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SUPPLEMENT TO THE CURRENTLY EFFECTIVE STATEMENT OF ADDITIONAL INFORMATION OF THE LISTED FUND: Deutsche Strategic High Yield Tax-Free Fund Effective October 1, 2014, the following replaces similar information relating to the fund under the “PART II: APPENDIX II-C — FEE RATES OF SERVICE PROVIDERS” section of the fund’s Statement of Additional Information: Fund Name Management Fee Rate Deutsche Strategic High Yield Tax-Free Fund First $300 million 0.515% Next $200 million 0.465% Next $500 million 0.440% Next $1 billion 0.420% Thereafter 0.400% Please Retain This Supplement for Future Reference September 10, 2014 SAISTKR-174

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): March 17, 2014 NEWPARK RESOURCES, INC. (Exact name of registrant as specified in its charter) Delaware 1-2960 72-1123385 (State or other Jurisdiction of Incorporation) (Commission File Number) (IRS Employer Identification No.) 2700 Research Forest Drive, Suite 100 The Woodlands, TX (Address of Principal Executive Offices) (Zip Code) Registrant’s telephone number, including area code: (281) 362-6800 (Former name or former address if changed since last report.) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: ☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) ☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) ☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) ☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) Item8.01 Other Events . On March 17, 2014, Newpark Resources, Inc. (the “Company”) issued a press release announcing that it has completed the previously announced sale of its Environmental Services business to ecoserv, LLC, a portfolio company of Denver-based Lariat Partners, LP, for $100 million in cash. A copy of the press release is attached hereto as Exhibit 99.1 and incorporated herein by reference. Item 9.01 Financial Statements and Exhibits. (d) Exhibits. 99.1 Press release issued by Newpark Resources, Inc. on March 17, 2014 . SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. NEWPARK RESOURCES, INC. Dated: March 18, 2014 By: /s/

  10.2 Commercial Security Agreement, $450,050 commercial loan between Champion Industries, Inc. and First Century Bank dated as of March 2, 2003.     INDUSTRIES, INC   FIRST CENTURY BANK, N.A. P. O. BOX 2968   500 FEDERAL STREET HUNTINGTON, WV 25703   BLUEFIELD, WV 24701 55-0717455 Type: o individual o partnership n corporation o           State of organization/registration (if applicable) WV           o If checked, refer to addendum for additional Debtors and signatures. COMMERCIAL SECURITY AGREEMENT The date of this Commercial Security Agreement (Agreement) is 04-02-2003         . SECURED DEBTS. This Agreement will secure all sums advanced by Secured Party under the terms of this Agreement and the payment and performance of the following described Secured Debts that (check one) o Debtor o                  _______________________________________________________________________(Borrower) owes to Secured party:         n Specific Debts. The following debts and all extensions, renewals, refinancings, modifications, and replacements (describe): LOAN # 1393995 IN THE AMOUNT OF $450,050.00 DATED 4/2/03       o All Debts. All present and future debts. even if this Agreement is not referenced, the debts are also secured by other collateral, or the future debt is unrelated to or of a different type than the current debt. Nothing in this Agreement is a commitment to make future loans or advances. SECURITY INTEREST. To secure the payment and performance of the Secured Debts, Debtor gives Secured Party a security interest in all of the Property described in this Agreement that Debtor owns or has sufficient rights in which to transfer an interest, now or in the future, wherever the Property is or will be located, and all proceeds and products of the Property. “Property” includes all parts, accessories, repairs, replacements, improvements, and accessions to the Property; any original evidence of tide or ownership; and all obligations that support the payment or performance of the Property. “Proceeds’’ includes anything acquired upon the sale, lease, license, exchange, or other disposition of the Property; any rights and claims arising from the Property; and any collections and distributions on account of the Property. This Agreement remains in effect until terminated in writing, even if the Secured Debts are paid and Secured Party is no longer obligated to advance funds to Debtor or Borrower. PROPERTY DESCRIPTION. The Property is described as follows:     o Accounts and Other Rights to Payment: All rights to payment, whether or not earned by performance, including, but not limited to, payment for property or services sold, leased, rented, licensed, or assigned. This includes any rights and interests (including all liens) which Debtor may have by law or agreement against any account debtor or obligor of Debtor.       o Inventory: All inventory held for ultimate sale or lease, or which has been or will be supplied under contracts of service, or which are raw materials, work in process, or materials used or consumed in Debtor’s business.       o Equipment: All equipment including, but not limited to, machinery, vehicles, furniture, fixtures, manufacturing equipment, farm machinery and equipment, shop equipment, office and record keeping equipment, parts, and tools. The Property         includes any equipment described in a list or schedule Debtor gives to Secured Party, but such a list is not necessary to create a valid security interest in all of Debtor’s equipment.       o Instruments and Chattel Paper: All instruments, including negotiable instruments and promissory notes and any other writings or records that evidence the right to payment of a monetary obligation, and tangible and electronic chattel paper.       o General Intangibles: All general intangibles including, but not limited to, tax refunds, patents and applications for patents, copyrights, trademarks, trade secrets, goodwill, trade names, customer lists, permits and franchises, payment intangibles, computer programs and all supporting information provided in connection with a transaction relating to computer programs, and the right to use Debtor’s name.       o Documents: All documents of title including, but not limited to, bills of lading, dock warrants and receipts, and warehouse receipts.       o Farm Products and Supplies: All farm products including, but not limited to, all poultry and livestock and their young, along with their produce, products, and replacements; all crops, annual or perennial, and all products of the crops; and all feed, seed, fertilizer, medicines, and other supplies used or produced in Debtor’s farming operations.       o Government Payments and Programs: All payments, accounts, general intangibles, and benefits including, but not limited to, payments in kind, deficiency payments, letters of entitlement, warehouse receipts, storage payments, emergency assistance and diversion payments, production flexibility contracts, and conservation reserve payments under any preexisting, current, or future federal or state government program.       o Investment Property: All investment property including, but not limited to, certificated securities, uncertificated securities, securities entitlements, securities accounts, commodity contracts, commodity accounts, and financial assets.       o Deposit Accounts: All deposit accounts including, but not limited to, demand, time, savings, passbook, and similar accounts.       n Specific Property Description: The Property includes, but is not limited by, the following (if required, provide real estate description):       DEMO HEIDELBERG QMD146-4 PRO OFFSET PRESS S/N 991619 WITH ALL STANDARD EQUIPMENT USE OF PROPERTY. The Property will be used for o personal n business o agricultural o purposes.     SIGNATURES. Debtor agrees to the terms on pages 1 and 2 of this Agreement and acknowledges receipt of a copy of this Agreement.       DEBTOR   SECURED PARTY CHAMPION INDUSTRIES, INC   FIRST CENTURY BANK, N.A.         TODD R. FRY   JEFFERY L. FORLINES VICE PRESIDENT & CFO   SENIOR VICE PRESIDENT                 ___________________ GENERAL PROVISIONS. Each Debtor’s obligations under this Agreement are independent of the obligations of any other Debtor. Secured Party may sue each Debtor individually or together with any Debtor will remain obligated under this Agreement. The duties and benefits of this Agreement will bind the successors and assigns of Debtor and Secured Party. No modification of this Agreement is effective unless made in writing and signed by Debtor and Secured Party. Whenever used, the plural includes the singular and the singular includes the plural. Time is of the essence. APPLICABLE LAW. This Agreement is governed by the laws of the state in which Secured Party is located. In the event of a dispute, the exc forum, venue, and place of jurisdiction will be the state in which Secured Party is located, unless otherwise required by law. If any provision of this Agreement is unenforceable by law, the unenforceable provision will be severed and the remaining provisions will still be enforceable. NAME AND LOCATION. Debtor’s name indicated on page 1 is Debtor’s exact legal name. If Debtor is not an individual, Debtor’s address is the location of Debtor’s chief executive offices or sole place of business. If Debtor is an entity organized and registered under state law, Debtor will provide verification of registration and location upon Secured Party’s request. Debtor will provide Secured Party with at least 30 days notice prior to any change in Debtor’s name, address, or state of the organization or registration. WARRANTIES AND REPRESENTATIONS. Debtor has the right, authority, and power to enter into this Agreement. The execution and delivery of this Agreement will not violate any agreement governing Debtor or Debtor’s property, or to which Debtor is a party. Debtor makes the following warranties and representations which continue as long as this Agreement is in effect: (1)   Debtor is duly organized and validly existing in all jurisdictions in which Debtor does business;   (2)   The execution and performance of the terms of this Agreement have been duly authorized, have received all necessary governmental approval, and will not violate any provision of law or order;   (3)   Other than previously disclosed to Secured Party, Debtor has not changed Debtor’s name or principal place of business within the last 10 years and has not used any other trade or fictitious name; and   (4)   Debtor does not and will not use any other name without Secured Party’s prior written consent. Debtor owns all of the Property, and Secured Party’s claim to the Property is ahead of the claims of any other creditor, except as otherwise agreed and disclosed to Secured party prior to any advance on the Secured Debts. The Property has not been used for any purpose that would violate any laws or subject the Property to forfeiture or seizure. DUTIES TOWARD PROPERTY. Debtor will protect the Property and Secured Party’s interest against any competing claim. Except as otherwise agreed, Debtor will keep the Property in Debtor’s possession at the address indicated on page 1 of this Agreement. Debtor will keep the Property in good repair and use the Property only for purposed specified on page 1. Debtor will not use the Property in violation of any law and will pay all taxes and assessments levied or assessed against the Property. Secured Party has the right of     reasonable access to inspect the Property, including the right to require Debtor to assemble and make the Property available to Secured Party. Debtor will immediately notify Secured Party of any loss or damage to the Property. Debtor will prepare and keep books, records, and accounts about the Property and Debtor’s business, to which Debtor will not sell, offer to sell, license, lease or otherwise transfer or encumber the Property without Secured Party’s prior written consent. Any disposition of the Property will violate Secured Party’s rights, unless the Property is inventory sold in the ordinary course of business at fair market value. If the Property includes chattel paper or instruments, either as original collateral or as proceeds of the Property, Debtor will record Secured Party’s interest on the face of the chattel paper or instruments. If the Property includes accounts, Debtor will collect all accounts in the ordinary course of business, unless otherwise required by Secured Party. Debtor will keep the proceeds of the accounts, and any goods returned to Debtor, in trust for Secured Party and will not commingle the proceeds or returned goods with any of Debtor’s other property. Secured Party has the right to require Debtor to pay Secured Party the full price on any returned items. Secured Party may require account debtors to make payments under the accounts directly to Secured Party. Debtor will deliver the accounts to Secured Party at Secured Party’s request. Debtor will give Secured Party all statements, reports, certificates, lists of account debtors (showing names, addresses, and amounts owing), invoices applicable to each account, and any other data pertaining to the accounts as Secured Party requests. If the Property includes farm products, Debtor will provide Secured Party with a list of the buyers, commission merchants, and selling agents to or though whom Debtor may sell the farm products. Debtor authorizes Secured Party to notify any additional parties regarding Secured Party’s interest in Debtor’s farm products, unless prohibited by law. Debtor agrees to plant, cultivate, and harvest crops in due season. Debtor will be in default if any loan proceeds are used for a purpose that will contribute to excessive erosion of highly erodible land or to the conversion of wetland to produce or to make possible the production of an agricultural commodity, further explained in 7 CFR Part 940, Subpart G, Exhibit M. If Debtor pledges the Property to Secured Party (delivers the Property into the possession or control of Secured Party or a designated third party), Debtor will, upon receipt, deliver any proceeds and products of the Property to Secured Party. Debtor will provide Secured party with any noted documents, financial statements, reports, and other information relating to the Property Debtor receives as the owner of the Property. PERFECTION OF SECURITY INTEREST. Debtor authorizes Secured Party to file a financing statement covering the Property. Debtor will comply with, facilitate, and otherwise assist Secured Party in connection with obtaining possession or control over the Property for purposes of perfecting Secured Party’s interest under the Uniform Commercial Code. INSURANCE. Debtor agrees to keep the Property insured against the risks reasonably associated with the Property until the Property is released from this Agreement. Debtor will maintain this insurance in the amounts Secured Party requires. Debtor may choose the insurance company, subject to Secured Party’s approval, which will not be unreasonably withheld. Debtor will have the insurance provider name Secured Party as loss payee on the insurance policy. Debtor will give Secured Party and the insurance proceeds toward the Secured Debts. Secured Party may require additional security as a condition of permitting any insurance proceeds to be used to repair or replace the Property. If Secured Party acquires the Property in damaged condition, Debtor’s rights to any insurance policies and proceeds will pass to Secured Party to the extent of the Secured Debts. Debtor will immediately notify Secured Party of the cancellation or termination of insurance. If Debtor fails to keep the Property insured, or fails to provide Secured Party with proof of insurance, Secured Party may obtain insurance to protect Secured Party’s interest in the Property. The insurance may include coverages not originally required of Debtor, may be written by a company other than one Debtor would choose, and may be written at a higher rate than Debtor could obtain if Debtor purchased the insurance. AUTHORITY TO PERFORM. Debtor authorizes Secured Party to do anything Secured Party deems reasonably necessary to protect the Property and Secured Party’s interest in the     Property. If Debtor fails to perform any of Debtor’s duties under this Agreement, Secured Party is authorized, without notice to Debtor, to perform the duties or cause them to be performed. These authorizations include, but are not limited to, permission to pay for the repair, maintenance, and preservation of the Property and take any action to realize the value of the Property. Secured Party’s authority to perform for Debtor does not create an obligation to perform, and Secured Party’s failure to perform will not preclude Secured Party from exercising any other rights under the law or this Agreement. If Secured Party performs for Debtor, Secured Party will use reasonable care. Reasonable care will not include any steps necessary to preserve rights against prior parties or any duty to take action in connection with the management of the Property. If Secured Party comes into possession of the Property, Secured Party will preserve and protect the Property to the extent required by law. Secured Party’s duty of care with respect to the Property will be satisfied if Secured Party exercises reasonable care in the safekeeping of the Property or in the selection of a third party in possession of the Property. Secured Party may enforce the obligations of an account debtor or other rights with respect to the account debtor’s or other person’s obligations to make payment or otherwise render performance to Debtor, and enforce any security interest that secures such obligations. PURCHASE MONEY SECURITY INTEREST. If the Property includes items purchased with the Secured Debts, the Property purchased with the Secured Debts will remain subject to Secured Party’s security interest until the Secured Debts are paid in full. Payments on any non-purchase money loan also secured by this Agreement will not be applied to the purchase money loan. Payments on the purchase money loan will be applied first to the non-purchase money portion of the loan, if any, and then to the purchase money portion in the order in which the purchase money Property was acquired. If the purchase money Property was acquired at the same time, payments will be terminated by application of this formula. DEFAULT. Debtor will be in default if: (1)   Debtor (or Borrower, if not the same) fails to make a payment in full when due;   (2)   Debtor fails to perform any condition or keep any covenant on this or any debt or agreement Debtor has with Secured Party;   (3)   a default occurs under the terms of any instrument or agreement evidencing or pertaining to the Secured Debts;   (4)   anything else happens that either causes Secured Party to reasonably believe that Secured Party will have difficulty in collecting the Secured Debts or significantly impairs the value of the Property. REMEDIES. After Debtor defaults, and after Secured Party gives any legally required notice and opportunity to cure the default, Secured Party may at Secured Party’s option do any one or more of the following: (1)   make all or any part of the Secured Debts immediately due and accrue interest at the highest post-maturity interest rate;   (2)   require Debtor to gather the Property and make it available to Secured Party in a reasonable fashion;   (3)   enter upon Debtor’s premises and take possession of all or any part of Debtor’s property for purposes of preserving the Property or its value and use and operate Debtor’s property to protect Secured Party’s interest, all without payment or compensation to Debtor;   (4)   use any remedy allowed by state or federal law, or provided in any agreement evidencing or pertaining to the Secured Debts. If Secured Party repossesses the Property or enforces the obligations of an account debtor, Secured Party may keep or dispose of the Property as provided by law. Secured Party will apply the proceeds of any collection or disposition first to Secured Party’s expenses of enforcement, which includes reasonable attorneys’ fees and legal expenses to the extent not prohibited by law, and then to the Secured Debts. Debtor (or Borrower, if no the same) will be liable for the deficiency, if any.     By choosing any one or more of these remedies, Secured Party does not give up the right to use any other remedy. Secured Party does not waive default by not using a remedy. WAIVER. Debtor waives all claims for damages caused by Secured Party’s acts or omissions where Secured Party acts in good faith. NOTICE AND ADDITIONAL DOCUMENTS. Where notice is required, Debtor agrees that 10 days prior written notice will be reasonable notice to Debtor under the Uniform Commercial Code. Notice to one party is notice to all parties. Debtor agrees to sign, deliver, and file any additional documents and certifications Secured Party considers necessary to perfect, continue, or preserve Debtor’s obligations under this Agreement and to confirm Secured Party’s lien status on the Property.           CHAMPION INDUSTRIES, INC   FIRST CENTURY BANK, N.A.     P.O. BOX 2968   500 FEDERAL STREET     HUNTINGTON, WV 25703   BLUEFIELD, WV 24701   Loan Number: 1393995              Date: 04-02-2003              Maturity Date: 04-02-2008_ BORROWER’S NAME AND   LENDER’S NAME AND ADDRESS   Loan Amount: $450,000.00      ADDRESS   “You” means the lender,   Renewal of            “I” includes each   its successors and   BR/RESP 01/801 borrower above, jointly   assigns.     and severally         For value received, I promise to pay to you, or your order, at your address listed above the PRINCIPAL sum of FOUR HUNDRED FIFTY THOUSAND FIFTY AND NO/100 Dollars $450,050.00 n Single Advance: I will receive all of this principal sum on 04-02-2003     . No additional advances are contemplated under this note.   o Multiple Advance: The principal sum shown above is the maximum amount of principal I can borrow under this note. On                        I will receive the amount of $              and future principal advances are contemplated. Conditions: The conditions for future advances are                                                                                                                                                                                                                                                                                                                                                                                            o Open End Credit: You and I agree that I may borrow up to the maximum amount of principal more than one time. This feature is subject to all other conditions and expires on                                                     . o Closad End Credit: You and I agree that I may borrow up to the maximum only one time (and subject to all other conditions).   INTEREST: I agree to pay interest on the outstanding principal balance from 04-02-2003      at the rate of 4.250 % per year until 04-03-2003 .       n Variable Rate: This rate may then change as stated below.       n Index Rate: The future rate will be EQUAL TO the following index rate: THE HIGHEST RATE ON CORPORATE LOANS POSTED BY AT LEAST 75% OF THE USA’S THIRTY LARGEST BANKS KNOWN AS THE WALL STREET JOURNAL PRIME RATE. THE RESULT OF THIS CALCULATION WILL BE ROUNDED UP TO THE NEAREST 0.125 .       o No Index: The future rate will not be subject to any internal or external index. It will be entirely in your control.       n Frequency and Timing: The rate on this note may change as often as EVERY DAY BEGINNING 04-03-2003 . A change in the interest rate will take effect ON THE SAME DAY .       o Limitations: During the term of this loan, the applicable annual interest rate will not be more than                       % or less than                       %. The rate may not change more than                       % each                       .       Effect of Variable Rate: A change in the interest rate will have the following effect on the payments:         n The amount of each scheduled payment will change. o The amount of the final payment will change.       o_______________________________________________________________________. ACCRUAL METHOD: Interest will be calculated on a ACTUAL/360 basis. POST MATURITY RATE: I agree to pay interest on the unpaid balance of this note owing after maturity, and until paid in full, as stated below:     n on the same fixed or variable rate basis in effect before maturity (as indicated above).       o at a rate equal to _________________________________________________________. n LATE CHARGE: if a payment is made more than 10 days after it is due, I agree to pay a late charge of 5.000% OF THE LATE AMOUNT. n ADDITIONAL CHARGES: In addition to interest, I agree to pay the following charges which n are o are not included in the principal amount above: ______________________________________________________________________________. PAYMENTS: I agree to pay this note as follows: ON DEMAND, BUT IF NO DEMAND IS MADE THEN 60 MONTHLY PAYMENTS OF $8,352.55 BEGINNING 05-02-2003. THIS IS A VARIABLE RATE LOAN AND THE PAYMENT AMOUNTS MAY CHANGE AFTER THE 1ST PAYMENT AND EVERY PAYMENT THEREAFTER. ADDITIONAL TERMS:   n SECURITY: This note is separately secured by (describe separate document by type and date):   SEPARATE SECURITY AGREEMENT DATED APRIL 2, 2003   (This section is for your internal use. Failure to list a separate security document does not mean the agreement will not secure this note.)   PURPOSE: The purpose of this loan is PURCHASE EQUIPMENT.   SIGNATURES: I AGREE TO THE TERMS OF THIS NOTE (INCLUDING THOSE ON PAGE 2). I have received a copy on today’s date.       Signature for Lender   CHAMPION INDUSTRIES, INC.         JEFFERY L. FORLINES, SENIOR VICE PRESIDENT   TODD R. FRY, VICE PRESIDENT & CFO                         UNIVERSAL NOTE   DEFINITIONS: As used on page 1, “n” means the terms that apply to this loan. “I,” “me” or “my” means each Borrower who signs this note and each other person or legal entity (including guarantors, endorsers, and sureties) who agrees to pay this note (together referred to as “us”). “You” or “your means the Lender and its successors and assigns. APPLICABLE LAW: The law of the state in which you are located will govern this note. Any term of this note which is contrary to applicable law will not be effective, unless the     law permits you and me to agree to such variation. If any provision of this agreement cannot be enforced according to its terms, this fact will not affect the enforceability of the remainder of this agreement. No modification of this agreement may be made without your express written consent. Time is of the essence in this element. COMMISSIONS OR OTHER REMUNERATION: I understand and agree that any insurance premiums paid to insurance companies as part of this note will involve money retained by you or paid back to you as commissions or other remuneration.      In addition, I understand and agree that some other payments to third parties as part of this note may also involve money retained by you or paid back to you as commissions or other remuneration. PAYMENTS: Each payment I make on this note will first reduce the amount I owe you for charges which are neither interest nor principal. The remainder of each payment will then reduce accrued unpaid interest, and then unpaid principal. If you and I agree to a different application of payments, we will describe our agreement on this note. I may prepay a part of, or the entire balance of this loan without penalty, unless we specify to the contrary on this note. Any partial prepayment will note excuse or reduce any later scheduled payment until this note is paid in full (unless, when I make the prepayment, you and I agree in writing to the contrary). INTEREST: Interest accrues on the principal remaining unpaid from time to time, until paid in full. If I receive the principal in more than one advance, each advance will start to earn interest only when I receive the advance. The interest rate in effect on this note at any given time will apply to the entire principal advanced at that time. Notwithstanding anything to the contrary, I do not agree to pay and you do not intend to charge any rate of interest that is higher than the maximum rate of interest you could charge under applicable law for the extension of credit that is agreed to here (either before or after maturity). If any notice of interest accrual is sent and is in error, we mutually agree by law and this agreement, you agree to refund it to me. INDEX RATE: The index will serve only as a device for setting the rate on this note. You do not guarantee by selecting this index, or the margin, that the rate on this note will be the same rate you charge on any other loans or class of loans to me or other borrowers. ACCRUAL METHOD: The amount of interest that I will pay on this loan will be calculated using the interest rate and accrual method stated on page 1 of this note. For purpose of interest calculation, the accrual method will determine the number of days in a “year.” If no accrual method is stated, then you may use any reasonable accrual method for calculating interest. POST MATURITY RATE: For purposed of deciding when the “Post Maturity Rate” ( shown on page 1) applies, the term “maturity” means the date of the last scheduled payment indicated on page 1 of this note or the date you accelerate payment on the note, whichever is earlier. SINGLE ADVANCE LOANS. If this is a single advance loan, you and I expect that you will make only one advance of principal. However, you may add other amounts to the principal if you make any payments described in the “PAYMENTS BY LENDER” paragraph below. MULTIPLE ADVANCE LOANS: If this is a multiple advance loan, you and I expect you will make more than one advance of principal. If this is closed and credit, repaying a part of the principal will not entitle me to additional credit. PAYMENTS BY LENDER: If you are authorized to pay, on my behalf, charges I am obligated to pay (such as property insurance premiums), then you may treat those payments made by you as advances and add them to the unpaid principal under this note, or you may demand immediate payment of the charges. SET-OFF: I agree that you may set off any amount due and payable under this note against any right I have to receive money from you.       “Right to receive money from you” means:     (1)   any deposit account balance I have with you;     (2)   any money owed to me on an item presented to you or in your possession for collection or exchange; and     (3)   any repurchase agreement or other nondeposit obligation.          “Any amount due and payable under this note” means that total amount of properly accelerate under this note.      If my right to receive money from you is also owned by someone who has not agreed to pay this note, your right of set-off will apply to my interest in the obligation and to any other amounts I could withdraw on my sole request or endorsement. Your right of set-off does not apply to an account or other obligation where my rights are only as a representative. It also does not apply to any Individual Retirement Account or other tax-deferred retirement account.      You will not be liable for the dishonor of any check when the dishonor occurs because you set off this debt against any of my accounts. I agree to hold you harmless from any such claims arising as a result of your exercise of your right of set-off. REAL ESTATE OF RESIDENCE SECURITY: If this note is secured by real estate or a residence that is personal property, the existence of a default and your remedies for such a default will be determined by applicable law, by the terms of any separate instrument creating the security interest and, to the extent not prohibited by law and not contrary to the terms of the separate security instrument, by the “Default” and “Remedies” paragraphs herein. DEFAULT: I will be in default if any one or more of the following occur: (1) I fail to make a payment on time or in the amount due; (2) I fail to keep the property insured, if required; (3) I fail to pay, or keep any promise, on any debt or agreement I have with you; (4) any other creditor of mine attempts to collect any debt I owe him through court proceedings; (5) I die, am declared incompetent, make an assignment for the benefit of creditors, or become insolvent (either because my liabilities exceed my assets or I am unable to pay my debts as they become due); (6) I make any written statement or provide any financial information that is untrue or inaccurate at the time it was provided; (7) I do or fail to do something which causes you to believe that you will have difficulty collecting the amount I owe you; (8) any collateral securing this note is used in a manner or for a purpose which threatens confiscation by a legal authority; (9) I change my name or assume an additional name without first notifying you before making such a change; (10) I fail to plant, cultivate and harvest crops in due season if I am a producer of crops; (11) any loan proceeds are used for a purpose that will contribute to excessive erosion of highly erodible land or to the conversion of wetlands to produce an agricultural commodity, as further explained in 7 C.F.R. Part 940, Subpart G, Exhibit M. REMEDIES: If I am in default on this note you have, but are not limited to, the following remedies:   (1)   You may demand immediate payment o all I owe you under this note (principal, accrued unpaid interest and other accrued charges).     (2)   You may set off this debt against any right I have to the payment of money from you, subject to the terms of the “Set-Off” paragraph herein.     (3)   You may demand security, additional security, or additional parties to be obligated to pay this note as a condition for not using any other remedy.     (4)   You may refuse to make advances to me or allow purchases on credit by me.     (5)   You may use any remedy you have under state and federal law. By selecting any one or more of these remedies you do not give up your right to later use any other remedy. By waiving your right to declare an event to be a default, you do not waive your right to later consider the event as a default if it continues or happens again. COLLECTION COSTS AND ATTORNEY’S FEES: I agree to pay all costs of collection, replevin or any other or similar type of cost if I am in default. In addition, if you hire an attorney to collect this note, I also agree to pay any fee you incur with such attorney plus court costs (except where prohibited by law). To the extent permitted by the United States Bankruptcy Code, I also agree to pay the reasonable attorney’s fees and costs you incur to collect this debt as awarded by any court exercising jurisdiction under the Bankruptcy Code.     WAIVER: I give up my rights to require you to do certain things. I will not require you to:   (1)   demand payment of amounts due (presentment);     (2)   obtain official certification of nonpayment (protest); or     (3)   give notice that amounts due have not been paid (notice of dishonor).     I waive any defenses I have based on suretyship or impairment of collateral. OBLIGATIONS INDEPENDENT: I understand that I must pay this note even if someone else has also agreed to pay it (by, for example, signing this form or a separate guarantee or endorsement). You may sue me alone, or anyone else who is obligated on this note, or any number of us together, to collect this note. You may do so without any notice that it has not been paid (notice of dishonor). You may without notice release any party to this agreement without releasing any other party. If you give up any of your rights, with or without notice, it will not affect my duty to pay this note. Any extension of new credit to any of us, or renewal of this note by all or less than all of us will not release me from my duty to pay it. (Of course, you are entitled to only one payment in full.) I agree that you may at your option extend this note or the debt represented by this note, or any portion of the note or debt, from time to time without limit or notice and for any term without affecting my liability for payment of the note, I will not assign my obligation under this agreement without your prior written approval. FINANCIAL INFORMATION: I agree to provide you, upon request, any financial statement or information you may deem necessary. I warrant that the financial statements and information I provide to you are or will be accurate, correct and complete. NOTICE: Unless otherwise required by law, any notice to me shall be given by delivering it or by mailing it by first class mail addressed to me at my last known address. My current address is on page 1. I agree to inform you in writing of any change in my address. I will give any notice to you by mailing it first class to your address stated on page 1 of this agreement, or to any other address that you have designated.                                                                       BORROWER’S                                                     INITIALS                                   INTEREST DATE OF   PRINCIPAL   (not   PRINCIPAL   PRINCIPAL   INTEREST   INTEREST   PAID TRANSACTION   ADVANCE   required)   PAYMENTS   BALANCE   RATE   PAYMENTS   THROUGH:                   $               $       $         %     $                                  

EXHIBIT 99.2 Management’s Discussion and Analysis For The Three Months Ended March 31, 2016 1 Management’s Discussion and Analysis May 12, 2016 In this document: (i) unless the content otherwise requires, references to “our”, “us”, “its”, “the Company” or “Exeter” mean Exeter Resource Corporation and its subsidiaries; (ii) information is provided as at March 31, 2016, unless otherwise stated; (iii) all references to monetary amounts are to Canadian Dollars, unless otherwise stated; and (iv) “$” refers to Canadian Dollars and “US$” refers to US Dollars. The following discussion is management’s assessment and analysis of the results and financial condition of Exeter and should be read in conjunction with the accompanying unaudited condensed interim consolidated financial statements and related notes. Forward Looking Statements This MD&A contains “forward-looking information” and “forward-looking statements” (together, the “forward-looking statements”) within the meaning of applicable securities laws and the United States Private Securities Litigation Reform Act of 1995, as amended.All statements other than statements of historical fact are forward looking statements. These forward-looking statements, principally under the heading “Outlook”, but also elsewhere in this document include estimates, forecasts and statements as to the Company’s belief with respect to, among other things, potential economics and development options for Caspiche as set out in the amended preliminary economic analysis study released December 19, 2014, the timing of its drilling, exploration programs and exploration results, objectives of and the completion of various studies, potential to secure adequate quantities of water and power, permitting, the Company’s ability to mitigate against foreign exchange risk, the ability of the Company to access capital to fund its activities, the ability of the Company to respond to market fluctuations and government regulations and the ability of the Company to demonstrate that a commercially viable mineral deposit exists on its Caspiche project, and the merits of the legal challenge to the easement over surface rights at Caspiche granted by the Chilean government. These forward-looking statements appear in a number of different places in this document and can be identified by words and phrases such as, but not limited to, “estimates”, “plans”, “is expected”, “objectives” or variations of such words or phrases, or statements that certain activities, events or results “may”, “would” or “could” occur.While the Company has based these forward-looking statements on its expectations about future events as at the date that this document was prepared, the statements are not a guarantee of the Company’s future performance and are subject to risks, uncertainties, assumptions and other factors which could cause actual results to differ materially from future results expressed or implied by such forward-looking statements.The Company’s forward-looking statements are based on the beliefs, expectations and opinions of management on the date the statements are made, and the Company does not assume any obligation to update forward-looking statements if circumstances or management’s beliefs, expectations or opinions should change except as required by law.Such factors and assumptions include, amongst others, the effects of general economic condition; changing foreign exchange rates and actions by government authorities; uncertainties associated with negotiations; misjudgements in the course of preparing forward-looking statements; fluctuations in gold, copper, silver and other commodity prices and currency exchange rates; uncertainties relating to interpretation of drill results and the geology; continuity and grade of mineral deposits; uncertainty of estimates of capital and operating costs; price and availability of capital equipment; price of various other inputs such as fuel, electricity and reagents; recovery rates, production estimates and estimated economic return; the need for cooperation of government agencies and native groups in the exploration and development of properties and the issuance of required permits; the need to obtain additional financing to develop properties and uncertainty as to the availability and terms of future financing; the possibility of delay in exploration or development programs or in construction projects and uncertainty of meeting anticipated program milestones; risks associated with project development, including risks associated with the failure to satisfy the requirements of the Company’s agreement with Anglo American on its Caspiche project which could result in loss of title; uncertainty as to timely availability of permits and other governmental approvals, uncertainty of the outcome of the legal challenge to the grant by the Chilean government of the easement over surface rights, uncertainty regarding the potential to secure adequate water, and other risks and uncertainties disclosed under “Risks” below and other risks and uncertainties disclosed in the Company’s current Annual Information Form, filed with the Canadian securities regulatory authorities and other information released by it and filed with the appropriate regulatory agencies.Although the Company has attempted to identify important risk factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other risk factors that cause actions, events or results not to be as anticipated, estimated or intended.There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from 2 those anticipated in such statements.For the reasons set forth above, readers should not place undue reliance on forward-looking statements.All statements are made as of the date of this MD&A and the Company is under no obligation to update or alter any forward-looking statements except as required under applicable securities laws. Cautionary note to U.S. Investors concerning reserve and resource estimates This MD&A and other information released by Exeter have been prepared in accordance with the requirements of the securities laws in effect in Canada, which differ from the requirements of United States securities laws.The terms “mineral reserve”, “proven mineral reserve” and “probable mineral reserve” are Canadian mining terms as defined in accordance with Canadian National Instrument 43-101 – Standards of Disclosure for Mineral Projects (“NI 43-101”) and the Canadian Institute of Mining, Metallurgy and Petroleum (the “CIM”) - CIM Definition Standards on Mineral Resources and Mineral Reserves, adopted by the CIM Council, as amended (“CIM Standards”).These definitions differ from the definitions in SEC Industry Guide 7 under the United States Securities Act of 1993, as amended (the “Securities Act”).Under SEC Industry Guide 7 standards, a “final” or “bankable” feasibility study is required to report reserves, the three-year historical average price is used in any reserve or cash flow analysis to designate reserves and the primary environmental analysis or report must be filed with the appropriate governmental authority. In addition, the terms “mineral resource”, “measured mineral resource”, “indicated mineral resource” and “inferred mineral resource” are defined in and required to be disclosed by NI 43-101 and the CIM Standards; however, these terms are not defined terms under SEC Industry Guide 7 and are normally not permitted to be used in reports and registration statements filed with the SEC.Investors are cautioned not to assume that any part or all of mineral deposits in these categories will ever be converted into reserves.“Inferred mineral resources” have a great amount of uncertainty as to their existence, and great uncertainty as to their economic feasibility.It cannot be assumed that all or any part of an inferred mineral resource will ever be upgraded to a higher category.Under Canadian rules, estimates of inferred mineral resources may not form the basis of feasibility or pre-feasibility studies.Investors are cautioned not to assume that all or any part of an inferred mineral resource exists or is economically or legally mineable.Disclosure of “contained ounces” in a resource is permitted disclosure under Canadian regulations; however, the SEC normally only permits issuers to report mineralization that does not constitute “reserves” by SEC Industry Guide 7 standards as in place tonnage and grade without reference to unit measures. Accordingly, information contained in this MD&A contains descriptions of our mineral deposits that may not be comparable to similar information made public by U.S. companies subject to the reporting and disclosure requirements under the United States federal securities laws and the rules and regulations thereunder. 3 Report on Operations First Quarter 2016 The Company continued its work on the Caspiche gold-copper project in the Maricunga region of Northern Chile in an effort to advance the project. The primary focus in 2016 is the advancement of programs related to securing water and investigating infrastructure requirements for the Caspiche project as well as the ongoing assessment of lower capital alternatives for the potential development of the project. Caspiche represents one of the largest mineral discoveries made in Chile in recent years. The unique characteristics of the deposit, with its surface oxide gold zone and higher grade gold-copper core, offer future mining opportunities that range from modest scale oxide heap leach gold production, to larger scale open pit/underground mining of the underlying gold-copper zone. An amended preliminary economic assessment (“2014 PEA”) for Caspiche released on December 19th, 2014 (with an effective date of April 30, 2014) identified three new potential development options focussed on lower throughputs and the higher grade core of the deposit.All three required lower Capex and would use lower quantities of water to support mining operations compared to previous studies.The 2014 PEA titled “Amended NI 43-101 Technical Report on the Caspiche Project, Atacama Region, Chile” dated December 19th, 2014 prepared by Santiago based engineering consultancies, NCL Ingeniería y Construcción and Alquimia Conceptos S.A. can be found at www.exeterresource.com or on SEDAR. PROJECTS CHILE Caspiche Project Northern Chile - Maricunga In 2005, the Company entered into an agreement with Anglo American with respect to seven properties in the Maricunga region of Chile.The terms of the agreement provided for increasing annual drilling and exploration commitments over five years, and the phased reversion of five properties to Anglo American.Exeter satisfied its obligations under the agreement, having spent more than the required minimum of US$2.55 million, including completing more than 15,500 metres (“m”) of required drilling, and exercised its option to acquire a 100% interest in the Caspiche property in February 2011. Anglo American retains a 3% net smelter royalty (“NSR”) from production from the property and has the right to buy the property back by reimbursing certain of the Company’s expenditures incurred on the property if it is not put into production within 15 years from the date the Company exercised its option.In addition, the Company will be required to pay a further 0.08% NSR from production pursuant to an agreement with a private entity. The Company is required to make an advance annual royalty payment of US$250,000 up until March 31, 2020 (US$1,500,000 paid to March 31, 2016) and thereafter US$1 million annually for the period March 31, 2021 to March 31, 2025 or until commencement of commercial production, should production commence prior to March 31, 2025, at which time the advance royalty will cease and the NSR will be payable. The Caspiche project is located in a prolific region of gold-porphyry deposits, 15 kilometres (“km”) (10 miles) southeast of Kinross Gold’s Maricunga open pit mine (formerly known as the Refugio mine) and 11 km (7 miles) north of Barrick Gold – Kinross Gold’s Cerro Casale project. Water agreement In January 2014, the Company’s Chilean subsidiary, Sociedad Contractual Minera Eton Chile (“Eton”), negotiated new water exploration agreement (“Water Agreement”) terms with the Chilean subsidiary of Canadian company Atacama Pacific Gold Corporation (“Atacama Pacific”).The new terms amend the original agreement entered into between the parties in May 2013.The Water Agreement allows Eton to earn an additional 40% interest, for an aggregate 90% interest, in any water rights granted following the discovery of water near Peñas Blancas (Laguna Verde) in the Maricunga region, northern Chile.To earn the additional 40% interest, Eton is required to incur an additional 40% (total of 90%) of all expenditures relating to exploration and potential development on the water tenements.In addition, in the event of approval of water rights by the General Directorate of Water Resources (“DGA”), Eton will assume Atacama Pacific’s obligation to pay Hydro Exploraciones SpA (“Hydro”), an Atacama 4 Pacific affiliate, US$15,000 per litre per second (“l/s”) of DGA approved water rights.Atacama Pacific will remain obligated to pay Hydro US$15,000 per l/s on its 10% interest.Regardless of the total amount of DGA approved water acquired, payments to Hydro are capped at US$1 million.These payments are not applicable to Eton’s original 50% interest in any water rights acquired.In addition, Eton will pay US$5,000 per month to Hydro from the date of any application for water rights for assisting with securing such water rights.The aggregate of the monthly payments are deductible from any amount payable to Hydro for water rights acquired. Land easement On June 10, 2013 the Company announced that its application for surface rights at Caspiche had been granted by the Chilean Government.The Company has applied to renew a 5 year lease agreement with the Chilean Government for the surface rights that correspond to its initial mineral rights in the area; the easement extends this area to cover most of its additional tenements as well as areas that may be required for potential development of a mine at Caspiche. In order to maintain these rights, which are valid for 25 years, the Company is required to make total payments of 158,876 Unidades de Fomento (UF)*, an equivalent of approximately US$6.4 million of which US$3.0 million has been paid to March 31, 2016. Seven annual payments of approximately US$490,000 each remain payable. * Unidad de Fomento (UF). This is a unit of account used in Chile. The exchange rate between the UF and the Chilean peso is constantly adjusted to inflation so that the value of the UF remains constant. Results from Operations The Company began 2016 and ended the quarter with 88,407,753 common shares outstanding.During the quarter, no options were exercised. As at May 12, 2016 the Company had 88,442,753 shares outstanding. Summary of Financial Results Selected Information The Company’s unaudited condensed interim consolidated financial statements for the first quarter ended March 31, 2016 (the “Interim Financial Statements”) have been prepared in accordance with International Financial Reporting Standards (“IFRS”), as applicable to interim financial reports including IAS 34 “Interim Financial Reporting”.The following selected information is taken from the Interim Financial Statements. First Quarter Ended March 31, 2016 The Company ended its first quarter ended March 31, 2016 with $20.7 million in cash and cash equivalents, and incurred approximately $1.2 million in exploration expenditures during the period. Share-based compensation expense of $295,000 was incurred due to recognizing the expense associated with the vesting of certain stock options that were issued in previous years. First Quarter Ended March 31, 2016 compared to the Fourth Quarter Ended December 31, 2015 At March 31, 2016, the Company had $20.7 million in cash and cash equivalents, $1.6 million less than the $22.3 million that was held at December 31, 2015. The decrease relates to the Company utilizing its cash resources to fund project exploration, mainly water exploration, and administrative requirements. The Company currently has no revenue generating activities. Interest income of $56,000 was recognized in the first quarter 2016 compared to $62,000 in the fourth quarter 2015. The decrease in 2016 was due to less cash in treasury as it was utilized in funding project exploration and administrative activities. Loss for the period ended March 31, 2016 was $1.8 million compared to $2.4 million in the fourth quarter of 2015. Significant variances for expenses: 5 · Mineral property exploration expenditures: $1.2 million ($1.6 million in 2015) – the decrease in exploration costs for Q1 2016 was largely attributable to the annual land easement payment incurred in Q4 2015 of approximately $643,000 offset by the advance royalty payment of approximately $324,000 incurred in Q1 2016. · Stock exchange listing and filing fees: $101,000 ($1,000 in 2015) – the variance is caused by costs incurred in Q1 2016 related to annual fees for listing on the Canadian and American stock markets and year-end filing fees. First Quarter Ended March 31, 2016 compared to the First Quarter ended March 31, 2015 The loss in the first quarter 2016 of $1.8 million is $1.1 million lower than the loss of $2.9 million incurred in the first quarter 2015. The decrease is mainly due to exploration costs being $1.2 million lower than in the comparative 2015 period. Significant variances for expenses: · Mineral property exploration expenditures: $1.2 million ($2.3 million in 2015) – the higher Q1-2015 expenditures are mostly attributable to costs related to the water drilling program in Peñas Blancas. Expenditures on field camp, IVA tax, legal work and drilling were cumulatively higher by approximately $1.1 million. The following is a summary of continuing operations results from the Company’s consolidated financial statements: Three month period ended March 31, (in thousands) Interest income $

ITEMID: 001-95933 LANGUAGEISOCODE: ENG RESPONDENT: SWE BRANCH: ADMISSIBILITY DATE: 2009 DOCNAME: BLADH v. SWEDEN IMPORTANCE: 4 CONCLUSION: Inadmissible JUDGES: Alvina Gyulumyan;Corneliu Bîrsan;Egbert Myjer;Elisabet Fura;Josep Casadevall TEXT: 1. The applicant, Mr Peter Bladh, is a Swedish national who was born in 1956 and lives in Eskilstuna. He was represented before the Court by Mr J. Södergren, a lawyer practising in Stockholm. The Swedish Government (“the Government”) were represented by their Agent, Mr B. Sjöberg, of the Ministry for Foreign Affairs. 2. The facts of the case, as submitted by the parties, may be summarised as follows. 3. Since the 1980s the applicant has been a member of the Graphic Workers Unemployment Fund (Grafikernas arbetslöshetskassa). 4. In the summer of the year 2000, for some unknown reason, the applicant either did not qualify for unemployment benefit or ceased to qualify for it. Accordingly, in order to discuss different employment programmes, the applicant had a meeting with his unemployment officer at the Public Employment Agency (Arbetsförmedlingen). The unemployment officer informed the applicant that by virtue of a “re-qualification” option set out in sections 12 and 19 of the Unemployment Insurance Act (Lagen om arbetslöshetsförsäkring, 1997:238; hereinafter “the 1997 Act”), the applicant could re-qualify for another three hundred days of unemployment benefit if he worked as a trainee for the municipality for seventy hours per month for “six calendar months”. 5. Accordingly, the applicant signed a contract and on 7 August 2000 began work as a trainee for the municipality at a plant for recycling electronic devices. The contract stipulated that the training programme was to end on 6 February 2001. During this period it appears that the applicant was paid by the Graphic Workers Unemployment Fund. 6. On 21 December 2000 Parliament passed a law (no. 2000:1460) which amended section 19 of the 1997 Act, thereby abolishing the re-qualification option through trainee work. The law entered into force on 5 February 2001, that is, the day before the applicant’s training programme was scheduled to end, and had the effect that in future only conventional employment could re-qualify for a further unemployment benefit period. 7. The applicant maintained that during the winter of 2000, when he became aware of the amendment to the 1997 Act, he tried several times in vain to contact his officer at the Public Employment Agency and the Graphic Workers Unemployment Fund, because if the amendment were applied strictly and formally, he would be disqualified from a further period of unemployment benefit. Thus he wanted the finishing date of his trainee work contract, namely 6 February 2001, to be brought forward, since in his view, in accordance with the provisions of the original section 19 of the 1997 Act, he would have fulfilled the requirement of working seventy hours per month for “six calendar months” by the end of January 2001. 8. After the applicant had concluded the training programme, he requested a further period of unemployment benefit. His request was refused by the Graphic Workers Unemployment Fund on 14 March 2001, and again on 2 July 2001, because he did not fulfil the criteria set out in section 12 of the 1997 Act. 9. The applicant appealed to the County Administrative Court (länsrätten) in Stockholm. On 21 August 2002 his request for an oral hearing in order to hear evidence from the officials at the Public Employment Agency and the Graphic Workers Unemployment Fund was refused. 10. By a judgment of 18 December 2002 the County Administrative Court found against the applicant. It reiterated that, under the transitional provisions of the amendment to the 1997 Act, only a training programme completed by 5 February 2001 could qualify for a further unemployment benefit period. The applicant had completed his trainee work on 6 February 2001, thus his situation was not covered by the transitional provisions. 11. On 11 May 2004, following a further appeal, the Administrative Court of Appeal (kammarrätten) in Stockholm granted the applicant leave to appeal against the first-instance judgment. The appellate court also requested an opinion from the Inspection for Unemployment Insurance (Inspektionen för arbetslöshetsförsäkring) 12. The applicant requested an oral hearing before the Administrative Court of Appeal. He stated that he wanted to hear the head of the Graphic Workers Unemployment Fund as regards the date on which the Fund had become aware of the amendment to the 1997 Act and its implications. He also wanted to ask him certain questions of a complex nature, for instance whether it would be considered a breach of official duty if an official of the Fund had advance knowledge of legislative amendments but refused to inform a member of the Fund thereof. By a decision of 11 November 2004, the court found an oral hearing unnecessary and refused the applicant’s request. 13. On 18 November 2004 the applicant made further submissions in writing, including a request for compensation for loss of income caused by the unpredictable decision of Parliament to amend the legislation. 14. By a judgment of 17 December 2004 the Administrative Court of Appeal upheld the judgment of the County Administrative Court, stating as follows: “Firstly, [the applicant’s] request for compensation for loss of income must be considered as a claim for damages. As it is not for the Administrative Court of Appeal to examine such a claim, the applicant’s request in this respect is refused. The question in the case is how section 19, subsection 1 of the Unemployment Insurance Act – [the requirement] that the individual must have participated in and, unless hindered by special reasons, completed vocational training mentioned therein – should be understood. Due to the ambiguity of the notion carried out previously used, the notion completed was chosen to clarify that, in addition to having participated in a training programme, it was a condition that such programme be finished. The purpose of the provision was to prevent that an insured person, when he had participated for a sufficiently long period of time, would be able to cut short the programme in order to obtain unemployment benefit instead (Government Bill 1988/89:100, annex 12, p. 94). In these circumstances, and since the transitional provision of the amendment which entered into force on 5 February 2001 unambiguously states that the conditions in section 19 of the Unemployment Insurance Act must have been fulfilled at the date of the entry into force, the Administrative Court of Appeal finds that the appeal must be rejected.” 15. A request by the applicant for leave to appeal to the Supreme Administrative Court (Regeringsrätten) was refused on 17 May 2006. 16. Before the amendments introduced by law no. 2000:1460, section 12 of the Unemployment Insurance Act stipulated that, in order to become eligible for unemployment benefit, the insured had to “have had gainful employment for at least 6 months and carried out work for at least 70 hours per calendar month” over a period of twelve months immediately prior to the date of unemployment. Section 19 of the Act, entitled “re-qualification requirement”, stipulated that time during which the insured had participated in and completed – unless hindered by special reasons – vocational training was equal to “gainful employment” (as set out in section 12 of the Act). 17. The amendments introduced by law no. 2000:1460 abolished the re-qualification option set out in section 19, which had the effect that trainee work could no longer be considered equal to “gainful employment” unless completed by 5 February 2001. 18. Under the transitional provisions, employment programmes which previously re-qualified for a further unemployment benefit period would continue to qualify, if they had been completed by the time the amending law entered into force, and if a request for unemployment benefit had been submitted no later than 31 March 2001.

Title: I Might Be the Father of Her Child, And I Want to Be Prepared Question:Background: I am a 27 y/o male, living in California, where these events occurred. She is a 25 y/o woman. I found out via social media that someone I've slept with casually is pregnant. I asked her about it and she said she doesn't know who the father is, and that she didn't inform me because she has no intention of allowing me into her or her child's life. I am more than okay with this. I do not want a child, nor do I have the means to adequately support one. I do not know whether she intends to keep it after birth, but let's assume she does. What should I do? For context, she and I have met in person only twice, and had sex both times. I used protection both times. The second time, around 6 weeks ago, is around when she got pregnant. During the second time, I only reached orgasm during oral sex. I know this is not foolproof, but it at least lowers the odds. I do not believe that I am the father. Furthermore, she has what I believe to be an undiagnosed personality disorder, (the main reason I chose not to continue pursuing her) and I would not put it past her to try and fuck with me just for her own thrill, even if she knows who the father actually is. So my main questions are: 1) I have screenshots where she explicitly states "we will never know who the father is" and "No matter what, I don't want you involved." Are these legally binding statements? 2) If they are not, and she decides to try to make me responsible for the child, what should I expect in 7 1/2 months time? What should I do/sign/not-sign? Do I need a lawyer to contest paternity? Anything I'm missing? 3) Is there such a thing as a statement of non-paternity? If i brought something like this to her and asked her to sign it, would this absolve me of any future obligation? Answer #1: 1. She cannot waive the child's right to child support. If she ever goes on public assistance (welfare) and she identifies you as the father, the state will come after you for child support. 2. If she contacts you ever, get a paternity test before you sign or agree to anything. Getting an attorney as well would be a good idea. 3. No. See #1.

Name: Council Regulation (EEC) No 2195/91 of 25 June 1991 amending Regulation (EEC) No 1408/71 on the application of social security schemes to employed persons, self- employed persons and members of their families moving within the Community and Regulation (EEC) No 574/72 laying down the procedure for implementing Regulation (EEC) No 1408/71 Type: Regulation Subject Matter: labour market; migration; social protection; employment Date Published: nan No L 206 / 2 Official Journal of the European Communities 29 . 7 . 91 COUNCIL REGULATION (EEC) No 2195 /91 of 25 June 1991 amending Regulation (EEC) No 1408/ 71 on the application of social security schemes to employed persons , self-employed persons and members of their families moving within the Community and Regulation (EEC) No 574/ 72 laying down the procedure for implementing Regulation (EEC) No 1408/ 71 THE COUNCIL OF THE EUROPEAN COMMUNITIES, Having regard to the Treaty establishing the European Economic Community, and in particular Articles 51 and 235 , thereof, Having regard to the proposal from the Commission, drawn up after consulting the Administrative Commission on Social Security for Migrant Workers 0 ), Having regard to the opinion of the European Parliament ( 2 ), Having regard to the opinion of the Economic and Social Commitee (3 ), Whereas it is necessary to amend Regulations (EEC) No 1408 / 71 (4) and No 574/72 (5 ) as updated by Regulation (EEC) No 2001 / 83 ( 6), as last amended by Regulation (EEC) No 3427/ 89 (7 ); whereas certain of these amendments are connected with changes made by the Member States in their social security legislation , while others are of a technical nature and are intended to improve these Regulations in the light of experience gained from implementing them; Whereas the amendments made to Article 57 of Regulation (EEC) No 1408 / 71 by Regulation (EEC) No 2332 (8 ) make it necessary to alter Article 12 (4 ) of Regulation (EEC) No 1408 / 71 ; Whereas it has proved necessary, following the judgment delivered by the Court of Justice in Case 302/ 84 (Ten Holder ) on 12 June 1986, to insert a new subparagraph (f) in Article 13 (2) of Regulation (EEC) No 1408 /71 in order to determine what legislation is applicable to persons to whom one Member State's legislation ceases to be applicable without the legislation of another Member State becoming applicable to them, in accordance with one of the rules laid down in the previous subparagraphs of the same Article 13 (2 ) or one of the exceptions provided for in Articles 14 to 17 of Regulation (EEC) No 1408 / 71 ; whereas this amendment also makes it necessary to alter Article 17 of the same Regulation; Whereas a new provision must be inserted in Regulation (EEC) No 1408 /71 to exempt pensioners from the legislation of the State of residence when they are already entitled to sickness insurance, maternity and family benefits under the legislation of another Member State ; Whereas it has proved necessary to supplement Article 39 of Regulation (EEC) No 1408 / 71 in order to specify the wages or salaries to be taken into account in the case of frontier-zone workers for the application of the legislation of those Member States in which the calculation of invalidity benefits is based on wages or salaries ; Whereas it has proved necessary , following the judgement delivered by the Court of Justice in Case 58 / 87 (Rebmann) on 29 June 1988 , to insert a new paragraph in Article 45 of Regulation (EEC) No 1408 / 71 providing that the Member State in which the worker resides shall take account for pensions purposes of periods of full unemployment completed by this worker in respect of which benefits have been paid by that State under Article 71 ( 1 ) ( a ) ( ii ) and (b ) ( ii ) of Regulation (EEC) No 1408 / 71 ; Whereas it has also proved necessary, for Member States whose legislation provides for the calculation of old-age benefits to be based on wages or salaries , to supplement Article 47 of Regulation (EEC) No 1408 / 71 by specifying the wage or salary to be taken into account where the frontier-zone worker has not completed any period of occupation in the country of residence; Whereas a loophole has been found in Regulation (EEC) No 1408 / 71 in respect of the unemployed persons who were formerly employed as mentioned in Article 71 ( 1 ) (a ) ( ii ) and (b ) ( ii ) who reside in the territory of the same Member State as the members of their families; whereas this loophole should be remedied by inserting a provision to the effect that the Member State of residence which provides sickness and maternity benefits under Articles 25 (2 ) and 39 (5 ) of Regulation (EEC) No 1408 /71 shall also pay family benefits to the person concerned; Whereas it seems necessary , following the addition , by this Regulation , of an eighth paragraph to Article 45 of (*) OJ No C 221 , 5 . 9 . 1990 , p. 3 . (2) OJ No C 19, 28 . 1 . 1991 , p. 579 , (3 ) OJ No C 41 , 18 . 2 . 1991 , p. 34 . (4) OJ No L 149 , 5 . 7. 1991 , p. 2 . (5) OJ No L 74 , 27. 3 . 1972, p. 1 . ( 6) OJ No L 230 , 22. 8 . 1983 , p. 6 . (7) OJ No L 331 , 16. 11 . 1989 , p. 1 . (8 ) OJ No L 224 , 2 . 8 . 1989 , p. 1 . 29. 7. 91 Official Journal of the European Communities No L 206 /3 Regulation (EEC) No 1408 / 71 , to give the person concerned the right to ask for benefits awarded under the former system to be reviewed in his favour: the introduction of a new lump-sum benefit for widows, the change in the manner of calculating earnings giving rise to Class 1 national insurance contributions and the introduction of the severe disablement allowance; Whereas Annex I to Regulation (EEC) No 1408 / 71 must be amended as a result of the transfer of responsibility for medical services in Gibraltar; Whereas Article 4 ( 10 ) ( a ) and (b ) of Regulation (EEC) No 574/72 should be amended in order to take account of the fact that the former paragraph 2 of Article 14d of Regulation (EEC) No 1408 /71 has become paragraph 3 by virtue of Article 1 of Regulation (EEC) No 3811 / 86 (*) and to include a reference to Article 8 and to the new Article 10b of Regulation (EEC) No 574 /72 inserted by this Regulation; Whereas Annex IV to Regulation (EEC) No 1408 /71 must be amended because of the introduction in the United Kingdom of a severe disablement allowance, the value of which does not depend on the length of periods of insurance; Whereas Section 'A. Belgium' to Regulation (EEC) No 1408 /71 should be amended in order to solve the problem of conversion into Belgian francs of income received by self-employed persons in a foreign currency ; Whereas , following the insertion by this Regulation into Regulation (EEC) No 1408 / 71 of a new Article 13 (2) (f) stipulating that persons to whom the legislation of a Member State ceases to apply without the legislation of another Member State becoming applicable to them shall be subject to the legislation of the Member State in whose territory they reside , a provision is required stipulating when, and under what conditions , this legislation ceases to be applicable ; Whereas certain entries in section *C. Germany' of Annex VI to Regulation (EEC) No 1408 / 71 must be amended to take account of several changes of form and substance made in German sickness insurance and pensions insurance legislation; whereas account should in particular be taken of a special feature of German legislation whereby recognition of a pension insurance period depends only on the person concerned residing in Germany; whereas , in order to protect migrant workers , the instances in which that condition is deemed to be fulfilled by workers who raise their children in another Member State should be specified ; Whereas a reference to Article 14d ( 1 ) of Regulation (EEC) No 1408 /71 must be inserted in Article 107 ( 1 ) (a) of Regulation (EEC) No 574 /72 for 'the purposes of stipulating the conversion rate to be applied for collection of contributions under this provision when it is necessary to convert into national currency the earnings received by an employed or self-employed person in the currency of another Member State; Whereas , following the insertion by this Regulation of a ' new Article 13 (2) (f) in Regulation (EEC) No 1408 /71 , » section 'G. Ireland' and and section 'L. United Kingdom' of Annex VI to Regulation (EEC) No 1408 / 71 should be : amended to clarify the implementation of this new provision with respect to these two States; Whereas section 'L. United Kingdom' of Annex I to Regulation (EEC) No 574/72 should be amended as a result of the division of the Department of Health and Social Security in Great Britain into two separate departments; Whereas section 'I. Luxembourg' of Annex VI to Regulation (EEC) No 1408 / 71 should be amended to take account of the changes made in Luxembourg legislation on old-age , invalidity and survivor's pension insurance; Whereas Annex 2 to Regulation (EEC) No 574/72 should be amended in order to take account of organizational changes in Denmark involving the division of the Danish National Social Security Office , and of the transfer of responsibility for Gibraltar's medical services and the division of the Department of Health and Social Security in Great Britain into two separate departments;Whereas section 'J. Netherlands' of Annex VI to Regulation (EEC) No 1408 /71 must be amended because of changes in the arrangements for collection of contributions and the abolition of the age limit for- the obligation to contribute to social insurance; whereas point 1 (b ) of the same section also needs to be amended in the interests of clarity; Whereas Annex 3 to Regulation (EEC) No 574/72 should be amended in order to take account of the division of the Danish National Social Security Office , of the fact that as from 1 January 1991 the German accident insurance bodies Whereas section 'L. United Kingdom' of Annex VI to Regulation (EEC) No 1408 / 71 should be amended as a result of the abolition of the British maternity allowance, 0 ) OJ No L 355 , 16 . 12 . 1986 , p. 5 . No L 206 /4 Official Journal of the European Communities 29 . 7 . 91 will have sole responsibility for benefits for accidents at work or occupational diseases in Germany and of the transfer of responsibility for Gibraltar's medical services and the division of the Department of Health and Social Security in Great Britain into two separate departments; Luxembourg' of Annex 10 to Regulation (EEC) No 574/72 ; Whereas section 'F. Greece' of Annex 10 to Regulation (EEC) No 574/ 72 must be amended to take account of the transfer of competence between the Greek social security institutions for mariners; Whereas section 'J. Netherlands' and section 'L. United Kingdom' of Annex 10 to Regulation (EEC) No 574/72 must be amended following the changes in the responsibilities of the Netherlands Social Insurance Council and the division of the Department of Health and Social Security in Great Britain into two separate departments, Whereas Annex 4 to Regulation (EEC) No 574 /72 must be amended to take account of the new function assigned to the Belgian Accidents at Work Fund, which is to act as the liaison body for accidents at work, the division of the Danish National Social Security Office , the change in the name of the German liaison body for sickness insurance and the division of the Department of Health and Social Security in Great Britain into two separate departments ; HAS ADOPTED THIS REGULATION:Whereas Annex 5 to Regulation (EEC) No 574 /72 must be amended because of the change in the Agreement of 7 February 1964 between the Netherlands and Belgium on family and childbirth allowances and in order to take account of the changes in the Agreement of 20 July 1978 between Germany and Luxembourg, which no longer covers benefits in kind for accidents at work and occupational diseases; Whereas the sections on Belgium, France, Greece, Ireland and the United Kingdom of Annex 10 to Regulation (EEC) No 574/ 72 should be amended in order to indicate the institutions designated by the competent authorities for implementation of Articles 14c of Regulation (EEC) No 1408 /71 and 12a (7 ) and ( 8 ) of Regulation (EEC) No 574/72 for those States ; Whereas sections 'B. Denmark' and 'C. Germany' of Annex 10 to Regulation (EEC) No 574/72 should be amended as necessary to take account of the division of the Danish National Social Security Office and the need to delete , in point 2 (c) of section 'C. Germany' of Annex 10 to Regulation (EEC) No 574 /72 , the reference to Article 14c ( 1 ) of Regulation (EEC) No 1408 / 71 , following the amendments made by Regulation (EEC) No 3811 / 86 ; Article 1 , Regulation (EEC) No 1408 / 71 is hereby amended as follows: 1 . In Article 12 (4 ), third line , the words 'under Article 57 (3) (c)' shall be replaced by the words 'under Article 57 (5 )', with effect from 2 August 1989 . 2 . In Article 13 (2) the following subparagraph shall be added: '( f) a person to whom the legislation of a Member State ceases to be applicable, without the legislation of another Member State becoming applicable to him in accordance with one of the rules laid down in the aforegoing subparagraphs or in accordance with one of the exceptions or special provisions laid down in Articles 14 to 17 shall be subject to the legislation of the Member State in whose territory he resides in accordance with the provisions of that legislation alone.' 3 . Article 17 shall be replaced by the following : 'Article 17 Exceptions to Articles 13 to 16 Two or more Member States , the competent authorities of these States or the bodies designated by these authorities may by common agreement provide for exceptions to the provisions of Articles 13 to 16 in the interest of certain categories of persons or of certain persons.' 4 . The following Article shall be added in Title II : 'Article 17a Special rules concerning recipients of pensions due under the legislation of one pr more Member State Whereas section 'C. Germany' of Annex 10 to Regulation (EEC) No 574 /72 must be amended to take account of the fact that as from 1 January 1991 the German accident insurance bodies will have sole responsibility for benefits in respect of accidents at work or occupational diseases in Germany, of the fact that the former paragraph 2 of Article 14d of Regulation (EEC) No 1408 / 71 has become paragraph 3 and of the change in the name of the German liaison body for sickness insurance; Whereas the former paragraph 2 of Article 14d of Regulation (EEC) No 1408 / 71 has become the new paragraph 3 and the references to this provision must therefore be corrected in sections 'F. Greece' and 'I. 29 . 7 . 91 Official Journal of the European Communities No L 206 / 5 the pension on the basis of the salary it used as the reference for providing that unemployment benefit in accordance with the legislation which it administers.' The recipient of a pension due under the legislation of a Member State or of pensions due under the legislation of several Member States who resides in the territory of another Member State may at his request be exempted from the legislation of the latter State provided that he is not subject to that legislation because of the pursuit of an occupation .' 8 . The following Article shall be added to Chapter 7, Section 1 : 'Article 72a Employed persons who have become fully unemployed An employed person who has become fully unemployed and to whom Article 71 ( 1 ) (a ) ( ii ) or ( b) ( ii ), first sentence , apply shall , for the members of his family residing in the territory of the same Member State as he, receive family benefits in accordance with the legislation of that State, as if he had been subject to that legislation during his last employment , taking account, where appropriate, of the provisions of Article 72. These benefits shall be provided by , and at the expense of, the institution of the place of residence.' 5 . The following subparagraph shall be added to Article 39 (5): 'If the legislation which that institution administers provides for the calculation of benefits to be based on wages or salaries , the institution shall take into account the wages or salaries received in the last country of employment and in the country of residence in accordance with the legislation which it administers. Where no wage or salary has been received in the country of residence , the competent institution shall refer, as necessary and in accordance with the rules laid down in its legislation, to the salaries received in the last country of employment.' 9 . The following paragraph shall be added to Article 94 : '10 . The rights of persons to whom a pension was awarded prior to the entry into force of Article 45 (8) may be reviewed at their request subject to the provisions of Article 45 (8 ).' 6 . The following paragraph shall be added to Article 45 : '8 . A period of full unemployment of a worker to whom Article 71 ( 1 ) (a ) ( ii) or (b) ( ii), first sentence, applies shall be taken into account by the competent institution of the Member State in whose territory the worker concerned resides in accordance with the legislation administered by that institution, as if that legislation applied to him during his last employment. If the period of full unemployment in the country of residence of the person concerned can be taken into account only if contribution periods have been completed in that country, this condition shall be deemed to be fulfilled if the contribution periods have been completed in another Member State .' 10 . In Annex 1 , Part II , section 'L. United Kingdom' entry (b), the words 'Group Practice Medical Scheme Ordinance 1973' shall be replaced by the words 'Medical (Gibraltar Health Authority) Ordinance 1987', with effect from 1 April 1988 . 11 . With effect from 29 November 1984 , in Annex IV, section 'L. United Kingdom': ( i ) point (a ) shall be replaced by the following: '(a) Great Britain Sections 15 and 36 of the Social Security Act 1975 . Sections 14, 15 and 16 of the Social Security Pensions Act 1975'; ( ii ) point (b ) shall be replaced by the following: '(b) Northern Ireland Sections 15 and 36 of the Social Security (Northern Ireland ) Act 1975 . Articles 16 to 18 of the Social Security Pensions (Northern Ireland ) Order 1975 .' 7. The following paragraph shall be added to Article 47 : '4 . If the legislation which the competent institution of a Member State administers requires a salary to be taken into account for the calculation of benefits, where the first and second subparagraphs of Article 45 ( 8 ) have been applied, and if, in this Member State, only periods of full unemployment with benefit in accordance with Article 71 ( 1 ) ( a) ( ii ) or the first sentence of Article 71 ( 1 ) (b ) ( ii ) are taken into consideration for the payment of pensions , the competent institution of that Member State shall pay No L 206 / 6 Official Journal of the European Communities 29 . 7 . 91 12 . Annex VI shall be amended as follows: (a ) the following entry shall be added to section 'A. Belgium': '8 . For the purposes of applying Articles 14a (2), (3 ) and (4), 14c (a ) and 14d of Regulation (EEC) No 1408 / 71 , business revenues in the reference year which serve as a basis for determining the contributions due by virtue of the social arrangements for self-employed persons shall be calculated using the mean annual rate for the year during which this income was received . The rate of conversion is the annual mean of the conversion rates published in the Official Journal of the European Communities pursuant to Article 107 (5 ) of Regulation (EEC) No 574 /72'; (b ) in section 'C. Germany' ( i ) point 6 shall be deleted with effect from 1 January 1989 ; ( ii) point 13 shall be deleted with effect from 1 January 1989 : '13 . For the purpose of applying German legislation on compulsory sickness insurance of pensioners as provided for in Article 5 ( 1 ) ( ii ) of Volume V of the Social Insurance Code (Fiinftes Buch Sozialgesetzbuch ” SGB V) and Article 56 of the Sickness Insurance Reform Law (Gesundheits ­ reformgesetz), periods of insurance or residence completed under the legislation of another Member State during which the person concerned was entitled to sickness benefits in kind are taken into account, in so far as is necessary , as periods of insurance completed under German legislation provided they do not overlap with periods of insurance completed under that legislation.'; ( iii ) point 14 shall be replaced by the following with effect from 1 January 1989 : *14 . For the grant of dash benefits pursuant to Article 47 ( 1 ) of Volume V of the German Social Insurance Code (SGB V) and Articles 200 (2) and 561 ( 1 ) of the German Law on Social Insurance (Reichsversicherungsordnung ” RVO), the German institutions shall determine the net remuneration to be taken into account for the calculation of the benefits as though the insured persons resided in the Federal Republic of Germany.'; ( iv ) the following entries shall be added with effect from 1 January 1989: '17. For the grant of benefits to persons requiring in-depth and constant care under Articles 53 et seq . of Volume V of the German Social Insurance Code (SGB V), the institution of the place of residence shall , for the provision of assistance in the form of benefits in kind , take account of periods of insurance, employment or residence completed under the legislation of another Member State as if they were periods completed under the legislation applicable to that institution . 18 . A person in receipt of a pension under German legislation and a pension under the legislation of another Member State shall be deemed, for the purposes of applying Article 27 of the Regulation, to be entitled to sickness and maternity benefits in kind if, under Article 8 ( 1 ), point 4 , of Volume V of the German Social Insurance Code (SGB V), that person is exempted from compulsory sickness insurance (Krankenversicherung).'; (v) the following entry shall be added with effect from 1 January 1986 : '19 . A period of insurance for child-rearing under German legislation is valid even for a period during which the employed person concerned brought up the child in another Member State provided that person was unable to I 29. 7 . 91 Official Journal of the European Communities No L 206/7 engage in occupational activity by virtue of Article 6 ( 1 ) of the Protection of Mothers Law (Mutterschutzgesetz) or took parental leave under Article 15 of the Federal Child-rearing Allowance Law (Bundes ­ erziehungsgeldgesetz ) and did not engage in any minor (geringfiigig) employment within the meaning of Article 8 of SGB IV.'; (c) the following entry shall be added to section 'G. Ireland': '10 . A period of subjection to Irish legislation in accordance with Article 13 (2 ) ( f) of the Regulation may not: ( i ) be taken into account under that provision as a period of subjection to Irish legislation for the purposes of Title III of the Regulation ; nor (ii ) make Ireland the competent State for the provision of benefits provided for in Articles 18 , 38 or 39 ( 1 ) of the Regulation.'; (d ) in section 'I. Luxembourg': ( i ) point 1 shall be replaced by the following with effect from 1 January 1988 : '1 . Notwithstanding Article 94 (2 ) of the Regulation, periods of insurance or periods treated as such completed by employed persons or self-employed persons under Luxembourg legislation for invalidity , old-age or death pension insurance either before 1 January 1946 or before an earlier date stipulated by a bilateral convention shall be taken into consideration for the purpose of applying this legislation only if the person concerned demonstrates that he has completed six months of insurance under the Luxembourg scheme after the date in question . Where several bilateral conventions apply, periods of insurance or periods treated as such shall be taken into consideration as from the earliest of these dates.'; ( ii ) the following entry shall be added with effect from 1 January 1988 : '4 . For the purpose of taking the insurance period provided for in Article 171 (7) of the Social Insurance Code (Code des Assurances Sociales) into account ,, the Luxembourg institution shall recognize periods of insurance completed by the person concerned under the legislation of any other Member State as if they were periods completed under the legislation which it administers. Application of the foregoing provision shall be subject to the condition that the person concerned last completed insurance periods under Luxembourg legislation.'; (e ) in section 'J - Netherlands': ( i ) in point 1 (b), the words 'at the time at which the aforementioned Article is applicable to him' shall be deleted with effect from 1 November 1989; (ii) in point 2 , the following shall be added with effect frcftn 1 January 1990: '( i ) For the purposes of Article 46 (2) of the Regulation, only periods of insurance completed after the age of 15 years under the Netherlands General Law on Old-Age Insurance (AOW) shall.be taken into account as periods of insurance;'; ( iii) in point 3 , (a ) shall be replaced by the following with effect from 1 January 1990: '(a) ( i ) for the purposes of Article 46 (2) of the Regulation, only periods of insurance completed after the age of 15 years under .the Netherlands General Law on Insurance for Widows and Orphans (AWW) shall be taken into account as periods of insurance ; / No L 206/ 8 Official Journal of the European Communities 29 . 7 . 91 (ii) for the purposes of the provisions of Article 46 (2 ) of the Regulation, periods before 1 October 1959 during which the employed or self-employed person resided in the territory of the Netherlands after the age of 15 years or during which, whilst residing in the territory of another Member State, he pursued an activity as an employed person in the Netherlands for an employer established in that country shall also be considered as periods of insurance i completed under Netherlands legislation relating to general insurance for widows and orphans.'; (f) in section 'L. United Kingdom': (i) in point 3 (b), after the words 'if, pursuant to Title II of the Regulation', the following words shall be added: 'excluding Article 13 (2) (f)'; ( ii ) point 4 shall be replaced by the following with effect from 1 April 1988 : '4 . The widow's payment provided under United Kingdom legislation shall be treated, for the purposes of Chapter 3 of the Regulation, as a survivor's pension.'; (iii ) in point 5 , after the words ' in accordance with Title II of the Regulation', the following words shall be added: 'excluding Article 13 (2) (f)'; ( iv) point 13.1 . shall be replaced by the following: '13.1 . For the purpose of calculating an earnings factor with a view to determining the right to benefits under United Kingdom legislation, subject to point 15 , each week during which an employed or self ­ employed person has been subject to the legislation of another Member State and which commenced during the relevant income tax year within the meaning of United Kingdom legislation shall be taken into account in the following way: (a) periods between 6 April 1975 and 5 April 1987: ( i) for each week of insurance, employment or residence as an employed person, the person concerned shall be deemed to have paid contributions as an employed earner on the basis of earnings equivalent to two-thirds of that year's upper earnings limit; ( ii) for each week of insurance, self-employment or residence as a self-employed person the person concerned shall be deemed to have paid class 2 contributions as a self-employed earner; (b) periods from 6 April 1987 onwards : ( i) for each week of insurance, employment or residence as an employed person, the person concerned shall be deemed to have received, and paid contributions as an employed earner for, weekly earnings equivalent to two-thirds of that week's upper earnings limit; ( ii ) for each week of insurance, self-employment or residence as a self-employed person the person concerned shall be deemed to have paid class 2 contributions as a self-employed earner; (c) for each full week during which he has completed a period treated as a period of insurance, employment, self-employment or residence, the person concerned shall be deemed to have had contributions or earnings credited to him as appropriate, but oniy to the extent required to bring his total earnings factor for that tax year to the level required to make that tax year a reckonable year within the meaning of the United Kingdom legislation governing the crediting of contributions or earnings.'; 29 . 7 . 91 Official Journal of the European Communities No L 206/9 (v) point 13.2 ( a) shall be replaced by the following: '(a ) if in any income tax year starting on or after 6 April 1975 , an employed person has completed periods of insurance , employment or residence exclusively in a Member State other than the United Kingdom, and the application of paragraph 1 (a) ( i ) or paragraph 1 (b ) ( i ) results in that year being counted as a qualifying year .within the meaning of United Kingdom legislation for the purposes of Article 46 (2 ) (a) of the Regulation, he shall be deemed to have been insured for 52 weeks in that year in that other Member State ;'; (vi)the following entries shall be added: '17 . For the purposes of entitlement to severe disablement allowance any employed or self-employed person who is, or has been, subject to United Kingdom legislation in accordance with Title II of the Regulation, excluding Article 13 (2 ) (f): (a) shall , for the entire period during which he was employed or self-employed and subject to United Kingdom legislation whilst present or resident in another Member State, be treated as having been present or resident in the United Kingdom; (b) shall be entitled to have periods of insurance as an employed or self-employed person completed in the territory and under the legislation of another Member state treated as periods of presence or residence in the United Kingdom. 18 . A period of subjection to United Kingdom legislation in accordance with Article 13 (2 ) (f) of the Regulation may not: ( i ) be taken into account under that provision as a period of subjection to United Kingdom legislation for the purposes of Title III of the Regulation, nor ( ii ) make the United Kingdom the competent State for the provision of the benefits provided for in Articles 18 , 38 or 39 ( 1 ) of the Regulation. 19 . Subject to any conventions concluded with individual Member States , for the purposes of Article 13 (2 ) (f) of the Regulation and Article 10b of the Implementing Regulation, United Kingdom legislation shall cease to apply at the end of the day on the latest of the following three days to any person previously subject to United Kingdom legislation as an employed or self-employed person : (a) the day on which residence is transferred to the other Member State referred to in Article 13 (2 ) (f); (b) the day of cessation of the employment or self-employment, whether permanent or temporary, during which that person was subject to United Kingdom legislation; (c) the last day of any period of receipt of United Kingdom sickness or maternity benefit (including benefits in kind for which the United Kingdom is the competent State) or unemployment benefit which (i ) began before the date of transfer of residence to another Member State or, if later , ( ii ) immediately followed employment or self-employment in another Member State while that person was subject to United Kingdom legislation . No L 206/ 10 Official Journal of the European Communities 29 . 7. 91 20 . The fact that a person has become subject to the legislation of another Member State in accordance with Article 13 (2) (f) of the Regulation, Article 10b of the Implementing Regulation and point 19 above, shall not prevent : (a ) the application to him by the United Kingdom as the competent State of the provisions relating to employed or self-employed persons of Title III , Chapter 1 and Chapter 2 , Section 1 or Article 40 (2) of the Regulation if he remains an employed or self-employed person for those purposes and was last so insured under the legislation of the United Kingdom; (b ) his treatment as an employed or self-employed person for the purposes of Chapter 7 and 8 of Title III of the Regulation or Articles 10 or 10a of the Implementing Regulation, provided United Kingdom benefit under Chapter 1 of Title III is payable to him in accordance with paragraph (a).' Article 2 Regulation (EEC) No 574 /72 is hereby amended as follows: 1 . In Article 4 ( 10): ( i) under (a), with effect from 1 January 1987, the words 'Article 14d (2)' shall be replaced by the words 'Article 14d (3)' and the following words shall be inserted after the word 'Regulation': 'Article 14c'; ( ii ) under (b), after the words 'Article 6 ( 1 )', the following words shall be inserted : 'Article 8 , Article 10b'. 2. The following Article shall be inserted in Tide III : 'Article 10b Formalities pursuant to Article 13 (2) (f) of the Regulation The date and conditions on which the legislation of a Member State ceases to be applicable to a person referred to in Article 13 (2) (f) of the Regulation shall be determined in accordance with that legislation . The institution designated by the competent authority of the Member State whose legislation becomes applicable to this person shall apply to the institution designated by the competent authority of the former Member State with a request to specify this date.' 3 . In Article 107 ( 1 ) ( a), after the words 'Article 12 (2), (3 ) and (4)' the words 'Article 14d ( 1 )' shall be added. 4 . In Annex 1 , section 'L. United Kingdom': ( i) point 1 shall be replaced by the following with effect from 25 July 1988 : '1 . Secretary of State for Social Security, London'; (ii) the following point shall be inserted with effect from 25 July 1988 : 'l.a Secretary of State for Health , London'; ( iii ) point 6 shall be replaced by the following with effect from 1 April 1988 : '6 . Director of the Gibraltar Health Authority.' 29 . 7 . 91 Official Journal of the European Communities No L 206 / 11 5 . Annex 2 shall be amended as follows : (a ) in section 'B. Denmark' with effect from 1 July 1989 : ( i ) in point 2 (a), the words 'Sikringsstyrelsen (National Social Security Office)' shall be replaced by the words 'Socialministeriet (Ministry for Social Affairs)'; , ( ii ) in point 3 (a), the words 'Sikringsstyrelsen (National Social Security Office)' shall be replaced by the words 'Socialministeriet (Ministry for Social Affairs)'; ( iii ) in point 4 (a ) the words 'Sikringsstyrelsen (National Social Security Office)' shall be replaced by the words 'Arbejdsskadestyrelsen (National Office for , Accidents at Work and Occupational Diseases)'; (b) in section 'L. United Kingdom': ( i ) in point 1 , the entry concerning Gibraltar shall be replaced by : '(Gibraltar Health Authority' with effect from 1 April 1988 ; ( ii ) in point 2 , in the entry concerning Great Britain , the words 'Health and shall be deleted with effect from 25 July 1988 . I 6 . Annex 3 shall be amended as follows : (a) in section 'B. Denmark', with effect from 1 July 1989 : in part I ” Institutions of the place of residence: ( i) in points (b) and (c) ( i ) the words 'Sikringsstyrelsen (National Social Security Office)' shall be replaced by the words 'Socialministeriet (Ministry of Social Affairs)'; ( ii ) in point (d ) ( i ) the words 'Sikringsstyrelsen (National Social Security Office)' shall be replaced by the words 'Arbejdsskadestyrelsen (National Office for Accidents at Work and Occupational Diseases)'; ( iii ) in point (e) the words 'Sikringsstyrelsen (National Social Security Office)' shall be replaced by the words 'Socialministeriet (Ministry of Social Affairs)'. in part II ” Institutions of the place of stay, in point (b ) ( i ), the words 'Sikringsstyrelsen (National Social Security Office)' shall be replaced by the words 'Arbejdsskadestyrelsen (National Office for Accidents at Work and Occupational Diseases)'. (b) in section 'C. Germany' point 2 shall be replaced by the following with effect from 1 January 1991 : '2 . Accident insurance : In all cases , the Hauptverband der gewerblichen Berufsgenossenschaften (Federation of Professional and Trade Associations in Industry), St Augustin'; (c) in section 'L. United Kingdom': ( i ) in point 1 , the entry for Gibraltar shall be replaced by : 'Gibraltar: Gibraltar Health Authority' with effect from 1 April 1988 ; ( ii ) in point 2, in the entry for Great Britain , the words 'Health and...' shall be deleted with effect from 25 July 1988 ; ( iii ) in point 3 , in the entry for Great Britain , the words 'Health and...' shall be deleted with effect from 25 July 1988 ; No L 206 / 12 Official Journal of the European Communities 29 . 7. 91 7 . Annex 4 shall be amended as follows: (a ) in section 'A. Belgium', point 4 shall be replaced by the following with effect from 1 January 1988 : '4 . Accidents at work and occupational diseases (a ) Accidents at work: fonds des accidents du travail (Accidents at Work Fund), Brussels; ( b ) Occupational diseases: ministà ¨re de la prà ©voyance sociale (Ministry of Social Welfare), Brussels'; ( b) in section 'B. Denmark' with effect from 1 July 1989 : ( i ) in points 1 , 2 , 3 , 5 , 6 and 7 the words 'Sikringsstyrelsen (National Social Security Office)' shall be replaced by the words 'Socialministeriet (Ministry of Social Affairs)'; ( ii ) in point 4 , the words 'Sikringsstyrelsen (National Social Security Office)' shall be replaced by the words 'Arbejdsskadestyrelsen (National Office for Accidents at Work and Occupational Diseases)'; (c) in section 'C. Germany', point 1 , the words 'Bundesverband der Ortskrankenkassen' (National Federation of Local Sickness Funds)' shall be replaced by the words 'AOK-Bundesverband (National Federation of Local Sickness Funds)' with effect from 1 January 1991 ; (d ) in section 'L. United Kingdom', in the entry for Great Britain the words 'Health and shall be deleted, with effect from 25 July 1988 . 8 . Annex 5 shall be amended as follows : (a ) in section *9 . Belgium ” Netherlands' in the first line of entry (a), the reference to Article 6 shall be deleted with effect from 1 April 1985 ; ( b) in section '27 . Germany ” Luxembourg', entry (e) shall be deleted with effect from 1 January 1989 . 9 . In Annex 6 , section 'F. Greece' shall be replaced by the following: 4F. Greece Pension insurance for employed and self-employed persons (sickness , old age and death ): Direct payment'. 10 . Annex 10 shall be amended as follows: ( a ) in section 'A. Belgium', the following entry shall be inserted : '3 . a For the purposes of applying Article 14c of the Regulation and Article 12a of the Implementing Regulation: Employed persons : office national de sà ©curità © sociale (National Social Security Office), Brussels ; Self-employed persons: institut national d'assurances sociales pour travailleurs indà ©pendants (National Social Insurance Institute for the Self-Employed), Brussels'; (b ) in section CB. Denmark' with effect from 1 July 1989 : ( i ) in points 1 , 2 , 3 , 6 and 7 the words 'Sikringsstyrelsen (National Social Security Office)' shall be replaced by the words 'Socialministeriet (Ministry for Social Affairs)'; 29 . 7 . 91 Official Journal of the European Communities No L 206 / 13 ( ii ) point 7 shall replaced by the following : '7. For the purposes of applying Article 110 of the Implementing Regulation : ( a) benefits in pursuance of Chapters 1 to 3 and Chapters 5 , 7 and 8 of Title III of the Regulation: Socialministeriet (Ministry for Social Affairs), Kà ¸benhavn; (b ) benefits in pursuance of Chapter 4 of Title III of the Regulation : Arbejdsskadestyrelsen (National Office for Accidents at Work and Occupational Diseases), K0benhavn; (c) benefits in pursuance of Chapter 6 of Title III of the Regulation : Direktoratet for Arbejdsloshedsforsikringen (Unemployment Insurance Office), Kà ¸benhavn;' (c) in section 'C. Germany': ( i ) in point 2 (c), first sentence , the reference '( 1 )' after the words 'Article 14c' shall be deleted with effect from 1 January 1987; (ii ) point 2 (c) ( ii ) shall be replaced by the following with effect from 1 January 1989 : '( ii ) Persons not insured with sickness insurance : employed persons : Bundesversicherungsanstalt fur Angestellte (Federal Insurance Office for Clerical Staff), Berlin ; for manual workers: the competent pension insurance institution for manual workers'; ( iii ) in point 3 , the words 'Bundesverband der Ortskrankenkassen (National Federation of Local Sickness Funds)' shall be replaced by the words 'AOK-Bundesverband (National Federation of Local Sickness Funds)' with effect from 1 January 1991 ; (iv) point 8 shall be replaced by the following with effect from 1 January 1991 : '8 . For the purposes of applying: (a ) Article 36 of the Regulation and Article 102 (2) of the Implementing Regulation : AOK-Bundesverband (National Federation of Local Sickness Funds), Bonn 2; (b ) Article 63 of the Regulation and Article 102 (2) of the implementing Regulation : Hauptverband der gewerblichen Berufsgenossenschaften (Federation of Professional and Trade Associations), St Augustin ; (c) Article 75 of the Regulation and Article 102 (2) of the implementing Regulation : Bundesanstalt fà ¼r Arbeit (Federal Labour Office), Nà ¼rnberg'; (v ) in point 9 ( a), the words 'Bundesverband der Ortskrankenkassen (National Federation of Local Sickness Funds)' shall be replaced by the words 'AOK-Bundesverband (National Federation of Local Sickness Funds)' with effect from 1 January 1991 ; (vi) point 9 (b) shall be replaced by the following with effect from 1 January 1991 : * '(b ) refund of benefits in kind incorrectly provided to workers on presentation of the certified statement provided for in Article 62 (2) of the implementing Regulation: Hauptverband der gewerblichen Berufsgenossenschaften (Federation of Professional and Trade Associations), St . Augustin'. (vii) in point 10, the words 'For the purposes of applying Article 14d (2 ) of the Regulation' shall be replaced by the words 'For the purposes of applying Article 14d (3 ) of the Regulation' with effect from 1 January 1987 ; No L 206/ 14 Official Journal of the European Communities 29 . 7 . 91 (d) in section 'E. France' the following entry shall be inserted: '4 .a For the purposes of applying Article 14c of the Regulation and Article 12a (7 ) and (8 ) of the implementing Regulation: (a ) Article 12a (7) of the implementing Regulation : ( i ) employment in France and non-agricultural self-employment in another Member State: caisse mutuelle rà ©gionale (Regional Mutual Benefit Fund); ( ii) employment in France and agricultural self-employment in another Member State : caisse de mutualità © sociale agricole (Agricultural Social Insurance Mutual Benefit Fund); (b) Article 12a ( 8 ) of the implementing Regulation : ( i) non-agricultural self-employment in France: caisse mutuelle rà ©gionale (Regional Mutual Benefit Fund); ( ii ) agricultural self-employment in France: caisse de mutualità © sociale agricole (Agricultural Social Insurance Mutual Benefit Fund); (c) in the case of non-agricultural self-employment in France and employment in Luxembourg, form E 101 shall be issued to the person concerned who shall submit it to the Regional Mutual Benefit Fund'; (e) in section 'F. Greece': ( i) the following entry shall be inserted: '4 .a For the purposes of applying Articles 14c of Regulation (EEC) No 1408 / 71 and 12a of Regulation (EEC) No 574/72: (a) in general: ÎÎ ´Ã Ã Î ¼ÃŽ ± Î šÃŽ ¿ÃŽ ¹ÃŽ ½Ã ‰ÃŽ ½ÃŽ ¹ÃŽ ºÃ ŽÃŽ ½ Î ‘Ï ƒÃ †ÃŽ ±ÃŽ »ÃŽ ¯Ã ƒÃŽ µÃ ‰ÃŽ ½ (ÎÎ šÃŽ ‘), Î ‘ÃŽ ¸ÃŽ ®ÃŽ ½ÃŽ ± (Social Insurance Institute, Athens); (b) for mariners: Î ÃŽ ±Ã Ï „ÃŽ ¹ÃŽ ºÃ Œ Î ‘ÏÎ ¿ÃŽ ¼ÃŽ ±Ã ‡ÃŽ ¹ÃŽ ºÃ Œ Î ¤ÃŽ ±ÃŽ ¼ÃŽ µÃŽ ¯ÃŽ ¿ (NAT), Î Î µÃŽ ¹Ã ÃŽ ±ÃŽ ¹ÃŽ ¬Ã ‚ (Mariners Retirement Fund, Piraeus)'; ( ii ) in point 5 , the words Tor the purposes of applying Article 14d (2)' shall be replaced by the words 'For the purposes of applying Article 14d (3 )' with effect from 1 January 1987; ( iii ) point 9 shall be amended as follows: ” the first sentence shall be replaced by the following: 'For the purposes of applying Article 102 (2) of the implementing Regulation'; ” subparagraph (b) shall be replaced by the following : '(b) Benefits for mariners: Î ŸÃŽ ¯ÃŽ ºÃŽ ¿ÃŽ ² Î ÃŽ ±Ã Ï „ÃŽ ¿Ã , Î Î µÃŽ ¹Ã ÃŽ ±ÃŽ ¹ÃŽ ¬Ã ‚ (Seamen's Home, Piraeus)'; ( iv) the following entry shall be added: '9a . For the purposes of applying Article 110 of the implementing Regulation : (a) Family allowances, unemployment : Î ŸÃ ÃŽ ³ÃŽ ±ÃŽ ½ÃŽ ¹Ã ƒÃŽ ¼Ã ŒÃ ‚ Î ‘ÏÎ ±Ã ƒÃ ‡ÃŽ ¿ÃŽ »ÃŽ ®Ã ƒÃŽ µÃ ‰Ã ‚ Î •Ã ÃŽ ³ÃŽ ±Ã „ÃŽ ¹ÃŽ ºÃŽ ¿Ã  Î ”Ï Î ½ÃŽ ±ÃŽ ¼ÃŽ ¹ÃŽ ºÃŽ ¿Ã  (Î ŸÃŽ ‘ÃŽ •ÃŽ ”), Î ‘ÃŽ ¸ÃŽ ®ÃŽ ½ÃŽ ± (Labour Employment Office , Athens); (b) benefits for mariners: Î ÃŽ ±Ã Ï „ÃŽ ¹ÃŽ ºÃ Œ Î ‘ÏÎ ¿ÃŽ ¼ÃŽ ±ÃŽ ¶ÃŽ ¹ÃŽ ºÃ Œ Î ¤ÃŽ ±ÃŽ ¼ÃŽ µÃŽ ¯ÃŽ ¿ (NAT), Î Î µÃŽ ¹Ã ÃŽ ±ÃŽ ¹ÃŽ ¬Ã ‚ (Mariners Retirement Fund, Piraeus); (c) other benefits: ÎÎ ´Ã Ã Î ¼ÃŽ ± Î šÃŽ ¿ÃŽ ¹ÃŽ ½Ã ‰ÃŽ ½ÃŽ ¹ÃŽ ºÃ ŽÃŽ ½ Î ‘Ï ƒÃ †ÃŽ ±ÃŽ »ÃŽ ¯Ã ƒÃŽ µÃ ‰ÃŽ ½ (ÎÎ šÃŽ ‘), Î ‘ÃŽ ¸ÃŽ ®ÃŽ ½ÃŽ ± (Social Insurance Institute, Athens)'; 29 . 7 . 91 Official Journal of the European Communities No L 206/ 15 (f) in section 'G. Ireland', the words 'For the purposes of applying Article 14 (c) of the Regulation' shall be inserted at the beginning of point 1 ; (g) in section 'I. Luxembourg', in point 1 , the words Tor the purposes of applying Article 14d (2)' shall be replaced by the words 'For the purposes of applying Article 14d (3 )' with effect from 1 January 1987; (h) in section 'J. Netherlands', in point 1 , the words 'For the purposes of applying Article 17 of the Regulation' shall be added at. the beginning, with effect from 1 April 1990; (i ) in section 'L. United Kingdom': ( i ) point 1 shall be replaced by the following: ' 1 . For the purposes of applying Articles 14c, 14d (3 ), 17 , 36 and 63 of the Regulation and Articles 6 ( 1 ), 8 , 11 ( 1 ), 11a ( 1 ), 12a , 13 (2 ) and (3), 14 ( 1 ), (2) and (3 ), 38 ( 1 ), 70 ( 1 ), 80 (2), 81 , 82 (2), 91 (2), 102 (2), 109, 110 and 113 (2) of the implementing Regulation: Great Britain: Department of Social Security . (Overseas Branch), Newcastle-upon-Tyne NE98 1YX); Northern Ireland (excluding Articles 36 and 63 of the Regulation and Articles 102 (2) and 113 (2) of the implementing Regulation, for which see Great Britain): Department of Health and Social Services (Overseas Branch), Belfast BT1 5DP'; ( ii) point 2 shall be replaced as follows: '2. For the purposes of applying Articles 85 (2), 86 (2 ) and 89 ( 1 ) of the implementing Regulation : Great Britain: Department of Social Security , Child Benefit Centre, Newcastle-upon-Tyne NE88 1AA; Northern Ireland: Department of Health and Social Services (Overseas Branch), Belfast BT1 5DP\ Article 3 This Regulation shall enter into force on the day of its publication in the Official Journal of the European Communities. This Regulation shall be binding in its entirety and directly applicable in all Member States . Done at Luxembourg, 25 June 1991 . For the Council The President J.-C . JUNCKER

Title: The Apartment Saga - Satan Shows Herself Question:This is my first time posting here and I really need people's help and advice. Sorry for it being really long but I had to explain my frustration, this also is in Toronto, Ontario. I have posted this to r/RentingToronto and R/CandianPersonalFinance. TL;DR – Land Lord lied to both me and an elderly woman about a shared basement apartment. Satan (Land Lord’s daughter), herself decided to show up. War between light and dark, good and evil ensued. I am now prepared to bring down fire and fury to scorch the earth where both of them stand. Need help in getting my money and the elderly woman’s money back. What are the next steps that we should take to ensure this happens to no one else. The story: I am a young (M30) professional currently working for a firm out by the Airport. I needed a place to rent and answered an ad on Kijiji for a 2 bedroom basement apartment. I was only looking for 1 bedroom but over the phone The Land Lord mentioned that he had a friend that worked at the airport that was over 50 years old and worked 2 jobs that would never be home. I agreed to look at the place, and after seeing it agreed that I would take the larger room out of the two. The whole basement would be rented out for $1500 but since I had the larger room I would pay $800 while the other person would pay $700. The kitchen, bathroom and main living area would be shared space. This was at the end of October and I would be moving in on Dec 1st. Fast forward to me moving in on Saturday, I showed up with only my bed to move in, because I wasn't exactly sure how the shared living accommodations were going to work. Upon my arrival I am greeted by the Land Lord and he advises me that my roommate is now: **a 72 year old woman who doesn't speak English**. I am immediately flushed with an uneasy feeling, regarding this new situation that I did not agree to. Since I had help moving my bed up there by my brother and he needed to get on the road I move my bed and a leather chair into my basement room, so my brother can get on his way. After my brother leaves I tell the Land Lord that I will not be staying here and that since he already has my money I will be gone after the first month. He agrees and leaves. Afterwards I go downstairs to talk to the family of the elderly woman, who is moving in the same day as I am. I begin talking with the woman's son (let’s call him Jack) and daughter (let’s call her Jane). Jack and Jane tell me that they came and saw the place in November, after my initial visit where I put $800 down, and the Land Lord told them that her roommate was going to be a man over the age of 50 who works 2 jobs at the airport and would rarely be home. **THEY FED THEM THE SAME LINE AND LIE THAT THEY TOLD ME**. All of us are just overcome with the fact that we had been lied to and just had to laugh about the absurdity of a 30 year old Male living with a 72 year old woman who doesn't speak English. After about 5 minutes the Land Lord's daughter (Let's call her Satan) comes down with a legal pad of paper and wants to talk to all of us; because she senses that we are unhappy about the living situation. Satan looks at me, with her eyes glaring and horns blazing, and says, “I guess you are not happy, or are unable to live with a 72 year old woman, and that age is a deal for you? You see me; I would be able to live with an elderly woman no problem.” I said, “Well it isn’t that I am unable to live with a 72 year old woman, it is the fact that it is inappropriate. Jack and Jane are unhappy that their Mother is going to be living with a 30 year old man that they do not know, and I felt like we were lied to.” I then asked, “So if the roles were reversed and you had to live with a 72 year old man, that didn’t speak English, you would be fine with that?” She accepted the loss and said, defeated, “Oh I guess, yeah, I wouldn’t be comfortable with that.” Next, with a sharp tone, Satan asks for my ID and is going to copy down my driver's license number and get me to sign a hand written note stating that I am going to leave at the end of the month. I tell her I'm not giving her my ID and that I'd like to sleep on the matter before I make a decision. Then Satan turns to Jack and Jane and discusses there options. We all communicate to her that we are displeased and that we have been lied to. After talking, Jack and Jane agree that her Mother cannot stay there and she will only be there for a month or at most 2 months (they communicated that it might take time for them to find a new place). Satan then decides that the Mother can stay there for an additional month or two, after I leave, and she will not look for another Tenant. Satan is prepared to take a loss on the unrented room, to help out the elderly woman. I see this gesture of kindness and a thought comes to my mind. I asked Satan, "If I find a place after the first two weeks can I be refunded half of the months’ rent ($400)?" At this moment Satan decides to show her true self, and retorts with rudeness and aggression (basically soft yelling), "ABSOLUTELY NOT! The only reason I am accommodating her is because she is an elderly woman. You are not. I have been in your situation before and I had to learn hard life lessons, just like you are going to have to here. You are going to have to take the loss and act like a man about it." And then she storms out of the room and starts talking Arabic (I think?) loudly in the hallway with her Father. A couple of seconds later Satan proceeds to storm out of the basement. My reaction at this point was to remain calm and collected outwardly. On the inside it was RAAAAAAGEEEEEEEEEE FUCKIIIINNNGGG RAAAAAGGGGEEEEE!!!!!!!! I was willing to let this go and take the loss but after her lecturing and chastising me about having to suck it up and take the loss (because both Satan and her Father lied to us) I am ready to go into full blown SCORCH THE FUCKING EARTH WHERE THEY STAND mode. To add icing to the cake the basement was originally $1500 to rent both bedrooms. I agreed to me paying $800 for the larger room while the other person would pay $700 for the smaller room. I found out that the Land Lord’s did not adjust the price and charged the woman $750. I feel horrible for the elderly woman and her family because they rented moving trucks and took time off work to move their Mother into this new place. The elderly woman was crying and visibly shaken by the whole ordeal. I don't even care about the $800 I have already lost, in fact it is moot at this point. I want to right this wrong so that they can't pull this crap again. These two (Satan and her Father) are nothing but wolves hiding in sheep’s clothing, and will pull this crap again. On the day I wrote the $800 cheque I signed a lease agreement so I was worried that I would be on the hook for at least 1 more month’s rent, as the Landlord agreed that if I gave him 2 months’ notice I can leave whenever I want. I asked about the rent agreement and the Land Lord (Satan’s father) tells me that he never made me sign anything. We argue about whether or not I had signed the agreement but in the end relented because at that point I just didn’t care. My question to you fine folks is, what can I do? What should be my next step to ensure that I can make their lives as difficult as possible? Again this is not a matter about money, this is now about principle. I am sick and tired of always having to take the higher road and walking away from situations while others take advantage. I have decided to not roll over on this and that I will be standing my ground against Satan. Please offer your words of wisdom. Thank you in advance for your efforts and advice. Answer #1: > What should be my next step to ensure that I can make their lives as difficult as possible? That's not what legal advice is for.Answer #2: You rented one bedroom and you got one bedroom. That is the risk you take when you rent a single room. Does not seem like the landlord actually did anything wrong here. Luckily you signed a month to moth agreement so just pay out the notice period and moveon. Answer #3: To be completely honest there's not much you can do. You each signed your lease and your landlord is letting you both out early. That's actually a decent deal. I would recommend that next time you insist on actually meeting your future roommate before you agree to move in with them and move on with your life.

Exhibit 99.3 September 7, 2010 Dear Fellow Shareholder: Since we wrote to you last, we successfully completed our recapitalization plan through which we acquired approximately 26% of Casey’s outstanding shares for $38 per share.This plan enabled us to drive earnings accretion, reward our shareholders, and maintain the financial flexibility to continue executing on our strategic initiatives.We continue to believe that Casey’s shares are substantially undervalued at all prices in our $38 to $40 self-tender price range.Our long-term shareholders appear to agree with us as evidenced by the fact that a majority of our post-recapitalization shares were not tendered into our self-tender offer even at $40 per share (52% of the approximately 37.8 million shares remaining after the recapitalization did not tender at any point in the range). Board Recommends Against $38.50 Offer from Couche-Tard; Casey’s Receives New $40 Per Share Preliminary Proposal from Strategic Third Party, and Casey’s Board Authorizes Discussions With the Third Party to Explore Whether a Transaction Can Be Reached That Reflects Casey’s True Value and Is in the Best Interests of Casey’s, Its Shareholders and Other Constituencies. As you know, on September 1st, 2010 Alimentation Couche-Tard Inc. (“Couche-Tard”) revised its tender offer to acquire Casey’s for $38.50 per common share.Casey’s Board thoroughly reviewed the revised offer and unanimously recommends that you NOT tender into the offer, as it substantially undervalues Casey’s and is not in the best interests of Casey’s, its shareholders and other constituencies.Separately, Casey’s received a preliminary proposal from a strategic third party regarding a consensual transaction at $40 per share in cash.The Board reviewed the proposal and unanimously determined that it substantially undervalues Casey’s.While the Board firmly believes that Casey’s value substantially exceeds $40 per share, it has authorized discussions with the third party to explore whether a transaction can be reached that reflects the true value of Casey’s and is in the best interests of Casey’s, its shareholders and other constituencies.Please understand that there can be no assurances that a transaction will be reached, and the Company is under no legal obligation to provide an update on the discussions with the third party. We believe both of these proposals substantially undervalue Casey’s for a number of reasons, including: ● Casey’s value proposition has dramatically increased since Couche-Tard launched its hostile offer in April through the execution of our strategic initiatives and successful recapitalization – boosting Casey’s ability to deliver shareholder returns. ● Analysts see Casey’s intrinsic value at $45 per share – without reflecting a takeover premium. ● Casey’s continues to deliver strong financial and operational results including increasing its total stores and dividend. ● Casey’s significant value is not reflected in Couche-Tard’s offer or the third party proposal – both represent low premiums. As mentioned above, we are confident that our long-term shareholders agree that Casey’s value substantially exceeds $40 per share, as evidenced by the fact that a majority of our post-recapitalization shares were not tendered into our self-tender offer even at $40 per share.It is also worth noting that the stock prices of Casey’s peers1 have increased 39% on average from April 8th, 2010 through September 3rd, 2010.We believe all of these factors affirm that Casey’s standalone value substantially exceeds $40, the high end of our recapitalization price range. 1Peers include Couche-Tard, Susser and The Pantry. 1 Casey’s Value Proposition Has Dramatically Increased Since Couche-Tard Launched its Hostile Offer in April Through the Execution of Our Strategic Initiatives and Successful Recapitalization. Casey’s has continued to execute well on its strategic initiatives to drive growth and shareholder returns, including recently signing commitments to acquire 52 stores by the end of this calendar year – putting us ahead of schedule in achieving our fiscal 2011 goal of increasing total stores by 4-6%.Also, through our recapitalization, we have created a substantially more efficient and lower cost capital structure by securing new long-term financing at the lowest rate in the Company’s history while still maintaining debt levels that are among the lowest in the industry.The recapitalization has also enabled our long-term shareholders to benefit from proportionally greater earnings per share (“EPS”) and higher returns on equity by reducing the total number of Casey’s common shares.This has boosted our ability to deliver returns to our remaining shareholders.Our strong ongoing performance coupled with the success of our highly accretive recapitalization has taken our valuation to the next level. Analysts See Casey’s Intrinsic Value at $45 Per Share – Without Reflecting a Takeover Premium. Several of the independent research analysts who regularly follow the Company have provided price targets and EPS estimates that take into account the recapitalization.These analysts’ price targets and EPS estimates for fiscal 2011 and 2012 are significantly higher than the estimates provided by the research analysts who reported such information for Casey’s just five months ago and reflect the Company’s strong fundamentals, the results of the recapitalization and the Company’s ability to deliver future value through its ongoing strategic initiatives.Their estimates do not reflect any change in control premium.The median EPS estimate of research analysts who have provided EPS estimates that take into account the recapitalization reflects a 20.8% increase in 2011 fiscal year EPS and a 25.9% increase in 2012 fiscal year EPS over the median fiscal 2011 and 2012 EPS estimates of analysts who covered Casey’s prior to April 9, 2010, the day Couche-Tard announced its original offer.Assuming the recapitalization occurred at the beginning of our 2011 fiscal year, the median post-recapitalization 2011 EPS estimate, on a pro forma basis, would be $2.84 per share, a 25.8% increase. Additionally, the current median price target of the analysts who have provided price targets that take into account the recapitalization is $45 per share, a 36.4% increase over the median price target of the analysts who had provided price targets for Casey’s shares prior to Couche-Tard’s original offer. 2 Median Price Targets and EPS Estimates by Analysts Who Have Provided Estimates that Take Into Account the Recapitalization Casey’s Continues to Deliver Strong Financial and Operational Results Including Increasing its Total Stores and Dividend. Casey’s first quarter fiscal 2011 results demonstrate that we are continuing to execute well on our strategic initiatives to drive growth and shareholder value.Excluding costs pertaining to the evaluation of the Couche-Tard offer and related actions, we achieved basic EPS in-line with analysts’ consensus estimates. ● Increasing Total Stores. We are making substantial progress in expanding our footprint in the Midwest – a key element of our growth strategy – through acquisitions and construction of new stores.Fiscal year to date, we have signed commitments to acquire an additional 52 stores by the end of this calendar year.We are ahead of schedule in achieving our fiscal 2011 goal of increasing Casey’s total number of stores by 4-6%, and we expect to announce additional acquisitions in the near future. ● Strong Gas Volume and Margins. We are continuing to benefit from momentum in gasoline margins, which have increased markedly in recent months, as well as from strong gas volume sales.Our gasoline margin continues to benefit from a responsive pricing environment, which we expect to continue.As a company that pumps approximately 350 million gallons per quarter, the margin improvements have the potential to contribute significantly to our results.We are well on track to achieve our fiscal 2011 goals of increasing same-store gasoline gallons sold by 1% with an average margin of 13.5 cents per gallon. ● Industry Leading Inside Same Store Sales Margins. We continue to benefit from having the highest inside same-store sales margins in the industry and have achieved positive inside same-store sales growth for 27 consecutive quarters, averaging 5.9% for the five fiscal years ended April 30, 2010, versus the peer average of 3.5% for the comparable fiscal period. ● Strong Balance Sheet. Casey’s balance sheet remains strong with $208 million in cash and cash equivalents at the end of the first quarter of fiscal 2011, pro forma for the recapitalization,up from about $152 million at the end of last quarter.Our post-recapitalization debt levels are among the lowest in the industry at just 2.5x EBITDA. This consistently solid performance is driving EPS growth and coupled with the success of our accretive recapitalization has enabled us to increase our dividend.As disclosed, the Board recently declared a quarterly dividend of $0.135 per share, a 35% increase.The Board is allocating the same aggregate dollars as last quarter even though the total share count is 26% lower as result of the recapitalization.Thus, shareholders are receiving the considerable benefits of the highest dividend payout ratio in the convenience store industry and the significant EPS accretion that has resulted from the successful recapitalization. 2 Includes estimates by BMO Capital Markets, Morgan Keegan, Feltl and Company, Northcoast Research, RBC Capital Markets and Sidoti (other analysts have not yet updated their price targets to reflect Casey’s recapitalization) 3 Includes estimates by BMO Capital Markets, Northcoast Research, RBC Capital Markets and Sidoti (other analysts have not yet updated their FY 2011 estimates to reflect Casey’s recapitalization) 4 Includes estimates by BMO Capital Markets, Feltl and Company, Northcoast Research, RBC Capital Markets and Sidoti (other analysts have not yet updated their FY 2012 estimates to reflect Casey’s recapitalization) 3 Casey’s Significant Value is Not Reflected in Couche-Tard’s Offer or the Third Party Proposal – Both Represent Low Premiums. The revised Couche-Tard offer and the third party proposal are low when measured against any number of valuation metrics.For example: ● As a best-in-class operator, Casey’s has historically reported increasing EBITDA and consistent operating cash flow generation.Yet the trailing EBITDA multiples implied by the $38.50 per share offer and the $40 per share proposal are 7.1x LTM EBITDA and 7.4x LTM EBITDA, respectively, for the 12 months ended July 31, 2010 (based on Casey’s LTM EBITDA of $273 million, including the addback of a one-time charge of $13.1 million related to the evaluation of the unsolicited offer and related actions by Couche-Tard). The 7.1x and 7.4x LTM EBITDA multiples compare to a five year average LTM EBITDA trading multiple of 7.6x for the convenience store sector (the peer group plus Casey’s), a multiple which does not reflect any control premium. ● Additionally, the $40 per share proposal represents merely a 5.8% premium to Casey’s average stock price of $37.82 per share since the expiration of our highly accretive recapitalization and prior to the September 1st announcement of Couche-Tard’s revised offer.It is a 5.6% premium to Casey’s average stock price since the announcement of our recapitalization and prior to the September 1st announcement of Couche-Tard’s revised offer and a 5.3% premium to the $38 price at which Casey’s repurchased shares in the recapitalization in a non-change of control transaction.These premiums represented by the $40 per share proposal are substantially lower than the 31% median premium for all cash acquisitions of U.S. companies in transactions valued between $1 billion and $3 billion in 2009 and 2010 to date. Casey’s Board of Directors is Acting in Shareholders’ Best Interests. Casey’s Board of Directors, which consists of seven independent members out of eight total directors, has an exceptional track record of creating value for Casey’s shareholders.If you had purchased Casey’s stock in fiscal 2001, you would have received a cumulative total return on your investment of 247% at the end of fiscal 2010. Your average return for each of those years would have been 13%. Such remarkable returns reflect not only Casey’s stock appreciation but also our Board’s commitment to increasing our dividend. Casey’s also has a strong history of transparency and good governance.In fact, for the last two years Casey’s was recognized by Forbes.com as one of the 100 most “trustworthy companies” in the United States in an assessment of “true quality of corporate accounting and management practices.” Casey’s Board has positioned the Company to continue to grow and create significant value for shareholders.As we have demonstrated, every one of us on Casey’s Board takes our fiduciary duties very seriously.We have acted – and will continue to act in the best interests of Casey’s, our shareholders, and our other constituencies as we move forward. Don’t Turn the Keys Over to Couche-Tard at This Critical Time in Casey’s History. We believe Couche-Tard’s proposal to replace our highly qualified, experienced directors with its hand-picked nominees has one purpose – a quick sale of Casey’s to Couche-Tard at a low price.Casey’s Board unanimously recommends shareholders not tender into Couche-Tard’s inadequate offer.We also urge shareholders to vote “FOR” the highly qualified slate of Casey’s directors at our upcoming annual meeting by voting for the nominees listed on the enclosed WHITE proxy card.We urge you to discard any blue proxy card sent to you by Couche-Tard or its affiliates. Even a vote against Couche-Tard’s nominees on Couche-Tard’s blue proxy card will cancel any previous proxy submitted by you. 4 All shareholders of record as of July 29, 2010, are entitled to vote at the annual meeting.To vote FOR Casey’s nominees, please sign, date and return the WHITE proxy card or vote via telephone or internet by following the instructions indicated on the WHITE proxy card.MacKenzie Partners, Inc. is acting as Casey’s proxy solicitor and information agent for the tender offer and can be reached toll-free at (800) 322-2885 or (212) 929-5500.You can also find additional relevant information at www.supportcaseys.com. Thank you. Robert Myers President and Chief Executive Officer Goldman, Sachs & Co. is acting as financial advisor to Casey’s, and Cravath, Swaine & Moore LLP and Ahlers & Cooney, PC are providing legal advice. Important Information In response to the tender offer commenced by Alimentation Couche-Tard Inc. (“Couche-Tard”) referred to in this communication, Casey’s General Stores, Inc. (“Casey’s”) has filed a solicitation/recommendation statement with the Securities and Exchange Commission (the “SEC”).Investors and security holders are urged to read the solicitation/recommendation statement with respect to the tender offer and, when they become available, any other relevant documents filed with the SEC, because they contain important information.Investors and security holders may obtain a free copy of the solicitation/recommendation statement with respect to the tender offer and other documents (when available) that Casey’s files with the SEC at the SEC’s website at www.sec.gov and Casey’s website at www.caseys.com. In addition, the solicitation/recommendation statement with respect to the tender offer and other documents (when available) filed by Casey’s with the SEC may be obtained from Casey’s free of charge by directing a request to Casey’s General Stores, Inc., Attn: Investor Relations, Casey’s General Stores, Inc., One Convenience Blvd., P.O. Box 3001, Ankeny, Iowa 50021-8045. Casey’s has filed with the SEC and mailed to its shareholders a definitive proxy statement and white proxy card in connection with its 2010 Annual Meeting of Shareholders. Investors and security holders are urged to read the definitive proxy statement and, when they become available, any other relevant documents filed with the SEC, because they contain important information. Investors and security holders may obtain a free copy of the definitive proxy statement and, when available, other documents that Casey’s files with the SEC at the SEC’s website at www.sec.gov and Casey’s website at www.caseys.com. In addition, the definitive proxy statement and, when available, other documents filed by Casey’s with the SEC may be obtained from Casey’s free of charge by directing a request to Casey’s General Stores, Inc.,Attn:Investor Relations, Casey’s General Stores, Inc., One Convenience Blvd., P.O. Box 3001, Ankeny, Iowa 50021-8045. Certain Information Concerning Participants Casey’s, its directors and executive officers may be deemed to be participants in the solicitation of Casey’s security holders in connection with its 2010 Annual Meeting of Shareholders. Security holders may obtain information regarding the names, affiliations and interests of such individuals in Casey’s Annual Report on Form10-K for the year ended April 30, 2010, which was filed with the SEC on June 29, 2010, and its definitive proxy statement for the 2010 Annual Meeting of Shareholders, which was filed with the SEC on August 12, 2010. To the extent holdings of Casey’s securities have changed since the amounts printed in the definitive proxy statement for the 2010 Annual Meeting of Shareholders, such changes have been or will be reflected on Statements of Change in Ownership on Form 4 filed with the SEC. These documents (when available) may be obtained free of charge from the SEC’s website at www.sec.gov and Casey’s website at www.caseys.com. Forward-Looking Statements This communication contains various “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.Forward-looking statements represent our expectations or beliefs concerning future events that may not prove to be accurate.The words “believe,” “expect,” “anticipate,” “intend,” “estimate,” “project” and similar expressions are used to identify forward-looking statements.We caution you that these statements are further qualified by important factors that could cause actual results to differ materially from those in the forward-looking statements, including the risk that our cash balances and cash generated from operations and financing activities will not be sufficient for our future liquidity and capital resource needs, competition in the industry in which we operate, changes in the price or supply of gasoline, tax increases or other changes in the price of or demand for tobacco products, potential liabilities and expenditures related to compliance with environmental and other laws and regulations, the seasonality of demand patterns, weather conditions, future actions by Couche-Tard in connection with its unsolicited tender offer to acquire Casey’s, the risk that disruptions or uncertainty from Couche-Tard’s unsolicited tender offer will divert management’s time and harm Casey’s relationships with our customers, employees and suppliers; the increased indebtedness that the Company has incurred to purchase shares of our common stock in our self tender offer; the price at which we purchased shares of our common stock in our self tender offer and the number of shares purchased in such offer; the price and time at which we may make any additional repurchases of our common stock following completion of our self tender offer as well as the number of shares acquired in such repurchases and the terms, timing, cost and interest rate on any indebtedness incurred to fund such repurchases; and the other risks and uncertainties included from time to time in our filings with the SEC.Further, there can be no assurance that a transaction with the strategic third party referred to in this communication will be reached on terms that the Casey’s Board of Directors (the “Board”) will determine are in the best interests of Casey’s, its shareholders and its other constituencies.Moreover, even if the Board were to approve a transaction with such third party, there can be no assurance that the approved transaction will be consummated.We further caution you that other factors we have not identified may in the future prove to be important in affecting our business and results of operations.We ask you not to place undue reliance on any forward-looking statements because they speak only of our views as of the statement dates.We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. # # # 5

June 22, United States Securities and Exchange CommissionDivision of Corporation FinanceOne Station PlacetreetWashington, D.C. 20549-6010Attn: Daniel Morris, Special Counsel Re: Vishay Precision Group, Inc. Amendment No. 6 to Registration Statement on Form 10 Filed June 22, 2010 File No. 001-34679 Dear Mr.

Exhibit 10.26   CONFIDENTIAL re signation AGREEMENT AND GENERAL RELEASE This Confidential Resignation Agreement and General Release (“Agreement”), is made and entered into by and between the undersigned individual, Timothy P. Mihalick (“you”) and Investors Real Estate Trust, a North Dakota real estate investment trust (“IRET”) (the signatories to this Agreement will be referred to collectively as the “Parties”). WHEREAS, IRET employed you as Chief Executive Officer; and WHEREAS, the Parties desire to amicably sever the employment relationship that existed between them; and WHEREAS, you have agreed to voluntarily resign your employment with IRET effective April 27, 2017; and WHEREAS, in consideration of the services rendered by you and the additional undertakings provided for herein, IRET has agreed to compensate you by providing the severance compensation described in this Agreement; and WHEREAS, the Parties have agreed, without IRET admitting liability of any kind, to enter into this Agreement pursuant to which each and every claim and/or cause of action asserted or which could have been asserted by you against IRET will be forever and finally released; and WHEREAS, both Parties have read and understand the terms and provisions of this Agreement, and desire and intend to be bound by the terms and provisions of this Agreement. NOW, THEREFORE, in consideration of the covenants and mutual promises and agreements herein contained, and other valuable consideration, the sufficiency of which is hereby acknowledged, the Parties agree as follows: 1. Release and Waiver Agreement.  You acknowledge and understand that this Agreement is a release and waiver contract and that this document is legally binding.  You and IRET understand that by signing this Agreement, each party has read and understood each provision and is agreeing to all of the provisions set forth in the Agreement. 2. Claims Covered by Agreement.  You and IRET acknowledge and understand that this Agreement applies only to claims which accrue or have accrued prior to the date this Agreement is executed by you and IRET. 3. Resignation of Employment.  You have resigned your position with IRET and its affiliates and subsidiaries effective April 27, 2017 (“Resignation Date”).          Confidential Resignation Agreement 1 Employee’s Initials: ________     4. Resignation Benefits.  In exchange for the promises you make in this Agreement, IRET covenants and agrees to provide you with “Resignation Benefits” as follows: a. IRET covenants and agrees to pay you compensation in the lump gross sum amount of $1,073,159.00 (the “Resignation Payment”). This Resignation Payment represents the sum of 1.5 times your current base salary plus 1.5 times your average annual earned cash bonus for the previous three years. b. IRET shall pay you a lump gross sum amount of $25,999.60, representing eighteen (18) months of your monthly premium for the cost of benefit continuation for health benefits (i.e., medical, dental and vision) (“COBRA Benefits”) in which you have enrolled for the 2017 plan year. The COBRA Benefits will be calculated based on your monthly premium amount as of the effective date of this Agreement. You will be solely responsible for the payment of monthly premiums and if you do not properly elect COBRA coverage in accordance with the applicable benefit plans, you will not receive the COBRA Benefits. For purposes of clarity, the COBRA Benefits provided pursuant to this paragraph will run concurrently with any period of COBRA coverage you may be entitled to receive under applicable law and the applicable benefit plans, determined without regard to this paragraph.  This provision is not intended in any manner to affect your rights to continuing COBRA coverage under the applicable benefit plans.  c. IRET shall issue you 5,864 common shares of IRET originally scheduled to vest on June 22, 2017 (“Stock Benefit”) pursuant to the terms of a Stock Award Agreement between IRET and you dated June 22, 2016 (the “Stock Award Agreement”).  Pursuant to the terms of the Stock Award Agreement, a condition to the vesting of the shares and issuance of the shares to you was that you continued to be employed by IRET on each vesting date specified in the Stock Award Agreement. In consideration for the accelerated vesting of these 5,864 common shares as a Resignation Benefit under this Agreement, you agree that effective as of the date of this Agreement, the Stock Award Agreement and any and all other stock award agreements, performance stock award agreements or any other agreements between IRET and you with respect to awards of common shares, any equity securities of IRET, cash bonuses or any other compensation of any kind, except as specifically provided herein, are hereby terminated and shall be void and of no further force and effect, and you shall have no further rights, and IRET shall have no further obligations to you, thereunder. d. You acknowledge that these Resignation Benefits are in addition to any benefits to which you were already entitled. IRET’s payment of these Resignation Benefits is subject to applicable federal, state, and local taxes and withholding.  The payments to you pursuant to this Agreement are intended to be exempt from Section 409A of the Internal Revenue Code of 1986, as amended (“Section 409A”), as short-term deferrals pursuant to Treas. Reg. § 1.409A-1(b)(4) and shall be construed and administered in accordance with such exemption. 5. Release and Waiver.  In consideration for the Resignation Benefits described in this Agreement, you agree to the following: a. You knowingly and voluntarily agree to waive and release IRET, its parents, affiliates, predecessors in interest and its subsidiaries, their respective officers, directors, employees, stockholders, representatives and agents, including their successors and assigns         Confidential Resignation Agreement 2 Employee’s Initials: ________     (collectively with the “Released Parties”), with respect to any and all claims, losses, liabilities, obligations and causes of action, known and unknown, arising out of, connected with, or relating to: (i) your employment; (ii) the Released Parties’ refusal or failure to continue your employment; (iii) the termination of your employment; or (iv) any transaction, occurrence or omission which transpired prior to your execution of this Agreement, including, but not limited to, claims for compensation, commissions, bonuses, deferred compensation, stock grants, other wages and benefits, breach of contract, wrongful termination, impairment of economic opportunity, intentional infliction of emotional distress, claims based on personal injury, work-related accident, any breach of implied or express covenant of good faith and fair dealing, violation of public policy, or any other contract, tort or personal injury claim, or claim based on any municipal, state or federal statute, regulation or ordinance relating to employment, employment discrimination or retaliation, 2000 et seq.; The Civil Rights Act of 1866, as amended, 42 U.S.C. § 1981; The Civil Rights Act of 1991, as amended, 42 U.S.C. § 1981a; The Age Discrimination in Employment Act of 1967, as amended, 29 U.S.C. § 621 et seq.; Americans With Disabilities Act, as amended, 42 U.S.C. § 12101 et seq.; Fair Labor Standards Act, as amended, 29 U.S.C. § 201 et seq.; Equal Pay Act, as amended, 29 U.S.C. §201 et seq.; National Labor Relations Act, as amended, 29 U.S.C. § 151 et seq.; Worker Adjustment and Retraining Notification Act, as amended, 29 U.S.C. § 2101 et seq., Employee Retirement Income Security Act of 1974, as amended, 29 U.S.C. § 1000 et seq.; Family and Medical Leave Act, as amended, 29 U.S.C. § 2601, et seq.; the North Dakota Human Rights Act, as amended, N.D. Cent. Code §14-02.4 et seq.; the North Dakota Equal Pay Act, as amended, N.D. Cent. Code § 34-06.1 et seq.; or any other statute, rule, regulation, ordinance, or common civil or other law, or judicial or administrative interpretation whether promulgated by federal, state, local or other jurisdiction or political subdivision. b. Also in consideration for (i) the Resignation Benefits, (ii) the promises and covenants contained herein, to which you acknowledge you are not otherwise entitled, and (iii) other good and valuable consideration, the sufficiency of which is hereby acknowledged, you hereby fully, finally, and completely release the Released Parties of and from any and all claims under the Age Discrimination in Employment Act of 1967, as amended, 29 U.S.C. § 621 et seq. (“ADEA”) arising on or before the date of this Agreement, and hereby acknowledge and agree that: this Agreement was negotiated at arm’s length; this Agreement is worded in a manner that you fully understand; you specifically waive any rights or claims under the ADEA; you knowingly and voluntarily agree to all of the terms set forth in the Agreement; you acknowledge and understand that any claims under the ADEA that may arise after the date of this Agreement are not waived; the rights and claims waived in this Agreement are in exchange for consideration over and above anything to which you were already undisputedly entitled; you have been and hereby are advised in writing to consult with an attorney prior to executing the Agreement; you understand that you have been given a period of up to forty-five (45) days to consider the ADEA release prior to executing it; and you understand that you have been given a period of seven (7) days from the date of the execution of the ADEA release to revoke the ADEA release, and understand and acknowledge that the ADEA release will not become effective or enforceable until the revocation period has expired.  If you elect to revoke your release of ADEA claims, the revocation must be in writing and delivered within seven (7) days from the date of your execution of the Agreement to IRET as follows: c/o Kolette McDonald, Vice President – Human Resources Management,         Confidential Resignation Agreement 3 Employee’s Initials: ________     IRET, 1400 31st Avenue SW, Suite 60, P.O. Box 1988, Minot, North Dakota 58702-1988, kmcdonald@iret.com. c. You understand and agree that by signing this Agreement, you—on behalf of yourself, your family, assigns, representatives, agents, estate, heirs, beneficiaries, executors, administrators, successors, and/or attorneys, if any—agree to give up any right or entitlement you may have under federal, state or local law against the Released Parties, concerning any events related to your employment or termination, or IRET’s failure to continue your employment. This Agreement extinguishes any potential employment discrimination claims you may have relating to your employment with IRET and IRET’s termination of your employment existing on the date you sign this Agreement. d. You further represent and warrant that you have not assigned to any third party any claim involving the Released Parties or authorized any third party to assert on your behalf any claim against the Released Parties. If a third party asserts a claim against the Released Parties on your behalf or includes you as a class member in any class action involving any claim, you agree to not accept any benefits or damages relating or arising out of such claim. e. You additionally represent, warrant and agree that you have received full and timely payment of all wages, salary, bonuses, and other compensation, and benefits that may have been due and payable to you by the Released Parties. You further represent, warrant and agree that you have received all leave or other benefits that may have been available to you under the Family and Medical Leave Act of 1993 (“FMLA”) or any comparable state law and that you have not been denied any rights or benefits available to you under the FMLA or any comparable state law. You expressly acknowledge and agree that the Released Parties are entering into this Agreement in reliance upon these representations by you. f. You understand that this Agreement also precludes you from recovering any relief as a result of any lawsuit, grievance or claims brought on your behalf and arising out of your employment or termination of, or separation from, employment, including your right to recover money in connection with a charge or investigation filed by any other individual or by the Equal Employment Opportunity Commission or any other federal or state agency, provided that nothing in this Agreement will affect your entitlement, if any, to workers’ compensation or unemployment compensation. g. You understand that this Agreement does not constitute a waiver of your right to file a charge or participate in an investigation by an administrative agency. Specifically, this Agreement does not waive your right to file a complaint with the North Dakota Department of Labor and Human Rights or to make a claim with the North Dakota Workforce Safety and Insurance agency.   6. Consultation with Attorney and Review Period. a. You are advised, and acknowledge that you have been advised, to consult with an attorney prior to executing this Agreement concerning the meaning, import, and legal significance of this Agreement.  You acknowledge that you have read this Agreement, as         Confidential Resignation Agreement 4 Employee’s Initials: ________     signified by your signature hereto, and are voluntarily executing the same for the purposes and consideration herein expressed. b. You acknowledge that you have been provided with a period of at least forty-five (45) calendar days within which to consider, review, and reflect upon the terms of this Agreement. Any discussions about or changes to the Agreement, whether material or immaterial, do not restart the running of the 45-day period. c. You have seven (7) calendar days in which you may revoke this Agreement after you sign it.  If you choose to revoke the Agreement, please notify Kolette McDonald, Vice President – Human Resources Management, IRET, 1400 31st Avenue SW, Suite 60, P.O. Box 1988, Minot, North Dakota 58702-1988, kmcdonald@iret.com in writing prior to the expiration of seven (7) calendar days after you have signed the Agreement. d. This Agreement shall not be effective until the expiration of seven  (7) calendar days after you sign it without revoking it.  Any amounts payable under this Agreement shall be paid no sooner than the expiration of seven (7) calendar days after, and no later than thirty (30) calendar days after, you sign the Agreement. 7. Confidentiality of Agreement. You shall treat the terms of this Agreement as strictly confidential. You shall not disclose the terms of this Agreement to anyone other than your spouse, attorney, accountant or tax advisor, without IRET’s prior written approval, except as may be required by law, or court order. If you receive a request pursuant to applicable law to disclose the existence or terms of this Agreement, you shall promptly notify IRET to enable it to seek a protective order or other appropriate remedy. You agree to notify your spouse, attorney, accountant and tax advisor of the confidential nature of this Agreement.  You may use this Agreement as evidence in a subsequent proceeding in which you allege a breach of this Agreement. Other than the exceptions set forth herein, you agree you shall not voluntarily introduce this Agreement as evidence in any proceeding or in any lawsuit unless required by law or court order. You agree that your confidentiality obligation is contractual and its terms are material to this Agreement. 8. Public Statements. You will not make any untrue, misleading, or defamatory statements concerning the Released Parties. You shall not directly or indirectly make, repeat or publish any false, disparaging, negative, unflattering, accusatory, or derogatory remarks or references, whether oral or in writing, concerning the Released Parties, or otherwise take any action which might reasonably be expected to cause damage or harm to the Released Parties.  However, nothing in this Agreement prohibits you from communicating with or fully cooperating in the investigations of any governmental agency on matters within their jurisdictions.  However, this Agreement does prohibit you from recovering any relief, including without limitation monetary relief, as a result of such activities. In agreeing not to make disparaging statements regarding the Released Parties, you acknowledge that you are making a knowing, voluntary and intelligent waiver of any and all rights you may have to make disparaging comments about the Released Parties including rights under the First Amendment to the United States Constitution and any other applicable federal and state constitutional rights.  _____ [initial]         Confidential Resignation Agreement 5 Employee’s Initials: ________     9. Confidential Information and Trade Secrets. You agree that you shall not, without IRET’s prior written consent, directly or indirectly, disclose, reveal or communicate, or cause or allow to be disclosed, revealed or communicated to any unauthorized person any of the Released Parties’ confidential matters, proprietary information or trade secrets, including, without limitation, lists, analyses, studies, plans, financial data, technology, programs, flow charts, information regarding products, techniques, methods, projects or strategies or any other business information or plans.  You further agree not to utilize any such confidential or proprietary information or trade secrets for your benefit or the benefit of others, including, without limitation, others in direct or indirect competition with IRET or its affiliates.  The obligations set forth in Paragraph 9 shall be in addition to any other confidentiality obligations that you may have to any of the Released Parties. You further acknowledge that the injury the Released Parties will suffer in the event of your breach of any covenant or agreement set forth in this paragraph cannot be compensated by monetary damages alone, and you therefore agree that the Released Parties, in addition to and without limiting any other remedies or otherwise, shall have the right to obtain an injunction against you. 10. IRET Property. You agree to return all IRET property, equipment, documents and other tangible things, including keys, building access card, cell phones, pagers, corporate credit cards, vehicles, and laptop or other computers, in accordance with IRET’s policies and rules, before your Resignation Benefits become payable.  You agree to not destroy, alter, erase, or otherwise change any software, data, or other information belonging to IRET.  You further agree IRET may withhold from your Resignation Benefits monies equal to the value of IRET property, equipment and tangible things you fail to return.  In addition, you agree that IRET may withhold from your Resignation Benefits any monies you owe IRET, including but not limited to, charges to the corporate credit card for which you did not submit a valid expense report, unused travel advances, salary draws, etc. 11. Consulting Services and Cooperation. From the date of this Agreement through September 30, 2017, and upon request from the chief executive officer, the chief financial officer or the general counsel of IRET, you agree to be available to provide consulting services to IRET, as described below.  You agree to be available approximately 25 hours each month (approximately 300 hours on an annualized basis), to respond promptly to inquiries from the above-named executive officers of IRET and to provide such information as they shall reasonably request.  In consideration for these consulting services, IRET will pay you $16,000.00 on the last day of each of May, June, July, August and September, 2017.  You agree that you shall cooperate with IRET in transitioning your responsibilities, providing information related to third parties with whom you worked, and promptly complying with other reasonable requests of IRET related to the conduct of IRET’s business and your former duties as an employee of IRET.  In addition, for a reasonable period after your resignation, you agree to make yourself available and to reasonably cooperate with IRET in any future claims or lawsuits involving the Released Parties where you have knowledge of the underlying facts. In addition, you agree not to voluntarily aid, assist or cooperate with any claimant or plaintiff or their attorneys or agents in any claim or lawsuit commenced against the Released Parties.  It is the intention of the parties that you will be deemed         Confidential Resignation Agreement 6 Employee’s Initials: ________     to be an independent contractor and not an employee of IRET.  IRET agrees to issue to you a Form 1099 for all payments made to you for your consulting services as described above. Nothing in this Agreement should be construed to prevent you from initiating or participating in any state of federal agency administrative proceeding or from testifying at an administrative hearing, deposition, or in court in response to a lawful subpoena. 12. Non-Admission of Wrongdoing.  This Agreement shall not in any way be construed as an admission of liability or as an admission that any of the Released Parties have acted wrongfully with respect to you. Each of the Released Parties specifically denies and disclaims any such liability or wrongful acts. 13. Knowing and Voluntary Agreement. You acknowledge and agree that after you received a copy of this Agreement: (i) you have had an opportunity to review this Agreement and to consult an attorney before signing it; and (ii) you enter into the Agreement knowingly, voluntarily and after any consultations with your attorney or other advisor as you deemed appropriate. 14. Choice of Law and Venue.  You and IRET agree that the laws of the State of North Dakota shall govern the enforceability, interpretation and legal effect of this Agreement.  The Parties agree to submit to the jurisdiction of the federal and state courts sitting in Ward County, North Dakota, for all purposes relating to the validity, interpretation, or enforcement of this Agreement, including, without limitation, any application for injunctive relief. 15. Severability.  IRET and you agree that, if any term of this Agreement shall be determined by a court to be void or unenforceable, the remaining provisions will remain effective and legally binding, and the void or unenforceable term shall be deemed not to be a part of this Agreement. 16. Amendments.  Any modification of this Agreement or additional obligation assumed by any Party in connection with this Agreement shall be binding only if evidenced in writing signed by each Party or an authorized representative of each Party. Additionally, this Agreement cannot be changed or terminated orally, but may be changed only through written addendum executed by all Parties. 17. Remedies.  Any material breach by you of the terms and conditions contained in this Agreement shall give IRET the right to discontinue the performance of any unperformed duties and obligations under this Agreement to the extent permitted by applicable law.  If you breach any term of the Agreement, any delay by IRET to enforce the Agreement shall not be deemed a waiver, acceptance, or acquiescence. No waiver shall bind IRET unless supported by consideration, executed in writing, and delivered to you by an authorized officer of IRET. 18. Entire Agreement.  This Agreement constitutes our entire agreement and supersedes any prior agreements or understanding between you and the Released Parties, except any confidentiality obligations referred to in Paragraph 9. You acknowledge that you enter into this Agreement without reliance on any written or oral promise or representation, other than those contained in this Agreement.         Confidential Resignation Agreement 7 Employee’s Initials: ________     IN WITNESS WHEREOF, this Confidential Resignation Agreement and General Release has been executed by each of the listed parties as of the date below.                     Timothy P. Mihalick   Investors Real Estate Trust                     Signature: /s/ Timothy P. Mihalick   By: /s/ Mark O. Decker, Jr.       Name: Mark O. Decker, Jr.       Title: President           Date:  April 27, 2017   Date:April 27, 2017               Confidential Resignation Agreement 8 Employee’s Initials: ________  

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-K (Mark One) (X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the fiscal year ended December 31, 2012 ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File number 0-7473 AMEXDRUG CORPORATION (Exact name of registrant as specified in its charter) Nevada 95-2251025 State or other jurisdiction of incorporation or organization (I.R.S. Employer I.D. No.) 7251 Condor Street, Commerce, CA 90040 (Address of principal executive offices) (Zip Code) Registrant’s telephone number, including area code: (323) 725-3100 Securities registered pursuant to Section 12(b) of the Exchange Act: Title of each class Name of each exchange on which registered None None Securities registered pursuant to Section 12(g) of the Exchange Act: Common stock, par value $0.001 (Title of Class) Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.Yes []No [X] Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.Yes [] No [x] Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.Yes [x] No [ ] Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant has required to submit and post such files). Yes [X] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. Large accelerated filer [] Accelerated filer [] Non-accelerated filer [] (Do not check if a smaller reporting company) Smaller reporting company [X] Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).Yes [] No [x] State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the voting and non-voting common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter. At June 30, 2012, the aggregate market value of the voting and non-voting common equity held by non-affiliates was $1,726,852 based upon 1,132,362 shares held by non-affiliates, and the average of the bid price and the asked price of $1.525 per share. After giving effect to the Company's 1 for 20 forward stock split which occurred on December 3, 2012, this would equate to the same aggregate market value based on 22,647,240 post-split shares held by non-affiliates and the average of the bid and asked price (on a post-split adjusted basis) of $0.076 per share. APPLICABLE ONLY TO CORPORATE REGISTRANTS Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.As of March 26, 2013, the registrant had 169,409,620 shares of common stock issued and outstanding, including 293,440 shares held as treasury shares. DOCUMENTS INCORPORATED BY REFERENCE List hereunder the following documents if incorporated by reference and the Part of the Form 10-K (e.g., Part I, Part II, etc.) into which the document is incorporated:(1) any annual report to security holders; (2) any proxy or information statement; and (3) any prospectus filed pursuant to Rule 424 (b) or (c) under the Securities Act of 1933.The listed documents should be clearly described for identification purposes (e.g. annual report to security holders for fiscal year ended December 24, 1980).None 1 TABLE OF CONTENTS PART I Page ITEM 1. BUSINESS 3 ITEM 1A. RISK FACTORS 16 ITEM 1B. UNRESOLVED STAFF COMMENTS 19 ITEM 2. PROPERTIES 19 ITEM 3. LEGAL PROCEEDINGS 20 ITEM 4. MINE SAFETY DISCLOSURES 20 PART II ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OR EQUITY SECURITIES 20 ITEM 6. SELECTED FINANCIAL DATA 22 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 22 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLSOURES ABOUT MARKET RISK 26 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 26 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 40 ITEM 9A. CONTROLS AND PROCEDURES 40 ITEM 9B. OTHER INFORMATION 41 PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE 41 ITEM 11. EXECUTIVE COMPENSATION 45 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS 47 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE 48 ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES 50 ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES 51 2 PART I Note Regarding Forward Looking Statements MANY STATEMENTS MADE IN THIS REPORT ARE FORWARD-LOOKING STATEMENTS THAT ARE NOT BASED ON HISTORICAL FACTS.ANY FORWARD-LOOKING STATEMENTS INCLUDED IN THIS REPORT REFLECT MANAGEMENT’S BEST JUDGMENT BASED ON FACTORS CURRENTLY KNOWN AND INVOLVE RISKS AND UNCERTAINTIES.BECAUSE THESE FORWARD-LOOKING STATEMENTS INVOLVE RISKS AND UNCERTAINTIES, THERE ARE IMPORTANT FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE EXPRESSED OR IMPLIED BY THESE FORWARD-LOOKING STATEMENTS.ACTUAL RESULTS MAY VARY MATERIALLY. ITEM 1. BUSINESS Business Development History Amexdrug Corporation, a Nevada corporation, is a holding company.It is located at 7251 Condor Street, Commerce, California 90040.Its phone number is (323) 725-3100.Its fax number is (323) 725-3133. Its website is www.amexdrug.com.Shares of Amexdrug common stock are traded on the OTC Bulletin Board under the symbol AXRX.OB.The President of Amexdrug has had experience working in the pharmaceutical industry for the past 30 years. Amexdrug Corporation, through its wholly-owned subsidiaries, BioRx Pharmaceuticals, Inc., Allied Med, Inc., Dermagen, Inc. and Royal Health Care, Inc., is a pharmaceutical and cosmeceutical company specializing in the research and development, manufacturing and distribution of pharmaceutical drugs, cosmetics and distribution of prescription and over-the-counter drugs, private manufacturing and labeling and a quality control laboratory. At Amexdrug Corporation, it is our anticipation to give our clientele the opportunity to purchase cost effective products while attempting to maximize the return of investments to our shareholders. Amexdrug Corporation distributes its products through its subsidiaries, BioRx Pharmaceuticals, Inc., Allied Med, Inc., Dermagen, Inc. and Royal Health Care, Inc. primarily to independent pharmacies and secondarily to small-sized pharmacy chains, alternative care facilities and other wholesalers and retailers in the state of California. We do not plan to introduce any new skin care over the counter (OTC) and natural products in 2012.We presently market fourteen products under the Sponix name.Our team of professionals fully pledges the effectiveness of our distinct products. Amexdrug Corporation was initially incorporated under the laws of the State of California on April 30, 1963 under the name of Harlyn Products, Inc.Harlyn Products, Inc. was engaged in the business of selling jewelry to department stores and retail jewelry stores until the mid-1990s. The name of the Company was changed to Amexdrug Corporation in April 2000 to reflect the change in the Company’s business to the sale of pharmaceutical products. The officers and directors of the Company also changed in April 2000. The domicile of the Company was changed from California to Nevada in December 2001. At that time the Company changed its fiscal year end from June 30 to December 31. 3 References in this report to “we,” “our,” “us,” the “Company” and “Amexdrug” refer to Amexdrug Corporation and also to our subsidiaries, BioRx Pharmaceuticals, Inc., Allied Med, Inc., Dermagen, Inc. and Royal Health Care, Inc. where appropriate. Amexdrug currently has 1,000,000,000 shares of authorized common stock $.001 par value, of which 169,409,620 are issued and outstanding, including 293,440 shares held as treasury shares. Forward Stock Split and Increase in Authorized Shares The Company’s Board of Directors has approved a 20 to 1 forward stock split and an increase in the number of authorized shares of the Company’s common stock from 50,000,000 shares to 1,000,000,000 shares.The par value remains at $0.001.Both of these actions were approved pursuant to Section 78.209 of the Nevada Revised Statutes, and became effective on December 3, 2013.After giving effect to the 20 to 1 forward stock split, the number of outstanding shares of the Company’s common stock increased from 8,470,481 pre-split shares to 169,409,620 post-split shares outstanding, as each outstanding share of the Company’s common stock became 20 shares as a result of the forward stock split.The effects of the 20 to 1 forward stock split have been applied to the Company’s financial statements included in this annual report as though the forward stock split had already occurred.The effects of the 20 to 1 forward stock split have also been applied to any share amounts and price per share amounts appearing in this annual report. Significant acquisitions BioRx Pharmaceuticals On November 8, 2004, Amexdrug formed a new subsidiary, BioRx Pharmaceuticals, Inc. as a Nevada corporation.BioRx Pharmaceuticals, Inc. is a wholesale manufacturer of cost saving pharmacy supplies, prescription packaging and skin care, hair and nail care products.BioRx manufactures, markets and distributes products to wholesalers, distributors and independent pharmacies. We expect to grow sales to drugstore chains in the near future.BioRX is committed to offer over the counter (OTC) products that are recommended with trust and faith by physicians, primarily podiatrists and dermatologists.The focus and mission of BioRx Pharmaceuticals, Inc. is to create, develop, manufacture and distribute products to help ease pain and restore and maintain the overall well-being of our customers.We strive for high performance and quality.Our commitment is to offer natural and OTC products that are recommended with confidence by doctors and pharmacists and that the customer can use with pleasure.Our compliance program is diligently followed through the Company. BioRx Pharmaceuticals, Inc. maintains high ethics for animal welfare and our products are never tested on animals.All products are made in the USA. A total of fourteen innovative health and wellness products have been manufactured for sale by BioRx Pharmaceuticals, Inc.These over-the-counter and natural products are effective for treatment of fungus, arthritis, sunburn protection and for healthy feet and nails.BioRx Pharmaceuticals is planning to sell these products to national chain drugstores, sport chain stores, natural food markets and other mass markets. These products will be marketed under the name of Sponix, and are being sold under the name of BioRx Pharmaceuticals. 4 Allied Med, Inc. On December 31, 2001, Amexdrug acquired all of the issued and outstanding common shares of Allied Med, Inc., an Oregon corporation, in a share exchange in a related party transaction. Allied Med, Inc., was formed as an Oregon corporation in October 1997 to operate in the pharmaceutical wholesale business of selling a full line of brand name and generic pharmaceutical products, over-the-counter (OTC) drug and non-drug products and health and beauty products to independent pharmacies, other retailers, alternative care facilities and other wholesalers. At Allied Med, our sincere interest is our customers’ needs.Our competitive discount pricing allows our customers an advantage. Amexdrug assumed the operations of Allied Med, and Amexdrug has been building on the wholesale pharmaceutical operations of Allied Med. The accompanying financial information includes the operations of Allied Med for all periods presented and the operations of Amexdrug Corporation from April 25, 2000. Dermagen, Inc. Amexdrug completed its purchase of Dermagen, Inc. on October 7, 2005.Dermagen, Inc. is now an operating subsidiary of Amexdrug.The acquisition of Dermagen, Inc. was not considered to be an acquisition of a significant amount of assets which would have required audited financial statements of Dermagen, Inc. Dermagen, Inc. is a growing manufacturing company specializing in the manufacturing and distribution of certain pharmaceuticals, medical devices, health and beauty products, and pharmacy and laboratory supplies.Dermagen, Inc. has a U.S.-FDA registered and state FDA approved manufacturing facility licensed to develop high margin skin and novel health and beauty products for niche markets.Dermagen’s competitive advantage is in its excellent product research and development. Royal Health Care Company In October 2003, Allied Med, Inc. acquired 100% of the assets of Royal Health Care Company.Royal Health Care Company is a health and beauty company which has sold specially manufactured facial and body creams, arthritic pain relief medications and an exclusive patented hair care product to pharmacies, beauty salons, beauty supply stores and other fine shops. Royal Health Care Company uses the highest quality ingredients for the finest quality products.Each product has been formulated with the essential ingredients and plant extracts to achieve optimum potential and quality.Royal Health Care Company products are manufactured by Dermagen, Inc. in an FDA approved manufacturing facility. The Royal Health Care Company assets acquired include the “Royal Health Care Company” name, logo, and related trademarks, all formulas to products manufactured for sale under the Royal Health Care Company name, and the Royal Health Care Company list of customers. These intellectual property rights were acquired without cost from a company in which Jack Amin’s wife is a principal shareholder. Mr. Amin is the CEO and Chairman of Amexdrug Corporation and Allied Med, Inc. Management believes this acquisition has provided the Company with an opportunity to increase the number of products sold by the Company, and expand the Company’s customer base. 5 On October 28, 2004, Amexdrug formed a new subsidiary, Royal Health Care, Inc. as a Nevada corporation.Royal Health Care, Inc. was formed to manufacture and sell health and beauty products. Business Segments Since 2005, Amexdrug has had operations in two segments of its business, namely:Distribution and Health and Beauty Products.Distribution consists of the wholesale pharmaceutical distribution and resale of brand and generic pharmaceutical products, over-the-counter drugs and non-drug products and health and beauty products.Health and Beauty Products consist of the manufacture and distribution of primarily health and beauty products, and also pharmacy and laboratory supplies.Manufacturing includes expertise in research and development for the healthcare industry, including pharmacy and laboratory supplies. Industry trends Pharmaceutical and healthcare markets According to IMS Health, the U.S. will remain the single largest pharmaceutical market.It forecasted 3-5% growth in 2011.Pharmaceutical sales in the U.S. were projected to reach $320 to $330 billion, up form an estimated $310 billion in 2010. The Company was unable to locate data confirming the amount of growth which actually occurred in 2011 or 2012.Sales are expected to increase due to a number of factors including: ● the value added by the introduction of new drugs into the marketplace, which more than offsets the value lost by medications losing patent protection; ● new patterns of drug lifestyle management, resulting in higher sales occurring earlier in the life cycle of a medication; ● increased money spent on direct-to-consumer marketing initiatives; ● an unprecedented period of investment by pharmaceutical companies worldwide; ● divergent growth rates expected for developed markets; ● peak years of patent expiries shift major therapies to generic dominance; and ● therapy growth dynamics allow promising new wave of innovation for new treatment options. Amexdrug believes that, currently, the pharmaceutical and health care product markets are serviced primarily by traditional full-line wholesalers. Internet The Internet has emerged as the fastest growing communications medium in history and is dramatically changing how businesses and individuals communicate and share information.The Internet has created new opportunities for conducting commerce, such as business-to-consumer and person-to-person e-commerce. Recently, the widespread adoption of intranets and the acceptance of the Internet as a business communications platform has created a foundation for business-to-business e-commerce that offers the potential for organizations to streamline complex processes, lower costs and increase productivity. Internet-based business-to-business e-commerce has experienced significant growth. Significant growth in the industry has been forecasted. Amexdrug hopes, although it cannot guarantee, that it will benefit from this growth. 6 The dynamics of business-to-business e-commerce relationships differ significantly from those of other e-commerce relationships.Business-to- business e-commerce solutions frequently automate processes that are fundamental to a business' operations by replacing various paper-based transactions with electronic communications. In addition, business-to-business e-commerce solutions must often be integrated with a customer's existing systems, a process that can be complex, time-consuming and expensive.Consequently, selection and implementation of a business-to-business e-commerce solution represents a significant commitment by the customer, and the costs of switching solutions are high. In addition, because business transactions are typically recurring and non-discretionary, the average order size and lifetime value of a business-to-business e-commerce customer is generally greater than that of a business-to-consumer e-commerce customer.These solutions are likely to be most readily accepted by industries characterized by a large number of buyers and sellers, a high degree of fragmentation among buyers, sellers or both, significant dependence on information exchange, large transaction volume and user acceptance of the Internet. Objectives and strategy Amexdrug’s key business objective is to become a leading wholesale manufacturer and distributor of pharmacy and laboratory supplies, and a leading full-line distributor of pharmaceuticals, over-the-counter products, health and beauty care products and nutritional supplements, with an emphasis on online sales. To accomplish this objective, Amexdrug plans to: ● market its name, products and services to create brand recognition and generate and capture traffic on its websites; ● provide quality products at competitive prices and efficient service; ● develop strategic relationships that increase Amexdrug’s product offerings; and ● attract and retain exceptional employees. Sales and marketing, customer service and support Our products are sold both through traditional wholesale distribution lines and e-commerce venues, including our website, www.amwrx.com.We believe our e-commerce, business-to-business model will allow the Company to leverage its existing wholesale distribution business, thus increasing its ability to effectively market and distribute its products.The Company uses a variety of programs to stimulate demand for its products and increase traffic to its websites, including a direct sales force, telemarketing, blast faxing and advertising. 7 Direct sales The Company maintains employees to act as its direct sales force to target organizations that buy and sell the products it carries. Telemarketing The Company maintains an in-house telemarketing group for use in customer prospecting, lead generation and lead follow-up. Advertising The Company advertises in trade journals, and at trade shows, and the Company will seek to engage in co-branding arrangements in the future. In addition to strategic agreements and traditional advertising, the Company, will, as revenue allows, implement online sales and marketing techniques in an attempt to increase brand recognition and direct traffic to its website. Some of these techniques may include banner ads on search engine websites and Internet directories, direct links from healthcare home pages, and mass e-mailings. Customer service and support Amexdrug believes that it can establish and maintain long-term relationships with its customers and encourage repeat visits if, among other things, the Company has excellent customer support and service. The Company currently offers information regarding its products and services and answers customer questions about the ordering process, and investigates the status of orders, shipments and payments. A customer can access the Company by fax or e-mail by following prompts located on the Company's website or by calling the Company's toll-free telephone line. Promotion of website As revenue allows, the Company will promote, advertise and increase recognition of its website through a variety of marketing and promotional techniques, including: ● developing co-marketing agreements with major online sites and services; ● enhancing online content and ease of use of its website; ● enhancing customer service and technical support; ● advertising in trade journals and at industry trade shows; ● conducting an ongoing public relations campaign; and ● developing other business alliances and partnerships. Distribution The Company distributes its Allied Med products from its facility in Commerce, California.Dermagen, Inc. manufactures and distributes its products from Fullerton, California.The Company fills orders with a combination of existing inventory and products it orders from suppliers. Currently, customers are receiving their products within 24 to 48 hours of order placement. As funds allow, the Company will increase its in-house inventory of products to allow for shorter delivery times. 8 Purchasing and Manufacturing Allied Med, Inc. purchases its products primarily from manufacturers and secondarily from other wholesalers and distributors. Allied Med’s purchasing department constantly monitors the market to take advantage of periodic volume discounts, market discounts and pricing changes.Dermagen, Inc. purchases its raw materials from suppliers, and manufactures its products in Fullerton, California for its customers. Technology and security The Company website is hosted and maintained by a third party. This provider delivers a secure platform for server hosting, including various safety features to protect the information residing in its servers. Moreover, the Company does not release information about its customers to third parties without the prior written consent of its customers unless otherwise required by law. Notwithstanding these precautions, the Company cannot assure that the security mechanisms will prevent security breaches or service breakdowns.Despite the implemented security measures, servers can be vulnerable to computer viruses, physical or electronic break-ins or other similar disruptions.Such a disruption could lead to interruptions or delays in service, loss of data, or an inability to accept and fulfill online customer orders. Any of these events could materially affect the Company's business. Management information system The accounting information for sales, purchases, perpetual inventory transactions, cash receipts and disbursements and sophisticated management reports are provided timely for analytical and bookkeeping purposes. Also, the order entry system was designed specifically for the Company and allows its customers to order product 24 hours per day either via fax, internet or phone modem. The system provides data to management enabling it to review sales trends and customer base, monitor inventory levels, credit and collection issues, and purchasing frequency and cost anticipation. Communication and availability of data is possible through a local area network ring. Competition Amexdrug faces strong competition both in price and service from national, regional and local full-line, short-line and specialty wholesalers, service merchandisers, self-warehousing chains and from manufacturers engaged in direct distribution. Many of our current and potential competitors have longer operating histories and much larger customer bases than we have.In addition, many of our competitors have greater brand recognition and significantly greater financial, marketing and other resources. To compete successfully, we have had to constantly monitor our competitive situation and develop strategies to allow us to compete with other companies who are able to: ● secure merchandise from vendors on more favorable terms; ● devote greater resources to marketing and promotional campaigns; and ● adopt more aggressive pricing or inventory availability policies. 9 In addition, many of our competitors have developed or may be able to develop e-commerce operations that compete with our e-commerce operations, and may be able to devote substantially more resources to website development and systems development than we do.The online commerce market is new, rapidly evolving and intensely competitive. The Company expects competition to intensify in the future because barriers to entry are minimal, and current and new competitors can launch new websites at relatively low cost.The Company believes that the critical success factors for companies seeking to create Internet business-to-business e-commerce solutions include the following: ● breadth and depth of product offerings; ● brand recognition; ● depth of existing customer base; and ● ease of use and convenience. Unlike other well-publicized product categories such as online book or compact disc retailing, there is no current market leader in its online business-to- business market segment. The Company's immediate goal is to position itself as a leading business-to-business e-commerce and online trade exchange provider for pharmaceuticals, over-the-counter products, health and beauty care products, pharmacy and laboratory supplies and nutritional supplements.To that end, we believe that our early entry into the online market may enable us to establish critical competitive advantages over future competitors.We believe that such competitive advantages include: ● the establishment of a recognizable brand; ● the development of online marketing and media relationships; ● the development of important relationships with manufacturers, distributors, wholesalers and content providers; and ● exposure to an existing customer base. However, competitive pressures created by any one of its current or future competitors, or by its competitors collectively, could materially affect the Company's business.We believe that the principal competitive factors in its market are and will be: ● brand recognition ● customer service ● speed and accessibility ● reliability and speed of fulfillment ● quality of site content ● price ● convenience ● selection Government regulations and legal uncertainties Healthcare regulation The manufacturing, packaging, labeling, advertising, promotion, distribution and sale of most of the products we distribute are subject to regulation by numerous governmental agencies, particularly the United States Food and Drug Administration, which regulates most of the products we distribute under the Federal Food, Drug and Cosmetic Act, and the United States Federal Trade Commission, which regulates the advertising of many of the products we distribute under the Federal Trade Commission Act. The products we distribute are also subject to regulation by, among other regulatory agencies, the Consumer Product Safety Commission, the United States Department of Agriculture, the United States Department of Environmental Regulation and the Occupational Safety and Health Administration. The manufacturing, labeling and advertising of the products we distribute is also regulated by the Occupational Safety and Health Administration through various state and local agencies. 10 Furthermore, Amexdrug and/or its customers are subject to extensive licensing requirements and comprehensive regulation governing various aspects of the healthcare delivery system, including the so called "fraud and abuse" laws.The fraud and abuse laws preclude: ● persons from soliciting, offering, receiving or paying any remuneration in order to induce the referral of a patient for treatment or for inducing the ordering or purchasing of items or services that are in any way paid for by Medicare or Medicaid, and ● physicians from making referrals to certain entities with which they have a financial relationship. The fraud and abuse laws and regulations are broad in scope and are subject to frequent modification and varied interpretations. Significant criminal, civil and administrative sanctions may be imposed for violation of these laws and regulations. The Company's advertising of dietary supplement products is also subject to regulation by the Federal Trade Commission under the Federal Trade Commission Act, in addition to state and local regulation. The Federal Trade Commission Act prohibits unfair methods of competition and unfair or deceptive acts or practices in or affecting commerce. The Federal Trade Commission Act also provides that the dissemination or the causing to be disseminated of any false advertisement pertaining to drugs or foods, which would include dietary supplements, is an unfair or deceptive act or practice. Under the Federal Trade Commission’s Substantiation Doctrine, an advertiser is required to have a “reasonable basis” for all objective product claims before the claims are made. Failure to adequately substantiate claims may be considered either deceptive or unfair practices. Pursuant to this Federal Trade Commission requirement, the Company is required to have adequate substantiation for all material advertising claims made for its products. The Company may be subject to additional laws or regulations by the Food and Drug Administration or other federal, state or foreign regulatory authorities, the repeal of laws or regulations which the Company considers favorable, such as the Dietary Supplement Health and Education Act of 1994, or more stringent interpretations of current laws or regulations, from time to time in the future. We cannot predict the nature of such future laws, regulations, interpretations or applications, nor can we predict what effect additional governmental regulations or administrative orders, when and if promulgated, would have on our business in the future. The Food and Drug Administration or other governmental regulatory bodies could, however, require the reformulation of certain products to meet new standards, the recall or discontinuance of certain products not able to be reformulated, imposition of additional record keeping requirements, expanded documentation of the properties of certain products, expanded or different labeling and scientific substantiation. Any or all of such requirements could have a material and adverse effect on our business. 11 The products we distribute function within the structure of the healthcare financing and reimbursement system of the United States. As a result of a wide variety of political, economic and regulatory influences, this system is currently under intense scrutiny and subject to fundamental changes. In recent years, the system has changed significantly in an effort to reduce costs.These changes include increased use of managed care, cuts in Medicare, consolidation of pharmaceutical and medical-surgical supply distributors, and the development of large, sophisticated purchasing groups. In addition, a variety of new approaches have been proposed to continue to reduce cost, including mandated basic healthcare benefits and controls on healthcare spending through limitations on the growth of private health insurance premiums and Medicare and Medicaid spending. The Company anticipates that Congress and state legislatures will continue to review and assess alternative healthcare delivery systems and payment methods and that public debate with respect to these issues will likely continue in the future. Because of uncertainty regarding the ultimate features of reform initiatives and their enactment and implementation, the Company cannot predict which, if any, of such reform proposals will be adopted, when they may be adopted, or what impact they may have on the Company. The Company expects the healthcare industry to continue to change significantly in the future. Some of these changes, such as a reduction in governmental support of healthcare services or adverse changes in legislation or regulations governing the privacy of patient information, or the delivery of pricing of pharmaceuticals and healthcare services or mandated benefits, may cause healthcare industry participants to greatly reduce the amount of the Company's products and services they purchase or the price they are willing to pay for the products we distribute.Changes in pharmaceutical manufacturers' pricing or distribution policies could also significantly reduce our income. While the Company uses its best efforts to adhere to the regulatory and licensing requirements, as well as any other requirements affecting the products we distribute, compliance with these often requires subjective legislative interpretation. Consequently, we cannot assure that our compliance efforts will be deemed sufficient by regulatory agencies and commissions enforcing these requirements. Violation of these regulations may result in civil and criminal penalties, which could materially and adversely affect our operations. Internet regulation Few laws currently regulate the Internet. Because of the Internet's popularity and increasing use, new laws and regulations may be adopted. Such laws and regulations may cover issues such as: ● user privacy ● distribution ● pricing ● taxation ● content ● characteristics and quality of products ● copyrights ● services Laws and regulations directly applicable to electronic commerce or Internet communications are becoming more prevalent. We believe that our use of third party material on our website is permitted under current provisions of copyright law. Because legal rights to certain aspects of Internet content and commerce are not clearly settled, our ability to rely upon exemptions or defenses under copyright law is uncertain. Also, although not yet enacted, Congress is considering laws regarding Internet taxation. In addition, various jurisdictions already have enacted laws that are not specifically directed to electronic commerce but that could affect its business. The applicability of many of these laws to the Internet is uncertain and could expose the Company to substantial liability. Any new legislation or regulation regarding the Internet, or the application of existing laws and regulations to the Internet, could materially and adversely affect the Company. If the Company were alleged to violate federal, state or foreign, civil or criminal law, even if the Company could successfully defend such claims, it could materially and adversely affect the Company. 12 Additionally, several telecommunications carriers are seeking to have telecommunications over the Internet regulated by the Federal Communications Commission in the same manner as other telecommunications services.Furthermore, local telephone carriers have petitioned the Federal Communications Commission to regulate Internet service providers and online service providers in a manner similar to long distance telephone carriers and to impose access fees on such providers. If either of these petitions are granted, the costs of communicating on the Internet could increase substantially. This, in turn, could slow the growth of use of the Internet. Any such legislation or regulation could materially and adversely affect its business, financial condition and operating results. Research and Development Amexdrug engages in some research and development of its products from time to time.Total research and development costs were $0 and $0 for the years ended December 31, 2012 and 2011, respectively.Amexdrug anticipates that it likely will not incur any research and development costs in 2013. Intellectual Property and Patent Protection We presently have no patents, and we have no immediate plans to pursue any patents. We believe that protecting the Company’s trademarks and registered domain name is important to our business strategy of building strong brand name recognition and that such trademarks have significant value in the marketing of the Company's products. To protect our proprietary rights, the Company will rely on copyright, trademark and trade secret laws, confidentiality agreements with employees and third parties, and license agreements with consultants, vendors and customers. Despite such protections, however, we may be unable to fully protect our intellectual property. Dependence on major suppliers During the year ended December 31, 2012, purchases from two suppliers accounted for 64% and 17% of total purchases, respectively. Accounts payable to these two suppliers accounted for 42% and 19% of the total accounts payable balance as of December 31, 2012, respectively.During the year ended December 31, 2011, purchases from the same two suppliers accounted for 79% and 14% of our total purchases, respectively.Accounts payable to these two suppliers accounted for 75% and 13% of the total accounts payable balance as of December 31, 2011. We presently enjoy a good relationship with our suppliers.If for any reason our business with our suppliers was interrupted or discontinued in the future, we would be able to acquire most, if not all, of the same products from other suppliers at similar competitive prices. However, the loss of our largest supplier could have a potential negative effect upon our future operations. 13 Dependence on major customers One customer accounted for 10% or more of our sales during the year ended December 31, 2012.That customer accounted for approximately 10% of our 2012 sales and 15% of our 2011 sales. Employees The Company currently employs nine full time and four part time employees. In addition, the Company uses the services of three independent contractors.Labor unions do not represent any of these employees. The Company considers its employee relations to be good. Competition for qualified personnel in its industry is intense, particularly for technical staff responsible for marketing, advertising, web development, and general and administrative activities. Employees will be permitted to participate in employee benefit plans of the Company that may be in effect from time to time, to the extent eligible. Physical facilities The Company's principal executive offices and its warehouse and distribution operations moved to 7251 Condor Street, Commerce California in March 2011.The Company leases 27,500 square feet at this location.The Company paid a rental rate of $7,700 per month during the year ended December 31, 2012.The rental amount increased to $8,800 per month effective March 1, 2013.Approximately 2,500 square feet of the premises is used for executive offices, and the balance of the premises is used for warehouse and distribution operations.The lease is for a period of three years which commenced on March 1, 2011 and terminates on February 28, 2014.The Company has the option to extend the lease for two additional three year periods.If the Company exercises the first option to extend, the rental rate would increase to $9,900 per month effective March 1, 2014, $11,000 per month effective March 1, 2015 and $11,550 per month effective March 1, 2016. If the Company exercises the second option to extend, the rental rate would be adjusted to a fair market rental value as may be agreed to by the parties or as may be determined by an appraiser or arbitrator as provided in the Option to Extend Addendum. Payment of the lease has been personally guaranteed by Jack Amin and his wife, Nora Amin.The Company believes this space will be sufficient for at least the next twelve months. The Company’s Dermagen, Inc. manufacturing operations are currently located at 2500 East Fender Avenue, Units I&J, Fullerton, California, which is leased under one lease agreement dated March 1, 2011.The Company leases approximately 3,520 square feet at a rental rate of $2,499.20 per month.The lease was amended in early 2012, and again in early 2013, each time to extend the lease term for a period of one year.The lease will now expire on February 28, 2014.Payment of the lease has been personally guaranteed by Jack Amin. The Company believes this space will be sufficient for at least the next twelve months. 14 The Company believes that the various facilities covered by the leases described above will be sufficient for at least the next twelve months. Company history prior to the acquisition of Allied Med, Inc. The Company was incorporated under the laws of the State of California on April 30, 1963 with authorized common stock of 10,000,000 shares at a par value of $.10 and 1,000,000 preferred shares with a par value of $1.00 under the name of Harlyn Products, Inc.Harlyn Products, Inc. was engaged in the business of selling jewelry to department stores until the mid-1990s. Solely for the purpose of changing domicile from California to Nevada, on December 12, 2001, Amexdrug Corporation, a California corporation, entered into a certain Merger Agreement with a newly formed, wholly-owned subsidiary Nevada corporation named Amexdrug Corporation.The Nevada corporation had been incorporated on December 4, 2001. As a result of the merger, which became effective on December 17, 2001, the Company became a Nevada corporation and the separate existence of the California corporation ceased. At the time of the merger, the Company changed its fiscal year end from June 30 to December 31. Acquisition of Allied Med, Inc. On December 31, 2001, Amexdrug acquired all of the issued and outstanding common shares of Allied Med, Inc., an Oregon corporation, in a share exchange in a related party transaction. Allied Med, Inc. was formed as an Oregon corporation in October 1997 to operate in the pharmaceutical wholesale business of selling a full line of brand name and generic pharmaceutical products, over-the-counter (OTC) drug and non-drug products and health and beauty products to independent and chain pharmacies, alternative care facilities and other wholesalers. Amexdrug assumed the operations of Allied med, and Amexdrug has been building on the wholesale pharmaceutical operations of Allied Med. Asset acquisitions following the acquisition of Allied Med, Inc. In October 2003, Allied Med, Inc. acquired 100% of the assets of Royal Health Care Company.Royal Health Care Company is a health and beauty company which has sold specially manufactured facial and body creams, arthritic pain relief medications and an exclusive patented hair care product to pharmacies, beauty salons, beauty supply stores and other fine shops. Royal Health Care Company uses the highest quality ingredients for the finest quality products.Each product has been formulated with the essential ingredients and plant extracts to achieve optimum potential and quality.Royal Health Care Company products are manufactured by a third party in an FDA approved manufacturing facility. The Royal Health Care Company assets acquired include the “Royal Health Care Company” name, logo, and related trademarks, all formulas to products manufactured for sale under the Royal Health Care Company name, and the Royal Health Care Company list of customers.These intellectual property rights were acquired without cost from a company in which Jack Amin’s wife is a principal shareholder.Mr. Amin is the CEO and Chairman of Amexdrug Corporation and Allied Med, Inc.Management believes this acquisition will provide the Company with an opportunity to increase the number of products sold by the Company, and expand the Company’s customer base. 15 Amexdrug completed its purchase of Dermagen, Inc. on October 7, 2005 with Amexdrug paying $70,000 cash to the Dermagen, Inc. shareholders.Dermagen, Inc. is now an operating subsidiary of Amexdrug. Dermagen, Inc. is a growing manufacturing company specializing in the manufacturing and distribution of certain pharmaceuticals, medical devices, health and beauty products, and pharmacy and laboratory supplies.Dermagen has a U.S.-FDA registered and state FDA approved manufacturing facility licensed to develop high margin skin and novel health and beauty products for niche markets.Our competitive advantage is in our superior product research and development for large leading domestic and international companies. New subsidiaries formed On October 28, 2004, Amexdrug formed a new subsidiary, Royal Health Care, Inc. as a Nevada corporation. Royal Health Care, Inc. was formed to manufacture and sell health and beauty products.Currently, Royal Health Care, Inc. has no assets, liabilities, or operations. On November 8, 2004, Amexdrug formed anew subsidiary,BioRx Pharmaceuticals, Inc. as a Nevada corporation.BioRx Pharmaceuticals, Inc.’s expertise lies in the manufacturing of pharmacy supplies and in conducting research and development of products for the healthcare industry.BioRx manufactures, develops distributes effective pharmaceuticals and cosmeceuticals, OTC products, and natural care products for the foot, nails, hair and for arthritis.Currently, BioRx Pharmaceuticals, Inc. has assets, liabilities, and operations. ITEM 1A. RISK FACTORS You should carefully consider the risks and uncertainties described below and other information in this report. If any of the following risks or uncertainties actually occur, our business, financial condition and operating results, would likely suffer. Additional risks and uncertainties, including those not yet identified or that we currently believe are immaterial, may also adversely affect our business, financial condition or operating results. Risks Relating to Our Business The industry in which Amexdrug operates is highly competitive and could affect our results of operations. The industry in which we operate is highly competitive and is marked by changes and new products. Our competitors and potential competitors include many large national and international companies as well as medium and small sized companies. Most existing and potential competitors have greater financial resources, larger market share, and larger production and research capability, which may enable them to establish and/or maintain a stronger competitive position than we have. If we fail to address competitive developments quickly and effectively, we will not be able to grow our business or remain a viable entity. Our business could be adversely affected by any adverse economic developments in wholesale pharmaceutical distribution and health and beauty products. We depend on the demand for our products in the U.S. Therefore, our business is susceptible to downturns in the wholesale pharmaceutical distribution and health and beauty products industry and the economy in general. Any significant downturn or worsening in the market or in general economic conditions would likely hurt our business. 16 If we fail to keep up with changes affecting our products, we will become less competitive and thus adversely affect future financial performance. In order to remain competitive, we must respond on a timely and cost-efficient basis to changes in our industry in general, industry standards and procedures and customer preferences. Management believes that to remain competitive, we will need to continuously obtain and/or develop new products and applications for existing products. In some cases these changes may be significant and the cost to comply with these changes may be substantial. We cannot assure you that we will be able to adapt to any changes in the future or that we will have the financial resources to keep up with changes in the marketplace. Also, the cost of adapting to any changes in our products may have a material and adverse effect on our operating results. Our business could be adversely affected by local, state, national, international laws or regulations. Our future success depends in part on laws and regulations that exist, or are expected to be enacted in the geographical areas where we do business. These laws and regulations could negatively affect our business and anticipated revenues. We cannot guarantee a positive outcome in direction, timing, or scope of laws and regulations that may be enacted which will affect our business. Our future success depends on retaining our existing key employees and hiring and assimilating new key employees. The loss of key employees or the inability to attract new key employees could limit our ability to execute our growth strategy, resulting in lost sales and a slower rate of growth. Our future success depends in part on our ability to retain our key employees including our president.We do not presently have employment agreements with our executives, each executive may be able to terminate his or her agreement at any time. It would be difficult for us to replace our president. In addition, as we grow we may need to hire additional key personnel. We may not be able to identify and attract high quality employees or successfully assimilate new employees into our existing management structure. We may be unable to protect our intellectual property adequately or cost effectively, which may cause us to lose market share or reduce prices. Our future success depends in part on our ability to protect and preserve proprietary rights related to our products. We cannot assure you that we will be able to prevent third parties from using our intellectual property rights and technology without our authorization. We have not obtained any patents on our products.We rely on trade secrets, common law trademark rights and trademark registrations. We may also employ confidentiality and work for hire, development, assignment and license agreements with employees, consultants, third party developers, licensees and customers. However, these measures afford only limited protection and may be flawed or inadequate. Also, enforcing intellectual property rights could be costly and time-consuming and could distract management’s attention from operating business matters. 17 Our intellectual property may infringe on the rights of others, resulting in costly litigation. In recent years, there has been significant litigation in the United States involving patents and other intellectual property rights. In particular, there has been an increase in the filing of suits alleging infringement of intellectual property rights, which pressure defendants into entering settlement arrangements quickly to dispose of such suits, regardless of their merits. Other companies or individuals may allege that we infringe on their intellectual property rights. Litigation, particularly in the area of intellectual property rights, is costly and the outcome is inherently uncertain. In the event of an adverse result against future rights we may acquire, we could be liable for substantial damages and we may be forced to discontinue our use of the subject matter in question or obtain a license to use those rights or develop non-infringing alternatives. Any of these results would increase our cash expenditures, adversely affecting our financial condition. Risks Relating to Ownership of Our Common Stock We cannot assure you that there will be an active trading market for our common stock and it could be difficult for holders of our common stock to liquidate their shares. Our common stock is quoted on the OTC Bulletin Board.The price of our shares has been volatile, our shares are thinly traded, and liquidation of a person’s holdings may be difficult. Thus, holders of our common stock may be required to retain their shares for a long period of time. We do not anticipate paying dividends in the foreseeable future, which could make our stock less attractive to potential investors. We anticipate that we will retain any future earnings and other cash resources for future operations and development of our business and do not intend to declare or pay any cash dividends in the foreseeable future. Any future payment of cash dividends will be at the discretion of our board of directors after taking into account many factors, including our operating results, financial condition and capital requirements. Corporations that pay dividends may be viewed as a better investment than corporations that do not. Future sales or the potential for sale of a substantial number of shares of our common stock could cause our market value to decline and could impair our ability to raise capital through subsequent equity offerings. Sales of a substantial number of shares of our common stock in the public markets, or the perception that these sales may occur, could cause the market price of our common stock to decline and could materially impair our ability to raise capital through the sale of additional equity securities. It may be difficult for a third party to acquire us, and this could depress our stock price. Under Nevada corporate law, we are permitted to include or exclude certain provisions in our articles of incorporation and/or by-laws that could discourage information contests and make it more difficult for you and other stockholders to elect directors and take other corporate actions. As a result, these provisions could limit the price that investors are willing to pay in the future for shares of our common stock. For example: · Under Nevada law, we are not required to provide for, and our by-laws do not provide for, cumulative voting in the election of directors, which would otherwise allow less than a majority of stockholders to elect director candidates; and · Stockholders cannot call a special meeting of stockholders unless they, in the aggregate, hold at least 10% of our common stock. 18 Trading in our shares is subject to certain "penny stock” regulation which could have a negative effect on the price of our shares in the public trading market. Public trading of our common stock on the OTCBB is subject to certain provisions, commonly referred to as the penny stock rule, promulgated under the Securities Exchange Act of 1934. A penny stock is generally defined to be any equity security that has a market price less than $5.00 per share, subject to certain exceptions. If our stock is deemed to be a penny stock, trading in our stock will be subject to additional sales practice requirements on broker-dealers. These may require a broker dealer to: · make a special suitability determination for purchasers of penny stocks; · receive the purchaser's written consent to the transaction prior to the purchase; and · deliver to a prospective purchaser of a penny stock, prior to the first transaction, a risk disclosure document relating to the penny stock market. Consequently, penny stock rules restrict the ability of broker-dealers to trade and/or maintain a market in our common stock. Also, many prospective investors may not want to get involved with the additional administrative requirements, which may have a material adverse effect on the trading of our shares. ITEM 1B. UNRESOLVED STAFF COMMENTS Not applicable. ITEM 2. PROPERTIES Executive offices and Operating facilities The Company's principal executive offices and its warehouse and distribution operations moved to 7251 Condor Street, Commerce California in March 2011.The Company leases 27,500 square feet at this location.The Company paid a rental rate of $7,700 per month during 2012.The rental amount increased to $8,800 per month effective March 1, 2013.Approximately 2,500 square feet of the premises is used for executive offices, and the balance of the premises is used for warehouse and distribution operations.The lease is for a period of three years which commenced on March 1, 2011 and terminates on February 28, 2014. The Company has the option to extend the lease for two additional three year periods. If the Company exercises the first option to extend, the rental rate would increase to $9,900 per month effective March 1, 2014, $11,000 per month effective March 1, 2015 and $11,550 per month effective March 1, 2016. If the Company exercises the second option to extend, the rental rate would be adjusted to a fair market rental value as may be agreed to by the parties or as may be determined by an appraiser or arbitrator as provided in the Option to Extend Addendum. Payment of the lease has been personally guaranteed by Jack Amin and his wife, Nora Amin. The Company believes this space will be sufficient for at least the next twelve months. 19 The Company’s Dermagen, Inc. manufacturing operations are currently located at 2500 East Fender Avenue, Units I &J, Fullerton, California, which is leased under one lease agreement dated March 1, 2011.The Company leases approximately 3,520 square feet at a rental rate of $2,464 per month.The lease was initially for a period of one year which commenced on March 1, 2011. In early 2012, and again in early 2013, the parties executed Amendments to extend the lease term for one year.It will now expire on February 28, 2014.Payment of the lease has been personally guaranteed by Jack Amin. The Company believes this space will be sufficient for at least the next twelve months. Adequacy of Facilities The Company believes that the various facilities covered by the leases described above will be sufficient for at least the next twelve months. ITEM 3. LEGAL PROCEEDINGS Amexdrug is not presently a party to any material pending legal proceedings.To the best of Amexdrug’s knowledge, no governmental authority or other party has threatened or is contemplating the filing of any material legal proceeding against Amexdrug. ITEM 4. MINE SAFETY DISCLOSURES Not Applicable. PART II ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES 20 Market information Our common stock is presently traded in the over-the-counter market and quoted on the National Association of Securities Dealers’ OTC Bulletin Board under the ticker symbol "AXRX.OB".The shares are thinly traded and a limited market presently exists for the shares.The following table describes, for the respective periods indicated, the prices of Amexdrug common stock in the over-the-counter market, based on inter-dealer bid prices, without retail mark-up, mark-down or commissions and may not necessarily represent actual transactions.The quotations have been provided by OTC Markets. Quarter ended High bid Low Bid March 31, 2012 $0.06 $0.001 June 30, 2012 $0.09 $0.05 September 30, 2012 $0.06 $0.005 December 31, 2012 $0.15 $0.0005 March 31, 2011 $0.08 $0.01 June 30, 2011 $0.08 $0.03 September 30, 2011 $0.08 $0.08 December 31, 2011 $0.08 $0.08 The stock prices described in the table above have been adjusted to reflect the Company’s 20 to 1 forward stock split of its common shares which occurred effective December 3, 2012, as though the forward stock split had occurred effective January 1, 2011. Based on its trading price, our common stockis considered a “penny stock” for purposes of federal securities laws, and therefore has been subject to certain regulations, which are summarized below. The Securities Enforcement and Penny Stock Reform Act of 1990 requires special disclosure relating to the market for penny stocks in connection with trades in any stock defined as a “penny stock.”Specifically, Rules 15g-1 through 15g-9 under the Securities Exchange Act of 1934 (the “Exchange Act”) impose sales practice and disclosure requirements on NASD broker-dealers who make a market in a “penny stock.”Securities and Exchange Commission regulations generally define a penny stock to be an equity security that has a market price of less than $5.00 per share and is not listed on The NASDAQ SmallCap Stock Market or a major stock exchange. These regulations affect the ability of broker-dealers to sell the Company’s securities and also may affect the ability of purchasers of the Company’s common stock to sell their shares in the secondary market. Under the penny stock regulations, a broker-dealer selling penny stock to anyone other than an established customer or “accredited investor,” generally, an individual with net worth in excess of $1,000,000 (not including the net value of the person’s primary residence) or an annual income exceeding $200,000, or $300,000 together with his or her spouse, must make a special suitability determination for the purchaser and must receive the purchaser’s written consent to the transaction prior to sale, unless the broker-dealer or the transaction is otherwise exempt. In addition, the penny stock regulations require the broker-dealer to deliver, prior to any transaction involving a penny stock, a disclosure schedule prepared by the Commission relating to the penny stock market, unless the broker-dealer or the transaction is otherwise exempt. A broker-dealer is also required to disclose commissions payable to the broker-dealer and the registered representative and current quotations for the securities. Finally, a broker-dealer is required to send monthly statements disclosing recent price information with respect to the penny stock held in a customer’s account and information with respect to the limited market in penny stocks. 21 As long as the penny stock regulations apply to the Company’s stock, it may be difficult to trade such stock because compliance with the regulations can delay and/or preclude certain trading transactions.Broker-dealers may be discouraged from effecting transactions in the Company’s stock because of the sales practice and disclosure requirements for penny stock. This could adversely affect the liquidity and/or price of the Company’s common stock, and impede the sale of the Company’s stock. Holders The number of record holders of Amexdrug's common stock as of March 26, 2013 is approximately 192.This number does not take into consideration stockholders whose shares are held by broker-dealers, finance institutions or other nominees. Dividend Policy Amexdrug has not declared any cash dividends with respect to its common stock during the last two fiscal years, and we do not intend to declare dividends in the foreseeable future. There are no material restrictions limiting, or that are likely to limit, Amexdrug’s ability to pay dividends on our securities, except for any applicable limitations under Nevada corporate law. Equity Compensation Plans The Company has not approved any compensation plans under which equity securities of the Company are authorized for issuance. Recent sales of unregistered securities During the past three years, Amexdrug has not sold any shares of its common stock without registration under the Securities Act of 1933. ITEM 6. SELECTED FINANCIAL DATA A smaller reporting company is not required to provide the information specified by this item. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OFFINANCIAL CONDITION AND RESULTS OF OPERATION Forward Looking Statements The following information contained in this Item 7 should be read in conjunction with the financial statements and accompanying notes and the other financial information appearing elsewhere in this Form 10-K. The Company’s fiscal year end is December 31. 22 This report and the exhibits attached hereto contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The forward-looking statements include, without limitation, statements as to management’s good faith expectations and beliefs, which are subject to inherent uncertainties which are difficult to predict and may be beyond the ability of the Company to control. Forward-looking statements are made based upon management’s expectations and belief concerning future developments and their potential effect upon the Company. There can be no assurance that future developments will be in accordance with management’s expectations or that the effect of future developments on the Company will be those anticipated by management. The words “believes,” “expects,” “intends,” “plans,” “anticipates,” “hopes,” “likely,” “will,” and similar expressions identify such forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors that could cause the actual results, performance or achievements of the Company, or industry results, to differ materially from future results, performance or achievements expressed or implied by such forward-looking statements. These risks and uncertainties, many of which are beyond the Company’s control, include (i) the sufficiency of existing capital resources and our ability to raise additional capital to fund cash requirements for future operations; and (ii) general economic conditions. Although we believe the expectations reflected in these forward-looking statements are reasonable, such expectations may prove to be incorrect. Readers are cautioned not to place undue reliance on these forward-looking statements which reflect management’s view only as of the date of this report. The Company undertakes no obligation to publicly release the result of any revisions to these forward-looking statements which may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events, conditions or circumstances. Overview Amexdrug Corporation is located at 7251 Condor Street, Commerce, California 90040.Its phone number is (323) 725-3100.Its fax number is (323) 725-3133. Its website is www.amexdrug.com. Shares of Amexdrug common stock are traded on the OTC Bulletin Board under the symbol AXRX.OB.The President of Amexdrug has had experience working in the pharmaceutical industry for the past 30 years. Amexdrug Corporation, through its wholly-owned subsidiaries, BioRx Pharmaceuticals, Inc., Allied Med, Inc., Dermagen, Inc. and Royal Health Care, Inc. is a pharmaceutical and cosmeceutical company specializing in the research and development, manufacturing and distribution of pharmaceutical drugs, cosmetics and distribution of prescription and over-the-counter drugs, private manufacturing and labeling and a quality control laboratory. At Amexdrug Corporation, it is our anticipation to give our clientele the opportunity to purchase cost effective products while attempting to maximize the return of investments to our shareholders. Amexdrug Corporation distributes its products through its subsidiaries, BioRx Pharmaceuticals, Inc., Allied Med, Inc., Dermagen, Inc. and Royal Health Care, Inc. primarily to independent pharmacies and secondarily to small-sized pharmacy chains, alternative care facilities and other wholesalers and retailers in the state of California. 23 BioRx Pharmaceuticals, Inc. is a proud member of the National Association of Chain Drug Stores (NACDS).BioRx Pharmaceuticals, Inc. has developed fourteenunique innovative products in the industry under the name Sponix. Our team of professionals fully pledges the effectiveness of our distinct products. At this time, we have certain distribution channels with suppliers and customers whom we know and trust, such as Amazon, and hundreds of independent pharmacies.Of the estimated 100,000 retailers (drug stores and food mass), our goal is to have 20,000 stores carry our products in 2013. The accompanying financial information includes the operations of Amexdrug Corporation and its subsidiaries for all periods presented. Results of operations for the years ended December 31, 2012 and 2011 Revenues For the year ended December 31, 2012, Amexdrug reported sales of $9,148,688, comprised of $7,254,363 of sales from the Company’s pharmaceutical wholesale distribution business of selling brand name and generic pharmaceutical products, and over-the-counter (OTC) health and beauty products, and $1,894,325 of sales of health and beauty products manufactured by the Company. This was $3,257,883 less than the $12,406,571 of sales reported for the year ended December 31, 2011 which was comprised primarily of $10,972,638 sales from the Company’s pharmaceutical wholesale distribution business of selling brand name generic pharmaceutical products, and over-the-counter (OTC) health and beauty products and $1,433,933 of sales of health and beauty products manufactured by the Company. Sales of health and beauty products also include sales of pharmacy and laboratory supplies.The decrease in sales is primarily due to declining sales of some brand name drugs which became generically available and also due to the loss of some customers. Costs of Goods Sold Cost of goods sold for the year ended December 31, 2012 was $8,142,128, a decrease of $3,268,697 from the $11,410,825 cost of goods sold for the year ended December 31, 2011. Gross Profit During the year ended December 31, 2012 gross profit increased by $10,814 to $1,006,560 or 11.0% of sales from the $995,746 or 8.0% of sales recorded for the year ended December 31, 2011.The Company attributes its increase in gross profit margin in 2012 due primarily to an increase in the percentage of sales of higher margin products in the later period, partially offset by a decrease in total sales. Expenses Total operating expenses, consisting entirely of selling, general and administrative expense, for the year ended December 31, 2012 were $791,167, an increase of $23,137 from the total operating expenses of $768,030 recorded for the year ended December 31, 2011. This increase in selling, general and administrative expense is primarily attributable to increases in advertising and marketing expense and travel expense. 24 Net Income During the year ended December 31, 2012, Amexdrug earned net income of $82,034.This was $18,613 less than the $100,647 of net income recorded for the year ended December 31, 2011. This decrease in net income is largely attributable to a reduction in revenue and increases in selling, general and administrative expense, depreciation and amortization expense. Liquidity and capital resources – December 31, 2012 As of December 31, 2012, Amexdrug reported total current assets of $1,870,065, comprised primarily of cash and cash equivalents of $415,962, accounts receivable of $558,569, inventory of $800,936, and prepaid expenses of $77,605. Total assets as of December 31, 2012 were $2,407,444, which included total current assets of $1,870,065, plus net property and equipment of $489,104, other deposits of $29,862, goodwill of $17,765 and trademarks of $648. Amexdrug’s current liabilities as of December 31, 2012 consist primarily of accounts payable of $697,339, notes payable related parties of $108,023, business line of credit balance of $697,842 promissory note current portion of $58,370, and a deferred tax liability of $57,300. During the year ended December 31, 2012, Amexdrug used $160,804 cash in operating activities compared to $137,016 cash used in operating activities in the year ended December 31, 2011.The primary adjustments to reconcile net income to net cash used in operating activities during 2012 were as follows:a decrease in accounts receivable of $109,108, an increase in accounts payable and accrued liabilities of $210,252, an increase in inventory of $602,760, an increase in deferred tax liability of $57,300, and depreciation and amortization of $19,538.Cash decreased during the year ended December 31, 2012 by $173,510 compared to an increase during 2011 of $145,769. Amexdrug had a cash balance of $415,962 at December 31, 2012.Operations have primarily been funded through cash generated through operations and through increased borrowings when needed. Management does not anticipate that Amexdrug will need to seek additional financing during the next twelve months. Business Line of Credit The Company has a business line of credit with National Bank of California.In December 2011, the maximum credit line was increased to $700,000. Stock Repurchases Between approximately June 2007 and December 31, 2012, Amexdrug repurchased a total of 293,440post-splitshares of its common stock at prices ranging from a low of $0.01 per share to a high of $0.15 per share.These shares are held by Amexdrug as treasury shares. Inflation In the opinion of management, inflation has not and will not have a material effect on our operations in the immediate future. Management will continue to monitor inflation and evaluate the possible future effects of inflation on our business and operations. 25 Capital Expenditures The Company expended $458,588 and $42,456 on capital expenditures during the years ended December 31, 2012 and 2011, respectively.The Company has no current plans for capital expenditures, but it is prepared to make such expenditures on an as needed basis. Critical Accounting Policies In the notes to the audited consolidated financial statements for the year ended December 31, 2012, included in this Form 10-K, the Company discusses those accounting policies that are considered to be significant in determining the results of operations and its financial position. The Company believes that the accounting principles utilized by it conform to accounting principles generally accepted in the United States of America. The preparation of financial statements requires Company management to make significant estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. By their nature, these judgments are subject to an inherent degree of uncertainty. On an on-going basis, the Company evaluates estimates. The Company bases its estimates on historical experience and other facts and circumstances that are believed to be reasonable, and the results form the basis for making judgments about the carrying value of assets and liabilities.The actual results may differ from these estimates under different assumptions or conditions. Recent Accounting Pronouncements For a description of recent accounting pronouncements adopted by the Company see the footnotes to the Company’s consolidated financial statements. ITEM 7A. QUANTATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK A smaller reporting company is not required to provide the information specified by this item. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Amexdrug’s consolidated audited balance sheets as of December 31, 2012 and 2011, Amexdrug’s consolidated audited statements of income, stockholders’ equity, and cash flows for the fiscal years ended December 31, 2012 and 2011 are included hereafter. 26 AMEXDRUG CORPORATION AND SUBSIDIARIES INDEX TO FINANCIAL STATEMENTS Page Reports of Independent Registered Public Accounting Firms 28 Consolidated Balance Sheets — December 31, 2012 and 2011 29 Consolidated Statements of Income for the Years Ended December 31, 2012 and 2011 30 Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 2012 and 2011 31 Consolidated Statements of Cash Flows for the Years Ended December 31, 2012 and 2011 32 Notes to Consolidated Financial Statements 33 27 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders Amexdrug Corporation Commerce, California We have audited the accompanying consolidated balance sheets of Amexdrug Corporation as of December 31, 2012 and 2011, and the related consolidated statements of income, stockholders' equity, and cash flows for the years then ended.These consolidated financial statements are the responsibility of the Company's management.Our responsibility is to express an opinion on thesefinancial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).Those standards require that we plan and perform the audit to obtain reasonable assurance about whether thefinancial statements are free of material misstatement.The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.Accordingly, we express no such opinion.An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Amexdrug Corporation as of December 31, 2012 and 2011, and the results of their operations and cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles. /s/ HJ Associates & Consultants, LLP HJ Associates & Consultants, LLP Salt Lake City, Utah April 2, 2013 28 AMEXDRUG CORPORATION AND SUBSIDIARIES Consolidated Balance Sheets December 31, 2012 December 31, 2011 Assets Current Assets Cash $ $ Investments - available for sale Accounts receivable, net of allowance of $7,833 and $21,561, respectively Prepaid expenses Inventory Other asset - Deferred tax asset - Total Current Assets Property and Equipment, at cost Office and computer equipment Leasehold improvements Less accumulated depreciation ) ) Net Property and Equipment Other Assets Other deposits Intangibles Customer base, net of accumulated amortization of $18,259 - - Trademark, net of accumulated amortization of $1,002 and $837, respectively Goodwill Total Other Assets Total Assets $ $ Liabilities and Shareholders' Equity Current Liabilities: Accounts payable $ $ Accrued liabilities Deferred operating lease liability Deferred tax liability - Notes payable related parties Business lines and short term promissory note Promissory note, current portion - Total Current Liabilities Long Term Liabilities Promissory note - Total Long Term Liabilities - Total Liabilities Stockholders' Equity Common stock, $0.001 par value; 1,000,000,000 authorized common shares 169,409,620 shares issued and outstanding Additional paid in capital ) ) Treasury stock ) ) Retained earnings Total Stockholders' Equity Total Liabilities and Stockholders' Equity $ $ The accompanying notes are an integral part of these consolidated financial statements. 29 AMEXDRUG CORPORATION AND SUBSIDIARIES Consolidated Statements ofIncome Years Ended December 31, 2012 December 31, 2011 Sales $ $ Cost of Goods Sold Gross Profit Operating Expenses Selling, general and administrative expense Total Operating Expenses Incomebefore depreciation expense Depreciation and amortization expense Income before Other Income/(Expenses) Other Income/(Expenses) Interest and other income 3 7 Penalty - ) Unrealized gain/(loss) ) Interest expense ) ) Total Other Income/(Expenses) ) ) Income before Provision for Income Taxes Income tax expense ) ) Net Income $ $ BASIC AND DILUTED INCOME PER SHARE $

SECURITIES PURCHASE AGREEMENT This Securities Purchase Agreement (this “Agreement”), dated as of March 13, 2017, is entered into by and between REAC Group, Inc., a Florida corporation (“Company”), and Iliad Research and Trading, L.P., a Utah limited partnership, its successors and/or assigns (“Investor”). A. Company and Investor are executing and delivering this Agreement in reliance upon the exemption from securities registration afforded by the Securities Act thereunder by the United States Securities and Exchange Commission (the “SEC”). B. Investor desires to purchase and Company desires to issue and sell, upon the terms and conditions set forth in this Agreement (i) a Convertible Promissory Note, in the form attached hereto as Exhibit A, in the original principal amount of $230,000.00 (the “Note”), convertible into shares of common stock, $0.00001 par value per share, of Company (the “Common Stock”), upon the terms and subject to the limitations and conditions set forth in such Note, and (ii) a Warrant to Purchase Shares of Common Stock, substantially in the form attached hereto as Exhibit B (the “Warrant”). C. This Agreement, the Note, the Warrant, the Investor Note (as defined below), and all other certificates, documents, agreements, resolutions and instruments delivered to any party under or in connection with this Agreement, as the same may be amended from time to time, are collectively referred to herein as the “Transaction Documents”. D. For purposes of this Agreement: “Conversion Shares” means all shares of Common Stock issuable upon conversion of all or any portion of the Note; “Warrant Shares” means all shares of Common Stock issuable upon the exercise of or pursuant to the Warrant; and “Securities” means the Note, the Conversion Shares, the Warrant and the Warrant Shares. NOW, THEREFORE, in consideration of the above recitals and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Company and Investor hereby agree as follows: 1. Purchase and Sale of Securities. 1.1. Purchase of Securities. Company shall issue and sell to Investor and Investor agrees to purchase from Company the Note and the Warrant. In consideration thereof, Investor shall pay (i) the amount designated as the initial cash purchase price on the signature page to this Agreement (the “Initial Cash Purchase Price”), and (ii) issue to Company the Investor Note (the sum of the initial principal amount of the Investor Note, together with the Initial Cash Purchase Price, the “Purchase Price”). The Purchase Price, the OID (as defined below), and the Transaction Expense Amount (as defined below) are allocated to the Tranches (as defined in the Note) of the Note and to the Warrant as set forth in the table attached hereto as Exhibit C. For the avoidance of doubt, the Initial Cash Purchase Price constitutes payment in full for the Initial Tranche (as defined in the Note) and Warrant. 1.2. Form of Payment. On the Closing Date, (i) Investor shall pay the Purchase Price to Company by delivering the following at the Closing: (A) the Initial Cash Purchase Price, which shall be delivered by wire transfer of immediately available funds to Company, in accordance with Company’s written wiring instructions; (B) an Investor Note in the principal amount of $50,000.00 duly executed and substantially in the form attached hereto as Exhibit D (the “Investor Note ”); and (ii) Company shall deliver the duly executed Note and Warrant on behalf of Company, to Investor, against delivery of such Purchase Price. Securities Purchase Agreement Page 1 1.3. Closing Date. Subject to the satisfaction (or written waiver) of the conditions set forth in Section 5 and Section 6 below, the date of the issuance and sale of the Securities pursuant to this Agreement (the “Closing Date”) shall be March 13, 2017, or such other mutually agreed upon date. The closing of the transactions contemplated by this Agreement (the “Closing”) shall occur on the Closing Date by means of the exchange by email of signed .pdf documents, but shall be deemed for all purposes to have occurred at the offices of Hansen Black Anderson Ashcraft PLLC in Lehi, Utah. 1.4. Collateral for the Note. The Note shall not be secured. 1.5. Collateral for Investor Note. Initially, the Investor Note will not be secured, but the Investor Note may become secured subsequent to the Closing by such collateral and at such time as determined by Investor in its sole discretion. In the event Investor desires to secure the Investor Note, Company shall timely execute any and all amendments and documents and take such other measures requested by Investor that are necessary or advisable in order to properly secure the Investor Note. 1.6. Original Issue Discount; Transaction Expense Amount. The Note carries an original issue discount of $20,000.00 (the “OID”). In addition, Company agrees to pay $10,000.00 to Investor to cover Investor’s legal fees, accounting costs, due diligence, monitoring and other transaction costs incurred in connection with the purchase and sale of the Securities (the “Transaction Expense Amount”), all of which amount is included in the initial principal balance of the Note. The Purchase Price, therefore, shall be $200,000.00, computed as follows: $230,000.00 initial principal balance, less the OID, less the Transaction Expense Amount. The Initial Cash Purchase Price shall be the Purchase Price less the sum of the initial principal amount of the Investor Note. The portions of the OID and the Transaction Expense Amount allocated to the Initial Cash Purchase Price are set forth on Exhibit C. 2. Investor’s Representations and Warranties. Investor represents and warrants to Company that as of the Effective Date: (i) this Agreement has been duly and validly authorized; (ii) this Agreement constitutes a valid and binding agreement of Investor enforceable in accordance with its terms; (iii) Investor is an “accredited investor” as that term is defined in Rule 501(a) of Regulation D of the 1933 Act; and (iv) this Agreement and the Investor Note have been duly executed and delivered on behalf of Investor. 3. Company’s Representations and Warranties. Company represents and warrants to Investor that as of the Effective Date: (1) Company is a corporation duly organized, validly existing and in good standing under the laws of its state of incorporation and has the requisite corporate power to own its properties and to carry on its business as now being conducted; (2) Company is duly qualified as a foreign corporation to do business and is in good standing in each jurisdiction where the nature of the business conducted or property owned by it makes such qualification necessary; (3) Company has registered its Common Stock under Section 12(g) of the Securities Exchange Act of 1934, as amended (the “1934 Act”), and is obligated to file reports pursuant to Section 13 or Section 15(d) of the 1934 Act; (4) each of the Transaction Documents and the transactions contemplated hereby and thereby, have been duly and validly authorized by Company and all necessary actions have been taken; (5) this Agreement, the Note, the Warrant, and the other Transaction Documents have been duly executed and delivered by Company and constitute the valid and binding obligations of Company enforceable in accordance with their terms; (6) the execution and delivery of the Transaction Documents by Company, the issuance of Securities in accordance with the terms hereof, and the consummation by Company of the other transactions contemplated by the Transaction Documents do not and will not conflict with or result in a breach by Company of any of the terms or provisions of, or constitute a default under (a) Company’s formation documents or bylaws, each as currently in effect, (b) any indenture, mortgage, deed of trust, or other material agreement or instrument to which Company is a party or by which it or any of its properties or assets are bound, including, without limitation, any listing agreement for the Common Stock, or (c) any Securities Purchase Agreement Page 2 existing applicable law, rule, or regulation or any applicable decree, judgment, or order of any court, United States federal, state or foreign regulatory body, administrative agency, or other governmental body having jurisdiction over Company or any of Company’s properties or assets; (7) no further authorization, approval or consent of any court, governmental body, regulatory agency, self-regulatory organization, or stock exchange or market or the stockholders or any lender of Company is required to be obtained by Company for the issuance of the Securities to Investor or the entering into of the Transaction Documents; (8) none of Company’s filings with the SEC contained, at the time they were filed, any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary to make the statements made misleading; (9) Company has filed all reports, schedules, forms, statements and other documents required to be filed by Company with the SEC under the 1934 Act on a timely basis or has received a valid extension of such time of filing and has filed any such report, schedule, form, statement or other document prior to the expiration of any such extension; (10) there is no action, suit, proceeding, inquiry or investigation before or by any court, public board or body pending or, to the knowledge of Company, threatened against or affecting Company before or by any governmental authority or non-governmental department, commission, board, bureau, agency or instrumentality or any other person, wherein an unfavorable decision, ruling or finding would have a material adverse effect on Company or which would adversely affect the validity or enforceability of, or the authority or ability of Company to perform its obligations under, any of the Transaction Documents; (11) Company has not consummated any financing transaction that has not been disclosed in a periodic filing or current report with the SEC under the 1934 Act; (12) Company is not, nor has it been at any time in the previous twelve (12) months, a “Shell Company,” as such type of “issuer” is described in Rule 144(i)(1) under the 1933 Act; (13) with respect to any commissions, placement agent or finder’s fees or similar payments that will or would become due and owing by Company to any person or entity as a result of this Agreement or the transactions contemplated hereby (“Broker Fees”), any such Broker Fees will be made in full compliance with all applicable laws and regulations and only to a person or entity that is a registered investment adviser or registered broker-dealer; (14) Investor shall have no obligation with respect to any Broker Fees or with respect to any claims made by or on behalf of other persons for fees of a type contemplated in this subsection that may be due in connection with the transactions contemplated hereby and Company shall indemnify and hold harmless each of Investor, Investor’s employees, officers, directors, stockholders, members, managers, agents, and partners, and their respective affiliates, from and against all claims, losses, damages, costs (including the costs of preparation and attorneys’ fees) and expenses suffered in respect of any such claimed Broker Fees; (15) when issued, the Conversion Shares and the Warrant Shares will be duly authorized, validly issued, fully paid for and non-assessable, free and clear of all liens, claims, charges and encumbrances; (16) neither Investor nor any of its officers, directors, stockholders, members, managers, employees, agents or representatives has made any representations or warranties to Company or any of its officers, directors, employees, agents or representatives except as expressly set forth in the Transaction Documents and, in making its decision to enter into the transactions contemplated by the Transaction Documents, Company is not relying on any representation, warranty, covenant or promise of Investor or its officers, directors, members, managers, employees, agents or representatives other than as set forth in the Transaction Documents; (17) Company acknowledges that the State of Utah has a reasonable relationship and sufficient contacts to the transactions contemplated by the Transaction Documents and any dispute that may arise related thereto such that the laws and venue of the State of Utah, as set forth more specifically in Section 9.3 below, shall be applicable to the Transaction Documents and the transactions contemplated therein; and (18) Company has performed due diligence and background research on Investor and its affiliates including, without limitation, John M. Fife, and, to its satisfaction, has made inquiries with respect to all matters Company may consider relevant to the undertakings and relationships contemplated by the Transaction Documents including, among other things, the following: http://investing.businessweek.com/research/stocks/people/person.asp?personId=7505107&ticker=UAHC; SEC Civil Case No. 07-C-0347 (N.D. Ill.); SEC Civil Action No. 07-CV-347 (N.D. Ill.); and FINRA Securities Purchase Agreement Page 3 Case #2011029203701. Company, being aware of the matters described in subsection (xviii) above, acknowledges and agrees that such matters, or any similar matters, have no bearing on the transactions contemplated by the Transaction Documents and covenants and agrees it will not use any such information as a defense to performance of its obligations under the Transaction Documents or in any attempt to avoid, modify or reduce such obligations. 4. Company Covenants. Until all of Company’s obligations under all of the Transaction Documents are paid and performed in full, or within the timeframes otherwise specifically set forth below, Company will at all times comply with the following covenants: (19) so long as Investor beneficially owns any of the Securities and for at least twenty (20) Trading Days (as defined in the Note) thereafter, Company will timely file on the applicable deadline all reports required to be filed with the SEC pursuant to Sections 13 or 15(d) of the 1934 Act, and will take all reasonable action under its control to ensure that adequate current public information with respect to Company, as required in accordance with Rule 144 of the 1933 Act, is publicly available, and will not terminate its status as an issuer required to file reports under the 1934 Act even if the 1934 Act or the rules and regulations thereunder would permit such termination; (20) the Common Stock shall be listed or quoted for trading on any of (a) NYSE, (b) NASDAQ, (c) OTCQX, (d) OTCQB, or (e) OTC Pink Current Information; (21) when issued, the Conversion Shares and the Warrant Shares will be duly authorized, validly issued, fully paid for and non-assessable, free and clear of all liens, claims, charges and encumbrances; (22) trading in Company’s Common Stock will not be suspended, halted, chilled, frozen, reach zero bid or otherwise cease on Company’s principal trading market; (23) Company will not transfer, assign, sell, pledge, hypothecate or otherwise alienate or encumber the Investor Note in any way without the prior written consent of Investor, which consent may be given or withheld in Investor’s sole and absolute discretion; (24) Company will not have at any given time any Variable Security Holders (as defined below), excluding Investor, without Investor’s prior written consent, which consent may be granted or withheld in Investor’s sole and absolute discretion; and (25) at Closing and on the first day of each calendar quarter for so long as the Note remains outstanding or on any other date during which the Note is outstanding, as may be requested by Investor, Company shall cause its Chief Executive Officer to provide to Investor a certificate in substantially the form attached hereto as Exhibit E (the “Officer’s Certificate”) certifying in his personal capacity and in his capacity as Chief Executive Officer of Company the number of Variable Security Holders of Company as of the date the applicable Officer’s Certificate is executed. For purposes hereof, the term “Variable Security Holder” means any holder of any Company securities that (A) have or may have conversion rights of any kind, contingent, conditional or otherwise, in which the number of shares that may be issued pursuant to such conversion right varies with the market price of the Common Stock, or (B) are or may become convertible into Common Stock (including without limitation convertible debt, warrants or convertible preferred stock), with a conversion price that varies with the market price of the Common Stock, even if such security only becomes convertible following an event of default, the passage of time, or another trigger event or condition (each a “Variable Security Issuance”). For avoidance of doubt, the issuance of shares of Common Stock under, pursuant to, in exchange for or in connection with any contract or instrument, whether convertible or not, is deemed a Variable Security Issuance for purposes hereof if the number of shares of Common Stock to be issued is based upon or related in any way to the market price of the Common Stock, including, but not limited to, Common Stock issued in connection with a Section 3(a)(9) exchange, a Section 3(a)(10) settlement, or any other similar settlement or exchange. 5. Conditions to Company’s Obligation to Sell. The obligation of Company hereunder to issue and sell the Securities to Investor at the Closing is subject to the satisfaction, on or before the Closing Date, of each of the following conditions: 5.1. Investor shall have executed this Agreement and the Investor Note and delivered the same to Company. Securities Purchase Agreement Page 4 5.2. Investor shall have delivered the Initial Cash Purchase Price to Company in accordance with Section 1.2 above. 6. Conditions to Investor’s Obligation to Purchase. The obligation of Investor hereunder to purchase the Securities at the Closing is subject to the conditions, provided that these conditions are for Investor’s sole benefit and may be waived by Investor at any time in its sole discretion: 6.1. Company shall have executed this Agreement, the Warrant, and the Note and delivered the same to Investor. 6.2. Company’s Chief Executive Officer shall have executed the Officer’s Certificate and delivered the same to Investor. 6.3. Company shall have delivered to Investor a fully executed Irrevocable Letter of Instructions to Transfer Agent (the “TA Letter”) substantially in the form attached hereto as Exhibit F acknowledged and agreed to in writing by Company’s transfer agent (the “Transfer Agent”). 6.4. Company shall have delivered to Investor a fully executed Secretary’s Certificate substantially in the form attached hereto as Exhibit G evidencing Company’s approval of the Transaction Documents. 6.5. Company shall have delivered to Investor a fully executed Share Issuance Resolution substantially in the form attached hereto as Exhibit H to be delivered to the Transfer Agent. 6.6.  Company shall have delivered to Investor fully executed copies of all other Transaction Documents required to be executed by Company herein or therein. 7. Reservation of Shares. On the date hereof, Company will reserve 7,000,000 shares of Common Stock from its authorized and unissued Common Stock to provide for all issuances of Common Stock under the Note and Warrant (the “Share Reserve”). Company further agrees to add additional shares of Common Stock to the Share Reserve in increments of 1,000,000 shares as and when requested by Investor if as of the date of any such request the number of shares being held in the Share Reserve is less than (i) three (3) times the number of shares of Common Stock obtained by dividing the Outstanding Balance (as defined in the Note) as of the date of the request by the Installment Conversion Price (as defined in the Note), plus (ii) three (3) times the number of Warrant Shares (as determined pursuant to the Warrant) deliverable upon full exercise of the Warrant. Company shall further require the Transfer Agent to hold the shares of Common Stock reserved pursuant to the Share Reserve exclusively for the benefit of Investor and to issue such shares to Investor promptly upon Investor’s delivery of a conversion notice under the Note or a notice of exercise under the Warrant. Finally, Company shall require the Transfer Agent to issue shares of Common Stock pursuant to the Note and the Warrant to Investor out of its authorized and unissued shares, and not the Share Reserve, to the extent shares of Common Stock have been authorized, but not issued, and are not included in the Share Reserve. The Transfer Agent shall only issue shares out of the Share Reserve to the extent there are no other authorized shares available for issuance and then only with Investor’s written consent. 8. Terms of Future Financings. So long as the Note is outstanding, upon any issuance by Company of any security with any term or condition more favorable to the holder of such security or with a term in favor of the holder of such security that was not similarly provided to Investor in the Transaction Documents, then Company shall notify Investor of such additional or more favorable term and such term, at Investor’s option, shall become a part of the Transaction Documents for the benefit of Securities Purchase Agreement Page 5 Investor. Additionally, if Company fails to notify Investor of any such additional or more favorable term, but Investor becomes aware that Company has granted such a term to any third party, Investor may notify Company of such additional or more favorable term and such term shall become a part of the Transaction Documents retroactive to the date on which such term was granted to the applicable third party. The types of terms contained in another security that may be more favorable to the holder of such security include, but are not limited to, terms addressing conversion discounts, conversion lookback periods, interest rates, original issue discounts, stock sale price, conversion price per share, warrant coverage, warrant exercise price, and anti-dilution/conversion and exercise price resets. 9. Miscellaneous. The provisions set forth in this Section 9 shall apply to this Agreement, as well as all other Transaction Documents as if these terms were fully set forth therein; provided, however, that in the event there is a conflict between any provision set forth in this Section 9 and any provision in any other Transaction Document, the provision in such other Transaction Document shall govern. 9.1. Certain Capitalized Terms. To the extent any capitalized term used in any Transaction Document is defined in any other Transaction Document (as noted therein), such capitalized term shall remain applicable in the Transaction Document in which it is so used even if the other Transaction Document (wherein such term is defined) has been released, satisfied, or is otherwise cancelled or terminated. 9.2. Arbitration of Claims. The parties shall submit all Claims (as defined in Exhibit I) arising under this Agreement or any other Transaction Document or any other agreement between the parties and their affiliates or any Claim relating to the relationship of the parties to binding arbitration pursuant to the arbitration provisions set forth in Exhibit I attached hereto (the “Arbitration Provisions”). The parties hereby acknowledge and agree that the Arbitration Provisions are unconditionally binding on the parties hereto and are severable from all other provisions of this Agreement. By executing this Agreement, Company represents, warrants and covenants that Company has reviewed the Arbitration Provisions carefully, consulted with legal counsel about such provisions (or waived its right to do so), understands that the Arbitration Provisions are intended to allow for the expeditious and efficient resolution of any dispute hereunder, agrees to the terms and limitations set forth in the Arbitration Provisions, and that Company will not take a position contrary to the foregoing representations. Company acknowledges and agrees that Investor may rely upon the foregoing representations and covenants of Company regarding the Arbitration Provisions. 9.3. Governing Law; Venue. This Agreement shall be construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Agreement shall be governed by, the internal laws of the State of Utah, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Utah or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Utah. Each party consents to and expressly agrees that exclusive venue for arbitration of any dispute arising out of or relating to any Transaction Document or the relationship of the parties or their affiliates shall be in Salt Lake County, Utah. Without modifying the parties obligations to resolve disputes hereunder pursuant to the Arbitration Provisions, for any litigation arising in connection with any of the Transaction Documents (and notwithstanding the terms (specifically including any governing law and venue terms) of any transfer agent services agreement or other agreement between the Transfer Agent and Company, such litigation specifically includes, without limitation any action between or involving Company and the Transfer Agent under the TA Letter or otherwise related to Investor in any way (specifically including, without limitation, any action where Company seeks to obtain an injunction, temporary restraining order, or otherwise prohibit the Transfer Agent from issuing shares of Common Stock to Investor for any reason)), each party hereto hereby (i) consents to and expressly submits to the exclusive personal jurisdiction of any state or federal court sitting in Salt Lake County, Utah, (ii) expressly submits to the Securities Purchase Agreement Page 6 exclusive venue of any such court for the purposes hereof, (iii) agrees to not bring any such action (specifically including, without limitation, any action where Company seeks to obtain an injunction, temporary restraining order, or otherwise prohibit the Transfer Agent from issuing shares of Common Stock to Investor for any reason) outside of any state or federal court sitting in Salt Lake County, Utah, and (iv) waives any claim of improper venue and any claim or objection that such courts are an inconvenient forum or any other claim, defense or objection to the bringing of any such proceeding in such jurisdiction or to any claim that such venue of the suit, action or proceeding is improper. Finally, Company covenants and agrees to name Investor as a party in interest in, and provide written notice to Investor in accordance with Section 9.13 below prior to bringing or filing, any action (including without limitation any filing or action against any person or entity that is not a party to this Agreement, including without limitation the Transfer Agent) that is related in any way to the Transaction Documents or any transaction contemplated herein or therein, including without limitation any action brought by Company to enjoin or prevent the issuance of any shares of Common Stock to Investor by the Transfer Agent, and further agrees to timely name Investor as a party to any such action. Company acknowledges that the governing law and venue provisions set forth in this Section 9.3 are material terms to induce Investor to enter into the Transaction Documents and that but for Company’s agreements set forth in this Section 9.3 Investor would not have entered into the Transaction Documents. 9.4. Specific Performance. Company acknowledges and agrees that irreparable damage may occur to Investor in the event that Company fails to perform any material provision of this Agreement or any of the other Transaction Documents in accordance with its specific terms. It is accordingly agreed that Investor shall be entitled to an injunction or injunctions to prevent or cure breaches of the provisions of this Agreement or such other Transaction Document and to enforce specifically the terms and provisions hereof or thereof, this being in addition to any other remedy to which the Investor may be entitled under the Transaction Documents, at law or in equity. For the avoidance of doubt, in the event Investor seeks to obtain an injunction against Company or specific performance of any provision of any Transaction Document, such action shall not be a waiver of any right of Investor under any Transaction Document, at law, or in equity, including without limitation its rights to arbitrate any Claim pursuant to the terms of the Transaction Documents. 9.5. Calculation Disputes. Notwithstanding the Arbitration Provisions, in the case of a dispute as to any determination or arithmetic calculation under the Transaction Documents, including without limitation, calculating the Outstanding Balance, Warrant Shares, Exercise Shares (as defined in the Warrant), Delivery Shares (as defined in the Warrant), Lender Conversion Price (as defined in the Note), Lender Conversion Shares (as defined in the Note), Installment Conversion Price, Installment Conversion Shares (as defined in the Note), Conversion Factor (as defined in the Note), Market Price (as defined in the Note), or VWAP (as defined in the Note) (each, a “Calculation”), Company or Investor (as the case may be) shall submit any disputed Calculation via email or facsimile with confirmation of receipt (i) within two (2) Trading Days after receipt of the applicable notice giving rise to such dispute to Company or Investor (as the case may be) or (ii) if no notice gave rise to such dispute, at any time after Investor learned of the circumstances giving rise to such dispute. If Investor and Company are unable to agree upon such Calculation within two (2) Trading Days of such disputed Calculation being submitted to Company or Investor (as the case may be), then Investor will promptly submit via email or facsimile the disputed Calculation to Unkar Systems Inc. (“Unkar Systems”). Investor shall cause Unkar Systems to perform the Calculation and notify Company and Investor of the results no later than ten (10) Trading Days from the time it receives such disputed Calculation. Unkar Systems’ determination of the disputed Calculation shall be binding upon all parties absent demonstrable error. Unkar Systems’ fee for performing such Calculation shall be paid by the incorrect party, or if both parties are incorrect, by the party whose Calculation is furthest from the correct Calculation as determined by Unkar Systems. In the event Company is the losing party, no extension of the Delivery Date (as defined in the Note) shall be granted and Company shall incur all effects for failing to deliver the applicable shares in a timely manner Securities Purchase Agreement Page 7 as set forth in the Transaction Documents. Notwithstanding the foregoing, Investor may, in its sole discretion, designate an independent, reputable investment bank or accounting firm other than Unkar Systems to resolve any such dispute and in such event, all references to “Unkar Systems” herein will be replaced with references to such independent, reputable investment bank or accounting firm so designated by Investor. 9.6. Counterparts. Each Transaction Document may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one instrument. The parties hereto confirm that any electronic copy of another party’s executed counterpart of a Transaction Document (or such party’s signature page thereof) will be deemed to be an executed original thereof. 9.7. Document Imaging. Investor shall be entitled, in its sole discretion, to image or make copies of all or any selection of the agreements, instruments, documents, and items and records governing, arising from or relating to any of Company’s loans, including, without limitation, this Agreement and the other Transaction Documents, and Investor may destroy or archive the paper originals. The parties hereto (i) waive any right to insist or require that Investor produce paper originals, (ii) agree that such images shall be accorded the same force and effect as the paper originals, (iii) agree that Investor is entitled to use such images in lieu of destroyed or archived originals for any purpose, including as admissible evidence in any demand, presentment or other proceedings, and (iv) further agree that any executed facsimile (faxed), scanned, emailed, or other imaged copy of this Agreement or any other Transaction Document shall be deemed to be of the same force and effect as the original manually executed document. 9.8. Headings. The headings of this Agreement are for convenience of reference only and shall not form part of, or affect the interpretation of, this Agreement. 9.9. Severability. In the event that any provision of this Agreement is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform to such statute or rule of law. Any provision hereof which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision hereof. 9.10. Entire Agreement. This Agreement, together with the other Transaction Documents, contains 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 Company nor Investor makes any representation, warranty, covenant or undertaking with respect to such matters. For the avoidance of doubt, all prior term sheets or other documents between Company and Investor, or any affiliate thereof, related to the transactions contemplated by the Transaction Documents (collectively, “Prior Agreements”), that may have been entered into between Company and Investor, or any affiliate thereof, are hereby null and void and deemed to be replaced in their entirety by the Transaction Documents. To the extent there is a conflict between any term set forth in any Prior Agreement and the term(s) of the Transaction Documents, the Transaction Documents shall govern. 9.11. No Reliance. Company acknowledges and agrees that neither Investor nor any of its officers, directors, members, managers, representatives or agents has made representatives, agents or employees except as expressly set forth in the directors, members, managers, agents or representatives other than as set forth in the Transaction Documents. Securities Purchase Agreement Page 8 9.12. Amendments. No provision of this Agreement may be waived or amended other than by an instrument in writing signed by both parties hereto. 9.13. Notices. Any notice required or permitted hereunder shall be given in writing (unless otherwise specified herein) and shall be deemed effectively given on the earliest of: (i) the date delivered, if delivered by personal delivery as against written receipt therefor or by email to an executive officer, or by facsimile (with successful transmission confirmation), (ii) the earlier of the date delivered or the third Trading Day after deposit, postage prepaid, in the United States Postal Service by certified mail, or (iii) the earlier of the date delivered or the third Trading Day after mailing by express courier, with delivery costs and fees prepaid, in each case, addressed to each of the other parties thereunto entitled at the following addresses (or at such other addresses as such party may designate by five (5) calendar days’ advance written notice similarly given to each of the other parties hereto): If to Company: REAC Group, Inc. Attn: Robert DeAngelis 8878 Covenant Avenue, Suite 209 Pittsburgh, Pennsylvania 15237 If to Investor: Iliad Research and Trading, L.P. Attn: John Fife 303 East Wacker Drive, Suite 1040 Chicago, Illinois 60601 With a copy to (which copy shall not constitute notice): Hansen Black Anderson Ashcraft PLLC Attn: Jonathan Hansen 3051 West Maple Loop Drive, Suite 325 Lehi, Utah 84043 9.14. Successors and Assigns. This Agreement or any of the severable rights and obligations inuring to the benefit of or to be performed by Investor hereunder may be assigned by Investor to a third party, including its affiliates, in whole or in part, without the need to obtain Company’s consent thereto. Company may not assign its rights or obligations under this Agreement or delegate its duties hereunder without the prior written consent of Investor. 9.15. Survival. The representations and warranties of Company and the agreements and covenants set forth in this Agreement shall survive the Closing hereunder notwithstanding any due diligence investigation conducted by or on behalf of Investor. Company agrees to indemnify and hold harmless Investor and all its officers, directors, employees, attorneys, and agents for loss or damage arising as a result of or related to any breach or alleged breach by Company of any of its representations, warranties and covenants set forth in this Agreement or any of its covenants and obligations under this Agreement, including advancement of expenses as they are incurred. 9.16. 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 Securities Purchase Agreement Page 9 the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby. 9.17. Investor’s Rights and Remedies Cumulative; Liquidated Damages. All rights, remedies, and powers conferred in this Agreement and the Transaction Documents are cumulative and not exclusive of any other rights or remedies, and shall be in addition to every other right, power, and remedy that Investor may have, whether specifically granted in this Agreement or any other Transaction Document, or existing at law, in equity, or by statute, and any and all such rights and remedies may be exercised from time to time and as often and in such order as Investor may deem expedient. The parties acknowledge and agree that upon Company’s failure to comply with the provisions of the Transaction Documents, Investor’s damages would be uncertain and difficult (if not impossible) to accurately estimate because of the parties’ inability to predict future interest rates and future share prices, Investor’s increased risk, and the uncertainty of the availability of a suitable substitute investment opportunity for Investor, among other reasons. Accordingly, any fees, charges, and default interest due under the Note, the Warrant, and the other Transaction Documents are intended by the parties to be, and shall be deemed, liquidated damages (under Company’s and Investor’s expectations that any such liquidated damages will tack back to the Closing Date for purposes of determining the holding period under Rule 144 under the 1933 Act). The parties agree that such liquidated damages are a reasonable estimate of Investor’s actual damages and not a penalty, and shall not be deemed in any way to limit any other right or remedy Investor may have hereunder, at law or in equity. The parties acknowledge and agree that under the circumstances existing at the time this Agreement is entered into, such liquidated damages are fair and reasonable and are not penalties. All fees, charges, and default interest provided for in the Transaction Documents are agreed to by the parties to be based upon the obligations and the risks assumed by the parties as of the Closing Date and are consistent with investments of this type. The liquidated damages provisions of the Transaction Documents shall not limit or preclude a party from pursuing any other remedy available at law or in equity; provided, however, that the liquidated damages provided for in the Transaction Documents are intended to be in lieu of actual damages. 9.18. Ownership Limitation. Notwithstanding anything to the contrary contained in this Agreement or the other Transaction Documents, if at any time Investor would be issued shares of Common Stock under any of the Transaction Documents, but such issuance would cause Investor (together with its affiliates) to beneficially own a number of shares exceeding the Maximum Percentage (as defined in the Note), then Company must not issue to Investor the shares that would cause Investor to exceed the Maximum Percentage. The shares of Common Stock issuable to Investor that would cause the Maximum Percentage to be exceeded are referred to herein as the “Ownership Limitation Shares”. Company shall reserve the Ownership Limitation Shares for the exclusive benefit of Investor. From time to time, Investor may notify Company in writing of the number of the Ownership Limitation Shares that may be issued to Investor without causing Investor to exceed the Maximum Percentage. Upon receipt of such notice, Company shall be unconditionally obligated to immediately issue such designated shares to Investor, with a corresponding reduction in the number of the Ownership Limitation Shares. For purposes of this Section, beneficial ownership of Common Stock will be determined under Section 13(d) of the 1934 Act. 9.19. Attorneys’ Fees and Cost of Collection. In the event of any arbitration or action at law or in equity to enforce or interpret the terms of this Agreement or any of the other Transaction Documents, the parties agree that the party who is awarded the most money (which, for the avoidance of doubt, shall be determined without regard to any statutory fines, penalties, fees, or other charges awarded to any party) shall be deemed the prevailing party for all purposes and shall therefore be entitled to an additional award of the full amount of the attorneys’ fees, deposition costs, and expenses paid by such prevailing party in connection with arbitration or litigation without reduction or apportionment based upon the individual claims or defenses giving rise to the fees and expenses. Nothing herein shall restrict Securities Purchase Agreement Page 10 or impair an arbitrator’s or a court’s power to award fees and expenses for frivolous or bad faith pleading. If (i) the Note or Warrant is placed in the hands of an attorney for collection or enforcement prior to commencing arbitration or legal proceedings, or is collected or enforced through any arbitration or legal proceeding, or Investor otherwise takes action to collect amounts due under the Note or to enforce the provisions of the Note or the Warrant, or (ii) there occurs any bankruptcy, reorganization, receivership of Company or other proceedings affecting Company’s creditors’ rights and involving a claim under the Note or the Warrant; then Company shall pay the costs incurred by Investor for such collection, enforcement or action or in connection with such bankruptcy, reorganization, receivership or other proceeding, including, without limitation, attorneys’ fees, expenses, deposition costs, and disbursements. 9.20. Waiver. No waiver of any provision of this Agreement shall be effective unless it is in the form of a writing signed by the party granting the waiver. No waiver of any provision or consent to any prohibited action shall constitute a waiver of any other provision or consent to any other prohibited action, whether or not similar. No waiver or consent shall constitute a continuing waiver or consent or commit a party to provide a waiver or consent in the future except to the extent specifically set forth in writing. 9.21. Waiver of Jury Trial. EACH PARTY TO THIS AGREEMENT IRREVOCABLY WAIVES ANY AND ALL RIGHTS SUCH PARTY MAY HAVE TO DEMAND THAT ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR IN ANY WAY RELATED TO THIS AGREEMENT, ANY OTHER TRANSACTION DOCUMENT, OR THE RELATIONSHIPS OF THE PARTIES HERETO BE TRIED BY JURY. THIS WAIVER EXTENDS TO ANY AND ALL RIGHTS TO DEMAND A TRIAL BY JURY ARISING UNDER COMMON LAW OR ANY APPLICABLE STATUTE, LAW, RULE OR REGULATION. FURTHER, EACH PARTY HERETO ACKNOWLEDGES THAT SUCH PARTY IS KNOWINGLY AND VOLUNTARILY WAIVING SUCH PARTY’S RIGHT TO DEMAND TRIAL BY JURY. 9.22. Time is of the Essence. Time is expressly made of the essence with respect to each and every provision of this Agreement and the other Transaction Documents. 9.23. Voluntary Agreement. Company has carefully read this Agreement and each of the other Transaction Documents and has asked any questions needed for Company to understand the terms, consequences and binding effect of this Agreement and each of the other Transaction Documents and fully understand them. Company has had the opportunity to seek the advice of an attorney of Company’s choosing, or has waived the right to do so, and is executing this Agreement and each of the other Transaction Documents voluntarily and without any duress or undue influence by Investor or anyone else. [Remainder of page intentionally left blank; signature page follows] Securities Purchase Agreement Page 11 IN WITNESS WHEREOF, the undersigned Investor and Company have caused this Agreement to be duly executed as of the date first above written. SUBSCRIPTION AMOUNT: Principal Amount of Note: $230,000.00 Initial Cash Purchase Price: $150,000.00 INVESTOR: By: Iliad Management, LLC, its General Partner By: Fife Trading, Inc., its Manager By:       John M. Fife, President COMPANY: By: Printed Name: Title: [Signature Page to Securities Purchase Agreement] ATTACHED EXHIBITS: Exhibit A Note Exhibit B Warrant Exhibit C Allocation of Purchase Price Exhibit D Form of Investor Note Exhibit E Officer’s Certificate Exhibit F Irrevocable Transfer Agent Instructions Exhibit G Secretary’s Certificate Exhibit H Share Issuance Resolution Exhibit I Arbitration Provisions CONVERTIBLE PROMISSORY NOTE Effective Date: March 13, 2017 U.S. $230,000.00 FOR VALUE RECEIVED, REAC Group, Inc., a Florida corporation (“Borrower”), promises to pay to Iliad Research and Trading, L.P., a Utah limited partnership, or its successors or assigns (“Lender”), $230,000.00 and any interest, fees, charges, and late fees on the date that is ten (10) months after the Purchase Price Date (the “Maturity Date”) in accordance with the terms set forth herein and to pay interest on the Outstanding Balance (including all Tranches (as defined below)), at the rate of ten percent (10%) per annum from the Purchase Price Date until the same is paid in full. This Convertible Promissory Note (this “Note”) is issued and made effective as of March 13, 2017 (the “Effective Date”). This Note is issued pursuant to that certain Securities Purchase Agreement dated March 13, 2017, as the same may be amended from time to time, by and between Borrower and Lender (the “Purchase Agreement”). All interest calculations hereunder shall be computed on the basis of a 360-day year comprised of twelve (12) thirty (30) day months, shall compound daily and shall be payable in accordance with the terms of this Note. Certain capitalized terms used herein are defined in Attachment 1 attached hereto and incorporated herein by this reference. This Note carries an OID of $20,000.00. In addition, Borrower agrees to pay $10,000.00 to Lender to cover Lender's legal fees, accounting costs, due diligence, monitoring and other transaction costs incurred in connection with the purchase and sale of this Note (the “Transaction Expense Amount”), all of which amount is included in the initial principal balance of this Note. The purchase price for this Note and the Warrant (as defined in the Purchase Agreement) shall be $200,000.00 (the ''Purchase Price”), computed as follows: $230,000.00 original principal balance, less the OID, less the Transaction Expense Amount. The Purchase Price shall be payable by delivery to Borrower at Closing of the Investor Note (as defined in the Purchase Agreement) and a wire transfer of immediately available funds in the amount of the Initial Cash Purchase Price (as defined in the Purchase Agreement). This Note shall be comprised of two (2) tranches  (each, a “Tranche”), consisting of (i) an initial Tranche in an amount equal to $175,000.00 and any interest, costs, fees or charges accrued thereon or added thereto under the terms of this Note and the other Transaction Documents (as defined in the Purchase Agreement) (the “Initial Tranche”), and (ii) one (1) additional Tranche, in the amount of $55,000.00, plus any interest, costs, fees or charges accrued thereon or added thereto under the terms of this Note and the other Transaction Documents (the “Subsequent Tranche”). The Initial Tranche shall correspond to the Initial Cash Purchase Price, $15,000.00 of the OID and the Transaction Expense Amount, and may be converted into shares of Common Stock (as defined below) any time subsequent to the Purchase Price Date. The Subsequent Tranche shall correspond to the Investor Note and $5,000.00 of the OID. Lender's right to convert the Subsequent Tranche is conditioned upon Lender's payment in full of the Investor Note (upon the satisfaction of such condition, the Subsequent Tranche becomes a “Conversion Eligible Tranche”). In the event Lender exercises its Lender Offset Right (as defined below) with respect to a portion of the Investor Note and pays in full the remaining outstanding balance of such Investor Note, the Subsequent Tranche shall be deemed to be a Conversion Eligible Tranche only for the portion of such Tranche that was paid for in cash by Lender and the portion of such Investor Note that was offset pursuant to Lender's exercise of the Lender Offset Right shall not be included in the applicable Conversion Eligible Tranche. For the avoidance of doubt, subject to the other terms and conditions hereof, the Initial Tranche shall be deemed a Conversion Eligible Tranche as of the Purchase Price Date for all purposes hereunder and may be converted in whole or in part at any time subsequent to the Purchase Price Date, and the Subsequent Tranche that becomes a Conversion Eligible Tranche may be converted in whole or in part at any time subsequent to the first date on which such Subsequent Tranche becomes a Conversion Eligible Tranche. For all purposes hereunder, Conversion Eligible Tranches shall be converted (or redeemed, as applicable) in order of the lowest-numbered Conversion Eligible Tranche and Conversion Eligible Tranches may be converted (or redeemed, as applicable) in one or more separate Conversions (as defined below), as Exhibit A - Note -Page 1 determined in Lender's sole discretion. At all times hereunder, the aggregate amount of any costs, fees or charges incurred by or assessable against Borrower hereunder, including, without limitation, any fees, charges or premiums incurred in connection with an Event of Default (as defined below), shall be added to the lowest-numbered then-current Conversion Eligible Tranche 1. Payment; Prepayment. 1.1. Payment. Provided there is an Outstanding Balance, on each Installment Date (as defined below), Borrower shall pay to Lender an amount equal to the Installment Amount (as defined below) due on such Installment Date in accordance with Section 8. All payments owing hereunder shall be in lawful money of the United States of America or Conversion Shares (as defined below), as provided for herein, and delivered to Lender at the address or bank account furnished to Borrower for that purpose. All payments shall be applied first to (a) costs of collection, if any, then to (b) fees and charges, if any, then to (c) accrued and unpaid interest, and thereafter, to (d) principal. 1.2. Prepayment. Notwithstanding the foregoing, so long as Borrower has not received a Lender Conversion Notice (as defined below) or an Installment Notice (as defined below) from Lender where the applicable Conversion Shares have not yet been delivered and so long as no Event of Default has occurred since the Effective Date (whether declared by Lender or undeclared and regardless of whether or not cured), then Borrower shall have the right, exercisable on not less than five (5) Trading Days prior written notice to Lender to prepay the Outstanding Balance of this Note, in full, in accordance with this Section 1. Any notice of prepayment hereunder (an “Optional Prepayment Notice”) shall be delivered to Lender at its registered address and shall state: (i) that Borrower is exercising its right to prepay this Note, and (ii) the date of prepayment, which shall be not less than five (5) Trading Days from the date of the Optional Prepayment Notice. On the date fixed for prepayment (the “Optional Prepayment Date”), Borrower shall make payment of the Optional Prepayment Amount (as defined below) to or upon the order of Lender as may be specified by Lender in writing to Borrower. If Borrower exercises its right to prepay this Note, Borrower shall make payment to Lender of an amount in cash equal to 125% (the “Prepayment Premium”) multiplied by the then Outstanding Balance of this Note (the “Optional Prepayment Amount”). In the event Borrower delivers the Optional Prepayment Amount to Lender prior to the Optional Prepayment Date or without delivering an Optional Prepayment Notice to Lender as set forth herein without Lender’s prior written consent, the Optional Prepayment Amount shall not be deemed to have been paid to Lender until the Optional Prepayment Date. Moreover, in such event the Optional Prepayment Liquidated Damages Amount will automatically be added to the Outstanding Balance of this Note on the day Borrower delivers the Optional Prepayment Amount to Lender. In the event Borrower delivers the Optional Prepayment Amount without an Optional Prepayment Notice, then the Optional Prepayment Date will be deemed to be the date that is five (5) Trading Days from the date that the Optional Prepayment Amount was delivered to Lender and Lender shall be entitled to exercise its conversion rights set forth herein during such five (5) day period. In addition, if Borrower delivers an Optional Prepayment Notice and fails to pay the Optional Prepayment Amount due to Lender within two (2) Trading Days following the Optional Prepayment Date, Borrower shall forever forfeit its right to prepay this Note. 2. Security. This Note is unsecured. 3. Lender Optional Conversion. 3.1. Lender Conversions. Lender has the right at any time after the Purchase Price Date until the Outstanding Balance has been paid in full, including without limitation (a) until any Optional Prepayment Date (even if Lender has received an Optional Prepayment Notice) or at any time thereafter with respect to any amount that is not prepaid, and (b) during or after any Fundamental Default Exhibit A - Note -Page 2 Measuring Period, at its election, to convert (each instance of conversion is referred to herein as a “Lender Conversion”) all or any part of the Outstanding Balance into shares (“Lender Conversion Shares”) of fully paid and non-assessable common stock, $0.00001 par value per share (“Common Stock”), of Borrower as per the following conversion formula: the number of Lender Conversion Shares equals the amount being converted (the “Conversion Amount”) divided by the Lender Conversion Price (as defined below). Conversion notices in the form attached hereto as Exhibit A (each, a “Lender Conversion Notice”) may be effectively delivered to Borrower by any method of Lender’s choice (including but not limited to facsimile, email, mail, overnight courier, or personal delivery), and all Lender Conversions shall be cashless and not require further payment from Lender. Borrower shall deliver the Lender Conversion Shares from any Lender Conversion to Lender in accordance with Section 9 below. 3.2. Lender Conversion Price. Subject to adjustment as set forth in this Note, the price at which Lender has the right to convert all or any portion of the Outstanding Balance into Common Stock is $0.25 per share (the “Lender Conversion Price”). However, in the event the Market Capitalization falls below the Minimum Market Capitalization at any time, then in such event (a) the Lender Conversion Price for all Lender Conversions occurring after the first date of such occurrence shall equal the lower of the Lender Conversion Price and the Market Price as of any applicable date of Conversion, and (b) the true-up provisions of Section 11 below shall apply to all Lender Conversions that occur after the first date the Market Capitalization falls below the Minimum Market Capitalization, provided that all references to the “Installment Notice” in Section 11 shall be replaced with references to a “Lender Conversion Notice” for purposes of this Section 3.2, all references to “Installment Conversion Shares” in Section 11 shall be replaced with references to “Lender Conversion Shares” for purposes of this Section 3.2, and all references to the “Installment Conversion Price” in Section 11 shall be replaced with references to the “Lender Conversion Price” for purposes of this Section 3.2. 3.3. Application to Installments. Notwithstanding anything to the contrary herein, including without limitation Section 8 hereof, Lender may, in its sole discretion, apply all or any portion of any Lender Conversion toward any Installment Conversion (as defined below), even if such Installment Conversion is pending, as determined in Lender’s sole discretion, by delivering written notice of such election (which notice may be included as part of the applicable Lender Conversion Notice) to Borrower at any date on or prior to the applicable Installment Date. In such event, Borrower may not elect to allocate such portion of the applicable Installment Amount pursuant to this Section 3.3 in the manner prescribed in Section 8.3; rather, Borrower must reduce the applicable Installment Amount by the Conversion Amount described in this Section 3.3. 4. Defaults and Remedies. 4.1. Defaults. The following are events of default under this Note (each, an “Event of Default”): (26) Borrower fails to pay any principal, interest, fees, charges, or any other amount when due and payable hereunder; (27) Borrower fails to deliver any Lender Conversion Shares in accordance with the terms hereof; (28) Borrower fails to deliver any Installment Conversion Shares (as defined below) or True-Up Shares (as defined below) in accordance with the terms hereof; (29) a receiver, trustee or other similar official shall be appointed over Borrower or a material part of its assets and such appointment shall remain uncontested for twenty (20) days or shall not be dismissed or discharged within sixty (60) days; (30) Borrower becomes insolvent or generally fails to pay, or admits in writing its inability to pay, its debts as they become due, subject to applicable grace periods, if any; (31) Borrower makes a general assignment for the benefit of creditors; (32) Borrower files a petition for relief under any bankruptcy, insolvency or similar law (domestic or foreign); (33) an involuntary bankruptcy proceeding is commenced or filed against Borrower; (34) Borrower defaults or otherwise fails to observe or perform any covenant, obligation, condition or agreement of Borrower contained herein or in any other Transaction Document, Exhibit A - Note -Page 3 other than those specifically set forth in this Section 4.1 and Section 4 of the Purchase Agreement; (35) any representation, warranty or other statement made or furnished by or on behalf of Borrower to Lender herein, in any Transaction Document, or otherwise in connection with the issuance of this Note is false, incorrect, incomplete or misleading in any material respect when made or furnished; (36) the occurrence of a Fundamental Transaction without Lender’s prior written consent; (37) Borrower fails to maintain the Share Reserve as required under the Purchase Agreement; (38) Borrower effectuates a reverse split of its Common Stock without twenty (20) Trading Days prior written notice to Lender; (39) any money judgment, writ or similar process is entered or filed against Borrower or any subsidiary of Borrower or any of its property or other assets for more than $100,000.00, and shall remain unvacated, unbonded or unstayed for a period of twenty (20) calendar days unless otherwise consented to by Lender; (40) Borrower fails to be DWAC Eligible; (41) Borrower fails to observe or perform any covenant set forth in Section 4 of the Purchase Agreement, or (42) Borrower breaches any covenant or other term or condition contained in any Other Agreements. 4.2. Remedies. At any time and from time to time after Lender becomes aware of the occurrence of any Event of Default, Lender may accelerate this Note by written notice to Borrower, with the Outstanding Balance becoming immediately due and payable in cash at the Mandatory Default Amount. Notwithstanding the foregoing, at any time following the occurrence of any Event of Default, Lender may, at its option, elect to increase the Outstanding Balance by applying the Default Effect (subject to the limitation set forth below) via written notice to Borrower without accelerating the Outstanding Balance, in which event the Outstanding Balance shall be increased as of the date of the occurrence of the applicable Event of Default pursuant to the Default Effect, but the Outstanding Balance shall not be immediately due and payable unless so declared by Lender (for the avoidance of doubt, if Lender elects to apply the Default Effect pursuant to this sentence, it shall reserve the right to declare the Outstanding Balance immediately due and payable at any time and no such election by Lender shall be deemed to be a waiver of its right to declare the Outstanding Balance immediately due and payable as set forth herein unless otherwise agreed to by Lender in writing). Notwithstanding the foregoing, upon the occurrence of any Event of Default described in clauses (d), (e), (f), (g) or (h) of Section 4.1, the Outstanding Balance as of the date of acceleration shall become immediately and automatically due and payable in cash at the Mandatory Default Amount, without any written notice required by Lender. At any time following the occurrence of any Event of Default, upon written notice given by Lender to Borrower, interest shall accrue on the Outstanding Balance beginning on the date the applicable Event of Default occurred at an interest rate equal to the lesser of 22% per annum or the maximum rate permitted under applicable law (“Default Interest”); provided, however, that no Default Interest shall accrue during the Fundamental Default Measuring Period. For the avoidance of doubt, Lender may continue making Lender Conversions at any time following an Event of Default until such time as the Outstanding Balance is paid in full. Borrower further acknowledges and agrees that Lender may continue making Conversions following the entry of any judgment or arbitration award in favor of Lender until such time that the entire judgment amount or arbitration award is paid in full. Borrower agrees that any judgment or arbitration award will, by its terms, be made convertible into Common Stock. Any Conversions made following a judgment or arbitration award shall be made pursuant to the following formula: the amount of the judgment or arbitration award being converted divided by 80% of the lowest Closing Bid Price in the ten (10) Trading Days immediately preceding the date of Conversion. In such event, Borrower and Lender agree that it is their expectation that any such judgment amount or arbitration award that is converted will tack back to the Purchase Price Date for purposes of determining the holding period under Rule 144. Borrower and Lender agree and stipulate that any judgment or arbitration award entered against Borrower shall be reduced by $1,000.00 and such $1,000.00 shall become the new Outstanding Balance of this Note and this Note shall expressly survive such judgment or arbitration award. Additionally, following the occurrence of any Event of Default, Borrower may, at its option, pay any Lender Conversion in cash instead of Lender Conversion Shares by paying to Lender on or before the applicable Delivery Date (as defined below) a cash amount equal to the number of Lender Conversion Shares set forth in the Exhibit A - Note -Page 4 applicable Lender Conversion Notice multiplied by the highest intra-day trading price of the Common Stock that occurs during the period beginning on the date the applicable Event of Default occurred and ending on the date of the applicable Lender Conversion Notice. In connection with acceleration described herein, Lender need not provide, and Borrower hereby waives, any presentment, demand, protest or other notice of any kind, and Lender may immediately and without expiration of any grace period enforce any and all of its rights and remedies hereunder and all other remedies available to it under applicable law. Such acceleration may be rescinded and annulled by Lender at any time prior to payment hereunder and Lender shall have all rights as a holder of the Note until such time, if any, as Lender receives full payment pursuant to this Section 4.2. No such rescission or annulment shall affect any subsequent Event of Default or impair any right consequent thereon. Nothing herein shall limit Lender’s right to pursue any other remedies available to it at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to Borrower’s failure to timely deliver Conversion Shares upon Conversion of the Notes as required pursuant to the terms hereof. 4.3. Fundamental Default Remedies. Notwithstanding anything to the contrary herein, in addition to all other remedies set forth herein, after giving effect to the Lender Offset Right (as defined below), which shall occur automatically upon the occurrence of any Fundamental Default, the Fundamental Liquidated Damages Amount shall be added to the Outstanding Balance upon Lender’s delivery to Borrower of a notice (which notice Lender may deliver to Borrower at any time following the occurrence of a Fundamental Default) setting forth its election to declare a Fundamental Default and the Fundamental Liquidated Damages Amount that will be added to the Outstanding Balance. 4.4. Certain Additional Rights. Notwithstanding anything to the contrary herein, in the event Borrower fails to make any payment when due or fails to deliver any Conversion Shares as and when required under this Note, then (a) the Lender Conversion Price for all Lender Conversions occurring after the date of such failure to pay shall equal the lower of the Lender Conversion Price and the provisions of Section 11 below shall apply to all Lender Conversions that occur after the date of such failure to pay, provided that all references to the “Installment Notice” in Section 11 shall be replaced with references to a “Lender Conversion Notice” for purposes of this Section 4.4, all references to “Installment Conversion Shares” in Section 11 shall be replaced with references to “Lender Conversion Shares” for purposes of this Section 4.4, and all references to the “Installment Conversion Price” in Section 11 shall be replaced with references to the “Lender Conversion Price” for purposes of this Section 4.4. For the avoidance of doubt, Lender’s exercise of the rights granted to it pursuant to this Section 4.4 shall not relieve Borrower of its obligation to continue paying the Installment Amount on all future Installment Dates. 5. Unconditional Obligation; No Offset. Borrower acknowledges that this Note is an unconditional, valid, binding and enforceable obligation of Borrower not subject to offset (except as set forth in Section 20 below), deduction or counterclaim of any kind. Borrower hereby waives any rights of offset it now has or may have hereafter against Lender, its successors and assigns, and agrees to make the payments or Conversions called for herein in accordance with the terms of this Note. 6. Waiver. No waiver of any provision of this Note shall be effective unless it is in the form of a writing signed by the party granting the waiver. No waiver of any provision or consent to any prohibited action shall constitute a waiver of any other provision or consent to any other prohibited action, whether or not similar. No waiver or consent shall constitute a continuing waiver or consent or commit a party to provide a waiver or consent in the future except to the extent specifically set forth in writing. Exhibit A - Note -Page 5 7. Rights Upon Issuance of Securities. 7.1. Subsequent Equity Sales. Except with respect to Excluded Securities, if Borrower or any subsidiary thereof, as applicable, at any time this Note is outstanding, shall sell, issue or grant any Common Stock, option to purchase Common Stock, right to reprice, preferred shares convertible into Common Stock, or debt, warrants, options or other instruments or securities to Lender or any third party which are convertible into or exercisable or exchangeable for shares of Common Stock (collectively, the “Equity Securities”), including without limitation any Deemed Issuance, at an effective price per share less than the then effective Lender Conversion Price (such issuance is referred to herein as a “Dilutive Issuance”), then, the Lender Conversion Price shall be automatically reduced and only reduced to equal such lower effective price per share. If the holder of any Equity Securities 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 are issued in connection with such Dilutive Issuance, be entitled to receive shares of Common Stock at an effective price per share that is less than the Lender Conversion Price, such issuance shall be deemed to have occurred for less than the Lender Conversion Price on the date of such Dilutive Issuance, and the then effective Lender Conversion Price shall be reduced and only reduced to equal such lower effective price per share. Such adjustments described above to the Lender Conversion Price shall be permanent (subject to additional adjustments under this section), and shall be made whenever such Equity Securities are issued. Borrower shall notify Lender, in writing, no later than the Trading Day following the issuance of any Equity Securities subject to this Section 7.1, indicating therein the applicable issuance price, or applicable reset price, exchange price, conversion price, or other pricing terms (such notice, the “Dilutive Issuance Notice”). For purposes of clarity, whether or not Borrower provides a Dilutive Issuance Notice pursuant to this Section 7.1, upon the occurrence of any Dilutive Issuance, on the date of such Dilutive Issuance the Lender Conversion Price shall be lowered to equal the applicable effective price per share regardless of whether Borrower or Lender accurately refers to such lower effective price per share in any subsequent Installment Notice or Lender Conversion Notice. 7.2. Adjustment of Lender Conversion Price upon Subdivision or Combination of Common Stock. Without limiting any provision hereof, if Borrower at any time on or after the Effective Date subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes of its outstanding shares of Common Stock into a greater number of shares, the Lender Conversion Price in effect immediately prior to such subdivision will be proportionately reduced. Without limiting any provision hereof, if Borrower at any time on or after the Effective Date combines (by combination, reverse stock split or otherwise) one or more classes of its outstanding shares of Common Stock into a smaller number of shares, the Lender Conversion Price in effect immediately prior to such combination will be proportionately increased. Any adjustment pursuant to this Section 7.2 shall become effective immediately after the effective date of such subdivision or combination. If any event requiring an adjustment under this Section 7.2 occurs during the period that a Lender Conversion Price is calculated hereunder, then the calculation of such Lender Conversion Price shall be adjusted appropriately to reflect such event. 7.3. Other Events. In the event that Borrower (or any subsidiary) shall take any action to which the provisions hereof are not strictly applicable, or, if applicable, would not operate to protect Lender from dilution or if any event occurs of the type contemplated by the provisions of this Section 7 but not expressly provided for by such provisions (including, without limitation, the granting of stock appreciation rights, phantom stock rights or other rights with equity features), then Borrower’s board of directors shall in good faith determine and implement an appropriate adjustment in the Lender Conversion Price so as to protect the rights of Lender, provided that no such adjustment pursuant to this Section 7.3 will increase the Lender Conversion Price as otherwise determined pursuant to this Section 7, provided further that if Lender does not accept such adjustments as appropriately protecting its interests hereunder Exhibit A - Note -Page 6 against such dilution, then Borrower’s board of directors and Lender shall agree, in good faith, upon an independent investment bank of nationally recognized standing to make such appropriate adjustments, whose determination shall be final and binding and whose fees and expenses shall be borne by Borrower. 8. Borrower Installments. 8.1. Installment Conversion Price. Subject to the adjustments set forth herein, the conversion price for each Installment Conversion (the “Installment Conversion Price”) shall be the lesser of (a) the Lender Conversion Price, and (b) the Market Price. 8.2. Installment Conversions. Beginning on the date that is six (6) months after the Purchase Price Date and on the same day of each month thereafter until the Maturity Date (each, an “Installment Date”), if paying in cash, Borrower shall pay to Lender the applicable Installment Amount due on such date subject to the provisions of this Section 8, and if paying in Installment Conversion Shares (as defined below), Borrower shall deliver such Installment Conversion Shares on or before the Delivery Date. Payments of each Installment Amount may be made (a) in cash; provided, however, that in the event Lender has paid off all or any portion of the Investor Note (such amount that is prepaid, the “Investor Note Prepayment Amount”), Borrower may not pay any portion of any Installment Amount in cash for a period of ninety (90) days following the date Investor delivered the applicable Investor Note Prepayment Amount to Borrower (the “Standstill Period”) and any payment in cash of any Installment Amount made during the Standstill Period shall be deemed to be a prepayment pursuant to Section 1 above and shall be subject to the Prepayment Premium provided in such section, or (b) by converting such Installment Amount into shares of Common Stock (“Installment Conversion Shares”, and together with the Lender Conversion Shares, the “Conversion Shares”) in accordance with this Section 8 (each instance of Borrower thus converting, an “Installment Conversion”) per the following formula: the number of Installment Conversion Shares equals the portion of the applicable Installment Amount being converted divided by the Installment Conversion Price, or (c) by any combination of the foregoing, so long as the cash is delivered to Lender on the applicable Installment Date and the Installment Conversion Shares are delivered to Lender on or before the applicable Delivery Date. Notwithstanding the foregoing, Borrower will not be entitled to elect an Installment Conversion with respect to any portion of any applicable Installment Amount and shall be required to pay the entire amount of such Installment Amount in cash if on the applicable Installment Date there is an Equity Conditions Failure, and such failure is not waived in writing by Lender. Moreover, in the event Borrower desires to pay all or any portion of any Installment Amount in cash, it must notify Lender in writing of such election and the portion of the applicable Installment Amount it elects to pay in cash not more than twenty-five (25) or less than fifteen (15) Trading Days prior to the applicable Installment Date. If Borrower fails to so notify Lender, it shall not be permitted to elect to pay any portion of such Installment Amount in cash unless otherwise agreed to by Lender in writing or proposed by Lender in an Installment Notice delivered by Lender to Borrower. Notwithstanding the foregoing or anything to the contrary herein, Borrower shall only be obligated to deliver Installment Amounts with respect to Tranches that have become Conversion Eligible Tranches and shall have no obligation to pay to Lender any Installment Amount with respect to any Tranche that has not become a Conversion Eligible Tranche. In furtherance thereof, in the event Borrower has repaid all Conversion Eligible Tranches pursuant to the terms of this Note, it shall have no further obligations to deliver any Installment Amount to Lender unless and until any Subsequent Tranche that was not previously a Conversion Eligible Tranche becomes a Conversion Eligible Tranche pursuant to the terms of this Note. Notwithstanding that failure to repay this Note in full by the Maturity Date is an Event of Default, the Installment Dates shall continue after the Maturity Date pursuant to this Section 8 until the Outstanding Balance is repaid in full, provided that Lender shall, in Lender’s sole discretion, determine the Installment Amount for each Installment Date after the Maturity Date. Exhibit A - Note -Page 7 8.3. Allocation of Installment Amounts. Subject to Section 8.2 regarding an Equity Conditions Failure, for each Installment Date, Borrower may elect to allocate the amount of the applicable Installment Amount between cash and Installment Conversion, by email or fax delivery of a notice to Lender substantially in the form attached hereto as Exhibit B (each, an “Installment Notice”), provided, that to be effective, each applicable Installment Notice must be received by prior to the applicable Installment Date. If Lender has not received an Installment Notice within such time period, then Lender may prepare the Installment Notice and deliver the same to Borrower by fax or email. Following its receipt of such Installment Notice, Borrower may either ratify Lender’s proposed allocation in the applicable Installment Notice or elect to change the allocation by written notice to Lender by email or fax on or before 12:00 p.m. New York time on the applicable Installment Date, so long as the sum of the cash payments and the amount of Installment Conversions equal the applicable Installment Amount, provided that Lender must approve any increase to the portion of the Installment Amount payable in cash. If Borrower fails to notify Lender of its election to change the allocation prior to the deadline set forth in the previous sentence (and seek approval to increase the amount payable in cash), it shall be deemed to have ratified and accepted the allocation set forth in the applicable Installment Notice prepared by Lender. If neither Borrower nor Lender prepare and deliver to the other party an Installment Notice as outlined above, then Borrower shall be deemed to have elected that the entire Installment Amount be converted via an Installment Conversion. Borrower acknowledges and agrees that regardless of which party prepares the applicable Installment Notice, the amounts and calculations set forth thereon are subject to correction or adjustment because of error, mistake, or any adjustment resulting from an Event of Default or other adjustment permitted under the Transaction Documents (an “Adjustment”). Furthermore, no error or mistake in the preparation of such notices, or failure to apply any Adjustment that could have been applied prior to the preparation of an Installment Notice may be deemed a waiver of Lender’s right to enforce the terms of the Note, even if such error, mistake, or failure to include an Adjustment arises from Lender’s own calculation. Borrower shall deliver the Installment Conversion Shares from any Installment Conversion to Lender in accordance with Section 9 below on or before each applicable Delivery Date. 9. Method of Conversion Share Delivery. On or before the close of business on the third (3rd) Trading Day following the Installment Date or the third (3rd) Trading Day following the date of delivery of a Lender Conversion Notice, as applicable (the “Delivery Date”), Borrower shall, provided it is DWAC Eligible at such time, deliver or cause its transfer agent to deliver the applicable Conversion Shares electronically via DWAC to the account designated by Lender in the applicable Lender Conversion Notice or Installment Notice. If Borrower is not DWAC Eligible, it shall deliver to Lender or its broker (as designated in the Lender Conversion Notice or Installment Notice, as applicable), via reputable overnight courier, a certificate representing the number of shares of Common Stock equal to the number of Conversion Shares to which Lender shall be entitled, registered in the name of Lender or its designee. For the avoidance of doubt, Borrower has not met its obligation to deliver Conversion Shares by the Delivery Date unless Lender or its broker, as applicable, has actually received the certificate representing the applicable Conversion Shares no later than the close of business on the relevant Delivery Date pursuant to the terms set forth above. Moreover, and notwithstanding anything to the contrary herein or in any other Transaction Document, in the event Borrower or its transfer agent refuses to deliver any Conversion Shares to Lender on grounds that such issuance is in violation of Rule 144 under the Securities Act of 1933, as amended (“Rule 144”), Borrower shall deliver or cause its transfer agent to deliver the applicable Conversion Shares to Lender with a restricted securities legend, but otherwise in accordance with the provisions of this Section 9. In conjunction therewith, Borrower will also deliver to Lender a written opinion from its counsel or its transfer agent’s counsel opining as to why the issuance of the applicable Conversion Shares violates Rule 144. 10. Conversion Delays. If Borrower fails to deliver Conversion Shares or True-Up Shares in accordance with the timeframes stated in Sections 9 or 11, as applicable, Lender, at any time prior to Exhibit A - Note -Page 8 selling all of those Conversion Shares or True-Up Shares, as applicable, may rescind in whole or in part that particular Conversion attributable to the unsold Conversion Shares or True-Up Shares, with a corresponding increase to the Outstanding Balance (any returned amount will tack back to the Purchase Price Date for purposes of determining the holding period under Rule 144). In addition, for each Lender Conversion, in the event that Lender Conversion Shares are not delivered by the fourth Trading Day (inclusive of the day of the Lender Conversion), a late fee equal to the greater of (a) $500.00 and (b) 2% of the applicable Lender Conversion Share Value rounded to the nearest multiple of $100.00 (but in any event the cumulative amount of such late fees for each Lender Conversion shall not exceed 200% of the applicable Lender Conversion Share Value) will be assessed for each day after the third Trading Day (inclusive of the day of the Lender Conversion) until Lender Conversion Share delivery is made; and such late fee will be added to the Outstanding Balance (such fees, the “Conversion Delay Late Fees”). For illustration purposes only, if Lender delivers a Lender Conversion Notice to Borrower pursuant to which Borrower is required to deliver 100,000 Lender Conversion Shares to Lender and on the Delivery Date such Lender Conversion Shares have a Lender Conversion Share Value of $20,000.00, then in such event a Conversion Delay Late Fee in the amount of $500.00 per day (the greater of $500.00 per day and $20,000.00 multiplied by 2%, which is $400.00) would be added to the Outstanding Balance of the Note until such Lender Conversion Shares are delivered to Lender. For purposes of this example, if the Lender Conversion Shares are delivered to Lender twenty (20) days after the applicable Delivery Date, the total Conversion Delay Late Fees that would be added to the Outstanding Balance would be $10,000.00 (20 days multiplied by $500.00 per day). If the Lender Conversion Shares are delivered to Lender one hundred (100) days after the applicable Delivery Date, the total Conversion Delay Late Fees that would be added to the Outstanding Balance would be $40,000.00 (100 days multiplied by $500.00 per day, but capped at 200% of the Lender Conversion Share Value). 11. True-Up. On the date that is twenty (20) Trading Days (a “True-Up Date”) from each date that the Installment Conversion Shares delivered by Borrower to Lender become Free Trading, there shall be a true-up where Borrower shall deliver to Lender additional Installment Conversion Shares (“True-Up Shares”) if the Installment Conversion Price as of the True-Up Date is less than the Installment Conversion Price used in the applicable Installment Notice. In such event, Borrower shall deliver to Lender within three (3) Trading Days of the True-Up Date (the “True-Up Share Delivery Date”) a number of True-Up Shares equal to the difference between the number of Installment Conversion Shares that would have been delivered to Lender on the True-Up Date based on the Installment Conversion Price as of the True-Up Date and the number of Installment Conversion Shares originally delivered to Lender pursuant to the applicable Installment Notice. For the avoidance of doubt, if the Installment Conversion Price as of the True-Up Date is higher than the Installment Conversion Price set forth in the applicable Installment Notice, then Borrower shall have no obligation to deliver True-Up Shares to Lender, nor shall Lender have any obligation to return any excess Installment Conversion Shares to Borrower under any circumstance. For the convenience of Borrower only, Lender may, in its sole discretion, deliver to Borrower a notice (pursuant to a form of notice substantially in the form attached hereto as Exhibit C) informing Borrower of the number of True-Up Shares it is obligated to deliver to Lender as of any given True-Up Date, provided that if Lender does not deliver any such notice, Borrower shall not be relieved of its obligation to deliver True-Up Shares pursuant to this Section 11. Notwithstanding the foregoing, if Borrower fails to deliver any required True-Up Shares on or before any applicable True-Up Share Delivery Date, then in such event the Outstanding Balance of this Note will automatically increase by a sum equal to the number of True-Up Shares deliverable as of the applicable True-Up Date multiplied by the Market Price for the Common Stock as of the applicable True-Up Date (under Lender’s and Borrower’s expectations that any such increase holding period under Rule 144). 12. Note or the other Transaction Documents, if at any time Lender shall or would be issued shares of Common Stock Exhibit A - Note -Page 9 under any of the Transaction Documents, but such issuance would cause Lender (together with its affiliates) to beneficially own a number of shares exceeding 4.99% of the number of shares of Common Stock outstanding on such date (including for such purpose the shares of Common Stock issuable upon such issuance) (the “Maximum Percentage”), then Borrower must not issue to Lender shares of Common Stock which would exceed the Maximum Percentage. For purposes of this section, beneficial ownership of Common Stock will be determined pursuant to Section 13(d) of the 1934 Act. The shares of Common Stock issuable to Lender that would cause the Maximum Percentage to be exceeded are referred to herein as the “Ownership Limitation Shares”. Borrower will reserve the Ownership Limitation Shares for the exclusive benefit of Lender. From time to time, Lender may notify Borrower in writing of the number of the Ownership Limitation Shares that may be issued to Lender without causing Lender to exceed the Maximum Percentage. Upon receipt of such notice, Borrower shall be unconditionally obligated to immediately issue such designated shares to Lender, with a corresponding reduction in the number of the Ownership Limitation Shares. Notwithstanding the forgoing, the term “4.99%” above shall be replaced with “9.99%” at such time as the Market Capitalization is less than $10,000,000.00. Notwithstanding any other provision contained herein, if the term “4.99%” is replaced with “9.99%” pursuant to the preceding sentence, such increase to “9.99%” shall remain at 9.99% until increased, decreased or waived by Lender as set forth below. By written notice to Borrower, Lender may increase, decrease or waive the Maximum Percentage as to itself but any such waiver will not be effective until the 61st day after delivery thereof. The foregoing 61-day notice requirement is enforceable, unconditional and non-waivable and shall apply to all affiliates and assigns of Lender. 13. Payment of Collection Costs. If this Note is placed in the hands of an attorney for collection or enforcement prior to commencing arbitration or legal proceedings, or is collected or enforced through any arbitration or legal proceeding, or Lender otherwise takes action to collect amounts due under this Note or to enforce the provisions of this Note, then Borrower shall pay the costs incurred by Lender for such collection, enforcement or action including, without limitation, attorneys’ fees and disbursements. Borrower also agrees to pay for any costs, fees or charges of its transfer agent that are charged to Lender pursuant to any Conversion or issuance of shares pursuant to this Note. 14. Opinion of Counsel. In the event that an opinion of counsel is needed for any matter related to this Note, Lender has the right to have any such opinion provided by its counsel. Lender also has the right to have any such opinion provided by Borrower’s counsel. 15. Governing Law; Venue. This Note shall be construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Note shall be governed by, the internal laws of the State of Utah, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Utah or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Utah. The provisions set forth in the Purchase Agreement to determine the proper venue for any disputes are incorporated herein by this reference. 16. Resolution of Disputes. 16.1. Arbitration of Disputes. By its acceptance of this Note, each party agrees to be bound by the Arbitration Provisions (as defined in the Purchase Agreement) set forth as an exhibit to the Purchase Agreement. 16.2. a dispute as to any Calculation (as defined in the Purchase Agreement), such dispute will be resolved in the manner set forth in the Purchase Agreement. Exhibit A - Note -Page 10 17. Cancellation. After repayment or conversion of the entire Outstanding Balance (including without limitation delivery of True-Up Shares pursuant to the payment of the final Installment Amount, if applicable), this Note shall be deemed paid in full, shall automatically be deemed canceled, and shall not be reissued. 18. Amendments. The prior written consent of both parties hereto shall be required for any change or amendment to this Note. 19. Assignments. Borrower may not assign this Note without the prior written consent of Lender. This Note and any shares of Common Stock issued upon conversion of this Note may be offered, sold, assigned or transferred by Lender without the consent of Borrower. 20. Offset Rights. Notwithstanding anything to the contrary herein or in any of the other Transaction Documents, (a) the parties hereto acknowledge and agree that Lender maintains a right of offset pursuant to the terms of the Investor Note that, under certain circumstances, permits Lender to deduct amounts owed by Borrower under this Note from amounts otherwise owed by Lender under the Investor Note (the “Lender Offset Right”), and (b) at any time Borrower shall be entitled to deduct and offset any amount owing by the initial Lender under the Investor Note from any amount owed by Borrower under this Note (the “Borrower Offset Right”). In order to exercise the Borrower Offset Right, Borrower must deliver to Lender (a) a completed and signed Borrower Offset Right Notice in the form attached hereto as Exhibit D, (b) the original Investor Note being offset marked “cancelled” or, in the event the applicable Investor Note has been lost, stolen or destroyed, a lost note affidavit in a form reasonably acceptable to Lender, and (c) a check payable to Lender in the amount of $250.00. In the event that Borrower’s exercise of the Borrower Offset Right results in the full satisfaction of Borrower’s obligations under this Note, Lender shall return the original Note to Borrower marked “cancelled” or, in the event this Note has been lost, stolen or destroyed, a lost note affidavit in a form reasonably acceptable to Borrower. For the avoidance of doubt, Borrower shall not incur any Prepayment Premium set forth in Section 1 hereof with respect to any portions of this Note that are satisfied by way of a Borrower Offset Right. 21. each and every provision of this Note and the documents and instruments entered into in connection herewith. 22. Notices. Whenever notice is required to be given under this Note, unless otherwise provided herein, such notice shall be given in accordance with the subsection of the Purchase Agreement titled “Notices.” 23. Liquidated Damages. Lender and Borrower agree that in the event Borrower fails to comply with any of the terms or provisions of this Note, Lender’s damages would be uncertain and difficult (if not impossible) to accurately estimate because of the parties’ inability to predict future interest rates, future share prices, future trading volumes and other relevant factors. Accordingly, Lender and Borrower agree that any fees, balance adjustments, Default Interest or other charges assessed under this Note are not penalties but instead are intended by the parties to be, and shall be deemed, liquidated damages (under Lender’s and Borrower’s expectations that any such liquidated damages will tack back to the Purchase Price Date for purposes of determining the holding period under Rule 144). 24. Waiver of Jury Trial. EACH OF LENDER AND BORROWER IRREVOCABLY WAIVES ANY AND ALL RIGHTS SUCH PARTY MAY HAVE TO DEMAND THAT ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR IN ANY WAY RELATED TO THIS NOTE OR THE RELATIONSHIPS OF THE PARTIES HERETO BE TRIED BY JURY. THIS WAIVER EXTENDS TO ANY AND ALL RIGHTS TO DEMAND A TRIAL BY JURY Exhibit A - Note -Page 11 25. Voluntary Agreement. Borrower has carefully read this Note and has asked any questions needed for Borrower to understand the terms, consequences and binding effect of this Note and fully understand them. Borrower has had the opportunity to seek the advice of an attorney of Borrower’s choosing, or has waived the right to do so, and is executing this Note voluntarily and without any duress or undue influence by Lender or anyone else. 26. Severability. If any part of this Note is construed to be in violation of any law, such part shall be modified to achieve the objective of Borrower and Lender to the fullest extent permitted by law and the balance of this Note shall remain in full force and effect. Exhibit A - Note -Page 12 IN WITNESS WHEREOF, Borrower has caused this Note to be duly executed as of the Effective Date. BORROWER: By: Name: Title: ACKNOWLEDGED, ACCEPTED AND AGREED: LENDER: By: By: [Signature Page to Convertible Promissory Note] ATTACHMENT 1 DEFINITIONS For purposes of this Note, the following terms shall have the following meanings: A1. “Adjusted Outstanding Balance” means the Outstanding Balance of this Note as of the date the applicable Fundamental Default occurred less any Conversion Delay Late Fees included in such Outstanding Balance. A2. “Approved Stock Plan” means any equity compensation plan which has been approved by the shareholders of Borrower and is in effect as of the Purchase Price Date, pursuant to which Borrower’s securities may be issued to any employee, officer or director for services provided to Borrower. A3. “Bloomberg” means Bloomberg L.P. (or if that service is not then reporting the relevant information regarding the Common Stock, a comparable reporting service of national reputation selected by Lender and reasonably satisfactory to Borrower). A4. “Closing Bid Price” and “Closing Trade Price” means the last closing bid price and last closing trade price, respectively, for the Common Stock on its principal market, as reported by Bloomberg, or, if its principal market begins to operate on an extended hours basis and does not designate the closing bid price or the closing trade price (as the case may be) then the last bid price or last trade price, respectively, of the Common Stock prior to 4:00:00 p.m., New York time, as reported by Bloomberg, or, if its principal market is not the principal securities exchange or trading market for the Common Stock, the last closing bid price or last trade price, respectively, of the Common Stock on the principal securities exchange or trading market where the Common Stock is listed or traded as reported by Bloomberg, or if the foregoing do not apply, the last closing bid price or last trade price, respectively, of the Common Stock in the over-the-counter market on the electronic bulletin board for the Common Stock as reported by Bloomberg, or, if no closing bid price or last trade price, respectively, is reported for the Common Stock by Bloomberg, the average of the bid prices, or the ask prices, respectively, of any market makers for the Common Stock as reported by OTC Markets Group, Inc., and any successor thereto. If the Closing Bid Price or the Closing Trade Price cannot be calculated for the Common Stock on a particular date on any of the foregoing bases, the Closing Bid Price or the Closing Trade Price (as the case may be) of the Common Stock on such date shall be the fair market value as mutually determined by Lender and Borrower. If Lender and Borrower are unable to agree upon the fair market value of the Common Stock, then such dispute shall be resolved in accordance with the procedures in Section 16.2. All such determinations shall be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during such period. A5. “Conversion” means a Lender Conversion under Section 3 or an Installment Conversion under Section 8. A6. “Conversion Eligible Outstanding Balance” means the Outstanding Balance of this Note less the sum of each Subsequent Tranche that has not yet become a Conversion Eligible Tranche (i.e., Lender has not yet paid the outstanding balance of the Investor Note that corresponds to such Subsequent Tranche). A7. “Conversion Factor” means 70%, subject to the following adjustments. If at any time the average of the three (3) lowest Closing Bid Prices during the twenty (20) Trading Days immediately preceding any date of measurement is below $0.10, then in such event the then-current Conversion Factor shall be reduced by 10% for all future Conversions (subject to other reductions set forth in this section). If at any time after the Effective Date, Borrower is not DWAC Eligible, then the then-current Conversion Factor will automatically be reduced by 5% for all future Conversions. If at any time after the Effective Date, the Conversion Shares are not DTC Eligible, then the then-current Conversion Factor will [Attachment 1 to Convertible Promissory Note, Page 1] automatically be reduced by an additional 5% for all future Conversions. Finally, in addition to the Default Effect, if any Major Default occurs after the Effective Date, the Conversion Factor shall automatically be reduced for all future Conversions by an additional 5% for each of the first three (3) Major Defaults that occur after the Effective Date (for the avoidance of doubt, each occurrence of any Major Default shall be deemed to be a separate occurrence for purposes of the foregoing reductions in Conversion Factor, even if the same Major Default occurs three (3) separate times). For example, the first time Borrower is not DWAC Eligible, the Conversion Factor for future Conversions thereafter will be reduced from 70% to 65% for purposes of this example. Following such event, the first time the Conversion Shares are no longer DTC Eligible, the Conversion Factor for future Conversions thereafter will be reduced from 65% to 60% for purposes of this example. If, thereafter, there are three (3) separate occurrences of a Major Default pursuant to Section 4.1(c), then for purposes of this example the Conversion Factor would be reduced by 5% for the first such occurrence, and so on for each of the second and third occurrences of such Major Default. A8. “Deemed Issuance” means an issuance of Common Stock that shall be deemed to have occurred on the latest possible permitted date pursuant to the terms hereof or any applicable Warrant in the event Borrower fails to deliver Conversion Shares as and when required pursuant to Section 9 of the Note or Warrant Shares (as defined in the Purchase Agreement) as and when required pursuant to the Warrant. For the avoidance of doubt, if Borrower has elected or is deemed under Section 8.3 to have elected to pay an Installment Amount in Installment Conversion Shares and fails to deliver such Installment Conversion Shares, such failure shall be considered a Deemed Issuance hereunder even if an Equity Conditions Failure exists at that time or other relevant date of determination. A9. “Default Effect” means multiplying the Conversion Eligible Outstanding Balance as of the date the applicable Event of Default occurred by (a) 15% for each occurrence of any Major Default, or (b) 5% for each occurrence of any Minor Default, and then adding the resulting product to the Outstanding Balance as of the date the applicable Event of Default occurred, with the sum of the foregoing then becoming the Outstanding Balance under this Note as of the date the applicable Event of Default occurred; provided that the Default Effect may only be applied three (3) times hereunder with respect to Major Defaults and three (3) times hereunder with respect to Minor Defaults; and provided further that the Default Effect shall not apply to any Event of Default pursuant to Section 4.1(b) hereof. A10. “DTC” means the Depository Trust Company or any successor thereto. A11. “DTC Eligible” means, with respect to the Common Stock, that such Common Stock is eligible to be deposited in certificate form at the DTC, cleared and converted into electronic shares by the DTC and held in the name of the clearing firm servicing Lender’s brokerage firm for the benefit of Lender. A12. “DTC/FAST Program” means the DTC’s Fast Automated Securities Transfer program. A13. “DWAC” means the DTC’s Deposit/Withdrawal at Custodian system. A14. “DWAC Eligible” means that (a) Borrower’s Common Stock is eligible at DTC for full services pursuant to DTC’s operational arrangements, including without limitation transfer through DTC’s DWAC system, (b) Borrower has been approved (without revocation) by DTC’s underwriting department, (c) Borrower’s transfer are otherwise eligible for delivery via DWAC; (e) Borrower has previously delivered all Conversion Shares to Lender via DWAC; and (f) Borrower’s transfer agent does not have a policy prohibiting or limiting delivery of the Conversion Shares via DWAC. A15. “Equity Conditions Failure” means that any of the following conditions has not been satisfied during any applicable Equity Conditions Measuring Period (as defined below): (a) with respect to the applicable date of determination all of the Conversion Shares would be freely tradable under Rule 144 or without the need for registration under any applicable federal or state securities laws (in each case, [Attachment 1 to Convertible Promissory Note, Page 2] disregarding any limitation on conversion of this Note); (b) on each day during the period beginning one month prior to the applicable date of determination and ending on and including the applicable date of determination (the “Equity Conditions Measuring Period”), the Common Stock is listed or designated for quotation (as applicable) on any of NYSE, NASDAQ, OTCQX, OTCQB, or OTC Pink Current Information (each, an “Eligible Market”) and shall not have been suspended from trading on any such Eligible Market (other than suspensions of not more than two (2) Trading Days and occurring prior to the applicable date of determination due to business announcements by Borrower); (c) on each day during the Equity Conditions Measuring Period, Borrower shall have delivered all shares of Common Stock issuable upon conversion of this Note on a timely basis as set forth in Section 9 hereof and all other shares of capital stock required to be delivered by Borrower on a timely basis as set forth in the other Transaction Documents; (d) any shares of Common Stock to be issued in connection with the event requiring determination may be issued in full without violating Section 12 hereof (Lender acknowledges that Borrower shall be entitled to assume that this condition has been met for all purposes hereunder absent written notice from Lender); (e) any shares of Common Stock to be issued in connection with the event requiring determination may be issued in full without violating the rules or regulations of the Eligible Market on which the Common Stock is then listed or designated for quotation (as applicable); (f) on each day during the Equity Conditions Measuring Period, no public announcement of a pending, proposed or intended Fundamental Transaction shall have occurred which has not been abandoned, terminated or consummated; (g) Borrower shall have no knowledge of any fact that would reasonably be expected to cause any of the Conversion Shares to not be freely tradable without the need for registration under any applicable state securities laws (in each case, disregarding any limitation on conversion of this Note); (h) on each day during the Equity Conditions Measuring Period, Borrower otherwise shall have been in material compliance with each, and shall not have breached any, term, provision, covenant, representation or warranty of any Transaction Document; (i) without limiting clause (j) above, on each day during the Equity Conditions Measuring Period, there shall not have occurred an Event of Default or an event that with the passage of time or giving of notice would constitute an Event of Default; (k) on each Installment Date, the average and median daily dollar volume of the Common Stock on its principal market for the previous twenty (20) Trading Days shall be greater than $15,000.00; (l) the ten (10) day average VWAP of the Common Stock is greater than $0.05, and (m) the Common Stock shall be DWAC Eligible as of each applicable Installment Date or other date of determination. A16. “Excluded Securities” means any shares of Common Stock, options, or convertible securities issued or issuable in connection with any Approved Stock Plan; provided that the option term, exercise price or similar provisions of any issuances pursuant to such Approved Stock Plan are not amended, modified or changed on or after the Purchase Price Date. A17. “Free Trading” means that (a) the shares or certificate(s) representing the applicable shares of Common Stock have been cleared and approved for public resale by the compliance departments of Lender’s brokerage firm and the clearing firm servicing such brokerage, and (b) such shares are held in the name of the clearing firm servicing Lender’s brokerage firm and have been deposited into such clearing firm’s account for the benefit of Lender. A18. “Fundamental Default” means that Borrower either fails to pay the entire Outstanding Balance to Lender on or before the Maturity Date or fails to pay the Mandatory Default Amount within three (3) Trading Days of the date Lender delivers any notice of acceleration to Borrower pursuant to Section 4.2 of this Note. A19. “Fundamental Default Conversion Value” means the Adjusted Outstanding Balance multiplied by the highest Fundamental Default Ratio that occurs during the Fundamental Default Measuring Period. A20. “Fundamental Default Measuring Period” means a number of months equal to the Outstanding Balance as of the date the Fundamental Default occurred divided by the Installment Amount, [Attachment 1 to Convertible Promissory Note, Page 3] with such number being rounded up to the next whole month; provided, however, that if Borrower repays the entire Outstanding Balance prior to the conclusion of the Fundamental Default Measuring Period, the Fundamental Default Measuring Period shall end on the date of repayment. For illustration purposes only, if the Outstanding Balance were equal to $125,000.00 as of the date a Fundamental Default occurred and if the Installment Amount were $28,500.00, then the Fundamental Default Measuring Period would equal five (5) months calculated as follows: $125,000.00/$28,500.00 equals 4.386, rounded up to five (5). A21. “Fundamental Default Ratio” means a ratio that will be calculated on each Trading Day during the Fundamental Default Measuring Period by dividing the Closing Trade Price for the Common Stock on a given Trading Day by the Lender Conversion Price (as adjusted pursuant to the terms hereof) in effect for such Trading Day. A22. “Fundamental Liquidated Damages Amount” means the greater of (a) (i) the quotient of the Outstanding Balance on the date the Fundamental Default occurred divided by the then-current Conversion Factor, minus (ii) the Outstanding Balance on the date the Fundamental Default occurred, or (b) the Fundamental Default Conversion Value. A23. “Fundamental Transaction” means that (a) (i) Borrower or any of its subsidiaries shall, directly or indirectly, in one or more related transactions, consolidate or merge with or into (whether or not Borrower or any of its subsidiaries is the surviving corporation) any other person or entity, or (ii) Borrower or any of its subsidiaries shall, directly or indirectly, in one or more related transactions, sell, lease, license, assign, transfer, convey or otherwise dispose of all or substantially all of its respective properties or assets to any other person or entity, or (iii) Borrower or any of its subsidiaries shall, directly or indirectly, in one or more related transactions, allow any other person or entity to make a purchase, tender or exchange offer that is accepted by the holders of more than 50% of the outstanding shares of voting stock of Borrower (not including any shares of voting stock of Borrower held by the person or persons making or party to, or associated or affiliated with the persons or entities making or party to, such purchase, tender or exchange offer), or (iv) Borrower or any of its subsidiaries shall, directly or indirectly, in one or more related transactions, consummate a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with any other person or entity whereby such other person or entity acquires more than 50% of the outstanding shares of voting stock of Borrower (not including any shares of voting stock of Borrower held by the other persons or entities making or party to, or associated or affiliated with the other persons or entities making or party to, such stock or share purchase agreement or other business combination), or (v) Borrower or any of its subsidiaries shall, directly or indirectly, in one or more related transactions, reorganize, recapitalize or reclassify the Common Stock, other than an increase in the number of authorized shares of Borrower’s Common Stock, or (b) any “person” or “group” (as these terms are used for purposes of Sections 13(d) and 14(d) of the 1934 Act and the rules and regulations promulgated thereunder) is or shall become the “beneficial owner” (as defined in Rule 13d-3 under the 1934 Act), directly or indirectly, of 50% of the aggregate ordinary voting power represented by issued and outstanding voting stock of Borrower. A24. “Installment Amount” means $46,000.00 ($230,000.00 ÷ 5), plus the sum of any accrued and unpaid interest on all Conversion Eligible Tranches as of the applicable Installment Date, and accrued and unpaid late charges, if any, under this Note as of the applicable Installment Date, and any other amounts accruing or owing to Lender under this Note as of such Installment Date; provided, however, that, if the remaining amount owing under all then-existing Conversion Eligible Tranches or otherwise with respect to this Note as of the applicable Installment Date is less than the Installment Amount set forth above, then the Installment Amount for such Installment Date (and only such Installment Amount) shall be reduced (and only reduced) by the amount necessary to cause such Installment Amount to equal such outstanding amount. [Attachment 1 to Convertible Promissory Note, Page 4] A25. “Lender Conversion Share Value” means the product of the number of Lender Conversion Shares deliverable pursuant to any Lender Conversion multiplied by the Closing Trade Price of the Common Stock on the Delivery Date for such Lender Conversion. A26. “Major Default” means any Event of Default occurring under Sections 4.1(a), 4.1(c), 4.1(l), or 4.1(p) of this Note. A27. “Mandatory Default Amount” means the greater of (a) the Outstanding Balance (including all Tranches, both Conversion Eligible Tranches and Subsequent Tranches that have not yet become Conversion Eligible Tranches) divided by the Installment Conversion Price on the date the Mandatory Default Amount is demanded, multiplied by the VWAP on the date the Mandatory Default Amount is demanded, or (b) the Outstanding Balance following the application of the Default Effect. A28. “Market Capitalization” means a number equal to (a) the average VWAP of the Common Stock for the immediately preceding fifteen (15) Trading Days, multiplied by (b) the aggregate number of outstanding shares of Common Stock as reported on Borrower’s most recently filed Form 10-Q or Form 10-K. A29. “Market Price” means the Conversion Factor multiplied by the average of the three (3) lowest Closing Bid Prices during the twenty (20) Trading Days immediately preceding the applicable Conversion. A30. “Minimum Market Capitalization” means $6,000,000.00. A31. “Minor Default” means any Event of Default that is not a Major Default or a Fundamental Default. A32. “OID” means an original issue discount. A33. “Optional Prepayment Liquidated Damages Amount” means an amount equal to the difference between (a) the product of (i) the number of shares of Common Stock obtained by dividing (1) the applicable Optional Prepayment Amount by (2) the Lender Conversion Price as of the date Borrower delivered the applicable Optional Prepayment Amount to Lender, multiplied by (ii) the Closing Trade Price of the Common Stock on the date Borrower delivered the applicable Optional Prepayment Amount to Lender, and (b) the applicable Optional Prepayment Amount paid by Borrower to Lender. For illustration purposes only, if the applicable Optional Prepayment Amount were $50,000.00, the Lender Conversion Price as of the date the Optional Prepayment Amount was paid to Lender was equal to $0.75 per share of Common Stock, and the Closing Trade Price of a share of Common Stock as of such date was equal to $1.00, then the Optional Prepayment Liquidated Damages Amount would equal $16,666.67 computed as follows: (a) $66,666.67 (calculated as (i) (1) $50,000.00 divided by (2) $0.75 multiplied by (ii) $1.00) minus (b) $50,000.00. A34. “Other Agreements” means, collectively, (a) all existing and future agreements and instruments between, among or by Borrower (or an affiliate), on the one hand, and Lender (or an affiliate), on the other hand, and (b) any financing agreement or a material agreement that affects Borrower’s ongoing business operations. A35. “Outstanding Balance” means as of any date of determination, the Purchase Price, as reduced or increased, as the case may be, pursuant to the terms hereof for payment, Conversion, offset, or otherwise, plus the OID, the Transaction Expense Amount, accrued but unpaid interest, collection and enforcements costs (including attorneys’ fees) incurred by Lender, transfer, stamp, issuance and similar taxes and fees related to Conversions, and any other fees or charges (including without limitation Conversion Delay Late Fees) incurred under this Note. A36. “Purchase Price Date” means the date the Initial Cash Purchase Price is delivered by Lender to Borrower. [Attachment 1 to Convertible Promissory Note, Page 5] A37. “Trading Day” means any day on which the New York Stock Exchange is open for trading. A38. “VWAP” means the volume weighted average price of the Common stock on the principal market for a particular Trading Day or set of Trading Days, as the case may be, as reported by Bloomberg. [Attachment 1 to Convertible Promissory Note, Page 6] EXHIBIT A Chicago, Illinois 60601 Date: __________________        Attn: Robert DeAngelis, CEO Pittsburgh, Pennsylvania 15237 LENDER CONVERSION NOTICE The above-captioned Lender hereby gives notice to REAC Group, Inc., a Florida corporation (the “Borrower”), pursuant to that certain Convertible Promissory Note made by Borrower in favor of Lender on March 13, 2017 (the “Note”), that Lender elects to convert the portion of the Note balance set forth below into fully paid and non-assessable shares of Common Stock of Borrower as of the date of conversion specified below. Said conversion shall be based on the Lender Conversion Price set forth below. In the event of a conflict between this Lender Conversion Notice and the Note, the Note shall govern, or, in the alternative, at the election of Lender in its sole discretion, Lender may provide a new form of Lender Conversion Notice to conform to the Note. Capitalized terms used in this notice without definition shall have the meanings given to them in the Note. A. Date of Conversion: ____________ B. Lender Conversion #:  ____________ C. Conversion Amount:  ____________ D. Lender Conversion Price:  _______________ E. Lender Conversion Shares:  _______________ (C divided by D) F. Remaining Outstanding Balance of Note:  ____________*   G. Remaining Balance of Investor Note: ____________* H.    Outstanding Balance of Note Net of Balance of Investor Note: ____________* (F minus G) * Subject to adjustments for corrections, defaults, interest and other adjustments permitted by the Transaction Documents (as defined in the Purchase Agreement), the terms of which shall control in the event of any dispute between the terms of this Lender Conversion Notice and such Transaction Documents. The Conversion Amount converted hereunder shall be deducted from the following Conversion Eligible Tranche(s): Conversion Amount Tranche No.             Additionally, $_________________ of the Conversion Amount converted hereunder shall be deducted from the Installment Amount(s) relating to the following Installment Date(s): __________________________________________. Please transfer the Lender Conversion Shares electronically (via DWAC) to the following account: [Exhibit A to Convertible Promissory Note, Page 1] Broker:   Address: DTC#:   Account #:   Account Name:   To the extent the Lender Conversion Shares are not able to be delivered to Lender electronically via the DWAC system, deliver all such certificated shares to Lender via reputable overnight courier after receipt of this Lender Conversion Notice (by facsimile transmission or otherwise) to: _____________________________________ _____________________________________ _____________________________________ Sincerely, Lender: By: By: [Exhibit A to Convertible Promissory Note, Page 2] EXHIBIT B Pittsburgh, Pennsylvania 15237 Date: _____________ Attn: John Fife Chicago, Illinois 60601 INSTALLMENT NOTICE The above-captioned Borrower hereby gives notice to Iliad Research and Trading, L.P., a Utah limited partnership (the “Lender”), pursuant to that certain Convertible Promissory Note made by Borrower in favor of Lender on March 13, 2017 (the “Note”), of certain Borrower elections and certifications related to payment of the Installment Amount of $_________________ due on ___________, 201_ (the “Installment Date”). In the event of a conflict between this Installment Notice and the Note, the Note shall govern, or, in the alternative, at the election of Lender in its sole discretion, Lender may provide a new form of Installment Notice to conform to the Note. Capitalized terms used in this notice without definition shall have the meanings given to them in the Note. INSTALLMENT CONVERSION AND CERTIFICATIONS AS OF THE INSTALLMENT DATE A. INSTALLMENT CONVERSION A. Installment Date: ____________, 201_ B. Installment Amount:  ____________ C. Portion of Installment Amount to be Paid in Cash: ____________ D. Portion of Installment Amount to be Converted into Common Stock: ____________ (B minus C) E. Installment Conversion Price:  _______________ (lower of (i) Lender Conversion Price in effect and (ii) Market Price as of Installment Date) F. Installment Conversion Shares:  _______________ (D divided by E) G. H. I. Outstanding Balance of Note Net of Balance of Investor Note: ____________ (G minus H)* the terms of this Installment Notice and such Transaction Documents. B. EQUITY CONDITIONS CERTIFICATION 1. Market Capitalization:________________ (Check One) 2. _________ Borrower herby certifies that no Equity Conditions Failure exists as of the Installment Date. [Exhibit B to Convertible Promissory Note, Page 1] 3. _________ Borrower hereby gives notice that an Equity Conditions Failure has occurred and requests a waiver from Lender with respect thereto. The Equity Conditions Failure is as follows: ____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________ Sincerely, Borrower: By: Name: Title: ACKNOWLEDGED AND CERTIFIED BY: Lender: By: By: [Exhibit B to Convertible Promissory Note, Page 2] EXHIBIT C Chicago, Illinois 60601 Date: __________________        Pittsburgh, Pennsylvania 15237 TRUE-UP NOTICE True-Up Conversion Shares related to _____________, 201_ (the “Installment Date”). In the event of a conflict between this True-Up Notice and the Note, the Note shall govern, or, in the alternative, at the election of Lender in its sole discretion, Lender may provide a new form of True-Up Notice to conform to the Note. Capitalized terms used in this notice without definition shall have the meanings given to them in the Note. TRUE-UP CONVERSION SHARES AND CERTIFICATIONS AS OF THE TRUE-UP DATE 1. TRUE-UP CONVERSION SHARES A. B. True-Up Date: ____________, 201_ C. Portion of Installment Amount Converted into Common Stock:  _____________ D. True-Up Conversion Price:  _______________ (lower of (i) Lender Conversion Price in effect and (ii) Market Price as of True-Up Date) E. True-Up Conversion Shares:  _______________ (C divided by D) F. Installment Conversion Shares Delivered: ________________ G. True-Up Conversion Shares to be Delivered: ________________ (only applicable if E minus F is greater than zero) 2. EQUITY CONDITIONS CERTIFICATION (Section to be completed by Borrower) A. Market Capitalization:________________ (Check One) B. of the applicable True-Up Date. [Exhibit C to Convertible Promissory Note, Page 1] C. ____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________ Sincerely, Lender:   By: By: [Exhibit C to Convertible Promissory Note, Page 2] EXHIBIT D Pittsburgh, Pennsylvania 15237 Date: _____________ Attn: John Fife Chicago, Illinois 60601 NOTICE OF EXERCISE OF BORROWER OFFSET RIGHT 2017 (the “Note”), of Borrower’s election to exercise the Borrower Offset Right as set forth below. In the event of a conflict between this Notice of Exercise of Borrower Offset Right and the Note, the Note shall govern. Capitalized terms used in this notice without definition shall have the meanings given to them in the Note. A. Effective Date of Offset: ____________, 201_ B. Amount of Offset:  ____________ C. Investor Note(s) Being Offset:  _______________ the terms of this Notice of Exercise of Borrower Offset Right and such Transaction Documents. Sincerely, Borrower: By: Name: Title: [Exhibit D to Convertible Promissory Note, Page 3] THIS WARRANT AND THE COMMON STOCK ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS WARRANT AND THE COMMON STOCK ISSUABLE HEREUNDER MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS WARRANT OR ANY SHARES ISSUABLE HEREUNDER UNDER SUCH ACT AND ANY APPLICABLE STATE SECURITIES LAW OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO REAC GROUP, INC. OR ITS TRANSFER AGENT THAT SUCH REGISTRATION IS NOT REQUIRED. REAC GROUP, INC. WARRANT TO PURCHASE SHARES OF COMMON STOCK 1. Issuance. For good and valuable consideration as set forth in the Purchase Agreement (as defined below), including without limitation the Initial Cash Purchase Price (as defined in the Purchase Agreement), the receipt and sufficiency of which are hereby acknowledged by REAC Group, Inc., a Florida corporation (“Company”); Iliad Research and Trading, L.P., a Utah limited partnership, its successors and/or registered assigns (“Investor”), is hereby granted the right to purchase at any time on or after the Issue Date (as defined below) until the date which is the last calendar day of the month in which the third anniversary of the Issue Date occurs (the “Expiration Date”), a number of fully paid and non-assessable shares (the “Warrant Shares”) of Company’s common stock, par value $0.00001 per share (the “Common Stock”), equal to $57,500.00 divided by the Market Price (as of the Issue Date), as such number may be adjusted from time to time pursuant to the terms and conditions of this Warrant to Purchase Shares of Common Stock (this “Warrant”). This Warrant is being issued pursuant to the terms of that certain Securities Purchase Agreement dated March 13, 2017, to which Company and Investor are parties (as the same may be amended from time to time, the “Purchase Agreement”). Certain capitalized terms used herein are defined in Attachment 1 attached hereto and incorporated herein by this reference. Moreover, to the extent any defined terms herein are defined in any other Transaction Document (as so noted herein), such defined term shall remain applicable in this Warrant even if the other Transaction Document has been released, satisfied, or is otherwise cancelled. This Warrant was issued to Investor on March 13, 2017 (the “Issue Date”). For the avoidance of doubt, the Initial Cash Purchase Price constitutes payment in full for this Warrant. 2. Exercise of Warrant. 2.1. General. (a) This Warrant is exercisable in whole or in part at any time and from time to time commencing on the Issue Date and ending on the Expiration Date. Such exercise shall be effectuated by submitting to Company (either by delivery to Company or by email or facsimile transmission) a completed and signed Notice of Exercise substantially in the form attached to this Warrant as Exhibit A (the “Notice of Exercise”). The date a Notice of Exercise is either faxed, emailed or delivered to Company shall be the “Exercise Date,” provided that, if such exercise represents the full exercise of the outstanding balance of this Warrant, Investor shall tender this Warrant to Company within five (5) Trading Days thereafter, but only if the Delivery Shares to be delivered pursuant to the Notice of Exercise have been delivered to Investor as of such date. The Notice of Exercise shall be executed by Investor and shall indicate (i) the number of Delivery Shares Exhibit B – Warrant  Page 1 to be issued pursuant to such exercise, and (ii) if applicable (as provided below), whether the exercise is a cashless exercise. (b) Notwithstanding any other provision contained herein or in any other Transaction Document to the contrary, at any time prior to the Expiration Date, Investor may elect a “cashless” exercise of this Warrant for any Warrant Shares whereby Investor shall be entitled to receive a number of shares of Common Stock equal to (i) the excess of the Current Market Value over the aggregate Exercise Price of the Exercise Shares, divided by (ii) the Adjusted Price. (c) If the Notice of Exercise form elects a “cash” exercise, the Exercise Price per share of Common Stock for the Delivery Shares shall be payable, at the election of Investor, in cash or by certified or official bank check or by wire transfer in accordance with instructions provided by Company at the request of Investor. (d) Upon the appropriate payment to Company, if any, of the Exercise Price for the Delivery Shares, Company shall promptly, but in no case later than the date that is three (3) Trading Days following the date the Exercise Price is paid to Company (or with respect to a “cashless exercise,” the date that is three (3) Trading Days following the Exercise Date) (the “Delivery Date”), deliver or cause Company’s Transfer Agent to deliver the applicable Delivery Shares electronically via the DWAC system to the account designated by Investor on the Notice of Exercise. If for any reason Company is not able to so deliver the Delivery Shares via the DWAC system, notwithstanding its best efforts to do so, such shall constitute a breach of this Warrant, and Company shall instead, on or before the applicable date set forth above in this subsection, issue and deliver to Investor or its broker (as designated in the Notice of Exercise), via reputable overnight courier, a certificate, registered in the name of Investor or its designee, representing the applicable number of Delivery Shares. For the avoidance of doubt, Company has not met its obligation to deliver Delivery Shares within the required timeframe set forth above unless Investor or its broker, as applicable, has actually received the Delivery Shares (whether electronically or in certificated form) no later than the close of business on the latest possible delivery date pursuant to the terms set forth above. Moreover, and notwithstanding anything to the contrary herein or in any other Transaction Document, in the event Company or its Transfer Agent refuses to deliver any Delivery Shares to Investor on grounds that such issuance is in violation of Rule 144 under the 1933 Act (as defined below) (“Rule 144”), Company shall deliver or cause its Transfer Agent to deliver the applicable Delivery Shares to Investor with a restricted securities legend, but otherwise in accordance with the provisions of this Section 2.1(d). In conjunction therewith, Company will also deliver to Investor a written opinion from its counsel or its Transfer Agent’s counsel opining as to why the issuance of the applicable Delivery Shares violates Rule 144. (e) If Delivery Shares are delivered later than as required under subsection (d) immediately above, Company agrees to pay, in addition to all other remedies available to Investor in the Transaction Documents, a late charge equal to the greater of (i) $500.00 and (ii) 2% of the product of (1) the number of shares of Common Stock not issued to Investor on a timely basis and to which Investor is entitled multiplied by (2) the Closing Trade Price of the Common Stock on the Trading Day immediately preceding the last possible date which Company could have issued such shares of Common Stock to Investor without violating this Warrant, rounded to the nearest multiple of $100.00 (such resulting amount, the “Warrant Share Value”) (but in any event the cumulative amount of such late fees for each exercise shall not exceed 200% of the Warrant Share Value), per Trading Day until such Warrant Shares are delivered (the “Late Fees”). Company acknowledges and agrees that the failure to timely deliver Delivery Shares hereunder is a material breach of this Warrant and that the Late Fees are properly charged as liquidated damages to compensate Investor for such breach. Company shall pay any Late Fees incurred under this subsection in immediately available Exhibit B – Warrant  Page 2 funds upon demand; provided, however, that, so long as the Note is outstanding, at the option of Investor, such amount owed may be added to the principal amount of the Note. Furthermore, in the event that Company fails for any reason to effect delivery of the Delivery Shares as required under subsection (d) immediately above, Investor may revoke all or part of the relevant Warrant exercise by delivery of a notice to such effect to Company, whereupon Company and Investor shall each be restored to their respective positions immediately prior to the exercise of the relevant portion of this Warrant, except that the Late Fees described above shall be payable through the date notice of revocation or rescission is given to Company. Finally, in the event Company fails to deliver any Delivery Shares to Investor for a period of ninety (90) days from the Delivery Date, Investor may elect, in its sole discretion, to stop the accumulation of the Late Fees as of such date and require Company to pay to Investor a cash amount equal to (i) the total amount of all Late Fees that have accumulated prior to the date of Investor’s election, plus (ii) the product of the number of Delivery Shares deliverable to Investor on such date if it were to exercise this Warrant with respect to the remaining number of Exercise Shares as of such date multiplied by the Closing Trade Price of the Common Stock on the Delivery Date (the “Cash Settlement Amount”). At such time as Investor makes an election to require Company to pay to it the Cash Settlement Amount, such obligation of Company shall be a valid and binding obligation of Company and shall for all purposes be deemed to be a debt obligation of Company owed to Investor as of the date it makes such election. Upon Company’s payment of the Cash Settlement Amount to Investor, this Warrant shall be deemed to have been satisfied. In addition, and for the avoidance of doubt, even if Company could not deliver the number of Delivery Shares deliverable to Investor if it were to exercise this Warrant with respect to the remaining number of Exercise Shares on the date of repayment due to the provisions of Section 2.2, the provisions of Section 2.2 will not apply with respect to Company’s payment of the Cash Settlement Amount. (f) Investor shall be deemed to be the holder of the Delivery Shares (not including any Ownership Limitation Shares (as defined below)) issuable to it in accordance with the provisions of this Section 2.1 on the Exercise Date. 2.2. Warrant or the other Transaction Documents, if at any time Investor shall or would be issued shares of Common Stock, but such issuance would cause Investor (together with its affiliates) to own a number of shares exceeding 4.99% of the number of shares of Common Stock outstanding on such date (the “Maximum Percentage”), Company must not issue to Investor shares of Common Stock which would exceed the Maximum Percentage. The shares of Common Stock issuable to Investor that would cause the Maximum Percentage to be exceeded are referred to herein as the “Ownership Limitation Shares”. In such event, Company shall reserve the Ownership Limitation Shares for the exclusive benefit of Investor. From time to time, Investor may notify Company in writing of the number of the Ownership Limitation Shares that may be issued to Investor without causing Investor to exceed the Maximum Percentage. Upon receipt of such notice, Company shall be unconditionally obligated to immediately issue such designated shares to Investor, with a corresponding reduction in the number of the Ownership Limitation Shares. Notwithstanding the foregoing, the term “4.99%” above shall be replaced with “9.99%” at such time as the Market Capitalization is less than $10,000,000.00. Notwithstanding any other provision contained herein, if the term “4.99%” is replaced with “9.99%” pursuant to the preceding sentence, such change to “9.99%” shall be permanent. By written notice to Company, Investor may increase, decrease or waive the Maximum Percentage as to itself but any such waiver will not be effective until the 61st day after delivery thereof. The foregoing 61-day notice requirement is enforceable, unconditional and non-waivable and shall apply to all affiliates and assigns of Investor. Exhibit B – Warrant  Page 3 3. Mutilation or Loss of Warrant. Upon receipt by Company of evidence satisfactory to it of the loss, theft, destruction or mutilation of this Warrant, and (in the case of loss, theft or destruction) receipt of reasonably satisfactory indemnification, and (in the case of mutilation) upon surrender and cancellation of this Warrant, Company will execute and deliver to Investor a new Warrant of like tenor and date and any such lost, stolen, destroyed or mutilated Warrant shall thereupon become void. 4. Rights of Investor. Investor shall not, by virtue of this Warrant alone, be entitled to any rights of a stockholder in Company, either at law or in equity, and the rights of Investor with respect to or arising under this Warrant are limited to those expressed in this Warrant and are not enforceable against Company except to the extent set forth herein. 5. Protection Against Dilution and Other Adjustments. 5.1. Capital Adjustments. If Company shall at any time prior to the expiration of this Warrant subdivide the Common Stock, by split-up or stock split, or otherwise, or combine its Common Stock, or issue additional shares of its Common Stock as a dividend, the number of Warrant Shares issuable upon the exercise of this Warrant shall forthwith be automatically increased proportionately in the case of a subdivision, split or stock dividend, or proportionately decreased in the case of a combination. Appropriate adjustments shall also be made to the Exercise Price and other applicable amounts, but the aggregate purchase price payable for the total number of Warrant Shares purchasable under this Warrant (as adjusted) shall remain the same. Any adjustment under this Section 5.1 shall become effective automatically 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. 5.2. Reclassification, Reorganization and Consolidation. In case of any reclassification, capital reorganization, or change in the capital stock of Company (other than as a result of a subdivision, combination, or stock dividend provided for in Section 5.1 above), then Company shall make appropriate provision so that Investor shall have the right at any time prior to the expiration of this Warrant to purchase, at a total price equal to that payable upon the exercise of this Warrant, the kind and amount of shares of stock and other securities and property receivable in connection with such reclassification, reorganization, or change by a holder of the same number of shares of Common Stock as were purchasable by Investor immediately prior to such reclassification, reorganization, or change. In any such case appropriate provisions shall be made with respect to the rights and interest of Investor so that the provisions hereof shall thereafter be applicable with respect to any shares of stock or other securities and property deliverable upon exercise hereof, and appropriate adjustments shall be made to the purchase price per Warrant Share payable hereunder, provided the aggregate purchase price shall remain the same. 5.3. Subsequent Equity Sales. If Company or any subsidiary thereof, as applicable, at any time and from time to time while this Warrant is outstanding, shall sell or grant any option to purchase, or sell or grant any right to reprice, or otherwise dispose of, sell or issue (or announce any offer, sale, grant or any option to purchase or other disposition of) any Common Stock (including any Common Stock issued under the Note, whether upon any type of conversion or any Deemed Issuance), debt, warrants, options, preferred shares or other instruments or securities which are convertible into or exercisable for shares of Common Stock (together herein referred to as “Equity Securities”), at an effective price per share less than the Exercise Price (such lower price, the “Base Share Price”, and any such issuance, a “Dilutive Issuance”) (if the holder of the Common Stock or Equity Securities so issued shall at any time, whether by exercise or exchange prices or otherwise, or due to Exhibit B – Warrant  Page 4 warrants, options, or rights per share which are issued in connection with such issuance, be entitled to receive shares of Common Stock at an effective price per share that 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 (a) the Exercise Price shall be reduced and only reduced to equal the Base Share Price, and (b) the number of Warrant Shares issuable upon the exercise of this Warrant shall be increased to an amount equal to the number of Warrant Shares Investor could purchase hereunder for an aggregate Exercise Price, as reduced pursuant to subsection (a) above, equal to the aggregate Exercise Price payable immediately prior to such reduction in Exercise Price, provided that the increase in the number of Exercise Shares issuable under this Warrant made pursuant to this Section 5.3 shall not at any time exceed a number equal to three (3) times the number of Exercise Shares issuable under this Warrant as of the Issue Date (for the avoidance of doubt, the foregoing cap on the number of Exercise Shares issuable hereunder shall only apply to adjustments made pursuant to this Section 5.3 and shall not apply to adjustments made pursuant to Sections 5.1, 5.2 or any other section of this Warrant). Such adjustments shall be made whenever such Common Stock or Equity Securities are issued. Company shall notify Investor, in writing, no later than the Trading Day following the issuance of any Common Stock or Equity Securities subject to this Section 5.3, indicating therein the applicable issuance price, or applicable reset price, exchange price, conversion price, or other pricing terms (such notice, the “Dilutive Issuance Notice”). Dilutive Issuance Notices shall be in the form set forth in Section 6 below. For purposes of clarification, whether or not Company provides a Dilutive Issuance Notice pursuant to this Section 5.3, upon the occurrence of any Dilutive Issuance, after the date of such Dilutive Issuance, Investor is entitled to receive the increased number of Warrant Shares provided for in subsection (b) above at an Exercise Price equal to the Base Share Price regardless of whether Investor accurately refers to the Base Share Price in the Notice of Exercise. Additionally, following the occurrence of a Dilutive Issuance, all references in this Warrant to “Warrant Shares” shall be a reference to the Warrant Shares as increased pursuant to subsection (b) above, and all references in this Warrant to “Exercise Price” shall be a reference to the Exercise Price as reduced pursuant to subsection (a) above, as the same may occur from time to time hereunder. 5.4. Exceptions to Adjustment. Notwithstanding the provisions of Section 5.3, no adjustment to the Exercise Price shall be effected as a result of an Excepted Issuance. 6. Certificate as to Adjustments. In each case of any adjustment or readjustment in the number or kind of shares issuable on the exercise of this Warrant, or in the Exercise Price, pursuant to the terms hereof, Company at its expense will promptly cause its Chief Financial Officer or other appropriate designee to compute such adjustment or readjustment in accordance with the terms of this Warrant and prepare a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based, including a statement of (a) the consideration received or receivable by Company for any additional shares of Common Stock issued or sold or deemed to have been issued or sold, (b) the number of shares of Common Stock outstanding or deemed to be outstanding, and (c) the Exercise Price and the number of shares of Common Stock to be received upon exercise of this Warrant, in effect immediately prior to such adjustment or readjustment and as adjusted or readjusted as provided in this Warrant. Nothing in this Section 6 shall be deemed to limit any other provision contained herein. 7. Transfer to Comply with the Securities Act. This Warrant and the Warrant Shares have not been registered under the Securities Act of 1933, as amended (the “1933 Act”). Neither this Warrant nor the Warrant Shares may be sold, transferred, pledged or hypothecated without (a) an effective registration statement under the 1933 Act relating to such security or (b) an opinion of counsel reasonably satisfactory to Company that registration is not required under the 1933 Act; provided, however, that the foregoing restrictions on transfer shall not apply to the transfer of the Warrant to an affiliate of Investor. Until such time as registration has occurred under the 1933 Act, Exhibit B – Warrant  Page 5 each certificate for this Warrant and any Warrant Shares shall contain a legend, in form and substance satisfactory to counsel for Company, setting forth the restrictions on transfer contained in this Section 7; provided, however, that Company acknowledges and agrees that any such legend shall be removed from all certificates for DTC Eligible Common Stock delivered hereunder as such Common Stock is cleared and converted into electronic shares by the DTC, and nothing contained herein shall be interpreted to the contrary. Upon receipt of a duly executed assignment of this Warrant, Company shall register the transferee thereon as the new holder on the books and records of Company and such transferee shall be deemed a “registered holder” or “registered assign” for all purposes hereunder, and shall have all the rights of Investor under this Warrant. Until this Warrant is transferred on the books of Company, Company may treat Investor as the absolute owner hereof for all purposes, notwithstanding any notice to the contrary. 8. Notices. Any notice required or permitted hereunder shall be given in the manner provided in the subsection titled “Notices” in the Purchase Agreement, the terms of which are incorporated herein by reference. 9. Supplements and Amendments; Whole Agreement. This Warrant may be amended or supplemented only by an instrument in writing signed by the parties hereto. This Warrant, together with the Purchase Agreement, contains the full understanding of the parties hereto with respect to the subject matter hereof and thereof and there are no representations, warranties, agreements or understandings with respect to the subject matter hereof and thereof other than as expressly contained herein and therein. 10. Purchase Agreement; Arbitration of Disputes; Calculation Disputes. This Warrant is subject to the terms, conditions and general provisions of the Purchase Agreement, including without limitation the Arbitration Provisions (as defined in the Purchase Agreement) set forth as an exhibit to the Purchase Agreement. In addition, notwithstanding the Arbitration Provisions, in the case of a dispute as to any Calculation (as defined in the Purchase Agreement), such dispute will be resolved in the manner set forth in the Purchase Agreement. 11. Governing Law; Venue. This Warrant shall be construed and enforced in accordance and performance of this Warrant shall be governed by, the internal laws of the 12. Waiver of Jury Trial. COMPANY IRREVOCABLY WAIVES ANY AND ALL RIGHTS IT MAY HAVE TO DEMAND THAT ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR IN ANY WAY RELATED TO THIS WARRANT OR THE RELATIONSHIPS OF THE PARTIES HERETO BE TRIED BY JURY. THIS WAIVER EXTENDS TO ANY AND ALL RIGHTS TO DEMAND A TRIAL BY JURY FURTHER, COMPANY ACKNOWLEDGES THAT IT IS KNOWINGLY AND VOLUNTARILY WAIVING ITS RIGHT TO DEMAND TRIAL BY JURY. 13. Remedies. The remedies at law of Investor under this Warrant in the event of any default or threatened default by Company in the performance of or compliance with any of the terms of this Warrant are not and will not be adequate and, without limiting any other remedies available to Investor in the Transaction Documents, at law or equity, to the fullest extent permitted by law, such Exhibit B – Warrant  Page 6 terms may be specifically enforced by a decree for the specific performance of any agreement contained herein or by an injunction against a violation of any of the terms hereof or otherwise without the obligation to post a bond. 14. Liquidated Damages. Company and Investor agree that in the event Company fails to comply with any of the terms or provisions of this Warrant, Investor’s damages would be uncertain and difficult (if not impossible) to accurately estimate because of the parties’ inability to predict future interest rates, future share prices, future trading volumes and other relevant factors. Accordingly, Investor and Company agree that any fees or other charges assessed under this Warrant are not penalties but instead are intended by the parties to be, and shall be deemed, liquidated damages (under Investor’s and Company’s expectations that any such liquidated damages will tack back to the Issue Date for purposes of determining the holding period under Rule 144. 15. Counterparts. This Warrant may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. Signatures delivered via facsimile or email shall be considered original signatures for all purposes hereof. 16. Attorneys’ Fees. In the event of any arbitration, litigation or dispute arising from this Warrant, the parties agree that the party who is awarded the most money (which, for the avoidance of doubt, shall be determined without regard to any statutory fines, penalties, fees, or other charges awarded to any party) shall be deemed the prevailing party for all purposes and shall therefore be entitled to an additional award of the full amount of the attorneys’ fees and expenses paid by said prevailing party in connection with arbitration or litigation without reduction or apportionment based upon the individual claims or defenses giving rise to the fees and expenses. Nothing herein shall restrict frivolous or bad faith pleading. 17. Severability. Whenever possible, each provision of this Warrant shall be interpreted in such a manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be invalid or unenforceable in any jurisdiction, such provision shall be modified to achieve the objective of the parties to the fullest extent permitted and such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Warrant or the validity or enforceability of this Warrant in any other jurisdiction. 18. each and every provision of this Warrant. 19. Descriptive Headings. Descriptive headings of the sections of this Warrant are inserted for convenience only and shall not control or affect the meaning or construction of any of the provisions hereof. Exhibit B – Warrant  Page 7 IN WITNESS WHEREOF, Company has caused this Warrant to be duly executed by an officer thereunto duly authorized as of the Issue Date. COMPANY: By: Printed Name: Title: [Signature Page to Warrant] ATTACHMENT 1 DEFINITIONS For purposes of this Warrant, the following terms shall have the following meanings: A1. “Adjusted Price” means the lower of (i) the Exercise Price (as such Exercise Price may be adjusted from time to time pursuant to the terms of this Warrant), and (ii) the Market Price. A2. “Approved Stock Plan” means any stock option plan which has been approved by the board of directors of Company and is in effect as of the Issue Date, pursuant to which Company’s securities may be issued to any employee, officer or director for services provided to Company. A3. of national reputation selected by Investor and reasonably satisfactory to Company). A4. shall be the fair market value as mutually determined by Investor and Company. If Investor and Company are unable to agree upon the fair market value of the Common Stock, then such dispute shall be resolved in accordance with the procedures in the Purchase Agreement governing Calculations. All such determinations shall be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during such period. A5. time the average of the three (3) lowest Closing Bid Prices in the twenty (20) Trading Days immediately preceding any date of measurement is below $0.10, then in such event the then-current Conversion Factor shall be permanently reduced by 10% (subject to other reductions set forth in this section). If at any time after the Issue Date, Company is not DWAC Eligible, then the then-current Conversion Factor will automatically be permanently reduced by 5%. If at any time after the Issue Date, the Delivery Shares are not DTC Eligible, then the then-current Conversion Factor will automatically be permanently reduced by an additional 5%. For example, the first time Company is not DWAC Eligible, the Conversion Factor for future exercises thereafter will be reduced from 70% to 65% for purposes of this example. If, thereafter, the Delivery Shares are not DTC Eligible, the Conversion Factor for all future exercises will automatically be permanently reduced from 65% to 60% for purposes of this example. A6. “Current Market Value” means an amount equal to the Trade Price multiplied by the number of Exercise Shares specified in the applicable Notice of Exercise. [Attachment 1 to Warrant, Page 1] A7. occurred on the latest possible permitted date pursuant to the terms of this Warrant or the Note in the event Company fails to deliver shares of Common Stock as and when required. A8. “Delivery Shares” means those shares of Common Stock issuable and deliverable upon the exercise or partial exercise, as the case may be, of this Warrant. A9. A10. firm servicing Investor’s brokerage firm for the benefit of Investor. A11. A12. A13. “DWAC Eligible” means that (a) Company’s Common Stock is eligible at DTC for limitation transfer through DTC’s DWAC system, (b) Company has been approved (without revocation) by the DTC’s underwriting department, (c) Company’s transfer agent is approved as an agent in the DTC/FAST Program, (d) the Delivery Shares are otherwise eligible for delivery via DWAC; (e) Company has previously delivered all Delivery Shares to Investor via DWAC; and (f) Company’s transfer agent does not have a policy prohibiting or limiting delivery of the Delivery Shares via DWAC. A14. “Excepted Issuances” means any shares of Common Stock, options, or convertible issuance pursuant to such Approved Stock Plan are not amended, modified or changed on or after the Issue Date. A15. “Exercise Price” means $0.25 per share of Common Stock, as the same may be adjusted from time to time pursuant to the terms and conditions of this Warrant. A16. “Exercise Shares” means those Warrant Shares subject to an exercise of this Warrant by Investor. By way of illustration only and without limiting the foregoing, if (i) this Warrant is initially exercisable for 4,180,000 Warrant Shares and Investor has not previously exercised this Warrant, and (ii) Investor were to make a cashless exercise with respect to 5,000 Warrant Shares pursuant to which 6,000 Delivery Shares would be issuable to Investor, then (1) this Warrant shall be deemed to have been exercised with respect to 5,000 Exercise Shares, (2) this Warrant would remain exercisable for 4,175,000 Warrant Shares, and (3) this Warrant shall be deemed to have been exercised with respect to 6,000 Delivery Shares. A17. “Market Capitalization” means the product equal to (a) the average VWAP of the Company’s most recently filed Form 10-Q or Form 10-K. A18. three (3) lowest Closing Bid Prices in the twenty (20) Trading Days immediately preceding the applicable date of exercise. By way of example only, if the Conversion Factor were 75% and the average of the three lowest Closing Bid Prices in the twenty (20) Trading Days immediately preceding the applicable date of exercise were $1.00 then the Market Price would be $0.75 (75% x $1.00). [Attachment 1 to Warrant, Page 2] A19. “Note” means that certain Convertible Promissory Note issued by Company to Investor pursuant to the Purchase Agreement, as the same may be amended from time to time, and including any promissory note(s) that replace or are exchanged for such referenced promissory note. A20. “Trade Price” means the higher of: (i) the Closing Trade Price of the Common Stock on the Issue Date; and (ii) the VWAP of the Common Stock for the Trading Day that is two (2) Trading Days prior to the Exercise Date. A21. “Trading Day” means any day the New York Stock Exchange is open for trading. A22. “Transaction Documents” means the Purchase Agreement, the Note, this Warrant, and all other documents, certificates, instruments and agreements entered into or delivered in conjunction therewith, as the same may be amended from time to time. A23. “VWAP” means the volume-weighted average price of the Common Stock on the [Attachment 1 to Warrant, Page 3] EXHIBIT A NOTICE OF EXERCISE OF WARRANT TO: ATTN: _______________ VIA FAX TO: (    )______________ EMAIL: ______________ The undersigned hereby irrevocably elects to exercise the right, represented by the Warrant to Purchase Shares of Common Stock dated as of March 13, 2017 (the “Warrant”), to purchase shares of the common stock, $0.00001 par value (“Common Stock”), of REAC Group, Inc., and tenders herewith payment in accordance with Section 2 of the Warrant, as follows: _______ CASH: $__________________________ = (Exercise Price x Delivery Shares) _______ Payment is being made by: _____ enclosed check _____ wire transfer _____ other _______ CASHLESS EXERCISE: Net number of Delivery Shares to be issued to Investor: ______* * based on: Current Market Value - (Exercise Price x Exercise Shares)                Adjusted Price Where: Trade Price [“TP”] = $____________ Exercise Shares = _____________ Current Market Value [TP x Exercise Shares] = $____________ Exercise Price = $____________ Adjusted Price = $____________ Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to them in the Warrant. It is the intention of Investor to comply with the provisions of Section 2.2 of the Warrant regarding certain limits on Investor’s right to receive shares thereunder. Investor believes this exercise complies with the provisions of such Section 2.2. Nonetheless, to the extent that, pursuant to the exercise effected hereby, Investor would receive more shares of Common Stock than permitted under Section 2.2, Company shall not be obligated and shall not issue to Investor such excess shares until such time, if ever, that Investor could receive such excess shares without violating, and in full compliance with, Section 2.2 of the Warrant. As contemplated by the Warrant, this Notice of Exercise is being sent by email or by facsimile to the fax number and officer indicated above. If this Notice of Exercise represents the full exercise of the outstanding balance of the Warrant, Investor will surrender (or cause to be surrendered) the Warrant to Company at the address indicated [Exhibit A to Warrant, Page 4] above by express courier within five (5) Trading Days after the Warrant Shares to be delivered pursuant to this Notice of Exercise have been delivered to Investor. To the extent the Delivery Shares are not able to be delivered to Investor via the DWAC system, please deliver certificates representing the Delivery Shares to Investor via reputable overnight courier after receipt of this Notice of Exercise (by facsimile transmission or otherwise) to: _____________________________________ _____________________________________ _____________________________________   Dated: _____________________ ___________________________ [Name of Investor] By:________________________ [Exhibit A to Warrant, Page 5] EXHIBIT C ALLOCATION OF PURCHASE PRICE Purchase Price Note Tranche OID/Transaction Expense Warrant Initial Cash Purchase Price Initial Tranche $25,000.00 Warrant Investor Note Subsequent Tranche $5,000.00   Exhibit C – Allocation of Purchase Price  Page 1 OFFICER’S CERTIFICATE The undersigned, Robert DeAngelis, Chief Executive Officer of REAC Group, Inc., a Florida corporation (“Company”), in connection with the issuance of that certain Convertible Promissory Note issued by Company on March 13, 2017 (the “Note”) in the original principal amount of $230,000.00 in favor of Iliad Research and Trading, L.P., a Utah limited partnership (“Investor”), pursuant to that certain Securities Purchase Agreement dated March 13, 2017 between Investor and Company (the “Purchase Agreement”), personally and in his capacity as an officer of Company, hereby represents, warrants and certifies that: 1. He is the duly appointed Chief Executive Officer of Company. 2. As of the date hereof, Company has no Variable Security Holders (as defined in the Purchase Agreement).   3. He agrees to cause Company to comply with the covenants found in Sections 4(vi) and (vii) of the Purchase Agreement. 4. He acknowledges that his execution and issuance of this Officer’s Certificate to Investor is a material inducement to Investor’s agreement to purchase the Note on the terms set forth in the Purchase Agreement and that but for his execution and issuance of this Officer’s Certificate, Investor would not have purchased the Note from Company. IN WITNESS WHEREOF, the undersigned, personally and in his capacity as an officer of Company, has executed this Officer’s Certificate as of March 13, 2017. _________________________________ Robert DeAngelis Exhibit D – Officer’s Certificate  Page 1 THIS NOTE (AS DEFINED BELOW) MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE ALIENATED OR ENCUMBERED WITHOUT THE PRIOR WRITTEN CONSENT OF INVESTOR (AS DEFINED BELOW). THIS NOTE IS SUBJECT TO A RIGHT OF OFFSET IN FAVOR OF INVESTOR UPON THE OCCURRENCE OF CERTAIN EVENTS AS SET FORTH IN MORE DETAIL IN SECTION 6 BELOW. $50,000.00 State of Utah March 13, 2017 INVESTOR NOTE FOR VALUE RECEIVED, Iliad Research and Trading, L.P., a Utah limited partnership (“Investor”), hereby promises to pay to REAC Group, Inc., a Florida corporation (“Company”, and together with Investor, the “Parties”), the principal sum of $50,000.00 together with all accrued and unpaid interest thereon, fees incurred or other amounts owing hereunder, all as set forth below in this Investor Note (this “Note”). This Note is issued pursuant to that certain Securities Purchase Agreement of even date herewith, entered into by and between Investor and Company (as the same may be amended from time to time, the “Purchase Agreement”), pursuant to which Company issued to Investor that certain Convertible Promissory Note in the principal amount of $230,000.00 (as the same may be amended from time to time, the “Company Note”) convertible into shares of Company’s Common Stock. All capitalized terms used but not otherwise defined herein shall have the meanings ascribed thereto in the Purchase Agreement. 20. Principal and Interest. Interest shall accrue on the unpaid principal balance and any unpaid late fees or other fees under this Note at a rate of ten percent (10%) per annum until the full amount of the principal and fees has been paid. Interest shall be computed on the basis of a 365-day year for the actual number of days elapsed. Notwithstanding any provision to the contrary herein, in no event shall the applicable interest rate at any time exceed the maximum interest rate allowed under applicable law, as provided in Section 12 below. The entire unpaid principal balance and all accrued and unpaid interest, if any, under this Note, shall be due and payable on the date that is ten (10) months from the date hereof (the “Investor Note Maturity Date”); provided, however, that Investor may elect, in its sole discretion, to extend the Investor Note Maturity Date for up to thirty (30) days by delivering written notice of such election to Company at any time prior to the Investor Note Maturity Date. 21. Payment. Unless prepaid, all principal and accrued interest under this Note is payable in one lump sum on the Investor Note Maturity Date. All payments of interest and principal shall be (i) in lawful money of the United States of America, and (ii) in the form of immediately available funds. All payments shall be applied first to costs of collection, if any, then to accrued and unpaid interest, and thereafter to principal. Payment of principal and interest hereunder shall be delivered to Company at the address furnished to Investor for that purpose. 22. Prepayment by Investor. Investor may, with Company’s consent, pay, without penalty, all or any portion of the outstanding balance along with any accrued but unpaid interest on this Note at any time prior to the Investor Note Maturity Date. 23. Security; Collateral. Investor may, in its sole discretion, designate collateral (the “Collateral”) as it deems fit, as security for Investor’s obligations hereunder, which Collateral may be, but is not required to be, real property, a letter of credit with a financial institution determined by Investor in its sole discretion, or pledged membership interests. Upon Investor’s designation of Collateral, each of Investor and Company shall timely execute any and all documents necessary or advisable in order to properly grant a security interest upon the Collateral in favor of Company. Exhibit E – Investor Note Page 1 24. Release. Company covenants and agrees that in the event that this Note is secured by Collateral, Company shall timely execute any and all documents necessary or advisable in order to release such security interest and Collateral to Investor, or Investor’s designee, upon the earlier of (i) the date this Note is paid in full and (ii) the date that is six (6) months and three (3) days following the date such Collateral is given as security for this Note, or such later date as determined in the sole discretion of Investor (the “Release Date”). For the avoidance of doubt, as of the date hereof, there is no collateral securing this Note, and after the Release Date, as applicable, there shall be no collateral securing this Note. 25. Right of Offset. Notwithstanding anything to the contrary herein or in any of the other Transaction Documents, in the event (i) of the occurrence of any Event of Default (as defined in the Company Note) under the Company Note or any other note issued by Company in connection with the Purchase Agreement, (ii) of a breach of any material term, condition, representation, warranty, covenant or obligation of Company under any Transaction Document, or (iii) Company sells, transfers, assigns, pledges or hypothecates this Note, or attempts to do any of the foregoing, whether voluntarily or involuntarily, Investor shall be entitled to deduct and offset any amount owing by Company under the Company Note from any amount owed by Investor under this Note (the “Investor Offset Right”), provided that if any of the foregoing events occur and Investor has not yet exercised the Investor Offset Right, the Investor Offset Right shall be automatically exercised on the date that is thirty (30) days prior to the Investor Note Maturity Date (an “Automatic Offset”). Other than with respect to an Automatic Offset, Investor may only elect to exercise the Investor Offset Right by delivering to Company an offset notice in a form substantially similar to Exhibit D to the Company Note or another form of Investor’s choosing. In the event that Investor’s exercise of the Investor Offset Right under this Section 6 results in the full satisfaction of Investor’s obligations under this Note, then Company shall return this Note to Investor for cancellation or, in the event this Note has been lost, stolen or destroyed, Company shall provide Investor with a lost note affidavit in a form reasonably acceptable to Investor. 26. Default. If any of the events specified below shall occur (each, an “Investor Note Default”) Company may declare the unpaid principal balance under this Note, together with all accrued and unpaid interest thereon, fees incurred or other amounts owing hereunder immediately due and payable, by notice in writing to Investor. If any default, other than a Payment Default (as defined below), is curable, then the default may be cured (and no Investor Note Default will have occurred) if Investor, after receiving written notice from Company demanding cure of such default, either (i) cures the default within fifteen (15) days of the receipt of such notice, or (ii) if the cure requires more than fifteen (15) days, immediately initiates steps that Company deems in Company’s reasonable discretion to be sufficient to cure the default and thereafter diligently continues and completes all reasonable and necessary steps sufficient to produce compliance as soon as reasonably practical. Each of the following events shall constitute an Investor Note Default: 26.1. Failure to Pay. Investor’s failure to make any payment when due and payable under this Note (a “Payment Default”); 26.2. Breaches of Covenants. Investor’s failure to observe or perform any other covenant, obligation, condition or agreement contained in this Note; 26.3. Representations and Warranties. If any representation, warranty, certificate, or other statement (financial or otherwise) made or furnished by or on behalf of Investor to Company in writing in connection with this Note or any of the other Transaction Documents, or as an inducement to Company to enter into the Purchase Agreement, shall be false or misleading in any material respect when made or furnished; and Exhibit E – Investor Note Page 2 26.4. Involuntary Bankruptcy. If any involuntary petition is filed under any bankruptcy or similar law or rule against Investor, and such petition is not dismissed within sixty (60) days, or a receiver, trustee, liquidator, assignee, custodian, sequestrator or other similar official is appointed to take possession of any of the assets or properties of Investor. 27. Binding Effect; Assignment. This Note shall be binding on the Parties and their respective heirs, successors, and assigns; provided, however, that neither Party shall assign any of its rights hereunder without the prior written consent of the other Party, except that Investor may assign this Note to any of its Affiliates without the prior written consent of Company and, furthermore, Company agrees that it shall not unreasonably withhold, condition or delay its consent to any other assignment of this Note by Investor. 28. 29. Purchase Agreement; Arbitration of Disputes. By acceptance of this Note, each Party agrees to be bound by the applicable terms, conditions and general provisions of the Purchase Agreement and the other Transaction Documents, including without limitation the Arbitration Provisions attached as an exhibit to the Purchase Agreement. 30. Customer Identification–USA Patriot Act Notice. Company hereby notifies Investor 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”), and Company’s policies and practices, Company is required to obtain, verify and record certain information and documentation that identifies Investor, which information includes the name and address of Investor and such other information that will allow Company to identify Investor in accordance with the Act. 31. Lawful Interest. It being the intention of Company and Investor to comply with all applicable laws with regard to the interest charged hereunder, it is agreed that, notwithstanding any provision to the contrary in this Note or any of the other Transaction Documents, no such provision, including without limitation any provision of this Note providing for the payment of interest or other charges, shall require the payment or permit the collection of any amount in excess of the maximum amount of interest permitted by law to be charged for the use or detention, or the forbearance in the collection, of all or any portion of the indebtedness evidenced by this Note or by any extension or renewal hereof (“Excess Interest”). If any Excess Interest is provided for, or is adjudicated to be provided for, in this Note, then in such event: 31.1. the provisions of this Section 12 shall govern and control; 31.2. Investor shall not be obligated to pay any Excess Interest; 31.3. any Excess Interest that Company may have received hereunder shall, at the option of Company, be (i) applied as a credit against the principal balance due under this Note or the accrued and unpaid interest thereon not to exceed the maximum amount permitted by law, or both, (ii) refunded to Investor, or (iii) any combination of the foregoing; Exhibit E – Investor Note Page 3 31.4. the applicable interest rate or rates shall be automatically subject to reduction to the maximum lawful rate allowed to be contracted for in writing under the applicable governing usury laws, and this Note and the Transaction Documents shall be deemed to have been, and shall be, reformed and modified to reflect such reduction in such interest rate or rates; and 31.5. Investor shall not have any action or remedy against Company for any damages whatsoever or any defense to enforcement of this Note or arising out of the payment or collection of any Excess Interest. 32. Pronouns. Regardless of their form, all words used in this Note shall be deemed singular or plural and shall have the gender as required by the text. 33. Headings. The various headings used in this Note as headings for sections or otherwise are for convenience and reference only and shall not be used in interpreting the text of the section in which they appear and shall not limit or otherwise affect the meanings thereof. 34. Time is of the Essence. Time is of the essence with this Note. 35. law, such part shall be modified to achieve the objective of the Parties to the fullest extent permitted by law and the balance of this Note shall remain in full force and effect. 36. Attorneys’ Fees. If any arbitration or action at law or in equity is necessary to enforce this Note or to collect payment under this Note, Company shall be entitled to recover reasonable attorneys’ fees directly related to such enforcement or collection actions. 37. Amendments and Waivers; Remedies. No failure or delay on the part of either Party hereto in exercising any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy. The remedies provided for herein are cumulative and are not exclusive of any remedies that may be available to either Party hereto at law, in equity or otherwise. Any amendment, supplement or modification of or to any provision of this Note, any waiver of any provision of this Note, and any consent to any departure by either Party from the terms of any provision of this Note, shall be effective (i) only if it is made or given in writing and signed by Investor and Company and (ii) only in the specific instance and for the specific purpose for which made or given. 38. Notices. Unless otherwise provided for herein, all notices, requests, demands, claims and other communications hereunder shall be given in accordance with the subsection of the Purchase Agreement titled “Notices.” Either Party may change the address to which notices, requests, demands, claims and other communications hereunder are to be delivered by providing notice thereof in the manner set forth in the Purchase Agreement. 39. Final Note. This Note, together with the other Transaction Documents, contains the complete understanding and agreement of Investor and Company and supersedes all prior representations, warranties, agreements, arrangements, understandings, and negotiations of Investor and Company with respect to the subject matter of the Transaction Documents. THIS NOTE, TOGETHER WITH THE OTHER TRANSACTION DOCUMENTS, REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF ANY ALLEGED PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. Exhibit E – Investor Note Page 4 40. Waiver of Jury Trial. EACH OF INVESTOR AND COMPANY IRREVOCABLY WAIVES ANY AND COUNTERCLAIM ARISING OUT OF OR IN ANY WAY RELATED TO THIS NOTE OR THE RELATIONSHIPS OF THE PARTIES HERETO BE TRIED BY JURY. THIS WAIVER EXTENDS TO ANY AND ALL RIGHTS TO DEMAND A TRIAL BY JURY ARISING UNDER COMMON LAW OR ANY APPLICABLE STATUTE, LAW, RULE OR REGULATION. FURTHER, EACH PARTY HERETO ACKNOWLEDGES THAT SUCH PARTY IS KNOWINGLY AND VOLUNTARILY WAIVING SUCH PARTY’S Exhibit E – Investor Note Page 5 IN WITNESS WHEREOF, the Parties have executed this Note as of the date set forth above. INVESTOR: By: By: COMPANY: By: Name:   Title:   Exhibit E – Investor Note Page 6 [To be reprinted on Company letterhead] March 13, 2017 ClearTrust, LLC 16540 Pointe Village Dr., Ste. 210 Lutz, FL 33558 Ladies and Gentlemen: REAC Group, Inc., a Florida corporation (the “Company”), and Iliad Research and Trading, L.P., a Utah limited partnership (the “Investor”), have entered into a Securities Purchase Agreement dated as of March 13, 2017 (the “Agreement”) providing for the issuance of that certain Convertible Promissory Note in the principal amount of $230,000.00 (the “Note”) and that certain Warrant to Purchase Shares of Common Stock (the “Warrant”). You as Transfer Agent are hereby irrevocably authorized and instructed to reserve a  number of shares of common stock (“Common Stock”) of the Company (initially, 7,000,000 shares) for issuance upon full conversion of the Note and full exercise of the Warrant in accordance with the terms thereof. The amount of Common Stock so reserved may be increased, from time to time, only upon the written instructions of the Company. Further, conversions will only be processed should there be sufficient unissued, but authorized shares available. The ability to convert the Note and exercise the Warrant in a timely manner is a material obligation of the Company pursuant to the Note and the Warrant. You have the right to rely on each notice of conversion (“Conversion Notice”) and notice of exercise (“Exercise Notice”) as presented, and have no responsibility to verify the conversion or exercise formula used. Provided you are acting as Transfer Agent at the time, your firm is hereby irrevocably authorized and instructed to within three (3) trading days issue shares of Common Stock of the Company to the Investor without any further action or confirmation by the Company upon your receipt from the Investor of: (i) a Conversion Notice or Exercise Notice executed by the Investor; (ii) any other supporting documentation reasonably required by the Transfer Agent; (iii) opinion of counsel confirming that the shares to be issued have been registered and the Registration Statement is currently effective or an opinion of counsel of the Investor or the Company, in form, substance and scope customary for opinions of counsel in comparable transactions (and satisfactory to the Transfer Agent), to the effect that the applicable shares of Common Stock are not “restricted securities” as defined in Rule 144 and otherwise may be issued pursuant to Rule 144 under the Federal Securities Act of 1933, as amended (the “Securities Act”), without any transfer restrictions; and (iv) customary seller representation letter for sales made under Rule 144 signed by the Investor if applicable. Such shares should be issued and delivered, at the option of the Investor as specified in the Conversion Notice, Exercise Notice or similar instruction either (i) electronically if the Company is approved by The Depository Trust Company (“DTC”) for Deposit Withdrawal at Custodian (“DWAC”) processing by making the shares available in book-entry form for further credit to the beneficial Investor account at a participant broker with DTC through its DWAC system, provided the Investor causes its broker or bank to properly initiate a DWAC deposit, or (ii) in certificated form without any restrictive legend which would restrict the transfer of the shares provided however that if such shares are not registered for resale under the Securities Act or are not able to be sold under Rule 144 and you have not received an opinion of counsel that the issuance of the shares is exempt from registration under the Securities Act, then the issued certificates for such shares shall bear the following restrictive legend: Exhibit F – Transfer Agent Letter Page 1 THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE SECURITIES MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER SAID ACT, OR AN OPINION OF COUNSEL IN FORM, SUBSTANCE AND SCOPE CUSTOMARY FOR OPINIONS OF COUNSEL IN COMPARABLE TRANSACTIONS AND SATISFACTORY TO THE TRANSFER AGENT THAT REGISTRATION IS NOT REQUIRED OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT. The unissued shares shall remain in the created reserve with you, the Transfer Agent, until the Investor and an authorized officer of the Company provide written instructions to you that the shares or any part of them shall be taken out of the reserve and shall no longer be subject to the terms of these instructions. In the event the Company delivers to the Investor via Certified Mail a written “Notice to Vacate the Reserve” and the Investor does not respond within 30 calendar days to such notice, the Company and Transfer Agent will assume the Investor is in agreement with said notice and will take the shares or any part of them out of the reserve at the end of said 30 days, and the Transfer Agent shall no longer be subject to the terms of these instructions for any shares removed from the reserve. The Company shall indemnify you and your officers, directors, principals, partners, agents and representatives, and hold each of them harmless from and against any and all loss, liability, damage, claim or expense (including the reasonable fees and disbursements of its attorneys) incurred by or asserted against you or any of them arising out of or in connection with the instructions set forth herein, the performance of your duties hereunder and otherwise in respect hereof, including the costs and expenses of defending yourself or themselves against any claim or liability hereunder. Such indemnification includes any claim made by the Company against you with respect to these instructions or the performance of your duties hereunder. You shall have no liability to the Company in respect of this, and you shall be entitled to rely in this regard on the advice of counsel. The Board of Directors of the Company has approved the foregoing IRREVOCABLE INSTRUCTIONS. Company hereby confirms to you that no instruction other than as contemplated herein will be given to you by Company with respect to the matters referenced herein. Company hereby authorizes you, and you shall be obligated, to disregard any contrary instruction received by or on behalf of Company or any other person purporting to represent Company. At your sole discretion, you are also authorized to release any information you deem necessary towards the processing, clearing, and settlement of the shares arising from this reservation. Notwithstanding any other provision hereof, Company and Investor understand that you shall not be required to perform any issuance or transfer of Conversion Shares if (i) such an issuance or transfer of Conversion Shares is in violation of any state or federal securities laws or regulations, or (ii) the issuance or transfer of Conversion Shares is prohibited or stopped as required or directed by an order of a court of competent jurisdiction. Additionally, Company and Investor understand that you shall not be required to perform any issuance or transfer of Common Stock if Company is in default of its payment obligations under its transfer agent service agreement (“the TA Agreement” with you; provided, however, that in such case Investor shall have the right to pay the obligations in default or otherwise resolve the deficiency in a manner satisfactory to the Transfer Agent. The Investor is responsible for all fees associated with the Conversion Notice or Exercise Notice, including but not limited to the issuance, delivery and transfer of shares, and acknowledges you will not act on a Conversion Notice or Exercise Notice without payment of fees owed. Exhibit F – Transfer Agent Letter Page 2 The Company agrees that in the event that you resign or are terminated as the Company’s Transfer Agent, the Company shall engage a suitable replacement agent that will agree to serve as agent for the Company within five (5) business days. You reserve the right to resign as Transfer Agent at any time in accordance with the terms of your TA Agreement with the Company, and upon either voluntary resignation or termination by the Company, your obligations under this letter shall cease immediately and you shall have no further obligations to act under these instructions. This letter is governed by the laws of the state of Florida. The Investor is intended to be and is a third party beneficiary hereof, and no amendment or modification to the instructions set forth herein may be made without the consent of the Investor. Very truly yours, By: Name: Title: Acknowledged and Agreed: By: By: Acknowledged and Agreed: ClearTrust, LLC By: ______________________________ Name: Title: Exhibit F – Transfer Agent Letter Page 3 SECRETARY’S CERTIFICATE I, ____________________, hereby certify that I am the duly elected, qualified and acting Secretary of REAC Group, Inc., a Florida corporation (“Company”), and I am authorized to execute this Secretary’s Certificate (this “Certificate”) on behalf of Company. This Certificate is delivered in connection with that certain Securities Purchase Agreement dated March 13, 2017 (the “Purchase Agreement”), by and between Company and Iliad Research and Trading, L.P., a Utah limited partnership.   Solely in my capacity as Secretary, I certify that Schedule 1 attached hereto is a true, accurate and complete copy of all of the resolutions adopted by the Board of Directors of Company (the “Resolutions”) approving and authorizing the execution, delivery and performance of the Purchase Agreement and related documents to which Company is a party on the date hereof, and the transactions contemplated thereby. Such Resolutions have not been amended, rescinded or modified since their adoption and remain in effect as of the date hereof. IN WITNESS WHEREOF, I have made this Secretary’s Certificate effective as of March 13, 2017. Printed Name: Title: Secretary Exhibit H – Share Issuance Resolution Page 1 Share Issuance Resolution Authorizing The Issuance Of New Shares Of Common Stock In ___________________________ Effective March 13, 2017 ___________________________ The undersigned, as a qualified officer of REAC Group, Inc., a Florida corporation (“Company”), hereby certifies that this Share Issuance Resolution is authorized by and consistent with the resolutions of Company’s board of directors (“Board Resolutions”) regarding (i) that certain Convertible Promissory Note in the face amount of $230,000.00 with an original issuance date of March 13, 2017 (the “Note”), made by Company in favor of Iliad Research and Trading, L.P., a Utah limited partnership, its successors and/or assigns (“Investor”), and (ii) that certain Warrant to Purchase Shares of Common Stock issued by Company to Investor (the “Warrant”), all pursuant to that certain Securities Purchase Agreement dated March 13, 2017, by and between Company and Investor (the “Purchase Agreement”). RESOLVED, that ClearTrust, LLC, as transfer agent (including any successor transfer agent, the “Transfer Agent”) of shares of Company’s common stock, $0.00001 par value per share (“Common Stock”), is authorized to rely upon: (i) a Lender Conversion Notice substantially in the form of Exhibit A attached hereto, whether an original or a copy (the “Lender Conversion Notice”),   (ii) an Installment Notice substantially in the form of Exhibit B attached hereto, whether an original or a copy (the “Installment Notice”),   (iii) a True-Up Notice substantially in the form of Exhibit C attached hereto, whether an original or a copy (the “True-Up Notice”), and (iv) a Notice of Exercise of Warrant substantially in the form of Exhibit D attached hereto, whether an original or a copy (the “Notice of Exercise”), in each case without any further inquiry, to be delivered to the Transfer Agent from time to time either by Company or Investor. RESOLVED FURTHER, that the Transfer Agent is authorized to issue the number of: (i) “Lender Conversion Shares” (representing shares of Common Stock) set forth in each Lender Conversion Notice delivered to the Transfer Agent,   (ii) “Installment Conversion Shares” (representing shares of Common Stock) set forth in each Installment Notice delivered to the Transfer Agent, (iii) “True-Up Shares” (representing shares of Common Stock) set forth in each True-Up Notice delivered to the Transfer Agent,   (iv) “Delivery Shares” (representing shares of Common Stock) set forth in each Notice of Exercise delivered to the Transfer Agent, and (v) all additional shares of Common Stock Company may subsequently instruct the Transfer Agent to issue in connection with any of the foregoing or otherwise under the Note or the Warrant, as the case may be, with such shares to be issued in the name of Investor, or its successors, transferees, or designees, free of any restricted security legend, as permitted by the Note or the Warrant, as the case may be. RESOLVED FURTHER, that consistent with the terms of the Purchase Agreement, the Transfer Agent is authorized and directed to immediately create a share reserve equal to 7,000,000 shares of Company’s Common Stock for the benefit of Investor (the “Share Reserve”); provided that the Share Reserve may increase in increments of 1,000,000 shares from time to time by written instructions provided to the Transfer Agent by Company or Investor as required by the Purchase Agreement and as contemplated by the Board Resolutions. RESOLVED FURTHER, that Investor and the Transfer Agent may rely upon the more general approvals and authorizations set forth in the Board Resolutions, and the Transfer Agent is hereby authorized and directed to take those further actions approved under the Board Resolutions. RESOLVED FURTHER, that Investor must consent in writing to any reduction of the Share Reserve held by the transfer agent; provided, however, that upon (i) full conversion and/or full repayment of the Note and (ii) the complete exercise (or expiration) of the Warrant, the Share Reserve will terminate thirty (30) days thereafter. RESOLVED FURTHER, that Company shall indemnify the Transfer Agent and its employees against any and all loss, liability, damage, claim or expenses incurred by or asserted against the Transfer Agent arising from any action taken by the Transfer Agent in reliance upon this Share Issuance Resolution. Nothing in this Share Issuance Resolution shall limit or restrict those resolutions and authorizations set forth in the Board Resolutions, including without limitation increasing the Share Reserve from time to time required by the Purchase Agreement. The undersigned officer of Company hereby certifies that this is a true copy of Company’s Share Issuance Resolution, effective as of the date set forth below, and that said resolution has not been in any way rescinded, annulled, or revoked, but the same is still in full force and effect. Officer’s Signature Date Printed Name and Title EXHIBITS ATTACHED TO SHARE ISSUANCE RESOLUTION: Exhibit A Lender Conversion Notice Exhibit B Installment Notice Exhibit C True-Up Notice Exhibit D Notice of Exercise Exhibit H – Share Issuance Resolution Page 2 ARBITRATION PROVISIONS 1. Dispute Resolution. For purposes of this Exhibit I, the term “Claims” means any disputes, claims, demands, causes of action, requests for injunctive relief, requests for specific performance, liabilities, damages, losses, or controversies whatsoever arising from, related to, or connected with the transactions contemplated in the Transaction Documents and any communications between the parties related thereto, including without limitation any claims of mutual mistake, mistake, fraud, misrepresentation, failure of formation, failure of consideration, promissory estoppel, unconscionability, failure of condition precedent, rescission, and any statutory claims, tort claims, contract claims, or claims to void, invalidate or terminate the Agreement (or these Arbitration Provisions (defined below)) or any of the other Transaction Documents. The term “Claims” specifically excludes a dispute over Calculations. The parties to the Agreement (the “parties”) hereby agree that the arbitration provisions set forth in this Exhibit I (“Arbitration Provisions”) are binding on each of them. As a result, any attempt to rescind the Agreement (or these Arbitration Provisions) or declare the Agreement (or these Arbitration Provisions) or any other Transaction Document invalid or unenforceable for any reason is subject to these Arbitration Provisions. These Arbitration Provisions shall also survive any termination or expiration of the Agreement. Any capitalized term not defined in these Arbitration Provisions shall have the meaning set forth in the Agreement. 2. Arbitration. Except as otherwise provided herein, all Claims must be submitted to arbitration (“Arbitration”) to be conducted exclusively in Salt Lake County, Utah and pursuant to the terms set forth in these Arbitration Provisions. Subject to the arbitration appeal right provided for in Paragraph 5 below (the “Appeal Right”), the parties agree that the award of the arbitrator rendered pursuant to Paragraph 4 below (the “Arbitration Award”) shall be (a) final and binding upon the parties, (b) the sole and exclusive remedy between them regarding any Claims, counterclaims, issues, or accountings presented or pleaded to the arbitrator, and (c) promptly payable in United States dollars free of any tax, deduction or offset (with respect to monetary awards). Subject to the Appeal Right, any costs or fees, including without limitation attorneys’ fees, incurred in connection with or incident to enforcing the Arbitration Award shall, to the maximum extent permitted by law, be charged against the party resisting such enforcement. The Arbitration Award shall include default interest (as defined or otherwise provided for in the Note, “Default Interest”) (with respect to monetary awards) at the rate specified in the Note for Default Interest both before and after the Arbitration Award. Judgment upon the Arbitration Award will be entered and enforced by any state or federal court sitting in Salt Lake County, Utah. 3. The Arbitration Act. The parties hereby incorporate herein the provisions and procedures set forth in the Utah Uniform Arbitration Act, U.C.A. § 78B-11-101 et seq. (as amended or superseded from time to time, the “Arbitration Act”). Notwithstanding the foregoing, pursuant to, and to the maximum extent permitted by, Section 105 of the Arbitration Act, in the event of conflict or variation between the terms of these Arbitration Provisions and the provisions of the Arbitration Act, the terms of these Arbitration Provisions shall control and the parties hereby waive or otherwise agree to vary the effect of all requirements of the Arbitration Act that may conflict with or vary from these Arbitration Provisions. 4. Arbitration Proceedings. Arbitration between the parties will be subject to the following: 4.1 Initiation of Arbitration. Pursuant to Section 110 of the Arbitration Act, the parties agree that a party may initiate Arbitration by giving written notice to the other party (“Arbitration Notice”) in the same manner that notice is permitted under Section 9.13 of the Agreement; provided, however, that the Arbitration Notice may not be given by email or fax. Arbitration will be deemed initiated as of the date that the Arbitration Notice is deemed delivered to such other party under Section 9.13 of the Agreement (the “Service Date”). After the Service Date, information may be delivered, and notices may be given, by email or fax pursuant to Section 9.13 of the Agreement or any other method permitted thereunder. The Arbitration Notice must describe the nature of the controversy, the remedies sought, and the election to Exhibit I – Arbitration Provisions, Page Exhibit I commence Arbitration proceedings. All Claims in the Arbitration Notice must be pleaded consistent with the Utah Rules of Civil Procedure. 4.2 Selection and Payment of Arbitrator. (a) Within ten (10) calendar days after the Service Date, Investor shall select and submit to Company the names of three (3) arbitrators that are designated as “neutrals” or qualified arbitrators by Utah ADR Services (http://www.utahadrservices.com) (such three (3) designated persons hereunder are referred to herein as the “Proposed Arbitrators”). For the avoidance of doubt, each Proposed Arbitrator must be qualified as a “neutral” with Utah ADR Services. Within five (5) calendar days after Investor has submitted to Company the names of the Proposed Arbitrators, Company must select, by written notice to Investor, one (1) of the Proposed Arbitrators to act as the arbitrator for the parties under these Arbitration Provisions. If Company fails to select one of the Proposed Arbitrators in writing within such 5-day period, then Investor may select the arbitrator from the Proposed Arbitrators by providing written notice of such selection to Company. (b) If Investor fails to submit to Company the Proposed Arbitrators within ten (10) calendar days after the Service Date pursuant to subparagraph (a) above, then Company may at any time prior to Investor so designating the Proposed Arbitrators, identify the names of three (3) arbitrators that are designated as “neutrals” or qualified arbitrators by Utah ADR Service by written notice to Investor. Investor may then, within five (5) calendar days after Company has submitted notice of its Proposed Arbitrators to Investor, select, by written notice to Company, one (1) of the Proposed Arbitrators to act as the arbitrator for the parties under these Arbitration Provisions. If Investor fails to select in writing and within such 5-day period one (1) of the three (3) Proposed Arbitrators selected by Company, then Company may select the arbitrator from its three (3) previously selected Proposed Arbitrators by providing written notice of such selection to Investor. (c) If a Proposed Arbitrator chosen to serve as arbitrator declines or is otherwise unable to serve as arbitrator, then the party that selected such Proposed Arbitrator may select one (1) of the other three (3) Proposed Arbitrators within three (3) calendar days of the date the chosen Proposed Arbitrator declines or notifies the parties he or she is unable to serve as arbitrator. If all three (3) Proposed Arbitrators decline or are otherwise unable to serve as arbitrator, then the arbitrator selection process shall begin again in accordance with this Paragraph 4.2. (d) The date that the Proposed Arbitrator selected pursuant to this Paragraph 4.2 agrees in writing (including via email) delivered to both parties to serve as the arbitrator hereunder is referred to herein as the “Arbitration Commencement Date”.  If an arbitrator resigns or is unable to act during the Arbitration, a replacement arbitrator shall be chosen in accordance with this Paragraph 4.2 to continue the Arbitration.  If Utah ADR Services ceases to exist or to provide a list of neutrals and there is no successor thereto, then the arbitrator shall be selected under the then prevailing rules of the American Arbitration Association. (e) Subject to Paragraph 4.10 below, the cost of the arbitrator must be paid equally by both parties. Subject to Paragraph 4.10 below, if one party refuses or fails to pay its portion of the arbitrator fee, then the other party can advance such unpaid amount (subject to the accrual of Default Interest thereupon), with such amount being added to or subtracted from, as applicable, the Arbitration Award. 4.3 Applicability of Certain Utah Rules. The parties agree that the Arbitration shall be conducted generally in accordance with the Utah Rules of Civil Procedure and the Utah Rules of Evidence. More specifically, the Utah Rules of Civil Procedure shall apply, without limitation, to the filing of any pleadings, motions or memoranda, the conducting of discovery, and the taking of any depositions. The Utah Rules of Evidence shall apply to any hearings, whether telephonic or in person, held by the arbitrator. Notwithstanding the foregoing, it is the parties’ intent that the incorporation of such rules will in no event supersede these Arbitration Provisions. In the event of any conflict between the Utah Rules of Civil Procedure or the Utah Rules of Evidence and these Arbitration Provisions, these Arbitration Provisions shall control. 4.4 Answer and Default. An answer and any counterclaims to the Arbitration Notice shall be required to be delivered to the party initiating the Arbitration within twenty (20) calendar days after the Arbitration Commencement Date. If an answer is not delivered by the required deadline, the arbitrator must provide written notice to the defaulting party stating that the arbitrator will enter a default award against such party if such party does not file an answer within five (5) calendar days of receipt of such notice. If an answer is not filed within the five (5) day extension period, the arbitrator must render a default award, consistent with the relief requested in the Arbitration Notice, against a party that fails to submit an answer within such time period. 4.5 Related Litigation. The party that delivers the Arbitration Notice to the other party shall have the option to also commence concurrent legal proceedings with any state or federal court sitting in Salt Lake County, Utah (“Litigation Proceedings”), subject to the following: (a) the complaint in the Litigation Proceedings is to be substantially similar to the claims set forth in the Arbitration Notice, provided that an additional cause of action to compel arbitration will also be included therein, (b) so long as the other party files an answer to the complaint in the Litigation Proceedings and an answer to the Arbitration Notice, the Litigation Proceedings will be stayed pending an Arbitration Award (or Appeal Panel Award (defined below), as applicable) hereunder, (c) if the other party fails to file an answer in the Litigation Proceedings or an answer in the Arbitration proceedings, then the party initiating Arbitration shall be entitled to a default judgment consistent with the relief requested, to be entered in the Litigation Proceedings, and (d) any legal or procedural issue arising under the Arbitration Act that requires a decision of a court of competent jurisdiction may be determined in the Litigation Proceedings. Any award of the arbitrator (or of the Appeal Panel (defined below)) may be entered in such Litigation Proceedings pursuant to the Arbitration Act. 4.6 Discovery. Pursuant to Section 118(8) of the Arbitration Act, the parties agree that discovery shall be conducted as follows: (a) Written discovery will only be allowed if the likely benefits of the proposed written discovery outweigh the burden or expense thereof, and the written discovery sought is likely to reveal information that will satisfy a specific element of a claim or defense already pleaded in the Arbitration. The party seeking written discovery shall always have the burden of showing that all of the standards and limitations set forth in these Arbitration Provisions are satisfied. The scope of discovery in the Arbitration proceedings shall also be limited as follows: (i) To facts directly connected with the transactions contemplated by the Agreement. (ii) another manner that is more convenient, less burdensome or less expensive than in the manner requested. (b) No party shall be allowed (i) more than fifteen (15) interrogatories (including discrete subparts), (ii) more than fifteen (15) requests for admission (including discrete subparts), (iii) more than ten (10) document requests (including discrete subparts), or (iv) more than three (3) depositions (excluding expert depositions) for a maximum of seven (7) hours per deposition. The costs associated with depositions will be borne by the party taking the deposition. The party defending the deposition will submit a notice to the party taking the deposition of the estimated attorneys’ fees that such party expects to incur in connection with defending the deposition. If the party defending the deposition fails to submit an estimate of attorneys’ fees within five (5) calendar days of its receipt of a deposition notice, then such party shall be deemed to have waived its right to the estimated attorneys’ fees.  The party taking the deposition must pay the party defending the deposition the estimated attorneys’ fees prior to taking the deposition, unless such obligation is deemed to be waived as set forth in the immediately preceding sentence. If the party taking the deposition believes that the estimated attorneys’ fees are unreasonable, such party may submit the issue to the arbitrator for a decision.  All depositions will be taken in Utah. (c) All discovery requests (including document production requests included in deposition notices) must be submitted in writing to the arbitrator and the other party. The party submitting the written discovery requests must include with such discovery requests a detailed explanation of how the proposed discovery requests satisfy the requirements of these Arbitration Provisions and the Utah Rules of Civil Procedure. The receiving party will then be allowed, within five (5) calendar days of receiving the proposed discovery requests, to submit to the arbitrator an estimate of the attorneys’ fees and costs associated with responding to such written discovery requests and a written challenge to each applicable discovery request. After receipt of an estimate of attorneys’ fees and costs and/or challenge(s) to one or more discovery requests, consistent with subparagraph (c) above, the arbitrator will within three (3) calendar days make a finding as to the likely attorneys’ fees and costs associated with responding to the discovery requests and issue an order that (i) requires the requesting party to prepay the attorneys’ fees and costs associated with responding to the discovery requests, and (ii) requires the responding party to respond to the discovery requests as limited by the arbitrator within twenty-five (25) calendar days of the arbitrator’s finding with respect to such discovery requests. If a party entitled to submit an estimate of attorneys’ fees and costs and/or a challenge to discovery requests fails to do so within such 5-day period, the arbitrator will make a finding that (A) there are no attorneys’ fees or costs associated with responding to such discovery requests, and (B) the responding party must respond to such discovery requests (as may be limited by the arbitrator) within twenty-five (25) calendar days of the arbitrator’s finding with respect to such discovery requests. Any party submitting any written discovery requests, including without limitation interrogatories, requests for production subpoenas to a party or a third party, or requests for admissions, must prepay the estimated attorneys’ fees and costs, before the responding party has any obligation to produce or respond to the same, unless such obligation is deemed waived as set forth above. (d) In order to allow a written discovery request, the arbitrator must find that the discovery request satisfies the standards set forth in these Arbitration Provisions and the Utah Rules of Civil Procedure. The arbitrator must strictly enforce these standards. If a discovery request does not satisfy any of the standards set forth in these Arbitration Provisions or the Utah Rules of Civil Procedure, the arbitrator may modify such discovery request to satisfy the applicable standards, or strike such discovery request in whole or in part. (e) Each party may submit expert reports (and rebuttals thereto), provided that such reports must be submitted within sixty (60) days of the Arbitration Commencement Date. Each party will be allowed a maximum of two (2) experts. Expert reports must contain the following: (i) a complete statement of all opinions the expert will offer at trial and the basis and reasons for them; (ii) the expert’s name and qualifications, including a list of all the expert’s publications within the preceding ten (10) years, and a list of any other cases in which the expert has testified at trial or in a deposition or prepared a report within the preceding ten (10) years; and (iii) the compensation to be paid for the expert’s report and testimony. The parties are entitled to depose any other party’s expert witness one (1) time for no more than four (4) hours. An expert may not testify in a party’s case-in-chief concerning any matter not fairly disclosed in the expert report. 4.6 Dispositive Motions.  Each party shall have the right to submit dispositive motions pursuant Rule 12 or Rule 56 of the Utah Rules of Civil Procedure (a “Dispositive Motion”). The party submitting the Dispositive Motion may, but is not required to, deliver to the arbitrator and to the other party a memorandum in support (the “Memorandum in Support”) of the Dispositive Motion. Within seven (7) calendar days of delivery of the Memorandum in Support, the other party shall deliver to the arbitrator and to the other party a memorandum in opposition to the Memorandum in Support (the “Memorandum in Opposition”). Within seven (7) calendar days of delivery of the Memorandum in Opposition, as applicable, the party that submitted the Memorandum in Support shall deliver to the arbitrator and to the other party a reply memorandum to the Memorandum in Opposition (“Reply Memorandum”). If the applicable party shall fail to deliver the Memorandum in Opposition as required above, or if the other party fails to deliver the Reply Memorandum as required above, then the applicable party shall lose its right to so deliver the same, and the Dispositive Motion shall proceed regardless. 4.7 Confidentiality. All information disclosed by either party (or such party’s agents) during the Arbitration process (including without limitation information disclosed during the discovery process or any Appeal (defined below)) shall be considered confidential in nature. Each party agrees not to disclose any confidential information received from the other party (or its agents) during the Arbitration process (including without limitation during the discovery process or any Appeal) unless (a) prior to or after the time of disclosure such information becomes public knowledge or part of the public domain, not as a result of any inaction or action of the receiving party or its agents, (b) such information is required by a court order, subpoena or similar legal duress to be disclosed if such receiving party has notified the other party thereof in writing and given it a reasonable opportunity to obtain a protective order from a court of competent jurisdiction prior to disclosure, or (c) such information is disclosed to the receiving party’s agents, representatives and legal counsel on a need to know basis who each agree in writing not to disclose such information to any third party. Pursuant to Section 118(5) of the Arbitration Act, the arbitrator is hereby authorized and directed to issue a protective order to prevent the disclosure of privileged information and confidential information upon the written request of either party. 4.8 Authorization; Timing; Scheduling Order. Subject to all other portions of these Arbitration Provisions, the parties hereby authorize and direct the arbitrator to take such actions and make such rulings as may be necessary to carry out the parties’ intent for the Arbitration proceedings to be efficient and expeditious. Pursuant to Section 120 of the Arbitration Act, the parties hereby agree that an Arbitration Award must be made within one hundred twenty (120) calendar days after the Arbitration Commencement Date. The arbitrator is hereby authorized and directed to hold a scheduling conference within ten (10) calendar days after the Arbitration Commencement Date in order to establish a scheduling order with various binding deadlines for discovery, expert testimony, and the submission of documents by the parties to enable the arbitrator to render a decision prior to the end of such 120-day period. 4.9 Relief. The arbitrator shall have the right to award or include in the Arbitration Award (or in a preliminary ruling) any relief which the arbitrator deems proper under the circumstances, including, without limitation, specific performance and injunctive relief, provided that the arbitrator may not award 4.10 Fees and Costs. As part of the Arbitration Award, the arbitrator is hereby directed to require the losing party (the party being awarded the least amount of money by the arbitrator, which, for the avoidance of doubt, shall be charges awarded to any party) to (a) pay the full amount of any unpaid costs and fees of the Arbitration, and (b) reimburse the prevailing party for all reasonable attorneys’ fees, arbitrator costs and fees, deposition costs, other discovery costs, and other expenses, costs or fees paid or otherwise incurred by the prevailing party in connection with the Arbitration. 5. Arbitration Appeal. 5.1 Initiation of Appeal.  Following the entry of the Arbitration Award, either party (the “Appellant”) shall have a period of thirty (30) calendar days in which to notify the other party (the “Appellee”), in writing, that the Appellant elects to appeal (the “Appeal”) the Arbitration Award (such notice, an “Appeal Notice”) to a panel of arbitrators as provided in Paragraph 5.2 below.  The date the Appellant delivers an Appeal Notice to the Appellee is referred to herein as the “Appeal Date”. The Appeal Notice must be delivered to the Appellee in accordance with the provisions of Paragraph 4.1 above with respect to delivery of an Arbitration Notice.  In addition, together with delivery of the Appeal Notice to the Appellee, the Appellant must also pay for (and provide proof of such payment to the Appellee together with delivery of the Appeal Notice) a bond in the amount of 110% of the sum the Appellant owes to the Appellee as a result of the Arbitration Award the Appellant is appealing.  In the event an Appellant delivers an Appeal Notice to the Appellee (together with proof of payment of the applicable bond) in compliance with the provisions of this Paragraph 5.1, the Appeal will occur as a matter of right and, except as specifically set forth herein, will not be further conditioned.  In the event a party does not deliver an Appeal Notice (along with proof of payment of the applicable bond) to the other party within the deadline prescribed in this Paragraph 5.1, such party shall lose its right to appeal the Arbitration Award.  If no party delivers an Appeal Notice (along with proof of payment of the applicable bond) to the other party within the deadline described in this Paragraph 5.1, the Arbitration Award shall be final.  The parties acknowledge and agree that any Appeal shall be deemed part of the parties’ agreement to arbitrate for purposes of these Arbitration Provisions and the Arbitration Act. 5.2 Selection and Payment of Appeal Panel.  In the event an Appellant delivers an Appeal Notice to the Appellee (together with proof of payment of the applicable bond) in compliance with the provisions of Paragraph 5.1 above, the Appeal will be heard by a three (3) person arbitration panel (the “Appeal Panel”). (a) Within ten (10) calendar days after the Appeal Date, the Appellee shall select and submit to the Appellant the names of five (5) arbitrators that are designated as “neutrals” or qualified arbitrators by Utah ADR Services (http://www.utahadrservices.com) (such five (5) designated persons hereunder are referred to herein as the “Proposed Appeal Arbitrators”). For the avoidance of doubt, each Proposed Appeal Arbitrator must be qualified as a “neutral” with Utah ADR Services, and shall not be the arbitrator who rendered the Arbitration Award being appealed (the “Original Arbitrator”). Within five (5) calendar days after the Appellee has submitted to the Appellant the names of the Proposed Appeal Arbitrators, the Appellant must select, by written notice to the Appellee, three (3) of the Proposed Appeal Arbitrators to act as the members of the Appeal Panel. If the Appellant fails to select three (3) of the Proposed Appeal Arbitrators in writing within such 5-day period, then the Appellee may select such three (3) arbitrators from the Proposed Appeal Arbitrators by providing written notice of such selection to the Appellant. (b) If the Appellee fails to submit to the Appellant the names of the Proposed Appeal Arbitrators within ten (10) calendar days after the Appeal Date pursuant to subparagraph (a) above, then the Appellant may at any time prior to the Appellee so designating the Proposed Appeal Arbitrators, identify the names of five (5) arbitrators that are designated as “neutrals” or qualified arbitrators by Utah ADR Service (none of whom may be the Original Arbitrator) by written notice to the Appellee.  The Appellee may then, within five (5) calendar days after the Appellant has submitted notice of its selected arbitrators to the Appellee, select, by written notice to the Appellant, three (3) of such selected arbitrators to serve on the Appeal Panel. If the Appellee fails to select in writing within such 5-day period three (3) of the arbitrators selected by the Appellant to serve as the members of the Appeal Panel, then the Appellant may select the three (3) members of the Appeal Panel from the Appellant’s list of five (5) arbitrators by providing written notice of such selection to the Appellee. (c) If a selected Proposed Appeal Arbitrator declines or is otherwise unable to serve, then the party that selected such Proposed Appeal Arbitrator may select one (1) of the other five (5) designated Proposed Appeal Arbitrators within three (3) calendar days of the date a chosen Proposed Appeal Arbitrator declines or notifies the parties he or she is unable to serve as an arbitrator. If at least three (3) of the five (5) designated Proposed Appeal Arbitrators decline or are otherwise unable to serve, then the Proposed Appeal Arbitrator selection process shall begin again in accordance with this Paragraph 5.2; provided, however, that any Proposed Appeal Arbitrators who have already agreed to serve shall remain on the Appeal Panel. (d) The date that all three (3) Proposed Appeal Arbitrators selected pursuant to this Paragraph 5.2 agree in writing (including via email) delivered to both the Appellant and the Appellee to serve as members of the Appeal Panel hereunder is referred to herein as the “Appeal Commencement Date”.  No later than five (5) calendar days after the Appeal Commencement Date, the Appellee shall designate in writing (including via email) to the Appellant and the Appeal Panel the name of one (1) of the three (3) members of the Appeal Panel to serve as the lead arbitrator in the Appeal proceedings. Each member of the Appeal Panel shall be deemed an arbitrator for purposes of these Arbitration Provisions and the Arbitration Act, provided that, in conducting the Appeal, the Appeal Panel may only act or make determinations upon the approval or vote of no less than the majority vote of its members, as announced or communicated by the lead arbitrator on the Appeal Panel.  If an arbitrator on the Appeal Panel ceases or is unable to act during the Appeal proceedings, a replacement arbitrator shall be chosen in accordance with Paragraph 5.2 above to continue the Appeal as a member of the Appeal Panel.  If Utah ADR Services ceases to exist or to provide a list of neutrals, then the arbitrators for the Appeal Panel shall be selected under the then prevailing rules of the American Arbitration Association. (d) Subject to Paragraph 5.7 below, the cost of the Appeal Panel must be paid entirely by the Appellant. 5.3 Appeal Procedure.  The Appeal will be deemed an appeal of the entire Arbitration Award. In conducting the Appeal, the Appeal Panel shall conduct a de novo review of all Claims described or otherwise set forth in the Arbitration Notice.  Subject to the foregoing and all other provisions of this Paragraph 5, the Appeal Panel shall conduct the Appeal in a manner the Appeal Panel considers appropriate for a fair and expeditious disposition of the Appeal, may hold one or more hearings and permit oral argument, and may review all previous evidence and discovery, together with all briefs, pleadings and other documents filed with the Original Arbitrator (as well as any documents filed with the Appeal Panel pursuant to Paragraph 5.4(a) below).  Notwithstanding the foregoing, in connection with the Appeal, the Appeal Panel shall not permit the parties to conduct any additional discovery or raise any new Claims to be arbitrated, shall not permit new witnesses or affidavits, and shall not base any of its findings or determinations on the Original Arbitrator’s findings or the Arbitration Award.   5.4 Timing.    (a) Within seven (7) calendar days of the Appeal Commencement Date, the Appellant (i) shall deliver or cause to be delivered to the Appeal Panel copies of the Appeal Notice, all discovery conducted in connection with the Arbitration, and all briefs, pleadings and other documents filed with the Original Arbitrator (which material Appellee shall have the right to review and supplement if necessary), and (ii) may, but is not required to, deliver to the Appeal Panel and to the Appellee a Memorandum in Support of the Appellant’s arguments concerning or position with respect to all Claims, counterclaims, issues, or accountings presented or pleaded in the Arbitration. Within seven (7) calendar days of the Appellant’s delivery of the Memorandum in Support, as applicable, the Appellee shall deliver to the Appeal Panel and to the Appellant a Memorandum in Opposition to the Memorandum in Support. Within seven (7) calendar days of the Appellee’s delivery of the Memorandum in Opposition, as applicable, the Appellant shall deliver to the Appeal Panel and to the Appellee a Reply Memorandum to the Memorandum in Opposition. If the Appellant shall fail to substantially comply with the requirements of clause (i) of this subparagraph (a), the Appellant shall lose its right to appeal the Arbitration Award, and the Arbitration Award shall be final.  If the Appellee shall fail to deliver the Memorandum in Opposition as required above, or if the Appellant shall fail to deliver the Reply Memorandum as required above, then the Appellee or the Appellant, as the case may be, shall lose its right to so deliver the same, and the Appeal shall proceed regardless. (b) Subject to subparagraph (a) above, the parties hereby agree that the Appeal must be heard by the Appeal Panel within thirty (30) calendar days of the Appeal Commencement Date, and that the Appeal Panel must render its decision within thirty (30) calendar days after the Appeal is heard (and in no event later than sixty (60) calendar days after the Appeal Commencement Date). 5.5 Appeal Panel Award.  The Appeal Panel shall issue its decision (the “Appeal Panel Award”) through the lead arbitrator on the Appeal Panel.  Notwithstanding any other provision contained herein, the Appeal Panel Award shall (a) supersede in its entirety and make of no further force or effect the Arbitration Award (provided that any protective orders issued by the Original Arbitrator shall remain in full force and effect), (b) be final and binding upon the parties, with no further rights of appeal, (c) be the sole and exclusive remedy between the parties regarding any Claims, counterclaims, issues, or accountings presented or pleaded in the Arbitration, and (d) be promptly payable in United States dollars free of any tax, deduction or offset (with respect to monetary awards).  Any costs or fees, including without limitation attorneys’ fees, incurred in connection with or incident to enforcing the Appeal Panel Award resisting such enforcement. The Appeal Panel Award shall include Default Interest (with respect to monetary awards) at the rate specified in the Note for Default Interest both before and after the Arbitration Award. Judgment upon the Appeal Panel Award will be entered and enforced by a state or federal court sitting in Salt Lake County, Utah. 5.6 Relief.  The Appeal Panel shall have the right to award or include in the Appeal Panel Award any relief which the Appeal Panel deems proper under the circumstances, including, without limitation, specific performance and injunctive relief, provided that the Appeal Panel may not award exemplary or punitive damages. 5.7 Fees and Costs.  As part of the Appeal Panel Award, the Appeal Panel is hereby fees of the Arbitration and the Appeal Panel, and (b) reimburse the prevailing party (the party being awarded the most amount of money by the Appeal Panel,  which, for the avoidance of doubt, shall be determined without regard to any statutory fines, penalties, fees, or other charges awarded to any part) the reasonable attorneys’ fees, arbitrator and Appeal Panel costs and fees, deposition costs, other discovery costs, and other expenses, costs or fees paid or otherwise incurred by the prevailing party in connection with the Arbitration (including without limitation in connection with the Appeal). 6. Miscellaneous.   6.1 Severability. If any part of these Arbitration Provisions is found to violate or be illegal under applicable law, then such provision shall be modified to the minimum extent necessary to make such provision enforceable under applicable law, and the remainder of the Arbitration Provisions shall remain unaffected and 6.2 Governing Law.  These Arbitration Provisions shall be governed by the laws of the State of Utah without regard to the conflict of laws principles therein.     6.3 Interpretation.  The headings of these Arbitration Provisions are for convenience of reference only and shall not form part of, or affect the interpretation of, these Arbitration Provisions. 6.4 Waiver. No waiver of any provision of these Arbitration Provisions shall be effective unless it is in the form of a writing signed by the party granting the waiver. 6.5 each and every provision of these Arbitration Provisions. [Remainder of page intentionally left blank]

EXHIBIT 10.12 CATERPILLAR INC. SUPPLEMENTAL RETIREMENT PLAN (formerly known as the Caterpillar Inc. Supplemental Pension Benefit Plan) (Amended and Restated as of December 10, 2014) Table of Contents ARTICLE I DEFINITIONS ARTICLE II ELIGIBILITY; ADOPTION BY AFFILIATES ARTICLE III DETERMINATION OF BENEFIT ARTICLE IV VESTING ARTICLE V PAYMENT OF BENEFIT ARTICLE VI ADMINISTRATION OF THE PLAN ARTICLE VII AMENDMENT ARTICLE VIII GENERAL PROVISIONS       CATERPILLAR INC. SUPPLEMENTAL RETIREMENT PLAN PREAMBLE The Caterpillar Inc. Supplemental Retirement Plan (formerly known as the Caterpillar Inc. Supplemental Pension Benefit Plan and hereinafter referred to as the “Plan”) was established as of January 1, 1976 by Caterpillar Inc. (the “Company”) to provide additional pension benefits to individuals who participate in the Caterpillar Inc. Retirement Income Plan, as amended, or any successor(s) to such plan (not including the applicable supplement of the Caterpillar Inc. Retirement Income Plan that reflects the provisions and benefits of the Solar Turbines Incorporated Retirement Plan on and after the merger of the Solar Turbines Incorporated Retirement Plan with and into the Caterpillar Retirement Income Plan effective as of 11:59 PM CST on December 31, 2014) (“RIP”), but whose benefits are limited due to the application of Section 401(a)(17) and/or Section 415 of the Internal Revenue Code of 1986, as amended. The Plan also provides the benefits that would otherwise be payable pursuant to RIP but for (i) an individual’s deferral of compensation under the Caterpillar Inc. Deferred Employees’ Investment Plan, the Caterpillar Inc. Supplemental Employees’ Investment Plan, or the Caterpillar Inc. Supplemental Deferred Compensation Plan or (ii) the exclusions from “Total Earnings” under RIP for an individual’s lump sum discretionary awards and variable base pay. This amended and restated Plan is effective as of January 1, 2005. For avoidance of doubt, all references in the Plan to RIP shall not include the applicable supplement of the Caterpillar Inc. Retirement Income Plan that reflects the provisions and benefits of the Solar Turbines Incorporated Retirement Plan on and after the merger of the Solar Turbines Incorporated Retirement Plan with and into the Caterpillar Retirement Income Plan effective as of 11:59 PM CST on December 31, 2014 and benefits under the Plan shall in no way be affected by benefits provided or not provided under such applicable supplement. This amendment and restated plan is effective as of the dates specified herein. ARTICLE I DEFINITIONS 1.1    General. When a word or phrase appears in the Plan with the initial letter capitalized, and the word or phrase does not begin a sentence, the word or phrase shall generally be a term defined in this Article I. The following words and phrases used in the Plan with the initial letter capitalized shall have the meanings set forth in this Article I, unless a clearly different meaning is required by the context in which the word or phrase is used or the word or phrase is defined for a limited purpose elsewhere in the Plan document: (a)    “Adopting Affiliate” means any Affiliate that has been authorized by the Company to adopt the Plan and which has adopted the Plan in accordance with Section 2.5. All Affiliates that adopted the Plan on or before the Effective Date and that had not terminated such adoption shall continue to be Adopting Affiliates of the Plan. (b)    “Affiliate” means a parent business that controls, or a subsidiary business that is controlled by, the Company. (c)    “Beneficiary” means, with respect to a Participant, the person or persons entitled to receive distributions of the Participant’s death benefits under RIP. (d)    “Benefit Determination Date” means the following: (i)    On or After Effective Date But Prior to January 1, 2009. On or after the Effective Date but prior to January 1, 2009, a Participant’s Benefit Determination Date shall be the date as of which the Participant has elected to commence benefits under RIP. (ii)    On or After January 1, 2009. On or after January 1, 2009, a Participant’s Benefit Determination Date shall be the date determined under (1) or (2) below: (iii)    With respect to (x) a Participant’s PEP Benefit (as defined in Section 3.2(b)), (y) a Choice Participant’s benefits under this Plan, or (z) a Participant’s Traditional Benefit (as defined in Section 3.2(a)) where the Participant satisfies the requirements under Section 5.2(d)(1)(i), (ii), (iii), (iv), or (v) as of the Participant’s Separation from Service, the Participant’s Benefit Determination Date shall be the first day of the month following the Participant’s Separation from Service. (iv)    With respect to a Participant’s Traditional Benefit (as defined in Section 3.2(a)) for a Participant other than a Choice Participant where the Participant does not satisfy the requirements under Section 5.2(d)(1)(i), (ii), (iii), (iv), or (v) as of the Participant’s Separation from Service, the Participant’s Benefit Determination Date shall be the first day of the month following the date that the Participant first satisfies the requirements under Section 5.2(d)(1)(i), (ii), (iii), (iv), or (v). (e)    “Benefit Payment Date” means the date as of which the Participant’s benefit amounts under the Plan shall be payable, as determined in accordance with Section 5.2(d). (f)    “Board” means the Board of Directors of the Company, or any authorized committee of the Board. (g)    “Choice Participant” means a Participant who (i) has a “frozen traditional benefit” under RIP as a result of the election made by such Participant to cease accruing a benefit under the traditional benefit formula of RIP and to begin accruing a benefit under the pension equity formula of RIP and (ii) had accrued a Traditional Benefit (as defined in Section 3.2(a)) under this Plan as of June 30, 2003. (h)    “Code” means the Internal Revenue Code of 1986, as amended from time to time, and any regulations promulgated thereunder. (i)    “Company” means Caterpillar Inc., and, to the extent provided in Section 8.8 below, any successor corporation or other entity resulting from a merger or consolidation into or with the Company or a transfer or sale of substantially all of the assets of the Company. (j)    “DEIP” means the Caterpillar Inc. Deferred Employees’ Investment Plan, as amended. (k)    “Director” means the Company’s Director of Compensation + Benefits. (l)    “Disability” or “Disabled” means that a Participant is determined to be totally disabled by the United States Social Security Administration. (m)    “Effective Date” means January 1, 2005. (n)    “ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time, and any regulations promulgated thereunder. (o)    “Lump Sum Discretionary Award” means any lump sum discretionary award paid to a Participant as determined in accordance with the established pay (p)    “Participant” means an employee of the Company or any Adopting Affiliate who satisfies the eligibility requirements for participation in the Plan. (q)    “Plan” means the Caterpillar Inc. Supplemental Retirement Plan, as set forth herein and as it may be amended from time to time. (r)    “Plan Administrator” means the Director. (s)    “Plan Year” means the calendar year. (t)    “RIP” means the Caterpillar Inc. Retirement Income Plan, as amended or any successor(s) to such plan, other than the applicable supplement of the Caterpillar Inc. Retirement Income Plan that reflects the provisions and benefits of the Solar Turbines Incorporated Retirement Plan on and after the merger of the Solar Turbines Incorporated Retirement Plan with and into the Caterpillar Retirement Income Plan effective as of 11:59 PM CST on December 31, 2014.” (u)    “SDCP” means the Caterpillar Inc. Supplemental Deferred Compensation Plan, as amended or any successor(s) to such plan. (v)    “SEIP” means the Caterpillar Inc. Supplemental Employees’ Investment Plan, as amended. (w)    “Separation from Service” means separation from service as determined in accordance with any regulations, rulings or other guidance issued by the Department of the Treasury pursuant to Section 409A(a)(2)(A)(i) of the Code, as it may be amended or replaced from time to time. (x)    “Specified Employee” means a “key employee” as defined in Section 416(i) of the Code without regard to Section 416(i)(5) and determined in accordance with Section 409A(a)(2)(B)(i) of the Code. (y)    “Unforeseeable Emergency” means 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. For purposes of the Plan, an “Unforeseeable Emergency” shall not include a Participant’s need to send his or her child to college or a Participant’s desire to purchase a home. Any determination as to whether a Participant has incurred an Unforeseeable Emergency shall be made in the sole discretion of the Plan Administrator in accordance with rules prescribed pursuant to Section 409A of the Code. (z)    “Variable Base Pay” means the variable base pay paid to a Participant as determined in accordance with the established pay practices of the Company and Adopting Affiliates. (aa)    “Sunset Participant” means a Participant who is classified as a “Sunset Participant” under the terms of RIP. (ab) “GSCS” means Caterpillar Logistics Services LLC (f/k/a Caterpillar Logistics Services, Inc.). (ac)“GSCS Participant” means a Participant who is employed by GSCS upon the closing of the sale of GSCS to an entity that is not an Affiliate. (ad)“GSCS Closing Date” means the date on which the sale of GSCS to an entity that is not an Affiliate is completed. 1.2    Construction. The masculine gender, when appearing in the Plan, shall include the feminine gender (and vice versa), and the singular shall include the plural, unless the Plan clearly states to the contrary. Headings and subheadings are for the purpose of reference only and are not to be considered in the construction of the Plan. If any provision of the Plan is determined to be for full force and effect. All of the provisions of the Plan shall be construed and enforced according to the laws of the State of Illinois without regard to conflict of law principles and shall be administered according to the laws of such state, except as otherwise required by ERISA, the Code, or other Federal law. ARTICLE II 2.1    Eligible Employees. The purpose of the Plan is to provide supplemental retirement benefits to a select group of management or highly compensated employees. This group of employees is sometimes referred to as a “top hat group.” The Plan constitutes an unfunded supplemental retirement plan and is fully exempt from Parts 2, 3, and 4 of Title I of ERISA. The Plan shall be governed and construed in accordance with Title I of ERISA. 2.2    Existing Participants.  Each individual who was a Participant in the Plan as of the date of execution of this plan document shall continue as such, subject to the provisions hereof. 2.3    New Participants. An employee shall participate in the Plan if the employee is receiving, is eligible to receive, or is accruing retirement benefits pursuant to RIP; and (a)    the employee’s RIP benefits are limited by application of Section 401(a)(17) of the Code; (b)    the employee’s RIP benefits are limited by application of Section 415(b) of the Code; (c)    the employee’s RIP benefits are decreased due to the employee’s deferral of salary or incentive compensation under SEIP, DEIP or SDCP; or (d)    the employee’s RIP benefits are limited due to the exclusions from “Total Earnings” (as defined under RIP) for the employee’s Lump Sum Discretionary Awards and Variable Base Pay. 2.4    Discontinuance of Participation. As a general rule, once an individual is a Participant, he will continue as such for all future Plan Years until his retirement or other termination of employment. In addition, prior to retirement or other termination of employment, the Plan Administrator shall discontinue an individual’s participation in the Plan if the Plan Administrator concludes, in the exercise of his discretion, that the individual is no longer properly included in the top hat group. If an individual’s participation is discontinued, the individual will no longer be eligible to accrue a benefit under the Plan. The individual will not be entitled to receive a distribution, however, until the occurrence of another event (e.g., death or Separation from Service) that entitles the individual to receive a distribution. 2.5    Adoption by Affiliates. An employee of an Affiliate may not become a Participant in the Plan unless the Affiliate has previously adopted the Plan. An Affiliate of the Company may adopt the Plan only with the approval of the Company. By adopting the Plan, the Affiliate shall be deemed to have agreed to assume the obligations and liabilities imposed upon it by the Plan, agreed to comply with all of the other terms and provisions of the Plan, delegated to the Plan Administrator the power and responsibility to administer the Plan with respect to the Affiliate’s employees, and delegated to the Company the full power to amend or terminate the Plan with respect to the Affiliate’s employees. Notwithstanding the foregoing, an Affiliate that has previously adopted the Plan may terminate its participation in the Plan in accordance with such rules and procedures that are promulgated by the Company. ARTICLE III DETERMINATION OF BENEFIT 3.1    General. Benefit amounts payable under the Plan shall be determined pursuant to Section 3.2 and, if applicable, adjusted pursuant to Section 3.4. Such determinations shall be made by reference to (a) the benefit amounts that would be payable to the Participant under RIP if SEIP, DEIP and SDCP deferrals and any Lump Sum Discretionary Awards or Variable Base Pay were taken into account in determining the Participant’s benefits thereunder and (b) without regard to the applicable limitations under Sections 401(a)(17) and 415 of the Code. For avoidance of doubt, effective January 1, 2011, any Participant who is not a Sunset Participant shall not receive any additional benefit accruals under this Article III, and any Sunset Participant shall not receive any additional benefit accruals under this Article III effective as of the earlier of: (1) the date he is no longer a Sunset Participant or (2) January 1, 2020. 3.2    Amount of Benefit Payable to Participant. The monthly benefit payable to the Participant by the Plan shall be equal to the sum of the Participant’s “Traditional Benefit” and “PEP Benefit” amounts (both as defined below), if any, determined under subsections (a) and (b) below as of the Participant’s Benefit Determination Date: (a)    “Traditional Benefit”. Any benefit payable to the Participant by the Plan under the “traditional benefit” provisions of RIP, as it may be amended from time to time, shall be determined as follows: (1)    Step One. The Plan Administrator shall determine the benefit that would be payable to the Participant pursuant to RIP if SEIP, DEIP and SDCP deferrals account and without regard to the applicable limitations under Sections 401(a)(17) and 415 of the Code. For purposes of this Section 3.2(a)(1), the parenthetical phrase of Section 5.2 of RIP reading “(2% for Participants in salary grades 30 or 31, 2.25% for Participants in salary grade 32, 2.4% for Participants in salary grades 33 or higher)” shall be disregarded. (2)    Step Two. The Plan Administrator shall determine the Participant’s benefit that would be payable pursuant to RIP (as calculated as of the Participant’s Benefit Determination Date). (3)    Step Three. The amount determined pursuant to paragraph (2) above shall be subtracted from the amount determined pursuant to paragraph (1) above to determine the benefit payable to the Participant pursuant to this Section 3.2(a) of the Plan (herein referred to as a Participant’s “Traditional Benefit”). (b)    “PEP Benefit”. Any benefit payable by the Plan to the Participant under the “pension equity formula” provisions of RIP, as it may be amended from time to time, shall be determined as follows: (1)    Step One. The Plan Administrator shall determine the single sum amount that would be payable to the Participant pursuant to RIP if SEIP, DEIP and SDCP deferrals and any Lump Sum Discretionary Awards or Variable Base Pay were taken into account and without regard to the applicable limitations under Sections (2)    Step Two. The Plan Administrator shall determine the Participant’s single sum amount that would be payable pursuant to RIP (as calculated as of the determine the single sum amount payable to the Participant pursuant to this Section 3.2(b) of the Plan (herein referred to as a Participant’s “PEP Benefit”). 3.3    Survivor Benefits. In the event a Participant dies after becoming vested under the Plan pursuant to Section 4.1 but prior to commencing his benefits under the Plan pursuant to Article V, a survivor benefit shall be payable as follows: (a)    Traditional Benefit. With respect to a Participant’s Traditional Benefit, if any, determined under Section 3.2(a) (and, if applicable, adjusted under Section 3.4), the Participant’s surviving spouse, if any, shall be entitled to a monthly survivor benefit payable during the spouse’s lifetime and terminating with the payment for the month in which such spouse’s death occurs. The monthly benefit payable to the surviving spouse shall be the portion of the amount determined under Section 3.2(a) (and, if applicable, adjusted under Section 3.4) as of the Participant’s Benefit Determination Date that the surviving spouse would have been entitled to receive under this Plan if the Participant had separated from service on the date of his death, commenced benefits in accordance with Article V in the form of a 50% joint and survivor annuity, and then died immediately thereafter. A surviving spouse who was not married to the deceased Participant for at least one year at the date of death shall not be eligible for the monthly survivor benefit pursuant to this Section 3.3. (b)    PEP Benefit. With respect to a Participant’s PEP Benefit, if any, determined under Section 3.2(b), such benefit shall be paid to the Participant’s Beneficiary in a single sum amount as soon as administratively feasible after the Benefit Determination Date. (c)    Certain Choice Participant Benefits. Notwithstanding the provisions of (a) and (b) above, with respect to a Choice Participant who does not make a contrary election pursuant to Section 5.2(c)(3), such Participant’s Beneficiary shall receive a single sum amount equal to the actuarial equivalent present value (using the actuarial assumptions under RIP applicable to the Participant as of his or her Benefit Determination Date) of the Participant’s Traditional Benefit and PEP Benefit calculated as of the date specified in Section 5.2(d)(1)(i), and as further adjusted by using the actuarial assumptions under RIP applicable to the Beneficiary as of the Participant’s Benefit Determination Date. Notwithstanding the foregoing, if a Choice Participant makes an election pursuant to Section 5.2(c)(3) to receive his or her benefits under the Plan in the form of monthly annuity payments, his or her Beneficiary, in lieu of the single sum amount described in the preceding sentence, shall receive a monthly benefit paid for the remainder of the Beneficiary’s life; provided that, the Beneficiary’s monthly benefit shall be equal to the actuarially equivalent monthly benefit of such single sum amount (using the actuarial assumptions under RIP applicable to the Beneficiary as of the Participant’s Benefit Determination Date); provided further that, in no event shall the Beneficiary’s monthly benefit be less than the monthly survivor benefit determined under Section 3.3(a) that, but for this Section 3.3(c), would have been payable to the Participant’s surviving spouse (or, if there is no surviving spouse, would have been payable under Section 3.3(a) had the Participant died with a surviving spouse). Any single sum amount or monthly benefit determined under this Section 3.3(c) shall be payable to the Participant’s Beneficiary as soon as administratively feasible after the date of the Participant’s death. 3.4    Early Retirement Reductions. Any benefits determined pursuant to this Article III shall be subject to the same reductions for early retirement as applicable under RIP. 3.5    Future Adjustments. Any benefit amounts payable under this Plan may be adjusted to take into account future amendments to RIP and increases in retirement income that are granted under RIP due to cost-of-living increases. Any benefit amounts payable under this Plan shall be adjusted to take into account future factors and adjustments made by the Secretary of the Treasury (in regulations or otherwise) to the limitations under Sections 401(a)(17) and 415 of the Code. ARTICLE IV VESTING 4.1    Vesting.  Subject to Section 8.1, each Participant shall be vested in his or her benefit, if any, that becomes payable under Article V of the Plan to the same extent that the Participant is vested in his or her benefit accrued under RIP. Notwithstanding the foregoing provisions of this Section 4.1, each GSCS Participant shall be fully vested at all times from and after the GSCS Closing Date in his or her benefit payable under the Plan. ARTICLE V PAYMENT OF BENEFIT 5.1    Payments on or After Effective Date But Prior to January 1, 2009. In accordance with the transitional guidance issued by the Internal Revenue Service and the Department of Treasury in Section 3 of IRS Notice 2007-86, any payment of benefits to a Participant or his Beneficiary commencing on or after the Effective Date but prior to January 1, 2009 shall be made pursuant to the Participant’s applicable payment election or the applicable pre-retirement survivor provisions under RIP. 5.2    Payments on or After January 1, 2009. Any payment of benefits to a Participant commencing on or after January 1, 2009 shall be determined in accordance with this Section 5.2. (a)    Limitation on Right to Receive Distribution. A Participant shall not be entitled to receive a distribution prior to the first to occur of the following events: (1)    The Participant’s Separation from Service, or in the case of a Participant who is a Specified Employee, the date which is six months after the Participant’s Separation from Service; (2)    The date the Participant becomes Disabled; (3)    The Participant’s death; (4)    A specified time (or pursuant to a fixed schedule) specified at the date of deferral of compensation; (5)    An Unforeseeable Emergency; or (6)    To the extent provided by the Secretary of the Treasury, a change in the ownership or effective control of the Company or an Adopting Affiliate or in the ownership of a substantial portion of the assets of the Company or an Adopting Affiliate. This Section 5.2(a) restates the restrictions on distributions set forth in Section 409A of the Code and is intended to impose restrictions on distributions pursuant to the Plan accordingly. This Section 5.2(a) does not describe the instances in which distributions will be made. Rather, distributions will be made only if and when permitted both by this Section 5.2(a) and another provision of the Plan. (b)    General Right to Receive Distribution. Following a Participant’s termination of employment or death, the Participant’s benefit amounts will be paid to the Participant in the manner and at the time provided in Sections 5.2(c) and 5.2(d), as applicable. A transfer of a Participant from the Company or any Affiliate to any other Affiliate or the Company shall not be deemed to be a termination of employment for purposes of this Section 5.2(b). (c)    Form of Payment. (1)    Traditional Benefit. Any monthly benefit payable to a Participant under Section 3.2(a) (and, if applicable, adjusted under Section 3.4) shall be paid in the form of annuity payments as follows: (i)    Unmarried Participants. The benefits of an unmarried Participant shall be paid in the form of a single life annuity for the Participant’s life. No payments shall be made after the Participant dies. Notwithstanding the foregoing, in accordance with uniform rules and procedures as may be adopted by the Plan Administrator from time to time, an unmarried Participant may elect, in lieu of a single life annuity, to have his or her benefits paid in any actuarially equivalent form of annuity permitted under RIP. (ii)    Married Participants. Subject to Section 3.3, the benefits of a married Participant shall be paid in the form of a joint and survivor annuity in a reduced monthly benefit for the Participant’s life (as determined in accordance with the applicable actuarial assumptions in effect under RIP) and then, if the Participant’s spouse is still alive, a benefit equal to 50% of the Participant’s monthly benefit is paid to the spouse for the remainder of his or her life. If the Participant’s spouse is not alive when the Participant dies, no further payments shall be made. Notwithstanding the foregoing, in accordance with uniform rules and procedures as may be adopted by the Plan Administrator from time to time, a married Participant may, with the written consent of the Participant’s spouse, elect to waive the joint and survivor annuity of this subparagraph (ii) and instead elect a single life annuity or any actuarially equivalent form of annuity permitted under RIP. In addition, if the Participant’s Benefit Payment Date, as described in clauses (i)-(v) of Section 5.2(d)(1), is delayed pursuant to the last sentence of Section 5.2(d)(1), then any monthly benefit amounts that would have been paid if not for such last sentence will be credited with interest at five percent (5%) per annum through the Participant’s Benefit Payment Date. Such delayed monthly benefit amounts and interest shall be paid in a single sum amount as soon as administratively feasible after such Benefit Payment Date. (2)    PEP Benefit. Any benefit payable to a Participant determined under Section 3.2(b) shall be paid in a single sum amount. In addition, if the Participant’s Benefit Payment Date, as described in Section 5.2(d)(2), is delayed pursuant to the first sentence of Section 5.2(d)(2), then any single sum amount that would have been paid if not for such first sentence will be credited with interest at five percent (5%) per annum through the Participant’s Benefit Payment Date. Such interest shall be paid in a single sum amount as soon as (3)    Special One-Time Election for Choice Participants. Pursuant to the transitional guidance issued by the Internal Revenue Service and the Department of Treasury, the Plan Administrator shall provide a special one-time election to Choice Participants whose benefits have not commenced as of December 31, 2008, to elect to have their benefits paid other than in the forms otherwise described in (1) and (2) above, subject to such procedures as are established by the Plan Administrator; provided that, if a Choice Participant does not make such an election, any benefit amounts under the Plan that become payable to such Choice Participant shall be paid in the forms described in (1) and (2) above, as applicable. In addition, if the Participant’s Benefit Payment Date, as described in Section 5.2(d)(3), is delayed pursuant to Section 5.2(d)(3), then any monthly benefit amounts or single sum amounts that would have been paid if not for such delay will be credited with interest at five percent (5%) per annum through the Participant’s Benefit Payment Date in accordance with the applicable provisions of (1) and (2) above. Such delayed monthly benefit amounts or single sum amounts and interest shall be paid in a single sum amount as soon as administratively feasible after such Benefit Payment Date. (d)    Timing of Payment. (1)    Traditional Benefit. Except as provided below, any benefit determined becomes payable to the Participant following Separation from Service shall commence on the first day of the month following the earliest of the following: (i)    the Participant’s attainment of age 65 or, if later, the Participant’s fifth anniversary of the date he or she commenced participation under RIP; (ii)    the Participant’s attainment of age 55 with the number of the Participant’s years of vesting service plus his or her age equaling at least 85; (iii)    the Participant’s attainment of age 60 after completing at least 10 years of vesting service; (iv)    the Participant’s attainment of age 55 after completing at least 15 years of vesting service; or (v)    the Participant’s completing at least 30 years of vesting service. For purposes of (ii), (iii), (iv) or (v) above, the Plan Administrator shall determine the Participant’s “years of vesting service” by reference to the applicable terms under RIP in existence as of the date the Participant first commenced participation under this Plan. Notwithstanding the foregoing provisions of this Section 5.2(d)(1), in no event shall any benefit payable to a Participant under Section 3.2(a) (and, if applicable, adjusted under Section 3.4) commence earlier than the first day of the month coincident with or next following a date that is at least six months after the Participant’s Separation from Service, except in the event of the Participant’s death, in which case any benefit payable to the Participant’s Beneficiary shall commence as of the applicable date specified in Section 3.3(a). (2)    PEP Benefit. Any benefit determined under Section 3.2(b) that becomes payable to the Participant following Separation from Service shall be paid on the first day of the month that is at least six months after the Participant’s Separation from Service. Notwithstanding the foregoing, in the event of the Participant’s death, any benefit payable to the Participant’s Beneficiary will be paid as soon as administratively feasible after the date of the Participant’s death. (3)    Certain Choice Participant Benefits. Any benefits that become payable to a Choice Participant following Separation from Service shall be paid on the death. 5.3    Automatic Lump Sum Distributions. Notwithstanding any provision of the Plan to the contrary: (a)    Certain Distributions on or After Effective Date But Prior to January 1, 2009. Effective as of the Effective Date but prior to January 1, 2009, if the actuarial equivalent present value of an individual’s benefit amounts payable under this Plan (as determined in accordance with the applicable actuarial assumptions in effect under RIP as of the individual’s Benefit Determination Date) is less than or equal to $10,000, the individual’s benefit amounts under the Plan shall be distributed in a single sum amount as soon as administratively feasible on or after such Benefit Determination Date. (b)    Certain Distributions on or After January 1, 2009. Effective January 1, 2009, if the sum of (i) the actuarial equivalent present value of an individual’s benefit amounts payable under this Plan (as determined in accordance with the applicable actuarial assumptions in effect under RIP as of the individual’s Benefit Determination Date) and (ii) the interest, if any, credited on such amounts through the individual’s Benefit Payment Date (as determined in accordance with the applicable provisions of Section 5.2(c)) is less than or equal to the dollar limitation under Section 402(g)(1)(B) of the Code in effect for the calendar year in which the individual’s Benefit Payment Date occurs, the individual’s benefit amounts under the Plan shall be distributed in a single sum amount equal to the sum of (i) and (ii) above as soon as administratively feasible on or after such Benefit Payment Date. 5.4    Withholding.  All distributions will be subject to all applicable tax and withholding requirements. 5.5    Ban on Acceleration of Benefits. Neither the time nor the schedule of any payment under the Plan may be accelerated except as permitted in regulations or other guidance issued by the Internal Revenue Service or the Department of the Treasury and as incorporated herein. ARTICLE VI ADMINISTRATION OF THE PLAN 6.1    General Powers and Duties. The following list of powers and duties is not intended to be exhaustive, and the Plan Administrator shall, in addition, exercise such other powers and perform such other duties as he may deem advisable in the administration of the Plan, unless such powers or duties are expressly assigned to another pursuant to the provisions of the Plan. (a)    General. The Plan Administrator shall perform the duties and exercise the powers and discretion given to him in the Plan document and by applicable law and his decisions and actions shall be final and conclusive as to all persons affected thereby. The Company and the Adopting Affiliates shall furnish the Plan Administrator with all data and information that the Plan Administrator may reasonably require in order to perform his functions. The Plan Administrator may rely without question upon any such data or information. (b)    Disputes. Any and all disputes that may arise involving Participants or beneficiaries shall be referred to the Plan Administrator and his decision shall be final. Furthermore, if any question arises as to the meaning, interpretation or application of any provisions of the Plan, the decision of the Plan Administrator shall be final. (c)    Agents. The Plan Administrator may engage agents, including recordkeepers, to assist him and he may engage legal counsel who may be counsel for the Company. The Plan Administrator shall not be responsible for any action taken or omitted to be taken on the advice of such counsel, including written opinions or certificates of any agent, counsel, actuary or physician. (d)    Insurance. At the Director’s request, the Company shall purchase liability insurance to cover the Director in his activities as the Plan Administrator. (e)    Allocations. The Plan Administrator is given specific authority to allocate responsibilities to others and to revoke such allocations. When the Plan Administrator has allocated authority pursuant to this paragraph, the Plan Administrator is not to be liable for the acts or omissions of the party to whom such responsibility has been allocated. (f)    Records. The Plan Administrator shall supervise the establishment and maintenance of records by his agents, the Company and each Adopting Affiliate containing all relevant data pertaining to any person affected hereby and his or her rights under the Plan. (g)    Interpretations. The Plan Administrator, in his sole discretion, shall interpret and construe the provisions of the Plan (and any underlying documents or policies). (h)    Electronic Administration. The Plan Administrator shall have the authority to employ alternative means (including, but not limited to, electronic, internet, intranet, voice response or telephonic) by which Participants may submit elections, directions and forms required for participation in, and the administration of, the Plan. If the Plan Administrator chooses to use these alternative means, any elections, directions or forms submitted in accordance with the rules and procedures promulgated by the Plan Administrator will be deemed to satisfy any provision of the Plan calling for the submission of a written election, direction or form. (i)    Delegation. The Plan Administrator may delegate his authority hereunder, in whole or in part, in his sole and absolute discretion. 6.2    Claims Procedures. Benefit claims under the Plan shall be resolved in accordance with Code Section 409A and uniform and nondiscriminatory procedures adopted by the Plan Administrator in accordance with Section 503 of ERISA. ARTICLE VII AMENDMENT      7.1    Amendment. The Company reserves the right at any time to amend, modify or suspend any or all of the provisions of this Plan, in whole or in part, at any time as designated by a written instrument duly adopted on behalf of the Company. 7.2    Effect of Amendment. Any amendment of the Plan shall not directly or indirectly reduce the benefits previously accrued by the Participant. 7.3 Termination. The Company expressly reserves the right to terminate the Plan. (a)General. In the event of termination, the Company shall specify whether termination will change the time at which distributions are made; provided that any acceleration of a distribution is consistent with Section 409A of the Code. In the absence of such specification, the timing of distributions shall be unaffected by termination. (b)GSCS Termination. Pursuant to the Company’s authority to terminate the Plan, the Plan is irrevocably terminated with respect to all GSCS Participants upon the GSCS Closing Date and no GSCS Participant shall accrue any benefits under the Plan for any purpose after the GSCS Closing Date. Pursuant to termination of the Plan with respect to the GSCS Participants pursuant to this Section 7.3(b), the present value of each GSCS Participant’s benefit amounts payable under the Plan shall be distributed to the GSCS Participant in a single sum amount as soon as practicable after the GSCS Closing Date, but in no event later than December 31 next following the GSCS Closing Date. Termination of the Plan with respect to GSCS Participants will change the time at which distributions are made to GSCS Participants. Payments to GSCS Participants pursuant to this Section 7.3(b) are intended to comply with section 409A of the Code and applicable guidance issued thereunder. ARTICLE VIII GENERAL PROVISIONS 8.1    Participant’s Rights Unsecured. The Plan at all times shall be entirely unfunded and no provision shall at any time be made with respect to segregating any assets of the Company for payment of any distributions hereunder. The right of a Participant or his or her Beneficiary to receive benefits hereunder shall be an unsecured claim against the general assets of the Company, and neither the Participant nor his Beneficiary shall have any rights in or against any specific assets of the Company. All amounts accrued by Participants hereunder shall constitute general assets of the Company and may be disposed of by the Company at such time and for such purposes as it may deem appropriate. Nothing in this Section shall preclude the Company from establishing a “Rabbi Trust,” but the assets in the Rabbi Trust must be available to pay the claims of the Company’s general creditors in the event of the Company’s insolvency. 8.2    No Guaranty of Benefits. Nothing contained in the Plan shall constitute a guaranty by the Company or any other person or entity that the assets of the Company will be sufficient to pay any benefit hereunder. 8.3    No Enlargement of Employee Rights. No Participant shall have any right to receive a distribution from the Plan except in accordance with the terms of the Plan. Participation in the Plan shall not be construed to give any Participant the right to be retained in the service of the Company or an Adopting Affiliate. 8.4    Section 409A Compliance. The Company intends that the Plan meet the requirements of Section 409A of the Code and the guidance issued thereunder. The Plan shall be administered, construed and interpreted in a manner consistent with that intention. 8.5    Spendthrift Provision. No interest of any person or entity in, or right to receive a distribution under, the Plan shall be subject in any manner to sale, transfer, assignment, pledge, attachment, garnishment, or other alienation or encumbrance of any kind; nor shall any such interest or right to receive a distribution be taken, either voluntarily or involuntarily, for the satisfaction of the debts of, or other obligations or claims against, such person or entity, including claims in bankruptcy proceedings. This Section shall not preclude arrangements for the withholding of taxes from deferrals, credits, or benefit payments, arrangements for the recovery of benefit overpayments, arrangements for the transfer of benefit rights to another plan, or arrangements for direct deposit of benefit payments to an account in a bank, savings and loan association or credit union (provided that such arrangement is not part of an arrangement constituting an assignment or alienation). 8.6    Domestic Relations Orders. Notwithstanding any provision of the Plan to the contrary, and to the extent permitted by law, the amounts payable pursuant to the Plan may be assigned or alienated pursuant to a “Domestic Relations Order” (as such term is defined in Section 414(p)(1)(B) of the Code), subject to such uniform rules and procedures as may be adopted by the Plan Administrator 8.7    Incapacity of Recipient. If the Plan Administrator is served with a court order holding that a person entitled to a distribution under the Plan is incapable of personally receiving and giving a valid receipt for such distribution, the Plan Administrator shall postpone payment until such time as a claim therefore shall have been made by a duly appointed guardian or other legal representative of such person. The Plan Administrator is under no obligation to inquire or investigate as to the competency of any person entitled to a distribution. Any payment to an appointed guardian or other legal representative under this Section shall be a payment for the account of the incapacitated person and a complete discharge of any liability of the Company and the Plan therefor. 8.8    Successors. The Plan shall be binding upon the successors and assigns of the Company and upon the heirs, beneficiaries and personal representatives of the individuals who become Participants hereunder. 8.9    Limitations on Liability. Notwithstanding any of the preceding provisions of the Plan, neither the Plan Administrator, the Director, or the Company, nor any individual acting as the Plan Administrator’s, the Director’s, or the Company’s employee, agent, or representative shall be liable to any Participant, former Participant, Beneficiary or other person for any claim, loss, liability or expense incurred in connection with the Plan. 8.10    Overpayments. If it is determined that the benefits under the Plan should not have been paid or should have been paid in a lesser amount, written notice thereof shall be given to the recipient of such benefits (or his legal representative) and he shall repay the amount of overpayment to the Company. If he fails to repay such amount of overpayment promptly, the Company shall arrange to recover for the Plan the amount of the overpayment by making an appropriate deduction or deductions from any future benefit payment or payments payable to that person (or his survivor or beneficiary) under the Plan or from any other benefit plan of the Company. 8.11    Plan Frozen. As a result of the freeze of RIP, participation and benefit accruals are frozen under the Plan. This Section 8.11 provides clarification regarding the freeze of the Plan. (a)    Participation Frozen. The Plan is frozen to (1) all employees hired after November 30, 2010 and (2) all employees rehired after December 31, 2010. Any employee hired or rehired after the applicable date in the preceding sentence shall not be eligible for the Plan and, in the case of a rehire, shall accrue no additional benefits under the Plan for any period of employment after such date. Similarly, the Plan is frozen to all individuals hired or rehired by the Company or any Affiliate thereof prior to the applicable date in the first sentence who, as of such date, were not Participants in the Plan and therefore such individuals will never become eligible to participate in the Plan. (b)    Benefits Frozen — Non-Sunset Participants. Effective January 1, 2011, the Plan is frozen with respect to any Participant who is not classified as a Sunset Participant on December 31, 2010. Any Participant who was not a Sunset Participant on December 31, 2010 shall no longer accrue any additional benefits under the Plan for periods of employment on or after January 1, 2011. (c) Benefits Frozen — Sunset Participants. (1) The Plan is frozen with respect to any Participant who is a Sunset Participant on December 31, 2010, but who later loses his status as a Sunset Participant, on the date such Participant loses status as a Sunset Participant. (2) Effective January 1, 2020, the Plan is frozen for all employees including by way of example but not limitation, Sunset Participants. (d)    Plan Completely Frozen — January 1, 2020. For avoidance of doubt, no individual shall: (1) become a new Participant in the Plan after November 30, 2010 regardless of hire date or transfer date; and (2) accrue any benefits under the Plan for any period of employment on or after January 1, 2020. (e)    Vesting Service Continues. For avoidance of doubt, a Participant shall continue to receive vesting service for any period of employment on or after the applicable freeze date referenced in this Section 8.11 for purposes of determining his or her vesting under Section 4.1 and his or her eligibility to commence benefits under Section 5.2(d).      8.12 Special Rules for Participants with Same-Sex Domestic Partners. (a)    Generally. Effective January 1, 2013, except as specified under this Section 8.12 or as prohibited by applicable law, to the extent the Plan provides for any benefit, right, feature, restriction, or obligation relating to, or upon, a Participant’s “spouse”, “Beneficiary”, “survivor”, or “surviving spouse” (or any individual having a similar relationship to the Participant), the Plan Administrator shall also apply such benefit, right, feature, restriction, or obligation to a Participant’s “same-sex domestic partner” (as defined in (b) below) in a uniform and non-discriminatory manner that is similar to how an opposite-gender spouse would be treated under the Plan. (b)    Definition of “Same-Sex Domestic Partner”. For purposes of this Section 8.12, the term “same-sex domestic partner” means the sole, same-sex person who is in a civil union, domestic partnership, or legal relationship similar thereto, with the Participant as recognized under the laws of the federal government or a state government of the United States of America, including its territories and possessions and the District of Columbia (or, with respect to any other country, legally recognized by the equivalent government(s) thereof). The Plan shall continue to treat such relationship as a same-sex domestic partnership, regardless of whether the Participant and his same-sex domestic partner remain in the jurisdiction where the relationship was legally entered into. In the event more than one person meets this definition for a given Participant, then the “same-sex domestic partner” shall be the person who first met the criteria in this definition. Notwithstanding anything herein to the contrary, if a Participant has a spouse recognized for purposes of federal law, no person will qualify as the Participant’s same-sex domestic partner unless such Participant’s marriage to such spouse is first lawfully dissolved. Except with respect to determining the length of time the same-sex domestic partner has satisfied the definition of same-sex domestic partner under the Plan, a Participant shall be considered to have a same-sex domestic partner only with respect to periods beginning on or after January 1, 2013, regardless of when such same-sex partnership was created. (c)    Exceptions. (1)    Determination of Status as a “married Participant”. For purposes of Section 5.2(c)(1), a Participant shall be considered a “married Participant” only if the Participant has a spouse recognized for purposes of federal law. For avoidance of doubt, a Participant with a same-sex domestic partner is considered to be an “unmarried Participant” and is not required to obtain the same-sex domestic partner’s consent for the election of any form of payment provided under the Plan, and the normal form of benefit for purposes of Section 5.2(c)(1) for any such Participant shall be a single life annuity for the Participant’s life. (2)    Determination of Unforeseeable Emergency. Only a spouse recognized for purposes of federal law shall be considered a “spouse” for purposes of applying the definition of “Unforeseeable Emergency” in Section 1.1(y). (3)    Domestic Relations Orders. Only a spouse recognized for purposes of federal law or another “alternate payee” (as defined under Section 414(p) of the Code) may enforce a domestic relations order against the Plan or a Participant’s interests hereunder pursuant to Section 8.6. 8.13    Determination of “spouse”. The term “spouse” means the person who is a Participant’s spouse for federal tax purposes pursuant to applicable Internal Revenue Service guidance; provided, however, that effective on and after June 26, 2013, the term spouse shall include a lawful same-sex spouse recognized by a state or other jurisdiction in which the ceremony establishing the marital relationship was performed - even if the Participant and spouse now reside in a state or other jurisdiction that does not recognize same-sex marriage. To the extent provided in any domestic relations order applicable to benefits payable under this Plan, a Participant’s former spouse may be treated as the surviving spouse for purposes of this Plan.

Name: Commission Regulation (EEC) No 1944/87 of 3 July 1987 fixing the import levies on cereals and on wheat or rye flour, groats and meal Type: Regulation Date Published: nan 4. 7. 87No L 185/38 Official Journal of the European Communities COMMISSION REGULATION (EEC) No 1944/87 of 3 July 1987 fixing the import levies on cereals and on wheat or rye flour, groats and meal THE COMMISSION OF THE EUROPEAN COMMUNITIES, Having regard to the Treaty establishing the European Economic Community, Having regard to the Act of Accession of Spain and Portugal , Having regard to Council Regulation (EEC) No 2727/75 of 29 October 1975 on the common organization of the market in cereals ('), as last amended by Regulation (EEC) No 1900/87 (2), and in particular Article 13(5) thereof, Having regard to Council Regulation No 1676/85 on the value of the unit of account and the exchange rates to be applied for the purposes of the common agricultural policy (3), as amended by Regulation (EEC) No 1636/87 (4), and in particular Article 3 thereof, Having regard to the opinion of the Monetary Committee , Whereas the first subparagraph of Article 13(1 ) of Regu ­ lation (EEC) No 2727/75 provides that a levy must be charged on imports of the products listed in Article 1 (a), (b) and (c) of that Regulation ; whereas the levy is equal for each product to the threshold price less the cif price ; Whereas, the threshold prices for cereals and for wheat and rye flour, and wheat groats and meal , were fixed for the 1987/88 marketing year by Regulations (EEC) No 2734/75 0, (EEC) No 1901 /87 (EEC) No 1903/87 0 and (EEC) No 1943/87 (8) ; Whereas, for the purpose of calculating the cif prices used to determine the levies, the Commission must take into account the factors indicated in Regulation No 156/ 67/EEC (9), as last amended by Regulation (EEC) No 31 /76 (10), and in particular the most favourable purcha ­ sing opportunities on the world market among those which are most representative of the real trend of the market, account being taken in particular of the need to prevent sudden variations likely to cause abnormal distur ­ bances on the Community market ; whereas the quality of the goods offered must also be taken into account, whether this quality corresponds to the standard quality fixed in Regulations (EEC) No 2731 /75 ("), as last amended by Regulation (EEC) No 1028/84 (12), and (EEC) No 2734/75, or whether adjustments need to be made by applying the coefficients of equivalence provided for in Regulation No 158/67/EEC (l3), as last amended by Regu ­ lation (EEC) No 3135/84 (14), and in Regulation No 159/ 67/EEC H ; Whereas the cif price is calculated for Rotterdam on the basis of the abovementioned elements, offers for other ports being adjusted, account being taken of the correc ­ tions necessitated by the differences in transport charges in relation to Rotterdam ; Whereas Council Regulation (EEC) No 486/85 (1S), last amended by Regulation (EEC) No 73/87 ('^), lays down the arrangements applicable on agricultural products and certain goods resulting from the processing of agricultural products originating in the African, Caribbean and Pacific States or in the overseas countries and territories ; Whereas, in accordance with Article 18(1 ) of Regulation (EEC) No 2727/75, the nomenclature provided for in this Regulation is incorporated in the Common Customs Tariff ; Whereas, if the levy system is to operate normally, levies should be calculated on the following basis : ” in the case of currencies which are maintained in rela ­ tion to each other at any given moment within a band of 2,25 %, a rate of exchange based on their central rate, multiplied by the corrective factor provided for in the last paragraph of Article 3 ( 1 ) of Council Regula ­ tion (EEC) No 1676/85, ” for other currencies, an exchange rate based on the arithmetic mean of the spot market rates of each of these currencies recorded for a given period in rela ­ tion to the Community currencies referred to in the previous indent, and the aforesaid coefficient ; Whereas these exchange rates being those recorded on 2 July 1987 ;(') OJ No L 281 , 1 . 11 . 1975, p. 1 . (2) OJ No L 182, 3 . 7 . 1987. (3) OJ No L 164, 24 . 6 . 1985, p . 1 . (4) OJ No L 153, 13 . 6 . 1987, p . 1 . (*) OJ No L 281 , 1 . 11 . 1975, p . 34 . fà ´ OJ No L 182, 3 . 7 . 1987 . (u) OJ No L 281 , 1 . 11 . 1975, p. 22. (12) OJ No L 107, 19 . 4. 1984, p . 17 . (13) OJ No 128 , 27. 6 . 1967, p . 2536/67. H OJ No L 293, 10 . 11 . 1984, p . 11 . (15) OJ No 128 , 27. 6 . 1967, p. 2542/67. H OJ No L 61 , 1 . 3 . 1985, p . 4. 0 OJ No L 182, 3 . 7 . 1987 . (*) See page 37 of this Official Journal . 0 OJ No 128 , 27 . 6 . 1967, p. 2533/67 . (10) OJ No L 5, 10 . 1 . 1976 , p. 18 . 17) OJ No L 11 , 13 . 1 . 1987, p. 23. 4. 7. 87 Official Journal of the European Communities No L 185/39 set out in the Annex thereto ; whereas these levies are altered only where variations in the components used to calculate them have the effect of increasing or reducing them by 0,73 ECU or more, HAS ADOPTED THIS REGULATION : Whereas, pursuant to Article 272 of the Act of Accession, the Community as constituted at 31 December 1985 must, in the case of products specified in Article 1 of Regulation (EEC) No 2727/75 which are imported from Portugal, apply the arrangements which were applicable in respect of Portugal before accession ; whereas, under Article 4 of Council Regulation (EEC) No 3792/85 of 20 December 1985 laying down the arrangements applying to trade in agricultural products between Spain and Portugal ('), the same arrangements are to be applied in the case of Spain ; whereas a levy should be applied pursuant to those arrangements and whereas that levy should be calculated in accordance with the rules laid down in Regulation No 156/67/EEC and taking into account the situation with regard to market prices in Portugal ; and whereas, in the case of imports into Spain the accession compensatory amount applicable to trade between Spain and the Community as constituted at 31 December 1985 should be deducted from the levy ; Whereas it follows from applying all the provisions of the abovementioned Regulations that the levies should be as Article 1 The import levies to be charged on the products listed in Article 1 (a), (b) and (c) of Regulation (EEC) No 2727/75 shall be as set out in the Annex hereto. Article 2 This Regulation shall enter into force on 4 July 1987. This Regulation shall be binding in its entirety and directly applicable in all Member States . Done at Brussels , 3 July 1987 . For the Commission Frans ANDRIESSEN Vice-President (') OJ No L 367, 31 . 12. 1985, p. 7 . 4. 7. 87No L 185/40 Official Journal of the European Communities ANNEX to the Commission Regulation of 3 July 1987 fixing the import levies on cereals and on wheat or rye flour, groats and meal (ECU/tonne) CCT heading No Description Levies Portugal Third country 10.01 B I Common wheat, and meslin _ 177,89 10.01 B 11 Durum wheat 28,00 230,41 0 0 10.02 Rye 23,74 151,06 H 10.03 Barley 22,03 173,69 10.04 Oats 70,15 128,24 10.05 B Maize , other than hybrid maize for sowing 2,38 177,56 (2) (3) (8) 10.07 A Buckwheat 22,03 113,81 10.07 B Millet 22,03 123,75 (4) 10.07 C II Grain sorghum, other than hybrid Il sorghum for sowing 27,10 184,69 0 0 10.07 D I Triticale 0 0 10.07 D II Canary seed ; other cereals 22,03 30,1 1 0 11.01 A Wheat or meslin flour ” 262,05 11.01 B Rye flour 42,22 224,49 11.02 A I a) Durum wheat groats and meal 104,75 370,13 11.02 A lb) Common wheat groats and meal 104,97 283,02 (') Where durum wheat originating in Morocco is transported directly from that country to the Community, the levy is reduced by 0,60 ECU/tonne . (*) In accordance with Council Regulation (EEC) No 486/85 the levies are not applied to imports into the French overseas departments of products originating in the African , Caribbean and Pacific States or in the 'overseas countries and territories'. (3) Where maize originating in the ACP or OCT is imported into the Community the levy is reduced by 1,81 ECU/tonne . (*) Where millet and sorghum originating in the ACP or OCT is imported into the Community the levy is reduced by 50 % . (*) Where durum wheat and canary seed produced in Turkey are transported directly from that country to the Community, the levy is reduced by 0,60 ECU/tonne . 0 The import levy charged on rye produced in Turkey and transported directly from that country to the Commu ­ nity is laid down in Council Regulation (EEC) No 1180/77 and Commission Regulation (EEC) No 2622/71 . O The levy applicable to rye shall be charged on imports of the product falling within subheading 10.07 D I (triti ­ cale). O The levy referred to in Article 1 of Council Regulation (EEC) No 2913/86 shall be fixed on the basis of an invita ­ tion to tender in accordance with Commission Regulation (EEC) No 3140/86.

Title: Am asked to drive my friend's uninsured and unregistered car across the state. If pulled over, who gets the citation? What about accidents? Question:Friend bought a second car and wants me to help drive one of them across the state of California as he follows me in his other car. I worry about liability. The pertinent details are as follows: I have a driver license, vehicular registration and insurance for my own vehicle *which remain uninvolved completely in this scenario*. I take train to meet him. Friend has suspended license, neither car is registered, both cars have some basic ownership info pointing to him (pink slip). We will be caravaning. I'll be driving the longer-owned car (b/c it's automatic transmission, meaning he will be in the car that is excusably unregistered (bought < 1 mo ago)). Who gets citations for unregistered, uninsured? I assume if i crash, he won't dick keep driving, although the guy has no license so who knows, especially if we simply get pulled over. If i am in accident, at-fault let's say, who gets sued? This guy is my friend, but takes risks that i don't approve, can't afford, reputation to upkeep yadda yadda. If I incur citations, fines, or lawsuits, would a contract drafted between me and friend relieving me of any financial responsibility hold up? I refuse to involve my vehicular insurance in this unless I'm being terribly sued (i.e. i won't report friend's VIN to my policy provider before driving, or if simply pulled over). Answer #1: As the driver, you will receive the citation. Part of your licensing requires you to understand that you must ensure that any vehicle that you operate is safe and legal. Any tickets you receive would be valid and you would have no legal defense, regarding blaming your friend. There's no such thing as a contract that you can sign, that is enforceable, that makes someone else responsible for you illegal choices. If there is no insurance and you get into an accident that is your fault, you will be personally liable for any damages. So yeah, this is a terrible idea.

Exhibit 10.40 Dominion Resources, Inc. Non-Employee Directors’ Annual Compensation As of December 31, 2011   Annual Retainer    Amount Service as Director    $160,000 ($60,000 cash; $100,000 stock) Service as Audit Committee or Compensation, Governance and Nominating Committee Chair    $15,000 Service as Finance and Risk Oversight Committee Chair    $10,000 Service as Lead Director    $20,000 Meeting Fees    Board meetings    $2,000 per meeting Committee meetings    $2,000 per meeting

Title: Someone is threatening me after a tinder match Question:[deleted] Answer #1: Scam. What does (s)he want in return for not posting your private bits all over?

Exhibit 32.1 CERTIFICATION PURSUANT TO SECTION -OXLEY ACT OF 2002 (18 U.S.C. 1350) Pursuant to Section 906 of the Sarbanes-Oxley Act of (18 U.S.C. 1350), the undersigned officer of SwissINSO Holding Inc., a Delaware corporation (the "Company"), does hereby certify, to the best of such officer's knowledge and belief, that: (1)The Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2012 (the “Form 10-Q”) of the Company fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2)The information contained in the Form 10-Q fairly presents, in all materials respects, the financial condition and results of operations of the Company. Date:August 20, 2012 /s/ Rafic Hanbali Rafic Hanbali Chief Executive Officer (Principal Executive Officer) A signed original of this written statement required by Section 906 has been provided to SwissINSO Holding Inc. and will be retained by SwissINSO Holding Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

EX10.3 PERFORMANCE ADJUSTED RESTRICTED STOCK UNIT AWARD AGREEMENT THIS AGREEMENT is entered into and effective as of March 29, 2019 (the “Date of Grant”), by and between Sleep Number Corporation (the “Company”) and (the “Grantee”). The Company has adopted the Sleep Number Corporation Amended and Restated 2010 Omnibus Incentive Plan (the “Plan”) authorizing the grant of Restricted Stock Unit Awards to employees, non-employee directors and consultants of the Company and its Subsidiaries (as defined in the Plan). The Company desires to give the Grantee a proprietary interest in the Company and an added incentive to advance the interests of the Company by granting to the Grantee a Restricted Stock Unit Award pursuant to the Plan. Accordingly, the parties agree as follows: 1.Grant of Award Units and Performance Adjustments. 1.1Grant of Award Units  The Company hereby grants to the Grantee a Restricted Stock Unit Award (the “Award”) consisting of _______ units (the “Award Units”) that will be settled in shares of the Company’s common stock, par value $0.01 per share (the “Common Stock”), subject to the terms, conditions and restrictions set forth below and in the Plan.  Reference in this Agreement to the Award Units or the Adjusted Award Units (as defined in Section 1.2 of this Agreement) will be deemed to include the Dividend Proceeds (as defined in Section 3.3 of this Agreement) with respect to such Award Units or Adjusted Award Units as provided in Section 3.3 of this Agreement. 1.2Performance Adjustments.  The number of Award Units granted hereunder is subject to adjustment based on the Company’s level of achievement versus annual Net Sales growth goals and annual NOP growth goals for the 2019, 2020 and 2021 fiscal years (the “Performance Period”).  (For purposes of this Agreement, “NOP” will be defined as Net Operating Income). The Net Sales growth goals and NOP growth goals will be equally weighted. The annual Net Sales growth goals, the annual NOP growth goals and the corresponding performance adjustment multiples are as follows:   Annual Growth Goals over the Performance Period (2019 thru 2021 fiscal years) Payout – as Multiple of Award Units to Vest   Net Sales (50%) NOP (50%) Threshold 3% 4% 0.5X Target 5% 9% 1.0X Maximum 12% 20% 2.0X 1   The calculation of the “Adjusted Award Units” based on performance versus these growth goals will be determined as follows: (a)The Company’s actual annual growth will be measured for each of the two (2) performance goals and for each of the three (3) fiscal years of the Performance Period; (b)A payout multiple will be determined for each performance goal and for each fiscal year, based on interpolation between the performance goals in the foregoing table (performance relative to a performance goal that is below the threshold for a fiscal year will result in a payout multiple of zero (0) for that performance goal for that fiscal year); and (c)The mean, or average, of the resulting six (6) payout multiples will be applied to the number of Award Units to determine the number of “Adjusted Award Units.” For example, if the annual Net Sales growth rate in 2019 is 5%, the multiple for that performance goal for that year will be 1.0X; and if the annual NOP growth rate in 2019 is 14.5%, the multiple for that performance goal for that year will be 1.5X.  Similar multiples will be determined for each performance goal and for each of the following fiscal years.  The resulting six (6) payout multiples will then be averaged to determine the final payout multiple. This final payout multiple times the number of Award Units originally granted results in the number of Adjusted Award Units that would vest, subject to all of the other proration and vesting provisions set forth in this Agreement. In order to reduce the potential impact of volatility in NOP results, the annual NOP percentage growth rate will not in any case be determined from a base NOP level that is less than 50% of the 2018 NOP level.  For example, if 2019 NOP is less than 50% of the 2018 NOP level, then the annual NOP percentage growth rate for 2020 will be determined from a base of 50% of the 2018 NOP level, rather than from the actual 2019 NOP level. The “Adjusted Award Units” will be subject to reduction for failure to generate Return on Invested Capital (ROIC) that exceeds Weighted Average Cost of Capital by at least 300 basis points (“bps”), as outlined in the table below.  The measurement will be based on an average of the basis points difference between annual ROIC and WACC for the three fiscal years 2019, 2020, and 2021. ROIC Basis Points difference versus WACC (e.g., ROIC of 12% vs. WACC of 10% = +200 bps) Reduction to Final Payout 0 bps or lower (i.e., ROIC at or below WACC) -20% of target award 1 to 99 bps -15% of target award 100 to 199 bps -10% of target award 200 to 299 bps -5% of target award 300 bps or greater No reduction   2   For the purpose of this calculation, ROIC shall be defined as detailed in the annual 10-K disclosure. For the purpose of this calculation, WACC shall be defined as detailed in Attachment A. The Company’s actual performance relative to the performance goals set forth above and the calculation of the Adjusted Award Units shall be determined by the Management Development and Compensation Committee (the “Committee”) of the Board of Directors following the conclusion of the Performance Period.  The Committee’s determination shall be final and conclusive for all purposes under this Agreement.  The number of Award Units resulting after adjustment as described above will be referred to herein as the “Adjusted Award Units.” 1.3Restrictive Covenant Agreement.  In consideration for the grant of this Award, Grantee agrees to execute and be bound by the terms of the Employee Inventions, Confidentiality, Non-Compete and Mutual Arbitration Agreement (the “Non-Compete Agreement”) attached hereto and Grantee acknowledges that Grantee’s failure to execute the Non-Compete Agreement will cause this Award to automatically terminate and be forfeited without any further action. 2.Grant Restriction. 2.1Restriction and Forfeiture.  The Grantee’s right to the Award Units or the Adjusted Award Units and the shares of Common Stock issuable under the Award Units or Adjusted Award Units will be subject to the Grantee remaining in continuous employment or service with the Company or any Subsidiary for a period of three (3) years (the “Restriction Period”) following the Date of Grant; provided, however, that such employment/service period restrictions (the “Restrictions”) will lapse and terminate prior to end of the Restriction Period as set forth in Section 2.2 below (or as otherwise set forth in the Plan for any circumstance not contemplated by the terms of Section 2.2). 2.2Death, Disability or other Termination of Employment or Service. (a)Death.  In the event of the Grantee’s death during the Restriction Period and prior to the Grantee’s termination of employment or other service, the Restrictions applicable to the Award Units or Adjusted Award Units will immediately lapse and terminate and the shares of Common Stock to be issued in settlement of the Award Units will be issued within 90 days of the Grantee’s death, with the performance adjustment determination related to any incomplete fiscal year(s) within the Performance Period deemed to be satisfied at the target level, with no reduction based on ROIC performance. (b)Disability.  In the event of the Grantee’s Disability (as defined by the Plan) during the Restriction Period and prior to the Grantee’s termination of employment or other service, the Grantee will become fully vested in the Award Units pending completion of the Performance Period and final determination of the Adjusted Award Units.  The shares of Common Stock to be issued in settlement of the Adjusted Award Units will be retained and held by the Company pending the final determination of the Adjusted Award Units and will be issued within 90 days of the end of the Restriction Period. 3   (c)Termination Due to Retirement. (i)In the event that the Grantee’s employment or other service with the Company and all Subsidiaries is terminated by reason of the Grantee’s retirement at or beyond age fifty-five (55) and the Grantee has five (5) or more years of service with the Company prior to retirement, the Grantee will become vested in the Award Units pro rata based on the number of calendar days elapsed in the Restriction Period as of the date of retirement (e.g., If the Grantee was granted 1,200 Award Units, and retirement occurs 730 calendar days into the 1,095 calendar days vesting period, then the Grantee will become vested with respect to an aggregate of 800 Award Units and the remaining 400 Award Units will terminate immediately without notice of any kind and will be forfeited) pending completion of the Performance Period and final determination of the Adjusted Award Units. (ii)In the event that the Grantee’s employment or other service with the Company and all Subsidiaries is terminated by reason of the Grantee’s retirement prior to age fifty-five (55) or the Grantee has fewer than five (5) years of service with the Company prior to retirement, all rights of the Grantee under the Plan and this Agreement relating to all Award Units with respect to which the Restrictions have not lapsed will terminate immediately without notice of any kind and will be forfeited. (iii)In the event that the Grantee’s employment or other service with the Company and all Subsidiaries is terminated by reason of the Grantee’s retirement at or beyond age sixty (60) and the Grantee has five (5) or more years of service with the Company prior to retirement, the Grantee will become fully vested in the Award Units pending completion of the Performance Period and final determination of the Adjusted Award Units if the following criteria are met: a) Grantee provides written notice of Grantee’s intention to retire one year before Grantee’s actual retirement date, and b) Grantee’s actual retirement date is at least one year after the Date of Grant. (iv)The shares of Common Stock to be issued in settlement of the Adjusted Award Units pursuant to paragraphs (i) or (iii) above will be retained and held by the Company pending the final determination of the Adjusted Award Units and will be issued within 90 days of the end of the Restriction Period. (d)Termination for Reasons other than Death, Disability or Retirement.  In the event the Grantee’s employment or other service with the Company and all Subsidiaries is terminated for any reason other than death, Disability or retirement as provided above, or the Grantee is in the employ or service of a Subsidiary and the Subsidiary ceases to be a Subsidiary of the Company (unless the Grantee continues in the employ or service of the Company or another Subsidiary), all rights of the Grantee under this Agreement relating to Award Units with respect to which the Restrictions have not lapsed will terminate immediately without notice of any kind, and will be forfeited. 4   3.Issuance of Shares. 3.1Timing.  Vested Award Units or Adjusted Award Units shall be converted to shares of Common Stock on a one-for-one basis and such shares shall be issued as soon as reasonably possible, but not more than 90 days, after the end of the Restriction Period, subject to the provisions set forth above applicable to vesting events that occur prior to the end of the Restriction Period. 3.2Limitations on Transfer.  Award Units or Adjusted Award Units will not be assignable or transferable by the Grantee, either voluntarily or involuntarily, and may not be subjected to any lien, directly or indirectly, by operation of law or otherwise.  Any attempt to transfer, assign or encumber the Award Units or Adjusted Award Units other than in accordance with this Agreement and the Plan will be null and void and will void the Award, and all Award Units or Adjusted Award Units for which the Restrictions have not lapsed will be forfeited and immediately returned to the Company. 3.3Dividends and Other Distributions.  The Award Units are being granted with an equal number of dividend equivalents.  Accordingly, the Grantee is entitled to receive an additional Award Unit with a value equal to any dividends or distributions (including, without limitation, any cash dividends, stock dividends or dividends in kind, the proceeds of any stock split or the proceeds resulting from any changes or exchanges described in Section 6 of this Agreement, all of which are referred to herein collectively as the “Dividend Proceeds”) that are paid or payable with respect to one share of Common Stock for each Award Unit which will be subject to the same rights, restrictions and performance adjustments under this Agreement as the Award Units to which such dividends or distributions relate.  The number of additional Award Units to be received as divided equivalents for each Award Unit shall be determined by dividing the cash dividend per share by the Fair Market Value of one share of Common Stock on the dividend or distribution payment date.  All such additional Award Units received as dividend equivalents will be subject to the same restrictions and performance adjustments as the Award Units to which such Dividend Proceeds relate. 3.4Fractional Shares.  The Grantee acknowledges that the Company will not issue or deliver fractional shares of Common Stock under this Agreement.  All fractional shares will be rounded up to the nearest whole share. 4.Rights of Grantee. 4.1Employment or Service.  Nothing in this Agreement will interfere with or limit in any way the right of the Company or any Subsidiary to terminate the employment or service of the Grantee at any time, nor confer upon the Grantee any right to continue in the employment or service with the Company or any Subsidiary at any particular position or rate of pay or for any particular period of time. 4.2Rights as a Shareholder.  The Grantee will have no rights as a shareholder until the Grantee becomes the holder of record of shares of Common Stock issued in settlement of the Adjusted Award Units. As soon as practicable after the satisfaction of any conditions to the effective issuance of shares of Common Stock in settlement of the Adjusted Award Units, the Grantee will be recorded on the books of the Company as the owner of such shares, and the 5   Company will issue one or more duly issued and executed stock certificates evidencing the shares. 5.Withholding Taxes.  The Company is entitled to (a) withhold and deduct from future wages of the Grantee (or from other amounts that may be due and owing to the Grantee from the Company), or to withhold from the shares of Common Stock that would otherwise be determined to be paid to the Company out of Dividend Proceeds, or make other arrangements for the collection of all amounts the Company reasonably determines are required to satisfy any federal, state or local withholding and employment-related tax requirements attributable to the receipt of the Award, the receipt of dividends or distributions on Award Units or Adjusted Award Units, or the lapse or termination of the Restrictions applicable to Award Units or Adjusted Award Units, or (b) require the Grantee promptly to remit the amount of such withholding to the Company.  In the event that the Company is unable to withhold such amounts, for whatever reason, the Grantee agrees to pay to the Company an amount equal to the amount the Company would otherwise be required to withhold under federal, state or local law. 6.Adjustments.  In the event of any reorganization, merger, consolidation, recapitalization, liquidation, reclassification, stock dividend, stock split, combination of shares, rights offering or divestiture (including a spin-off) or any other change in the corporate structure or shares of the Company, the Committee (or, if the Company is not the surviving corporation in any such transaction, the board of directors of the surviving corporation), in order to prevent dilution or enlargement of the rights of the Grantee, will make appropriate adjustment (which determination will be conclusive) as to the number and kind of securities or other property (including cash) subject to this Award. 7.Subject to Plan.  The Award and the Award Units granted pursuant to this Agreement have been granted under, and are subject to the terms of, the Plan.  The terms of the Plan are incorporated by reference in this Agreement in their entirety. In addition, the Grantee, by execution hereof, acknowledges having received a copy of the Plan.  The provisions of this Agreement will be interpreted as to be consistent with the Plan and any ambiguities in this Agreement will be interpreted by reference to the Plan.  In the event that any provision of this Agreement is not authorized by or is inconsistent with the terms of the Plan, the terms of the Plan will prevail. 8.Forfeiture, Clawback or Recoupment.  In addition to the other rights of the Committee under the Plan, if Grantee is determined by the Committee, acting in its sole discretion, to have taken any action that would constitute Adverse Action or Cause as defined under the Plan, or that is subject to any other or additional “clawback”, forfeiture or recoupment policy adopted by the Company, either prior to or after the date of this Agreement, or to have violated the Non-Compete Agreement, as defined in Section 1.3, (a) all of Grantee’s rights under the Plan and any agreements evidencing an Award granted under the Plan, including this Agreement evidencing this Award, then held by Grantee shall terminate and be forfeited upon the effectiveness of such Committee action, and without notice of any kind, and (b) the Committee in its sole discretion may require Grantee to surrender and return, transfer or assign to the Company all or any portion of the shares of Common Stock received, or to disgorge all or any profits or any other economic value (however defined by the Committee) made or realized by Grantee or Grantee’s affiliate, during the period beginning one (1) year prior to your termination of employment or service with the Employer, in connection with any Awards granted under the Plan, including this Award, or any shares of Common Stock issued upon the exercise or vesting of any Awards, including this 6   Award.  This Section 8 shall not apply and shall automatically become void ab initio following a Change of Control. 9.Miscellaneous. 9.1Binding Effect.  This Agreement will be binding upon the heirs, executors, administrators and successors of the parties to this Agreement. 9.2Governing Law.  This Agreement and all rights and obligations under this Agreement will be construed in accordance with the Plan and governed by the laws of the State of Minnesota, without regard to conflicts of laws provisions.  Any legal proceeding related to this Agreement will be brought in an appropriate Minnesota court and the parties to this Agreement consent to the exclusive jurisdiction of the court for this purpose. 9.3Entire Agreement.  This Agreement and the Plan set forth the entire agreement and understanding of the parties to this Agreement with respect to the grant and vesting of this Award and the administration of the Plan and supersede all prior agreements, arrangements, plans and understandings relating to the grant and vesting of this Award and the administration of the Plan. 9.4Amendment and Waiver.  Other than as provided in the Plan, this Agreement may be amended, waived, modified or canceled only by a written instrument executed by the parties to this Agreement or, in the case of a waiver, by the party waiving compliance. 9.5Code Section 409A.  Payment of amounts under this Agreement are intended to comply with the requirements of Code section 409A and this Agreement shall in all respects be administered and construed to give effect to such intent.  The Committee in its sole discretion may accelerate or delay distribution of any shares in payment of amounts due under this Agreement if and to the extent allowed under Code section 409A.   The parties hereto have executed this Agreement effective the day and year first above written. SLEEP NUMBER CORPORATION [gvfplym3k1bb000001.jpg] Shelly Ibach President and CEO 7   By execution of this Agreement,GRANTEE the Grantee acknowledges having received a copy of the Plan. (Signature) (Name and Address) ___________________________________ 8  

American Funds Mortgage Fund One Market, Steuart Tower Suite 2000 San Francisco, California 94105 Phone (415) 421-9360 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION -OXLEY ACT OF 2002 JOHN H. SMET, President and Principal Executive Officer, and BRIAN C. JANSSEN, Treasurer and Principal Financial Officer of American Funds Mortgage Fund (the "Registrant"), each certify to the best of his knowledge that: 1) The Registrant's periodic report on Form N-CSR for the period ended August 31, 2012 (the "Form N-CSR") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and 2) The information contained in the Form N-CSR fairly presents, in all material respects, the financial condition and results of operations of the Registrant. Principal Executive Officer Principal Financial Officer AMERICAN FUNDS MORTGAGE FUND AMERICAN FUNDS MORTGAGE FUND /s/ John H. Smet /s/ Brian C. Janssen John H. Smet, President Brian C. Janssen, Treasurer Date: October 31, 2012 Date: October 31, 2012 A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to AMERICAN FUNDS MORTGAGE FUND and will be retained by AMERICAN FUNDS MORTGAGE FUND and furnished to the Securities and Exchange Commission (the "Commission") or its staff upon request. This certification is being furnished to the Commission solely pursuant to 18 U.S.C. Section 1350 and is not being filed as part of the Form N-CSR filed with the Commission.

EXHIBIT 10.5 AMENDMENT TO THAT TECHNOLOGY PURCHASE AGREEMENT QUADRA MARKETING CORP. and QUADRA ENERGY SYSTEMS INC 06/01/2009 This Amendment Agreement sets out the terms and conditions governing the amendment to the Technology Purchase Agreement for the sale and transfer of a Pyrolsis System of an Energy Conversion and Waste Disposal Technology from QUADRA MARKETING CORP to QUADRA ENERGY SYSTEMS INC. AMENDMENT AGREEMENT TO THAT TECHNOLOGY PURCHASE AGREEMENT DATED THE 30TH DAY OF APRIL 2009 THIS AMENDMENT AGREEMENT ("Amending Agreement") is made and entered into as of the 1st day of June, 2009, between QUADRA MARKETING CORP. of No. 5 New Road, P.O. Box 388 Belize City, Belize ("Seller"), and QUADRA ENERGY SYSTEMS INC.(“Purchaser”) WITNESSETH: WHEREAS the Seller and the Purchaser entered into a Technology Purchase Agreement dated the 30th day of April 2009 (the “Agreement”). AND WHEREAS the Seller and Purchaser are desirous of amending certain terms of the Agreement. NOW THEREFORE, in consideration of the foregoing and of the mutual promises, covenants, and conditions set forth below, the parties hereby agree to amend the Agreement as follows: 1.      Paragraph 5(b) which provides as follows:     “The Purchase Price for the acquisition of the Technology shall be the sum One Million Three Hundred and Fifty ($1,350,000 USD) which purchase price shall be paid by the Buyer’s parent company, a Nevada corporation, through the issuance to the Seller, Three Million (3,000,000) common shares of the Buyer, at a deemed price of $0.45 per share, which shares shall be deemed fully paid and non-assessable and shall bear a restrictive legend endorsed upon the shares restricting the transfer or selling of the shares for such hold period as required by the applicable securities laws. The delivery of the shares to the Seller shall be done concurrently at the date of closing.”     is hereby deleted and the share certificate representing the common shares issued to the Seller returned to the Buyer and the share certificate cancelled.   2.      Paragraph 5(a) which provides as follows:     “A Royalty Fee. The Royalty Fee for purposes of this Agreement shall be an amount equal to Five Per Cent (5%) of the Buyer’s Gross Revenues as set out in the Buyer’s audited financial statements prepared in accordance with the Generally Accepted Accounting Principles (GAAP) at the end of each fiscal quarter.”     is hereby deleted and the following is inserted in the place and stead thereof so that 5(a) of the Agreement now reads as follows:   2 amount equal to Ten Per Cent (10%) of the Buyer’s Gross Revenues as set out in quarter.”   3.      All other terms and conditions of the Agreement shall remain unamended and shall remain in full force and effect. Dated at the City of Las Vegas, Nevada, this 1st day of June 2009. QUADRA MARKETING CORP. By: _________________________________ QUADRA ENERGY SYSTEMS INC. By: ________________________________ 3

  Exhibit 10.36 THE GREENBRIER COMPANIES Amendment No. 1 to 2005 Stock Incentive Plan      Pursuant to Section 15.2 of the 2005 Stock Incentive Plan (the “Plan”) of The Greenbrier Companies (the “Company”), the Board of Directors of the Company has amended the Plan as follows:   1.   Director Restricted Shares. Section 6.1 of the Plan is amended to increase the amount of the annual automatic award of restricted stock to non-employee directors from $42,500 in value of stock to $60,000 per year, effective as of January 2006.     2.   Payment of Par Value for Shares. The Plan is amended to delete the requirement that the par value for shares purchased under the Plan be paid in cash. Specifically, Section 7.5 is amended to delete the second sentence of that Section, and the second sentence of Section 9.2 is amended by deleting the phrase “..., for the amount in excess of the par value of such newly issued Restricted Shares,...”.     3.   Effective Date. Except as otherwise provided herein, this Amendment No. 1 shall be effective as of the date of approval by the Board of Directors. Except as hereby amended, the Plan Approved by the Board of Directors June 30, 2005

Exhibit 31.1 CERTIFICATION PURSUANT TO RULES 13a-14(a) and 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934 I, Andre Luiz Nascimento Moreira, certify that: 1.I have reviewed this quarterly report on Form 10-Q of Alarming Devices, Inc. (the “Registrant”); 2.Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3.Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4.I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant, and we have: a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; 5.I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonable likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. Date:February 22, 2011 /s/Andre Luiz Nascimento Moreira [Missing Graphic Reference] Name:Andre Luiz Nascimento Moreira Title: President, Secretary/ Treasurer, Chief Financial Officer and Chairman of the Board of Director (Principal Executive Officer and Principal Accounting Officer)

EXHIBIT 99.1 Grant Park Fund Weekly Commentary For the Week Ended March 5, 2010 March 5, 2010 Weekly ROR1 Month-to-Date ROR1 Year-to-Date ROR1 Class A Units 1.2% 1.2% -6.3% Class B Units 1.2% 1.2% -6.4% Legacy 1 Class Units 1.2% 1.2% -5.9% Legacy 2 Class Units 1.1% 1.2% -5.9% GAM 1 Class Units 0.9% 1.0% -6.2% GAM 2 Class Units 0.9% 1.0% -6.2% GAM 3 Class Units 0.9% 1.0% -6.5% S&P 500 Total Return Index2 3.1% 3.1% 2.5% Barclays Capital U.S. Long Government Index2 -1.2% -1.2% 1.6% 1 Subject to independent verification. 2 Index is unmanaged and is not available for direct investment.Please see Indices Overview (below) for more information.Weekly RORs are calculated using data acquired through Bloomberg. Sector Commentary Agriculturals/Softs Sector/Market Price Action Cause Grains markets Decrease Weak forecasts for U.S. exports caused by U.S. dollar strength Corn Decrease Reports showing large corn yields from Argentine farmers Soybeans Decrease Sharp reduction in bio-diesel production in January Grant Park’s longer-term trading advisors are predominantly long the agriculturals/softs sector.Grant Park’s shorter-term trading advisors are also predominantly long the sector. Currencies Sector/Market Price Action Cause Japanese Yen Decrease Better-than-expected U.S. payroll estimates for February Great British Pound Decrease Uncertainty surrounding the outcome of the upcoming British election Australian Dollar Increase Strong economic data from the region Grant Park’s longer-term trading advisors are predominantly short the currency sector.Grant Park’s shorter-term trading advisors are also predominantly short the sector. Energy Sector/Market Price Action Cause Crude Oil Increase Optimism for the U.S. economy following Friday’s jobs report Natural Gas Decrease Energy Information Agency reports stating that the natural gas surplus has increased Grant Park’s longer-term trading advisors are predominantly long the energy sector, as are Grant Park’s shorter-term trading advisors. ALL PERFORMANCE REPORTED IS NET OF FEES AND EXPENSES. PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. FUTURES TRADING INVOLVES A HIGH DEGREE OF RISK AND IS NOT SUITABLE FOR ALL INVESTORS. THIS DOES NOT CONSTITUTE AN OFFER OF ANY SECURITY FOR SALE.OFFERING BY PROSPECTUS ONLY. INFORMATION IN THIS COMMENTARY IS DRAWN FROM VARIOUS SOURCES THAT ARE DEEMED TO BE RELIABLE.

Form of Warrants NEITHER THIS SECURITY NOR THE SECURITIES FOR WHICH THIS SECURITY IS EXERCISABLE HAVE 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.THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES. COMMON STOCK PURCHASE WARRANT TAPIMMUNE, INC. Warrant Shares: []Initial Exercise Date: [] THIS COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies that, for value received, [] (the “Holder”) is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after the date hereof (the “Initial Exercise Date”) and on or prior to the close of business on the fifth (5th) anniversary of the Initial Exercise Date (the “Termination Date”) but not thereafter, to subscribe for and purchase from TapImmune, Inc., a Nevada corporation (the “Company”), up to [] shares (the “Warrant Shares”) of Common Stock.The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price, as defined in Section 1(b). Section 1.Exercise. a)Exercise of Warrant.Exercise of the purchase rights represented by this Warrant may be made, in whole or in part, at any time or times on or after the Initial Exercise Date and on or before the Termination Date by delivery to the Company (or such other office or agency of the Company as it may designate by notice in writing to the registered Holder at the address of the Holder appearing on the books of the Company) of a duly executed facsimile copy of the Notice of Exercise Form annexed hereto.Within three (3) Trading Days following the date of exercise as aforesaid, the Company shall have received payment of the aggregate Exercise Price of the shares thereby purchased by wire transfer or cashier’s check drawn on a United States bank.Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company until the Holder has purchased all of the Warrant Shares available hereunder and the Warrant has been exercised in full, in which case, the Holder shall surrender this Warrant to the Company for cancellation within three (3) Trading Days of the exercise in full as aforesaid.Partial exercises of this Warrant resulting in purchases of a portion of the total number of Warrant Shares available hereunder shall have the effect of lowering the outstanding number of Warrant Shares purchasable hereunder in an amount equal to the applicable number of Warrant Shares purchased.The Holder and the Company shall maintain records showing the number of Warrant Shares purchased and the date of such purchases.The Company shall deliver any objection to any Notice of Exercise Form within ten (10) Business Days of receipt of such notice.In the event of any dispute or discrepancy, the records of the Holder shall be controlling and determinative in the absence of manifest error. The Holder and any assignee, by acceptance of this Warrant, acknowledge and agree that, by reason of the provisions of this paragraph, following the purchase of a portion of the Warrant Shares hereunder, the number of Warrant Shares available for purchase hereunder at any given time may be less than the amount stated on the face hereof. b)Exercise Price.The exercise price per share of the Common Stock under this Warrant shall be twenty-five-cents ($0.25 USD), subject to adjustment hereunder (the “Exercise Price”). c)Forced Exercise of Warrant.On any date on which (i) the average of the VWAP (as defined below) for the Company’s common stock over the prior ten (10) trading days is greater than fifty-cents ($0.50 USD) (as such price may be adjusted in a manner to correspond with the adjustment of the Exercise Price pursuant to Section 3), (ii) the average daily dollar volume sold over the prior ten (10) trading days is greater than twenty-five-thousand-dollars ($25,000 USD) and (iii) a registration statement covering all of the Warrant Shares has been declared effective by the U.S. Securities and Exchange Commission and remains effective, then the Company, at its sole discretion, may force the exercise of the Warrant, in whole or in part by notifying the Holder (in the manner set out in Section 4(h) hereunder) of the amount of the Warrant that it must exercise and the amount due hereunder. Within ten (10) business days of the delivery of the Notice under this Section 1(c), the Holder shall deliver the amount due as set out in the notice, provided that if condition (iii) in this Section 1(c) is no longer met, the forced exercise under this Section 1(c) is no longer valid and such payment need not be made.Failure to provide such funds by the eleventh (11th) business day after delivery of the Notice under this Section 1(c) shall result in an immediate two percent (2%) increase in the Exercise Price, and if such funds remain unpaid, there shall be an additional two percent (2%) increase each month thereafter.If the Company has not received payments due under this Section 1(c) after the tenth (10th) business day and any of the conditions (i), (ii) or (iii) in this Section 1(c) ceases to be true, the forced exercise under this Section 1(c) shall remain in full force.Upon payment under this Section 1(c), the Company shall provide the Holder with the Warrant Shares pursuant to Section 1(d). 1 “VWAP” means, as of any date, the dollar volume-weighted average price for the Company’s common stock on FINRA’s Over-the-Counter Bulletin Board or any U.S. national exchange on which the Company’s common stock is listed during the period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York time, as reported by Bloomberg through its “Volume at Price” function or, if the foregoing does not apply, the dollar volume-weighted average price of such security in the over-the-counter market on the electronic bulletin board for such security during the period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York time, as reported by Bloomberg, or, if no dollar volume-weighted average price is reported for such security by Bloomberg for such hours, the average of the highest closing bid price and the lowest closing ask price of any of the market makers for such security as reported in the “pink sheets” by Pink Sheets LLC (formerly the National Quotation Bureau, Inc.). d) Mechanics of Exercise. i.Delivery of Certificates Upon Exercise.Certificates for shares purchased hereunder shall be transmitted by the Transfer Agent to the Holder by crediting the account of the Holder’s prime broker with the Depository Trust Company through its Deposit/Withdrawal at Custodian (“DWAC”) system if the Company is then a participant in such system and there is an effective Registration Statement covering the resale of the Warrant Shares by the Holder the date that is two (2) Trading Days after the later of (A) the delivery to the Company of the Notice of Exercise Form and (B)payment of the aggregate Exercise Price as set forth above (such date, the “Warrant Share Delivery Date”). 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 as aforesaid, so long as payment to the Company of the Exercise Price and all taxes required to be paid by the Holder, if any, pursuant to Section 1(d)(vi) prior to the issuance of such shares, has been made in accordance with the terms of this Warrant.If the Company fails for any reason to deliver to the Holder certificates evidencing the Warrant Shares subject to a Notice of Exercise by the Warrant Share Delivery Date, the Company shall pay to the Holder, in cash, as liquidated damages and not as a penalty, for each $2,000 of Warrant Shares subject to such exercise (based on the VWAP of the Common Stock on the date of the applicable Notice of Exercise), $10 per Trading Day for each Trading Day after such Warrant Share Delivery Date until such certificates are delivered or Holder rescinds such exercise. 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. 2 iii.Rescission Rights.If the Company fails to cause the Transfer Agent to transmit to the Holder a certificate or the certificates representing the Warrant Shares pursuant to Section 1(d)(i) by the Warrant Share Delivery Date, then, the Holder will have the right to rescind such exercise. iv.No Fractional Shares or Scrip.No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant.As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such exercise, the Company shall, at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Exercise Price or round up to the next whole share. v.Charges, Taxes and Expenses.Issuance of certificates for Warrant Shares shall be made without charge to the Holder for any issue or transfer tax or other incidental expense in respect of the issuance of such certificate, all of which taxes and expenses shall be paid by the Company, and such certificates shall be issued in the name of the Holder or in such name or names as may be directed by the Holder; provided, however, that in the event certificates for Warrant Shares are to be issued in a name other than the name of the Holder, this Warrant when surrendered for exercise shall be accompanied by the Assignment Form attached hereto duly executed by the Holder and the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse it for any transfer tax incidental thereto. vi.Closing of Books.The Company will not close its stockholder books or records in any manner which prevents the timely exercise of this Warrant, pursuant to the terms hereof. e) Holder’s Exercise Limitations.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 1 or otherwise, to the extent that after giving effect to such issuance after exercise as set forth on the applicable Notice of Exercise, the Holder (together with the Holder’s Affiliates, and any other Persons acting as a group together with the Holder or any of the Holder’s Affiliates), 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 the Holder and its Affiliates shall include the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which would be issuable upon (i) exercise of the remaining, nonexercised portion of this Warrant beneficially owned by the Holder or any of its Affiliates and (ii) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation, any otherCommon Stock 3 Equivalents) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its Affiliates. Except as set forth in the preceding sentence, for purposes of this Section 1(e), 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 the Holder that the Company is not representing to the Holder that such calculation is in compliance with Section 13(d) of the Exchange Act and the Holder is solely responsible for any schedules required to be filed in accordance therewith.To the extent that the limitation contained in this Section 1(e) applies, the determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates) and of which portion of this Warrant is exercisable shall be in the sole discretion of the Holder, and the submission of a Notice of Exercise shall be deemed to be the Holder’s determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates) and of which portion of this Warrant is exercisable, in each case subject to the Beneficial Ownership 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 1(e), 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 (A) the Company’s most recent periodic or annual report filed with the Commission, as the case may be, (B) a more recent public announcement by the Company or (C) a more recent written notice by the Company or the 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 Trading Days confirm orally and in writing to the 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 the 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 Holder, upon not less than 61 days’ prior notice to the Company, may increase or decrease the Beneficial Ownership Limitation provisions of this Section 1(e), provided that the Beneficial Ownership Limitation in no event exceeds 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 held by the Holder and the provisions of this Section 1(e) shall continue to apply.Any such increase or decrease will not be effective until the 61st day after such notice is delivered to the Company.The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 1(e) 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. 4 Section 2.Certain Adjustments. a)Stock Dividends and Splits. If the Company, at any time while this Warrant is outstanding: (i) pays a stock dividend or otherwise makes a distribution or distributions on shares of its Common Stock or any other equity or equity equivalent securities payable in shares of Common Stock (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company upon exercise of this Warrant), (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares or (iv) issues by reclassification of shares of the Common Stock any shares of capital stock of the Company, then in each case the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event, and the number of shares issuable upon exercise of this Warrant shall be proportionately adjusted such that the aggregate Exercise Price of this Warrant shall remain unchanged.Any adjustment made pursuant to this Section 2(a) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification. b)Pro Rata Distributions.If the Company, at any time while this Warrant is outstanding, shall distribute to all holders of Common Stock (and not to the Holders) evidences of its indebtedness or assets (including cash and cash dividends) or rights or warrants to subscribe for or purchase any security other than the Common Stock (which shall be subject to Section 2(b)), then in each such case the Exercise Price shall be adjusted by multiplying the Exercise Price in effect immediately prior to the record date fixed for determination of stockholders entitled to receive such distribution by a fraction of which the denominator shall be the VWAP determined as of the record date mentioned above, and of which the numerator shall be such VWAP on such record date less the then per share fair market value at such record date of the portion of such assets or evidence of indebtedness or rights or warrants so distributed applicable to one outstanding share of the Common Stock as determined by the Board of Directors in good faith.In either case the adjustments shall be described in a statement provided to the Holder of the portion of assets or evidences of indebtedness so distributed or such subscription rights applicable to one share of Common Stock.Such adjustment shall be made whenever any such distribution is made and shall become effective immediately after the record date mentioned above. 5 c)Fundamental Transaction. If, at any time while this Warrant is outstanding, (i) the Company, directly or indirectly, in one or more related transactions effects any merger or consolidation of the Company with or into another Person, (ii) the Company, directly or indirectly, effects any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially all of its assets in one or a series of related transactions, (iii) any, direct or indirect, purchase offer, tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which holders of Common Stock are permitted to sell, tender or exchange their shares for other securities, cash or property and has been accepted by the holders of 50% or more of the outstanding Common Stock, (iv) the Company, directly or indirectly, in one or more related transactions effects any reclassification, reorganization or recapitalization of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property, (v) the Company, directly or indirectly, in one or more related transactions consummates a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with another Person whereby such other Person acquires more than 50% of the outstanding shares of Common Stock (not including any shares of Common Stock held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock or share purchase agreement or other business combination) (each a “Fundamental Transaction”), then, upon any subsequent exercise of this Warrant, the Holder shall have the right to receive, for each Warrant Share that would have been issuable upon such exercise immediately prior to the occurrence of such Fundamental Transaction, at the option of the Holder (without regard to any limitation in Section 1(e) on the exercise of this Warrant), the number of shares of Common Stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and any additional consideration (the “Alternate Consideration”) receivable as a result of such Fundamental Transaction by a holder of the number of shares of Common Stock for which this Warrant is exercisable immediately prior to such Fundamental Transaction (without regard to any limitation in Section 1(e) on the exercise of this Warrant).For purposes of any such exercise, the determination of the Exercise Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Exercise Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration.If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any exercise of this Warrant following such Fundamental Transaction.Notwithstanding anything to the contrary, in the event of a Fundamental Transaction that is (1) an all cash transaction, (2) a “Rule 13e-3 transaction” as defined in Rule 13e-3 under the Exchange Act, or (3) a Fundamental Transaction involving a person or entity not traded on a national securities exchange, the Company or any Successor Entity (as defined below) shall, at the Holder’s option, exercisable at any time concurrently with, or within 30 days after, the consummation of the Fundamental Transaction, purchase this Warrant from the Holder by paying to the Holder an amount of 6 cash equal to the Black Scholes Value of the remaining unexercised portion of this Warrant on the date of the consummation of such Fundamental Transaction.“Black Scholes Value” means the value of this Warrant based on the Black and Scholes Option Pricing Model obtained from the “OV” function on Bloomberg, L.P. (“Bloomberg”) determined as of the day of consummation of the applicable Fundamental Transaction for pricing purposes and reflecting (A) a risk-free interest rate corresponding to the U.S. Treasury rate for a period equal to the time between the date of the public announcement of the applicable Fundamental Transaction and the Termination Date, (B) an expected volatility equal to the greater of 100% and the 100 day volatility obtained from the HVT function on Bloomberg as of the Trading Day immediately following the public announcement of the applicable Fundamental Transaction, (C) the underlying price per share used in such calculation shall be the sum of the price per share being offered in cash, if any, plus the value of any non-cash consideration, if any, being offered in such Fundamental Transaction and (D) a remaining option time equal to the time between the date of the public announcement of the applicable Fundamental Transaction and the Termination Date.The Company shall cause any successor entity in a Fundamental Transaction in which the Company is not the survivor (the “Successor Entity”) to assume in writing all of the obligations of the Company under this Warrant and the other Transaction Documents in accordance with the provisions of this Section 2(e) pursuant to written agreements in form and substance reasonably satisfactory to the Holder and approved by the Holder (without unreasonable delay) prior to such Fundamental Transaction and shall, at the option of the holder of this Warrant, deliver to the Holder in exchange for this Warrant a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to this Warrant which is exercisable for a corresponding number of shares of capital stock of such Successor Entity (or its parent entity) equivalent to the shares of Common Stock acquirable and receivable upon exercise of this Warrant (without regard to any limitations on the exercise of this Warrant) prior to such Fundamental Transaction, and with an exercise price which applies the exercise price hereunder to such shares of capital stock (but taking into account the relative value of the shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock, such number of shares of capital stock and such exercise price being for the purpose of protecting the economic value of this Warrant immediately prior to the consummation of such Fundamental Transaction), and which is reasonably satisfactory in form and substance to the Holder. Upon the occurrence of any such Fundamental Transaction, the Successor Entity shall succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction, the provisions of this Warrant and the other Transaction Documents referring to the “Company” shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shall assume all of the obligations of the Company under this Warrant and the other Transaction Documents with the same effect as if such Successor Entity had been named as the Company herein. d)Calculations. All calculations under this Section 2 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this Section 2, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the sum of the number of shares of Common Stock (excluding treasury shares, if any) issued and outstanding. 7 e)Notice to Holder. i.Adjustment to Exercise Price. Whenever the Exercise Price is adjusted pursuant to any provision of this Section 2, the Company shall promptly mail to the Holder a notice setting forth the Exercise Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment. ii.Notice to Allow Exercise by Holder. If (A) the Company shall declare a dividend (or any other distribution in whatever form) on the Common Stock, (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock, (C) the Company shall authorize the granting to all holders of the Common Stock rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights, (D) the approval of any stockholders of the Company shall be required in connection with any reclassification of the Common Stock, any consolidation or merger to which the Company is a party, any sale or transfer of all or substantially all of the assets of the Company, or any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property, or (E) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company, then, in each case, the Company shall cause to be mailed to the Holder at its last address as it shall appear upon the Warrant Register of the Company, at least 20 calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange; provided that the failure to mail such notice or any defect therein or in the mailing thereof shall not affect the validity of the corporate action required to be specified in such notice.To the extent that any notice provided hereunder constitutes, or contains, material, non-public information regarding the Company or any of the Subsidiaries, the Company shall simultaneously file such notice with the Commission pursuant to a Current Report on Form 8-K.The Holder shall remain entitled to exercise this Warrant during the period commencing on the date of such notice to the effective date of the event triggering such noticeexcept as may otherwise be expressly set forth herein. 8 Section 3.Transfer of Warrant. a)Transferability.Subject to (i) the receipt of written consent by the Company (which is solely in the Company’s discretion), (ii) compliance with any applicable securities laws and (iii) the conditions set forth in Section 3(d) hereof, this Warrant and all rights hereunder are transferable, in whole or in part, upon surrender of this Warrant at the principal office of the Company or its designated agent, together with a written assignment of this Warrant substantially in the form attached hereto duly executed by the Holder or its agent or attorney and funds sufficient to pay any transfer taxes payable upon the making of such transfer.Upon such surrender and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees, as applicable, and in the denomination or denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and this Warrant shall promptly be cancelled.The Warrant, if properly assigned in accordance herewith, may be exercised by a new holder for the purchase of Warrant Shares without having a new Warrant issued. b)New Warrants. This Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid office of the Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or its agent or attorney.Subject to compliance with Section 3(a), as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice. All Warrants issued on transfers or exchanges shall be dated the Initial Exercise Date and shall be identical with this Warrant except as to the number of Warrant Shares issuable pursuant thereto. c)Warrant Register. The Company shall register this Warrant, upon records to be maintained by the Company for that purpose (the “Warrant Register”), in the name of the record Holder hereof from time to time.The Company may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary. d)Transfer Restrictions. If, at the time of the surrender of this Warrant in connection with any transfer of this Warrant, the transfer of this Warrant shall not be either (i) registered pursuant to an effective registration statement under the Securities Act and under applicable state securities or blue sky laws or (ii) eligible for resale without volume or manner-of-sale restrictions or current public information requirements pursuant to Rule 144, the Company may require, as a condition of allowing such transfer, that the Holder or transferee of this Warrant, as the case may be, provide the Company with a certificate representing that it is an Accredited Investor (as defined under the rules of the Securities Act of 1933). 9 e)Representation by the Holder.The Holder, by the acceptance hereof, represents and warrants that it is acquiring this Warrant and, upon any exercise hereof, will acquire the Warrant Shares issuable upon such exercise, for its own account and not with a view to or for distributing or reselling such Warrant Shares or any part thereof in violation of the Securities Act or any applicable state securities law, except pursuant to sales registered or exempted under the Securities Act. Section 4.Miscellaneous. a)No Rights as Stockholder Until Exercise.This Warrant does not entitle the Holder to any voting rights, dividends or other rights as a stockholder of the Company prior to the exercise hereof as set forth in Section 1(d)(i). b)Loss, Theft, Destruction or Mutilation of Warrant. The Company covenants that upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any stock certificate relating to the Warrant Shares, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which, in the case of the Warrant, shall not include the posting of any bond), and upon surrender and cancellation of such Warrant or stock certificate, if mutilated, the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or stock certificate. c)Saturdays, Sundays, Holidays, etc.If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall not be a Business Day, then, such action may be taken or such right may be exercised on the next succeeding Business Day. d)Authorized Shares.The Company covenants that, during the period the Warrant is outstanding, it will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights under this Warrant.The Company further covenants that its issuance of this Warrant 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 Warrant Shares upon the exercise of the purchase rights under this Warrant.The Company will take all such reasonable action as may be necessary to assure that such Warrant Shares may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of the Trading Market upon which the Common Stock may be listed.The Company covenants that all Warrant Shares which may be issued upon the exercise of the purchase rights represented by this Warrant will, upon exercise of the purchase rights represented by this Warrant and payment for such Warrant Shares in accordance herewith, be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges created by the Company in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue). 10 Except and to the extent as waived or consented to by the Holder, the Company shall not by any action, including, without limitation, amending its certificate of incorporation or through any reorganization, 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 of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of Holder as set forth in this Warrant against impairment.Without limiting the generality of the foregoing, the Company will (i) not increase the par value of any Warrant Shares above the amount payable therefor upon such exercise immediately prior to such increase in par value, (ii) take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares upon the exercise of this Warrant and (iii) use commercially reasonable efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof, as may be, necessary to enable the Company to perform its obligations under this Warrant. Before taking any action which would result in an adjustment in the number of Warrant Shares for which this Warrant is exercisable or in the Exercise Price, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having jurisdiction thereof. e)Jurisdiction. All questions concerning the construction, validity, enforcement and interpretation of this Warrant shall be determined in accordance with the laws of the state of New York. f)Restrictions.The Holder acknowledges that the Warrant Shares acquired upon the exercise of this Warrant will have restrictions upon resale imposed by state and federal securities laws. g)Nonwaiver and Expenses.No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder shall operate as a waiver of such right or otherwise prejudice Holder’s rights, powers or remedies, notwithstanding the fact that all rights hereunder terminate on the Termination Date.If the Company willfully and knowingly fails to comply with any provision of this Warrant, which results in any material damages to the Holder, the Company shall pay to Holder such amounts as shall be sufficient to cover any costs and expenses including, but not limited to, reasonable attorneys’ fees, including those of appellate proceedings, incurred by Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers or remedies hereunder. h)Notices.Any notice, request or other document required or permitted to be given or delivered to the Holder or the Company shall be delivered to the respective address provided by the Holder and the Company on the date hereof or, if the Company’s address has changed, the Company’s address provided in the Company’s most recent public filing with the US Securities and Exchange Commission . 11 i) Limitation of Liability.No provision hereof, in the absence of any affirmative action by Holder to exercise this Warrant to purchase Warrant Shares, and no enumeration herein of the rights or privileges of Holder, shall give rise to any liability of Holder for the purchase price of any Common Stock or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company. j) Remedies.The Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Warrant.The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees to waive and not to assert the defense in any action for specific performance that a remedy at law would be adequate. k)Successors and Assigns.Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby shall inure to the benefit of and be binding upon the successors and permitted assigns of the Company and the successors and permitted assigns of Holder.The provisions of this Warrant are intended to be for the benefit of any Holder from time to time of this Warrant and shall be enforceable by the Holder or holder of Warrant Shares. l) Amendment.This Warrant may be modified or amended or the provisions hereof waived with the written consent of the Company and the Holder. m)Severability.Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant 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 provisions or the remaining provisions of this Warrant. n)Headings.The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant. ***** (Signature Pages Follow) 12 IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized as of the date first above indicated. TAPIMMUNE, INC. By: Name: Title: 13 NOTICE OF EXERCISE TO:TAPIMMUNE, INC. 1.(1)The undersigned hereby elects to purchase Warrant Shares of the Company pursuant to the terms of the attached Warrant (only if exercised in full), and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any. 2.(2)Payment shall take the form of lawful money of the United States. 3.(3)Please issue a certificate or certificates representing said Warrant Shares in the name of the undersigned or in such other name as is specified below: The Warrant Shares shall be delivered to the following DWAC Account Number or by physical delivery of a certificate to: (4)Accredited Investor.The undersigned is an “accredited investor” as defined in Regulation D promulgated under the Securities Act of 1933, as amended. [SIGNATURE OF HOLDER] Name of Investing Entity: Signature of Authorized Signatory of Investing Entity: Name of Authorized Signatory: Title of Authorized Signatory: Date: 14 ASSIGNMENT FORM (To assign the foregoing warrant, execute this form and supply required information. Do not use this form to exercise the warrant.) FOR VALUE RECEIVED, [] all of or [] shares of the foregoing Warrant and all rights evidenced thereby are hereby assigned to whose address is . Dated:, Holder’s Signature: Holder’s Address: Signature Guaranteed: NOTE:The signature to this Assignment Form must correspond with the name as it appears on the face of the Warrant, without alteration or enlargement or any change whatsoever, and must be guaranteed by a bank or trust company.Officers of corporations and those acting in a fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing Warrant. 15

Exhibit CLARIFICATION ADDENDUM This clarification addendum, entered into as of February 28, 2008 hereby amends that certain Asset Purchase Agreement (the “APA”) dated February 26, 2007 between Accountabilities, Inc. (the “Company”) and ReStaff Services, Inc.(“ReStaff”) to include a definition of the term Net Income as used in paragraphs 1.2(d) and 1.2(e) of the APA.Such definition is as follows: Net Income shall be the result of adding net income, interest, taxes, depreciation, amortization and unusual and non-recurring items, as such amounts are derived from financial statements prepared in conformance with generally accepted accounting principles of the United States. In witness whereof, this Agreement has been duly executed by the parties hereto as of the date first above written. ACCOUNTABILITIES, INC. By: /s/Stephen DelVecchia Name: Stephen DelVecchia Title: Chief Financial Officer RESTAFF SERVICES, INC. By: /s/Rhonda Faria Name: Rhonda Faria Title: President

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM We consent to the incorporation by reference in this Post-Effective Amendment No. 24 to Registration Statement No. 333-83364 (the “Registration Statement”) on Form N-4 of our report dated April 22, 2011, relating to the financial statements of Sun Life of Canada (U.S.) Variable Account F, and to the incorporation by reference of our report dated March28, 2011, relating to the consolidated financial statements of Sun Life Assurance Company of Canada (U.S.) (the “Company”) (which expresses an unqualified opinion and includes an explanatory paragraph, relating to the Company changing its method of accounting and reporting for other-than-temporary impairments in 2009 and changing its method of accounting and reporting for the fair value measurement of certain assets and liabilities in 2008, as discussed in Note 1 and Note 5, respectively, of the consolidated financial statements). /s/DELOITTE & TOUCHE LLP Boston, Massachusetts September 26, 2011

Exhibit 31.2 CERTIFICATION I, Robert Scott Lorimer, certify that: 1. I have reviewed this quarterly report on Form 10-Q of U.S. Energy Corp.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this transition report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have: a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation, and d. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report)that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. DATED this 9th day of May, 2010. /s/Robert Scott Lorimer Robert Scott Lorimer Chief Financial Officer

Title: I keep getting called by scammers and I want to scare them by saying I will sue them. Question:Hello. I live in Canada and I have gotten three calls this week from a fake tax revenue agency telling me to call them back or a arrest warrant will be put on me. I have blocked the numbers but I keep getting the calls so I want to call them back pretending to be a lawyer of a client wanting to sue the fake agency. ​ any tips, advice or legal speak I should know so I can really try and scare them into not not calling me. Answer #1: Nothing you say to them will matter they won't stop.

Exhibit 31.2 CERTIFICATION I, Marvin S. Hausman, certify that: 1. I have reviewed this quarterlyreport on Form10-QSB of OXIS International, Inc. (“registrant”); 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a, 15(e) and 15-d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principals; c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and 5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial data information; and b) Any fraud, whether or not material, that involves management or other employees whohave a significant role in the registrant’s internal controls. OXIS INTERNATIONAL, INC. Date:August 14, 2007 By: /s/Marvin S. Hausman Marvin S. Hausman Acting Principal Accounting and Financial Officer

Name: Commission Regulation ( EEC ) No 289/92 of 4 February 1992 on the supply of various lots of skimmed ­milk powder as food aid Type: Regulation Subject Matter: Asia and Oceania; processed agricultural produce; America; cooperation policy Date Published: nan 7. 2. 92 Official Journal of the European Communities No L 31 /19 COMMISSION REGULATION (EEC) No 289/92 of 4 February 1992 on the supply of various lots of skimmed-milk powder as food aid Whereas, notably for logistical reasons, certain supplies are not awarded within the first and second deadlines for submissions of tenders ; whereas, in order to avoid re ­ publication of the notice of invitation to tender, a third deadline for submission of tenders should be opened, HAS ADOPTED THIS REGULATION : THE COMMISSION OF THE EUROPEAN COMMUNITIES, Having regard to the Treaty establishing the European Economic Community, Having regard to Council Regulation (EEC) No 3972/86 of 22 December 1986 on food-aid policy and food-aid management ('), as last amended by Regulation (EEC) No 1930/90 (2), and in particular Article 6 ( 1 ) (c) thereof, Whereas Council Regulation (EEC) No 1420/87 of 21 May 1987 laying down implementing rules for Regulation (EEC) No 3972/86 on food-aid policy and food-aid management (3) lays down the list of countries and organ ­ izations eligible for food-aid operations and specifies the general criteria on the transport of food aid beyond the fob stage ; Whereas following the taking of a number of decisions on the allocation of food aid the Commission has allocated to certain beneficiary organizations 1 190 tonnes of skim ­ med-milk powder ; Whereas it is necessary to provide for the carrying-out of this measure in accordance with the rules laid down by Commission Regulation (EEC) No 2200/87 of 8 July 1987 laying down general rules for the mobilization in the Community of products to be supplied as Community food aid (4), as amended by Regulation (EEC) No 790/91 (*) ; whereas it is necessary to specify the time limits and conditions of supply and the procedure to be followed to determine the resultant costs : Article 1 Milk products shall be mobilized in the Community, as Community food aid, for supply to the recipients listed in the Annex in accordance with Regulation (EEC) No 2200/87 and under the conditions set out in the Annex. Supplies shall be awarded by the tendering procedure. The successful tenderer is deemed to have noted and accepted all the general and specific conditions appli ­ cable. Any other condition or reservation included in his tender is deemed unwritten . Article 2 This Regulation shall enter into force on the day following its publication in the Official Journal of the European Communities. This Regulation shall be binding in its entirety and directly applicable in all Member States. Done at Brussels, 4 February 1992. For the Commission Ray MAC SHARRY Member of the Commission (') OJ No L 370, 30. 12. 1986, p. 1 . 0 OJ No L 174, 7. 7 . 1990, p. 6. (3) OJ No L 136, 26. 5 . 1987, p. 1 . (4) OJ No L 204, 25. 7. 1987, p. 1 . 0 OJ No L 81 , 28 . 3 . 1991 , p . 108 . No L 31 /20 Official Journal of the European Communities 7. 2. 92 ANNEX LOT A 1 . Operation No ('): 1354/90 2. Programme : 1990 3. Recipient (") : League of Red Cross and Red Crescent Societies, Logistic Service, PO Box 372, CH-1211 Geneva 19 (tel . 734 55 80, fax 733 55 80, fax 733 03 95, telex 412133 LRCS CH) 4. Representative of the recipient (3) : Red Crescent Society of the Yemen Arab Republic, Head Office, Building No 10, Street 26 September, Sana'a, Yemen Arab Republic (tel. 20 31 31 /32/33, telex 3124 HILAL YE) 5. Place or country of destination : Yemen 6. Product to be mobilized : vitaminized skimmed-milk powder 7. Characteristics and quality of the goods (2) (6) Q : see OJ No C 1 14, 29. 4. 1991 , p. 3 (under I. B. 1 ) 8 . Total quantity : 190 tonnes 9. Number of lots : one 10. Packaging and marking (9) (10) : 25 kg (see OJ No C 114, 29. 4. 1991 , p . 4 (under L B. 3 .)) Markings in English Supplementary markings on the packaging : 'a red crescent with the points towards the right / DSM / Là ŒCROSS / FOR FREE DISTRIBUTION / SANA'A* 1 1 . Method of mobilization : the Community market The skimmed-milk powder must be manufactured and the vitamins incorporated after the award of the tender 12. Stage of supply : free at port of landing ” landed 13. Port of shipment : ” 14. Port of landing specified by the recipient : ” 15. Port of landing : Hodeida 1 6. Address of the warehouse and, if appropriate, port of landing : ” 17. Period for making the goods available at the port of shipment where the supply is awarded at the port of shipment stage : 25. 3 ” 5. 4. 1992. 18 . Deadline for the supply : 30. 4. 1992 19. Procedure for determining the costs of supply : invitation to tender 20. In the case of an invitation to tender, date of expiry of the period allowed for submission of tenders (4) : 12 noon on 24. 2. 1992 21 . A. In the case of a second invitation to tender : (a) deadline for the submission of tenders : 12 noon on 9. 3 . 1992 ; (b) period for making the goods available at the port of shipment where the supply is awarded at the port of shipment stage : 10 ” 20. 4.' 1992 ; (c) dealine for the supply : 15. 5. 1992 B. In the case of a third invitation to tender : (a) deadline for the submission of tenders : 12 noon on 23. 3 . 1992 ; (b) period for making the goods available at the port of shipment where the supply is awarded at the port of shipment stage : 25. 4 ” 5. 5. 1 992 ; (c) deadline for the supply : 31 . 5. 1992 22. Amount of the tendering security : ECU 20 per tonne 23. Amount of the delivery security : 10 % of the amount of the tender in ecus 24. Address for submission of tenders : Bureau de l'aide alimentaire, à l'attention de Monsieur N. Arend, bà ¢timent Loi 120, bureau 7/46, Rue de la Loi, 200, B- 1 049 Brussels ; (telex 22037 AGREC B or 25670 AGREC B) 25. Refund payable on request by the successful tenderer ^ : refund applicable on 28 . 12. 1991 , fixed by Commission Regulation (EEC) No 3806/91 (OJ No L 357, 28 . 12. 1991 , p. 24) 7. 2. 92 Official Journal of the European Communities No L 31 /21 LOTS B and C 1 . Operation Nos ('): 1475/90 and 1476/90 2. Programme : 1990 3. Recipient : Nicaragua 4. Representative of the recipient (3) : Enimport (Sr. Wilfredo Delgado), Carretera a Masaya, Frente a Camino de Oriente (tel . 67 10 32, Fax 74 688 ” Managua) 5. Place or country of destination : Nicaragua 6. Product to be mobilized : vitaminized skimmed-milk powder 7. Characteristics and quality of the goods (2) (') : (see OJ No C 114, 29. 4. 1991 , p. 3 (under I.B.I )) 8 . Total quantity : 1 000 tonnes 9. Number of lots : two (B : 500 tonnes ; C : 500 tonnes) 10. Packaging and marking (') : 25 kg ; OJ No C 114, 29 . 4. 1991 , p. 4 (under I.B.3) Markings in Spanish 11 . Method of mobilization : the Community market The skimmed-milk powder must be manufactured and the vitamins incorporated after the award of the tender 12. Stage of supply : free at port of landing ” landed 13. Port of shipment : ” 14. Port of landing specified by the recipient : ” 15. Port of landing : San Juan del Sur 1 6. Address of the warehouse and, if appropriate, port of landing : ” 1 7. Period for making the goods available at the port of shipment where the supply is awarded at the port of shipment stage : 25. 3 - 5 . 4. 1992 18 . Deadline for the supply : 5. 5 . 1992 19. Procedure for determining the costs of supply : invitation to tender 20. In the case of an invitation to tender, date of expiry of the period allowed for submission of tenders (4) : 12 noon on 24. 2. 1992 21 . A. In the case of a second invitation to tender : (a) deadline for the submission of tenders : 12 noon on 9 . 3. 1992 ; (b) period for making the goods available at the port of shipment where the supply is awarded at the port of shipment stage : 10 ” 20 . 4. 1992 ; (c) deadline for the supply : 20. 5 . 1992 B. In the case of a third invitation to tender : (a) deadline for the submission of tenders : 12 noon on 23. 3 . 1992 ; t (b) period for making the goods available at the port of shipment where the supply is awarded at the port of shipment stage : 25. 4 ” 5. 5 . 1992 ; (c) deadline for the supply : 5. 6 . 1992 22. Amount of tendering security : ECU 20 per tonne 23. Amount of delivery security : 10 % of the tender in ecus 24. Address for submission of tenders : Bureau de l'aide alimentaire, à l'attention de Monsieur N. Arend, Bà ¢timent Loi 120, bureau 7/46, Rue de la Loi, 200 B- 1 049 Brussels ; (telex 22037 AGREC B or 25670 AGREC B) 25. Refund payable on application by the successful tenderer (*): refund applicable 28 . 12. 1991 , fixed by Commission Regulation (EEC) No 3806/91 (OJ No L 357, 28 . 12. 1991 , p. 24) No L 31 /22 Official Journal of the European Communities 7. 2 . 92 Notes : (') The operation number is to be quoted in all correspondence. (2) The successful tenderer shall deliver to the beneficiary a certificate from an official entity certifying that' for the product to be delivered the standards applicable, relative to nuclear radiation, in the Member State concerned, have not been exceeded. Radioactivity analysis' must indicate the caesium- 134 and - 137 levels . (3) Commission delegate to be contacted ' by the successful tenderer : see list published in OJ No C 114, 29. 4. 1991 , p. 33 (A : Jordan ; B and C : Costa Rica). (4) In order not to overload the telex, tenderers are requested to provide, before the date and time laid down in point 20 of this Annex, evidence that the tendering security referred to in Article 7 (4) (a) of Regula ­ tion (EEC) No 2200/87 has been lodged, preferably : ” by porter at the office referred to in point 24 of this Annex, or ” by telecopier on one of the following numbers in Brussels : ” 235 01 32, ” 236 10 97, ” 235 01 30, ” 236 20 05, ” 236 33 04. (*) Commission Regulation (EEC) No 2330/87 (OJ No L 210, 1 . 8 . 1987, p. 56), is applicable as regards the export refund and, where appropriate, the monetary and accession compensatory amounts, the represen ­ tative rate and the monetary coefficient. The date referred to in Article 2 of the abovementioned Regula ­ tion is that referred to in point 25 of this Annex. (6) The successful tenderer shall give the beneficiaries' representative, at the time of delivery, a certificate of origin . i7) The succesful tenderer shall give the beneficiaries' representative, at the time of delivery, a health certifi ­ cate . (8) Veterinary certificate issued by an official entity stating that the product was processed with pasteurized milk, coming from healthy animals, processed under excellent sanitary conditions which are supervised by qualified technical personnel and that the area of production of raw milk had not registered foot-and ­ mouth disease nor any other notifiable infectious/contagious disease during the 12 months prior to the processing. (') To be delivered on standard pallets ” 40 bags each pallet ” wrapped in plastic shrinked cover. (I0) Transport documents must be legalized by the diplomatic representation in the country of origin of the goods. (") The successful tenderer is to contact the recipient as soon as possible to . establish which consignment documents are required and how they are to be distributed.

Name: 2000/350/EC: Commission Decision of 2 May 2000 on epidemiological surveillance of bluetongue in Greece and certain measures to prevent the spread of the disease (notified under document number C(2000) 1143) (Only the Greek text is authentic) Type: Decision_ENTSCHEID Subject Matter: agricultural activity; health; Europe; EU finance; means of agricultural production; agricultural policy Date Published: 2000-05-25 Avis juridique important|32000D03502000/350/EC: Commission Decision of 2 May 2000 on epidemiological surveillance of bluetongue in Greece and certain measures to prevent the spread of the disease (notified under document number C(2000) 1143) (Only the Greek text is authentic) Official Journal L 124 , 25/05/2000 P. 0058 - 0060Commission Decisionof 2 May 2000on epidemiological surveillance of bluetongue in Greece and certain measures to prevent the spread of the disease(notified under document number C(2000) 1143)(Only the Greek text is authentic)(2000/350/EC)THE COMMISSION OF THE EUROPEAN COMMUNITIES,Having regard to the Treaty establishing the European Community,Having regard to Council Directive 90/425/EEC of 26 June 1990 concerning veterinary and zootechnical checks applicable in intra-Community trade in certain live animals and products with a view to the completion of the internal market(1), as last amended by Directive 92/118/EEC(2), and in particular Article 10(4) thereof,Having regard to Council Decision 90/424/EEC(3) of 26 June 1990 on expenditure in the veterinary field as last amended by Decision 94/370/EC(4), and in particular Article 6 thereof,Whereas:(1) Following outbreaks of bluetongue in 1999 on a certain part of the Greek territory.(2) Bluetongue is included in List A of the Office International des Epizooties (OIE) and its spread constitutes a serious hazard for the Community and could have international consequences for trade.(3) It is necessary to set up an alert system to monitor, after a cold season, the possible start of a new cycle of the disease in year 2000 in regions where the virus circulation was established in 1999.(4) It is necessary to maintain restriction of movements of animals in order to prevent movements of viraemic animals.(5) The infected zone may be divided, on the basis of the epidemiological data available on the evolution of the disease during the year 1999, into a low-risk area and a high-risk area.(6) Anti-vector measures have to be implemented during winter time in places where virus-transmission might have been maintained.(7) Greece has adopted since 19 November 1999 (Ministerial Decision No 398171 as amended by Ministerial Decision No 331765) national measures prohibiting the dispatch to Member States and export to third countries of animals, their sperm, ova and embryos, of species susceptible to bluetongue (all ruminants) from its entire territory. Greek authorities have undertaken not to amend those measures without prior consultation with and agreement of the Commission and the Member States in the framework of the Standing Veterinary Committee.(8) The measures provided for in this Decision are in accordance with the opinion of the Standing Veterinary Committee,HAS ADOPTED THIS DECISION:Article 11. For the purpose of this Decision the following definitions shall apply:- "zone at low risk" means prefectures where during the year 1999:- data available concludes that bluetongue virus was in circulation,- C. imicola has not been captured,- the disease was sporadic,- "zone at high risk" means prefectures where during the year 1999:- C. imicola has been captured,- the disease was epidemic.2. Prefectures may be added to one of the zones considering the geographical or ecological elements, even when they do not meet all the criteria, in order to respect an epidemiological consistency.3. The prefectures included in the zone at low risk are listed in Annex I.4. The prefectures included in the zone at high risk are listed in Annex II.Article 21. Greece shall set up before 1 June 2000 an epidemiological surveillance of bluetongue in each of the prefectures listed in Annexes I and II not covered by Decision 2000/71/EC(5) by establishing the follow-up of 50 sentinel bovine animals in localities most exposed to the risk of new incursions of the disease and setting at least one light trap in one of those localities, close to what could be considered as a suitable breeding site for vectors.2. Greece shall communicate to the Commission before 1 June 2000 a map of the selected locations of the sentinel animals and traps.3. Sentinel animals shall be tested every 15 days and any seroconversion shall be immediately notified to the Commission and the Member States.4. In case cattle are not available in suitable locations, sheep or goats shall be taken as sentinel animals.Article 31. Greece shall prohibit the dispatch of animals, their sperm, ova and embryos, of species susceptible to bluetongue from prefectures listed in Annexes I and II to the rest of the Greek territory.2. Greece shall prohibit the dispatch of animals, their sperm, ova and embryos, of species susceptible to bluetongue from the prefectures listed in Annex II to the prefectures listed in Annex I.3. By derogation, in the case of slaughter animals, the competent Greek authority may authorise movements prohibited in paragraphs 1 and 2 under the following conditions:- animals must be transported in vehicles sealed by the competent authority directly to the slaughterhouse for the purpose of slaughter without delay, under official supervision,- the competent authority responsible for the slaughterhouse shall be informed of the intention to send animals to it and must notify the dispatching competent authority of their arrival,- animals must have undergone, before transport, an external insecticide treatment to prevent any attack of vectors before slaughtering,- animals shall be protected from attacks by vectors after their arrival in the slaughterhouse until they are slaughtered,- animals must show no sign of bluetongue on the day of transport.4. Paragraphs 1 and 2 do not apply when the surveillance and monitoring has demonstrated, for at least 90 days, no evidence of bluetongue transmission or vector activity in the prefecture of origin.Article 4Greece shall request authorisation for the entry of sheep into the prefectures listed in Annexes I and II delivered by the local competent authority under conditions that ensure the traceability of the animals.No compensation in the framework of Decision 90/424/EEC will be due to the owners of those animals in case of slaughter because of bluetongue.Article 5During the course of the year 2000 Greece shall apply restrictions to movements provided in Articles 3 and 4 to new prefectures if they meet the requirements provided in Article 1 to be listed in Annex I or II.Annexes will be reviewed every two months.Article 6Greek authorities may introduce further measures other than those referred to in this Decision if they are deemed necessary for the control of the disease. Greece shall inform the Commission and the Member States of these measures immediately. They shall be discussed in the framework of the Standing Veterinary Committee.Article 7Before the end of the vector's low activity period, Greece shall set up an anti-vector programme by insecticide spray of suitable breeding sites in places where vector activity might have been maintained during winter.Article 8For the epidemiological surveillance and the control of Bluetongue in Greece, the Community financial contribution towards the cost of the measures implemented in 2000, shall be, up to a maximum of EUR 110000:- 50 % of the cost incurred by Greece for serological analysis of the sentinel animals set up in accordance with Article 2,- 50 % of the costs incurred by Greece, up to a maximum amount of EUR 10000 for the set up of the entomological survey in accordance with Article 2,- 50 % of the costs incurred by Greece for the purchase of insecticide and spraying equipment for the implementation of the anti-vector campaign provided for in Article 7.Article 9The Community financial contribution shall be granted after supporting documents have been submitted.The supporting documents referred to in paragraph 1 shall include a list of the expenses (excluding VAT), including a description of the measures and the date of payment.Article 10Applications for payment, together with the supporting documents referred to in Article 9 shall be submitted to the Commission before 1 April 2001.Article 111. The Commission may carry out on-the-spot checks in collaboration with the competent national authorities to ensure that the assisted measures have been implemented and the relevant expenditure incurred.The Commission shall inform the Member States of the outcome of these checks.2. Articles 8 and 9 of Council Regulation (EC) No 1258/1999 shall apply, mutatis mutandis.Article 12This Decision shall apply until 1 February 2001.Article 13This Decision is addressed to the Hellenic Republic.Done at Brussels, 2 May 2000.For the CommissionDavid ByrneMember of the Commission(1) OJ L 224, 18.8.1990, p. 29.(2) OJ L 62, 15.3.1993, p. 49.(3) OJ L 224, 18.8.1990, p. 19.(4) OJ L 168, 2.7.1994, p. 31.(5) OJ L 24, 29.1.2000, p. 53.ANNEX IZones at low riskEvros, Rodopi, Xanthi, Kavala, Drama, Serres and Thessaloniki.ANNEX IIZones at high riskChalkidiki, Pieria, Larissa, Magnissia, Evia, Lesvos, Dodekanisa, Samos and Chios.

Title: Caught stealing $6 in value, what are long term consequences? (WA) Question:I stole from a store today, caught with $6 of merch. I was cooperative and gave them documentation, returned the item and received some paperwork about being banned. They they said that the Seattle PD would likely reach out to me in a letter about a $206 restitution charge, which I'm okay with paying. What are the long term consequencesof my actions today? Yes I was a degenerate and I feel bad, it was a mistake that I will never make again. I just don't want anything on my record, I figured for $6 I'd be fine with simply paying whatever I legally owe them but I'd hate to get a blemish on my record. Thanks guys. Answer #1: If you're talking about a civil demand, that's from the merchant not the police. The police would issue you a ticket with a court date if you were charged with somebody. > but I'd hate to get a blemish on my record. If this resolves itself without you being charged with something, consider this a warning and never steal anything ever again. That's the best way to avoid a criminal record as opposed to dealing with it after getting caught.

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of report (Date of earliest event reported): September 10, 2010 WATTS WATER TECHNOLOGIES, INC. (Exact Name of Registrant as Specified in its Charter) DELAWARE 001-11499 04-2916536 (State or Other Jurisdiction (Commission File Number) (IRS Employer of Incorporation) Identification No.) 815 Chestnut Street, North Andover, Massachusetts 01845 (Address of Principal Executive Offices) (Zip Code) (978) 688-1811 (Registrant's telephone number, including area code) (Former Name or Former Address, if Changed Since Last Report) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below): ¨Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) ¨Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) ¨Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) ¨Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) Item 2.05.Costs Associated with Exit or Disposal Activities. On September 13, 2010, the Board of Directors of Watts Water Technologies, Inc. (the “Company”) approved a restructuring program with respect to certain of the Company’s operating facilities in the United States.The restructuring program is expected to include the shutdown of two manufacturing facilities in North Carolina.Operations at these facilities will be consolidated into the Company’s manufacturing facilities in New Hampshire, Missouri and other locations.The program is expected to include pre-tax charges totaling approximately $6.6 million, including costs for severance, relocation, clean-up and certain asset write-downs.The total net after-tax charge for this restructuring program is expected to be approximately $4.1 million (including $0.4 million in non-cash charges), with costs being incurred through 2011.The Company expects to spend approximately $1.2 million in capital expenditures to consolidate operations.Annual cash savings, net of tax, are estimated to be approximately $1.6 million, which the Company expects to fully realize by the second half of 2012.The restructuring program is expected to be completed by the end of the third quarter of 2011. Item 8.01.Other Events. On September 10, 2010, Patrick S. O’Keefe, the Company’s President and Chief Executive Officer, established a pre-arranged plan to exercise stock options and sell shares of class A common stock, par value $.10 per share, of the Company (“Class A Common Stock”) in accordance with Rule 10b5-1 under the Securities Exchange Act of 1934.Mr. O’Keefe’s plan provides that stock options for up to 50,000 shares of Class A Common Stock may be exercised and the underlying shares may be sold prior to December 31, 2010. Rule 10b5-1 permits insiders to implement a written plan to sell stock when they are not aware of material non-public information and continue to sell shares in accordance with the predetermined plan, even if they subsequently become aware of such information. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Date: September 15, 2010 WATTS WATER TECHNOLOGIES, INC. By: /s/ Kenneth R. Lepage Kenneth R. Lepage General Counsel and Executive Vice President of Administration

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): June 23, 2016 GIGA-TRONICS INCORPORATED (Exact name of registrant as specified in its charter) California 0-12719 94-2656341 (State or other jurisdiction of incorporation) Commission File No. (IRS Employer Identification Number) 4650 Norris Canyon Road, San Ramon, CA 94583 (Address of principal executive offices, including zip code) (925) 328-4650 (Registrant’s telephone number, including area code) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: [ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) [ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) [ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) [ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) Item 8 .0 1 Other Events . On June 23, 2016 Giga-tronics Incorporated (“Giga-tronics”) (NASDAQ: GIGA) announced an agreement for the sale of its Switch product line to Astronics Test Systems Inc. (“Astronics”), a wholly owned subsidiary of Astronics Corporation (NASDAQ: ATRO). Upon signing, Astronics paid $850,000 for the intellectual property of the product line. Giga-tronics is estimating a net gain in the quarter ending June 25, 2016 of approximately $650,000, after related expenses are subtracted from the sales price. Astronics is also purchasing approximately $500,000 of related materials inventory from Giga-tronics. The materials inventory will transfer throughout July and August of 2016. Item 5.02 Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers. Jeffery T. Lum, Chief Technical Officer, will be leaving the Company effective July 1st, 2016.Mr. Lum’s departure is as a result of the sale of the Company’s Switch product line to Astronics. Mr. Lum’s expertise was primarily dedicated to the Company’s Switch product line. Pursuant to the termination of employment and change of control agreements between the Company and Mr. Lum, he will receive cash equal to the equivalent of six months of his base salary. On June 23, 2016, the Company issued a press release announcing the sale of the product line. A copy of the press release is attached as Exhibit 99.1 to this Form 8-K and is incorporated herein by reference. Item 9.01 Financial Statements and Exhibits. (d) Exhibits. Exhibit No. Description (d) Exhibit 99.1 Press Release dated June 23, 2016 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. GIGA-TRONICS INCORPORATED Date: June 24, 2016 By: /s/Steven D. Lance Steven D. Lance Vice President of Finance, Chief Financial Officer

Exhibit 32.1 THERMO FISHER SCIENTIFIC INC. CERTIFICATION REQUIRED BY EXCHANGE ACT RULES 13a-14(b) and 15d-14(b), AS ADOPTED PURSUANT TO SECTION -OXLEY ACT OF 2002 In connection with the Quarterly Report on Form 10-Q of Thermo Fisher Scientific Inc. (the “Company”) for the period ended June 28, 2014, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, Marc N. Casper, President and Chief Executive Officer of the Company, hereby certifies, pursuant to Securities Exchange Act of 1934 Rules 13a-14(b) and 15d-14(b), that: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Dated:August 1, 2014 /s/ Marc N. Casper Marc N. Casper President and Chief Executive Officer A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Thermo Fisher Scientific Inc. and will be retained by Thermo Fisher Scientific Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

Title: Need Help, Accused of stealing cash while completing Taskrabbit task. Question:I do gig work for side cash through the Taskrabbit app. Today I had a task where I rented a ladder, transported it to the customers house, and changed some light bulbs. The project went smoothly, we got along well and we both reviewed each other positively. He had some especially nice things to say about how I completed the task. I just received a message from him saying "I am missing some cash from my bedroom, you were the only person in the room and I know that you took the cash. Return it and I will forget about the incident, If you do not I will go to the police." I absolutely did not steal the cash. let me be perfectly clear about that. I have an email into tasker support asking what to do but just in case they fail to deliver an answer do you have any suggestions on how I can protect myself or what I can do to deescalate the situation? I dont think this guy is a scammer, we met face to face, we talked about ourselves and our background and he oversees the IT infrastructure for the state that we live in, the house is a mansion in probably the million dollar range. Answer #1: Tell him to call the police. Alternatively you call the police and report him for extortion. He's done this before.Answer #2: Anecdotal but I've been in retail banking for 15 years and people accuse us of shorting them all the time...only to return or call a little later saying they found it. Only no apologies about the accusations of theft by my teller staff. Yeah, Nancy's been here 30+ years but she was just waiting for her moment to take that $20 from you.

AMENDMENT 2 TO EXCLUSIVE LICENSE AGREEMENT THIS AMENDMENT 2 TO EXCLUSIVE LICENSE AGREEMENT (the “Amendment”) is made this 21st day of December 2011, by and between Advanomics Corporation, a Canadian corporation (the “Licensor”), with its principal place of business at 579 rue Lajeunesse, Laval, Quebec, Canada, H7X 3K4, and Sunshine Biopharma, Inc., a Colorado corporation (“the Licensee”), with its principal place of business at 2015 Peel Street, 5th Floor, Montreal, Quebec H3A 1T8, who hereby agree as follows: RECITALS: WHEREAS, the parties hereto have previously entered into that certain Exclusive License Agreement dated August 20, 2009 (the “License Agreement”), wherein Licensor provided Licensee an exclusive license to the oncology drug, Adva-27a (Difluoro-Etoposidetm) as well as the Adva-27a development through clinical trials (the “Licensed Materials”); and WHEREAS, the parties hereto hereby wish to amend the License Agreement as indicated herein. NOW, THEREFORE, in exchange for good and valuable consideration, the sufficiency of which is acknowledged, the parties hereto hereby agree to amend the License Agreement as follows: ARTICLE II Term and Termination of License Section 2.4.4 is hereby deleted in its entirety. ARTICLE III Consideration for License ARTICLE III is hereby amended to replace Section 3.1(d) and add Section 3.1(e), which shall henceforth read as follows: “3.1           Consideration for License.  In consideration for the granting of the exclusive License herein, Licensee hereby agrees to: (d)           Pay Licensor (or its assigns) an annual license fee of $360,000.00 US on or before December 31 of each calendar year starting with the year 2012; and (e)           Reimburse Licensor (or its assigns) all of the research and development expenses (including clinical trials expenses) which the licensor incurs in connection with the Licensed Materials.  Such reimbursements to the Licensor shall be made by the Licensee within ten (10) days of receipt of relevant invoices by the Licensee.” The balance of the License Agreement, as amended to date, shall remain in full force and effect. IN WITNESS WHEREOF the parties hereto have executed this amendment to the License Agreement effective as of the date first written above.                                                                                                                                LICENSOR:    LICENSEE:           ADVANOMICS CORPORATION   SUNSHINE BIOPHARMA, INC.                           By:  /s/Steve N. Slilaty   By: /s/ Camille Sebaaly     Steve N. Slilaty, President      Camille Sebaaly, CFO                                                                                                                   

Exhibit 31.1 CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION SARBANES-OXLEY ACT OF 2002 I, Noreen Griffin, certify that: 1. I have reviewed this Annual Report on Form 10-K of Immune Therapeutics, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: (a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and 5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): (a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. Dated: March 31, 2015 By: /s/ Noreen Griffin Noreen Griffin Chief Executive Officer (Principal Executive Officer)

SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section13 or 15(d) of the Securities Exchange Act of 1934 Date of report (Date of earliest event reported): February 7, 2011 SELECTICA, INC. (Exact name of Company as specified in Charter) Delaware (State or other jurisdiction of incorporation or organization) 000-29637 (Commission File No.) 77-0432030 (IRS Employee Identification No.) 1740 Technology Drive, Suite 460 San Jose, California 95110 (Address of Principal Executive Offices) (408)570-9700 (Issuer Telephone number) Check the appropriate box below if the Form8-K filing is intended to simultaneously satisfy the filing obligation of the Company under any of the following provisions (see General Instruction A.2 below). o Written communications pursuant to Rule425 under the Securities Act (17 CFR 230.425) o Soliciting material pursuant to Rule14a-12 under the Exchange Act (17 CFR240.14a-12) o Pre-commencement communications pursuant to Rule14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)). o Pre-commencement communications pursuant to Rule13e-4(c) under the Exchange Act (17 CFR 240.13(e)-4(c)) Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers. Promotion of Mr. Stern to Chief Executive Officer. On February 7, 2011, Selectica, Inc. (the “Company”) promoted Jason Stern, 40, to Chief Executive Officer, effective immediately. Since January 12, 2010, Mr. Stern has served, and will continue to serve, as the Company’s President and Chief Operating Officer. From June 2009 to January 2010, Mr.Stern served as the Company’s Senior Vice President of Operations of the Contract Management Solutions. From March 2008 to June 2009, Mr.Stern served as the Company’s Vice President of Products and Business Development for Contract Management Solutions and from January 2007 to March 2008 was Vice President of Solutions. Prior to joining the Company in November 2006, Mr.Stern was the Vice President of Product Management for I-many, Inc. from April 2003 to November 2006. From September 1999 to June 2002, Mr.Stern was employed by Oracle Corporation, an enterprise software company, managing products for CRM, Call Center, and Finance. Mr.Stern has a B.A. from UCLA and an M.B.A. from the University of Southern California. Compensation Arrangements with Mr.Stern. In connection with his promotion, Mr.Stern’s annual base salary was increased from $225,000 to $250,000. Press Release. On February 8, 2011, the Company issued a press release announcing Mr. Stern’s promotion.A copy of the press release is attached hereto as Exhibit99.1. Item 9.01 Financial Statements and Exhibits. (d) Exhibits Exhibit No. Description Press release of Selectica, Inc., dated February 8, 2011. 2 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this Current Report to be signed on its behalf by the undersigned hereunto duly authorized. Dated: February 8, 2011 SELECTICA, INC. By: /s/ Todd Spartz Name:Todd Spartz Title:Chief Financial Officer 3 EXHIBIT INDEX Exhibit No. Description Press release of Selectica, Inc., dated February 8, 2011.

Exhibit 10.1     EMPLOYMENT AGREEMENT             EMPLOYMENT AGREEMENT made and entered into as of the Effective Date as hereinafter defined, by and among VALASSIS COMMUNICATIONS, INC. (“VCI”), a Delaware corporation whose principal place of business is located at 19975 Victor Parkway, Livonia, Michigan, 48152, (the “Corporation”), and James Parkinson (the “Executive”).   IN CONSIDERATION of the mutual promises, covenants and agreements set forth below, it is hereby agreed as follows:   1.   Employment and Term. (a)  The Corporation agrees to employ the Executive, and the Executive agrees to remain in the employ of the Corporation, in accordance with the terms and provisions of this Agreement for the period set forth below (the “Employment Period”).   (b)  The Employment Period shall commence on January 1, 2012 (the “Effective Date”) and shall continue until the close of business on December 31, 2013.   2.   Duties and Powers of Executive.                    (a)  Position.  The Executive shall serve as Chief Digital and Technology Officer. This title is subject to change during the Employment Period.                    (b)  Duties.  During the Employment Period, and excluding any periods of vacation and sick leave to which the Executive is entitled, the Executive agrees to devote substantially his full business time and attention during normal business hours to the business and affairs of the Corporation and to the discharge of his duties hereunder.  The Executive shall perform his duties hereunder subject to the customary oversight by the President & Chief Executive Officer.   3.   Compensation.   The Executive shall receive the following compensation for his services hereunder to the Corporation:   (a) Salary.  The Executive’s annual base salary (“Annual Base Salary”), payable not less often than biweekly, shall be at the annual rate of not less than $300,000 commencing on January 1, 2012.  The Board of Directors of VCI (the “Board”) may from time to time direct such upward adjustments in Annual Base Salary and other compensation and benefits as the Board deems to be necessary or desirable, including, without limitation, adjustments in order to reflect increases in the cost of living.  Annual Base Salary shall not be reduced after any increase thereof.  Any increase in Annual Base Salary and/or other compensation and benefits shall not serve to limit or reduce any other obligation of the Corporation under this Agreement.       (b)  Incentive Compensation. Commencing on effective date, the Executive shall be eligible for a cash bonus of up to 75% of the Annual Base Salary on the following basis:  (i) 50% in accordance with the targets set by the Board and the Compensation/Stock Option Committee of the Corporation (the “Committee”); and (ii) 50% in accordance with performance targets set by the President & Chief Executive Officer. Such bonus may include opportunities over Target based on revenue or other goals. Any such additional opportunity will be communicated on an annual basis. In the case of 3(b)(i) herein, such bonus shall be paid promptly after the end of the applicable six-month period ended June 30 or December 31 when the Committee has determined that applicable targets have been met but in no event later than 60 days after each June 30 and December 31.  In the case of 3(b)(ii) herein, such bonus shall be paid when the President & Chief Executive Officer has determined that the applicable performance targets have been met but in no event later than 60 days after each December 31.  The Executive shall also be entitled to participate in any programs of the Corporation enabling employees to apply all or part of any bonus to the purchase of the Corporation’s stock and receive matching grants. (c)  Retirement and Welfare Benefit Plans.  During the Employment Period and so long as the Executive is employed by the Corporation, she shall be eligible to participate in all savings, retirement and welfare plans, practices, policies and programs including, without limitation, Valassis Employees’ Retirement Savings Plan, its Flex Plan, its death benefit plans, its disability benefit plans, and its medical, dental and health and welfare plans (the “Plans”) applicable generally to employees and/or other executives of the Corporation.   (d)  Expenses.  The Corporation agrees to reimburse the Executive for all expenses, including those for travel and entertainment, properly incurred by him in the performance of his/her duties hereunder in accordance with policies established from time to time by the Board, and the Executive shall account to the Corporation for such expenses. Any such reimbursements shall be made within thirty (30) days after the proper delivery by the Executive of such evidence of expenses that the Corporation may require, but in no event will the reimbursement payment be made later than the end of the calendar year following the calendar year in which the expense is incurred.   (e)  Fringe Benefits.  During the Employment Period, the Corporation shall provide an automobile or an auto allowance to the Executive under the Company’s policy then in effect. Any amounts paid by the Corporation hereunder shall be made within thirty (30) days after the proper delivery by the Executive of such evidence of expenses that the Corporation may require, but in no event will the the calendar year in which the expense is incurred. The Corporation shall furnish to the Executive financial planning, tax and estate preparation services. (f)      Vacation and Other Absences.  During the Employment Period and so long as the Executive is employed by the Corporation, she shall be entitled to paid vacation and such other paid absences whether for holidays, illness, personal time or any similar purposes, in accordance with the plans, policies, programs and practices of the Corporation in effect from time to time.        4.   Termination of Employment.   2       (a)  Death or Disability.  The Executive’s employment shall terminate automatically upon the Executive’s death during the Employment Period.  If the Corporation determines in good faith that Disability (as defined below) of the Executive has occurred during the Employment Period, it may give to the Executive written notice in accordance with Section 9(b) of this Agreement of its intention to terminate the Executive’s employment.  In such event, the Executive’s employment with the Corporation shall terminate effective on the 30th day after receipt of such notice by the Executive (the “Disability Effective Date”), provided that within the thirty (30) days after such receipt, the Executive shall not have returned to full-time performance of the Executive’s duties.  For purposes of this Agreement, “Disability” shall mean the absence of the Executive from the Executive’s duties with the Corporation for a period of at least 180 days during any 12-month period as a result of incapacity due to mental or physical illness. (b)  By the Corporation for Cause.  The Corporation may terminate the Executive’s employment during the Employment Period for Cause.  For purposes of this Agreement, “Cause” shall mean (i) the conviction of the Executive for the commission of a felony; (ii) action by the Executive involving willful malfeasance or gross negligence or failure to act by the Executive involving material nonfeasance, which, at the time of such willful malfeasance or gross negligence or material nonfeasance, has a materially adverse effect on the Corporation; or (iii) the failure by the Executive to follow directives of the President & Chief Executive Officer of VCI or the failure to meet reasonable performance standards established by such executives of the Corporations. The Company reserves the right to require Employee to relocate Employee’s principal place of business to the Company’s headquarters in Livonia, Michigan (“Headquarters”) and to relocate Employee’s household to within 100 miles of Headquarters by providing reasonable notice of the requirement. Requiring such relocation shall not comprise a termination or other breach of this Agreement.  Employee’s refusal or failure to timely relocate in compliance with such notice of relocation requirement shall comprise a voluntary resignation and Employee shall not be entitled to severance pay or further compensation under this Agreement or otherwise thereafter. (c)  Notice of Termination.  Any termination by the Corporation for Cause shall be communicated by Notice of Termination to the Executive in accordance with Section 9(b) of this Agreement.  For purposes of this Agreement, a “Notice of Termination” means a written notice which (i) indicates the specific termination provision in this Agreement relied upon; (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated; and (iii) if the Date of Termination (as defined in Section 4(d)) is other than the date of receipt of such notice, specifies the termination date (which date shall be not more than 30 days after the giving of such notice).  The failure by the Corporation to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Cause shall not waive any right of the Corporation hereunder or preclude the Corporation from asserting such fact or circumstance in enforcing the Corporation’s rights hereunder.   (d)  Date of Termination.  “Date of Termination” means (i) if the Executive’s employment is terminated by the Corporation for Cause, the date of receipt of the Notice of Termination or any later date specified therein, as the case may be; (ii) if the Executive’s employment is terminated by the Corporation other than for Cause or by reason of Death or   3   Disability, the Date of Termination shall be the date on which the Corporation notifies the Executive of such termination; and (iii) if the Executive’s employment is terminated by reason of death or Disability, the Date of Termination shall be the date of death of the Executive or the Disability Effective Date, as the case may be.   5.   Obligations of the Corporation upon Termination.   (a)  Termination Other Than for Cause.  During the Employment Period, if the Corporation shall terminate the Executive’s employment (other than in the case of a termination for Cause) or the Executive’s employment shall terminate by reason of death or Disability (termination in any such case referred to as “Termination”): (i) the Corporation shall pay to the Executive in a lump sum in cash the sum of (1) the Executive’s Annual Base Salary through the Date of Termination to the extent not theretofore paid and (2) any accrued vacation pay, to the extent not theretofore paid.  To the extent not theretofore paid, the sum of the amounts described in clauses (1) and (2) shall be hereinafter referred to as the “Accrued Obligations.”  The amounts specified in this Section 5(a)(i) shall be paid within 30 days after the Date of Termination; and   (ii) in the event of Termination other than by reason of the Executive’s death or Disability, then beginning on the biweekly payment date next following the Termination and on each biweekly payment date thereafter until the end of the Employment Period (the period from such Date of Termination until the end of the Employment Period herein called the “Severance Period”), the Corporation shall pay to the Executive an amount equal to the biweekly installment of the Executive’s Annual Base Salary in effect as of such Date of Termination; and (iii) in the event of Termination other than by reason of the Executive’s death or Disability, the Corporation shall pay to the Executive in a lump sum in cash within 30 days after the Date of Termination a bonus in an amount equal to two times the Maximum Semi-Annual Cash Bonus for the current six-month period in which the event of Termination occurred, whether or not earned; (or, with respect to any employment termination that occurs during the calendar year 2012, an amount equal to 100% of the maximum annual cash bonus for such year, whether or not earned, as determined under the Section 3(b) of this Agreement); and   (iv) in the event of Termination other than by reason of the Executive’s death or Disability, then, during the Severance Period, the Corporation shall continue medical and dental benefits on a monthly basis to the Executive and/or the Executive’s family at least equal to those which would have been provided if the Executive’s employment had not been terminated, such benefits to be in accordance with the most favorable plans, practices, programs or policies (the “M&W Plans”) of the Corporation as in effect and applicable generally to other executives of the Corporation and their families during the 90-day period immediately preceding the Date of Termination or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other executives of   4     the Corporation (but on a prospective basis only unless, and then only to the extent, such more favorable M&W Plans are by their terms retroactive), provided, however, that if the Executive becomes re-employed with another employer and is eligible to receive medical or dental benefits under another employer-provided plan, the benefits under the M&W Plans shall be reduced as provided in Section 6 of this Agreement.  For purposes of determining eligibility of the Executive for benefits under the M&W Plans, the Executive shall be considered to have remained employed until the end of the Severance Period. The parties intend that continued coverage under the M&W Plans shall not constitute a ‘deferral of compensation’ under Treas. Reg. Section 1.409A-1(b) during the period the Executive would be entitled to continuation coverage under Section 4980B (COBRA) (typically 18 months) or during any period in which such continued coverage qualifies as a ‘limited payment’ of an ‘in kind’ benefit under Treas. Reg. Section 1.409A-1(b)(9)(v)(C) and (D).  Any portion of the continued coverage under the M&W Plans that is subject to Section 409A of the Code is intended to qualify as a ‘reimbursement or in-kind benefit plan’ under Treas. Reg. Section 1.409A-3(i)(1)(iv).  If the Corporation reimburses the Executive for the amount of any benefit under this subsection (iv), such reimbursement shall be made on or before the last day of the Executive’s taxable year following the taxable year in which the expense was incurred. In no event shall the amount that the Corporation pays for any such benefit in any one year affect the amount that it will pay in any other year, and in no event shall the benefits described in this paragraph be subject to liquidation or exchange.   (v)  Notwithstanding the payment schedules contained elsewhere in this Section 5, to the extent necessary to comply with the requirements of Section 409A of the Code, if the Executive is a ‘specified employee’ (as defined below) at the time of his termination of employment, the payments under Section 5(a)(ii) shall not be made before the date which is six (6) months and one (1) day after the date of the Executive’s termination of employment (or, if earlier, the date of his death).  For purposes of the preceding sentence, a ‘specified employee’ shall have the meaning set forth in Section 1.409A-1(i) of the Final Regulations under Section 409A of the Code.  As provided by Section 409A of the Code and the regulations thereunder, however, no delay shall apply to payments under Section 5(a)(ii) of the Employment Agreement to the extent the aggregate amount of such payments does not exceed the lesser of:  two (2) times the Executive’s annualized compensation based upon their annual rate of pay for services provided to the Corporation for the calendar year preceding the Corporation’s taxable year in which the Executive has a ‘separation from service’ (as such term is used in Section 409A of the Code) or two (2) times the limit on compensation set forth in Section 401(a)(17) of the Code for the year in which the Executive has a separation from service (the ‘Designated Compensation Amount’).  Any (1) amounts otherwise payable under the terms of Section 5(a)(ii) during the six (6) month period beginning on the date of the Executive’s termination of employment that are in excess of the Designated Compensation Amount and (2) other payments under this Section 5 that are delayed as provided for in this Section 5(c) will be paid in full within thirty (30) days after the end of such six (6) month period, with the remaining payments made on the schedule provided in the applicable subsection of this Section 5.   5     (b)  Termination by the Corporation for Cause.  Subject to the provisions of Section 6 of this Agreement, if the Executive’s employment shall be terminated for Cause during the Employment Period, the Corporation shall have no further obligations to the Executive under this Agreement other than the obligation to pay to the Executive Annual Base Salary through the Date of Termination plus the amount of any compensation previously deferred by the Executive, in each case to the extent theretofore unpaid.   6. Mitigation.   The Executive shall make reasonable efforts to mitigate damages by seeking other comparable employment.  To the extent that the Executive shall receive compensation or benefits from such other employment, the payments to be made and the benefits to be provided by the Corporation as provided in this Agreement shall be correspondingly reduced.  If the Executive shall fail to make reasonable efforts to mitigate damages by seeking other comparable employment, the Corporation’s obligations under this Agreement shall cease until such time as the Executive commences to make such efforts.  If the Executive finally prevails with respect to any dispute among the Corporation, the Executive or others as to the interpretation, terms, validity or enforceability of (including any dispute about the amount of any payment pursuant to) this Agreement, the Corporation agrees to pay all legal fees and expenses which the Executive may reasonably incur as a result of any such dispute; provided, however, that if the Executive is not entitled to recover such legal fees and expenses pursuant to the foregoing provisions of this Section 6, the Executive shall not be entitled to recover any such legal fees or expenses, and she hereby waives any rights to such recovery, under any provision of the By-laws (now or hereafter in effect) of the Corporation which provide for indemnification of or payment to the Executive of legal fees and expenses. Any amounts paid by the Corporation under this paragraph shall be made within thirty (30) days after the proper delivery by the Executive of such evidence of legal fees and expenses that the Corporation may require, but in no event will the reimbursement payment be made later than the end of the calendar year following the calendar year in which the expense is incurred.   7.   Confidential Information and Competitive Conduct.   (a)  Confidential Information.  The Executive shall hold in a fiduciary capacity for the benefit of the Corporation all secret, confidential information, knowledge or data relating to the Corporation or any of its affiliated companies, and its respective businesses, which shall have been obtained by the Executive during the Executive’s employment by the Corporation or any of its affiliated companies and which shall not have been or now or hereafter have become public knowledge (other than by acts by the Executive or representatives of the Executive in violation of this Agreement).  During the Employment Period and for a period of five years thereafter, the Executive shall not, without the prior written consent of the Corporation or as may otherwise be required by law or legal process, communicate or divulge any such information, knowledge or data to anyone other than the Corporation and those designated by them.   (b)  Covenant Not to Compete or Solicit.  During the Employment Period, the Executive shall not offer or sell any products or services that compete in any market with the businesses of VCI, nor shall she render services to any firm, person or corporation so competing   6   with VCI, nor shall she have any interest, direct or indirect, in any business that is so competing with the businesses of VCI; provided, however, that ownership of five percent or less of any class of debt or equity securities which are publicly traded securities shall not be a violation of this covenant.  The Corporation, at its sole option and in its sole discretion, may choose to subject the Executive to additional non-competition and non-solicitation restrictions, for up to two additional years after the end of the Employment Period so long as VCI shall pay to the Executive with respect to each year as to which it has exercised its option an amount equal to the Executive’s then Annual Base Salary in biweekly installments during such year.  The first year of such extension shall be exercised at the option of VCI upon written notice to the Executive not later than 60 days prior to the end of the Employment Period.  The second year of such extension shall be exercised at the option of VCI upon written notice to the Executive not later than 60 days prior to the end of the exercised first year of such extension.  So long as the Executive is employed hereunder, and for any additional period of time described in the preceding sentences, the Executive shall not, directly or indirectly, (i) solicit any employee of VCI with a view to inducing or encouraging such employee to leave the employ of VCI for the purpose of being hired by the Executive or any employer affiliated with the Executive or (ii) solicit, take away, attempt to take away, or otherwise interfere with VCI’s business relationship with any of its respective customers.  For purposes of this Section 7(b), all references to VCI shall include VCI and all affiliated companies.   (c)  In the event of a breach or threatened breach of this Section 7, the Executive agrees that the Corporation shall be entitled to injunctive relief in a court of appropriate jurisdiction to remedy any such breach or threatened breach, the Executive acknowledging that damages would be inadequate and insufficient.        8.   Successors.   (a)  This Agreement is personal to the Executive and without the prior written consent of the Corporation shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution.  This Agreement shall inure to the benefit of and be enforceable by the Executive’s legal representative.   (b) This Agreement shall inure to the benefit of and be binding upon the Corporation and its successors and assigns. 9.   Miscellaneous.   (a)  The captions of this Agreement are not part of the provisions hereof and shall have no force or effect.  This Agreement may not be amended, modified, repealed, waived, extended or discharged except by an agreement in writing signed by the party against whom enforcement of such amendment, modification, repeal, waiver, extension or discharge is sought.  No person, other than pursuant to a resolution of the Board or a committee thereof, shall have authority on behalf of the Corporation to agree to amend, modify, repeal, waive, extend or discharge any provision of this Agreement or anything in reference thereto.   7       (b)  All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows:     James Parkinson c/o Valassis Communications, Inc. 19975 Victor Parkway Livonia, MI  48152   If to the Corporation:   Valassis Communications, Inc. 19975 Victor Parkway Livonia, MI  48152 Attention:  Todd L. Wiseley   (c)  The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement.   (d)  The Corporation may withhold from any amounts payable under this Agreement such Federal, state or local taxes as shall be required to be withheld pursuant to any applicable law or regulation.   (e)  This instrument contains the entire agreement of the Executive and the Corporation with respect to the subject matter hereof, and all promises, representations, understandings, arrangements and prior agreements are merged herein and superseded hereby. (f)  The parties intend that the payments and benefits provided for in this Agreement to either be exempt from Section 409A of the Code or be provided in a manner that complies with Section 409A of the Code.  Notwithstanding anything contained herein to the contrary, all payments and benefits which are payable upon a termination of employment hereunder shall be paid or provided only upon those terminations of employment that constitute a ‘separation from service’ from the Corporation within the meaning of Section 409A of the Code (determined after applying the presumptions set forth in Treas. Reg. Section 1.409A-1(h)(1)).     8   IN WITNESS WHEREOF, the Executive and, pursuant to due authorization from its Board of Directors, the Corporations have caused this Agreement to be executed as of the day and year first above written. VALASSIS COMMUNICATIONS, INC.     By: /s/ Todd Wiseley Name: Todd Wiseley Title: Secretary /s/ James Parkinson James Parkinson   9   AMENDMENT TO EMPLOYMENT AGREEMENT THIS AMENDMENT TO EMPLOYMENT AGREEMENT (the “Amendment”) is made April 24, 2013 by and between Valassis Communications, Inc. (the “Corporation”) and James WHEREAS, the Corporation and the Executive entered into that certain Employment Agreement effective as of January 1, 2012 (the “Employment Agreement”). NOW THEREFORE, in consideration of the above recitals, the parties hereto agree as set forth below. 1. Section 1(b) of the Employment Agreement shall be amended and restated as follows:     “The Employment Period shall commence as of January 1, 2012 (the “Effective Date”) and shall continue until the close of business on December 31, 2015.” 2. Section 2 (a) of the Employment Agreement shall be amended and restated as follows: “(a) Position.  The executive shall serve as the Executive Vice President, Chief Digital and Technology Officer.  This title is subject to change during the employment period.” 3. Section 3(b) of the Employment Agreement shall be amended and restated as follows: “Commencing on January 1, 2013, with respect to each six month period ending on June 30 and December 31 thereafter during the Employment Period, the Executive shall be paid by the Corporation a cash bonus on the following basis: (i) 50% in accordance with the performance targets (the “Targets”) set by the Board and/or the Compensation/Stock Option Committee (the “Committee”), and (ii) 50% in accordance with performance targets set by the President & Chief Executive Officer of the Corporation.  Such targets may be semi-annual, annual or a combination of both. The target annual cash bonus will be between 100%-165% of the Annual Base Salary (the “Target Award”).  The actual amount of the award shall range from zero to 130% of the Target Award based upon achievement of specified performance objectives as set by the Board, the Committee and/or the President & Chief Executive Officer, as applicable.  Each such bonus shall be paid promptly after the end of the applicable performance period.”       4. Section 5(a)(iii) of the Employment Agreement shall be amended and restated as follows: “(iii) in the event of Termination other than by reason of the Executive’s death within 30 days after the Date of Termination an amount equal to the Executive’s then current maximum annual bonus opportunity; and” 5.   All other terms of the Employment Agreement shall remain in full force and effect. 6.   This instrument, together with the Employment Agreement, contains the entire agreement of the parties with respect to the subject matter hereof.     11   IN WITNESS WHEREOF, the Executive and the Corporation have caused this Agreement to be executed as of the day and year first above written.  VALASSIS COMMUNICATIONS, INC.          By:  Name: Todd Wiseley  Title: Secretary                  /s/ James Parkinson  James Parkinson   12  

SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 6-K REPORT OF FOREIGN ISSUER PURSUANT TO RULE 13a-16 OR 15d-16 OF THE SECURITIES EXCHANGE ACT OF 1934 For the month of December, 2016 (Commission File No. 001-33356), Gafisa S.A. (Translation of Registrant's name into English) Av. Nações Unidas No. 8501, 19th floor São Paulo, SP, 05425-070 Federative Republic of Brazil (Address of principal executive office) Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F. Form 20-F X Form 40-F Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1) Yes No X Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): Yes No X Indicate by check mark whether by furnishing the information contained in this Form, the Registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934: Yes No X If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): N/A Gafisa Announces Sale of Stake in Construtora Tenda FOR IMMEDIATE RELEASE - São Paulo, December 14, 2016 - Gafisa S.A. (Bovespa: GFSA3; NYSE: GFA) (“the Company”), a leading Brazilian real estate developer, announced today to its shareholders and the market in general that: In accordance with the Material Fact released today, the Company has entered into a share purchase and sale agreement with Jaguar Growth Asset Management, LLC for the acquisition of up to 30% of the shares issued by Tenda at a price of R$8.13 per share. Under the terms of the agreement, Gafisa will receive cash proceeds of R$231.7 million, valuing Tenda’s full share capital at R$539.0 million. Jaguar Growth Asset Management, LLC is a real estate private equity firm focused exclusively on global growth markets outside of the United States, and founded by investment professionals with significant real estate market expertise and 15 years of experience in Brazil. The transaction follows the decision by Gafisa’s Board of Directors to discontinue efforts to conduct a secondary public offering of Tenda’s shares, with the consequent cancellation of the application for registration of said Offering before the Brazilian Securities and Exchange Commission (CVM). The execution of this transaction is subject to the verification of certain precedent conditions, among which the following are highlighted: (i) The reduction of Tenda's capital stock, without cancellation of shares, with a refund to Gafisa, currently its sole shareholder, of R$100.0 million adjusted based on the SELIC rate, being: (a) R$50.0 million with settlement by December 31, 2018; and (b) the balance to be paid by December 31, 2019, with the possibility of prepayment due to certain financial covenants provided for in the agreement; (ii) The reduction of Gafisa's capital stock in the form of a distribution of shares to its shareholders corresponding to 50% of Tenda's capital stock; and (iii) The conclusion of the proceedings related to the exercise by Gafisa shareholders of their preemptive rights for the acquisition of shares, at the price per share referenced in the transaction., noting that Gafisa will offer within this scope to its shareholders 50% of the shares representative of

Exhibit Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 I, David S. Bassin, Chief Financial Officer of inVentiv Health, Inc., certify that: 1. I have reviewed this quarterly report on Form10-Q of inVentiv Health, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules13a-15(f) and 15d-15(f)) for the registrant and have: (a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information. b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. May 8, 2009 By: /s/DAVID S. BASSIN David S. Bassin Chief Financial Officer

Exhibit 10.1   SHARED SERVICES AGREEMENT This SHARED SERVICES AGREEMENT (the “Agreement”) is made as of the 20th day of September, 2007 by and between Oakley, Inc., a Washington corporation (“Oakley”) and Red.com, Inc. dba Red Digital Cinema Camera Company, a Washington corporation (“Red”). RECITALS A.           Red, a digital cinema camera company owned by Mr. Jim Jannard, the Chairman of Oakley, wishes to purchase certain services from Oakley for the benefit of Red from time to time. B.           Oakley wishes to provide limited services for Red. AGREEMENT NOW, THEREFORE, in consideration of the terms and conditions set forth in this Agreement, Oakley and Red agree as follows: 1.           Shared Services. From time to time, certain of Oakley’s employees shall perform defined, agreed-upon services for Red at a fair market value hourly rate of pay as detailed in Schedule 1, which schedule shall be updated from time to time to reflect changes in the fair market value rates charged and/or changes in the list of Oakley employees who perform some services for Red.  Additionally, Red shall reimburse Oakley at cost for all other out-of-pocket costs incurred by Oakley on behalf of Red. 2.           Payment. Red shall maintain a deposit with Oakley to prepay any costs incurred that shall be replenished on an as needed basis.  Oakley shall determine the costs actually incurred by Red monthly and shall submit an invoice to Red on a monthly basis.  Payment is due upon receipt of invoice.  Should any invoice remain unpaid for more than thirty (30) days, interest shall be paid at a rate equal to the lower of one and one-half percent (1.5%) per month or the highest rate permitted by applicable law. 3.           Indemnification. Red agrees to indemnify, defend and hold Oakley, its affiliates, directors, officers, employees, vendors, and contractors harmless against any and all losses, damages or liabilities (including costs, expenses and reasonable attorney’s fees) resulting from or related to any work performed pursuant to this Agreement, including any negligence or misconduct in performing such services.  Red shall reimburse Oakley promptly for any legal or other expenses reasonably incurred by Oakley in connection with providing evidence in or preparing to serve or serving as a witness with respect to, any lawsuits, investigations, claims or other proceedings arising in any manner out of or in connection with the rendering of services by Oakley hereunder. 4.           Limitation of Liability. In no event, regardless of the legal theory asserted (including without limitation breach of contract, negligence or any tort claim), shall Oakley be liable to Red or any person asserting claims on behalf of or in the right of Red for (i) any claim, liability, loss, damage or expense; or (ii) consequential, indirect, incidental or special damages of any nature suffered by Red (including, without limitation, lost profits or business opportunity costs). 5.           Term and Termination. This Agreement shall commence on the date first written above and shall run for a term of one (1) year, automatically renewing for additional one (1) year terms unless terminated at any time, including within the first year, by either party, with or without cause, pursuant to thirty (30) days written notice. 6.           Non-Solicitation. For the term of this Agreement and for a period of two (2) years thereafter, Red shall not either directly or indirectly solicit, induce, recruit, or encourage to leave the employment of Oakley for any reason any employee of Oakley or person who left the employ of Oakley less than six (6) months prior to such solicitation without receiving prior written permission from the Oakley Chief Executive Officer to make such solicitation.  It is expressly agreed that Oakley would suffer irreparable injury if Red were to breach any of the provisions of this Section 6 and that Oakley would by reason of any such breach be entitled to injunctive relief in a court of appropriate jurisdiction without the need to post a bond or other security and without the need to demonstrate special damages.  The aforementioned injunctive relief is and shall be in addition to any other remedies that may be available to Oakley under this Agreement or otherwise.  Attached hereto as Schedule 2 is a list of current Oakley employees who shall be allowed to leave Oakley for Red upon the agreement of Oakley’s President. 7.           Miscellaneous Provisions. 7.1           No Partnership. Oakley and Red expressly acknowledge and agree that they are not joint ventures or partners, and do not have fiduciary duties with respect to one another, in any manner whatsoever.  Nothing in this Agreement, nor any communication or other action between the parties related to this Agreement, is intended or shall be construed to create a joint venture, partnership or fiduciary relationship between Oakley and Red or their respective owners, partners, shareholders or affiliates. 7.2           Benefits. This Agreement shall inure to the benefit of and shall be binding upon the parties hereto and their respective successors and assigns, heirs and legal representatives. 7.3           Entire Agreement. This Agreement contains the entire agreement of the parties, and supersedes all prior agreements, understandings and negotiations, whether written or oral, with respect to the subject matter hereof. It may not be changed orally but only by an agreement in writing. 7.4           Governing Law. This Agreement shall be construed in accordance with the laws of the State of California, without reference to principles governing choice or conflict of laws. 7.5           Counterparts. This Agreement may be executed in one or more together shall constitute one and the same instrument. [signature page follows]   IN WITNESS WHEREOF, the parties have executed this Agreement as of the date set forth above. Oakley: Oakley, Inc.,   a Washington corporation     By: __________________________     Name: ________________________     Its: ___________________________ Red: Red.com, Inc.,   a Washington corporation     By: __________________________     Name: ________________________

Form N-Q Item 3 I, Peter M. Donovan, certify that: 1.I have reviewed this report on Form N-Q of The Wright Managed Equity Trust (on behalf of Wright Selected Blue Chip Equities Fund, Wright Major Blue Chip Equities Fund and Wright International Blue Chip Equities Fund), 2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3.Based on my knowledge, the schedules of investmentsincluded in this report, fairly present in all material respects the investments of the registrant as of the end of the fiscal quarter for which the report is filed; 4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940 ) for the registrant and have: (a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report, based on such evaluation; and (d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and 5.The registrant’s other certifying officer and I have disclosed to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): (a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting. Date: October 28, 2010 By: /s/ Peter M. Donovan Peter M. Donovan President Form N-Q Item 3 I, Gale L. Bertrand, certify that: 1.I have reviewed this report on Form N-Q of The Wright Managed Equity Trust (on behalf of Wright Selected Blue Chip Equities Fund, Wright Major Blue Chip Equities Fund and Wright International Blue Chip Equities Fund), 2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3.Based on my knowledge, the schedules of investmentsincluded in this report, fairly present in all material respects the investments of the registrant as of the end of the fiscal quarter for which the report is filed; 4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940 ) for the registrant and have: (a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report, based on such evaluation; and (d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and 5.The registrant’s other certifying officer and I have disclosed to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): (a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting. Date: October 18, 2010 By: /s/ Gale L. Bertrand Gale L. Bertrand Treasurer

Name: Commission Regulation (EC) No 1546/2004 of 30 August 2004 fixing the export refunds on malt Type: Regulation Subject Matter: trade policy; foodstuff Date Published: nan 31.8.2004 EN Official Journal of the European Union L 280/7 COMMISSION REGULATION (EC) No 1546/2004 of 30 August 2004 fixing the export refunds on malt THE COMMISSION OF THE EUROPEAN COMMUNITIES, Having regard to the Treaty establishing the European Community, Having regard to Council Regulation (EC) No 1784/2003 of 29 September 2003 on the common organisation of the market in cereals (1), and in particular Article 13(3) thereof, Whereas: (1) Article 13 of Regulation (EC) No 1784/2003 provides that the difference between quotations or prices on the world market for the products listed in Article 1 of that Regulation and prices for those products within the Community may be covered by an export refund. (2) The refunds must be fixed taking into account the factors referred to in Article 1 of Commission Regulation (EC) No 1501/95 of 29 June 1995 laying down certain detailed rules under Council Regulation (EEC) No 1766/92 on the granting of export refunds on cereals and the measures to be taken in the event of disturbance on the market for cereals (2). (3) The refund applicable in the case of malts must be calculated with amount taken of the quantity of cereals required to manufacture the products in question. The said quantities are laid down in Regulation (EC) No 1501/95. (4) The world market situation or the specific requirements of certain markets may make it necessary to vary the refund for certain products according to destination. (5) The refund must be fixed once a month. It may be altered in the intervening period. (6) It follows from applying these rules to the present situation on markets in cereals, and in particular to quotations or prices for these products within the Community and on the world market, that the refunds should be as set out in the Annex hereto. (7) The measures provided for in this Regulation are in accordance with the opinion of the Management Committee for Cereals, HAS ADOPTED THIS REGULATION: Article 1 The export refunds on malt listed in Article 1(1)(c) of Regulation (EC) No 1784/2003 shall be as set out in the Annex hereto. Article 2 This Regulation shall enter into force on 1 September 2004. This Regulation shall be binding in its entirety and directly applicable in all Member States. Done at Brussels, 30 August 2004. For the Commission Franz FISCHLER Member of the Commission (1) OJ L 270, 21.10.2003, p. 78. (2) OJ L 147, 30.6.1995, p. 7. Regulation as last amended by Regulation (EC) No 1431/2003 (OJ L 203, 12.8.2003, p. 16). ANNEX to the Commission Regulation of 30 August 2004 fixing the export refunds on malt Product code Destination Unit of measurement Amount of refunds 1107 10 19 9000 A00 EUR/t 0,00 1107 10 99 9000 A00 EUR/t 0,00 1107 20 00 9000 A00 EUR/t 0,00 NB: The product codes and the A series destination codes are set out in Commission Regulation (EEC) No 3846/87 (OJ L 366, 24.12.1987, p. 1) as amended. The numeric destination codes are set out in Commission Regulation (EC) No 2081/2003 (OJ L 313, 28.11.2003, p. 11).

Exhibit 5.2 1 NEW YORK, NY10104-0050 TELEPHONE: 212.468.8000 FACSIMILE: 212.468.7900 WWW.MOFO.COM morrison & foerster llp new york, san francisco, los angeles, palo alto, sacramento, san diego, denver, northern virginia, washington, d.c. tokyo, london, brussels, beijing, shanghai, hong kong September 19, 2012 BioLineRx Ltd. P.O. Box 45158 19 Hartum Street Jerusalem 91450, Israel Re: BioLineRx Ltd. — Offering of 20,000,000 Ordinary Shares Ladies and Gentlemen: We have acted as counsel to BioLineRx Ltd. (the “Company”), a corporation organized under the laws of the State of Israel, in connection with the preparation of the Registration Statement on Form S-8 (the “Registration Statement”), to be filed with the Securities and Exchange Commission (“SEC”) under the Securities Act of 1933, as amended (the “Act”), in connection with the registration under the Act of 20,000,000 ordinary shares, par value NIS 0.01 per share (the “Shares”), issuable under the BioLineRx Ltd. 2003 Share Incentive Plan (the “Plan”).The Shares may be represented by the Company’s American Depositary Shares (“ADSs”) under the Deposit Agreement dated as of July 21, 2011 (the “Deposit Agreement”), among the Company, The Bank of New York, as depositary, and the holders from time to time of the Company’s ADSs. We have reviewed the Deposit Agreement and the American Depositary Receipts (“ADRs”) evidencing the ADSs and have considered such aspects of New York law as we have deemed relevant for purposes of the opinion set forth below.In connection with this opinion, we have examined such corporate records, documents, instruments, certificates of public officials and of the Company and such questions of law as we have deemed necessary for the purpose of rendering the opinions set forth herein. In such examination, we have assumed the genuineness of all signatures and the authenticity of all items submitted to us as originals and the conformity with originals of all items submitted to us as copies. Based on the foregoing, and subject to the further assumptions and qualifications set forth below, it is our opinion that: 1. Upon issuance by the Depositary of the ADRs evidencing ADSs, against the deposit of the duly and validly issued Shares in accordance with the provisions of the Deposit Agreement, the ADRs will be duly and validly issued and the persons in whose names such ADRs are registered will be entitled to the rights specified therein and in the Deposit Agreement. BioLineRx Ltd. September 19, 2012 Page 2 2. The ADSs, when sold or delivered to the award holders in accordance with the Plan and the options or other awards granted thereunder, will entitle the holders of such ADSs to the rights specified in the Deposit Agreement. Please note that we are opining only as to the matters expressly set forth herein, that no opinion should be inferred as to any other matter.We are opining herein as to the New York Business Corporation Law as in effect on the date hereof, and we express no opinion with respect to any other laws, rules or regulations.This opinion is based upon currently existing laws, rules, regulations and judicial decisions, and we disclaim any obligation to advise you of any change in any of these sources of law or subsequent legal or factual developments which might affect any matters or opinions set forth herein.This opinion is being rendered solely in connection with the registration of the offering and sale of the Shares, as represented by ADSs, pursuant to the registration requirements of the Act. We hereby consent to the use of this opinion as Exhibit 5.2 to the Registration Statement and to the reference to us under the caption “Legal Matters” in the prospectus included in the Registration Statement.In giving such consent, we do not hereby admit that we are acting within the category of persons whose consent is required under Section 7 of the Act or the rules or regulations of the SEC thereunder. Very truly yours, /s/ Morrison & Foerster LLP

Exhibit 10.8   FIRST AMENDED AND RESTATED EMPLOYMENT AGREEMENT   This FIRST AMENDED AND RESTATED EMPLOYMENT AGREEMENT is entered into as of August 8, 2003 by and among Riverwood International Corporation, a Delaware corporation (“Employer”), Riverwood Holding, Inc., a Delaware corporation to be renamed Graphic Packaging Corporation (“Holding”) and Daniel J. Blount (“Executive”).     WHEREAS, Employer currently employs Executive pursuant to an Employment Agreement dated as of September 1, 1998 (the “Prior Agreement”);   WHERAS, Holding entered into an Agreement and Plan of Merger (the “Merger Agreement”) dated as of March 25, 2003 with Graphic Packaging International Corporation (“GPIC”) pursuant to which GPIC will become a wholly owned subsidiary of Holding (such transaction, the “Merger”) on the Effective Date (as such term is defined in the Merger Agreement);   WHEREAS, Holding, Employer and Executive desire to amend the Prior Agreement to become effective on the Effective Date.   NOW, THEREFORE, in consideration of the promises and mutual covenants contained herein and for other good and valuable consideration, Employer and Executive hereby agree and the Prior Agreement is hereby amended and restated in its entirety, as follows:   1              AGREEMENT TO EMPLOY.  UPON THE TERMS AND SUBJECT TO THE CONDITIONS OF THIS AGREEMENT, EMPLOYER HEREBY EMPLOYS EXECUTIVE, AND EXECUTIVE HEREBY ACCEPTS EMPLOYMENT BY EMPLOYER.   2              TERM; POSITION AND RESPONSIBILITIES.   (A)           TERM OF EMPLOYMENT.  UNLESS EXECUTIVE’S EMPLOYMENT SHALL SOONER TERMINATE PURSUANT TO SECTION 7, EMPLOYER SHALL EMPLOY EXECUTIVE FOR A TERM COMMENCING ON THE EFFECTIVE DATE AND ENDING ON THE THIRD ANNIVERSARY OF THAT DATE (THE “EMPLOYMENT PERIOD”).   (B)           POSITION AND RESPONSIBILITIES.  DURING THE EMPLOYMENT PERIOD, EXECUTIVE SHALL SERVE AS SENIOR VICE PRESIDENT, INTEGRATION OF EMPLOYER AND SHALL HAVE (I) RESPONSIBILITY FOR THE ACHIEVEMENT OF SYNERGIES IN CONNECTION WITH THE COMBINATION OF EMPLOYER’S BUSINESS WITH GPIC’S BUSINESS FOLLOWING THE MERGER, (II) RESPONSIBILITY FOR THE OPERATIONAL ASPECTS OF EMPLOYER’S INFORMATION TECHNOLOGY FUNCTION, (III) RESPONSIBILITY FOR THE MANAGEMENT OF THE INTEGRATION STAFF OF EMPLOYER AND (IV) SUCH OTHER     DUTIES CONSISTENT WITH EXECUTIVE’S TITLE AND POSITION AS THE BOARD OF DIRECTORS OF EMPLOYER (“EMPLOYER’S BOARD”) SPECIFIES FROM TIME TO TIME.  EXECUTIVE SHALL REPORT TO THE COMPANY’S PRESIDENT AND CHIEF EXECUTIVE OFFICER.  EXECUTIVE SHALL DEVOTE ALL OF HIS SKILL, KNOWLEDGE AND WORKING TIME (EXCEPT FOR (I) VACATION TIME AS SET FORTH IN SECTION 6(C) AND ABSENCE FOR SICKNESS OR SIMILAR DISABILITY AND (II) TO THE EXTENT THAT IT DOES NOT INTERFERE WITH THE PERFORMANCE OF EXECUTIVE’S DUTIES HEREUNDER, (A) SUCH REASONABLE TIME AS MAY BE DEVOTED TO SERVICE ON BOARDS OF DIRECTORS OF OTHER CORPORATIONS AND ENTITIES, SUBJECT TO THE PROVISIONS OF SECTION 9, AND THE FULFILLMENT OF CIVIC RESPONSIBILITIES AND (B) SUCH REASONABLE TIME AS MAY BE NECESSARY FROM TIME TO TIME FOR PERSONAL FINANCIAL MATTERS) TO THE CONSCIENTIOUS PERFORMANCE OF THE DUTIES AND RESPONSIBILITIES OF SUCH POSITION.  IF SO ELECTED OR DESIGNATED BY THE RESPECTIVE SHAREHOLDERS THEREOF, EXECUTIVE SHALL SERVE AS A MEMBER OF THE BOARDS OF DIRECTORS OF HOLDING, EMPLOYER AND THEIR RESPECTIVE AFFILIATES DURING THE EMPLOYMENT PERIOD WITHOUT ADDITIONAL COMPENSATION.   3              BASE SALARY.  AS COMPENSATION FOR THE SERVICES TO BE PERFORMED BY EXECUTIVE DURING THE EMPLOYMENT PERIOD, EMPLOYER SHALL PAY EXECUTIVE A BASE SALARY AT AN ANNUALIZED RATE OF $325,000, PAYABLE IN INSTALLMENTS ON EMPLOYER’S REGULAR PAYROLL DATES, AND, IN THE EVENT THAT EXECUTIVE’S EMPLOYMENT HEREUNDER IS TERMINATED BY DEATH, FOR THE REMAINDER OF THE PAY PERIOD IN WHICH DEATH OCCURS AND FOR ONE MONTH THEREAFTER.   4              INCENTIVE COMPENSATION ARRANGEMENTS.  DURING THE EMPLOYMENT PERIOD, EXECUTIVE SHALL BE ENTITLED TO THE FOLLOWING INCENTIVE COMPENSATION.   (A)           SYNERGY ACHIEVEMENT AWARD.  FOR EACH OF THE FIRST THREE YEARS, MEASURED AS PROVIDED IN SECTION 4(A)(II) BELOW, FOLLOWING THE EFFECTIVE DATE (EACH, AN “AWARD YEAR”), THE EXECUTIVE SHALL BE ELIGIBLE TO RECEIVE A CASH BONUS (THE “SYNERGY ACHIEVEMENT AWARD”) DETERMINED IN ACCORDANCE WITH THIS SECTION 4(A).   (I)            THE SYNERGY ACHIEVEMENT AWARD WILL BE ADMINISTERED BY A COMMITTEE INITIALLY CONSISTING OF B. CHARLES AMES, KEVIN CONWAY AND STEPHEN M. HUMPHREY (THE “SYNERGY REVIEW COMMITTEE”).  REPLACEMENTS FOR ANY MEMBER OF THE SYNERGY REVIEW COMMITTEE SHALL BE NAMED BY THE CHIEF EXECUTIVE OFFICER OF EMPLOYER.  FOR EACH AWARD YEAR IN THE EMPLOYMENT PERIOD THE SYNERGY REVIEW COMMITTEE SHALL, IN ITS DISCRETION, DETERMINE THE VALUE OF THE SYNERGIES ACHIEVED.   (II)           THE FIRST AWARD YEAR SHALL BEGIN ON THE FIRST DAY OF THE CALENDAR MONTH IN WHICH THE EFFECTIVE DATE OCCURS.  THE SECOND AND THIRD AWARD YEARS SHALL BEGIN ON THE FIRST AND SECOND ANNIVERSARIES, RESPECTIVELY, OF THE FIRST DAY OF THE FIRST AWARD YEAR.   (III)          THE SYNERGY ACHIEVEMENT AWARD (IF ANY) FOR A GIVEN AWARD YEAR SHALL BE CALCULATED IN ACCORDANCE WITH SCHEDULE I.   2   (IV)          UNLESS OTHERWISE DETERMINED BY THE SYNERGY REVIEW COMMITTEE AND THE COMPENSATION COMMITTEE OF EMPLOYER (THE “COMPENSATION COMMITTEE”), THE SYNERGY ACHIEVEMENT AWARD (IF ANY) EARNED IN RESPECT OF AN AWARD YEAR SHALL BE PAID TO THE EXECUTIVE ON THE EARLIER OF SIXTY (60) DAYS FOLLOWING (I) THE LAST DAY OF THE AWARD YEAR IN WHICH THE TOTAL SYNERGIES ACHIEVED SINCE THE EFFECTIVE DATE REACHES $59.1 MILLION AND (II) THE LAST DAY OF THE THIRD AWARD YEAR.   (V)           THE SYNERGY ACHIEVEMENT AWARD IS SUBJECT TO SUCH CONDITIONS AS THE COMPENSATION COMMITTEE REASONABLY DETERMINES NECESSARY TO PREVENT THE TREATMENT OF THE SYNERGY ACHIEVEMENT AWARD AS OTHER THAN “PERFORMANCE BASED COMPENSATION” WITHIN THE MEANING OF SECTION 162(M)(4)(C) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”).   (B)           EQUITY AWARDS   (I)            OPTION EXCHANGE.  EXECUTIVE SHALL SURRENDER 1,200 UNVESTED SERVICE OPTIONS TO PURCHASE CLASS A COMMON STOCK OF EMPLOYER (“SERVICE OPTIONS”) AND 3,000 UNVESTED PERFORMANCE OPTIONS TO PURCHASE CLASS A COMMON STOCK OF EMPLOYER (“PERFORMANCE OPTIONS”) GRANTED TO EXECUTIVE PURSUANT TO THE RIVERWOOD HOLDING, INC. STOCK INCENTIVE PLAN (THE “1996 STOCK INCENTIVE PLAN”), 3,277 UNVESTED PERFORMANCE OPTIONS GRANTED TO EXECUTIVE PURSUANT TO THE RIVERWOOD HOLDING, INC. SUPPLEMENTAL LONG TERM INCENTIVE PLAN (THE “1999 LTIP”) AND 17,136 UNVESTED SERVICE OPTIONS GRANTED TO EXECUTIVE PURSUANT TO THE RIVERWOOD HOLDING, INC. 2002 STOCK INCENTIVE PLAN (THE “2002 STOCK PLAN”) (ALL SUCH UNVESTED SERVICE OPTIONS AND PERFORMANCE OPTIONS, THE “UNVESTED OPTIONS”) AND EXECUTIVE SHALL RECEIVE (I) 4,923 SERVICE OPTIONS (THE “NEW OPTIONS”) PURSUANT TO THE 2003 RIVERWOOD HOLDING, INC. LONG TERM INCENTIVE PLAN (THE “2003 LTIP”), ON TERMS SUBSTANTIALLY SIMILAR TO THOSE PROVIDED TO OTHER SENIOR EXECUTIVES OF EMPLOYER AND (II) 7,384 RESTRICTED STOCK UNITS (THE “2003 EXCHANGE RESTRICTED UNITS”) PURSUANT TO THE 2003 LTIP ON TERMS SUBSTANTIALLY SIMILAR TO THOSE PROVIDED TO OTHER SENIOR EXECUTIVES OF EMPLOYER.   (II)           UNIT EXCHANGE.  EXECUTIVE SHALL SURRENDER 1,500 INCENTIVE STOCK UNITS GRANTED TO EXECUTIVE PURSUANT TO THE 1999 LTIP AND 1,800 RESTRICTED STOCK UNITS GRANTED TO EXECUTIVE PURSUANT TO THE 2002 STOCK PLAN AND EXECUTIVE SHALL RECEIVE 3,300 RESTRICTED STOCK UNITS PURSUANT TO THE 2003 LTIP (THE “2003 REPLACEMENT RESTRICTED UNITS” AND, TOGETHER WITH THE 2003 EXCHANGE RESTRICTED UNITS, THE “NEW RESTRICTED UNITS”) ON TERMS SUBSTANTIALLY SIMILAR TO THOSE PROVIDED TO OTHER SENIOR EXECUTIVES OF EMPLOYER.   5              EMPLOYEE BENEFITS.  DURING THE EMPLOYMENT PERIOD, EMPLOYEE BENEFITS, INCLUDING LIFE, MEDICAL, DENTAL, ACCIDENTAL DEATH AND DISMEMBERMENT, BUSINESS TRAVEL ACCIDENT, PRESCRIPTION DRUG AND DISABILITY INSURANCE, SHALL BE PROVIDED TO EXECUTIVE IN ACCORDANCE WITH THE PROGRAMS OF EMPLOYER THEN AVAILABLE TO ITS SENIOR EXECUTIVES, AS THE SAME MAY BE AMENDED AND IN EFFECT FROM TIME TO TIME.  EXECUTIVE SHALL ALSO BE ENTITLED TO   3   PARTICIPATE IN ALL OF EMPLOYER’S PROFIT SHARING, PENSION, RETIREMENT, DEFERRED COMPENSATION AND SAVINGS PLANS, AS THE SAME MAY BE AMENDED AND IN EFFECT FROM TIME TO TIME, APPLICABLE TO SENIOR EXECUTIVES OF EMPLOYER.  THE BENEFITS REFERRED TO IN THIS SECTION 5 SHALL BE PROVIDED TO EXECUTIVE ON A BASIS THAT IS COMMENSURATE WITH EXECUTIVE’S POSITION AND DUTIES WITH EMPLOYER HEREUNDER AND THAT IS NO LESS FAVORABLE THAN THAT OF SIMILARLY SITUATED EMPLOYEES OF EMPLOYER.   6              PERQUISITES AND EXPENSES.   (A)           GENERAL.  DURING THE EMPLOYMENT PERIOD, EXECUTIVE SHALL BE ENTITLED TO THE PERQUISITES SET FORTH ON SCHEDULE II HERETO.   (B)           PROFESSIONAL DEVELOPMENT.  EMPLOYER SHALL REIMBURSE EXECUTIVE FOR REASONABLE EXPENSES INCURRED IN CONNECTION WITH (I) CONTINUING EDUCATION FOR THE MAINTENANCE OF EXECUTIVE’S LICENSE AS A CERTIFIED PUBLIC ACCOUNTANT, (II) EXECUTIVE’S PARTICIPATION IN THE “WORLD CLASS” CHIEF FINANCIAL OFFICER EDUCATION PROGRAM AND (III) EXECUTIVE’S PARTICIPATION IN EDUCATIONAL PROGRAMS RELEVANT TO HIS RESPONSIBILITIES FOR THE EMPLOYER’S INFORMATION TECHNOLOGY FUNCTION.   (C)           BUSINESS TRAVEL, LODGING, ETC.  EMPLOYER SHALL REIMBURSE EXECUTIVE FOR REASONABLE TRAVEL, LODGING, MEAL AND OTHER REASONABLE EXPENSES INCURRED BY HIM IN CONNECTION WITH HIS PERFORMANCE OF SERVICES HEREUNDER UPON SUBMISSION OF EVIDENCE, SATISFACTORY TO EMPLOYER, OF THE INCURRENCE AND PURPOSE OF EACH SUCH EXPENSE AND OTHERWISE IN ACCORDANCE WITH EMPLOYER’S BUSINESS TRAVEL REIMBURSEMENT POLICY APPLICABLE TO ITS SENIOR EXECUTIVES AS IN EFFECT FROM TIME TO TIME.   (D)           VACATION.  DURING THE EMPLOYMENT PERIOD, EXECUTIVE SHALL BE ENTITLED TO A NUMBER OF WEEKS OF PAID VACATION ON AN ANNUALIZED BASIS, WITHOUT CARRYOVER ACCUMULATION, EQUAL TO THE GREATER OF (I) FOUR WEEKS AND (II) THE NUMBER OF WEEKS OF PAID VACATION PER YEAR APPLICABLE TO SENIOR EXECUTIVES OF EMPLOYER IN ACCORDANCE WITH ITS VACATION POLICY AS IN EFFECT FROM TIME TO TIME.   7              TERMINATION OF EMPLOYMENT.   (A)           TERMINATION DUE TO DEATH OR DISABILITY.  IN THE EVENT THAT EXECUTIVE’S EMPLOYMENT HEREUNDER TERMINATES DUE TO DEATH OR IS TERMINATED BY EMPLOYER DUE TO EXECUTIVE’S DISABILITY (AS DEFINED BELOW), NO TERMINATION BENEFITS SHALL BE PAYABLE TO OR IN RESPECT OF EXECUTIVE EXCEPT AS PROVIDED IN SECTION 7(F)(II).  FOR PURPOSES OF THIS AGREEMENT, “DISABILITY” SHALL MEAN A PHYSICAL OR MENTAL DISABILITY THAT PREVENTS OR WOULD PREVENT THE PERFORMANCE BY EXECUTIVE OF HIS DUTIES HEREUNDER FOR A CONTINUOUS PERIOD OF SIX MONTHS OR LONGER.  THE DETERMINATION OF EXECUTIVE’S DISABILITY SHALL (I) BE MADE BY AN INDEPENDENT PHYSICIAN WHO IS REASONABLY ACCEPTABLE TO EMPLOYER AND EXECUTIVE (OR HIS REPRESENTATIVE), (II) BE FINAL AND BINDING ON THE PARTIES HERETO AND (III) BE BASED ON SUCH   4   COMPETENT MEDICAL EVIDENCE AS SHALL BE PRESENTED TO SUCH INDEPENDENT PHYSICIAN BY EXECUTIVE AND/OR EMPLOYER OR BY ANY PHYSICIAN OR GROUP OF PHYSICIANS OR OTHER COMPETENT MEDICAL EXPERTS EMPLOYED BY EXECUTIVE AND/OR EMPLOYER TO ADVISE SUCH INDEPENDENT PHYSICIAN.   (B)           TERMINATION BY EMPLOYER FOR CAUSE.  EXECUTIVE MAY BE TERMINATED FOR CAUSE (AS DEFINED BELOW) BY EMPLOYER, PROVIDED THAT EXECUTIVE SHALL BE PERMITTED TO ATTEND A MEETING OF EMPLOYER’S BOARD WITHIN 30 DAYS AFTER DELIVERY TO HIM OF A NOTICE OF TERMINATION (AS DEFINED BELOW) PURSUANT TO THIS SECTION 7(B) TO EXPLAIN WHY HE SHOULD NOT BE TERMINATED FOR CAUSE AND, IF FOLLOWING ANY SUCH EXPLANATION BY EXECUTIVE, EMPLOYER’S BOARD DETERMINES THAT EMPLOYER DOES NOT HAVE CAUSE TO TERMINATE EXECUTIVE’S EMPLOYMENT, ANY SUCH PRIOR NOTICE OF TERMINATION DELIVERED TO EXECUTIVE SHALL THEREUPON BE WITHDRAWN AND OF NO FURTHER FORCE OR EFFECT.  “CAUSE” SHALL MEAN (I) THE WILLFUL FAILURE OF EXECUTIVE SUBSTANTIALLY TO PERFORM HIS DUTIES HEREUNDER (OTHER THAN ANY SUCH FAILURE DUE TO EXECUTIVE’S PHYSICAL OR MENTAL ILLNESS) OR OTHER WILLFUL AND MATERIAL BREACH BY EXECUTIVE OF ANY OF HIS OBLIGATIONS HEREUNDER OR UNDER ANY OPTION AGREEMENT OR OTHER INCENTIVE AWARD AGREEMENT, AFTER A WRITTEN DEMAND FOR SUBSTANTIAL PERFORMANCE HAS BEEN DELIVERED, AND A REASONABLE OPPORTUNITY TO CURE HAS BEEN GIVEN, TO EXECUTIVE BY EMPLOYER’S BOARD, WHICH DEMAND IDENTIFIES IN REASONABLE DETAIL THE MANNER IN WHICH EMPLOYER’S BOARD BELIEVES THAT EXECUTIVE HAS NOT SUBSTANTIALLY PERFORMED HIS DUTIES OR HAS BREACHED HIS OBLIGATIONS, (II) EXECUTIVE’S ENGAGING IN WILLFUL AND SERIOUS MISCONDUCT THAT HAS CAUSED OR IS REASONABLY EXPECTED TO RESULT IN MATERIAL INJURY TO EMPLOYER OR ANY OF ITS AFFILIATES OR (III) EXECUTIVE’S CONVICTION OF, OR ENTERING A PLEA OF GUILTY OR NOLO CONTENDERE TO, A CRIME THAT CONSTITUTES A FELONY.   (C)           TERMINATION WITHOUT CAUSE.  A TERMINATION “WITHOUT CAUSE” SHALL MEAN A TERMINATION OF EMPLOYMENT BY EMPLOYER OTHER THAN DUE TO DISABILITY AS DESCRIBED IN SECTION 7(A) OR FOR CAUSE AS DESCRIBED IN SECTION 7(B).   (D)           TERMINATION BY EXECUTIVE.  EXECUTIVE MAY TERMINATE HIS EMPLOYMENT FOR ANY REASON.  A TERMINATION OF EMPLOYMENT BY EXECUTIVE FOR “GOOD REASON” SHALL MEAN A TERMINATION BY EXECUTIVE OF HIS EMPLOYMENT WITH EMPLOYER WITHIN 30 DAYS FOLLOWING THE OCCURRENCE, WITHOUT EXECUTIVE’S CONSENT, OF ANY OF THE FOLLOWING EVENTS: (I) THE ASSIGNMENT TO EXECUTIVE OF DUTIES THAT ARE SIGNIFICANTLY DIFFERENT FROM, AND THAT RESULT IN A SUBSTANTIAL DIMINUTION OF, THE DUTIES THAT HE IS TO ASSUME ON THE DATE HEREOF, (II) THE FAILURE OF EMPLOYER TO OBTAIN THE ASSUMPTION OF THIS AGREEMENT BY ANY SUCCESSOR (AS DEFINED BELOW) TO EMPLOYER AS CONTEMPLATED BY SECTION 14, (III) A REDUCTION IN THE RATE OF EXECUTIVE’S BASE SALARY OR (IV) A MATERIAL BREACH BY EMPLOYER OF ANY OF ITS OBLIGATIONS HEREUNDER OR BY HOLDING OF ANY OF ITS OBLIGATIONS UNDER ANY OPTION AGREEMENT OR OTHER INCENTIVE AWARD AGREEMENT, PROVIDED THAT, IN THE CASE OF ANY OF CLAUSES (I), (III) OR (IV), WITHIN 30 DAYS FOLLOWING THE OCCURRENCE OF ANY OF THE EVENTS SET FORTH THEREIN, EXECUTIVE SHALL HAVE DELIVERED WRITTEN NOTICE TO EMPLOYER OF HIS INTENTION TO TERMINATE HIS EMPLOYMENT FOR GOOD REASON, WHICH NOTICE SPECIFIES IN REASONABLE DETAIL THE   5   CIRCUMSTANCES CLAIMED TO GIVE RISE TO EXECUTIVE’S RIGHT TO TERMINATE HIS EMPLOYMENT FOR GOOD REASON, AND EMPLOYER OR HOLDING, AS THE CASE MAY BE, SHALL NOT HAVE CURED SUCH CIRCUMSTANCES TO THE REASONABLE SATISFACTION OF EXECUTIVE.   (E)           NOTICE OF TERMINATION.  ANY TERMINATION BY EMPLOYER PURSUANT TO SECTION 7(A), 7(B) OR 7(C), OR BY EXECUTIVE PURSUANT TO SECTION 7(D), SHALL BE COMMUNICATED BY A WRITTEN NOTICE OF TERMINATION ADDRESSED TO THE OTHER PARTIES TO THIS AGREEMENT.  A ”NOTICE OF TERMINATION” SHALL MEAN A NOTICE STATING THAT EXECUTIVE’S EMPLOYMENT WITH EMPLOYER HAS BEEN OR WILL BE TERMINATED.   (F)            PAYMENTS UPON CERTAIN TERMINATIONS.   (I)            IN THE EVENT OF A TERMINATION OF EXECUTIVE’S EMPLOYMENT BY EMPLOYER WITHOUT CAUSE OR A TERMINATION BY EXECUTIVE OF HIS EMPLOYMENT FOR GOOD REASON DURING THE EMPLOYMENT PERIOD OR A TERMINATION OF EXECUTIVE’S EMPLOYMENT AS A RESULT OF THE EXPIRATION OF THE EMPLOYMENT PERIOD, EMPLOYER SHALL PAY TO EXECUTIVE (OR, FOLLOWING HIS DEATH, TO EXECUTIVE’S BENEFICIARIES):   (A)          HIS BASE SALARY, WHICH SHALL BE PAYABLE IN INSTALLMENTS ON EMPLOYER’S REGULAR PAYROLL DATES, FOR THE PERIOD  (THE “SEVERANCE PERIOD”) BEGINNING ON THE DATE OF TERMINATION (AS DEFINED BELOW) AND ENDING ON THE EIGHTEEN MONTH ANNIVERSARY OF THE DATE OF TERMINATION, AND   (B)           ANY EARNED BUT UNPAID SYNERGY ACHIEVEMENT AWARDS, PAYABLE PROMPTLY FOLLOWING SUCH TERMINATION OF EMPLOYMENT AND A PRO RATA PORTION OF THE SYNERGY ACHIEVEMENT AWARD (THE “PRO RATA SYNERGY AWARD”) THAT WOULD HAVE BEEN PAYABLE TO EXECUTIVE FOR THE AWARD YEAR THAT INCLUDES THE DATE OF TERMINATION, PAYABLE PROMPTLY FOLLOWING THE CALCULATION THEREOF, LESS   (C)           THE AMOUNT, IF ANY, PAID OR PAYABLE TO EXECUTIVE UNDER THE TERMS OF ANY SEVERANCE PLAN, POLICY, PROGRAM OR PRACTICE OF HOLDING, EMPLOYER OR ANY OF THEIR RESPECTIVE AFFILIATES APPLICABLE TO EXECUTIVE, AS IN EFFECT ON THE DATE OF TERMINATION;   provided that Employer may, at any time, pay to Executive, in a single lump sum and in satisfaction of Employer’s obligations under clauses (A) and (B) of this Section 7(f)(i), an amount equal to (x) the installments of the Base Salary then remaining to be paid to Executive pursuant to clause (A) above, and the amount, if any, then remaining to be paid to Executive pursuant to clause (B) above, less (y) the amount, if any, remaining to be paid to Executive pursuant to any plan, policy, program or practice identified under clause (C) above.   If Executive’s employment shall terminate and he is entitled to receive continued payments of his Base Salary under clause (A) of this Section 7(f)(i), Employer   6   shall (x) continue to provide to Executive during the Severance Period the life, medical, dental and prescription drug benefits referred to in Section 5 (the “Continued Benefits”) and (y) reimburse Executive for expenses incurred by him for outplacement and career counseling services provided to Executive for an aggregate amount not in excess of the lesser of (i) $25,000 and (ii) 20% of Executive’s Base Salary.   Executive shall not have a duty to mitigate the costs to Employer under this Section 7(f)(i), except that Continued Benefits shall be reduced or canceled to the extent of any comparable benefit coverage earned by (whether or not paid currently) or offered to Executive during the Severance Period by a subsequent employer or other Person (as defined below) for which Executive performs services, including but not limited to consulting services.   (II)           IF EXECUTIVE’S EMPLOYMENT SHALL TERMINATE UPON HIS DEATH OR DISABILITY OR IF EMPLOYER SHALL TERMINATE EXECUTIVE’S EMPLOYMENT FOR CAUSE OR EXECUTIVE SHALL TERMINATE HIS EMPLOYMENT WITHOUT GOOD REASON DURING THE EMPLOYMENT PERIOD, EMPLOYER SHALL PAY EXECUTIVE HIS FULL BASE SALARY THROUGH THE DATE OF TERMINATION; PLUS, IN THE CASE OF TERMINATION UPON EXECUTIVE’S DEATH OR DISABILITY, (I) ANY EARNED BUT UNPAID SYNERGY ACHIEVEMENT AWARD AND (II) THE PRO RATA SYNERGY AWARD (DETERMINED AS PROVIDED IN SECTION 7(F)(I)) FOR THE PORTION OF THE AWARD YEAR PRECEDING EXECUTIVE’S DATE OF TERMINATION (EXCLUSIVE OF ANY TIME BETWEEN THE ONSET OF A PHYSICAL OR MENTAL DISABILITY THAT PREVENTS THE PERFORMANCE BY EXECUTIVE OF HIS DUTIES HEREUNDER AND THE RESULTING DATE OF TERMINATION); PLUS, IN THE CASE OF TERMINATION UPON EXECUTIVE’S DEATH, HIS FULL BASE SALARY FOR THE REMAINDER OF THE PAY PERIOD IN WHICH DEATH OCCURS AND FOR ONE MONTH THEREAFTER, AS PROVIDED IN SECTION 3.   (III)          EXCEPT AS SPECIFICALLY SET FORTH IN THIS SECTION 7(F), NO BENEFITS PAYABLE TO EXECUTIVE UNDER ANY OTHERWISE APPLICABLE PLAN, POLICY, PROGRAM OR PRACTICE OF EMPLOYER SHALL BE LIMITED BY THIS SECTION 7(F), PROVIDED THAT (X) EXECUTIVE SHALL NOT BE ENTITLED TO RECEIVE ANY PAYMENTS OR BENEFITS UNDER ANY SUCH PLAN, POLICY, PROGRAM OR PRACTICE PROVIDING ANY BONUS OR INCENTIVE COMPENSATION (AND THE PROVISIONS OF THIS SECTION 7(F) SHALL SUPERSEDE THE PROVISIONS OF ANY SUCH PLAN, POLICY, PROGRAM OR PRACTICE), AND (Y) THE AMOUNT, IF ANY, PAID OR PAYABLE TO EXECUTIVE UNDER THE TERMS OF ANY SUCH PLAN, POLICY, PROGRAM OR PRACTICE RELATING TO SEVERANCE SHALL REDUCE THE AMOUNTS PAYABLE UNDER SECTION 7(F)(I) AS PROVIDED IN CLAUSE (C) THEREOF.   (G)           DATE OF TERMINATION.  AS USED IN THIS AGREEMENT, THE TERM “DATE OF TERMINATION” SHALL MEAN (I) IF EXECUTIVE’S EMPLOYMENT IS TERMINATED BY HIS DEATH, THE DATE OF HIS DEATH, (II) IF EXECUTIVE’S EMPLOYMENT IS TERMINATED BY EMPLOYER FOR CAUSE, THE DATE ON WHICH NOTICE OF TERMINATION IS GIVEN AS CONTEMPLATED BY SECTION 7(E) OR, IF LATER, THE DATE OF TERMINATION SPECIFIED IN SUCH NOTICE, AND (III) IF EXECUTIVE’S EMPLOYMENT IS TERMINATED BY EMPLOYER WITHOUT CAUSE, DUE TO EXECUTIVE’S DISABILITY OR BY EXECUTIVE FOR ANY REASON, THE DATE THAT IS 30 DAYS AFTER THE DATE ON WHICH NOTICE OF   7   TERMINATION IS GIVEN AS CONTEMPLATED BY SECTION 7(E) OR, IF NO SUCH NOTICE IS GIVEN, 30 DAYS AFTER THE DATE OF TERMINATION OF EMPLOYMENT.   (H)           RESIGNATION UPON TERMINATION.  EFFECTIVE AS OF ANY DATE OF TERMINATION UNDER THIS SECTION 7 OR OTHERWISE AS OF THE DATE OF EXECUTIVE’S TERMINATION OF EMPLOYMENT WITH EMPLOYER, EXECUTIVE SHALL RESIGN, IN WRITING, FROM ALL BOARD MEMBERSHIPS AND OTHER POSITIONS THEN HELD BY HIM WITH HOLDING, EMPLOYER AND THEIR RESPECTIVE AFFILIATES.   8              UNAUTHORIZED DISCLOSURE.  DURING THE PERIOD OF EXECUTIVE’S EMPLOYMENT WITH EMPLOYER AND THE TEN-YEAR PERIOD FOLLOWING ANY TERMINATION OF SUCH EMPLOYMENT, WITHOUT THE PRIOR WRITTEN CONSENT OF EMPLOYER’S BOARD OR ITS AUTHORIZED REPRESENTATIVE, EXCEPT TO THE EXTENT REQUIRED BY AN ORDER OF A COURT HAVING JURISDICTION OR UNDER SUBPOENA FROM AN APPROPRIATE GOVERNMENT AGENCY, IN WHICH EVENT, EXECUTIVE SHALL USE HIS BEST EFFORTS TO CONSULT WITH EMPLOYER’S BOARD PRIOR TO RESPONDING TO ANY SUCH ORDER OR SUBPOENA, AND EXCEPT AS REQUIRED IN THE PERFORMANCE OF HIS DUTIES HEREUNDER, EXECUTIVE SHALL NOT DISCLOSE ANY CONFIDENTIAL OR PROPRIETARY TRADE SECRETS, CUSTOMER LISTS, DRAWINGS, DESIGNS, INFORMATION REGARDING PRODUCT DEVELOPMENT, MARKETING PLANS, SALES PLANS, MANUFACTURING PLANS, MANAGEMENT ORGANIZATION INFORMATION (INCLUDING BUT NOT LIMITED TO DATA AND OTHER INFORMATION RELATING TO MEMBERS OF THE BOARD OF DIRECTORS OF HOLDING, EMPLOYER OR ANY OF THEIR RESPECTIVE AFFILIATES OR TO MANAGEMENT OF HOLDING, EMPLOYER OR ANY OF THEIR RESPECTIVE AFFILIATES), OPERATING POLICIES OR MANUALS, BUSINESS PLANS, FINANCIAL RECORDS, PACKAGING DESIGN OR OTHER FINANCIAL, COMMERCIAL, BUSINESS OR TECHNICAL INFORMATION (A) RELATING TO HOLDING, EMPLOYER OR ANY OF THEIR RESPECTIVE AFFILIATES OR (B) THAT HOLDING, EMPLOYER OR ANY OF THEIR RESPECTIVE AFFILIATES MAY RECEIVE BELONGING TO SUPPLIERS, CUSTOMERS OR OTHERS WHO DO BUSINESS WITH HOLDING, EMPLOYER OR ANY OF THEIR RESPECTIVE AFFILIATES (COLLECTIVELY, “CONFIDENTIAL INFORMATION”) TO ANY THIRD PERSON UNLESS SUCH CONFIDENTIAL INFORMATION HAS BEEN PREVIOUSLY DISCLOSED TO THE PUBLIC OR IS IN THE PUBLIC DOMAIN (OTHER THAN BY REASON OF EXECUTIVE’S BREACH OF THIS SECTION 8).   9              NON-COMPETITION.  DURING THE PERIOD OF EXECUTIVE’S EMPLOYMENT WITH EMPLOYER AND, FOLLOWING ANY TERMINATION THEREOF, THE PERIOD ENDING ON THE LATER OF (A) THE FIRST ANNIVERSARY OF THE DATE OF TERMINATION AND (B) THE LAST DAY OF THE SEVERANCE PERIOD, EXECUTIVE SHALL NOT, DIRECTLY OR INDIRECTLY, BECOME EMPLOYED IN A SIMILAR EXECUTIVE CAPACITY BY, ENGAGE IN BUSINESS WITH, SERVE AS AN AGENT OR CONSULTANT TO, OR BECOME A PARTNER, MEMBER, PRINCIPAL OR STOCKHOLDER (OTHER THAN A HOLDER OF LESS THAN 1% OF THE OUTSTANDING VOTING SHARES OF ANY PUBLICLY HELD COMPANY) OF, THE MEAD CORPORATION, ANY OF ITS SUBSIDIARIES OR ANY OTHER CURRENT OR FUTURE DIRECT COMPETITOR (OR ANY OF SUCH DIRECT COMPETITOR’S SUBSIDIARIES OR AFFILIATES) IN THE PAPERBOARD AND PAPERBOARD PACKAGING BUSINESS OF HOLDING, EMPLOYER OR ANY OF THEIR RESPECTIVE SUBSIDIARIES, AS DETERMINED IN GOOD FAITH BY EMPLOYER’S BOARD.  FOR PURPOSES OF THIS SECTION 9, THE PHRASE EMPLOYMENT “IN A SIMILAR EXECUTIVE CAPACITY” SHALL MEAN EMPLOYMENT IN ANY POSITION IN CONNECTION WITH WHICH EXECUTIVE HAS OR REASONABLY WOULD BE VIEWED AS HAVING POWERS AND AUTHORITIES WITH RESPECT TO ANY OTHER PERSON OR ANY PART OF THE BUSINESS THEREOF THAT ARE   8   SUBSTANTIALLY SIMILAR, WITH RESPECT THERETO, TO THE POWERS AND AUTHORITIES ASSIGNED TO THE SENIOR VICE PRESIDENT, FINANCE OR ANY SUPERIOR EXECUTIVE OFFICER OF EMPLOYER IN THE BY-LAWS OF EMPLOYER AS IN EFFECT ON THE DATE HEREOF, A COPY OF THE RELEVANT PORTIONS OF WHICH HAS BEEN DELIVERED TO EXECUTIVE ON OR BEFORE THE DATE HEREOF, AND WHICH EXECUTIVE HEREBY CONFIRMS THAT HE HAS REVIEWED.   10            NON-SOLICITATION OF EMPLOYEES.  DURING THE PERIOD OF EXECUTIVE’S EMPLOYMENT WITH EMPLOYER AND, FOLLOWING ANY TERMINATION THEREOF, THE PERIOD ENDING ON THE LAST DAY OF THE SEVERANCE PERIOD (SUCH PERIODS COLLECTIVELY, THE “RESTRICTION PERIOD”), EXECUTIVE SHALL NOT, DIRECTLY OR INDIRECTLY, FOR HIS OWN ACCOUNT OR FOR THE ACCOUNT OF ANY OTHER PERSON ANYWHERE IN THE UNITED STATES OR EUROPE, (I) SOLICIT FOR EMPLOYMENT, EMPLOY OR OTHERWISE INTERFERE WITH THE RELATIONSHIP OF HOLDING, EMPLOYER OR ANY OF THEIR RESPECTIVE SUBSIDIARIES WITH, ANY PERSON WHO AT ANY TIME DURING THE SIX MONTHS PRECEDING SUCH SOLICITATION, EMPLOYMENT OR INTERFERENCE IS OR WAS EMPLOYED BY OR OTHERWISE ENGAGED TO PERFORM SERVICES FOR HOLDING, EMPLOYER OR ANY OF THEIR RESPECTIVE SUBSIDIARIES, OTHER THAN ANY SUCH SOLICITATION OR EMPLOYMENT DURING EXECUTIVE’S EMPLOYMENT WITH HOLDING AND EMPLOYER ON BEHALF OF HOLDING, AND EMPLOYER, OR (II) INDUCE ANY EMPLOYEE OF HOLDING, EMPLOYER OR ANY OF THEIR RESPECTIVE AFFILIATES WHO IS A MEMBER OF MANAGEMENT TO ENGAGE IN ANY ACTIVITY WHICH EXECUTIVE IS PROHIBITED FROM ENGAGING IN UNDER ANY OF SECTIONS 8, 9, 10 OR 11 OR TO TERMINATE HIS EMPLOYMENT WITH EMPLOYER.   11            NON-SOLICITATION OF CUSTOMERS.  DURING THE RESTRICTION PERIOD, EXECUTIVE SHALL NOT, DIRECTLY OR INDIRECTLY, FOR HIS OWN ACCOUNT OR FOR THE ACCOUNT OF ANY OTHER PERSON ANYWHERE IN THE UNITED STATES OR EUROPE, SOLICIT OR OTHERWISE ATTEMPT TO ESTABLISH ANY BUSINESS RELATIONSHIP OF A NATURE THAT IS COMPETITIVE WITH THE PAPERBOARD AND PAPERBOARD PACKAGING BUSINESS OF HOLDING, EMPLOYER OR ANY OF THEIR RESPECTIVE SUBSIDIARIES, AS DETERMINED IN GOOD FAITH BY EMPLOYER’S BOARD WITH ANY PERSON WHO IS OR WAS A CUSTOMER, CLIENT OR DISTRIBUTOR OF HOLDING, EMPLOYER OR ANY OF THEIR RESPECTIVE AFFILIATES AT ANY TIME DURING WHICH EXECUTIVE WAS EMPLOYED BY EMPLOYER (IN THE CASE OF ANY SUCH ACTIVITY DURING SUCH TIME) OR DURING THE TWELVE-MONTH PERIOD PRECEDING THE DATE OF TERMINATION (IN THE CASE OF ANY SUCH ACTIVITY AFTER THE DATE OF TERMINATION), OTHER THAN ANY SUCH SOLICITATION ON BEHALF OF HOLDING, EMPLOYER OR ANY OF THEIR RESPECTIVE AFFILIATES DURING EXECUTIVE’S EMPLOYMENT WITH EMPLOYER.   12            RETURN OF DOCUMENTS.  IN THE EVENT OF THE TERMINATION OF EXECUTIVE’S EMPLOYMENT FOR ANY REASON, EXECUTIVE SHALL DELIVER TO EMPLOYER ALL OF (A) THE PROPERTY OF EACH OF HOLDING, EMPLOYER AND THEIR RESPECTIVE AFFILIATES AND (B) THE NON-PERSONAL DOCUMENTS AND DATA OF ANY NATURE AND IN WHATEVER MEDIUM OF EACH OF HOLDING, EMPLOYER AND THEIR RESPECTIVE AFFILIATES, AND HE SHALL NOT TAKE WITH HIM ANY SUCH PROPERTY, DOCUMENTS OR DATA OR ANY REPRODUCTION THEREOF, OR ANY DOCUMENTS CONTAINING OR PERTAINING TO ANY CONFIDENTIAL INFORMATION.  WHETHER DOCUMENTS OR DATA ARE “PERSONAL” OR “NON-PERSONAL” SHALL BE DETERMINED AS FOLLOWS:  EXECUTIVE SHALL PRESENT ANY DOCUMENTS OR   9   DATA THAT HE WISHES TO TAKE WITH HIM TO THE CHIEF LEGAL OFFICER OF EMPLOYER FOR HIS REVIEW.  THE CHIEF LEGAL OFFICER SHALL MAKE AN INITIAL DETERMINATION WHETHER ANY SUCH DOCUMENTS OR DATA ARE PERSONAL OR NON-PERSONAL, AND WITH RESPECT TO SUCH DOCUMENTS OR DATA THAT HE DETERMINES TO BE NON-PERSONAL, SHALL NOTIFY EXECUTIVE EITHER THAT SUCH DOCUMENTS OR DATA MUST BE RETAINED BY EMPLOYER OR THAT EMPLOYER MUST MAKE AND RETAIN A COPY THEREOF BEFORE EXECUTIVE MAY TAKE SUCH DOCUMENTS OR DATA WITH HIM.  ANY DISPUTES AS TO THE PERSONAL OR NON-PERSONAL NATURE OF ANY SUCH DOCUMENTS OR DATA SHALL FIRST BE PRESENTED TO THE CHAIRMAN OF EMPLOYER’S BOARD OR TO ANOTHER REPRESENTATIVE DESIGNATED BY EMPLOYER’S BOARD, AND IF SUCH DISPUTES ARE NOT PROMPTLY RESOLVED BY EXECUTIVE AND THE CHAIRMAN OR SUCH REPRESENTATIVE, SUCH DISPUTES SHALL BE RESOLVED THROUGH ARBITRATION PURSUANT TO SECTION 17(B).   13            INJUNCTIVE RELIEF WITH RESPECT TO COVENANTS; FORUM, VENUE AND JURISDICTION.  EXECUTIVE ACKNOWLEDGES AND AGREES THAT THE COVENANTS, OBLIGATIONS AND AGREEMENTS OF EXECUTIVE CONTAINED IN SECTIONS 8, 9, 10, 11, 12 AND 13 RELATE TO SPECIAL, UNIQUE AND EXTRAORDINARY MATTERS AND THAT A VIOLATION OF ANY OF THE TERMS OF SUCH COVENANTS, OBLIGATIONS OR AGREEMENTS WILL CAUSE EMPLOYER IRREPARABLE INJURY FOR WHICH ADEQUATE REMEDIES ARE NOT AVAILABLE AT LAW.  THEREFORE, EXECUTIVE AGREES THAT EMPLOYER SHALL BE ENTITLED TO AN INJUNCTION, RESTRAINING ORDER OR SUCH OTHER EQUITABLE RELIEF (WITHOUT THE REQUIREMENT TO POST BOND) AS A COURT OF COMPETENT JURISDICTION MAY DEEM NECESSARY OR APPROPRIATE TO RESTRAIN EXECUTIVE FROM COMMITTING ANY VIOLATION OF SUCH COVENANTS, OBLIGATIONS OR AGREEMENTS.  THESE INJUNCTIVE REMEDIES ARE CUMULATIVE AND IN ADDITION TO ANY OTHER RIGHTS AND REMEDIES EMPLOYER MAY HAVE.  EMPLOYER, HOLDING AND EXECUTIVE HEREBY IRREVOCABLY SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND THE FEDERAL COURTS OF THE UNITED STATES OF AMERICA, IN EACH CASE LOCATED IN NEW YORK CITY, IN RESPECT OF THE INJUNCTIVE REMEDIES SET FORTH IN THIS SECTION 13 AND THE INTERPRETATION AND ENFORCEMENT OF SECTIONS 8, 9, 10, 11, 12 AND 13 INSOFAR AS SUCH INTERPRETATION AND ENFORCEMENT RELATE TO ANY REQUEST OR APPLICATION FOR INJUNCTIVE RELIEF IN ACCORDANCE WITH THE PROVISIONS OF THIS SECTION 13, AND THE PARTIES HERETO HEREBY IRREVOCABLY AGREE THAT (A) THE SOLE AND EXCLUSIVE APPROPRIATE VENUE FOR ANY SUIT OR PROCEEDING RELATING SOLELY TO SUCH INJUNCTIVE RELIEF SHALL BE IN SUCH A COURT, (B) ALL CLAIMS WITH RESPECT TO ANY REQUEST OR APPLICATION FOR SUCH INJUNCTIVE RELIEF SHALL BE HEARD AND DETERMINED EXCLUSIVELY IN SUCH A COURT, (C) ANY SUCH COURT SHALL HAVE EXCLUSIVE JURISDICTION OVER THE PERSON OF SUCH PARTIES AND OVER THE SUBJECT MATTER OF ANY DISPUTE RELATING TO ANY REQUEST OR APPLICATION FOR SUCH INJUNCTIVE RELIEF, AND (D) EACH HEREBY WAIVES ANY AND ALL OBJECTIONS AND DEFENSES BASED ON FORUM, VENUE OR PERSONAL OR SUBJECT MATTER JURISDICTION AS THEY MAY RELATE TO AN APPLICATION FOR SUCH INJUNCTIVE RELIEF IN A SUIT OR PROCEEDING BROUGHT BEFORE SUCH A COURT IN ACCORDANCE WITH THE PROVISIONS OF THIS SECTION 13.  ALL DISPUTES NOT RELATING TO ANY REQUEST OR APPLICATION FOR INJUNCTIVE RELIEF IN ACCORDANCE WITH THIS SECTION 13 SHALL BE RESOLVED BY ARBITRATION IN ACCORDANCE WITH SECTION 17(B).   10   14            ASSUMPTION OF AGREEMENT.  EMPLOYER SHALL REQUIRE ANY SUCCESSOR THERETO, BY AGREEMENT IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO EXECUTIVE, TO EXPRESSLY ASSUME AND AGREE TO PERFORM THIS AGREEMENT IN THE SAME MANNER AND TO THE SAME EXTENT THAT EMPLOYER WOULD BE REQUIRED TO PERFORM IT IF NO SUCH SUCCESSION HAD TAKEN PLACE.  FAILURE OF EMPLOYER TO OBTAIN SUCH AGREEMENT PRIOR TO THE EFFECTIVENESS OF ANY SUCH SUCCESSION SHALL BE A BREACH OF THIS AGREEMENT AND SHALL ENTITLE EXECUTIVE TO COMPENSATION FROM EMPLOYER IN THE SAME AMOUNT AND ON THE SAME TERMS AS EXECUTIVE WOULD BE ENTITLED HEREUNDER IF EMPLOYER HAD TERMINATED EXECUTIVE’S EMPLOYMENT WITHOUT CAUSE AS DESCRIBED IN SECTION 7, EXCEPT THAT FOR PURPOSES OF IMPLEMENTING THE FOREGOING, THE DATE ON WHICH ANY SUCH SUCCESSION BECOMES EFFECTIVE SHALL BE DEEMED THE DATE OF TERMINATION.   15            ENTIRE AGREEMENT.  THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) CONSTITUTES THE ENTIRE AGREEMENT AMONG THE PARTIES HERETO WITH RESPECT TO THE SUBJECT MATTER HEREOF.  ALL PRIOR CORRESPONDENCE AND PROPOSALS (INCLUDING BUT NOT LIMITED TO SUMMARIES OF PROPOSED TERMS) AND ALL PRIOR PROMISES, REPRESENTATIONS, UNDERSTANDINGS, ARRANGEMENTS AND AGREEMENTS RELATING TO SUCH SUBJECT MATTER (INCLUDING BUT NOT LIMITED TO THOSE MADE TO OR WITH EXECUTIVE BY ANY OTHER PERSON AND THOSE CONTAINED IN ANY PRIOR EMPLOYMENT, CONSULTING OR SIMILAR AGREEMENT ENTERED INTO BY EXECUTIVE AND EMPLOYER OR ANY PREDECESSOR THERETO OR AFFILIATE THEREOF) ARE MERGED HEREIN AND SUPERSEDED HEREBY.   16            INDEMNIFICATION.  EMPLOYER HEREBY AGREES THAT IT SHALL INDEMNIFY AND HOLD HARMLESS EXECUTIVE TO THE FULLEST EXTENT PERMITTED BY DELAWARE LAW FROM AND AGAINST ANY AND ALL LIABILITIES, COSTS, CLAIMS AND EXPENSES, INCLUDING ALL COSTS AND EXPENSES INCURRED IN DEFENSE OF LITIGATION (INCLUDING ATTORNEYS’ FEES), ARISING OUT OF THE EMPLOYMENT OF EXECUTIVE HEREUNDER, EXCEPT TO THE EXTENT ARISING OUT OF OR BASED UPON THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF EXECUTIVE.  COSTS AND EXPENSES INCURRED BY EXECUTIVE IN DEFENSE OF SUCH LITIGATION (INCLUDING ATTORNEYS’ FEES) SHALL BE PAID BY EMPLOYER IN ADVANCE OF THE FINAL DISPOSITION OF SUCH LITIGATION UPON RECEIPT BY EMPLOYER OF (A) A WRITTEN REQUEST FOR PAYMENT, (B) APPROPRIATE DOCUMENTATION EVIDENCING THE INCURRENCE, AMOUNT AND NATURE OF THE COSTS AND EXPENSES FOR WHICH PAYMENT IS BEING SOUGHT, AND (C) AN UNDERTAKING ADEQUATE UNDER DELAWARE LAW MADE BY OR ON BEHALF OF EXECUTIVE TO REPAY THE AMOUNTS SO PAID IF IT SHALL ULTIMATELY BE DETERMINED THAT EXECUTIVE IS NOT ENTITLED TO BE INDEMNIFIED BY EMPLOYER UNDER THIS AGREEMENT, INCLUDING BUT NOT LIMITED TO AS A RESULT OF SUCH EXCEPTION.   17            MISCELLANEOUS.   (A)           BINDING EFFECT; ASSIGNMENT.  THIS AGREEMENT SHALL BE BINDING ON AND INURE TO THE BENEFIT OF EMPLOYER, HOLDING AND THEIR RESPECTIVE SUCCESSORS AND PERMITTED ASSIGNS.  THIS AGREEMENT SHALL ALSO BE BINDING ON AND INURE TO THE BENEFIT OF EXECUTIVE AND HIS HEIRS, EXECUTORS, ADMINISTRATORS AND LEGAL REPRESENTATIVES.  THIS AGREEMENT SHALL NOT BE ASSIGNABLE BY ANY PARTY HERETO WITHOUT THE PRIOR WRITTEN CONSENT OF THE OTHER   11   PARTIES HERETO, EXCEPT AS PROVIDED PURSUANT TO THIS SECTION 17(A).  EACH OF HOLDING AND EMPLOYER MAY EFFECT SUCH AN ASSIGNMENT WITHOUT PRIOR WRITTEN APPROVAL OF EXECUTIVE UPON THE TRANSFER OF ALL OR SUBSTANTIALLY ALL OF ITS BUSINESS AND/OR ASSETS (BY WHATEVER MEANS), PROVIDED THAT THE SUCCESSOR TO EMPLOYER SHALL EXPRESSLY ASSUME AND AGREE TO PERFORM THIS AGREEMENT IN ACCORDANCE WITH THE PROVISIONS OF SECTION 14.   (B)           ARBITRATION.  ANY DISPUTE OR CONTROVERSY ARISING UNDER OR IN CONNECTION WITH THIS AGREEMENT (EXCEPT IN CONNECTION WITH ANY REQUEST OR APPLICATION FOR INJUNCTIVE RELIEF IN ACCORDANCE WITH SECTION 13) SHALL BE RESOLVED BY BINDING ARBITRATION.  THE ARBITRATION SHALL BE HELD IN THE CITY OF ATLANTA, GEORGIA AND EXCEPT TO THE EXTENT INCONSISTENT WITH THIS AGREEMENT, SHALL BE CONDUCTED IN ACCORDANCE WITH THE COMMERCIAL ARBITRATION RULES OF THE AMERICAN ARBITRATION ASSOCIATION THEN IN EFFECT AT THE TIME OF THE ARBITRATION, AND OTHERWISE IN ACCORDANCE WITH PRINCIPLES WHICH WOULD BE APPLIED BY A COURT OF LAW OR EQUITY.  THE ARBITRATOR SHALL BE ACCEPTABLE TO BOTH EMPLOYER AND EXECUTIVE.  IF THE PARTIES CANNOT AGREE ON AN ACCEPTABLE ARBITRATOR, THE DISPUTE SHALL BE HEARD BY A PANEL OF THREE ARBITRATORS, ONE APPOINTED BY EMPLOYER, ONE APPOINTED BY EXECUTIVE, AND THE THIRD APPOINTED BY THE OTHER TWO ARBITRATORS.  ALL EXPENSES OF ARBITRATION SHALL BE BORNE BY THE PARTY WHO INCURS THE EXPENSE, OR, IN THE CASE OF JOINT EXPENSES, BY BOTH PARTIES IN EQUAL PORTIONS, EXCEPT THAT, IN THE EVENT EXECUTIVE PREVAILS ON THE PRINCIPAL ISSUES OF SUCH DISPUTE OR CONTROVERSY, ALL SUCH EXPENSES SHALL BE BORNE BY EMPLOYER.   (C)           GOVERNING LAW.  THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO PRINCIPLES OF CONFLICTS OF LAWS, PROVIDED THAT THE INDEMNIFICATION PROVISIONS CONTAINED IN SECTION 16 SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF  THE STATE OF DELAWARE.   (D)           TAXES.  EMPLOYER MAY WITHHOLD FROM ANY PAYMENTS MADE UNDER THIS AGREEMENT ALL APPLICABLE TAXES, INCLUDING BUT NOT LIMITED TO INCOME, EMPLOYMENT AND SOCIAL INSURANCE TAXES, AS SHALL BE REQUIRED BY LAW.   (E)           AMENDMENTS.  NO PROVISION OF THIS AGREEMENT MAY BE MODIFIED, WAIVED OR DISCHARGED UNLESS SUCH MODIFICATION, WAIVER OR DISCHARGE IS APPROVED BY EMPLOYER’S BOARD OR A PERSON AUTHORIZED THEREBY AND IS AGREED TO IN WRITING BY EXECUTIVE AND, IN THE CASE OF ANY SUCH MODIFICATION, WAIVER OR DISCHARGE AFFECTING THE RIGHTS OR OBLIGATIONS OF HOLDING, IS APPROVED BY THE BOARD OF DIRECTORS OF HOLDING OR A PERSON AUTHORIZED THEREBY.  NO WAIVER BY ANY PARTY HERETO AT ANY TIME OF ANY BREACH BY ANY 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.  NO WAIVER OF ANY PROVISION OF THIS AGREEMENT SHALL BE IMPLIED FROM ANY COURSE OF DEALING BETWEEN OR AMONG THE PARTIES HERETO OR FROM ANY FAILURE BY ANY PARTY HERETO TO ASSERT ITS RIGHTS HEREUNDER ON ANY OCCASION OR SERIES OF OCCASIONS.   12   (F)            SEVERABILITY.  IN THE EVENT THAT ANY ONE OR MORE OF THE PROVISIONS OF THIS AGREEMENT SHALL BE OR BECOME INVALID, ILLEGAL OR UNENFORCEABLE IN ANY RESPECT, THE VALIDITY, LEGALITY AND ENFORCEABILITY OF THE REMAINING PROVISIONS CONTAINED HEREIN SHALL NOT BE AFFECTED THEREBY.   (G)           NOTICES.  ANY NOTICE OR OTHER COMMUNICATION REQUIRED OR PERMITTED TO BE DELIVERED UNDER THIS AGREEMENT SHALL BE (I) IN WRITING, (II) DELIVERED PERSONALLY, BY COURIER SERVICE OR BY CERTIFIED OR REGISTERED MAIL, FIRST-CLASS POSTAGE PREPAID AND RETURN RECEIPT REQUESTED, (III) DEEMED TO HAVE BEEN RECEIVED ON THE DATE OF DELIVERY OR, IF SO MAILED, ON THE THIRD BUSINESS DAY AFTER THE MAILING THEREOF, AND (IV) ADDRESSED AS FOLLOWS (OR TO SUCH OTHER ADDRESS AS THE PARTY ENTITLED TO NOTICE SHALL HEREAFTER DESIGNATE IN ACCORDANCE WITH THE TERMS HEREOF):   (A)          IF TO EMPLOYER, TO IT AT:   Riverwood International Corporation 814 Livingston Court Marietta, Georgia  30067 Attention:  General Counsel   (B)           IF TO HOLDING, TO IT AT:   c/o Riverwood International Corporation 814 Livingston Court Marietta, Georgia  30067 Attention:  General Counsel   (C)           IF TO EXECUTIVE, TO HIM AT HIS RESIDENTIAL ADDRESS AS CURRENTLY ON FILE WITH EMPLOYER.   Copies of any notices or other communications given under this Agreement shall also be given to:   Clayton, Dubilier & Rice, Inc. 375 Park Avenue New York, New York  10152 Attention:  Mr. Kevin J. Conway   and   Debevoise & Plimpton 875 Third Avenue New York, New York  10022 Attention:  Franci J. Blassberg, Esq.   13   (H)           VOLUNTARY AGREEMENT; NO CONFLICTS.  EXECUTIVE, EMPLOYER AND HOLDING EACH REPRESENT THAT THEY ARE ENTERING INTO THIS AGREEMENT VOLUNTARILY AND THAT EXECUTIVE’S EMPLOYMENT HEREUNDER AND EACH PARTY’S COMPLIANCE WITH THE TERMS AND CONDITIONS OF THIS AGREEMENT WILL NOT CONFLICT WITH OR RESULT IN THE BREACH BY SUCH PARTY OF ANY AGREEMENT TO WHICH HE OR IT IS A PARTY OR BY WHICH HE OR IT OR HIS OR ITS PROPERTIES OR ASSETS MAY BE BOUND.   (I)            COUNTERPARTS.  THIS AGREEMENT MAY BE EXECUTED IN COUNTERPARTS, EACH OF WHICH SHALL BE DEEMED AN ORIGINAL AND ALL OF WHICH TOGETHER SHALL CONSTITUTE ONE AND THE SAME INSTRUMENT.   (J)            HEADINGS.  THE SECTION AND OTHER HEADINGS CONTAINED IN THIS AGREEMENT ARE FOR THE CONVENIENCE OF THE PARTIES ONLY AND ARE NOT INTENDED TO BE A PART HEREOF OR TO AFFECT THE MEANING OR INTERPRETATION HEREOF.   (K)           CERTAIN DEFINITIONS.   “Affiliate”:  with respect to any Person, means any other Person that, directly or indirectly through one or more intermediaries, Controls, is Controlled by, or is under common Control with the first Person, including but not limited to a Subsidiary of the first Person, a Person of which the first Person is a Subsidiary, or another Subsidiary of a Person of which the first Person is also a Subsidiary.   “Control”:  with respect to any Person, means the possession, directly or indirectly, severally or jointly, of the power to direct or cause the direction of the management policies of such Person, whether through the ownership of voting securities, by contract or credit arrangement, as trustee or executor, or otherwise.   “Person”:  any natural person, firm, partnership, limited liability company, association, corporation, company, trust, business trust, governmental authority or other entity.   “Subsidiary”:  with respect to any Person, each corporation or other Person in which the first Person owns or Controls, directly or indirectly, capital stock or other ownership interests representing 50% or more of the combined voting power of the outstanding voting stock or other ownership interests of such corporation or other Person.   “Successor”:  of a Person means a Person that succeeds to the first Person’s assets and liabilities by merger, liquidation, dissolution or otherwise by operation of law, or a Person to which all or substantially all the assets and/or business of the first Person are transferred.   14   IN WITNESS WHEREOF, Employer and Holding have duly executed this Agreement by their authorized representatives, and Executive has hereunto set his hand, in each case effective as of the date first above written.       RIVERWOOD INTERNATIONAL CORPORATION         By: /s/ Wayne E. Juby       Name:  Wayne E. Juby     Title: Senior Vice President, Human Resources               RIVERWOOD HOLDING, INC.               By:                         Executive:               /s/ Daniel J. Blount     15   Schedule I   Annual Synergy Achievement Award (all $ are millions)   Synergy Award Schedule   Amount   Percent   Bonus   $ 51.6   100 % $ 2.0   $ 46.4   90 % $ 1.8   $ 41.3   80 % $ 1.6   $ 28.4   55 % $ 1.1   $ 25.8   50 % $ 1.0     Synergy achievement over $51.6 earns additional bonus accruing at the rate of 5 cents per dollar for synergies between $51.6 and $54.1; 10 cents per dollar for synergies achieved between $54.1 and $56.6; and 20 cents per dollar for synergies achieved between $56.6 and $59.1.  For the achievement of synergies over $59.1, the Synergy Award Committee may, in its discretion, grant additional awards.   For the first 10% increase in the first two years in synergy achieved, an additional 10% bonus on the $2.0 target bonus will be earned.   Year 1   Year 2   Year 3   Total                   $ 18.1   $ 20.0   $ 13.5   $ 51.6     •      Year 1 – Synergies achieved at $19.9; an additional $0.2 is earned. •      Year 2 – Synergies achieved at $22.0; an additional $0.2 is earned.   16   Schedule II   Perquisites   1              ANNUAL EXECUTIVE PHYSICAL.   2                                          REIMBURSEMENT UP TO $1,000 ANNUALLY FOR EXPENSES RELATING TO INCOME TAX PREPARATION PLUS ADDITIONAL FEES IF INCURRED ON ACCOUNT OF JOB-RELATED CIRCUMSTANCES AND THE COST OF REPRESENTATION BY RETURN PREPARER DURING ANY AUDIT.   3                                          REIMBURSEMENT FOR EXPENSES INCURRED FOR FINANCIAL AND ESTATE PLANNING SERVICES OF UP TO $5,000 FOR EXPENSES INCURRED IN THE FIRST CALENDAR YEAR SERVICES ARE UTILIZED AND UP TO $2,500 FOR EXPENSES INCURRED IN CALENDAR YEARS THEREAFTER.   17

Name: Council Implementing Regulation (EU) No 949/2011 of 22 September 2011 implementing Regulation (EC) No 560/2005 imposing certain specific restrictive measures directed against certain persons and entities in view of the situation in Cà ´te dâ Ivoire Type: Implementing Regulation Subject Matter: Africa; international affairs Date Published: nan 24.9.2011 EN Official Journal of the European Union L 247/1 COUNCIL IMPLEMENTING REGULATION (EU) No 949/2011 of 22 September 2011 implementing Regulation (EC) No 560/2005 imposing certain specific restrictive measures directed against certain persons and entities in view of the situation in Cà ´te dIvoire THE COUNCIL OF THE EUROPEAN UNION Having regard to Council Regulation (EC) No 560/2005 of 12 April 2005 imposing certain specific restrictive measures directed against certain persons and entities in view of the situation in Cà ´te dIvoire (1), and in particular Article 11a(2) thereof, Whereas: (1) On 12 April 2005, the Council adopted Regulation (EC) No 560/2005. (2) In view of the developments in Cà ´te dIvoire, the list of natural and legal persons, entities or bodies subject to restrictive measures set out in Annex IA to Regulation (EC) No 560/2005 should be amended. (3) In view of the urgency, and in order to ensure that the measures provided for in this Regulation are effective, this Regulation should enter into force immediately upon its publication, HAS ADOPTED THIS REGULATION: Article 1 The natural persons listed in the Annex to this Regulation shall be deleted from the list set out in Annex IA to Regulation (EC) No 560/2005. Article 2 This Regulation shall enter into force on the date of its publication in the Official Journal of the European Union. This Regulation shall be binding in its entirety and directly applicable in all Member States. Done at Brussels, 22 September 2011. For the Council The President M. DOWGIELEWICZ (1) OJ L 95, 14.4.2005, p. 1. ANNEX Natural persons referred to in Article 1 2. Lieutenant-Colonel Nathanaà «l Ahouman Brouha 19. Mr Yao NDrà © 52. Mr Timothà ©e Ahoua NGuetta 53. Mr Jacques Andrà © Daligou Monoko 54. Mr Bruno Walà © Ekpo 55. Mr Fà ©lix Tano Kouakou 56. Ms Hortense Kouassi Angoran 57. Ms Josà ©phine Suzanne Tourà © 79. Colonel Major Hilaire Babri Gohourou 89. Mr Roland Dagher 105. Zakaria Fellah 107. Charles Kader Gore 109. Kadio Morokro Mathieu

Exhibit 10.1   FOURTH AMENDMENT TO THE RESTRUCTURING AGREEMENT DATED OCTOBER 25, 2004     FOURTH AMENDMENT TO RESTRUCTURING AGREEMENT   This FOURTH AMENDMENT, dated October 25, 2004 (the “Amendment”), to the Restructuring Agreement (as amended from time to time in accordance with the terms therein, the “Restructuring Agreement”), dated August 24, 2004, by and among the parties specified therein is executed by (i) Applied Extrusion Technologies, Inc., a Delaware corporation (“AET”), Applied Extrusion Technologies, Inc. (Canada), a Delaware corporation (“AET Canada” and together, with AET, the “Company”) and Applied Extrusion Technologies Limited (“AET/UK”), and (ii) Barclays Bank PLC, DDJ Capital Management, LLC (as investment manger or adviser acting on behalf of certain funds and accounts it manages or advises), Post Advisory Group, LLC, TCW Shared Opportunity Fund III, L.P., TCW Shared Opportunity Fund IV, L.P., TCW Shared Opportunity Fund IVB, L.P., TCW/PCG Special Situation Partners, LLC, Xerion Partners I LLC and Pequot Capital Management, Inc. (as investment manager or adviser acting on behalf of certain funds and accounts it manages or advises) (together the “Participating Holders”).   WHEREAS, the Company, AET/UK and each of the Participating Holders have determined that it is in each of their best interests to, as of the date hereof, amend and restate Sections 1(a) and 8(b)(iii) of the Restructuring Agreement in its entirety in the form specified below.   NOW THEREFORE, in consideration of the promises and the mutual covenants and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Company, AET/UK and each of the Participating Holders hereby agree as follows:   1.                                       Amendment & Restatement of Sections 1(a) and 8(b)(iii) of the Restructuring Agreement.   Section 1(a) is amended by deleting the words “October 25, 2004” and replacing them with the words “November 1, 2004.”   Section 8(b)(iii) is amended and restated in its entirety to read as follows:   “(iii)  If the Solicitation Commencement Date has not occurred on or before November 1, 2004;”   2.                                       Entire Agreement.  This Amendment constitutes the entire agreement among the parties hereto with respect to the subject matter hereof and supersedes all other prior negotiations, agreements and understandings, both written and oral, among the parties hereto with respect to the subject matter hereof.   3.                                       Other Terms & Conditions.  Each of the other provisions, terms and conditions of the Restructuring Agreement are deemed to have been incorporated by reference herein and remain in full force and effect without amendment, alteration or any other modification notwithstanding anything to the contrary herein.   [Remainder of Page Left Intentionally Blank]     IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to be executed and delivered by its duly authorized officer as of the date first above written.     APPLIED EXTRUSION TECHNOLOGIES, INC.           By: /s/ Brian P. Crescenzo       Name: Brian P. Crescenzo     Title: Vice President, Secretary and Chief Financial Officer                   APPLIED EXTRUSION TECHNOLOGIES (CANADA), INC.           By:       Name: Brian P. Crescenzo     Title: Secretary                   APPLIED EXTRUSION TECHNOLOGIES LIMITED           By:       Name: Brian P. Crescenzo     Title: Secretary     written.       Barclays Bank PLC           By: /s/ Damien Miller       Name: Damien Miller     Title:  Director     written.       DDJ Capital Management, LLC, as investment manager or adviser acting on behalf of certain funds and accounts it manages or advises       By: /s/ Robert L. Hockett       Name: Robert L. Hockett     Title:  Principal     written.       Post Advisory Group, LLC       By: /s/ Carl Goldsmith       Name: Carl Goldsmith     Title: Senior Investment Officer     written.       Pequot Capital Management, Inc. , as investment manager or adviser acting on behalf of certain funds and accounts it manages or advises.           By: /s/ Richard Joslin       Name: Richard Joslin     Title:  Principal     written.     TCW Shared Opportunity Fund III, L.P. TCW Shared Opportunity Fund IV, L.P.      Face Amount of Notes Held: (set forth in accompanying memorandum) Face Amount of Notes Held: (set forth in accompanying memorandum)     By: TCW Asset Management Company, its Investment Adviser Investment Adviser     By: /s/ C. Shawn Bookin   By:   Name: C. Shawn Bookin, Managing Director Name: Managing Director     By: /s/ Richard H. Stevenson   By:   Name: Richard H. Stevenson, Vice President Name: Vice President   TCW Shared Opportunity Fund IVB, L.P. TCW/PCG Special Situation Partners, LLC     accompanying memorandum) accompanying memorandum)     Investment Adviser Investment Adviser     By:   By:   Name: Managing Director Name: Managing Director     By:   By:   Name: Vice President Name: Vice President     written.       Xerion Partners I LLC           By: /s/  Daniel J. Arbess       Name:  Daniel J. Arbess     Title:  

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 12b-25 SEC. FILE NUMBER 001-33715 CUSIP NUMBER NOTIFICATION OF LATE FILING (Check one): o Form 10-K o Form 20-F o Form 11-K x Form 10-Q o Form 10-D o Form N-SAR o Form N-CSR For Period Ended June 30, 2011 o Transition Report on Form 10-K o Transition Report on Form 20-F o Transition Report on Form 11-K o Transition Report on Form 10-Q o Transition Report on Form N-SAR For the Transition Period Ended Nothing in this form shall be construed to imply that the Commission has verified any information contained herein. If the notification relates to a portion of the filing checked above, identify the Item(s) to which the notification relates: PART I - REGISTRANT INFORMATION OKANA VENTURES, INC. Full Name of Registrant N/A Former Name if Applicable Moliere No. 222, Torre de Oficinas, Col. Los Morales Polanco, Delgacion Miguel Hidalgo Address of Principal Executive Office (Street and Number) Mexico City, Mexico, 11540 City, State and Zip Code PART 11 - RULES 12b-25(b) AND (c) If the subject report could not be filed without unreasonable effort or expense and the registrant seeks relief pursuant to Rule 12b-25(b), the following should be completed. (Check box if appropriate). x (a) The reasons described in reasonable detail in Part III of this form could not be eliminated without unreasonable effort or expense; (b) The subject annual report, semi-annual report, transition report on Form 10-K, Form 20-F, 11-K Form N-SAR or Form N-CSR, or portion thereof, will be filed on or before the fifteenth calendar day following the prescribed due date; or the subject quarterly report of transition report on Form 10-Q or subject distribution report on Form 10-D, or portion thereof will be filed on or before the fifth calendar day following the prescribed due date; and (c) The accountant’s statement or other exhibit required by Rule 12b-25(c) has been attached if applicable. 2 PART III - NARRATIVE State below in reasonable detail the reasons why Forms 10-K, 20-F, 11-K, 10-Q, N-SAR, N-CSR, or the transition report or portion thereof, could not be filed within the prescribed time period. The Registrant is unable to file, without unreasonable effort and expense, its Form 10-Q Quarterly Report for the period ended June 30, 2011 because the Registrant's auditors require additional documentation to complete their review of the Form 10-Q. PART IV - OTHER INFORMATION Name and telephone number of person to contact in regard to this notification Maria Peralta 636-6986 (Name) (Area Code) (Telephone Number) Have all other periodic reports required under Section 13 or 15(d) of the Securities Exchange Act of 1934 or Section 30 of the Investment Company Act of 1940 during the preceding 12 months or for such shorter period that the registrant was required to file such report(s) been filed? If answer is no, identify report(s). x Yes o No Is it anticipated that any significant change in results of operations from the corresponding period for the last fiscal year will be reflected by the earnings statements to be included in the subject report or portion thereof? o Yes x No If so, attach an explanation of the anticipated change, both narratively and quantitatively, and, if appropriate, state the reasons why a reasonable estimate of the results cannot be made 3 Okana Ventures, Inc. (Name of Registrant as Specified in Charter) has caused this notification to be signed on its behalf by the undersigned hereunto duly authorized. Date: August 15, 2011 By: /s/ Maria Peralta Maria Peralta, President INSTRUCTION: The form may be signed by an executive officer of the registrant or by any other duly authorized representative. The name and title of the person signing the form shall be typed or printed beneath the signature. If the statement is signed on behalf of the registrant by an authorized representative (other than an executive officer), evidence of the representative’s authority to sign on behalf of the registrant shall be filed with the form. 4

Registration No. 333-71521 811-05118 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-6 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 Pre-Effective Amendment No. Post-Effective Amendment No. 13 and/or REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 Amendment No. 100 Principal Life Insurance Company Variable Life Separate Account (Exact Name of Registrant) Principal Life Insurance Company (Name of Depositor) The Principal Financial Group, Des Moines, Iowa 50392 (Address of Depositor's Principal Executive Offices) (Zip Code) (515) 248-3842 Depositor's Telephone Number, including Area Code Charles M. Schneider Principal Life Insurance Company The Principal Financial Group Des Moines, Iowa 50392-0300 Telephone Number, Including Area Code: (515) 246-5688 (Name and Address of Agent for Service) Please send copies of all communications to John W. Blouch, Esq. Dykema Gossett PLLC Franklin Square, Suite 300 West 1treet, N.W. Washington, DC 20005-3306 Principal Survivorship Flexible Premium Variable Universal Life (Title of Securities Being Registered) It is proposed that this filing will become effective (check appropriate box) immediately upon filing pursuant to paragraph (b) of Rule 485 X on May 1, 2010 pursuant to paragraph (b) of Rule 485 60 days after filing pursuant to paragraph (a)(1) of Rule 485 on (date) pursuant to paragraph (a)(1) of Rule 485 If appropriate, check the following box: This post-effective amendment designates a new effective date for a previously filed post-effective amendment. No filing fee is due because an indefinite amount of securities is deemed to have been registered in reliance on Section 24(f) of the Investment Company Act of 1940. PRINCIPAL SURVIVORSHIP FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY Issued by Principal Life Insurance Company (the “Company”) through its Principal Life Insurance Company Variable Life Separate Account This prospectus is dated May 1, 2010. The Company no longer offers or issues the Policy. This Prospectus is only for the use of current Policy owners. This prospectus provides information about the Policy and is accompanied by current prospectuses for the underlying mutual funds that are available as investment options under the Policy. Please read these prospectuses carefully and keep them for future reference. The Securities and Exchange Commission (“SEC”) has not approved or disapproved this security or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. Not all the benefits, programs, features and investment options described in this prospectus are available or approved for use in every state. No person is authorized to give any information or to make any representation in connection with this Policy other than those contained in this prospectus. TABLE OF CONTENTS SUMMARY: BENEFITS AND RISKS 4 Policy Benefits 4 Death Benefits and Proceeds 4 Premium Payment Flexibility 4 Policy Values 4 Adjustment Options 4 Maturity Proceeds 5 Policy Risks 5 Risks of Poor Investment Performance 5 Policy Termination (Lapse) 5 Limitations on Access to Surrender Value 5 Adverse Tax Consequences 6 Risks of Underlying Mutual Funds 6 SUMMARY: FEE TABLES 7 GLOSSARY 10 CORPORATE ORGANIZATION AND OPERATION 12 The Company 12 Principal Life Insurance Company Variable Life Separate Account 12 The Funds 12 The Fixed Account 13 CHARGES AND DEDUCTIONS 14 Premium Expense Charge 14 Surrender Charge 14 Monthly Policy Charge 15 Transaction Charge 16 Underlying Mutual Fund Charges 17 GENERAL DESCRIPTION OF THE POLICY 17 The Contract 17 Rights Under the Policy 17 Policy Limitations 18 Optional Insurance Benefits 20 Reservation of Rights 21 Right to Exchange 21 Suicide 21 Delay of Payments or Transfers 21 PREMIUMS 22 Payment of Premiums 22 Premiums Affecting Guarantee Provisions 22 Premium Limitations 23 Allocation of Premiums 23 2 Principal Survivorship Flexible Premium Variable Universal Life 1-800-247-9988 DEATH BENEFITS AND POLICY VALUES 24 Death Proceeds 24 Death Benefit Option 26 Change in Death Benefit Option 27 IRS Definition of Life Insurance 27 Maturity Proceeds 27 Adjustment Options 27 Policy Values 28 SURRENDERS AND PARTIAL SURRENDERS 29 Surrenders 29 Examination Offer (Free-Look Provision) 29 LOANS 30 Policy Loans 30 Loan Account 30 Loan Payments 30 POLICY TERMINATION AND REINSTATEMENT 31 Policy Termination (Lapse) 31 Reinstatement 32 TAX ISSUES RELATED TO THE POLICY 33 GENERAL PROVISIONS 35 Frequent Trading and Market-Timing (Abusive Trading Practices) 35 Purchase Procedures 36 Distribution of the Policy 37 Payments to Financial Intermediaries 37 Service Arrangements and Compensation 37 Statement of Values 38 Services Available via the Internet and Telephone 38 Misstatement of Age or Gender 39 Non-Participating Policy 39 Incontestability 39 Independent Registered Public Accounting Firm 39 LEGAL PROCEEDINGS 39 TABLE OF SEPARATE ACCOUNT DIVISIONS 40 APPENDIX A - TARGET PREMIUMS 53 ADDITIONAL INFORMATION 56 Principal Survivorship Flexible Premium Variable Universal Life 3 www.principal.com SUMMARY: BENEFITS AND RISKS This prospectus describes an individual survivorship flexible premium variable universal life insurance policy offered by the Company. This is a brief summary of the Policy’s features. More detailed information follows later in this prospectus. POLICY BENEFITS Death Benefits and Proceeds The Company guarantees to pay a death benefit for as long as the Policy is in force. The death benefit proceeds are paid to the beneficiary(ies) when the surviving insured dies. Death proceeds are calculated as of the date of death of the surviving insured. The amount of the death proceeds is: • the death benefit plus interest (as explained in DEATH BENEFITS AND POLICY VALUES – Death Proceeds); • minus loan indebtedness; • minus any overdue monthly policy charges (Overdue monthly policy charges arise when a Policy is in a grace period and the policy value is insufficient to cover the sum of the cost of insurance and of additional benefits provided by any rider plus other policy charges); • plus proceeds from any benefit rider on the surviving insured’s life. Death proceeds are paid in cash or applied under a benefit payment option. The Policy provides for two death benefit options. A death benefit option is elected on the application. Subject to certain conditions, the death benefit option may be changed after the Policy has been issued. Premium Payment Flexibility You may choose the amount and frequency of premium payments (subject to certain limitations). Policy Values The policy value reflects your premium payments, partial surrenders, policy loans, policy expenses, interest credited to the fixed account and/or the investment experience of the divisions. There is no guaranteed minimum division value. Policy Loans A loan may be taken using the Policy as collateral. The maximum loan amount is 90% of the net surrender value. Full Surrender The Policy may be surrendered and any net surrender value paid to the owner. If the full surrender is within ten years of the policy date or a policy face amount increase, a surrender charge is imposed. Partial Surrender On or after the second policy anniversary, a Policy may be partially surrendered and the proceeds paid to the owner. The surrender charge does not apply to partial surrenders. A transaction fee of the lesser of $25 or 2% of the amount surrendered is imposed. The minimum amount of a partial surrender is $500. Adjustment Options The face amount may be increased or decreased unless the Policy is in a grace period or if monthly policy charges are being waived under a rider. Face Amount Increase The minimum amount of an increase is $100,000 and is subject to our underwriting guidelines in effect at the time the increase is requested. Face Amount Decrease On or after the second policy anniversary, a decrease in face amount may be requested if the request does not decrease the policy face amount below $100,000. 4 SUMMARY: BENEFITS AND RISKS Principal Survivorship Flexible Premium Variable Universal Life 1-800-247-9988 Maturity Proceeds If either insured is living on the maturity date, we will pay the owner an amount equal to the death proceeds as described above unless the Extended Coverage rider is in effect. Maturity proceeds are paid in cash lump sum or applied under a benefit payment option. The Policy terminates on the maturity date. POLICY RISKS Risks of Poor Investment Performance Policy charges and surrender charges are among the reasons why the Policy is not intended to be a short-term savings vehicle. It is possible that investment performance could cause a loss of the entire amount allocated to the divisions. Without additional premium payments, investments in the fixed account or a death benefit guarantee rider, it is possible that no death benefit would be paid upon the surviving insured’s death. NOTE:Each division invests in a corresponding underlying mutual fund. The underlying mutual funds are NOT available to the general public directly but are available only as investment options in variable life insurance policies or variable annuity contracts issued by life insurance companies and qualified plans. Some of the underlying mutual funds have been established by investment advisers that manage publicly traded mutual funds having similar names and investment objectives. While some of the underlying mutual funds may be similar to, and may in fact be modeled after publicly traded mutual funds, the underlying mutual funds are not otherwise directly related to any publicly traded mutual fund. Consequently, the investment performance of publicly traded mutual funds and of any underlying mutual fund may differ substantially. Policy Termination (Lapse) On an ongoing basis, the Policy’s net surrender value must be sufficient to cover the monthly policy charges and any loan indebtedness. It is possible that poor investment performance could cause the Policy to lapse unless additional premiums are paid. Partial surrenders or policy loans may increase the risk of lapse because the amount of either or both is not available to generate investment return or pay for policy charges. When the Policy lapses, it terminates with no value and no longer provides any life insurance benefit at the death of the surviving insured. During the first five policy years, the Policy will stay in force if ((a) minus (b)) is greater than or equal to (c) where: (a) is the sum of the premiums paid; (b) is the sum of all loan indebtedness, partial surrenders and transaction charges; and (c) is the sum of the minimum monthly premiums since the policy date to the most recent monthly date. Limitations on Access to Surrender Value Partial Surrenders • On or after the second policy anniversary, you may request a partial surrender of the net surrender value. The minimum amount of a partial surrender is $500. • Two partial surrenders may be made in a policy year. The total of the amount(s) surrendered may not be greater than 75% of the net surrender value (as of the date of the request for the first partial surrender in that policy year). • The death benefit will be reduced by the amount of the partial surrender plus the transaction charge. • A transaction fee of the lesser of $25 or 2% of the amount surrendered is imposed. Full Surrenders If the full surrender is within ten years of the policy date or a policy face amount increase, a surrender charge is imposed. Surrender charges are calculated based on the number of years the Policy was in force. If you reinstate your Policy and then it is fully surrendered, a surrender charge may be imposed. The number of policy years is calculated from the original policy date through the surrender date - excluding the period during which the Policy was terminated. Principal Survivorship Flexible Premium Variable Universal Life SUMMARY: BENEFITS AND RISKS 5 www.principal.com Adverse Tax Consequences A full surrender or cancellation of the Policy by lapse or the maturity of the Policy on its maturity date may have adverse tax consequences. If the amount received by the policy owner plus any loan indebtedness exceeds the premiums paid into the Policy, then the excess generally will be treated as taxable income. In certain employer-sponsored life insurance arrangements participants may be required to report for income tax purposes, one or more of the following: • the value each year of the life insurance protection provided; • an amount equal to any employer-paid premiums; or • some or all of the amount by which the current value exceeds the employer’s interest in the Policy. Participants should consult with the sponsor or the administrator of the plan, and/or with their personal tax or legal adviser, to determine the tax consequences, if any, of their employer-sponsored life insurance arrangements. There are other tax issues to consider when you own a life insurance policy. These are described in more detail in TAX ISSUES RELATED TO THE POLICY. Risks of Underlying Mutual Funds A comprehensive discussion of the risks of each underlying mutual fund may be found in the underlying mutual fund’s prospectus. As with all mutual funds, as the value of an underlying mutual fund’s assets rise or fall, the fund’s share price changes. If you sell your units in a division (each of which invests in an underlying mutual fund) when their value is less than the price you paid, you will lose money. Equity Funds The biggest risk is that the fund’s returns may vary, and you could lose money. The equity funds are each designed for long-term investors who can accept the risks of investing in a portfolio with significant common stock holdings. Common stocks tend to be more volatile than other investment choices. The value of an underlying mutual fund’s portfolio may decrease if the value of an individual company in the portfolio decreases. The value of an underlying mutual fund’s portfolio could also decrease if the stock market goes down Income Funds A fundamental risk of fixed-income securities is that their value will fall if interest rates rise. Since the value of a fixed- income portfolio will generally decrease when interest rates rise, the underlying mutual fund’s share price may likewise decrease. Another fundamental risk associated with fixed-income securities is credit risk, which is the risk that an issuer will be unable to make principal and interest payments when due. International Funds The international underlying mutual funds have significant exposure to foreign markets. As a result, their returns and price per share may be affected to a large degree by fluctuations in currency exchange rates or political or economic conditions in a particular country. 6 SUMMARY: BENEFITS AND RISKS Principal Survivorship Flexible Premium Variable Universal Life 1-800-247-9988 SUMMARY: FEE TABLES The following tables describe the fees and expenses that you will pay when buying, owning, and surrendering the Policy. The first table describes the fees and expenses that you will pay at the time that you buy or surrender the Policy. Transaction Fees Charge Charge is Deducted: Amount Deducted Maximum Sales Charge Imposed: from each premium paid policy years 1-10 (after issue or adjustment) 5.0% of premium paid (up to target premium) 2.0% of premium paid (in excess of target premium) policy years 11+ (after issue or adjustment) 2.0% of all premium paid Taxes (federal, state and local) from each premium paid 3.45% of premium paid Maximum Surrender Charge* from proceeds upon full surrender policy years 1-10 (after issue or adjustment) Guaranteed Minimum $2.78 per $1,000 of face amount Guaranteed Maximum $36.90 per $1,000 of face amount Current first year charge for Representative $9.50 per $1,000 of face amount Insureds (55-year old male and 50-year old female, each with a risk classification of preferred non-smoker) Transaction Fee from proceeds upon partial surrender Guaranteed maximum lesser of $25 or 2% of the amount surrendered Current none * Surrender charges decline over time. Principal Survivorship Flexible Premium Variable Universal Life SUMMARY: FEE TABLES 7 www.principal.com The next table describes the fees and expenses that you will pay periodically during the time that you own the Policy, not including underlying mutual fund fees and expenses. Periodic Charges Other Than Underlying Mutual Fund Operating Expenses When Charge Charge is Deducted Amount Deducted Cost of Insurance*: monthly Guaranteed Minimum Charge $0.00 per $1,000 of net amount at risk Guaranteed Maximum Charge $83.33 per $1,000 of net amount at risk Current first year charge for Representative Insureds** $0.01 per $1,000 of net amount at risk Mortality and Expense Risks Charge: monthly Current: equivalent to: policy years 1-9 0.80% of the value in the divisions per year after policy year 9 0.30% of the value in the divisions per year Administration Charge: monthly Guaranteed Maximum: all policy years $8.00 per month (plus $0.08 per $1,000 of face amount (increased by $0.005 per $1,000 per month for each insured classified as a smoker)) Current: policy years 1-10 (after issue or adjustment) $8.00 per month plus $0.08 per $1,000 of face amount (increased by $0.005 per $1,000 per month for each insured classified as a smoker) policy years 11-20 (after issue or adjustment) $8.00 per month plus $0.04 per $1,000 of face amount (no additional smoker charge). after policy year 21 (after issue or adjustment) $8.00 per month plus $0.02 per $1,000 of face amount (no additional smoker charge). annually Net Policy Loan Charge (accrued daily) policy years 1-10 2.0% of loan balance per year (the difference between the interest charged on the loan balance and the interest credited to the loan account) after policy year ten 0.25% of loan balance per year (the difference between the interest charged on the loan balance and the interest credited to the loan account) Optional Insurance Benefits Four Year Term Rider monthly Guaranteed Minimum $0.02 per $1,000 of rider benefit Guaranteed Maximum $5.17 per $1,000 of rider benefit Current charge for Representative Insureds** $0.02 per $1,000 of rider benefit 8 SUMMARY: FEE TABLES Principal Survivorship Flexible Premium Variable Universal Life 1-800-247-9988 Periodic Charges Other Than Underlying Mutual Fund Operating Expenses When Charge Charge is Deducted Amount Deducted Policy Split Option Rider monthly (We reserve the right to charge a one-time fee of $500 at the time the Rider benefit is exercised.) Guaranteed Minimum $0.01 per $1,000 of face amount Guaranteed Maximum $0.01 per $1,000 of face amount Current charge for Representative Insureds** $0.01 per $1,000 of face amount Single Life Term Rider monthly Guaranteed Minimum $0.06 per $1,000 of net amount of risk Guaranteed Maximum $20.22 per $1,000 of net amount of risk Current charge for Representative Insureds** $0.12 per $1,000 of net amount at risk * The cost of insurance rate at issue and for any underwritten face amount increase is based on the gender, issue age and age at adjustment, duration since issue and since adjustment, smoking status, and risk classification of the insureds. The charge shown in the table may not be representative of the charge that a particular policy owner will pay. Typically, cost of insurance rates are lower for insureds who: are non-smokers; have a risk classification of preferred; are younger; and are fully underwritten. You may obtain more information about the particular cost of insurance charge that would apply to your insureds from your registered representative or by phoning 1-800-247-9988. ** Representative Insureds are a 55-year old male and 50-year old female, each with a risk classification of standard non-smoker. The following table shows the minimum and maximum total operating expenses charged by any of the underlying mutual funds that you may pay periodically during the time that you own the Policy. More detail concerning the fees and expenses of each underlying mutual fund is contained its prospectus. Annual Underlying Mutual Fund Operating Expenses as of December 31, 2009. Minimum Maximum Total annual underlying mutual fund operating expenses (expenses that are deducted from underlying mutual fund assets, including management fees, distribution and/or 0.27% 1.35% service (12b-1) fees and other expenses) Principal Survivorship Flexible Premium Variable Universal Life SUMMARY: FEE TABLES 9 www.principal.com GLOSSARY adjustment – change to your Policy resulting from an increase or decrease in policy face amount or a change in: smoking status; death benefit option; rating or riders. adjustment date – the monthly date on or next following the Company’s approval of a requested adjustment. attained age – for each insured, it is the insured’s issue age on the birthday on or preceding the last policy anniversary. business day – any date that the New York Stock Exchange (“NYSE”) is open for trading and trading is not restricted. cumulative death benefit guarantee premium – a premium which is required to be paid in order to guarantee that the Policy will not lapse for a specific number of years. division – a part of the Separate Account which invests in shares of an underlying mutual fund. effective date – the date on which all requirements for issuance of a Policy have been satisfied. face amount – life insurance base policy coverage amount. fixed account – that part of the Policy that is not in the divisions or loan account. general account – assets of the Company other than those allocated to any of our Separate Accounts. insureds – the persons named as the “insureds” on the application for the Policy. The insureds may or may not be the owners. joint equivalent age (JEA) – the adjusted age of the insured which is based on the gender, age, smoking status and risk classification of each insured. loan account – that part of the policy value that reflects the value transferred from the division(s) and/or fixed account as collateral for a policy loan. loan indebtedness – the amount of any policy loan and unpaid loan interest. maturity date – the policy anniversary where either insured’s attained age is 100. minimum monthly premium – the amount that, if paid, will keep the Policy in force for one month (not taking into account the current monthly policy charge and surrender charge). monthly date – the day of the month which is the same day as the policy date. Example: If the policy date is September 5, 2005, the first monthly date is October 5, 2005. monthly policy charge – the amount subtracted from the policy value on each monthly date equal to the sum of the cost of insurance and of additional benefits provided by any rider plus the monthly administration charge and mortality and expense risks charge in effect on the monthly date. net amount at risk – the amount upon which the cost of insurance charges are based. It is the result of: • the death benefit (as described in the Policy) at the beginning of the policy month, divided by 1.0024663; minus • the policy value at the beginning of the policy month calculated as if the monthly policy charge was zero. net policy value – the policy value minus any loan indebtedness. 10 GLOSSARY Principal Survivorship Flexible Premium Variable Universal Life 1-800-247-9988 net premium – the gross premium less the deductions for the premium expense charge. It is the amount of premium allocated to the divisions and/or fixed account. net surrender value – surrender value minus any loan indebtedness. no-lapse guarantee premium – a premium which is required to be paid in order to guarantee the Policy will not lapse in the first five years. notice – any form of communication received in our home office which provides the information we need which may be in writing sent to us by mail, or any other manner we approve in advance. owner – the person, including joint owner, who owns all the rights and privileges of this Policy. policy date – the date from which monthly dates, policy years and policy anniversaries are determined the policy date may not be in the future and will never be the 29th, 30th, or 31st of any month. policy value – the sum of the values in the divisions, the fixed account and the loan account. policy year – the one-year period beginning on the policy date and ending one day before the policy anniversary and any subsequent one year period beginning on a policy anniversary. Example: If the policy date is September 5, 2005, the first policy year ends on September 4, 2006. The first policy anniversary falls on September 5, 2006. premium expense charge – the charge deducted from premium payments to cover a sales charge and state, local and federal taxes. prorated basis – in the proportion that the value of a particular division or the fixed account bears to the total value of all divisions and the fixed account. surrender value – policy value minus any surrender charge. surviving insured – the insured who is living at the death of the other insured. If both insureds die simultaneously, then the term “surviving insured” means the younger of the two insureds. target premium – a premium amount which is used to determine any applicable premium expense charge and surrender charge under a Policy. Target premiums are provided in Appendix A. underlying mutual fund – a registered open-end investment company, or a separate investment account or portfolio thereof, in which a division invests. unit – the accounting measure used to calculate the value of each division. valuation period – the period begins at the close of normal trading on the NYSE, generally 4:00 p.m. E.T. on each business day, and ends at the close of normal trading of the NYSE on the next business day. written request – actual delivery to the Company at our office of a written notice or request, signed and dated, on a form we supply or approve. Your notices may be mailed to us at: Principal Life Insurance Company P O Box 9296 Des Moines, Iowa 50306-9296 Phone: 1-800-247-9988 you – the owner(s) of the Policy. Principal Survivorship Flexible Premium Variable Universal Life GLOSSARY 11 www.principal.com CORPORATE ORGANIZATION AND OPERATION The Company The Company is a stock life insurance company with its home office at: Principal Financial Group, Des Moines, Iowa 50306. It is authorized to transact life and annuity business in all of the United States and the District of Columbia. The Company is a wholly owned subsidiary of Principal Financial Services, Inc., which in turn, is a directly wholly owned subsidiary of Principal Financial Group, Inc. On June 24, 1879, the Company was incorporated under Iowa law as a mutual life insurance company named Bankers Life Association. It changed its name to Bankers Life Company in 1911 and then to Principal Mutual Life Insurance Company in 1986. The name change to Principal Life Insurance Company and reorganization into a mutual holding company structure took place July 1, 1998. Effective October 26, 2001, Principal Mutual Holding Company converted to a stock company and Principal Financial Group, Inc. completed its initial public offering. The Company believes that, consistent with well established industry and SEC practice, the periodic reporting requirements of the Securities and Exchange Act of 1934 do not apply to it as the depositor of one or more variable insurance product separate accounts. If such requirements are deemed to apply to it as such a depositor, the Company intends to rely on the exemption from such requirements provided by Rule 12h-7 under that Act. Principal Life Insurance Company Variable Life Separate Account The Separate Account was established under Iowa law on November 2, 1987. It was then registered as a unit investment trust with the SEC. This registration does not involve SEC supervision of the investments or investment policies of the Separate Account. The income, gains, and losses, whether or not realized, credited to or charged against the Separate Account reflect the Separate Account’s own investment experience and not the investment experience of the Company’s other assets. Assets of the Separate Account may not be used to pay any liabilities of the Company other than those arising from the policies funded by the Separate Account. The Company is obligated to pay all amounts promised to Policy owners under the Policy. The Company does not guarantee the investment results of the Separate Account. There is no assurance that the value of your policy will equal the total of your premium payments. In a low interest rate environment, yields for the Money Market division, after deduction of all applicable Policy and rider charges, may be negative even though the yield for the underlying money market fund, before deducting for such charges, is positive. If you allocate a portion of your Policy value to a Money Market division or participate in a scheduled automatic transfer program where Policy value is allocated to a Money Market division, that portion of your Policy value allocated to the Money Market division may decrease in value. The Funds The assets of each division of the Separate Account invest in a corresponding underlying mutual fund. The Company purchases and sells fund shares for the Separate Account at their net asset value. The assets of each division are separate from the others. A division’s performance has no effect on the investment performance of any other division. The funds are mutual funds registered under the Investment Company Act of 1940 as open-end management investment companies. A full description of the funds, their investment objectives, policies and restrictions, charges and expenses and other operational information is contained in the attached prospectuses (which should be read carefully before investing). Additional copies of these documents are available without charge from a sales representative or our home office (1-800-247-9988). The Table of Separate Account Divisions later in this prospectus contains a brief summary of the investment objectives of, and advisor and sub-advisor, if applicable, for each division. New divisions may be added and made available. Divisions may also be eliminated from the Separate Account following approval from appropriate regulatory authority. 12 CORPORATE ORGANIZATION AND OPERATION Principal Survivorship Flexible Premium Variable Universal Life 1-800-247-9988 Deletion or Substitution of Investments We reserve the right to make certain changes if, in our judgement, they best serve your interests or are appropriate in carrying out the purpose of the Policy. Any changes are made only to the extent and in the manner permitted by applicable laws. Also, when required by law, we will obtain your approval of the changes and approval from any appropriate regulatory authority. Approvals may not be required in all cases. Examples of the changes we may make include: • transfer assets in any division to another division or to the fixed account; • add, combine or eliminate divisions; or • substitute the shares of a division for shares in another division • if shares of a division are no longer available for investment; or • if in our judgement, investment in a division becomes inappropriate considering the purposes of the division. If we eliminate or combine existing divisions or transfer assets from one division to another, you may change allocation percentages and transfer any value in an affected division to another division(s) and/or the fixed account without charge. You may exercise this transfer privilege until the later of 60 days after a) the effective date of the change, or b) the date you receive notice of the options available. You may only exercise this right if you have an interest in the affected division(s). Voting Rights We vote shares of the underlying mutual funds owned by the Separate Account according to the instructions of Policy owners. We will notify you of shareholder meetings of the mutual funds underlying the divisions in which you hold units. We will send you proxy materials and instructions for you to provide voting instructions to us. We will arrange for the handling and tallying of proxies received from you and other Policy owners. If you give no voting instructions, we will vote those shares in the same proportion as shares for which we received instructions. We determine the number of fund shares that you may instruct us to vote by allocating one vote for each $100 of policy value in the division. Fractional votes are allocated for amounts less than $100. We determine the number of underlying fund shares you may instruct us to vote as of the record date established by the mutual fund for its shareholder meeting. In the event that applicable law changes or we are required by regulators to disregard voting instructions, we may decide to vote the shares of the underlying mutual funds in our own right. NOTE: Because there is no required minimum number of votes a small number of votes can have a disproportionate effect. The Fixed Account The fixed account is a part of our general account. Because of exemptions and exclusions contained in the Securities Act of 1933 and the Investment Company Act of 1940, the fixed account and any interest in it are not subject to the provisions of these acts. As a result the SEC has not reviewed the disclosures in this prospectus relating to the fixed account. However, disclosures relating to it are subject to generally applicable provisions of the federal securities laws relating to the accuracy and completeness of statements made in prospectuses. You may obtain more information regarding the fixed account from our home office or from a sales representative. Our obligations with respect to the fixed account are supported by our general account. Subject to applicable law, we have sole discretion over the investment of assets in the general account. We guarantee that net premiums allocated to the fixed account accrue interest daily at an effective annual rate of 3% compounded annually. We may, in our sole discretion, credit interest at a higher rate. We may defer payment of proceeds payable out of the fixed account for a period of up to six months. Principal Survivorship Flexible Premium Variable Universal Life CORPORATE ORGANIZATION AND OPERATION 13 www.principal.com The Fixed Account The value of your fixed account on any business day is: • net premiums allocated to the fixed account • plus transfers from the division(s) • plus interest credited to the fixed account • minus surrenders, surrender charges, monthly policy charges and transaction fees • minus transfers to the loan account • minus transfers to the division(s). CHARGES AND DEDUCTIONS We make certain charges and deductions to support operation of the Policy and the Separate Account. Some charges are deducted from premium payments when they are received. Other charges are deducted on a monthly basis while others are deducted at the time a Policy is surrendered or terminated. Premium Expense Charge (Sales Charge and Taxes) When we receive your premium payment, we deduct a premium expense charge. Deductions from premiums during each of the first ten years and with respect to premiums made because of a policy face amount increase, during the first ten years after the increase, equal: • sales load of 5.00% of premiums paid up to target premium (2.00% of premiums in excess of target premium) • plus 2.20% (of premiums paid) for state and local taxes • plus 1.25% (of premiums paid) for federal taxes. Deductions from premiums after the tenth policy year (and ten years after a policy face amount increase) are: • sales load of 2.00% of premiums paid • plus 2.20% (of premiums paid) for state and local taxes • plus 1.25% (of premiums paid) for federal taxes. The actual taxes we pay vary from state to state. The expense charge is based upon the average tax rate we expect to pay nationwide, the premiums we receive from all states and other expense assumptions. The rate for a particular Policy does not necessarily reflect the actual tax costs applicable to that Policy. The sales load is intended to pay us for distribution expenses, including commissions paid to sales representatives, printing of prospectuses and sales literature, and advertising. Target Premium The target premium is based on the gender, if applicable, age and risk classification of the insureds (see APPENDIX A- TARGET PREMIUM). The target premium is a calculated premium amount used to determine the premium expense change and the surrender charge. The target premium is not required to be paid. Surrender Charge A surrender charge is imposed upon full surrender of the Policy within ten years of the policy date or of a policy face amount increase. In addition, if you reinstate your Policy and then it is fully surrendered, a surrender charge may be imposed. Surrender charges vary based on the target premium of the Policy, age at issue or adjustment, state of issue and number of policy years since issue or adjustment. The charge applies only during the first ten policy years unless there is a policy face amount increase. A policy face amount increase has its own surrender charge period that begins on the adjustment date. The total surrender charge on the Policy is the sum of the surrender charges for the policy face amount at issue and each policy face amount increase. The surrender charge is not affected by any decrease in policy face amount or any change in policy face amount resulting from a change of death benefit options. The surrender charge on an early surrender or Policy lapse is significant. As a result, you should purchase a Policy only if you have the financial capacity to keep it in force for a substantial period of time. The surrender charge compensates us for expenses relating to the sale of the Policy. 14 CHARGES AND DEDUCTIONS Principal Survivorship Flexible Premium Variable Universal Life 1-800-247-9988 Surrender Charge Percentage The surrender charge during any policy year is equal to the number of target premiums from the table below multiplied by the applicable surrender charge percentage also shown below. See Appendix A for the description of how to calculate Joint Equivalent Age (“JEA”). Joint Equivalent Age (JEA) Number of on policy or adjustment date target premiums 75 or less 1.00 76 through 80 0.90 81 through 85 0.75 86 or greater 0.65 Surrender Charge Percentage Table Number of years since policy The following percentage of date and/or the adjustment date surrender charge is payable 0 through 5 100.00% 6 95.24 7 85.71 8 71.43 9 52.38 10 28.57 11 and later 00.00 The surrender charge on a face amount increase is calculated by multiplying the increase in target premium due to the face increase by the applicable number of target premiums from the table above. This result is multiplied by the percentage from the Surrender Charge Percentage Table to get the increase in surrender charges for all years. Monthly Policy Charge The monthly policy charge is made up of: • a charge for the cost of insurance; • a monthly administration charge; • a mortality and expense risks charge; and • any charge for an optional insurance benefit provided by rider(s). On the policy date and each monthly date thereafter, we deduct the charge from your policy value in the divisions and/ or fixed account (but not your loan account). The deduction is made using your current monthly policy charge allocation percentages. Your allocation percentages may be: • the same as allocation percentages for premium payments; • determined on a prorated basis; or • determined by any other allocation method which we agree upon. For each division and/or fixed account, the allocation percentage must be zero or a whole number. The total of the allocation percentages must equal 100. Allocation percentages may be changed without charge. A request for an allocation change is effective on the date we receive the request. If we cannot follow your instructions because of insufficient value in any division and/or the fixed account, the monthly policy charge is deducted on a prorated basis. Cost of Insurance Charge This charge compensates us for providing insurance protection under the Policy. The monthly cost of insurance charge is (a) multiplied by (b) where: (a) is the cost of insurance rate (described below) divided by 1,000; and (b) is the net amount at risk. Principal Survivorship Flexible Premium Variable Universal Life CHARGES AND DEDUCTIONS 15 www.principal.com The net amount at risk is the difference between the death benefit and the policy value. The lower the policy value, the higher the net amount at risk thus higher cost of insurance charges. The net amount at risk is affected by investment performance, policy loans, payment of premiums, fees and charges under the Policy, death benefit option chosen, partial surrenders and face amount adjustments. Different cost of insurance rates may apply to policy face amount increases. The cost of insurance for the increase is based on each insured’s gender*, issue age, duration since issue, smoking status, and risk classification at the time of the increase. The guaranteed maximum cost of insurance rate for the increase is based on the each insured’s gender*, attained age and risk classification at the time of the increase * The cost of insurance rate for Policies issued in states which require unisex pricing or in connection with employment related insurance and benefit plans is not based on the gender of the insureds. Groups and persons buying Policies under a sponsored arrangement may apply for flexible underwriting. If flexible underwriting is granted, the cost of insurance charge may increase because of higher anticipated mortality experience. Flexible underwriting programs currently available include: batch underwriting, simplified issue underwriting and guar- anteed issue underwriting. Special underwriting programs are offered that provide simplified underwriting. The cost of insurance rates for healthy individuals are greater under simplified underwriting than on Policies subjected to full underwriting. Monthly Administration Charge This charge reimburses us for the costs of maintaining the Policy, including accounting and record keeping. • The current monthly administration charge is $8.00 per month. • An additional monthly administration charge is imposed in the first ten policy years of $0.08 per $1,000 of face amount. The charge of $0.08 per $1,000 of face amount is increased by $0.005 per $1,000 for each insured that is classified as a smoker. • An additional monthly administration charge is imposed in the eleven through twenty policy years of $0.04 per $1,000 of face amount (no additional smoker charge). • An additional monthly administration charge is imposed after policy year twenty of $0.02 per $1,000 of face amount (no additional smoker charge). Guaranteed Administration Charges In all policy years, the guaranteed maximum monthly administration charge is $8.00 per month plus ($.08 per $1,000 of face amount). The charge is increased by $0.005 per $1,000 for each insured that is classified as a smoker. Mortality and Expense Risks Charge The charge compensates us for distribution and administrative expenses. Each month during the first nine policy years, we deduct a mortality and expense risks charge at an annual rate of 0.80% of the value in the divisions. Each month thereafter, we deduct a charge at an annual rate of 0.30% of the value in the divisions. We reserve the right to increase the annual rate after the ninth policy year but guarantee that the maximum annual rate will not exceed 0.80% of the value of the divisions. If we increase the annual rate, the increase will only apply to policies issued on or after the date of the increase. Transaction Charge A transaction fee of the lesser of $25 or 2% of the surrender amount applies to each partial surrender. The fee is withdrawn in the same proportion as the allocation used for the most recent monthly policy charge. 16 CHARGES AND DEDUCTIONS Principal Survivorship Flexible Premium Variable Universal Life 1-800-247-9988 Underlying Mutual Fund Charges The assets of each division are used to purchase shares in a corresponding mutual fund at net asset value. The net asset value of the mutual fund reflects management fees and operating expenses already deducted from the assets of the mutual fund. Current management fees and operating expenses for a mutual fund are shown in the prospectus for the underlying mutual fund. GENERAL DESCRIPTION OF THE POLICY The Contract The entire contract is made up of applications, amendments, riders and endorsements attached to the Policy, current data pages, copies of any supplemental applications, amendments, endorsements and revised data pages which are mailed to you. No statement, unless made in an application, is used to void a Policy (or void an adjustment in the case of an adjustment application). Only our corporate officers can agree to change or waive any provisions of a Policy. Any change or waiver must be in writing and signed by an officer of the Company. The descriptions that follow are based on provisions of the Policy offered by this prospectus. Rights Under the Policy Ownership Unless changed, the owner(s) is as named in the application. The owner(s) may exercise every right and privilege of the Policy, subject to the rights of any irrevocable beneficiary(ies) and any assignee(s). All rights and privileges of ownership of a Policy end if death proceeds are paid, upon the maturity date, if the Policy is surrendered or if the grace period ends without our receiving the payment required to keep the Policy in force. If an owner dies before the Policy terminates, the surviving owner(s), if any, succeeds to that person’s ownership interest, unless otherwise specified. If all owners die before the Policy terminates, the Policy passes to the estate of the last surviving owner. With our consent, you may specify a different arrangement for contingent ownership. You may change your ownership designation at any time. Your request must be in writing and approved by us. After approval, the change is effective as of the date you signed the request for change. We reserve the right to require that you send us the Policy so that we can record the change. Beneficiary If the surviving insured dies before the maturity date, we pay death proceeds to your named beneficiary(ies). You have the right to name a beneficiary(ies) and contingent beneficiary(ies). This may be done as part of the application process or by sending us a written request. Unless you have named an irrevocable beneficiary, you may change your beneficiary designation by sending us a written request. After approval, the change is effective as of the date you signed the request for change. We reserve the right to require that you send us the Policy so that we can record the change. If no beneficiary(ies) survives the surviving insured, the death proceeds are paid to the owner(s) or the estate of the owner(s) in equal percentages unless otherwise specified. Assignment You may assign your Policy. Each assignment is subject to any payments made or action taken by the Company prior to our notification of the assignment. We assume no responsibility for the validity of any assignment. An assignment must be made in writing and filed with us at our home office. The irrevocable beneficiary(ies), if any, must authorize any assignment in writing. Your rights, as well as those of the beneficiary(ies), are subject to any assignment on file with us. Principal Survivorship Flexible Premium Variable Universal Life GENERAL DESCRIPTION OF THE POLICY 17 www.principal.com Policy Limitations Division Transfers You may transfer amounts between the divisions and/or the fixed account. You must specify the dollar amount or whole percentage to transfer from each division. The transfer is made, and the values determined as of the end of the valuation period in which we receive your request. In states where allowed, we reserve the right to reject transfer instructions from someone providing them for multiple Policies for which he or she is not the owner. You may request an unscheduled transfer or set up a periodic transfer by: • sending us a written request; • calling us if telephone privileges apply (1-800-247-9988); or • visiting www.principal.com (if internet privileges apply). You may not make a transfer to the fixed account if: • a transfer has been made from the fixed account to a division within six months; or • immediately after the transfer, the fixed account value would be more than $1,000,000 (without our prior approval). Unscheduled Transfers. You may make unscheduled transfers from a division to another division or to the fixed account. The minimum transfer amount is the lesser of $100 or the value of your division. Scheduled Transfers (Dollar Cost Averaging). You may elect to have automatic transfers made out of one division into one or more of the other divisions and/or the fixed account. You choose the investment options, the dollar amount and timing of the transfers. There is no transfer fee imposed on scheduled transfers. There is no fee for participation in the scheduled transfer program. Automatic transfers are designed to reduce the risks that result from market fluctuations. They do this by spreading out the allocation of your money to investment options over a longer period of time. This allows you to reduce the risk of investing most of your money at a time when market prices are high. The success of this strategy depends on market trends and is not guaranteed. Example: Month Amount Invested Share Price Shares Purchased January $100 $ 25.00 4 February $100 $ 20.00 5 March $100 $ 20.00 5 April $100 $ 10.00 10 May $100 $ 15.00 6 June $ 20.00 5 Total $600 $ 110.00 35 In the example above, the average share price is $18.33 (total of share prices ($110.00) divided by number of purchases (6)) and the average share cost is $17.14 (amount invested ($600.00) divided by number of shares purchased (35)). Automatic transfers are made on a periodic basis. • The amount of the transfer is: • the dollar amount you select (the minimum is the lesser of $100 or the value of the division); or • a percentage of the division value as of the date you specify (other than the 29th, 30th or 31st). • You select the transfer date (other than the 29th, 30th or 31st) and the transfer frequency (annually, semi-annually, quarterly or monthly). If the selected date is not a business day, the transfer is completed on the next business day. • The value of the division must be equal to or more than $2,500 when your scheduled transfers begin. • Transfers continue until your interest in the division has a zero balance or we receive notice to stop them. • We reserve the right to limit the number of divisions from which simultaneous transfers are made. In no event will it ever be less than two. 18 GENERAL DESCRIPTION OF THE POLICY Principal Survivorship Flexible Premium Variable Universal Life 1-800-247-9988 Fixed Account Transfers Transfers from your investment in the fixed account to your division(s) are subject to certain limitations. You may transfer amounts by making either a scheduled or unscheduled fixed account transfer. You may not make both a scheduled and an unscheduled fixed account transfer in the same policy year. In states where allowed, we reserve the right to reject transfer instructions from someone providing them for multiple Policies for which he or she is not the owner. Unscheduled Transfers. You may make one unscheduled fixed account to division(s) transfer within the 30-day period following each policy anniversary. • You must specify the dollar amount or percentage to be transferred (not to exceed 25% of the fixed account value as of the most recent policy anniversary). • The minimum transfer amount must be at least $100 (or the entire value of your fixed account if less). • If your fixed account value is less than $1,000, you may transfer up to 100% of your fixed account. • There is no transaction charge imposed on the transfer(s). Scheduled Transfers. You may make scheduled transfers on a monthly basis from the fixed account to your division(s) without an additional charge as follows: • The value of your fixed account must be equal to or more than $2,500 when your scheduled transfers begin. We reserve the right to change this amount but it will never be more than $10,000. • The amount of the transfer is: • the dollar amount you select (minimum of $50); or • a percentage of the fixed account value (the maximum amount of the transfer is 2% of the fixed account value as of the specified date) as of the date you specify which may be: • the later of the policy date or most recent policy anniversary date; or • the date the Company receives your request. • Transfers occur on a date you specify (other than the 29th, 30th or 31st of any month). • If the specified date is not a business day, the transfer is completed on the next business day. Scheduled transfers continue until your value in the fixed account has a zero balance or we receive your notice to stop them. If you stop the transfers, you may not start them again until six months after the last scheduled transfer. You may change the amount of the transfer once each policy year by: • sending us a written request; • calling us if telephone privileges apply (1-800-247-9988); or • visiting www.principal.com (if internet privileges apply). As transfers are made on a monthly basis, a change in the amount of transfer is effective with the scheduled transfer after our receipt of notice of the change. Automatic Portfolio Rebalancing (APR) APR allows you to maintain a specific percentage of your policy value in the divisions over time. Example: You may choose to rebalance so that 50% of your policy values are in the Money Market division and 50% in the SmallCap Value I division. At the end of the specified period, market changes may have caused 60% of your value to be in the Money Market division and 40% in the SmallCap Value I division. By rebalancing, units from the Money Market division are sold and the proceeds are used to purchase units in the SmallCap Value I division so that 50% of the policy values are once again invested in each division. Principal Survivorship Flexible Premium Variable Universal Life GENERAL DESCRIPTION OF THE POLICY 19 www.principal.com You may elect APR at the time of application or after the Policy has been issued. There is no charge for participation in the APR program. The APR transfers: • do not begin until the expiration of the examination offer period; • are done without charge; • may be done on the frequency you specify: • quarterly APR transfers may be done on a calendar year or policy year basis; • semiannual or annual APR transfers may only be done on a policy year basis. • may be done by: • calling us (if telephone privileges apply (1-800-247-9988)); • mailing us your written request; • faxing your request to us; or • visiting www.principal.com (if internet privileges apply). • are made at the end of the next valuation period after we receive your instruction; • are not available for values in the fixed account; and • are not available if you have scheduled transfers from the same divisions. Optional Insurance Benefits Subject to certain conditions, you may add one or more optional insurance benefits to your Policy. Detailed information concerning optional insurance benefits may be obtained from an authorized agent or our home office. Not all optional insurance benefits are available in all states. Some provisions may vary from state to state. The cost, if any, of an optional insurance benefit is deducted from your policy value. Death Benefit Guarantee Rider This rider extends the no-lapse guarantee provision if premiums paid equal or exceed the death benefit guarantee premium requirement. This rider is automatically made a part of the Policy if the premium (planned or paid) is equal to or greater than the annual death benefit guarantee premium requirement. The level of premium (planned or paid) determines whether the no-lapse guarantee is extended to the insured’s attained age 100. An illustration (available at no charge from your sales representative or our home office) will provide the death benefit guarantee premium requirement applicable to your Policy. The death benefit guarantee premium requirement is described in the section “Premiums.” If on any monthly date, the death benefit guarantee premium is not met, we send you a notice stating the premium required to keep the rider in effect. If the premium required to maintain the rider is not received in our service office before the expiration of the 61 days (which begins when the notice is mailed), the death benefit guarantee is no longer in effect and the rider is terminated. If the rider terminates, it may not be reinstated. The rider may not be added after the Policy has been issued. Enhanced Death Benefit Rider This rider modifies the table of applicable percentages to provide a death benefit equal to or higher than required by the Internal Revenue Service for a Policy to continue to qualify as life insurance (see DEATH BENEFITS AND POLICY VALUES - Death Benefit Option). The rider must be elected at the time of application or any time prior to Policy issue. There is no charge for this rider. Extended Coverage Rider If at least one of the insureds is living on the policy maturity date, we will continue your policy in force. The new maturity date will be the date of the surviving insured’s death. No additional premium payments are allowed, adjustment options are not available and the death benefit option is changed to option 1. All investment account and fixed account policy values will be transferred to the Money Market division and no further transfers are allowed. You may choose not to extend the maturity date and instead receive the maturity proceeds by requesting the rider not be attached to your Policy. The rider may be added at any time prior to the maturity date. There is no charge for this rider. 20 GENERAL DESCRIPTION OF THE POLICY Principal Survivorship Flexible Premium Variable Universal Life 1-800-247-9988 Four Year Term Insurance Rider This rider provides an additional death benefit to be paid to beneficiaries upon the insured’s death. This rider provides protection for a limited period of time that ends 4 years after the policy date and may not be extended. This rider provides no cash value. The rider must be elected at the time of application or any time prior to Policy issue. There is a charge for this rider. Policy Split Option Rider This rider allows a policy to be split in the event of a divorce or a change in the estate laws. Values are placed into the policies on an attained age basis. The face amount and accumulated values are split equally into two individual policies. This rider is available at issue only. There is a charge for this rider. Single Life Term Insurance Rider This rider provides an additional level death benefit to be paid to beneficiaries upon the insured’s death. This rider provides no cash value. The rider must be elected at the time of application or any time prior to Policy issue. There is a charge for this rider. Reservation of Rights We reserve the right to change the Policy to assure it continues to qualify as life insurance for tax purposes. However, we cannot make any guarantee regarding the future tax treatment of any Policy. We also reserve the right to amend or terminate the special plans described in this prospectus, for example preauthorized premium payments. You would be notified of any such action to the extent required by law. Right to Exchange During the first 24 months after the effective date (except during a grace period), you have the right to make an irrevocable, one-time election to transfer all of your division values to the fixed account. No charge is imposed on this transfer. The accumulated value immediately after the transfer will be the same as immediately before the transfer. From the exchange date forward, the accumulated value will no longer be affected by the investment performance of the divisions. Your request must be in writing and be signed by the owner(s). The request must be postmarked or delivered to our home office before the end of the 24-month period. The transfer is effective when we receive your written request. Suicide Death proceeds are not paid if either insured dies by suicide, while sane or insane, within two years of the policy date (or two years from the date of policy face amount increase with respect to such increase). In the event of the suicide of either insured within two years of the policy date, our only liability is a refund of premiums paid, without interest, minus any loan indebtedness and partial surrenders. In the event of suicide within two years of a policy face amount increase, our only liability with respect to that increase is a refund of the cost of insurance for the increase. If the suicide occurs at the death of the first insured, this amount will be paid to the owner(s)) of the Policy. If the suicide occurs at the death of the surviving insured, this amount will be paid to the beneficiary(ies). For Policies issued in New York only the above paragraph is not applicable. The following provision applies only to Policies issued in New York. If either insured dies by suicide, while sane or insane, within two years of the policy date (or two years from the date of face amount increase with respect to such increase), we will issue a single life variable life insurance policy to the survivor without evidence of good health. The face amount of the new policy will be one-half of the face amount of the original policy. We will refund one-half of the premium received for the original policy. Delay of Payments or Transfers Payment due to exercise of your rights under the examination offer provision, surrenders, policy loans, death or maturity proceeds, and transfers to or from a division are generally made within five days after we receive your instructions in a form acceptable to us. This period may be shorter where required by law. However, payment of any amount upon return of the Policy, full or partial surrender, policy loan, death, maturity or the transfer to or from a division may be deferred during any period when the right to sell mutual fund shares is suspended as permitted under provisions of the Investment Company Act of 1940. Principal Survivorship Flexible Premium Variable Universal Life GENERAL DESCRIPTION OF THE POLICY 21 www.principal.com The right to sell shares may be suspended during any period when: • trading on the NYSE is restricted as determined by the SEC or when the NYSE is closed for other than weekends and holidays, or • an emergency exists, as determined by the SEC, as a result of which: • disposal by a fund of securities owned by it is not reasonably practicable; • it is not reasonably practicable for a fund to fairly determine the value of its net assets; or • the SEC permits suspension for the protection of security holders. If a payment or transfer is delayed and you do not cancel your instructions in writing, the transaction will be priced on the first business day following the expiration of the permitted delay. The transaction is made within five days thereafter. In addition, we reserve the right to defer payment of that portion of your policy value that is attributable to a premium payment made by check for a reasonable period of time (not to exceed 15 business days) to allow the check to clear the banking system. We may defer payment of proceeds payable out of the fixed account for a period of up to six months. PREMIUMS Payment of Premiums The amount and frequency of your premium payments affects the policy value, the net surrender value and how long the Policy remains in force. Generally, the higher the policy face amount, the higher the no-lapse guarantee premium will be. You must pay premiums to us at our home office, Principal Life Insurance Company, 801 Grand (IDPC), Des Moines, Iowa 50392. Payments are to be made via personal or financial institution check (for example, a bank or cashier’s check). We reserve the right to refuse any payment that we feel presents a fraud or money laundering risk. Examples of the types of payments we will not accept are cash, money orders, travelers checks, credit card checks, and foreign checks. You may set up monthly preauthorized withdrawals to allow us to automatically deduct premium payments from your checking or other financial institution account. You may make unscheduled payments and/or establish a payment schedule (we send premium reminder notices if you establish an annual, semiannual or quarterly planned payment schedule). Premium payments may also be made through payroll deduction where permitted by state law and approved by us. Premiums Affecting Guarantee Provisions Your initial premium must be at least the no-lapse guarantee premium. After the initial premium, you may determine the amount and timing of subsequent premium payments (with certain restrictions): however, we recommend you continue to pay at least the no-lapse guarantee premium. By meeting the no-lapse guarantee premium requirement, your Policy is guaranteed not to lapse during the first five policy years even if the net surrender value is insufficient to cover the monthly policy charge. The no-lapse guarantee premium requirement is met if ((a) minus (b)) is greater than or equal to (c) where: (a) is the sum of premiums paid; (b) is the sum of all loan indebtedness, partial surrenders and transaction fees; and (c) is the sum of the minimum monthly premium (no-lapse guarantee) since the policy date to the most recent monthly date. If the no-lapse premium requirement is not met and the net surrender value is insufficient to cover the monthly policy charge, the Policy may lapse in the first five policy years. After the first 60 months from the policy date, making premium payments under your planned periodic premium schedule does not guarantee that your Policy will stay in force unless: • your Policy’s net surrender value is at least equal to the monthly policy charge on the current monthly date, or • the death benefit guarantee rider is in effect. 22 PREMIUMS Principal Survivorship Flexible Premium Variable Universal Life 1-800-247-9988 If the Death Benefit Guarantee rider is made a part of your Policy and you pay at least the death benefit guarantee premium requirement, the death benefit guarantee period will last longer than the five year period provided by the no- lapse guarantee provision. Example: • If the policy face amount is $250,000 and the insureds are a male with an attained age of 55 and a female with an attained age of 50 both who are preferred non-smokers: • No-lapse guarantee premium requirement is $1,449.00. (30% of the Guideline Annual Premium (100% for policies written in New York)) • Death benefit guarantee to attained age 100 of the youngest insured premium requirement is $3,865.00. (80% of the Guideline Annual Premium) The death benefit guarantee premium requirement is met if ((a) minus (b)) is greater than or equal to (c) where: (a) is the sum of premiums paid; (b) is the sum of all loan indebtedness and partial surrenders; and (c) is the sum of the death benefit guarantee monthly premiums since the policy date to the most recent monthly date. If the death benefit guarantee premium requirement is not met, the Death Benefit Guarantee Rider will lapse. In the first five policy years, the Policy will still have the no-lapse guarantee as long as the premiums paid are sufficient to meet the no-lapse guarantee premium requirement. Both the no-lapse guarantee premium and the death benefit guarantee premium are per $1000 of face amount and vary by issue age, gender* and smoking status. The no-lapse guarantee premium and the death benefit guarantee premium are shown on the current data pages. * For Policies issued in states which require unisex pricing or in connection with employment related insurance and benefit plans, the premiums are not based on the gender of the insured. Premium Limitations In no event may the total of all premiums paid, both scheduled and unscheduled, be more than the maximum premium payments allowed for life insurance under the Internal Revenue Code. If you make a premium payment that would result in total premiums exceeding the maximum limitation, we only accept that portion of the payment that makes total premiums equal the maximum. Unless otherwise directed, any excess will be returned and no further premiums are accepted until allowed by the current maximum premium limitations. Allocation of Premiums Your initial net premium (and other net premiums we receive prior to the effective date and twenty days after the effective date) is allocated to the Money Market division at the end of the business day we receive the premium. Twenty-one days after the effective date, the money is reallocated to the divisions and/or fixed account according to your instructions. If the twenty-first day is not a business day, the transfer will occur on the first business day following the twenty-first day from the effective date. Example: The effective date of your Policy is February 1st. Your net premium is allocated to the Money Market division at the end of the valuation period we receive the premium. At the close of business on February 21st, the net premium is reallocated to the divisions and/or fixed account that you selected. Net premium payments received after the twenty-day period are allocated to the divisions and/or fixed account according to your instructions. For each division and fixed account, the allocation percentage must be zero or a whole number. The total of all allocation percentages must equal 100. Incomplete allocation instructions may delay processing. Net premium payments are allocated as of the valuation period in which they are received. At any time, you may change the percentage allocation for future premium payments by: • sending a written request to us; • calling us at 1-800-247-9988 (if telephone privileges apply); or • visiting www.principal.com (if internet privileges apply). Principal Survivorship Flexible Premium Variable Universal Life PREMIUMS 23 www.principal.com The allocation changes are effective at the end of the valuation period in which your new instructions are received. NOTE: We reserve the right to keep the initial premium payment in the Money Market division longer than 20 days to correspond to the examination offer periods of a particular state’s replacement requirements. Division Valuation There is no guaranteed minimum division value. Its value reflects the investment experience of the division. It is possible that the investment performance could cause a loss of the entire amount allocated to the division. Without additional premium payments or a Death Benefit Guarantee rider, it is possible that no death benefit would be paid upon the surviving insured’s death. At the end of any valuation period, your value in a division is: • the number of units you have in the division • multiplied by the value of a unit in the division. The number of units is the total of units purchased by allocations to the division from: • your initial premium payment (less premium expense charges); • plus subsequent premium payments (less premium expense charges); • plus transfers from another division or the fixed account minus units sold: • for partial surrenders from the division; • as part of a transfer to another division, the fixed account or the loan account; and • to pay monthly policy charges and any transaction fees. We calculate unit values on days that the NYSE is open for trading and trading is not restricted. We do not calculate unit values on these recognized holidays: New Year’s Day; Labor Day; Martin Luther King, Jr. Day; Thanksgiving; President’s Day; Christmas; Good Friday; Memorial Day and Independence Day. In addition, we do not calculate unit values if an emergency exists making disposal or valuation of securities held in the underlying mutual funds impracticable or if the SEC, by order, permits a suspension or postponement for the protection of security holders. To calculate the unit value of a division, the unit value from the previous business day is multiplied by the division’s net investment factor for the current valuation period. The number of units does not change due to a change in unit value. The net investment factor measures the performance of each division. The net investment factor for a valuation period is calculated as follows: [{the share price (net asset value) of the underlying mutual fund at the end of the valuation period before that day’s transactions plus the per share amount of the dividend (or other distribution) made by the mutual fund during the valuation period} divided by the share price of the underlying mutual fund at the end of the previous valuation period after that day’s transactions]. When an investment owned by an underlying mutual fund pays a dividend, the dividend increases the net asset value of a share of the underlying mutual fund as of the date the dividend is recorded. As the net asset value of a share of an underlying mutual fund increases, the unit value of the corresponding division also reflects an increase. Payment of a dividend under these circumstances does not increase the number of units you own in the division. DEATH BENEFITS AND POLICY VALUES Death Proceeds If coverage is in effect and the surviving insured dies before the maturity date, we pay death proceeds. If both insureds die simultaneously, then surviving insured shall mean the younger of the two insureds. No benefit is paid on the death of the first insured to die unless such benefit exists under a rider. 24 DEATH BENEFITS AND POLICY VALUES Principal Survivorship Flexible Premium Variable Universal Life 1-800-247-9988 You must notify us of the death of the first insured to die as soon as possible after it occurs. This facilitates the timely payment of death proceeds at the death of the surviving insured and may affect the status of any riders. You must provide us: • proof of the death of both insureds; • Beneficiary’s Statement (Claim Form)*; and • Trust Agreement (if the beneficiary is a trust). * If the beneficiary is a corporation, the Claim Form must be signed by a corporate officer and submitted with a copy of the Articles of Incorporation or By-Laws indicating the authority of the office and a current Board resolution providing the name of the officer authorized to execute the Claim Form. The corporation must also submit a Certificate of Good Standing or Certificate of Existence provided by the state of incorporation. Payment is made to any assignee. The remainder is paid to your named beneficiary(ies) under your designated benefit payment option (see GENERAL DESCRIPTION OF THE POLICY - Rights Under the Policy). The payments are made in cash lump sum or under a fixed benefit payment option. Death proceeds are calculated as of the date of the surviving insured’s death and include: • the death benefit described below; • minus loan indebtedness; • minus any overdue monthly policy charges if the surviving insured died during a grace period; • plus interest on the death proceeds as required by state law; and • plus proceeds from any benefit rider(s) on the life of the surviving insured. Benefit Instructions While the surviving insured is alive, you may give us instructions for payment of death proceeds under one of the fixed benefit payment options of the Policy. If at the surviving insured’s death, you have not provided benefit payment option instructions, the beneficiary(ies) select the benefit payment option to be used. If a benefit payment option is not selected, the death proceeds are paid in a cash lump sum. These choices are also available if the Policy matures or is surrendered. The instructions or changes to the instructions must be in writing. If you change the beneficiary(ies), prior benefit payment option instructions are revoked. The fixed benefit payment options include: • Custom Benefit Arrangement A customized benefit payment option may be arranged with our approval. • Life Income We pay income during a person’s lifetime. Without a guaranteed period, it is possible that only one payment is made under this option if the beneficiary dies before the second payment is due. A minimum guaranteed period of from 5 to 30 years may be used (if the beneficiary dies before all of the guaranteed payments have been made, the guaranteed remaining payments are made to the beneficiary named in the benefit payment option instructions.) • Joint and Survivor Life Income We pay income during the lifetime of two people and continue until the death of the survivor. Without a guaranteed period, it is possible that only one payment is made under this option if both of the beneficiaries die before the second payment is due. A minimum guaranteed period of from 5 to 30 years may be used (if both of the beneficiaries die before all of the guaranteed payments have been made, the guaranteed remaining payments are made to the beneficiary named in the benefit payment option instructions.) If no beneficiary(ies) survive the surviving insured, the death proceeds will be paid to the owner or the owner’s estate unless otherwise specified. Interest at a rate set by us, but never less than required by state law, will be applied to calculate the above benefit payment options. Principal Survivorship Flexible Premium Variable Universal Life DEATH BENEFITS AND POLICY VALUES 25 www.principal.com Death Benefit Option The death benefit option is selected at the time of application. If a death benefit option is not chosen, the Policy will be issued with Death Benefit Option 1. The two death benefit options available are: • Death Benefit Option 1 - the death benefit equals the greater of: • the face amount; or • the amount found by multiplying the policy value by the applicable percentage from the table below. • Death Benefit Option 2 - the death benefit equals the greater of: • the face amount plus the policy value; or • the amount found by multiplying the policy value by the applicable percentage from the table below. APPLICABLE PERCENTAGES* (For ages not shown, the applicable percentages decrease by a pro rata portion for each full year.) Younger insured’s attained age Percentage 40 and under 250 45 215 50 185 55 150 60 130 65 120 70 115 75 through 90 105 95 and older 101 * We reserve the right, where allowed by law, to change or delete the percentages as required by changes to the Internal Revenue Code. Example: The following assumptions are made to demonstrate the use of the Table. Death Benefit Option: 1 Face Amount: $250,000 Policy Value: $150,000 Attained Age of Younger Insured: 50 Risk Class: Preferred Non-smoker Applicable Percentage: 185% Death Benefit: $150,000 x 185% $277,500 26 DEATH BENEFITS AND POLICY VALUES Principal Survivorship Flexible Premium Variable Universal Life 1-800-247-9988 Change in Death Benefit Option You may change the death benefit option on or after the second policy anniversary. Up to two changes are allowed per policy year. Your request must be made in writing and approved by us. The effective date of the change will be the monthly date that coincides with, or next follows, our approval. If the death benefit option change involves a face decrease, you may elect to keep the current face amount, subject to underwriting review and approval. Changing from Death Benefit Option 1 to Death Benefit Option 2 We will decrease the face amount. The amount of the decrease is equal to the policy value on the effective date of the change. If there have been increases in the face amount, the decrease of face amount will be made on a last in, first out basis. Because the death benefit can con- tinue to increase under Death Benefit Option 2, we may require proof of insurability. Cost of insurance charges will likely increase. Face Amount Death Benefit Policy Value before the change before the change before the change $1,000,000 $1,000,000 $50,000 after the change after the change after the change $950,000 $1,000,000 $50,000 ($1,000,000 - $50,000) ($950,000 + $50,000) . Changing from Death Benefit Option 2 to Death Benefit Option 1 We will increase the face amount. The amount of the increase is equal to the policy value on the effective date of the change. The face amount increase will be in the same proportion as the policy face amount to the face amount. Because the death benefit will not continue to increase under Death Benefit Option 1, no proof of insurability is required. Cost of insurance charges will likely decrease. Face Amount Death Benefit Policy Value before the change before the change before the change $1,000,000 $1,050,000 $50,000 ($1,000,000 + $50,000) after the change after the change after the change $1,050,000 $1,050,000 $50,000 ($1,000,000 + $50,000) IRS Definition of Life Insurance The Policy should qualify as a life insurance contract as long as it satisfies certain tests under Section 7702 of the Internal Revenue Code. • The Policy qualifies if it satisfies a cash value accumulation test or a guideline premium requirement and falls within a cash value corridor. • If at any time a premium is paid which would result in total premiums exceeding the current maximum premium allowed, we only accept that portion of the premium which would make the total premiums equal the maximum. Maturity Proceeds The maturity date is the policy anniversary where either insured’s attained age is 100 and is shown on your current data pages. If either insured is living on the maturity date, the Policy is in force and you do not want the maturity date extended by the Extended Coverage Rider, maturity proceeds equal to the death proceeds are paid. If the Extended Coverage Rider is attached but you wish to receive the maturity proceeds at the Policy’s maturity and avoid conversion to Death Benefit Option 1, you must send instructions to our office. The maturity proceeds are paid either as a cash lump sum on the maturity date or under the benefit payment option you have selected. Only if the Extended Coverage Rider is present on the Policy will the maturity date automatically be extended to the date of the surviving insured’s death (as explained in GENERAL DESCRIPTION OF THE POLICY - Optional Insurance Benefits). Adjustment Options Increase in policy face amount You may request an increase at any time provided that the Policy is not in a grace period and monthly policy charges are not being waived under a rider. The minimum increase in policy face amount is $100,000. A policy face amount increase request made in the first 60 policy months will increase the minimum monthly premium for the remainder of the 60 months. Principal Survivorship Flexible Premium Variable Universal Life DEATH BENEFITS AND POLICY VALUES 27 www.principal.com The request must be made on an adjustment application. The application must be signed by the owner(s) and the insured. If your request is not approved, no changes are made to your Policy. We will approve your request if: • both insureds are alive at the time of your request; and • the attained age of the older insured is 90 or less and of the younger insured is 85 or less at the time of the request; and • we receive evidence satisfactory to us that at least one of the insureds is insurable under our underwriting guidelines in place at the time of your request. The increase in policy face amount is in a risk classification determined by us. The adjustment is effective on the monthly date on or next following our approval of your request. We calculate an “adjustment conditional receipt premium deposit” (payment that accompanies request) based on your request for an increase. If you make a payment with your adjustment application of at least as much as the adjustment conditional receipt premium deposit, we issue a conditional receipt. The conditional receipt shows receipt of the payment and outlines any interim insurance coverage. Any payment made with the adjustment application is held in our general account without interest. If we approve the adjustment, on the effective date of the adjustment, the amount of the premium payment being held minus the premium expense charge is moved to the divisions and/or fixed account. Your current premium allocation percentages are used to make this allocation. The cost of insurance charge will increase in the event of an increase in a Policy’s face amount. If there is insufficient value to pay the higher charges after an increase in face amount, the Policy will lapse. The entire Policy would be at risk of lapsing, not just the incremental increase in face amount. New surrender charges apply to the increased portion of the policy face amount. Decrease in policy face amount On or after the second policy anniversary, you may request a decrease in the policy face amount. No transaction fee is imposed on decreases in the policy face amount. A decrease in face amount lowers the cost of insurance charges but does not reduce surrender charges. A decrease is requested as follows: • the request must be made on an adjustment application; • the application must be signed by the owner(s); • the Policy is not in a grace period; • monthly policy charges are not being waived under a waiver rider; • the decrease is at least the minimum amount as determined by our underwriting guidelines in place at the time of your request; and • the decrease may not reduce the policy face amount below $100,000. A decrease may not be allowed if the decrease would cause a refund of premium and/or the distribution of the policy value in order to maintain compliance with the limits required by the Internal Revenue Code relating to the definition of life insurance. Policy Values Your policy value is equal to the sum of the values in your divisions, fixed account and loan account. The policy value: • increases as premiums are applied and when interest is credited; • decreases as policy loans, partial surrenders, unpaid loan interest and policy expenses are deducted; • increases or decreases as the investment experience of your chosen divisions fluctuates. 28 DEATH BENEFITS AND POLICY VALUES Principal Survivorship Flexible Premium Variable Universal Life 1-800-247-9988 SURRENDERS AND PARTIAL SURRENDERS Surrenders You must send us a written request for any surrender. The request must be signed by all owners, irrevocable beneficiary(ies), if any, and any assignees. The surrender is effective and the surrender value calculated as of the end of the valuation period during which we receive the written request for surrender. Total and partial surrenders from the Policy are generally paid within five business days of our receipt of the written request for surrender. Certain delays in payment are permitted (see GENERAL DESCRIPTION OF THE POLICY - Delay of Payments). Full surrender You may surrender the Policy while the Policy is in effect. If the full surrender is within ten years of the policy date or a policy face amount increase, a surrender charge is imposed. There is no refund of any monthly policy charges deducted before the full surrender effective date. We reserve the right to require you to return the Policy to us prior to making any payment though this does not affect the amount of the surrender value. Partial surrender On or after the second policy anniversary and prior to the maturity date, you may surrender a part of the net surrender value. The minimum amount of a partial surrender is $500. Up to two partial surrenders may be made during a policy year. The total of your two partial surrenders during a policy year may not be greater than 75% of the net surrender value (as of the date of the request for the first partial surrender in that policy year). The partial surrender may not decrease the face amount to less than $100,000. Partial surrenders may negatively affect your no-lapse guarantee provision and your Death Benefit Guarantee rider, if applicable. Your accumulated value is reduced by the amount of the surrender and transaction fee. We surrender units from the divisions and/or values from the fixed account to equal the dollar amount of the surrender request. The surrender is deducted from your division(s) and/or fixed account according to the surrender allocation percentages you specify. If surrender allocation percentages are not specified, we use your monthly policy charge allocation percentages. No surrender charge is imposed on a partial surrender. You pay a transaction fee on each partial surrender. The fee is the lesser of $25 or two percent of the amount surrendered. It is withdrawn in the same proportion as your monthly policy charge allocation. If Death Benefit Option 1 is in effect and the death benefit equals the face amount, the face amount is reduced by the amount of the partial surrender and transaction fee. In situations where the death benefit is greater than the face amount, the face amount is reduced by the amount the partial surrender plus transaction fee exceeds the difference between the death benefit and face amount. If the face amount had been increased, any reduction of the face amount is made on a last in, first out basis. If the Death Benefit Option 2 is in effect, there is no reduction in the face amount upon a partial surrender. Examination Offer (Free-Look Provision) Under state law, you have the right to return the Policy for any reason during the examination offer period. If you return the Policy, we will refund your premium in states where required. In states where permitted, we will refund the net policy value plus any fees or charges taken (which may be more or less than premiums paid). Your request to return the Policy must be in writing. The request and the Policy must be mailed to us or returned to the agent no later (as determined by the postmark) than the last day of the examination offer period as shown below. The examination offer period is the later of: • 10 days after the Policy is delivered to you; or • such later date as specified by applicable state law. NOTE: See GENERAL DESCRIPTION OF THE POLICY - Delay of Payments. Principal Survivorship Flexible Premium Variable Universal Life SURRENDERS AND PARTIAL SURRENDERS 29 www.principal.com LOANS Policy Loans While your Policy is in effect (but after the examination offer period) and has a net surrender value, you may borrow money from us with the Policy as the security for the policy loan. • The maximum amount you may borrow is 90% of the net surrender value as of the date we process the policy loan. • You may request a policy loan of $5,000 or less by calling us at 1-800-247-9988. If you are requesting a policy loan of more than $5,000, your request must be made in writing. • Generally, policy loan proceeds are sent within five business days from the date we receive your request (see GENERAL DESCRIPTION OF THE POLICY - Delay of Payments). • Requests for policy loans from any joint owner are binding on all joint owners. You are charged interest on your policy loan at the annual rate of 8.00%. Interest accrues daily and is due and payable at the end of the policy year. If interest is not paid when due, it is added to the loan amount. Adding unpaid interest to the policy loan amount causes additional amounts to be withdrawn from your division(s) and/or fixed account and transferred to the loan account. Withdrawals are made in the same proportion as the allocation used for the most recent monthly policy charge. A policy loan generally has a permanent effect on policy values. If a policy loan had not been made, the policy value would reflect the investment experience of the division(s) and the interest credited to the fixed account. In addition, loan indebtedness is subtracted from: • death proceeds at the death of the surviving insured; • surrender value upon full surrender or termination of a Policy; and • maturity proceeds paid. Policy loans and unpaid loan interest reduce your net surrender value. If the net surrender value is less than the monthly policy charges on a monthly date, the 61-day grace period provision applies (see POLICY TERMINATION AND REINSTATEMENT - Policy Termination (Lapse)). If the Policy lapses with an outstanding loan balance, there may be tax consequences. Loan Account When a policy loan is taken, a loan account is established. An amount equal to the loan is transferred from your division(s) and fixed account to your loan account. Loan accounts are part of our general account. You may instruct us on the proportions to be taken from your accounts. There are no restrictions on the accounts from which the loan amount can be transferred. If you do not provide such instruction, the loan amount is withdrawn in the same proportion as the allocation used for the most recent monthly policy charge. Any loan interest due and unpaid is transferred in the same manner. Your loan account earns interest from the date of transfer. The loan account interest rate is 6.00% per year during the first ten policy years and 7.75% per year after the tenth policy year. Interest accrues daily and is paid at the end of the policy year. Loan Payments While the Policy is in force and before the insured dies, you may pay the loan indebtedness as follows: • policy loans may be repaid totally or in part; • repayments are allocated to the division(s) and fixed account in the proportions used for allocation of premium payments; • the repayments are allocated as of the valuation period in which we receive the repayment; • repayments are to be sent to our service office; and • payments that we receive that are not designated as premium payments are applied as loan repayments if a policy loan is outstanding. 30 LOANS Principal Survivorship Flexible Premium Variable Universal Life 1-800-247-9988 POLICY TERMINATION AND REINSTATEMENT Policy Termination (Lapse) If the net surrender value on any monthly date is less than the monthly policy charge, a 61-day grace period begins. However, during the first 60 policy months, the Policy will not enter a grace period if ((a) minus (b)) is greater than or equal to (c) where: (a) is the sum of the premiums paid; (b) is the sum of all existing policy loans, unpaid loan interest and partial surrenders; and (c) is the sum of the minimum monthly premiums (no-lapse guarantee) since the policy date to the most recent monthly date. After the first 60 policy months, making premium payments under your planned periodic premium schedule does not guarantee that your Policy will stay in force unless: • your Policy’s net surrender value is at least equal to the monthly policy charge on the current monthly date; or • the death benefit guarantee rider is in effect. Grace Period If the net surrender value on a monthly date is less than the current monthly charge or the loan indebtedness is greater than the net surrender value (overloan), and neither the no-lapse guarantee provision nor the death benefit guarantee rider is in effect, we will send you a notice of pending lapse and a grace period begins. We will send you a notice at the start of the grace period (to your last known post office address) stating the required premium to avoid policy lapse. If the grace period begins because of an overloan, the notice will also state a higher, optional premium payment amount that will decrease the loan indebtedness. Loan repayments count toward your grace period payment. The grace period will end 61 days after the day the notice is mailed. If the required premium is not received by us by the end of the grace period, the Policy will lapse without value. NOTE: The state of Florida requires that the net surrender value of the policy equal zero prior to entering a grace period. The grace period will end 31 days after the day the notice is mailed. If you are in a grace period, the required payment is equal to [(a) plus (b)] divided by (c) where: (a) is the amount by which the surrender charge is more than the policy value on the monthly date at the start of the grace period before the monthly policy charge is deducted; (b) is three monthly policy charges; and (c) is one minus the maximum premium expense charge percentage (see CHARGES AND DEDUCTIONS - Premium Expense Charge). When the required premium is paid during the grace period, monthly charges are not deducted until the monthly anniversary following the payment. Therefore, during the grace period the net surrender value may be overstated. The determination of three monthly policy charges is made by taking three times the “failed” monthly deduction that could not be made due to insufficient policy value. Example with policy loan: Policy Value: $5,000 Loan Balance: $4,000 Surrender Charge: $500 Net Surrender Value: $500 (minimum of zero or Policy Value minus Loan Balance minus Surrender Charge) Monthly Policy Charge: $1,000 No-Lapse Guarantee Premium: $1,200 Maximum Premium Expense Charge in the first policy year: 8.45% (5.00% sales charge, 2.20% state and local taxes, 1.25% federal taxes) The required premium is $3,277 (0 + (3 X $1,000))/(1 - 0.0845) Principal Survivorship Flexible Premium Variable Universal Life POLICY TERMINATION AND REINSTATEMENT 31 www.principal.com Example with no policy loan: Policy Value: $1,000 Loan Balance: $0 Surrender Charge: $1,500 Net Surrender Value: $0 (minimum of zero or Policy Value minus Loan Balance minus Surrender Charge) Monthly Policy Charge: $1,000 No-Lapse Guarantee Premium: $1,200 Maximum Premium Expense Charge in the first policy year: 8.45% (5.00% sales charge, 2.20% state and local taxes, 1.25% federal taxes) The required premium is $3,823 (500 + (3 X $1,000))/(1 - 0.0845) The required premium is intended to reimburse us for the monthly policy charges during the grace period, and to provide enough policy value to pay the monthly policy charge on the first monthly date after the grace period. If the grace period ends before we receive the required premium, we keep any remaining value in the Policy to cover past due policy charges. Adverse market fluctuations may cause the Policy to enter into subsequent grace periods. The Policy is in force during a grace period. If we do not receive the required premium, the Policy terminates as of the end of the grace period. If the insured dies during a grace period, the death benefit is paid and the amount is reduced by: • all monthly policy charges due and unpaid at the death of the insured; and • any loan indebtedness. The Policy also terminates: • when you make a full Policy surrender; • when death proceeds are paid; and • on the maturity date. When the Policy terminates, all of the owners’ Policy rights and privileges end. Neither partial surrenders nor policy loans may be made during a grace period. Reinstatement Subject to certain conditions, you may reinstate a Policy that terminated because of insufficient value. The Policy may only be reinstated: • prior to the maturity date and while one insured is alive; • upon our receipt of satisfactory evidence of insurability (according to our underwriting guidelines then in effect); • if you make a payment of a reinstatement premium; and • if the application for reinstatement is mailed to us within three years of the Policy termination (in some states, we must provide a longer period of time for Policy reinstatement). The reinstatement premium is calculated using the required premium formulas found above in the Grace Period section. The required premium formula in effect on the date the Policy was terminated will be used in this calculation. If a policy loan or loan interest was unpaid when the Policy terminated, the policy loan must be reinstated or repaid (loan interest does not accrue over the period the Policy was terminated). We do not require payment of monthly policy charges during the period the Policy was terminated. Reinstatement is effective on the next monthly date following our approval of the reinstatement application. Premiums received with your reinstatement application are held in the general account without interest. If the reinstatement is approved, they are allocated to your selected division(s) and/or fixed account on the reinstatement date. We will use the premium allocation percentages in effect at the time of termination of the Policy unless you provide new allocation instructions. The reinstated Policy has the same policy date as the original Policy. Your rights and privileges as owner(s) are restored upon reinstatement. If you reinstate your Policy and then it is fully surrendered, a surrender charge may be imposed. The surrender charge, if any, is calculated based on the number of years the Policy was in force. The premium expense charge is calculated based on the number of years since the Policy was issued. 32 POLICY TERMINATION AND REINSTATEMENT Principal Survivorship Flexible Premium Variable Universal Life 1-800-247-9988 TAX ISSUES RELATED TO THE POLICY The following description is a general summary of the tax rules pertaining to life insurance policies. This section relates primarily to federal income taxes rules, regulations and interpretations, which in our opinion are currently in effect but which are subject to change at any time. This summary is not comprehensive and is not intended as tax advice. While we reserve the right to change the Policy to assure it continues to qualify as life insurance for tax purposes, we cannot make any guarantee regarding the future tax treatment of any Policy. NOTE: Due to the complexity of these rules and because they are affected by the facts and circumstances of each Policy, you should consult with legal and tax counsel and other competent advisors regarding these matters. Taxation of Death Proceeds The death proceeds payable under a Policy are generally excludable from the gross income of the beneficiary(ies) under the Internal Revenue Code (IRC). However, if the Policy is transferred for valuable consideration, then a portion of the death proceeds may be includable in the beneficiary’s gross income. The Pension Protection Act of 2006 limits the tax-free death proceeds for employer-owned insurance to the amount of premiums paid unless certain requirements are satisfied. This legislation pertains to Policies issued August 17, 2006 and later, and Policies issued prior to August 17, 2006 that have had a material increase in the death benefit or other material change on or after August 17, 2006. The following requirements must be satisfied in order for the death proceeds of employer-owned life insurance to be tax-free: 1) Specific written notice must be provided to the insured, and written consent from the insured must be obtained prior to the policy being issued; and 2) A specific qualifying condition with respect to the insured’s status must be met. Some examples are: the insured must be either (i) an employee of the policy holder at any time during the 12 month period before the insured’s death, or (ii) a director or a highly compensated employee or a highly compensated individual, as defined by the IRC, at the time the policy was issued. Taxation of Maturity Proceeds A taxable event may occur if the net surrender value at maturity plus any loan indebtedness is greater than premiums paid less partial surrenders and premium refunds. The taxable amount is the difference between the surrender value and the remaining premiums in the policy. Taxation of Growth in Policy Value Any increase in policy value is not included in gross income while the Policy is in-force and continues to meet the definition of life insurance as defined under Section 7702 of the Internal Revenue Code. If a contract does not meet the definition of life insurance, the policy owner will be subject to income tax on annual increases in cash value. Taxation of Policy Surrenders and Partial Surrenders A surrender or lapse of the Policy may have income tax consequences. Upon surrender, the owner(s) is not taxed on the surrender value except for the amount, if any, that exceeds the gross premiums paid less the untaxed portion of any prior surrenders. The amount of any loan indebtedness, upon surrender or lapse, is added to the net surrender value and treated, for this purpose, as if it had been received. A loss incurred upon surrender is generally not deductible. The tax consequences of a surrender may differ if the proceeds are received under any benefit payment option. A full surrender of the Policy will, and a partial surrender may, be included in your gross income to the extent that the distribution exceeds your premiums paid into the Policy. Partial surrenders generally are not taxable unless the total of such surrenders exceeds total premiums paid to the date of partial surrender less the untaxed portion of any prior partial surrenders. Principal Survivorship Flexible Premium Variable Universal Life TAX ISSUES RELATED TO THE POLICY 33 www.principal.com If within the first fifteen policy years, you make a partial surrender with a corresponding reduction in the fact amount, special rules apply. Under those circumstances, the Internal Revenue Code has defined a special formula under which you may be taxed on all or a portion of the surrender amount. Transfers between the division(s) and/or fixed account are not considered as distributions from the Policy and would not be considered taxable income. Taxation of Policy Loans and Loan Interest If the Policy is not a modified endowment contract, loans received under the Policy are not generally considered to be distributions subject to tax. Interest paid to us as a result of a policy loan may or may not be deductible depending on a number of factors. If the Policy is a modified endowment contract, loans received under the Policy are considered to be distributions subject to tax. If the Policy lapses with an outstanding loan balance, there may be tax consequences. Taxation of Change of Owner Transfer of ownership may have tax consequences to the owner. Please consult with your tax advisor before changing ownership of your life insurance policy. Taxation of Change of Insured For tax purposes, changing the insured is considered to be the same as a surrender of the policy. The taxable amount is generally the difference between the policy value and the net premiums paid. Modified Endowment Contract Status A Policy becomes a Modified Endowment Contract when premiums paid exceed certain premium limits as defined by Section 7702A of the Internal Revenue Code. There is no change regarding the tax-deferred internal build-up of policy value or the income tax-free death benefit to your beneficiary(ies), however, distributions from a Modified Endowment Contract are taxed as if the Policy is a deferred annuity. Thus, taxation on partial surrenders, policy loans and other defined distributions will occur if your policy value is greater than your premiums paid. In addition, taxable distributions are subject to a federal income tax penalty of 10% unless the distribution is • made after the owner attains age 59 ½; or • attributable to the taxpayer becoming disabled; or • part of a series of substantially equal periodic payments (made not less frequently than annually) made for the life or life expectancy of the taxpayer or the joint lives or joint life expectancy of the taxpayer and beneficiary. Once a Policy is classified as a Modified Endowment Contract, the classification cannot be changed. Modified endowment contract classification may be avoided by limiting the amount of premiums paid under the Policy. In the absence of your instructions, we will refund all or part of the premium payment that would make the Policy a modified endowment contract. Taxation of Exchange or Assignment of Policies An exchange or assignment of a Policy may have tax consequences. Please consult with your tax advisor before exchanging or assigning your life insurance policy. Corporate Alternative Minimum Tax Ownership of a Policy by certain corporations may affect the owner’s exposure to the corporate alternative minimum tax. In determining whether it is subject to alternative minimum tax, the corporate owner must make two computations. First, the corporation must take into account a portion of the current year’s increase in the built-in gain in its corporate owned policies. Second, the corporation must take into account a portion of the amount by which the death benefits received under any Policy exceed the sum of a) the premiums paid on that Policy in the year of death, and b) the corporation’s basis in the Policy (as measured for alternative minimum tax purposes) as of the end of the corporation’s tax year immediately preceding the year of death. The corporate alternative minimum tax does not apply to S Corporations. Such tax also does not apply to “Small Corporations” as defined by Section 55(e) of the Internal Revenue Code. 34 TAX ISSUES RELATED TO THE POLICY Principal Survivorship Flexible Premium Variable Universal Life 1-800-247-9988 Special Considerations for Corporations Section 264 of the Internal Revenue Code imposes numerous limitations on the interest and other business deductions that may otherwise be available to businesses that own life insurance policies. In addition, the premium paid by a business for a life insurance policy is not deductible as a business expense or otherwise if the business is directly or indirectly a beneficiary of the policy. Other Tax Issues Federal estate taxes and state and local estate, inheritance and other taxes may become due depending on applicable law and your circumstances or the circumstances of the Policy beneficiary(ies) if you or the insured dies. Withholding Withholding is generally required on certain taxable distributions under insurance contracts. In the case of periodic payments, the withholding is at graduated rates. With respect to non-periodic distributions, withholding is a flat rate of 10%. You may elect to have either non-periodic or periodic payments made without withholding except if your tax identification number has not been furnished to us or if the IRS has notified us that the number you furnished is incorrect. Non-resident aliens are subject to 30% withholding (or lower treaty rate) on taxable distributions. GENERAL PROVISIONS Frequent Trading and Market-Timing (Abusive Trading Practices) This Policy is not designed for frequent trading or market timing activity of the investment options. If you intend to trade frequently and/or use market timing investment strategies, you should not purchase this Policy. The Company does not accommodate market timing. We consider frequent trading and market timing activities to be abusive trading practices because they: • Disrupt the management of the underlying mutual funds by; • forcing the fund to hold short-term (liquid) assets rather than investing for long term growth, which results in lost investment opportunities for the fund; and • causing unplanned portfolio turnover; • Hurt the portfolio performance of the underlying mutual funds; and • Increase expenses of the underlying mutual fund and separate account due to; • increased broker-dealer commissions; and • increased recordkeeping and related costs. If we are not able to identify such abusive trading practices, the abuses described above will negatively impact the Contract and cause investors to suffer the harms described. We have adopted policies and procedures to help us identify and prevent abusive trading practices. In addition, the underlying mutual funds monitor trading activity to identify and take action against abuses. While our policies and procedures are designed to identify and protect against abusive trading practices, there can be no certainty that we will identify and prevent abusive trading in all instances. When we do identify abusive trading, we will apply our policies and procedures in a fair and uniform manner. If we, or an underlying mutual fund that is an investment option with the Contract, deem abusive trading practices to be occurring, we will take action that may include, but is not limited to: • Rejecting transfer instructions from a Contract owner or other person authorized by the owner to direct transfers; • Restricting submission of transfer requests by, for example, allowing transfer requests to be submitted by 1st class U.S. mail only and disallowing requests made via the internet, by facsimile, by overnight courier or by telephone; • Limiting the number of unscheduled transfer during a Contract year to no more than 12; • Prohibiting you from requesting a transfer among the divisions for a minimum of thirty days where there is evidence of at least one round-trip transaction (exchange or redemption of shares that were purchased within 30 days of the exchange/redemption) by you; and • Taking such other action as directed by the underlying mutual fund. Principal Survivorship Flexible Premium Variable Universal Life GENERAL PROVISIONS 35 www.principal.com The underlying mutual funds have reserved the right to accept or reject, without prior written notice, any transfer requests. In some instances, a transfer may be completed prior to a determination of abusive trading. In those instances, we will reverse the transfer (within two business days of the transfer) and return the Contract to the investment option holdings it had prior to the transfer. We will give you notice in writing in this instance. Purchase Procedures A completed application and required supplements must be submitted to us through an agent or broker selling the Policy. The minimum policy face amount when the Policy is originally issued is $100,000. We reserve the right to increase or decrease the minimum policy face amount. The increased minimum face amount would apply only to Policies issued after the effective date of the increase. To issue a Policy, we require that at least one insured be age 85 or younger as of the policy date. Neither insured may be older than age 90 as of the policy date. Other underwriting restrictions may apply. An applicant for the Policy must: • furnish satisfactory evidence of insurability of the insured; and • meet our insurance underwriting guidelines and suitability rules. If you want insurance coverage to start at the time the application is submitted, you must send a payment with your completed application. The amount is based on the face amount of the Policy, the death benefit option and the charges and expenses of the Policy. This amount is shown on the policy illustration provided to you by us or your registered representative. If this amount is submitted with the application, a conditional receipt will be given to you. The receipt acknowledges the initial payment and details any interim conditional insurance coverage. Payments are to be made via personal or financial institution check (for example, a bank or cashier’s check). We reserve the right to refuse any payment that we feel presents a fraud or money laundering risk. Examples of the types of payments we will not accept are cash, money orders, travelers checks, credit card checks, and foreign checks. We reserve the right to reject any application or related premium if we determine that we have not received complete information and/or instructions or that our underwriting guidelines, suitability rules or procedures have not been met. Any premium submitted will be returned no later than five business days from the date the application was rejected. Important Information about Customer Identification Procedures To help the government fight the funding of terrorism and money laundering activities, Federal law requires financial institutions to obtain, verify, and record information that identifies each person who opens an account. When you open an account, we will ask for your name, address, date of birth, and other information that will allow us to verify your identity. We may also ask to see your driver’s license or other identifying documents. If concerns arise with verification of your identification, no transactions, other than redemptions, will be permitted while we attempt to reconcile the concerns. If we are unable to verify your identity within 30 days of our receipt of your original purchase, the account(s) will be closed and redeemed in accordance with normal redemption procedures. Policy Date If we issue a Policy, a policy date is determined. Policies will not be dated on the 29th, 30th or 31st of any month. Policies that would otherwise be dated on these dates will be dated on the first day of the following month. Policies that are issued on a cash on delivery (COD) basis and that would otherwise be dated on the 29th, 30th or 31st of a month will be dated on the first day of the following month. Your policy date is shown on the current data pages. Current data pages are the most recent policy specification pages issued to a Policy owner and are located in the Policy. 36 GENERAL PROVISIONS Principal Survivorship Flexible Premium Variable Universal Life 1-800-247-9988 Upon specific request and our approval, your Policy may be backdated. The policy date may not be more than six months prior to the date of application (or shorter period if required by state law). Payment of at least the monthly policy charges is required for the backdated period. Monthly policy charges are deducted from the policy value for the backdated period. Effective Date The Policy date and the effective date are the same unless a backdated policy date is requested. Insurance coverage is effective, provided all purchase requirements for the Policy have been satisfied. If the proposed insured dies before the effective date, there is no coverage under the Policy (coverage is determined solely under the terms of the conditional receipt, if any). Distribution of the Policy The Company has appointed Princor Financial Services Corporation (“Princor”) (Des Moines, Iowa 50392-0200), a broker-dealer registered under the Securities Exchange Act of 1934, a member of the Financial Industry Regulatory Authority and affiliate of the Company, as the distributor and principal underwriter of the Policy. The Company pays commissions on sales of the Policy of no more than 50% of premiums received in the first policy year (or the first year following an adjustment) up to the surrender target premium. In addition, a commission of up to 3.0% of premium above the surrender target premium received in the first policy year (or first year following an adjustment) may be paid. After the first year, following the policy date (or adjustment date), commissions range from 0% to 4.0% of premiums received. Expense allowances may be paid to agents and brokers based on premiums received. Princor also may receive 12b-1 fees in connection with purchases and sales of mutual funds underlying the Policies. The 12b-1 fees for the underlying mutual funds are shown in the prospectuses of each underlying mutual fund. Applications for the Policies are solicited by registered representatives of Princor or such other broker-dealers as have entered into selling agreements with Princor. Such registered representatives act as appointed agents of the Company under applicable state insurance law and must be licensed to sell variable insurance products. The Company intends to offer the Policy in all jurisdictions where it is licensed to do business and where the Policy is approved. Payments to Financial Intermediaries The Company pays compensation to broker-dealers, financial institutions and other parties (“Financial Intermediaries”) for the sale of the Policy according to schedules in the sales agreements and other agreements reached between the Company and the Financial Intermediaries. Such compensation generally consists of commissions on premiums paid on the Policy. The Company and/or its affiliates may also pay other amounts (“Additional Payments”) that include, but are not limited to, marketing allowances, expense reimbursements and education payments. These Additional Payments are designed to provide incentives for the sale and retention of the Policies as well as other products sold by the Company and may influence the Financial Intermediary or sales representative to recommend the purchase of this Policy over competing policies or over other investment options. You may ask your sales representative about these differing and divergent interests, how she/he is personally compensated and how his/her broker-dealer is compensated for soliciting applications for the Policy. Service Arrangements and Compensation The Company and/or Princor have entered into agreements with the distributors, advisers and/or the affiliates of some of the mutual funds underlying the Policy and receive compensation for providing certain services including, but not limited to, distribution and operational support services, to the underlying mutual fund. Fees for these services are paid periodically (typically, quarterly or monthly) based on the average daily net asset value of shares of each fund held by the Separate Account and purchased at the Policy owners’ instructions. Because the Company and Princor receive such fees, they may be subject to competing interests in making these funds available as investment options under the Policy. The Company takes into consideration the anticipated payments from underlying mutual funds when it determines the charges assessed under the Policy. Without these payments, charges under the Policy are expected to be higher. Principal Survivorship Flexible Premium Variable Universal Life GENERAL PROVISIONS 37 www.principal.com Statement of Values You receive an annual statement at the end of each policy year. The statement will show: • current death benefit; • current policy value and surrender value; • all premiums paid since the last statement; • all charges since the last statement; • any loan indebtedness; • any partial surrenders since the last statement; • the number of units and unit value; • total value of each of your divisions and the fixed account; • designated beneficiary(ies); and • all riders included in the Policy. You will also receive a statement as of the end of each calendar quarter. At any time, you may request a free current statement by telephoning 1-800-247-9988. We also send you the reports required by the Investment Company Act of 1940 (as amended). Services Available via the Internet and Telephone If you elect internet and/or telephone privileges, instructions for the following transactions may be given to us via the internet or telephone: • change in allocations of future premium payments; • change in allocation of the monthly policy charge; • change to your APR instructions; • change to your scheduled transfer instructions; • unscheduled transfers; and • policy loan (not available via the internet) (loan proceeds are mailed to the owner’s address of record). If the Policy is owned by a trust, an authorized individual (with the proper password) may use these services and provide us with instructions. Your instructions: • may be given by calling us at 1-800-247-9988 24 hours per day, seven days per week. Counselors are available for assistance between 7 a.m. and 7 p.m. Central Time on any day that the NYSE is open; • may be given by accessing us at www.principal.com (for security purposes, you need a password to use any of the internet services, including viewing your Policy information on-line. If you don’t have a password, you can obtain one at www.principal.com); • must be received by us before the close of the NYSE (generally 3:00 p.m. Central Time) to be effective the day you call; • are effective the next business day if not received until after the close of the NYSE; and • from one joint owner are binding on all joint owners. Direct Dial You may receive information about your Policy from our Direct Dial system 24 hours per day, seven days per week. The Direct Dial number is 1-800-247-9988. Through this automated system, you can: • obtain information about unit values and policy values; • initiate certain changes to your Policy; and • change your password. Instructions from one joint owner are binding on all joint owners. If the Policy is owned by a trust, an authorized individual (with the proper password) may use these services and provide us with instructions. 38 GENERAL PROVISIONS Principal Survivorship Flexible Premium Variable Universal Life 1-800-247-9988 Although neither the Separate Account nor the Company is responsible for the authenticity of telephone transaction or internet requests, the Separate Account and the Company reserve the right to refuse telephone and/or internet orders. You are liable for a loss resulting from a fraudulent telephone or internet order that we reasonably believe is genuine. We use reasonable procedures to assure instructions are genuine. If the procedures are not followed, we may be liable for loss due to unauthorized or fraudulent transactions. The procedures for telephone instructions include: recording all telephone instructions, requesting personal identification information (name, phone number, social security number, birth date, etc.) and sending written confirmation to the owner’s address of record. The procedures for internet and Direct Dial include requesting the same personal identification information as well as your password, logging all internet and Direct Dial activity and sending written transaction confirmations to the owner’s address of record. Misstatement of Age or Gender If the age or, where applicable, gender of an insured has been misstated, we adjust the death benefit payable under your Policy to reflect the amount that would have been payable at the correct age and gender. Non-Participating Policy The Policies do not share in any divisible surplus of the Company. Incontestability We will not contest the insurance coverage provided by the Policy, except for any increases in face amount, after the Policy has been in force during the lifetime of the insured for a period of two years from the policy date. Any policy face amount increase has its own two-year contestability period that begins on the effective date of the adjustment. In many states, the time limit in the incontestability period does not apply to fraudulent misrepresentations. Independent Registered Public Accounting Firm The financial statements of the Principal Life Insurance Company Variable Life Separate Account and the consolidated financial statements of the Principal Life Insurance Company are included in the Statement of Additional Information. Those statements have been audited by Ernst & Young LLP, independent registered public accounting firm, 801 Grand Avenue, Des Moines, Iowa 50309, for the periods indicated in their reports. LEGAL PROCEEDINGS There are no legal proceedings pending to which the Separate Account is a party or which would materially affect the Separate Account. Principal Survivorship Flexible Premium Variable Universal Life LEGAL PROCEEDINGS 39 www.principal.com TABLE OF SEPARATE ACCOUNT DIVISIONS The following is a brief summary of the investment objectives of each division. There is no guarantee that the objectives will be met. American Century VP Income & Growth Division Invests in: American Century VP Income & Growth Fund - Class I Investment Advisor: American Century Investment Management, Inc. Investment Objective: seeks capital growth by investing in common stocks. Income is a secondary objective. American Century VP Inflation Protection Division Invests in: American Century VP Inflation Protection Fund - Class II Investment Advisor: American Century Investment Management, Inc. Investment Objective: pursues long-term total return using a strategy that seeks to protect against U.S. inflation. American Century VP Mid Cap Value Division Invests in: American Century VP Mid Cap Value Fund - Class II Investment Advisor: American Century Investment Management, Inc. Investment Objective: seeks long-term capital growth. Income is a secondary objective. American Century VP Ultra Division Invests in: American Century VP Ultra Fund - Class I Investment Advisor: American Century Investment Management, Inc. Investment Objective: seeks long-term capital growth. American Century VP Value Division Invests in: American Century VP Value Fund - Class II Investment Advisor: American Century Investment Management, Inc. Investment Objective: seeks long-term capital growth. Income is a secondary objective. 40 TABLE OF SEPARATE ACCOUNT DIVISIONS Principal Survivorship Flexible Premium Variable Universal Life 1-800-247-9988 Calvert SRI Equity Division Invests in: Calvert VP Sustainable and Responsible Investment Equity Portfolio Investment Advisor: Atlanta Capital Management Company LLC through a sub-advisory agreement with Calvert Asset Management Company, Inc. Investment Objective: seeks growth in capital through investment in stocks of issuers in industries believed to offer opportunities for potential capital appreciation and which meet the portfolio's investment criteria including financial, sustainability and social responsibility factors. Delaware Small Cap Value Division Invests in: Delaware VIP Small Cap Value Series - Service Class Investment Advisor: Delaware Management Company Investment Objective: seeks capital appreciation. Fidelity VIP Contrafund Division Invests in: Fidelity VIP Contrafund ® Portfolio - Initial Class Investment Advisor: Fidelity Management & Research Company Investment Objective: seeks long-term capital appreciation. Fidelity VIP Equity-Income Division Invests in: Fidelity VIP Equity-Income Portfolio - Initial Class Investment Advisor: Fidelity Management & Research Company Investment Objective: seeks reasonable income. The fund will also consider the potential for capital appreciation. The fund's goal is to achieve a yield which exceeds the composite yield on the securities comprising the Standard & Poor's 500 Index (S&P 500 ® ). Fidelity VIP Growth Division Invests in: Fidelity VIP Growth Portfolio - Service Class 2 Investment Advisor: Fidelity Management & Research Company Investment Objective: seeks to achieve capital appreciation. Principal Survivorship Flexible Premium Variable Universal Life TABLE OF SEPARATE ACCOUNT DIVISIONS 41 www.principal.com Fidelity VIP High Income Division Invests in: Fidelity VIP High Income Portfolio - Initial Class Investment Advisor: Fidelity Management & Research Company Investment Objective: seeks a high level of current income, while also considering growth of capital. Invesco Capital Appreciation Division (fka AIM V.I. Capital Appreciation Division) Invests in: Invesco V.I. Capital Appreciation Fund - Series I Shares (fka AIM V.I. Capital Appreciation Fund - Series I Shares) Investment Advisor: Invesco Advisers, Inc. Investment Objective: seeks long-term growth of capital. Invesco Core Equity Division (fka AIM V.I. Core Equity Division) Invests in: Invesco V.I. Core Equity Fund - Series I Shares (fka AIM V.I. Core Equity Fund - Series I Shares) Investment Advisor: Invesco Advisers, Inc. Investment Objective: seeks long-term growth of capital. Invesco Dynamics Division (fka AIM V.I. Dynamics Division) Invests in: Invesco V.I. Dynamics Fund - Series I Shares (fka AIM V.I. Dynamics Fund - Series I Shares) Investment Advisor: Invesco Advisers, Inc. Investment Objective: seeks long-term capital growth. Invesco Global Health Care Division (fka AIM V.I. Global Health Care Division) Invests in: Invesco V.I. Global Health Care Fund - Series I Shares (fka AIM V.I. Global Health Care Fund - Series I Shares) Investment Advisor: Invesco Advisers, Inc. Investment Objective: seeks long-term growth of capital. 42 TABLE OF SEPARATE ACCOUNT DIVISIONS Principal Survivorship Flexible Premium Variable Universal Life 1-800-247-9988 Invesco Small Cap Equity Division (fka AIM V.I. Small Cap Equity Division) Invests in: Invesco V.I. Small Cap Equity Fund - Series I Shares (fka AIM V.I. Small Cap Equity Fund - Series I Shares) Investment Advisor: Invesco Advisers, Inc. Investment Objective: seeks long-term growth of capital. Invesco Technology Division (fka AIM V.I. Technology Division) Invests in: Invesco V.I. Technology Fund - Series I Shares (fka AIM V.I. Technology Fund - Series I Shares) Investment Advisor: Invesco Advisers, Inc. Investment Objective: seeks long-term growth of capital. Janus Aspen Enterprise Division Invests in: Janus Aspen Series Enterprise Portfolio - Service Shares Investment Advisor: Janus Capital Management LLC Investment Objective: seeks long-term growth of capital. Asset Allocation Division Invests in: Principal Variable Contracts Funds Asset Allocation Account - Class 1 Investment Advisor: Morgan Stanley Investment Management, Inc. (doing business as Van Kampen) through a sub-advisory agreement with Principal Management Corporation Investment Objective: seeks to generate a total investment return consistent with the preservation of capital. Balanced Division Invests in: Principal Variable Contracts Funds Balanced Account - Class 1 Investment Advisor: Principal Global Investors, LLC through a sub-advisory agreement with Principal Management Corporation Investment Objective: seeks to generate a total return consisting of current income and capital appreciation. Principal Survivorship Flexible Premium Variable Universal Life TABLE OF SEPARATE ACCOUNT DIVISIONS 43 www.principal.com Bond & Mortgage Securities Division Invests in: Principal Variable Contracts Funds Bond & Mortgage Securities Account - Class 1 Investment Advisor: Principal Global Investors, LLC through a sub-advisory agreement with Principal Management Corporation Investment Objective: seeks to provide current income. Diversified International Division Invests in: Principal Variable Contracts Funds Diversified International Account - Class 1 Investment Advisor: Principal Global Investors, LLC through a sub-advisory agreement with Principal Management Corporation Investment Objective: seeks long-term growth of capital. Equity Income Division Invests in: Principal Variable Contracts Funds Equity Income Account - Class 1 Investment Advisor: Edge Asset Management, Inc. through a sub-advisory agreement with Principal Management Corporation Investment Objective: seeks to provide a relatively high level of current income and long-term growth of income and capital. Government & High Quality Bond Division (will merge into the Mortgage Securities Division effective July Invests in: Principal Variable Contracts Funds Government & High Quality Bond Account - Class 1 (will merge into the Principal Variable Contracts Funds Mortgage Securities Account - Class 1 effective July 2010) Investment Advisor: Principal Global Investors, LLC through a sub-advisory agreement with Principal Management Corporation Investment Objective: seeks a high level of current income, liquidity and safety of principal. International Emerging Markets Division Invests in: Principal Variable Contracts Funds International Emerging Markets Account - Class 1 Investment Advisor: Principal Global Investors, LLC through a sub-advisory agreement with Principal Management Corporation Investment Objective: seeks long-term growth of capital. 44 TABLE OF SEPARATE ACCOUNT DIVISIONS Principal Survivorship Flexible Premium Variable Universal Life 1-800-247-9988 International SmallCap Division (will merge into the Diversified International Division effective July 2010) Invests in: Principal Variable Contracts Funds International SmallCap Account - Class 1 (will merge into the Principal Variable Contracts Funds Diversified International Account - Class 1 effective July 2010) Investment Advisor: Principal Global Investors, LLC through a sub-advisory agreement with Principal Management Corporation Investment Objective: seeks long-term growth of capital by investing in a portfolio of equity securities of companies established outside of the U.S. LargeCap Blend II Division Invests in: Principal Variable Contracts Funds LargeCap Blend Account II - Class 1 Investment Advisor: T. Rowe Price Associates, Inc. and ClearBridge Advisors, LLC through sub-advisory agreements with Principal Management Corporation Investment Objective: seeks long-term growth of capital. LargeCap Growth Division Invests in: Principal Variable Contracts Funds LargeCap Growth Account - Class 1 Investment Advisor: Columbus Circle Investors through a sub-advisory agreement with Principal Management Corporation Investment Objective: seeks long-term growth of capital. LargeCap Growth I Division Invests in: Principal Variable Contracts Funds LargeCap Growth Account I - Class 1 Investment Advisor: T. Rowe Price Associates, Inc. and Brown Investment Advisory Incorporated through sub- advisory agreements with Principal Management Corporation Investment Objective: seeks long-term growth of capital. LargeCap S&P 500 Index Division Invests in: Principal Variable Contracts Funds LargeCap S&P 500 Index Account - Class 1 Investment Advisor: Principal Global Investors, LLC through a sub-advisory agreement with Principal Management Corporation Investment Objective: seeks long-term growth of capital. Principal Survivorship Flexible Premium Variable Universal Life TABLE OF SEPARATE ACCOUNT DIVISIONS 45 www.principal.com LargeCap Value Division Invests in: Principal Variable Contracts Funds LargeCap Value Account - Class 1 Investment Advisor: Principal Global Investors, LLC through a sub-advisory agreement with Principal Management Corporation Investment Objective: seeks long-term growth of capital. LargeCap Value III Division Invests in: Principal Variable Contracts Funds LargeCap Value Account III - Class 1 Investment Advisor: AllianceBernstein, L.P. and Westwood Management Corp. through sub-advisory agreements with Principal Management Corporation Investment Objective: seeks long-term growth of capital. MidCap Blend Division Invests in: Principal Variable Contracts Funds MidCap Blend Account - Class 1 Investment Advisor: Principal Global Investors, LLC through a sub-advisory agreement with Principal Management Corporation Investment Objective: seeks long-term growth of capital. MidCap Growth I Division (will merge into the MidCap Blend Division effective July 2010) Invests in: Principal Variable Contracts Funds MidCap Growth Account I - Class 1 (will merge into the Principal Variable Contracts Funds MidCap Blend Account - Class 1 effective July 2010) Investment Advisor: Mellon Capital Management Corporation through a sub-advisory agreement with Principal Management Corporation Investment Objective: seeks long-term growth of capital. MidCap Value II Division (will merge into the MidCap Blend Division effective July 2010) Invests in: Principal Variable Contracts Funds MidCap Value Account II - Class 1 (will merge into the Principal Variable Contracts Funds MidCap Blend Account - Class 1 effective July 2010) Investment Advisor: Jacobs Levy Equity Management, Inc. through a sub-advisory agreement with Principal Management Corporation Investment Objective: seeks long-term growth of capital. 46 TABLE OF SEPARATE ACCOUNT DIVISIONS Principal Survivorship Flexible Premium Variable Universal Life 1-800-247-9988 Money Market Division Invests in: Principal Variable Contracts Funds Money Market Account - Class 1 Investment Advisor: Principal Global Investors, LLC through a sub-advisory agreement with Principal Management Corporation Investment Objective: seeks as high a level of current income as is considered consistent with preservation of principal and maintenance of liquidity. Mortgage Securities Division (division name will change to Government & High Quality Bond Division effective July 2010) Invests in: Principal Variable Contracts Funds Mortgage Securities Account - Class 1 (fund name will change to Principal Variable Contracts Funds Government & High Quality Bond Account - Class 1 effective July 2010) Investment Advisor: Edge Asset Management, Inc. through a sub-advisory agreement with Principal Management Corporation. Investment Objective: seeks to provide a high level of current income consistent with safety and liquidity. Principal LifeTime 2010 Division Invests in: Principal Variable Contracts Funds Principal LifeTime 2010 Account - Class 1 Investment Advisor: Principal Global Investors, LLC through a sub-advisory agreement with Principal Management Corporation Investment Advisor: seeks a total return consisting of long-term growth of capital and current income. Principal LifeTime 2020 Division Invests in: Principal Variable Contracts Funds Principal LifeTime 2020 Account - Class 1 Investment Advisor: Principal Global Investors, LLC through a sub-advisory agreement with Principal Management Corporation Investment Objective: seeks a total return consisting of long-term growth of capital and current income. Principal Survivorship Flexible Premium Variable Universal Life TABLE OF SEPARATE ACCOUNT DIVISIONS 47 www.principal.com Principal LifeTime 2030 Division Invests in: Principal Variable Contracts Funds Principal LifeTime 2030 Account - Class 1 Investment Advisor: Principal Global Investors, LLC through a sub-advisory agreement with Principal Management Corporation Investment Objective: seeks a total return consisting of long-term growth of capital and current income. Principal LifeTime 2040 Division Invests in: Principal Variable Contracts Funds Principal LifeTime 2040 Account - Class 1 Investment Advisor: Principal Global Investors, LLC through a sub-advisory agreement with Principal Management Corporation Investment Objective: seeks a total return consisting of long-term growth of capital and current income. Principal LifeTime 2050 Division Invests in: Principal Variable Contracts Funds Principal LifeTime 2050 Account - Class 1 Investment Advisor: Principal Global Investors, LLC through a sub-advisory agreement with Principal Management Corporation Investment Objective: seeks a total return consisting of long-term growth of capital and current income. Principal LifeTime Strategic Income Division Invests in: Principal Variable Contracts Funds Principal LifeTime Strategic Income Account - Class 1 Investment Advisor: Principal Global Investors, LLC through a sub-advisory agreement with Principal Management Corporation Investment Objective: seeks current income, and as a secondary objective, capital appreciation. Real Estate Securities Division Invests in: Principal Variable Contracts Funds Real Estate Securities Account - Class 1 Investment Advisor: Principal Real Estate Investors, LLC through a sub-advisory agreement with Principal Management Corporation Investment Objective: seeks to generate a total return. 48 TABLE OF SEPARATE ACCOUNT DIVISIONS Principal Survivorship Flexible Premium Variable Universal Life 1-800-247-9988 SAM Balanced Portfolio Division Invests in: Principal Variable Contracts Funds Strategic Asset Management Portfolios - Balanced Portfolio - Class 1 Investment Advisor: Edge Asset Management, Inc. through a sub-advisory agreement with Principal Management Corporation Investment Objective: seeks to provide as high a level of total return (consisting of reinvested income and capital appreciation) as is consistent with reasonable risk. In general, relative to the other Portfolios, the Balanced Portfolio should offer investors the potential for a medium level of income and a medium level of capital growth, while exposing them to a medium level of principal risk. SAM Conservative Balanced Portfolio Division Invests in: Principal Variable Contracts Funds Strategic Asset Management Portfolios - Conservative Balanced Portfolio - Class 1 Investment Advisor: Edge Asset Management, Inc. through a sub-advisory agreement with Principal Management Corporation Investment Objective: seeks to provide a high level of total return (consisting of reinvestment of income and capital appreciation), consistent with a moderate degree of principal risk. In general, relative to the other Portfolios, the Conservative Balanced Portfolio should offer investors the potential for a medium to high level of income and a medium to low level of capital growth, while exposing them to a medium to low level of principal risk. SAM Conservative Growth Portfolio Division Invests in: Principal Variable Contracts Funds Strategic Asset Management Portfolios - Conservative Growth Portfolio - Class 1 Investment Advisor: Edge Asset Management, Inc. through a sub-advisory agreement with Principal Management Corporation Investment Objective: seeks to provide long-term capital appreciation. In general, relative to the other Portfolios, the Conservative Growth Portfolio should offer investors the potential for a low to medium level of income and a medium to high level of capital growth, while exposing them to a medium to high level of principal risk. Principal Survivorship Flexible Premium Variable Universal Life TABLE OF SEPARATE ACCOUNT DIVISIONS 49 www.principal.com SAM Flexible Income Portfolio Division Invests in: Principal Variable Contracts Funds Strategic Asset Management Portfolios - Flexible Income Portfolio - Class 1 Investment Advisor: Edge Asset Management, Inc. through a sub-advisory agreement with Principal Management Corporation Investment Objective: seeks to provide a high level of total return (consisting of reinvestment of income with some capital appreciation). In general, relative to the other Portfolios, the Flexible Income Portfolio should offer investors the potential for a high level of income and a low level of capital growth, while exposing them to a low level of principal risk. SAM Strategic Growth Portfolio Division Invests in: Principal Variable Contracts Funds Strategic Asset Management Portfolios - Strategic Growth Portfolio - Class 1 Investment Advisor: Edge Asset Management, Inc. through a sub-advisory agreement with Principal Management Corporation Investment Objective: seeks to provide long-term capital appreciation. In general, relative to the other Portfolios, the Strategic Growth Portfolio should offer investors the potential for a high level of capital growth, and a corresponding level of principal risk. Short-Term Bond Division (division will merge into the Short-Term Income Division effective July 2010) Invests in: Principal Variable Contracts Funds Short-Term Bond Account - Class 1 (will merge into the Principal Variable Contracts Funds Short-Term Income Account - Class 1 effective July 2010) Investment Advisor: Principal Global Investors, LLC through a sub-advisory agreement with Principal Management Corporation Investment Objective: seeks to provide current income. Short-Term Income Division Invests in: Principal Variable Contracts Funds Short-Term Income Account - Class 1 Investment Advisor: Edge Asset Management, Inc. through a sub-advisory agreement with Principal Management Corporation Investment Objective: seeks to provide as high a level of current income as is consistent with prudent investment management and stability of principal. 50 TABLE OF SEPARATE ACCOUNT DIVISIONS Principal Survivorship Flexible Premium Variable Universal Life 1-800-247-9988 SmallCap Blend Division Invests in: Principal Variable Contracts Funds SmallCap Blend Account - Class 1 Investment Advisor: Principal Global Investors, LLC through a sub-advisory agreement with Principal Management Corporation Investment Objective: seeks long-term growth of capital. SmallCap Growth II Division Invests in: Principal Variable Contracts Funds SmallCap Growth Account II - Class 1 Investment Advisor: Emerald Advisors, Inc. and Essex Investment Management Company, LLC through sub- advisory agreements with Principal Management Corporation Investment Objective: seeks long-term growth of capital. SmallCap Value I Division Invests in: Principal Variable Contracts Funds SmallCap Value Account I - Class 1 Investment Advisor: J.P. Morgan Investment Management, Inc., and Mellon Capital Management Corporation through sub-advisory agreements with Principal Management Corporation Investment Objective: seeks long-term growth of capital. Putnam VT Voyager Division Invests in: Putnam VT Voyager Fund - Class IB Investment Advisor: Putnam Management Investment Objective: seeks capital appreciation. Wells Fargo Advantage VT Index Asset Allocation Division (fka Wells Fargo Advantage VT Asset Allocation Division) Invests in: Wells Fargo Advantage VT Index Asset Allocation Fund (fka Wells Fargo Advantage VT Asset Allocation Fund) Investment Advisor: Wells Capital Management Incorporated through a sub-advisory agreement with Wells Fargo Funds Management, LLC Investment Objective: seeks long-term total return, consisting of capital appreciation and current income. Principal Survivorship Flexible Premium Variable Universal Life TABLE OF SEPARATE ACCOUNT DIVISIONS 51 www.principal.com Wells Fargo Advantage VT Equity Income Division Invests in: Wells Fargo Advantage VT Equity Income Fund Investment Advisor: Wells Capital Management Incorporated through a sub-advisory agreement with Wells Fargo Funds Management, LLC Investment Objective: seeks long-term capital appreciation and dividend income. Wells Fargo Advantage VT Large Company Growth Division Invests in: Wells Fargo Advantage VT Large Company Growth Fund Investment Advisor: Peregrine Capital Management, Inc. through a sub-advisory agreement with Wells Fargo Funds Management, LLC Investment Objective: seeks to provide long-term capital appreciation. 52 TABLE OF SEPARATE ACCOUNT DIVISIONS Principal Survivorship Flexible Premium Variable Universal Life 1-800-247-9988 APPENDIX A - TARGET PREMIUMS The target premiums for the Policy are based on the joint equivalent age (JEA) of the insureds. The JEA takes into account the gender*, age, smoking status and risk classification of each insured. The calculation is as follows: 1) Start with the unadjusted individual ages of insured #1 and insured #2. Call this (X1) and (X2) respectively. 2) Take each individual age and adjust for gender. • if Male the gender adjustment is 0 • if Female the gender adjustment is minus 5 • if Unisex rating is used, the gender adjustment is minus 2 3) Take resulting individual ages from step 2 and adjust for smokers if applicable. • if Male Smoker the smoker adjustment is plus 3 • if Female Smoker the smoker adjustment is plus 2 • if Unisex Smoker the smoker adjustment is plus 3 4) Take resulting individual ages from step 3 and adjust for substandard table ratings, if any. The use of substandard table ratings are determined as part of the underwriting process and are based on less than standard mortality risk. • if table A rating then add 2 • if table B rating then add 4 • if table C rating then add 6 • if table D rating then add 8 • if table E rating then add 10 • if table F rating then add 12 • if table G rating then add 14 • if table H rating then add 15 • if rating is higher than table H then add 16. 5) The result of step 4 is the adjusted individual ages of insured #1 and insured #2. Call this (X1A) and (X2A) respectively. 6) If (X1A) is greater than 100 then set (X1A) equal to 100. 7) If (X2A) is greater than 100 then set (X2A) equal to 100. 8) Take the difference between (X1A) and (X2A). Call this (XDIFF). Principal Survivorship Flexible Premium Variable Universal Life APPENDIX A - TARGET PREMIUMS 53 www.principal.com 9) Look up (XDIFF) on the table below to find out what to add on to youngest adjusted age. XDIFF ADD ON 0 0 1 to 2 1 3 to 4 2 5 to 6 3 7 to 9 4 10 to 12 5 13 to 15 6 16 to 18 7 19 to 23 8 24 to 28 9 29 to 34 10 35 to 39 11 40 to 44 12 45 to 47 13 48 to 50 14 51 to 53 15 54 to 56 16 57 to 60 17 61 to 64 18 65 to 69 19 70 to 75 20 76 to 85 21 10) The JEA (Joint Equivalent Age) is equal to the Minimum of (X1A) and (X2A) plus ADD ON from the table above. Example: Male Nonsmoker age 45 table rating A, Female Smoker age 57. 1) (X1) 45 and (X2) 57 2) (X1) 45 + 0 45; and (X2) 57 - 5 52 3) (X1) 45 + 0 45; and (X2) 52 + 2 54 4) (X1) 45 + 2 47; and (X2) 54 + 0 54 5) (XIA) 47; (X2A) 54 6) (XIA) is not greater than 100 7) (X2A) is not greater than 100 8) (XDIFF) (X2A) - (X1A) 54 - 47 7 9) ADD ON 4 10) JEA minimum of (XIA) and (X2A) + ADD ON 47 + 4 51 54 APPENDIX A - TARGET PREMIUMS Principal Survivorship Flexible Premium Variable Universal Life 1-800-247-9988 SVUL Target Premium Rates per $1000 of Face JEA Target JEA Target <20 2.78 61 21.67 20 2.78 62 22.98 21 2.87 63 24.23 22 2.95 64 25.41 23 3.03 65 26.52 24 3.13 66 27.56 25 3.22 67 28.56 26 3.32 68 29.53 27 3.41 69 30.45 28 3.52 70 31.36 29 3.62 71 32.27 30 3.73 72 33.17 31 3.84 73 34.08 32 3.96 74 35.02 33 4.07 75 35.97 34 4.24 76 36.95 35 4.42 77 37.95 36 4.60 78 38.94 37 4.79 79 39.96 38 4.99 80 40.99 39 5.20 81 42.00 40 5.41 82 42.00 41 5.64 83 42.00 42 5.87 84 42.00 43 6.11 85 42.00 44 6.51 86 42.00 45 6.93 87 42.00 46 7.38 88 42.00 47 7.86 89 42.00 48 8.38 90 42.00 49 8.93 >90 42.00 50 9.50 51 10.12 52 10.78 53 11.49 54 12.54 55 13.68 56 14.92 57 16.22 58 17.58 59 18.94 60 20.32 * The cost of insurance rate for Policies issued in states which require unisex pricing or in connection with employment related insurance and benefit plans is not based on the gender of the insured. Principal Survivorship Flexible Premium Variable Universal Life APPENDIX A - TARGET PREMIUMS 55 www.principal.com ADDITIONAL INFORMATION Additional information about the Policy is available in the Statement of Additional Information dated May 1, 2010, and which is part of this prospectus. Your questions and/or requests for a free copy of the Statement of Additional Information or a free personalized illustration should be directed to: Principal Survivorship Flexible Premium Variable Universal Life, Principal Financial Group, P.O. Box 9296, Des Moines, Iowa 50306-9296, 1-800-247-9988. You may also contact us through our internet site: www.principal.com Information about the Policy (including the Statement of Additional Information) can be reviewed and copied at the Securities and Exchange Commission’s Public Reference Room in Washington, D.C. Information on the operation of the public reference room may be obtained by calling the Commission at 202-551-8090. Reports and other information about the Policy are available on the Commission’s internet site at http://www.sec.gov. Copies of this information may be obtained, upon payment of a duplicating fee, by writing the Public Reference Section of the Commission, Room 1580, treet NE, Washington, D.C. 20549. Principal Survivorship Flexible Premium Variable Universal Life Investment Company Act File No. 333-71521 56 ADDITIONAL INFORMATION Principal Survivorship Flexible Premium Variable Universal Life 1-800-247-9988 PART B STATEMENT OF ADDITIONAL INFORMATION PRINCIPAL SURVIVORSHIP FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE dated May 1, 2010 The Statement of Additional Information provides information about the Survivorship Flexible Premium Variable Universal Life Insurance Policy sponsored by Principal Life Insurance Company through its Principal Life Insurance Company Variable Life Separate Account. This Statement of Additional Information is not a prospectus but does provide information that supplements the Policy’s Prospectus dated May 1, 2010. It should be read with that Prospectus which is available without charge. To request a copy of the Prospectus, please contact us at: Principal Survivorship Flexible Premium Variable Universal Life Principal Financial Group Des Moines, Iowa 50306-9296 Telephone:1-800-247-9988 TABLE OF CONTENTS Page GENERAL INFORMATION AND HISTORY 3 THE COMPANY 3 PRINCIPAL LIFE INSURANCE COMPANY VARIABLE LIFE SEPARATE ACCOUNT 3 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 3 UNDERWRITERS 3 UNDERWRITING PROCEDURES 3 PERFORMANCE DATA 4 FINANCIAL STATEMENTS 5 2Principal Survivorship Flexible Premium Variable Universal Life 1-800-247-9988 GENERAL INFORMATION AND HISTORY The Company Principal Life Insurance Company (the “Company”) is the issuer of the Survivorship Flexible Premium Variable Universal Life Insurance Policy (the “Policy”). The Company is a stock life insurance company with its home office at: Principal Financial Group, Des Moines, Iowa 50392. It is authorized to transact life and annuity business in all states of the United States and the District of Columbia. The Company is a wholly owned indirect subsidiary of Principal Financial Group, Inc., a publicly-traded company. In 1879, the Company was incorporated under Iowa law as a mutual assessment life insurance company named Bankers Life Association. It became a legal reserve life insurance company and changed its name to Bankers Life Company in 1911 and then to Principal Mutual Life Insurance Company in 1986. The name change to Principal Life Insurance Company and reorganization into a mutual insurance holding company structure took place in 1998, when the Company became a stock life insurance company. In 2001, the mutual insurance holding company converted to a stock company through a process called demutualization, resulting in the current organizational structure. Principal Life Insurance Company Variable Life Separate Account The separate account was established under Iowa law on November 2, 1987. It was then registered as a unit investment trust with the SEC. This registration does not involve SEC supervision of the investments or investment policies of the separate account. All of the units of the Separate Account are owned by the Company. Policy owners may purchase units of the divisions of the Separate Account. INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Ernst & Young LLP, 801 Grand Avenue, Suite 3000, Des Moines, Iowa, 50309, serves as the independent registered public accounting firm for Principal Life Insurance Company Variable Life Separate Account and the Company. UNDERWRITERS The principal underwriter of the Policy is Princor Financial Services Corporation (“Princor”) which is a wholly-owned subsidiary of Principal Financial Services, Inc. and an affiliate of the Company. The address of Princor is the Principal Financial Group, 680 8th Street, Des Moines, IA 50392-0200. Princor was incorporated in Iowa in 1968, and is a securities broker-dealer registered with the SEC as well as a member of the Financial Industry Regulatory Authority. The Policies may also be sold through other broker-dealers authorized by Princor and applicable law to do so. The Policy’s offering to the public is continuous. As the principal underwriter, Princor is paid for the distribution of the Policy. For the last three fiscal years Princor has received and retained the following commissions: received/retained received/retained received/retained $107,122/$0 $305,160.86/$0 $257,865/$0 UNDERWRITING PROCEDURES Guaranteed maximum cost of insurance rates are based on 1ortality Table (the prevailing mortality table approved by the National Association of Insurance Commissioners), age last birthday, with distinction for the gender and smoking status. Principal Survivorship Flexible Premium Variable Universal Life GENERAL INFORMATION AND HISTORY 3 www.principal.com PERFORMANCE DATA The Separate Account may publish advertisements containing information (including graphs, charts, tables and examples) about the performance of one or more of its divisions. The Policy was not offered prior to July 1, 1999. The Separate Account may publish advertisements containing information about the hypothetical performance of one or more of its divisions for this Policy as if the Policy had been issued on or after the date the underlying mutual fund in which such division invests was first offered. The hypothetical performance from the date of the inception of the underlying mutual fund is derived by reducing the actual performance of the underlying mutual fund by the fees and charges of the Policy as if it had been in existence. The yield and total return figures described below vary depending upon market conditions, the composition of the underlying mutual fund’s portfolios and operating expenses. These factors and possible differences in the methods used in calculating yield and total return should be considered when comparing the Separate Account performance figures to performance figures published for other products. The Separate Account may also quote rankings, yields or returns published by independent statistical services or publishers and information regarding performance of certain market indices. Any performance data quoted for the Separate Account represents historical performance and is not intended to indicate future performance. From time to time the Principal Variable Contracts Fund, Inc. advertises its Money Market division’s “yield” and “effective yield”. Both yield figures are based on historical earnings and are not intended to indicate future performance. The “yield” of the division refers to the income generated in the division over a seven day period (the period will be stated in the advertisement). This income is then “annualized.” That is, the amount of income generated during that week is assumed to be generated each week over a 52-week period and is shown as a percentage. The “effective yield” is calculated similarly but, when annualized, the income earned in the division is assumed to be reinvested. The “effective yield” is slightly higher than the “yield” because of the compounding effect of this assumed reinvestment. Neither yield quotation reflects a sales load deducted from purchase payments which, if included, would reduce the “yield” and “effective yield.” For the period ended December 31, 2009, the 7-day annualized and effective yields were 0.00% and 0.00%, respectively. In addition, the Separate Account advertises the “yield” for certain other divisions. The “yield” of a division is determined by annualizing the net investment income per unit for a specific, historical 30-day period and dividing the result by the ending maximum offering price of the unit for the same period. This yield quotation does not reflect a contingent deferred sales charge which, if included, would reduce the “yield.” No contingent deferred sales charge is assessed on investments in the Separate Account divisions of the Policy, however, Policies which are fully surrendered within the first ten policy years (or within ten years of a face amount increase) are subject to a surrender charge. The performance information does not include any charges or fees that are deducted from your Policy. These are charges and fees such as the sales charge, charge for taxes, surrender charges, transfer fees (if any), cost of insurance charge, mortality and expense risks charge, administrative charge, policy loan interest charge (if any), and charges for optional insurance benefits. Some of these charges vary depending on the age of the insureds, gender, face amount, underwriting class, premiums, policy duration, and account value. All of these policy charges will have a significant impact on your Policy’s value and overall performance. If these charges and fees were reflected in the performance data, performance would be lower. To see the impact of these charges and fees on your Policy’s performance, you should obtain a personalized illustration based on historical underlying mutual fund performance from your financial adviser. 4 PERFORMANCE DATA Principal Survivorship Flexible Premium Variable Universal Life 1-800-247-9988 Following are the hypothetical average annual total returns for the periods ended December 31, 2009 assuming the Policy had been offered as of the effective dates of the underlying mutual funds in which the divisions invest: Effective One Five Ten Since Division Date Year Years Years Inception AIM V.I. Capital Appreciation May 5, 1993 21.08 -2.03 -4.30 5.57 AIM V.I. Core Equity May 2, 1994 28.30 3.56 -1.06 7.51 AIM V.I. Dynamics August 25, 1997 42.44 1.30 -2.79 3.04 AIM V.I. Global Health Care May 22, 1997 27.67 3.02 3.23 6.73 AIM V.I. Small Cap Equity August 29, 2003 21.29 1.84 5.04 AIM V.I. Technology May 21, 1997 57.40 1.21 -9.81 2.29 American Century VP Income & Growth October 31, 1997 18.10% -1.11% -0.91% 3.19% American Century VP Ultra May 1, 2001 34.48 -1.21 -0.49 American Century VP Value May 1, 1996 19.72 0.61 5.83 7.22 Asset Allocation June 1, 1994 18.81 3.55 2.93 6.88 Balanced December 18, 1987 21.16 0.97 1.05 6.77 Bond & Mortgage Securities December 18, 1987 20.91 2.15 4.55 6.64 Diversified International May 2, 1994 28.15 4.85 1.69 6.12 Equity Income April 28, 1998 20.00 1.68 6.43 5.97 Fidelity VIP Contrafund ® January 3, 1995 35.71 3.69 2.82 10.53 Fidelity VIP Equity-Income November 3, 1986 30.21 -0.72 1.84 8.42 Fidelity VIP Growth October 31, 1986 27.97 -0.81 -3.97 8.40 Fidelity VIP High Income October 1, 1985 43.96 4.86 2.27 7.26 Government & High Quality Bond April 9, 1987 5.29 2.93 4.74 6.56 International Emerging Markets October 24, 2000 69.25 15.06 13.83 International SmallCap May 1, 1998 34.55 4.23 3.65 8.12 Janus Aspen Enterprise September 13, 1993 44.44 4.62 -4.94 8.55 LargeCap Blend II May 1, 2002 29.67 1.01 2.56 LargeCap Growth May 2, 1994 27.01 1.85 -3.24 4.26 LargeCap Growth I June 1, 1994 52.71 2.37 -1.71 8.29 LargeCap S&P 500 Index May 3, 1999 26.31 0.17 -1.27 -0.40 LargeCap Value May 13, 1970 16.30 -0.71 0.99 10.37 LargeCap Value III May 1, 2002 19.80 -2.63 1.10 MidCap Blend December 18, 1987 33.76 3.83 6.63 11.91 MidCap Growth I May 1, 1998 35.15 1.90 1.35 1.74 MidCap Value II May 3, 1999 34.13 -1.39 6.02 6.60 Money Market March 18, 1983 0.22 2.98 2.78 4.90 Mortgage Securities May 6, 1993 6.47 4.88 5.65 5.46 Principal LifeTime 2010 August 30, 2004 25.07 1.25 2.87 Principal LifeTime 2020 August 30, 2004 27.49 1.60 3.43 Principal LifeTime 2030 August 30, 2004 28.22 1.15 3.00 Principal LifeTime 2040 August 30, 2004 29.55 1.06 3.12 Principal LifeTime 2050 August 30, 2004 30.04 0.98 3.04 Principal LifeTime Strategic Income August 30, 2004 18.95 1.35 2.69 Putnam VT Voyager February 1, 1988 63.90 3.95 -2.74 9.70 Real Estate Securities May 1, 1998 28.92 2.43 12.45 9.51 SAM Balanced Portfolio June 3, 1997 23.84 3.10 3.75 6.71 SAM Conservative Balanced Portfolio April 23, 1998 21.15 3.69 4.79 4.62 SAM Conservative Growth Portfolio June 3, 1997 25.70 1.98 2.35 6.52 SAM Flexible Income Portfolio September 9, 1997 19.95 3.92 5.17 6.02 SAM Strategic Growth Portfolio June 3, 1997 27.45 1.25 1.38 6.81 Short-Term Bond May 1, 2003 10.22 1.30 1.29 Short-Term Income January 12, 1994 9.94 3.98 4.98 4.70 SmallCap Blend May 1, 1998 22.18 -1.06 0.22 1.33 SmallCap Growth II May 1, 1998 31.74 -1.10 -6.96 -0.18 SmallCap Value I May 1, 1998 16.20 -2.01 7.22 6.44 Wells Fargo Advantage VT Asset Allocation April 15, 1994 15.46 0.72 1.26 6.60 Wells Fargo Advantage VT Equity Income May 6, 1996 16.86 -0.95 0.44 4.66 Wells Fargo Advantage VT Large Company Growth September 20, 1999 43.38 0.36 -2.81 -0.97 FINANCIAL STATEMENTS Principal Survivorship Flexible Premium Variable Universal Life FINANCIAL STATEMENTS 5 www.principal.com Report of Independent Registered Public Accounting Firm The Board of Directors and Participants Principal Life Insurance Company We have audited the accompanying statements of assets and liabilities of each of the divisions of Principal Life Insurance Company Variable Life Separate Account (“Separate Account”), comprised of the divisions described in Note 1, as of December 31, 2009, and the related statements of operations for the year then ended and changes in net assets for each of the two years in the period then ended, or for those divisions operating for portions of such periods as disclosed in the financial statements. These financial statements are the responsibility of the management of the Separate Account. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Separate Account’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Separate Account’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2009 by correspondence with the fund companies or their transfer agents, as applicable. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of each of the respective divisions of Principal Life Insurance Company Variable Life Separate Account at December 31, 2009, and the results of their operations and the changes in their net assets for the periods described above, in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young LLP Des Moines, Iowa April22, 2010 Principal Life Insurance Company Variable Life Separate Account Statements of Assets and Liabilities December 31, 2009 AIM V.I. AIM V.I. Capital Capital Appreciation Appreciation Series I Series II Division Division Assets Investments in shares of mutual funds, at market $ 2,411,539 $ 910,342 Liabilities – – Net assets $ 2,411,539 $ 910,342 Net assets Applicable to accumulation units: Benefit Variable Universal Life $ 198,500 $ – Benefit Variable Universal Life II – – Executive Variable Universal Life 1,048,180 – Executive Variable Universal Life II – 395,670 Flex Variable Life – – PrinFlex Life ® 710,105 – Survivorship Variable Universal Life 168,444 – Variable Universal Life Accumulator 286,310 – Variable Universal Life Accumulator II – 348,504 Variable Universal Life Income – 154,057 Variable Universal Life Income II – 12,111 Total net assets $ 2,411,539 $ 910,342 Investments in shares of mutual funds, at cost $ 2,597,732 $ 954,356 Shares of mutual fund owned 118,620 45,517 Accumulation units outstanding: Benefit Variable Universal Life 25,553 – Benefit Variable Universal Life II – – Executive Variable Universal Life 134,930 – Executive Variable Universal Life II – 51,404 Flex Variable Life – – PrinFlex Life ® 91,412 – Survivorship Variable Universal Life 21,683 – Variable Universal Life Accumulator 36,857 – Variable Universal Life Accumulator II – 45,277 Variable Universal Life Income – 20,015 Variable Universal Life Income II – 1,573 Accumulation unit value: Benefit Variable Universal Life $ 7.77 $ – Benefit Variable Universal Life II – 7.70 Executive Variable Universal Life 7.77 – Executive Variable Universal Life II – 7.70 Flex Variable Life 7.56 – PrinFlex Life ® 7.77 – Survivorship Variable Universal Life 7.77 – Variable Universal Life Accumulator 7.77 – Variable Universal Life Accumulator II – 7.70 Variable Universal Life Income – 7.70 Variable Universal Life Income II – 7.70 See accompanying notes. AIM V.I. AIM V.I. AIM V.I. AIM V.I. AIM V.I. AIM V.I. AIM V.I. Global International Mid Cap Small Cap Core Equity Core Equity Dynamics Health Care Growth Core Equity Equity Series I Series II Series I Series I Series I Series II Series I Division Division Division Division Division Division Division $ 7,608,684 $ 5,877,336 $ 1,903,534 $ 7,205,126 $ 7,166,134 $ 462,042 $ 4,873,329 – – – – – – – $ 7,608,684 $ 5,877,336 $ 1,903,534 $ 7,205,126 $ 7,166,134 $ 462,042 $ 4,873,329 $ 216,722 $ – $ 129,956 $ 492,233 $ 1,168,302 $ 32,858 $ 618,014 – 8,664 – 359 38,329 – 716 2,904,823 – 1,207,153 1,915,417 5,610,909 429,184 3,102,844 – 735,269 21,411 7,111 348,594 – 85,926 24,784 – 3,277 11,599 – – 5,378 2,708,299 – 410,014 2,138,084 – – 799,763 484,726 – 28,172 355,327 – – 47,439 1,269,330 – 103,551 795,179 – – 213,249 – 2,732,158 – 1,044,521 – – – – 2,304,489 – 408,019 – – – – 96,756 – 37,277 – – – $ 7,608,684 $ 5,877,336 $ 1,903,534 $ 7,205,126 $ 7,166,134 $ 462,042 $ 4,873,329 $ 7,197,606 $ 5,858,594 $ 1,810,403 $ 7,337,802 $ 6,767,222 $ 355,504 $ 4,616,547 305,324 237,468 133,769 454,009 275,515 42,663 378,952 18,960 – 14,229 41,009 64,253 2,884 75,489 – 523 – 30 2,108 – 84 254,127 – 132,168 159,588 308,580 37,669 379,006 – 44,368 2,344 592 19,171 – 10,032 2,313 – 383 1,031 – – 670 236,934 – 44,891 178,140 – – 97,689 42,406 – 3,084 29,605 – – 5,795 111,048 – 11,338 66,252 – – 26,059 – 164,861 – 87,027 – – – – 139,056 – 33,995 – – – – 5,838 – 3,106 – – – $ 11.43 $ – $ 9.13 $ 12.00 $ 18.18 $ 11.39 $ 8.19 – 16.57 9.13 12.00 18.18 – 8.57 11.43 – 9.13 12.00 18.18 11.39 8.19 – 16.57 9.13 12.00 18.18 – 8.57 10.71 – 8.56 11.25 – – 8.02 11.43 – 9.13 12.00 – – 8.19 11.43 – 9.13 12.00 – – 8.19 11.43 – 9.13 12.00 – – 8.19 – 16.57 – 12.00 – – – – 16.57 – 12.00 – – – – 16.57 – 12.00 – – – Principal Life Insurance Company Variable Life Separate Account Statements of Assets and Liabilities (continued) December 31, 2009 AllianceBernstein AIM V.I. Global Thematic Technology Growth Series I Class A Division Division Assets Investments in shares of mutual funds, at market $ 3,675,167 $ 2,853 Liabilities – – Net assets $ 3,675,167 $ 2,853 Net assets Applicable to accumulation units: Benefit Variable Universal Life $ 317,392 $ – Benefit Variable Universal Life II – 356 Executive Variable Universal Life 1,971,931 – Executive Variable Universal Life II – 2,497 Flex Variable Life 43,685 – PrinFlex Life ® 989,169 – Survivorship Variable Universal Life 73,757 – Variable Universal Life Accumulator 279,233 – Variable Universal Life Accumulator II – – Variable Universal Life Income – – Variable Universal Life Income II – – Total net assets $ 3,675,167 $ 2,853 Investments in shares of mutual funds, at cost $ 3,098,774 $ 2,427 Shares of mutual fund owned 278,633 171 Accumulation units outstanding: Benefit Variable Universal Life 51,903 – Benefit Variable Universal Life II – 36 Executive Variable Universal Life 322,477 – Executive Variable Universal Life II – 254 Flex Variable Life 7,622 – PrinFlex Life ® 161,761 – Survivorship Variable Universal Life 12,062 – Variable Universal Life Accumulator 45,665 – Variable Universal Life Accumulator II – – Variable Universal Life Income – – Variable Universal Life Income II – – Accumulation unit value: Benefit Variable Universal Life $ 6.11 $ – Benefit Variable Universal Life II – 9.85 Executive Variable Universal Life 6.11 – Executive Variable Universal Life II – 9.85 Flex Variable Life 5.73 – PrinFlex Life ® 6.11 – Survivorship Variable Universal Life 6.11 – Variable Universal Life Accumulator 6.11 – Variable Universal Life Accumulator II – – Variable Universal Life Income – – Variable Universal Life Income II – – See accompanying notes. American American AllianceBernstein AllianceBernstein AllianceBernstein AllianceBernstein Century VP Century VP American International International Small Cap Small/Mid Cap Income & Income & Century VP Growth Value Growth Value Growth Growth International Class A Class A Class A Class A Class I Class II Class II Division Division Division Division Division Division Division $ 70,295 $ 297,236 $ 44,416 $ 9,225 $ 2,757,100 $ 1,994,880 $ 332,334 – – – – – – – $ 70,295 $ 297,236 $ 44,416 $ 9,225 $ 2,757,100 $ 1,994,880 $ 332,334 $ – $ 18,272 $ – $ – $ – $ 97,990 $ 41,266 763 6,202 3,854 – – – – – 235,596 – – – 743,590 291,068 69,532 16,206 – – – 465 – – – – – 15,886 – – – – – – 1,804,814 – – – – – – 190,320 – – – – – – 746,080 – – – – – – – 556,140 – – – – – – 548,926 – – 20,960 40,562 9,225 – 47,769 – $ 70,295 $ 297,236 $ 44,416 $ 9,225 $ 2,757,100 $ 1,994,880 $ 332,334 $ 66,107 $ 289,535 $ 35,926 $ 8,253 $ 3,268,171 $ 2,194,328 $ 306,988 4,219 20,220 3,717 688 512,472 370,796 43,049 – 2,871 – – – 8,848 2,968 93 975 496 – – – – – 37,023 – – – 67,145 20,935 8,432 2,547 – – – 42 – – – – – 1,683 – – – – – – 179,227 – – – – – – 18,900 – – – – – – 74,089 – – – – – – – 50,218 – – – – – – 49,567 – – 3,294 5,220 1,005 – 4,313 – $ – $ 6.36 $ – $ – $ – $ 11.07 $ 13.90 8.25 6.36 7.77 9.18 – 11.07 13.90 – 6.36 – – – 11.07 13.90 8.25 6.36 7.77 9.18 – 11.07 13.90 – – – – 9.44 – – – – – – 10.07 – – – – – – 10.07 – – – – – – 10.07 – – – – – – – 11.07 – – – – – – 11.07 – – 6.36 7.77 9.18 – 11.07 – Principal Life Insurance Company Variable Life Separate Account Statements of Assets and Liabilities (continued) December 31, 2009 American Century VP American MidCap Value Century VP Class II Ultra Class I Division Division Assets Investments in shares of mutual funds, at market $ 4,068,513 $ 1,477,027 Liabilities – – Net assets $ 4,068,513 $ 1,477,027 Net assets Applicable to accumulation units: Benefit Variable Universal Life $ 260,347 $ – Benefit Variable Universal Life II 11,836 – Executive Variable Universal Life 3,623,951 – Executive Variable Universal Life II 172,379 – Flex Variable Life – 13,770 PrinFlex Life ® – 730,881 Survivorship Variable Universal Life – 180,963 Variable Universal Life Accumulator – 551,413 Variable Universal Life Accumulator II – – Variable Universal Life Income – – Variable Universal Life Income II – – Total net assets $ 4,068,513 $ 1,477,027 Investments in shares of mutual funds, at cost $ 3,438,888 $ 1,549,779 Shares of mutual fund owned 335,409 181,900 Accumulation units outstanding: Benefit Variable Universal Life 22,116 – Benefit Variable Universal Life II 1,005 – Executive Variable Universal Life 307,853 – Executive Variable Universal Life II 14,644 – Flex Variable Life – 1,590 PrinFlex Life ® – 79,098 Survivorship Variable Universal Life – 19,584 Variable Universal Life Accumulator – 59,673 Variable Universal Life Accumulator II – – Variable Universal Life Income – – Variable Universal Life Income II – – Accumulation unit value: Benefit Variable Universal Life $ 11.77 $ – Benefit Variable Universal Life II 11.77 – Executive Variable Universal Life 11.77 – Executive Variable Universal Life II 11.77 – Flex Variable Life – 8.66 PrinFlex Life ® – 9.24 Survivorship Variable Universal Life – 9.24 Variable Universal Life Accumulator – 9.24 Variable Universal Life Accumulator II – – Variable Universal Life Income – – Variable Universal Life Income II – – See accompanying notes. American American American Bond & Calvert Century VP Century VP Century VP Asset Mortgage Income Ultra Class II Value Class II Vista Class II Allocation Balanced Securities Initial Shares Division Division Division Division Division Division Division $ 2,182,538 $ 9,964,717 $ 424,369 $ 13,700,091 $ 14,078,377 $ 44,713,944 $ 43,818 – – – – – – – $ 2,182,538 $ 9,964,717 $ 424,369 $ 13,700,091 $ 14,078,377 $ 44,713,944 $ 43,818 $ 175,858 $ 880,607 $ 143,595 $ – $ – $ 2,359,315 $ – – 8,797 282 – – 42,931 3,549 1,086,616 3,055,482 272,070 – – 14,577,501 – – 636,970 – – – 137,793 – – 11,625 – 101,178 2,102,480 1,675,039 – – 1,794,120 – 10,161,369 9,081,393 13,089,480 – – 549,144 – 950,924 504,040 1,499,012 – – 578,226 – 1,028,394 976,499 2,891,898 – 691,627 1,421,162 – 1,048,723 913,941 5,295,395 – 228,437 912,360 – 409,503 500,024 3,035,912 – – 116,224 8,422 – – 109,668 40,269 $ 2,182,538 $ 9,964,717 $ 424,369 $ 13,700,091 $ 14,078,377 $ 44,713,944 $ 43,818 $ 2,176,509 $ 11,657,365 $ 379,993 $ 14,330,772 $ 15,842,147 $ 48,596,104 $ 43,177 271,460 1,883,690 32,370 1,183,082 1,141,799 4,453,580 2,856 17,205 68,550 14,900 – – 131,342 – – 685 29 – – 2,390 329 106,311 237,853 28,232 – – 811,522 – – 49,585 – – – 7,671 – – 958 – 8,191 67,744 50,053 – – 139,663 – 506,826 617,864 728,685 – – 42,748 – 64,119 45,668 95,834 – – 45,013 – 51,316 66,437 160,991 – 67,667 110,631 – 52,305 62,181 294,792 – 22,349 71,023 – 20,425 34,019 169,008 – – 9,047 874 – – 6,105 3,738 $ 10.22 $ 12.85 $ 9.64 $ – $ – $ 17.96 $ – – 12.85 9.64 – – 17.96 10.77 10.22 12.85 9.64 – – 17.96 – – 12.85 9.64 – – 17.96 10.77 – 12.13 – 12.35 31.04 33.46 – – 12.85 – 20.05 14.70 17.96 – – 12.85 – 14.83 11.04 15.64 – – 12.85 – 20.05 14.70 17.96 – 10.22 12.85 – 20.05 14.70 17.96 – 10.22 12.85 – 20.05 14.70 17.96 – – 12.85 9.64 – – 17.96 10.77 Principal Life Insurance Company Variable Life Separate Account Statements of Assets and Liabilities (continued) December 31, 2009 Dreyfus IP Diversified Core Value International Service Shares Division Division Assets Investments in shares of mutual funds, at market $ 84,234,130 $ 445,449 Liabilities – – Net assets $ 84,234,130 $ 445,449 Net assets Applicable to accumulation units: Benefit Variable Universal Life $ 2,388,388 $ 36,898 Benefit Variable Universal Life II 40,799 – Executive Variable Universal Life 21,174,438 407,345 Executive Variable Universal Life II 596,166 1,206 Flex Variable Life 102,074 – PrinFlex Life ® 28,880,749 – Survivorship Variable Universal Life 2,703,093 – Variable Universal Life Accumulator 13,858,313 – Variable Universal Life Accumulator II 7,568,025 – Variable Universal Life Income 6,617,533 – Variable Universal Life Income II 304,552 – Total net assets $ 84,234,130 $ 445,449 Investments in shares of mutual funds, at cost $ 106,609,070 $ 532,943 Shares of mutual fund owned 7,494,140 37,846 Accumulation units outstanding: Benefit Variable Universal Life 133,055 3,318 Benefit Variable Universal Life II 2,273 – Executive Variable Universal Life 1,179,612 36,629 Executive Variable Universal Life II 33,212 108 Flex Variable Life 7,499 – PrinFlex Life ® 1,608,925 – Survivorship Variable Universal Life 197,614 – Variable Universal Life Accumulator 772,036 – Variable Universal Life Accumulator II 421,609 – Variable Universal Life Income 368,658 – Variable Universal Life Income II 16,966 – Accumulation unit value: Benefit Variable Universal Life $ 17.95 $ 11.12 Benefit Variable Universal Life II 17.95 11.12 Executive Variable Universal Life 17.95 11.12 Executive Variable Universal Life II 17.95 11.12 Flex Variable Life 13.61 – PrinFlex Life ® 17.95 – Survivorship Variable Universal Life 13.68 – Variable Universal Life Accumulator 17.95 – Variable Universal Life Accumulator II 17.95 – Variable Universal Life Income 17.95 – Variable Universal Life Income II 17.95 – See accompanying notes. Dreyfus Socially Dreyfus VIF Responsible Dreyfus VIF Developing Dreyfus VIF DWS Dreman Fidelity VIP Growth Appreciation Leaders Quality Bond Small Mid Cap Equity Equity-Income Service Shares Service Shares Service Shares Service Shares Value Class B Income Initial Class Division Division Division Division Division Division Division $ 109,197 $ 1,219,174 $ 2,616,547 $ 2,102,331 $ 758,480 $ 6,644,519 $ 20,393,485 – – – – – – – $ 109,197 $ 1,219,174 $ 2,616,547 $ 2,102,331 $ 758,480 $ 6,644,519 $ 20,393,485 $ 56,632 $ 284,341 $ 150,097 $ 307,124 $ 57,778 $ – $ – – 3,294 – – 13,526 – – 52,565 901,714 120,827 1,795,207 165,617 – – – 29,825 – – 488,774 – – – – – – – 37,279 98,130 – – – – – 3,649,525 16,467,648 – – – – – 607,271 1,875,869 – – – – – 392,660 1,951,838 – – 1,379,054 – – 1,063,404 – – – 966,569 – – 894,380 – – – – – 32,785 – – $ 109,197 $ 1,219,174 $ 2,616,547 $ 2,102,331 $ 758,480 $ 6,644,519 $ 20,393,485 $ 95,670 $ 1,283,168 $ 3,513,432 $ 2,014,175 $ 684,615 $ 8,285,796 $ 26,704,621 4,184 39,064 112,588 190,601 75,621 505,287 1,213,176 5,406 24,513 17,830 22,293 5,980 – – – 284 – – 1,400 – – 5,018 77,736 14,350 130,316 17,141 – – – 2,571 – – 50,586 – – – – – – – 4,577 9,804 – – – – – 438,130 942,813 – – – – – 72,900 160,756 – – – – – 47,118 111,745 – – 163,810 – – 127,657 – – – 114,813 – – 107,368 – – – – – 3,393 – – $ 10.48 $ 11.60 $ 8.42 $ 13.78 $ 9.66 $ – $ – 10.48 11.60 – – 9.66 – – 10.48 11.60 8.42 13.78 9.66 – – 10.48 11.60 – – 9.66 – – – – – – – 8.14 10.01 – – – – – 8.33 17.47 – – – – – 8.33 11.67 – – – – – 8.33 17.47 – – 8.42 – – 8.33 – – – 8.42 – – 8.33 – – – – – 9.66 – – Principal Life Insurance Company Variable Life Separate Account Statements of Assets and Liabilities (continued) December 31, 2009 Fidelity VIP Fidelity VIP Equity-Income Growth Service Service Class 2 Class 2 Division Division Assets Investments in shares of mutual funds, at market $ 15,108,950 $ 8,286,529 Liabilities – – Net assets $ 15,108,950 $ 8,286,529 Net assets Applicable to accumulation units: Benefit Variable Universal Life $ 1,368,760 $ 832,316 Benefit Variable Universal Life II 4,196 – Executive Variable Universal Life 7,067,324 3,264,486 Executive Variable Universal Life II 25,116 – Flex Variable Life – 8,341 PrinFlex Life ® – 1,201,731 Survivorship Variable Universal Life – 191,569 Variable Universal Life Accumulator – 648,239 Variable Universal Life Accumulator II 4,029,449 1,135,350 Variable Universal Life Income 2,512,728 1,004,497 Variable Universal Life Income II 101,377 – Total net assets $ 15,108,950 $ 8,286,529 Investments in shares of mutual funds, at cost $ 17,507,991 $ 8,587,023 Shares of mutual fund owned 911,826 278,539 Accumulation units outstanding: Benefit Variable Universal Life 123,095 85,466 Benefit Variable Universal Life II 377 – Executive Variable Universal Life 635,612 335,213 Executive Variable Universal Life II 2,259 – Flex Variable Life – 907 PrinFlex Life ® – 123,399 Survivorship Variable Universal Life – 19,671 Variable Universal Life Accumulator – 66,560 Variable Universal Life Accumulator II 362,398 116,583 Variable Universal Life Income 226,006 103,147 Variable Universal Life Income II 9,118 – Accumulation unit value: Benefit Variable Universal Life $ 11.12 $ 9.74 Benefit Variable Universal Life II 11.12 – Executive Variable Universal Life 11.12 9.74 Executive Variable Universal Life II 11.12 – Flex Variable Life – 9.20 PrinFlex Life ® – 9.74 Survivorship Variable Universal Life – 9.74 Variable Universal Life Accumulator – 9.74 Variable Universal Life Accumulator II 11.12 9.74 Variable Universal Life Income 11.12 9.74 Variable Universal Life Income II 11.12 – See accompanying notes. Fidelity VIP Fidelity VIP II Fidelity VIP II Fidelity VIP III Franklin Fidelity VIP High Income Asset Manager Fidelity VIP II Contrafund Mid Cap Income High Income Service Service Contrafund Service Service Securities Initial Class Class 2 Class 2 Initial Class Class 2 Class 2 Class 2 Division Division Division Division Division Division Division $ 5,564,017 $ 14,189,947 $ 1,372,985 $ 56,891,997 $ 51,117,027 $ 26,698,587 $ 10,153,903 – – – – – – – $ 5,564,017 $ 14,189,947 $ 1,372,985 $ 56,891,997 $ 51,117,027 $ 26,698,587 $ 10,153,903 $ – $ 1,520,601 $ 621,459 $ – $ 5,547,668 $ 4,460,449 $ 2,357,389 – 7,742 – – 66,587 104,334 10,459 – 10,866,940 751,526 – 33,980,596 16,792,017 7,739,630 – 440,406 – – 1,062,929 478,557 46,425 17,111 – – 210,585 – – – 4,318,503 – – 49,324,739 – – – 825,903 – – 3,744,928 – – – 402,500 – – 3,611,745 – – – – 846,344 – – 5,100,934 2,026,847 – – 447,728 – – 4,878,136 2,653,352 – – 60,186 – – 480,177 183,031 – $ 5,564,017 $ 14,189,947 $ 1,372,985 $ 56,891,997 $ 51,117,027 $ 26,698,587 $ 10,153,903 $ 5,865,172 $ 13,989,618 $ 1,294,549 $ 68,232,938 $ 58,767,298 $ 28,466,258 $ 10,548,960 1,051,799 2,739,372 107,348 2,759,069 2,519,321 1,063,689 719,115 – 85,136 46,037 – 368,039 234,660 139,532 – 433 – – 4,417 8,806 619 – 608,420 55,671 – 2,254,312 883,410 458,101 – 24,658 – – 70,516 40,389 2,748 1,108 – – 14,875 – – – 289,423 – – 1,908,979 – – – 65,561 – – 249,714 – – – 26,976 – – 139,783 – – – – 47,385 – – 338,403 106,630 – – 25,067 – – 323,621 139,590 – – 3,370 – – 31,856 9,629 – $ – $ 17.86 $ 13.50 $ – $ 15.07 $ 19.01 $ 16.90 – 17.86 – – 15.07 11.85 16.90 – 17.86 13.50 – 15.07 19.01 16.90 – 17.86 – – 15.07 11.85 16.90 15.44 – – 14.16 – – – 14.92 – – 25.84 – – – 12.60 – – 15.00 – – – 14.92 – – 25.84 – – – – 17.86 – – 15.07 19.01 – – 17.86 – – 15.07 19.01 – – 17.86 – – 15.07 19.01 – Principal Life Insurance Company Variable Life Separate Account Statements of Assets and Liabilities (continued) December 31, 2009 Franklin Mutual Franklin Global Discovery Mutual Securities Shares Class 2 Class 2 Division Division Assets Investments in shares of mutual funds, at market $ 12,140,748 $ 7,752,224 Liabilities – – Net assets $ 12,140,748 $ 7,752,224 Net assets Applicable to accumulation units: Benefit Variable Universal Life $ 2,171,452 $ 1,456,234 Benefit Variable Universal Life II 21,168 17,463 Executive Variable Universal Life 9,075,016 6,162,730 Executive Variable Universal Life II 772,457 115,797 Flex Variable Life – – PrinFlex Life ® – – Survivorship Variable Universal Life – – Variable Universal Life Accumulator – – Variable Universal Life Accumulator II – – Variable Universal Life Income – – Variable Universal Life Income II 100,655 – Total net assets $ 12,140,748 $ 7,752,224 Investments in shares of mutual funds, at cost $ 12,241,766 $ 8,350,232 Shares of mutual fund owned 645,441 531,703 Accumulation units outstanding: Benefit Variable Universal Life 120,214 113,551 Benefit Variable Universal Life II 1,172 1,362 Executive Variable Universal Life 502,394 480,543 Executive Variable Universal Life II 42,763 9,029 Flex Variable Life – – PrinFlex Life ® – – Survivorship Variable Universal Life – – Variable Universal Life Accumulator – – Variable Universal Life Accumulator II – – Variable Universal Life Income – – Variable Universal Life Income II 5,572 – Accumulation unit value: Benefit Variable Universal Life $ 18.06 $ 12.82 Benefit Variable Universal Life II 18.06 12.82 Executive Variable Universal Life 18.06 12.82 Executive Variable Universal Life II 18.06 12.82 Flex Variable Life – – PrinFlex Life ® – – Survivorship Variable Universal Life – – Variable Universal Life Accumulator – – Variable Universal Life Accumulator II – – Variable Universal Life Income – – Variable Universal Life Income II 18.06 – See accompanying notes. Franklin Franklin Goldman Sachs Rising Small Cap Franklin Franklin VIT Structured Government Dividends Value Strategic Income U.S. Government Small Cap & High International Securities Securities Securities Fund Equity Service Quality Emerging Class 2 Class 2 Class 2 Class 2 Class I Bond Markets Division Division Division Division Division Division Division $ 1,917,515 $ 7,895,865 $ 2,936,683 $ – $ 371,513 $ 36,682,870 $ 29,413,299 – – – – – – – $ 1,917,515 $ 7,895,865 $ 2,936,683 $ – $ 371,513 $ 36,682,870 $ 29,413,299 $ 578,953 $ 1,129,092 $ 113,462 $ – $ 47,713 $ 2,134,891 $ 389,909 7,055 16,123 15,859 – – 9,252 61,911 1,209,480 6,621,936 1,896,022 – 323,800 13,240,919 5,294,794 85,461 128,714 911,340 – – 69,323 418,414 – – – – – 190,323 401,763 – – – – – 11,203,424 8,725,873 – – – – – 1,658,657 1,114,375 – – – – – 3,499,235 2,557,642 – – – – – 2,737,457 4,712,124 – – – – – 1,751,361 5,234,351 36,566 – – – – 188,028 502,143 $ 1,917,515 $ 7,895,865 $ 2,936,683 $ – $ 371,513 $ 36,682,870 $ 29,413,299 $ 1,872,893 $ 7,732,537 $ 2,796,798 $ – $ 301,654 $ 38,098,274 $ 31,382,680 120,903 618,314 243,708 – 42,122 3,493,607 1,979,361 48,382 80,128 10,157 – 6,083 113,893 12,296 590 1,144 1,420 – – 494 1,952 101,073 469,928 169,731 – 41,281 706,379 166,971 7,142 9,134 81,583 – – 3,698 13,195 – – – – – 14,604 13,416 – – – – – 597,683 275,170 – – – – – 102,799 35,142 – – – – – 186,678 80,655 – – – – – 146,039 148,597 – – – – – 93,432 165,065 3,056 – – – – 10,031 15,835 $ 11.97 $ 14.09 $ 11.17 $ 9.88 $ 7.84 $ 18.74 $ 31.71 11.97 14.09 11.17 9.88 – 18.74 31.71 11.97 14.09 11.17 9.88 7.84 18.74 31.71 11.97 14.09 11.17 9.88 – 18.74 31.71 – – – – – 13.03 29.95 – – – – – 18.74 31.71 – – – – – 16.13 31.71 – – – – – 18.74 31.71 – – – – – 18.74 31.71 – – – – – 18.74 31.71 11.97 – – – – 18.74 31.71 Principal Life Insurance Company Variable Life Separate Account Statements of Assets and Liabilities (continued) December 31, 2009 Janus Aspen International Balanced SmallCap Service Shares Division Division Assets Investments in shares of mutual funds, at market $ 37,674,235 $ 3,066,711 Liabilities – – Net assets $ 37,674,235 $ 3,066,711 Net assets Applicable to accumulation units: Benefit Variable Universal Life $ 2,018,877 $ 124,667 Benefit Variable Universal Life II 7,274 12,769 Executive Variable Universal Life 9,756,867 2,781,100 Executive Variable Universal Life II 21,323 148,175 Flex Variable Life 59,079 – PrinFlex Life ® 15,647,717 – Survivorship Variable Universal Life 1,363,346 – Variable Universal Life Accumulator 1,984,736 – Variable Universal Life Accumulator II 3,742,492 – Variable Universal Life Income 2,963,409 – Variable Universal Life Income II 109,115 – Total net assets $ 37,674,235 $ 3,066,711 Investments in shares of mutual funds, at cost $ 51,769,922 $ 2,890,101 Shares of mutual fund owned 3,171,232 109,800 Accumulation units outstanding: Benefit Variable Universal Life 80,417 7,906 Benefit Variable Universal Life II 290 810 Executive Variable Universal Life 388,637 176,368 Executive Variable Universal Life II 849 9,397 Flex Variable Life 3,587 – PrinFlex Life ® 623,286 – Survivorship Variable Universal Life 63,859 – Variable Universal Life Accumulator 79,058 – Variable Universal Life Accumulator II 149,072 – Variable Universal Life Income 118,039 – Variable Universal Life Income II 4,346 – Accumulation unit value: Benefit Variable Universal Life $ 25.11 $ 15.77 Benefit Variable Universal Life II 25.11 15.77 Executive Variable Universal Life 25.11 15.77 Executive Variable Universal Life II 25.11 15.77 Flex Variable Life 16.47 – PrinFlex Life ® 25.11 – Survivorship Variable Universal Life 21.35 – Variable Universal Life Accumulator 25.11 – Variable Universal Life Accumulator II 25.11 – Variable Universal Life Income 25.11 – Variable Universal Life Income II 25.11 – See accompanying notes. Janus Janus Janus Janus Janus Aspen Janus Aspen Aspen Aspen Aspen Research Aspen JP Morgan Enterprise Flexible Bond Forty Overseas Core Worldwide Core Bond Service Shares Service Shares Service Shares Service Shares Service Shares Service Shares Class I Division Division Division Division Division Division Division $ 6,720,485 $ 25,116,282 $ 302,393 $ 6,165,753 $ 2,385,594 $ 625,289 $ 1,455,078 – – – – – – – $ 6,720,485 $ 25,116,282 $ 302,393 $ 6,165,753 $ 2,385,594 $ 625,289 $ 1,455,078 $ 214,268 $ 1,802,292 $ – $ 956,469 $ 387,158 $ 209,339 $ 255,783 16,655 68,293 20,638 – – – – 3,065,546 20,145,414 – 5,209,284 1,998,436 405,775 1,199,295 147,988 3,100,283 202,341 – – 10,175 – 12,592 – – – – – – 2,437,027 – – – – – – 46,349 – – – – – – 780,060 – – – – – – – – – – – – – – – – – – – – – – 79,414 – – – – $ 6,720,485 $ 25,116,282 $ 302,393 $ 6,165,753 $ 2,385,594 $ 625,289 $ 1,455,078 $ 5,951,610 $ 24,061,084 $ 281,302 $ 6,018,661 $ 2,853,329 $ 578,902 $ 1,393,126 224,765 1,879,961 9,116 136,774 170,278 24,115 132,400 19,363 111,149 – 36,448 31,201 20,126 24,066 1,505 4,212 2,417 – – – – 277,032 1,242,393 – 198,510 161,050 39,011 112,836 13,374 191,198 23,696 – – 978 – 1,214 – – – – – – 220,233 – – – – – – 4,189 – – – – – – 70,495 – – – – – – – – – – – – – – – – – – – – – – 9,300 – – – – $ 11.07 $ 16.22 $ – $ 26.24 $ 12.41 $ 10.40 $ 10.63 11.07 16.22 8.54 – – 10.40 – 11.07 16.22 – 26.24 12.41 10.40 10.63 11.07 16.22 8.54 – – 10.40 – 10.37 – – – – – – 11.07 – – – – – – 11.07 – – – – – – 11.07 – – – – – – – – – – – – – – – – – – – – – – 8.54 – – – – Principal Life Insurance Company Variable Life Separate Account Statements of Assets and Liabilities (continued) December 31, 2009 JP Morgan Small Cap Core LargeCap Class I Blend II Division Division Assets Investments in shares of mutual funds, at market $ 3,001,576 $ 11,639,190 Liabilities – – Net assets $ 3,001,576 $ 11,639,190 Net assets Applicable to accumulation units: Benefit Variable Universal Life $ 726,059 $ 526,123 Benefit Variable Universal Life II – 10,816 Executive Variable Universal Life 2,275,517 1,406,165 Executive Variable Universal Life II – 54,587 Flex Variable Life – 39,496 PrinFlex Life ® – 2,417,533 Survivorship Variable Universal Life – 200,005 Variable Universal Life Accumulator – 1,024,767 Variable Universal Life Accumulator II – 3,628,458 Variable Universal Life Income – 2,271,000 Variable Universal Life Income II – 60,240 Total net assets $ 3,001,576 $ 11,639,190 Investments in shares of mutual funds, at cost $ 2,446,020 $ 15,610,928 Shares of mutual fund owned 255,236 1,874,266 Accumulation units outstanding: Benefit Variable Universal Life 54,277 44,030 Benefit Variable Universal Life II – 905 Executive Variable Universal Life 170,152 117,679 Executive Variable Universal Life II – 4,568 Flex Variable Life – 3,500 PrinFlex Life ® – 202,320 Survivorship Variable Universal Life – 16,738 Variable Universal Life Accumulator – 85,762 Variable Universal Life Accumulator II – 303,659 Variable Universal Life Income – 190,056 Variable Universal Life Income II – 5,041 Accumulation unit value: Benefit Variable Universal Life $ 13.35 $ 11.95 Benefit Variable Universal Life II – 11.95 Executive Variable Universal Life 13.35 11.95 Executive Variable Universal Life II – 11.95 Flex Variable Life – 11.28 PrinFlex Life ® – 11.95 Survivorship Variable Universal Life – 11.95 Variable Universal Life Accumulator – 11.95 Variable Universal Life Accumulator II – 11.95 Variable Universal Life Income – 11.95 Variable Universal Life Income II – 11.95 See accompanying notes. MFS VIT MFS VIT LargeCap LargeCap LargeCap LargeCap LargeCap Global Equity Growth Growth Growth I S&P 500 Index Value Value III Service Class Service Class Division Division Division Division Division Division Division $ 23,256,106 $ 83,747,727 $ 20,275,375 $ 45,490,568 $ 13,847,674 $ 537,057 $ 2,364,492 – – – – – – – $ 23,256,106 $ 83,747,727 $ 20,275,375 $ 45,490,568 $ 13,847,674 $ 537,057 $ 2,364,492 $ 391,426 $ 877,857 $ – $ 214,535 $ 1,110,069 $ 38,751 $ 433,542 11,549 14,152 46,453 – 8,018 3,325 1,219 4,163,476 5,422,094 – 2,563,229 2,704,228 494,936 1,730,741 366,347 749,000 789,230 21,804 78,763 45 198,990 34,151 83,480 49,604 3,624,850 41,074 – – 15,273,658 50,102,013 11,672,923 19,629,726 2,324,748 – – 1,095,917 3,054,348 1,405,403 1,101,711 353,253 – – 482,550 16,793,599 1,540,495 15,696,817 1,240,377 – – 727,300 3,499,708 2,905,663 1,416,314 3,380,419 – – 709,732 2,826,514 1,470,819 1,061,059 2,558,376 – – – 324,962 394,785 160,523 48,349 – – $ 23,256,106 $ 83,747,727 $ 20,275,375 $ 45,490,568 $ 13,847,674 $ 537,057 $ 2,364,492 $ 25,510,664 $ 81,100,219 $ 21,393,819 $ 62,686,788 $ 17,457,413 $ 451,204 $ 2,075,905 1,819,726 4,681,259 2,573,017 2,131,704 1,599,039 44,643 112,061 31,725 50,731 – 14,282 104,347 3,219 32,453 936 818 4,778 – 754 276 91 337,449 313,338 – 170,642 254,200 41,117 129,556 29,692 43,286 81,177 1,452 7,404 4 14,896 3,973 8,825 5,335 98,280 4,089 – – 1,237,927 2,895,469 1,200,623 1,306,814 218,530 – – 139,475 293,548 143,965 108,629 33,206 – – 39,111 970,511 158,448 1,044,990 116,598 – – 58,947 202,242 298,863 94,289 317,762 – – 57,524 163,345 151,282 70,638 240,490 – – – 18,780 40,606 10,687 4,545 – – $ 12.34 $ 17.30 $ – $ 15.02 $ 10.64 $ 12.04 $ 13.36 12.34 17.30 9.72 15.02 10.64 12.04 13.36 12.34 17.30 – 15.02 10.64 12.04 13.36 12.34 17.30 9.72 15.02 10.64 12.04 13.36 8.60 9.46 9.30 36.88 10.05 – – 12.34 17.30 9.72 15.02 10.64 – – 7.86 10.40 9.76 10.14 10.64 – – 12.34 17.30 9.72 15.02 10.64 – – 12.34 17.30 9.72 15.02 10.64 – – 12.34 17.30 9.72 15.02 10.64 – – – 17.30 9.72 15.02 10.64 – – Principal Life Insurance Company Variable Life Separate Account Statements of Assets and Liabilities (continued) December 31, 2009 MFS VIT MidCap MFS VIT Growth New Discovery Service Class Service Class Division Division Assets Investments in shares of mutual funds, at market $ 287,362 $ 3,023,685 Liabilities – – Net assets $ 287,362 $ 3,023,685 Net assets Applicable to accumulation units: Benefit Variable Universal Life $ 121,502 $ 550,613 Benefit Variable Universal Life II – 7,959 Executive Variable Universal Life 165,860 1,676,392 Executive Variable Universal Life II – 19,644 Flex Variable Life – – PrinFlex Life ® – – Survivorship Variable Universal Life – – Variable Universal Life Accumulator – – Variable Universal Life Accumulator II – 427,105 Variable Universal Life Income – 306,483 Variable Universal Life Income II – 35,489 Total net assets $ 287,362 $ 3,023,685 Investments in shares of mutual funds, at cost $ 245,388 $ 2,744,482 Shares of mutual fund owned 63,576 231,700 Accumulation units outstanding: Benefit Variable Universal Life 13,814 42,847 Benefit Variable Universal Life II – 619 Executive Variable Universal Life 18,857 130,451 Executive Variable Universal Life II – 1,529 Flex Variable Life – – PrinFlex Life ® – – Survivorship Variable Universal Life – – Variable Universal Life Accumulator – – Variable Universal Life Accumulator II – 33,236 Variable Universal Life Income – 23,850 Variable Universal Life Income II – 2,762 Accumulation unit value: Benefit Variable Universal Life $ 8.80 $ 12.85 Benefit Variable Universal Life II – 12.85 Executive Variable Universal Life 8.80 12.85 Executive Variable Universal Life II – 12.85 Flex Variable Life – – PrinFlex Life ® – – Survivorship Variable Universal Life – – Variable Universal Life Accumulator – – Variable Universal Life Accumulator II – 12.85 Variable Universal Life Income – 12.85 Variable Universal Life Income II – 12.85 See accompanying notes. MFS VIT Research MFS VIT MFS VIT MFS VIT International Total Return Utilities Value MidCap MidCap MidCap Service Class Service Class Service Class Service Class Blend Growth I Value II Division Division Division Division Division Division Division $ 378,041 $ 44,655 $ 136,391 $ 9,922,238 $ 72,045,578 $ 15,577,915 $ 17,924,788 – – – – – – – $ 378,041 $ 44,655 $ 136,391 $ 9,922,238 $ 72,045,578 $ 15,577,915 $ 17,924,788 $ 116,646 $ – $ – $ 798,243 $ 1,321,085 $ 220,503 $ 1,129,630 4,890 – 378 63,091 16,218 4,200 2,232 244,661 – – 8,873,701 7,688,980 2,847,496 4,468,823 11,844 44,655 35,143 187,203 194,059 24,990 87,961 – – – – 11,241,926 38,212 80,049 – – – – 36,526,404 6,332,366 4,176,327 – – – – 2,910,479 673,100 749,105 – – – – 3,985,881 1,298,887 1,493,068 – – – – 4,497,851 2,382,436 2,994,802 – – – – 3,205,177 1,641,420 2,643,307 – – 100,870 – 457,518 114,305 99,484 $ 378,041 $ 44,655 $ 136,391 $ 9,922,238 $ 72,045,578 $ 15,577,915 $ 17,924,788 $ 368,308 $ 43,067 $ 121,797 $ 9,460,853 $ 79,986,912 $ 17,784,682 $ 22,090,157 33,366 2,584 6,022 849,507 2,305,458 1,920,828 1,728,523 14,689 – – 59,217 49,322 17,941 83,297 616 – 45 4,680 606 342 165 30,809 – – 658,285 287,071 231,682 329,526 1,492 4,653 4,173 13,887 7,245 2,033 6,486 – – – – 138,472 3,601 6,297 – – – – 1,363,723 515,224 307,960 – – – – 137,232 54,160 55,238 – – – – 148,814 105,679 110,098 – – – – 167,929 193,844 220,833 – – – – 119,666 133,552 194,914 – – 11,978 – 17,082 9,300 7,336 $ 7.94 $ – $ – $ 13.48 $ 26.78 $ 12.29 $ 13.56 7.94 9.60 8.42 13.48 26.78 12.29 13.56 7.94 – – 13.48 26.78 12.29 13.56 7.94 9.60 8.42 13.48 26.78 12.29 13.56 – – – – 81.18 10.61 12.71 – – – – 26.78 12.29 13.56 – – – – 21.21 12.43 13.56 – – – – 26.78 12.29 13.56 – – – – 26.78 12.29 13.56 – – – – 26.78 12.29 13.56 – – 8.42 – 26.78 12.29 13.56 Principal Life Insurance Company Variable Life Separate Account Statements of Assets and Liabilities (continued) December 31, 2009 Money Mortgage Market Securities Division Division Assets Investments in shares of mutual funds, at market $ 200,345,768 $ 1,967,188 Liabilities – – Net assets $ 200,345,768 $ 1,967,188 Net assets Applicable to accumulation units: Benefit Variable Universal Life $ 11,783,332 $ – Benefit Variable Universal Life II 481,671 – Executive Variable Universal Life 121,132,906 943,271 Executive Variable Universal Life II 11,261,160 49,733 Flex Variable Life 793,756 2,670 PrinFlex Life ® 30,411,936 383,592 Survivorship Variable Universal Life 3,700,000 271,338 Variable Universal Life Accumulator 3,502,898 51,913 Variable Universal Life Accumulator II 8,561,235 92,432 Variable Universal Life Income 5,546,863 147,228 Variable Universal Life Income II 3,170,011 25,011 Total net assets $ 200,345,768 $ 1,967,188 Investments in shares of mutual funds, at cost $ 200,345,765 $ 2,000,178 Shares of mutual fund owned 200,345,766 195,352 Accumulation units outstanding: Benefit Variable Universal Life 775,233 – Benefit Variable Universal Life II 31,689 – Executive Variable Universal Life 7,969,415 87,644 Executive Variable Universal Life II 740,879 4,621 Flex Variable Life 38,085 250 PrinFlex Life ® 2,000,822 35,642 Survivorship Variable Universal Life 275,310 25,211 Variable Universal Life Accumulator 230,458 4,824 Variable Universal Life Accumulator II 563,249 8,588 Variable Universal Life Income 364,932 13,680 Variable Universal Life Income II 208,566 2,324 Accumulation unit value: Benefit Variable Universal Life $ 15.20 $ 10.76 Benefit Variable Universal Life II 15.20 10.76 Executive Variable Universal Life 15.20 10.76 Executive Variable Universal Life II 15.20 10.76 Flex Variable Life 20.83 10.67 PrinFlex Life ® 15.20 10.76 Survivorship Variable Universal Life 13.44 10.76 Variable Universal Life Accumulator 15.20 10.76 Variable Universal Life Accumulator II 15.20 10.76 Variable Universal Life Income 15.20 10.76 Variable Universal Life Income II 15.20 10.76 See accompanying notes. Neuberger Neuberger Neuberger Oppenheimer PIMCO PIMCO PIMCO Berman AMT Berman AMT Berman AMT Main Street High Yield Real Return Short-Term Guardian Partners Small-Cap Growth Small Cap Administrative Administrative Administrative I Class I Class S Class Service Shares Class Class Class Division Divison Divison Division Division Division Division $ 1,496,226 $ 4,174,663 $ 243,787 $ 92,043 $ – $ 150,687 $ 130,094 – – – – – – – $ 1,496,226 $ 4,174,663 $ 243,787 $ 92,043 $ – $ 150,687 $ 130,094 $ 277,975 $ 277,791 $ 55,917 $ 40,226 $ – $ 50,401 $ – 1,063 514 – 1,226 – – – 1,203,017 3,844,219 186,352 28,839 – 100,286 – 14,171 27,396 1,518 11,016 – – 130,094 – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – 24,743 – 10,736 – – – $ 1,496,226 $ 4,174,663 $ 243,787 $ 92,043 $ – $ 150,687 $ 130,094 $ 1,256,491 $ 4,595,742 $ 235,754 $ 87,260 $ – $ 154,123 $ 131,497 93,631 425,552 23,784 6,446 – 12,113 12,919 22,778 29,938 7,164 4,202 – 5,098 – 87 55 – 128 – – – 98,576 414,299 23,875 3,012 – 10,144 – 1,161 2,953 195 1,151 – – 13,003 – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – 2,667 – 1,121 – – – $ 12.20 $ 9.28 $ 7.81 $ 9.57 $ 10.29 $ 9.89 $ 10.00 12.20 9.28 7.81 9.57 10.29 9.89 10.00 12.20 9.28 7.81 9.57 10.29 9.89 10.00 12.20 9.28 7.81 9.57 10.29 9.89 10.00 – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – 9.28 – 9.57 – – – Principal Life Insurance Company Variable Life Separate Account Statements of Assets and Liabilities (continued) December 31, 2009 PIMCO Principal Total Return LifeTime Administrative Strategic Class Income Division Division Assets Investments in shares of mutual funds, at market $ 728,235 $ 2,462,034 Liabilities – – Net assets $ 728,235 $ 2,462,034 Net assets Applicable to accumulation units: Benefit Variable Universal Life $ 111,266 $ 50,679 Benefit Variable Universal Life II – 1,127 Executive Variable Universal Life 400,298 1,891,000 Executive Variable Universal Life II 216,671 30,437 Flex Variable Life – – PrinFlex Life ® – 75,824 Survivorship Variable Universal Life – – Variable Universal Life Accumulator – 16,487 Variable Universal Life Accumulator II – 155,153 Variable Universal Life Income – 236,457 Variable Universal Life Income II – 4,870 Total net assets $ 728,235 $ 2,462,034 Investments in shares of mutual funds, at cost $ 739,235 $ 2,276,123 Shares of mutual fund owned 67,305 254,869 Accumulation units outstanding: Benefit Variable Universal Life 11,174 4,400 Benefit Variable Universal Life II – 98 Executive Variable Universal Life 40,199 164,157 Executive Variable Universal Life II 21,759 2,642 Flex Variable Life – – PrinFlex Life ® – 6,582 Survivorship Variable Universal Life – – Variable Universal Life Accumulator – 1,431 Variable Universal Life Accumulator II – 13,469 Variable Universal Life Income – 20,527 Variable Universal Life Income II – 423 Accumulation unit value: Benefit Variable Universal Life $ 9.96 $ 11.52 Benefit Variable Universal Life II 9.96 11.52 Executive Variable Universal Life 9.96 11.52 Executive Variable Universal Life II 9.96 11.52 Flex Variable Life – 12.66 PrinFlex Life ® – 11.52 Survivorship Variable Universal Life – 11.52 Variable Universal Life Accumulator – 11.52 Variable Universal Life Accumulator II – 11.52 Variable Universal Life Income – 11.52 Variable Universal Life Income II – 11.52 See accompanying notes. Putnam VT Putnam VT Principal Principal Principal Principal Principal Growth & International LifeTime LifeTime LifeTime LifeTime LifeTime Income Equity Class IB Class IB Division Division Division Division Division Division Division $ 5,524,373 $ 17,405,073 $ 13,669,409 $ 7,770,752 $ 5,756,816 $ 272,124 $ 1,763,602 – – – – – – – $ 5,524,373 $ 17,405,073 $ 13,669,409 $ 7,770,752 $ 5,756,816 $ 272,124 $ 1,763,602 $ 314,381 $ 2,324,009 $ 1,065,204 $ 541,657 $ 714,021 $ 269,152 $ 840,664 – 10,677 10,962 39,213 18,853 – – 4,274,617 10,137,964 6,643,673 1,317,930 1,109,367 2,972 922,938 155,626 1,261,975 223,353 515,831 48,251 – – – – – – – – – – 210,550 24,653 – 20,723 – – – – – – – – – 1,514 – – – 54 – – 378,590 1,079,711 1,249,922 951,776 817,473 – – 398,615 2,309,146 4,057,169 4,218,826 2,913,933 – – 1,030 71,041 394,473 185,519 114,141 – – $ 5,524,373 $ 17,405,073 $ 13,669,409 $ 7,770,752 $ 5,756,816 $ 272,124 $ 1,763,602 $ 4,858,095 $ 15,857,298 $ 13,325,986 $ 8,296,169 $ 6,234,935 $ 259,717 $ 1,957,120 573,663 1,745,745 1,387,757 777,075 582,084 18,897 159,170 27,027 194,096 90,954 45,970 60,870 25,795 64,839 – 892 936 3,328 1,607 – – 367,487 846,703 567,268 111,851 94,571 285 71,184 13,379 105,397 19,071 43,778 4,113 – – – – – – – – – – 17,585 2,105 – 1,767 – – – – – – – – – 130 – – – 5 – – 32,547 90,199 106,722 80,775 69,690 – – 34,269 192,853 346,406 358,046 248,408 – – 89 5,933 33,682 15,745 9,730 – – $ 11.63 $ 11.97 $ 11.71 $ 11.78 $ 11.73 $ 10.43 $ 12.97 11.63 11.97 11.71 11.78 11.73 – – 11.63 11.97 11.71 11.78 11.73 10.43 12.97 11.63 11.97 11.71 11.78 11.73 – – 13.83 14.32 14.55 14.81 14.92 – – 11.63 11.97 11.71 11.78 11.73 – – 11.63 11.97 11.71 11.78 11.73 – – 11.63 11.97 11.71 11.78 11.73 – – 11.63 11.97 11.71 11.78 11.73 – – 11.63 11.97 11.71 11.78 11.73 – – 11.63 11.97 11.71 11.78 11.73 – – Principal Life Insurance Company Variable Life Separate Account Statements of Assets and Liabilities (continued) December 31, 2009 Putnam VT Voyager Real Estate Class IB Securities Division Division Assets Investments in shares of mutual funds, at market $ 22,852,428 $ 31,571,436 Liabilities – – Net assets $ 22,852,428 $ 31,571,436 Net assets Applicable to accumulation units: Benefit Variable Universal Life $ 179,236 $ 2,648,963 Benefit Variable Universal Life II – 34,016 Executive Variable Universal Life 1,014,324 12,285,663 Executive Variable Universal Life II – 388,278 Flex Variable Life 10,805 67,336 PrinFlex Life ® 19,309,240 7,348,342 Survivorship Variable Universal Life 1,015,288 700,635 Variable Universal Life Accumulator 1,323,535 2,229,777 Variable Universal Life Accumulator II – 3,049,853 Variable Universal Life Income – 2,653,332 Variable Universal Life Income II – 165,241 Total net assets $ 22,852,428 $ 31,571,436 Investments in shares of mutual funds, at cost $ 23,518,250 $ 40,232,997 Shares of mutual fund owned 705,322 2,915,183 Accumulation units outstanding: Benefit Variable Universal Life 13,810 91,702 Benefit Variable Universal Life II – 1,178 Executive Variable Universal Life 78,156 425,308 Executive Variable Universal Life II – 13,442 Flex Variable Life 1,162 2,876 PrinFlex Life ® 1,487,825 254,387 Survivorship Variable Universal Life 94,091 22,535 Variable Universal Life Accumulator 101,980 77,191 Variable Universal Life Accumulator II – 105,581 Variable Universal Life Income – 91,854 Variable Universal Life Income II – 5,720 Accumulation unit value: Benefit Variable Universal Life $ 12.98 $ 28.89 Benefit Variable Universal Life II – 28.89 Executive Variable Universal Life 12.98 28.89 Executive Variable Universal Life II – 28.89 Flex Variable Life 9.30 23.41 PrinFlex Life ® 12.98 28.89 Survivorship Variable Universal Life 10.79 31.09 Variable Universal Life Accumulator 12.98 28.89 Variable Universal Life Accumulator II – 28.89 Variable Universal Life Income – 28.89 Variable Universal Life Income II – 28.89 See accompanying notes. SAM SAM SAM SAM SAM Conservative Conservative Flexible Strategic Balanced Balanced Growth Income Growth Short-Term Short-Term Portfolio Portfolio Portfolio Portfolio Portfolio Bond Income Division Division Division Division Division Division Division $ 10,643,470 $ 3,391,793 $ 17,341,193 $ 3,520,776 $ 11,993,256 $ 4,469,871 $ 2,719,682 – – – – – – – $ 10,643,470 $ 3,391,793 $ 17,341,193 $ 3,520,776 $ 11,993,256 $ 4,469,871 $ 2,719,682 $ 157,621 $ 21,851 $ 263,377 $ 11,321 $ 530,809 $ 397,771 $ 70,575 137,322 2,909 90,625 2,775 48,511 14,531 41,694 2,487,455 1,189,072 1,089,207 736,689 2,273,170 1,656,058 765,975 478,623 168,467 183,688 452,208 179,624 62,960 680,383 2,215 – 158 12,090 – 206,117 12,761 991,094 402,325 1,086,995 700,023 1,353,971 827,833 346,627 83,855 30,052 373,828 32,893 4,394 175,717 241,474 200,578 137,664 100,565 23,247 209,480 220,491 78,849 681,955 643,324 1,062,923 225,855 1,642,739 394,824 135,626 3,409,220 415,842 6,787,937 881,342 4,096,540 416,570 280,115 2,013,532 380,287 6,301,890 442,333 1,654,018 96,999 65,603 $ 10,643,470 $ 3,391,793 $ 17,341,193 $ 3,520,776 $ 11,993,256 $ 4,469,871 $ 2,719,682 $ 9,824,065 $ 3,217,282 $ 16,783,086 $ 3,314,615 $ 11,851,091 $ 4,609,347 $ 2,724,808 775,198 310,036 1,256,608 294,626 808,716 504,500 1,105,562 16,578 2,152 30,117 1,062 64,021 36,669 6,420 14,443 287 10,363 260 5,851 1,340 3,792 261,626 117,127 124,551 69,082 274,168 152,667 69,673 50,341 16,594 21,005 42,405 21,665 5,804 61,887 162 – 11 947 – 19,971 1,170 104,242 39,630 124,298 65,644 163,303 76,321 31,529 8,820 2,960 42,747 3,085 530 16,199 21,964 21,096 13,560 11,500 2,180 25,266 20,327 7,172 71,727 63,369 121,546 21,179 198,132 36,398 12,336 358,576 40,962 776,204 82,647 494,086 38,402 25,479 211,780 37,459 720,624 41,479 199,492 8,942 5,967 $ 9.51 $ 10.15 $ 8.75 $ 10.66 $ 8.29 $ 10.85 $ 10.99 9.51 10.15 8.75 10.66 8.29 10.85 10.99 9.51 10.15 8.75 10.66 8.29 10.85 10.99 9.51 10.15 8.75 10.66 8.29 10.85 10.99 13.66 13.06 14.19 12.76 14.59 10.32 10.90 9.51 10.15 8.75 10.66 8.29 10.85 10.99 9.51 10.15 8.75 10.66 8.29 10.85 10.99 9.51 10.15 8.75 10.66 8.29 10.85 10.99 9.51 10.15 8.75 10.66 8.29 10.85 10.99 9.51 10.15 8.75 10.66 8.29 10.85 10.99 9.51 10.15 8.75 10.66 8.29 10.85 10.99 Principal Life Insurance Company Variable Life Separate Account Statements of Assets and Liabilities (continued) December 31, 2009 SmallCap SmallCap Blend Growth II Division Division Assets Investments in shares of mutual funds, at market $ 18,665,583 $ 17,655,229 Liabilities – – Net assets $ 18,665,583 $ 17,655,229 Net assets Applicable to accumulation units: Benefit Variable Universal Life $ 324,178 $ 622,391 Benefit Variable Universal Life II 283 555 Executive Variable Universal Life 756,772 3,651,657 Executive Variable Universal Life II 6,923 141,115 Flex Variable Life 77,345 27,519 PrinFlex Life ® 6,038,608 9,522,593 Survivorship Variable Universal Life 454,342 684,141 Variable Universal Life Accumulator 9,480,114 791,946 Variable Universal Life Accumulator II 811,212 1,188,594 Variable Universal Life Income 697,836 934,691 Variable Universal Life Income II 17,970 90,027 Total net assets $ 18,665,583 $ 17,655,229 Investments in shares of mutual funds, at cost $ 23,087,345 $ 19,560,769 Shares of mutual fund owned 2,777,617 2,006,276 Accumulation units outstanding: Benefit Variable Universal Life 27,621 63,769 Benefit Variable Universal Life II 24 57 Executive Variable Universal Life 64,481 374,132 Executive Variable Universal Life II 590 14,458 Flex Variable Life 7,680 4,628 PrinFlex Life ® 514,521 975,655 Survivorship Variable Universal Life 37,210 88,544 Variable Universal Life Accumulator 807,755 81,141 Variable Universal Life Accumulator II 69,119 121,779 Variable Universal Life Income 59,459 95,765 Variable Universal Life Income II 1,531 9,224 Accumulation unit value: Benefit Variable Universal Life $ 11.74 $ 9.76 Benefit Variable Universal Life II 11.74 9.76 Executive Variable Universal Life 11.74 9.76 Executive Variable Universal Life II 11.74 9.76 Flex Variable Life 10.07 5.95 PrinFlex Life ® 11.74 9.76 Survivorship Variable Universal Life 12.21 7.73 Variable Universal Life Accumulator 11.74 9.76 Variable Universal Life Accumulator II 11.74 9.76 Variable Universal Life Income 11.74 9.76 Variable Universal Life Income II 11.74 9.76 See accompanying notes. Summit Summit Summit Templeton EAFE Russell 2000 S&P Developing Templeton International Small Cap MidCap T. Rowe Price Markets Foreign SmallCap Index Index 400 Index Equity Securities Securities Value I Class F Class F Class F Income II Class 2 Class 2 Division Division Division Division Division Division Division $ 24,364,263 $ 26,222 $ 2,334,755 $ 222,310 $ 276,850 $ 2,403,075 $ 3,824,937 – – – – – – – $ 24,364,263 $ 26,222 $ 2,334,755 $ 222,310 $ 276,850 $ 2,403,075 $ 3,824,937 $ 1,631,895 $ – $ 154,322 $ – $ 86,065 $ 320,538 $ 13,096 8,853 9,824 7,791 – – 5,487 17,757 7,099,931 – 1,555,969 – 190,785 1,983,581 2,587,735 90,982 16,398 263,508 – – 93,469 1,206,349 248,307 – – – – – – 8,625,704 – – – – – – 991,382 – – – – – – 1,903,682 – – – – – – 1,986,490 – 117,051 39,135 – – – 1,667,554 – 168,592 152,333 – – – 109,483 – 67,522 30,842 – – – $ 24,364,263 $ 26,222 $ 2,334,755 $ 222,310 $ 276,850 $ 2,403,075 $ 3,824,937 $ 31,053,039 $ 26,328 $ 1,979,796 $ 198,298 $ 244,745 $ 2,230,255 $ 3,042,449 2,253,863 358 46,343 4,035 15,721 245,713 284,382 78,596 – 16,186 – 8,782 22,342 1,486 426 1,181 817 – – 382 2,015 341,952 – 163,190 – 19,467 138,258 293,648 4,382 1,971 27,637 – – 6,515 136,893 17,599 – – – – – – 415,438 – – – – – – 44,548 – – – – – – 91,687 – – – – – – 95,675 – 12,276 4,510 – – – 80,314 – 17,682 17,556 – – – 5,273 – 7,082 3,554 – – – $ 20.76 $ – $ 9.53 $ – $ 9.80 $ 14.35 $ 8.81 20.76 8.32 9.53 – – 14.35 8.81 20.76 – 9.53 – 9.80 14.35 8.81 20.76 8.32 9.53 – – 14.35 8.81 14.11 – – – – – – 20.76 – – – – – – 22.25 – – – – – – 20.76 – – – – – – 20.76 – 9.53 8.68 – – – 20.76 – 9.53 8.68 – – – 20.76 – 9.53 8.68 – – – Principal Life Insurance Company Variable Life Separate Account Statements of Assets and Liabilities (continued) December 31, 2009 Templeton Van Eck Global Bond Worldwide Securities Hard Assets Class 2 Initial Class Division Division Assets Investments in shares of mutual funds, at market $ 2,580,923 $ 1,764,936 Liabilities – – Net assets $ 2,580,923 $ 1,764,936 Net assets Applicable to accumulation units: Benefit Variable Universal Life $ 116,557 $ 106,248 Benefit Variable Universal Life II 60,508 23,981 Executive Variable Universal Life 1,654,910 1,459,792 Executive Variable Universal Life II 748,948 174,915 Flex Variable Life – – PrinFlex Life ® – – Survivorship Variable Universal Life – – Variable Universal Life Accumulator – – Variable Universal Life Accumulator II – – Variable Universal Life Income – – Variable Universal Life Income II – – Total net assets $ 2,580,923 $ 1,764,936 Investments in shares of mutual funds, at cost $ 2,516,462 $ 1,570,613 Shares of mutual fund owned 148,928 60,319 Accumulation units outstanding: Benefit Variable Universal Life 9,855 11,946 Benefit Variable Universal Life II 5,116 2,696 Executive Variable Universal Life 139,930 164,127 Executive Variable Universal Life II 63,327 19,666 Flex Variable Life – – PrinFlex Life ® – – Survivorship Variable Universal Life – – Variable Universal Life Accumulator – – Variable Universal Life Accumulator II – – Variable Universal Life Income – – Variable Universal Life Income II – – Accumulation unit value: Benefit Variable Universal Life $ 11.83 $ 8.89 Benefit Variable Universal Life II 11.83 8.89 Executive Variable Universal Life 11.83 8.89 Executive Variable Universal Life II 11.83 8.89 Flex Variable Life – – PrinFlex Life ® – – Survivorship Variable Universal Life – – Variable Universal Life Accumulator – – Variable Universal Life Accumulator II – – Variable Universal Life Income – – Variable Universal Life Income II – – See accompanying notes. Wells Fargo Vanguard Wells Fargo Wells Fargo Advantage VT Vanguard Vanguard VIF Advantage VT Advantage VT Large VIF VIF Equity Mid-Cap Asset Equity Company Balanced Index Index Allocation Income Growth Division Division Division Division Division Division $ 29,660,009 $ 38,804,843 $ 11,783,530 $ 1,161,996 $ 1,047,681 $ 1,047,095 – – – – – – $ 29,660,009 $ 38,804,843 $ 11,783,530 $ 1,161,996 $ 1,047,681 $ 1,047,095 $ 7,378,597 $ 4,308,742 $ 2,753,491 $ 38,316 $ 2,656 $ 2,115 – – 11,037 – – – 22,281,412 34,496,101 8,691,235 253,915 – 448,024 – – 327,767 – – – – – – 6,775 276,377 – – – – 248,557 268,644 245,514 – – – 54,346 112,450 33,878 – – – 132,160 30,198 28,738 – – – 129,561 83,224 172,612 – – – 298,366 274,132 116,214 – – – – – – $ 29,660,009 $ 38,804,843 $ 11,783,530 $ 1,161,996 $ 1,047,681 $ 1,047,095 $ 29,748,688 $ 38,353,519 $ 13,245,540 $ 1,347,722 $ 1,093,411 $ 993,801 1,709,511 1,838,221 980,327 110,351 92,633 116,733 477,190 369,410 191,719 3,102 251 206 – – 769 – – – 1,440,979 2,957,479 605,165 20,551 – 43,598 – – 22,822 – – – – – – 581 27,640 – – – – 20,123 25,371 23,892 – – – 4,400 10,620 3,297 – – – 10,702 2,852 2,797 – – – 10,489 7,860 16,797 – – – 24,156 25,890 11,309 – – – – – – $ 15.46 $ 11.66 $ 14.36 $ 12.35 $ 10.59 $ 10.28 – – 14.36 – – – 15.46 11.66 14.36 12.35 10.59 10.28 – – 14.36 – – – – – – 11.66 10.00 9.70 – – – 12.35 10.59 10.28 – – – 12.35 10.59 10.28 – – – 12.35 10.59 10.28 – – – 12.35 10.59 10.28 – – – 12.35 10.59 10.28 – – – – – – Principal Life Insurance Company Variable Life Separate Account Statements of Operations Year Ended December 31, 2009 AIM V.I. AIM V.I. Capital Capital Appreciation Appreciation Series I Series II Division Division Investment income (loss) Income: Dividends $ 14,058 $ 2,293 Expenses: Mortality and expense risks – – Net investment income (loss) 14,058 2,293 Realized gains (losses) on investments Realized gains (losses) on sale of fund shares (186,458) (26,093) Capital gains distributions – – Total realized gains (losses) on investments (186,458) (26,093) Change in net unrealized appreciation or depreciation of investments 623,083 149,131 Net gains (losses) on investments 450,683 125,331 Payment from Affilitate – – Net increase (decrease) in net assets resulting from operations $ 450,683 $ 125,331 See accompanying notes. AIM V.I. AIM V.I. AIM V.I. AIM V.I. AIM V.I. AIM V.I. AIM V.I. Global International Mid Cap Small Cap Core Equity Core Equity Dynamics Health Care Growth Core Equity Equity Series I Series II Series I Series I Series I Series II Series I Division Division Division Division Division Division Division $ 124,080 $ 78,117 $ – $ 22,195 $ 85,969 $ 4,216 $ 7,542 315 – 20 150 – – 33 123,765 78,117 (20) 22,045 85,969 4,216 7,509 (240,521) (102,445) (90,317) (364,124) (619,635) (20,979) (514,249) – – – – – 5,314 – (240,521) (102,445) (90,317) (364,124) (619,635) (15,665) (514,249) 1,806,859 1,117,162 622,424 1,839,795 2,257,639 128,887 1,385,153 1,690,103 1,092,834 532,087 1,497,716 1,723,973 117,438 878,413 – – – – – – – $ 1,690,103 $ 1,092,834 $ 532,087 $ 1,497,716 $ 1,723,973 $ 117,438 $ 878,413 Principal Life Insurance Company Variable Life Separate Account Statements of Operations (continued) Year Ended December 31, 2009 AllianceBernstein AIM V.I. Global Thematic Technology Growth Series I Class A Division Division (1) Investment income (loss) Income: Dividends $ – $ – Expenses: Mortality and expense risks 229 – Net investment income (loss) (229) – Realized gains (losses) on investments Realized gains (losses) on sale of fund shares (316,417) 48 Capital gains distributions – – Total realized gains (losses) on investments (316,417) 48 Change in net unrealized appreciation or depreciation of investments 1,614,463 426 Net gains (losses) on investments 1,297,817 474 Payment from Affilitate – – Net increase (decrease) in net assets resulting from operations $ 1,297,817 $ 474 (1) Represented the operations of Alliance Bernstein Global Technology Division until May 18, 2009 name change. See accompanying notes. American American AllianceBernstein AllianceBernstein AllianceBernstein AllianceBernstein Century VP Century VP American International International Small Cap Small/Mid Cap Income & Income & Century VP Growth Value Growth Value Growth Growth International Class A Class A Class A Class A Class I Class II Class II Division Division Division Division Division Division Division $ – $ 3,563 $ – $ 19 $ 114,630 $ 61,126 $ 9,113 – – – – 103 – – – 3,563 – 19 114,527 61,126 9,113 224 (50,171) 27 98 (141,314) (143,641) (111,276) – – – 74 – – – 224 (50,171) 27 172 (141,314) (143,641) (111,276) 4,188 81,442 8,526 973 439,940 346,032 235,557 4,412 34,834 8,553 1,164 413,153 263,517 133,394 – – – – – – – $ 4,412 $ 34,834 $ 8,553 $ 1,164 $ 413,153 $ 263,517 $ 133,394 Principal Life Insurance Company Variable Life Separate Account Statements of Operations (continued) Year Ended December 31, 2009 American Century VP American MidCap Value Century VP Class II Ultra Class I Division Division Investment income (loss) Income: Dividends $ 71,397 $ 3,896 Expenses: Mortality and expense risks – 85 Net investment income (loss) 71,397 3,811 Realized gains (losses) on investments Realized gains (losses) on sale of fund shares (34,361) (192,483) Capital gains distributions – – Total realized gains (losses) on investments (34,361) (192,483) Change in net unrealized appreciation or depreciation of investments 751,009 585,872 Net gains (losses) on investments 788,045 397,200 Payment from Affilitate – – Net increase (decrease) in net assets resulting from operations $ 788,045 $ 397,200 See accompanying notes. American American American Bond & Calvert Century VP Century VP Century VP Asset Mortgage Income Ultra Class II Value Class II Vista Class II Allocation Balanced Securities Initial Shares Division Division Division Division Division Division Division $ 3,261 $ 417,770 $ – $ 376,195 $ 589,525 $ 4,639,773 $ 2,287 – 70 – 696 14,153 11,773 – 3,261 417,700 – 375,499 575,372 4,628,000 2,287 (424,294) (1,074,410) (94,824) (449,833) (593,498) (1,857,818) 224 – – – – – – – (424,294) (1,074,410) (94,824) (449,833) (593,498) (1,857,818) 224 976,797 2,227,117 180,149 2,275,175 2,394,511 4,814,459 783 555,764 1,570,407 85,325 2,200,841 2,376,385 7,584,641 3,294 – – – – – – – $ 555,764 $ 1,570,407 $ 85,325 $ 2,200,841 $ 2,376,385 $ 7,584,641 $ 3,294 Principal Life Insurance Company Variable Life Separate Account Statements of Operations (continued) Year Ended December 31, 2009 Dreyfus IP Diversified Core Value International Service Shares Division Division Investment income (loss) Income: Dividends $ 3,644,523 $ 9,275 Expenses: Mortality and expense risks 676 – Net investment income (loss) 3,643,847 9,275 Realized gains (losses) on investments Realized gains (losses) on sale of fund shares (6,461,383) (56,841) Capital gains distributions – – Total realized gains (losses) on investments (6,461,383) (56,841) Change in net unrealized appreciation or depreciation of investments 20,937,623 119,215 Net gains (losses) on investments 18,120,087 71,649 Payment from Affilitate 277,822 – Net increase (decrease) in net assets resulting from operations $ 18,397,909 $ 71,649 See accompanying notes. Dreyfus Socially Dreyfus VIF Responsible Dreyfus VIF Developing Dreyfus VIF DWS Dreman Fidelity VIP Growth Appreciation Leaders Quality Bond Small Mid Cap Equity Equity-Income Service Shares Service Shares Service Shares Service Shares Value Class B Income Initial Class Division Division Division Division Division Division Division $ 406 $ 24,749 $ 26,455 $ 79,604 $ 3,604 $ 327,325 $ 406,649 – – – – – 251 697 406 24,749 26,455 79,604 3,604 327,074 405,952 (869) (191,165) (248,075) (4,660) (74,232) (837,714) (1,906,592) – 81,517 – – – – – (869) (109,648) (248,075) (4,660) (74,232) (837,714) (1,906,592) 22,584 308,888 769,430 170,038 167,055 1,615,549 6,394,534 22,121 223,989 547,810 244,982 96,427 1,104,909 4,893,894 – – – – – – – $ 22,121 $ 223,989 $ 547,810 $ 244,982 $ 96,427 $ 1,104,909 $ 4,893,894 Principal Life Insurance Company Variable Life Separate Account Statements of Operations (continued) Year Ended December 31, 2009 Fidelity VIP Fidelity VIP Equity-Income Growth Service Service Class 2 Class 2 Division Division Investment income (loss) Income: Dividends $ 275,413 $ 14,444 Expenses: Mortality and expense risks – 100 Net investment income (loss) 275,413 14,344 Realized gains (losses) on investments Realized gains (losses) on sale of fund shares (2,974,007) (1,183,898) Capital gains distributions – 6,400 Total realized gains (losses) on investments (2,974,007) (1,177,498) Change in net unrealized appreciation or depreciation of investments 5,950,630 3,173,025 Net gains (losses) on investments 3,252,036 2,009,871 Payment from Affilitate – – Net increase (decrease) in net assets resulting from operations $ 3,252,036 $ 2,009,871 See accompanying notes. Fidelity VIP Fidelity VIP II Fidelity VIP II Fidelity VIP III Franklin Fidelity VIP High Income Asset Manager Fidelity VIP II Contrafund Mid Cap Income High Income Service Service Contrafund Service Service Securities Initial Class Class 2 Class 2 Initial Class Class 2 Class 2 Class 2 Division Division Division Division Division Division Division $ 403,389 $ 996,074 $ 27,801 $ 685,709 $ 501,177 $ 102,232 $ 687,873 111 – – 1,449 – – – 403,278 996,074 27,801 684,260 501,177 102,232 687,873 (241,574) (451,433) (558,513) (3,921,797) (3,536,828) (1,927,046) (635,192) – – 2,118 13,616 12,326 120,769 – (241,574) (451,433) (556,395) (3,908,181) (3,524,502) (1,806,277) (635,192) 1,360,485 2,820,256 925,239 18,252,357 15,866,423 8,890,474 2,633,725 1,522,189 3,364,897 396,645 15,028,436 12,843,098 7,186,429 2,686,406 – – – – – – – $ 1,522,189 $ 3,364,897 $ 396,645 $ 15,028,436 $ 12,843,098 $ 7,186,429 $ 2,686,406 Principal Life Insurance Company Variable Life Separate Account Statements of Operations (continued) Year Ended December 31, 2009 Franklin Mutual Franklin Global Discovery Mutual Securities Shares Class 2 Class 2 Division (1) Division Investment income (loss) Income: Dividends $ 112,235 $ 122,668 Expenses: Mortality and expense risks – – Net investment income (loss) 112,235 122,668 Realized gains (losses) on investments Realized gains (losses) on sale of fund shares (369,765) (792,109) Capital gains distributions 264,823 – Total realized gains (losses) on investments (104,942) (792,109) Change in net unrealized appreciation or depreciation of investments 2,039,192 2,210,596 Net gains (losses) on investments 2,046,485 1,541,155 Payment from Affilitate – – Net increase (decrease) in net assets resulting from operations $ 2,046,485 $1,541,155 (1) Represented the operations of Franklin Mutual Discovery Securities Class 2 Division until May 18, 2009 name change. (2) Commenced operations November 23, 2009. See accompanying notes. Franklin Franklin Goldman Sachs Rising Small Cap Franklin Franklin VIT Structured Government Dividends Value Strategic Income U.S. Government Small Cap & High International Securities Securities Securities Fund Equity Service Quality Emerging Class 2 Class 2 Class 2 Class 2 Class I Bond Markets Division Division Division Division (2) Division Division Division $ 26,800 $ 98,782 $ 66,002 $ – $ 3,805 $ 2,201,389 $ 422,773 – – – – – 1,391 2,334 26,800 98,782 66,002 – 3,805 2,199,998 420,439 (199,506) (1,008,119) (6,260) – (139,840) (595,920) (3,105,416) – 272,033 – – – – – (199,506) (736,086) (6,260) – (139,840) (595,920) (3,105,416) 513,927 2,479,823 159,522 – 259,279 240,285 13,577,208 341,221 1,842,519 219,264 – 123,244 1,844,363 10,892,231 – – – – – – 29,795 $ 341,221 $ 1,842,519 $ 219,264 $ – $ 123,244 $ 1,844,363 $ 10,922,026 Principal Life Insurance Company Variable Life Separate Account Statements of Operations (continued) Year Ended December 31, 2009 Janus Aspen International Balanced SmallCap Service Shares Division Division Investment income (loss) Income: Dividends $ 971,215 $ 50,473 Expenses: Mortality and expense risks 417 – Net investment income (loss) 970,798 50,473 Realized gains (losses) on investments Realized gains (losses) on sale of fund shares (6,762,920) (26,481) Capital gains distributions – 42,358 Total realized gains (losses) on investments (6,762,920) 15,877 Change in net unrealized appreciation or depreciation of investments 15,579,844 281,132 Net gains (losses) on investments 9,787,722 347,482 Payment from Affilitate 119,831 – Net increase (decrease) in net assets resulting from operations $ 9,907,553 $ 347,482 (1) Represented the operations of Janus Aspen Mid Cap Growth Service Shares Division until May 18, 2009 name change. (2) Represented the operations of Janus Aspen International Growth Services Shares Division until May 18, 2009 name change. (3) Represented the operations of Janus Aspen Fundamental Equity Service Shares Division until May 18, 2009 name change. (4) Represented the operations of Janus Aspen Worldwide Growth Service Shares Division until May 18, 2009 name change. (5) Commenced operations April 24, 2009. See accompanying notes. Janus Janus Janus Janus Janus Aspen Janus Aspen Aspen Aspen Aspen Research Aspen JP Morgan Enterprise Flexible Bond Forty Overseas Core Worldwide Core Bond Service Shares Service Shares Service Shares Service Shares Service Shares Service Shares Class I Division (1) Division Division Division (2) Division (3) Division (4) Division (5) $ – $ 764,308 $ 3 $ 17,447 $ 4,283 $ 7,840 $ – 77 – – – – – – (77) 764,308 3 17,447 4,283 7,840 – (351,548) 316,073 3,963 (789,411) (294,019) (93,431) 16,744 – 13,077 – 112,489 – – – (351,548) 329,150 3,963 (676,922) (294,019) (93,431) 16,744 2,361,747 975,251 21,095 2,881,119 905,637 309,744 61,952 2,010,122 2,068,709 25,061 2,221,644 615,901 224,153 78,696 – – – – – – – $ 2,010,122 $ 2,068,709 $ 25,061 $ 2,221,644 $ 615,901 $ 224,153 $ 78,696 Principal Life Insurance Company Variable Life Separate Account Statements of Operations (continued) Year Ended December 31, 2009 JP Morgan Small Cap Core LargeCap Class I Blend II Division (1) Division Investment income (loss) Income: Dividends $ 6,557 $ 170,686 Expenses: Mortality and expense risks – 345 Net investment income (loss) 6,557 170,341 Realized gains (losses) on investments Realized gains (losses) on sale of fund shares 161,597 (1,022,233) Capital gains distributions – – Total realized gains (losses) on investments 161,597 (1,022,233) Change in net unrealized appreciation or depreciation of investments 555,556 3,425,038 Net gains (losses) on investments 723,710 2,573,146 Payment from Affilitate – – Net increase (decrease) in net assets resulting from operations $ 723,710 $ 2,573,146 (1) Commenced operations April 24, 2009. See accompanying notes. MFS VIT MFS VIT LargeCap LargeCap LargeCap LargeCap LargeCap Global Equity Growth Growth Growth I S&P 500 Index Value Value III Service Class Service Class Division Division Division Division Division Division Division $ 150,846 $ 33,711 $ 756,554 $ 2,042,928 $ 439,203 $ 9,238 $ 328 159 625 404 24,356 317 – – 150,687 33,086 756,150 2,018,572 438,886 9,238 328 (1,005,024) (1,528,477) (756,241) (2,872,369) (1,869,400) (33,640) (108,041) – – – – – – – (1,005,024) (1,528,477) (756,241) (2,872,369) (1,869,400) (33,640) (108,041) 5,802,913 30,688,338 4,224,709 7,174,056 3,742,324 178,260 573,224 4,948,576 29,192,947 4,224,618 6,320,259 2,311,810 153,858 465,511 – – – – – – – $ 4,948,576 $ 29,192,947 $ 4,224,618 $ 6,320,259 $ 2,311,810 $ 153,858 $ 465,511 Principal Life Insurance Company Variable Life Separate Account Statements of Operations (continued) Year Ended December 31, 2009 MFS VIT MidCap MFS VIT Growth New Discovery Service Class Service Class Division Division Investment income (loss) Income: Dividends $ – $ – Expenses: Mortality and expense risks – – Net investment income (loss) – – Realized gains (losses) on investments Realized gains (losses) on sale of fund shares (189,331) (435,622) Capital gains distributions – – Total realized gains (losses) on investments (189,331) (435,622) Change in net unrealized appreciation or depreciation of investments 298,051 1,182,837 Net gains (losses) on investments 108,720 747,215 Payment from Affilitate – – Net increase (decrease) in net assets resulting from operations $ 108,720 $ 747,215 See accompanying notes. MFS VIT Research MFS VIT MFS VIT MFS VIT International Total Return Utilities Value MidCap MidCap MidCap Service Class Service Class Service Class Service Class Blend Growth I Value II Division Division Division Division Division Division Division $ 79 $ – $ 700 $ 97,898 $ 533,355 $ 19,571 $ 274,010 – – – – 73,035 252 504 79 – 700 97,898 460,320 19,319 273,506 1,152 249 279 (787,134) (3,352,143) (1,080,258) (2,678,152) – – – – 3,305,640 – – 1,152 249 279 (787,134) (46,503) (1,080,258) (2,678,152) 10,850 1,588 14,223 2,525,407 17,936,142 5,020,619 7,138,706 12,081 1,837 15,202 1,836,171 18,349,959 3,959,680 4,734,060 – – – – – – – $ 12,081 $ 1,837 $ 15,202 $ 1,836,171 $ 18,349,959 $ 3,959,680 $ 4,734,060 Principal Life Insurance Company Variable Life Separate Account Statements of Operations (continued) Year Ended December 31, 2009 Money Mortgage Market Securities Division Division Investment income (loss) Income: Dividends $ 507,368 $ 199,145 Expenses: Mortality and expense risks 5,983 99 Net investment income (loss) 501,385 199,046 Realized gains (losses) on investments Realized gains (losses) on sale of fund shares – (38,169) Capital gains distributions – – Total realized gains (losses) on investments – (38,169) Change in net unrealized appreciation or depreciation of investments 3 (32,987) Net gains (losses) on investments 501,388 127,890 Payment from Affilitate – – Net increase (decrease) in net assets resulting from operations $ 501,388 $ 127,890 (1) Commenced operations November 23, 2009. See accompanying notes. Neuberger Neuberger Neuberger Oppenheimer PIMCO PIMCO PIMCO Berman AMT Berman AMT Berman AMT Main Street High Yield Real Return Short-Term Guardian Partners Small-Cap Growth Small Cap Administrative Administrative Administrative I Class I Class S Class Service Shares Class Class Class Division Division Division Division Division (1) Division (1) Division (1) $ 14,565 $ 87,568 $ – $ 8 $ – $ 125 $ 128 – – – – – – – 14,565 87,568 – 8 – 125 128 (83,146) (739,142) (17,531) 185 – (4) (2) – 388,989 – – – 1,886 1,177 (83,146) (350,153) (17,531) 185 – 1,882 1,175 365,887 1,751,466 53,430 4,742 – (3,436) (1,403) 297,306 1,488,881 35,899 4,935 – (1,429) (100) – – – – – – – $ 297,306 $ 1,488,881 $ 35,899 $ 4,935 $ – $ (1,429) $ (100) Principal Life Insurance Company Variable Life Separate Account Statements of Operations (continued) Year Ended December 31, 2009 PIMCO Principal Total Return LifeTime Administrative Strategic Class Income Division (1) Division Investment income (loss) Income: Dividends $ 1,024 $ 83,324 Expenses: Mortality and expense risks – – Net investment income (loss) 1,024 83,324 Realized gains (losses) on investments Realized gains (losses) on sale of fund shares (84) (103,961) Capital gains distributions 7,860 14,042 Total realized gains (losses) on investments 7,776 (89,919) Change in net unrealized appreciation or depreciation of investments (11,000) 353,492 Net gains (losses) on investments (2,200) 346,897 Payment from Affilitate – – Net increase (decrease) in net assets resulting from operations $ (2,200) $ 346,897 (1) Commenced operations November 23, 2009. See accompanying notes. Putnam VT Putnam VT Principal Principal Principal Principal Principal Growth & International LifeTime LifeTime LifeTime LifeTime LifeTime Income Equity Class IB Class IB Division Division Division Division Division Division Division $ 172,094 $ 445,349 $ 208,127 $ 150,674 $ 102,660 $ 5,197 $ – – – – – – – – 172,094 445,349 208,127 150,674 102,660 5,197 – (506,605) (1,548,083) (1,145,387) (335,748) (444,411) (37,498) (759,654) 7,413 – 13,518 – – – – (499,192) (1,548,083) (1,131,869) (335,748) (444,411) (37,498) (759,654) 1,420,702 4,760,302 3,883,602 1,818,737 1,586,495 99,907 1,117,248 1,093,604 3,657,568 2,959,860 1,633,663 1,244,744 67,606 357,594 – – – – – – – $ 1,093,604 $ 3,657,568 $ 2,959,860 $ 1,633,663 $ 1,244,744 $ 67,606 $ 357,594 Principal Life Insurance Company Variable Life Separate Account Statements of Operations (continued) Year Ended December 31, 2009 Putnam VT Voyager Real Estate Class IB Securities Division Division Investment income (loss) Income: Dividends $ 150,591 $ 1,044,729 Expenses: Mortality and expense risks 91 358 Net investment income (loss) 150,500 1,044,371 Realized gains (losses) on investments Realized gains (losses) on sale of fund shares (850,728) (6,896,949) Capital gains distributions – – Total realized gains (losses) on investments (850,728) (6,896,949) Change in net unrealized appreciation or depreciation of investments 9,817,200 12,830,102 Net gains (losses) on investments 9,116,972 6,977,524 Payment from Affilitate – – Net increase (decrease) in net assets resulting from operations $ 9,116,972 $ 6,977,524 See accompanying notes. SAM SAM SAM SAM SAM Conservative Conservative Flexible Strategic Balanced Balanced Growth Income Growth Short-Term Short-Term Portfolio Portfolio Portfolio Portfolio Portfolio Bond Income Division Division Division Division Division Division Division $ 253,024 $ 73,181 $ 597,538 $ 79,651 $ 293,948 $ 224,072 $ 89,956 10 – – 16 – 1,397 22 253,014 73,181 597,538 79,635 293,948 222,675 89,934 (191,552) (73,566) (321,027) (19,102) (444,900) (278,520) 249 190,251 33,077 665,306 15,622 109,949 – – (1,301) (40,489) 344,279 (3,480) (334,951) (278,520) 249 1,510,341 468,029 2,421,879 302,090 2,441,519 397,199 (5,093) 1,762,054 500,721 3,363,696 378,245 2,400,516 341,354 85,090 – – – – – – – $ 1,762,054 $ 500,721 $ 3,363,696 $ 378,245 $ 2,400,516 $ 341,354 $ 85,090 Principal Life Insurance Company Variable Life Separate Account Statements of Operations (continued) Year Ended December 31, 2009 SmallCap SmallCap Blend Growth II Division Division Investment income (loss) Income: Dividends $ 117,202 $ – Expenses: Mortality and expense risks 573 189 Net investment income (loss) 116,629 (189) Realized gains (losses) on investments Realized gains (losses) on sale of fund shares (1,322,646) (1,169,237) Capital gains distributions – – Total realized gains (losses) on investments (1,322,646) (1,169,237) Change in net unrealized appreciation or depreciation of investments 4,680,858 5,417,836 Net gains (losses) on investments 3,474,841 4,248,410 Payment from Affilitate – – Net increase (decrease) in net assets resulting from operations $ 3,474,841 $ 4,248,410 See accompanying notes. Summit Summit Summit Templeton EAFE Russell 2000 S&P Developing Templeton International Small Cap MidCap T. Rowe Price Markets Foreign SmallCap Index Index 400 Index Equity Securities Securities Value I Class F Class F Class F Income II Class 2 Class 2 Division Division Division Division Division Division Division $ 490,505 $ 223 $ 6,082 $ 947 $ 7,276 $ 57,720 $ 33,275 1,621 – – – – – – 488,884 223 6,082 947 7,276 57,720 33,275 (3,106,428) 473 (222,517) (2,312) (173,093) (596,083) (89,125) – – 25,024 – – 5,573 41,049 (3,106,428) 473 (197,493) (2,312) (173,093) (590,510) (48,076) 6,083,341 (106) 668,773 49,128 229,447 1,451,848 897,363 3,465,797 590 477,362 47,763 63,630 919,058 882,562 – – – – – – – $ 3,465,797 $ 590 $ 477,362 $ 47,763 $ 63,630 $ 919,058 $ 882,562 Principal Life Insurance Company Variable Life Separate Account Statements of Operations (continued) Year Ended December 31, 2009 Templeton Van Eck Global Bond Worldwide Securities Hard Assets Class 2 Initial Class Division (1) Division Investment income (loss) Income: Dividends $ 71,202 $ 743 Expenses: Mortality and expense risks – – Net investment income (loss) 71,202 743 Realized gains (losses) on investments Realized gains (losses) on sale of fund shares (5,718) (31,690) Capital gains distributions – 1,473 Total realized gains (losses) on investments (5,718) (30,217) Change in net unrealized appreciation or depreciation of investments 63,972 290,823 Net gains (losses) on investments 129,456 261,349 Payment from Affilitate – – Net increase (decrease) in net assets resulting from operations $ 129,456 $ 261,349 (4) Represented the operations of Templeton Global Income Securities Class 2 Division until May 18, 2009 name change. See accompanying notes. Wells Fargo Vanguard Wells Fargo Wells Fargo Advantage VT Vanguard Vanguard VIF Advantage VT Advantage VT Large VIF VIF Equity Mid-Cap Asset Equity Company Balanced Index Index Allocation Income Growth Division Division Division Division Division Division $ 1,091,192 $ 879,508 $ 154,039 $ 20,695 $ 18,156 $ 2,891 – – – 45 1,702 1 1,091,192 879,508 154,039 20,650 16,454 2,890 (1,153,555) (6,765,976) (1,475,971) (103,963) (53,042) (56,356) – 615,655 385,097 – – – (1,153,555) (6,150,321) (1,090,874) (103,963) (53,042) (56,356) 5,610,331 13,433,397 4,340,539 229,849 226,030 351,013 5,547,968 8,162,584 3,403,704 146,536 189,442 297,547 – – – – – – $ 5,547,968 $ 8,162,584 $ 3,403,704 $ 146,536 $ 189,442 $ 297,547 Principal Life Insurance Company Variable Life Separate Account Statements of Changes in Net Assets Years Ended December 31, 2009 and 2008 AIM V.I. Capital Appreciation Series I Division Increase (decrease) in net assets Operations: Net investment income (loss) $ 14,058 $ – Total realized gains (losses) on investments (222,268) Change in net unrealized appreciation or depreciation of investments (1,074,730) Net gains (losses) from investments (1,296,998) Payment from Affiliate – – Net increase (decrease) in net assets resulting from operations (1,296,998) Policy related transactions: Net premium payments, less sales charges and applicable premium taxes 1,397,669 Contract terminations and surrenders (457,963) Death benefit payments (8,246) Policy loan transfers (15,898) Transfers to other contracts (503,174) Cost of insurance and administration charges (106,158) Mortality and expenses charges (13,438) Surrender charges (9,191) Increase (decrease) in net assets from policy related transactions 283,601 Total increase (decrease) (1,013,397) Net assets at beginning of period 2,977,214 Net assets at end of period $ 2,411,539 $ 1,963,817 See accompanying notes. AIM V.I. Capital AIM V.I. AIM V.I. Appreciation Core Equity Core Equity Series II Series I Series II Division Division Division $ 2,293 $ – $ 123,765 $ $ 78,117 $ (11,952) (361,592) (58,943) (243,483) (2,545,748) (1,524,052) (255,435) (2,735,756) (1,495,925) – – – – – – (255,435) (2,735,756) (1,495,925) 238,575 3,596,881 1,735,087 (7,407) (1,682,115) (112,620) – – (1,291) (105) (12,180) (39,132) (48,383) (41,551) (1,359,170) (466,049) (65,754) (394,116) (401,814) (4,771) (48,496) (25,875) (6,217) (82,171) (86,667) 100,695 (9,610) 593,574 (154,740) (2,745,366) (902,351) 527,486 8,760,541 4,410,238 $ 910,342 $ $ 7,608,684 $ $ 5,877,336 $ Principal Life Insurance Company Variable Life Separate Account Statements of Changes in Net Assets (continued) Years Ended December 31, 2009 and 2008 AIM V.I. Dynamics Series I Division Increase (decrease) in net assets Operations: Net investment income (loss) $ (20) $ (24) Total realized gains (losses) on investments (177,177) Change in net unrealized appreciation or depreciation of investments (760,542) Net gains (losses) from investments (937,743) Payment from Affiliate – – Net increase (decrease) in net assets resulting from operations (937,743) Policy related transactions: Net premium payments, less sales charges and applicable premium taxes 1,040,035 Contract terminations and surrenders (534,634) Death benefit payments – – Policy loan transfers (2,531) Transfers to other contracts (582,253) Cost of insurance and administration charges (48,634) Mortality and expenses charges (6,115) Surrender charges 7,087 Increase (decrease) in net assets from policy related transactions (127,045) Total increase (decrease) (1,064,788) Net assets at beginning of period 2,117,938 Net assets at end of period $ 1,903,534 $ 1,053,150 See accompanying notes. AIM V.I. AIM V.I. AIM V.I. Global International Mid Cap Health Care Growth Core Equity Series I Series I Series II Division Division Division 2009 2009 2009 2008 $ 22,045 $ (214) $ 85,969 $ 33,546 $ 4,216 $ 785 1,280,457 (194,612) 6,744 (3,359,340) (3,093,176) (22,559) (2,079,097) (3,254,242) (15,030) – – – – – – (2,079,097) (3,254,242) (15,030) 3,409,862 2,871,934 128,884 (936,364) (506,771) – – (8,806) – – – (41,646) 63,181 – – (1,559,851) (2,426,236) (4,184) (302,772) (125,985) (1,576) (33,106) (17,420) (225) (69,718) 28,520 – – 457,599 (112,777) 122,899 (1,621,498) (3,367,019) 107,869 6,910,891 7,850,496 26,367 $ 7,205,126 $ 5,289,393 $ 7,166,134 $ 4,483,477 $ 462,042 $ 134,236 Principal Life Insurance Company Variable Life Separate Account Statements of Changes in Net Assets (continued) Years Ended December 31, 2009 and 2008 AIM V.I. Small Cap Equity Series I Division Increase (decrease) in net assets Operations: Net investment income (loss) $ 7,509 $ (26) Total realized gains (losses) on investments (202,696) Change in net unrealized appreciation or depreciation of investments (1,022,258) Net gains (losses) from investments (1,224,980) Payment from Affiliate – – Net increase (decrease) in net assets resulting from operations (1,224,980) Policy related transactions: Net premium payments, less sales charges and applicable premium taxes 3,218,759 Contract terminations and surrenders (627,327) Death benefit payments – Policy loan transfers (7,889) Transfers to other contracts (1,069,473) Cost of insurance and administration charges (107,791) Mortality and expenses charges (13,841) Surrender charges (19,735) Increase (decrease) in net assets from policy related transactions 1,372,703 Total increase (decrease) 147,723 Net assets at beginning of period 3,226,685 Net assets at end of period $ 4,873,329 $ 3,374,408 (1) Commenced operations November 24, 2008. Represented the operations of AllianceBernstein Global Technology Division until May 18, 2009 name change. (2) Commenced operations November 24, 2008. See accompanying notes. AllianceBernstein AllianceBernstein AIM V.I. Global Thematic International Technology Growth Growth Series I Class A Class A Division Division (1) Division (2) 2009 2008 2009 2008 2009 $ (229) $ (214) $– $ – $ – $– (139,359) 48 1 1 (1,468,349) – – (1,607,922) 1 1 – – – – – – (1,607,922) 1 1 1,572,190 (1) (1) (366,203) – – – – (537) – – – – 7,304 – – – – (1,279,731) – – (100,823) – – (13,415) – – (16,527) – – – – (197,742) (1) (1) (1,805,664) – – 3,798,170 – – – – $ 3,675,167 $ 1,992,506 $ 2,853 $ – $ 70,295 $ – Principal Life Insurance Company Variable Life Separate Account Statements of Changes in Net Assets (continued) Years Ended December 31, 2009 and 2008 AllianceBernstein International Value Class A Division (1) Increase (decrease) in net assets Operations: Net investment income (loss) $ 3,563 $ – Total realized gains (losses) on investments (359) Change in net unrealized appreciation or depreciation of investments (73,741) Net gains (losses) from investments (74,100) Payment from Affiliate – – Net increase (decrease) in net assets resulting from operations (74,100) Policy related transactions: Net premium payments, less sales charges and applicable premium taxes 145,653 Contract terminations and surrenders – Death benefit payments – – Policy loan transfers – Transfers to other contracts (1) Cost of insurance and administration charges (820) Mortality and expenses charges (85) Surrender charges – Increase (decrease) in net assets from policy related transactions 144,747 Total increase (decrease) 70,647 Net assets at beginning of period – Net assets at end of period $ 297,236 $ 70,647 (1) Commenced operations May 19, 2008. (2) Commenced operations July 21, 2008. See accompanying notes. American AllianceBernstein AllianceBernstein Century VP Small Cap Small/Mid Cap Income & Growth Value Growth Class A Class A Class I Division (2) Division (2) Division 2009 $ – $– $ 19 $ – $ 66,275 27 (6) (2) 303,603 (36) (1) (1,750,616) (42) (3) (1,380,738) – – – – – – (42) (3) (1,380,738) 555 175 741,508 – – – – (444,677) – – – – – – – – – (17,921) (1) (1) (307,994) (75) (78) (208,373) (2) (2) (25,817) – – – – (45,623) 477 94 (308,897) 435 91 (1,689,635) – 91 – 4,155,398 $ 44,416 $435 $91 $ 2,465,763 Principal Life Insurance Company Variable Life Separate Account Statements of Changes in Net Assets (continued) Years Ended December 31, 2009 and 2008 American Century VP Income & Growth Class II Division Increase (decrease) in net assets Operations: Net investment income (loss) $ 61,126 $ 21,764 Total realized gains (losses) on investments 84,449 Change in net unrealized appreciation or depreciation of investments (673,640) Net gains (losses) from investments (567,427) Payment from Affiliate – – Net increase (decrease) in net assets resulting from operations (567,427) Policy related transactions: Net premium payments, less sales charges and applicable premium taxes 790,065 Contract terminations and surrenders (12,923) Death benefit payments (96) Policy loan transfers (10,304) Transfers to other contracts (681,113) Cost of insurance and administration charges (104,654) Mortality and expenses charges (7,340) Surrender charges (9,451) Increase (decrease) in net assets from policy related transactions (35,816) Total increase (decrease) (603,243) Net assets at beginning of period 1,879,755 Net assets at end of period $ 1,994,880 $ 1,276,512 See accompanying notes. American American Century VP Century VP American International MidCap Value Century VP Class II Class II Ultra Class I Division Division Division $ 9,113 $ $ 71,397 $ 245 $ 3,811 $ (100) 92,166 (10,602) 72,611 (447,433) (97,516) (1,228,766) (351,071) (107,873) (1,156,255) – – – – – – (351,071) (107,873) (1,156,255) 306,828 496,527 851,501 (3,806) (8,762) (486,218) – – – – 80 1,738 – (46,610) (273,207) (45,897) (414,750) (8,284) (12,477) (132,168) (1,143) (1,715) (16,889) 246 (750) (20,761) 22,372 426,926 (265,895) (328,699) 319,053 (1,422,150) 766,014 345,322 2,699,711 $ 332,334 $ $ 4,068,513 $ 664,375 $ 1,477,027 $ 1,277,561 Principal Life Insurance Company Variable Life Separate Account Statements of Changes in Net Assets (continued) Years Ended December 31, 2009 and 2008 American Century VP Ultra Class II Division Increase (decrease) in net assets Operations: Net investment income (loss) $ 3,261 $ – Total realized gains (losses) on investments 247,742 Change in net unrealized appreciation or depreciation of investments (1,327,431) Net gains (losses) from investments (1,079,689) Payment from Affiliate – – Net increase (decrease) in net assets resulting from operations (1,079,689) Policy related transactions: Net premium payments, less sales charges and applicable premium taxes 1,260,553 Contract terminations and surrenders (92,289) Death benefit payments – Policy loan transfers (4,371) Transfers to other contracts (510,992) Cost of insurance and administration charges (95,139) Mortality and expenses charges (8,096) Surrender charges (17,537) Increase (decrease) in net assets from policy related transactions 532,129 Total increase (decrease) (547,560) Net assets at beginning of period 2,389,138 Net assets at end of period $ 2,182,538 $ 1,841,578 See accompanying notes. American American Century VP Century VP Asset Value Class II Vista Class II Allocation Division Division Division 2009 2008 2009 2008 $ 417,700 $ $ – $ – $ 375,499 $ 182,911 (11,822) 1,058,249 (3,209,923) (139,356) (6,154,146) (2,801,438) (151,178) (4,592,394) – – – – – – (2,801,438) (151,178) (4,592,394) 4,170,231 445,887 5,264,502 (901,524) – (2,768,454) (10,593) – – (180,307) (22,809) – (82,726) (3,906,368) (45,854) (2,088,663) (453,156) (4,620) (933,952) (45,501) (634) (102,829) (89,349) – (147,153) (1,259,069) 394,779 (1,039,582) (4,060,507) 243,601 (5,631,976) 11,691,507 51,889 18,197,111 $ 9,964,717 $ $ 424,369 $ 295,490 $ 13,700,091 $ Principal Life Insurance Company Variable Life Separate Account Statements of Changes in Net Assets (continued) Years Ended December 31, 2009 and 2008 Balanced Division Increase (decrease) in net assets Operations: Net investment income (loss) $ 575,372 $ 556,087 Total realized gains (losses) on investments 468,175 Change in net unrealized appreciation or depreciation of investments (6,667,710) Net gains (losses) from investments (5,643,448) Payment from Affiliate – – Net increase (decrease) in net assets resulting from operations (5,643,448) Policy related transactions: Net premium payments, less sales charges and applicable premium taxes 3,256,878 Contract terminations and surrenders (1,815,613) Death benefit payments (74,457) Policy loan transfers (405,179) Transfers to other contracts (1,536,854) Cost of insurance and administration charges (1,101,132) Mortality and expenses charges (103,277) Surrender charges (94,388) Increase (decrease) in net assets from policy related transactions (1,874,022) Total increase (decrease) (7,517,470) Net assets at beginning of period 19,321,099 Net assets at end of period $ 14,078,377 $ 11,803,629 (1) Commenced operations July 21, 2008. See accompanying notes. Bond & Calvert Mortgage Income Diversified Securities Initial Shares International Division Division (1) Division 2009 $ 4,628,000 $ $ 2,287 $ 184 $ 3,643,847 $ (2,331,520) (2) 19,628,472 (9,066,413) (142) (76,599,967) (8,513,407) 40 (55,301,356) – – – – – (8,513,407) 40 (55,301,356) 20,145,171 5,413 32,484,056 (10,260,667) – (8,797,214) (27,988) – – (95,029) (633,179) – – (811,883) (10,571,468) – (12,991,787) (2,541,943) (147) (4,066,866) (251,460) (5) (421,109) (455,820) – (464,774) (4,597,354) 5,261 4,835,394 (13,110,761) 5,301 (50,465,962) 51,556,746 – 115,426,154 $ 44,713,944 $ 38,445,985 $ 43,818 $ 5,301 $ 84,234,130 $ 64,960,192 Principal Life Insurance Company Variable Life Separate Account Statements of Changes in Net Assets (continued) Years Ended December 31, 2009 and 2008 Dreyfus IP Core Value Service Shares Division Increase (decrease) in net assets Operations: Net investment income (loss) $ 9,275 $ 12,107 Total realized gains (losses) on investments (2,327) Change in net unrealized appreciation or depreciation of investments (280,171) Net gains (losses) from investments (270,391) Payment from Affiliate – – Net increase (decrease) in net assets resulting from operations (270,391) Policy related transactions: Net premium payments, less sales charges and applicable premium taxes 320,469 Contract terminations and surrenders (17,694) Death benefit payments – – Policy loan transfers (1,159) Transfers to other contracts (339,699) Cost of insurance and administration charges (8,540) Mortality and expenses charges (1,177) Surrender charges 1,143 Increase (decrease) in net assets from policy related transactions (46,657) Total increase (decrease) (317,048) Net assets at beginning of period 691,928 Net assets at end of period $ 445,449 $ 374,880 See accompanying notes. Dreyfus Socially Dreyfus VIF Responsible Dreyfus VIF Developing Growth Appreciation Leaders Service Shares Service Shares Service Shares Division Division Division 2009 2009 $ 406 $ 215 $ 24,749 $ $ 26,455 $ (2,609) 89,138 (372,317) (19,728) (521,751) (964,347) (22,122) (413,224) (1,320,899) – – – – – – (22,122) (413,224) (1,320,899) 48,340 382,453 1,309,721 (8,939) (36,663) (346,272) – – – – – – – 1,270 (23,829) (7,139) (230,884) (735,478) (1,662) (19,057) (250,270) (234) (2,635) (18,324) – 578 (3,138) (18,225) 30,944 91,346 (82,677) 8,822 (321,878) (1,403,576) 52,897 1,349,699 3,359,297 $ 109,197 $ 61,719 $ 1,219,174 $ $ 2,616,547 $ Principal Life Insurance Company Variable Life Separate Account Statements of Changes in Net Assets (continued) Years Ended December 31, 2009 and 2008 Dreyfus VIF Quality Bond Service Shares Division Increase (decrease) in net assets Operations: Net investment income (loss) $ 79,604 $ 42,673 Total realized gains (losses) on investments (3,775) Change in net unrealized appreciation or depreciation of investments (77,417) Net gains (losses) from investments (38,519) Payment from Affiliate – – Net increase (decrease) in net assets resulting from operations (38,519) Policy related transactions: Net premium payments, less sales charges and applicable premium taxes 1,188,884 Contract terminations and surrenders – Death benefit payments – Policy loan transfers 1,058 Transfers to other contracts (166,885) Cost of insurance and administration charges (13,973) Mortality and expenses charges (1,936) Surrender charges – Increase (decrease) in net assets from policy related transactions 1,007,148 Total increase (decrease) 968,629 Net assets at beginning of period 533,855 Net assets at end of period $ 2,102,331 $ 1,502,484 (1) Commenced operations May 19, 2008. See accompanying notes. DWS Dreman Fidelity VIP Small Mid Cap Equity Equity-Income Value Class B Income Initial Class Division (1) Division Division 2009 2009 $ 3,604 $ – $ 327,074 $ $ 405,952 $ (3,318) 207,736 (3,086,033) (93,190) (3,205,648) (13,114,696) (96,508) (2,823,663) (15,518,087) – – – – – – (96,508) (2,823,663) (15,518,087) 320,961 2,384,859 5,448,271 – (487,874) (5,765,089) – – (36,288) (34,843) – (86,034) (251,209) (6,696) (765,387) (4,229,467) (1,510) (479,039) (1,540,518) (193) (47,107) (178,797) – (39,921) (218,627) 312,562 443,209 (6,770,279) 216,054 (2,380,454) (22,288,366) – 7,985,086 39,772,449 $ 758,480 $ 216,054 $ 6,644,519 $ $ 20,393,485 $ Principal Life Insurance Company Variable Life Separate Account Statements of Changes in Net Assets (continued) Years Ended December 31, 2009 and 2008 Fidelity VIP Equity-Income Service Class 2 Division 2009 2008 Increase (decrease) in net assets Operations: Net investment income (loss) $ 275,413 $ 407,980 Total realized gains (losses) on investments (1,750,611) Change in net unrealized appreciation or depreciation of investments (7,071,859) Net gains (losses) from investments (8,414,490) Payment from Affiliate – – Net increase (decrease) in net assets resulting from operations (8,414,490) Policy related transactions: Net premium payments, less sales charges and applicable premium taxes 10,992,661 Contract terminations and surrenders (1,719,394) Death benefit payments (2,229) Policy loan transfers (310,046) Transfers to other contracts (4,852,383) Cost of insurance and administration charges (799,080) Mortality and expenses charges (68,068) Surrender charges (26,867) Increase (decrease) in net assets from policy related transactions 3,214,594 Total increase (decrease) (5,199,896) Net assets at beginning of period 18,229,824 Net assets at end of period $ 15,108,950 $ 13,029,928 See accompanying notes. Fidelity VIP Fidelity VIP Growth Fidelity VIP High Income Service High Income Service Class 2 Initial Class Class 2 Division Division Division 2009 2009 2009 $ 14,344 $ $ 403,278 $ 409,156 $ 996,074 $ 651,618 (143,352) (639,048) (265,246) (5,766,369) (1,039,584) (2,178,605) (5,849,857) (1,269,476) (1,792,233) – – – – – – (5,849,857) (1,269,476) (1,792,233) 5,155,691 1,597,155 4,914,720 (1,205,395) (1,665,753) (486,218) (6,389) (15,348) – (76,224) (42,653) 3,418 (1,994,457) (1,432,976) (2,300,883) (493,318) (295,337) (155,879) (49,851) (34,134) (18,622) (15,031) (50,321) 6,887 1,315,026 (1,939,367) 1,963,423 (4,534,831) (3,208,843) 171,190 11,140,565 6,412,871 5,762,637 $ 8,286,529 $ $ 5,564,017 $ $ 14,189,947 $ Principal Life Insurance Company Variable Life Separate Account Statements of Changes in Net Assets (continued) Years Ended December 31, 2009 and 2008 Fidelity VIP II Asset Manager Service Class 2 Division Increase (decrease) in net assets Operations: Net investment income (loss) $ 27,801 $ 68,875 Total realized gains (losses) on investments 99,019 Change in net unrealized appreciation or depreciation of investments (1,008,412) Net gains (losses) from investments (840,518) Payment from Affiliate – – Net increase (decrease) in net assets resulting from operations (840,518) Policy related transactions: Net premium payments, less sales charges and applicable premium taxes 1,977,784 Contract terminations and surrenders (67,588) Death benefit payments – Policy loan transfers (12,000) Transfers to other contracts (846,605) Cost of insurance and administration charges (46,831) Mortality and expenses charges (6,482) Surrender charges 4,366 Increase (decrease) in net assets from policy related transactions 1,002,644 Total increase (decrease) 162,126 Net assets at beginning of period 2,023,197 Net assets at end of period $ 1,372,985 $ 2,185,323 See accompanying notes. Fidelity VIP II Fidelity VIP III Fidelity VIP II Contrafund Mid Cap Contrafund Service Service Initial Class Class 2 Class 2 Division Division Division 2009 2009 $ 684,260 $ $501,177 $ 360,263 $ 102,232 $ 54,739 (1,211,978) (1,626,958) 2,364,260 (37,870,835) (19,495,922) (13,124,767) (38,385,915) (20,762,617) (10,705,768) – – – – – – (38,385,915) (20,762,617) (10,705,768) 12,727,593 27,414,987 11,754,994 (12,056,950) (1,887,135) (705,181) (112,102) (10,437) (5,436) (559,692) (303,600) (35,808) (6,498,638) (10,273,306) (8,188,621) (3,605,901) (1,421,942) (723,558) (402,345) (137,011) (78,020) (440,971) (61,049) (15,953) (10,949,006) 5,464,225 13,320,507 2,002,417 (49,334,921) (7,442,110) (8,703,351) 96,470,550 40,251,814 25,610,819 $ 56,891,997 $ $ 51,117,027 $ 32,809,704 $ 26,698,587 $ 16,907,468 Principal Life Insurance Company Variable Life Separate Account Statements of Changes in Net Assets (continued) Years Ended December 31, 2009 and 2008 Franklin Income Securities Class 2 Division Increase (decrease) in net assets Operations: Net investment income (loss) $ 687,873 $ 456,007 Total realized gains (losses) on investments (109,960) Change in net unrealized appreciation or depreciation of investments (3,263,283) Net gains (losses) from investments (2,917,236) Payment from Affiliate – – Net increase (decrease) in net assets resulting from operations (2,917,236) Policy related transactions: Net premium payments, less sales charges and applicable premium taxes 3,851,492 Contract terminations and surrenders (211,890) Death benefit payments – Policy loan transfers (7,578) Transfers to other contracts (2,548,329) Cost of insurance and administration charges (200,367) Mortality and expenses charges (27,684) Surrender charges 1,259 Increase (decrease) in net assets from policy related transactions 856,903 Total increase (decrease) (2,060,333) Net assets at beginning of period 9,406,826 Net assets at end of period $ 10,153,903 $ 7,346,493 (1) Represented the operations of Franklin Mutual Discovery Securities Class 2 Division until May 18, 2009 name change. See accompanying notes. Franklin Franklin Mutual Franklin Rising Global Discovery Mutual Dividends Securities Shares Securities Class 2 Class 2 Class 2 Division (1) Division Division $ 112,235 $ 198,904 $ 122,668 $ 202,747 $ 26,800 $ 34,271 157,548 (23,298) (99,138) (3,100,317) (3,036,536) (563,986) (2,743,865) (2,857,087) (628,853) – – – – – – (2,743,865) (2,857,087) (628,853) 5,270,649 3,842,790 1,015,695 (540,328) (147,445) (79,021) – – – – – (5,484) (11,589) (109,924) (2,882,489) (2,246,736) (1,429,312) (150,022) (128,789) (42,370) (20,734) (17,824) (5,851) 11,840 1,253 4,578 1,683,432 1,291,660 (646,205) (1,060,433) (1,565,427) (1,275,058) 8,175,336 6,834,033 2,916,023 $ 12,140,748 $ 7,114,903 $ 7,752,224 $ 5,268,606 $ 1,917,515 $ 1,640,965 Principal Life Insurance Company Variable Life Separate Account Statements of Changes in Net Assets (continued) Years Ended December 31, 2009 and 2008 Franklin Small Cap Value Securities Class 2 Division Increase (decrease) in net assets Operations: Net investment income (loss) $ 98,782 $ 59,043 Total realized gains (losses) on investments 185,235 Change in net unrealized appreciation or depreciation of investments (2,201,737) Net gains (losses) from investments (1,957,459) Payment from Affiliate – – Net increase (decrease) in net assets resulting from operations (1,957,459) Policy related transactions: Net premium payments, less sales charges and applicable premium taxes 3,418,251 Contract terminations and surrenders (59,420) Death benefit payments – Policy loan transfers 7,234 Transfers to other contracts (2,044,231) Cost of insurance and administration charges (95,501) Mortality and expenses charges (13,199) Surrender charges (4,889) Increase (decrease) in net assets from policy related transactions 1,208,245 Total increase (decrease) (749,214) Net assets at beginning of period 5,219,897 Net assets at end of period $ 7,895,865 $ 4,470,683 (1) Commenced operations May 19, 2008. (2) Commenced operations November 23, 2009. See accompanying notes. Goldman Sachs Franklin Franklin VIT Structured Strategic Income U.S. Government Small Cap Securities Fund Equity Service Class 2 Class 2 Class I Division (1) Division (2) Division $ 66,002 $ – $ – $ 3,805 $ 3,142 (232) – (78,620) (19,637) – (92,920) (19,869) – (168,398) – – – – – (19,869) – (168,398) 334,960 – 392,564 – – – (4,665) – – – – – – – – 5,119 (59,779) – (228,603) (1,774) – (10,462) (237) – (1,456) – – – (399) 273,170 – 152,098 253,301 – (16,300) – – 361,422 $ 2,936,683 $ 253,301 $ – $ 371,513 $ 345,122 Principal Life Insurance Company Variable Life Separate Account Statements of Changes in Net Assets (continued) Years Ended December 31, 2009 and 2008 Government & High Quality Bond Division Increase (decrease) in net assets Operations: Net investment income (loss) $ 2,199,998 $ 1,740,726 Total realized gains (losses) on investments (481,899) Change in net unrealized appreciation or depreciation of investments (1,940,789) Net gains (losses) from investments (681,962) Payment from Affiliate – – Net increase (decrease) in net assets resulting from operations (681,962) Policy related transactions: Net premium payments, less sales charges and applicable premium taxes 20,543,950 Contract terminations and surrenders (6,097,199) Death benefit payments (38,342) Policy loan transfers (601,096) Transfers to other contracts (13,494,726) Cost of insurance and administration charges (1,952,586) Mortality and expenses charges (217,760) Surrender charges (339,717) Increase (decrease) in net assets from policy related transactions (2,197,476) Total increase (decrease) (2,879,438) Net assets at beginning of period 37,166,064 Net assets at end of period $ 36,682,870 $ 34,286,626 See accompanying notes. Janus International Aspen Emerging International Balanced Markets SmallCap Service Shares Division Division Division $ 420,439 $ 256,413 $ 970,799 $ 1,018,892 $ 50,473 $ 31,130 6,953,547 5,946,657 (119,716) (24,124,075) (38,750,243) (174,273) (16,914,115) (31,784,694) (262,859) – – – – (16,914,115) (31,784,694) (262,859) 13,289,789 18,376,761 1,614,731 (3,536,862) (6,389,223) (403,266) (35,708) (59,477) – – (279,854) (616,528) (916) (5,115,033) (11,643,060) (1,058,771) (1,418,377) (2,273,400) (16,051) (127,815) (237,065) (2,222) (240,962) (291,323) 26,052 2,535,178 (3,133,315) 159,557 (14,378,937) (34,918,009) (103,302) 29,042,953 65,296,135 1,098,509 $ 29,413,299 $ 14,664,016 $ 37,674,235 $ 30,378,126 $ 3,066,711 $ 995,207 Principal Life Insurance Company Variable Life Separate Account Statements of Changes in Net Assets (continued) Years Ended December 31, 2009 and 2008 Janus Aspen Enterprise Service Shares Division (1) Increase (decrease) in net assets Operations: Net investment income (loss) $ (77) $ 4,730 Total realized gains (losses) on investments (339,660) Change in net unrealized appreciation or depreciation of investments (3,457,161) Net gains (losses) from investments (3,792,091) Payment from Affiliate – – Net increase (decrease) in net assets resulting from operations (3,792,091) Policy related transactions: Net premium payments, less sales charges and applicable premium taxes 4,428,335 Contract terminations and surrenders (1,068,298) Death benefit payments (1,504) Policy loan transfers (57,263) Transfers to other contracts (2,603,190) Cost of insurance and administration charges (261,339) Mortality and expenses charges (31,641) Surrender charges (45,646) Increase (decrease) in net assets from policy related transactions 359,454 Total increase (decrease) (3,432,637) Net assets at beginning of period 7,471,395 Net assets at end of period $ 6,720,485 $ 4,038,758 (1) Represented the operations of Janus Aspen Mid Cap Growth Service Shares Division until May 18, 2009 name change. (2) Commenced operations July 21, 2008. (3) Represented the operations of Janus Aspen International Growth Service Shares Division until May 18, 2009 name change. See accompanying notes. Janus Janus Janus Aspen Aspen Aspen Flexible Bond Forty Overseas Service Shares Service Shares Service Shares Division Division (2) Division (3) $ 764,308 $ 276,998 $ 3 $ – $ 17,447 $ 118,976 (62,382) (1) 367,836 116,771 (4) (3,249,037) 331,387 (5) (2,762,225) – – – – – – 331,387 (5) (2,762,225) 8,449,449 1,219 3,464,840 (1,132,032) – – (44,105) – – – – – (1,869) – – (3,379) (2,569,704) (1) (1,509,179) (144,933) (18) (73,652) (19,994) (1) (10,196) 59,683 – – (1,205) 4,640,600 1,199 1,823,124 4,971,987 1,194 (939,101) 3,707,605 – 3,665,209 $ 25,116,282 $ 8,679,592 $ 302,393 $ 1,194 $ 6,165,753 $ 2,726,108 Principal Life Insurance Company Variable Life Separate Account Statements of Changes in Net Assets (continued) Years Ended December 31, 2009 and 2008 Janus Aspen Research Core Service Shares Division (1) Increase (decrease) in net assets Operations: Net investment income (loss) $ 4,283 $ 115,107 Total realized gains (losses) on investments 464,172 Change in net unrealized appreciation or depreciation of investments (1,712,825) Net gains (losses) from investments (1,133,546) Payment from Affiliate – – Net increase (decrease) in net assets resulting from operations (1,133,546) Policy related transactions: Net premium payments, less sales charges and applicable premium taxes 1,192,075 Contract terminations and surrenders (34,937) Death benefit payments – – Policy loan transfers (6,748) Transfers to other contracts (779,092) Cost of insurance and administration charges (35,479) Mortality and expenses charges (4,903) Surrender charges 1,181 Increase (decrease) in net assets from policy related transactions 332,097 Total increase (decrease) (801,449) Net assets at beginning of period 2,460,447 Net assets at end of period $ 2,385,594 $ 1,658,998 (1) Represented the operations of Janus Aspen Fundamental Equity Service Shares Division until May 18, 2009 name change. (2) Represented the operations of Janus Aspen Worldwide Growth Service Shares Division until May 18, 2009 name change. (3) Commenced operations April 24, 2009. See accompanying notes. Janus Aspen JP Morgan JP Morgan Worldwide Core Bond Small Cap Core LargeCap Service Shares Class I Class I Blend II Division (2) Division (3) Division (3) Division $ 7,840 $ $ – $ 6,557 $ 170,341 $ (11,638) 3,785,698 (415,509) (8,768,772) (419,092) (4,825,924) – – – – – – (419,092) (4,825,924) 417,185 4,499,711 (731) (818,699) – – – (41,533) (166) (123,965) (455,793) (2,090,382) (13,610) (813,479) (1,879) (70,266) 47 (149,375) (54,947) 392,012 (474,039) (4,433,912) 1,011,240 – – 12,770,013 $ 625,289 $ 537,201 $ 1,455,078 $ 3,001,576 $ 11,639,190 $ 8,336,101 Principal Life Insurance Company Variable Life Separate Account Statements of Changes in Net Assets (continued) Years Ended December 31, 2009 and 2008 LargeCap Growth Division Increase (decrease) in net assets Operations: Net investment income (loss) $ 150,687 $ 131,753 Total realized gains (losses) on investments (229,246) Change in net unrealized appreciation or depreciation of investments (13,447,438) Net gains (losses) from investments (13,544,931) Payment from Affiliate – – Net increase (decrease) in net assets resulting from operations (13,544,931) Policy related transactions: Net premium payments, less sales charges and applicable premium taxes 8,651,888 Contract terminations and surrenders (2,919,233) Death benefit payments (66,501) Policy loan transfers (383,042) Transfers to other contracts (3,125,968) Cost of insurance and administration charges (1,481,610) Mortality and expenses charges (162,297) Surrender charges (125,993) Increase (decrease) in net assets from policy related transactions 387,244 Total increase (decrease) (13,157,687) Net assets at beginning of period 30,968,055 Net assets at end of period $ 23,256,106 $ 17,810,368 See accompanying notes. LargeCap LargeCap LargeCap Growth I S&P 500 Index Value Division Division Division $ 33,086 $ $ 756,150 $ $ 2,018,572 $ 1,244,876 (1,063,581) 363,202 6,186,671 (38,466,530) (13,124,890) (30,516,771) (39,392,944) (11,940,079) (23,085,224) – – – – – – (39,392,944) (11,940,079) (23,085,224) 15,649,021 6,309,479 7,854,481 (6,276,855) (14,222,502) (3,097,081) (123,910) (48,097) (129,237) (1,119,376) (136,401) (479,933) (6,600,231) (3,556,393) (3,227,945) (4,793,001) (1,625,034) (2,759,630) (528,901) (168,421) (284,846) (322,871) (495,857) (164,529) (4,116,124) (13,943,226) (2,288,720) (43,509,068) (25,883,305) (25,373,944) 100,279,674 41,350,323 66,963,695 $ 83,747,727 $ $ 20,275,375 $ 15,467,018 $ 45,490,568 $ 41,589,751 Principal Life Insurance Company Variable Life Separate Account Statements of Changes in Net Assets (continued) Years Ended December 31, 2009 and 2008 LargeCap Value III Division Increase (decrease) in net assets Operations: Net investment income (loss) $ 438,886 $ 397,568 Total realized gains (losses) on investments (670,182) Change in net unrealized appreciation or depreciation of investments (8,230,412) Net gains (losses) from investments (8,503,026) Payment from Affiliate – – Net increase (decrease) in net assets resulting from operations (8,503,026) Policy related transactions: Net premium payments, less sales charges and applicable premium taxes 7,477,972 Contract terminations and surrenders (1,272,071) Death benefit payments (47,067) Policy loan transfers (170,168) Transfers to other contracts (6,280,299) Cost of insurance and administration charges (1,031,592) Mortality and expenses charges (95,377) Surrender charges (148,216) Increase (decrease) in net assets from policy related transactions (1,566,818) Total increase (decrease) (10,069,844) Net assets at beginning of period 21,792,811 Net assets at end of period $ 13,847,674 $ 11,722,967 See accompanying notes. MFS VIT MFS VIT MFS VIT MidCap Global Equity Growth Growth Service Class Service Class Service Class Division Division Division $ 9,238 $ 1,778 $ 328 $ – $ – $ – 3,346 (18,825) 11,179 (95,307) (391,961) (294,179) (90,183) (410,786) (283,000) – – – – – – (90,183) (410,786) (283,000) 207,339 972,725 121,730 (22,519) – (9,367) – – – – (5,931) 897 – (249) (33,532) (371,813) (163,620) (4,390) (19,064) (9,250) (607) (2,628) (1,284) (1,658) – 605 138,702 580,117 (61,435) 48,519 169,331 (344,435) 235,402 697,794 586,596 $ 537,057 $ 283,921 $ 2,364,492 $ 867,125 $ 287,362 $ 242,161 Principal Life Insurance Company Variable Life Separate Account Statements of Changes in Net Assets (continued) Years Ended December 31, 2009 and 2008 MFS VIT New Discovery Service Class Division Increase (decrease) in net assets Operations: Net investment income (loss) $ – $ – Total realized gains (losses) on investments 182,450 Change in net unrealized appreciation or depreciation of investments (896,293) Net gains (losses) from investments (713,843) Payment from Affiliate – – Net increase (decrease) in net assets resulting from operations (713,843) Policy related transactions: Net premium payments, less sales charges and applicable premium taxes 586,363 Contract terminations and surrenders (34,356) Death benefit payments – Policy loan transfers 272 Transfers to other contracts (284,820) Cost of insurance and administration charges (50,975) Mortality and expenses charges (4,819) Surrender charges (8,588) Increase (decrease) in net assets from policy related transactions 203,077 Total increase (decrease) (510,766) Net assets at beginning of period 1,660,097 Net assets at end of period $ 3,023,685 $ 1,149,331 (1) Commenced operations on November 24, 2008. (2) Commenced operations on July 21, 2008. See accompanying notes. MFS VIT Research MFS VIT MFS VIT International Total Return Utilities Service Class Service Class Service Class Division Division (1) Division (2) $ 79 $ 12 $ – $ – $ 700 $– 66 – – (1,199) – 371 (1,121) – 371 – – – – – – (1,121) – 371 923 – 10,143 – – – – – – – – – – – – – – – – – – 1 – – (123) – (240) (15) – (8) – – – – – – 786 – 9,895 (335) – 10,266 2,975 – – – $ 378,041 $ 2,640 $ 44,655 $ – $ 136,391 $ 10,266 Principal Life Insurance Company Variable Life Separate Account Statements of Changes in Net Assets (continued) Years Ended December 31, 2009 and 2008 MFS VIT Value Service Class Division Increase (decrease) in net assets Operations: Net investment income (loss) $ 97,898 $ 38,353 Total realized gains (losses) on investments 45,366 Change in net unrealized appreciation or depreciation of investments (2,237,415) Net gains (losses) from investments (2,153,696) Payment from Affiliate – – Net increase (decrease) in net assets resulting from operations (2,153,696) Policy related transactions: Net premium payments, less sales charges and applicable premium taxes 6,111,742 Contract terminations and surrenders (119,306) Death benefit payments – Policy loan transfers (5,996) Transfers to other contracts (654,072) Cost of insurance and administration charges (98,174) Mortality and expenses charges (13,545) Surrender charges (2,641) Increase (decrease) in net assets from policy related transactions 5,218,008 Total increase (decrease) 3,064,312 Net assets at beginning of period 2,986,115 Net assets at end of period $ 9,922,238 $ 6,050,427 See accompanying notes. MidCap MidCap MidCap Blend Growth I Value II Division Division Division $ 460,320 $ 393,580 $ 19,319 $ 13,682 $ 273,506 $ 6,914,985 1,399,264 (440,688) (37,525,546) (9,468,004) (10,902,591) (30,216,981) (8,055,058) (11,158,327) – – – – – – (30,216,981) (8,055,058) (11,158,327) 19,361,886 5,772,701 8,602,737 (10,079,328) (2,326,796) (2,297,698) (134,864) (35,762) (8,818) (1,100,349) (148,808) (141,907) (8,014,531) (2,535,046) (5,307,090) (3,934,580) (969,593) (1,228,297) (358,321) (98,286) (119,220) (457,161) (135,897) (179,041) (4,717,248) (477,487) (679,334) (34,934,229) (8,532,545) (11,837,661) 92,374,110 19,869,619 25,740,652 $ 72,045,578 $ 57,439,881 $ 15,577,915 $ 11,337,074 $ 17,924,788 $ 13,902,991 Principal Life Insurance Company Variable Life Separate Account Statements of Changes in Net Assets (continued) Years Ended December 31, 2009 and 2008 Money Market Division Increase (decrease) in net assets Operations: Net investment income (loss) $ 501,385 $ 3,320,925 Total realized gains (losses) on investments – 4 Change in net unrealized appreciation or depreciation of investments 3 – Net gains (losses) from investments 3,320,929 Payment from Affiliate – – Net increase (decrease) in net assets resulting from operations 3,320,929 Policy related transactions: Net premium payments, less sales charges and applicable premium taxes 230,080,579 Contract terminations and surrenders (28,406,439) Death benefit payments (35,924) Policy loan transfers (5,843,235) Transfers to other contracts (119,036,876) Cost of insurance and administration charges (6,960,009) Mortality and expenses charges (725,328) Surrender charges (778,913) Increase (decrease) in net assets from policy related transactions 68,293,855 Total increase (decrease) 71,614,784 Net assets at beginning of period 114,089,370 Net assets at end of period $ 200,345,768 $ 185,704,154 (1) Commenced operations on November 24, 2008. See accompanying notes. Neuberger Neuberger Berman AMT Berman AMT Mortgage Guardian Partners Securities I Class I Class Division (1) Division Divison 2009 $ 199,046 $ – $ 14,565 $ 2,030 $ 87,568 $ 16,022 – (2,319) 329,304 (3) (176,311) (2,100,253) (3) (176,600) (1,754,927) – – – – – – (3) (176,600) (1,754,927) 3,022 327,006 2,797,914 – (10,363) – – – – – – – – 13 (24) (12,124) – (297,717) (711,607) – (5,182) (40,287) – (717) (5,546) – (124) – 3,022 12,879 2,028,350 3,019 (163,721) 273,423 – 546,825 1,631,507 $ 1,967,188 $ $ 1,496,226 $ 383,104 $ 4,174,663 $ 1,904,930 Principal Life Insurance Company Variable Life Separate Account Statements of Changes in Net Assets (continued) Years Ended December 31, 2009 and 2008 Neuberger Berman AMT Small-Cap Growth S Class Divison Increase (decrease) in net assets Operations: Net investment income (loss) $ – $ – Total realized gains (losses) on investments (2,359) Change in net unrealized appreciation or depreciation of investments (41,364) Net gains (losses) from investments (43,723) Payment from Affiliate – – Net increase (decrease) in net assets resulting from operations (43,723) Policy related transactions: Net premium payments, less sales charges and applicable premium taxes 143,116 Contract terminations and surrenders – – Death benefit payments – – Policy loan transfers – – Transfers to other contracts (89,362) Cost of insurance and administration charges (1,918) Mortality and expenses charges (266) Surrender charges – – Increase (decrease) in net assets from policy related transactions 51,570 Total increase (decrease) 7,847 Net assets at beginning of period 134,096 Net assets at end of period $ 243,787 $ 141,943 (1) Commenced operations on May 19, 2008. (2) Commenced operations on November 23, 2009. See accompanying notes. Oppenheimer PIMCO PIMCO PIMCO PIMCO Main Street High Yield Real Return Short-Term Total Return Small Cap Administrative Administrative Administrative Administrative Service Shares Class Class Class Class Division (1) Division (2) Division (2) Division (2) Division (2) $ 8 $– $– (3) – 41 – 38 – – – – – – – 38 – 721 – – – – – – – – – – – – – – – – – – – – – (47) – (1) – – – – – – – 673 – 711 – – – – – – $ 92,043 $711 $ – $ 150,687 $ 728,235 Principal Life Insurance Company Variable Life Separate Account Statements of Changes in Net Assets (continued) Years Ended December 31, 2009 and 2008 Principal LifeTime Strategic Income Division 2009 Increase (decrease) in net assets Operations: Net investment income (loss) $ 83,324 $ 20,410 Total realized gains (losses) on investments (214) Change in net unrealized appreciation or depreciation of investments (169,589) Net gains (losses) from investments (149,393) Payment from Affiliate – – Net increase (decrease) in net assets resulting from operations (149,393) Policy related transactions: Net premium payments, less sales charges and applicable premium taxes 447,294 Contract terminations and surrenders (3,761) Death benefit payments – – Policy loan transfers – Transfers to other contracts (63,580) Cost of insurance and administration charges (23,924) Mortality and expenses charges (1,866) Surrender charges (5,368) Increase (decrease) in net assets from policy related transactions 348,795 Total increase (decrease) 199,402 Net assets at beginning of period 420,748 Net assets at end of period $ 2,462,034 $ 620,150 See accompanying notes. Principal Principal Principal LifeTime LifeTime LifeTime Division Division Division $ 172,094 $ 78,561 $ 445,349 $ 289,531 $ 208,127 $ 292,932 (23,179) 231,673 352,997 (787,847) (3,468,165) (3,930,984) (732,465) (2,946,961) (3,285,055) – – – – – – (732,465) (2,946,961) (3,285,055) 2,194,220 5,986,939 5,003,326 (6,102) (129,214) (124,656) – – – (444) – (17,135) (241) (27,279) (32,621) (965,365) (1,321,666) (1,135,457) (94,947) (440,390) (703,089) (7,644) (35,076) (44,637) (3,397) (48,167) (86,629) 1,116,524 3,984,703 2,859,102 384,059 1,037,742 (425,953) 1,578,882 5,925,227 6,948,872 $ 5,524,373 $ 1,962,941 $ 17,405,073 $ 6,962,969 $ 13,669,409 $ 6,522,919 Principal Life Insurance Company Variable Life Separate Account Statements of Changes in Net Assets (continued) Years Ended December 31, 2009 and 2008 Principal LifeTime Division Increase (decrease) in net assets Operations: Net investment income (loss) $ 150,674 $ 197,365 Total realized gains (losses) on investments 159,603 Change in net unrealized appreciation or depreciation of investments (2,605,841) Net gains (losses) from investments (2,248,873) Payment from Affiliate – – Net increase (decrease) in net assets resulting from operations (2,248,873) Policy related transactions: Net premium payments, less sales charges and applicable premium taxes 4,152,690 Contract terminations and surrenders (32,428) Death benefit payments – (121,784) Policy loan transfers (132,904) Transfers to other contracts (1,667,191) Cost of insurance and administration charges (739,593) Mortality and expenses charges (41,445) Surrender charges (40,483) Increase (decrease) in net assets from policy related transactions 1,376,862 Total increase (decrease) (872,011) Net assets at beginning of period 5,120,488 Net assets at end of period $ 7,770,752 $ 4,248,477 See accompanying notes. Putnam VT Putnam VT Principal Growth & International LifeTime Income Equity Class IB Class IB Division Division Division 2009 2009 2009 $ 102,660 $ 156,867 $ 5,197 $ $ – $ 52,637 201,683 (42,494) 202,712 (2,247,624) (51,559) (1,723,301) (1,889,074) (89,714) (1,467,952) – – – – – – (1,889,074) (89,714) (1,467,952) 2,971,262 196,330 1,141,539 (72,452) (11,915) (931,150) – – – – (23,690) 1,910 5,485 (608,197) (270,556) (719,995) (470,638) (4,968) (56,414) (28,222) (696) (7,828) (31,872) (1,020) (12,315) 1,736,191 (90,915) (580,678) (152,883) (180,629) (2,048,630) 3,525,835 343,980 3,826,029 $ 5,756,816 $ 3,372,952 $ 272,124 $ 163,351 $ 1,763,602 $ Principal Life Insurance Company Variable Life Separate Account Statements of Changes in Net Assets (continued) Years Ended December 31, 2009 and 2008 Putnam VT Voyager Class IB Division Increase (decrease) in net assets Operations: Net investment income (loss) $ 150,500 $ (89) Total realized gains (losses) on investments (818,969) Change in net unrealized appreciation or depreciation of investments (8,368,581) Net gains (losses) from investments (9,187,639) Payment from Affiliate – – Net increase (decrease) in net assets resulting from operations (9,187,639) Policy related transactions: Net premium payments, less sales charges and applicable premium taxes 3,881,060 Contract terminations and surrenders (1,991,419) Death benefit payments (30,093) Policy loan transfers (423,509) Transfers to other contracts (1,974,962) Cost of insurance and administration charges (1,596,672) Mortality and expenses charges (182,846) Surrender charges (54,338) Increase (decrease) in net assets from policy related transactions (2,372,779) Total increase (decrease) (11,560,418) Net assets at beginning of period 26,410,082 Net assets at end of period $ 22,852,428 $ 14,849,664 See accompanying notes. SAM SAM Conservative Real Estate Balanced Balanced Securities Portfolio Portfolio Division Division Division 2009 2009 2009 $ 1,044,371 $ 840,725 $ 253,014 $ $ 73,181 $ 7,406,895 54,110 40,287 (21,030,035) (698,354) (293,460) (12,782,415) (585,470) (219,622) – – – – – – (12,782,415) (585,470) (219,622) 17,778,061 3,340,796 1,554,192 (5,601,720) (29,884) – (36,356) – – – (404,099) 81,923 62 (10,068,707) (506,676) (61,117) (2,093,824) (141,394) (45,491) (223,810) (8,273) (2,899) (240,185) (47,788) – (890,640) 2,688,704 1,444,747 (13,673,055) 2,103,234 1,225,125 39,638,839 813,967 175,216 $ 31,571,436 $ $ 10,643,470 $ $ 3,391,793 $ 1,400,341 Principal Life Insurance Company Variable Life Separate Account Statements of Changes in Net Assets (continued) Years Ended December 31, 2009 and 2008 SAM Conservative Growth Portfolio Division Increase (decrease) in net assets Operations: Net investment income (loss) $ 597,538 $ 112,621 Total realized gains (losses) on investments 230,052 Change in net unrealized appreciation or depreciation of investments (1,841,444) Net gains (losses) from investments (1,498,771) Payment from Affiliate – – Net increase (decrease) in net assets resulting from operations (1,498,771) Policy related transactions: Net premium payments, less sales charges and applicable premium taxes 6,145,430 Contract terminations and surrenders (12,854) Death benefit payments – Policy loan transfers (9,279) Transfers to other contracts (365,731) Cost of insurance and administration charges (403,298) Mortality and expenses charges (21,869) Surrender charges (11,088) Increase (decrease) in net assets from policy related transactions 5,321,311 Total increase (decrease) 3,822,540 Net assets at beginning of period 2,204,577 Net assets at end of period $ 17,341,193 $ 6,027,117 See accompanying notes. SAM SAM Flexible Strategic Income Growth Short-Term Portfolio Portfolio Bond Division Division Division 2009 2009 2009 $ 79,635 $ $ 293,948 $ 127,308 $ 222,675 $ 183,038 17,466 458,883 (116,649) (96,561) (2,293,513) (558,716) (59,656) (1,707,322) (492,327) – – – – – – (59,656) (1,707,322) (492,327) 1,089,522 5,439,520 2,905,183 – (8,256) (49,595) – – – – (5,960) 5,074 (35,034) (72,559) (156,978) (404,618) (2,228,368) (29,754) (461,013) (184,218) (1,693) (26,965) (15,979) – (8,685) (12,652) 906,171 4,494,949 335,852 846,515 2,787,627 (156,475) 53,648 2,075,409 3,799,816 $ 3,520,776 $ 900,163 $ 11,993,256 $ 4,863,036 $ 4,469,871 $ Principal Life Insurance Company Variable Life Separate Account Statements of Changes in Net Assets (continued) Years Ended December 31, 2009 and 2008 Short-Term Income Division (1) Increase (decrease) in net assets Operations: Net investment income (loss) $ 89,934 $ – Total realized gains (losses) on investments – Change in net unrealized appreciation or depreciation of investments (33) Net gains (losses) from investments (33) Payment from Affiliate – – Net increase (decrease) in net assets resulting from operations (33) Policy related transactions: Net premium payments, less sales charges and applicable premium taxes 17,071 Contract terminations and surrenders – Death benefit payments – – Policy loan transfers – Transfers to other contracts – Cost of insurance and administration charges (24) Mortality and expenses charges (3) Surrender charges – Increase (decrease) in net assets from policy related transactions 17,044 Total increase (decrease) 17,011 Net assets at beginning of period – Net assets at end of period $ 2,719,682 $ 17,011 (1) Commenced operations on November 24, 2008. See accompanying notes. SmallCap SmallCap SmallCap Blend Growth II Value I Division Division Division 2009 2009 $ 116,629 $ $ (189) $ $ 488,884 $ 1,986,320 (693,425) 977,974 (11,850,554) (8,771,217) (12,345,715) (9,765,179) (9,464,983) (11,075,648) – – – – – – (9,765,179) (9,464,983) (11,075,648) 3,648,075 6,780,029 11,665,838 (1,493,625) (1,797,189) (4,195,556) (42,626) (15,622) (47,396) (207,640) (155,627) (241,492) (2,154,302) (2,725,844) (7,772,065) (925,255) (1,139,705) (1,409,546) (107,778) (123,604) (150,063) (82,063) (114,556) (218,366) (1,365,214) 707,882 (2,368,646) (11,130,393) (8,757,101) (13,444,294) 27,223,324 22,496,216 36,103,116 $ 18,665,583 $ $ 17,655,229 $ $ 24,364,263 $ Principal Life Insurance Company Variable Life Separate Account Statements of Changes in Net Assets (continued) Years Ended December 31, 2009 and 2008 Summit EAFE International Index Class F Division (1) Increase (decrease) in net assets Operations: Net investment income (loss) $ 223 $ – Total realized gains (losses) on investments 1 Change in net unrealized appreciation or depreciation of investments – Net gains (losses) from investments 1 Payment from Affiliate – – Net increase (decrease) in net assets resulting from operations 1 Policy related transactions: Net premium payments, less sales charges and applicable premium taxes (1) Contract terminations and surrenders – – Death benefit payments – – Policy loan transfers – – Transfers to other contracts – Cost of insurance and administration charges – Mortality and expenses charges – Surrender charges – – Increase (decrease) in net assets from policy related transactions (1) Total increase (decrease) – Net assets at beginning of period – – Net assets at end of period $ 26,222 $ – (1) Commenced operations on November 24, 2008. See accompanying notes. Summit Summit Russell 2000 S&P Small Cap MidCap 400 T. Rowe Price Index Index Equity Class F Class F Income II Division Division Division 2009 2009 2009 $ 6,082 $ 9,964 $ 947 $ 609 $ 7,276 $ 11,138 (62,776) (24,010) (23,435) (269,094) (25,116) (197,804) (321,906) (48,517) (210,101) – – – – – – (321,906) (48,517) (210,101) 839,996 198,953 995,622 – – – – – – – – (805) – – – (425,334) (62,578) (143,763) (22,828) (5,570) (3,935) (2,255) (323) (546) – – – 388,774 130,482 847,378 66,868 81,965 637,277 698,632 – 37,446 $ 2,334,755 $ $ 222,310 $ 81,965 $ 276,850 $ 674,723 Principal Life Insurance Company Variable Life Separate Account Statements of Changes in Net Assets (continued) Years Ended December 31, 2009 and 2008 Templeton Developing Markets Securities Class 2 Division Increase (decrease) in net assets Operations: Net investment income (loss) $ 57,720 $ 48,733 Total realized gains (losses) on investments 205,363 Change in net unrealized appreciation or depreciation of investments (1,559,851) Net gains (losses) from investments (1,305,755) Payment from Affiliate – – Net increase (decrease) in net assets resulting from operations (1,305,755) Policy related transactions: Net premium payments, less sales charges and applicable premium taxes 2,046,913 Contract terminations and surrenders (410,413) Death benefit payments – Policy loan transfers (2,536) Transfers to other contracts (1,124,180) Cost of insurance and administration charges (32,828) Mortality and expenses charges (4,534) Surrender charges 22,839 Increase (decrease) in net assets from policy related transactions 495,261 Total increase (decrease) (810,494) Net assets at beginning of period 2,169,080 Net assets at end of period $ 2,403,075 $ 1,358,586 (1) Commenced operations on May 19, 2008. Represented the operations of Templeton Global Income Securities Class 2 Division until May 18, 2009 name change. See accompanying notes. Templeton Templeton Van Eck Foreign Global Bond Worldwide Securities Securities Hard Assets Class 2 Class 2 Initial Class Division Division (1) Division $ 33,275 $ 3,640 $ 71,202 $ 3,742 $ 743 $ – 5,854 (171) (7,386) (115,010) 489 (96,500) (105,516) 4,060 (103,886) – – – – – – (105,516) 4,060 (103,886) 376,528 138,207 356,046 – – – – – – – – – – – – – – – (23,301) (6,659) (23,957) (1,670) (682) (1,906) (232) (99) (276) – – – – – 351,325 130,767 329,907 245,809 134,827 226,021 33,149 – – $ 3,824,937 $ 278,958 $ 2,580,923 $ 134,827 $ 1,764,936 $ 226,021 Principal Life Insurance Company Variable Life Separate Account Statements of Changes in Net Assets (continued) Years Ended December 31, 2009 and 2008 Vanguard VIF Balanced Division Increase (decrease) in net assets Operations: Net investment income (loss) $ 1,091,192 $ 706,967 Total realized gains (losses) on investments 427,167 Change in net unrealized appreciation or depreciation of investments (6,936,374) Net gains (losses) from investments (5,802,240) Payment from Affiliate – – Net increase (decrease) in net assets resulting from operations (5,802,240) Policy related transactions: Net premium payments, less sales charges and applicable premium taxes 14,064,668 Contract terminations and surrenders (304,388) Death benefit payments – Policy loan transfers (109,397) Transfers to other contracts (6,711,398) Cost of insurance and administration charges (452,573) Mortality and expenses charges (62,624) Surrender charges 10,153 Increase (decrease) in net assets from policy related transactions 6,434,441 Total increase (decrease) 632,201 Net assets at beginning of period 21,821,683 Net assets at end of period $ 29,660,009 $ 22,453,884 See accompanying notes. Vanguard Wells Fargo Vanguard VIF Advantage VT VIF Equity Mid-Cap Asset Index Index Allocation Division Division Division $ 879,508 $ 476,341 $ 154,039 $ 146,608 $ 20,650 $ 36,658 (191,072) 522,901 (9,603) (13,957,170) (5,962,976) (544,510) (13,671,901) (5,293,467) (517,455) – – – – – – (13,671,901) (5,293,467) (517,455) 30,646,358 5,849,828 591,062 (1,071,391) (496,374) (181,115) – – – – (110,037) (39,209) 8,272 (6,594,743) (3,350,528) (535,780) (486,947) (220,875) (69,964) (67,251) (30,541) (7,017) 31,196 (13,730) (5,776) 22,347,185 1,698,571 (200,318) 8,675,284 (3,594,896) (717,773) 21,186,096 11,181,584 1,749,612 $ 38,804,843 $ 29,861,380 $ 11,783,530 $ 7,586,688 $ 1,161,996 $ 1,031,839 Principal Life Insurance Company Variable Life Separate Account Statements of Changes in Net Assets (continued) Years Ended December 31, 2009 and 2008 Wells Fargo Advantage VT Equity Income Division Increase (decrease) in net assets Operations: Net investment income (loss) $ 16,454 $ 11,096 Total realized gains (losses) on investments 42,400 Change in net unrealized appreciation or depreciation of investments (304,853) Net gains (losses) from investments (251,357) Payment from Affiliate – – Net increase (decrease) in net assets resulting from operations (251,357) Policy related transactions: Net premium payments, less sales charges and applicable premium taxes 268,638 Contract terminations and surrenders (36,514) Death benefit payments – – Policy loan transfers (8,522) Transfers to other contracts (72,391) Cost of insurance and administration charges (39,894) Mortality and expenses charges (3,507) Surrender charges (1,691) Increase (decrease) in net assets from policy related transactions 106,119 Total increase (decrease) (145,238) Net assets at beginning of period 611,481 Net assets at end of period $ 1,047,681 $ 466,243 See accompanying notes. Wells Fargo Advantage VT Large Company Growth Division $ 2,890 $ 2,316 (10,381) (386,325) (394,390) – – (394,390) 294,108 (5,406) – (2,611) (5,271) (51,758) (32,492) (3,087) (1,454) 192,029 (202,361) 849,796 $ 1,047,095 $ 647,435 Principal Life Insurance Company Variable Life Separate Account Notes to Financial Statements December 31, 2009 1. Nature of Operations and Significant Accounting Policies Principal Life Insurance Company Variable Life Separate Account (the Separate Account) is a segregated investment account of Principal Life Insurance Company (Principal Life) and is registered under the Investment Company Act of 1940 as a unit investment trust, with no stated limitations on the number of authorized units. As directed by eligible contract holders, each division of the Separate Account invests exclusively in shares representing interests in a corresponding investment option. As of December 31, 2009, contract holder investment options include the following diversified open-end management investment companies: Principal Variable Contracts Funds, Inc. (1) Asset Allocation Account Balanced Account Bond & Mortgage Securities Account Diversified International Account Equity Income Account (2) Government & High Quality Bond Account International Emerging Markets Account International SmallCap Account LargeCap Blend II Account LargeCap Growth Account LargeCap Growth I Account LargeCap S&P 500 Index Account LargeCap Value Account LargeCap Value III Account MidCap Blend Account MidCap Growth I Account MidCap Value II Account Money Market Account Mortgage Securities Account (3) Principal LifeTime Strategic Income Account Principal LifeTime 2010 Account Principal LifeTime 2020 Account Principal LifeTime 2030 Account Principal LifeTime 2040 Account Principal LifeTime 2050 Account Real Estate Securities Account Short-Term Bond Account Short-Term Income Account (3) SmallCap Blend Account SmallCap Growth II Account SmallCap Value I Account Strategic Asset Management Portfolios – Balanced Portfolio Account (4) Strategic Asset Management Portfolios – Conservative Balanced Portfolio Account (4) Strategic Asset Management Portfolios – Conservative Growth Portfolio Account (4) Strategic Asset Management Portfolios – Flexible Income Portfolio Account (4) Strategic Asset Management Portfolios – Strategic Growth Portfolio Account (4) Principal Life Insurance Company Variable Life Separate Account Notes to Financial Statements (continued) 1. Nature of Operations and Significant Accounting Policies (continued) AIM V.I. Capital Appreciation Fund Series I (5) AIM V.I. Capital Appreciation Fund Series II (5) AIM V.I. Core Equity Fund Series I AIM V.I. Core Equity Fund – Series II AIM V.I. Dynamics Fund – Series I AIM V.I. Global Health Care Fund – Series I AIM V.I. International Growth Fund – Series I AIM V.I. Mid Cap Core Equity Fund – Series II (6) AIM V.I. Small Cap Equity Fund – Series I (7) AIM V.I. Technology Fund – Series I AllianceBernstein VP Series Fund Inc.: Global Thematic Growth Portfolio – Class A (3,8) International Growth Portfolio – Class A (3) International Value Portfolio – Class A (9) Small Cap Growth Portfolio – Class A (10) Small/Mid Cap Value Portfolio – Class A (10) American Century Variable Portfolios, Inc.: VP Income & Growth Fund – Class I VP Income & Growth Fund – Class II VP International Fund – Class II VP MidCap Value Fund – Class II (6) VP Ultra Fund – Class I VP Ultra Fund – Class II VP Value Fund – Class II VP Vista Fund – Class II (6) Calvert Income Initial Shares (10) Dreyfus Investment Portfolios, Core Value Portfolio – Service Shares Dreyfus Socially Responsible Growth Fund Inc. – Service Shares Dreyfus Variable Investment Fund: Appreciation Portfolio – Service Shares Developing Leaders Portfolio – Service Shares Quality Bond Portfolio – Service Shares DWS Dreman Small Mid Cap Value VIP – Class B (9) Fidelity Variable Insurance Products Fund: Equity-Income Portfolio – IC Equity-Income Portfolio – SC2 Growth Portfolio – SC2 High Income Portfolio – IC High Income Portfolio – SC2 Fidelity Variable Insurance Products Fund II: Asset Manager Portfolio – SC2 Contrafund Portfolio – IC Contrafund Portfolio – SC2 Fidelity Variable Insurance Products Fund III, Mid Cap Portfolio – SC2 Franklin Templeton VIP Trust: Global Bond Securities Fund – Class 2 (9,11) Income Securities Fund – Class 2 Mutual Global Discovery Securities Fund – Class 2 (12) Mutual Shares Fund – Class 2 Rising Dividends Securities Fund – Class 2 Small Cap Value Securities Fund – Class 2 Principal Life Insurance Company Variable Life Separate Account Notes to Financial Statements (continued) 1. Nature of Operations and Significant Accounting Policies (continued) Franklin Templeton VIP Trust, (continued): Strategic Income Securities Fund – Class 2 (9) Developing Markets Securities Fund – Class 2 (6) Foreign Securities Fund – Class 2 (4) U.S. Government Fund Class 2 (13) Goldman Sachs Variable Insurance Trust, Structured Small Cap Equity Fund – Service Class I (6) Janus Aspen Series Balanced Portfolio – Service Shares Janus Aspen Series Flexible Bond Portfolio – Service Shares Janus Aspen Series Forty Portfolio – Service Shares (10) Janus Aspen Series Research Core Portfolio – Service Shares (14) Janus Aspen Series Overseas Portfolio – Service Shares (15) Janus Aspen Series Enterprise Portfolio – Service Shares (16) Janus Aspen Series Worldwide Portfolio – Service Shares (17) JP Morgan Insurance Trust: JP Morgan Core Bond Portfolio - Class I (18) JP Morgan Small Cap Core Portfolio - Class I (18) MFS Variable Insurance Trust: Global Equity Series – Service Class (6) Growth Series – Service Class MidCap Growth Series – Service Class New Discovery Series – Service Class Research International Series– Service Class (4) Total Return Series – Service Class (3) Utilities Series – Service Class (10) Value Series – Service Class Neuberger Berman AMT Guardian Portfolio – I Class Neuberger Berman AMT Partners Portfolio – I Class (6) Neuberger Berman AMT Small Cap Growth Portfolio – S Class (6) Oppenheimer Main Street Small Cap Fund

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 6-K REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16 UNDER THE SECURITIES EXCHANGE ACT OF 1934 For the month of October 2015 Commission File Number: 001-36637 MOL GLOBAL, INC. Lots 07-03 & 08-03, Levels 7 & 8 Berjaya Times Square, No. 1, Jalan Imbi 55100 Kuala Lumpur, Malaysia (Address of principal executive offices) Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F. Form 20-F X Form 40-F Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. MOL Global, Inc. By : /s/ Ramesh Pathmanathan Name: : Ramesh Pathmanathan Title: : Chief Financial Officer Date: October 13, 2015 Exhibit Index Exhibit 99.1 – Press release

As filed with the Securities and Exchange Commission on November 15, 2013 File No. 333-191030 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C.20549 Amendment No. 3 FORM S-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 BGS ACQUISITION SUBSIDIARY, INC.* (Exact Name of Registrant as Specified in Its Charter) Delaware 46-3358018 (State or Other Jurisdiction of Incorporation or Organization) (Primary Standard Industrial Classification Code Number) (I.R.S. Employer Identification Number) 6342 North Bay Road Miami Beach, FL 33141 (305) 866-1102 (Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant’s Principal Executive Offices) Cesar Baez BGS Acquisition Subsidiary, Inc. 6342 North Bay Road Miami Beach, FL 33141 (305) 866-1102 (Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent for Service) Approximate date of commencement of proposed sale of the securities to the public:As soon as practicable after (i) this Registration Statement on Form S-4 becomes effective, (ii) all other conditions to the merger of BGS Acquisition Corp., a British Virgin Islands corporation (“BGS Corp.”), into the Registrant (“BGS Acquisition”), with the Registrant surviving, and the merger of TransnetYX Holding Corp. (“TransnetYX”), a Delaware corporation, with and into BGS Merger Subsidiary, Inc., a Delaware corporation (“Merger Sub”), a wholly owned subsidiary of the Registrant, and (iii) all other conditions to the share exchange by and among BGS Corp., the Registrant, Merger Sub, TransnetYX, Black Diamond Financial Group, LLC, a Delaware limited liability company, and Black Diamond Holdings LLC, a Colorado limited liability company (“Black Diamond”), pursuant to the Amended and Restated Merger and Share Exchange Agreement attached as Annex A to the Prospectus contained herein have been satisfied or waived. If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, please check the following box. o If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. Large Accelerated Filer o Accelerated Filer o Non-Accelerated Filer o (Do not check if a smaller reporting company) Smaller Reporting Company x *BGS Acquisition Subsidiary, Inc., the registrant whose name appears on the cover of this registration statement is a Delaware corporation.We intend that, just prior to the Business Combination (as defined below), BGS Acquisition Subsidiary, Inc. will change its name to YX Genomics, Inc.Accordingly, shares of common stock of YX Genomics, Inc. will be issued in connection with the transactions contemplated by the Amended and Restated Merger and Share Exchange Agreement attached as Annex A to the prospectus that constitutes a part of this registration statement. The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until this Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION BECOMES EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND WE ARE NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED. SUBJECT TO COMPLETION, DATED NOVEMBER 15, 2013 EMERGING GROWTH COMPANY STATUS We qualify as an “emerging growth company” under the Jumpstart Our Business Startups Act (the “JOBS Act”), and as such we are subject to reduced public company reporting requirements.Please see “Management’s Discussion and Analysis of Financial Condition and Results of Operations of TransnetYX—JOBS Act.” We have elected to opt-out of the extended transition period for complying with new or revised accounting standards pursuant to Section 107(b) of the JOBS Act of 2012. This election is irrevocable. and of BGS ACQUISITION SUBSIDIARY, INC.* *We intend that BGS Acquisition Subsidiary, Inc. will change its name to YX Genomics, Inc. just prior to the Business Combination.Accordingly, it is anticipated that the securities to be issued in connection with the transactions contemplated by the Amended and Restated Merger and Share Exchange Agreement, attached as Annex A to this prospectus, will be the securities of YX Genomics, Inc. We intend to list our common stock and warrants under the symbols “YXGI” and “YXGIW,” respectively, on the NASDAQ Capital Market following the consummation of our Business Combination (as described in this prospectus). You should carefully consider the contents of this prospectus, including the section “Risk Factors” beginning on page16 of this prospectus. We Are Not Asking You for a Proxy and You are Requested Not To Send Us a Proxy. We have filed a registration statement on Form S-4, of which this prospectus is a part, to register (1) the issuance of our common stock, warrants and unit purchase options that are delivered to the shareholders of BGS Acquisition Corp. (our parent company) upon the completion of a redomestication of BGS Acquisition Corp. to Delaware by way of a merger with and into us, and (2) the issuance of our common stock to the stockholders of TransnetYX Holding Corp. upon the completion of a merger of TransnetYX Holding Corp. with and into our wholly owned subsidiary, both of which will occur on the same day and are referred to in this prospectus as the “Business Combination.” To issue the securities to which this prospectus relates, (1) BGS Acquisition Corp. will have completed a tender offer that provided its shareholders with an opportunity to redeem their ordinary shares for cash equal to their pro rata share of the amount in a trust account established for the purposes of completing a business combination rather than participating in the Business Combination, (2) the registration statement of which this prospectus is a part shall have been declared effective and (3) the Business Combination shall have been completed. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the securities to be issued in connection with the share exchange or determined if this document is truthful or complete. Any representation to the contrary is a criminal offense. The date of this prospectus is , 2013 TABLE OF CONTENTS TABLE OF CONTENTS Page USE OF CERTAIN TERMS iii SUMMARY OF THE PROSPECTUS 1 BGS CORP. SUMMARY FINANCIAL INFORMATION 9 TRANSNETYX SUMMARY FINANCIAL INFORMATION 10 BGS ACQUISITION AND SUBSIDIARIESPRO FORMA SUMMARY FINANCIAL INFORMATION 11 SUMMARY RISK FACTORS 12 SUMMARY COMPARATIVE HISTORICAL AND UNAUDITED PRO FORMA PER SHARE DATA 13 PRICE RANGE OF SECURITIES AND DIVIDENDS 14 RISK FACTORS 16 SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS 26 CAPITALIZATION 27 DIVIDEND POLICY 28 U.S. FEDERAL INCOME TAX CONSEQUENCES 29 THE MERGER AGREEMENT 36 BGS ACQUISITION SUBSIDIARYUNAUDITED CONDENSED COMBINED PRO FORMA FINANCIAL STATEMENTS 48 TRANSNETYX BUSINESS 54 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF TRANSNETYX 61 BGS CORP. BUSINESS 71 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF BGS CORP. 77 COMPARATIVE SHARE INFORMATION 79 DIRECTORS, EXECUTIVE OFFICERS, EXECUTIVE COMPENSATION AND CORPORATE GOVERNANCE 80 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERSAND MANAGEMENT OF BGS CORP. PRIOR TO THE BUSINESS COMBINATION 91 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERSAND MANAGEMENT OF TRANSNETYX PRIOR TO THE BUSINESS COMBINATION 94 SECURITY OWNERSHIP OF THE COMBINED COMPANY AFTER THE BUSINESS COMBINATION 96 CERTAIN TRANSACTIONS 98 DESCRIPTION OF BGS CORP.’S SECURITIES DESCRIPTION OF THE COMBINED COMPANY’S SECURITIESFOLLOWING THE BUSINESS COMBINATION MATERIAL DIFFERENCES IN THE RIGHTS OF BGS CORP. SHAREHOLDERS FOLLOWING THE BUSINESS COMBINATION EXPERTS LEGAL MATTERS WHERE YOU CAN FIND ADDITIONAL INFORMATION INDEX TO FINANCIAL STATEMENTS F-1 ANNEX A AMENDED AND RESTATED MERGER AND SHARE EXCHANGE AGREEMENT A-1 ANNEX BFORM OF LOCK-UP AGREEMENT B-1 PART II-INFORMATION NOT REQUIRED IN PROSPECTUS II-1 EXHIBIT INDEX II-6 Annex A–Amended and Restated Merger and Share Exchange Agreement, dated August 13, 2013 Annex B–Form of Lock-up Agreement This document incorporates by reference important business and financial information about BGS Acquisition and BGS Corp. from documents that are not included in or delivered with this prospectus. These documents are available without charge to security holders of BGS Corp. upon written or oral request at the applicable company’s address and telephone number listed below: BGS Acquisition Corp. 6342 North Bay Road Miami Beach, FL 33141 Telephone: (305) 866-1102 Please be sure to include your complete name and address in your request. Please see “Where You Can Find Additional Information” to find out where you can find more information about BGS Acquisition, BGS Corp. and TransnetYX. ii TABLE OF CONTENTS USE OFCERTAIN TERMS As further set forth in this prospectus and unless otherwise indicated or where the context otherwise requires: · references to “BGS Corp.” refer to the registrant’s parent company, BGS Acquisition Corp., a British Virgin Islands business company with limited liability; · references to “BGS Acquisition” refer to the registrant, BGS Acquisition Subsidiary, Inc., a Delaware corporation and a wholly owned subsidiary of BGS Corp., whose name is expected to be changed to YX Genomics, Inc. just prior to the Business Combination; · references to “we,” “us,” “our,” “company” or “our company” refer to BGS Corp. prior to the Business Combination and BGS Acquisition following the Business Combination; · references to “TransnetYX” refer to TransnetYX Holding Corp., a Delaware corporation, and its subsidiaries, unless the context otherwise indicates, and the post-Transaction Merger Subsidiary of BGS Acquisition; · references to “Merger Sub” refer to BGS Merger Subsidiary, Inc., a Delaware corporation and wholly owned subsidiary of BGS Acquisition formed for the purpose of the Transaction Merger, whose name is expected to be changed to TransnetYX Holding Corp. in connection with the Transaction Merger and which is referred to in post-Transaction Merger periods as “TransnetYX;” · references to “Black Diamond” refer to Black Diamond Holdings LLC, a Colorado limited liability company and majority owner of TransnetYX; · references to the “Securities Act” refer to the United States Securities Act of 1933, as amended, and references to the “Exchange Act” refer to the United States Securities Exchange Act of 1934, as amended; · references to an “FPI” or “FPI status” refer to a foreign private issuer as defined by and determined pursuant to Rule 3b-4 of the Exchange Act; · references to the “Merger Agreement” refer to the Amended and Restated Merger and Share Exchange Agreement dated August 13, 2013 by and among BGS Corp., BGS Acquisition, Merger Sub, Black Diamond, Black Diamond Financial Group, LLC and TransnetYX; · references to the “Redomestication” refer to the merger of BGS Corp. with and into BGS Acquisition, a wholly owned subsidiary of BGS Corp., with BGS Acquisition surviving the merger; · references to the “Transaction Merger” refer to the transaction immediately following the Redomestication, pursuant to which TransnetYX will be merged with and into Merger Sub, a wholly owned subsidiary of BGS Acquisition, with Merger Sub surviving; · references to the “Business Combination” refer to the Redomestication together with the Transaction Merger; · references to the “Business Combination Deadline” refer to November 26, 2013; · references to “Ordinary Shares,” “BGS Corp. Warrants” and “Units” refer to securities of BGS Corp.; · references to “Common Stock” and “BGS Acquisition Warrants” refer to securities of BGS Acquisition; · references to the “Initial Shareholder” or “Sponsor” refer to Julio Gutierrez; iii TABLE OF CONTENTS · references to “FounderShares” refer to the Ordinary Shares held by the Initial Shareholder; · references to “Public Shares” refer to Ordinary Shares sold as part of the Units in BGS Corp.’s initial public offering (whether they were purchased in the offering or thereafter in the open market); · references to “public shareholders” refer to holders of Public Shares, including the Initial Shareholder and BGS Corp. management team to the extent the Initial Shareholder and/or members of the management team hold Public Shares, provided that the Initial Shareholder and each memberofmanagement shall be considered a “public shareholder” only with respect to any Public Shares held by them; · references to“Sponsor Warrants” refer to the BGS Corp. Warrants to purchase an aggregate of 3,266,667 Ordinary Shares, each exercisable for one Ordinary Share at $10.00 per share, issued in private placements thatoccurred prior to the consummation of BGS Corp.’s initial public offering; · references to “Public Warrants” refer to BGS Corp. Warrants that were sold as part of the Units in BGS Corp.’s initial public offering (whether they were purchased in the offering or thereafter in the open market); · references to “private placements” refer to the private placements of the Sponsor Warrants; · references to BGS Corp.’s “initial investors” refer to the following individuals: Julio Gutierrez, Claudia Gomez, Cesar Baez, Mariana GutierrezGarciaand John Grabski; · references to “underwriters” refer to the underwriters of BGS Corp.'s initial public offering; · references to “Companies Act” refers to theBVI Business Companies Act, 2004 of the British Virgin Islands; · references to the “memorandumand articles of association” refer to BGS Corp.’s memorandum and articles of association, as amended; and · all dollar amounts are in U.S. dollars unless otherwise indicated. iv TABLE OF CONTENTS SUMMARY OFTHE PROSPECTUS This summary highlights selected information from this prospectus but may not contain all of the information that may be important to you.Accordingly, we encourage you to read carefully this entire prospectus, including the Merger Agreement attached as Annex A.Please read these documents carefully as they are the legal documents that govern the Business Combination and your rights in the Business Combination. The Parties BGS Acquisition BGS Acquisition Subsidiary, Inc. 6342 North Bay Road Miami Beach, FL 33141 Telephone: (305) 866-1102 BGS Acquisition is a wholly owned subsidiary of BGS Corp. formed in June 2013 for the purpose of engaging in the Business Combination.BGS Acquisition will be the survivor of the Redomestication and will be the parent company of TransnetYX following the Transaction Merger.BGS Acquisition intends to change its name to YX Genomics, Inc. just prior to the Business Combination. BGS Corp. BGS Acquisition Corp. 6342 North Bay Road Miami Beach, FL 33141 Telephone: (305) 866-1102 BGS Corp. is a blank check company that was incorporated as a British Virgin Islands business company with limited liability on August 9, 2011 for the purpose of acquiring, engaging in a share exchange, share reconstruction and amalgamation with, contractual control arrangement with, purchasing all or substantially all of the assets of, or engaging in any other similar business combination with one or more operating businesses or assets. Prior to its initial public offering, BGS Corp. issued an aggregate of 1,725,000 Founder Shares, no par value, to the Initial Shareholder. On March 14, 2012, BGS Corp.’s directors approved a 1.125-for-1 reverse split of BGS Corp.’s outstanding Founder Shares, reducing the number of outstanding Founder Shares from 1,725,000 to 1,533,333. When BGS Corp.’s underwriters elected not to exercise their over-allotment option in connection with BGS Corp’s initial public offering, the Initial Shareholder forfeited 200,000 Founder Shares, pursuant to the terms of the private placement of the Founder Shares, and now owns 1,333,333 Founder Shares. BGS Corp. completed its initial public offering on March 26, 2012 of 4,000,000 Units at a purchase price of $9.50 per Unit (the offering price to the public of $10.00 per Unit minus the underwriters’ discount of $0.30 per Unit and deferred corporate finance fee of $0.20 per Unit).Each Unit included one Ordinary Share and one Public Warrant to purchase one Ordinary Share at an exercise price of $10.00 pursuant to BGS Corp.’s registration statement on Form F-1 (File No. 333-178780).Pursuant to private placements, BGS Corp. issued 3,266,667 Sponsor Warrants (together with the Public Warrants, the BGS Corp. Warrants).The offerings yielded total net proceeds to BGS Corp. of approximately $40,600,000, all of which was placed in a trust account established for the benefit of the BGS Corp.’s public shareholders. On March 21, 2012, the Units commenced trading on the NASDAQ Capital Market under the symbol “BGSCU.” On May 18, 2012, BGS Corp. was notified by its underwriters that the Units could be separated into the Ordinary Shares and BGS Corp. Warrants underlying the Units and commenced trading on the NASDAQ Capital Market under the symbols “BGSC” and “BGSCW,” respectively. Following the separation, the Units continue trading. 1 TABLE OF CONTENTS On September 23, 2013, BGS Corp. completed a tender offer, pursuant to which it offered the holders of Ordinary Shares the chance to tender their Ordinary Shares for cash rather than retain Ordinary Shares that are subject to the Business Combination Deadline of November 26, 2013, or the Extension Tender Offer.Upon completion of the Extension Tender Offer, BGS Corp. accepted for purchase 2,182,317 Ordinary Shares that were validly tendered and not properly withdrawn.As of November 15, 2013, approximately $18,449,482 was held in deposit in BGS Corp.’s trust account. TransnetYX TransnetYX Holding Corp. 8110 Cordova Road, Suite 119 Cordova, TN 38016 Phone: 901-507-0476 TransnetYX is a Delaware corporation formed in 2002 to develop an automated genotyping platform and provide genotyping testing services to various biotechnology and medical researchers. The company has two wholly owned subsidiaries, TransnetYX Inc., or TYX, a Tennessee corporation, which operates a molecular diagnostic laboratory and an animal genotyping business, and Harmonyx Diagnostics, Inc., or Harmonyx, a Tennessee corporation, which is developing, marketing and distributing products for pharmacogenomics, or PGx, testing services. TransnetYX is a molecular diagnostics processing company based in Memphis, Tennessee that provides 24-hour and 72-hour genetic testing in the animal genotyping market. Generally, genotyping is the process of determining genetic variants. Since launching these services in June 2004, TransnetYX has processed over 6.8 million genetic tests for researchers with a 99.93% accuracy rate for over 200 leading academic and pharmaceutical research customers throughout the U.S. and in Europe.To perform the testing needs of the research community, TransnetYX has developed a library of over 11,000 testing assays which allows it to test for more than 545,000 genetic strains and has developed an integrated order management, laboratory information management systems and laboratory process automation in order to cost-effectively process and accurately report the large testing volumes of the research community. Utilizing the same integrated processing platform, the TransnetYX laboratory, through Harmonyx, became Clinical Laboratory Improvement Amendment of 1988, as amended, or CLIA, approved in March 2011 and the first billable PGx test was completed in July 2011.CLIA approval enables TransnetYX to genotype human DNA and report the results to qualified health care professionals as defined by the United States Food and Drug Administration, or FDA.Human DNA genotyping can assist physicians in prescribing the proper drug therapies as guided by pharmaceutical companies, the FDA or research published by the industry in publications, such as the Journal of the American College of Cardiology or the American Heart Association. TransnetYX is currently only marketing the genetic test to determine genetic expression for the liver enzyme (CYP2C19).For Plavix® (clopidogrel) to be effective, it must be activated by a liver enzyme (CYP2C19) and some patients do not activate Plavix® sufficiently.This test is considered an InVitro Diagnostic Device by the FDA, which means the test must be ordered by a physician, the test must be processed in a CLIA certified facility and the results must be delivered to a qualified health care professional as defined by the FDA.While TransnetYX is licensed to perform genotyping tests as ordered by a FDA defined qualified health care professional, which includes physicians, substantially all of its revenues are derived from its Laboratory Animal Genotyping business described below. TransnetYX operates a molecular diagnostic laboratory to support these two business units: Laboratory Animal Genotyping and Personalized Medicine Genotyping. Laboratory Animal Genotyping Market TransnetYX performs laboratory animal genotyping on several species, including, mice, zebrafish, rats, ferrets, rabbits and goats. TransnetYX uses the same testing process regardless of the species being tested.Currently, approximately 90% of TransnetYX’s laboratory genetic screening is performed on mice. TransnetYX estimates that there are over 90 million mice worldwide bred in research breeding facilities, and of these mice about half are mutant mice, which means they have had genes knocked in or knocked out and will need to be genotyped to ensure the proper genetic strain for medical research.Genotype researchers generally perform this test by hand, which, because of the volume and complexity, can be time consuming and prone to clerical or procedural error when performed manually. 2 TABLE OF CONTENTS Personalized Medicine Genotyping Market Scientists, physicians and the pharmaceutical industry are actively developing ways to customize medical treatments to suit each person’s distinctive genetic signature. Pharmacogenomics is the analysis of a patient’s specific genetic expression in order to optimize their drug therapy to ensure maximum efficacy with minimal adverse effects. As with the animal testing market, the clinical researchers identify specific biomarkers which are portions of the genome that are most likely to affect the body’s reaction to a given treatment. This basic genetic test must yield a simple (yes/no) genotyping result for each of the biomarkers in the person being tested and TransnetYX’s automated testing process can identify and report the genotyping result quickly and accurately. Once these biomarkers are identified as affecting the response to a proposed treatment and the drug goes to market, the patient will need to be genotyped in order for the physician to prescribe a safe and effective drug therapy.The FDA currently lists over 120 drugs in which biomarkers that affect those drugs’ safety and efficacy have been identified.Some, but not all, of this list of FDA-approved drugs have pharmacogenomic information in their labels and include specific actions to be taken based on genetic information.TransnetYX’s integrated testing and results delivery process provides a cost-effective platform to process and accurately report the large testing volumes that the medical community may require to deliver the safe and effective drug therapies to their patients. Utilizing genotyping to assist in selection or dosage of a drug therapy is still in its infancy and is not yet considered standard of care for physicians. From June 2011 until November 2013, TransnetYX’s primary efforts to commercialize its PGx testing services were limited to direct marketing of its PGx testing services to physicians.To date, TransnetYX has had very limited success in convincing physicians to adopt PGx testing as a standard course of care.TransnetYX believes that the science supporting the benefits of identifying biomarkers that affect a drug therapy regimen is strong. TransnetYX primarily attributes the low physician adoption rate of PGx testing to the fact that medical associations such as the American Medical Association or the American Board of Cardiology have not taken the position that PGx testing should be the standard of care.In November 2013, TransnetYX adapted its marketing efforts to work with pharmacists to educate drug consumers about the safety and efficacy of drug therapy.TransnetYX believes that as pharmacists and consumers become more aware of the drugs that the FDA lists as having biomarkers that affect those drugs’ efficacy and safety, and understand that there is a simple test available to determine whether the drug prescribed is working and safe for an individual, patients will begin to demand this type of testing. The National Human Genome Research Institute states the following on its website (www.genome.gov): Depending on your genetic makeup, some drugs may work more or less effectively for you than they do in other people. Likewise, some drugs may produce more or fewer side effects in you than in someone else. In the near future, doctors will be able to routinely use information about your genetic makeup to choose those drugs and drug doses that offer the greatest chance of helping you. Pharmacogenomics may also help to save you time and money. By using information about your genetic makeup, doctors soon may be able to avoid the trial-and-error approach of giving you various drugs that are not likely to work for you until they find the right one. Using pharmacogenomics, the “best-fit” drug to help you can be chosen from the beginning. The Business Combination and the Merger Agreement Conditions to Effecting the Business Combination The securities to which this prospectus relates are issued in connection with the completion of the Business Combination.Prior to the Business Combination, as set forth in BGS Corp.’s memorandum and articles of association, BGS Corp. must have offered the holders of its Ordinary Shares the opportunity to redeem their Ordinary Shares for a cash amount equal to their pro rata share of the amount in a trust account established for the purposes of completing a business combination, rather than participating in the Business Combination, pursuant to a tender offer, or the Offer.If more than 832,461 Ordinary Shares are tendered in the Offer, then BGS Corp. will terminate the Offer and liquidate the company, and no Business Combination will be consummated.Following the completion of the Offer, the registration statement, of which this prospectus is a part, for the securities that are the subject of this prospectus, which includes the BGS Acquisition securities to be issued to the holders of BGS Corp. securities as a result of the Redomestication and the Common Stock to be issued to the TransnetYX stockholders as a result of the Transaction Merger, must have been declared effective.Finally, the conditions to the closing of the Transaction Merger must have been met or waived. The obligations of the parties to the Merger Agreement to consummate the Transaction Merger are subject to the satisfaction (or waiver by applicable party) of certain conditions before consummation of the Transaction Merger, including the following conditions, the first two of which are completely unwaivable: ● The Redomestication shall have been consummated and the applicable filings made in the appropriate jurisdictions. ● The SEC shall have declared the Registration Statement of which this prospectus is a part effective.No stop order suspending the effectiveness of such registration statement or any part thereof shall have been issued. ● The cash available to BGS Acquisition immediately prior to the Transaction Merger shall be an amount no less than $10.0 million, which shall be used to (1) provide $6.0 million in working capital to the survivor entity, Merger Sub, which will include the payment of certain Business Combination-related expenses, the delivery of $200,000 of which may be waived in the sole discretion of Black Diamond, and (2) pay at least $4.0 million to the stockholders of TransnetYX on a pro rata basis. Only after all of those events have occurred, including the Redomestication, may the Transaction Merger occur.Pursuant to BGS Corp.’s memorandum and articles of association, the Business Combination must be completed no later than November 26, 2013.For additional information on conditions to the consummation of the Transaction Merger, see “The Merger Agreement—Conditions to Closing of the Transaction Merger.” Redomestication to Delaware BGS Corp. will effect a merger in which it will merge with and into BGS Acquisition, with BGS Acquisition surviving the merger.BGS Acquisition was formed in June 2013 for the purposes of effectuating the Business Combination.Its Chief Executive Officer is Cesar Baez, BGS Corp.’s Chief Executive Officer. At the time of the Redomestication: ● Assuming no Public Shares are tendered pursuant to the Offer, each of the 1,817,683 Public Shares then outstanding will be converted automatically into one substantially equivalent share of BGS Acquisition’s Common Stock; ● The 1,333,333 Founder Shares will be converted automatically into 666,667 shares of Common Stock which will not be transferable until the date (1) with respect to 25% of such Common Stock, that the closing price of the Common Stock exceeds $12.00 for any 20 trading days within a 30-trading day period following the consummation of the Business Combination, (2) with respect to 25% of such Common Stock, that the closing price of the Common Stock exceeds $13.50 for any 20 trading days within a 30-trading day period following the consummation of the Business Combination, (3) with respect to 25% of such Common Stock, that the closing price of the Common Stock exceeds $15.00 for any 20 trading days within a 30-trading day period following the consummation of the Business Combination, and (4) with respect to 25% of such Common Stock, that the closing price of the Common Stock exceeds $17.00 for any 20 trading days within a 30-trading day period following the consummation of the Business Combination; 3 TABLE OF CONTENTS ● Each of the 4,000,000 Public Warrants will be converted into a substantially equivalent warrant to purchase Common Stock, each exercisable for one share of Common Stock at $10.00 per share, or the BGS Acquisition Warrants; ● Each of the 3,266,667 Sponsor Warrants will be converted into 1/20th of a share of Common Stock for a total of 163,333 shares of Common Stock, one-half of which will not be transferable until the date when the closing price of the Common Stock exceeds $12.00 for any 20 trading days within a 30-trading day period following the consummation of the Business Combination and one-half of which will not be transferable until the date when the closing price of the Common Stocks exceeds $13.50 for any 20 trading days within a 30-trading day period following the consummation of the Business Combination; and · Each of the 340,000 unit purchase options of BGS Corp. held by the underwriters will be converted into one substantially equivalent purchase option to acquire one share of Common Stock and one BGS Acquisition Warrant. Upon effectiveness of the Redomestication, BGS Corp. will cease to exist and BGS Acquisition will be the surviving corporation.As a result, BGS Acquisition will assume all the property, rights, privileges, agreements, powers and franchises, debts, liabilities, duties and obligations of BGS Corp., including any and all agreements, covenants, duties and obligations of BGS Corp. set forth in the Merger Agreement.Immediately following the Redomestication, but prior to the Transaction Merger, the organizational structure of BGS Acquisition will be as follows: For further information regarding the Merger Agreement, see “The Merger Agreement” beginning on page36of this prospectus. 4 TABLE OF CONTENTS Merger with TransnetYX; Merger Consideration Immediately following the Redomestication, TransnetYX will be merged with and into Merger Sub, a Delaware corporation and wholly owned subsidiary of BGS Acquisition.The organizational structure of BGS Acquisition and TransnetYX immediately following the Transaction Merger will be as follows: Pursuant to the terms of the Merger Agreement, in exchange for all of the outstanding shares of TransnetYX common stock, BGS Acquisition will issue to the stockholders of record of TransnetYX 8,000,000 shares of Common Stock on a pro rata basis and will pay a maximum of $15.0 million in cash, up to $11.0 million of which may be paid in additional shares of Common Stock if there is not adequate cash to accommodate a $15.0 million payment to the stockholders of TransnetYX and have approximately $6.0 million available in the surviving company for payment of transaction expenses and for working capital purposes.Two million of the shares of Common Stock held by Black Diamond, or the Lock-up Common Stock, immediately following the Transaction Merger will be subject to a lock-up agreement, or the Lock-up Agreement, that will limit Black Diamond’s ability to dispose of the Lock-up Common Stock until the earlier of the post-Business Combination operating company achieving gross revenues in fiscal year 2015 in excess of $60.0 million or December 31, 2020.A copy of the Lock-up Agreement is attached hereto as Annex B.In addition, TransnetYX stockholders will be entitled to receive up to an additional 8,000,000 shares of the Common Stock on a pro rata basis as an earn out based on the gross revenues of TransnetYX in fiscal year 2015, which we refer to as the Earn-Out Common Stock. To the extent the gross revenues of TransnetYX in the fiscal year ended December 31, 2015 exceed $40.0 million, BGS Acquisition will issue to the stockholders of TransnetYX, on a pro rata basis, a number of shares of BGS Acquisition Common Stock equal to certain percentages of gross revenues in accordance with the following table: Gross Revenues Percentage of Gross Revenue Shares to be Issued as a Percentage of Gross Revenue ≤$45 million 10% 4,000,000 up to 4,500,000 >$45 million up to $50 million 12% up to an additional 600,000 >$50 million up to $55 million 16% up to an additional 800,000 >$55 million up to $60 million 22% up to an additional 1,100,000 >$60 million and up 30% up to an additional 1,000,000 5 TABLE OF CONTENTS The approximate dollar value of the merger consideration to be paid in cash and Common Stock by BGS Acquisition pursuant to the Merger Agreement is $95.0 million, assuming no Earn-out Common Stock is issued, or $175 million, assuming all 8,000,000 shares of Earn-out Common Stock are issued, in each case based on the purchase price of the Ordinary Shares of $10.00. Prior to the Business Combination, as set forth in BGS Corp.’s memorandum and articles of association, BGS Corp. must complete the Offer. The consummation of the Business Combination, pursuant to BGS Corp.’s memorandum and articles of association, is conditioned upon BGS Acquisition maintaining $5,000,001 in net tangible assets following the consummation of the Offer.Pursuant to the Merger Agreement, BGS Acquisition will be required to have at least $10.0 million in cash to close the Business Combination, which will be used to (1) provide approximately $6.0 million in working capital to the survivor entity, Merger Sub, which will include the payment of certain Business Combination-related expenses, and (2) pay at least $4.0 million to the stockholders of TransnetYX on a pro rata basis. After the Business Combination, assuming no redemptions of Ordinary Shares for cash in the Offer, BGS Corp.’s current public shareholders will own approximately 16.3% of BGS Acquisition, BGS Corp.’s current directors, officers and affiliates will own approximately 7.0% of BGS Acquisition, and the pre-Business Combination stockholders of TransnetYX will own approximately 75.5% of BGS Acquisition.Assuming redemption by holders of 832,461 of BGS Corp.’s outstanding Public Shares in the Offer, BGS Corp. public shareholders will own approximately 8.8% of BGS Acquisition, BGS Corp.’s current directors, officers and affiliates will own approximately 7.0% of BGS Acquisition, and the pre-Business Combination stockholders of TransnetYX will own approximately 81.6% of BGS Acquisition. Business Combination Deadline Tender Offer On September 23, 2013, BGS Corp. completed the Extension Tender Offer, pursuant to which it offered the holders of Ordinary Shares the chance to tender their Ordinary Shares rather than retain Ordinary Shares that would be subject to a Business Combination Deadline of November 26, 2013.BGS Corp. purchased 2,182,317 Ordinary Shares for cash in the Extension Tender Offer, leaving 3,151,016 Ordinary Shares outstanding, including 1,817,683 Public Shares.If more than 832,461 Ordinary Shares are tendered in the Offer, BGS Corp. will not be able to close the Business Combination by the Business Combination Deadline. The Registration Rights Agreement Pursuant to the Merger Agreement, BGS Acquisition agreed to enter into a Registration Rights Agreement with Black Diamond and the TransnetYX stockholders that provides for the registration of the Earn-out Common Stock and the Lock-up Common Stock prior to the consummation of the Business Combination; however, such covenant has been waived in connection with BGS Acquisition registering the Earn-out Common Stock and the Lock-up Common Stock pursuant to the registration statement of which this prospectus is a part. Reasons for BGS Corp. and TransnetYX to Enter into the Business Combination The board of directors of BGS Corp. concluded that the Business Combination and the related transactions are in the best interests of BGS Corp.’s shareholders. In reaching its decision the board of directors of BGS Corp. considered various industry and financial data and due diligence and publicly available evaluation materials provided by TransnetYX. For a more complete discussion of these factors, see “The Merger Agreement—BGS Corp.’s Reasons to Enter into the Transaction” beginning on page46of this prospectus. The TransnetYX board of directors considered many factors in concluding that the terms of the Transaction Merger are advisable, consistent with, and in furtherance of, the strategies and goals of TransnetYX and recommending the approval and adoption of the Merger Agreement by the TransnetYX stockholders. For a more complete discussion of these factors, see “The Merger Agreement—TransnetYX’s Reasons to Enter into the Transaction” beginning on page47of this prospectus. 6 TABLE OF CONTENTS Interests of Certain Persons in the Business Combination BGS Corp.’s directors and officers have interests in the Business Combination that are different from, or in addition to, the interests of its shareholders, including: ● If the proposed Business Combination is not completed by the Business Combination Deadline, BGS Corp. will be required to liquidate.In such event, the 1,333,333 Founder Shares held by Julio Gutierrez, BGS Corp.’s chairman of the board (also referred to herein as BGS Corp.’s Sponsor or Initial Shareholder), and the 2,333,333 Sponsor Warrants collectively owned by BGS Corp.’s officers, directors and chairman will expire worthless.Such Founder Shares and Sponsor Warrants had an aggregate market value of approximately $13.8million based on the closing price of the Ordinary Shares of $10.15and BGS Corp. Warrants of $0.105, on the NASDAQ Capital Market as of November 14, 2013.The directors, officers and chairman of BGS Corp. purchased the 2,333,333 Sponsor Warrants for an aggregate purchase price of approximately $1.75 million, or $0.75 per Sponsor Warrant. ● Unless BGS Corp. consummates the Business Combination, its officers, directors and chairman will not receive reimbursement for any out-of-pocket expenses incurred by them to the extent that such expenses exceeded the amount of its working capital.As of November 15, 2013, BGS Corp.’s officers, directors and chairman were entitled to $1,755,571 in reimbursable expenses.As a result, the financial interest of BGS Corp.’s officers, directors and its chairman or their affiliates could influence its officers’ and directors’ motivation in pursuing TransnetYX as a target and therefore there may be a conflict of interest when the directors and officers determine whether the Business Combination is in the BGS Corp. shareholders’ best interests. ● BGS Corp.’s chairman has contractually agreed that, if BGS Corp. liquidates prior to the consummation of a business combination, he will be personally liable to ensure that the proceeds in the trust account are not reduced below $10.15 per share by the claims of target businesses or claims of vendors or other entities that are owed money by BGS Corp. for services rendered or contracted for or products sold to it.Therefore, BGS Corp.’s chairman has a financial interest in consummating any business combination, thereby resulting in a conflict of interest.BGS Corp.’s chairman or his affiliates could influence BGS Corp.’s officers’ and directors’ motivation in pursuing TransnetYX as a target and therefore there may be a conflict of interest when the directors and officers determine whether the Business Combination is in the BGS Corp. shareholders’ best interests. ● If the Business Combination with TransnetYX is completed, Patrick Imeson and Robert Bean of TransnetYX and Cesar Baez of BGS Corp. will serve as directors of BGS Acquisition.Additionally, if the Business Combination is completed, George Caravias, Michael Feinberg, Kenneth Hamlet and Mark Hoffman will serve as independent members of the board of directors of BGS Acquisition. ● The exercise of BGS Corp.’s directors’ and officers’ discretion in agreeing to changes or waivers in the terms of the transaction may result in a conflict of interest when determining whether such changes or waivers are appropriate and in best interests of BGS Corp.’s shareholders. Shareholder Meeting On September 13, 2013, shareholders of BGS Corp. approved an amendment to the memorandum and articles of association to extend the Business Combination Deadline from September 26, 2013 to November 26, 2013, or the Extension Amendment, and approved an amendment to the Investment Management Trust Agreement, or the IMTA, by and between BGS Corp. and Continental Stock Transfer & Trust Company entered into at the time of BGS Corp.’s initial public offering to (1) permit the withdrawal from the trust account of an amount sufficient to purchase the Public Shares validly tendered and not withdrawn in the Extension Tender Offer and (2) extend the date on which to liquidate the trust account in accordance with the IMTA to November 26, 2013 (the IMTA Amendment). 7 TABLE OF CONTENTS Appraisal Rights There is no vote of BGS Corp. shareholders required for the approval of the Business Combination, and accordingly, therewere no appraisal rights in relation to mattersconsidered at the Shareholder Meeting.However, BGS Corp. shareholders will have appraisal rights in relation to the Redomestication.A shareholder electing to dissent from the Redomestication is required to give BGS Corp. a written notice of its decision to dissent within 20 days immediately following the date when the copy of a plan of merger approved by BGS Corp. in connection with the Redomestication or an outline of the plan of merger is given to the shareholder under the Companies Act.See “Description of BGS Corp.’s Securities—Appraisal Rights.” In connection with the Transaction Merger, record holders of TransnetYX common stock who comply with the procedures summarized in “Merger Agreement—Appraisal Rights” will be entitled to appraisal rights if the Transaction Merger is completed. Anticipated Accounting Treatment The Transaction Merger will be accounted for as a “reverse merger” and recapitalization since the sellers of TransnetYX will control the combined company immediately following the completion of the transaction.TransnetYX will be deemed to be the accounting acquirer in the transaction and, consequently, the transaction is treated as a recapitalization of TransnetYX.Accordingly, the assets and liabilities and the historical operations that are reflected in the financial statements will be those of TransnetYX and will be recorded at the historical cost basis of TransnetYX.BGS Corp.’s assets, liabilities and results of operations will be consolidated with the assets, liabilities and results of operations of TransnetYX after consummation of the acquisition. Regulatory Approvals The Redomestication, the Transaction Merger and the other transactions contemplated by the Merger Agreement are not subject to any additional federal or state regulatory requirements or approvals, including the Hart-Scott-Rodino Antitrust Improvements Act of 1976, except for filings with the State of Delaware and with the Registry of Corporate Affairs in the British Virgin Islands necessary to effectuate the transactions contemplated by the Merger Agreement. 8 TABLE OF CONTENTS BGS CORP. SUMMARY FINANCIALINFORMATION The data below for the period from August 9, 2011 (date of incorporation) to July 31, 2012 and the year ended July 31, 2013 has been derived from BGS Corp.’s audited financial statements for such periods, which are included elsewhere in this prospectus. The information presented below should be read in conjunction with “Capitalization” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations of BGS Corp.” beginning on pages27and77, respectively, of this prospectus and BGS Corp.’s audited and unaudited financial statements and notes thereto beginning on pagesF-3andF-7, respectively, of this prospectus. Statement of Operations Data: For the Year Ended July 31, For the Period from August 9, 2011 (date of incorporation) to July 31, 2012 (as restated) Revenue $

EXHIBIT 32.2 CERTIFICATION PURSUANT TO 18 U.S.C. §1350, AS ADOPTED PURSUANT TO SECTION -OXLEY ACT OF 2002 In connection with the Quarterly Report of Imperial Resources, Inc. (the “Company”) on Form 10-Q for the period ended December 31, 2011 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Mike Mackey, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in this Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: February 20, 2012 By: /s/ Mike Mackey Mike Mackey Chief Financial Officer, Principal Financial and Accounting Officer A signed original of this written statement required by Section 906 has been provided to Imperial Resources, Inc. and will be retained by Imperial Resources, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

Exhibit 10.2 AMENDMENT NO. 3 This AMENDMENT NO. 3, dated as of March 23, 2009 (“Amendment No. 3”), is entered into by and among DAYTON SUPERIOR CORPORATION, a Delaware corporation (the “Borrower”), the persons designated as “Lenders” on the signature pages hereto (the “Lenders”), and GENERAL ELECTRIC CAPITAL CORPORATION (“GE Capital”), a Delaware corporation, as administrative agent (in such capacity, the “Administrative Agent”). WHEREAS, the Borrower, the other Loan Parties, the Lenders and GE Capital, as administrative agent and collateral agent, are party to the Term Loan Credit Agreement dated as of March 3, 2008 (as amended by Amendment No. 1, dated as of June 4, 2008, and Amendment No. 2, dated as of March 16, 2009, the “Original Credit Agreement”; all capitalized terms defined in the Original Credit Agreement and not otherwise defined herein to have the meanings assigned thereto in the Original Credit Agreement); and WHEREAS, the Borrower wishes to amend the Original Credit Agreement in the manner set forth below; and WHEREAS, the Lenders, subject to the terms and conditions of this Amendment No. 3, are willing to amend the Original Credit Agreement as provided herein. NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, the Borrower and the Lenders agree as follows: Section 1. AMENDMENT Subject to the satisfaction of the condition to effectiveness referred to in Section 3 below, the Original Credit Agreement is hereby amended as follows:        (a)  Section 1.1 of the Original Credit Agreement is hereby amended by adding in the appropriate alphabetical places the following definitions: ‘“Amendment No. 3’ means Amendment No. 3 to this Agreement dated as of March 23, 2009 among the Borrower, the Administrative Agent and the Lenders signatory thereto.” ‘“Amendment No. 3 Effective Date’ means March 23, 2009.”        (b)  The definition of the term “Base Rate” appearing in Section 1.1 of the Original Credit Agreement is amended and restated in its entirety as follows: ‘“Base Rate’ means the greatest of (i) the rate last quoted by The Wall Street Journal as the “Prime rate” (viz., as of the date hereof, the base rate posted by 70% of the nation’s largest banks) in the United States or, if The Wall Street Journal ceases to quote such rate, the highest per annum interest rate published by the Federal Reserve Board in Federal Reserve Statistical Release H.15 (519) (Selected Interest Rates) as the “bank prime loan” rate or, if such rate is no longer quoted therein, any similar rate quoted therein (as determined by the Administrative Agent) or any similar release by the Federal Reserve Board (as determined by the Administrative Agent), (ii) 400 basis points in excess of the Federal Funds Rate, (iii) 4.25% per annum and (iv) a per annum rate equal to the Eurodollar Rate calculated based on an Interest Period of three months plus the difference between the Applicable Margin for Eurodollar Rate Loans and the Applicable Margin for Base Rate Loans.”        (c)  The definition of the term “Scheduled Maturity Date” appearing in Section 1.1 of the Original Credit Agreement is amended and restated in its entirety as follows: “‘Scheduled Maturity Date’ means April 9, 2009.”        (d)  Section 2.9(b)(i) of the Original Credit Agreement is hereby amended by inserting the following immediately prior to the word “and” which ends such Section 2.9(b)(i): “, provided, that from and after the Amendment No. 3 Effective Date, in lieu of payments every three months from the first day of such Interest Period, payments of interest on Eurodollar Loans shall be made on the last day of each calendar month within such Interest Period,”.        (e)  Section 2.10(a) of the Original Credit Agreement is hereby amended by adding the following sentence at the end of such Section 2.10(a): “Notwithstanding anything to the contrary contained in this Agreement, from and after the Amendment No. 3 Effective Date, no Interest Period other than a one month Interest Period may be selected for the conversion to or continuation of any Eurodollar Rate Loan.”        (f)  Section 6.1(c) of the Original Credit Agreement is amended by inserting the following immediately after the phrase “90 days” appearing in such Section 6.1(c): “(or, in the case of the Fiscal Year ended December 31, 2008, 120 days)”.        (g)  Section 6 of the Original Credit Agreement is amended by adding the following Sections 6.9 and 6.10 at the end of such Section 6 as follows: “Section 6.9.  Additional Information.   In addition, from and after the Amendment No. 3 Effective Date, weekly, on Friday of each week, the Borrower shall deliver (i) to the Administrative Agent and the Lenders a Borrowing Base Certificate (as defined as of the date hereof in the Revolving Credit Agreement) with respect to Borrower and its Domestic Subsidiaries, accompanied by such supporting detail and documentation as has been delivered to the Revolving Credit Administrative Agent (other than any third party valuation reports prepared for the Revolving Credit Administrative Agent), as provided for therein in connection with a Borrowing Base Certificate and (ii) to the Administrative Agent and the Lenders, a 13 week rolling cash flow forecast, together with an explanation of the differences from the prior cash flow forecast, in each case, in form and substance satisfactory to the Lenders. Borrower shall also deliver to the Administrative Agent and the Lenders all term sheets, engagement letters, letters of intent, agreements in principle and definitive agreements and, to the extent requested by the Administrative Agent or any Lender, other material documents, in each case relating to efforts by or on behalf of Borrower to raise debt or equity capital or to sell Borrower, and Borrower agrees not to enter into any such agreement that is subject to confidentiality provisions that prohibit disclosure thereof to the Administrative Agent and the Lenders.  Borrower shall conduct weekly telephone calls with the Administrative Agent, the other Lenders who wish to participate, the advisors to the Administrative Agent and to the Lenders and the financial advisors to the Borrower. Such telephone calls may be conducted concurrently with those required by Section 6.9 of the Revolving Credit Agreement. From time to time, at the request of the Administrative Agent or any Lender, Borrower shall deliver to the Administrative Agent and the Lenders lists of all financial advisors retained by Borrower and descriptions of the compensation arrangements made with such financial advisors, and shall provide to the Administrative Agent and the Lenders access to such advisors and such other information as the Administrative Agent or any Lender may request with respect to work being performed by such advisors on behalf of the Borrower. 2 Section 6.10.  Additional Deliveries. Concurrently with delivering or giving any financial statement, certificate, report, notice or writing, or providing other information, under the foregoing provisions of Section 6, Borrower will deliver a copy of such financial statement, certificate, report, notice or writing or provide such other information to the Lenders.”        (h)  Section 7.7 of the Original Credit Agreement is hereby amended and restated in its entirety as follows: “Section 7.7.  Access to Books and Records.  Each Group Member shall permit the Administrative Agent, the Lenders and any Related Person of any of them and any financial advisor to the Lenders or legal counsel to the Administrative Agent or to the Lenders (other than the Administrative Agent), as often as reasonably requested, at any reasonable time during normal business hours and with reasonable advance notice (except that, during the continuance of an Event of Default, no such notice shall be required) to (a) visit and inspect the property of each Group Member and examine and make copies of and abstracts from, the corporate (and similar), financial, operating and other books and records of each Group Member, (b) discuss the affairs, finances and accounts of each Group Member with any officer or director of any Group Member and (c) communicate directly with any registered certified public accountants (including the Group Members’ Accountants); provided that if such visit or inspection occurs at any time when no Default has occurred and is continuing, such visit or inspection shall be coordinated through the Administrative Agent.  Each Group Member shall authorize its respective registered certified public accountants (including the Group Members’ Accountants) to communicate directly with the Administrative Agent, the Lenders and their Related Persons and with any financial advisor to the Lenders or legal counsel to the Administrative Agent or the Lenders, and to disclose to the Administrative Agent, the Lenders and their Related Persons and any financial advisor to the Lenders or legal counsel to the Administrative Agent or the Lenders all financial statements and other documents and information as they might have and the Administrative Agent or any Lender reasonably requests with respect to any Group Member.” 3        (i)  Section 7.11(c) of the Original Credit Agreement is hereby amended by inserting the following immediately prior to the period that ends such Section 7.11(c): “, provided, however, that notwithstanding the foregoing, from and after the Amendment No. 3 Effective Date, whether or not any Event of Default is continuing, the Administrative Agent may direct, and at the direction of the Required Lenders shall direct, that all cash or securities in any Controlled Deposit Account (other than Borrower’s disbursement account into which proceeds of the Loans under (and as such term is defined in) the Revolving Credit Agreement are deposited) or Controlled Securities Account be transferred on a daily basis to a deposit account maintained by and in the name of the Administrative Agent (which may be the deposit account described in Section 2.13(a)) for application to the Obligations”.        (j)  Section 8.16 of the Original Credit Agreement is hereby amended by amending and restating clause (ii) thereof in its entirety as follows:  “(ii)          Liens permitted by Section 8.2(a) or Section 8.2(b),”        (k)  Section 9.1 of the Original Credit Agreement is hereby amended by (i) replacing the period ending paragraph (h) of such Section 9.1 with “; or” and (ii) adding the following immediately thereafter: “(i)  the Borrower shall extend the expiration date of the Exchange Offer and Consent Solicitation Relating to Debt Securities Issued by Dayton Superior Corporation, issued by the Borrower on July 15, 2008 (the “Exchange Offer”), to a date beyond April 9, 2009 or shall accept any of the Senior Subordinated Notes pursuant to the Exchange Offer. (j)  the Borrower shall fail on or prior to April 9, 2009 to negotiate and deliver to the Administrative Agent a letter of intent or definitive term sheet for the acquisition of the Borrower by a Person acceptable to the Lenders on terms and conditions satisfactory to the Lenders; or (k)  the Borrower shall fail to pay on or prior to 5:00 p.m. (New York time) on March 23, 2009, to the Administrative Agent, Gibson, Dunn & Crutcher LLP or King & Spalding LLP, in each case, in immediately available funds, the  fees and expenses and respective deposits described in Section 2(a) of Amendment No. 3.” 4        (l)  Section 9.2 of the Original Credit Agreement is amended by replacing the phrase “During the continuance of any Event of Default, the Administrative Agent may, and, at the request of the Required Lenders shall,” with the phrase “During the continuance of any Event of Default the Administrative Agent (so long as General  Electric Capital Corporation is the Administrative Agent) may, or (so long as (x) General Electric Capital Corporation is not the Administrative Agent and (y) the “Obligations” under and as such term is defined in the Revolving Credit Agreement have been or are concurrently being, accelerated), General Electric Capital Corporation may, and at request of the Required Lenders, the Administrative Agent shall,”.        (m)  Section 10.9(a) of the Original Credit Agreement is amended by amending and restating the first sentence thereof in its entirety as follows:  “The Administrative Agent may resign at any time and shall resign upon the written request of the Required Lenders in the event that an Event of Default is continuing, in each case by delivering notice of such resignation to the Lenders and the Borrower, effective on the date set forth in such notice (which date shall, in the case of a resignation upon request of the Required Lenders, be the date specified in such request, if any, provided that such date is no earlier than 5 days and no later than 30 days after the date such request is sent) or, if no such date is set forth therein, upon the date such notice shall be effective.”        (n)  Section 11.1(a)(iv) of the Original Credit Agreement is amended by replacing the phrase “or to the application of any payment, including as set forth in Section 2.12” with the phrase “but shall apply to the application of all payments, including as set forth in Section 2.12.”        (o)  Section 11.1(a)(vii) of the Original Credit Agreement is amended by inserting immediately prior to the semicolon ending such section the following “or change to a lesser percentage or number of Lenders any requirement that the Lenders approve any document or documents, event or circumstance”.        (p)  Section 11.3(c) of the Original Credit Agreement is amended by replacing the text “including fees and disbursements of counsel, limited, solely in the case of Lenders other than the Administrative Agent, to one legal counsel” at the end of such Section 11.3(c) with the following text: “including fees and disbursements of (x) one legal counsel to the Administrative Agent (or, if GE Capital shall no longer be the Administrative Agent, one legal counsel to GE Capital) and (y) one legal counsel to, collectively, the Lenders other than GE Capital, which shall be selected by such Lenders (or, upon written notice from any such Lender to the Borrower that such Lenders do not wish to be represented by the same legal counsel, 50% of the fees and disbursements of one legal counsel to each such other Lender individually, to be selected in each case by each such other Lender, provided that no such Lender may select Gibson, Dunn & Crutcher LLP as its legal counsel in such event, and Gibson, Dunn & Crutcher LLP shall resign as counsel to such other Lenders upon joint written request of such other Lenders and payment of all accrued fees and disbursements of Gibson, Dunn & Crutcher LLP through such date of resignation), and one financial advisor to the Lenders”. 5 Section 2. FEES AND EXPENSES        (a)  On or prior to 5:00 p.m. (New York time) on March 23, 2009, Borrower shall promptly pay to Administrative Agent all reasonable costs, expenses and charges incurred by Administrative Agent in connection with the preparation, negotiation, execution and delivery of this Agreement and any documents and instruments relating hereto pursuant to and consistent with Section 11.3 of the Credit Agreement.  On or prior to 5:00 p.m. (New York time) on March 23, 2009, the Borrower shall deposit with Gibson, Dunn & Crutcher LLP, counsel for Davidson Kempner Capital Management LLC and Silverpoint Capital, L.P., as Lenders, $50,000 to be applied toward payment of legal fees and disbursements of Gibson, Dunn & Crutcher LLP, and shall deposit with King & Spalding LLP, counsel for Administrative Agent, $25,000 to be applied toward payment of legal fees and expenses of King & Spalding LLP, in each case as incurred, in representation of such Lenders and the Administrative Agent, as the case may be, in connection with this Amendment No. 3 and the preservation of their rights and any potential restructuring, as provided under Section 11.3(c) of the Original Credit Agreement; and the Borrower agrees to pay all such fees and expenses, if any, in excess of such amount, to the extent payable under Section 11.3(c) of the Original Credit Agreement, upon demand by such Lenders or the Administrative Agent, as the case may be.  Borrower also confirms its obligation under Section 11.3 of the Credit Agreement to reimburse all reasonable costs, fees and expenses of an independent financial consultant selected by the Administrative Agent and the Revolving Credit Administrative Agent (as retained by independent counsel to the Administrative Agent and the Revolving Credit Administrative Agent); provided, that the Required Lenders may, in their sole discretion, on behalf of the Lenders, select an independent financial consultant to the Lenders to be retained by one or more of the Lenders or counsel to one of more of the Lenders, in any case, as determined by the Required Lenders, and notwithstanding anything in Section 11 of the Credit Agreement to the contrary, Borrower shall reimburse all reasonable costs, fees and expenses of such financial consultant, and Administrative Agent shall not be entitled to reimbursement by Borrower for the costs or expenses of a separate financial consultant to Administrative Agent, in its capacity as such.          (b)  In consideration of the execution by Administrative Agent and the Lenders of this Agreement and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, each Lender signing this Agreement shall earn a non-refundable fee, payable by Borrower on the Amendment No. 3 Effective Date to Administrative Agent for the pro rata benefit of such Lenders without offset, deduction or withholding of any kind, in an amount equal to 3.0% of such Lender’s outstanding Term Loans under the Credit Agreement as of the date hereof (without giving effect to this Agreement).  Such fee shall be paid-in-kind and capitalized as an additional principal amount of the Term Loans, and which shall, at the request of any Lender to whom such capitalized fee is owing, be evidenced by PIK Notes in the form of Exhibit K attached to the Credit Agreement. 6 Section 3. CONDITIONS TO EFFECTIVENESS This Amendment No. 3 shall be effective as of March 23, 2009 (the “Amendment No. 3 Effective Date”), subject to and upon satisfaction on or prior to such date of the following conditions: (i) receipt by the Administrative Agent of one or more counterparts of this Amendment No. 3 executed and delivered by the Borrower, the Administrative Agent and the Lenders, (ii) receipt by the Administrative Agent of evidence satisfactory to the Administrative Agent that the Revolving Credit Agreement has been amended (or is concurrently being amended) pursuant to an amendment in the form of Annex I hereto (the “Revolving Credit Facility Amendment”), (iii) receipt by the Administrative Agent of a certificate of a Responsible Officer that no Default or Event of Default has occurred or is continuing, and (iv) the Borrower shall have delivered a PIK Note to each Lender that has made a request therefor of the Borrower representing such Lender’s pro rata portion of the principal amount of the fee referred to in, and capitalized pursuant to, Section 2(b) hereof. Section 4. LIMITATION ON SCOPE Except as expressly amended hereby, all of the representations, warranties, terms, covenants and conditions of the Loan Documents shall remain in full force and effect in accordance with their respective terms.  The amendment set forth herein shall be limited precisely as provided for herein and shall not be deemed to be a waiver of, amendment of, consent to or modification of any term or provision of the Loan Documents or any other document or instrument referred to therein or of any transaction or further or future action on the part of the Borrower or any other Loan Party requiring the consent of the Administrative Agent or Lenders except to the extent specifically provided for herein.  The Administrative Agent and Lenders have not and shall not be deemed to have waived any of their respective rights and remedies against the Borrower or any other Loan Party for any existing or future Defaults or Event of Default. Section 5. MISCELLANEOUS        (a)  The Borrower hereby represents and warrants that (i) this Amendment No. 3 has been duly authorized and executed by it, and the Original Credit Agreement, as amended by this Amendment No. 3, is its legal, valid and binding obligation, enforceable in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, moratorium and similar laws affecting the rights of creditors in general; (ii) this Amendment No. 3 is being delivered in the State of New York; and (iii) each of the representations and warranties made or deemed made by Borrower under the Original Credit Agreement is true and correct as of the date of this Amendment No. 3. 7        (b)  The Borrower hereby ratifies and confirms the Original Credit Agreement as amended hereby, and agrees that, as amended hereby, the Original Credit Agreement remains in full force and effect.        (c)  The Borrower hereby acknowledges, confirms and agrees that, as of the date hereof, the security interests and liens granted to the Administrative Agent on behalf of itself and the Secured Parties under the Original Credit Agreement and the other Loan Documents securing the Obligations are in full force and effect, are properly perfected and are enforceable in accordance with the terms of the Credit Agreement and the other Loan Documents.        (d)  The Borrower hereby acknowledges, confirms and agrees that as of the Amendment No. 3 Effective Date (giving effect to the provisions of this Amendment No. 3), the Borrower is in the aggregate indebted to the Administrative Agent and Lenders for Term Loans under the Loan Documents in the principal amount of $102,227,500, and that all such obligations under the Credit Agreement owing by the Borrower together with interest accrued and accruing thereon, and all fees, costs, expenses and other charges now or hereafter payable by the Borrower to the Administrative Agent and each Lender pursuant to the terms of the Loan Documents and this Amendment No. 3, are unconditionally owing by the Borrower to each Lender, without offset, defense or counterclaim of any kind, nature or description whatsoever        (e)  The Administrative Agent and each Lender party to this Amendment No. 3 hereby consents to the amendments and modifications set forth in that certain Revolving Credit Facility Amendment attached hereto as Annex I.        (f)  The Borrower hereby represents and warrants as of the date hereof in favor of the Administrative Agent and each Lender that each and every representation and warranty heretofore made by the Borrower in the Original Credit Agreement and the other Loan Documents is true and correct as if made on the date hereof (except to the extent such representations and warranties expressly relate to an earlier date in which case such representations and warranties were true and correct in all material respects as of such earlier date) and with specific reference to this Amendment No. 3 and all other Loan Documents executed and/or delivered in connection herewith, provided that the representation and warranty contained in this paragraph (f) shall not apply to the representation and warranty contained in Section 4.5 of the Original Credit Agreement or the representation and warranty contained in Section 4.6 of the Original Credit Agreement, except to the extent that the representation and warranty contained in Section 4.6 of the Original Credit Agreement constitutes a representation and warranty that the Borrower is Solvent within the meaning of clause (c) of the definition of the term ‘Solvent’.        (g)  The Borrower agrees that all Loan Documents remain in full force and effect notwithstanding the execution and delivery of this Amendment No. 3.        (h)  This Amendment No. 3 may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all of which counterparts together shall constitute but one and the same instrument. 8        (i)  All references in the Loan Documents to the “Credit Agreement” and in the Original Credit Agreement as amended hereby to “this Agreement,” “hereof,” “herein” or the like shall mean and refer to the Original Credit Agreement as amended by this Amendment No. 3 (as well as by all subsequent amendments, restatements, modifications and supplements thereto).        (j)  Each of the following provisions of the Original Credit Agreement is hereby incorporated herein by this reference with the same effect as though set forth in its entirety herein, mutatis mutandis, and as if “this Agreement” in any such provision read “this Amendment No. 3”: Section 11.11 (Notices), Section 11.13 (Governing Law), Section 11.14 (Jurisdiction), Section 11.15 (Waiver of Jury Trial), Section 11.16 (Severability) and Section 11.18 (Entire Agreement). Section 6. RELEASE Borrower hereby releases, acquits, and forever discharges the Administrative Agent and each of the Lenders and each past or present affiliate, officer, director, agent, servant, employee, representative and attorney of the Administrative Agent and the Lenders from any and all claims, causes of action, suits, debts, liens, obligations, liabilities, demands, losses, costs and expenses (including attorneys’ fees) of any kind, character, or nature whatsoever, known or unknown, fixed or contingent, which Borrower may have or claim to have now or which may hereafter arise out of or connected with any act of commission or omission of the Administrative Agent or any Lender existing or occurring prior to the date of this Amendment No. 3 or any instrument executed prior to the date of this Amendment No. 3 including, without limitation, any claims, liabilities or obligations arising with respect to the Original Credit Agreement or the other of the Loan Documents.  The provisions of this Section 6 shall be binding upon Borrower and shall inure to the benefit of the Administrative Agent and the Lenders and each past or present affiliate, officer, director, agent, servant, employee, representative and attorney of the Administrative Agent and the Lenders. [signature pages follow] 9 WITNESS the due execution hereof by the respective duly authorized officers of the undersigned as of the date first written above. BORROWER: DAYTON SUPERIOR CORPORATION, a Delaware corporation By: /s/ Edward J. Puisis______________________       Name:  Edward J. Puisis       Title: Executive Vice President and CFO LENDERS: GENERAL ELECTRIC CAPITAL CORPORATION, as Administrative Agent and a Lender By: /s/ Michelle Handy______                             Name: Michelle Handy       Title:  Its Duly Authorized Signatory DK ACQUISITION PARTNERS, LP, as a Lender By: M.H. DAVIDSON & CO., its general partner By: /s/ Avi Friedman                                               Name: Avi Friedman       Title:  General Partner 10 FIELD POINT III, LTD., as a Lender By: /s/ Michael A. Gatto____                             Name: Michael A. Gatto       Title:  Authorized Signatory FIELD POINT IV, LTD., as a Lender       Title:  Authorized Signatory GRAND CENTRAL ASSET TRUST, SIL SERIES, as a Lender By: /s/ Brian Schott______                               Name: Brian Schott       Title:  Attorney-in-fact 11 Annex I Please see attached. Please see Exhibit 10.2

Exhibit 10.6 FINANCIAL GUARANTY INSURANCE POLICY             OBLIGOR: AmeriCredit Automobile Receivables Trust 2008-A-F   Policy No.: 51899-N   OBLIGATIONS: As described in Endorsement No. 1 hereto   Date of Issuance: May 29, 2008           FINANCIAL SECURITY ASSURANCE INC. (“Financial Security”), for consideration received, hereby UNCONDITIONALLY AND IRREVOCABLY GUARANTEES to each Holder, subject only to the terms of this Policy (which includes each endorsement hereto), the full and complete payment by the Obligor of Scheduled Payments of principal of, and interest on, the Obligations.           For the further protection of each Holder, Financial Security irrevocably and unconditionally guarantees:      (a) payment of the amount of any distribution of principal of, or interest on, the Obligations made during the Term Of This Policy to such Holder that is subsequently avoided in whole or in part as a preference payment under applicable law (such payment to be made by Financial Security in accordance with Endorsement No. 1 hereto).      (b) payment of any amount required to be paid under this Policy by Financial Security following Financial Security’s receipt of notice as described in Endorsement No. 1 hereto.           Financial Security shall be subrogated to the rights of each Holder to receive payments under the Obligations to the extent of any payment by Financial Security hereunder.           Except to the extent expressly modified by an endorsement hereto, the following terms shall have the meanings specified for all purposes of this Policy. “Holder” means the registered owner of any Obligation as indicated on the registration books maintained by or on behalf of the Obligor for such purpose or, if the Obligation is in bearer form, the holder of the Obligation. “Scheduled Payments” means payments which are scheduled to be made during the Term Of This Policy in accordance with the original terms of the Obligations when issued and without regard to any amendment or modification of such Obligations thereafter; payments which become due on an accelerated basis as a result of (a) a default by the Obligor, (b) an election by the Obligor to pay principal on an accelerated basis or (c) any other cause, shall not constitute “Scheduled Payments” unless Financial Security shall elect, in its sole discretion, to pay such principal due upon such acceleration together with any accrued interest to the date of acceleration. “Term Of This Policy” shall have the meaning set forth in Endorsement No. 1 hereto.           This Policy sets forth in full the undertaking of Financial Security, and shall not be modified, altered or affected by any other agreement or instrument, including any modification or amendment thereto, or by the merger, consolidation or dissolution of the Obligor. Except to the extent expressly modified by an endorsement hereto, the premiums paid in respect of this Policy are nonrefundable for any reason whatsoever, including payment, or provision being made for payment, of the Obligations prior to maturity. This Policy may not be canceled or revoked during the Term Of This Policy. THIS POLICY IS NOT COVERED BY THE PROPERTY/CASUALTY INSURANCE SECURITY FUND SPECIFIED IN ARTICLE 76 OF THE NEW YORK INSURANCE LAW.           In witness whereof, FINANCIAL SECURITY ASSURANCE INC. has caused this Policy to be executed on its behalf by its Authorized Officer.             FINANCIAL SECURITY ASSURANCE INC.       By   /s/ M. Douglas Watson, Jr.         Authorized Officer                    A subsidiary of Financial Security Assurance Holdings Ltd.     31 West 52nd Street, New York, N.Y. 10019   (212) 826-0100 Form 100NY (5/89)         ENDORSEMENT NO. 1 TO FINANCIAL GUARANTY INSURANCE POLICY (NOTES POLICY)       FINANCIAL SECURITY   31 West 52nd Street ASSURANCE INC.   New York, New York 10019       OBLIGOR:   AmeriCredit Automobile Receivables Trust 2008-A-F       OBLIGATIONS:   $160,000,000 Class A-1 2.6936% Asset Backed Notes, Series 2008-A-F     $100,000,000 Class A-2-A 4.47% Asset Backed Notes, Series 2008-A-F     $139,000,000 Class A-2-B LIBOR + 1.75% Floating Rate Asset Backed Notes, Series 2008-A-F     $153,000,000 Class A-3 5.68% Asset Backed Notes, Series 2008-A-F     $198,000,000 Class A-4 6.96% Asset Backed Notes, Series 2008-A-F       Policy No.:   51899-N       Date of Issuance:   May 29, 2008      1. Definitions. For all purposes of this Policy, the terms specified below shall have the meanings or constructions provided below. Capitalized terms used herein and not otherwise defined herein shall have the meanings provided in the Indenture or the Sale and Servicing Agreement unless otherwise specified.      “Business Day” means any day other than a Saturday, Sunday, legal holiday or other day on which commercial banking institutions in Wilmington, Delaware, Fort Worth, Texas, New York City, New York, Minneapolis, Minnesota or any other location of any successor Servicer, successor Owner Trustee or successor Trust Collateral Agent are authorized or obligated by law, executive order or governmental decree to be closed.      “Financial Security” means Financial Security Assurance Inc., a New York stock insurance company.      “Holder” shall have the meaning set forth in the Indenture; provided, however that “Holder” shall not include the Obligor or any affiliates or successors thereof in the event the Obligor, or any such affiliate or successor, is a registered or beneficial owner of the Obligations.      “Indenture” means the Indenture, dated as of May 21, 2008, between the Obligor and Wells Fargo Bank, National Association, as Trustee and Trust Collateral Agent, as amended from time to time with the consent of Financial Security.      “Indenture Trustee” means Wells Fargo Bank, National Association, in its capacity as Trustee under the Indenture and any successor in such capacity.      “Policy” means this Financial Guaranty Insurance Policy and includes each endorsement thereto.     Policy No.: 51899-N   Date of Issuance: May 29, 2008      “Receipt” and “Received” mean actual delivery to Financial Security and to the Fiscal Agent (as defined below), if any, prior to 12:00 noon, New York City time, on a Business Day; delivery either on a day that is not a Business Day, or after 12:00 noon, New York City time, shall be deemed to be receipt on the next succeeding Business Day. If any notice or certificate given hereunder by the Trust Collateral Agent is not in proper form or is not properly completed, executed or delivered, or contains any misstatement, it shall be deemed not to have been Received, and Financial Security or its Fiscal Agent shall promptly so advise the Trust Collateral Agent and the Trust Collateral Agent may submit an amended notice.      “Sale and Servicing Agreement” means the Sale and Servicing Agreement dated as of May 21, 2008 among the Obligor, AmeriCredit Financial Services, Inc., as Servicer, AFS SenSub Corp., as Seller and Wells Fargo Bank, National Association, as Backup Servicer and Trust Collateral Agent, as such agreement accordance with the terms thereof.      “Scheduled Payments” means, as to each Insured Distribution Date, payments which are required to be made to Holders in accordance with the original terms of the Obligations when issued and without regard to any subsequent amendment or modification of the Obligations or of the Indenture except amendments or modifications to which Financial Security has given its prior written consent, which payments are (i) the Noteholders’ Interest Distributable Amount with respect to the related Distribution Date, (ii) the Noteholders’ Remaining Parity Deficit Amount with respect to the related Distribution Date and (iii) with respect to the Final Scheduled Distribution Date for any class of Obligations, the outstanding principal amount of such class on such Final Scheduled Distribution Date, after taking into account reductions on such date of such outstanding principal amount from all sources other than this Policy. Scheduled Payments do not include payments which become due on an accelerated basis as a principal on an accelerated basis, (c) the occurrence of an Event of Default under the Indenture or (d) any other cause, unless Financial Security elects, in its sole discretion, to pay in whole or in part such principal due upon acceleration, together with any accrued interest to the date of acceleration. In the event Financial Security does not so elect, this Policy will continue to guarantee payment on the Obligations in accordance with their original terms. Scheduled Payments shall not include (x) any portion of a Noteholders’ Interest Distributable Amount or of a Noteholders’ Interest Carryover Amount due to Holders because the appropriate notice and certificate for payment in proper form as required by paragraph 2 hereof was not timely Received by Financial Security or (y) any portion of a Noteholders’ Interest Distributable Amount due to Holders representing interest on any Noteholders’ Interest Carryover Amount accrued from and including the date of payment of the amount of such Noteholders’ Interest Carryover Amount, unless in each case, Financial Security elects, in its sole discretion, to pay such amount in whole or in part, pursuant hereto. Scheduled Payments shall not include any amounts due in respect of the Obligations attributable to any increase in interest rate, penalty or other sum payable by the Obligor by reason of any default or event of default in respect of the Obligations, or by reason of any deterioration of the credit worthiness of the Obligor, nor shall Scheduled Payments include, nor shall coverage be provided under this Policy in respect of, any 3   taxes, withholding or other charge with respect to any Holder imposed by any governmental authority due in connection with the payment of any Scheduled Payment to a Holder.      “Term Of This Policy” means the period from and including the Date of Issuance to and including the date on which (i) all Scheduled Payments have been paid or deemed to be paid within the meaning of Section 4.1 of the Indenture; (ii) any period during which any Scheduled Payment could have been avoided in whole or in part as a preference payment under applicable bankruptcy, insolvency, receivership or similar law shall have expired and (iii) if any proceedings requisite to avoidance as a preference payment have been commenced prior to the occurrence of (i) and (ii), a final and nonappealable order in resolution of each such proceeding has been entered.      “Trust Collateral Agent” means Wells Fargo Bank, National Association, in its capacity as Trust Collateral Agent under the Indenture, acting as agent for the Indenture Trustee in accordance with the terms of the Indenture, and any successor in such capacity.      2. Notices and Conditions to Payment in Respect of Scheduled Payments. Following Receipt by Financial Security of a notice and certificate from the Trust Collateral Agent in the form attached as Exhibit A to this Endorsement, Financial Security will pay any amount payable hereunder in respect of Scheduled Payments on the Obligations out of the funds of Financial Security on the later to occur of (a) 12:00 noon, New York City time, on the third Business Day following such Receipt; and (b) 12:00 noon, New York City time, on the date on which such payment is due on the Obligations. Payments due hereunder in respect of Scheduled Payments will be disbursed to the Trust Collateral Agent by wire transfer of immediately available funds.      Financial Security shall be entitled to pay any amount hereunder in respect of Scheduled Payments on the Obligations, including any amount due on the Obligations on an accelerated basis, whether or not any notice and certificate shall have been Received by Financial Security as provided above; provided, however, that by acceptance of this Policy the Trust Collateral Agent agrees to provide to Financial Security, upon Financial Security’s request to the Trust Collateral Agent, a notice and certificate in respect of any such payments made by Financial Security. Financial Security shall be entitled to pay hereunder any amount that becomes due on the Obligations on an accelerated basis at any time or from time to time after such amount becomes due, in whole or in part, prior to the scheduled date of payment thereof; Scheduled Payments insured hereunder shall not include interest, in respect of principal paid hereunder on an accelerated basis, accruing from and after the date of such payment of principal. Financial Security’s obligations hereunder in respect of Scheduled Payments shall be discharged to the extent funds are disbursed by Financial Security as provided herein whether or not such funds are properly applied by the Trust Collateral Agent.      3. Notices and Conditions to Payment in Respect of Scheduled Payments Avoided as Preference Payments. If any Scheduled Payment is avoided as a preference payment under applicable bankruptcy, insolvency, receivership or similar law, Financial 4   Security will pay such amount out of the funds of Financial Security on the later of (a) the date when due to be paid pursuant to the Order referred to below or (b) the first to occur of (i) the fourth Business Day following Receipt by Financial Security from the Trust Collateral Agent of (A) a certified copy of the order (the “Order”) of the court or other governmental body that exercised jurisdiction to the effect that the Holder is required to return Scheduled Payments made with respect to the Obligations during the Term Of This Policy because such payments were avoidable as preference payments under applicable bankruptcy law, (B) a certificate of the Holder that the Order has been entered and is not subject to any stay and (C) an assignment duly executed and delivered by the Holder, in such form as is reasonably required by Financial Security, and provided to the Holder by Financial Security, irrevocably assigning to Financial Security all rights and claims of the Holder relating to or arising under the Obligations against the estate of the Obligor or otherwise with respect to such preference payment or (ii) the date of Receipt by Financial Security from the Trust Collateral Agent of the items referred to in clauses (A), (B) and (C) above if, at least four Business Days prior to such date of Receipt, Financial Security shall have Received written notice from the Trust Collateral Agent that such items were to be delivered on such date and such date was specified in such notice. Such payment shall be disbursed to the receiver, conservator, debtor-in-possession or trustee in bankruptcy named in the Order and not to the Trust Collateral Agent or any Holder directly (unless a Holder has previously paid such amount to the receiver, conservator, debtor-in-possession or trustee in bankruptcy named in the Order, in which case such payment shall be disbursed to the Trust Collateral Agent for distribution to such Holder upon proof of such payment reasonably satisfactory to Financial Security). In connection with the foregoing, Financial Security shall have the rights provided pursuant to Section 6.2 of the Sale and Servicing Agreement.      4. Governing Law. This Policy shall be construed in accordance with, and this Policy and all matters arising out of or relating in any way to this Policy shall be governed by, the law of the state of New York.      5. Fiscal Agent. At any time during the Term Of This Policy, Financial Security may appoint a fiscal agent (the “Fiscal Agent”) for purposes of this Policy by written notice to the Trust Collateral Agent at the notice address specified in the Indenture specifying the name and notice address of the Fiscal Agent. From and after the date of receipt of such notice by the Trust Collateral Agent, (i) copies of all notices and documents required to be delivered to Financial Security pursuant to this Policy shall be simultaneously delivered to the Fiscal Agent and to Financial Security and shall not be deemed Received until Received by both, and (ii) all payments required to be made by Financial Security under this Policy may be made directly by Financial Security or by the Fiscal Agent on behalf of Financial Security. The Fiscal Agent is the agent of Financial Security only and the Fiscal Agent shall in no event be liable to any Holder for any acts of the Fiscal Agent or any failure of Financial Security to deposit, or cause to be deposited, sufficient funds to make payments due under the Policy.      6. Waiver of Defenses. To the fullest extent permitted by applicable law, Financial Security agrees not to assert, and hereby waives, for the benefit of each Holder, all rights (whether by counterclaim, setoff or otherwise) and defenses (including, without 5   limitation, the defense of fraud), whether acquired by subrogation, assignment or otherwise, to the extent that such rights and defenses may be available to Financial Security to avoid payment of its obligations under this Policy in accordance with the express provisions of this Policy. Nothing in this paragraph shall be construed to limit or otherwise impair Financial Security’s right to pursue recovery or claims (based on contractual rights, securities law violations, fraud or other causes of action) against any person or entity, or, except as provided in paragraph 3 of this Endorsement, to require payment by Financial Security of any amounts that have been previously paid or that are not otherwise due in accordance with the express provisions of this Policy or the Obligations. Nothing in this Policy shall be construed to require payment to the extent any force majeure event or governmental act prevents Financial Security from performing its obligations under this Policy or such performance is otherwise rendered impossible, in which event Financial Security agrees to (i) use commercially reasonable efforts to perform its obligations under this Policy notwithstanding such force majeure event, governmental act or impossibility of performance and (ii) perform its obligations under this Policy promptly following cessation of such force majeure event, governmental act or impossibility of performance.      7. Notices. All notices to be given hereunder shall be in writing (except as otherwise specifically provided herein) and shall be mailed by registered mail or personally delivered or telecopied to Financial Security as follows: Financial Security Assurance Inc. 31 West 52nd Street Attention: Managing Director — Transaction Oversight Department Re: Policy No. 51899-N Telecopy No.: (212) 339-3518 Confirmation: (212) 826-0100      Financial Security may specify a different address or addresses by writing mailed or delivered to the Trust Collateral Agent.      8. Priorities. In the event that any term or provision of the face of this Policy is inconsistent with the provisions of this Endorsement, the provisions of this Endorsement shall take precedence and shall be binding.      9. Exclusions From Insurance Guaranty Funds. This Policy is not covered by the Property/Casualty Insurance Security Fund specified in Article 76 of the New York Insurance Law. This Policy is not covered by the Florida Insurance Guaranty Association created under Part II of Chapter 631 of the Florida Insurance Code. In the event that Financial Security were to become insolvent, any claims arising under this Policy are excluded from coverage by the California Insurance Guaranty Association, established pursuant to Article 14.2 of Chapter 1 of Part 2 of Division 1 of the California Insurance Code. 6        10. Surrender of Policy. The Trust Collateral Agent shall surrender this Policy to Financial Security for cancellation upon expiration of the Term Of This Policy.      IN WITNESS WHEREOF, FINANCIAL SECURITY ASSURANCE INC. has caused this Endorsement No. 1 to be executed by its Authorized Officer.       By    /s/ M. Douglas Watson Jr.         Authorized Officer              7   EXHIBIT A To Endorsement No. 1 NOTICE OF CLAIM AND CERTIFICATE (Letterhead of Trust Collateral Agent) 31 West 52nd Street      Re:       AmeriCredit Automobile Receivables Trust 2008-A-F      The undersigned, a duly authorized officer of Wells Fargo Bank, National Association (the “Trust Collateral Agent”), hereby certifies to Financial Security Assurance Inc. (“Financial Security”), with reference to Financial Guaranty Insurance Policy No. 51899-N dated May 29, 2008, (the “Policy”) issued by Financial Security in respect of the $160,000,000 Class A-1 2.6936% Asset Backed Notes, $100,000,000 Class A-2-A 4.47% Asset Backed Notes, $139,000,000 Class A-2-B LIBOR + 1.75% Floating Rate Asset Backed Notes, $153,000,000 Class A-3 5.68% Asset Backed Notes, and $198,000,000 Class A-4 6.96% Asset Backed Notes of the above-referenced Trust (the “Obligations”), that:      (i) The Trust Collateral Agent is the Trust Collateral Agent for the Holders under the Indenture.      (ii) The sum of all amounts on deposit (or scheduled to be on deposit) in the Note Distribution Account and available for distribution to the Holders pursuant to the Indenture will be $                     (the “Shortfall”) less than the aggregate amount of Scheduled Payments due on                               .      (iii) The Trust Collateral Agent is making a claim under the Policy for the Shortfall to be applied to the payment of Scheduled Payments.      (iv) The Trust Collateral Agent agrees that, following receipt of funds from Financial Security, it shall (a) hold such amounts in trust and apply the same directly to the payment of Scheduled Payments on the Obligations when due; (b) not apply such funds for any other purpose; (c) not commingle such funds with other funds held by the Trust Collateral Agent and (d) maintain an accurate record of such payments with respect to each Obligation and the corresponding claim on the Policy and proceeds thereof, and, if the Obligation is required to be surrendered or presented for such payment, shall stamp on each such Obligation the legend “$[insert applicable amount] paid by Financial Security and the balance hereof has been cancelled and reissued” and then shall deliver such Obligation to Financial Security.      (v) The Trust Collateral Agent, on behalf of the Holders, hereby assigns to Financial Security (a) the rights of the Holders with respect to the Obligations to the A-1   extent of any payments under the Policy and (b) any claims of amounts due to the Holders in respect of securities law, fraud or other claims arising out of or relating to the offer and sale of the Obligations. The foregoing assignments are in addition to, and not in limitation of, rights of subrogation otherwise available to Financial Security in respect of such payments. Payments to Financial Security in respect of the foregoing assignments shall in all cases be subject to and subordinate to the rights of the Holders to receive all Scheduled Payments in respect of the Obligations. The Trust Collateral Agent shall take such action and deliver such instruments as may be reasonably requested or required by Financial Security to effectuate the purpose or provisions of this clause (v).      (vi) The Trust Collateral Agent, on behalf of the Holders, hereby appoints Financial Security as agent and attorney-in-fact for the Trust Collateral Agent and each such Holder in any legal proceeding with respect to the Obligations. The Trust Collateral Agent hereby agrees that, so long as an Insurer Default (as defined in the Indenture) shall not exist, Financial Security may at any time during the continuation of any proceeding by or against the Obligor under the United States Bankruptcy Code or any other applicable bankruptcy, insolvency, receivership, rehabilitation or similar law (an “Insolvency Proceeding”) direct all matters relating to such Insolvency Proceeding, including without limitation, (A) all matters relating to any claim in connection with an Insolvency Proceeding seeking the avoidance as a preferential transfer of any payment made with respect to the Obligations (a “Preference Claim”), (B) the direction of any appeal of any order relating to any Preference Claim at the expense of Financial Security but subject to reimbursement as provided in the Insurance Agreement and (C) the posting of any surety, supersedeas or performance bond pending any such appeal. In addition, the Trust Collateral Agent hereby agrees that Financial Security shall be subrogated to, and the Trust Collateral Agent on its behalf and on behalf of each Holder, hereby delegates and assigns, to the fullest extent permitted by law, the rights of the Trust Collateral Agent and each Holder in the conduct of any Insolvency Proceeding, including, without limitation, all rights of any party to an adversary proceeding or action with respect to any court order issued in connection with any such Insolvency Proceeding.      (vii) Payment should be made by wire transfer directed to [SPECIFY ACCOUNT].      Unless the context otherwise requires, capitalized terms used in this Notice of Claim and Certificate and not defined herein shall have the meanings provided in the Policy. A-2        IN WITNESS WHEREOF, the Trust Collateral Agent has executed and delivered this Notice of Claim and Certificate as of the ___th day of          , 20_.             WELLS FARGO BANK, NATIONAL ASSOCIATION, as Trust Collateral Agent                       By           Title              For Financial Security or Fiscal Agent Use Only Wire transfer sent on                      By                          Confirmation Number                          A-3

Exhibit 10.5 PURCHASE AGREEMENT This PURCHASE AGREEMENT (“Agreement”) is made as of the 12th day of March, 2013 by and between AVRA Surgical Robotics, Inc., a Delaware corporation (the “Company”) and the investor set forth on the signature page affixed hereto (the “Investor”). RECITALS WHEREAS, the Company and the Investor are executing and delivering this Agreement in reliance upon the exemption from securities registration afforded by the provisions of Regulation D (“Regulation D”), as promulgated by the U.S. Securities and Exchange Commission (the “SEC”) under the Securities Act; and WHEREAS, the Investor wishes to purchase from the Company, and the Company wishes to sell and issue to the Investor, upon the terms and subject to the conditions stated in this Agreement, an aggregate of 117,371 shares (collectively, the “Shares”) of the Company’s common stock, par value $0.0001 per share (together with any securities into which such shares may be reclassified, whether by merger, charter amendment or otherwise, the “Common Stock”) at a purchase price of $2.13 per Share (the “Per Share Purchase Price”). NOW THEREFORE, in consideration of the mutual promises made herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1.Definitions.For the purposes of this Agreement, the following terms shall have the meanings set forth below: “Affiliate” means, with respect to any Person, any other Person which directly or indirectly through one or more intermediaries Controls, is controlled by, or is under common Control with, such Person. “Agreement” has the meaning set forth in the preamble. “Business Day” means a day, other than a Saturday or Sunday, on which banks in New York City are open for the general transaction of business. “Buy-In” has the meaning set forth in Section 7.4. “Closing” has the meaning set forth in Section 2. “Closing Date” has the meaning set forth in Section 3. “Common Stock” has the meaning set forth in the recitals. “Company” has the meaning set forth in the preamble. 1 “Company’s Knowledge” means the actual knowledge of the executive officers (as defined in Rule 405 under the Securities Act) of the Company, after commercially practicable due inquiry. “Control” (including the terms “controlling”, “controlled by” or “under common control with”) means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise. “Disclosure Schedules” has the meaning set forth in Section 4. “EMA” has the meaning set forth in Section 4.27. “Exchange Act” means the Securities Exchange Act of 1934, as amended, or any successor statute, and the rules and regulations promulgated thereunder. “FDA” has the meaning set forth in Section 4.27. “GAAP” has the meaning set forth in Section 4.18. “Governmental Permits” has the meaning set forth in Section 4.13. “Intellectual Property” has the meaning set forth in Section 4.15. “Investor” has the meanings set forth in the preamble. “Material Adverse Effect” means a material adverse effect on (i) the assets, liabilities, results of operations, condition (financial or otherwise), business, or prospects of the Company and its Subsidiaries taken as a whole, (ii) the legality or enforceability of this Agreement or (iii)the ability of the Company to perform its obligations under this Agreement. “Per Share Purchase Price” has the meaning set forth in the recitals. “Person” means an individual, corporation, partnership, limited liability company, trust, business trust, association, joint stock company, joint venture, sole proprietorship, unincorporated organization, governmental authority or any other form of entity not specifically listed herein. “Regulated Product” has the meaning set forth in Section 4.27. “Regulation D” has the meaning set forth in the recitals. “Rule 144” means Rule 144 promulgated by the SEC pursuant to the Securities Act, as such Rule may be amended or interpreted from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such Rule. “SEC” has the meaning set forth in the recitals. 2 “SEC Filings” has the meaning set forth in Section 4.6. “Securities” means the Shares. “Securities Act” means the Securities Act of 1933, as amended, or any successor statute, and the rules and regulations promulgated thereunder. “Shares” has the meaning set forth in the recitals. “Subsidiary” of any Person means another Person, an amount of the voting securities, other voting ownership or voting partnership interests of which is sufficient to elect at least a majority of its Board of Directors or other governing body (or, if there are no such voting interests, 50% or more of the equity interests of which) is owned directly or indirectly by such first Person. “10-K” has the meaning set forth in Section 4.6. “Transfer Agent” has the meaning set forth in Section 7.4. 2.Purchase and Sale of the Shares.Subject to the terms and conditions of this Agreement, on the Closing Date (as defined below), the Investor shall purchase, and the Company shall sell and issue to the Investor, the Shares in exchange for payment as specified in Section 3 below of an aggregate purchase price equal to the Per Share Purchase Price multiplied by the number of Shares to be purchased by the Investor (the “Closing”). 3.Closing. Upon confirmation that the other conditions to closing specified herein have been satisfied or duly waived by the Investor, the parties hereto shall effect the Closing by the Investor delivering in same day funds an amount equal to the purchase price to be paid by the Investor for the Shares as set forth in Section 2 and the Company causing its transfer agent to issue the Shares in book entry form to the Investor (or if the Company so elects, issuing a share certificate to the Investor within five (5) Business Days of the Closing) (the date on which the Closing occurs, the “Closing Date”).The Closing shall take place either at the offices of [], electronically via electronic mail or facsimile or at such other location and on such other date as the Company and the Investor shall mutually agree. 4.Representations and Warranties of the Company.The Company hereby represents and warrants to the Investor that, except as set forth in the schedules delivered herewith (collectively, the “Disclosure Schedules”) or in the SEC Filings of the Company: 4.1Organization, Good Standing and Qualification.The Company’s only Subsidiary is MIS-Robotics GmbH. The Company has been duly organized and is validly existing as corporation in good standing under the laws of the State of Delaware.The Company is duly qualified to do business and is in good standing as a foreign corporation in each jurisdiction in which its ownership or lease of property or the conduct of its business require such qualification and has all corporate power and authority necessary to own or hold its properties and to conduct the business in which it is engaged, except where the failure to so qualify or have such power or authority would not have, singly or in the aggregate, or could not reasonably be expected to have a Material Adverse Effect. 3 4.2Authorization.The Company has full corporate power and authority to enter into this Agreement and has taken all requisite action on the part of the Company, its officers, directors and stockholders necessary for (i) the authorization, execution and delivery of this Agreement, (ii) the authorization of the performance of all obligations of the Company hereunder, and (iii) the authorization, issuance (or reservation for issuance) and delivery of the Shares.This Agreement has been duly executed by the Company and constitutes the legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability, relating to or affecting creditors’ rights generally and to general equitable principles. 4.3Capitalization.Schedule 4.3 sets forth as of the date hereof (a) the authorized capital stock of the Company; (b) the number of shares of capital stock issued and outstanding; (c) the number of shares of capital stock issuable pursuant to the Company’s stock plans; and (d) the number of shares of capital stock issuable and reserved for issuance pursuant to securities exercisable for, or convertible into or exchangeable for any shares of capital stock of the Company.All of the issued and outstanding shares of the Company’s capital stock have been duly authorized and validly issued.No Person is entitled to pre-emptive or similar statutory or contractual rights with respect to any securities of the Company.Except as contemplated by this Agreement and as described on Schedule 4.3, as of the date of this Agreement, there are no outstanding warrants, options, convertible securities or other rights, agreements or arrangements of any character under which the Company is or may be obligated to issue any equity securities of any kind. Except as described on Schedule 4.3, there are no voting agreements, buy-sell agreements, option or right of first purchase agreements or other agreements of any kind among the Company and any of the securityholders of the Company relating to the securities of the Company held by them.Except as set forth herein, no Person has the right to require the Company to register any securities of the Company under the Securities Act, whether on a demand basis or in connection with the registration of securities of the Company for its own account or for the account of any other Person. The issuance and sale of the Shares hereunder will not obligate the Company to issue shares of Common Stock or other securities to any other Person (other than the Investor) and will not result in the adjustment of the exercise, conversion, exchange or reset price of any outstanding security. The Company does not have outstanding stockholder purchase rights or “poison pill” or any similar arrangement in effect giving any Person the right to purchase any equity interest in the Company upon the occurrence of certain events. 4.4Valid Issuance.The Shares have been duly and validly authorized and, when issued and paid for pursuant to this Agreement, will be validly issued, fully paid and nonassessable, and shall be free and clear of all encumbrances and restrictions (other than those created by the Investor), except for restrictions on transfer set forth in this Agreement or imposed by applicable securities laws. 4 4.5Consents.The execution, delivery and performance by the Company of this Agreement and the offer, issuance and sale of the Shares require no consent of, action by or in respect of, or filing with, any Person, governmental body, agency, or official other than filing a Form D with the SEC and filings that have been made pursuant to applicable state securities laws, post-sale filings pursuant to applicable state and federal securities laws which the Company undertakes to file within the applicable time periods. 4.6Delivery of SEC Filings; Business.The Company has made available to the Investor through the EDGAR system, true and complete copies of the Company’s most recent Annual Report on Form 10-K for the fiscal year ended December 31, 2011 (as amended prior to the date hereof, the “10-K”), and all other reports filed by the Company pursuant to the Exchange Act since the filing of the 10-K and prior to the date hereof (collectively, the “SEC Filings”).The SEC Filings are the only filings required of the Company pursuant to the Exchange Act for such period.The SEC Filings contain a complete and accurate description in all material respects of the business of the Company and its Subsidiaries, taken as a whole, as of the dates such filings were filed with the SEC. 4.7Use of Proceeds.The net proceeds of the sale of the Shares hereunder shall be used by the Company for working capital and general corporate purposes. 4.8No Material Adverse Change.Since September 30, 2012, except as identified and described in the SEC Filings or as set forth on Schedule 4.8, there has not been: (a)any change in the consolidated assets, liabilities, financial condition or operating results of the Company from that reflected in the financial statements included in the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2012, except for changes in the ordinary course of business which have not had and could not reasonably be expected to have a Material Adverse Effect, individually or in the aggregate; (b)any material transaction entered into by the Company or a Subsidiary other than in the ordinary course of business; (c)the loss of the services of any key employee, or material change in the composition or duties of the senior management of the Company or any Subsidiary; or (d)any other event or condition of any character that has had or could reasonably be expected to have a Material Adverse Effect. 4.9SEC Filings.At the time of filing thereof, the SEC Filings complied as to form in all material respects with the requirements of the Exchange Act and did not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. 5 4.10No Conflict, Breach, Violation or Default.The execution, delivery and performance of this Agreement by the Company and the issuance and sale of the Securities will not result in the creation or imposition of any lien, charge or encumbrance upon any of the assets of the Company or any Subsidiary pursuant to the terms or provisions of, or result in a breach or violation of any of the terms or provisions of, or conflict with or constitute a default under, or give any party a right to terminate any of its obligations under, or result in the acceleration of any obligation under, (i)the certificate or articles of incorporation or by-laws of the Company or any Subsidiary, (ii)any indenture, mortgage, deed of trust, voting trust agreement, loan agreement, bond, debenture, note agreement or other evidence of indebtedness, lease, contract or other agreement or instrument to which the Company or any Subsidiary is a party or by which the Company or any Subsidiary or any of their properties is bound or affected, or (iii) violate or conflict with any judgment, ruling, decree, order, statute, rule or regulation of any court or other governmental agency or body applicable to the business or properties of the Company or any Subsidiary, except as to (ii) and (iii) above for such breaches, violations or defaults which, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect. 4.11Tax Matters.The Company and its Subsidiaries (i) have timely filed all necessary federal, state, local and foreign tax returns, and all such returns were true, complete and correct, (ii) have paid all federal, state, local and foreign taxes, assessments, governmental or other charges due and payable for which the Company or any Subsidiary is liable, including, without limitation, all sales and use taxes and all taxes which the Company or any Subsidiary is obligated to withhold from amounts owing to employees, creditors and third parties, and (iii) does not have any tax deficiency or claims outstanding or assessed or, to the best of its knowledge, proposed against the Company or any Subsidiary, except those, in each of the cases described in clauses (i), (ii) and (iii) of this Section 4.11 that would not, singularly or in the aggregate, have a Material Adverse Effect.Neither the Company nor any Subsidiary has engaged in any transaction which is a corporate tax shelter or which could be characterized as such by the Internal Revenue Service or any other taxing authority.The accruals and reserves on the books and records of the Company and its Subsidiaries in respect of tax liabilities for any taxable period not yet finally determined are adequate to meet any assessments and related liabilities for any such period, and since December31, 2010, neither the Company nor any Subsidiary has incurred any liability for taxes other than in the ordinary course. 4.12Title to Properties.Except as disclosed in the SEC Filings, the Company and its Subsidiaries have good and marketable title in fee simple to, or have valid rights to lease or otherwise use, all items of real or personal property which are material to the business of the Company or any Subsidiary, in each case free and clear of any material liens, encumbrances, security interests, claims and defects and all of the leases and subleases material to the business of the Company or any Subsidiary, and under which the Company or any Subsidiary holds properties described in the SEC filings, are in full force and effect. 4.13Certificates, Authorities and Permits.The Company and its Subsidiaries are development stage companies that intend to acquire and possess all licenses, certificates, authorizations, permits, consents, orders, approvals and authorizations to be issued by, and declarations and filings with, the appropriate local, state, federal or foreign regulatory agencies or bodies, including, without limitation, the FDA and any agency of any foreign government and any other foreign regulatory authority exercising authority comparable to that of the FDA (including any non-governmental entity whose approval or authorization is required under foreign law comparable to that administered by the FDA), which are necessary or desirable for the ownership of its properties or the conduct of its business (collectively, the “Governmental Permits”) as the products of the Company and its Subsidiaries are developed and such Governmental Permits are required.Neither the Company nor any Subsidiary has received notification of any revocation or modification (or proceedings related thereto) of any such Governmental Permit and the Company has no reason to believe that any such Governmental Permit currently in effect will not be renewed. 6 4.14Labor Matters. (a)Neither the Company nor any Subsidiary is a party to or bound by any collective bargaining agreements or other agreements with labor organizations.Neither the Company nor any Subsidiary has violated in any material respect any laws, regulations, orders or contract terms, affecting the collective bargaining rights of employees, labor organizations or any laws, regulations or orders affecting employment discrimination, equal opportunity employment, or employees’ health, safety, welfare, wages and hours. (b)(i) There are no labor disputes existing, or to the Company's Knowledge, threatened, and (ii) to the Company’s Knowledge, the Company and its Subsidiaries enjoys good labor and employee relations with their employees and labor organizations. (c)The Company and its Subsidiaries are, and at all times have been, in compliance in all material respects with all applicable laws respecting employment (including laws relating to classification of employees and independent contractors) and employment practices, terms and conditions of employment, wages and hours, and immigration and naturalization. 4.15Intellectual Property.The Company and its Subsidiaries aredevelopment stage companies that are developing products, and which own or possess the right to use all patents, trademarks, trademark registrations, service marks, service mark registrations, trade names, copyrights, licenses, inventions, software, databases, know-how, Internet domain names, trade secrets and other unpatented and/or unpatentable proprietary or confidential information, systems or procedures, and other intellectual property (collectively, “Intellectual Property”) necessary to carry on the business of the Company and its Subsidiaries as currently conducted to date, and neither the Company nor any Subsidiary is aware of any claim to the contrary or any challenge by any other person to the rights of the Company or any Subsidiary with respect to the foregoing except for those that could not have a Material Adverse Effect.To the Company’s Knowledge, the business of the Company and its Subsidiaries as now conducted and as proposed to be conducted does not and will not infringe or conflict with any valid and enforceable patents, trademarks, service marks, trade names, copyrights, trade secrets, licenses or other Intellectual Property or franchise right of any Person; and, if found to so infringe or conflict, would not do so in a manner or to an extent that it could have a Material Adverse Effect.No claim has been made against the Company or any Subsidiary alleging the infringement by the Company or any Subsidiary of any patent, trademark, service mark, trade name, copyright, trade secret, license in or other intellectual property right or franchise right of any Person.The Company and its Subsidiaries have taken all reasonable steps to protect, maintain and safeguard its rights in all Intellectual Property, including the execution of appropriate nondisclosure and confidentiality agreements.The consummation of the transactions contemplated by this Agreement will not result in the loss or impairment of or payment of any additional amounts with respect to, nor require the consent of any other Person in respect of, the right of the Company or any Subsidiary to own, use or hold for use any of the Intellectual Property as owned, used or held for use in the conduct 7 of the businesses as currently conducted.With respect to the use of the software in the business of the Company or any Subsidiary as it is currently conducted, neither the Company nor any Subsidiary has experienced any material defects in such software including any material error or omission in the processing of any transactions other than defects which have been corrected, and to the Company’s Knowledge, no such software contains any device or feature designed to disrupt, disable, or otherwise impair the functioning of any software or is subject to the terms of any “open source” or other similar license that provides for the source code of the software to be publicly distributed or dedicated to the public.The Company and its Subsidiaries have at all times complied with all applicable laws relating to privacy, data protection, and the collection and use of personal information collected, used, or held for use by the Company or any Subsidiary in the conduct of the business of the Company or any Subsidiary.No claims have been asserted or threatened against the Company or any Subsidiary alleging a violation of any person’s privacy or personal information or data rights and the consummation of the transactions contemplated hereby will not breach or otherwise cause any violation of any law related to privacy, data protection, or the collection and use of personal information collected, used, or held for use by the Company or any Subsidiary in the conduct of the business of the Company or any Subsidiary.The Company and its Subsidiaries take reasonable measures to ensure that such information is protected against unauthorized access, use, modification, or other misuse. 4.16Environmental Matters.The Company and its Subsidiaries are in compliance with all foreign, federal, state and local rules, laws and regulations relating to the use, treatment, storage and disposal of hazardous or toxic substances or waste and protection of health and safety or the environment which are applicable to its business, except where the failure to comply would not, singularly or in the aggregate, have a Material Adverse Effect. 4.17Litigation.There are no pending actions, suits or proceedings against or affecting the Company or any Subsidiary or any of their properties; and to the Company’s Knowledge, no such actions, suits or proceedings are threatened or contemplated.Neither the Company nor any Subsidiary or any director or executive officer thereof, is or since December31, 2011 has been the subject of any action involving a claim of violation of or liability under federal or state securities laws or a claim of breach of fiduciary duty.There has not been, and to the Company’s Knowledge, there is not pending or contemplated, any investigation by the SEC involving the Company, any Subsidiary or any current or former director or executive officer of the Company or any Subsidiary. 4.18Financial Statements.The financial statements, together with the related notes and schedules, included or incorporated by reference in each SEC filing fairly present, in all material respects, the financial position and the results of operations and changes in financial position of the Company and other consolidated entities at the respective dates or for the respective periods therein specified.Such statements and related notes and schedules have been prepared in accordance with the generally accepted accounting principles in the United States (“GAAP”) applied on a consistent basis throughout the periods involved except as may be set forth in the related notes included or incorporated by reference in the SEC filings.The financial statements, together with the related notes and schedules, included or incorporated by reference in the SEC filings comply in all material respects with the Securities Act or the Exchange Act.All disclosures contained in the SEC filings regarding “non-GAAP financial measures” (as such term is defined in the Exchange Act) comply with Regulation G of the Exchange Act and Item 10 of Regulation S-K under the Securities Act, to the extent applicable. 8 4.19[INTENTIONALLY OMITTED]. 4.20Brokers and Finders.No Person will have, as a result of the transactions contemplated by this Agreement, any valid right, interest or claim against or upon the Company or any Subsidiary or an Investor for any commission, fee or other compensation pursuant to any agreement, arrangement or understanding entered into by or on behalf of the Company or any Subsidiary. 4.21Private Placement.Assuming the accuracy of the representations and warranties made by the Investor herein, the offer and sale of the Securities to the Investor as contemplated hereby is exempt from the registration requirements of the Securities Act. 4.22Questionable Payments.Neither the Company nor any of its Subsidiaries nor, to the Company’s Knowledge, any of their respective current or former stockholders, directors, officers, employees, agents or other Persons acting on behalf of the Company or any Subsidiary, has on behalf of the Company or any Subsidiary or in connection with their respective businesses: (a) used any corporate funds for unlawful contributions, gifts, entertainment or other unlawful expenses relating to political activity; (b) made any direct or indirect unlawful payments to any governmental officials or employees from corporate funds; (c) established or maintained any unlawful or unrecorded fund of corporate monies or other assets; (d) made any false or fictitious entries on the books and records of the Company or any Subsidiary; or (e) made any unlawful bribe, rebate, payoff, influence payment, kickback or other unlawful payment of any nature. 4.23Transactions with Affiliates.Except as set forth in Schedule 4.23, none of the officers or directors of the Company or any Subsidiary and, to the Company’s Knowledge, none of the employees of the Company or any Subsidiary is presently a party to any transaction with the Company or any Subsidiary (other than as holders of stock options and/or warrants, and 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 Company’s Knowledge, any entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee or partner. 4.24Internal Controls.The Company and its Subsidiaries maintain a system of internal accounting and other controls sufficient 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 and to maintain accountability for assets; (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 existing assets at reasonable intervals and appropriate action is taken with respect to any differences. 9 4.25Disclosures.Investor has signed a non-disclosure agreement, and as a result, the Company, its Subsidiaries and Persons acting on their behalf haveprovided the Investor or its agents or counsel with certain information that constitutes or might constitute material, non-public information, other than the terms of the transactions contemplated hereby.The Company understands and confirms that the Investor will rely on the information disclosed under such non-disclosure agreementin effecting transactions in securities of the Company.All of the disclosure furnished by or on behalf of the Company to the Investor regarding the Company and its Subsidiaries, their respective businesses and the transactions contemplated hereby, including the Disclosure Schedules to this Agreement, 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 light of the circumstances under which they were made, not misleading. The Company acknowledges and agrees that the Investor has not made any representations or warranties with respect to the transactions contemplated hereby other than those specifically set forth in Section 5 hereof. 4.26Regulation M Compliance. The Company has not, and to the Knowledge of the Company, no one acting on its behalf has, (i) taken, directly or indirectly, any action designed to cause or to result in the stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of any of the Securities, (ii) sold, bid for, purchased, or paid any compensation for soliciting purchases of, any of the Securities, or (iii) paid or agreed to pay to any Person any compensation for soliciting another to purchase any other securities of the Company. 4.27FDA. The Company and its Subsidiaries do not manufacture, package, label, test, distribute, sell, and/or market anyproduct subject to the jurisdiction of the U.S. Food and Drug Administration (“FDA”) or European Medicines Agency (“EMA”).There is no pending, completed or, to the Company’s Knowledge, threatened, action (including any lawsuit, arbitration, or legal or administrative or regulatory proceeding, charge, complaint, or investigation) against the Company or any of its Subsidiaries, and none of the Company or any of its Subsidiaries has received any notice, warning letter or other communication from the FDA, EMA, or any other governmental entity. 5.Representations and Warranties of the Investor.The Investor hereby represents and warrants to the Company that: 5.1Organization and Existence.Such Investor is a duly organized, validly existing corporation, limited partnership or limited liability company in good standing under the laws of the state of its organization and has all requisite corporate, partnership or limited liability company power and authority to invest in the Securities pursuant to this Agreement. 5.2Authorization.The execution, delivery and performance by such Investor of the this Agreement has been duly authorized by all necessary action and constitutes the valid and legally binding obligation of such Investor, enforceable against such Investor in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability, relating to or affecting creditors’ rights generally, and the Investor has full right and power to perform pursuant to this Agreement and make an investment in the Company.The consummation of the transactions contemplated hereby by the Investor will not result in a violation of or conflict with any law or its charter or other organizational documents or any order, judgment, injunction, agreement or controlling document to which the Investor is a party or by which it is bound.The Investor has full power and authority to execute and deliver this Agreement and to carry out the provisions hereof and to purchase and hold the Shares, This Agreement has been duly executed and delivered on behalf of the Investor. 10 5.3Purchase Entirely for Own Account.The Securities to be received by such Investor hereunder will be acquired for such Investor’s own account, not as nominee or agent, and not with a view to the resale or distribution of any part thereof in violation of the Securities Act, and such Investor has no present intention of selling, granting any participation in, or otherwise distributing the same in violation of the Securities Act,without prejudice, however, to such Investor’s right at all times to sell or otherwise dispose of all or any part of such Securities in compliance with applicable federal and state securities laws.Nothing contained herein shall be deemed a representation or warranty by such Investor to hold the Securities for any period of time.Such Investor is not a broker-dealer registered with the SEC under the Exchange Act or an entity engaged in a business that would require it to be so registered. 5.4Investment Experience.Such Investor acknowledges that it can bear the economic risk and complete loss of its investment in the Securities and has such knowledge and experience in financial or business matters that it is capable of evaluating the merits and risks of the investment contemplated hereby. 5.5Disclosure of Information.Such Investor has had an opportunity to receive all information related to the Company requested by it and to ask questions of and receive answers from the Company regarding the Company, its business and the terms and conditions of the offering of the Securities.The Investor has reviewed copies of the SEC Filings, all of which are available for review at www.sec.gov.The Investor further acknowledges that it is familiar with the contents of such SEC Filings.Such Investor acknowledges receipt of copies of the SEC Filings.Neither such inquiries nor any other due diligence investigation conducted by such Investor shall modify, limit or otherwise affect such Investor’s right to rely on the Company’s representations and warranties contained in this Agreement. 5.6Restricted Securities.None of the Shares are registered under the Securities Act, or any state securities laws. The Investor acknowledges that the Shares have not been recommended by any US Federal or State securities commission or regulatory authority and that no such authority has confirmed the accuracy or determined the adequacy of this Agreement. The Investor understands that the offering and sale of the Shares is intended to be exempt from registration under the Securities Act, by virtue of Section 4(2) thereof and, if deemed advisable by the Company, the provisions of Regulation D promulgated thereunder, based, in part, upon the representations, warranties and agreements of the Investor contained in this Agreement. The Investor understands that the Shares may not be sold, transferred or otherwise disposed of without registration under the Securities Act or an exemption therefrom. 5.7Legends.It is understood that, except as provided below, certificates evidencing the Securities may bear the following legend: 11 (a)“The securities represented hereby 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, and, accordingly, may not be transferred unless (i) such securities have been registered for sale pursuant to the Securities Act of 1933, as amended, (ii) such securities may be sold without restriction pursuant to Rule 144, or (iii) such transfer may lawfully be made without registration under the Securities Act of 1933, as amended, and in the case of (ii) or (iii) above, an opinion of counsel acceptable to the Company has been obtained confirming the ability to transfer.” (b)If required by the authorities of any state in connection with the issuance of sale of the Securities, the legend required by such state authority. 5.8Accredited Investor.At the time such Investor was offered the Securities, it was, and as of the date hereof it is, an “accredited investor” as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under the Securities Act. 5.9Brokers and Finders.No Person will have, as a result of the transactions contemplated by this Agreement, any valid right, interest or claim against or upon the Company, any Subsidiary for any commission, fee or other compensation pursuant to any agreement, arrangement or understanding entered into by or on behalf of such Investor. 5.10Non-Reliance. In evaluating the suitability of an investment in the Company, the Investor has not relied upon any representation or other information (oral or written) other than as stated in the SEC Filings, this Agreement or as contained in documents so furnished to the Investor or its advisors, if any, by the Company in writing. The Investor is not relying on the Company, or any of its employees or agents with respect to the legal, tax, economic and related considerations of an investment in any the Shares and the Investor has relied on the advice of, or has consulted with, only its own advisors. 5.11No General Solicitation. The Investor is unaware of, is in no way relying on, and did not become aware of the offering of the Shares through or as a result of, any form of general solicitation or general advertising including, without limitation, any article, notice, advertisement or other communication published in any newspaper, magazine or similar media or broadcast over television, radio or over the Internet, in connection with the offering and sale of the Shares and is not purchasing the Shares as a result of any seminar or meeting to which the Investor was invited by, or any solicitation of a subscription by, a person not previously known to the Investor in connection with investments in securities generally. 5.12Investor Suitability. The Investor understands and agrees that purchase of the Shares is a high risk investment and the Investor is able to afford an investment in a speculative venture having the risks and objectives of the Company and its Subsidiaries and has adequate means of providing for the Investor’s current financial needs and foreseeable contingencies and has no need for liquidity from its investment in the Shares for an indefinite period of time.The Investor must bear the substantial economic risks of the investment in the Shares indefinitely because none of the Shares may be sold, hypothecated or otherwise disposed of unless subsequently registered under the Securities Act and applicable state securities laws or an exemption from such registration is available.The investment is a suitable one for the Investor. 12 5.13Specific Purpose. The Investor as an entity represents that it was not formed for the specific purpose of acquiring the Shares, 5.14Purchase Price.The Investor also acknowledges that the Company may repurchase or issue and sell shares of the Common Stock of the Company at a per share purchase price that may be less than or greater than the Purchase Price paid for the Shares and such Investor has had the opportunity to consult with its Advisors with respect to the tax implications regarding the purchase of the Shares. 6.Conditions to Closing. 6.1Conditions to the Investor’s Obligations. The obligation of the Investor to purchase Shares at the Closing is subject to the fulfillment to such Investor’s satisfaction, on or prior to the Closing Date, of the following conditions, any of which may be waived by such Investor: (a)The representations and warranties made by the Company in Section 4 hereof qualified as to materiality shall be true and correct at all times prior to and on the Closing Date, except to the extent any such representation or warranty expressly speaks as of an earlier date, in which case such representation or warranty shall be true and correct as of such earlier date, and, the representations and warranties made by the Company in Section 4 hereof not qualified as to materiality shall be true and correct in all material respects at all times prior to and on the Closing Date, except to the extent any such representation or warranty expressly speaks as of an earlier date, in which case such representation or warranty shall be true and correct in all material respects as of such earlier date.The Company shall have performed in all material respects all obligations and covenants herein required to be performed by it on or prior to the Closing Date. (b)The Company shall have obtained any and all consents, permits, approvals, registrations and waivers necessary or appropriate for consummation of the purchase and sale of the Securities, all of which shall be in full force and effect. (c)No judgment, writ, order, injunction, award or decree of or by any court, or judge, justice or magistrate, including any bankruptcy court or judge, or any order of or by any governmental authority, shall have been issued, and no action or proceeding shall have been instituted by any governmental authority, enjoining or preventing the consummation of the transactions contemplated hereby. (d)The Company shall have delivered a Certificate, executed on behalf of the Company by its Chief Executive Officer or its Chief Financial Officer, dated as of the Closing Date, certifying to the fulfillment of the conditions specified in subsections (a), (b), and (c) of this Section 6.1. 6.2Conditions to Obligations of the Company. The Company’s obligation to sell and issue Shares at the Closing is subject to the fulfillment to the satisfaction of the Company on or prior to the Closing Date of the following conditions, any of which may be waived by the Company: 13 (a)The representations and warranties made by the Investor in Section 5 hereof shall be true and correct in all material respects when made, and shall be true and correct in all material respects on the Closing Date with the same force and effect as if they had been made on and as of said date. (b)The Investor shall have performed in all material respects all obligations and covenants herein required to be performed by it on or prior to the Closing Date. 7.Covenants and Agreements of the Company. 7.1No Conflicting Agreements.The Company will not take any action, enter into any agreement or make any commitment that would conflict or interfere in any material respect with the Company’s obligations to the Investor. 7.2Insurance.The Company shall provide a full, true and correct copy of its current directors’ and officers’ insurance as in effect as of the date hereof, within sixty (60) Business Days of the Closing. 7.3Registration Rights.In the event the Company grants “piggyback” or Form S-3 registration rights to any holder of Common Stock after the date hereof, the Company agrees to provide the Investor with the same registration rights by means of signing the agreement pursuant to which such rights are granted. 7.4Removal of Legends.In connection with any sale or disposition of the Shares by an Investor pursuant to Rule 144 or pursuant to any other exemption under the Securities Act such that the purchaser acquires freely tradable shares and upon compliance by the Investor with the requirements of this Agreement, the Company shall cause the transfer agent for the Common Stock (the “Transfer Agent”) to issue replacement certificates representing the Securities sold or disposed of without restrictive legends or update the book entry for such Shares to remove any restrictions.Upon the earlier of (i) registration for resale or (ii) sale of the Shares pursuant to Rule 144, the Company shalldeliver to the Transfer Agent irrevocable instructions that the Transfer Agent shall reissue a certificate representing shares of Common Stock without legends (or remove the restrictive notation in the case of book entry shares) upon receipt by such Transfer Agent of the legended certificates for such shares in the case of certificated Shares, together with, if such legend is being removed pursuant to Rule 144, a customary representation by the Investor that Rule 144 applies to the shares of Common Stock represented thereby. The Investor understands and acknowledges that Rule 144 is not available to the Investor in connection with the sale of the Shares or any other holders of shares of Common Stock of the Company until one year following the date on which Form 10 information is filed with the SEC, or such other term as the SEC may provide from time to time.With respect to the removal of legends or restrictive notations from Shares registered for resale, the Investor agrees with the Company that if Shares are sold pursuant to a Registration Statement, they will be sold in compliance with the plan of distribution set forth therein, and acknowledges that the removal of the restrictive legend from certificates representing Shares or restrictive 14 notations for book entry Shares as set forth in this Section 7.4 is predicated upon the Company’s reliance upon this understanding.From and after the earlier of such dates, upon the Investor’s written request, the Company shall promptly cause certificates evidencing the Investor’s Securities to be replaced with certificates which do not bear such restrictive legends or cause the Transfer Agent to update the book entry to remove any restrictive notation, as applicable.When the Company is required to cause an unlegended certificate to replace a previously issued legended certificate or remove a restrictive notation from book entry Shares, if: (1) the unlegended certificate is not delivered to an Investor within five (5) Business Days of submission by that Investor of a legended certificate and supporting documentation to the Transfer Agent as provided above or the restrictive legend is not removed and (2) prior to the time such unlegended certificate or confirmation of removal of the restrictive notation is received by the Investor, the Investor, or any third party on behalf of such Investor or for the Investor’s account, purchases (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the Investor of shares represented by such certificate or book entry (a “Buy-In”), then the Company shall pay in cash to the Investor (for costs incurred either directly by such Investor or on behalf of a third party) the amount by which the total purchase price paid for Common Stock as a result of the Buy-In (including brokerage commissions, if any) exceeds the proceeds received by such Investor as a result of the sale to which such Buy-In relates.The Investor shall provide the Company written notice indicating the amounts payable to the Investor in respect of the Buy-In. 7.5Form D; Blue Sky Filings.The Company agrees to timely file a Form D with respect to the Securities as required under Regulation D and to provide a copy thereof, promptly upon request of the Investor. The Company shall take such action as the Company shall reasonably determine is necessary in order to obtain an exemption for, or to qualify the Securities for, sale to the Investor at the Closing under applicable securities or “Blue Sky” laws of the states of the United States, and shall provide evidence of such actions promptly upon request of the Investor. 8.Survival and Indemnification. 8.1Survival.The representations, warranties, covenants and agreements contained in this Agreement shall survive the Closing of the transactions contemplated by this Agreement. 8.2Indemnification.The Company agrees to indemnify and hold harmless the Investor and its Affiliates and their respective directors, officers, trustees, members, managers, employees and agents, and their respective successors and assigns, from and against any and all losses, claims, damages, liabilities and expenses (including without limitation reasonable attorney fees and disbursements and other expenses incurred in connection with investigating, preparing or defending any action, claim or proceeding, pending or threatened and the costs of enforcement thereof) (collectively, “Losses”) to which such Person may become subject as a result of any breach of representation, warranty, covenant or agreement made by or to be performed on the part of the Company under this Agreement, and will reimburse any such Person for all such amounts as they are incurred by such Person. 15 8.3Conduct of Indemnification Proceedings.Any person entitled to indemnification hereunder shall (i) give prompt notice to the indemnifying party of any claim with respect to which it seeks indemnification and (ii) permit such indemnifying party to assume the defense of such claim with counsel reasonably satisfactory to the indemnified party; provided that any person entitled to indemnification hereunder shall have the right to employ separate counsel and to participate in the defense of such claim, but the fees and expenses of such counsel shall be at the expense of such person unless (a) the indemnifying party has agreed to pay such fees or expenses, or (b) the indemnifying party shall have failed to assume the defense of such claim and employ counsel reasonably satisfactory to such person or (c) in the reasonable judgment of any such person, based upon written advice of its counsel, a conflict of interest exists between such person and the indemnifying party with respect to such claims (in which case, if the person notifies the indemnifying party in writing that such person elects to employ separate counsel at the expense of the indemnifying party, the indemnifying party shall not have the right to assume the defense of such claim on behalf of such person); 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, except to the extent that such failure to give notice shall materially adversely affect the indemnifying party in the defense of any such claim or litigation.It is understood that the indemnifying party shall not, in connection with any proceeding in the same jurisdiction, be liable for fees or expenses of more than one separate firm of attorneys at any time for all such indemnified parties.No indemnifying party will, except with the consent of the indemnified party, consent to entry of any judgment or enter into any settlement that 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. 9.Miscellaneous. 9.1Successors and Assigns.This Agreement may not be assigned by a party hereto without the prior written consent of the Company or the Investor, as applicable, provided, however, that, after the Closing Date, the Investor may assign its rights and delegate its duties hereunder in whole or in part to an Affiliate or to a third party acquiring some or all of its Securities in a transaction complying with applicable securities laws without the prior written consent of the Company.The provisions of this Agreement shall inure to the benefit of and be binding upon the respective permitted successors and assigns of the parties.Without limiting the generality of the foregoing, in the event that the Company is a party to a merger, consolidation, share exchange or similar business combination transaction in which the Common Stock is converted into the equity securities of another Person, from and after the effective time of such transaction, such Person shall, by virtue of such transaction, be deemed to have assumed the obligations of the Company hereunder, and the term “Company”, in reference to obligations to be performed after the effective date of such transaction, shall be deemed to refer to such Person and the term “Shares”, in reference to obligations to be performed after the effective date of such transaction, shall be deemed to refer to the securities received by the Investor in connection with such transaction.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. 16 9.2Counterparts; Faxes.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.This Agreement may also be executed via facsimile or by email in .pdf form, which shall be deemed an original. 9.3Titles and Subtitles.The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement. 9.4Notices.Unless otherwise provided, any notice required or permitted under this Agreement shall be given in writing and shall be deemed effectively given as hereinafter described (i) if given by personal delivery, then such notice shall be deemed given upon such delivery, (ii) if given by telex or telecopier, then such notice shall be deemed given upon receipt of confirmation of complete transmittal, (iii) if given by mail, then such notice shall be deemed given upon the earlier of (A) receipt of such notice by the recipient or (B) three days after such notice is deposited in first class mail, postage prepaid, and (iv) if given by an internationally recognized overnight air courier, then such notice shall be deemed given one Business Day after delivery to such carrier.All notices shall be addressed to the party to be notified at the address as follows, or at such other address as such party may designate by ten days’ advance written notice to the other party: If to the Company: Avra Surgical Robotics, Inc. c/o Stamell & Schager, LLP 1 Liberty Plaza, 35th Floor New York, NY 10006 Attention:Jared Stamell Fax: 212-566-4061With a copy to: David N. Feldman, Esq. Richardson & Patel LLP 405 Lexington Avenue, 49th Floor New York, NY 10174 Fax:(917) 677-8165 If to the Investor: With a copy to: 9.5Expenses.The parties hereto shall pay their own costs and expenses in connection herewith.In the event that legal proceedings are commenced by any party to this Agreement against another party to this Agreement in connection with this Agreement, the party or parties which do not prevail in such proceedings shall pay the reasonable attorneys’ fees and other reasonable out-of-pocket costs and expenses incurred by the prevailing party in such proceedings. 17 9.6Amendments and Waivers.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), only with the written consent of the Company and the Investor or, in the case of a waiver, by the party against whom enforcement of any such waived provision is sought.Any amendment or waiver effected in accordance with this paragraph shall be binding upon each holder of any Securities purchased under this Agreement at the time outstanding, each future holder of all such Securities, and the Company. 9.7Severability.Any provision of this Agreement 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 but shall be interpreted as if it were written so as to be enforceable to the maximum extent permitted by applicable law, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.To the extent permitted by applicable law, the parties hereby waive any provision of law which renders any provision hereof prohibited or unenforceable in any respect. 9.8Entire Agreement.This Agreement, including the Disclosure Schedules, constitutes the entire agreement among the parties hereof with respect to the subject matter hereof and thereof and supersedes all prior agreements and understandings, both oral and written, between the parties with respect to the subject matter hereof and thereof. 9.9Further Assurances.The parties shall execute and deliver all such further instruments and documents and take all such other actions as may reasonably be required to carry out the transactions contemplated hereby and to evidence the fulfillment of the agreements herein contained. 9.10Governing Law; Consent to Jurisdiction; Waiver of Jury Trial.This Agreement shall be governed by, and construed in accordance with, the internal laws of the State of New York without regard to the choice of law principles thereof.Each of the parties hereto irrevocably submits to the exclusive jurisdiction of the courts of the State of New York located in New York County and the United States District Court for the Southern District of New York for the purpose of any suit, action, proceeding or judgment relating to or arising out of this Agreement and the transactions contemplated hereby.Service of process in connection with any such suit, action or proceeding may be served on each party hereto anywhere in the world by the same methods as are specified for the giving of notices under this Agreement.Each of the parties hereto irrevocably consents to the jurisdiction of any such court in any such suit, action or proceeding and to the laying of venue in such court.Each party hereto irrevocably waives any objection to the laying of venue of any such suit, action or proceeding brought in such courts and irrevocably waives any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum. EACH OF THE PARTIES HERETO WAIVES ANY RIGHT TO REQUEST A TRIAL BY JURY IN ANY LITIGATION WITH RESPECT TO THIS AGREEMENT AND REPRESENTS THAT COUNSEL HAS BEEN CONSULTED SPECIFICALLY AS TO THIS WAIVER. [Signature page follows] 18 IN WITNESS WHEREOF, the parties have executed this Purchase Agreement or caused their duly authorized officers to execute this Agreement as of the date first above written. The Company: AVRA SURGICAL ROBOTICS, INC. By: Name: Barry Cohen Title:

Exhibit 23.1 CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM We consent to the incorporation by reference in Registration Statement No. 333-203508 on Form S-8 our report dated March 8, 2016, relating to the consolidated financial statements of Aduro Biotech, Inc. (the “Company”) appearing in this Annual Report on Form 10-K of the Company for the year ended December 31, 2015. /s/ DELOITTE & TOUCHE San Francisco, California

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2010 o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT For the transition period from to 000-52225 (Commission file number) SOLAR ACQUISITION CORP. (Exact name of small business issuer as specified in its charter) Florida 20-5080271 (State or other jurisdictionof incorporation or organization) (IRS Employer Identification No.) 215 Dino Drive, Ann Arbor, MI 48103 (Address of principal executive offices) 734-320-7628 (Issuer's telephone number) N/A (Former name, former address and former fiscal year, if changed since last report) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.YesxNo o Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).Yes oNo x State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: As of October 14, 2010 11,541,000–shares of common stock Transitional Small Business Disclosure Format (check one):Yes oNo x Solar Acquisition Corp. Index Page Number PART I.FINANCIAL INFORMATION Item 1.

Exhibit 32.1 CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350 In connection with this Quarterly Report of NewEra Technology Development Co., Ltd. (the “Company”) on Form 10-Q for theperiod endingDecember 31, 2010, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Chen, Zengxing, Chief Executive Officer and Chief Financial Officer of the Company, certifies to the best of his knowledge, pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Sec. 906 of the Sarbanes-Oxley Act of 2002, that: 1. Such Quarterly Report on Form 10-Q for theperiod endingDecember 312010, fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in such Quarterly Report on Form 10-Q for theperiod endingDecember 31, 2010, fairly presents, in all material respects, the financial condition and results of operations of NewEra Technology Development Co., Ltd. Dated:January 26, 2011 By: /s/ Chen, Zengxing Chen, Zengxing Chief Executive Officer and Principal Accounting Officer

Exhibit 10.15 AMENDED AND RESTATED EMPLOYMENT AGREEMENT THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this “Agreement”), dated as of March 4, 2015, is entered into by and between Demand Media, Inc., a Delaware corporation (the “Company”) and Peter Kim (the “Employee”). WHEREAS, the Employee and the Company previously entered into that certain Employment Agreement, dated August 13, 2013, as amended on September 8, 2014 (the “Prior Agreement”), pursuant to which the Employee currently serves as the Company’s Senior Vice President, Accounting; WHEREAS, the Company desires to continue to employ the Employee as Senior Vice President, Accounting and to employ Employee as interim Chief Accounting Officer and to enter into an agreement embodying the terms of such employment; WHEREAS, as of the Effective Date (as defined below), the Prior Agreement shall terminate and be superseded by this Agreement; and WHEREAS, the Employee desires to accept such continuation of employment with the Company, subject to the terms and conditions of this Agreement. NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS: 1. Employment Period. Subject to the provisions for earlier termination hereinafter provided, the Employee’s employment hereunder shall be for a term (the “Employment Period”) commencing on March 5, 2015 (the “Effective Date”) and ending on the third (3rd) anniversary of the Effective Date. The Employee’s employment hereunder is terminable at will by the Company or by the Employee at any time (for any reason or for no reason), subject to the provisions of Section 4 hereof. This Agreement is effective as of the Effective Date. 2. Terms of Employment. (a) Position and Duties. (i) During the Employment Period, the Employee shall serve as Senior Vice President, Accounting and interim Chief Accounting Officer, and shall perform such duties as are usual and customary for such position. At the Company’s request, the Employee shall serve the Company and/or its subsidiaries and affiliates in other capacities in addition to the foregoing. In the event that the Employee, during the Employment Period, serves in any one or more of such additional capacities, the Employee’s compensation shall not be increased beyond that specified in Section 2(b) hereof. In addition, in the event the Employee’s service in one or more of such additional capacities is terminated, the Employee’s compensation, as specified in Section 2(b) hereof, shall not be diminished or reduced in any manner as a result of such termination provided that the Employee otherwise remains employed under the terms of this Agreement. (ii) During the Employment Period, and excluding any periods of vacation and sick leave to which the Employee may be entitled, the Employee agrees to devote the Employee’s full business time and attention to the business and affairs of the Company. (iii) During the Employment Period, the Employee shall perform the services required by this Agreement at the Company’s principal offices located in Santa Monica, California (the “Principal Location”), except for travel to other locations as may be necessary to fulfill the Employee’s duties and responsibilities hereunder. (b) Compensation, Benefits, Etc. (i) Base Salary. During the Employment Period, the Employee shall receive a base salary equal to two hundred seventy-five thousand ($275,000) per annum (the “Base Salary”). The Base Salary shall be paid in installments in accordance with the Company’s applicable payroll practices, as in effect from time to time, but no less often than monthly. (ii) Annual Bonus. In addition to the Base Salary, the Employee shall be eligible to earn, for each fiscal year of the Company ending during the Employment Period, a discretionary cash performance bonus (an “Annual Bonus”) under the Company’s bonus plan or program applicable to senior employees. The Employee’s target Annual Bonus (the “Target Bonus”) shall be set at thirty percent (30%) of the Base Salary actually paid for such year. The actual amount of any Annual Bonus shall be determined on the basis of the attainment of Company performance metrics applicable to senior employees and/or individual performance objectives, in each case, as established and approved by the Board of Directors of the Company (the “Board”) or the Compensation Committee of the Board (the “Compensation Committee”) (or their designee) in its sole discretion. Payment of any Annual Bonus(es), to the extent any Annual Bonus(es) become payable, will be contingent upon the Employee’s continued employment through the applicable payment date, which shall occur on the date on which annual bonuses are paid generally to the Company’s senior employees. (iii) Equity Awards. (A) Restricted Stock Unit Award. The Company’s Compensation Committee previously approved the grant by the Company to the Employee of a restricted stock unit award covering fifteen thousand (15,000) shares of the Company’s common stock (the “Initial RSUs”), under the Company’s 2010 Incentive Award Plan, as amended (the “Plan”). Subject to Section 4(c) hereof and the Employee’s continued employment with the Company through the applicable vesting date(s), one quarter (1/4) of the Initial RSUs vested on August 15, 2014, with an additional 1/16th of the Initial RSUs scheduled to vest on each three (3)-month anniversary thereof. The terms and conditions of the Initial RSUs were set forth in a separate award agreement in a form prescribed by the Company (the “Initial RSU Agreement”), entered into by the Company and the Employee, which evidenced the grant of the Initial RSUs. In addition to the foregoing grant, subject to approval by the Compensation Committee, the Company agrees to grant to Employee an RSU award covering ten thousand (10,000) shares of the Company’s common stock (the “2015 RSUs”) under the Plan, which RSU award shall vest in three (3) substantially equal installments commencing on March 1, 2016 and each anniversary thereafter. The terms and conditions of the 2015 RSUs, including the vesting commencement date and any restrictions thereon, shall be set forth in a separate RSU award agreement to be entered into by the Company and Employee which shall evidence the grant of the RSUs (the “2015 RSU Award Agreement”). The Initial RSUs and the 2015 RSUs are collectively referred to as the “RSUs”, and the Initial RSU Agreement and the 2015 RSU Agreement are collectively referred to as the “RSU Agreements.” (B) Stock Option Award. Subject to approval by the Compensation Committee, the Company agrees to grant to Employee a nonqualified option to purchase twenty-five thousand (25,000) shares of the Company’s common stock (the “Stock Option”) under the Plan, with an exercise price equal to the fair market value per share on the date of grant. Subject to Section 4(c) hereof, the Stock Option shall vest over three (3) years with one-third (1/3) vesting on March 1, 2016 and one-thirty-sixth (1/36th) vesting on each monthly anniversary thereafter, subject to the Employee’s continued employment with the Company through such date. The terms and conditions of the Stock Option, including the vesting commencement date and any restrictions thereon, shall be set forth in a separate award agreement in a form prescribed by the Company (the “Stock Option Agreement”), to be entered into by the Company and the Employee, which shall evidence the grant of the Stock Option (which, together with the RSU Agreements, shall constitute the “Equity Award Agreements”). The Stock Option shall be governed in all respects by the terms and conditions of the Plan. (iv) Incentive, Savings and Retirement Plans. During the Employment Period, the Employee shall be eligible to participate in all other incentive plans, practices, policies and programs, and all savings and retirement plans, practices, policies and programs, in each case that are available generally to senior employees of the Company. In addition, during the Employment Period, the Employee shall be eligible to receive periodic equity incentive awards from the Company, including under any annual equity incentive program that may be established by the Company for its senior employees, as may be in effect from time to time. (v) Welfare Benefit Plans. During the Employment Period, the Employee and the Employee’s dependents shall be eligible to participate in the welfare benefit plans, practices, policies and programs (including, as applicable, medical, dental, disability, employee life, group life and accidental death insurance plans and programs) maintained by the Company for its senior employees. (vi) Expenses. During the Employment Period, the Employee shall be entitled to receive prompt reimbursement for all reasonable business expenses incurred by the Employee in accordance with the policies, practices and procedures of the Company provided to senior employees of the Company. (vii) Fringe Benefits. During the Employment Period, the Employee shall be entitled to such fringe benefits and perquisites as are provided by the Company to its senior employees from time to time, in accordance with the policies, practices and procedures of the Company, and shall receive such additional fringe benefits and perquisites as the Company may, in its discretion, from time-to-time provide. Nothing contained in Sections 2(b)(iv)-(v) hereof or this Section 2(b)(vii) shall, or shall be construed to, obligate the Company to adopt or maintain any incentive, savings, retirement, welfare, fringe benefit or other plan(s) or program(s) at any time. (viii) Vacation. During the Employment Period, Employee shall be eligible to accrue up to 3 weeks of paid vacation and 40 paid sick hours per year, subject to limitations on accrual carry over and other restrictions generally applicable holidays that the Company may offer similarly situated employees. 3. Termination of Employment. (a) Death or Disability. The Employee’s employment shall terminate automatically upon the Employee’s death during the Employment Period. Either the Company or the Employee may terminate the Employee’s employment in the event of the Employee’s Disability during the Employment Period. For purposes of this Agreement, “Disability” shall mean a disability as determined under the Company’s applicable long-term disability plan that prevents the Employee from performing the Employee’s duties under this Agreement (even with a reasonable accommodation by the Company) for a period of six (6) months or more or, if no such plan applies, as determined in the reasonable discretion of the Company. (b) Cause. The Company may terminate the Employee’s employment during the Employment Period for Cause or without Cause. For purposes of this Agreement, “Cause” shall have the meaning set forth in the Plan. 2 (c) Termination by the Employee. The Employee’s employment may be terminated by the Employee for any reason, including with Good Reason in connection with a Change in Control (as defined in the Plan). For purposes of this Agreement, “Good Reason” shall mean the occurrence of any one or more of the following events in connection with a Change in Control, in any case, without the Employee’s prior written consent, unless the Company fully corrects the circumstances constituting Good Reason (provided such circumstances are capable of correction) as provided below: (i) a demotion or material diminution of the Employee’s position, authority, duties or responsibilities (other than any insubstantial action not taken in bad faith and which is promptly remedied by the Company upon notice by the Employee); provided that “Good Reason” does not include a change in title, authority, duties and/or responsibilities following a Change in Control if (A) the Employee’s new title is that of a senior officer of the entity surviving such Change in Control (or, if applicable, its parent company if such entity has a parent company) reporting directly to an executive officer of the entity surviving such Change in Control (or, if applicable, its parent company, if such entity has a parent company), and the Employee’s authority, duties and responsibilities are commensurate with such title or (B) (1) the entity entity has a parent company) continues to operate the Company’s principal businesses as a separate unit, division or subsidiary or combines the Company’s principal businesses with one of its existing units, divisions or subsidiaries and (2) the Employee’s new title is that of a senior officer of such unit, division or subsidiary reporting directly to an executive officer of such unit, division or subsidiary (or to an executive officer of the entity surviving the Change in Control or parent company thereof) and (in either case) the Employee’s authority, duties and responsibilities are commensurate with such title and are similar in scope (with respect to such unit, division or subsidiary) to the authority, duties and responsibilities of the Employee prior to the Change in Control; (ii) a requirement that the Employee report to work more than fifty (50) miles from the Company’s Principal Location (not including normal business travel required of the Employee’s position) or, to the extent such requirement would not constitute a material change in the geographic location at which the Employee must perform services under this Agreement within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), such higher number of miles from the Company’s Principal Location as would constitute a material change in the geographic location at which the Employee must perform services under this Agreement within the meaning of Section 409A of the Code; (iii) a material reduction in the Employee’s base salary; or (iv) a material breach by the Company of its obligations hereunder. Notwithstanding the foregoing, the Employee will not be deemed to have resigned for Good Reason unless (1) the Employee provides the Company with written notice setting forth in reasonable detail the facts and circumstances claimed by the Employee to constitute Good Reason within sixty (60) days after the date of the occurrence of any event that the Employee knows or should reasonably have known to constitute Good Reason, (2) the Company fails to cure such acts or omissions within thirty (30) days following its receipt of such notice, and (3) the effective date of the Employee’s termination for Good Reason occurs no later than sixty (60) days after the expiration of the Company’s cure period. (d) Notice of Termination. Any termination by the Company for Cause, or by the Employee for Good Reason, shall be communicated by a Notice of Termination to the other parties hereto given in accordance with Section 10(b) hereof. For purposes of this Agreement, a “Notice of Termination” means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Employee’s employment under the provision so indicated and (iii) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the termination date (which date shall be not more than sixty (60) days after the giving of such notice). The failure by the Employee or the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason or Cause shall not waive any right of the Employee or the Company, respectively, hereunder or preclude the Employee or the Company, respectively, from asserting such fact or circumstance in enforcing the Employee’s or the Company’s rights hereunder. (e) Termination of Offices and Directorships. Upon termination of the Employee’s employment for any reason, unless otherwise specified in a written agreement between the Employee and the Company, the Employee shall be deemed to have resigned from all offices, directorships, and other employment positions if any, then held with the Company, and shall take all actions reasonably requested by the Company to effectuate the foregoing. 3 4. Obligations of the Company upon Termination. (a) Without Cause, For Good Reason, Death or Disability, or Post CFO Appointment Termination (as defined below). Subject to Section 4(d) hereof, if the Employee incurs a “separation from service” from the Company (within the meaning of Section 409A(a)(2)(A)(i) of the Code, and Treasury Regulation Section 1.409A-1(h)) (a “Separation from Service”) during the Employment Period (such date, the “Date of Termination”) by reason of (1) a termination of the Employee’s employment by the Company without Cause; (2) a termination of the Employee’s employment by the Employee for Good Reason; (3) a termination of the Employee’s employment by reason of the Employee’s death or Disability; or (4) a termination of the Employee’s employment by the Company without Cause within six (6) months of the commencement of employment of a permanent Chief Financial Officer (a “Post CFO Appointment Termination”) (each of (1), (2), (3) and (4), a “Qualifying Termination”): (i) The Employee (or the Employee’s estate or beneficiaries, if applicable) shall be paid, in a single lump-sum payment on the date of the Employee’s termination of employment, the aggregate amount of the Employee’s earned but unpaid Base Salary and accrued but unpaid vacation pay (if any) through the date of such termination (the “Accrued Obligations”), in each case, to the extent not previously paid. (ii) In addition, subject to Section 4(d) hereof and the Employee’s (or the Employee’s estate’s or beneficiaries’, if applicable) timely execution and non-revocation of a Release (as described below), the Employee (or the Employee’s estate or beneficiaries, if applicable) shall be paid: (A) an amount equal to six (6) months’ of the Base Salary in effect on the Date of Termination (or, solely in the case of a Post CFO Appointment Termination, an amount equal to nine (9) months’ of the Base Salary in effect on the Date of Termination), payable in a single lump-sum payment on the sixtieth (60th) day following the Date of Termination; and (B) as applicable, any unpaid Annual Bonus to which the Employee would have become entitled for any fiscal year of the Company that ends on or before the Date of Termination had the Employee remained employed through the payment date, payable in a single lump-sum payment on the date on which annual bonuses are paid to the Company’s senior employees generally for such calendar year, but in no event later than March 15th of the calendar year immediately following the calendar year in which the Date of Termination occurs, with the actual date within such period determined by the Company in its sole discretion; and (C) solely in the case of a Post CFO Appointment Termination, fifty percent (50%) of the Employee’s pro-rated Target Bonus with respect to the fiscal year in which the Date of Termination occurs (i.e., pro-rated from the Effective Date to the Date of Termination), payable in a single lump-sum payment on the sixtieth (60th) day following the Date of Termination (it being understood that such amount may be less than the Employee’s pro-rated Target Bonus as a result of Company underperformance of the applicable performance criteria in such calendar year); and (D) solely in the case of a Post CFO Appointment Termination, (i) certain outstanding compensatory equity awards (excluding the 2015 RSUs and the Stock Option contemplated by Section 2(b)(iii) hereof (collectively, the “2015 Equity Awards”)) (the “Equity Awards”) that have not yet vested shall conditionally vest and, as applicable, become exercisable on the Date of Termination with respect to such number of shares underlying each such Equity Award that would have vested over the six (6) month period immediately following the Date of Termination, had each such Equity Award continued to vest in accordance with its terms; and (ii) with respect to the 2015 Equity Awards that have not yet vested, such awards shall conditionally vest and, as applicable, become exercisable on the Date of Termination in an amount equal to twenty-five percent (25%) of such remaining unvested award. For the avoidance of doubt: (A) to the extent that any provision of this Agreement is inconsistent with the terms and conditions of any equity award agreement between the Employee and the Company, this Agreement shall constitute an amendment thereto, and (B) in no event shall any Equity Award or 2015 Equity Award expire during any applicable Release (as defined below) consideration and revocation periods, rather, such awards shall remain outstanding and eligible to vest upon the Employee’s execution and non-revocation of the Release and, to the extent that such awards would have vested prior to the effectiveness of the Release, such awards shall instead vest upon the effectiveness of the Release. (iii) In addition, subject to Section 4(d) hereof and conditioned upon the Employee’s timely execution and non-revocation of a Release, during the period commencing on the Date of Termination and ending on the six (6)-month anniversary of the Date of Termination (or, solely in the case of a Post CFO Appointment Termination, during the period commencing on the Date of Termination and ending on the nine (9)-month anniversary of the Date of Termination) or, if earlier, the date on which the Employee becomes eligible for coverage under the group health plan of a subsequent employer (of which eligibility the Employee hereby agrees to give prompt notice to the Company) (in any case, the “COBRA Period”), subject to the Employee’s valid election to continue healthcare coverage under Section 4980B of the Code and the regulations thereunder, the Company shall continue to provide the Employee and the Employee’s eligible dependents with coverage under its group health plans at the same levels and the same cost to the Employee as would have applied if the Employee’s employment had not been terminated based on the Employee’s elections in effect on the Date of Termination, provided, however, that (A) if any plan pursuant to which such benefits are provided 4 is not, or ceases prior to the expiration of the period of continuation coverage to be, exempt from the application of Section 409A of the Code under Treasury Regulation Section 1.409A-1(a)(5), or (B) the Company is otherwise unable to continue to cover the Employee under its group health plans (including without limitation, Section 2716 of the Public Health Service Act), then, in either case, an amount equal to each remaining Company subsidy shall thereafter be paid to the Employee as currently taxable compensation in substantially equal monthly installments over the continuation coverage period (or the remaining portion thereof). The payments and benefits described in the preceding Sections 4(a)(ii) and (iii) are referred to herein as the “Severance.” Notwithstanding the foregoing, it shall be a condition to the Employee’s (or the Employee’s estate’s or beneficiaries’, if applicable) right to receive the Severance that the Employee (or the Employee’s estate or beneficiaries, if applicable) execute and deliver to the Company an effective release of claims in substantially the form attached hereto as Exhibit A (the “Release”) within twenty-one (21) days (or, to the extent required by law, forty-five (45) days) following the Date of Termination and that the Employee (or the Employee’s estate or beneficiaries, if applicable) not revoke such Release during any applicable revocation period. (b) For Cause, Without Good Reason or Other Terminations. If the Company terminates the Employee’s employment for Cause, the Employee terminates the Employee’s employment without Good Reason, or the Employee’s employment terminates for any other reason not enumerated in this Section 4, in any case, during the Employment Period, the Company shall pay to the Employee the Accrued Obligations in cash within thirty (30) days after the Date of Termination (or by such earlier date as may be required by applicable law). (c) Equity Vesting in Connection with a Change in Control. In addition to any payments or benefits due to the Employee (or the Employee’s estate or beneficiaries, if applicable) under Section 4(a) above (if any), subject to and conditioned upon the Employee’s timely execution and non-revocation of a Release, if the Employee’s employment is terminated by reason of a Qualifying Termination and a Change in Control (A) occurs on or within ninety (90) days after the Date of Termination or (B) has occurred within one (1) year before the Date of Termination, all outstanding compensatory equity awards that have not yet vested shall conditionally vest and, as applicable, become exercisable on the later of the Date of Termination and the date of such Change in Control (and such vesting shall become unconditional upon such execution and non-revocation of a Release). For the avoidance of doubt, if a Qualifying Termination occurs prior to a Change in Control, all outstanding, unvested compensatory equity awards that would otherwise terminate on the Date of Termination shall remain outstanding and eligible to vest solely upon a Change in Control occurring within ninety (90) days after the Date of Termination (but shall not otherwise vest following the Date of Termination) and shall terminate on the ninetieth (90th) day following the Date of Termination if a Change in Control has not occurred on or prior to such ninetieth (90th) day (or such earlier expiration date applicable to the award (other than due to a termination of employment)). Notwithstanding the foregoing, if the Employee fails to timely execute or revokes a Release, all conditionally vested awards (and any shares received in respect of such awards) shall be forfeited upon such failure or revocation (subject to repayment by the Company to the Employee of any amounts (if any) paid by the Employee with respect to shares underlying such conditionally vested awards. (d) Six-Month Delay. Notwithstanding anything to the contrary in this Agreement, no compensation or benefits, including without limitation any severance payments or benefits payable under Section 4 hereof, shall be paid to the Employee during the six (6)-month period following the Employee’s “separation from service” (within the meaning of Section 409A(a)(2)(A)(i) of the Code) if the Company determines that paying such amounts at the time or times indicated in this Agreement would be a prohibited distribution under Section 409A(a)(2)(B)(i) of the Code. If the payment of any such amounts is delayed as a result of the previous sentence, then on the first business day following the end of such six (6)-month period (or such earlier date upon which such amount can be paid under Section 409A of the Code without resulting in a prohibited distribution, including as a result of the Employee’s death), the Company shall pay the Employee a lump-sum amount equal to the cumulative amount that would have otherwise been payable to the Employee during such period. (e) Exclusive Benefits. Except as expressly provided in this Section 4 and subject to Section 5 hereof, the Employee shall not be entitled to any additional payments or benefits upon or in connection with the Employee’s termination of employment. (f) Equity Award Agreements. For the avoidance of doubt, nothing contained in this Agreement is intended to result in any vesting terms that are less favorable to the Employee than those contained in any applicable equity award agreement and, to the extent that the vesting terms contained in any such award agreement are more favorable to the Employee than those provided herein, including, without limitation, this Section 4, the terms of such award agreement shall control. 5. Non-Exclusivity of Rights. Amounts which are vested benefits or which the Employee is otherwise entitled to receive under any plan, policy, practice or program of or any contract or agreement with the Company at or subsequent to the Date of Termination shall be payable in accordance with such plan, policy, practice or program or contract or agreement except as explicitly modified by this Agreement. 6. Excess Parachute Payments, Limitations on Payments. (a) Best Pay Cap. Notwithstanding any other provision of this Agreement, in the event that any payment or benefit received or to be received by the Employee (including any payment or benefit received in connection with a termination of the Employee’s employment, whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement) (all such payments and 5 benefits, including the payments and benefits under Section 4 hereof, being hereinafter referred to as the “Total Payments”) would be subject (in whole or part), to excise tax imposed under Section 4999 of the Code (the “Excise Tax”), then, after taking into account any reduction in the Total Payments provided by reason of Section 280G of the Code in such other plan, arrangement or agreement, the cash severance payments under this Agreement shall first be reduced, and the noncash severance payments hereunder shall thereafter be reduced, to the extent necessary so that no portion of the Total Payments is subject to the Excise Tax but only if (i) the net amount of such Total Payments, as so reduced (and after subtracting the net amount of federal, state and local income taxes on such reduced Total Payments and after taking into account the phase out of itemized deductions and personal exemptions attributable to such reduced Total Payments) is greater than or equal to (ii) the net amount of such Total Payments without such reduction (but after subtracting the net amount of federal, state and local income taxes on such Total Payments and the amount of Excise Tax to which the Employee would be subject in respect of such unreduced Total Payments and after taking into account the phase out of itemized deductions and personal exemptions attributable to such unreduced Total Payments). The Total Payments shall be reduced in the following order: (A) reduction of any cash severance payments otherwise payable to the Employee that are exempt from Section 409A of the Code; (B) reduction of any other cash payments or benefits otherwise payable to the Employee that are exempt from Section 409A of the Code, but excluding any payments attributable to any acceleration of vesting or payments with respect to any equity award that are exempt from Section 409A of the Code; (C) reduction of any other payments or benefits otherwise payable to the Employee on a pro-rata basis or such other manner that complies with Section 409A of the Code, but excluding any payments attributable to any acceleration of vesting and payments with respect to any equity award that are exempt from Section 409A of the Code; and (D) reduction of any payments attributable to any acceleration of vesting or payments with respect to any equity award that are exempt from Section 409A of the Code, in each case beginning with payments that would otherwise be made last in time. (b) Certain Exclusions. For purposes of determining whether and the extent to which the Total Payments will be subject to the Excise Tax, (i) no portion of the Total Payments the receipt or enjoyment of which the Employee shall have waived at such time and in such manner as not to constitute a “payment” within the meaning of Section 280G(b) of the Code shall be taken into account; (ii) no portion of the Total Payments shall be taken into account which, in the written opinion of an independent, nationally recognized accounting firm (the “Accounting Firm”), does not constitute a “parachute payment” within the meaning of Section 280G(b)(2) of the Code (including by reason of Section 280G(b)(4)(A) of the Code) and, in calculating the Excise Tax, no portion of such Total Payments shall be taken into account which, in the opinion of the Accounting Firm, constitutes 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; and (iii) the value of any non-cash benefit or any deferred payment or benefit included in the Total Payments shall be determined by the Accounting Firm in accordance with the principles of Sections 280G(d)(3) and (4) of the Code. 7. Confidential Information and Non-Solicitation. The Employee hereby acknowledges that the Employee has previously entered into an agreement with the Company containing confidentiality and other protective covenants (the “Confidentiality Agreement”) and that the Employee remains bound by the terms and conditions of the Confidentiality Agreement. 8. Representations. The Employee hereby represents and warrants to the Company that (a) the Employee is entering into this Agreement voluntarily and that the performance of the Employee’s obligations hereunder will not violate any agreement between the Employee and any other person, firm, organization or other entity, and (b) the Employee is not bound by the terms of any agreement with any previous employer or other party to refrain from competing, directly or indirectly, with the business of such previous employer or other party that would be violated by the Employee’s entering into this Agreement and/or providing services to the Company pursuant to the terms of this Agreement. 9. Successors. (a) This Agreement is personal to the Employee and, without the prior written consent of the Company, shall not be assignable by the Employee otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Employee’s legal representatives. (b) This Agreement shall inure to the benefit of and be binding upon the Company (c) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company 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 it if no such succession had taken place. As used in this Agreement, “Company” shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise. 10. Miscellaneous. (a) Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of California, without reference to principles of conflict of laws. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. 6 (b) Notices. All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: If to the Employee: at the Employee’s most recent address on the records of the Company. Demand Media, Inc. 1655 26th Street Santa Monica, CA 90404 Attn: General Counsel Latham & Watkins LLP 355 South Grand Ave. Los Angeles, CA 90071-1560 Attn: Alex Voxman or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee. (c) Sarbanes-Oxley Act of 2002. Notwithstanding anything herein to the contrary, if the Company determines, in its good faith judgment, that any transfer or deemed transfer of funds hereunder is likely to be construed as a personal loan prohibited by Section 13(k) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and the rules and regulations promulgated thereunder, then such transfer or deemed transfer shall not be made to the extent necessary or appropriate so as not to violate the Exchange Act and the rules and regulations promulgated thereunder. (d) Section 409A of the Code. (i) To the extent applicable, this Agreement shall be interpreted in accordance with Section 409A of the Code and Department of Treasury regulations and other interpretive guidance issued thereunder. Notwithstanding any provision of this Agreement to the contrary, if the Company determines that any compensation or benefits payable under this Agreement may be subject to Section 409A of the Code and related Department of Treasury guidance, the Company shall work in good faith with the Employee to adopt such amendments to this Agreement or adopt other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions, that the Company determines are necessary or appropriate to avoid the imposition of taxes under Section 409A of the Code, including without limitation, actions intended to (i) exempt the compensation and benefits payable under this Agreement from Section 409A of the Code, and/or (ii) comply with the requirements of Section 409A of the Code and related Department of Treasury guidance; provided, however, that this Section 10(d) shall not create an obligation on the part of the Company to adopt any such amendment, policy or procedure or take any such other action, nor shall the Company have any liability for failing to do so. (ii) Any right to a series of installment payments pursuant to this Agreement is to be treated as a right to a series of separate payments. To the extent permitted under Section 409A of the Code, any separate payment or benefit under this Agreement or otherwise shall not be deemed “nonqualified deferred compensation” subject to Section 409A of the Code and Section 4(d) hereof to the extent provided in the exceptions in Treasury Regulation Section 1.409A-1(b)(4), Section 1.409A-1(b)(9) or any other applicable exception or provision of Section 409A of the Code. (iii) To the extent that any payments or reimbursements provided to the Employee under this Agreement, including, without limitation, pursuant to Section 2(b)(vi) hereof, are deemed to constitute compensation to the Employee to which Treasury Regulation Section 1.409A-3(i)(1)(iv) would apply, such amounts shall be paid or reimbursed reasonably promptly, but not later than December 31 of the year following the year in which the expense was incurred. The amount of any such payments eligible for reimbursement in one year shall not affect the payments or expenses that are eligible for payment or reimbursement in any other taxable year, and the Employee’s right to such payments or reimbursement of any such expenses shall not be subject to liquidation or exchange for any other benefit. (e) Severability. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. (f) Withholding. The Company may withhold from any amounts payable under this Agreement such Federal, state, local or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation. 7 (g) No Waiver. The Employee’s or the Company’s failure to insist upon strict compliance with any provision of this Agreement or the failure to assert any right the Employee or the Company may have hereunder, including, without limitation, the right of the Employee to terminate employment for Good Reason pursuant to Section 3(c) hereof, shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement. (h) Entire Agreement. As of the Effective Date, this Agreement, together with the Confidentiality Agreement, the Equity Award Agreements and any prior equity award agreements constitutes the final, complete and exclusive agreement between the Employee and the Company with respect to the subject matter hereof and replaces and supersedes any and all other agreements, offers or promises, whether oral or written, by any member of the Company and its subsidiaries and affiliates, or representative thereof. The Employee agrees that the Prior Agreement shall be terminated and of no further force or effect from and after the Effective Date. In the event that the Employee’s employment with the Company is terminated prior to the Effective Date, this Agreement (including, without limitation, the immediately preceding sentence) shall have no force or effect. (i) Amendment. No amendment or other modification of this Agreement shall be effective unless made in writing and signed by the parties hereto. (j) Counterparts. This Agreement and any agreement referenced herein may be executed simultaneously in two or more counterparts, each of which shall be deemed an original but which together shall constitute one and the same instrument. [SIGNATURE PAGE FOLLOWS] 8 IN WITNESS WHEREOF, the Employee has hereunto set the Employee’s hand and, pursuant to the authorization from the Board, the Company has caused these presents to be executed in its name on its behalf, all as of the day and year first above written.   DEMAND MEDIA, INC., a Delaware corporation     By:   /s/ Sean Moriarty     Name:   Sean Moriarty     Title:   Chief Executive Officer   “EMPLOYEE”         /s/ Peter Kim     Peter Kim       9 EXHIBIT A GENERAL RELEASE For valuable consideration, the receipt and adequacy of which are hereby acknowledged, the undersigned does hereby release and forever discharge the “Releasees” hereunder, consisting of Demand Media, Inc., a Delaware corporation (the “Company”) and each of its partners, subsidiaries, associates, affiliates, successors, heirs, assigns, agents, directors, officers, employees, representatives, lawyers, insurers, and all persons acting by, through, under or in concert with them, or any of them, of and from any and all manner of action or actions, cause or causes of action, in law or in equity, suits, debts, liens, contracts, agreements, promises, liability, claims, demands, damages, losses, costs, attorneys’ fees or expenses, of any nature whatsoever, known or unknown, fixed or contingent (hereinafter called “Claims”), which the undersigned now has or may hereafter have against the Releasees, or any of them, by reason of any matter, cause, or thing whatsoever from the beginning of time to the date hereof. The Claims released herein include, without limiting the generality of the foregoing, any Claims in any way arising out of, based upon, or related to the employment or termination of employment of the undersigned by the Releasees, or any of them; any alleged breach of any express or implied contract of employment; any alleged torts or other alleged legal restrictions on Releasees’ right to terminate the employment of the undersigned; and any alleged violation of any federal, state or local statute or ordinance including, without limitation, Title VII of the Civil Rights Act of 1964, the Age Discrimination In Employment Act, the Americans With Disabilities Act, and the California Fair Employment and Housing Act. Notwithstanding the foregoing, this general release (the “Release”) shall not operate to release any rights or claims of the undersigned (i) to payments or benefits under Section 4(a) of that certain Amended and Restated Employment Agreement, dated as of March 4, 2015 between Demand Media, Inc. and the undersigned (the “Employment Agreement”), whichever is applicable to the payments and benefits provided in exchange for this Release, (ii) to payments or benefits under any equity award agreement between the undersigned and the Company, (iii) with respect to Section 2(b)(vi) of the Employment Agreement, (iv) to accrued or vested benefits the undersigned may have, if any, as of the date hereof under any applicable plan, policy, practice, program, contract or agreement with the Company, (v) to any Claims, including claims for indemnification and/or advancement of expenses, arising under any indemnification agreement between the undersigned and the Company or under the bylaws, certificate of incorporation of other similar governing document of the Company, or (vi) to any Claims which cannot be waived by an employee under applicable law. THE UNDERSIGNED ACKNOWLEDGES THAT THE EMPLOYEE HAS BEEN ADVISED BY LEGAL COUNSEL AND IS FAMILIAR WITH THE PROVISIONS OF CALIFORNIA CIVIL CODE SECTION 1542, WHICH PROVIDES AS FOLLOWS: “A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR.” THE UNDERSIGNED, BEING AWARE OF SAID CODE SECTION, HEREBY EXPRESSLY WAIVES ANY RIGHTS THE EMPLOYEE MAY HAVE THEREUNDER, AS WELL AS UNDER ANY OTHER STATUTES OR COMMON LAW PRINCIPLES OF SIMILAR EFFECT. IN ACCORDANCE WITH THE OLDER WORKERS BENEFIT PROTECTION ACT OF 1990, THE UNDERSIGNED IS HEREBY ADVISED AS FOLLOWS: (A) THE EMPLOYEE HAS THE RIGHT TO CONSULT WITH AN ATTORNEY BEFORE SIGNING THIS RELEASE; (B) THE EMPLOYEE HAS TWENTY-ONE (21) DAYS TO CONSIDER THIS RELEASE BEFORE SIGNING IT; AND (C) THE EMPLOYEE HAS SEVEN (7) DAYS AFTER SIGNING THIS RELEASE TO REVOKE THIS RELEASE, AND THIS RELEASE WILL BECOME EFFECTIVE UPON THE EXPIRATION OF THAT REVOCATION PERIOD. The undersigned represents and warrants that there has been no assignment or other transfer of any interest in any Claim which the Employee may have against Releasees, or any of them, and the undersigned agrees to indemnify and hold Releasees, and each of them, harmless from any liability, Claims, demands, damages, costs, expenses and attorneys’ fees incurred by Releasees, or any of them, as the result of any such assignment or transfer or any rights or Claims under any such assignment or transfer. It is the intention of the parties that this indemnity does not require payment as a condition precedent to recovery by the Releasees against the undersigned under this indemnity. The undersigned agrees that if the Employee hereafter commences any suit arising out of, based upon, or relating to any of the Claims released hereunder or in any manner asserts against Releasees, or any of them, any of the Claims released hereunder, then the undersigned agrees to pay to Releasees, and each of them, in addition to any other damages caused to Releasees thereby, all attorneys’ fees incurred by Releasees in defending or otherwise responding to said suit or Claim. A-1 The undersigned further understands and agrees that neither the payment of any sum of money nor the execution of this Release shall constitute or be construed as an admission of any liability whatsoever by the Releasees, or any of them, who have consistently taken the position that they have no liability whatsoever to the undersigned. IN WITNESS WHEREOF, the undersigned has executed this Release this          day of             ,         .             Peter Kim   A-2

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 13D Under the Securities Exchange Act of 1934 Empire Global Gaming, Inc. (Name of Issuer) Common Stock (Title of Class of Securities) 29173R100 (CUSIP Number) Nicholas Sorge, Sr. 555 Woodside Avenue Bellport, NY 11713 (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) February 28, 2013 (Date of Event Which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule13G to report the acquisition that is the subject of this Schedule13D, and is filing this schedule because of §§240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box. o Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See §240.13d-7 for other parties to whom copies are to be sent. * The remainder of this cover page shall be filled out for a reporting person’s initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934 (“Act”) or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). Persons who respond to the collection of information contained in this form are not required to respond unless the form displays a currently valid OMB control number. CUSIP No. 29173R100 1 NAMES OF REPORTING PERSONS: Nicholas Sorge, Sr. I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY): CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS): 2 (a)o (b)o 3 SEC USE ONLY: 4 SOURCE OF FUNDS (SEE INSTRUCTIONS): OO 5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e): o 6 CITIZENSHIP OR PLACE OF ORGANIZATION: United States 7 SOLE VOTING POWER: 40,000,000 shares of Common Stock* NUMBER OF SHARES 8 SHARED VOTING POWER: BENEFICIALLY OWNED BY 0 EACH REPORTING 9 SOLE DISPOSITIVE POWER: PERSON WITH 40,000,000 shares of Common Stock* 10 SHARED DISPOSITIVE POWER: 0 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON: 40,000,000 shares of Common Stock* 12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11)EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS): o 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11): 80.7% 14 TYPE OF REPORTING PERSON (SEE INSTRUCTIONS): IN,SC * Does not include 2,900,000 shares of Common Stock owned by the Reporting Persons wife. 2 Item1. Security and Issuer. The class of equity securities to which this Schedule13D relates is the common stock of Empire Global Gaming, Inc., a Nevada corporation (the “Issuer”). The principal executive offices of the Issuer are located at 555 Woodside Avenue, Bellport, New York 11713. Item2. Identity and Background. This Schedule13D is being filed on behalf of Nicholas Sorge, Sr. (the “Reporting Person”) with an address at 555 Woodside Avenue, Bellport, New York 11713.The Reporting Person is the President and Director of the Issuer.The Reporting Person is a citizen of the United States. During the last five years, the Reporting Person has not been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors), nor been a party to any civil proceeding of a judicial or administrative body of competent jurisdiction which resulted in a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or a finding of violation of any such laws. Item3. Source and Amount of Funds or Other Consideration. The Reporting Person acquired 40,000,000 shares of Common Stock of the Issuer as a founder of the Issuer. Item4. Purpose of Transaction. The Reporting Person acquired the shares of Common Stock of the Issuer as a founder of the Issuer and serving as President of the Issuer. The Reporting Person has no definitive or specific plans or proposals that relate to or would result in the occurrence of any of the actions described in Items4(a) through 4(j). Item5. Interest in Securities of the Issuer. (a) The Reporting Person owns 40,000,000 shares of Common Stock of the Issuer (constituting 80.7% of the Issuer’s issued and outstanding common stock). (b) The Reporting Person has the sole power to vote or to direct the vote and sole power to dispose or to direct the disposition of, the 40,000,000 shares of Common Stock of the Issuer of the Issuer that the Reporting Person owns. (c) Transactions in the securities effected during the past sixty days: None, other than the transaction described in Item4 of this Schedule13D. (d) No other person is known to have the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, the securities beneficially owned by the Reporting Person. (e) The date on which the Reporting Person ceased to be beneficial owners of more than five percent of the class of securities: Not applicable. 3 Item6. Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer. Except for the Agreement described in Item4 of this Schedule13D there are no contracts, arrangements, understandings or relationships (legal or otherwise) among the persons named in Item 2 and between such persons and any person with respect to any securities of the Issuer, including but not limited to transfer or voting of any of the securities, finder's fees, joint ventures, loan or option arrangements, puts or calls, guarantees of profits, division of profits or loss, or the giving or withholding of proxies, naming the persons with whom such contracts, arrangements, understandings or relationships have been entered into. Item7. Material to Be Filed as Exhibits. None. 4 SIGNATURE After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. March 7, 2013 Nicholas Sorge, Sr. /s/Nicholas Sorge, Sr. 5

Exhibit 10.5 SEVERANCE AGREEMENT THIS SEVERANCE AGREEMENT (this “Agreement”), dated as of February 1 , 2007 is made and entered by and between Novell, Inc., a Delaware corporation (the “Company”), and Colleen O’Keefe (the “Executive”). WITNESSETH: WHEREAS, the Executive is a senior executive of the Company and is expected to make major contributions to the short- and long-term profitability, growth and financial strength of the Company; WHEREAS, the Board has determined that appropriate arrangements should be taken to encourage the continued attention and dedication of Executive to his assigned duties without distraction; WHEREAS, in consideration of the Executive’s employment with the Company, the Company desires to provide Executive with certain compensation and benefits set forth in this Agreement in order to ameliorate the financial and career impact on Executive in the event the Executive’s employment with the Company is terminated for a reason related to, or unrelated to, a Change in Control (as defined below) of the Company; NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements hereinafter set forth and intending to be legally bound hereby, the Company and the Executive agree as follows: 1.      Certain Defined Terms.  In addition to terms defined elsewhere herein, the following terms have the following meanings when used in this Agreement with initial capital letters: (a)    “Base Pay” means the greater of (i) Executive’s annual base salary rate, exclusive of bonuses, commissions and other Incentive Pay, as in effect immediately preceding Executive’s Termination Date, or (ii) Executive’s highest annual base salary rate, exclusive of bonuses, commissions and other Incentive Pay, as in effect in any of the three (3) full calendar years preceding Executive’s Termination Date. (b)    “Board” means the Board of Directors of the Company. (c)    “Cause”: (i)    For purposes of Involuntary Termination Prior to a Change in Control, means a determination by the Company’s Chief Executive Officer or Senior Vice President-People, in either case with legal advice and consultation of the Company’s Senior Vice President – General Counsel, acting in his authority as the Company’s general counsel, that Executive has committed any of the following acts: (A)    continued violations of the Executive’s obligations which are demonstrably willful or deliberate on the Executive’s part after there has been delivered to the Executive a written demand for performance from the Company which describes the basis for the Company’s belief that the Executive has willfully or deliberately violated his obligations to the Company; (B)    engaging in willful misconduct which is injurious to the Company or any Subsidiary; (C)    committing a felony, an act of fraud against or the misappropriation of property belonging to the Company or any Subsidiary; (D)    breaching, in any material respect, terms of any confidentiality or proprietary information agreement between the Executive and the Company; or (E)    committing a material violation of the Company’s Code of Business Ethics or Employee Conduct and Standards Policy, as either or both are in effect from time to time by the Company. (ii)    For purposes of Involuntary Termination Associated With a Change in Control, means a determination by the Board that Executive has committed any of the following acts: (A)    the Executive has been convicted of a criminal violation involving fraud, embezzlement or theft in connection with his duties or in the course of her employment with the Company or any Subsidiary; or (B)    the Executive has committed intentional wrongful disclosure of secret processes or confidential information of the Company or any Subsidiary; and any such act has been demonstrably and materially harmful to the Company. For purposes of this subparagraph (B), no act on the part of the Executive will be deemed “intentional” if it was due primarily to an error in judgment or negligence, but will be deemed “intentional” if done by the Executive not in good faith and without reasonable belief that the Executive’s action was in the best interest of the Company. Notwithstanding the foregoing, the Executive will not be deemed to have been terminated for “Cause” under this subsection (ii) unless and until there has been delivered to the Executive a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the members of the Board then in office at a meeting of the Board, finding that, in the good faith opinion of the Board, the Executive has committed an act constituting “Cause,” as herein defined, and specifying the particulars thereof in detail. Prior to any such determination, Executive shall be provided with reasonable notice of such pending determination and Executive, together with his counsel (if the Executive chooses to have counsel present at such meeting), shall be provided with the opportunity to be heard before the Board makes any such determination. Nothing herein will limit the right of the Executive or his beneficiaries to contest the validity or propriety of any such determination.   2 (d)    “Change in Control” means the occurrence of any of the following events: (i)    the acquisition by any individual, entity or group (within the meaning of section 13(d)(3) or 14(d)(2) of the Exchange Act) (a “Person”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 25% or more of the combined voting power of the then outstanding Voting Stock of the Company; provided, however, that for purposes of this Section 1(d)(i), the following acquisitions will not constitute a Change in Control: (A) any issuance of Voting Stock of the Company directly from the Company that is approved by the Incumbent Board (as defined in Section 1(d)(ii), below), (B) any acquisition by the Company of Voting Stock of the Company, (C) any acquisition of Voting Stock of the Company by any employee benefit plan (or related trust) sponsored or maintained by the Company or any Subsidiary, or (D) any acquisition of Voting Stock of the Company by any Person pursuant to a Business Combination that complies with clauses (A), (B) and (C) of Section 1(d)(iii), below; and provided, further, that a Change in Control will not occur if any Person becomes the beneficial owner of 25% or more of the combined voting power of the Voting Stock of the Company solely as a result of an issuance of Voting Stock described in clause (A) of this Section 1(d)(i) or an acquisition of Voting Stock described in clause (B) of this Section 1(d)(i) unless and until such Person thereafter acquires beneficial ownership of Voting Stock of the Company that causes the aggregate percent of the combined voting power of the Voting Stock of the Company then owned beneficially by such Person to exceed the percent of the combined voting power of Voting Stock of the Company owned beneficially by such Person immediately after such issuance or acquisition described in clause (A) or (B) of this Section 1(d)(i); (ii)    individuals who, as of the date hereof, constitute the Board (the “Incumbent Board,” as modified by this Section 1(d)(ii)), cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a Director subsequent to the date hereof whose election, or nomination for election by the Company’s stockholders, was approved by a vote of at least two-thirds of the Directors then comprising the Incumbent Board (either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for director, without objection to such nomination) will be deemed to have then been a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest (within the meaning of Rule 14a-11 of the Exchange Act) 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; (iii)    consummation of a reorganization, merger or consolidation, a sale or other disposition of all or substantially all of the assets of the Company, or other transaction (each, a “Business Combination”), unless, in each case, immediately following such Business Combination, (A) all or substantially all of the individuals and entities who were the beneficial owners of Voting Stock 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 shares of Voting Stock of the entity resulting from such Business Combination (including, without limitation, an entity   3 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), (B) no Person (other than the Company; such entity resulting from such Business Combination; any employee benefit plan (or related trust) sponsored or maintained by the Company, any Subsidiary or such entity resulting from such Business Combination; or any Person who immediately prior to such Business Combination beneficially owned directly or indirectly 25% or more of the combined voting power of the voting stock of the Company and whose ownership of such Voting Stock did not result in a Change in Control under Section 1(d)(i)) beneficially owns, directly or indirectly, 25% or more of the combined voting power of the then outstanding shares of Voting Stock of the entity resulting from such Business Combination, and (C) 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 of the action of the Board providing for such Business Combination; or (iv)    approval by the stockholders of the Company of a complete liquidation or dissolution of the Company, except pursuant to a Business Combination that (e)    “COBRA” means the Consolidated Omnibus Budget Reconciliation Act of 1986, as amended. (f)    “Code” means the Internal Revenue Code of 1986, as amended. (g)    “Constructive Termination Associated With a Change in Control” means the termination of the Executive’s employment with the Company by Executive as a result of the occurrence of one of the following events as a result of a Change in Control: (i)    without the Executive’s express written consent, the failure to elect or reelect or otherwise to maintain the Executive in the office or the position, or an equivalent office or position, of or with the Company and/or a Subsidiary (or any successor thereto by operation of law or otherwise), as the case may be, which the Executive held immediately prior to a Change in Control, or the removal of the Executive as a Director of the Company and/or a Subsidiary (or any successor thereto) if the Executive has been a Director of the Company and/or a Subsidiary immediately prior to the Change in Control; (ii)    without the Executive’s express written consent, the failure of the Company to remedy any of the following within ten (10) business days after receipt by the Company of written notice thereof from the Executive: (A) an adverse change in the nature or scope of the authorities, powers, functions, responsibilities or duties attached to the position with the Company and any Subsidiary which the Executive held immediately prior to the Change in Control, (B) a reduction in the aggregate of the Executive’s Base Pay, Incentive Pay, and Equity Compensation, or (C) the termination or denial of the Executive’s rights to Employee Benefits or a reduction in the scope or value thereof;   4 (iii)    without the Executive’s express written consent, a determination by the Executive (which determination will be conclusive and binding upon the parties hereto provided it has been made in good faith and in all events will be presumed to have been made in good faith unless otherwise shown by the Company by clear and convincing evidence) that a change in circumstances has occurred following a Change in Control, including, without limitation, a change in the scope of the business or other activities for which the Executive was responsible immediately prior to the Change in Control, which has rendered the Executive unable to carry out, has hindered the Executive’s performance of, or has caused the Executive to suffer a reduction in, any of the authorities, powers, functions, responsibilities or duties attached to the position held by the Executive immediately prior to the Change in Control, which situation is not remedied within ten (10) business days after written notice to the Company from the Executive of such determination; (iv)    without the Executive’s express written consent, the liquidation, dissolution, merger, consolidation or reorganization of the Company or transfer of all or substantially all of its business and/or assets, unless the successor or successors (by liquidation, merger, consolidation, reorganization, transfer or otherwise) to which all or substantially all of its business and/or assets have been transferred (by operation of law or otherwise) assumes all duties and obligations of the Company under this Agreement pursuant to Section 15(a); (v)    without the Executive’s express written consent, a requirement by the Company that the Executive have his principal location of work changed to any location that is in excess of thirty-five (35) miles from the location thereof immediately prior to the Change in Control, or that the Executive travel away from his office in the course of discharging his responsibilities or duties hereunder at least 20% more (in terms of aggregate days in any calendar year or in any calendar quarter when annualized for purposes of comparison to any prior year) than was required of the Executive in any of the three (3) full years immediately prior to the Change in Control; or (vi)    without limiting the generality or effect of the foregoing, without the Executive’s express written consent, any material breach of this Agreement by the Company or any successor thereto which is not remedied by the Company within ten (10) business days after receipt by the Company of written notice from the Executive of such breach. In no event shall the termination of Executive’s employment with the Company on account of the Executive’s death or Disability or because the Executive engaged in conduct constituting Cause be deemed to be a Constructive Termination Associated With a Change in Control. (h)    “Constructive Termination Prior to a Change in Control” means the termination of Executive’s employment with the Company by the Executive as a result of:   5 (i)    without the Executive’s express written consent, a comprehensive and substantial reduction in all or most of the Executive’s primary duties, authority and responsibilities compared to the Executive’s duties, authority and responsibilities immediately prior to such reduction; (ii)    without the Executive’s express written consent, a significant reduction in the Executive’s Base Pay compared to the Executive’s Base Pay in effect immediately prior to such reduction; provided, however, that a reduction in the Executive’s Base Pay of less than twenty percent (20%) or a reduction in the Executive’s Base Pay that is part of an overall reduction in compensation also applied to other senior executives of the Company as a result of decreased business performance by the Company or one of its business units, shall not constitute a Constructive Termination Prior to a Change in Control; or (iii)    without the Executive’s express written consent, the failure of the Company to obtain the assumption of this Agreement by any successors. in conduct constituting Cause be deemed to be a Constructive Termination Prior to a Change in Control. (i)    “Disability” means the Executive becomes permanently disabled within the meaning of, and begins actually to receive disability benefits pursuant to, the long-term disability plan in effect for, or applicable to, the Executive. (j)    “Employee Benefits” means the perquisites, benefits and service credit for benefits as provided under any and all employee retirement income and welfare benefit policies, plans, programs or arrangements in which the Executive is entitled to participate, including, without limitation, any stock option, performance share, performance unit, stock purchase, stock appreciation, savings, pension, supplemental executive retirement, or other retirement income or welfare benefit, deferred compensation, incentive compensation, group or other life, health, medical/hospital or other insurance (whether funded by actual insurance or self-insured by the Company or a Subsidiary), disability, salary continuation, expense reimbursement and other employee benefit policies, plans, programs or arrangements that may now exist or any equivalent successor policies, plans, programs or arrangements that may be adopted hereafter by the Company or a Subsidiary, providing perquisites, benefits and service credit for benefits at least as great in the aggregate as are payable thereunder. (k)    “Equity Compensation” means any stock option, stock appreciation, stock purchase, restricted stock, restricted stock unit, long term incentive cash bonus award or any other kind of equity-based plan, program, arrangement or grant regardless of whether the form of distribution is in stock or cash. (l)    “Exchange Act” means the Securities Exchange Act of 1934, as amended.   6 (m)    “Incentive Pay” means the greater of: (i) Executive’s maximum Target Bonus for which Executive was eligible during the period that includes the Termination Date, or (ii) the highest aggregate bonus or incentive payment paid to Executive during any of the three (3) full calendar years prior to his Termination Date. For purposes of this definition, “Target Bonus” means the annual bonus, incentive, commission or other sales incentive compensation, or comparable incentive payment opportunity which, in the sole discretion of the Company, is deemed to constitute a Target Bonus, in addition to Base Pay, for which Executive was eligible to receive, but did not receive prior to his Termination Date, in regard to services rendered in the year covered by Executive’s Termination Date and is to be made pursuant to any bonus, incentive, profit-sharing, performance, discretionary pay or similar agreement, policy, plan, program or arrangement (whether or not funded) of the Company or a Subsidiary, or any successor thereto. For purposes of this definition, “Incentive Pay” does not include any Equity Compensation, one time bonus or payment (including, but not limited to, any sign-on bonus), any amounts contributed by the Company for the benefit of Executive to any qualified or nonqualified deferred compensation plan, whether or not provided under an arrangement described in the prior sentence, or any amounts designated by the parties as amounts other than Incentive Pay. (n)    “Involuntary Termination Associated With a Change in Control” means the termination of Executive’s employment related to a Change in Control: (i) by the Company for any reason other than Cause, the Executive’s death or the Executive’s Disability, or (ii) on account of a Constructive Termination Associated with a Change in Control. (o)    “Involuntary Termination Prior to a Change in Control” means the termination of Executive’s employment unrelated to a Change in Control: (i) by the Company for any reason other than Cause, the Executive’s death or the Executive’s Disability, or (ii) on account of a Constructive Termination Prior (p)    “Key Employee” shall mean any employee or former employee of the Company who is considered a key employee under section 409A(2)(B)(i) of the Code, having an identification date for purposes of section 409A of December 31, or any other party deemed a key Employee under applicable regulations issued pursuant to section 409A. (q)    “Restricted Business” means, (i)    if the Executive is entitled to severance benefits under this Agreement on account of an Involuntary Termination Prior to a Change in Control, (A) the design, development, manufacture, marketing or support of local or wide area network products, computer operating systems, applications products, software products or services that enable organizations to more effectively conduct business using the Web, or any other software products of the type designed, developed, manufactured, sold or supported by the Company or as proposed to be designed, developed, manufactured, sold or supported by the Company pursuant to a development project that is actually being pursued during the term of this Agreement; (B) any business that performs technology   7 and consulting services that help businesses develop and accelerate their transition to Internet-based e-business solutions and processes, or management services that assist businesses in improving their operating processes; or (C) any business that competes directly or indirectly with the hardware, software or consulting businesses of the Company. (ii)    if the Executive is entitled to severance benefits under this Agreement on account of an Involuntary Termination Associated With a Change in Control, any business function with a direct competitor of the Company that is substantially similar to the business function performed by the Executive with the Company immediately prior to his Termination Date. (r)    “Restricted Territory” means the counties, towns, cities or states of any country in which the Company operates or does business. (s)    “Severance Period” means the twelve (12) month period after the Executive’s Termination Date. (t)    “Subsidiary” means any Company controlled affiliate. (u)    “Termination Date” means the last day of Executive’s employment with the Company. (v)    “Termination of Employment” means, except as provided in the following sentence, the termination of Executive’s active employment relationship with the Company on account of an Involuntary Termination Prior to a Change in Control or an Involuntary Termination Associated With a Change in Control. For purposes of the non-solicitation provision of Section 11 of the Agreement, the term “Termination of Employment” shall mean the termination of Executive’s employment relationship with the Company for any reason, including, but not limited to, the Executive’s Involuntary Termination Prior to a Change in Control, Involuntary Termination Associated With a Change in Control, voluntary termination, termination on account of Disability, or termination by the Company for Cause. (w)    “Voting Stock” means securities entitled to vote generally in the election of directors.   2. Termination Prior to a Change in Control. (a)    Involuntary Termination Prior to a Change in Control. In the event Executive’s employment is terminated on account of an Involuntary Termination Prior to a Change in Control, Executive shall be entitled to the benefits provided in subsection (b) of this Section 2. (b)    Compensation and Benefits Upon Involuntary Termination Prior to a Change in Control. Subject to the provisions of Section 5 hereof, in the event a termination described in subsection (a) of this Section 2 occurs, the Company shall pay and provide to the Executive after his Termination Date:   8 (i)    150% of his Base Pay, payable in equal installments over the Severance Period, in accordance with the Company’s normal payroll practices, commencing not later than the thirtieth day after Executive’s Termination Date occurs (or the end of the revocation period for the Release, if later); provided, however, that if Executive is deemed by the Company to be a Key Employee as of the Termination Date, such payment shall occur on the earlier of the following: (x) six months following Executive’s Termination Date; or (y) the date on which the Company determines payment may be made without causing adverse tax consequences to Executive. Notwithstanding the foregoing, the Company may determine, in its sole discretion and at any time, to provide that the amounts payable under this subsection (i) shall be paid to Executive in a lump sum, as opposed to installments over the Severance Period; provided, however, that such discretion shall not be exercised in a manner which will cause adverse income tax results to Executive. (ii)    Executive shall receive his pro rated Incentive Pay for the year in which his Termination of Employment occurs. The pro rated Incentive Pay shall be based on the Executive’s Incentive Pay for the year in which Executive’s Termination Date occurs, multiplied by a fraction, the numerator of which is the number of days during which Executive was employed by the Company in the year of his termination and the denominator of which is 365. Such pro rated Incentive Pay shall be paid to Executive in equal installments over the Severance Period, consistent with the Company’s past payroll practices, commencing with the first payroll period that occurs after the period during which Executive’s right to revoke his acceptance to the terms of the Release has expired. Notwithstanding the foregoing, the Company may determine, in its sole discretion and at any time, to provide that the amounts payable under this subsection (ii) shall be paid to Executive in a lump sum, as opposed to installments over the Severance Period. (iii)    For the Severance Period commencing the month immediately following the month in which his Termination Date occurs, Executive shall continue to receive the medical and dental coverage in effect on his Termination Date (or generally comparable coverage) for himself and, where applicable, his spouse and dependents, as the same may be changed from time to time for employees generally, as if Executive had continued in employment during such period; provided, however, that in the event that such continuation coverage violates applicable law or results in a material adverse tax effect to the Company or the Executive, the Company shall pay Executive cash in lieu of such coverage in an amount equal to Executive’s after-tax cost of continuing comparable coverage, where such coverage may not be continued by the Company (or where such continuation would adversely affect the tax status of the plan pursuant to which the coverage is provided). If the Executive does not receive the cash payment described in the preceding sentence, the Company shall take all commercially reasonable efforts to provide that the COBRA health care continuation coverage period under section 4980B of the Code, shall commence immediately after the foregoing twelve (12) month benefit period, with such continuation coverage continuing until the earlier of (i) the end of the applicable COBRA health care continuation coverage period or (ii) the date on which Executive is covered by the medical and dental coverage of his successor employer, if any.   9 (iv)    With respect to any Company stock options held by the Executive as of the date of such Involuntary Termination Prior to a Change in Control, the Company shall accelerate the vesting of that portion of the Executive’s stock options, if any, which would have vested and become exercisable within the one (1) year period after the Executive’s Termination Date, such options, plus any other options that previously became exercisable and have not expired or been exercised, to remain exercisable, notwithstanding anything in any other agreement governing such options, for the longer of (A) a period of six (6) months after the Executive’s Termination Date, or (B) the period set forth in the award agreement covering the option (the “Option Expiration Date”); provided, however, that in no event will the option be exercisable beyond its original term or, if not addressed in the grant agreement, then not later than the latest date that will avoid adverse tax consequences to the Executive (if such date is earlier than the Option Expiration Date). (v)    With respect to any shares of Company common stock held by the Executive that are, at the time of such Involuntary Termination Prior to a Change in Control, subject to the Company’s repurchase right upon termination of the Executive’s employment (“Restricted Stock”), the Company shall waive such repurchase right as to the number of shares of Restricted Stock that would have vested within the one (1) year period after the Executive’s Termination Date. (vi)    To cover the cost of outplacement assistance services for Executive that are actually provided by an outplacement agency selected by Executive, for which the Company provides prior approval, with such approval not to be unreasonably withheld, in an amount not to exceed twenty percent (20%) of the Executive’s Base Pay. (vii)    Executive shall receive any amounts earned, accrued or owing but not yet paid to Executive as of his Termination Date, payable in a lump sum, and any benefits accrued or earned in accordance with the terms of any applicable benefit plans and programs of the Company.   3. Termination Associated With a Change in Control. (a)    Involuntary Termination Associated With a Change in Control. In the event Executive’s employment is terminated after, or in connection with, a Change in Control, on account of (i) an Involuntary Termination Associated With a Change in Control within the two year period after the Change in Control, or (ii) an Involuntary Termination Associated With a Change in Control that occurs (A) not more than six (6) months prior to the date on which a Change in Control occurs or (B) following the commencement of any discussion with a third person that ultimately results in a Change in Control, Executive shall be entitled to the benefits provided in subsection (b) of this Section 3. If Executive is entitled to benefits described in this Section 3 by reason of clause (a)(ii) above, Executive shall receive the compensation and benefits described in Section 2(b) above after his Termination of Employment, in accordance with the provisions of Section 2(b), regardless of whether the Change in Control actually occurs, and Executive shall receive the additional compensation and benefits described in Section   10 3(b) below only if the Change in Control is consummated and shall receive such additional amounts after the consummation of the Change in Control, in accordance with the provisions of Section 3(b) below. For purposes of subsection 3(a)(ii)(B) above, to be eligible to receive amounts described in Section 3(b) below, the Change in Control must be consummated within the twelve (12) month period following Executive’s Termination Date, except in circumstances pursuant to which the consummation of the Change in Control is delayed, through no failure of the Company or the third person, by a governmental or regulatory authority or agency with jurisdiction over the matter, or as a result of other similar circumstances. In such a circumstance, the remaining of the twelve (12) month period shall be tolled and shall recommence upon termination of the delaying event. (b)    Compensation and Benefits Upon Involuntary Termination Associated With a Change in Control. Subject to the provisions of Section 5 hereof, in the event a termination described in subsection (a) of this Section 3 occurs, the Company (i)    Lump sum payment equal to (A) 2 times Base Pay, plus (B) 2 times Incentive Pay. Payment shall be made in accordance with the Company’s normal payroll practices but not later than the thirtieth day after Executive’s Termination Date (or the end of the revocation period for the Release, if later); provided, however, that if Executive is deemed by the Company to be a Key Employee as of the Termination Date, such payment shall occur on the earlier of the following: (x) six months following Executive’s Termination Date; or (y) the date on which the Company determines payment may be made without causing adverse tax consequences to Executive. Pay shall be paid to Executive in a lump sum in accordance with the Company’s normal payroll practices but not later than the thirtieth day after Executive’s later). the   11 foregoing twenty-four (24) month benefit period, with such continuation coverage (iv)    Lump sum payment equal to the total amount that Executive would have received under the Company’s 401(k) plan as a Company match if Executive was eligible to participate in the Company’s 401(k) plan for the twenty-four (24) month period after his Termination Date and he contributed the maximum amount to the plan for the match. Payment shall be made in accordance with the Company’s normal payroll practices but not later than the thirtieth day after Executive’s Termination Date (or the end of the revocation period for the Release, if later). (v)    Lump sum payment equal to the total premiums that the Company would have paid under Executive’s split-dollar life insurance policy, if any, that is in effect immediately prior to his Termination Date, if Executive was employed by the Company for the twenty-four (24) month period following Executive’s Termination Date; provided, however, that if the remaining length of the term of the split-dollar arrangement pursuant to which the Company must make premium payments is less than the foregoing twenty-four (24) month period, Executive shall only receive a lump sum payment equal to the remaining Company premiums for the term of the arrangement. Payment shall be made in accordance with the Release, if later). Notwithstanding the foregoing, no payment shall be made to Executive pursuant to this subsection (v) if on the Executive’s Termination Date, either Executive does not have a split-dollar life insurance policy with the Company or the Company has no obligations to make premium contributions to Executive’s split-dollar life insurance policy. (vi)    Lump sum payment equal to twenty percent (20%) of the Executive’s Base Pay in order to cover the cost of outplacement assistance services for Executive. Payment shall be made in accordance with the Company’s normal payroll practices but not later than the thirtieth day after Executive’s Termination Date (or the end of the revocation period for the Release, if later). (c)    Notwithstanding any provision to the contrary in any applicable plan, program or agreement, or any contrary provision in this Agreement in the event that either or both of the following occur:   12 (i)    a Change in Control in which Executive’s employment is terminated on account of an Involuntary Termination Associated with a Change in Control; or (ii)    a Change in Control in which the acquiror or successor fails to provide the Executive with equity compensation rights substantially comparable in value to the Executive’s unvested equity compensation rights immediately prior to the Change in Control, then all stock options, Restricted Stock and other equity rights held by the Executive will become fully vested and/or exercisable, as the case may be, on the Executive’s Termination Date, and all stock options held by the Executive shall remain exercisable, notwithstanding anything in any other agreement governing such options, for the longer of (i) a period of twenty-four (24) months after the Executive’s Termination Date, or (ii) the period set forth For purposes of subsection (ii) above, equity compensation provided by the acquiror or successor shall be deemed substantially comparable to Executive’s unvested equity compensation rights immediately prior to the Change in Control only if (A) such unvested equity compensation rights are assumed by the acquiror or successor on the same basis (including the same exchange ratio) as is provided to non-employee holders of such equity or, if none, on a basis substantially identical to such basis; or (B) such unvested equity compensation rights are replaced by equity compensation rights granted by the acquiror or successor which rights are materially identical in value to (employing the same equity valuation methodology as the Company employed for financial accounting purposes immediately prior to the Change in Control) and are subject to the same vesting schedule as was applicable to the unvested equity compensation rights held by the Executive immediately prior to the Change in Control. 4.      Termination of Employment on Account of Disability, Cause or Death.  Notwithstanding anything in this Agreement to the contrary, if Executive’s employment terminates on account of Disability, Executive shall be entitled to receive disability benefits under any disability program maintained by the Company that covers Executive, and Executive shall not be considered to have terminated employment under this Agreement and shall not receive benefits pursuant to Sections 2 and 3 hereof. If Executive’s employment terminates on account of Cause or because of his death, Executive shall not be considered to pursuant to Sections 2 and 3 hereof. 5.      Release.  Notwithstanding the foregoing, no such payments shall be made or benefits provided unless Executive executes, and does not revoke, the Company’s standard written release, substantially in the form as attached hereto as Annex A, (the “Release”), of any and all claims against the Company and all related parties with respect   13 to all matters arising out of Executive’s employment by the Company (other than entitlements under the terms of this Agreement or under any other plans or programs of the Company in which Executive participated and under which Executive has accrued or become entitled to a benefit) or a termination thereof. 6.      Enforcement.  Without limiting the rights of the Executive at law or in equity, if the Company fails to make any payment or provide any benefit required to be made or provided hereunder on a timely basis, the Company will pay interest on the amount or value thereof at an annualized rate of interest equal to the so-called composite “prime rate” as quoted from time to time during the relevant period in the Eastern Edition of The Wall Street Journal. Such interest will be payable as it accrues on demand. Any change in such prime rate will be effective on and as of the date of such change. 7.      Certain Additional Payments by the Company. (a)    The provisions of this Section 7 shall apply notwithstanding anything in this Agreement to the contrary. Subject to subsection (b) below, in the event that it shall be determined that any payment, benefit provided 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 (a “Payment”), would constitute an “excess parachute payment” within the meaning of section 280G of the Code, the Company shall pay Executive an additional amount (the “Gross-Up Payment”) such that the net amount retained by Executive after deduction of any excise tax imposed under section 4999 of the Code, and any federal, state and local income tax, employment tax, excise tax and other tax imposed upon the Gross-Up Payment, shall be equal to the Payment. The right to each payment of such amount shall vest as of the day on which the payment determination is made, and each such payment shall be made on the thirtieth day following the vesting date. (b)    Notwithstanding subsection (a), and notwithstanding any other provisions of this Agreement to the contrary, if the net after-tax benefit to Executive of receiving the Gross-Up Payment does not exceed the Safe Harbor Amount (as defined below) by more than 10% (as compared to the net-after tax benefit to Executive resulting from elimination of the Gross-Up Payment and reduction of the Payments to the Safe Harbor Amount), then (i) the Company shall not pay Executive the Gross-Up Payment and (ii) the provisions of subsection (c) below shall apply. The term “Safe Harbor Amount” means the maximum dollar amount of parachute payments that may be paid under section 280G of the Code without imposition of an excise tax under section 4999 of the Code. (c)    The provisions of this subsection (c) shall apply only if the Company is not required to pay Executive a Gross-Up Payment as a result of subsection (b) above. If the Company is not required to pay Executive a Gross-Up Payment as a result of the provisions of subsection (b), the Company will apply a limitation on the Payment amount as set forth in subsection (i) below (a “Parachute Cap”) if the application of the Parachute Cap is beneficial to Executive, according to the following provisions:   14 (i)    If subsection (ii) does not apply, the aggregate present value of the Payments under Section 3 of this Agreement (“Agreement Payments”) shall be reduced (but not below zero) to the Reduced Amount. The “Reduced Amount” shall be an amount expressed in present value which maximizes the aggregate present value of Agreement Payments without causing any Payment to be subject to the limitation of deduction under section 280G of the Code. For purposes of this Section 7, “present value” shall be determined in accordance with section 280G(d)(4) of the Code. (ii)    It is the intention of the parties that the Parachute Cap apply only if application of the Parachute Cap is beneficial to Executive. Therefore, if the net amount that would be retained by Executive under this Agreement without the Parachute Cap, after payment of any excise tax under section 4999 of the Code, exceeds the net amount that would be retained by Executive with the Parachute Cap, then the Company shall not apply the Parachute Cap to Executive’s payments. In that event, neither the Parachute Cap nor the Gross-Up Payment will apply to Executive. (d)    All determinations to be made under this Section 7 shall be made by the nationally recognized independent public accounting firm used by the Company immediately prior to the Change in Control (“Accounting Firm”), which Accounting Firm shall provide its determinations and any supporting calculations to the Company and Executive within ten days of Executive’s termination date. If any Gross-Up Payment is required to be made, the Company shall make the Gross-Up Payment within ten days after receiving the Accounting Firm’s calculations. Any such determination by the Accounting Firm shall be binding upon the Company and Executive. (e)    All of the fees and expenses of the Accounting Firm in performing the determinations referred to in this Section 7 shall be borne solely by the Company. 8.      No Mitigation Obligation.  The Company hereby acknowledges that it will be difficult and may be impossible for the Executive to find reasonably comparable employment following the Termination Date. Accordingly, the payment of the severance compensation by the Company to the Executive in accordance with the terms of this Agreement is hereby acknowledged by the Company to be reasonable, and the Executive will not be required to mitigate the amount of any payment provided for in this Agreement by seeking other employment or otherwise, nor will any profits, income, earnings or other benefits from any source whatsoever create any mitigation, offset, reduction or any other obligation on the part of the Executive hereunder or otherwise. 9.      Legal Fees and Expenses.  In the event of a Change in Control, it is the intent of the Company that the Executive not be required to incur legal fees and the related expenses associated with the interpretation, enforcement or defense of the 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 the Executive hereunder. Accordingly, if a Change in Control occurs and it should appear to the 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   15 other action or proceeding designed to deny, or to recover from, the Executive the benefits provided or intended to be provided to the Executive under Section 3(b) of the Agreement, the Company irrevocably authorizes the Executive from time to time to retain counsel of the Executive’s choice, at the expense of the Company as hereafter provided, to advise and represent the Executive in connection with any such interpretation, 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 the Executive’s entering into an attorney-client relationship with such counsel, and in that connection the Company and the Executive agree that a confidential relationship will exist between the Executive and such counsel. Without respect to whether the 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’ and related fees and expenses incurred by the Executive in connection with any of the foregoing; provided that, in regard to such matters, the Executive has not acted frivolously, in bad faith or with no colorable claim of success. Such expenses will be paid by the Company on the thirtieth day following its receipt of adequate substantiation to support payment of the expense amount. 10.    Confidentiality.  The Executive hereby covenants and agrees that he will not disclose to any person not employed by the Company, or use in connection with engaging in competition with the Company, any confidential or proprietary information (as defined below) of the Company. For purposes of this Agreement, the term “confidential or proprietary information” will include all information of any nature and in any form that is owned by the Company and that is not publicly available (other than by the Executive’s breach of this Section 10) or generally known to persons engaged in businesses similar or related to those of the Company. Confidential or proprietary information will include, without limitation, the Company’s financial matters, customers, employees, industry contracts, strategic business plans, product development (or other proprietary product data), marketing plans, consulting solutions and processes, and all other secrets and all other information of a confidential or proprietary nature which is protected by the Uniform Trade Secrets Act. For purposes of the preceding two sentences, the term “Company” will also include any Subsidiary (collectively, the “Restricted Group”). The foregoing obligations imposed by this Section 10 will not apply (i) in the course of the business of and for the benefit of the Company, (ii) if such confidential or proprietary information has become, through no fault of the Executive, generally known to the public, or (iii) if the Executive is required by law to make disclosure (after giving the Company notice and an opportunity to contest such requirement). 11.    Covenants Not to Compete and Not to Solicit.  In the event of Executive’s Termination of Employment, the Company’s obligations to provide severance pay as provided in Sections 2 and 3 shall be expressly conditioned upon the Executive’s covenants not to compete and not to solicit as provided herein. In the event the Executive breaches his obligations to the Company as provided herein, the Company’s obligations to make severance payments to Executive pursuant to Sections 2 and 3 shall cease, without prejudice to any other remedies that may be available to the Company.   16 (a)    Covenant Not to Compete. (i)    If Executive is receiving compensation and benefits under Section 2(b) above, then for a period of nine (9) months following Executive’s Termination Date, the Executive shall not directly or indirectly, engage in (whether as ownership interest in, or participate in a financing, operation, management or control of, any person, firm, corporation or business that is a Restricted Business in a Restricted Territory without the prior written consent of the Board. For this purpose, ownership of no more than 5% of the outstanding Voting Stock of a publicly traded corporation shall not constitute a violation of this provision. (ii)    If Executive is receiving compensation and benefits under Section 3(b) above (or subsequently becomes entitled to severance under Section 3(b) above because of a termination described in Section 3(a)(ii)), then for a period of one (1) year following Executive’s Termination Date, the Executive shall not directly or indirectly, engage in (whether as employee, consultant, proprietor, partner, director or otherwise), or have any ownership interest in, or participate in a financing, operation, management or control of, any person, firm, corporation or business that is a Restricted Business in a Restricted Territory without the prior written consent of the Board. For this purpose, ownership of no more than 5% of the outstanding Voting Stock of a publicly traded corporation shall not constitute a violation of this provision. (b)    Covenant Not to Solicit.  The Executive shall not, for a period of two (2) years after the Executive’s Termination Date for any reason: (i) solicit, encourage or take any other action which is intended to induce any other employee of the Company to terminate his employment with the Company; or (ii) interfere in any manner with the contractual or employment relationship between the Company and any such employee of the Company. The foregoing shall not prohibit Executive or any entity with which Executive may be affiliated from hiring a former employee of the Company, provided that such hiring results exclusively from such former employee’s affirmative response to a general recruitment effort. (c)    Interpretation.  The covenants contained herein are intended to be construed as a series of separate covenants, one for each county, town, city and state or other political subdivision of a Restricted Territory. Except for geographic coverage, each such separate covenant shall be deemed identical in terms to the covenant contained in the preceding subsections. If, in any judicial proceeding, the court shall refuse to enforce any of the separate covenants (or any part thereof) deemed included in such subsections, then such unenforceable covenant (or such part) shall be deemed to be eliminated from this Agreement for the purpose of those proceedings to the extent necessary to permit the remaining separate covenants (or portions thereof) to be enforced. (d)    Reasonableness.  In the event that the provisions of this Section 11 shall ever be deemed to exceed the time, scope or geographic limitations permitted by applicable laws, then such provisions shall be reformed to the maximum time, scope or geographic limitations, as the case may be, permitted by applicable laws.   17 12.    Employment Rights.  Nothing expressed or implied in this Agreement will create any right or duty on the part of the Company or the Executive to have the Executive remain in the employment of the Company or any Subsidiary prior to or following any Change in Control. 13.    Certain Tax Matters. (a)    Withholding.  The Company may withhold from any amounts payable under this Agreement all federal, state, city or other taxes as the Company is required to withhold pursuant to any applicable law, regulation or ruling. (b)    Effect of Section 409A of the Code.  The parties intend that the provisions of this Agreement will operate in a manner that will avoid adverse federal income tax consequences under Section 409A of the Code. Executive hereby acknowledges and agrees that the Company may take any actions deemed necessary in its sole discretion to avoid adverse federal income tax consequences under section 409A of the Code and that such action may be taken without the consent of Executive. (c)    Time of Payment.  If a payment is not made by the designated payment date under this Agreement, the payment will be made in any event by the later of (i) the end of the calendar year in which the designated payment date occurs or (ii) the 15th day of the third calendar month following the designated payment date, or such other date as may be permitted by section 409A of the Code and the regulations thereunder. 14.    Term of Agreement.  This Agreement shall continue in full force and effect for the duration of Executive’s employment with the Company; provided, however, that after the termination of Executive’s employment during the term of this Agreement, this Agreement shall remain in effect until all of the obligations of the parties hereunder are satisfied or have expired. 15.    Successors and Binding Agreement. (a)    The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation, reorganization or otherwise) to all or substantially all of the business or assets of the Company, by agreement in form and substance reasonably satisfactory to the Executive, expressly to assume and agree to perform this Agreement in the same manner and to the same extent the Company would be required to perform if no such succession had taken place. This Agreement will be binding upon and inure to the benefit of the Company and any successor to the Company, including without limitation any persons acquiring directly or indirectly all or substantially all of the business or assets of the Company whether by purchase, merger, consolidation, reorganization or otherwise (and such successor will thereafter be deemed the “Company” for the purposes of this Agreement), but will not otherwise be assignable, transferable or delegable by the Company. (b)    This Agreement will inure to the benefit of and be enforceable by the Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees and legatees. This Agreement will supersede the provisions of any   18 employment or other agreement between the Executive and the Company that relate to any matter that is also the subject of this Agreement, and such provisions in such other agreements will be null and void. (c)    This Agreement is personal in nature and neither of the parties hereto will, without the consent of the other, assign, transfer or delegate this Agreement or any rights or obligations hereunder except as expressly provided in Sections 15(a) and 15(b). Without limiting the generality or effect of the foregoing, the Executive’s right to receive payments hereunder will not be assignable, transferable or delegable, whether by pledge, creation of a security interest, or otherwise, other than by a transfer by the Executive’s will or by the laws of descent and distribution and, in the event of any attempted assignment or transfer contrary to this Section 15(c), the Company will have no liability to pay any amount so attempted to be assigned, transferred or delegated. 16.    Notices.  For all purposes of this Agreement, all communications, including without limitation notices, consents, requests or approvals, required or permitted to be given hereunder will be in writing and will be deemed to have been duly given when hand delivered or dispatched by electronic facsimile transmission (with receipt thereof orally confirmed by the recipient), or five (5) business days after having been mailed by United States registered or certified mail, return receipt requested, postage prepaid, or three (3) business days after having been sent by a nationally recognized courier service for overnight/next-day delivery, such as FedEx, UPS, or the United States Postal Service, addressed to the Company (to the attention of the Secretary of the Company) at its principal executive office and to the Executive at his principal residence, or to such other address as any party may have furnished to the other in writing and in accordance herewith, except that notices of changes of address will be effective only upon receipt. 17.    Governing Law.  The validity, interpretation, construction and performance of this Agreement will be governed by and construed in accordance with the substantive laws of the Commonwealth of Massachusetts, without giving effect to the principles of conflict of laws of such Commonwealth. 18.    Validity.  If any provision of this Agreement or the application of any provision hereof to any person or circumstances is held invalid, unenforceable or otherwise illegal, the remainder of this Agreement and the application of such provision to any other person or circumstances will not be affected, and the provision so held to be invalid, unenforceable or otherwise illegal will be reformed to the extent (and only to the extent) necessary to make it enforceable, valid or legal. 19.    Miscellaneous. (a)    Except as provided in subparagraph (b) below, no provision of this or discharge is agreed to in writing signed by the Executive and the Company. No waiver by either party hereto at any time of any breach by the other party hereto or compliance with any condition or provision of this Agreement to be performed by such other party will be deemed a waiver of similar or dissimilar provisions or conditions at the same or at   19 any prior or subsequent time. No agreements or representations, oral or otherwise, expressed or implied with respect to the subject matter hereof have been made by either party that are not set forth expressly in this Agreement. References to Sections are to references to Sections of this Agreement. Any reference in this Agreement to a provision of a statute, rule or regulation will also include any successor provision thereto. Whenever used herein, the masculine includes the feminine. (b)    Notwithstanding any contrary provision of this Agreement, the Company may modify benefits otherwise payable or to be provided under this Agreement without obtaining the Executive’s consent to such modification to the extent that the Company determines in its sole discretion that such modification is necessary or appropriate in order to effect compliance with applicable law or regulatory requirements. In particular, the Executive acknowledges and agrees that the provisions of Section 409A of the Code may require delay in payment or provision of benefits otherwise due under the terms of this Agreement until a date that is at least six (6) months following the date of the Executive’s separation from service with the Company, and may limit the permissible forms or timing of severance benefits that may be provided under this Agreement. 20.    Survival.  Notwithstanding any provision of this Agreement to the contrary, the parties’ respective rights and obligations under Sections 2, 3, 7, 9, 10, and 11 will survive any termination or expiration of this Agreement or the termination of the Executive’s employment for any reason whatsoever. 21.    Counterparts.  This Agreement may be executed in one or more counterparts, each of which will be deemed to be an original but all of which together will constitute one and the same agreement.   20 IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed and delivered as of the date first above written.   NOVELL, INC. By:   Name: Title: EXECUTIVE     21 Annex A SEPARATION OF EMPLOYMENT AGREEMENT AND GENERAL RELEASE THIS SEPARATION OF EMPLOYMENT AGREEMENT AND GENERAL RELEASE (the “Agreement”) is made as of this _____ day of _______, ______, by and between Novell, Inc. (the “Company”) and _______________ (“Executive”). WHEREAS, Executive formerly was employed by the Company as _________; WHEREAS, Executive and Company entered into the Severance Agreement, dated _____ _____, 200_, (the “Severance Agreement”) which provides for certain benefits in the event that Executive’s employment is terminated on account of a reason set forth in the Severance Agreement; WHEREAS, Executive and the Company mutually desire to terminate Executive’s employment on an amicable basis, such termination to be effective __________ _____, _____ (“Date of Resignation”); and WHEREAS, in connection with the termination of Executive’s employment, the parties have agreed to a separation package and the resolution of any and all disputes between them. NOW, THEREFORE, IT IS HEREBY AGREED by and between Executive and the Company as follows: 1.      (a)    Executive, for and in consideration of the commitments of the Company as set forth in paragraph 6 of this Agreement, and intending to be legally bound, does hereby REMISE, RELEASE AND FOREVER DISCHARGE the Company, its affiliates, subsidiaries and parents, and its officers, directors, employees, and agents, and its and their respective successors and assigns, heirs, executors, and administrators (collectively, “Releasees”) from all causes of action, suits, debts, claims and demands whatsoever in law or in equity, which Executive ever had, now has, or hereafter may have, whether known or unknown, or which Executive’s heirs, executors, or administrators may have, by reason of any matter, cause or thing whatsoever, from the beginning of Executive’s employment to the date of this Agreement, and particularly, but without limitation of the foregoing general terms, any claims arising from or relating in any way to Executive’s employment relationship with the Company, the terms and conditions of that employment relationship, and the termination of that employment relationship, including, but not limited to, any claims arising under the Age Discrimination in Employment Act, the Older Workers Benefit Protection Act, Title VII of The Civil Rights Act of 1964, the Americans with Disabilities Act, the Family and Medical Leave Act of 1993, the Employee Retirement Income Security Act of 1974, [State Fair Employment Practice Law], and any other claims under any federal, state or local common law, statutory, or regulatory provision, now or hereafter recognized, and any claims for attorneys’ fees and costs. This Agreement is effective without regard to   A-1 the legal nature of the claims raised and without regard to whether any such claims are based upon tort, equity, implied or express contract or discrimination of any sort. (b)    To the fullest extent permitted by law, and subject to the provisions of paragraph 11 below, Executive represents and affirms that (i) [other than______,] Executive has not filed or caused to be filed on Executive’s behalf any claim for relief against the Company or any Releasee and, to the best of Executive’s knowledge and belief, no outstanding claims for relief have been filed or asserted against the Company or any Releasee on Executive’s behalf; (ii) [other than______,] Executive has not reported any improper, unethical or illegal conduct or activities to any supervisor, manager, department head, human resources representative, agent or other representative of the Company, to any member of the Company’s legal or compliance departments, or to the ethics hotline, and has no knowledge of any such improper, unethical or illegal conduct or activities; and (iii) Executive will not file, commence, prosecute or participate in any judicial or arbitral action or proceeding against the Company or any Releasee based upon or arising out of any act, omission, transaction, occurrence, contract, claim or event existing or occurring on or before the date of this Agreement. 2.      [The Company, for and in consideration of the commitments of the Executive as set forth in this Agreement, and intending to be legally bound, does hereby REMISE, RELEASE AND FOREVER DISCHARGE the Executive from all claims, demands or causes of action arising out of facts or occurrences prior to the date of this Agreement, but only to the extent the Company knows or reasonably should know of such facts or occurrence and only to the extent such claim, demand or cause of action relates to a violation of applicable law or the performance of Executive’s duties with the Company; provided, however, that this release of claims shall not in any case be effective with respect to any claim by the Company alleging a breach of the Executive’s obligations under this Agreement.] [Note: Paragraph 2 only applies if Executive is receiving severance benefits on account of an Involuntary Termination Associated With a Change in Control.] 3.      In consideration of the Company’s agreements as set forth in paragraph 6 herein, Executive agrees to be comply with the limitations described in Sections 10 and 11 of the Severance Agreement. 4.      Executive further agrees and recognizes that Executive has permanently and irrevocably severed Executive’s employment relationship with the Company, that Executive shall not seek employment with the Company or any affiliated entity at any time in the future, and that the Company has no obligation to employ him in the future. 5.      Executive further agrees that Executive will not disparage or subvert the Company, or make any statement reflecting negatively on the Company, its affiliated corporations or entities, or any of their officers, directors, employees, agents or representatives, including, but not limited to, any matters relating to the operation or management of the Company, Executive’s employment and the termination of Executive’s employment, irrespective of the truthfulness or falsity of such statement.   2 6.      In consideration for Executive’s agreement as set forth herein, the Company agrees: [Note: The following severance benefits would apply if the Executive has an Involuntary Termination Prior to a Change in Control.] (i)    [to pay Executive 150% of Executive’s Base Pay (as defined in the Severance Agreement) [for the Severance Period (as defined in the Severance Agreement), payable in equal installments, consistent with the Company’s past payroll practices, commencing with the first payroll period that occurs after the period during which Executive’s right to revoke Executive’s acceptance to the terms of this Agreement have expired.] or [, payable in a lump sum, within thirty (30) days after Executive’s Date of Resignation (or the end of the revocation period set forth in this Agreement, if later).] (ii)    to pay Executive Executive’s pro rated Incentive Pay (as defined in the Severance Agreement) for the year in which Executive’s Date of Resignation occurs. Such pro rated Incentive Pay shall be paid to Executive [for the Severance Period payable in equal installments, consistent with the Company’s past payroll practices, commencing with the first payroll period that occurs after the period during which Executive’s right to revoke Executive’s acceptance to the terms of the Release has expired.] or [paid in a lump sum, within thirty (30) days after Executive’s Date of Resignation (or the end of the revocation period set forth in this Agreement, if later).] (iii)    [for a period of twelve (12) months following Executive’s Date of Resignation, Executive shall continue to receive the medical and dental coverage in effect on Executive’s Date of Resignation (or generally comparable coverage) for Executive and, where applicable, Executive’s spouse and dependents, as the same may be changed from time to time for employees generally, as if Executive had continued in employment during such period.] or [pay Executive cash in a lump sum payment equal to Executive’s after-tax cost of continuing comparable medical and dental coverage for the twelve (12) month period following Executive’s Date of Resignation]. [The Company shall take all commercially the medical and dental coverage of Executive’s successor employer, if any.] (iv)    with respect to any Company stock options held by the Executive as of Executive’s Date of Resignation, the portion of Executive’s stock options, if any, which would have vested and become exercisable within the one (1) year period after the Executive’s Date of Resignation shall become vested and exercisable as of Executive’s Date of Resignation, such options, plus any other options that previously became exercisable and have not expired or been agreement governing   3 such options, for the longer of (A) a period of six (6) months after the Executive’s Date of Resignation, or (B) the period set forth in the award agreement covering the option, subject in either case only to the original term of the option. Any stock options held by Executive that are not exercisable as of the Executive’s Date of Resignation shall terminate as of the Executive’s Date of Resignation. (v)    with respect to any shares of Company common stock that are held by the Executive that are, at the time of Executive’s Date of Resignation, subject to the Company’s repurchase right upon termination of the Executive’s employment (“Restricted Stock”), to waive such repurchase right as to the number of shares of Restricted Stock that would have become no longer subject to the Company’s repurchase right within the one (1) year period after the Executive’s Date of Resignation. (vi)    pay the cost of outplacement assistance services for Executive that are actually provided by an outplacement agency selected by Executive, which the Company provides prior approval, with such approval not to be unreasonably Base Pay. yet paid to Executive as of Executive’s Date of Resignation, payable in a lump sum, and any benefits accrued or earned in accordance with the terms of any applicable benefit plans and programs of the Company. Except as set forth in this Agreement, it is expressly agreed and understood that Releasees do not have, and will not have, any obligations to provide Executive at any time in the future with any payments, benefits or considerations other than those recited in this paragraph, or those required by law, other than under the terms of any benefit plans which provide benefits or payments to former employees according to their terms.] Involuntary Termination Associated With a Change in Control.] (i)    [to pay to Executive a lump sum payment equal to (A) 2 times Base Pay (as defined in the Severance Agreement), plus (B) 2 times Incentive Pay (as defined in the Severance Agreement). Payment shall be made within thirty (30) days after the effective date of Executive’s Date of Resignation (or the end of the revocation period set forth in this Agreement, if later). occurs. Such pro rated Incentive Pay shall be paid to Executive in a lump sum within thirty (30) days after the effective date of the termination (or the end of the revocation period set forth in this Agreement, if later).   4 (iii)    [for a period of twenty-four (24) months following Executive’s Date of had continued in employment during such period] or [pay Executive cash in a lump sum payment equal to Executive’s after-tax cost of continuing comparable medical and dental coverage for the twenty-four (24) month period following Executive’s Date of Resignation.] [The Company shall take all commercially reasonable efforts to provide that the COBRA health care continuation coverage period under section 4980B of the Code, shall commence immediately after the foregoing continuing until the earlier of (0 the end of the applicable COBRA health care (iv)    to pay to Executive a lump sum payment equal to the total amount that Executive would have received under the Company’s 401(k) plan as a Company match if Executive was eligible to participate in the Company’s 401(k) plan for the twenty-four (24) month period after Executive’s Date of Resignation and Executive contributed the maximum amount to the plan for the match. Payment shall be made within thirty (30) days after the Executive’s Date of Resignation (or the end of the revocation period set forth in this Agreement, if later). (v)    [to pay to Executive a lump sum payment equal to the total premiums that the Company would have paid under Executive’s split-dollar life insurance policy, if any, that is in effect immediately prior to Executive’s Date of Resignation, if Executive was employed by the Company for the twenty-four (24) month period following Executive’s Date of Resignation. Payment shall be made within thirty (30) days after the effective date of Executive’s Date of Resignation (or the end of the revocation period set forth in this Agreement, if later)]. [Note: The foregoing only applies if Executive has a split-dollar arrangement with the Company and the Company is required to make premium contributions on Executive’s Date of Resignation. The total months covered by the premiums will be reduced if the term of the policy is shorter than that provided for Executive.] (vi)    to pay to Executive a lump sum payment equal to twenty percent (20%) of the Executive’s Base Pay in order to cover the cost of outplacement assistance services for Executive. Payment shall be made within thirty (30) days after the effective date of Executive’s Date of Resignation (or the end of the revocation period set forth in this Agreement, if later).   5 (viii)  with respect to any Company stock options, Restricted Stock, and other equity rights held by Executive as of Executive’s Date of Resignation, shall become vested and/or exercisable, as the case may be, as of Executive’s Date of Resignation, and such options, plus any other options that previously became exercisable and have not expired or been exercised, to remain exercisable, notwithstanding anything in any other agreement governing such options, for the longer of (A) a period of twenty-four (24) months after the Executive’s Date of Resignation, or (B) the period set forth in the award agreement covering the option, subject in either case only to the original term of the option. 7.    Executive understands and agrees that the payments, benefits and agreements provided in this Agreement are being provided to him in consideration for Executive’s acceptance and execution of, and in reliance upon Executive’s representations in, this Agreement. Executive acknowledges that if Executive had not executed this Agreement containing a release of all claims against the Company, Executive would only have been entitled to the payments provided in the Company’s standard severance pay plan for employees. 8.    Executive acknowledges and agrees that the Company previously has satisfied any and all obligations owed to him under any employment agreement or offer letter Executive has with the Company and, further, that this Agreement supersedes any employment agreement or offer letter Executive has with the Company, and any and all prior agreements or understandings, whether written or oral, between the parties shall remain in full force and effect to the extent not inconsistent with this Agreement, and further, that, except as set forth expressly herein, no promises or representations have been made to him in connection with the termination of Executive’s employment agreement, if any, or offer letter, if any, with the Company, or the terms of this Agreement. 9.    Executive agrees not to disclose the terms of this Agreement to anyone, except Executive’s spouse, attorney and, as necessary, tax/financial advisor. Likewise, the Company agrees that the terms of this Agreement will not be disclosed except as may be necessary to obtain approval or authorization to fulfill its obligations hereunder or as required by law. It is expressly understood that any violation of the confidentiality obligation imposed hereunder constitutes a material breach of this Agreement. 10.    Executive represents that Executive does not presently have in Executive’s possession any records and business documents, whether on computer or hard copy, and other materials (including but not limited to computer disks and tapes, computer programs and software, office keys, correspondence, files, customer lists, technical   6 information, customer information, pricing information, business strategies and plans, sales records and all copies thereof) (collectively, the “Corporate Records”) provided by the Company and/or its predecessors, subsidiaries or affiliates or obtained as a result of Executive’s prior employment with the Company and/or its predecessors, subsidiaries or affiliates, or created by Executive while employed by or rendering services to the Company and/or its predecessors, subsidiaries or affiliates. Executive acknowledges that all such Corporate Records are the property of the Company. In addition, Executive shall promptly return in good condition any and all Company owned equipment or property, including, but not limited to, automobiles, personal data assistants, facsimile machines, copy machines, pagers, credit cards, cellular telephone equipment, business cards, laptops and computers. As of the Date of Resignation, the Company will make arrangements to remove, terminate or transfer any and all business communication lines including network access, cellular phone, fax line and other business numbers. 11.    Nothing in this Agreement shall prohibit or restrict Executive from: (i) making any disclosure of information required by law; (ii) providing information to, or testifying or otherwise assisting in any investigation or proceeding brought by, any federal regulatory or law enforcement agency or legislative body, any self-regulatory organization, or the Company’s [designated legal, compliance or human resources officers]; or (iii) filing, testifying, participating in or otherwise assisting in a proceeding relating to an alleged violation of any federal, state or municipal law relating to fraud, or any rule or regulation of the Securities and Exchange Commission or any self-regulatory organization. 12.    The parties agree and acknowledge that the agreement by the Company described herein, and the settlement and termination of any asserted or unasserted claims against the Releasees, are not and shall not be construed to be an admission of any violation of any federal, state or local statute or regulation, or of any duty owed by any of the Releasees to Executive. 13.    Executive agrees and recognizes that should Executive breach any of the obligations or covenants set forth in this Agreement, the Company will have no further obligation to provide Executive with the consideration set forth herein, and will have the right to seek repayment of all consideration paid up to the time of any such breach. Further, Executive acknowledges in the event of a breach of this Agreement, Releasees may seek any and all appropriate relief for any such breach, including equitable relief and/or money damages, attorney’s fees and costs. 14.    Executive further agrees that the Company shall be entitled to preliminary and permanent injunctive relief, without the necessity of proving actual damages, as well as to an equitable accounting of all earnings, profits and other benefits arising from any violations of this Agreement, which rights shall be cumulative and in addition to any other rights or remedies to which the Company may be entitled. 15.    This Agreement and the obligations of the parties hereunder shall be construed, interpreted and enforced in accordance with the laws of the Commonwealth of Massachusetts.   7 16.    Executive certifies and acknowledges as follows: (a)    That Executive has read the terms of this Agreement, and that Executive understands its terms and effects, including the fact that Executive has agreed to RELEASE AND FOREVER DISCHARGE the Company and each and everyone of its affiliated entities from any legal action arising out of Executive’s employment relationship with the Company and the termination of that employment relationship; (b)    That Executive has signed this Agreement voluntarily and knowingly in exchange for the consideration described herein, which Executive acknowledges is adequate and satisfactory to him and which Executive acknowledges is in addition to any other benefits to which Executive is otherwise entitled; (c)    That Executive has been and is hereby advised in writing to consult with an attorney prior to signing this Agreement; (d)    That Executive does not waive rights or claims that may arise after the date this Agreement is executed; (e)    That the Company has provided him with a period of [twenty-one (21)] or [forty-five (45)] days within which to consider this Agreement, and that Executive has signed on the date indicated below after concluding that this Separation of Employment Agreement and General Release is satisfactory to him; and (f)    Executive acknowledges that this Agreement may be revoked by him within seven (7) days after execution, and it shall not become effective until the expiration of such seven (7) day revocation period. In the event of a timely revocation by Executive, this Agreement will be deemed null and void and the Company will have no obligations hereunder.   8 Intending to be legally bound hereby, Executive and the Company executed the foregoing Separation of Employment Agreement and General Release this _____ day of _______, _____.       Witness:     [Executive]     NOVELL, INC.     By:         Witness:     Name: Title:         9

Title: Moving truck impounded, who is responsible for the fees?? Topic: Traffic and Parking Answer #1: You got the truck impounded. Who else would be responsible for the fees?

As filed with the Securities and Exchange Commission on September 5, 2007 Registration No. 333- UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C.20549 FORM S-8 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 PUREDEPTH, INC. (Exact name of registrant as specified in its charter) Delaware 20-4831825 (State or other jurisdiction of Incorporation or organization) 225 Shoreline Drive, Suite 610 Redwood City, California94065 Telephone (650) 632-0800 (I.R.S. Employer Identification No.) (Address of principal executive offices) PUREDEPTH, INC. 2 (Full title of the Plan) Jonathan J. McCaman Chief Financial Officer PureDepth, Inc. 225 Shoreline Drive, Suite 610 Redwood City, California94065 Telephone (650) 632-0800 Facsimile (650) 632-0818 (Name and address of agent for service) Copy to: James M. Koshland, Esq. Jenelle Cox, Esq. DLA Piper US LLP 2000 University Avenue East Palo Alto, California94303 Telephone: (650) 833-2000 CALCULATION OF REGISTRATION FEE Title of Securities to be Registered1 Proposed Maximum Amount to be Registered 2 Proposed Maximum Offering Price Per Share3 Proposed Maximum Aggregate Offering Price3 Amount of Registration Fee 2006 Stock Incentive Plan Common Stock ($0.001 par value) 8,500,0004 $1.31 $11,135,000 $341.85 1 The securities to be registered include options and rights to acquire Common Stock. 2 Pursuant to Rule 416(a), this registration statement also covers any additional securities that may be offered or issued in connection with any stock split, stock dividend or similar transaction. 3 Calculated solely for purposes of this offering under Rule 457(h), the price is based upon the average of the high and low prices of the Common Stock on September 4, 2007 as reported on the OTC Bulletin Board. 4 Represents shares available for issuance upon the exercise of equity awards under the PureDepth, Inc. 2006 Stock Incentive Plan. Pursuant to General Instruction E to Form S-8, this Registration Statement on Form S-8 registers the offer and sale of an additional 8,500,000 shares of the Registrant’s Common Stock for the issuance under the 2006 Stock IncentivePlan.The contents of the prior Registration Statement for the 2006 Stock Incentive Plan, Filing No. 333-139884, to the extent they are not updated herein, are incorporated by reference. PART II Item 3.Incorporation of Documents by Reference. The following documents filed by the Registrant with the Securities and Exchange Commission are hereby incorporated by reference herein: (a) Annual Report on Form 10-KSB for the fiscal year ended January 31, 2007 filed on May31, 2007, as amended on Form 10-KSB/A on June 1, 2007; (b) All other reports filed pursuant to Section 13(a) or 15(d) of the Exchange Act since the end of the fiscal year covered by the registrant document referred to in (a) above; and (c) The description of the Registrant’s Common Stock contained in the Registrant’s registration statement filed under the Exchange Act, including any amendment or report filed for the purpose of updating such description. All documents subsequently filed by the Registrant pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Securities Exchange Act of 1934, prior to the filing of a post-effective amendment which indicates that all securities offered have been sold or which deregisters all securities then remaining unsold, shall be deemed to be incorporated by reference in this Registration Statement and to be a part hereof from the date of filing of such documents. Item 4.Description of Securities. Common Stock All shares of our common stock have equal voting rights and are entitled to one vote per share in all matters to be voted upon by our stockholders.The shares of common stock do not entitle their holders to any preemptive, subscription, conversion or redemption rights, and may be issued only as fully paid and non-assessable shares.Cumulative voting in the election of directors is not permitted, which means that the holders of a majority of the issued and outstanding shares of common stock represented at any meeting at which a quorum is present will be able to elect our entire board of directors if they so choose.In that event, the holders of the remaining shares of common stock will not be able to elect any directors.In the event of our liquidation, each stockholder is entitled to receive a proportionate share of the assets available for distribution to stockholders after the payment of liabilities and after distribution in full of preferential amounts, if any, to be distributed to holders of our preferred stock, if any.Holders of shares of common stock are entitled to share pro rata in dividends and distributions with respect to the common stock when, as and if declared by our board of directors out of funds legally available for dividends.This is after requirements with respect to preferential dividends on, and other matters relating to, the preferred stock, if any, have been met.We have not paid any dividends on our common stock and intend to retain earnings, if any, to finance the development and expansion of our business.Future dividend policy is subject to the discretion of the board of directors.All issued and outstanding shares of our common stock are fully paid and non-assessable. Item 5.Interests of Named Experts and Counsel. Not applicable. Item 6.Indemnification of Directors and Officers. Under Article 6 of the Registrant’s Bylaws, each director and officer of the Registrant will be indemnified to the fullest extent permitted by applicable law as it presently exists or may hereafter be amended, who was or is made or is threatened to be made a party or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he or she, or a person for whom he or she is the legal representative, is or was a director or officer of the Registrant or, while a director or officer of the Registrant, is or was serving at the request of the Registrant as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust, enterprise or nonprofit entity, including service with respect to employee benefit plans, against all liability and loss suffered and expenses (including attorneys’ fees) reasonably incurred by such director or officer.However, the Registrant shall be required to indemnify a director or officer in connection with a proceeding commenced by such director or officer only if the commencement of such proceeding (or part thereof) by the director or officer was authorized by the Board. The Registrant’s Certificate of Incorporation also eliminates the liability of directors of the Registrant for monetary damages to the fullest extent permissible under Delaware law. Section 145 of the Delaware General Corporation Law states: (a) A corporation shall have the power to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action arising by or in the right of the corporation) by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation 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 actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his 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 the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful. (b)A corporation shall have power to indemnify any person who 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 corporation to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, or other enterprise against expenses (including attorneys’ fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation and except that no indemnification shall be made in respect to any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery 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, such person is fairly and reasonably entitled to indemnity for such expense which the Court of Chancery or such other court shall deem proper. The Registrant maintains insurance on behalf of its officers and directors, insuring them against liabilities that they may incur in such capacities or arising out of this status. The above discussion of the Registrant’s Certificate of Incorporation and Bylaws and of Section 145 of the Delaware General Corporation Law is not intended to be exhaustive and is respectively qualified in its entirety by such Certificate of Incorporation, Bylaws and statute. Item 7.Exemption from Registration Claimed. Not applicable. Item 8.Exhibits. See Exhibit Index. Item 9.Undertakings. The undersigned Registrant hereby undertakes: (1)To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement: (i)To include any prospectus required by Section 10(a)(3) of the Securities Act; (ii)To reflect in the prospectus any facts or events arising after the effective date of the Registration Statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the Registration Statement; and (iii)To include any material information with respect to the plan of distribution not previously disclosed in the Registration Statement or any material change to such information in the Registration Statement; provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed with or furnished to the Securities and Exchange Commission by the Registrant pursuant to Section13 or Section 15(d) of the Exchange Act that are incorporated by reference in the Registration Statement. (2)That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3)To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. The undersigned Registrant hereby undertakes that, for purposes of determining any liability under the Securities Act, each filing of the Registrant’s annual report pursuant to Section13(a) or Section 15(d) of the Exchange Act (and, where applicable, each filing of an employee benefit plan’s annual report pursuant to Section 15(d) of the Exchange Act) that is incorporated by reference in the Registration Statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-8 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Redwood City, State of California, on this 5th day of September, 2007. PureDepth, Inc. By: /s/Jonathan J. McCaman Jonathan J. McCaman Chief Financial Officer POWER OF ATTORNEY Each person whose signature to this Registration Statement appears below hereby constitutes and appoints Thomas M. Marcus and Jonathan J. McCaman as his or her true and lawful attorneys-in-fact and agents, with full power of substitution, to sign on his or her behalf individually and in the capacity stated below and to perform any acts necessary to be done in order to file all amendments to this Registration Statement and any and all instruments or documents filed as part of or in connection with this Registration Statement or the amendments thereto and each of the undersigned does hereby ratify and confirm all that said attorney-in-fact and agent, or his substitutes, shall do or cause to be done by virtue hereof.The undersigned also grants to said attorney-in-fact, full power and authority to do and perform any and all acts necessary or incidental to the performance and execution of the powers herein expressly granted. This Power of Attorney shall remain in effect until revoked in writing by the undersigned. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated: Name Title Date /s/ Thomas L. Marcus Thomas L. Marcus Interim Chief Executive Officer and Director (Principal Executive Officer) September 5, 2007 /s/ Jonathan J. McCaman Jonathan J. McCaman Chief Financial Officer (Principal Accounting and Financial Officer) September 5, 2007 /s/ Mark Kalow Mark Kalow Director September 5, 2007 /s/ John Floisand John Floisand Director September 5, 2007 /s/ Kristin Bowman Kristin Bowman Director September 5, 2007 INDEX TO EXHIBITS Exhibit Description 4.1 Certificate of Incorporation of the Registrant is incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on June 5, 2006. 4.2 Certificate of Amendment to Certificate of Incorporation of the Registrant is incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on June 5, 2006. 4.3 Bylaws of the Registrant are incorporated by reference to Exhibit 3.5 to the Company’s Optional Form for Registration of Securities to be Sold to the Public by Small Business Issuers on Form SB-2 filed with the Securities and Exchange Commission on May 30, 2006. 5.1 Opinion of DLA Piper US LLP. 23.1 Consent of DLA Piper US LLP (included in Exhibit 5.1). 23.2 Consent of Independent Registered Public Accounting Firm – Mark Bailey & Company, Ltd. 24.1 Power of Attorney (included on the signature page to this registration statement). 99.1 PureDepth, Inc. 2006 Stock Incentive Plan, as amended, is incorporated by reference to Exhibit 10.7 to the Company’s Optional Form for Registration of Securities to be Sold to the Public by Small Business Issuers on Form SB-2/A filed with the Securities and Exchange Commission on August 29, 2007.

CERTIFICATION I, Peter H. Mattoon, certify that: 1. I have reviewed this report on Form N-Q of SCS Hedged Opportunities Fund, LLC; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the schedules of investments included in this report fairly present in all material respects the investments of the registrant as of the end of the fiscal quarter for which the report is filed; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940)for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report, based on such evaluation; (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: August 25, 2014 /s/ Peter H. Mattoon Peter H. Mattoon Chief Executive Officer CERTIFICATION I, Joseph E. McCuine, certify that: 1. I have reviewed this report on Form N-Q of SCS Hedged Opportunities Fund, LLC; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the schedules of investments included in this report fairly present in all material respects the investments of the registrant as of the end of the fiscal quarter for which the report is filed; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940)for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report, based on such evaluation; (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: August 25, 2014 /s/ Joseph E. McCuine Joseph E. McCuine Chief Financial Officer

Exhibit 10.1 NEWMONT MINING CORPORATION 2013 STOCK INCENTIVE PLAN RESTRICTED STOCK UNIT AGREEMENT This Agreement (“Agreement”), dated February 26, 2014, is made between Newmont Mining Corporation (“Newmont”) and “Executive,” as specified in his or her Grant Summary and Grant Acknowledgment (collectively, the “Grant Acknowledgment”). The Grant Acknowledgment is set forth on the Computershare—Employee Online webpage. The Grant Acknowledgment is incorporated by reference herein. This Agreement shall be deemed executed by Executive upon his or her electronic execution of the Grant Acknowledgment. All capitalized terms that are not defined herein shall have the meaning as defined in the Newmont Mining Corporation 2013 Stock Incentive Plan (“Plan”). 1. Award of Restricted Stock Units. Newmont hereby grants to Executive the right to receive from Newmont the number of shares of $1.60 par value Common Stock of Newmont (the “Restricted Stock Units” or “RSU’s”) (rounded down to the nearest whole share) specified in the Grant Acknowledgment, pursuant to the terms and subject to the conditions and restrictions set forth in this Agreement and the Plan, including the Vesting Period, as such term is defined in this Agreement, and in connection with such award, Newmont and Executive hereby agree as follows: 2. Vesting Period. The Vesting Period shall commence on the date of this Agreement and shall end on the dates set forth below as to that percentage of the total shares of Common Stock subject to this Agreement set forth opposite each such date:   Date    Percentage Vested   February 26, 2015      33 %  February 26, 2016      33 %  February 26, 2017      34 %  3. Termination of Employment for death, disability, and following change of control. Notwithstanding the foregoing, if (i) Executive dies, or (ii) Executive’s employment by Newmont or any Subsidiary terminates by reason of (a) disability (as determined under the terms of the Long-Term Disability Plan of Newmont), or (b) termination of employment entitling Executive to benefits under an Executive Change of Control Plan of Newmont , in any such case prior to the completion of the Vesting Period, the Vesting Period shall terminate, and all RSUs not theretofore forfeited in accordance with this Agreement shall become fully vested and nonforfeitable, as of the date of Executive’s death or other termination of employment, referred to in clause (i) or (ii) above. Separation of Employment under a Severance Plan of Newmont or Retirement. Notwithstanding the foregoing, if Executive ceases to be employed by Newmont and/or a Subsidiary prior to completion of the Vesting Period as a result of: a) a termination of employment entitling Executive to benefits under a Severance Plan of Newmont, or; b) retirement under the Pension Plan of Newmont entitling Executive to an immediate pension (not including stable value retirement unless Executive has reached the age of 65 or retirement under the International Retirement Plan of Newmont (“IRP”) entitling Executive to 100% vesting in the IRP supplemental amount), the Vesting Period shall terminate for a pro-rata percentage of the shares granted, based upon the date of grant and separation date, in accordance with the following formula:   LOGO [g708626g16x68.jpg] If Executive ceases to be employed by Newmont and/or a Subsidiary prior to the completion of the Vesting Period under circumstances other than those set forth above, namely death, disability, termination qualifying for benefits under the Executive Change of Control Plan of Newmont applicable to Executive or separation qualifying for benefits under the Executive Severance Plan of Newmont or retirement as stated above, Executive agrees that any unvested RSUs will be immediately and unconditionally forfeited without any action required by Executive or Newmont, to the extent that the Vesting Period had not ended in accordance with Paragraph 2 as of the date of such cessation of employment. 4. No Ownership Rights Prior to Issuance of Common Stock. Executive shall not have any rights as a shareholder of Newmont with respect to the shares of Common Stock underlying the RSUs, including but not limited to the right to vote with respect to such shares of Common Stock, until and after the shares of Common Stock have been actually issued to Executive and transferred on the books and records of Newmont; provided, however, upon vesting of the RSUs pursuant to the Vesting Period, or Executive’s earlier termination of employment under circumstances entitling Executive to vest in the RSUs pursuant to Paragraph 3, Newmont shall make a cash payment to the Executive equal to any dividends paid with respect to shares of Common Stock underlying such RSUs from the date of this Agreement until the date such RSUs vest, minus any applicable taxes. 5. Withholding Taxes. Upon vesting pursuant to the Vesting Period, or Executive’s earlier termination of employment under circumstances entitling Executive to vest in the RSUs pursuant to Paragraph 3, Executive shall be entitled to receive the shares of Common Stock, less an amount of shares of Common Stock with a Fair Market Value on the date of vesting equal to the minimum required withholding obligation taking into account Executive’s effective tax rate and all applicable federal, state, local and foreign taxes, and Executive shall be entitled to receive the net number of shares of Common Stock after withholding of shares for taxes unless such tax obligations are satisfied in accordance with Paragraph 6. Notwithstanding the foregoing, to the extent any such taxes are required by law to be withheld with respect to the Restricted Stock Units prior to the end of the Vesting Period, Executive agrees that Newmont may withhold such amount for taxes through payroll services from other cash compensation payable to Executive from Newmont.   - 2 - 6. Delivery of Shares of Common Stock. As soon as reasonably practicable following the date of vesting pursuant to the Vesting Period, or Executive’s earlier termination of employment or other event entitling Executive to vest in the RSUs pursuant to Paragraph 3, subject to Section 9(i), Newmont shall cause to be delivered to Executive a stock certificate or electronically deliver shares through a direct registration system for the number of shares of Common Stock (net of tax withholding as provided in Paragraph 5) deliverable to Executive in accordance with the provisions of this Agreement; provided, however, that Newmont may allow Executive to elect to have shares of Common Stock, which are deliverable in accordance with the provisions of this Agreement upon vesting (or a portion of such shares at least sufficient to satisfy Executive’s tax withholding obligations with respect to such Common Stock), sold on behalf of Executive, with the cash proceeds thereof, net of tax withholding, remitted to Executive, in lieu of Executive receiving a stock certificate or electronic delivery of shares in a direct registration system. 7. Nontransferability. Executive’s interest in the RSUs and any shares of Common Stock relating thereto may not be sold, transferred, pledged, assigned, encumbered or otherwise alienated or hypothecated otherwise than by will or by the laws of descent and distribution, prior to such time as the shares of Common Stock have actually been issued and delivered to Executive. 8. Acknowledgements. Executive acknowledges receipt of and understands and agrees to the terms of the RSUs award and the Plan. In addition to the above terms, Executive understands and agrees to the following: (a) Executive hereby acknowledges receipt of a copy of the Plan and agrees to be bound by all of the terms and provisions thereof, including the terms and provisions adopted after the date of this Agreement but prior to the completion of the Vesting Period. If and to the extent that any provision contained in this Agreement is inconsistent with the Plan, the Plan shall govern. (b) Executive acknowledges that as of the date of this Agreement, the Agreement, the Grant Acknowledgement and the Plan set forth the entire understanding between Executive and Newmont regarding the acquisition of shares of Common Stock underlying the RSUs in Newmont and supersedes all prior oral and written agreements pertaining to the RSUs. (c) Executive understands that his or her employer, Newmont and its Subsidiaries hold certain personal information about Executive, including but not limited to his or her name, home address, telephone number, date of birth, social security number, salary, nationality, job title and details of all RSUs or other entitlement to shares of Common Stock awarded, canceled, exercised, vested, unvested or outstanding (“personal data”). Certain personal data may also constitute “sensitive personal data” within the meaning of applicable law. Such data include but are not limited to the information provided above and any changes thereto and other appropriate personal and financial data about Executive. Executive hereby gives explicit consent to Newmont and any of its Subsidiaries to process any such personal data and/or sensitive personal data. Executive also hereby gives explicit consent to Newmont to transfer any such personal data and/or sensitive personal data outside the country in which Executive is employed, including, but not limited to the United States. The legal persons for whom such personal data are intended include, but are not limited to Newmont and its agent, Computershare Investor Services. Executive has been informed of his or her right of access and correction to his or her personal data by applying to Director of Compensation, Newmont Corporate.   - 3 - (d) Executive understands that Newmont has reserved the right to amend or terminate the Plan at any time, and that the award of RSUs under the Plan at one time does not in any way obligate Newmont or its Subsidiaries to grant additional RSUs in any future year or in any given amount. Executive acknowledges and understands that the RSUs are awarded in connection with Executive’s status as an employee of his or her employer and can in no event be interpreted or understood to mean that Newmont is Executive’s employer or that there is an employment relationship between Executive and Newmont. Executive further acknowledges and understands that Executive’s participation in the Plan is voluntary and that the RSUs and any future RSUs under the Plan are wholly discretionary in nature, the value of which do not form part of any normal or expected compensation for any purposes, including, but not limited to, calculating any termination, severance, resignation, redundancy, end of service payments, bonuses, long-service awards, pension or retirement benefits or similar payments, other than to the extent required by local law. (e) Executive acknowledges and understands that the future value of the shares of Common Stock acquired by Executive under the Plan is unknown and cannot be predicted with certainty and that no claim or entitlement to compensation or damages arises from the forfeiture of the RSUs or termination of the Plan or the diminution in value of any shares of Common Stock acquired under the Plan and Executive irrevocably releases Newmont and its Subsidiaries from any such claim that may arise. (f) Executive acknowledges that the vesting of the RSUs ceases upon the earlier of termination of employment or receipt of notice of termination of employment for any reason, except as may otherwise be explicitly provided herein, and the Executive irrevocably waives any right to the contrary under applicable law. (g) Executive acknowledges that the Executive’s acceptance of the RSUs, including the terms and conditions herein, is voluntary. 9. Miscellaneous (a) No Right to Continued Employment. Neither the RSUs nor any terms contained in this Agreement shall confer upon Executive any expressed or implied right to be retained in the service of any Subsidiary for any period at all, nor restrict in any way the right of any such Subsidiary, which right is hereby expressly reserved, to terminate his or her employment at any time with or without cause. Executive acknowledges and agrees that any right to receive delivery of shares of Common Stock is earned only by continuing as an employee of a Subsidiary at the will of such Subsidiary, or satisfaction of any other applicable terms and conditions contained in this Agreement and the Plan, and not through the act of being hired, being granted the RSUs or acquiring shares of Common Stock hereunder. (b) Compliance with Laws and Regulations. The award of the RSUs to Executive and the obligation of Newmont to deliver shares of Common Stock hereunder shall be subject to (a) all applicable federal, state, local and foreign laws, rules and regulations, and (b) any registration, qualification, approvals or other requirements imposed by any government or regulatory agency or body which the Newmont Committee shall, in its sole discretion, determine to be necessary or applicable. Moreover, shares of Common Stock shall not be delivered hereunder if such delivery would be contrary to applicable law or the rules of any stock exchange.   - 4 - (c) Investment Representation. If at the time of delivery of shares of Common Stock, the Common Stock is not registered under the Securities Act of 1933, as amended (the “Securities Act”), and/or there is no current prospectus in effect under the Securities Act with respect to the Common Stock, Executive shall execute, prior to the delivery of any shares of Common Stock to Executive by Newmont, an agreement (in such form as the Newmont Committee may specify) in which Executive represents and warrants that Executive is purchasing or acquiring the shares acquired under this Agreement for Executive’s own account, for investment only and not with a view to the resale or distribution thereof, and represents and agrees that any subsequent offer for sale or distribution of any kind of such shares shall be made only pursuant to either (i) a registration statement on an appropriate form under the Securities Act, which registration statement has become effective and is current with regard to the shares being offered or sold, or (ii) a specific exemption from the registration requirements of the Securities Act, but in claiming such exemption Executive shall, prior to any offer for sale of such shares, obtain a prior favorable written opinion, in form and substance satisfactory to the Newmont Committee, from counsel for or approved by the Newmont Committee, as to the applicability of such exemption thereto. (d) Definitions. All capitalized terms that are used in this Agreement that are not defined herein have the meanings defined in the Plan. In the event of a conflict between the terms of the Plan and the terms of this Agreement, the terms of the Plan shall prevail. (e) Notices. Any notice or other communication required or permitted hereunder shall, if to Newmont, be in accordance with the Plan, and, if to Executive, be in writing and delivered in person or by registered or certified mail or overnight courier, postage prepaid, addressed to Executive at his or her last known address as set forth in Newmont’s records. (f) Severability. If any of the provisions of this Agreement should be deemed unenforceable, the remaining provisions shall remain in full force and effect. (g) Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware. (h) Transferability of Agreement. This Agreement may not be transferred, assigned, pledged or hypothecated by either party hereto, other than by operation of law. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns, including, in the case of Executive, his or her estate, heirs, executors, legatees, administrators, designated beneficiary and personal representatives. Nothing contained in this Agreement shall be deemed to prevent transfer of the RSUs in the event of Executive’s death in accordance with Section 14(b) of the Plan. (i) Specified Employee Delay. If Newmont determines that settlement of RSUs hereunder (i) constitutes a deferral of compensation for purposes of Section 409A of the Internal Revenue Code (the “Code”), (ii) is made to Executive by reason of his or her “separation from service” (within the meaning of Code Section 409A), and (iii) Executive is a “specified employee” (within the meaning of Code Section 409A) at the time settlement would otherwise occur, transfers of Common Stock will be delayed until the first day of the seventh month following the date of such separation from service or, if earlier, on Executive’s death.   - 5 - (j) Modification. Except as otherwise permitted by the Plan, this Agreement may not be modified or amended, nor may any provision hereof be waived, in any way except in writing signed by the parties hereto. Notwithstanding any other provision of this Agreement to the contrary, the Committee may amend this Agreement to the extent it determines necessary or appropriate to comply with the requirements of Code Section 409A and the guidance thereunder and any such amendment shall be binding on Executive. IN WITNESS WHEREOF, pursuant to Executive’s Grant Acknowledgement (including without limitation, the Terms and Conditions section hereof), incorporated herein by reference, and electronically executed by Executive, Executive agrees to the terms and conditions of this Award Agreement.   - 6 -

As filed with the Securities and Exchange Commission on November 4, 2011 SECURITIES ACT FILE NO. 333-134551 INVESTMENT COMPANY ACT FILE NO. 811-21906 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM N-1A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933|X| Pre-Effective Amendment No. | | Post Effective Amendment No. 152|X| and/or REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940|X| Amendment No. 155|X| (Check appropriate box or boxes) CLAYMORE EXCHANGE-TRADED FUND TRUST (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) 2 LISLE, ILLINOIS 60532 (Address of Principal Executive Offices) (630) 505-3700 Registrant's Telephone Number KEVIN M. ROBINSON, ESQ. CLAYMORE ADVISORS, LLC 2 LISLE, ILLINOIS 60532 (Name and Address of Agent for Service) Copy to: STUART M. STRAUSS, ESQ. DECHERT LLP 1 NEW YORK, NEW YORK 10036 APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING: IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE (CHECK APPROPRIATE BOX) IMMEDIATELY UPON FILING PURSUANT TO PARAGRAPH (B) OF RULE 485. ON [DATE] PURSUANT TO PARAGRAPH (B) OF RULE 485. 60 DAYS AFTER FILING PURSUANT TO PARAGRAPH (A)(1) OF RULE 485. ON [DATE] PURSUANT TO PARAGRAPH (A) OF RULE 485. X 75 DAYS AFTER FILING PURSUANT TO PARAGRAPH (A)(2) OF RULE 485. ON [DATE] PURSUANT TO PARAGRAPH (A) OF RULE 485. The Securities and Exchange Commission has not approved or disapproved these securities or passed upon the adequacy of this prospectus. Any representation to the contrary is a criminal offense. TABLE OF CONTENTS Page Summary Information 3 Guggenheim BulletShares 2021 Corporate Bond ETF 3 Additional Information About the Fund’s Principal Investment Strategies and Principal Investment Risks 9 Non-Principal Investment Strategies 10 Non-Principal Risk Considerations 11 Disclosure of Portfolio Holdings 13 Investment Management Services 14 Purchase and Redemption of Shares 15 How to Buy and Sell Shares 16 Frequent Purchases and Redemptions 20 Fund Service Providers 21 Index Provider 21 Disclaimers 22 Federal Income Taxation 22 Tax-Advantaged Product Structure 24 Other Information 24 Financial Highlights 25 2 | CLAYMORE EXCHANGE-TRADED FUND TRUST Summary Information Guggenheim BulletShares 2021 Corporate Bond ETF ( ) Investment Objective The Fund seeks investment results that correspond generally to the performance, before the Fund’s fees and expenses, of an investment grade corporate bond index called the BulletShares® USD Corporate Bond 2021 Index (the “2021 Index”, or the "Index"). Fees and Expenses of the Fund This table describes the fees and expenses that you may pay if you buy and hold shares of the Fund. Investors purchasing Shares in the secondary market may be subject to costs (including customary brokerage commissions) charged by their broker. Annual Fund Operating Expenses (expenses that you pay each year as a percentage of the value of your investment) Management Fees (comprehensive management fee) [ ]% Distribution and/or service (12b-1) fees(1) – % Other expenses(2) [ ]% Total annual Fund operating expenses [ ]% (1) The Fund has adopted a Distribution and Service (12b-1) Plan pursuant to which the Fund may bear a 12b-1 fee not to exceed 0.25% per annum of the Fund’s average daily net assets. However, no such fee is currently paid by the Fund and the Board of Trustees has adopted a resolution that no such fee will be paid for at least 12 months from the date of this Prospectus. (2) “Other expenses” have been estimated for the current fiscal year. Example This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other funds. The Example does not take into account brokerage commissions that you may pay when purchasing or selling Shares of the Fund. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and then redeem all of your shares at the end of those periods. The Example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be: One Year Three Years $[ ] $[ ] PROSPECTUS | 3 Portfolio Turnover The Fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when Shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the example, affect the Fund’s performance. Principal Investment Strategies The Fund, using a low cost “passive” or “indexing” investment approach, will seek to replicate, before the Fund’s fees and expenses, the performance of the 2021 Index. The 2021 Index is a rules-based index comprised of, as of September 30, 2011approximately142 investment grade corporate bonds with effective maturities in the year 2021. The 2021 Index is designed to represent the performance of a held-to-maturity portfolio of U.S. dollar-denominated investment-grade corporate bonds with effective maturities in the year 2021. The effective maturity of an eligible corporate bond is determined by its actual maturity or, in the case of callable securities, the effective maturity of the security as determined in accordance with a rules-based methodology developed by Accretive Asset Management LLC (“Accretive” or the “Index Provider”). The Fund has a designated year of maturity of 2021 and will terminate on or about December 31, 2021. In connection with such termination, the Fund will make a cash distribution to then-current shareholders of its net assets after making appropriate provisions for any liabilities of the Fund. The Fund does not seek to return any predetermined amount at maturity. The Fund will invest at least 80% of its total assets in component securities that comprise the 2021 Index. Under normal conditions, the Fund will invest at least 80% of its net assets in corporate bonds. The Fund has adopted a policy that requires the Fund to provide shareholders with at least 60 days notice prior to any material change in this policy or the 2021 Index. In the last six months of operation, when the bonds held by the Fund mature, the Fund’s portfolio will transition to cash and cash equivalents, including U.S. Treasury Bills and investment grade commercial paper. The Fund will terminate on or about the date above without requiring additional approval by the Trust’s Board of Trustees (the “Board”) or Fund shareholders. The Board may change the termination date to an earlier or later date without shareholder approval if a majority of the Board determines the change to be in the best interest of the Fund. The Board of Trustees of the Trust may change the Fund’s investment strategy and other policies without shareholder approval, except as otherwise indicated. The Fund expects to use a sampling approach in seeking to achieve its investment objective. Sampling means that the Investment Adviser uses quantitative analysis to select securities from the Index universe to obtain a representative sample of securities that resemble the Index in terms of key risk factors, performance attributes and other characteristics. These characteristics include maturity, credit quality, sector, duration and other characteristics of fixed income securities. The quantity of holdings in the Fund will be based on a number of factors, including the asset size of the Fund, potential transaction costs in acquiring particular securities, the anticipated impact of particular index securities on the performance of the Index and the availability of particular securities in the secondary market. However, the Fund may use replication to achieve its objective if practicable. There may also be instances in which the Investment Adviser may choose to overweight another security in the Index, or purchase (or sell) securities not in the Index which the Investment Adviser believes are 4 | CLAYMORE EXCHANGE-TRADED FUND TRUST appropriate to substitute for one or more Index components, in seeking to accurately track the Index. In addition, from time to time securities are added to or removed from the Index. The Fund may sell securities that are represented in the Index or purchase securities that are not yet represented in the Index in anticipation of their removal from or addition to the Index. Principal Investment Risks Investors should consider the following risk factors and special considerations associated with investing in the Fund, which may cause you to lose money. Investment Risk. An investment in the Fund is subject to investment risk, including the possible loss of the entire principal amount that you invest. Interest Rate Risk. As interest rates rise, the value of fixed-income securities held by the Fund are likely to decrease. Securities with longer durations tend to be more sensitive to interest rate changes, making them more volatile than securities with shorter durations. Credit/Default Risk. Issuers or guarantors of debt instruments or the counterparty to a repurchase agreement or loan of portfolio securities may be unable or unwilling to make timely interest and/or principal payments or otherwise honor its obligations. Debt instruments are subject to varying degrees of credit risk, which may be reflected in credit ratings. Securities issued by the U.S. government generally have less credit risk than debt securities of non-government issuers. However, securities issued by certain U.S. government agencies are not necessarily backed by the full faith and credit of the U.S. government. Credit rating downgrades and defaults (failure to make interest or principal payment) may potentially reduce the Fund’s income and share price. Asset Class Risk. The bonds in the Fund’s portfolio may underperform the returns of other bonds or indexes that track other industries, markets, asset classes or sectors. Different types of bonds and indexes tend to go through different performance cycles than the general bond market. Call Risk/Prepayment Risk. During periods of falling interest rates, an issuer of a callable bond may exercise its right to pay principal on an obligation earlier than expected. This may result in the Fund reinvesting proceeds at lower interest rates, resulting in a decline in the Fund’s income. Extension Risk. An issuer may exercise its right to pay principal on an obligation later than expected. This may happen when there is a rise in interest rates. Under these circumstances, the value of the obligation will decrease and the Fund’s performance may suffer from its inability to invest in higher yielding securities. Income Risk. Falling interest rates may cause the Fund’s income to decline. Liquidity Risk. Liquidity risk exists when particular investments are difficult to purchase or sell. If the Fund invests in illiquid securities or securities that become illiquid, Fund returns may be reduced because the Fund may be unable to sell the illiquid securities at an advantageous time or price. Declining Yield Risk. During the final year of the Fund’s operations, as the bonds held by the Fund mature and the Fund’s portfolio transitions to cash and cash equivalents, the Fund’s yield will generally tend to move toward the yield of cash and cash equivalents and thus may be lower than the yields of the bonds previously held by the Fund and/or prevailing yields for bonds in the market. PROSPECTUS | 5 Fluctuation of Yield and Liquidation Amount Risk. The Fund, unlike a direct investment in a bond that has a level coupon payment and a fixed payment at maturity, will make distributions of income that vary over time. Unlike a direct investment in bonds, the breakdown of returns between Fund distributions and liquidation proceeds are not predictable at the time of your investment. For example, at times during the Fund’s existence, it may make distributions at a greater (or lesser) rate than the coupon payments received on the Fund’s portfolio, which will result in the Fund returning a lesser (or greater) amount on liquidation than would otherwise be the case. The rate of Fund distribution payments may adversely affect the tax characterization of your returns from an investment in the Fund relative to a direct investment in corporate bonds. If the amount you receive as liquidation proceeds upon the Fund’s termination is higher or lower than your cost basis, you may experience a gain or loss for tax purposes. Industrial Sector Risk.The security prices of companies in the industrial sector are affected by supply and demand both for their specific product or service and for industrial sector products in general.The products of manufacturing companies may face product obsolescence due to rapid technological developments and frequent new product introduction.Government regulation, world events and economic conditions may affect the performance of companies in the industrial sector.Companies in the industrial sector may be at risk for environmental damage and product liability claims. Financial Services Sector Risk. The financial services industries are subject to extensive government regulation, can be subject to relatively rapid change due to increasingly blurred distinctions between service segments, and can be significantly affected by availability and cost of capital funds, changes in interest rates, the rate of corporate and consumer debt defaults, and price competition. In addition, the deterioration of the credit markets since late 2007 generally has caused an adverse impact in a broad range of markets, including U.S. and international credit and interbank money markets generally, thereby affecting a wide range of financial institutions and markets. In particular, events in the financial sector since late 2008 have resulted, and may continue to result, in an unusually high degree of volatility in the financial markets, both domestic and foreign. These events have included the U.S. government’s placement of the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation under conservatorship, the bankruptcy filing of Lehman Brothers Holdings Inc., the sale of Merrill Lynch to Bank of America, the U.S. government support of American International Group, Inc., the sale of Wachovia to Wells Fargo, reports of credit and liquidity issues involving certain money market mutual funds, and emergency measures by the U.S. and foreign governments banning short-selling. This situation has created instability in the financial markets and caused certain financial services companies to incur large losses. Numerous financial services companies have experienced substantial declines in the valuations of their assets, taken action to raise capital (such as the issuance of debt or equity securities), or even ceased operations. These actions have caused the securities of many financial services companies to experience a dramatic decline in value. Moreover, certain financial companies have avoided collapse due to intervention by the U.S. or foreign regulatory authorities (such as the Federal Deposit Insurance Corporation or the Federal Reserve System), but such interventions have often not averted a substantial decline in the value of such companies’ securities. Issuers that have exposure to the real estate, mortgage and credit markets have been particularly affected by the foregoing events and the general market turmoil, and it is uncertain whether or for how long these conditions will continue. Non-Correlation Risk. The Fund’s return may not match the return of the Index for a number of reasons. For example, the Fund incurs a number of operating expenses not applicable to 6 | CLAYMORE EXCHANGE-TRADED FUND TRUST the Index, and incurs costs in buying and selling securities, especially when rebalancing the Fund’s securities holdings to reflect changes in the composition of the Index. Since the Index constituents may vary on a monthly basis, the Fund’s costs associated with rebalancing may be greater than those incurred by other exchange-traded funds that track indices whose composition changes less frequently. The Fund may not be fully invested at times, either as a result of cash flows into the Fund or reserves of cash held by the Fund to meet redemptions and expenses. Since the Fund utilizes a sampling approach, its return may not correlate as well with the return on the Index as would be the case if it purchased all of the securities in the Index with the same weightings as the Index. Concentration Risk. If the Index concentrates in an industry or group of industries the Fund’s investments will be concentrated accordingly. In such event, the value of the Fund’s Shares may rise and fall more than the value of shares of a fund that invests in securities of companies in a broader range of industries. Replication Management Risk. Unlike many investment companies, the Fund is not “actively” managed. Therefore, it would not necessarily sell a security because the security’s issuer was in financial trouble or defaulted, or whose credit rating was downgraded, unless that security is removed from the Index. Issuer-Specific Changes. The value of an individual security or particular type of security can be more volatile than the market as a whole and can perform differently from the value of the market as a whole. The value of securities of smaller issuers can be more volatile than that of larger issuers. Non-Diversified Fund Risk. The Fund is considered non-diversified and can invest a greater portion of assets in securities of individual issuers than a diversified fund. As a result, changes in the market value of a single investment could cause greater fluctuations in share price than would occur in a diversified fund. Risk of Cash Transactions. In certain instances, unlike most ETFs, the Fund may effect creations and redemptions for cash, rather than in-kind. As a result, an investment in the Fund may be less tax-efficient than an investment in a more conventional ETF. ETFs generally are able to make in-kind redemptions and avoid being taxed on gain on the distributed portfolio securities at the Fund level. Because the Fund may effect redemptions for cash, rather than in-kind distributions, it may be required to sell portfolio securities in order to obtain the cash needed to distribute redemption proceeds. If the Fund recognizes gain on these sales, this generally will cause the Fund to recognize gain it might not otherwise have recognized, or to recognize such gain sooner than would otherwise be required if it were to distribute portfolio securities in-kind. The Fund generally intends to distribute these gains to shareholders to avoid being taxed on this gain at the Fund level and otherwise comply with the special tax rules that apply to it. This strategy may cause shareholders to be subject to tax on gains they would not otherwise be subject to, or at an earlier date than, if they had made an investment in a different ETF. Moreover, cash transactions may have to be carried out over several days if the securities market is relatively illiquid and may involve considerable brokerage fees and taxes. These brokerage fees and taxes, which will be higher than if the Fund sold and redeemed its Shares principally in-kind, will be passed on to purchasers and redeemers of Creation Units in the form of creation and redemption transaction fees. The Fund’s Shares will change in value, and you could lose money by investing in the Fund. The Fund may not achieve its investment objective. An investment in the Fund has not been guaranteed, sponsored, recommended, or approved by the United PROSPECTUS | 7 States, or any agency, instrumentality or officer of the United States, has not been insured by the Federal Deposit Insurance Corporation (FDIC) and is not guaranteed by and is not otherwise an obligation of any bank or insured depository institution. Fund Performance As of the date of this Prospectus, the Fund has not yet commenced investment operations. When the Fund has completed a full calendar year of investment operations, this section will include charts that show annual total returns, highest and lowest quarterly returns and average annual total returns (before and after taxes) compared to a benchmark index selected for the Fund. Management Investment Adviser. Guggenheim Funds Investment Advisors, LLC. Portfolio Managers. The portfolio managers who are currently responsible for the day-today management of the Fund’s portfolio are Chuck Craig, CFA, and Saroj Kanuri, CFA. Mr. Craig, Managing Director, Portfolio Management and Supervision, and Mr. Kanuri, Vice President, ETF Portfolio Management, have managed the Fund’s portfolio since its inception. Purchase and Sale of Shares The Fund will issue and redeem Shares at NAV only in a large specified number of Shares called a “Creation Unit” or multiples thereof. A Creation Unit consists of 150,000 Shares. Creation Unit transactions are typically constructed in exchange for the deposit or delivery of in kind securities and/or cash. Except when aggregated in Creation Units, the Shares are not redeemable securities of the Fund. Individual Shares of the Fund may only be purchased and sold in secondary market transactions through brokers. Shares of the Fund will be listed for trading on NYSE Arca, Inc. (“NYSE Arca”) and because Shares will trade at market prices rather than NAV, Shares of the Fund may trade at a price greater than or less than NAV. Tax Information The Fund’s distributions are taxable and will generally be taxed as ordinary income or capital gains. Payments to Broker-Dealers and Other Financial Intermediaries If you purchase shares of the Fund through a broker-dealer or other financial intermediary (such as a bank), the Investment Adviser or other related companies may pay the intermediary for marketing activities and presentations, educational training programs, the support of technology platforms and/or reporting systems or other services related to the sale or promotion of the Fund. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary and your salesperson to recommend the Fund over another investment. Ask your salesperson or visit your financial intermediary’s website for more information. 8 | CLAYMORE EXCHANGE-TRADED FUND TRUST Additional Information About the Fund’s Principal Investment Strategies and Principal Investment Risks Investment Objective The Fund’s investment objective is non-fundamental and may be changed by the Board of Trustees without shareholder approval. Index Methodology BulletShares® USD Corporate Bond 2021 Index. The Index is designed to represent the performance of a held-to-maturity portfolio of U.S. dollar-denominated investment-grade corporate bonds with effective maturities in 2021. The effective maturity of an eligible corporate bond is determined by its actual maturity or, in the case of callable securities, the effective maturity of the security as determined in accordance with a rules-based methodology developed by Accretive. Index Construction 1. Securities eligible for inclusion in the Index are U.S. dollar-denominated fixed-income securities of corporate issuers that meet the following criteria: · have at least $500 million of outstanding face value; · are rated investment grade by at least one Nationally Recognized Statistical Rating Organization (“NRSRO”); · are issued by companies domiciled in the U.S., Canada, Western Europe (Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland and the United Kingdom) or Japan. 2. The Index is limited to securities that pay fixed amounts of interest and the following types of securities are specifically excluded: · Rule 144A securities, private placements or retail bonds; · floating-rate securities; · zero-coupon bonds and zero-coupon step-up bonds; · convertible securities and other bonds with equity-type features; and · inflation- and other index-linked bonds. 3. The Index is constructed as follows: · At the beginning of each calendar year the Index undergoes an effective maturity reconstitution, where bonds in the universe of eligible securities are assigned to PROSPECTUS | 9 the Index based on their actual maturities or, in the case of callable bonds, effective maturities as determined by a proprietary, rules-based process. · Prior to July 1 of the Index’s target maturity year, the Index is rebalanced based on the market values of the Index’s constituents on a monthly basis. Additions to or removals from the universe of eligible securities are reflected in each monthly rebalancing. · Prior to July 1 of the Index’s target maturity year, proceeds of constituents that are called or mature between rebalances are reinvested in 13-week U.S. Treasury Bills until the next monthly rebalancing of the Index. The reinvested amount is reallocated on a pro rata basis across Index constituents at the next monthly rebalance. · Beginning on July 1 of the Index’s target maturity year: · The Index is calculated using a proprietary methodology that seeks to track the return of a held-to-maturity individual bond. In accordance with this methodology, the portfolio of bonds established in connection with the last monthly rebalancing of the Index prior to July 1 of its target maturity year will be fixed for the remainder of the life of the Index. · As bonds in the Index mature or are called and principal is returned, proceeds are re-invested in 13-week U.S. Treasury Bills until the termination of the Index. It is expected that the Index will consist largely, if not completely, of assets invested in such instruments when it terminates. 4. Decisions regarding additions to and removals from the Index are made by the Index Provider and are subject to periodic review by a policy steering committee known as the BulletShares® Index Committee. Non-Principal Investment Strategies As a principal investment strategy and as described above, the Fund will invest at least 80% of its total assets in component securities that comprise the Index. As non-principal investment strategies, the Fund may invest its remaining assets in fixed income securities not included in the Index, money market instruments, including repurchase agreements or other funds which invest exclusively in money market instruments, convertible securities, structured notes (notes on which the amount of principal repayment and interest payments are based on the movement of one or more specified factors, such as the movement of a particular bond or bond index) and in swaps, options and futures contracts. Swaps, options and futures contracts (and convertible securities and structured notes) may be used by the Fund in seeking performance that corresponds to the Index (whether by gaining exposure to the Index as a whole or to certain specific Index components in lieu of the Fund holding such Index components directly), and in managing cash flows, but will not be used for hedging purposes. The Fund will not invest in money market instruments as part of a temporary defensive strategy to protect against potential market declines. The Investment Adviser anticipates that it may take approximately three business days (i.e., each day the NYSE Arca is open) for additions and deletions to the Fund’s Index to be reflected in the portfolio composition of the Fund. 10 | CLAYMORE EXCHANGE-TRADED FUND TRUST The Fund may borrow money from a bank up to a limit of 10% of the value of its assets, but only for temporary or emergency purposes. The Fund may lend its portfolio securities to brokers, dealers and other financial institutions desiring to borrow securities to complete transactions and for other purposes. In connection with such loans, the Fund receives liquid collateral equal to at least 102% of the value of the portfolio securities being lent. This collateral is marked to market on a daily basis. The Fund may lend its portfolio securities in an amount up to 331/3% of its assets. Securities lending is not a principal investment strategy of the Fund. The policies described herein constitute non-fundamental policies that may be changed by the Board of Trustees without shareholder approval. Certain other fundamental policies of the Fund are set forth in the Statement of Additional Information under “Investment Restrictions.” Non-Principal Risk Considerations In addition to the principal risks described previously, there are certain non-principal risks related to investing in the Fund. Foreign Issuers Risk. The Fund may invest in U.S. registered, dollar-denominated bonds of foreign corporations, which have different risks than investing in U.S. companies. These include differences in accounting, auditing and financial reporting standards, the possibility of expropriation or confiscatory taxation, adverse changes in investment or exchange control regulations, political instability which could affect U.S. investments in foreign countries, and potential restrictions of the flow of international capital. Foreign companies may be subject to less governmental regulation than U.S. issuers. Moreover, individual foreign economies may differ favorably or unfavorably from the U.S. economy in such respects as growth of gross domestic product, rate of inflation, capital investment, resource self-sufficiency and balance of payment options. Derivatives Risk. A derivative is a financial contract, whose value depends on, or is derived from, the value of an underlying asset such as a security or index. The Fund may invest in certain types of derivatives contracts, including futures, options and swaps. Compared to conventional securities, derivatives can be more sensitive to changes in interest rates or to sudden fluctuations in market prices and thus the Fund’s losses may be greater if it invests in derivatives. Specific risks relating to the Fund’s investments in derivatives are set forth below: Futures Risk. While the Fund may benefit from the use of futures, unanticipated changes in interest rates, securities prices or currency exchange rates may result in poorer overall performance than if the Fund had not entered into any futures contracts. Because perfect correlation between a futures position and an Index position that is intended to be simulated is impossible to achieve, the desired protection may not be obtained and the Fund may be exposed to additional risk of loss. The loss incurred by the Fund in entering into futures contracts is potentially unlimited and may exceed the amount invested. Futures markets are highly volatile and the use of futures may increase the volatility of the Fund’s NAV. As a result of the low margin deposits normally required in futures trading, a relatively small price movement in a futures contract may result in substantial losses to the Fund. Futures contracts may be illiquid, PROSPECTUS | 11 and exchanges may limit fluctuations in futures contract prices during a single day. Foreign exchanges may not provide the same protection as U.S. exchanges. Options Risk. The buyer of an option acquires the right to buy (a call option) or sell (a put option) a certain quantity of a security (the underlying security) or instrument at a certain price up to a specified point in time. The seller or writer of the option is obligated to sell (a call option) or buy (a put option) the underlying security. All options written (sold) by the Fund will be covered. When writing (selling) call options on securities or a securities index, the Fund may cover its positions by owning the underlying security or securities on which the option is written or by owning a call option on the underlying security (or, in the case of options on a securities index, by owning securities whose price changes are expected to be equal to those of the securities in the index). Alternatively, the Fund may cover its positions by maintaining, in a segregated account, cash or liquid securities equal in value to the exercise price of the call options written by the Fund. When the Fund writes (sells) an option, if the underlying securities do not increase or decrease to a price level that would make the exercise of the option profitable to the holder thereof, the option generally will expire without being exercised and the Fund will realize as profit the premium received for such option. When a covered call option which the Fund writes (sells) is exercised, the Fund will be required to sell the underlying securities to the option holder at the strike price, and will not participate in any increase in the price of such securities above the strike price. When a covered put option which the Fund writes (sells) is exercised, the Fund will be required to purchase the underlying securities at a price in excess of the market value of such securities. A decision as to whether, when and how to use options involves the exercise of skill and judgment and even a well conceived option transaction may be unsuccessful because of market behavior or unexpected events. The prices of options can be highly volatile and the use of options can lower total returns. There may be an imperfect correlation between the movement in prices of options and the securities underlying them. There may not be a liquid secondary market for options. Swaps Risk. A swap is a two-party contract that generally obligates one party to pay the positive return and the other party to pay the negative return on a specified reference security, basket of securities, security index or index component. Swaps can involve greater risks than direct investment in securities, because swaps may be leveraged and are subject to counterparty risk (e.g., the risk of a counterparty’s defaulting on the obligation or bankruptcy), credit risk and pricing risk (i.e., swaps may be difficult to value). Swaps may also be considered illiquid. It may not be possible for the Fund to liquidate a swap position at an advantageous time or price, which may result in significant losses. Trading Issues. Trading in Shares on the NYSE Arca may be halted due to market conditions or for reasons that, in the view of the NYSE Arca, make trading in Shares inadvisable. In addition, trading in Shares on the NYSE Arca is subject to trading halts caused by extraordinary market volatility pursuant to the NYSE Arca “circuit breaker” rules. There can be no assurance that the requirements of the NYSE Arca necessary to maintain the listing of the Fund will continue to be met or will remain unchanged. Fluctuation of Net Asset Value. The NAV of the Fund’s Shares will generally fluctuate with changes in the market value of the Fund’s holdings. The market prices of the Shares will 12 | CLAYMORE EXCHANGE-TRADED FUND TRUST generally fluctuate in accordance with changes in NAV as well as the relative supply of and demand for the Shares on the NYSE Arca. The Investment Adviser cannot predict whether the Shares will trade below, at or above their NAV. Price differences may be due, in large part, to the fact that supply and demand forces at work in the secondary trading market for the Shares will be closely related to, but not identical to, the same forces influencing the prices of the securities of the Index trading individually or in the aggregate at any point in time. However, given that the Shares can be purchased and redeemed in Creation Units (unlike shares of many closed-end funds, which frequently trade at appreciable discounts from, and sometimes premiums to, their NAV), the Investment Adviser believes that large discounts or premiums to the NAV of the Shares should not be sustained. Securities Lending. Although the Fund will receive collateral in connection with all loans of its securities holdings, the Fund would be exposed to a risk of loss should a borrower default on its obligation to return the borrowed securities (e.g., the loaned securities may have appreciated beyond the value of the collateral held by the Fund). In addition, the Fund will bear the risk of loss of any cash collateral that they invest. Leverage. To the extent that the Fund borrows money in the limited circumstances described under “Non-Principal Investment Strategies” above, it may be leveraged. Leveraging generally exaggerates the effect on NAV of any increase or decrease in the market value of the Fund’s portfolio securities. Disclosure of Portfolio Holdings A description of the Trust’s policies and procedures with respect to the disclosure of the Fund’s portfolio securities is available in the Fund’s Statement of Additional Information. PROSPECTUS | 13 Investment Management Services Investment Adviser Guggenheim Funds Investment Advisors, LLC (“Guggenheim Funds Advisers” or the “Investment Adviser”), a wholly-owned subsidiary of Guggenheim Funds Services Group, Inc., (“Guggenheim Funds Group”), acts as the Fund’s investment adviser pursuant to an advisory agreement with the Trust (the “Advisory Agreement”). The Investment Adviser is a Delaware limited liability company with its principal offices located at 2455 Corporate West Drive, Lisle, Illinois 60532. Guggenheim Funds Distributors, Inc. (“Guggenheim Funds Distributors”) currently offers closed-end funds, unit investment trusts and exchange-traded funds. Guggenheim Funds Group is a subsidiary of Guggenheim Partners, LLC (“Guggenheim”), a global, diversified financial services firm with more than $100 billion in assets under supervision. Guggenheim, through its affiliates, provides investment management, investment advisory, insurance, investment banking and capital markets services. The firm is headquartered in Chicago and New York with a global network of offices throughout the United States, Europe, and Asia. Pursuant to the Advisory Agreement, the Investment Adviser manages the investment and reinvestment of the Fund’s assets and administers the affairs of the Fund to the extent requested by the Board of Trustees. The Investment Adviser also acts as investment adviser to closed-end and open-end management investment companies. Pursuant to the Advisory Agreement, the Fund pays the Investment Adviser a unitary management fee for the services and facilities it provides payable on a monthly basis at the annual rate of [ ]% of the Fund’s average daily net assets. Out of the unitary management fee, the Investment Adviser pays substantially all expenses of the Fund, including the cost of transfer agency, custody, fund administration, legal, audit and other services, except for the fee payments under the Investment Advisory Agreement, distribution fees, if any, brokerage expenses, taxes, interest, litigation expenses and other extraordinary expenses (such as expenses relating to a meeting of the Fund’s shareholders). The Investment Adviser’s unitary management fee is designed to pay the Fund’s expenses and to compensate the Investment Adviser for providing services for the Fund. Approval of Advisory Agreement A discussion regarding the basis for the Board of Trustees’ approval of the Advisory Agreement will be available in the Fund’s annual report to shareholders to be dated May 31, 2012. Portfolio Managers The portfolio managers who are currently responsible for the day-to-day management of the Fund’s portfolio are Chuck Craig, CFA, and Saroj Kanuri, CFA. Messrs. Craig and Kanuri have managed the Fund’s portfolio since its inception. Mr. Craig is a Managing Director, Portfolio Management and Supervision, of the Investment Adviser and Guggenheim Funds Distributors and joined Guggenheim Funds Distributors in 14 | CLAYMORE EXCHANGE-TRADED FUND TRUST May of 2003. Mr. Craig received an M.S. in Financial Markets from the Center for Law and Financial Markets at the Illinois Institute of Technology. He also earned a B.S. in Finance from Northern Illinois University. Mr. Kanuri is a Vice President, ETF Portfolio Management, of the Investment Adviser and Guggenheim Funds Distributors and joined Guggenheim Funds Distributors in October of 2006. Prior to joining Guggenheim Funds Distributors, Mr. Kanuri served as an analyst at Northern Trust Corporation from 2001-2006. Mr. Kanuri received a B.S. in Finance from the University of Illinois at Chicago. The Statement of Additional Information provides additional information about each portfolio manager’s compensation structure, other accounts managed by each portfolio manager and each portfolio manager’s ownership of securities of the Fund. Purchase and Redemption of Shares General The Shares will be issued or redeemed by the Fund at net asset value per Share only in Creation Unit size. Most investors will buy and sell Shares of the Fund in secondary market transactions through brokers. Shares of the Fund are listed for trading on the secondary market on the NYSE Arca. Shares can be bought and sold throughout the trading day like other publicly traded shares. There is no minimum investment. Although Shares are generally purchased and sold in “round lots” of 100 Shares, brokerage firms typically permit investors to purchase or sell Shares in smaller “odd lots,” at no per-share price differential. When buying or selling Shares through a broker, you will incur customary brokerage commissions and charges, and you may pay some or all of the spread between the bid and the offered price in the secondary market on each leg of a round trip (purchase and sale) transaction. The Fund trades on the NYSE Arca at prices that may differ to varying degrees from the daily NAV of the Shares. Given that the Fund’s Shares can be issued and redeemed in Creation Units, the Investment Adviser believes that large discounts and premiums to NAV should not be sustained for long. The Fund will trade under the NYSE Arca symbol set forth in the chart below, subject to notice of issuance: Name of Fund NYSE Arca Ticker Symbol Guggenheim BulletShares 2021 Corporate Bond ETF [ ] The Fund may liquidate and terminate at any time without shareholder approval. Share prices are reported in dollars and cents per Share. Investors may acquire Shares directly from the Fund, and shareholders may tender their Shares for redemption directly to the Fund, only in Creation Units of 150,000. In certain circumstances the Fund may restrict or reject a creation or redemption order, and notify a shareholder of such restriction or rejection, as described in “Creation and Redemption of Creation Unit Aggregations” in the Statement of Additional Information and in the Fund’s authorized participant agreement. PROSPECTUS | 15 Book Entry Shares are held in book-entry form, which means that no stock certificates are issued. The Depository Trust Company (“DTC”) or its nominee is the record owner of all outstanding Shares of the Fund and is recognized as the owner of all Shares for all purposes. Investors owning Shares are beneficial owners as shown on the records of DTC or its participants. DTC serves as the securities depository for all Shares. Participants in DTC include securities brokers and dealers, banks, trust companies, clearing corporations and other institutions that directly or indirectly maintain a custodial relationship with DTC. As a beneficial owner of Shares, you are not entitled to receive physical delivery of stock certificates or to have Shares registered in your name, and you are not considered a registered owner of Shares. Therefore, to exercise any right as an owner of Shares, you must rely upon the procedures of DTC and its participants. These procedures are the same as those that apply to any other stocks that you may hold in book entry or “street name” form. How to Buy and Sell Shares Pricing Fund Shares The trading price of the Fund’s shares on the NYSE Arca may differ from the Fund’s daily net asset value and can be affected by market forces of supply and demand, economic conditions and other factors. The NYSE Arca will disseminate the approximate value of Shares of the Fund every fifteen seconds. This approximate value should not be viewed as a “real-time” update of the NAV per Share of the Fund because the approximate value may not be calculated in the same manner as the NAV, which is computed once a day, generally at the end of the business day. The Fund is not involved in, or responsible for, the calculation or dissemination of the approximate value and the Fund does not make any warranty as to its accuracy. The net asset value per Share of the Fund is determined once daily as of the close of the NYSE, usually 4:00 p.m. Eastern time, each day the NYSE is open for trading. Shares will not be priced on regular national holidays or other days on which the NYSE is closed. NAV per Share is determined by dividing the value of the Fund’s portfolio securities, cash and other assets (including accrued interest), less all liabilities (including accrued expenses), by the total number of shares outstanding. Debt securities are valued at the mean between the last available bid and ask prices for such securities or, if such prices are not available, at prices for securities of comparable maturity, quality, and type. Debt securities may also be valued based on price quotations or other equivalent indications of value provided by a third-party pricing service. Short-term securities for which market quotations are not readily available are valued at amortized cost, which approximates market value. Equity securities are valued at the last reported sale price on the principal exchange or on the principal OTC market on which such securities are traded, as of the close of regular trading on the NYSE Arca on the day the securities are being valued or, if there are no sales, at the mean of the most recent bid and asked prices. Equity securities that are traded primarily on the NASDAQ Stock Market are valued at the NASDAQ Official Closing Price. 16 | CLAYMORE EXCHANGE-TRADED FUND TRUST Securities for which market quotations (or other market valuations such as those obtained from a pricing service) are not readily available, including restricted securities, are valued by the Investment Adviser by a method that the Investment Adviser believes accurately reflects fair value, pursuant to policies adopted by the Board of Trustees and subject to the ultimate supervision of the Board of Trustees. Securities will be valued at fair value when market quotations are not readily available or are deemed unreliable, such as when a security’s value or meaningful portion of the Fund’s portfolio is believed to have been materially affected by a significant event. Such events may include a natural disaster, an economic event like a bankruptcy filing, a trading halt in a security, an unscheduled early market close or a substantial fluctuation in domestic and foreign markets that has occurred between the close of the principal exchange and the NYSE Arca. In such a case, the value for a security is likely to be different from the last quoted market price. In addition, due to the subjective and variable nature of fair market value pricing, it is possible that the value determined for a particular asset may be materially different from the value realized upon such asset’s sale. Creation Units Investors such as market makers, large investors and institutions who wish to deal in Creation Units directly with the Fund must have entered into an authorized participant agreement with the distributor, or purchase through a dealer that has entered into such an agreement. Set forth below is a brief description of the procedures applicable to purchase and redemption of Creation Units. For more detailed information, see “Creation and Redemption of Creation Unit Aggregations” in the Statement of Additional Information. How to Buy Shares In order to purchase Creation Units of the Fund, an investor must generally deposit a designated portfolio of corporate bonds constituting a substantial replication, or a representation, of the securities included in the Index (the “Deposit Securities”) (and/or an amount in cash in lieu of some or all of the Deposit Securities) and generally make a small cash payment referred to as the “Cash Component.” For those Authorized Participants (as defined below) that are not eligible for trading a Deposit Security, custom orders are available. The list of the names and the amounts of the Deposit Securities is made available by the Fund’s custodian through the facilities of the National Securities Clearing Corporation, commonly referred to as NSCC, immediately prior to the opening of business each day of the NYSE Arca. The Cash Component represents the difference between the net asset value of a Creation Unit and the market value of the Deposit Securities. In the case of custom orders, cash-in-lieu may be added to the Cash Component to replace any Deposit Securities that the Authorized Participant (as defined below) may not be eligible to trade. As the planned termination date of the Fund approaches, the Fund may elect to accept creation orders mostly or entirely in cash. As bonds held by the Fund begin to mature, creations may be effected increasingly in cash. Orders must be placed by or through a participant of The Depository Trust Company (“DTC Participant”) that has entered into an agreement with the Trust and the distributor, with respect to purchases and redemptions of Creation Units (collectively, “Authorized Participant” or “AP”) and must be in proper form pursuant to the requirements regarding submission and logistics set forth in such agreement. See “Creation and Redemption of PROSPECTUS | 17 Creation Unit Aggregations” in the Statement of Additional Information. All standard orders must be placed for one or more whole Creation Units of Shares of the Fund and must be received by the distributor in proper form no later than the close of regular trading on the NYSE Arca (ordinarily 4:00 p.m. Eastern time) (“Closing Time”) in order to receive that day’s closing NAV per Share. In the case of certain custom orders, at the request of the AP and as further described in the Statement of Additional Information, the order must be received by the distributor no later than one hour prior to Closing Time in order to receive that day’s closing NAV per Share. A custom order may be placed by an Authorized Participant in the event that the Trust permits or requires the substitution of an amount of cash to be added to the Cash Component to replace any Deposit Security which may not be available in sufficient quantity for delivery or which may not be eligible for trading by such Authorized Participant or the investor for which it is acting or any other relevant reason. See “Creation and Redemption of Creation Unit Aggregations” in the Statement of Additional Information. A fixed creation transaction fee of $[ ] per transaction (the “Creation Transaction Fee”) is applicable to each transaction regardless of the number of Creation Units purchased in the transaction. An additional variable charge for cash creations or partial cash creations may also be imposed to compensate the Fund for the costs associated with buying the applicable securities. The Fund may adjust these fees from time to time based on actual experience. The Fund reserves the right to effect creations in cash. A shareholder may request a cash creation in lieu of securities, however, the Fund may, in its discretion, reject any such request. See “Creation and Redemption of Creation Unit Aggregations” in the Statement of Additional Information. The price for each Creation Unit will equal the daily NAV per Share times the number of Shares in a Creation Unit plus the fees described above and, if applicable, any transfer taxes. Shares of the Fund may be issued in advance of receipt of all Deposit Securities subject to various conditions, including a requirement to maintain on deposit with the Trust cash at least equal to 115% of the market value of the missing Deposit Securities. See “Creation and Redemption of Creation Unit Aggregations” in the Statement of Additional Information. Legal Restrictions on Transactions in Certain Securities An investor subject to a legal restriction with respect to a particular security required to be deposited in connection with the purchase of a Creation Unit may, at the Fund’s discretion, be permitted to deposit an equivalent amount of cash in substitution for any security which would otherwise be included in the Deposit Securities applicable to the purchase of a Creation Unit. For more details, see “Creation and Redemption of Creation Unit Aggregations” in the Statement of Additional Information. Redemption of Shares Shares may be redeemed only in Creation Units at their NAV and only on a day the NYSE Arca is open for business. The Fund’s custodian makes available immediately prior to the opening of business each day of the NYSE Arca, through the facilities of the NSCC, the list of the names and the amounts of the Fund’s portfolio securities that will be applicable that day to redemption requests in proper form (“Fund Securities”). Fund Securities received on redemption may not be identical to Deposit Securities which are applicable to purchases 18 | CLAYMORE EXCHANGE-TRADED FUND TRUST of Creation Units. Unless cash redemptions or partial cash redemptions are available or specified for the Fund, the redemption proceeds consist of the Fund Securities, plus cash in an amount equal to the difference between the NAV of Shares being redeemed as next determined after receipt by the transfer agent of a redemption request in proper form, and the value of the Fund Securities (the “Cash Redemption Amount”), less the applicable redemption fee and, if applicable, any transfer taxes. Should the Fund Securities have a value greater than the NAV of Shares being redeemed, a compensating cash payment to the Trust equal to the differential, plus the applicable redemption fee and, if applicable, any transfer taxes will be required to be arranged for, by or on behalf of the redeeming shareholder. As the planned termination date of the Fund approaches, the Fund may elect to accept creation orders mostly or entirely in cash. As bonds held by the Fund begin to mature, redemptions may be effected increasingly in cash. For more details, see “Creation and Redemption of Creation Unit Aggregations” in the Statement of Additional Information. An order to redeem Creation Units of the Fund may only be effected by or through an Authorized Participant. An order to redeem must be placed for one or more whole Creation Units and must be received by the transfer agent in proper form no later than the Closing Time in order to receive that day’s closing NAV per Share. In the case of certain custom orders, at the request of the AP and as further described in the Statement of Additional Information, the order must be received by the transfer agent no later than 3:00 p.m. Eastern time. A fixed redemption transaction fee of $[ ] per transaction is applicable to each demption transaction regardless of the number of Creation Units redeemed in the transaction. An additional variable charge for cash redemptions or partial cash redemptions may also be imposed to compensate the Fund for the costs associated with selling the applicable securities. The Fund may adjust these fees from time to time based on actual experience. The Fund reserves the right to effect redemptions in cash. A shareholder may request a cash redemption in lieu of securities, however, the Fund may, in its discretion, reject any such request. See “Creation and Redemption of Creation Unit Aggregations” in the Statement of Additional Information. Distributions Dividends and Capital Gains. Fund shareholders are entitled to their share of the Fund’s income and net realized gains on its investments. The Fund pays out substantially all of its net earnings to its shareholders as “distributions.” The Fund typically earns interest from debt securities. These amounts, net of expenses, are passed along to Fund shareholders as “income dividend distributions.” The Fund realizes capital gains or losses whenever it sells securities. Net long-term capital gains are distributed to shareholders as “capital gain distributions.” Income dividends, if any, are distributed to shareholders monthly. Net capital gains are distributed at least annually. Dividends may be declared and paid more frequently to improve Index tracking or to comply with the distribution requirements of the Internal Revenue Code of 1986, as amended. Some portion of each distribution may result in a return of capital. Fund shareholders will be notified regarding the portion of the distribution that represents a return of capital. PROSPECTUS | 19 Distributions in cash may be reinvested automatically in additional whole Shares only if the broker through which the Shares were purchased makes such option available. Distribution Plan and Service Plan The Board of Trustees of the Trust has adopted a distribution and services plan (the “Plan”) pursuant to Rule 12b-1 under the Investment Company Act of 1940, as amended (the “1940 Act”). Under the Plan, the Fund is authorized to pay distribution fees in connection with the sale and distribution of its shares and pay service fees in connection with the provision of ongoing services to shareholders of each class and the maintenance of shareholder accounts in an amount up to 0.25% of its average daily net assets each year. No 12b-1 fees are currently paid by the Fund, and there are no current plans to impose these fees. In addition, no such fees may be paid in the future without further approval by the Board of Trustees and the Board of Trustees has adopted a resolution that no such fees will be paid for at least 12 months from the date of this Prospectus. However, in the event 12b-1 fees are charged in the future, because these fees are paid out of the Fund’s assets on an ongoing basis, these fees will increase the cost of your investment in the Fund. By purchasing shares subject to distribution fees and service fees, you may pay more over time than you would by purchasing shares with other types of sales charge arrangements. Long-term shareholders may pay more than the economic equivalent of the maximum front-end sales charge permitted by the rules of the Financial Industry Regulatory Authority. The net income attributable to the Shares will be reduced by the amount of distribution fees and service fees and other expenses of the Fund. The Investment Adviser or its affiliates may make payments to broker-dealers, banks or other financial intermediaries (together, “intermediaries”) related to marketing activities and presentations, educational training programs, the support of technology platforms and/or reporting systems, or their making shares of the Fund and certain other Guggenheim Funds ETFsavailable to their customers. Such payments, which may be significant to the intermediary, are not made by the Fund. Rather, such payments are made by the Investment Adviser or its affiliates from their own resources, which come directly or indirectly in part from fees paid by the Guggenheim Funds ETFcomplex. Payments of this type are sometimes referred to as revenue-sharing payments. A financial intermediary may make decisions about which investment options it recommends or makes available, or the level of services provided, to its customers based on the revenue-sharing payments it is eligible to receive. Therefore, such payments to an intermediary create conflicts of interest between the intermediary and its customers and may cause the intermediary to recommend the Fund or other Guggenheim Funds ETFsover another investment. More information regarding these payments is contained in the Fund’s Statement of Additional Information. Please contact your salesperson or other investment professional for more information regarding any such payments his or her firm may receive from the Investment Adviser or its affiliates. Frequent Purchases and Redemptions The Fund imposes no restrictions on the frequency of purchases and redemptions. The Board of Trustees evaluated the risks of market timing activities by the Fund’s shareholders when they considered that no restriction or policy was necessary. The Board noted that the 20 | CLAYMORE EXCHANGE-TRADED FUND TRUST Fund’s Shares can only be purchased and redeemed directly from the Fund in Creation Units by APs and that the vast majority of trading in the Fund’s Shares occurs on the secondary market. Because the secondary market trades do not involve the Fund directly, it is unlikely those trades would cause many of the harmful effects of market timing, including dilution, disruption of portfolio management, increases in the Fund’s trading costs and the realization of capital gains. To the extent the Fund may effect the purchase or redemption of Creation Units in exchange wholly or partially for cash, the Board noted that such trades could result in dilution to the Fund and increased transaction costs, which could negatively impact the Fund’s ability to achieve its investment objective. However, the Board noted that direct trading by APs is critical to ensuring that the Fund’s Shares trade at or close to NAV. In addition, the Fund imposes fixed and variable transaction fees on purchases and redemptions of Creation Units to cover the custodial and other costs incurred by the Fund in effecting trades. Finally, the Investment Adviser monitors orders from APs for patterns of abusive trading and the Fund reserves the right to not accept orders from APs that the Investment Adviser has determined may be disruptive to the management of the Fund, or otherwise not in the Fund’s best interests. Fund Service Providers Guggenheim Funds Investment Advisors, LLC is the administrator of the Fund. The Bank of New York Mellon is the custodian and fund accounting and transfer agent for the Fund. Dechert LLP serves as legal counsel to the Fund. [ ] serves as the Fund’s independent registered public accounting firm. The independent registered public accounting firm is responsible for auditing the annual financial statements of the Fund and performs other audit-related and tax services. Index Provider Accretive Asset Management LLC (“Accretive”) is the Index Provider for the Fund. Accretive is not affiliated with the Trust, the Investment Adviser, or the distributor. The Investment Adviser has entered into a license agreement with Accretive to use the Index. The Fund is entitled to use its underlying Index pursuant to a sub-licensing arrangement with the Investment Adviser. Guggenheim Funds Group, the parent entity of the Investment Adviser, has entered into an agreement with Accretive (the “Option Agreement”) pursuant to which Guggenheim Funds Group has the option, between April 28, 2013 and April 28, 2015 (the “Option Period”), to purchase Accretive. However, neither Guggenheim Funds Group nor the Investment Adviser has any rights under the Option Agreement (or the license agreement governing the Investment Adviser’s use of the Index) to (a) control, direct or influence the business of Accretive prior to any eventual exercise of the option to purchase Accretive, or (b) control, direct, influence or obtain any knowledge regarding (i) the compilation or operation, or (ii) any changes to the constituents or underlying methodology, of the Index prior to the time such information is incorporated and/or publicly disclosed. Any exercise of the option to purchase Accretive during the Option Period is at the discretion of Guggenheim Funds Group and does not become mandatory upon the fulfillment of any PROSPECTUS | 21 condition. Moreover, Guggenheim Funds Group will not be permitted to exercise the option to purchase Accretive during the Option Period unless (a) the Investment Adviser and the Trust have obtained exemptive relief from the Securities and Exchange Commission (the “SEC”) allowing them to offer exchange-traded funds based upon indexes provided by an affiliated entity or (b) the SEC has adopted a rule allowing such exchange-traded funds to be offered without additional exemptive relief. Accordingly, the Option Agreement will not affect the compilation and operation of the Index, and Accretive is not affiliated with the Trust, the Investment Adviser or the distributor. Disclaimers “BulletShares®“ and the name of the Index are trademarks of Accretive and have been licensed for use for certain purposes by the Investment Adviser. The Fund is not sponsored, endorsed, sold or promoted by Accretive and Accretive makes no representation regarding the advisability of investing in Shares of the Fund. The Fund and its Shares are not sponsored, endorsed, sold or promoted by Accretive. Accretive makes no representation or warranty, express or implied, to the shareholders of the Fund or any member of the public regarding the advisability of investing in securities generally or in the Fund particularly or the ability of any data supplied by Accretive to track general market performance. Accretive’s only relationship to the Investment Adviser is the licensing of certain trademarks and trade names of Accretive and of the data supplied by Accretive, which is determined, composed and calculated by Accretive without regard to the Fund or its Shares. Accretive has no obligation to take the needs of the Investment Adviser or the shareholders of the Fund into consideration in determining, composing or calculating the data supplied by Accretive. Accretive is not responsible for and has not participated in the determination of the prices of the Shares of the Fund or the timing of the issuance or sale of such Shares. Accretive has no obligation or liability in connection with the administration, marketing or trading of the Fund or its Shares. The Investment Adviser does not guarantee the accuracy and/or the completeness of the 2021 Index or any data included therein. Federal Income Taxation As with any investment, you should consider how your investment in Shares will be taxed. The tax information in this Prospectus is provided as general information. You should consult your own tax professional about the tax consequences of an investment in Shares. Unless your investment in Shares is made through a tax-exempt entity or tax-deferred retirement account, such as an IRA plan, you need to be aware of the possible tax consequences when: · Your Fund makes distributions, · You sell your Shares listed on the NYSE Arca, and · You purchase or redeem Creation Units. 22 | CLAYMORE EXCHANGE-TRADED FUND TRUST Taxes on Distributions Dividends from net investment income, if any, are declared and paid monthly. The Fund may also pay a special distribution at the end of the calendar year to comply with federal tax requirements. In general, your distributions are subject to federal income tax when they are paid, whether you take them in cash or reinvest them in the Fund. Dividends paid out of the Fund’s income and net short-term gains, if any, are taxable as ordinary income. Distributions of net long-term capital gains, if any, in excess of net short-term capital losses are taxable as long-term capital gains, regardless of how long you have held the Shares. Long-term capital gains of non-corporate taxpayers are generally taxed at a maximum rate of 15% for taxable years beginning before January 1, 2013. Thereafter without future Congressional action, the maximum rate of long-term capital gain will return to 20% in 2013. Distributions in excess of the Fund’s current and accumulated earnings and profits are treated as a tax-free return of capital to the extent of your basis in the Shares, and as capital gain thereafter. A distribution will reduce the Fund’s net asset value per Share and may be taxable to you as ordinary income or capital gain even though, from an investment standpoint, the distribution may constitute a return of capital. If you are not a citizen or permanent resident of the United States, the Fund’s ordinary income dividends (which include distributions of net short-term capital gains) will generally be subject to a 30% U.S. withholding tax, unless a lower treaty rate applies or unless such income is effectively connected with a U.S. trade or business carried on through a permanent establishment in the United States. Prospective investors are urged to consult their tax advisors concerning the applicability of the U.S. withholding tax. Dividends and interest received by the Fund and capital gains may give rise to withholding and other taxes imposed by foreign countries. Tax conventions between certain countries and the United States may reduce or eliminate such taxes. By law, the Fund must withhold a percentage of your distributions and proceeds if you have not provided a taxpayer identification number or social security number. The backup withholding rate for individuals is currently 28%. Taxes on Exchange-Listed Shares Sales Currently, any capital gain or loss realized upon a sale of Shares is generally treated as long-term capital gain or loss if the Shares have been held for more than one year and as short-term capital gain or loss if the Shares have been held for one year or less. Capital loss realized on the sale or exchange of shares held for six months or less will be treated as long-term capital loss to the extent of any long-term capital gain dividends received by the shareholder. The ability to deduct capital losses may be limited. Taxes on Purchase and Redemption of Creation Units An Authorized Participant who exchanges securities for Creation Units generally will recognize a gain or a loss. The gain or loss will be equal to the difference between the PROSPECTUS | 23 market value of the Creation Units at the time and the exchanger’s aggregate basis in the securities surrendered and the Cash Component paid. A person who exchanges Creation Units for securities will generally recognize a gain or loss equal to the difference between the exchanger’s basis in the Creation Units and the aggregate market value of the securities received and the Cash Redemption Amount. The Internal Revenue Service, however, may assert that a loss realized upon an exchange of securities for Creation Units cannot be deducted currently under the rules governing “wash sales” on the basis that there has been no significant change in economic position. Persons exchanging securities should consult their own tax advisor with respect to whether the wash sale rules apply and when a loss might be deductible. Under current federal tax laws, any capital gain or loss realized upon redemption of Creation Units is generally treated as long-term capital gain or loss if the Shares have been held for more than one year and as a short-term capital gain or loss if the Shares have been held for one year or less. If you purchase or redeem Creation Units, you will be sent a confirmation statement showing how many and at what price you purchased or sold Shares. The foregoing discussion summarizes some of the possible consequences under current federal tax law of an investment in the Fund. It is not a substitute for personal tax advice. You may also be subject to state and local taxation on Fund distributions and sales of Fund Shares. You are advised to consult your personal tax advisor about the potential tax consequences of an investment in Fund Shares under all applicable tax laws. Tax-Advantaged Product Structure Unlike interests in many conventional mutual funds, the Shares are traded throughout the day on a national securities exchange, whereas mutual fund interests are typically only bought and sold at closing net asset values. The Shares have been designed to be tradable in the secondary market on a national securities exchange on an intra-day basis, and to be created and redeemed in-kind and/or for cash in Creation Units at each day’s next calculated NAV. These arrangements are designed to protect ongoing shareholders from adverse effects on the Fund’s portfolio that could arise from frequent cash creation and redemption transactions. In a conventional mutual fund, redemptions can have an adverse tax impact on taxable shareholders because the mutual fund may need to sell portfolio securities to obtain cash to meet fund redemptions. These sales may generate taxable gains for the shareholders of the mutual fund, whereas the Shares’ in-kind redemption mechanism generally will not lead to a tax event for the Fund or its ongoing shareholders. Other Information For purposes of the 1940 Act, the Fund is treated as a registered investment company. Section 12(d)(1) of the 1940 Act restricts investments by investment companies in the securities of other investment companies, including shares of the Fund. Registered investment companies are permitted to invest in the Fund beyond the limits set forth in Section 12(d)(1) subject to certain terms and conditions set forth in an SEC exemptive order issued to the Trust, including that such investment companies enter into an agreement with the Fund. 24 | CLAYMORE EXCHANGE-TRADED FUND TRUST Financial Highlights Because the Shares of the Fund are newly offered, there is no financial information available for the Shares as of the date of this prospectus. PROSPECTUS | 25 Premium/Discount Information Information about the differences between the daily market price on secondary markets for Shares and the NAV of the Fund can be found at www.guggenheimfunds.com. Total Return Information Information about the total return of the Fund’s Index in comparison to the total return of the Fund can be found at www.guggenheimfunds.com. 26 | CLAYMORE EXCHANGE-TRADED FUND TRUST For More Information Existing Shareholders or Prospective Investors • Call your broker • www.guggenheimfunds.com Dealers • www.guggenheimfunds.com • Distributor Telephone: (800) 345-7999 Investment Adviser Guggenheim Funds Investment Advisors, LLC 2455 Corporate West Drive Lisle, Illinois 60532 Distributor Guggenheim Funds Distributors, Inc. 2455 Corporate West Drive Lisle, Illinois 60532 Custodian The Bank of New York Mellon 101 Barclay Street New York, New York 10286 Transfer Agent The Bank of New York Mellon 101 Barclay Street New York, New York 10286 Legal Counsel Dechert LLP 1095 Avenue of the Americas New York, New York 10036-6797 Independent Registered Public Accounting Firm [ ] A Statement of Additional Information dated [ ], 2012, which contains more details about the Fund, is incorporated by reference in its entirety into this Prospectus, which means that it is legally part of this Prospectus. You will find additional information about the Fund in its annual and semi-annual reports to shareholders, when available. The annual report will explain the market conditions and investment strategies affecting the Fund’s performance during its last fiscal year. You can ask questions or obtain a free copy of the Fund’s shareholder reports or the Statement of Additional Information by calling 1-800-345-7999. Free copies of the Fund’s shareholder reports and the Statement of Additional Information are available from our website at www.guggenheimfunds.com. Information about the Fund, including its reports and the Statement of Additional Information, has been filed with the SEC. It can be reviewed and copied at the SEC’s Public Reference Room in Washington, DC or on the EDGAR database on the SEC’s internet site (http://www.sec.gov). Information on the operation of the SEC’s Public Reference Room may be obtained by calling the SEC at (202) 551-8090. You can also request copies of these materials, upon payment of a duplicating fee, by electronic request at the SEC’s e-mail address (publicinfo@sec.gov) or by writing the Public Reference section of the SEC, treet NE, Room 1580, Washington, DC 20549. PROSPECTUS Distributor Guggenheim Funds Distributors, Inc. 2455 Corporate West Drive Lisle, Illinois 60532 [ ], 2012 Investment Company Act File No. 811-21906 [CODE] INVESTMENT COMPANY ACT FILE NO. 811-21906 CLAYMORE EXCHANGE-TRADED FUND TRUST STATEMENT OF ADDITIONAL INFORMATION DATED [ ], 2012 This Statement of Additional Information (“SAI”) is not a prospectus. It should be read in conjunction with the Prospectus dated [], 2012 for the Guggenheim BulletShares 2021 Corporate Bond ETF (NYSE Arca: []), a series of the Claymore Exchange-Traded Fund Trust (the “Trust”), as it may be revised from time to time. Capitalized terms used herein that are not defined have the same meaning as in the Prospectus, unless otherwise noted. A copy of the Prospectus may be obtained without charge by writing to the Trust’s Distributor, Guggenheim Funds Distributors, Inc., or by calling toll free 1-800-345-7999. TABLE OF CONTENTS Page GENERAL DESCRIPTION OF THE TRUST AND THE FUND 2 EXCHANGE LISTING AND TRADING 3 INVESTMENT RESTRICTIONS AND POLICIES 3 INVESTMENT POLICIES AND RISKS 6 GENERAL CONSIDERATIONS AND RISKS 11 MANAGEMENT 13 BROKERAGE TRANSACTIONS 28 ADDITIONAL INFORMATION CONCERNING THE TRUST 29 CREATION AND REDEMPTION OF CREATION UNIT AGGREGATIONS 32 TAXES 38 FEDERAL TAX TREATMENT OF FUTURES AND OPTIONS CONTRACTS 41 DETERMINATION OF NAV 41 DIVIDENDS AND DISTRIBUTIONS 42 MISCELLANEOUS INFORMATION 42 FINANCIAL STATEMENTS 42 1 GENERAL DESCRIPTION OF THE TRUST AND THE FUND The Trust was organized as a Delaware statutory trust on May 24, 2006 and is authorized to have multiple series or portfolios. The Trust is an open-end management investment company, registered under the Investment Company Act of 1940, as amended (the “1940 Act”). The Trust currently consists of [30] investment portfolios. This SAI relates to the Guggenheim BulletShares 2021 Corporate Bond ETF (the “Fund”). The Fund is based on an underlying index (the “Underlying Index”) of corporate bonds. The Fund is “non-diversified” and, as such, the Fund’s investments are not required to meet certain diversification requirements under the 1940 Act.1 The shares of the Fund are referred to herein as “Shares” or “Fund Shares.” The Fund is managed by Guggenheim Funds Investment Advisors, LLC (“Guggenheim Funds Advisors” or the “Investment Adviser”). The Fund offers and issues Shares at net asset value (“NAV”) only in aggregations of a specified number of Shares (each a “Creation Unit” or a “Creation Unit Aggregation”), generally in exchange for a basket of component securities included in its Underlying Index (the “Deposit Securities”) and/or an amount in cash in lieu of some or all of the Deposit Securities), together with the deposit of a specified cash payment (the “Cash Component”). The Fund’s Shares are listed on the NYSE Arca, Inc. (the “NYSE Arca”). Fund Shares will trade on the NYSE Arca at market prices that may be below, at or above NAV. Shares are redeemable only in Creation Unit Aggregations and, generally, in exchange for portfolio securities and/or a specified cash payment. Creation Units are aggregations of 150,000 Shares. In the event of the liquidation of the Fund, the Trust may lower the number of Shares in a Creation Unit. The Trust reserves the right to offer a “cash” option for creations and redemptions of Fund Shares. Fund Shares may be issued in advance of receipt of Deposit Securities subject to various conditions including a requirement to maintain on deposit with the Trust cash at least equal to 115% of the market value of the missing Deposit Securities. See the “Creation and Redemption of Creation Unit Aggregations” section. In each instance of such cash creations or redemptions, transaction fees may be imposed that will be higher than the transaction fees associated with in-kind creations or redemptions. In all cases, such fees will be limited in accordance with the requirements of the Securities and Exchange Commission (the “SEC”) applicable to 1 If the Fund’s investments are “diversified” under the 1940 Act for a period of three years, the Fund will then be considered “diversified” and will not be able to convert to a non-diversified fund without the approval of shareholders. 2 management investment companies offering redeemable securities. EXCHANGE LISTING AND TRADING There can be no assurance that the requirements of the NYSE Arca necessary to maintain the listing of Shares of the Fund will continue to be met. The NYSE Arca may, but is not required to, remove the Shares of the Fund from listing if (i) following the initial 12-month period beginning at the commencement of trading of the Fund, there are fewer than 50 beneficial owners of the Shares of the Fund for 30 or more consecutive trading days; (ii) the value of the Underlying Index is no longer calculated or available; or (iii) such other event shall occur or condition exist that, in the opinion of the NYSE Arca, makes further dealings on the NYSE Arca inadvisable. The NYSE Arca will remove the Shares of the Fund from listing and trading upon termination of the Fund. As in the case of other stocks traded on the NYSE Arca, broker’s commissions on transactions will be based on negotiated commission rates at customary levels. The Trust reserves the right to adjust the price levels of the Shares in the future to help maintain convenient trading ranges for investors. Any adjustments would be accomplished through stock splits or reverse stock splits, which would have no effect on the net assets of the Fund. INVESTMENT RESTRICTIONS AND POLICIES INVESTMENT OBJECTIVE The Fund seeks investment results that correspond generally to the performance, before the Fund’s fees and expenses, of an investment grade corporate bond index called the BulletShares(R) USD Corporate Bond 2021 Index (the “2021 Index”). 3 INVESTMENT RESTRICTIONS The Board of Trustees of the Trust (the “Board” or the “Trustees”) has adopted as fundamental policies the Fund’s investment restrictions, numbered (1) through (7) below. The Fund, as a fundamental policy, may not: (1)Invest 25% or more of the value of its total assets in securities of issuers in any one industry or group of industries, except to the extent that the Underlying Index that the Fund replicates concentrates in an industry or group of industries. This restriction does not apply to obligations issued or guaranteed by the U.S. Government, its agencies or instrumentalities. (2)Borrow money, except that the Fund may (i) borrow money from banks for temporary or emergency purposes (but not for leverage or the purchase of investments) up to 10% of its total assets and (ii) make other investments or engage in other transactions permissible under the 1940 Act that may involve a borrowing, provided that the combination of (i) and (ii) shall not exceed 33 1/3% of the value of the Fund’s total assets (including the amount borrowed), less the Fund’s liabilities (other than borrowings). (3)Act as an underwriter of another issuer’s securities, except to the extent that the Fund may be deemed to be an underwriter within the meaning of the Securities Act of 1933 in connection with the purchase and sale of portfolio securities. (4) Make loans to other persons, except through (i) the purchase of debt securities permissible under the Fund’s 4 investment policies, (ii) repurchase agreements or (iii) the lending of portfolio securities, provided that no such loan of portfolio securities may be made by the Fund if, as a result, the aggregate of such loans would exceed 33 1/3% of the value of the Fund’s total assets. (5)Purchase or sell physical commodities unless acquired as a result of ownership of securities or other instruments (but this shall not prevent the Fund (i) from purchasing or selling options, futures contracts or other derivative instruments, or (ii) from investing in securities or other instruments backed by physical commodities). (6)Purchase or sell real estate unless acquired as a result of ownership of securities or other instruments (but this shall not prohibit the Fund from purchasing or selling securities or other instruments backed by real estate or of issuers engaged in real estate activities). (7)Issue senior securities, except as permitted under the 1940 Act. Pursuant to restriction (1), if the Fund’s Underlying Index concentrates in an industry or group of industries, the Fund will concentrate its investments accordingly. If the Fund’s Underlying Index ceases to concentrate in an industry or group of industries, the Fund will cease concentrating its investments accordingly. Except for restriction (2), if a percentage restriction is adhered to at the time of investment, a later increase in percentage resulting from a change in market value of the investment or the total assets, or the sale of a security out of the portfolio, will not constitute a violation of that restriction. With respect to restriction (2)(ii), the Fund does not currently intend to make investments or engage in other transactions constituting borrowing for 1940 Act purposes where such investments or transactions are for leverage or the purchase of investments. The foregoing fundamental investment policies cannot be changed without approval by holders of a “majority of the Fund’s outstanding voting shares.” As defined in the 1940 Act, this means the vote of (i) 67% or more of the Fund’s shares present at a meeting, if the holders of more than 50% of the Fund’s shares are present or represented by proxy, or (ii) more than 50% of the Fund’s shares, whichever is less. In addition to the foregoing fundamental investment policies, the Fund is also subject to the following non-fundamental restrictions and policies, which may be changed at any time by the Board of Trustees without shareholder approval. The Fund may not: (1)Sell securities short, unless the Fund owns or has the right to obtain securities equivalent in kind and amount to the securities sold short at no added cost, and provided that transactions in options, futures contracts, options on futures contracts or other derivative instruments are not deemed to constitute selling securities short. (2)Purchase securities on margin, except that the Fund may obtain such short-term credits as are necessary for the clearance of transactions; and provided that margin deposits in connection with futures contracts, options on futures contracts or other derivative instruments shall not constitute purchasing securities on margin. 5 (3) Purchase securities of open-end or closed-end investment companies except in compliance with the 1940 Act. Invest in direct interests in oil, gas or other mineral exploration programs or leases; however, the Fund may invest in the securities of issuers that engage in these activities. Invest in illiquid securities if, as a result of such investment, more than 15% of the Fund’s net assets would be invested in illiquid securities. With respect to investment in illiquid securities, if changes in the values of the Fund’s securities cause the Fund’s holdings of illiquid securities to exceed the 15% limitation (as if liquid securities have become illiquid), the Fund will take such actions as it deems appropriate and practicable to attempt to reduce its holdings of illiquid securities. The Fund does not currently intend to engage in short sales. The investment objective of the Fund is a non-fundamental policy that can be changed by the Board of Trustees without approval by shareholders. INVESTMENT POLICIES AND RISKS The discussion below supplements, and should be read in conjunction with, the “Principal Investment Strategies” and “Principal Investment Risks” sections of the Prospectus. Bonds. The Fund invests a portion of their assets in U.S. registered, dollar-denominated bonds. A bond is an interest-bearing security issued by a company, governmental unit or, in some cases, a non-U.S. entity. The issuer of a bond has a contractual obligation to pay interest at a stated rate on specific dates and to repay principal (the bond’s face value) periodically or on a specified maturity date. An issuer may have the right to redeem or “call” a bond before maturity, in which case the investor may have to reinvest the proceeds at lower market rates. Most bonds bear interest income at a “coupon” rate that is fixed for the life of the bond. The value of a fixed rate bond usually rises when market interest rates fall, and falls when market interest rates rise. Accordingly, a fixed rate bond’s yield (income as a percent of the bond’s current value) may differ from its coupon rate as its value rises or falls. Other types of bonds bear income at an interest rate that is adjusted periodically. Because of their adjustable interest rates, the value of “floating-rate” or “variable-rate” bonds fluctuates much less in response to market interest rate movements than the value of fixed rate bonds. The Fund may treat some of these bonds as having a shorter maturity for purposes of calculating the weighted average maturity of its investment portfolio. Bonds may be senior or subordinated obligations. Senior obligations generally have the first claim on a corporation’s earnings and assets and, in the event of liquidation, are paid before subordinated obligations. Bonds may be unsecured (backed only by the issuer’s general creditworthiness) or secured (also backed by specified collateral). Corporate Bonds. The Fund may invest in corporate bonds. The investment return of corporate bonds reflects interest on the security and changes in the market value of the security. The market value of a corporate bond may be affected by the credit rating of the corporation, the corporation’s performance and perceptions of the corporation in the market place. There is a risk that the issuers of the securities may not be able to meet their obligations on interest or principal payments at the time called for by an instrument. 6 The discussion below supplements, and should be read in conjunction with, the “Non-Principal Investment Strategies” and “Non-Principal Risk Considerations” sections of the Prospectus. U.S. Government Obligations. The Fund may invest a portion of its assets in various types of U.S. Government obligations. U.S. Government obligations are a type of bond. U.S. Government obligations include securities issued or guaranteed as to principal and interest by the U.S. Government, its agencies or instrumentalities. Payment of principal and interest on U.S. Government obligations (i) may be backed by the full faith and credit of the United States (as with U.S. Treasury obligations and Government National Mortgage Association (i.e., GNMA) certificates) or (ii) may be backed solely by the issuing or guaranteeing agency or instrumentality itself (as with Federal National Mortgage Association (i.e., FNMA), Federal Home Loan Mortgage Corporation (i.e., FHLMC) and Federal Home Loan Bank (i.e., FHLB) notes. In the latter case, the investor must look principally to the agency or instrumentality issuing or guaranteeing the obligation for ultimate repayment, which agency or instrumentality may be privately owned. There can be no assurance that the U.S. Government would provide financial support to its agencies or instrumentalities where it is not obligated to do so. As a general matter, the value of debt instruments, including U.S. Government obligations, declines when market interest rates increase and rises when market interest rates decrease. Certain types of U.S. Government obligations are subject to fluctuations in yield or value due to their structure or contract terms. Loans of Portfolio Securities. The Fund may lend its investment securities to approved borrowers. Any gain or loss on the market price of the securities loaned that might occur during the term of the loan would be for the account of the Fund. Pursuant to the positions of the SEC staff, these loans cannot exceed 33 1/3% of the Fund’s total assets. Voting rights in respect of such lent securities will typically pass to the borrower, but the Fund retains the right to call any security in anticipation of a vote that the Investment Adviser deems material to the security on loan. Approved borrowers are brokers, dealers, domestic and foreign banks, or other financial institutions that meet credit or other requirements as established by, and subject to the review of, the Trust’s Board, so long as the terms, the structure and the aggregate amount of such loans are not inconsistent with the 1940 Act and the rules and regulations thereunder or interpretations of the SEC, which require that (a) the borrowers pledge and maintain with the Fund collateral consisting of cash, an irrevocable letter of credit issued by a bank, or securities issued or guaranteed by the U.S. Government having a value at all times of not less than 102% of the value of the securities loaned (on a “mark-to-market” basis); (b) the loan be made subject to termination by the Fund at any time; and (c) the Fund receives reasonable interest on the loan. From time to time, the Fund may return a part of the 7 interest earned from the investment of collateral received from securities loaned to the borrower and/or a third party that is unaffiliated with the Fund and that is acting as a finder. Repurchase Agreements. The Fund may enter into repurchase agreements, which are agreements pursuant to which securities are acquired by the Fund from a third party with the understanding that they will be repurchased by the seller at a fixed price on an agreed date. These agreements may be made with respect to any of the portfolio securities in which the Fund is authorized to invest. Repurchase agreements may be characterized as loans secured by the underlying securities. The Fund may enter into repurchase agreements with (i) member banks of the Federal Reserve System having total assets in excess of $500 million and (ii) securities dealers (“Qualified Institutions”). The Investment Adviser will monitor the continued creditworthiness of Qualified Institutions. The use of repurchase agreements involves certain risks. For example, if the seller of securities under a repurchase agreement defaults on its obligation to repurchase the underlying securities, as a result of its bankruptcy or otherwise, the Fund will seek to dispose of such securities, which action could involve costs or delays. If the seller becomes insolvent and subject to liquidation or reorganization under applicable bankruptcy or other laws, the Fund’s ability to dispose of the underlying securities may be restricted. Finally, it is possible that the Fund may not be able to substantiate its interest in the underlying securities. To minimize this risk, the securities underlying the repurchase agreement will be held by the custodian at all times in an amount at least equal to the repurchase price, including accrued interest. If the seller fails to repurchase the securities, the Fund may suffer a loss to the extent proceeds from the sale of the underlying securities are less than the repurchase price. The resale price reflects the purchase price plus an agreed upon market rate of interest. The collateral is marked to market daily. Reverse Repurchase Agreements. The Fund may enter into reverse repurchase agreements, which involve the sale of securities with an agreement to repurchase the securities at an agreed-upon price, date and interest payment and have the characteristics of borrowing. The securities purchased with the funds obtained from the agreement and securities collateralizing the agreement will have maturity dates no later than the repayment date. Generally the effect of such transactions is that the Fund can recover all or most of the cash invested in the portfolio securities involved during the term of the reverse repurchase agreement, while in many cases the Fund is able to keep some of the interest income associated with those securities. Such transactions are only advantageous if the Fund has an opportunity to earn a greater rate of return on the cash derived from these transactions than the interest cost of obtaining the same amount of cash. Opportunities to realize earnings from the use of the proceeds equal to or greater than the interest required to be paid may not always be available and the Fund intends to use the reverse repurchase technique only when the Investment Adviser believes it will be advantageous to the Fund. The use of reverse repurchase agreements may exaggerate any interim increase or decrease in the value of the Fund’s assets. The custodian bank will maintain a separate account for the Fund with securities having a value equal to or greater than such commitments. Under the 1940 Act, reverse repurchase agreements are considered a form of borrowing. Accordingly, the Fund may invest up to 33 1/3% of its total assets in reverse repurchase agreements, but the Fund currently expects to only invest in reverse repurchase agreements to a much more limited extent. Reverse repurchase agreements are not part of the Fund’s principal investment strategy. Money Market Instruments. The Fund may invest a portion of its assets in high-quality money market instruments on an ongoing basis to provide liquidity. The instruments in which the Fund may invest include: (i) short-term obligations issued by the U.S. Government; (ii) negotiable certificates of deposit (“CDs”), fixed time deposits and bankers’ acceptances of U.S. and foreign 8 banks and similar institutions; (iii) commercial paper rated at the date of purchase at least “Prime-2” or higher by Moody’s Investors Service, Inc. or “A-2” or higher by Standard & Poor’s or, if unrated, of comparable quality as determined by the Investment Adviser; (iv) repurchase agreements; and (v) money market mutual funds. CDs are short-term negotiable obligations of commercial banks. Time deposits are non-negotiable deposits maintained in banking institutions for specified periods of time at stated interest rates. Banker’s acceptances are time drafts drawn on commercial banks by borrowers, usually in connection with international transactions. Investment Companies. The Fund may invest in the securities of other investment companies (including money market funds). Under the 1940 Act or as otherwise permitted by the SEC, the Fund’s investment in investment companies is limited to, subject to certain exceptions, (i) 3% of the total outstanding voting stock of any one investment company, (ii) 5% of the Fund’s total assets with respect to any one investment company and (iii) 10% of the Fund’s total assets of investment companies in the aggregate. Illiquid Securities. The Fund may invest up to an aggregate amount of 15% of its net assets in illiquid securities. Illiquid securities include securities subject to contractual or other restrictions on resale and other instruments that lack readily available markets. Futures and Options. The Fund may utilize exchange-traded futures and options contracts and swap agreements. Futures contracts generally provide for the future sale by one party and purchase by another party of a specified commodity at a specified future time and at a specified price. Index futures contracts are settled daily with a payment by one party to the other of a cash amount based on the difference between the level of the index specified in the contract from one day to the next. Futures contracts are standardized as to maturity date and underlying instrument and are traded on futures exchanges. Futures traders are required to make a good faith margin deposit in cash or U.S. government securities with a broker or custodian to initiate and maintain open positions in futures contracts. A margin deposit is intended to assure completion of the contract (delivery or acceptance of the underlying commodity or payment of the cash settlement amount) if it is not terminated prior to the specified delivery date. Brokers may establish deposit requirements which are higher than the exchange minimums. Futures contracts are customarily purchased and sold on margin deposits which may range upward from less than 5% of the value of the contract being traded. After a futures contract position is opened, the value of the contract is marked to market daily. If the futures contract price changes to the extent that the margin on deposit does not satisfy margin requirements, payment of additional “variation” margin will be required. Conversely, change in the contract value may reduce the required margin, resulting in a repayment of excess margin to the contract holder. Variation margin payments are made to and from the futures broker for as long as the contract remains open. In such case, the Fund would expect to earn interest income on its margin deposits. Closing out an open 9 futures position is done by taking an opposite position (“buying” a contract which has previously been “sold,” or “selling” a contract previously “purchased”) in an identical contract to terminate the position. Brokerage commissions are incurred when a futures contract position is opened or closed. The Fund may use exchange-traded futures and options, together with positions in cash and money market instruments, to simulate full investment in its Underlying Index, but will not use such instruments for hedging purposes. Under such circumstances, the Investment Adviser may seek to utilize other instruments that it believes to be correlated to the underlying index components or a subset of the components. The Fund will not use such instruments for hedging purposes. An option on a futures contract, as contrasted with the direct investment in such a contract, gives the purchaser the right, in return for the premium paid, to assume a position in the underlying futures contract at a specified exercise price at any time prior to the expiration date of the option. Upon exercise of an option, the delivery of the futures position by the writer of the option to the holder of the option will be accompanied by delivery of the accumulated balance in the writer’s futures margin account that represents the amount by which the market price of the futures contract exceeds (in the case of a call) or is less than (in the case of a put) the exercise price of the option on the futures contract. The potential for loss related to the purchase of an option on a futures contract is limited to the premium paid for the option plus transaction costs. Because the value of the option is fixed at the point of purchase, there are no daily cash payments by the purchaser to reflect changes in the value of the underlying contract; however, the value of the option changes daily and that change would be reflected in the NAV of the Fund. The potential for loss related to writing call options on fixed income securities or indices is unlimited. The potential for loss related to writing put options is limited only by the aggregate strike price of the put option less the premium received. The Fund may purchase and write put and call options on futures contracts that are traded on a U.S. exchange as a hedge against changes in value of its portfolio securities, or in anticipation of the purchase of securities, and may enter into closing transactions with respect to such options to terminate existing positions. There is no guarantee that such closing transactions can be effected. Restrictions on the Use of Futures Contracts and Options on Futures Contracts. The Commodity Futures Trading Commission has eliminated limitations on futures trading by certain regulated entities, including registered investment companies, and consequently registered investment companies may engage in unlimited futures transactions and options thereon provided that the investment adviser to the company claims an exclusion from regulation as a commodity pool operator. In connection with its management of the Trust, the Investment Adviser has claimed such an exclusion from registration as a commodity pool operator under the Commodity Exchange Act (the “CEA”). Therefore, it is not subject to the registration and regulatory requirements of the CEA. Therefore, there are no limitations on the extent to which the Fund may engage in non-hedging transactions involving futures and options thereon, except as set forth in the Fund’s Prospectus and this SAI. Swap Agreements. Swap agreements are contracts between parties in which one party agrees to make periodic payments to the other party (the “Counterparty”) based on the change in market value or level of a specified rate, index or asset. In return, the Counterparty agrees to make periodic payments to the first party based on the return of a different specified rate, index or asset. Swap agreements will usually be done on a net basis, the Fund receiving or paying only the net amount of the two payments. The net amount of the excess, if any, of the Fund’s obligations over its entitlements with respect to each swap is accrued on a daily basis and an amount of cash or highly liquid securities having an aggregate value at least equal to the accrued excess is maintained in an account at the Trust’s custodian bank. 10 The use of interest-rate and index swaps is a highly specialized activity that involves investment techniques and risks different from those associated with ordinary portfolio security transactions. These transactions generally do not involve the delivery of securities or other underlying assets or principal. The use of swap agreements involves certain risks. For example, if the Counterparty under a swap agreement defaults on its obligation to make payments due from it, as a result of its bankruptcy or otherwise, the Fund may lose such payments altogether, or collect only a portion thereof, which collection could involve costs or delays. Ratings. The use of credit ratings as a principal method of selecting bonds can involve certain risks. For example, credit ratings evaluate the safety of principal and interest payments, not the market value risk of bonds. Also, credit rating agencies may fail to change credit ratings in a timely fashion to reflect events since the security was last rated. An investment-grade rating means the security or issuer is rated investment-grade by Moody’s(R) Investors Service (“Moody’s”), Standard & Poor’s(R) (“S&P”), Fitch Inc., Dominion Bond Rating Service Limited, or another credit rating agency designated as an NRSRO by the SEC, or is unrated but considered to be of equivalent quality by the Investment Adviser. Bonds rated Baa by Moody’s or BBB by S&P or above are considered “investment grade” securities; bonds rated Baa are considered medium grade obligations which lack outstanding investment characteristics and have speculative characteristics, while bonds rated BBB are regarded as having adequate capacity to pay principal and interest. Subsequent to purchase by the Fund, a rated security may cease to be rated or its rating may be reduced below an investment grade rating. Bonds rated lower than Baa3 by Moody’s or BBB- by S&P are below investment grade quality and are obligations of issuers that are considered predominantly speculative with respect to the issuer’s capacity to pay interest and repay principal according to the terms of the obligation and, therefore, carry greater investment risk, including the possibility of issuer default and bankruptcy and increased market price volatility. Such securities (“lower rated securities”) are commonly referred to as “junk bonds” and are subject to a substantial degree of credit risk. Lower rated securities are often issued by smaller, less creditworthy companies or by highly leveraged (indebted) firms, which are generally less able than more financially stable firms to make scheduled payments of interest and principal. The risks posed by securities issued under such circumstances are substantial. Bonds rated below investment grade tend to be less marketable than higher-quality bonds because the market for them is less broad. The market for unrated bonds is even narrower. GENERAL CONSIDERATIONS AND RISKS A discussion of the risks associated with an investment in the Fund is contained in the Prospectus in the “Principal Investment Risks” and “Non-Principal Risk Considerations” sections. The discussion below supplements, and should be read in conjunction with, the “Principal Investment Risks” section of the Prospectus. An investment in the Fund should be made with an understanding that the value of the Fund’s portfolio securities may fluctuate in accordance with changes in the financial condition of the issuers of the portfolio securities, the value of fixed income securities in general and other factors that affect the market. An investment in the Fund should also be made with an understanding of the risks inherent in an investment in fixed income securities, including the risk that the financial condition of issuers may become impaired or that the general condition of the fixed income market may deteriorate (either of which may cause a decrease in the value of the portfolio securities and thus in 11 the value of Fund Shares). Fixed income securities are susceptible to general market fluctuations and to volatile increases and decreases in value as market confidence and perceptions of their issuers change. These investor perceptions are based on various and unpredictable factors, including expectations regarding government, economic, monetary and fiscal policies, inflation and interest rates, economic expansion or contraction, and global or regional political, economic or banking crises. The existence of a liquid trading market for certain securities may depend on whether dealers will make a market in such securities. There can be no assurance that a market will be made or maintained or that any such market will be or remain liquid. The price at which securities may be sold and the value of the Fund’s Shares will be adversely affected if trading markets for the Fund’s portfolio securities are limited or absent, or if bid/ask spreads are wide. The discussion below supplements, and should be read in conjunction with, the “Non-Principal Risk Considerations” section of the Prospectus. Risks of Futures and Options Transactions. There are several risks accompanying the utilization of futures contracts and options on futures contracts. First, while the Fund plans to utilize futures contracts only if an active market exists for such contracts, there is no guarantee that a liquid market will exist for the contract at a specified time. Furthermore, because, by definition, futures contracts project price levels in the future and not current levels of valuation, market circumstances may result in a discrepancy between the price of the index future and the movement in the Underlying Index. In the event of adverse price movements, the Fund would continue to be required to make daily cash payments to maintain its required margin. In such situations, if the Fund has insufficient cash, it may have to sell portfolio securities to meet daily margin requirements at a time when it may be disadvantageous to do so. In addition, the Fund may be required to deliver the instruments underlying futures contracts it has sold. The risk of loss in trading futures contracts or uncovered call options in some strategies (e.g., selling uncovered index futures contracts) is potentially unlimited. The Fund does not plan to use futures and options contracts in this way. The risk of a futures position may still be large as traditionally measured due to the low margin deposits required. In many cases, a relatively small price movement in a futures contract may result in immediate and substantial loss or gain to the investor relative to the size of a required margin deposit. The Fund, however, intends to utilize futures and options contracts in a manner designed to limit its risk exposure to levels comparable to direct investment in fixed income securities. Utilization of futures and options on futures by the Fund involves the risk of imperfect or even negative correlation to the Underlying Index if the index underlying the futures contract differs from the Underlying Index. There is also the risk of loss by the Fund of margin deposits in the event of bankruptcy of a broker with whom the Fund has an open position in the futures contract or option; however, this risk is substantially minimized because (a) of the regulatory requirement that the broker has to “segregate” customer funds from its corporate funds, and (b) in the case of regulated exchanges in the United States, the clearing corporation stands behind the broker to make good losses in such a situation. The purchase of put or call options could be based upon predictions by the Investment Adviser as to anticipated trends, which predictions could prove to be incorrect and a part or all of the premium paid therefore could be lost. Because the futures market imposes less burdensome margin requirements than the securities market, an increased amount of participation by speculators in the futures market could result in price fluctuations. Certain financial futures exchanges limit the amount of fluctuation permitted in futures contract prices during a single trading day. The daily limit establishes the 12 maximum amount by which the price of a futures contract may vary either up or down from the previous day’s settlement price at the end of a trading session. Once the daily limit has been reached in a particular type of contract, no trades may be made on that day at a price beyond that limit. It is possible that futures contract prices could move to the daily limit for several consecutive trading days with little or no trading, thereby preventing prompt liquidation of futures positions and subjecting the Fund to substantial losses. In the event of adverse price movements, the Fund would be required to make daily cash payments of variation margin. Risks of Swap Agreements. The risk of loss with respect to swaps generally is limited to the net amount of payments that the Fund is contractually obligated to make. Swap agreements are also subject to the risk that the swap counterparty will default on its obligations. If such a default were to occur, the Fund will have contractual remedies pursuant to the agreements related to the transaction. However, such remedies may be subject to bankruptcy and insolvency laws which could affect the Fund’s rights as a creditor (e.g., the Fund may not receive the net amount of payments that it contractually is entitled to receive). The Fund, however, intends to utilize swaps in a manner designed to limit its risk exposure to levels comparable to direct investments in fixed income securities. MANAGEMENT Trustees and Officers The general supervision of the duties performed by the Investment Adviser for the Fund under the Investment Advisory Agreement is the responsibility of the Board of Trustees. The Board of Trustees currently has five Trustees, all of whom have no affiliation or business connection with the Investment Adviser, the Distributor or any of their affiliated persons and do not own any stock or other securities issued by the Investment Adviser or the Distributor. These are the “non-interested” or “independent” Trustees (“Independent Trustees”). The Independent Trustees of the Trust, their term of office and length of time served, their principal business occupations during the past five years, the number of portfolios in the Fund Complex (defined below) overseen by each Independent Trustee, and other directorships, if any, held by the Trustee are shown below. The Fund Complex includes all open- and closed-end funds (including all of their portfolios) advised by the Investment Adviser and any funds that have an investment adviser that is an affiliated person of the Investment Adviser. As of the date of this SAI, the Fund Complex consists of the Trust’s [30] portfolios, 15 separate portfolios of Claymore Exchange-Traded Fund Trust 2 and 16 closed-end management investment companies. 13 NUMBER OF OTHER PORTFOLIOS DIRECTORSHIPS NAME, ADDRESS IN FUND HELD BY AND YEAR OF TERM OF COMPLEX TRUSTEES BIRTH OF POSITION(S) OFFICE AND PRINCIPAL OVERSEEN DURING THE INDEPENDENT HELD WITH LENGTH OF OCCUPATION(S) BY PAST FIVE TRUSTEES* TRUST TIME SERVED** DURING PAST 5 YEARS TRUSTEES YEARS Randall C. Barnes Trustee Since 2006 Private Investor. Formerly, Senior Vice [57] None. Year of birth: 1951 President & Treasurer, PepsiCo, Inc. (1993- 1997), President, Pizza Hut International (1991- 1993) and Senior Vice President, Strategic Planning and New Business Development, PepsiCo, Inc. (1987-1990). Roman Friedrich III Trustee Since 2010 Founder and President of Roman Friedrich & [51] Director, Zincore Metals Inc. Year of birth: 1946 Company, Ltd. a mining and metals investment (2009-present) and bank (1998-present).Formerly, Senior Managing WindstormResources Director of McNicoll, Lewis & Vlak, an Inc. (March 2011 - investment bank and institutional broker- present); Axiom Gold dealer specializing in capital intensive and Silver Corp. industries such as energy, metals and mining (June 2011 - present). (2010-2011). StrataGold Corporation (2003-2009). Gateway Gold Corp. (2004-2008). GFM Resources Ltd. (2005-2010). Robert B. Karn III Trustee Since 2010 Consultant (1998-present). Formerly, [51] Director of Peabody Energy Year of birth: 1942 Managing Partner, Financial and Economic Company (2003 to present) Consulting, St. Louis office of Arthur and GP Natural Resource Andersen, LLP. (1977-1997). Partners, LLC (2002 to present) Ronald A. Nyberg Trustee Since 2006 Partner of Nyberg & Cassioppi, LLC, a law firm [59] None. Year of Birth: 1953 specializing in Corporate Law, Estate Planning and Business Transactions (2000-present). Formerly, Executive Vice President, General Counsel, and Corporate Secretary of Van Kampen Investments (1982-1999). 14 Ronald E. Toupin, Jr. Trustee Since 2006 Portfolio Consultant (2010-present). Formerly, [56] Trustee, Bennett Group of Year of Birth: 1958 Vice President, Manager and Portfolio Funds (2011-present). Manager of Nuveen Asset Management (1998-1999), Vice President of Nuveen Investment Advisory Corp. (1992-1999), Vice President and Manager of Nuveen Unit Investment Trusts (1991-1999) and Assistant Vice President and Portfolio Manager of Nuveen Unit Investment Trusts (1988-1999), each of John Nuveen & Company, Inc. (1982- * The business address of each Trustee is c/o Guggenheim Funds Investment Advisors, LLC, 2455 Corporate West Drive, Lisle, Illinois 60532. ** This is the period for which the Trustee began serving the Trust. Each Trustee serves an indefinite term, until his successor is elected. 15 The executive officers of the Trust, length of time served and principal business occupations during the past five years are shown below. NAME, ADDRESS AND YEAR OF BIRTH OF EXECUTIVE POSITION(S) HELD LENGTH OF OFFICERS* WITH TRUST TIME SERVED** PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Kevin M. Robinson Chief Executive Officer and Chief Since 2008 Senior Managing Director, General Counsel and Corporate Secretary Year of birth: 1959 Legal Officer (2007-present) ofGuggenheim Funds Investment Advisors, LLC, and Guggenheim Funds Distributors, Inc.; Chief Legal Officer of certain funds in the Fund Complex. Formerly, Associate General Counsel (2000- 2007) of NYSE Euronext, Inc. Formerly, Archipelago Holdings, Inc. Senior Managing Director and Associate General Counsel (1997-2000) of ABN Amro Inc. Formerly, Senior Counsel in the Enforcement Division (1989-1997) of the U.S. Securities and Exchange Commission. John L. Sullivan Chief Financial Officer, Since 2010 Senior Managing Director and Head of Fund Administration of Year of birth: 1955 Chief Accounting Officer and Guggenheim Funds Investment Advisors, LLC (2010-present). Treasurer Chief Financial Officer, Chief Accounting Officer and Treasurer for certain funds in theFund Complex. Formerly, Managing Director and Chief Compliance Officer for each of the funds in the Van Kampen Investments fund complex (2004-2010). Formerly, Managing Director and Head of Fund Accounting and Administration for Morgan Stanley Investment Management (2002-2004). Bruce Saxon Chief Compliance Officer Since 2006 Vice President, Fund Compliance Officer of Guggenheim Funds Services Year of birth: 1957 Group, Inc. (2006-present). Chief Compliance Officer of certain funds in the Fund Complex. Formerly, Chief Compliance Officer/Assistant Secretary of Harris Investment Management, Inc. (2003-2006). Director-Compliance of Harrisdirect LLC (1999-2003). William H. Belden III Vice President Since 2006 Managing Director of Guggenheim Funds Distributors, Inc. (2005-present). Year of birth: 1965 Formerly, Vice President of Product Management at Northern Trust Global Investments (1999-2005); Vice President of Stein Roe & Farnham (1995-1999). Chuck Craig Vice President Since 2006 Managing Director (2006-present), Vice President (2003-2006) of Year of birth: 1967 Guggenheim Funds Distributors, Inc. Formerly, Assistant Vice President, First Trust Portfolios, L.P. (1999-2003); Analyst, PMA Securities, Inc. (1996-1999). 16 David A. Botset Vice President Since 2010 Senior Vice President, Guggenheim Funds Distributors, Inc. from 2008 to Year of birth: 1974 present, formerly Vice President, Guggenheim Funds Distributors, Inc. (2007-2008); Assistant Vice President, Investment Development and Oversight, Nuveen Investments (2004 - 2007); Assistant Vice President Internal Sales and Service, Nuveen Investments. James Howley Assistant Treasurer Since 2006 Vice President, Fund Administration of Guggenheim Funds Distributors, Year of birth: 1972 Inc. (2004-present).Formerly, Manager, Mutual Fund Administration of Van Kampen Investments, Inc. Mark J. Furjanic Assistant Treasurer Since 2008 Vice President, Fund Administration-Tax (2005-present) of Guggenheim Year of birth: 1959 Funds Investment Advisors, LLC and Guggenheim Funds Distributors, Inc.; Assistant Treasurer of certain funds in the Fund Complex. Formerly, Senior Manager (1999-2005) for Ernst & Young LLP. Donald P. Swade Assistant Treasurer Since 2008 Vice President, Fund Administration (2006-present) of Guggenheim Year of birth: 1972 Funds Investment Advisors, LLC and Guggenheim Funds Distributors, Inc.; Assistant Treasurer of certain funds in the Fund Complex. Formerly, Manager-Mutual Fund Financial Administration (2003-2006) for Morgan Stanley/Van Kampen Investments. Mark E. Mathiasen Secretary Since 2011 Vice President; Assistant General Counsel of Guggenheim Funds Services Year of birth: 1978 Group, Inc. (2007-present). Secretary of certain funds in the Fund Complex. Formerly, Assistant Secretary of the Trust (2008-2011). Previously, Law Clerk, Idaho State Courts (2003-2006). * The business address of each Trustee is c/o Guggenheim Funds Investment Advisors, LLC, 2455 Corporate West Drive, Lisle, Illinois 60532. ** This is the period for which the Trustee began serving the Trust. Each Trustee serves an indefinite term, until his successor is elected. 17 For each Trustee, the dollar range of equity securities beneficially owned by the Trustee in the Fund and in all registered investment companies overseen by the Trustee, as of December 31, 2011, is shown below. DOLLAR RANGE OF EQUITY AGGREGATE DOLLAR RANGE OF EQUITY SECURITIES IN THE SECURITIES IN ALL GUGGENHEIM REGISTERED INVESTMENT BULLETSHARES 2021 COMPANIES OVERSEEN BY NAME OF TRUSTEE CORPORATE BOND ETF TRUSTEE IN FAMILY OF INVESTMENT COMPANIES Randall C. Barnes None Over $100,000 Roman Friedrich III None $1 - $10,000 Robert B. Karn III None $10,001-50,000 Ronald A. Nyberg None Over $100,000 Ronald E. Toupin, Jr. None None As to each Independent Trustee and his immediate family members, no person owned beneficially or of record securities in an investment adviser or principal underwriter of the Fund, or a person (other than a registered investment company) directly or indirectly controlling, controlled by or under common control with an investment adviser or principal underwriter of the Fund. Board Leadership Structure The primary responsibility of the Board of Trustees is to represent the interests of the Fund and to provide oversight of the management of the Fund. The Fund’s day-to-day operations are managed by the Investment Adviser and other service providers who have been approved by the Board. The Board is currently comprised of five Trustees, all of whom (including the chairman) are Independent Trustees. Generally, the Board acts by majority vote of all the Trustees, which includes a majority vote of the Independent Trustees. The Board has appointed an Independent Chairperson, who presides at Board meetings and who is responsible for, among other things, participating in the planning of Board meetings, setting the tone of Board meetings and seeking to encourage open dialogue and independent inquiry among the trustees and management. The Board has established two standing committees (as described below) and has delegated certain responsibilities to those committees, each of which is comprised solely of Independent Trustees. The Board and its committees will meet periodically throughout the year to oversee the Fund’s activities, review contractual arrangements with service providers, review the Fund’s financial statements, oversee compliance with regulatory requirements, and review performance. The Independent Trustees are represented by independent legal counsel at Board and committee meetings. The Board has determined that this leadership structure, including an Independent Chairperson, a supermajority of Independent Trustees and committee membership limited to Independent Trustees, is appropriate in light of the characteristics and circumstances of the Trust. Qualifications and Experience of Trustees and Nominees The Trustees considered the educational, business and professional experience of each Board member and the service by each Trustee as a trustee of certain other Guggenheim funds. The Trustees were selected to serve and continue on the Board based upon their skills, experience, judgment, analytical ability, diligence, ability to work effectively with other Trustees, availability and commitment to attend meetings and perform the responsibilities of a Trustee and a demonstrated willingness to take an independent and questioning view of management. The Trustees also considered, among other factors, the particular attributes described below with respect to the various individual Board members. Randall C. Barnes. Mr. Barnes has served as a trustee of other funds in the Fund Complex since 2004. Mr. Barnes also 18 serves on the board of certain Guggenheim-sponsored Canadian funds. Through his service as a trustee of other funds in the Fund Complex, prior employment experience as President of Pizza Hut International and as Treasurer of PepsiCo, Inc., and his personal investment experience, Mr. Barnes is experienced in financial, accounting, regulatory and investment matters. Roman Friedrich III. Mr. Friedrich has served as a trustee of other funds in the Fund Complex since 2003. Mr. Friedrich also serves on the board of certain Guggenheim-sponsored Canadian funds.Through his service as a trustee of other funds in the Fund Complex, his service as a director on other public company boards, his experience as founder and chairman of Roman Friedrich & Company, a financial advisory firm, and his prior experience as a senior executive of various financial securities firms, Mr. Friedrich is experienced in financial, investment and regulatory matters. Robert B. Karn III. Mr. Karn has served as a trustee of other funds in the Fund Complex since 2004. Through his service as a trustee of other funds in the Fund Complex, his service as a director onother public and private company boards, his experience as an accountant and consultant, and his prior experience, including Managing Partner of the Financial and Economic Consulting Practice of the St. Louis office at Arthur Andersen, LLP, Mr. Karn is experienced in accounting, financial, investment and regulatory matters. The Board has determined that Mr. Karn is an “audit committee financial expert” as defined by the SEC. Ronald A. Nyberg. Mr. Nyberg has served as a trustee of other funds in the Fund Complex since 2003. Through his service as a trustee of other funds in the Fund Complex, his professional trainingand experience as an attorney and partner of a law firm, Nyberg & Cassioppi, LLC, and his prior employment experience, including Executive Vice President and General Counsel of Van Kampen Investments, an asset management firm, Mr. Nyberg is experienced in financial, regulatory and governance matters. Ronald E. Toupin, Jr. Mr. Toupin has served as a trustee of other funds in the Fund Complex since 2003. Through his service as a trustee of other funds in the Fund Complex, and his professionaltraining and prior employment experience, including Vice President and Portfolio Manager for Nuveen Asset Management, an asset management firm, Mr. Toupin is experienced in financial, regulatory and investment matters. Each Trustee also now has considerable familiarity with the Trust, its adviser and other service providers, and their operations, as well as the special regulatory requirements governing regulated investment companies and the special responsibilities of investment company trustees as a result of his substantial prior service as a Trustee of certain funds in the Fund Complex. Board’s Role in Risk Oversight Consistent with its responsibility for oversight of the Trust, the Board, among other things, oversees risk management of the Fund’s investment program and business affairs directly and through the committee structure it has established. The Board has established the Audit Committee and the Nominating and Governance Committee to assist in its oversight functions, including its oversight of the risks the Fund faces. Each committee reports its activities to the Board on a regular basis. Risks to the Fund include, among others, investment risk, credit risk, liquidity risk, valuation risk and operational risk, as well as the overall business risk relating to the Fund. The Board has adopted, and will periodically review, policies, procedures and controls designed to address these different types of risks. Under the Board’s supervision, the officers of the Trust, the Investment Adviser and other service providers to the Fund also have implemented a variety of processes, procedures and controls to address various risks. In addition, as part of the Board’s periodic review of the Fund’s advisory and other service provider agreements, the Board may consider risk management aspects of the service providers’ operations and the functions for which they are responsible. 19 The Board requires officers of the Trust to report to the full Board on a variety of matters at regular and special meetings of the Board and its committees, as applicable, including matters relating to risk management. The Audit Committee also receives reports from the Fund’s independent registered public accounting firm on internal control and financial reporting matters. On at least a quarterly basis, the Board meets with the Fund’s Chief Compliance Officer, including separate meetings with the Independent Trustees in executive session, to discuss compliance matters and, on at least an annual basis, receives a report from the Chief Compliance Officer regarding the effectiveness of the Fund’s compliance program. The Board, with the assistance of Trust management, reviews investment policies and risks in connection with its review of the Fund’s performance. In addition, the Board receives reports from the Investment Adviser on the investments and securities trading of the Fund. With respect to valuation, the Board oversees a pricing committee comprised of Trust officers and Investment Adviser personnel and has approved Fair Valuation procedures applicable to valuing the Fund’s securities, which the Board and the Audit Committee periodically review. The Board also requires the Investment Adviser to report to the Board on other matters relating to risk management on a regular and as-needed basis. Role of Diversity in Considering Board Candidates In considering Trustee nominee candidates, the Nominating and Governance Committee takes into account a wide variety of factors, including the overall diversity of the Board’s composition. The Nominating and Governance Committee believes the Board generally benefits from diversity of background, experience and views among its members, and considers this a factor in evaluating the composition of the Board, but has not adopted any specific policy in this regard. Board Committees Messrs. Barnes, Friedrich, Karn, Nyberg and Toupin, who are not “interested persons” of the Trust, as defined in the 1940 Act, serve on the Trust’s Nominating and Governance Committee. The Nominating and Governance Committee is responsible for recommending qualified candidates to the Board in the event that a position is vacated or created. The Nominating and Governance Committee would consider recommendations by shareholders if a vacancy were to exist. Such recommendations should be forwarded to the Secretary of the Trust. The Trust does not have a standing compensation committee. During the fiscal year ended May 31, 2011, the Trust’s Nominating and Governance Committee met three times. Messrs. Barnes, Friedrich, Karn, Nyberg and Toupin, who are not “interested persons” of the Trust, as defined in the 1940 Act, serve on the Trust’s Audit Committee. The Audit Committee is generally responsible for reviewing and evaluating issues related to the accounting and financial reporting policies and internal controls of the Trust and, as appropriate, the internal controls of certain service providers, overseeing the quality and objectivity of the Trust’s financial statements and the audit thereof and acting as a liaison between the Board of Trustees and the Trust’s independent registered public accounting firm. During the fiscal year ended May 31, 2011, the Trust’s Audit Committee met four times. Remuneration of Trustees and Officers The Trust, together with Claymore Exchange-Traded Fund Trust 2, pays each Independent Trustee a fee of $35,000 per year, and also pays an annual fee of $4,500 to the independent chairperson of the Board of Trustees, an annual fee of $3,000 to the independent chairperson of the Audit Committee and an annual fee of $1,500 to the independent chairperson of the Nominating and Governance Committee. In addition, the Trust pays each Independent Trustee a fee of (a) $1,000 for each regular or special 20 meeting of the Board of Trustees attended by such Trustee, (b) $1,000 for each meeting of the Board of Trustees for the organization of one or more new separate series of the Trust attended by such Trustee, and (c) $500 for each meeting of the Audit Committee or the Nominating and Governance Committee attended by such Trustee (in each case whether the meeting occurs and/or the Trustee attends in person or by telephone). Officers who are employed by the Investment Adviser receive no compensation or expense reimbursements from the Trust. The table below shows the compensation that was paid to Trustees for the fiscal year ended May 31, 2011: PENSION OR RETIREMENT TOTAL AGGREGATE BENEFITS ACCRUED COMPENSATION COMPENSATION AS PART OF PAID FROM NAME OF TRUSTEE FROM TRUST FUND EXPENSES FUND COMPLEX INDEPENDENT TRUSTEES Randall C. Barnes N/A Roman Friedrich III N/A Robert B. Karn III N/A Ronald A. Nyberg N/A Ronald E. Toupin, Jr. N/A The officers and Trustees of the Trust, in the aggregate, own less than 1% of the shares of the Fund. Investment Adviser. The Investment Adviser manages the investment and reinvestment of the Fund’s assets and administers the affairs of the Fund to the extent requested by the Board of Trustees. Portfolio Managers. Chuck Craig, CFA, Managing Director, Portfolio Management and Supervision, and Saroj Kanuri, CFA, Vice President, ETF Portfolio Management, of Guggenheim Funds Advisors, serve as portfolio managers for the Fund and are responsible for the day-to-day management of the Fund’s portfolio. Other Accounts Managed by the Portfolio Managers. As of May 31, 2011, Messrs. Craig and Kanuri managed two registered investment companies (consisting of a total of 40 separate series) with a total of approximately $3.8 billion in assets; no pooled investment vehicles other than registered investment companies; and no other accounts. Although the funds in the Trust that are managed by Messrs. Craig and Kanuri may have different investment strategies, each has a portfolio objective of replicating its underlying index. The Investment Adviser does not believe that management of the different funds of the Trust presents a material conflict of interest for the portfolio managers or the Investment Adviser. Portfolio Manager Compensation. The portfolio managers’ compensation consists of the following elements: Base salary: Each portfolio manager is paid a fixed base salary by the Investment Adviser which is set at a level determined to be appropriate based upon the individual’s experience and responsibilities. 21 Annual bonus: Each portfolio manager is eligible for a discretionary annual bonus. There is no policy regarding, or agreement with, each portfolio manager to receive bonuses or any other compensation in connection with the performance of any of the accounts managed by the portfolio manager. Each portfolio manager also participates in benefit plans and programs generally available to all employees of the Investment Adviser. Securities Ownership of the Portfolio Managers. As of May 31, 2011, the portfolio managers do not own shares of the Fund. Investment Advisory Agreement. Pursuant to an Investment Advisory Agreement between the Investment Adviser and the Trust, the Investment Adviser is responsible for all expenses of the Fund, including the cost of transfer agency, custody, fund administration, legal, audit and other services, except interest expenses, distribution fees or expenses, if any, brokerage expenses, taxes, and extraordinary expenses not incurred in the ordinary course of the Fund’s business. For the Investment Adviser’s services to the Fund, the Fund has agreed to pay an annual management fee equal to []% of its average daily net assets. 22 Under the Investment Advisory Agreement, the Investment Adviser will not be liable for any error of judgment or mistake of law or for any loss suffered by the Fund in connection with the performance of the Investment Advisory Agreement, except a loss resulting from willful misfeasance, bad faith or gross negligence on the part of the Investment Adviser in the performance of its duties or from reckless disregard of its duties and obligations thereunder. The Investment Advisory Agreement continues until [], and thereafter only if approved annually by the Board, including a majority of the Independent Trustees. The Agreement terminates automatically upon assignment and is terminable at any time without penalty as to the Fund by the Board, including a majority of the Independent Trustees, or by vote of the holders of a majority of the Fund’s outstanding voting securities on 60 days written notice to the Investment Adviser, or by the Investment Adviser on 60 days written notice to the Fund. Guggenheim Funds Advisors is located at 2455 Corporate West Drive, Lisle, Illinois 60532. Guggenheim Funds Services Group, Inc. (“Guggenheim Funds Group”), the parent company of Guggenheim Funds Advisors, is a wholly-owned subsidiary of Guggenheim Partners, LLC (“Guggenheim”). Guggenheim is a diversified financial services firm whose primary business lines include asset management, investment advisory, fixed income brokerage, institutional finance, and merchant banking. Through its affiliates, including Guggenheim Partners Asset Management, Inc., Guggenheim has more than $100 billion of assets under supervision. The firm is headquartered in Chicago and New York with a global network of offices throughout the United States, Europe, and Asia. Administrator. Guggenheim Funds Advisors also serves as the Trust’s administrator. Pursuant to an administration agreement, Guggenheim Funds Advisors provides certain administrative, bookkeeping and accounting services to the Trust. Guggenheim Funds Advisors is compensated for its administrative, bookkeeping and accounting services to the Fund solely from the unitary management fee pursuant to the Investment Advisory Agreement. 23 Custodian and Transfer Agent. The Bank of New York Mellon (“BNY”), located at 101 Barclay Street, New York, New York 10286, also serves as custodian for the Fund pursuant to a Custodian Agreement. As custodian, BNY holds the Fund’s assets, calculates the net asset value of Shares and calculates net income and realized capital gains or losses. BNY also serves as transfer agent of the Fund pursuant to a Transfer Agency Agreement. As compensation for the foregoing services, BNY receives certain out-of-pocket costs, transaction fees and asset based fees which are accrued daily and paid monthly by the Investment Adviser from the management fee pursuant to the Investment Advisory Agreement. Distributor. Guggenheim Funds Distributors, Inc. (“Guggenheim Funds Distributors” or the “Distributor”) is the Distributor of the Fund’s Shares. Its principal address is 2455 Corporate West Drive, Lisle, Illinois 60532. The Distributor has entered into a Distribution Agreement with the Trust pursuant to which it distributes Fund Shares. Shares are continuously offered for sale by the Fund through the Distributor only in Creation Unit Aggregations, as described in the Prospectus and below under the heading “Creation and Redemption of Creation Unit Aggregations.” 12b-1 Plan. The Trust has adopted a Distribution and Service Plan pursuant to Rule 12b-1 under the 1940 Act (the “Plan”) pursuant to which the Fund may reimburse the Distributor up to a maximum annual rate of 0.25% of its average daily net assets. The Trust may pay a monthly fee not to exceed 0.25% per annum of the Fund’s average daily net assets to reimburse the Distributor for actual amounts expended to finance any activity primarily intended to result in the sale of Creation Units of the Fund or the provision of investor services, including but not limited to (i) delivering copies of the Trust’s then-current prospectus to prospective purchasers of such Creation Units; (ii) marketing and promotional services including advertising; (iii) facilitating communications with beneficial owners of shares of the Fund; and (iv) such other services and obligations as are set forth in the Distribution Agreement. Distribution expenses incurred in any one year in excess of 0.25% of the Fund’s average daily net assets may be reimbursed in subsequent years subject to the annual 0.25% limit and subject further to the approval of the Board of Trustees, including a majority of the Independent Trustees. The Distributor may use all or any portion of the amount received pursuant to the Plan to compensate securities dealers or other persons that are Authorized Participants for providing distribution assistance, including broker-dealer and shareholder support and educational and promotional services, pursuant to agreements with the Distributor, or to pay any of the expenses associated with other activities authorized under the Plan. 24 The Plan shall, unless terminated as set forth below, remain in effect with respect to the Fund provided that its continuance is specifically approved at least annually by a vote of both a majority of the Trustees and a majority of the Independent Trustees, cast in person at a meeting called for the purpose of voting on the Plan. The Plan may be terminated at any time, without payment of any penalty, by vote of a majority of the Independent Trustees, or by vote of a majority of the outstanding voting securities (as such term is defined in the 1940 Act) of the Fund. In the event of termination or non-continuance of the Plan, the Trust may reimburse any expense which it incurred prior to such termination or non-continuance, provided that such reimbursement is specifically approved by both a majority of the Board of Trustees and a majority of the Independent Trustees. Under the Plan and as required by Rule 12b-1, the Trustees will receive and review after the end of each calendar quarter a written report provided by the Distributor of the amounts expended under the Plan and the purpose for which such expenditures were made. The Plan was adopted in order to permit the implementation of the Fund’s method of distribution. However, no such fee is currently charged to the Fund, and there are no plans in place to impose such a fee. In addition, the Board of Trustees has adopted a resolution that no such fee shall be paid for at least 12 months from the date of this SAI. Financial Intermediary Compensation. The Investment Adviser and/or its subsidiaries or affiliates (“Guggenheim Entities”) may pay certain broker-dealers, banks and other financial intermediaries (“Intermediaries”) for certain activities related to the Fund or other Guggenheim funds (“Payments”). Any Payments made by Guggenheim Entities will be made from their own assets and not from the assets of the Fund. Although a portion of Guggenheim Entities’ revenue comes directly or indirectly in part from fees paid by the Fund and other Guggenheim funds, Payments do not increase the price paid by investors for the purchase of shares of, or the cost of owning, the Fund or other Guggenheim funds. Guggenheim Entities may make Payments for Intermediaries’ participating in activities that are designed to make registered representatives, other professionals and individual investors more knowledgeable about the Fund or for other activities, such as participation in marketing activities and presentations, educational training programs, the support of technology platforms and/or reporting systems (“Education Costs”). Guggenheim Entities may also make Payments to Intermediaries for certain printing, publishing and mailing costs associated with the Fund or materials relating to exchange-traded funds in general (“Publishing Costs”). In addition, Guggenheim Entities may make Payments to Intermediaries that make shares of the Fund and certain other Guggenheim funds available to their clients or for otherwise promoting the Fund and other Guggenheim funds. Payments of this type are sometimes referred to as revenue-sharing payments. Payments to an Intermediary may be significant to the Intermediary, and amounts that Intermediaries pay to your salesperson or other investment professional may also be significant for your salesperson or other investment professional. Because an Intermediary may make decisions about which investment options it will recommend or make available to its clients or what services to provide for various products based on payments it receives or is eligible to receive, Payments create conflicts of interest between the Intermediary and its clients and these financial incentives may cause the Intermediary to recommend the Fund and other Guggenheim funds over other investments. The same conflict of interest exists with respect to your salesperson or other investment professional if he or she receives similar payments from his or her Intermediary firm. Guggenheim Entities may determine to make Payments based on any number of metrics. For example, Guggenheim Entities may make Payments at year-end or other intervals in a fixed amount, an amount based upon an Intermediary’s services at defined 25 levels or an amount based on the Intermediary’s net sales of one or more Guggenheim funds in a year or other period, any of which arrangements may include an agreed-upon minimum or maximum payment, or any combination of the foregoing. As of the date of this SAI, Guggenheim anticipates that the Payments paid by Guggenheim Entities in connection with the Fund and other Guggenheim funds will be immaterial to Guggenheim Entities in the aggregate for the next year. Please contact your salesperson or other investment professional for more information regarding any Payments his or her Intermediary firm may receive. Any payments made by the Guggenheim Entities to an Intermediary may create the incentive for an Intermediary to encourage customers to buy shares of Guggenheim funds. Aggregations. Fund Shares in less than Creation Unit Aggregations are not distributed by the Distributor. The Distributor will deliver the Prospectus and, upon request, this SAI to persons purchasing Creation Unit Aggregations and will maintain records of both orders placed with it and confirmations of acceptance furnished by it. The Distributor is a broker-dealer registered under the Securities Exchange Act of 1934 (the “Exchange Act”) and a member of the Financial Industry Regulatory Authority (“FINRA”). The Distribution Agreement for the Fund provides that it may be terminated as to the Fund at any time, without the payment of any penalty, on at least 60 days written notice by the Trust to the Distributor (i) by vote of a majority of the Independent Trustees or (ii) by vote of a majority of the outstanding voting securities (as defined in the 1940 Act) of the Fund. The Distribution Agreement will terminate automatically in the event of its assignment (as defined in the 1940 Act). The Distributor may also enter into agreements with securities dealers (“Soliciting Dealers”) who will solicit purchases of Creation Unit Aggregations of Fund Shares. Such Soliciting Dealers may also be Participating Parties (as defined in “Procedures for Creation of Creation Unit Aggregations” below) and DTC Participants (as defined in “DTC Acts as Securities Depository” below). Index Provider. Set forth below is the Fund and the Underlying Index upon which it is based. FUND UNDERLYING INDEX Guggenheim BulletShares 2021 Corporate Bond ETF 2021 Index 26 Accretive Asset Management LLC (“Accretive”) is not affiliated with the Fund or with the Investment Adviser. The Fund is entitled to use its respective Underlying Index pursuant to a sub-licensing arrangement with the Investment Adviser, which in turn has a licensing agreement with the Index Provider. The Fund reimburses the Investment Adviser for the licensing fee payable to the Index Provider. Except as set forth below, the only relationships that Accretive has with the Investment Adviser or Distributor of the Fund in connection with the Fund is that Accretive has licensed certain of its intellectual property, including the determination of the component securities of the Underlying Index and the name of the Underlying Index. The Underlying Index is selected and calculated without regard to the Investment Adviser, Distributor or owners of the Fund. Accretive has no obligation to take the specific needs of the Investment Adviser, Distributor or owners of the Fund into consideration in the determination and calculation of the Underlying Index. Accretive is not responsible for and has not participated in the determination of pricing or the timing of the issuance or sale of the Shares of the Fund or in the determination or calculation of the net asset value of the Fund. Accretive has no obligation or liability in connection with the administration, marketing or trading of the Fund. ACCRETIVE SHALL HAVE NO LIABILITY FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS RELATED TO THE FUND OR UNDERLYING INDEX. ACCRETIVE MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY THE INVESTMENT ADVISER, DISTRIBUTOR OR OWNERS OF THE FUND, OR ANY OTHER PERSON OR ENTITY, FROM THE USE OF THE UNDERLYING INDEX OR ANY DATA INCLUDED THEREIN. ACCRETIVE MAKES NO WARRANTY, EXPRESS OR IMPLIED, AND EXPRESSLY DISCLAIM ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE, WITH RESPECT TO THE FUND OR TO THE UNDERLYING INDEX OR TO ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL ACCRETIVE HAVE ANY LIABILITY FOR ANY SPECIAL, PUNITIVE, INDIRECT OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS) IN CONNECTION WITH THE FUND OR THE UNDERLYING INDEX, EVEN IF ACCRETIVE IS NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES. Guggenheim Funds Group, the parent entity of the Investment Adviser, has entered into an agreement with Accretive (the “Option Agreement”) pursuant to which Guggenheim Funds Group has the option, between April 28, 2013 and April 28, 2015 (the “Option Period”), to purchase Accretive. However, neither Guggenheim Funds Group nor the Investment Adviser has any rights under the Option Agreement (or the license agreement governing the Investment adviser’s use of each Index) to (a) control, direct or influence the business of Accretive prior to any eventual exercise of the option to purchase Accretive, or (b) control, direct, influence or obtain any knowledge regarding (i) the compilation or operation, or (ii) any changes to the constituents or underlying methodology, of the Index prior to the time such information is incorporated and/or publicly disclosed. Any exercise of the option to purchase Accretive during the Option Period is at the discretion of Guggenheim Funds Group and does not become mandatory upon the fulfillment of any condition. Moreover, Guggenheim Funds Group will not be permitted to exercise the option to purchase Accretive during the Option Period unless (a) the Investment Adviser and the Trust have obtained exemptive relief from the SEC allowing them to offer exchange-traded funds based upon indexes provided by an affiliated entity or (b) the SEC has adopted a rule allowing such exchange-traded funds to be offered without additional exemptive relief. Accordingly, the Option Agreement will not affect the compilation and operation of each Index, and Accretive is not affiliated with the Trust, the Investment Adviser or the Distributor. 27 BROKERAGE TRANSACTIONS The policy of the Trust regarding purchases and sales of securities is that primary consideration will be given to obtaining the most favorable prices and efficient executions of transactions. Consistent with this policy, when securities transactions are effected on a stock exchange, the Trust’s policy is to pay commissions that are considered fair and reasonable without necessarily determining that the lowest possible commissions are paid in all circumstances. In seeking to determine the reasonableness of brokerage commissions paid in any transaction, the Investment Adviser relies upon its experience and knowledge regarding commissions generally charged by various brokers. The sale of Fund Shares by a broker-dealer is not a factor in the selection of broker-dealers. In seeking to implement the Trust’s policies, the Investment Adviser effects transactions with those brokers and dealers that the Investment Adviser believes provide the most favorable prices and are capable of providing efficient executions. The Investment Adviser and its affiliates do not currently participate in soft dollar transactions. The Investment Adviser assumes general supervision over placing orders on behalf of the Fund for the purchase or sale of portfolio securities. If purchases or sales of portfolio securities by the Fund and one or more other investment companies or clients supervised by the Investment Adviser are considered at or about the same time, transactions in such securities are allocated among the Fund, the several investment companies and clients in a manner deemed equitable to all by the Investment Adviser. In some cases, this procedure could have a detrimental effect on the price or volume of the security as far as the Fund is concerned. However, in other cases, it is possible that the ability to participate in volume transactions and to negotiate lower brokerage commissions will be beneficial to the Fund. The primary consideration is prompt execution of orders at the most favorable net price. 28 ADDITIONAL INFORMATION CONCERNING THE TRUST The Trust is an open-end management investment company registered under the 1940 Act. The Trust was organized as a Delaware statutory trust on May 24, 2006. The Trust is authorized to issue an unlimited number of shares in one or more series or “funds.” The Trust currently is comprised of [30] funds. The Board of Trustees of the Trust has the right to establish additional series in the future, to determine the preferences, voting powers, rights and privileges thereof and to modify such preferences, voting powers, rights and privileges without shareholder approval. Each Share issued by the Fund has a pro rata interest in the assets of the Fund. Fund Shares have no preemptive, exchange, subscription or conversion rights and are freely transferable. Each Share is entitled to participate equally in dividends and distributions declared by the Board with respect to the Fund, and in the net distributable assets of the Fund on liquidation. The Trustees may at any time, by majority vote and without shareholder approval, cause the Fund to redeem all of its Shares and liquidate. Each Share has one vote with respect to matters upon which a shareholder vote is required consistent with the requirements of the 1940 Act and the rules promulgated thereunder. Shares of all funds, including the Fund, of the Trust vote together as a single class except as otherwise required by the 1940 Act, or if the matter being voted on affects only a particular fund, and, if a matter affects a particular fund differently from other funds, the shares of that fund will vote separately on such matter. The Declaration of Trust may, except in limited circumstances, be amended or supplemented by the Trustees without shareholder vote. The holders of Fund Shares are required to disclose information on direct or indirect ownership of Fund Shares as may be required to comply with various laws applicable to the Fund, and ownership of Fund Shares may be disclosed by the Fund if so required by law or regulation. The Trust is not required and does not intend to hold annual meetings of shareholders. Shareholders owning more than 51% of the outstanding shares of the Trust have the right to call a special meeting to remove one or more Trustees or for any other purpose. 29 The Trust does not have information concerning the beneficial ownership of Shares held by DTC Participants (as defined below). Shareholders may make inquiries by writing to the Trust, c/o the Distributor, 2455 Corporate West Drive, Lisle, Illinois 60532. Control Persons and Principal Holders of Securities. As of the date of this SAI, no persons owned 5% or more of the Fund’s securities. Book Entry Only System. The following information supplements and should be read in conjunction with the section in the Prospectus entitled “Book Entry.” DTC Acts as Securities Depository for Fund Shares. Shares of the Fund are represented by securities registered in the name of DTC or its nominee and deposited with, or on behalf of, DTC. DTC, a limited-purpose trust company, was created to hold securities of its participants (the “DTC Participants”) and to facilitate the clearance and settlement of securities transactions among the DTC Participants in such securities through electronic book-entry changes in accounts of the DTC Participants, thereby eliminating the need for physical movement of securities certificates. DTC Participants include securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations, some of whom (and/or their representatives) own DTC. More specifically, DTC is owned by a number of its DTC Participants and by the New York Stock Exchange (“NYSE”), the NYSE Arca and FINRA. Access to the DTC system is also available to others such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a DTC Participant, either directly or indirectly (the “Indirect Participants”). Beneficial ownership of Shares is limited to DTC Participants, Indirect Participants and persons holding interests through DTC Participants and Indirect Participants. Ownership of beneficial interests in Shares (owners of such beneficial interests are referred to herein as “Beneficial Owners”) is shown on, and the transfer of ownership is effected only through, records maintained by DTC (with respect to DTC Participants) and on the records of DTC Participants (with respect to Indirect Participants and Beneficial Owners that are not DTC Participants). Beneficial Owners will receive from or through the DTC Participant a written confirmation relating to their purchase and sale of Shares. Conveyance of all notices, statements and other communications to Beneficial Owners is effected as follows. Pursuant to the Depositary Agreement between the Trust and DTC, DTC is required to make available to the Trust upon request and for a fee to be charged to the Trust a listing of the Shares of the Fund held by each DTC Participant. The Trust shall inquire of each such DTC Participant as to the number of Beneficial Owners holding Shares, directly or indirectly, through such DTC Participant. The Trust shall provide each such DTC Participant with copies of such notice, statement or other communication, in such form, number and at such place as such DTC Participant may reasonably request, in order that such notice, statement or communication may be transmitted by such DTC Participant, directly or indirectly, to such Beneficial Owners. In addition, the Trust shall pay to each such DTC Participant a fair and reasonable amount as reimbursement for the expenses attendant to such transmittal, all subject to applicable statutory and regulatory requirements. Fund distributions shall be made to DTC or its nominee, Cede & Co., as the registered holder of all Fund Shares. DTC or its nominee, upon receipt of any such distributions, shall immediately credit DTC Participants’ accounts with payments in amounts proportionate to their respective beneficial interests in Shares of the Fund as shown on the records of DTC or its nominee. Payments by DTC Participants to Indirect Participants and Beneficial Owners of Shares held through such DTC Participants will be governed by standing instructions and customary practices, as is now the case with securities held for the accounts of customers in bearer form or registered in a “street name,” and will be the responsibility of such DTC Participants. 30 The Trust has no responsibility or liability for any aspect of the records relating to or notices to Beneficial Owners, or payments made on account of beneficial ownership interests in such Shares, or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests, or for any other aspect of the relationship between DTC and the DTC Participants or the relationship between such DTC Participants and the Indirect Participants and Beneficial Owners owning through such DTC Participants. DTC may decide to discontinue providing its service with respect to Shares at any time by giving reasonable notice to the Trust and discharging its responsibilities with respect thereto under applicable law. Under such circumstances, the Trust shall take action to find a replacement for DTC to perform its functions at a comparable cost. Proxy Voting. The Board of Trustees of the Trust has delegated responsibility for decisions regarding proxy voting for securities held by the Fund to the Investment Adviser. The Investment Adviser engages a third-party proxy service, such as Institutional Shareholder Services or a similar service, to vote all proxies on behalf of the Fund. The Investment Adviser periodically reviews the proxy voting results to ensure that proxies are voted in accordance with the service’s guidelines and that proxies are voted in a timely fashion. To avoid any conflicts of interest, the Investment Adviser does not have authority to override the recommendations of the third party service provider, except upon the written authorization of the client directing the Investment Adviser to vote in a specific manner. All overrides shall be approved by the Chief Compliance Officer. To the extent that the third party service provider seeks the Investment Adviser’s direction on how to vote on any particular matter, the Chief Compliance Officer and Chief Financial Officer shall determine whether any potential conflict of interest is present. If a potential conflict of interest is present, the Investment Adviser shall seek instructions from clients on how to vote that particular item. The Trust is required to disclose annually the Fund’s complete proxy voting record on Form N-PX covering the period July 1 through June 30 and file it with the SEC no later than August 31. Form N-PX for the Fund also will be available at no charge upon request by calling 1-800-345-7994 or by writing to Claymore Exchange-Traded Fund Trust at 2455 Corporate West Drive, Lisle, IL 60532. The Fund’s Form N-PX will also be available on the SEC’s website at www.sec.gov. Quarterly Portfolio Schedule. The Trust is required to disclose, after its first and third fiscal quarters, the complete schedule of the Fund’s portfolio holdings with the SEC on Form N-Q. The Trust also discloses a complete schedule of the Fund’s portfolio holdings with the SEC on Form N-CSR after its second and fourth quarters. Form N-Q and Form N-CSR for the Fund will be available on the SEC’s website at http://www.sec.gov. The Fund’s Form N-Q and Form N-CSR may also be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. and information on the operation of the Public Reference Room may be obtained by calling 1-202-551-8090. The Fund’s Form N-Q and Form N-CSR will be available without charge, upon request, by calling 1-888-949-3837 or by writing to Claymore Exchange-Traded Fund Trust at 2455 Corporate West Drive, Lisle, IL 60532. Portfolio Holdings Policy. The Trust has adopted a policy regarding the disclosure of information about the Trust’s portfolio holdings. The Fund and its service providers may not receive compensation or any other consideration (which includes any agreement to maintain assets in the Fund or in other investment companies or accounts managed by the Investment Adviser or any affiliated person of the Investment Adviser) in connection with the disclosure of portfolio holdings information of the Fund. The Trust’s policy is implemented and overseen by the Chief Compliance Officer of the Fund, subject to the oversight of the Board of Trustees. Periodic reports regarding these procedures will be provided to the Board of Trustees of the Trust. The Board of Trustees of the Trust must approve all material amendments to this policy. The Fund’s complete portfolio holdings are publicly 31 disseminated each day the Fund is open for business through financial reporting and news services, including publicly accessible Internet web sites. In addition, a basket composition file, which includes the security names and share quantities to deliver in exchange for Fund shares, together with estimates and actual cash components, is publicly disseminated daily prior to the opening of the NYSE Arca via the National Securities Clearing Corporation (“NSCC”). The basket represents one Creation Unit of the Fund. The Trust, the Investment Adviser and the Distributor will not disseminate non-public information concerning the Trust. Codes of Ethics. Pursuant to Rule 17j-1 under the 1940 Act, the Board of Trustees has adopted a Code of Ethics for the Trust and approved Codes of Ethics adopted by the Investment Adviser and the Distributor (collectively the “Codes”). The Codes are intended to ensure that the interests of shareholders and other clients are placed ahead of any personal interest, that no undue personal benefit is obtained from the person’s employment activities and that actual and potential conflicts of interest are avoided. The Codes apply to the personal investing activities of Trustees and officers of the Trust, the Investment Adviser and the Distributor (“Access Persons”). Rule 17j-1 and the Codes are designed to prevent unlawful practices in connection with the purchase or sale of securities by Access Persons. Under the Codes, Access Persons are permitted to engage in personal securities transactions, but are required to report their personal securities transactions for monitoring purposes. The Codes permit personnel subject to the Codes to invest in securities subject to certain limitations, including securities that may be purchased or held by the Fund. In addition, Access Persons are required to obtain approval before investing in initial public offerings or private placements. The Codes are on file with the SEC, and are available to the public. CREATION AND REDEMPTION OF CREATION UNIT AGGREGATIONS Creation. The Trust issues and sells Shares of the Fund only in Creation Unit Aggregations on a continuous basis through the Distributor, without a sales load, at the NAV next determined after receipt, on any Business Day (as defined below), of an order in proper form. A “Business Day” is any day on which the NYSE is open for business. As of the date of this SAI, the NYSE observes the following holidays: New Year’s Day, Martin Luther King, Jr. Day, Washington’s Birthday, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. Deposit of Securities and Deposit or Delivery of Cash. The consideration for purchase of Creation Unit Aggregations of the Fund generally consists of the in-kind deposit of a designated portfolio of fixed income securities the “Deposit Securities” (and/or an amount of cash in lieu of some or all of the Deposit Securities) per each Creation Unit Aggregation constituting a substantial replication of the securities included in the Underlying Index (“Fund Securities”) and an amount of cash the “Cash Component” computed as described below. Together, the Deposit Securities (and/or an amount of cash in lieu of some or all of the Deposit Securities) and the Cash Component constitute the “Fund Deposit,” which represents the minimum initial and subsequent investment amount for a Creation Unit Aggregation of the Fund. The Cash Component is sometimes also referred to as the Balancing Amount. The Cash Component serves the function of compensating for any differences between the NAV per Creation Unit Aggregation and the Deposit Amount (as defined below). The Cash Component is an amount equal to the difference between the NAV of the Fund Shares (per Creation Unit Aggregation) and the “Deposit Amount” an amount equal to the market value of the Deposit Securities. If the Cash Component is a positive number (i.e., the NAV per Creation Unit Aggregation exceeds the Deposit Amount), the creator will deliver the Cash Component. If the Cash Component is a negative number (i.e., the NAV per Creation Unit Aggregation is less than the Deposit Amount), the creator will receive the Cash Component. 32 The Custodian, through the NSCC (discussed below), makes available on each Business Day, prior to the opening of business on the NYSE Arca (currently 9:30 a.m., Eastern time), the list of the names and the required number of shares of each Deposit Security to be included in the current Fund Deposit (based on information at the end of the previous Business Day) for the Fund. Such Fund Deposit is applicable, subject to any adjustments as described below, in order to effect creations of Creation Unit Aggregations of the Fund until such time as the next-announced composition of the Deposit Securities is made available. The identity and number of shares of the Deposit Securities required for a Fund Deposit for the Fund changes as rebalancing adjustments and corporate action events are reflected within the Fund from time to time by the Investment Adviser with a view to the investment objective of the Fund. The composition of the Deposit Securities may also change in response to adjustments to the weighting or composition of the Component Securities of the Underlying Index. In addition, the Trust reserves the right to permit or require the substitution of an amount of cash i.e., a “cash in lieu” amount to be added to the Cash Component to replace any Deposit Security that may not be available in sufficient quantity for delivery or that may not be eligible for transfer through the systems of DTC, or which might not be eligible for trading by an Authorized Participant (as defined below) or the investor for which it is acting or other relevant reason. Brokerage commissions incurred in connection with the acquisition of Deposit Securities not eligible for transfer through the systems of DTC will be at the expense of the Fund and will affect the value of all Shares; but the Investment Adviser, subject to the approval of the Board of Trustees, may adjust the transaction fee within the parameters described above to protect ongoing shareholders. The adjustments described above will reflect changes known to the Investment Adviser on the date of announcement to be in effect by the time of delivery of the Fund Deposit, in the composition of the Underlying Index or resulting from certain corporate actions. In addition to the list of names and numbers of securities constituting the current Deposit Securities of a Fund Deposit, the Custodian, through the NSCC, also makes available on each Business Day, the estimated Cash Component, effective through and including the previous Business Day, per outstanding Creation Unit Aggregation of the Fund. Procedures for Creation of Creation Unit Aggregations. To be eligible to place orders with the Distributor and to create a Creation Unit Aggregation of the Fund, an entity must a DTC Participant (see the Book Entry Only System section), and, in each case, must have executed an agreement with the Distributor, with respect to creations and redemptions of Creation Unit Aggregations (“Participant Agreement”) (discussed below). A DTC Participant is also referred to as an “Authorized Participant.” Investors should contact the Distributor for the names of Authorized Participants that have signed a Participant Agreement. All Fund Shares, however created, will be entered on the records of DTC in the name of Cede & Co. for the account of a DTC Participant. All orders to create Creation Unit Aggregations (through an Authorized Participant), must be received by the Distributor no later than the closing time of the regular trading session on the NYSE Arca (“Closing Time”) (ordinarily 4:00 p.m., Eastern time) in each case on the date such order is placed in order for creation of Creation Unit Aggregations to be effected based on the NAV of Shares of the Fund as next determined on such date after receipt of the order in proper form. In the case of custom orders placed by an Authorized Participant in the event that the Trust permits the substitution of an amount of cash to be added to the Cash Component to replace any Deposit Security which may not be available in sufficient quantity for delivery or which may not be eligible for trading by such Authorized Participant or the investor for which it is acting or other relevant reason, the order must be received by the Distributor no later than 3:00 p.m. Eastern time on the trade date. A custom order placed by an Authorized 33 Participant must be received no later than 4:00 p.m. Eastern time on the trade date in the event that the Trust requires the substitution of an amount of cash to be added to the Cash Component to replace any Deposit Security which may not be available in sufficient quantity for delivery or which may not be eligible for trading by such Authorized Participant or the investor for which it is acting or other relevant reason. The date on which an order to create Creation Unit Aggregations (or an order to redeem Creation Unit Aggregations, as discussed below) is placed is referred to as the “Transmittal Date.” Orders must be transmitted by an Authorized Participant by telephone or other transmission method acceptable to the Distributor pursuant to procedures set forth in the Participant Agreement, as described below (see the “Placement of Creation Orders” section). Severe economic or market disruptions or changes, or telephone or other communication failure may impede the ability to reach the Distributor or an Authorized Participant. All orders from investors who are not Authorized Participants to create Creation Unit Aggregations shall be placed with an Authorized Participant, as applicable, in the form required by such Authorized Participant. In addition, the Authorized Participant may request the investor to make certain representations or enter into agreements with respect to the order, e.g., to provide for payments of cash, when required. Investors should be aware that their particular broker may not have executed a Participant Agreement and that, therefore, orders to create Creation Unit Aggregations of the Fund have to be placed by the investor’s broker through an Authorized Participant that has executed a Participant Agreement. In such cases there may be additional charges to such investor. At any given time, there may be only a limited number of broker-dealers that have executed a Participant Agreement. Those placing orders for Creation Unit Aggregations should afford sufficient time to permit proper submission of the order to the Distributor prior to the Closing Time on the Transmittal Date. Persons placing orders should ascertain the deadlines applicable to DTC and the Federal Reserve Bank wire system by contacting the operations department of the broker or depository institution effectuating such transfer of Deposit Securities and Cash Component. Placement of Creation Orders. Fund Deposits must be delivered through a DTC Participant that has executed a Participant Agreement pre-approved by the Investment Adviser and the Distributor. Such orders will be effected through a transfer of securities and cash directly through DTC. The Fund Deposit transfer must be ordered by the DTC Participant on the Transmittal Date in a timely fashion so as to ensure the delivery of the requisite number of Deposit Securities through DTC to the account of the Fund by no later than 11:00 a.m., Eastern time, of the next Business Day immediately following the Transmittal Date. All questions as to the number of Deposit Securities to be delivered, and the validity, form and eligibility (including time of receipt) for the deposit of any tendered securities, will be determined by the Trust, whose determination shall be final and binding. The amount of cash equal to the Cash Component must be transferred directly to the Custodian through the Federal Reserve Bank wire transfer system in a timely manner so as to be received by the Custodian no later than 2:00 p.m., Eastern time, on the next Business Day immediately following such Transmittal Date. An order to create Creation Unit Aggregations is deemed received by the Distributor on the Transmittal Date if (i) such order is received by the Distributor not later than the Closing Time on such Transmittal Date; and (ii) all other procedures set forth in the Participant Agreement are properly followed. However, if the Custodian does not receive both the required Deposit Securities and the Cash Component by 11:00 a.m. and 2:00 p.m., Eastern time, respectively, on the next Business Day immediately following the Transmittal Date, such order will be canceled. Upon written notice to the Distributor, such canceled order may be resubmitted the following Business Day using a Fund Deposit as newly constituted to reflect the then current Deposit Securities and Cash Component. The delivery of Creation Unit Aggregations so created will occur no later than the third (3rd) Business Day following the day on which the purchase order is deemed received by the Distributor. 34 Additional transaction fees may be imposed with respect to transactions in which any cash can be used in lieu of Deposit Securities to create Creation Units. (See Creation Transaction Fee section below). Creation Unit Aggregations may be created in advance of receipt by the Trust of all or a portion of the applicable Deposit Securities as described below. In these circumstances, the initial deposit will have a value greater than the NAV of the Fund Shares on the date the order is placed in proper form since, in addition to available Deposit Securities, cash must be deposited in an amount equal to the sum of (i) the Cash Component, plus (ii) 115% of the market value of the undelivered Deposit Securities (the “Additional Cash Deposit”). The order shall be deemed to be received on the Business Day on which the order is placed provided that the order is placed in proper form prior to 4:00 p.m., Eastern time, on such date, and federal funds in the appropriate amount are deposited with the Custodian by 11:00 a.m., Eastern time, the following Business Day. If the order is not placed in proper form by 4:00 p.m., Eastern time, or federal funds in the appropriate amount are not received by 11:00 a.m. Eastern time, the next Business Day, then the order may be deemed to be canceled and the Authorized Participant shall be liable to the Fund for losses, if any, resulting therefrom. An additional amount of cash shall be required to be deposited with the Trust, pending delivery of the missing Deposit Securities to the extent necessary to maintain the Additional Cash Deposit with the Trust in an amount at least equal to 115% of the daily marked to market value of the missing Deposit Securities. To the extent that missing Deposit Securities are not received by 1:00 p.m., Eastern time, on the third Business Day following the day on which the purchase order is deemed received by the Distributor or in the event a marked-to-market payment is not made within one Business Day following notification by the Distributor that such a payment is required, the Trust may use the cash on deposit to purchase the missing Deposit Securities. Authorized Participants will be liable to the Trust and the Fund for the costs incurred by the Trust in connection with any such purchases. These costs will be deemed to include the amount by which the actual purchase price of the Deposit Securities exceeds the market value of such Deposit Securities on the day the purchase order was deemed received by the Distributor plus the brokerage and related transaction costs associated with such purchases. The Trust will return any unused portion of the Additional Cash Deposit once all of the missing Deposit Securities have been properly received by the Custodian or purchased by the Trust and deposited into the Trust. In addition, a transaction fee, as listed below, will be charged in all cases. The delivery of Creation Unit Aggregations so created will occur no later than the third Business Day following the day on which the purchase order is deemed received by the Distributor. Acceptance of Orders for Creation Unit Aggregations. The Trust reserves the absolute right to reject a creation order transmitted to it by the Distributor in respect of the Fund if: (i) the order is not in proper form; (ii) the investor(s), upon obtaining the Fund Shares ordered, would own 80% or more of the currently outstanding shares of the Fund; (iii) the Deposit Securities delivered are not as disseminated for that date by the Custodian, as described above; (iv) acceptance of the Deposit Securities would have certain adverse tax consequences to the Fund; (v) acceptance of the Fund Deposit would, in the opinion of counsel, be unlawful; (vi) acceptance of the Fund Deposit would otherwise, in the discretion of the Trust or the Investment Adviser, have an adverse effect on the Trust or the rights of beneficial owners; or (vii) in the event that circumstances outside the control of the Trust, the Custodian, the Distributor and the Investment Adviser make it for all practical purposes impossible to process creation orders. Examples of such circumstances include acts of God; public service or utility problems such as fires, floods, extreme weather conditions and power outages resulting in telephone, telecopy and computer failures; market conditions or activities causing trading halts; systems failures involving computer or other information systems affecting the Trust, the Investment Adviser, the Distributor, DTC, the Custodian or any other participant in the creation process, and similar extraordinary events. The Distributor shall notify a prospective creator of a Creation Unit and/or the Authorized Participant acting on behalf of such prospective creator of its rejection of the order of such person. The Trust, the Custodian, any sub-custodian and the Distributor are under no duty, however, to give notification of any defects or irregularities in the delivery of Fund Deposits nor shall any of them incur any liability for the failure to give any such notification. 35 All questions as to the number of shares of each security in the Deposit Securities and the validity, form, eligibility, and acceptance for deposit of any securities to be delivered shall be determined by the Trust, and the Trust’s determination shall be final and binding. Creation Transaction Fee. Investors will be required to pay a fixed creation transaction fee, described below, payable to the Distributor regardless of the number of creations made each day. An additional charge of up to four times the fixed transaction fee (expressed as a percentage of the value of the Deposit Securities) may be imposed for cash creations (to offset the Trust’s brokerage and other transaction costs associated with using cash to purchase the requisite Deposit Securities). Investors are responsible for the costs of transferring the securities constituting the Deposit Securities to the account of the Trust. The Standard Creation/Redemption Transaction Fee for the Fund will be [ ]. As the planned termination date of the Fund approaches, the Fund may elect to accept creation orders mostly or entirely in cash. As bonds held by the Fund begin to mature, creations may be effected increasingly in cash. Redemption of Fund Shares in Creation Units Aggregations. Fund Shares may be redeemed only in Creation Unit Aggregations at its NAV next determined after receipt of a redemption request in proper form by the Fund through the Transfer Agent and only on a Business Day. The Fund will not redeem Shares in amounts less than Creation Unit Aggregations. Beneficial owners must accumulate enough Shares in the secondary market to constitute a Creation Unit Aggregation in order to have such Shares redeemed by the Trust. There can be no assurance, however, that there will be sufficient liquidity in the public trading market at any time to permit assembly of a Creation Unit Aggregation. Investors should expect to incur brokerage and other costs in connection with assembling a sufficient number of Fund Shares to constitute a redeemable Creation Unit Aggregation. An Authorized Participant submitting a redemption request is deemed to represent to the Trust that it (or its client) (i) owns outright or has full legal authority and legal beneficial right to tender for redemption the requisite number of Shares to be redeemed and can receive the entire proceeds of the redemption, and (ii) the Shares to be redeemed have not been loaned or pledged to another party nor are they the subject of a repurchase agreement, securities lending agreement or such other arrangement which would preclude the delivery of such Shares to the Trust. The Trust reserves the right to verify these representations at its discretion, but will typically require verification with respect to a redemption request from the Fund in connection with higher levels of redemption activity and/or short interest in the Fund. If the Authorized Participant, upon receipt of a verification request, does not provide sufficient verification of its representations as determined by the Trust, the redemption request will not be considered to have been received in proper form and may be rejected by the Trust. With respect to the Fund, the Custodian, through the NSCC, makes available prior to the opening of business on the NYSE Arca (currently 9:30 a.m., Eastern time) on each Business Day, the identity of the Fund Securities that will be applicable (subject to possible amendment or correction) to redemption requests received in proper form (as described below) on that day. Fund Securities received on redemption may not be identical to Deposit Securities that are applicable to creations of Creation Unit Aggregations. Unless cash redemptions or partial cash redemptions are available or specified for the Fund, the redemption proceeds for a Creation Unit Aggregation generally consist of Fund Securities as announced on the Business Day of the request for redemption received in proper form plus or minus cash in an amount equal to the difference between the NAV of the Fund Shares being redeemed, as next determined after a receipt of a request in proper form, and the value of the Fund Securities (the “Cash Redemption Amount”), less a redemption transaction fee as listed below. In the event that the Fund Securities have a value greater than the NAV of the Fund 36 Shares, a compensating cash payment equal to the difference is required to be made by or through an Authorized Participant by the redeeming shareholder. The right of redemption may be suspended or the date of payment postponed (i) for any period during which the NYSE is closed (other than customary weekend and holiday closings); (ii) for any period during which trading on the NYSE is suspended or restricted; (iii) for any period during which an emergency exists as a result of which disposal of the Shares of the Fund or determination of the Fund’s NAV is not reasonably practicable; or (iv) in such other circumstances as is permitted by the SEC. Redemption Transaction Fee. A redemption transaction fee is imposed to offset transfer and other transaction costs that may be incurred by the Fund. An additional variable charge for cash redemptions (when cash redemptions are available or specified) for the Fund may be imposed. Investors will also bear the costs of transferring the Fund Securities from the Trust to their account or on their order. Investors who use the services of a broker or other such intermediary in addition to an Authorized Participant to effect a redemption of a Creation Unit Aggregation may be charged an additional fee of up to four times the fixed transaction fee for such services. The standard redemption transaction fees for the Fund are the same as the creation fee set forth above. Placement of Redemption Orders. Orders to redeem Creation Unit Aggregations must be delivered through a DTC Participant that has executed the Participant Agreement. Such orders will be effected through transfer of Fund Shares directly through DTC. An order to redeem Creation Unit Aggregations is deemed received by the Trust on the Transmittal Date if (i) such order is received by the Transfer Agent not later than 4:00 p.m., Eastern time on such Transmittal Date; (ii) such order is accompanied or followed by the requisite number of Shares of the Fund, which delivery must be made through DTC to the Custodian no later than 11:00 a.m., Eastern time (for the Fund Shares), on the next Business Day immediately following such Transmittal Date (the “DTC Cut-Off-Time”) and 2:00 p.m., Eastern Time for any Cash Component, if any owed to the Fund; and (iii) all other procedures set forth in the Participant Agreement are properly followed. After the Trust has deemed an order for redemption received, the Trust will initiate procedures to transfer the requisite Fund Securities which are expected to be delivered within three Business Days and the Cash Redemption Amount, if any owed to the redeeming Beneficial Owner to the Authorized Participant on behalf of the redeeming Beneficial Owner by the third Business Day following the Transmittal Date on which such redemption order is deemed received by the Trust. The calculation of the value of the Fund Securities and the Cash Redemption Amount to be delivered/received upon redemption will be made by the Custodian according to the procedures set forth under Determination of NAV computed on the Business Day on which a redemption order is deemed received by the Trust. Therefore, if a redemption order in proper form is submitted to the Transfer Agent by a DTC Participant not later than Closing Time on the Transmittal Date, and the requisite 37 number of Shares of the Fund are delivered to the Custodian prior to the DTC Cut-Off-Time, then the value of the Fund Securities and the Cash Redemption Amount to be delivered/received will be determined by the Custodian on such Transmittal Date. If, however, either (i) the requisite number of Shares of the Fund are not delivered by the DTC Cut-Off-Time, as described above, or (ii) the redemption order is not submitted in proper form, then the redemption order will not be deemed received as of the Transmittal Date. In such case, the value of the Fund Securities and the Cash Redemption Amount to be delivered/received will be computed on the Business Day following the Transmittal Date provided that the Fund Shares of the Fund are delivered through DTC to the Custodian by 11:00 a.m., Eastern time, the following Business Day pursuant to a properly submitted redemption order. If it is not possible to effect deliveries of the Fund Securities, the Trust may in its discretion exercise its option to redeem such Fund Shares in cash, and the redeeming Beneficial Owner will be required to receive its redemption proceeds in cash. In addition, an investor may request a redemption in cash that the Fund may, in its sole discretion, permit. In either case, the investor will receive a cash payment equal to the NAV of its Fund Shares based on the NAV of Shares of the Fund next determined after the redemption request is received in proper form (minus a redemption transaction fee and additional charge for requested cash redemptions specified above, to offset the Fund’s brokerage and other transaction costs associated with the disposition of Fund Securities). The Fund may also, in its sole discretion, upon request of a shareholder, provide such redeemer a portfolio of securities that differs from the exact composition of the Fund Securities, or cash in lieu of some securities added to the Cash Component, but in no event will the total value of the securities delivered and the cash transmitted differ from the NAV. Redemptions of Fund Shares for Fund Securities will be subject to compliance with applicable federal and state securities laws and the Fund (whether or not it otherwise permits cash redemptions) reserves the right to redeem Creation Unit Aggregations for cash to the extent that the Trust could not lawfully deliver specific Fund Securities upon redemptions or could not do so without first registering the Fund Securities under such laws. An Authorized Participant or an investor for which it is acting subject to a legal restriction with respect to a particular security included in the Fund Securities applicable to the redemption of a Creation Unit Aggregation may be paid an equivalent amount of cash. The Authorized Participant may request the redeeming Beneficial Owner of the Fund Shares to complete an order form or to enter into agreements with respect to such matters as compensating cash payment, beneficial ownership of Shares or delivery instructions. As the planned termination date of the Fund approaches, the Fund may elect to accept redemption orders mostly or entirely in cash. As bonds held by the Fund begin to mature, redemptions may be effected increasingly in cash. TAXES The Fund intends to qualify for and to elect to be treated as a separate regulated investment company (a “RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). As a RIC, the Fund will not be subject to U.S. federal income tax on the portion of its taxable investment income and capital gains that it distributes to its shareholders. To qualify for treatment as a RIC, a company must annually distribute at least 90% of its net investment company taxable income (which includes, but is not limited to, dividends, interest and net short-term capital gains) and meet several other requirements relating to the nature of its income and the diversification of its assets. If the Fund fails to qualify for any taxable year as a RIC (and is not able to cure said failure through the payment of certain penalties), all of its taxable income will be subject to tax at regular corporate income tax rates without any deduction for distributions to shareholders, and such distributions generally will be taxable to shareholders as ordinary dividends to the extent of the Fund’s current and accumulated earnings and profits. In addition, in order to requalify for taxation as a RIC, the Fund may be required to recognize unrealized gains, pay substantial taxes and interest and make certain distributions. 38 The Fund is treated as a separate corporation for federal income tax purposes. The Fund therefore is considered to be a separate entity in determining its treatment under the rules for RICs described herein and in the Prospectus. Losses in one fund do not offset gains in another fund and the requirements (other than certain organizational requirements) to qualify for RIC status are determined at the Fund level rather than at the Trust level. The Fund will be subject to a 4% excise tax on certain undistributed income if it does not distribute to its shareholders in each calendar year at least 98% of its ordinary income for the calendar year plus 98.2% of its net capital gains for twelve months ended October 31 of such year. The Fund intends to declare and distribute dividends and distributions in the amounts and at the times necessary to avoid the application of this 4% excise tax. As a result of tax requirements, the Trust on behalf of the Fund has the right to reject an order to purchase Shares if the purchaser (or group of purchasers) would, upon obtaining the Shares so ordered, own 80% or more of the outstanding Shares of the Fund and if, pursuant to section 351 of the Code, the Fund would have a basis in the Deposit Securities different from the market value of such securities on the date of deposit. The Trust also has the right to require information necessary to determine beneficial Share ownership for purposes of the 80% determination. The Fund may make investments that are subject to special federal income tax rules, such as investments in repurchase agreements, money market instruments, convertible securities, structured notes, and non-U.S. corporations classified as “passive foreign investment companies.” Those special tax rules can, among other things, affect the timing of income or gain, the treatment of income as capital or ordinary and the treatment of capital gain or loss as long-term or short-term. The application of these special rules would therefore also affect the character of distributions made by the Fund. The Fund may need to borrow money or dispose of some of its investments earlier than anticipated in order to meet its distribution requirements. See “Federal Tax Treatment of Futures and Options Contracts” for certain federal income tax rules regarding futures and options contracts. Distributions from the Fund’s net investment income, including net short-term capital gains, if any, and distributions of income from securities lending, are taxable as ordinary income. Distributions reinvested in additional Shares of the Fund through the means of a dividend reinvestment service will be taxable dividends to shareholders acquiring such additional Shares to the same extent as if such dividends had been received in cash. Distributions of net long-term capital gains, if any, in excess of net short-term capital losses are taxable as long-term capital gains, regardless of how long shareholders have held the Shares. Capital loss realized on the sale or exchange of Shares held for six months or less will be treated as long-term capital loss to the extent of any capital gain dividends received by the shareholder. Dividends declared by the Fund in October, November or December and paid to shareholders of record of such months during the following January may be treated as having been received by such shareholders in the year the distributions were declared. 39 Long-term capital gains of non-corporate taxpayers are generally taxed at a maximum rate of 15% for taxable years beginning before January 1, 2013. Thereafter, without further Congressional action, that rate will return to 20%. In addition, some ordinary dividends declared and paid by the Fund to non-corporate shareholders may qualify for taxation at the lower reduced tax rates applicable to long-term capital gains, provided that holding period and other requirements are met by the Fund and the shareholder. Without further Congressional action, the lower tax rate on qualified dividend income will not apply after December 31, 2012 and all ordinary dividends will be taxed at ordinary income tax rates. The Fund will report to shareholders annually the amounts of dividends received from ordinary income, the amount of distributions received from capital gains and the portion of dividends which may qualify for the corporate dividends received deduction. In addition, the Fund will report the amount of dividends to non-corporate shareholders eligible for taxation at the lower reduced tax rates applicable to long-term capital gains. If, for any fiscal year, the total distributions made exceed the Fund’s current and accumulated earnings and profits, the excess will, for federal income tax purposes, be treated as a tax free return of capital to each shareholder up to the amount of the shareholder’s basis in his or her shares, and thereafter as gain from the sale of shares. The amount treated as a tax free return of capital will reduce the shareholder’s adjusted basis in his or her shares, thereby increasing his or her potential gain or reducing his or her potential loss on the subsequent sale of his or her shares. The sale, exchange or redemption of Shares may give rise to a gain or loss. In general, any gain or loss realized upon a taxable disposition of Shares will be treated as long-term capital gain or loss if the Shares have been held for more than one year. Otherwise, the gain or loss on the taxable disposition of Shares will be treated as short-term capital gain or loss. A loss realized on a sale or exchange of Shares of the Fund may be disallowed if other substantially identical Shares are acquired (whether through the automatic reinvestment of dividends or otherwise) within a sixty-one (61) day period beginning thirty (30) days before and ending thirty (30) days after the date that the Shares are disposed of. In such a case, the basis of the Shares acquired must be adjusted to reflect the disallowed loss. Any loss upon the sale or exchange of Shares held for six (6) months or less is treated as long-term capital loss to the extent of any capital gain dividends received by the shareholders. Distribution of ordinary income and capital gains may also be subject to state and local taxes. Distributions of ordinary income paid to shareholders who are nonresident aliens or foreign entities that are not effectively connected to the conduct of a trade or business within the U.S. will generally be subject to a 30% U.S. withholding tax unless a reduced rate of withholding or a withholding exemption is provided under applicable treaty law. However, shareholders who are nonresident aliens or foreign entities will generally not be subject to U.S. withholding or income tax on gains realized on the sale of Shares or on dividends from capital gains unless (i) such gain or capital gain dividend is effectively connected with the conduct of a trade or business within the U.S. or (ii) in the case of a non-corporate shareholder, the shareholder is present in the U.S. for a period or periods aggregating 183 days or more during the year of the sale or capital gain dividend and certain other conditions are met. Gains on the sale of Shares and dividends that are effectively connected with the conduct of a trade or business within the U.S. will generally be subject to U.S. federal net income taxation at regular income tax rates. Nonresident shareholders are urged to consult their own tax advisors concerning the applicability of the United States withholding tax and possible applicability of U.S. estate tax. Some shareholders may be subject to a withholding tax on distributions of ordinary income, capital gains and any cash received on redemption of Creation Units (“backup withholding”). Generally, shareholders subject to backup withholding will be those for whom no certified taxpayer identification number is on file with the Fund or who, to the Fund’s knowledge, have furnished an incorrect number. When establishing an account, an investor must certify under penalty of perjury that such number is correct and that such investor is not otherwise subject to backup withholding. 40 Dividends and interest received by the Fund may give rise to withholding and other taxes imposed by foreign countries. Tax conventions between certain countries and the United States may reduce or eliminate such taxes. The foregoing discussion is a summary only and is not intended as a substitute for careful tax planning. Purchasers of Shares should consult their own tax advisors as to the tax consequences of investing in such Shares, including under federal, state, local and other tax laws. Finally, the foregoing discussion is based on applicable provisions of the Code, regulations, judicial authority and administrative interpretations in effect on the date hereof. Changes in applicable authority could materially affect the conclusions discussed above, and such changes often occur. FEDERAL TAX TREATMENT OF FUTURES AND OPTIONS CONTRACTS The Fund is required for federal income tax purposes to mark to market and recognize as income for each taxable year its net unrealized gains and losses on certain futures contracts as of the end of the year as well as those actually realized during the year. Gain or loss from broad-based index options and futures contracts that are listed on a qualified board or exchange are generally required to be marked to market and will result in 60% long-term and 40% short-term capital gain or loss. Application of this rule may alter the timing and character of distributions to shareholders. The Fund may be required to defer the recognition of losses on futures contracts, options contracts and swaps to the extent of any unrecognized gains on offsetting positions held by the Fund. In order for the Fund to continue to qualify for federal income tax treatment as a RIC, at least 90% of its gross income for a taxable year must be derived from qualifying income, i.e., dividends, interest, income derived from loans or securities, gains from the sale of securities or of foreign currencies or other income derived with respect to the Fund’s business of investing in securities (including net income derived from an interest in certain “qualified publicly traded partnerships”). It is anticipated that any net gain realized from the closing out of futures or options contracts will be considered gain from the sale of securities or derived with respect to the Fund’s business of investing in securities and therefore will be qualifying income for purposes of the 90% gross income requirement. The Fund intends to distribute to shareholders at least annually any net capital gains which have been recognized for federal income tax purposes, including unrealized gains at the end of the Fund’s fiscal year on futures or options transactions. Such distributions are combined with distributions of capital gains realized on the Fund’s other investments and shareholders are advised on the nature of the distributions. DETERMINATION OF NAV The following information supplements and should be read in conjunction with the section in the Prospectus entitled “How to Buy and Sell Shares - Pricing Fund Shares.” The NAV per Share of the Fund is computed by dividing the value of the net assets of the Fund (i.e., the value of its total assets less total liabilities) by the total number of Shares of the Fund outstanding, rounded to the nearest cent. Expenses and fees, including without limitation, the management and administration fees, are accrued daily and taken into account for purposes of determining NAV. The NAV per Share is calculated by the Custodian and determined as of the close of the regular trading session on the NYSE (ordinarily 4:00 p.m., Eastern time) on each day that such exchange is open. 41 In computing the Fund’s NAV, the Fund’s securities holdings traded on a national securities exchange are valued based on their last sale price. Price information on listed securities is taken from the exchange where the security is primarily traded. Securities regularly traded in an over-the-counter market are valued at the latest quoted sale price in such market or in the case of the NASDAQ, at the NASDAQ official closing price. Other portfolio securities and assets for which market quotations are not readily available are valued based on fair value as determined in good faith in accordance with procedures adopted by the Board. DIVIDENDS AND DISTRIBUTIONS The following information supplements and should be read in conjunction with the section in the Prospectus entitled “Dividends, Distributions and Taxes.” General Policies. Dividends from net investment income, if any, are declared and paid monthly. Distributions of net realized securities gains, if any, generally are declared and paid once a year, but the Trust may make distributions on a more frequent basis. The Trust reserves the right to declare special distributions if, in its reasonable discretion, such action is necessary or advisable to preserve the status of the Fund as a RIC or to avoid imposition of income or excise taxes on undistributed income. Dividends and other distributions on Fund Shares are distributed, as described below, on a pro rata basis to Beneficial Owners of such Shares. Dividend payments are made through DTC Participants and Indirect Participants to Beneficial Owners then of record with proceeds received from the Fund. Dividend Reinvestment Service. No reinvestment service is provided by the Trust. Broker-dealers may make available the DTC book-entry Dividend Reinvestment Service for use by Beneficial Owners of the Fund for reinvestment of their dividend distributions. Beneficial Owners should contact their broker to determine the availability and costs of the service and the details of participation therein. Brokers may require Beneficial Owners to adhere to specific procedures and timetables. MISCELLANEOUS INFORMATION Counsel. Dechert LLP, 1095 Avenue of the Americas, New York, New York 10036-6797, is counsel to the Trust. Independent Registered Public Accounting Firm. [], serves as the Fund’s independent registered public accounting firm. They audit the Fund’s financial statements and perform other audit-related and tax services. FINANCIAL STATEMENTS You may request a copy of the Trust’s Annual Report, when available, at no charge by calling 1-800-345-7999 during normal business hours. 42 PART C: OTHER INFORMATION ITEM 28. EXHIBITS: (a)(1) Certificate of Trust.* (a)(2) Amended and Restated Agreement and Declaration of Trust.***** (b) Bylaws of the Trust.** (c) Not applicable. (d)(1) Investment Advisory Agreement between the Trust and Claymore Advisors, LLC.***** (d)(2) Expense Reimbursement Agreement between the Trust and Claymore Advisors, LLC.**** (d)(3) Investment Subadvisory Agreement among the Trust, Claymore Advisors, LLC and Guggenheim Partners Asset Management, LLC.***** (e)(1) Distribution Agreement between the Trust and Claymore Securities, Inc.** (e)(2) Form of Participant Agreement (equity ETFs).***** (e)(3) Form of Participant Agreement (fixed income ETFs) ***** (f) Not applicable. (g) Form of Custody Agreement between the Trust and The Bank of New York.** (h)(1) Administration Agreement between the Trust and Claymore Advisors, LLC.** (h)(2) Form of Transfer Agency Services Agreement between the Trust and The Bank of New York.** (h)(3) Form of Fund Accounting Agreement between the Trust and The Bank of New York.*** (h)(4) Form of Sub-License Agreement between the Trust and Claymore Advisors, LLC.*** (i) Opinion and consent of Dechert LLP.***** (j) Consent of independent registered public accounting firm.***** (k) Not applicable. (l) Not applicable. (m) Distribution and Service Plan.**** (n) Not applicable. (o) Not applicable. (p) Code of Ethics of the Trust and the InvestmentAdviser.***** (q)(1) Powers of attorney (Barnes, Nyberg and Toupin).***** (q)(2)

Exhibit 10.3   Registration Rights Agreement THIS REGISTRATION RIGHTS AGREEMENT (this “Agreement”) is made and entered into as of October 8, 2014 by and among Platform Specialty Products Corporation, a Delaware corporation (the “Company”), on the one hand, and each of the other signatories party hereto (each, a “Holder”). WHEREAS, the Company and each Holder entered into that certain Subscription Agreement dated October 3, 2014 (the “Subscription Agreement”), in connection with which, on the date hereof, the Company sold approximately 25.4 million newly issued shares (the “Shares”) of common stock, par value $0.01 per share (the “Common Stock”), to the Holders; and WHEREAS, in order to induce the Holders to purchase the Shares in the Offering, the Company has agreed to provide the registration rights provided for in this Agreement for the holders of Registrable Shares (as defined below). NOW, THEREFORE, in consideration of the premises and the mutual covenants of the parties hereto, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: 1.Definitions. As used in this Agreement, the following terms shall have the following meanings: “Additional Payments” is defined in Section 7(a). “Additional Payments Payment Date” means the last day of each month following the date on which a Registration Default occurs. “Additional Shares” means shares or other securities issued in respect of the Shares by reason of or in connection with any stock dividend, stock distribution, stock split or similar issuance. “Affiliate” means, as to any specified Person, (i) any Person that directly, or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with, the specified Person, (ii) any executive officer, director, trustee or general partner of the specified Person and (iii) any legal entity for which the specified Person acts as an executive officer, director, trustee or general partner. For purposes of this definition, “control” (including the correlative meanings of the terms “controlled by” and “under common control with”), as used with respect to any Person, shall mean the possession, directly, or indirectly through one or more intermediaries, of the power to direct or cause the direction of the management and policies of such Person, whether by contract, through the ownership of voting securities, partnership interests or other equity interests or otherwise. “Agreement” is defined in the introductory paragraph of this Agreement.      “Business Day” means each Monday, Tuesday, Wednesday, Thursday and Friday that is not a day on which banking institutions in New York, New York are authorized or obligated by applicable law, regulation or executive order to close. “Commission” means the Securities and Exchange Commission. “Common Stock” is defined in the first recital clause of this Agreement. “Company” is defined in the introductory paragraph of this Agreement, and any successor thereto. “End of Suspension Notice” is defined in Section 5(c) hereof. rules and regulations promulgated by the Commission pursuant thereto. “FINRA” means the Financial Industry National Regulatory Agency. “Holder” means each record or beneficial owner of any Registrable Shares from time to time. “Losses” is defined in Section 6(a) hereof. “Mandatory Registration Statement” is defined in Section 2(a) hereof. “NYSE” means the New York Stock Exchange. “Offering” means the private placement by the Company of approximately 25.4 million shares of Common Stock to certain accredited investors. “Person” means an individual, limited liability company, partnership, corporation, trust, unincorporated organization, government or agency or political subdivision thereof, or any other legal entity. “Private Placement Memorandum” means the private placement memorandum, dated September 30, 2014, pursuant to which the Shares were offered and sold in the Offering. “Prospectus” means the prospectus included in any Registration Statement, including any preliminary prospectus, and all other amendments and supplements to any such prospectus, including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference, if any, in such prospectus. -1-   “Registrable Shares” means the Shares and any Additional Shares in respect thereof, in each case, upon original issuance thereof, and at all times subsequent thereto, including upon the transfer thereof by the original Holder or any subsequent Holder, until, in the case of any such Shares or Additional Shares, as applicable, the earliest to occur of (i) the date on which they have been sold pursuant to a Registration Statement or sold pursuant to Rule 144 or (ii) the date on which they are sold to the Company or any of its subsidiaries, provided, however, that Registrable Shares will cease to be deemed Registrable Shares at such time as such Registrable Shares may be eligible for resale by a Holder pursuant to Rule 144 without regard to volume or manner of sale restrictions or the requirement that the Company be current in its Exchange Act reporting. “Registration Default” is defined in Section 7(a). “Registration Expenses” means any and all expenses incident to the performance of or compliance with this Agreement, including, without limitation: (i) all Commission, securities exchange, the NYSE and FINRA fees, (ii) all fees and expenses incurred in connection with compliance with international, federal or state securities or blue sky laws (including, without limitation, any registration, listing and filing fees and reasonable fees and disbursements of counsel in connection with blue sky qualification of any of the Registrable Shares and the preparation of a blue sky memorandum and compliance with the rules of FINRA and NYSE), (iii) all expenses of any Persons in preparing or assisting in preparing, word processing, duplicating, printing, delivering and distributing any Registration Statement, any Prospectus, any amendments or supplements thereto, securities sales agreements, certificates and any other documents relating to the performance under and compliance with this Agreement, (iv) all fees and expenses incurred in connection with the listing or inclusion of any of the Registrable Shares on the NYSE pursuant to Section 4(j) of this Agreement, (v) the fees and disbursements of counsel for the Company and of the independent public accountants of the Company (including, without limitation, the expenses of any special audit and “cold comfort” letters required by or incident to such performance), (vi) any reasonable, documented expenses incurred by the Holders in connection with any Registration Statement (other than fees and disbursements of counsel therefor) and (vii) any fees and disbursements customarily paid in issues and sales of securities (including the fees and expenses of any experts retained by the Company in connection with any Registration Statement), provided, however, that Registration Expenses shall exclude brokers’ or underwriters’ discounts and commissions and transfer taxes, if any, relating to the sale or disposition of Registrable Shares by a Holder and the fees and disbursements of any counsel to the Holders. “Registration Statement” means any Mandatory Registration Statement or Subsequent Registration Statement. “Rule 144”, “Rule 158”, “Rule 415” or “Rule 424”, respectively, means such specified rule promulgated by the Commission pursuant to the Securities Act, as such rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission as a replacement thereto having substantially the same effect as such rule. regulations promulgated by the Commission thereunder. -2-   “Selling Expenses” means, if any, all underwriting or broker fees, discounts and selling commissions or similar fees or arrangements and transfer taxes allocable to the sale of the Registrable Shares included in the applicable offering. “Selling Holder” means a Holder who is selling Registrable Shares under a registration statement pursuant to the terms of this Agreement. “Shares” is defined in the first recital clause of this Agreement. “Subsequent Registration Statement” is defined in Section 2(b) hereof. “Subscription Agreement” is defined in the first recital clause of this Agreement. “Suspension Event” is defined in Section 5(c) hereof. “Suspension Notice” is defined in Section 5(c) hereof. 2.Registration Rights. (a) Mandatory Registration. In accordance with the procedures set forth in Section 4, the Company agrees to file with the Commission, as promptly as practicable following the special meeting of stockholders to be held to approve the issuance of certain shares to be sold in the Offering and, in any event, within ten (10) Business Days following the filing of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014 (the “Filing Date”), a resale registration statement on Form S-1, Form S-3 or such other form under the Securities Act then available to the Company providing for the resale pursuant to Rule 415 from time to time by the Holders of any and all Registrable Shares consisting of Shares and all Additional Shares in respect thereof, if any, issued prior to the effectiveness of such registration statement (including the Prospectus, amendments and supplements to such registration statement, including pre- and post-effective amendments, all exhibits thereto and all material incorporated by reference or deemed to be incorporated by reference, if any, in such registration statement, the “Mandatory Registration Statement”); provided, however, that in no event shall the Company be obligated to make the initial filing of the Mandatory Registration Statement until such time as the Company is able to comply with the financial statement requirements under Regulation S-X of the Commission’s rules and regulations. The Company agrees to use its commercially reasonable efforts to cause the Commission to declare any Mandatory Registration Statement effective by the earlier of (i) three Business Days after the Commission has advised the Company that such Mandatory Registration Statement has not been selected for review by the Commission; (ii) three Business Days after the Commission has advised the Company that it has no further comments to the Mandatory Registration Statement; or (iii) 90 days after the Filing Date; provided, however, that the Company shall have no obligation to cause a Mandatory Registration Statement to be declared effective with respect to the Registrable Securities of a Holder, except insofar as such Holder has provided the information set forth in Section 2(a)(ii) below in accordance with the timing requirements set forth therein. -3-   (i) The Company shall use its commercially reasonable efforts to cause any Mandatory Registration Statement to remain continuously effective until the earlier of (A) the sale pursuant to such Mandatory Registration Statement of all of the Registrable Securities covered by such Mandatory Registration Statement, (B) the sale, transfer or other disposition pursuant to Rule 144 of all of the Registrable Shares covered by such Mandatory Registration Statement, (C) such time as the Registrable Shares covered by such Mandatory Registration Statement that are not held by Affiliates of the Company are, in the opinion of counsel to the Company, eligible for resale pursuant to Rule 144 without regard to volume or manner of sale restrictions or the requirement that the Company be current in its Exchange Act reporting, (D) such time as all of the Registrable Shares covered by such Mandatory Registration Statement have been sold to the Company or any of its subsidiaries or (E) the first anniversary of the effective date of the initial Mandatory Registration Statement (subject to extension pursuant to Section 5(d)). Any Mandatory Registration Statement shall provide for the resale from time to time, and pursuant to any method or combination of methods legally available to, and requested by, the Holder(s) of the Registrable Shares. (ii) Selling Stockholder Questionnaires. Each Holder agrees, by its acquisition of Registrable Shares, that if such Holder wishes to sell Registrable Shares pursuant to a Mandatory Registration Statement and related Prospectus, it will do so only in accordance with this Section 2(a)(ii). Upon request by the Company, each Holder wishing to sell Registrable Shares pursuant to a Mandatory Registration Statement and related Prospectus agrees to deliver a written notice, substantially in form and substance of Appendix D of the Private Placement Memorandum (a “Notice and Questionnaire”), to the Company (to the extent such Notice and Questionnaire has not been previously provided by such Holder). If not previously provided, the Company shall provide or cause to be provided the Notice and Questionnaire to the Holders no later than the date of initial filing of the Mandatory Registration Statement with the Commission. No Holder shall be entitled to be named as a Selling Holder in the Mandatory Registration Statement as of the initial effective date of the Mandatory Registration Statement, and no Holder shall be entitled to use the Prospectus forming a part thereof for resales of Registrable Shares at any time, unless such Holder has returned a completed and signed Notice and Questionnaire to the Company by the deadline for response set forth therein; provided, however, that Holders shall have at least 10 calendar days from the date on which the Notice and Questionnaire is first provided to such Holders to return a completed and signed Notice and Questionnaire to the Company. Notwithstanding the foregoing, (1) upon the request of any Holder that did not return a Notice and Questionnaire on a timely basis or did not receive a Notice and Questionnaire because it was a subsequent transferee of Registrable Shares after the Company provided the Notice and Questionnaire, the Company shall provide a Notice and Questionnaire to such Holders at the address set forth in the request and (2) upon receipt of a properly completed Notice and Questionnaire from such Holder, the Company shall use all commercially reasonable efforts to name such Holder as a Selling Holder in the Mandatory Registration Statement by means of a pre-effective amendment, by means of a post-effective amendment or, if permitted by the Commission, by means of a Prospectus supplement to the Mandatory Registration Statement; provided, however, that the Company will have no obligation to add Holders to the Mandatory Registration Statement as Selling Holders more frequently that one time per every 30 calendar days. -4-   (b) Subsequent Registration Statement for Additional Shares Issued after Effectiveness of the Mandatory Registration Statement. If any Additional Shares are issued or distributed to Holders after the effectiveness of the Mandatory Registration Statement, or such Additional Shares were otherwise not included in a prior Registration Statement, then the Company shall as soon as practicable file an additional registration statement (including the Prospectus, amendments and supplements to such registration statement, including pre- and post-effective amendments, all exhibits thereto and all material incorporated by reference or deemed to be incorporated by reference, if any, in such registration statement, a “Subsequent Registration Statement”) covering such Additional Shares on behalf of the Holders thereof in the same manner, and subject to the same provisions in this Agreement as the Mandatory Registration Statement. (c) Expenses. The Company shall pay all Registration Expenses in connection with the registration of the Registrable Shares pursuant to this Agreement. Each Holder participating in a registration pursuant to this Section 2 shall bear such Holder’s proportionate share (based on the total number of Registrable Shares sold in such registration) of all Selling Expenses and any other expense of the Holders not specifically allocated to the Company pursuant to this Agreement relating to the sale or disposition of such Holder’s Registrable Shares pursuant to any Registration Statement. 3.Rule 144 Reporting. With a view to making available the benefits of certain rules and regulations of the Commission that may permit the sale of the Registrable Shares to the public without registration, the Company agrees to: (a)use its commercially reasonable efforts to make and keep public information regarding the Company available, as those terms are understood and defined in Rule 144, at all times from the date hereof and until all Registrable Shares have been sold pursuant to a Registration Statement or pursuant to Rule 144; (b)use its commercially reasonable efforts to file with the Commission in a timely manner all reports and other documents required to be filed by the Company under the Securities Act and the Exchange Act, at all times from and after the date hereof; and (c)so long as a Holder owns any Registrable Shares, furnish, unless otherwise available at no charge by access electronically to the Commission’s EDGAR filing system, to such Holder forthwith upon request (i) a copy of the most recent annual or quarterly report of the Company, and (ii) such other reports and documents of the Company so filed with the Commission as such Holder may reasonably request in availing itself of any rule or regulation of the Commission allowing such Holder to sell any such Registrable Shares without registration. 4.Registration Procedures. In connection with the obligations of the Company with respect to any registration pursuant to this Agreement, the Company shall: -5-   (a) prepare and file with the Commission, as specified in this Agreement, each Registration Statement, which Registration Statement shall comply as to form in all material respects with the requirements of the applicable form and include all financial statements required by the Commission to be filed therewith, and use its commercially reasonable efforts to cause any Mandatory Registration Statement to become and remain continuously effective as set forth in Section 2(a)(i) hereof; (b) subject to Section 4(h) hereof, (i) prepare and file with the Commission such amendments and post-effective amendments to each such Registration Statement as may be necessary to keep such Registration Statement effective for the period described in Section 4(a) hereof, (ii) cause each Prospectus contained therein to be supplemented by any required Prospectus supplement, and as so supplemented to be filed pursuant to Rule 424 or any similar rule that may be adopted under the Securities Act, and (iii) comply in all material respects with the provisions of the Securities Act with respect to the disposition of all securities covered by each Registration Statement during the applicable period in accordance with the intended method or methods of distribution by the Selling Holders thereof; (c) furnish to the Holders, without charge, such number of copies of each Prospectus, including each preliminary Prospectus, and any amendment or supplement thereto and such other documents as such Holder may reasonably request, in order to facilitate the public sale or other disposition of the Registrable Shares; the Company hereby consenting to the use of such Prospectus, including each preliminary Prospectus, by the Holders, if any, in connection with the offering and sale of the Registrable Shares covered by any such Prospectus; (d) use its commercially reasonable efforts to register or qualify, or obtain exemption from registration or qualification for, all Registrable Shares by the time the applicable Registration Statement is declared effective by the Commission under all applicable state securities or “blue sky” laws of such domestic jurisdictions as any Holder covered by a Registration Statement shall reasonably request in writing, keep each such registration or qualification or exemption effective during the period such Registration Statement is required to be kept effective pursuant to Section 4(a) and do any and all other acts and things that may be reasonably necessary or advisable to enable such Holder to consummate the disposition in each such jurisdiction of such Registrable Shares owned by such Holder; provided, however, that the Company shall not be required to (i) qualify generally to do business in any jurisdiction or to register as a broker or dealer in such jurisdiction where it would not otherwise be required to qualify but for this Section 4(d), (ii) subject itself to taxation in any such jurisdiction, or (iii) submit to the general service of process in any such jurisdiction; (e) notify each Holder with Registrable Shares covered by a Registration Statement promptly and, if requested by any such Holder, confirm such advice in writing (i) when such Registration Statement has become effective and when any post-effective amendments and supplements thereto become effective, (ii) of the issuance by the Commission or any state securities authority of any stop order suspending the effectiveness of such Registration Statement or the initiation of any proceedings for that purpose, (iii) of any request by the Commission or any other federal or state governmental authority for amendments or supplements to such Registration Statement or related Prospectus or for additional information, and (iv) of the happening of any event during the period such Registration Statement is effective as a result of which such Registration Statement or the related Prospectus or any document incorporated by reference therein contains any untrue statement of a material fact or omits to state any material fact the light of the circumstances under which they were made, not misleading (which information shall be accompanied by an instruction to suspend the use of the Registration Statement and the Prospectus until the requisite changes have been made); -6-   (f) during the period of time referred to in Section 4(a) above, use its commercially reasonable efforts to avoid the issuance of, or if issued, to obtain the withdrawal of, any order enjoining or suspending the use or effectiveness of a Registration Statement or suspending the qualification (or exemption from qualification) of any of the Registrable Shares for sale in any jurisdiction, as promptly as practicable; (g) upon request, furnish to each requesting Holder with Registrable Shares covered by a Registration Statement, without charge, at least one conformed copy of such Registration Statement and any post-effective amendment or supplement thereto (without documents incorporated therein by reference or exhibits thereto, unless requested); (h) except as provided in Section 5, upon the occurrence of any event contemplated by Section 4(e)(iv), use its commercially reasonable efforts to promptly prepare a supplement or post-effective amendment to a Registration Statement or the related Prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered to the purchasers of the Registrable Shares, such Prospectus will not contain the light of the circumstances under which they were made, not misleading, and, upon request, promptly furnish to each requesting Holder a reasonable number of copies of each such supplement or post-effective amendment; (i) enter into customary agreements and take all other action in connection therewith in order to expedite or facilitate the distribution of the Registrable Shares included in such Registration Statement; (j) use its commercially reasonable efforts (including, without limitation, seeking to cure in the Company’s listing or inclusion application any deficiencies cited by the exchange or market) to list or include all Registrable Shares on any securities exchange on which the Common Stock is then listed or included; (k) prepare and file in a timely manner all documents and reports required by the Exchange Act and, to the extent the Company’s obligation to file such reports pursuant to Section 15(d) of the Exchange Act expires prior to the expiration of the effectiveness period of the Registration Statement as required by Section 4(a) hereof, the Company shall register the Registrable Shares under the Exchange Act and shall maintain such registration through the effectiveness period required by Section 4(a) hereof; -7-   (l) (i) otherwise use its commercially reasonable efforts to comply in all material respects with all applicable rules and regulations of the Commission, (ii) make generally available to its stockholders, as soon as reasonably practicable, earnings statements (which need not be audited) covering at least 12 months that satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder, and (iii) delay filing any Registration Statement or Prospectus or amendment or supplement to such Registration Statement or Prospectus to which any Holder of Registrable Shares covered by any Registration Statement shall have reasonably objected on the grounds that such Registration Statement or Prospectus or amendment or supplement does not comply in all material respects with the requirements of the Securities Act, provided that the Company may file such Registration Statement or Prospectus or amendment or supplement following such time as the Company shall have made a good faith effort to resolve any such issue with the objecting Holder and shall have advised the Holder in writing of its reasonable belief that such filing complies in all material respects with the requirements of the Securities Act; (m) cause to be maintained a registrar and transfer agent for all Registrable Shares covered by any Registration Statement from and after a date not later than the effective date of such Registration Statement; and (n) in connection with any sale or transfer of the Registrable Shares (whether or not pursuant to a Registration Statement) that will result in the securities being delivered no longer constituting Registrable Shares, cooperate with the Holders to facilitate the timely preparation and delivery of certificates representing the Registrable Shares to be sold, which certificates shall not bear any transfer restrictive legends (other than as required by the Company’s charter), and to enable such Registrable Shares to be in such denominations and registered in such names as the Holders may request at least three Business Days prior to any sale of the Registrable Shares. The Company may require the Holders to furnish to the Company such information regarding the proposed distribution by such Holder as the Company may from time to time reasonably request in writing or as shall be required to effect the registration of the Registrable Shares, and no Holder shall be entitled to be named as a Selling Holder in any Registration Statement and no Holder shall be entitled to use the Prospectus forming a part thereof if such Holder does not provide such information to the Company. Each Holder further agrees to furnish promptly to the Company in writing all information required from time to time to make the information previously furnished by such Holder not misleading. Each Holder agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in Section 4(e)(ii), 4(e)(iii) or 4(e)(iv) hereof, such Holder will immediately discontinue disposition of Registrable Shares pursuant to a Registration Statement until (i) any such stop order is vacated or (ii) if an event described in Section 4(e)(iii) or 4(e)(iv) occurs, such Holder’s receipt of the copies of the supplemented or amended Prospectus. If so directed by the Company, such Holder will deliver to the Company (at the reasonable expense of the Company) all copies in its possession, other than permanent file copies then in such Holder’s possession, of the Prospectus covering such Registrable Shares current at the time of receipt of such notice. 5.Suspension Period. -8-   (a) Subject to the provisions of this Section 5 and a good faith determination by the Company that it is in the best interest of the Company to suspend the use of any Mandatory Registration Statement, following the effectiveness of such Mandatory Registration Statement (and the filings with any international, federal or state securities commissions), the Company, by written notice to the Holders, may direct the Holders to suspend sales of the Registrable Shares pursuant to such Mandatory Registration Statement for such times as the Company reasonably may determine is necessary and advisable (but in no event for more than 30 days in any 90-day period or 90 days in any 365-day period), if any of the following events shall occur: (i) an underwritten public offering of Common Stock by the Company if the Company is advised by the underwriters that the concurrent resale of the Registrable Shares by the Holders pursuant to the Mandatory Registration Statement would have a material adverse effect on the Company’s offering, (ii) there is material non-public information regarding the Company which (A) the Company determines not to be in the Company's best interest to disclose, (B) would, in the good faith determination of the Company, require any revisions to the Registration Statement so that it will not contain light of the circumstances under which they were made, not misleading, and (C) which the Company is not otherwise required to disclose, (iii) there is a significant bone fide business opportunity (including, but not limited to, the acquisition or disposition of assets (other than in the ordinary course of business), including any significant merger, consolidation, tender offer or other similar transaction) available to the Company which the Company determines not to be in the Company's best interest to disclose, or (iv) the Company is required to file a post-effective amendment to a Registration Statement to incorporate the Company’s quarterly or annual reports or audited financial statements on Forms 10-Q and 10-K; provided, however, that no suspension period permitted pursuant to this clause (iv) shall continue for more than 5 consecutive Business Days. (b) Upon the earlier to occur of (A) the Company delivering to the Holders an End of Suspension Notice, as hereinafter defined, or (B) the end of the maximum permissible suspension period, the Company shall use its commercially reasonable efforts to promptly amend or supplement the Mandatory Registration Statement on a post-effective basis, if necessary, or to take such action as is necessary to make resumed use of the Mandatory Registration Statement compatible with the Company’s best interest, as applicable, so as to permit the Holders to resume sales of the Registrable Shares as soon as possible. (c) In the case of an event that causes the Company to suspend the use of a Registration Statement (a “Suspension Event”), the Company shall give written notice (a “Suspension Notice”) to the Holders to suspend sales of the Registrable Shares, and such notice shall state that such suspension shall continue only for so long as the Suspension Event or its effect is continuing and the Company is taking all reasonable steps to terminate suspension of the effectiveness of the Registration Statement as promptly as possible. The Holders shall not effect any sales of the Registrable Shares pursuant to such Registration Statement (or such filings) at any time after it has received a Suspension Notice from the Company and prior to receipt of an End of Suspension Notice (as defined below). If so directed by the Company, each Holder will deliver to the Company (at the reasonable expense of the Company) all copies other than permanent file copies then in such Holder’s possession of the Prospectus covering the Registrable Shares at the time of receipt of the Suspension Notice. The Holders may recommence effecting sales of the Registrable Shares pursuant to the Registration Statement (or such filings) following further notice to such effect (an “End of Suspension Notice”) from the Company, which End of Suspension Notice shall be given by the Company to the Holders in the manner described above promptly following the conclusion of any Suspension Event and its effect. -9-   (d) Notwithstanding any provision herein to the contrary, if the Company shall give a Suspension Notice pursuant to this Section 5 with respect to any Mandatory Registration Statement, the Company agrees that it shall extend the period of time during which such Mandatory Registration Statement shall be maintained effective pursuant to this Agreement by the number of days during the period from the date of the giving of the Suspension Notice to and including the date when Holders shall have received the End of Suspension Notice and copies of the supplemented or amended Prospectus necessary to resume sales; provided such period of time shall not be extended beyond the date that Shares or Additional Shares are not Registrable Shares. 6.Indemnification and Contribution. (a) By the Company.    In the event of a registration of any Registrable Shares under the Securities Act pursuant to this Agreement, the Company will indemnify and hold harmless each Selling Holder thereunder, its directors, officers, employees, agents and managers, and each Person, if any, who controls such Selling Holder within the meaning of the Securities Act and the Exchange Act, and its directors, officers, employees, agents and managers, against any losses, claims, damages, expenses or liabilities (including reasonable attorneys’ fees and expenses) (collectively, “Losses”), joint or several, to which such Selling Holder or controlling Person may become subject under the Securities Act, the Exchange Act or otherwise, insofar as such Losses (or actions or proceedings, whether commenced or threatened, in respect thereof), (i) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact (in the case of any prospectus, in the light of the circumstances under which such statement is made) contained in a Mandatory Registration Statement or any other registration statement contemplated by this Agreement, any preliminary prospectus or final prospectus contained therein, or any free writing prospectus related thereto, or any amendment or supplement thereof, or (ii) 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 (in the case of a prospectus, in the light of the circumstances under which they were made) not misleading, and will reimburse each such Selling Holder, their respective directors and officers and each such controlling Person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such Loss or actions or proceedings; provided, however, that the Company will not be liable in any such case if and to the extent that any such Loss arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission so made in conformity with information furnished by such Selling Holder or such controlling Person in writing specifically for use in the Mandatory Registration Statement or such other registration statement, free writing prospectus or prospectus supplement, as applicable.  Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such Selling Holder or any such director, officer, employee, agent, manager or controlling Person, and shall survive the transfer of such securities by such Selling Holder. -10-   (b) By Each Selling Holder.    In the event of a registration of any Registrable Shares under the Securities Act pursuant to this Agreement, each Selling Holder agrees to indemnify and hold harmless the Company, its directors, officers, employees, agents and managers, and each Person, if any, who controls the Company within the meaning of the Securities Act and the Exchange Act, and its directors, officers, employees, agents and managers, against any Losses, joint or several, to which the Company or such controlling Person may become subject under the Securities Act, the Exchange Act or otherwise, insofar as such Losses (or actions or proceedings, whether commenced or threatened, in respect thereof), (i) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact (in the case of any prospectus, in the light of the circumstances under which such statement is made) contained in a Mandatory Registration Statement or any other registration statement contemplated by this Agreement, any preliminary prospectus or final prospectus contained therein, or any free writing prospectus related thereto, or any amendment or supplement thereof, (ii) 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 (in the case of a prospectus, in the light of the circumstances under which they were made) not misleading, and will reimburse the Company, its directors and officers and each such controlling Person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such Loss or actions or proceedings, but in the case of each of clause (i) and (ii) of this Section 6(b), only with respect to information regarding such Selling Holder furnished in writing by or on behalf of such Selling Holder expressly for inclusion in a amendment or supplement thereof; provided, however, that the liability of each Selling Holder shall not be greater in amount than the dollar amount of the proceeds received by such Selling Holder from the sale of the Registrable Securities giving rise to such indemnification. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of the Company or any such director, officer, employee, agent, manager or controlling Person, and shall survive the transfer of such securities by such Selling Holder.  (c) Notice.    Promptly after any indemnified party has received notice of any indemnifiable claim hereunder, or the commencement of any action, suit or proceeding by a third person, which the indemnified party believes in good faith is an indemnifiable claim under this Agreement, the indemnified party shall give the indemnifying party written notice of such claim but failure to so notify the indemnifying party will not relieve the indemnifying party from any liability it may have to such indemnified party hereunder except to the extent that the indemnifying party is materially prejudiced by such failure.  Such notice shall state the nature and the basis of such claim to the extent then known.  The indemnifying party shall be entitled to participate in and, to the extent it shall wish, to assume and undertake the defense thereof with counsel reasonably satisfactory to such indemnified party and, after notice from the indemnifying party to such indemnified party of its election so to assume and undertake the defense thereof, the indemnifying party shall not be liable to such indemnified party under this Section 6 for any legal expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation and of liaison with counsel so selected; provided, however, that, (i) if the indemnifying party has failed to assume the defense and employ counsel or (ii) if the defendants in any such action include both the indemnified party and the indemnifying party and counsel to the indemnified party shall have concluded that there may be reasonable defenses available to the indemnified party that are different from or additional to those available to the indemnifying party, or if the interests of the indemnified party reasonably may be deemed to conflict with the interests of the indemnifying party, then the indemnified party shall have the right to select a separate counsel and to assume such legal defense and otherwise to participate in the defense of such action, with the reasonable out-of-pocket expenses and fees of such separate counsel and other reasonable out-of-pocket expenses related to such participation to be reimbursed by the indemnifying party as incurred.  Notwithstanding any other provision of this Agreement, the indemnifying party shall not settle any indemnified claim without the consent of the indemnified party, unless the settlement thereof imposes no liability or obligation on, and includes a complete release from liability of, and does not contain any admission of wrongdoing by, the indemnified party. -11-   (d) Contribution.    If the indemnification provided for in this Section 6 is held by a court or government agency of competent jurisdiction to be unavailable to any indemnified party or is insufficient to hold them harmless in respect of any Losses, then each such 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 Loss in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and of such indemnified party on the other in connection with the statements or omissions which resulted in such Losses, as well as any other relevant equitable considerations; provided, however, that in no event shall such Selling Holder be required to contribute an aggregate amount in excess of the dollar amount of gross proceeds received by such Selling Holder from the sale of Registrable Shares giving rise to such indemnification.  The relative fault of the indemnifying party on the one hand and the indemnified party on the other 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 has been made by, or relates to, information supplied by such party, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.  The parties hereto agree that it would not be just and equitable if contributions pursuant to this paragraph were to be determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to herein.  The amount paid by an indemnified party as a result of the Losses referred to in the first sentence of this paragraph shall be deemed to include any legal and other expenses reasonably incurred by such indemnified party in connection with investigating or defending any Loss that is the subject of this paragraph. 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 is not guilty of such fraudulent misrepresentation. (e) Other Indemnification.    The provisions of this Section 6 shall be in addition to any other rights to indemnification or contribution that an indemnified party may have pursuant to law, equity, contract or otherwise. 7.Additional Payments Under Certain Circumstances. (a) Additional payments (“Additional Payments”) with respect to the Registrable Shares shall be assessed as follows if any of the following events occur (each such event in clauses (i) through (iv) below being herein called a “Registration Default”): -12-   (i) the Mandatory Registration Statement has not been filed within the period provided in Section 1 above, or declared effective within the period set forth in the last sentence of the first paragraph of Section 2(a) hereto; (ii) the Company fails to comply with the public information requirements described in Section 3 hereto anytime during the six-month period beginning on the six-month anniversary of the closing date of the Offering; (iii) the Company fails, with respect to a Holder that supplies a Notice and Questionnaire described in Section 2(a)(ii), to cause an amendment to the already effective Mandatory Registration Statement to be filed or, if permitted by the Commission, to prepare a Prospectus supplement to the Mandatory Registration Statement and distribute such supplement to Holders, in each case within the time period set forth in Section 2(a)(ii) to name such Holder as an additional Selling Holder; or (iv) the Mandatory Registration Statement is declared effective by the Commission but (A) the Mandatory Registration Statement thereafter ceases to be effective during the period contemplated by Section 2(a)(i) or (B) as specified in Section 5(a), the Mandatory Registration Statement or the Prospectus ceases to be usable in connection with resales of Registrable Shares during the periods specified herein and the Company fails to (1) cure the Mandatory Registration Statement within five Business Days by a post-effective amendment or a report filed pursuant to the Exchange Act or (2) if applicable, terminate the suspension period described in Section 5(a) by the 30th day, as applicable. Each of the foregoing will constitute a Registration Default whatever the reason for any such event and whether it is voluntary or involuntary or is beyond the Company’s control or pursuant to operation of law or as a result of any action or inaction by the Commission. (b) Additional Payments shall accrue on the Registrable Shares for each such day from and including the date on which any such Registration Default occurs to but excluding the date on which all such Registration Defaults have been cured at a rate of 0.50% per month (on a 30/360 basis) of the price at which the Company offered the Shares. Additional Payments shall be paid in accordance with Section 7(d) below. In the case of a Registration Default described in clause (a)(iv), the Company’s obligation to pay Additional Payments extends only to the affected Registrable Shares. Other than the obligation of payment of any Additional Payments in accordance with the terms hereof, the Company will have no other liabilities for monetary damages with respect to its registration obligations. With respect to each Holder, the Company’s obligations to pay Additional Payments remain in effect only so long as the Shares held by the Holder are Registrable Shares; provided however, any obligations of the Company for accrued but unpaid Additional Payments at the time such Shares cease to be Registrable Shares shall survive until such time as all such obligations with respect to such Shares shall have been satisfied in full. Notwithstanding anything to the contrary contained herein, in no event shall the aggregate of all Additional Payments payable by the Company hereunder exceed five percent (5%) of the aggregate price at which the Company offered the Shares. -13-   (c) A Registration Default referred to in Section 7(a)(ii) shall be deemed not to have occurred and be continuing, and no Additional Payments shall accrue as a result thereof, in relation to the Mandatory Registration Statement or the related prospectus if (i) (A) such Registration Default has occurred solely as a result of material events, with respect to the Company that would need to be described in such Mandatory Registration Statement or the related prospectus or (B) the Registration Default relates to any information supplied or failed to be supplied by a Holder of Registrable Securities and (ii) the Company is proceeding promptly and in good faith to amend or supplement the Mandatory Registration Statement and related prospectus to describe such events as required by Section 5; provided, however, that in any case if such Registration Default occurs for a continuous period in excess of 45 days beyond any permitted 30 or 90-day suspension period (as provided by Section 5), Additional Payments shall be payable in accordance with the above paragraph (b) from the day such Registration Default occurs until such Registration Default is cured. (d) Any amounts of Additional Payments pursuant to Section 5(a) will be payable in cash in arrears on each Additional Payments Payment Date. The amount of Additional Payments will be determined on the basis of a 360-day year comprised of twelve 30-day months, and the actual number of days on which Additional Payments accrued during such period. 8.Termination of the Company’s Obligations. The Company shall have no further obligations pursuant to this Agreement at the earlier of (i) such time as no Registrable Shares are outstanding and (ii) such time as the Registrable Shares covered by the Registration Statement that are not held by Affiliates of the Company are, in the opinion of counsel to the Company, eligible for resale pursuant to Rule 144 without regard to the requirement that the Company be current in its Exchange Act reporting; provided, however, that in each case the Company’s obligations under Sections 3, 6 and 10 of this Agreement shall remain in full force and effect following such time. 9.Limitations on Subsequent Registration Rights. From and after the date of this Agreement, the Company shall not, without the prior written consent of the Holders of a majority of the then outstanding Registrable Shares, enter into any agreement with any holder or prospective holder of any securities of the Company that would allow such holder or prospective holder to include such securities in the Mandatory Registration Statement, filed pursuant to the terms hereof, 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 his securities will not reduce the amount of Registrable Shares of the Holders that is included. 10.Miscellaneous. (a) Amendments and Waivers. This Agreement may not be amended, modified or supplemented, and waivers or consents to or departures from the provisions hereof may not be given, without the written consent of the Company and Holders beneficially owning a majority of the then outstanding Registrable Shares; provided, however, that for purposes of this Agreement, Registrable Shares owned, directly or indirectly, by an Affiliate of the Company shall not be deemed to be outstanding. Notwithstanding the foregoing, a waiver or consent to or departure from the provisions hereof with respect to a matter that relates exclusively to the rights of a Holder whose Registrable Shares are being sold pursuant to a Registration Statement and that does not directly or indirectly affect, impair, limit or compromise the rights of other Holders may be given by such Holder; 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. -14-   (b) Notices. All notices and other communications, provided for or permitted hereunder shall be made in writing and delivered by facsimile (with receipt confirmed), overnight courier or registered or certified mail, return receipt requested, or by telegram, addressed as follows: (i) if to a Holder, at the most current address given by the transfer agent and registrar of the Shares to the Company; and (ii) if to the Company, at the offices of the Company at 245 Freight Street, Waterbury, CT 06702, Attn: John L. Cordani, Facsimile: (203) 575-7970; with copies (which shall not constitute notice) to: Greenberg Traurig P.A., Attn: Donn Beloff, 401 East Las Olas Blvd., Suite 2000, Fort Lauderdale, FL 33301, Facsimile: (954) 765-1477. (c) Successors and Assigns; Third Party Beneficiaries. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties hereto and shall inure to the benefit of each Holder. (d) 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 an original and all of which taken together shall constitute one and the same agreement. (e) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW THAT WOULD OTHERWISE REQUIRE THE APPLICATION OF THE LAW OF ANY OTHER STATE. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT OF THE SOUTHERN DISTRICT OF NEW YORK OR THE SUPREME COURT OF THE STATE OF NEW YORK OR SITTING IN NEW YORK COUNTY IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, AND IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS. EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. -15-   (f) Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction 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, and the parties hereto shall use their commercially reasonable 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 is hereby stipulated and declared to be the intention of the parties hereto that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable. (g) Entire Agreement. This Agreement, together with the Subscription Agreement, is intended by the parties hereto 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 therein. (h) Registrable Shares Held by the Company or its Affiliates. Whenever the consent or approval of Holders of a specified percentage of Registrable Shares is required hereunder, Registrable Shares held by the Company or its Affiliates, other than the Holders, shall not be counted in determining whether such consent or approval was given by the Holders of such required percentage. (i) Survival. This Agreement is intended to survive the consummation of the transactions contemplated by the Subscription Agreement. The indemnification and contribution obligations under Section 6 of this Agreement shall survive the termination of the Company’s obligations under Section 2 of this Agreement. (j) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the provisions of this Agreement. All references made in this Agreement to “Section” refer to such Section of this Agreement, unless expressly stated otherwise.   [Remainder of this Page Intentionally Left Blank] -16-   first above written. PLATFORM SPECIALTY PRODUCTS CORPORATION                   By: /s/ Frank J. Monteiro     Name: Frank J. Monteiro   Title: Chief Financial Officer         [Holder Signature Page]         HOLDERS: [NAME OF HOLDER]                   By:       Name:   Title:          

Exhibit 3.2 ARTICLES OF INCORPORATION OF Cheval Resources corporation The undersigned, for the purpose of forming a corporation pursuant to the provisions of the General Corporation Law of the State of Delaware does hereby state as follows: ARTICLE ONE The name of the Corporation is ChevalResources Corporation ARTICLE TWO The address of the Corporation’s principal office in the State of Delaware is,16192 Coastal Highway Lewes, DE 19958county of Sussex and the name of its registered agent at such address is Harvard Business services inc ARTICLE THREE The duration of the Corporation shall be perpetual. ARTICLE FOUR The nature of the business or purposes to be conducted or promoted is to engage in any lawful act or activity for which corporations may be organized under the Delaware corporation laws (the “DRS”). ARTICLE FIVE The Corporation shall have authority to issue two classes of stock, and the total number authorized shall be one hundred million (100,000,000) shares of Common Stock of the par value of ($.0001) each, and twenty five million (25,000,000) shares of Preferred Stock of the par value of ($.0001) each. A description of the different classes of stock of the Corporation and a statement of the designations and the powers, preferences and rights, and the qualifications, limitations or restrictions thereof, in respect of each class of such stock are as follows: Issuance in Class or Series. The Preferred Stock may be issued from time to time in one or more series, or divided into additional classes and such classes into one or more series. The terms of a class or series, including all rights and preferences, shall be as specified in the resolution or resolutions adopted by the Board of Directors designating such class or series, which resolution or resolutions the Board of Directors is hereby expressly authorized to adopt. Such resolution or resolutions with respect to a class or series shall specify all or such of the rights or preferences of such class or series as the Board of Directors shall determine, including the following, if applicable: (a) the number of shares to constitute such class or series and the distinctive designation thereof; (b) the dividend or manner for determining the dividend payable with respect to the shares of such class or series and the date or dates from which dividends shall accrue, whether such dividends shall be cumulative, and, if cumulative, the date or dates from which dividends shall accumulate and whether the shares in such class or series shall be entitled to preference or priority over any other class or series of stock of the Corporation with respect to payment of dividends; (c) the terms and conditions, including price or a manner for determining the price, of redemption, if any, of the shares of such class or series; (d) the terms and conditions of a retirement or sinking fund, if any, for the purchase or redemption of the shares of such class or series; (e) the amount which the shares of such class or series shall be entitled to receive, if any, in the event of any liquidation, dissolution or winding up of the Corporation and whether such shares shall be entitled to a preference or priority over shares of another class or series with respect to amounts received in connection with any liquidation, dissolution or winding up of the Corporation; (f) whether the shares of such class or series shall be convertible into, or exchangeable for, shares of stock of any other class or classes, or any other series of the same or any other class or classes of stock, of the Corporation and the terms and conditions of any such conversion or exchange; (g) the voting rights, if any, of shares of stock of such class or series in addition to those granted herein; (h) the status as to reissuance or sale of shares of such class or series redeemed, purchased or otherwise reacquired, or surrendered to the Corporation upon conversion; (i) the conditions and restrictions, if any, on the payment of dividends or on the making of other distributions on, or the purchase, redemption or other acquisition by the Corporation or any subsidiary, of any other class or series of stock of the Corporation ranking junior to such shares as to dividends or upon liquidation; (j) the conditions, if any, on the creation of indebtedness of the Corporation, or any subsidiary; and (k) such other preferences, rights, restrictions and qualifications as the Board of Directors may determine. All shares of the Common Stock shall be of the same class and shall have equal dividend or distribution, liquidation and other rights. All shares of the Common Stock shall rank equally, and all shares of the Preferred Stock shall rank equally, and be identical within their classes in all respects regardless of series, except as to terms which may be specified by the Board of Directors pursuant to the above provisions. All shares of any one series of a class of Preferred Stock shall be of equal rank and identical in all respects, except that shares of any one series issued at different times may differ as to the dates on which dividends thereon shall accrue and be cumulative. Other Provisions. Shares of Common Stock or Preferred Stock of any class or series may be issued with such voting powers, full or limited, or no voting powers, and such designations, preferences and relative participating, option or special rights, and qualifications, limitations or restrictions thereof, as shall be stated and expressed in the resolution or resolutions providing for the issuance of such stock adopted by the Board of Directors. Any of the voting powers, designations, preferences, rights and qualifications, limitations or restrictions of any such class or series of stock may be made dependent upon facts ascertainable outside the resolution or resolutions of the Board of Directors providing for the issue of such stock by the Board of Directors, provided the manner in which such facts shall operate upon the voting powers, designations, preferences, rights and qualifications, limitations or restrictions or such class or series is clearly set forth in the resolution or resolutions providing for the issue of such stock adopted by the Board of Directors. Shares of Common or Preferred Stock reacquired by the Corporation shall no longer be deemed outstanding and shall have no voting or other rights unless and until reissued. Shares reacquired by the Corporation may be canceled and restored to the status of authorized and unissued stock by action of the Board of Directors. Common Stock. Except as otherwise provided in any resolution or resolutions adopted by the Board of Directors, the Common Stock shall (a) have the exclusive voting power of the corporation; (b) entitle the holders thereof to one vote per share at all meetings of the stockholders of the Corporation; (c) entitle the holders to share ratably, without preference over any other shares of the Corporation, in all assets of the Corporation In the event of any dissolution, liquidation or winding up of the Corporation; and (d) entitle the record holder thereof on such record dates as are determined, from time to time, by the Board of Directors to receive such dividends, if any, if, as and when declared by the Board of Directors. ARTICLE SIX The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors, which initially shall consist of one director. The number of directors comprising the Board of Directors shall be fixed upon resolution of the Board of Directors and may be increased or decreased from time to time in the manner provided in the bylaws of the Corporation; except that , at no time shall there be less than one (1) director. The name, address and category of the initial member of the Board of Directors is Rory O'Dare3211 Ocean Drive Vero Beach , Florida 32963 Shares of the Corporation shall not be subject to assessment for payment of the debts of the Corporation. ARTICLE SEVEN The Board of Directors shall have the power to make, adopt, amend, or repeal the Bylaws of the Corporation. ARTICLE EIGHT In the event that the Board of Directors of the Corporation determines that it is in the Corporation’s best interest to amend these Articles of Incorporation, the Board of Directors shall adopt a resolution setting forth the proposed amendment and declaring its advisability and submit the mater to the stockholders entitled to vote thereon for the consideration thereof in accordance with the provision of the DRS and these Articles of Incorporation. In the resolution setting forth the proposed amendment, the Board of Directors may insert a provision allowing the Board of Directors to later abandon the amendment, without concurrence by the stockholders, after the amendment has received stockholder approval but before the amendment is filed with the Delaware Secretary of State. ARTICLE NINE A director or officer of the Corporation shall not be personally liable to the Corporation or its stockholders for damages for breach of fiduciary duty as a director or officer, except for: (1)acts or omissions which involve intentional misconduct, fraud or a knowing violation of law; or (2)the payment of dividends in violation of the DRS. Any repeal or modification of the provisions of this Article Eleven by the stockholders of the Corporation shall be prospective only, and shall not adversely affect any limitation on the personal liability of a director or officer of the Corporation with respect to any act or omission occurring prior to the effective date of such repeal or modification. If the Delaware Corporation Law hereafter is amended to authorize the further elimination or limitation of the liability of directors or officers, then the liability of a director or officer of the Corporation, in addition to the limitation on personal liability provided here, shall be limited to the fullest extent permitted by the amended Delaware Corporation Law. In the event that any of the provisions of this Article Eleven (including any provision within a single sentence) is held by a court of competent jurisdiction to be valid, void or otherwise unenforceable, the remaining provisions are severable and shall remain enforceable to the fullest extent permitted by law. ARTICLE TEN The Corporation shall, to the fullest extent permitted by the provisions of the DRS, as the same may be amended and supplemented, indemnify any and all persons whom it shall have power to indemnify under said section from and against any and all of the expenses, liabilities, or other matters referred in or covered by said section, and the indemnification provided for herein shall not be deemed exclusive of any other rights to which those indemnified may be entitled under the Bylaws, agreement, vote of stockholders, or disinterested directors, or otherwise, both as to action his official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer, employee, or agent and shall inure to the benefit of the heirs, executors, and administrators of such a person. DatedMarch 1, 2011 Cheval Resources corporation /s/ Rory O'Dare RoryO'Dare President

Exhibit 10J COGNEX CORPORATION 2007 STOCK OPTION AND INCENTIVE PLAN   Section 1. General Purpose of the Plan; Definitions The name of the plan is the Cognex Corporation 2007 Stock Option and Incentive Plan (the “Plan”). The purpose of the Plan is to encourage and enable the officers, employees, Non-Employee Directors and other key persons (including consultants) of Cognex Corporation (the “Company”) and its Subsidiaries upon whose judgment, initiative and efforts the Company largely depends for the successful conduct of its business to acquire a proprietary interest in the Company. It is anticipated that providing such persons with a direct stake in the Company’s welfare will assure a closer identification of their interests with those of the Company and its stockholders, thereby stimulating their efforts on the Company’s behalf and strengthening their desire to remain with the Company. The following terms shall be defined as set forth below: “Administrator” means either the Board or the compensation committee of the Board or a similar committee performing the functions of the compensation committee and which is comprised of not less than two Non-Employee Directors who are independent. “Award” or “Awards,” except where referring to a particular category of grant under the Plan, shall include Incentive Stock Options, Non-Qualified Stock Options, Stock Appreciation Rights and Restricted Stock Awards. “Award Agreement” means a written or electronic agreement setting forth the terms and provisions applicable to an Award granted under the Plan. Each Award Agreement is subject to the terms and conditions of the Plan. “Board” means the Board of Directors of the Company. A “Change of Control” shall be deemed to have occurred if any person, or any two or more persons acting as a group, and all affiliates of such person or persons, who prior to such time owned less than fifty percent (50%) of the then outstanding Stock, shall acquire such additional shares of the Stock in one or more transactions, or series of transactions, such that following such transaction or transactions, such person or group and affiliates beneficially own sixty percent (60%) or more of the Stock outstanding. “Code” means the Internal Revenue Code of 1986, as amended, and any successor Code, and related rules, regulations and interpretations. “Effective Date” means the date on which the Plan is approved by stockholders as set forth in Section 14. rules and regulations thereunder. “Fair Market Value” of the Stock on any given date means the last reported sale price at which Stock is traded on such date or, if no Stock is traded on such date, the next preceding date on which Stock was traded, as reflected on NASDAQ Global Select Market or another national securities exchange. “Incentive Stock Option” means any Stock Option designated and qualified as an “incentive stock option” as defined in Section 422 of the Code. “Non-Employee Director” means a member of the Board who is not also an employee of the Company or any Subsidiary.   1 “Non-Qualified Stock Option” means any Stock Option that is not an Incentive Stock Option. “Option” or “Stock Option” means any option to purchase shares of Stock granted pursuant to Section 5. “Restricted Stock Award” means an Award entitling the recipient to acquire, at such purchase price (which may be zero) as determined by the Administrator, shares of Stock subject to such restrictions and conditions as the Administrator may determine at the time of grant. “Sale Event” shall mean (i) the sale of all or substantially all of the assets of the Company on a consolidated basis to an unrelated person or entity, (ii) a merger, reorganization or consolidation in which the outstanding shares of Stock are converted into or exchanged for securities of the successor entity and the holders of the Company’s outstanding voting power immediately prior to such transaction do not own a majority of the outstanding voting power of the successor entity immediately upon completion of such transaction, or (iii) the sale of all of the Stock of the Company to an unrelated person or entity. “Sale Price” means the value as determined by the Administrator of the consideration payable, or otherwise to be received by stockholders, per share of Stock pursuant to a Sale Event. “Section 409A” means Section 409A of the Code and the regulations and other guidance promulgated thereunder. “Stock” means the Common Stock, par value $.002 per share, of the Company, subject to adjustments pursuant to Section 3. “Stock Appreciation Right” means an Award entitling the recipient to receive shares of Stock having a value equal to the excess of the Fair Market Value of the Stock on the date of exercise over the exercise price of the Stock Appreciation Right multiplied by the number of shares of Stock with respect to which the Stock Appreciation Right shall have been exercised. “Subsidiary” means any corporation or other entity (other than the Company) in which the Company has at least a 50 percent interest, either directly or indirectly. “Ten Percent Owner” means an employee who owns or is deemed to own (by reason of the attribution rules of Section 424(d) of the Code) more than 10 percent of the combined voting power of all classes of stock of the Company or any parent or subsidiary corporation.   Section 2. Administration of Plan; Administrator Authority to Select Grantees and Determine Awards (a) Administration of Plan. The Plan shall be administered by the Administrator. (b) Powers of Administrator. The Administrator shall have the power and authority to grant Awards consistent with the terms of the Plan, including the power and authority: (i) to select the individuals to whom Awards may from time to time be granted; (ii) to determine the time or times of grant, and the extent, if any, of Incentive Stock Options, Non-Qualified Stock Options, Stock Appreciation Rights, Restricted Stock Awards or any combination of the foregoing, granted to any one or more grantees; (iii) to determine the number of shares of Stock to be covered by any Award;   2 (iv) to determine and modify from time to time the terms and conditions, including restrictions, not inconsistent with the terms of the Plan, of any Award, which terms and conditions may differ among individual awards and grantees, and to approve the form of written instruments evidencing the Awards; (v) to accelerate at any time the exercisability or vesting of all or any portion of any Award, including upon a Change of Control or a Sale Event; (vi) subject to the provisions of Section 5(a)(ii), to extend at any time the period in which Stock Options may be exercised; and (vii) at any time to adopt, alter and repeal such rules, guidelines and practices for administration of the Plan and for its own acts and proceedings as it shall deem advisable; to interpret the terms and provisions of the Plan and any Award (including related written instruments); to make all determinations it deems advisable for the administration of the Plan; to decide all disputes arising in connection with the Plan; and to otherwise supervise the administration of the Plan. All decisions and interpretations of the Administrator shall be binding on all persons, including the Company and Plan grantees. (c) Delegation of Authority to Grant Awards. Subject to applicable law, the Administrator, in its discretion, may delegate to the Chief Executive Officer of the Company all or part of the Administrator’s authority and duties with respect to the granting of Awards, to individuals who are (i) not subject to the reporting and other provisions of Section 16 of the Exchange Act and (ii) not “covered employees” within the meaning of Section 162(m) of the Code. Any such delegation by the Administrator shall include a limitation as to the amount of Awards that may be granted during the period of the delegation and shall contain guidelines as to the determination of the exercise price and the vesting criteria. The Administrator may revoke or amend the terms of a delegation at any time but such action shall not invalidate any prior actions of the Administrator’s delegate or delegates that were consistent with the terms of the Plan. (d) Award Agreement. Awards under the Plan shall be evidenced by Award Agreements that set forth the terms, conditions and limitations for each Award which may include, without limitation, the term of an Award, the provisions applicable in the event employment or service terminates, and the Company’s authority to unilaterally or bilaterally amend, modify, suspend, cancel or rescind an Award. (e) Indemnification. Neither the Board nor the Administrator, nor any member of either or any delegate thereof, shall be liable for any act, omission, interpretation, construction or determination made in good faith in connection with the Plan, and the members of the Board and the Administrator (and any delegate thereof) shall be entitled in all cases to indemnification and reimbursement by the Company in respect of any claim, loss, damage or expense (including, without limitation, reasonable attorneys’ fees) arising or resulting therefrom to the fullest extent permitted by law and/or under the Company’s articles or bylaws or any directors’ and officers’ liability insurance coverage which may be in effect from time to time and/or any indemnification agreement between such individual and the Company.   Section 3. Stock Issuable Under the Plan; Mergers; Substitution (a) Stock Issuable. The maximum number of shares of Stock reserved and available for issuance under the Plan shall be 2,300,000 shares, subject to adjustment as provided in Section 3(b). For purposes of this limitation, the shares of Stock underlying any Awards that are forfeited, canceled or otherwise terminated (other than by exercise) shall be added back to the shares of Stock available for issuance under the Plan. Shares tendered or held back upon exercise of an Option or settlement of an Award to cover the exercise price or tax withholding shall not be available for future issuance under the Plan. In addition, upon exercise of Stock Appreciation Rights, the gross number of shares exercised shall be deducted from the total number of shares remaining available for issuance under the Plan. Subject to such overall limitations, shares of Stock may be issued up to such maximum number pursuant to any type   3 or types of Award; provided, however, that Stock Options or Stock Appreciation Rights with respect to no more than 500,000 shares of Stock may be granted to any one individual grantee during any one calendar year period. The shares available for issuance under the Plan may be authorized but unissued shares of Stock or shares of Stock reacquired by the Company. (b) Changes in Stock. Subject to Section 3(c) hereof, if, as a result of any reorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock split or other similar change in the Company’s capital stock, the outstanding shares of Stock are increased or decreased or are exchanged for a different number or kind of shares or other securities of the Company, or additional shares or new or different shares or other securities of the Company or other non-cash assets are distributed with respect to such shares of Stock or other securities, or, if, as a result of any merger or consolidation, sale of all or substantially all of the assets of the Company, the outstanding shares of Stock are converted into or exchanged for securities of the Company or any successor entity (or a parent or subsidiary thereof), the Administrator shall make an appropriate or proportionate adjustment in (i) the maximum number of shares reserved for issuance under the Plan, (ii) the number of Stock Options or Stock Appreciation Rights that can be granted to any one individual grantee, (iii) the number and kind of shares or other securities subject to any then outstanding Awards under the Plan, (iv) the repurchase price, if any, per share subject to each outstanding Restricted Stock Award, and (v) the price for each share subject to any then outstanding Stock Options and Stock Appreciation Rights under the Plan, without changing the aggregate exercise price (i.e., the exercise price multiplied by the number of Stock Options and Stock Appreciation Rights) as to which such Stock Options and Stock Appreciation Rights remain exercisable. The Administrator shall also make equitable or proportionate adjustments in the number of shares subject to outstanding Awards and the exercise price and the terms of outstanding Awards to take into consideration cash dividends paid other than in the ordinary course or any other extraordinary corporate event. Notwithstanding the foregoing, no adjustment shall be made under this Section 3(b) if the Administrator determines that such action could cause any Award to fail to satisfy the conditions of any applicable exception from the requirements of Section 409A or otherwise could subject the grantee to the additional tax imposed under Section 409A in respect of an outstanding Award or constitute a modification, extension or renewal of an Incentive Stock Option within the meaning of Section 424(h) of the Code. The adjustment by the Administrator shall be final, binding and conclusive. No fractional shares of Stock shall be issued under the Plan resulting from any such adjustment, but the Administrator in its discretion may make a cash payment in lieu of fractional shares. (c) Mergers and Other Transactions. Upon the effective time of the Sale Event, the Plan and all outstanding Awards granted hereunder shall terminate, unless provision is made in connection with the Sale Event in the sole discretion of the parties thereto for the assumption or continuation of Awards theretofore granted by the successor entity, or the substitution of such Awards with new Awards of the successor entity or parent thereof, with appropriate adjustment as to the number and kind of shares and, if appropriate, the per share exercise prices, as such parties shall agree (after taking into account any acceleration hereunder). In the event of such termination, (i) the Company shall have the option (in its sole discretion) to make or provide for a cash payment to the grantees holding Options and Stock Appreciation Rights, in exchange for the cancellation thereof, in an amount equal to the difference between (A) the Sale Price multiplied by the number of shares of Stock subject to outstanding Options and Stock Appreciation Rights (to the extent then exercisable (after taking into account any acceleration thereof) at prices not in excess of the Sale Price) and (B) the aggregate exercise price of all such outstanding Options and Stock Appreciation Rights; or (ii) each grantee shall be permitted, within a specified period of time prior to the consummation of the Sale Event as determined by the Administrator, to exercise all outstanding Options and Stock Appreciation Rights held by such grantee. (d) Substitute Awards. The Administrator may grant Awards under the Plan in substitution for stock and stock based awards held by employees, directors or other key persons of another corporation in connection with the merger or consolidation of the employing corporation with the Company or a Subsidiary or the acquisition by the Company or a Subsidiary of property or stock of the employing corporation. The Administrator may direct that the substitute awards be granted on such terms and conditions as the Administrator considers appropriate in the circumstances. Any substitute Awards granted under the Plan shall not count against the share limitation set forth in Section 3(a).   4 Section 4. Eligibility Grantees under the Plan will be such full or part-time officers and other employees, Non-Employee Directors and key persons (including consultants and prospective employees) of the Company and its Subsidiaries as are selected from time to time by the Administrator in its sole discretion.   Section 5. Stock Options (a) Form of Stock Options. Any Stock Option granted under the Plan shall be in such form as the Administrator may from time to time approve. Stock Options granted under the Plan may be either Incentive Stock Options or Non-Qualified Stock Options. Incentive Stock Options may be granted only to employees of the Company or any Subsidiary that is a “subsidiary corporation” within the meaning of Section 424(f) of the Code. To the extent that any Option does not qualify as an Incentive Stock Option, it shall be deemed a Non-Qualified Stock Option. Stock Options granted pursuant to this Section 5 shall be subject to the following terms and conditions and shall contain such additional terms and conditions, not inconsistent with the terms of the Plan, as the Administrator shall deem desirable. (b) Exercise Price. The exercise price per share for the Stock covered by a Stock Option granted pursuant to this Section 5 shall be determined by the Administrator at the time of grant but shall not be less than 100 percent of the Fair Market Value on the date of grant. In the case of an Incentive Stock Option that is granted to a Ten Percent Owner, the option price of such Incentive Stock Option shall be not less than 110 percent of the Fair Market Value on the grant date. (c) Option Term. The term of each Stock Option shall be fixed by the Administrator, but no Stock Option shall be exercisable more than ten years after the date the Stock Option is granted. In the case of an Incentive Stock Option that is granted to a Ten Percent Owner, the term of such Stock Option shall be no more than five years from the date of grant. (d) Exercisability; Rights of a Stockholder. Stock Options shall become exercisable at such time or times, whether or not in installments, as shall be determined by the Administrator at or after the grant date. The Administrator may at any time accelerate the exercisability of all or any portion of any Stock Option. An optionee shall have the rights of a stockholder only as to shares acquired upon the exercise of a Stock Option and not as to unexercised Stock Options. (e) Method of Exercise. Stock Options may be exercised in whole or in part, by giving written notice of exercise to the Company, specifying the number of shares to be purchased. Payment of the purchase price may be made by one or more of the following methods to the extent provided in the Option Award Agreement: (i) In cash, by certified or bank check or other instrument acceptable to the Administrator; (ii) Through the delivery (or attestation to the ownership) of shares of Stock that have been purchased by the optionee on the open market or that are beneficially owned by the optionee and are not then subject to restrictions under any Company plan. Such surrendered shares shall be valued at Fair Market Value on the exercise date. To the extent required to avoid variable accounting treatment under FAS 123R or other applicable accounting rules, such surrendered shares shall have been owned by the optionee for at least six months; or   5 (iii) By the optionee delivering to the Company a properly executed exercise notice together with irrevocable instructions to a broker to promptly deliver to the Company cash or a check payable and acceptable to the Company for the purchase price; provided that in the event the optionee chooses to pay the purchase price as so provided, the optionee and the broker shall comply with such procedures and enter into such agreements of indemnity and other agreements as the Administrator shall prescribe as a condition of such payment procedure. Payment instruments will be received subject to collection. The transfer to the optionee on the records of the Company or of the transfer agent of the shares of Stock to be purchased pursuant to the exercise of a Stock Option will be contingent upon receipt from the optionee (or a purchaser acting in his stead in accordance with the provisions of the Stock Option) by the Company of the full purchase price for such shares and the fulfillment of any other requirements contained in the Option Award Agreement or applicable provisions of laws (including the satisfaction of any withholding taxes that the Company is obligated to withhold with respect to the optionee). In the event an optionee chooses to pay the purchase price by previously-owned shares of Stock through the attestation method, the number of shares of Stock transferred to the optionee upon the exercise of the Stock Option shall be net of the number of attested shares. In the event that the Company establishes, for itself or using the services of a third party, an automated system for the exercise of Stock Options, such as a system using an internet website or interactive voice response, then the paperless exercise of Stock Options may be permitted through the use of such an automated system. (f) Annual Limit on Incentive Stock Options. To the extent required for “incentive stock option” treatment under Section 422 of the Code, the aggregate Fair Market Value (determined as of the time of grant) of the shares of Stock with respect to which Incentive Stock Options granted under this Plan and any other plan of the Company or its parent and subsidiary corporations become exercisable for the first time by an optionee during any calendar year shall not exceed $100,000. To the extent that any Stock Option exceeds this limit, it shall constitute a Non-Qualified Stock Option.   Section 6. Stock Appreciation Rights (a) Exercise Price of Stock Appreciation Rights. The exercise price of a Stock Appreciation Right shall not be less than 100 percent of the Fair Market Value of the Stock on the date of grant. (b) Grant and Exercise of Stock Appreciation Rights. Stock Appreciation Rights may be granted by the Administrator independently of any Stock Option granted pursuant to Section 5 of the Plan. (c) Terms and Conditions of Stock Appreciation Rights. Stock Appreciation Rights shall be subject to such terms and conditions as shall be determined from time to time by the Administrator.   Section 7. Restricted Stock Awards (a) Nature of Restricted Stock Awards. The Administrator shall determine the restrictions and conditions applicable to each Restricted Stock Award at the time of grant. Conditions may be based on continuing employment (or other service relationship) and/or achievement of pre-established performance goals and objectives. The grant of a Restricted Stock Award is contingent on the grantee executing the Restricted Stock Award Agreement. The terms and conditions of each such Award Agreement shall be determined by the Administrator, and such terms and conditions may differ among individual Awards and grantees. (b) Rights as a Stockholder. Upon execution of the Restricted Stock Award Agreement and payment of any applicable purchase price, a grantee shall have the rights of a stockholder with respect to the voting of the Restricted Stock, subject to such conditions contained in the Restricted Stock Award Agreement. Unless the Administrator shall otherwise determine, (i) uncertificated Restricted Stock shall be accompanied by a notation on the records of the Company or the transfer agent to the effect that they are subject to forfeiture until such Restricted Stock are vested as provided in Section 7(d) below, and (ii) certificated Restricted Stock shall remain in the possession of the Company until such Restricted Stock is vested as provided in Section 7(d) below, and the grantee shall be required, as a condition of the grant, to deliver to the Company such instruments of transfer as the Administrator may prescribe.   6 (c) Restrictions. Restricted Stock may not be sold, assigned, transferred, pledged or otherwise encumbered or disposed of except as specifically provided herein or in the Restricted Stock Award Agreement. Except as may otherwise be provided by the Administrator either in the Award Agreement or, subject to Section 11 below, in writing after the Award Agreement is issued if a grantee’s employment (or other service relationship) with the Company and its Subsidiaries terminates for any reason, any Restricted Stock that has not vested at the time of termination shall automatically and without any requirement of notice to such grantee from or other action by or on behalf of, the Company be deemed to have been reacquired by the Company at its original purchase price (if any) from such grantee or such grantee’s legal representative simultaneously with such termination of employment (or other service relationship), and thereafter shall cease to represent any ownership of the Company by the grantee or rights of the grantee as a stockholder. Following such deemed reacquisition of unvested Restricted Stock that are represented by physical certificates, a grantee shall surrender such certificates to the Company upon request without consideration. (d) Vesting of Restricted Stock. The Administrator at the time of grant shall specify the date or dates and/or the attainment of pre-established performance goals, objectives and other conditions on which the non-transferability of the Restricted Stock and the Company’s right of repurchase or forfeiture shall lapse. Notwithstanding the foregoing, except in the case of retirement, death or disability, in the event that any such Restricted Stock granted to employees shall have a performance-based goal, the restriction period with respect to such shares shall not be less than one year, and in the event any such Restricted Stock granted to employees shall have a time-based restriction, the total restriction period with respect to such shares shall not be less than three years; provided, however, that Restricted Stock with a time-based restriction may become vested incrementally over such three-year period. Subsequent to such date or dates and/or the attainment of such pre-established performance goals, objectives and other conditions, the shares on which all restrictions have lapsed shall no longer be Restricted Stock and shall be deemed “vested.” Except as may otherwise be provided by the Administrator either in the Award Agreement or, subject to Section 11 below, in writing after the Award Agreement is issued, a grantee’s rights in any shares of Restricted Stock that have not vested shall automatically terminate upon the grantee’s termination of employment (or other service relationship) with the Company and its Subsidiaries and such shares shall be subject to the provisions of Section 7(c) above.   Section 8. Transferability of Awards (a) Transferability. Except as provided in Section 8(b) below, during a grantee’s lifetime, his or her Awards shall be exercisable only by the grantee, or by the grantee’s legal representative or guardian in the event of the grantee’s incapacity. No Awards shall be sold, assigned, transferred or otherwise encumbered or disposed of by a grantee other than by will or by the laws of descent and distribution. No Awards shall be subject, in whole or in part, to attachment, execution, or levy of any kind, and any purported transfer in violation hereof shall be null and void. (b) Administrator Action. Notwithstanding Section 8(a), (i) an optionee may transfer his or her options (other than any Incentive Stock Options) and stock appreciation rights to his or her immediate family members, to trusts for the benefit of such family members, or to partnerships in which such family members are the only partners, and (ii) an optionee may transfer awards granted under the Plan pursuant to a divorce decree or other domestic relations order as defined in the Code or Title I of the Employee Retirement Income Security Act of 1974, as amended (or the rules thereunder), provided in either case that the transferee agrees in writing with the Company to be bound by all of the terms and conditions of this Plan and the applicable Award.   7 (c) Family Member. For purposes of Section 8(b), “family member” shall mean a grantee’s child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, including adoptive relationships, any person sharing the grantee’s household (other than a tenant of the grantee), a trust in which these persons (or the grantee) have more than 50 percent of the beneficial interest, a foundation in which these persons (or the grantee) control the management of assets, and any other entity in which these persons (or the grantee) own more than 50 percent of the voting interests. (d) Designation of Beneficiary. Each grantee to whom an Award has been made under the Plan may designate a beneficiary or beneficiaries to exercise any Award or receive any payment under any Award payable on or after the grantee’s death. Any such designation shall be on a form provided for that purpose by the Administrator and shall not be effective until received by the Administrator. If no beneficiary has been designated by a deceased grantee, or if the designated beneficiaries have predeceased the grantee, the beneficiary shall be the grantee’s estate.   Section 9. Tax Withholding (a) Payment by Grantee. Each grantee shall, no later than the date as of which the value of an Award or of any Stock or other amounts received thereunder first becomes includable in the gross income of the grantee for Federal income tax purposes, pay to the Company, or make arrangements satisfactory to the Administrator regarding payment of, any Federal, state, or local taxes of any kind required by law to be withheld by the Company with respect to such income. The Company and its Subsidiaries shall, to the extent permitted by law, have the right to deduct any such taxes from any payment of any kind otherwise due to the grantee. The Company’s obligation to deliver evidence of book entry (or stock certificates) to any grantee is subject to and conditioned on tax withholding obligations being satisfied by the grantee. (b) Payment in Stock. Subject to approval by the Administrator, a grantee may elect to have the Company’s minimum required tax withholding obligation satisfied, in whole or in part, by authorizing the Company to withhold from shares of Stock to be issued pursuant to any Award a number of shares with an aggregate Fair Market Value (as of the date the withholding is effected) that would satisfy the withholding amount due.   Section 10. Transfer, Leave of Absence, Etc. For purposes of the Plan, the following events shall not be deemed a termination of employment: (a) a transfer to the employment of the Company from a Subsidiary or from the Company to a Subsidiary, or from one Subsidiary to another; or (b) an approved leave of absence for military service or sickness, or for any other purpose approved by the Company, if the employee’s right to re-employment is guaranteed either by a statute or by contract or under the policy pursuant to which the leave of absence was granted or if the Administrator otherwise so provides in writing.   Section 11. Amendments and Termination The Board may, at any time, amend or discontinue the Plan and the Administrator may, at any time, amend or cancel any outstanding Award for the purpose of satisfying changes in law or for any other lawful purpose, but no such action shall adversely affect rights under any outstanding Award without the holder’s consent. Except as provided in Section 3(b) or 3(c), in no event may the Administrator exercise its discretion to reduce the exercise price of outstanding Stock Options or Stock Appreciation Rights or effect repricing through cancellation and re-grants. Any material Plan amendments (other than amendments that curtail the scope of the Plan), including any Plan amendments that (i) increase the number of shares reserved for issuance under the Plan, (ii) expand the type of Awards available under, materially expand the eligibility to participate in, or materially extend the term of, the Plan,   8 or (iii) materially change the method of determining Fair Market Value, shall be subject to approval by the Company stockholders entitled to vote at a meeting of stockholders. In addition, to the extent determined by the Administrator to be required by the Code to ensure that Incentive Stock Options granted under the Plan are qualified under Section 422 of the Code or to ensure that compensation earned under Awards qualifies as performance-based compensation under Section 162(m) of the Code, Plan amendments shall be subject to approval by the Company stockholders entitled to vote at a meeting of stockholders. Nothing in this Section 11 shall limit the Administrator’s authority to take any action permitted pursuant to Section 3(c).   Section 12. Status of Plan With respect to the portion of any Award that has not been exercised and any payments in cash, Stock or other consideration not received by a grantee, a grantee shall have no rights greater than those of a general creditor of the Company unless the Administrator shall otherwise expressly determine in connection with any Award or Awards. In its sole discretion, the Administrator may authorize the creation of trusts or other arrangements to meet the Company’s obligations to deliver Stock or make payments with respect to Awards hereunder, provided that the existence of such trusts or other arrangements is consistent with the foregoing sentence.   Section 13. General Provisions (a) No Distribution. The Administrator may require each person acquiring Stock pursuant to an Award to represent to and agree with the Company in writing that such person is acquiring the shares without a view to distribution thereof. (b) Delivery of Stock Certificates. Stock certificates to grantees under this Plan shall be deemed delivered for all purposes when the Company or a stock transfer agent of the Company shall have mailed such certificates in the United States mail, addressed to the grantee, at the grantee’s last known address on file with the Company. Uncertificated Stock shall be deemed delivered for all purposes when the Company or a Stock transfer agent of the Company shall have given to the grantee by electronic mail (with proof of receipt) or by United file with the Company, notice of issuance and recorded the issuance in its records (which may include electronic “book entry” records). Notwithstanding anything herein to the contrary, the Company shall not be required to issue or deliver any certificates evidencing shares of Stock pursuant to the exercise of any Award, unless and until the Administrator has determined, with advice of counsel (to the extent the Administrator deems such advice necessary or advisable), that the issuance and delivery of such certificates is in compliance with all applicable laws, regulations of governmental authorities and, if applicable, the requirements of any exchange on which the shares of Stock are listed, quoted or traded. All Stock certificates delivered pursuant to the Plan shall be subject to any stop-transfer orders and other restrictions as the Administrator deems necessary or advisable to comply with federal, state or foreign jurisdiction, securities or other laws, rules and quotation system on which the Stock is listed, quoted or traded. The Administrator may place legends on any Stock certificate to reference restrictions applicable to the Stock. In addition to the terms and conditions provided herein, the Administrator may require that an individual make such reasonable covenants, agreements, and representations as the Administrator, in its discretion, deems necessary or advisable in order to comply with any such laws, regulations, or requirements. The Administrator shall have the right to require any individual to comply with any timing or other restrictions with respect to the settlement or exercise of any Award, including a window-period limitation, as may be imposed in the discretion of the Administrator. (c) Stockholder Rights. Until Stock is deemed delivered in accordance with Section 13(b), no right to vote or receive dividends or any other rights of a stockholder will exist with respect to shares of Stock to be issued in connection with an Award, notwithstanding the exercise of a Stock Option or any other action by the grantee with respect to an Award.   9 (d) Other Compensation Arrangements; No Employment Rights. Nothing contained in this Plan shall prevent the Board from adopting other or additional compensation arrangements, including trusts, and such arrangements may be either generally applicable or applicable only in specific cases. The adoption of this Plan and the grant of Awards do not confer upon any employee any right to continued employment with the Company or any Subsidiary. (e) Trading Policy Restrictions. Option exercises and other Awards under the Plan shall be subject to such Company’s insider trading policy and procedures, as in effect from time to time.   Section 14. Effective Date of Plan This Plan shall become effective upon approval by the holders of a majority of the votes cast at a meeting of stockholders at which a quorum is present. No grants of Stock Options and other Awards may be made hereunder after the tenth anniversary of the Effective Date and no grants of Incentive Stock Options may be made hereunder after the tenth anniversary of the date the Plan is approved by the Board.   Section 15. Governing Law This Plan and all Awards and actions taken thereunder shall be governed by, and construed in accordance with, the laws of the Commonwealth of Massachusetts, applied without regard to conflict of law principles. DATE APPROVED BY BOARD OF DIRECTORS: February 26, 2007 DATE APPROVED BY SHAREHOLDERS: April     , 2007   10

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Date of Report: October 12, 2011 (Date of earliest event reported) Rosetta Resources Inc. (Exact name of registrant as specified in its charter) DE 000-51801 43-2083519 (State or other jurisdiction of incorporation) (Commission File Number) (IRS Employer Identification Number) 717 Texas, Suite 2800 Houston, TX (Address of principal executive offices) (Zip Code) 713-335-4000 (Registrant's telephone number, including area code) Not Applicable (Former Name or Former Address, if changed since last report) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) Item 7.01. Regulation FD Disclosure On October 12, 2011, Rosetta Resources Inc. ("Rosetta") announced that it will hold its third quarter 2011 conference call on Tuesday, November 8, 2011 at 11:00 a.m. Eastern, 10:00 a.m. Central. The conference call will be hosted by Randy L. Limbacher, Rosetta’s Chairman, CEO and President. A copy of Rosetta's press release relating to this event can be found on the Company's website under "Press Releases". The press release is furnished as Exhibit 99.1 to this Current Report. Exhibit 99.1 shall not be deemed to be "filed" for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and will not be incorporated by reference into any registration statement filed under the Securities Act of 1933, as amended, unless specifically identified therein as being incorporated therein by reference. Item 9.01. Financial Statements and Exhibits (a) Financial statements: None (b) Pro forma financial information: None (c) Company transactions: None (d) Exhibits Exhibits. The Registrant includes a copy of the press release as Exhibit 99.1. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Dated: October 12, 2011 ROSETTA RESOURCES INC. By: MICHAEL J. ROSINSKI Michael J. Rosinski Executive Vice President, Chief Financial Officer and Treasurer Exhibit Index Exhibit No. Description Press Release of Rosetta Resources Inc. dated October 12, 2011.

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-Q QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-5079 John Hancock Tax-Exempt Series Fund (Exact name of registrant as specified in charter) 601 Congress Street, Boston, Massachusetts 02210 (Address of principal executive offices) (Zip code) Salvatore Schiavone, Treasurer 601 Congress Street Boston, Massachusetts 02210 (Name and address of agent for service) Registrant's telephone number, including area code: 617-663-4497 Date of fiscal year end: May 31 Date of reporting period: August 31, 2011 ITEM 1. SCHEDULE OF INVESTMENTS New York Tax-Free Income Fund As of 8-31-11 (Unaudited) Maturity Par value Rate (%) date Value Municipal Bonds 94.68% (Cost $55,586,043) New York 81.04% Brooklyn Arena Local Development Corp. Barclays Center Project 6.375 07/15/43 $1,000,000 1,020,690 Chautauqua Asset Securitization Corp. Tobacco Settlement 6.750 07/01/40 1,000,000 890,450 City of New York, Series E-1 6.250 10/15/28 500,000 588,890 Herkimer County Industrial Development Agency Flots Adult Home, Series A 5.500 03/20/40 970,000 1,030,169 Long Island Power Authority Electric, Power & Light Revenues, Series A 5.750 04/01/39 1,500,000 1,640,430 Long Island Power Authority Electric, Power & Light Revenues, Series A 6.000 05/01/33 1,000,000 1,120,360 Metropolitan Transportation Authority Transit Revenue, Series A 5.250 11/15/28 1,000,000 1,088,620 Metropolitan Transportation Authority Transit Revenue, Series B 5.000 11/15/34 1,750,000 1,827,682 Monroe County Industrial Development Corp/NY, Series A 5.000 07/01/41 1,000,000 1,023,340 Monroe Newpower Corp. Electric, Power & Light Revenues 5.100 01/01/16 1,000,000 1,027,790 Nassau County Industrial Development Agency North Shore Health Systems Project, Series A 6.250 11/01/21 275,000 275,888 New York City Industrial Development Agency 7 World Trade Center, Series A 6.250 03/01/15 2,000,000 2,007,340 New York City Industrial Development Agency Airis JFK I LLC Project, Series A AMT 5.500 07/01/28 1,000,000 869,390 New York City Industrial Development Agency Brooklyn Navy Yard Cogeneration Partners AMT 5.650 10/01/28 1,000,000 790,210 New York City Industrial Development Agency Lycee Francais De NY Project, Series A (D) 5.375 06/01/23 1,000,000 1,018,560 New York City Industrial Development Agency Polytechnic University Project (D) 5.250 11/01/27 1,000,000 1,005,680 New York City Industrial Development Agency Terminal One Group Association Project AMT (P) 5.500 01/01/21 1,000,000 1,052,980 New York City Municipal Water Finance Authority Water Revenue, Series A 5.750 06/15/40 1,000,000 1,113,760 New York City Municipal Water Finance Authority Water Revenue, Series D Zero 06/15/20 2,000,000 1,550,300 New York City Municipal Water Finance Authority Water Revenue, Series FF-2 5.000 06/15/40 1,000,000 1,049,230 New York City Municipal Water Finance Authority Water Revenue, Series GG-1 5.000 06/15/39 1,000,000 1,049,230 New York City Transitional Finance Authority Government Fund/Grant Revenue, Series S-4 5.500 01/15/39 1,000,000 1,079,660 New York City Transitional Finance Authority Income Tax Revenue, Series A (Zero coupon steps up to 14.000% on 11-1-11) Zero 11/01/29 1,000,000 997,760 New York Liberty Development Corp. 5.625 07/15/47 1,000,000 1,008,220 New York Local Assistance Corp. Sales Tax Revenue, Series C 5.500 04/01/17 1,225,000 1,446,835 New York State Dormitory Authority General Purpose, Series E 5.000 02/15/35 1,000,000 1,061,540 New York State Dormitory Authority Miriam Osborn Memorial Home Association, Series B (D) 6.875 07/01/25 750,000 757,238 1 New York Tax-Free Income Fund As of 8-31-11 (Unaudited) Maturity Par value Rate (%) date Value New York (continued) New York State Dormitory Authority Mount Sinai School of Medicine 5.125 07/01/39 $1,000,000 $1,015,720 New York State Dormitory Authority North Shore Long Island Jewish Group, Prerefunded to 5- 1-13 5.375 05/01/23 1,000,000 1,084,530 New York State Dormitory Authority Orange Regional Medical Center 6.125 12/01/29 750,000 741,158 New York State Dormitory Authority Rockefeller University, Series A 5.000 07/01/41 1,000,000 1,065,320 New York State Dormitory Authority State University Education Facilities, Series A (D) 5.250 05/15/15 1,000,000 1,096,950 New York State Dormitory Authority State University Education Facilities, Series A 5.500 05/15/19 2,000,000 2,341,800 New York State Environmental Facilities Corp. Water Revenue, Series A 5.000 06/15/34 1,000,000 1,060,120 Oneida County Industrial Development Agency Hamilton College Project, Series A (D) Zero 07/01/29 5,330,000 2,295,471 Onondaga County Industrial Development Agency AMT 6.125 01/01/32 1,000,000 832,210 Orange County Industrial Development Agency Arden Hill Care Center, Series C 7.000 08/01/31 500,000 414,460 Port Authority of New York & New Jersey 5th Installment Special Project AMT 6.750 10/01/19 1,500,000 1,389,225 Port Authority of New York & New Jersey JFK International Airport Terminal 6.000 12/01/36 1,000,000 1,016,920 Suffolk County Industrial Development Agency Huntington Hospital Project, Series B 6.000 11/01/22 1,000,000 1,020,330 Triborough Bridge & Tunnel Authority Highway Revenue Tolls, Escrowed to Maturity, Series Y 6.125 01/01/21 1,500,000 1,980,885 Tsasc, Inc., Tobacco Settlement Prerefunded to 7-15-12, Series 1 5.500 07/15/24 640,000 665,690 Upper Mohawk Valley Regional Water Finance Authority Water Revenue (D) Zero 04/01/22 2,230,000 1,441,271 Westchester County Healthcare Corp. Senior Lien, Series A 6.000 11/01/30 1,150,000 1,150,391 Puerto Rico 10.32% Commonwealth of Puerto Rico Public Improvement - Series A 5.750 07/01/41 1,000,000 984,490 Puerto Rico Public Building Authority Lease Revenue, Series A (D) 6.250 07/01/12 1,110,000 1,154,378 Puerto Rico Public Finance Corp. Prerefunded to 2-1-12, Series E 5.500 08/01/29 1,005,000 1,026,999 Puerto Rico Sales Tax Financing Authority Sales Tax Revenue, Series A (Zero coupon steps up to 6.750% on 8-1-16) Zero 08/01/32 2,000,000 1,720,860 Puerto Rico Sales Tax Financing Corp., Series C 5.000 08/01/35 1,000,000 974,100 Puerto Rico Sales Tax Financing Corp., Series C 5.375 08/01/38 500,000 504,380 Virgin Islands 2.50% Virgin Islands Public Finance Authority, Series A 6.750 10/01/37 1,000,000 1,058,570 Virgin Islands Public Finance Authority, Series A1-1 5.000 10/01/29 500,000 484,360 Guam 0.82% Guam Government, Series A 5.750 12/01/34 500,000 503,210 2 New York Tax-Free Income Fund As of 8-31-11 (Unaudited) Total investments (Cost $55,586,043)† 94.68% Other assets and liabilities, net 5.32% Total net assets 100.00% The percentage shown for each investment category is the total value of the category as a percentage of the net assets of the Fund. AMT Interest earned from these securities may be considered a tax preference item for purpose of the Federal Alternative Minimum Tax. (D) Bond is insured by one of these companies: As a percentage of total Insurance coverage investmets ACA Financial Guaranty Corp. 4.76% Ambac Financial Group, Inc. 4.44% National Public Finance Guarantee Insurance Company 5.81% (P) Variable rate obligation. The coupon rate shown represents the rate at period end. † At 8-31-11, the aggregate cost of investment securities for federal income tax purposes was $55,472,975. Net unrealized appreciation aggregated $2,943,065, of which $3,664,590 related to appreciated investment securities and $721,525 related to depreciated investment securities. The Fund has the following sector composition as a percentage of total net assets on 8-31-11. General Obligation Bonds 3% Revenue Bonds Education 14% Health Care 10% Water & Sewer 10% Development 9% Utilities 8% Airport 7% Transportation 5% Tobacco 3% Facilities 2% Pollution 1% Other Revenue 23% Short-Term Investments & Other 5% 3 Note to the Schedule of Investments (Unaudited) Security valuation. Investments are stated at value as of the close of regular trading on the New York Stock Exchange (NYSE), normally at 4:00 P

Exhibit 10.1   PROPERTY CATASTROPHE EXCESS OF LOSS REINSURANCE AGREEMENT   UNITED PROPERTY AND CASUALTY INSURANCE COMPANY St. Petersburg, Florida   EFFECTIVE:      June 1, 2009 EXPIRATION:  June 1, 2010         LOGO [g95347bms_logo.jpg] PROPERTY CATASTROPHE EXCESS OF LOSS REINSURANCE AGREEMENT TABLE OF CONTENTS ARTICLE     DESCRIPTION    PAGE 1     Business Covered    1 2     Retention and Limit    1 3     Term    2 4     Territory    2 5     Exclusions    2 6     Definitions    4 7     Net Retained Lines    6 8     Other Reinsurance    7 9     Premium    7 10     Reinstatement    8 11     Notice of Loss and Loss Settlements    8 12     Salvage and Subrogation    8 13     Offset    8 14     Unauthorized Reinsurance    8 15     Taxes    10 16     Currency    10 17     Delay, Omission or Error    10 18     Access to Records    10 19     Arbitration    10 20     Service of Suit    11 21     Insolvency    12 22     Third Party Rights    12 23     Severability    13 24     Confidentiality    13 25     Entire Agreement    13 26     Law and Jurisdiction    13 27     Intermediary    13 28     Mode of Execution    14     Attachments:     Schedule A – First Property Catastrophe Excess of Loss Reinsurance     Schedule B – Second Property Catastrophe Excess of Loss Reinsurance     Schedule C – Third Property Catastrophe Excess of Loss Reinsurance     Schedule D – Fourth Property Catastrophe Excess of Loss Reinsurance     Nuclear Incident Exclusion Clause - Physical Damage - Reinsurance - USA     Terrorism Exclusion Clause             A9CFHB008_4129088       LOGO [g95347bms_logo.jpg]     June 19, 2009       PROPERTY CATASTROPHE (hereinafter referred to as the “Agreement”) between (hereinafter referred to as the “Company”) and the Subscribing Reinsurer(s) executing the attached Interests and Liabilities Contract (hereinafter referred to as the “Reinsurer”) ARTICLE 1 — BUSINESS COVERED This Agreement is to indemnify the Company in respect of its net excess liability as a result of any loss or losses which may occur during the term of this Agreement under any policies, contracts and binders of insurance or reinsurance (hereinafter called “Policies”) in force at the effective date hereof or issued or renewed on or after that date, covering business classified by the Company as Property and written in the State of Florida. Such business shall include but not be limited to Homeowners, Condominium Owners, and business written under the Company’s Garage Program. ARTICLE 2 — RETENTION AND LIMIT The Reinsurer will be liable in respect of each and every Loss Occurrence, for the Ultimate Net Loss over and above an initial Ultimate Net Loss for that excess layer as shown in the Schedules attached hereto, each and every Loss Occurrence, subject to a limit shown as for that excess layer as shown in the Schedules attached hereto, each and every Loss Occurrence. The Florida Hurricane Catastrophe Fund (FHCF) limit provided pursuant to Section 215.555 (4)(c)(1)., Florida Statutes (commonly referred to as the “Mandatory Layer,” which is currently estimated to be $289,563,580 excess of $121,776,870, and the FHCF limit provided pursuant to Section 215.555 (17), Florida Statutes (and defined therein as the “Temporary Increase in Coverage Limit Option,” which is currently estimated to be $67,438,388 excess of $443,514,180), shall be deemed to inure to the benefit of this Contract whether collectible or not and shall be deemed to be paid to the Company in accordance with the FHCF reimbursement contract at the Projected Payout Multiple set forth therein as of the date hereof (calculated based on a claims paying capacity of the FHCF of $27,175,000,000 and will be deemed not to be reduced by any subsequent recalculation of the Projected Payout Multiple or the final Payout Multiple due to any reduction or exhaustion of the FHCF’s claims-paying capacity as respects either the Mandatory Layer or the Temporary Increase in Coverage Limit Option.               A9CFHB008_4129088       LOGO [g95347bms_logo.jpg]       June 19, 2009    Page 1 of 15    ARTICLE 3 — TERM This Agreement shall become effective at 12:01 a.m., Local Standard Time at the location where the Loss Occurrence commences, June 1, 2009, with respect to losses arising out of Loss Occurrences commencing at or after that time and date, and shall remain in full force and effect until 12:01 a.m. Local Standard Time at the location where the Loss Occurrence commences, June 1, 2010. The Company may terminate or reduce a subscribing reinsurer’s percentage share in this Agreement at any time by giving prior written notice to the subscribing reinsurer by certified mail in the event of any of the following:     1) The subscribing reinsurer’s policyholders’ surplus falls by 20% or more; or     2) A State Insurance Department or other legal authority orders the subscribing reinsurer to cease writing business; or     3) The subscribing reinsurer has become insolvent or has been placed into liquidation or receivership (whether voluntary or involuntary), or there has been instituted against it proceedings for the appointment of a receiver, liquidator, rehabilitator, conservator, or trustee in bankruptcy, or other agent known by whatever name, to take possession of its assets or control of its operation; or     4) The subscribing reinsurer has become merged with, acquired or controlled by any company, corporation, or individual(s) not controlling the subscribing reinsurer’s operations previously; or     5) The subscribing reinsurer ceases assuming new and renewal property treaty reinsurance business; or     6) The subscribing reinsurer’s A.M. Best or Standard and Poor’s rating is downgraded below A-. In the event the Company terminates or reduces a subscribing reinsurer’s percentage share in accordance with this paragraph, the termination or reduction will be effective for losses occurring on or after the date of the written notice to the subscribing reinsurer, and the premium due to the subscribing reinsurer for any reduced percentage share for the Agreement Year will be reduced on a pro rata basis for the portion of the Agreement Year which is unexpired as of that date. Any return premium owed by the subscribing reinsurer in accordance with such a termination or reduction shall be payable as promptly as possible, but no later than 30 days following the effective date of reduction or termination. If a loss has been paid under this Agreement or a subscribing reinsurer’s share is terminated after November 30, 2009, then no such return premium shall be made. Should this Agreement expire while a loss covered hereunder is in progress, the Reinsurer shall be responsible for the loss in progress in the same manner and to the same extent it would have been responsible had the Agreement expired the day following the conclusion of the loss in progress. ARTICLE 4 — TERRITORY This Agreement shall follow the territorial limits of the Company’s original Policies. ARTICLE 5 — EXCLUSIONS This Agreement does not apply to and specifically excludes the following:     A. Reinsurance assumed except as respects the following; Reinsurance assumed as a result of the depopulation of the Citizens Property and Casualty Insurance Company and any successor               A9CFHB008_4129088       LOGO [g95347bms_logo.jpg]       June 19, 2009    Page 2 of 15      organisation of this entity and/or any reinsurance assumed from Private Carriers as a result of depopulations.     B. Financial guarantee and/or insolvency business.     C. Third party liability and medical payments business.     D. Liability as a member, subscriber or reinsurer of any Pool, Syndicate or Association; and any combination of insurers or reinsurers formed for the purpose of covering specific perils, specific classes of business or for the purpose of insuring risks located in specific geographical areas and any assessments from Citizens Property and Casualty Insurance Company and any successor organisation of this entity.     E. All liability of the Company arising by contract, operation of law, or otherwise, from its participation or membership, whether voluntary or involuntary, in any insolvency fund. “Insolvency Fund” includes any guaranty fund, insolvency fund, plan, pool, association, fund or other arrangement, however denominated, established or governed, which provides for any assessment of or payment or assumption by the Company of part or all of any claim, debt, charge, fee or other obligation of an insurer, or its successors or assigns, which has been declared by any competent authority to be insolvent, or which is otherwise deemed unable to meet any claim, debt, charge, fee or other obligation in whole or in part.     F. Loss or liability from any Pool, Association or Syndicate and any assessment or similar demand for payment related to the Florida Hurricane Catastrophe Fund.     G. All Accident and Health, Fidelity, Surety, Boiler and Machinery, Workers’ Compensation and Credit business.     H. All Ocean Marine business.     I. Flood and/or earthquake when written as such.     J. Difference in Conditions insurances and similar kinds of insurances, however styled, insofar as they may provide coverage for losses from the following causes:     1) Flood, surface water, waves, tidal water or tidal waves, overflow of streams or other bodies of water or spray from any of the foregoing, all whether wind-driven or not, except when covering property in transit; or     2) Earthquake, landslide, subsidence or other earth movement or volcanic eruption, except when covering property in transit.     K. Mortgage Impairment insurances and similar kinds of insurances, however styled.     L. All Automobile Business.     M. Loss or damage directly or indirectly occasioned by, happening through or in consequences of war, invasion, acts of foreign enemies, hostilities (whether war be declared or not), civil war, rebellion, revolution, insurrection, military or usurped power, or confiscation or nationalisation or requisition or destruction of or damage to property by or under the order of any government or public or local authority.     N. Loss and/or Damage and/or Costs and/or Expenses arising from seepage and/or pollution and/or contamination, other than contamination from smoke. Nevertheless, this exclusion does not preclude any payment of the cost of removal of debris of property damaged by a loss otherwise covered hereunder, subject always to a limit of 25% of the Company’s property loss under the applicable original Policy.             A9CFHB008_4129088       LOGO [g95347bms_logo.jpg]     June 19, 2009    Page 3 of 15      O. Nuclear risks as defined in the “Nuclear Incident Exclusion Clause - Physical Damage Reinsurance” attached to and forming part of this Agreement.     P. All liability arising out of mold, spores and/or fungus but this exclusion shall not apply to those losses which follow as a direct result of a loss caused by a peril otherwise covered hereunder.     Q. Terrorism, in accordance with NMA2930c, attached hereto. ARTICLE 6 — DEFINITIONS     A. The term “Loss Occurrence” shall mean the sum of all individual losses directly occasioned by any one disaster, accident or loss or series of disasters, accidents or losses arising out of one event which occurs within the area of one state of the United States or province of Canada and states or provinces contiguous thereto and to one another. However, the duration and extent of any one Loss Occurrence shall be limited to all individual losses sustained by the Company occurring during any period of 168 consecutive hours arising out of and directly occasioned by the same event except that the term Loss Occurrence shall be further defined as follows:     (i) As regards windstorm, hail, tornado, hurricane, cyclone, including ensuing collapse and water damage, all individual losses sustained by the Company occurring during any period of 96 consecutive hours arising out of and directly occasioned by the same event. However, the event need not be limited to one state or province or states or provinces contiguous thereto.     (ii) As regards riot, riot attending a strike, civil commotion, vandalism and malicious mischief, all individual losses sustained by the Company occurring during any period of 72 consecutive hours within the area of one municipality or county and the municipalities or counties contiguous thereto arising out of and directly occasioned by the same event. The maximum duration of 72 consecutive hours may be extended in respect of individual losses which occur beyond such 72 consecutive hours during the continued occupation of an insured’s premises by strikers, provided such occupation commenced during the aforesaid period.     (iii) As regards earthquake (the epicenter of which need not necessarily be within the territorial confines referred to in the opening paragraph of this Article) and fire following directly occasioned by the earthquake, only those individual fire losses which commence during the period of 168 consecutive hours may be included in the Company’s Loss Occurrence.     (iv) As regards freeze, only individual losses directly occasioned by collapse, breakage of glass and water damage (caused by bursting of frozen pipes and tanks) may be included in the Company’s Loss Occurrence. For all Loss Occurrences, other than (ii) above, the Company may choose the date and time when any such period of consecutive hours commences provided that it is not earlier than the date and time of the occurrence of the first recorded individual loss sustained by the Company arising out of that disaster, accident or loss and provided that only one such period of 168 consecutive hours shall apply with respect to one event, except for any “Loss Occurrence” referred to in sub-paragraph (i) above where only one such period of 96 consecutive hours shall apply with respect to one event, regardless of the duration of the event. As respects those Loss Occurrences referred to in (ii) above, if the disaster, accident or loss occasioned by the event is of greater duration than 72 consecutive hours, then the Company may             A9CFHB008_4129088       LOGO [g95347bms_logo.jpg]     June 19, 2009    Page 4 of 15    divide that disaster, accident or loss into two or more Loss Occurrences provided no two periods overlap and no individual loss is included in more than one such period and provided that no period commences earlier than the date and time of the occurrence of the first recorded individual loss sustained by the Company arising out of that disaster, accident or loss. No individual losses occasioned by an event that would be covered by the 72 hours clause, may be included in any loss occurrence claimed under the 96 hours clause, nor may individual losses occasioned by an event that would be covered by either the 72 or 96 hours clauses, be included in any “Loss Occurrence” claimed under the 168 hours provision. Losses directly or indirectly occasioned by:     (i) loss of, alteration of, or damage to or     (ii) a reduction in the functionality, availability or operation of a computer system, hardware, programme, software, data, information repository, microchip, integrated circuit or similar device in computer equipment or non-computer equipment, whether the property of the policyholder of the Company or not, do not in and of themselves constitute an event unless arising out of one or more of the following perils: fire, lightning, explosion, aircraft or vehicle impact, falling objects, windstorm, hail, tornado, cyclone, hurricane, earthquake, volcano, tsunami, flood, freeze or weight of snow. Any date change, including leap year calculations, shall not in and of itself be regarded as a loss occurrence for the purposes of this Agreement.     B. The term “Ultimate Net Loss” as used herein is defined as the sum or sums (including 90% of any Extra Contractual Obligations and/or 90% of any Loss In Excess of Policy Limits, and any Loss Adjustment Expenses as hereinafter defined, provided there is an indemnity loss hereunder, any Loss Adjustment Expense/fair rental value unrecoverable from the FHCF) paid or payable by the Company in settlement of claims and in satisfaction of judgments rendered on account of such claims, after deduction of all salvage, all recoveries and all claims on inuring insurance or reinsurance, whether collectible or not. Nothing herein shall be construed to mean that losses under this Agreement are not recoverable until the Company’s Ultimate Net Loss has been ascertained.     C. The terms “Loss In Excess of Policy Limits” and “Extra Contractual Obligations” as used herein shall be defined as follows:     1. “Loss In Excess of Policy Limits” shall mean any amount paid or payable by the Company in excess of its Policy limits, but otherwise within the terms of its Policy, as a result of an action against it by its insured or its insured’s assignee to recover damages the insured is legally obligated to pay because of the Company’s alleged or actual negligence or bad faith in rejecting a settlement within Policy limits, or in discharging its duty to defend or prepare the defense in the trial of an action against its insured, or in discharging its duty to prepare or prosecute an appeal consequent upon such an action.     2. “Extra Contractual Obligations” shall mean any punitive, exemplary, compensatory or consequential damages, other than Loss In Excess of Policy Limits, paid or payable by the Company as a result of an action against it by its insured or its insured’s assignee, which                   A9CFHB008_4129088       LOGO [g95347bms_logo.jpg]       June 19, 2009    Page 5 of 15      action alleges negligence or bad faith on the part of the Company in handling a claim under a policy subject to this Agreement. An Extra Contractual Obligation shall be deemed, in all circumstances, to have occurred on the same date as the loss covered or alleged to be covered under the Policy Notwithstanding anything stated herein, this Agreement shall not apply to any Loss In Excess of Policy Limits or any Extra Contractual Obligation incurred by the Company as a result of any fraudulent and/or criminal act by any officer or director of the Company acting individually or collectively or in collusion with any individual or corporation or any other organization or party involved in the presentation, defense, settlement of any claim covered hereunder. Savings Clause (Applicable only if the Reinsurer is domiciled in the State of New York): In no event shall coverage be provided to the extent that such coverage is not permitted under New York law.     D. The term “Loss Adjustment Expense” as used herein shall mean expenses assignable to the investigation, appraisal, adjustment, settlement, litigation, defense and/or appeal of claims, regardless of how such expenses are classified for statutory reporting purposes. Loss Adjustment Expense shall include, but not be limited to, Loss Adjustment Expense not recoverable from the FHCF, interest on judgments, expenses of outside adjusters, and a pro rata share of the salaries and expenses of the Company’s field employees according to the time occupied adjusting such losses, but excluding salaries of the Company’s officials and any normal overhead charges, and excluding Declaratory Judgment Expenses or other legal expenses and costs incurred in connection with coverage questions and legal actions connected thereto.     E. The term “Declaratory Judgment Expense” as used herein shall mean the Company’s own costs and legal expense incurred in direct connection with declaratory judgment actions brought to determine the Company’s defense and/or indemnification obligations that are assignable to specific claims arising out of policies reinsured by this Agreement, regardless of whether the declaratory judgment action is considered successful or unsuccessful. Any Declaratory Judgment Expense will be deemed to have been incurred by the Company on the date of the original loss, if any, giving rise to the declaratory judgment action.     F. The term “Agreement Year” as used herein shall be defined as the period from 12:01 a.m., Local Standard Time at the location where the Loss Occurrence commences, June 1, 2009, until 12:01 a.m., Local Standard Time at the location where the Loss Occurrence commences, June 1, 2010. However, if this Agreement is terminated, Agreement Year as used herein shall mean the period from 12:01 a.m., Local Standard Time at the location where the Loss Occurrence commences, June 1, 2009 through the effective date of termination. ARTICLE 7 — NET RETAINED LINES This Agreement applies only to that portion of any insurances or reinsurances covered by this Agreement which the Company retains net for its own account (prior to deduction of any underlying reinsurance), and in calculating the amount of any loss hereunder and also in computing the amount or amounts in excess of which this Agreement attaches, only loss or losses in respect of that portion of any insurances or reinsurances which the Company retains net for its own account shall be included.               A9CFHB008_4129088       LOGO [g95347bms_logo.jpg]       June 19, 2009    Page 6 of 15    It is understood and agreed that the amount of the Reinsurer’s liability hereunder in respect of any loss or losses shall not be increased by reason of the inability of the Company to collect from any other reinsurers, whether specific or general, any amounts which may have become due from them, whether such inability arises from the insolvency of such other reinsurers or otherwise. ARTICLE 8 — OTHER REINSURANCE The Company shall be permitted to carry other reinsurance, recoveries under which shall inure solely to the benefit of the Company and be entirely disregarded in applying all of the provisions of this Agreement. ARTICLE 9 — PREMIUM     A. As premium for each excess layer of reinsurance coverage provided by this Agreement, the Company shall pay the Reinsurer the greater of the following:     1. The amount, shown as “Minimum Premium” for that excess layer in the Schedules attached hereto; or     2. The percentage, shown as “provisional rate” for that excess layer in the Schedules attached hereto to the Company’s Total Insurance Values in-force for Coverages A, B, C and D in respect of the Company’s Homeowners/Dwelling/Condominium Business as at September 30, 2009.     B. The Company shall pay the Reinsurer a deposit premium for each excess layer of the amount, shown as “Deposit Premium” for that excess layer in the Schedules attached hereto, which is payable in four installments. The first three installments shall be an amount equal to 25% of “Deposit Premium” for that excess layer at July 1, 2009, October 1, 2009, and January 1, 2010. The fourth installment for each excess layer shall be equal to the adjusted deposit premium for that excess layer, computed in accordance with paragraph C below and is due on April 1, 2010. However, in the event this Agreement is terminated, there shall be no deposit premium installments due after the effective date of termination.     C. “Adjusted deposit premium” as used herein shall mean:     1. The premium due hereunder for each excess layer, computed in accordance with paragraph A above; less     2. The first, second and third installments paid for each excess layer in accordance with paragraph B above.     D. No later than April 1, 2010 (or the date of termination in the event this Agreement is terminated prior to April 1, 2010), the Company shall provide a report to the Reinsurer setting forth the premium due hereunder for each excess layer, computed in accordance with paragraph A above, and the adjusted deposit premium for each excess layer, computed in accordance with paragraph C above. In the event this Agreement is terminated prior to April 1, 2010, any additional premium due the Reinsurer or return premium due the Company shall be remitted promptly. Should the Total Insurance Values in-force for Coverages A, B, C and D in respect of the Company’s Homeowners/Dwelling/Condominium Business as at September 30, 2009 increase less than 10% of $39,493,781,760, there will be no additional premium due the Reinsurer.               A9CFHB008_4129088       LOGO [g95347bms_logo.jpg]       June 19, 2009    Page 7 of 15    ARTICLE 10 — REINSTATEMENT Loss payments under this Agreement will reduce the limit of coverage afforded by the amounts paid, but the limit of coverage will be reinstated from the time of the occurrence of the loss. Nevertheless, the Reinsurer’s liability for each excess layer shall not exceed the amount shown in the Schedules attached hereto, as respects loss or losses arising out of one occurrence. ARTICLE 11 — NOTICE OF LOSS AND LOSS SETTLEMENTS The Company shall notify the Reinsurer promptly of all claims which, in the opinion of the Company, may involve the Reinsurer, and of all subsequent developments regarding these claims which may materially affect the position of the Reinsurer. The notification shall be made in the form of a report, submitted no less frequently than on a quarterly basis, that details losses paid and the expected Ultimate Net Losses for each claim related to a Loss Occurrence subject to this Agreement. All loss settlements made by the Company, provided they are within the terms of the Company’s original Policies and of this Agreement, shall be binding upon Reinsurer, and amounts falling to the share of Reinsurer shall be payable without delay upon reasonable evidence of the amount being given by the Company. ARTICLE 12 — SALVAGE AND SUBROGATION (BRMA 47E) The Reinsurer shall be credited with salvage or subrogation recoveries (i.e., reimbursement obtained or recovery made by the Company, less loss adjustment expense incurred in obtaining such reimbursement or making such recovery) on account of claims and settlements involving reinsurance hereunder. Salvage thereon shall always be used to reimburse the excess carriers in the reverse order of their priority according to their participation before being used in any way to reimburse the Company for its primary loss. The Company hereby agrees to enforce its rights to salvage or subrogation relating to any loss, a part of which loss was sustained by the Reinsurer, and to prosecute all claims arising out of such rights. ARTICLE 13 — OFFSET (BRMA 36C) The Company and the Reinsurer shall have the right to offset any balance or amounts due from one party to the other under the terms of the Agreement. The party asserting the right of offset may exercise such right any time whether the balances due are on account of premiums or losses or otherwise. ARTICLE 14 — UNAUTHORIZED REINSURANCE (Applies only to a Reinsurer who does not qualify for full credit with any insurance regulatory authority having jurisdiction over the Company’s reserves.) As regards Policies or bonds issued by the Company coming within the scope of this Agreement, the Company agrees that when it shall file with the insurance regulatory authority or set up on its books reserves for unearned premium and losses covered hereunder which it shall be required by law to set up, it will forward to the Reinsurer a statement showing the proportion of such reserves which is applicable to the Reinsurer. The Reinsurer hereby agrees to fund such reserves in respect of unearned premium (including but not limited to, the unearned portion of any deposit premium installment), known outstanding losses that have been reported to the Reinsurer and allocated Loss Adjustment Expense relating thereto, and losses and allocated Loss Adjustment Expense paid by the Company but not recovered from the Reinsurer, including all               A9CFHB008_4129088       LOGO [g95347bms_logo.jpg]       June 19, 2009    Page 8 of 15    case reserves plus any reasonable amount estimated to be unreported from known Loss Occurrences as shown in the statement prepared by the Company (hereinafter referred to as “Reinsurer’s Obligations”) by funds withheld, cash advances or a Letter of Credit. The Reinsurer shall have the option of determining the method of funding provided it is acceptable to the insurance regulatory authorities having jurisdiction over the Company’s reserves. When funding by a Letter of Credit, the Reinsurer agrees to apply for and secure timely delivery to the Company of a clean, irrevocable and unconditional Letter of Credit issued by a bank and containing provisions acceptable to the insurance regulatory authorities having jurisdiction over the Company’s reserves in an amount equal to the Reinsurer’s proportion of said reserves. Such Letter of Credit shall be issued for a period of not less than one year, and shall be automatically extended for one year from its date of expiration or any future expiration date unless 30 days (60 days where required by insurance regulatory authorities) prior to any expiration date the issuing bank shall notify the Company by certified or registered mail that the issuing bank elects not to consider the Letter of Credit extended for any additional period. The Reinsurer and Company agree that the Letters of Credit provided by the Reinsurer pursuant to the provisions of this Agreement may be drawn upon at any time, notwithstanding any other provision of this Agreement, and be utilized by the Company or any successor, by operation of law, of the Company including, without limitation, any liquidator, rehabilitator, receiver or conservator of the Company for the following purposes, unless otherwise provided for in a separate Trust Agreement:     (a)    to reimburse the Company for the Reinsurer’s Obligations, the payment of which is due under the terms of this Agreement and which has not been otherwise paid;   (b)    to make refund of any sum which is in excess of the actual amount required to pay the Reinsurer’s Obligations under this Agreement;   (c)    to fund an account with the Company for the Reinsurer’s Obligations. Such cash deposit shall be held in an interest bearing account separate from the Company’s other assets, and interest thereon not in excess of the prime rate shall accrue to the benefit of the Reinsurer;   (d)    to pay the Reinsurer’s share of any other amounts the Company claims are due under this Agreement. In the event the amount drawn by the Company on any Letter of Credit is in excess of the actual amount required for (a) or (c), or in the case of (d), the actual amount determined to be due, the Company shall promptly return to the Reinsurer the excess amount so drawn. All of the foregoing shall be applied without diminution because of insolvency on the part of the Company or the Reinsurer. The issuing bank shall have no responsibility whatsoever in connection with the propriety of withdrawals made by the Company or the disposition of funds withdrawn, except to ensure that withdrawals are made only upon the order of properly authorized representatives of the Company. At annual intervals, or more frequently as agreed but never more frequently than quarterly, the Company shall prepare a specific statement of the Reinsurer’s Obligations, for the sole purpose of amending the Letter of Credit, in the following manner:     (a)    If the statement shows that the Reinsurer’s Obligations exceed the balance of credit as of the statement date, the Reinsurer shall, within 30 days after receipt of notice of such excess, secure               A9CFHB008_4129088       LOGO [g95347bms_logo.jpg]       June 19, 2009    Page 9 of 15         delivery to the Company of an amendment to the Letter of Credit increasing the amount of credit by the amount of such difference.   (b)    If, however, the statement shows that the Reinsurer’s Obligations are less than the balance of credit as of the statement date, the Company shall, within 30 days after receipt of written request from the Reinsurer, release such excess credit by agreeing to secure an amendment to the Letter of Credit reducing the amount of credit available by the amount of such excess credit. ARTICLE 15 — TAXES The Company will be liable for taxes (except Federal Excise Tax) on premiums reported to the Reinsurer hereunder. Federal Excise Tax applies only to those Reinsurers, excepting Underwriters at Lloyd’s London and other Reinsurers exempt from the Federal Excise Tax, who are domiciled outside the United States of America. The Reinsurer has agreed to allow for the purposes of paying the Federal Excise Tax the applicable percentage of the premium payable hereon (as imposed under Section 4371 of the Internal Revenue Code) to the extent such premium is subject to Federal Excise Tax. In the event of any return of premium becoming due hereunder the Reinsurer will deduct the applicable percentage from the return premium payable hereon, and the Company or its agent should take steps to recover the Tax from the U.S. Government. ARTICLE 16 — CURRENCY The currency to be used for all purposes of this Agreement shall be United States of America currency. ARTICLE 17 — DELAY, OMISSION OR ERROR Any inadvertent delay, omission or error shall not be held to relieve either party hereto from any liability which would attach to it hereunder if such delay, omission or error had not been made, providing such delay, omission or error is rectified upon discovery. ARTICLE 18 — ACCESS TO RECORDS The Reinsurers or their designated representatives shall have free access at any reasonable time to all records of the Company which pertain in any way to this Agreement. ARTICLE 19 — ARBITRATION (BRMA 6J) As a condition precedent to any right of action hereunder, in the event of any dispute or difference of opinion hereafter arising with respect to this Contract, it is hereby mutually agreed that such dispute or difference of opinion shall be submitted to arbitration. One Arbiter shall be chosen by the Company, the other by the Reinsurer, and an Umpire shall be chosen by the two Arbiters before they enter upon arbitration, all of whom shall be active or retired disinterested executive officers of insurance or reinsurance companies or Lloyd’s London Underwriters. In the event that either party should fail to choose an Arbiter within thirty (30) days following a written request by the other party to do so, the requesting party may choose two Arbiters who shall in turn choose an Umpire before entering upon arbitration. If the two Arbiters fail to agree upon the selection of an Umpire within thirty (30) days following their appointment,               A9CFHB008_4129088       LOGO [g95347bms_logo.jpg]       June 19, 2009    Page 10 of 15    each Arbiter shall nominate three candidates within ten (10) days thereafter, two of whom the other shall decline, and the decision shall be made by drawing lots. Each party shall present its case to the Arbiters within thirty (30) days following the date of appointment of the Umpire. The Arbiters shall consider this Contract as an honorable engagement rather than merely as a legal obligation and they are relieved of all judicial formalities and may abstain from following the strict rules of law. The decision of the Arbiters shall be final and binding on both parties; but failing to agree, they shall call in the Umpire and the decision of the majority shall be final and binding upon both parties. Judgment upon the final decision of the Arbiters may be entered in any court of competent jurisdiction. If more than one reinsurer is involved in the same dispute, all such reinsurers shall constitute and act as one party for purposes of this Article and communications shall be made by the Company to each of the reinsurers constituting one party, provided, however, that nothing herein shall impair the rights of such reinsurers to assert several, rather than joint, defenses or claims, nor be construed as changing the liability of the reinsurers participating under the terms of this Contract from several to joint. Each party shall bear the expense of its own Arbiter, and shall jointly and equally bear with the other the expense of the Umpire and of the arbitration. In the event that the two Arbiters are chosen by one party, as above provided, the expense of the Arbiters, the Umpire and the arbitration shall be equally divided between the two parties. Any arbitration proceedings shall take place at a location mutually agreed upon by the parties to this Contract, but notwithstanding the location of the arbitration, all proceedings pursuant hereto shall be governed by the law of the state in which the Company has its principal office. ARTICLE 20 — SERVICE OF SUIT It is agreed that in the event of the failure of the Reinsurers hereon to pay any amount claimed to be due hereunder, the Reinsurers hereon, at the request of the Company, will submit to the jurisdiction of a Court of competent jurisdiction within the United States. Nothing in this Article constitutes or should be understood to constitute a waiver of Reinsurers’ rights to commence an action in any Court of competent jurisdiction in the United States, to remove an action to a United States District Court, or to seek a transfer of a case to another Court as permitted by the laws of the United States or of any State in the United States. It is further agreed that service of process in such suit may be made upon Messrs Mendes and Mount, 750 Seventh Avenue, New York, New York 10019-6829, and that in any suit instituted against any one of them upon this Agreement, Reinsurers will abide by the final decision of such Court or of any Appellate Court in the event of an appeal. The above-named are authorized and directed to accept service of process on behalf of Reinsurers in any such suit and/or upon the request of the Company to give a written undertaking to the Company that they will enter a general appearance upon Reinsurers’ behalf in the event such a suit shall be instituted. Further, pursuant to any statute of any state, territory or district of the United States which makes provision therefore, Reinsurers hereon hereby designate the Superintendent, Commissioner or Director of Insurance or other officer specified for that purpose in the statute, or his successor or successors in office, as their true and lawful attorney upon whom may be served any lawful process in any action, suit or proceeding instituted by or on behalf of the Company or any beneficiary hereunder arising out of this Agreement of insurance (or reinsurance), and hereby designate the above-named as the person to whom the said officer is authorized to mail such process or a true copy thereof.               A9CFHB008_4129088       LOGO [g95347bms_logo.jpg]       June 19, 2009    Page 11 of 15    ARTICLE 21 — INSOLVENCY In the event of the insolvency of the Company, the reinsurance under this Agreement shall be payable by the Reinsurer to the Company or its liquidator, receiver or statutory successor on the basis of the liability of the Company under the original Policy or Policies reinsured, without diminution because of the insolvency of the Company, except as provided by Section 4118 (a)(1)(A) of the New York Insurance Law, provided the conditions of 1114(c) of such law have been met, if New York law applies, or except (a) where this Agreement specifically provides another payee in the event of the insolvency of the Company or (b) where a Reinsurer(s) subscribing a participation hereunder with the consent of the original insured or insureds, has assumed such policy obligations of the Company to such payees. If the Company should become insolvent, then the liquidator, receiver or statutory successor of the Company shall give written notice to the Reinsurer of the pendency of any claim against the Company which is likely to produce a loss under this Agreement within a reasonable time after such claim is filed in the insolvency proceeding; during the pendency of such claim, the Reinsurer under this Agreement may investigate such claim and interpose, at its own expense, in the proceeding where such claim is to be adjudicated, any defense or defenses which the Reinsurer may deem available to the Company or its liquidator or receiver or statutory successor. The expense thus incurred by the Reinsurer shall be chargeable, subject to court approval, against the insolvent Company as part of the expense of liquidation to the extent of the benefit which may accrue If those Reinsurers subscribing a majority participation in this Agreement elect to interpose defense to a claim, the expense shall be apportioned in accordance with the terms of this Agreement as though such expenses had been incurred by the Company. Should the Company go into liquidation or should a receiver be appointed the Reinsurer shall be entitled to deduct from any sums which may be due or may become due to the Company under this Agreement, any sums which are due to the Reinsurer by the Company under this Agreement and which are due at a fixed or stated date, as well as any other sums due to the Reinsurer which are permitted to be offset under applicable law. ARTICLE 22 — THIRD PARTY RIGHTS (BRMA 52C) This Agreement is solely between the Company and the Reinsurer, and in no instance shall any other party have any rights under this Agreement except as expressly provided otherwise in the INSOLVENCY ARTICLE.               A9CFHB008_4129088       LOGO [g95347bms_logo.jpg]       June 19, 2009    Page 12 of 15    ARTICLE 23 -- SEVERABILITY If any provision of this Agreement shall be rendered illegal or unenforceable by the laws, regulations or public policy of any state, such provision shall be considered void in such state, but this shall not affect the validity or enforceability of any other provision of this Agreement or the enforceability of such provision in any other jurisdiction. ARTICLE 24 -- CONFIDENTIALITY For a period of three years following the termination or expiration of this Agreement, the contracting parties undertake to regard the terms of this Agreement (and any confidential, proprietary information relating thereto provided in writing to such other party) as confidential, with the parties to effect the same prudence and care afforded by such party to its own confidential, proprietary information. Each party further agrees that it shall not disclose any of such information to any third party without the prior written consent of the other party or except as may be required by applicable law or regulation, or by legal process (including without limitation as may be required by United States Federal tax law or regulation), or to the auditors, professional advisors, accountants, retrocessionaires, related managing general agents, directors or officers of such party with a reasonable need to know such information. Except as expressly set forth above, the parties agree and acknowledge that this Article is not intended to restrict or limit the conduct of the other party’s current or proposed business. ARTICLE 25 -- ENTIRE AGREEMENT (BRMA 74B) This Agreement constitutes the entire agreement between the parties. In no event shall this Agreement provide any guarantee of profit, directly or indirectly, from the Reinsurer to the Company or from the Company to the Reinsurer. This Agreement may be clarified, amended or modified only by written agreement signed by both parties. Such written agreement shall become part of this Agreement. ARTICLE 26 -- LAW AND JURISDICTION This Agreement shall be governed by the laws of the State of Florida and shall be subject to the jurisdiction of the courts of the United States of America (subject to the provisions of the SERVICE OF SUIT ARTICLE). ARTICLE 27 -- INTERMEDIARY BMS Intermediaries Inc., is hereby recognized as the intermediary negotiating this Agreement for all business hereunder. All communications (including but not limited to notices, statements, premiums, return premiums, commissions, taxes, losses, Loss Adjustment Expense, salvages and loss settlements) relating thereto shall be transmitted to the Company or the Reinsurer through BMS Intermediaries Inc., 5005 LBJ Freeway, Suite 700, Dallas, Texas 75244. Payments by the Company to the intermediary shall be deemed to constitute payment to the Reinsurer. Payments by the Reinsurer to the intermediary shall be deemed only to constitute payment to the Company to the extent that such payments are actually received by the Company.               A9CFHB008_4129088       LOGO [g95347bms_logo.jpg]       June 19, 2009    Page 13 of 15    ARTICLE 28 -- MODE OF EXECUTION Whenever a notice, statement, report or any other written communication is required by this Agreement, unless otherwise specified, such notice, statement, report or other written communication may be transmitted by certified or registered mail, nationally or internationally recognized express delivery service, personal delivery, electronic mail, or facsimile. With the exception of notices of termination, first class mail is also acceptable. The use of any of the following shall constitute a valid execution of this Agreement or any amendments thereto:     A. Paper documents with an original ink signature;     B. Facsimile or electronic copies of paper documents showing an original ink signature; and/or     C. Electronic records with an electronic signature made via an electronic agent. For the purposes of this Agreement, the terms “electronic record,” “electronic signature” and “electronic agent” shall have the meanings set forth in the Electronic Signatures in Global and National Commerce Act of 2000 or any amendments thereto. This Agreement may be executed in one or more counterparts, each of which, when duly executed, shall be deemed an original. Signed in St. Petersburg, Florida this                  day of                                                                          , 2009. For and on behalf of the Company:                 A9CFHB008_4129088       LOGO [g95347bms_logo.jpg]       June 19, 2009    Page 14 of 15    SCHEDULE A First Property Catastrophe Excess of Loss Reinsurance This Schedule is attached to and forms a part of the Property Catastrophe Excess of Loss Reinsurance Agreement and sets out specific terms, conditions and participating Reinsurers for the Company’s First Property Catastrophe Excess of Loss Reinsurance. RETENTION AND LIMIT The Reinsurer will be liable in respect of each and every Loss Occurrence for the Ultimate Net Loss over and above an initial Ultimate Net Loss of $26,402,427 each and every Loss Occurrence, subject to a limit of liability to the Reinsurer of 95% of $43,000,000 each and every Loss Occurrence. PREMIUM The Company shall pay the Reinsurer a Deposit Premium of $16,340,000 (being 95% of $17,200,000) in accordance with the PREMIUM ARTICLE of this Agreement. The Deposit Premium shall be adjusted in accordance with the PREMIUM ARTICLE of this Agreement, by a provisional rate of 0.0414% to the Company’s Total Insurance Values in-force for Coverages A, B, C and D in respect of the Company’s Homeowners/Dwelling/Condominium Business (“TIV”) as at September 30, 2009 subject to a minimum premium of $13,072,000. (Minimum premium to be 80% of the developed Deposit Premiums which are in turn based on TIV at September 30, 2009 of $39,493,781,760.) REINSTATEMENT Each claim hereon reduces the amount of indemnity under this Agreement from the time of occurrence of the loss, but such amount is hereby reinstated from the time of occurrence of the loss in consideration of the payment by the Company of an additional premium calculated by applying to the premium earned hereon, the percentage of the face amount of this Agreement so reinstated. Nevertheless, the Reinsurer’s liability hereunder shall never exceed 95% of $43,000,000 for any one Loss Occurrence and 95% of $86,000,000 for all Loss Occurrences during the term of this Agreement.               A9CFHB008_4129088       LOGO [g95347bms_logo.jpg]       June 19, 2009       SCHEDULE B Second Property Catastrophe Excess of Loss Reinsurance participating Reinsurers for the Company’s Second Property Catastrophe Excess of Loss Reinsurance. RETENTION AND LIMIT the Ultimate Net Loss over and above an initial Ultimate Net Loss of $69,402,427 of 95% of $50,392,285 each and every Loss Occurrence. PREMIUM The Company shall pay the Reinsurer a Deposit Premium of $15,319,255 (being 95% of $16,125,531) in accordance with the PREMIUM ARTICLE of this Agreement. The Agreement, by a provisional rate of 0.0388% to the Company’s Total Insurance subject to a minimum premium of $12,255,404. (Minimum premium to be 80% of the REINSTATEMENT Reinsurer’s liability hereunder shall never exceed 95% of $50,392,285 for any one Loss Occurrence and 95% of $100,784,570 for all Loss Occurrences during the               A9CFHB008_4129088       LOGO [g95347bms_logo.jpg]       June 19, 2009       SCHEDULE C Third Property Catastrophe Excess of Loss Reinsurance participating Reinsurers for the Company’s Third Property Catastrophe Excess of Loss Reinsurance. RETENTION AND LIMIT $119,794,712 each and every Loss Occurrence, subject to a limit of liability to the Reinsurer of $30,507,128 each and every Loss Occurrence. In the event the limit and retention provided by the FHCF and/or the limit and retention provided by the Temporary Increase in Coverage Limits (“TICL”) are adjusted in accordance with the provisions of the reimbursement contract between the Company and the State Board of Administration of the State of Florida, the Company’s additional retention, if any, will be included in the limit of liability of the Reinsurer. In no event shall the limit of liability to the Reinsurer exceed $30,507,128 each and every Loss Occurrence. In the event the coverage provided by the Temporary Increase in Coverage Limits (“TICL”) and/or the coverage provided by the FHCF is depleted, exhausted or otherwise unavailable, the Reinsurer will be liable in respect of each and every Loss Occurrence for the Ultimate Net Loss over and above an initial Ultimate Net Loss of $119,794,712 each and every Loss Occurrence, subject to a limit of liability to the Reinsurer of $30,507,128. PREMIUM The Company shall pay the Reinsurer a Deposit Premium of $6,101,426 in accordance with the PREMIUM ARTICLE of this Agreement. The Deposit Premium shall be adjusted in accordance with the PREMIUM ARTICLE of this Agreement, by a provisional rate of 0.0154% to the Company’s Total Insurance Values in-force for subject to a minimum premium of $4,881,140.80. (Minimum premium to be 80% of the REINSTATEMENT Reinsurer’s liability hereunder shall never exceed $30,507,128 for any one Loss Occurrence and $61,014,256 for all Loss Occurrences during the term of this Agreement.               A9CFHB008_4129088       LOGO [g95347bms_logo.jpg]       June 19, 2009       SCHEDULE D Fourth Property Catastrophe Excess of Loss Reinsurance participating Reinsurers for the Company’s Fourth Property Catastrophe Excess of Loss Reinsurance. RETENTION AND LIMIT $150,301,840 each and every Loss Occurrence, subject to a limit of liability to the Reinsurer of 50% of $8,804,762 each and every Loss Occurrence. Reinsurer exceed 50% of $8,804,762 each and every Loss Occurrence. Loss of $150,301,840 each and every Loss Occurrence, subject to a limit of liability to the Reinsurer of 50% of $8,804,762. PREMIUM The Company shall pay the Reinsurer a Deposit Premium of $638,345 (being 50% of $1,276,690) in accordance with the PREMIUM ARTICLE of this Agreement. The Agreement, by a provisional rate of 0.0016% to the Company’s Total Insurance subject to a minimum premium of $510,676. (Minimum premium to be 80% of the REINSTATEMENT Reinsurer’s liability hereunder shall never exceed 50% of $8,804,762 for any one Loss Occurrence and 50% of $17,609,524 for all Loss Occurrences during the term of this Agreement.               A9CFHB008_4129088       LOGO [g95347bms_logo.jpg]       NUCLEAR INCIDENT EXCLUSION CLAUSE - PHYSICAL-DAMAGE - REINSURANCE - U.S.A.     1. This Agreement does not cover any loss or liability accruing to the Reassured, directly or indirectly, and whether as Insurer or Reinsurer, from any Pool of Insurers or Reinsurers formed for the purpose of covering Atomic or Nuclear Energy risks.     2. Without in any way restricting the operation of paragraph (1) of this Clause, this Agreement does not cover any loss or liability accruing to the Reassured, directly or indirectly and whether as Insurer or Reinsurer, from any insurance against Physical Damage (including business interruption or consequential loss arising out of such Physical Damage) to:     I. Nuclear reactor power plants including all auxiliary property on the site, or     II. Any other nuclear reactor, installation, including laboratories handling radioactive materials in connection with reactor installations, and “critical facilities” as such, or     III. Installations for fabricating complete fuel elements or for processing substantial quantities of “special nuclear material,” and for reprocessing, salvaging, chemically separating, storing or disposing of “spent” nuclear fuel or waste materials, or     IV. Installations other than those listed in paragraph (2) III above using substantial quantities of radioactive isotopes or other products of nuclear fission.     3. Without in any way restricting the operation of paragraphs (1) and (2) hereof, this Agreement does not cover any loss or liability by radioactive contamination accruing to the Reassured, directly or indirectly, and whether as Insurer or Reinsurer, from any insurance on property which is on the same site as a nuclear reactor power plant or other nuclear installation and which normally would be insured therewith except that this paragraph (3) shall not operate.     (a) where Reassured does not have knowledge of such nuclear reactor power plant or nuclear installation, or     (b) where the said insurance contains a provision excluding coverage for damage to property caused by or resulting from radioactive contamination, however caused. However, on and after 1st January, 1960 this sub-paragraph (b) shall only apply provided the said radioactive contamination exclusion provision has been approved by the Governmental Authority having jurisdiction thereof.     4. Without in any way restricting the operation of paragraphs (1), (2) and (3) hereof, this Agreement does not cover any loss or liability by radioactive contamination accruing to the Reassured, directly or indirectly, and whether as Insurer or Reinsurer, when such radioactive contamination is a named hazard specifically insured against.     5. It is understood and agreed that this Clause shall not extend to risks using radioactive isotopes in any form where the nuclear exposure is not considered by the Reassured to be the primary hazard.     6. The term “special nuclear material” shall have the meaning given it in the Atomic Energy Act of 1954 or by any law amendatory thereof.     7. Reassured to be sole judge of what constitutes:     (a) substantial quantities, and               A9CFHB008_4129088       LOGO [g95347bms_logo.jpg]         (b) the extent of installation, plant or site. Note - Without in any way restricting the operation of paragraph (I) hereof, it is understood and agreed that     (a) all policies issued by the Reassured on or before 31st December 1957 shall be free from the application of the other provisions of this Clause until expiry date or 31st December 1960 whichever first occurs whereupon all the provisions of this Clause shall apply.     (b) with respect to any risk located in Canada policies issued by the Reassured on or before 31st December 1958 shall be free from the application of the other provisions of this Clause until expiry date or 31st December 1960 whichever first occurs whereupon all the provisions of this Clause shall apply. In accordance with NMA 1119 (12/12/57)               A9CFHB008_4129088       LOGO [g95347bms_logo.jpg]       TERRORISM EXCLUSION (Property Treaty Reinsurance) Notwithstanding any provision to the contrary within this reinsurance agreement or any endorsement thereto, it is agreed that this reinsurance agreement excludes loss, damage, cost, or expense directly or indirectly caused by, contributed to by, resulting from, or arising out of or in connection with any act of terrorism, as defined herein, regardless of any other cause or event contributing concurrently or in any other sequence to the loss. An act of terrorism includes any act, or preparation in respect of action, or threat of action designed to influence the government de jure or de facto of any nation or any political division thereof, or in pursuit of political, religious, ideological or similar purposes to intimidate the public or a section of the public of any nation by any person or group(s) of persons whether acting alone or on behalf of or in connection with any organisation(s) or government(s) de jure or de facto, and which:     (i) involves violence against one or more persons; or   (ii) involves damage to property; or   (iii) endangers life other than that of the person committing the action; or   (iv) creates a risk to health or safety of the public or a section of the public; or   (v) is designed to interfere with or to disrupt an electronic system. This reinsurance agreement also excludes loss, damage, cost or expense directly or indirectly caused by, contributed to by, resulting from, or arising out of or in connection with any action in controlling, preventing, suppressing, retaliating against, or responding to any act of terrorism. Notwithstanding the above and subject otherwise to the terms, conditions, and limitations of this reinsurance agreement, in respect only of personal lines this reinsurance agreement will pay actual loss or damage (but not related cost or expense) caused by any act of terrorism provided such act is not directly or connection with biological, chemical, radioactive, or nuclear pollution or contamination or explosion. NMA2930c 22/11/02 Form approved by Lloyd’s Market Association [Non-Marine]         A9CFHB008_4129088       LOGO [g95347bms_logo.jpg]       INTERESTS AND LIABILITIES CONTRACT in respect of the PROPERTY CATASTROPHE between and XYZ REINSURANCE COMPANY (hereinafter referred to as the “Subscribing Reinsurer”) It is hereby agreed by and between the Company, of the one part, and the Subscribing Reinsurer, of the other part, that the Subscribing Reinsurer subscribes a share of the Interests and Liabilities of the Reinsurer as set forth in the PROPERTY CATASTROPHE EXCESS OF LOSS REINSURANCE AGREEMENT effective June 1, 2009 as set forth below: EXHIBIT A – X% EXHIBIT B – X% EXHIBIT C – X% EXHIBIT D – X% The share(s) of the Subscribing Reinsurer in the Interests and Liabilities of the “Reinsurer” in respect of the said Agreement shall be separate and apart from the shares of the other reinsurers subscribing to the said Agreement, and the Interests and Liabilities of the Subscribing Reinsurer shall not be joint with those of the other reinsurers, and the Subscribing Reinsurer in no event shall participate in the Interests and Liabilities of the other reinsurers subscribing hereon. IN WITNESS WHEREOF, the SUBSCRIBING REINSURER hereto by their respective duly authorized officers have executed this Contract as of the date undermentioned: Signed in Anytown, Anystate, this                              day of                                                                                           , 2009. _______________________________________ XYZ REINSURANCE COMPANY               A9CFHB008_4129088       LOGO [g95347bms_logo.jpg]      

Name: Commission Regulation (EEC) No 3084/82 of 22 November 1982 fixing the import levies on cereals and on wheat or rye flour, groats and meal Type: Regulation Date Published: nan No L 326/6 Official Journal of the European Communities 23 . 11 . 82 COMMISSION REGULATION (EEC) No 3084/82 of 22 November 1982 fixing the import levies on cereals and on wheat or rye flour, groats and meal a band of 2-25 % , a rate of exchange based on their central rate, ” for other currencies, an exchange rate based on the arithmetic mean of the spot market rates of each of these currencies in relation to the Community currencies referred to in the previous indent ; Whereas these exchange rates being those recorded on 19 November 1982 ; Whereas it follows from applying the detailed rules contained in Regulation (EEC) No 2118/82 to today's offer prices and quotations known to the Commission that the levies at present in force should be altered to the amounts set out in the Annex hereto, THE COMMISSION OF THE EUROPEAN COMMUNITIES, Having regard to the Treaty establishing the European Economic Community, Having regard to Council Regulation (EEC) No 2727/75 of 29 October 1975 on the common organi ­ zation of the market in cereals ('), as last amended by Regulation (EEC) No 1451 /82 (2), and in particular Article 13 (5) thereof, Having regard to Council Regulation No 129 on the value of the unit of account and the exchange rates to be applied for the purposes of the common agricul ­ tural policy (3), as last amended by Regulation (EEC) No 2543/73 (4), and in particular Article 3 thereof, Having regard to the opinion of the Monetary Committee, Whereas, the import levies on cereals, wheat and rye flour, and wheat groats and meal were fixed by Regula ­ tion (EEC) No 211 8/82 and subsequent amending Regulations ; Whereas, if the levy system is to operate normally, levies should be calculated on the following basis : ” in the case of currencies which are maintained in relation to each other at any given moment within HAS ADOPTED THIS REGULATION : Article 1 The import levies to be charged on products listed in Article 1 (a), (b) and (c) of Regulation (EEC) No 2727/75 shall be as set out in the Annex hereto . Article 2 This Regulation shall enter into force on 23 November 1982. This Regulation shall be binding in its entirety and directly applicable in all Member States . Done at Brussels , 22 November 1982 . For the Commission Poul DALSAGER Member of the Commission (') OJ No L 281 , 1 . 11 . 1975, p . 1 . (2) OJ No L 164, 14 . 6 . 1982, p . 1 . (3) OJ No 106, 30 . 10 . 1962, p . 2553/62 . (4) OJ No L 263 , 19 . 9 . 1973, p . 1 . ( 5) OJ No L 223 , 31 . 7 . 1982, p . 44. 23 . 11 . 82 Official Journal of the European Communities No L 326/7 ANNEX to the Commission Regulation of 22 November 1982 fixing the import levies on cereals and on wheat or rye flour, groats and meal (ECU/tonne) CCT heading No Description Levies 10.01 B I Common wheat, and mesiin 99-30 10.01 B II Durum wheat 148-48 (&gt;)(*) 10.02 Rye 99-99 ( «) 10.03 Barley 111-99 10.04 Oats 77-44 10.05 B Maize, other than hybrid maize for sowing 100-15 (2) f) 10.07 A Buckwheat 0 10.07 B Millet o o 10.07 C Grain sorghum 95-64 (4) 10.07 D Canary seed ; other cereals 0 (Î · 11.01 A Wheat or mesiin flour 152-81 11.01 B Rye flour 153-80 1 1 .02 A I a) Durum wheat groats and meal 242-59 1 1 .02 Alb) Common wheat groats and meal 164-15 (') Where durum wheat originating in Morocco is transported directly from that country to the Community, the levy is reduced by 0-60 ECU/tonne . (2) In accordance with Regulation (EEC) No 435/80, the levies are not aplied to imports into the French overseas departments of products originating in the African, Caribbean and Pacific States or in the 'overseas countries and territories '. (3) Where maize originating in the ACP or OCT is imported into the Community the levy is reduced by 1-81 ECU/tonne . (4) Where millet and sorghum originating in the ACP or OCT is imported into the Community the levy is reduced by 50 % . (5) Where durum wheat and canary seed produced in Turkey are trans ­ ported directly from that country to the Community, the levy is reduced by 0-60 ECU/tonne . (6) The import levy charged on rye produced in Turkey and transported directly from that country to the Community is laid down in Council Regulation (EEC) No 1180/77 and Commission Regulation (EEC) No 2622/71 .

Exhibit 10.1 EIGHTH AMENDMENT TO CREDIT AGREEMENT This Eighth Amendment to Credit Agreement is dated October 15, 2014, by and among ATI Funding Corporation, a Delaware corporation (“ATI Funding”), TDY Holdings, LLC, a Delaware limited liability company (“TDYH”) (ATI Funding and TDYH are each, a “Borrower” and collectively, the “Borrowers”), the Guarantors (as defined in the Credit Agreement (as hereinafter defined)) party hereto, the Lenders (as hereinafter defined) party hereto and PNC Bank, National Association (“PNC Bank”) as administrative agent for the Lenders (in such capacity, the “Administrative Agent”) (the “Eighth Amendment”). WHEREAS, the Borrowers, the Guarantors, PNC Bank and various other financial institutions party thereto (PNC Bank and such other financial institutions are each, a “Lender” and collectively, the “Lenders”) and the Administrative Agent entered into that certain Credit Agreement, dated July 31, 2007, as amended by (i) that certain First Amendment to Credit Agreement, dated May 29, 2009, among the Borrowers, the Guarantors, the Lenders and the Administrative Agent, (ii) that certain Second Amendment to Credit Agreement, dated December 22, 2010, among the Borrowers, the Guarantors, the Lenders and the Administrative Agent, (iii) that certain Third Amendment to Credit Agreement, dated March 11, 2011, (iv) that certain Fourth Amendment to Credit Agreement, dated November 9, 2011, (v) that certain Fifth Amendment to Credit Agreement, dated April 4, 2012, among (vi) that certain Sixth Amendment to Credit Agreement, dated May 31, 2013, among the Borrowers, the Guarantors, the Lenders and the Administrative Agent, and (vii) that certain Seventh Amendment to Credit Agreement, dated September 26, 2013, among the Borrowers, the Guarantors, the Lenders and the Administrative Agent (as further amended, restated, modified or supplemented from time to time, the “Credit Agreement”); and WHEREAS, the Borrowers and the Guarantors desire to amend certain provisions of the Credit Agreement and the Lenders and the Administrative Agent shall permit such amendments pursuant to the terms and conditions set forth herein. NOW, THEREFORE, in consideration of the premises contained herein and other acknowledged, and intending to be legally bound hereby, the parties hereto agree as follows: 1. All capitalized terms used herein that are defined in the Credit Agreement shall have the same meaning herein as in the Credit Agreement unless the context clearly indicates otherwise. 2. Section 1.1 [Certain Definitions] of the Credit Agreement is hereby amended by inserting the following defined terms in appropriate alphabetical order: Collateral Document or Collateral Documents shall have the meaning specified in Section 7.1.10 [Springing Lien]. Collateral Period means the period commencing on a Springing Lien Trigger Date and to and through, and ending on, the next occurring Collateral Release Date. Collateral Release Date shall have the meaning specified in Section 7.1.10 [Springing Lien]. Commodity Hedge shall mean a price protection agreement related to commodity products and entered into by any Loan Party or any Subsidiary of any Loan Party for hedging purposes (and not for speculation). Debt Rating means, as of any date of determination, the rating as determined and publicly announced by Standard & Poor’s or Moody’s of ATI’s non-credit-enhanced, senior unsecured long-term debt. Eighth Amendment Effective Date means October 15, 2014. Foreign Currency Hedge shall mean any foreign exchange transaction, including spot and forward foreign currency purchases and sales, listed or over-the-counter options on foreign currencies, non-deliverable forwards and options, foreign currency swap agreements, currency exchange rate price hedging arrangements, and any other similar transaction providing for the purchase of one currency in exchange for the sale of another currency. Foreign Currency Hedge Liabilities shall have the meaning assigned in the definition of Lender Provided Foreign Currency Hedge. Hedge Liabilities shall mean collectively, the Foreign Currency Hedge Liabilities and the Interest Rate Hedge Liabilities. Interest Rate Hedge Liabilities shall have the meaning assigned in the definition of Lender Provided Interest Rate Hedge. Investment Grade Rating means a Debt Rating equal to or higher than Baa3 (or the equivalent) by Moody’s or BBB- (or the equivalent) by Standard & Poor’s. Lender Provided Commodity Hedge shall mean a Commodity Hedge which is provided by any Lender or its Affiliate and with respect to which the Administrative Agent confirms: (i) is documented in a standard International Swaps and Derivatives Association Master Agreement or another reasonable and customary manner and (ii) provides for the method of calculating the reimbursable amount of the provider’s credit exposure in a reasonable and customary manner. The liabilities owing to the provider of any Lender Provided Commodity Hedge (the “Commodity Hedge Liabilities”) by any Loan Party that is party to such Lender Provided Commodity Hedge shall, for purposes of this Agreement and all other Loan Documents be “Obligations” of such Person and of each other Loan Party, be guaranteed obligations under the Guaranty Agreement and secured obligations under any other Loan Document, as applicable, and otherwise treated as Obligations for purposes of the other Loan Documents, except to the extent constituting Excluded Swap Obligations of such Person. The Liens securing the Commodity Hedge Liabilities shall be pari passu with the Liens securing all other Obligations under this Agreement and the other Loan Documents, subject to the express provisions of Section 8.2.5 [Application of Proceeds]. Lender Provided Foreign Currency Hedge shall mean a Foreign Currency Hedge which is provided by any Lender or its Affiliate and for which such Lender confirms to the Administrative Agent in writing prior to the execution thereof that it: (a) is documented in a standard International Swaps and Derivatives Association Master Agreement or another reasonable and customary manner, (b) provides for the method of calculating the reimbursable amount of the provider’s credit exposure in a reasonable and customary manner, and (c) is entered into for hedging (rather than speculative) purposes. The liabilities owing to the provider of any Lender Provided Foreign Currency Hedge (the “Foreign Currency Hedge Liabilities”) by any Loan Party that is party to such Lender Provided Foreign Currency Hedge shall, for purposes of this Agreement and all other Loan Foreign Currency Hedge Liabilities shall be pari passu with the Liens securing all other Obligations under this Agreement and the other Loan Documents, subject to the express provisions of Section 8.2.5 [Application of Proceeds]. Other Lender Provided Financial Service Product shall mean agreements or other arrangements under which any Lender or Affiliate of a Lender provides any of the following products or services to any of the Loan Parties: (a) credit cards, (b) credit card processing services, (c) debit cards, (d) purchase cards, (e) ACH transactions, or (f) cash management, including controlled disbursement, accounts or services. Release Event shall have the meaning assigned to that term in Section 7.1.10 Security Agreement or Security Agreements shall mean, singularly or collectively, as the context may require, (i) the Security Agreement in substantially the form of Exhibit 7.1.10 executed and delivered by the Loan Parties to the Administrative Agent for the benefit of the Lenders on the Eighth Amendment Effective Date and (ii) any other Security Agreement executed and delivered by any Person to the Administrative Agent for the benefit of the Lenders on or after Eighth Amendment Effective Date, in form and content satisfactory to the Administrative Agent, each as amended, modified or Springing Lien Collateral means all accounts receivable and inventory of the Loan Parties, whether now or hereafter acquired, and the proceeds thereof. For the avoidance of doubt, no such property shall be deemed to be Springing Lien Collateral until the Springing Lien Trigger Date has occurred and such property has become subject to a Lien securing the Obligations hereunder and under the Loan Documents, in each case pursuant to the executed and delivered Security Agreement. Springing Lien Trigger Date means each date on which a Springing Lien Trigger Event has occurred. Springing Lien Trigger Event means, any of the following has occurred: (a)(i) the Debt Rating of ATI, as determined and announced by Standard & Poor’s, is BB+ or lower, and (ii) the Debt Rating of ATI, as determined an announced by Moody’s, is Ba1 or lower, or (b) an Event of Default has occurred and is continuing and has not been waived by the Required Lenders or cured, to the extent that the Event of Default may, by its terms, be cured. 3. Section 1.1 [Certain Definitions] of the Credit Agreement is hereby amended by amending and restating the following definitions in their entirety and inserting them in the appropriate alphabetical order: Consolidated EBIT for any period of determination shall mean the sum of (i) net income (or loss) (excluding extraordinary gains or losses including, without limitation, those items created by mandated changes in accounting treatment), plus (ii) net interest expense, (iii) plus all charges against or minus credits to income for federal, state and local taxes, (iv) plus or minus, as applicable, any other non-cash non-recurring items of gain or loss with respect to such fiscal period not already excluded hereunder, (v) plus or minus, as applicable, any non-cash pension expense or income, provided, however, that voluntary income, and (vi) plus any extinguishment expenses paid for the premium (whether allocated to debt or equity) required to tender ATI’s 4.25% convertible notes due in 2014, in each case of ATI and its Subsidiaries for such period determined and consolidated in accordance with GAAP; provided, however, that Consolidated EBIT shall be calculated so as to exclude the effect of any gain or loss that represents after-tax gains or losses attributable to any sale, lease, transfer or other disposition of property or other assets or series of related sales, leases, transfers or other dispositions of property or other assets by ATI and/or any of its Subsidiaries other than any sales, leases, transfers or other dispositions of inventory, or obsolete, worn-out or excess furniture, fixtures, equipment or other property, real or personal, tangible or intangible, in each case in the ordinary course of business. Notwithstanding the foregoing, Consolidated EBIT shall be calculated to include any income (as determined and consolidated in accordance with GAAP) realized from any transaction of any nature involving the sale, lease, transfer or other disposition of any interest in the HRPF or the sale of equity of any entity which owns the HRPF so long as ATI beneficially owns or holds greater than fifty percent (50%) of any class of the voting equity interests of the entity which owns the HRPF or such entity holds greater than a fifty percent (50%) interest in the HRPF both before and after giving effect to any such sale, lease, transfer or other disposition of any interest in the HRPF or any such sale of equity of any entity which owns the HRPF. Interest Coverage Ratio shall mean, as of any date of determination, the ratio of Consolidated EBITDA to interest expense, in each case determined and consolidated for ATI and its Subsidiaries in accordance with GAAP. Lender Provided Interest Rate Hedge shall mean an Interest Rate Hedge which is provided by any Lender or its Affiliate and with respect to which the Administrative Agent confirms: (i) is documented in a standard International Swaps and Derivatives Association Master Agreement or another reasonable and customary manner, (ii) provides for the method of calculating the reimbursable amount of the provider’s credit exposure in a reasonable and customary manner, and (iii) is entered into for hedging (rather than speculative) purposes. The liabilities owing to the provider of any Lender Provided Interest Rate Hedge (the “Interest Rate Hedge Liabilities”) by any Loan Party that is party to such Lender Provided Interest Rate Hedge shall, for purposes of this Agreement and all other Loan Documents be “Obligations” of such Person and of each other Loan Party, be guaranteed obligations under any Guaranty Agreement and secured obligations under any other Loan Document, as applicable, and otherwise treated as Obligations for purposes of the other Loan Documents, except to the extent Hedge Liabilities shall be pari passu with the Liens securing all other Obligations under this Agreement and the other Loan Documents, subject to the express provisions of Section 8.2.5 [Application of Proceeds]. LIBOR Rate shall mean, with respect to the Loans comprising any Borrowing Tranche to which the LIBOR Rate Option applies for any Interest Period, the interest rate per annum determined by the Administrative Agent by dividing (the resulting quotient rounded upwards, if necessary, to the nearest 1/100th of 1% per annum) (i) the rate which appears on the Bloomberg Page BBAM1 (or on such other substitute Bloomberg page that displays rates at which US dollar deposits are offered by leading banks in the London interbank deposit market), or the rate which is quoted by another source selected by the Administrative Agent as an authorized information vendor for the purpose of displaying rates at which US dollar deposits are offered by leading banks in the London interbank deposit market (an “Alternate Source”), at approximately 11:00 a.m., London time, two (2) Business Days prior to the commencement of such Interest Period as the London interbank offered rate for U.S. Dollars for an amount comparable to such Borrowing Tranche and having a borrowing date and a maturity comparable to such Interest Period (or if there shall at any time, for any reason, no longer exist a Bloomberg Page BBAM1 (or any substitute page) or any Alternate Source, a comparable replacement rate determined by the Administrative Agent at such time (which determination shall be conclusive absent manifest error)), by (ii) a number equal to 1.00 minus the LIBOR Reserve Percentage. The LIBOR Rate shall be adjusted with respect to any Loan to which the LIBOR Rate Option applies that is outstanding on the effective date of any change in the LIBOR Rate Reserve Percentage as of such effective date. The Administrative Agent shall give prompt notice to the Borrowers of the LIBOR Rate as determined or adjusted in accordance herewith, which determination shall be conclusive absent manifest error. Loan Documents shall mean this Agreement, the Administrative Agent’s Letter, the First Amendment Administrative Agent’s Letter, the Guaranty Agreements, the Intercompany Subordination Agreement, the Notes, the Security Agreement, the Collateral Documents, the Letters of Credit and any other instruments, certificates or documents delivered in connection herewith or therewith, as the same may be amended, modified or supplemented from time to time in accordance herewith or therewith, and Loan Document shall mean any of the Loan Documents. Obligation shall mean any obligation or liability of any of the Loan Parties, howsoever created, arising or evidenced, whether direct or indirect, absolute or contingent, now or hereafter existing, or due or to become due, under or in connection with (i) this Agreement, the Notes, the Letters of Credit, the Administrative Agent’s Letter or any other Loan Document whether to the Administrative Agent, any of the Lenders or their Affiliates or other persons provided for under such Loan Documents, (ii) any Lender Provided Interest Rate Hedge, (iii) any Lender Provided Foreign Currency Hedge, (iv) any Lender Provided Commodity Hedge, and (v) any Other Lender Provided Financial Service Product. Notwithstanding the foregoing provisions in this definition, Obligations shall not include Excluded Swap Obligations. Permitted Liens shall mean: (i) Liens for taxes, assessments, or similar charges, incurred in the ordinary course of business and which are not yet due and payable; (ii) Pledges or deposits made in the ordinary course of business to secure payment of workmen’s compensation, or to participate in any fund in connection with workmen’s compensation, unemployment insurance, old-age pensions or other social security programs or general liability or product liability insurance; (iii) Liens of mechanics, materialmen, warehousemen, carriers, or other like Liens, securing obligations incurred in the ordinary course of business that are not yet due and payable and Liens of landlords securing obligations to pay lease payments that are not yet due and payable or in default; (iv) Good-faith pledges or deposits made in the ordinary course of business to secure performance of bids, tenders, contracts (other than for the repayment of borrowed money) or leases, not in excess of the aggregate amount due thereunder, or to secure statutory obligations, or surety, appeal, indemnity, performance or other similar bonds required in the ordinary course of business; (v) Encumbrances consisting of zoning restrictions, easements or other restrictions on the use of real property, none of which materially impairs the use of such property or the value thereof, and none of which is violated in any material respect by existing or proposed structures or land use; (vi) Liens on property leased by or consigned to any Loan Party or Subsidiary of a Loan Party under capital and operating leases or consignment arrangements securing obligations of such Loan Party or Subsidiary to the lessor under such leases; (vii) Any Lien existing on the date of this Agreement and described on Schedule 1.1(P), provided that the principal amount secured thereby is not hereafter increased, and no additional assets become subject to such Lien, and Liens created in connection with a refinancing of Indebtedness related to Liens identified on Schedule 1.1(P) which refinancing is not in violation of the terms of this Agreement; (viii) Purchase Money Security Interests, provided that the aggregate value of the assets subject to such Purchase Money Security Interest securing such Indebtedness shall not exceed ten percent (10%) of Consolidated Tangible Assets (excluding for the purpose of this computation any loans or deferred payments secured by Liens described on Schedule 1.1(P)); (ix) Liens arising solely by virtue of any statutory or common law provision relating to banker’s liens, rights of set-off or similar rights and remedies as to deposit accounts or other funds maintained with a creditor depository institution, provided that (1) such deposit account is not a dedicated cash collateral account and is not subject to restrictions against access by the applicable Loan Party in excess of those set forth by regulations promulgated by the Federal Reserve Board, and (2) such deposit account is not intended by such Loan Party to provide collateral to the depository institution; (xi) Liens on assets acquired in connection with a Permitted Acquisition, provided that such Liens extend only to the assets acquired in such Permitted Acquisition; (xii) Liens arising in connection with a Receivable Financing in an amount not to exceed Two Hundred Fifty Million and 00/100 Dollars ($250,000,000.00) unless such Receivables Financing has been approved by the Required Lenders; (xiii) Liens incurred by Shanghai STAL Precision Stainless Steel Co. Ltd. on assets owned by Shanghai STAL Precision Stainless Steel Co. Ltd.; (xiv) Liens consisting of pledges of government securities or cash collateral in an amount not to exceed One Hundred Million and 00/100 Dollars ($100,000,000.00) to secure obligations under Hedging Contracts entered into in the ordinary course of business; (xv) The following, (A) if the validity or amount thereof is being contested in good faith by appropriate and lawful proceedings diligently conducted so long as levy and execution thereon have been stayed and continue to be stayed or (B) if a final judgment is entered and such judgment is discharged within thirty (30) days of entry, and in any case they do not, in the aggregate, materially impair the ability of any Loan Party to perform its Obligations hereunder or under the other Loan Documents: (1) Claims or Liens for taxes, assessments or charges due and payable and subject to interest or penalty; provided that the applicable Loan Party maintains such reserves or other appropriate provisions as shall be required by GAAP and pays all such taxes, assessments or charges forthwith upon the commencement of proceedings to foreclose any such Lien; (2) Claims, Liens or encumbrances upon, and defects of title to, real or personal property, including any attachment of personal or real property or other legal process prior to adjudication of a dispute on the merits; (3) Claims or Liens of mechanics, materialmen, warehousemen, carriers, or other statutory nonconsensual Liens; or (4) Liens resulting from final judgments or orders described in Section 8.1.6 [Final Judgments or Orders]; (xvi) Liens and security interests in favor of the Administrative Agent for the benefit of the Lenders and their Affiliates securing the Obligations (including Lender Provided Interest Rate Hedges, Lender Provided Foreign Currency Hedges, Lender Provided Commodity Hedges, and Other Lender Provided Financial Services Products; and (xvii) Liens not otherwise described by the foregoing clauses in this definition on assets other than Inventory of the Loan Parties securing Indebtedness, provided that the value of the assets subject to such Liens securing such Indebtedness shall not exceed ten percent (10%) of Consolidated Tangible Assets. 4. Section 7.1 [Affirmative Covenants] of the Credit Agreement is hereby amended by inserting a new Section 7.1.10 as follows: 7.1.10 Springing Lien. (i) On the Eighth Amendment Effective Date, the Loan Parties shall have executed and delivered a Security Agreement in the form of Exhibit 7.1.10 hereto and such other security instruments, financing statements, certificates and other similar instruments and agreements, each in form and substance reasonably acceptable to the Administrative Agent (collectively, the “Collateral Documents” and each a “Collateral Document”). On a Springing Lien Trigger Date, the Administrative Agent and the Loan Parties shall take or cause to be taken such other action, as shall be reasonably determined by the Administrative Agent, to vest in the Administrative Agent for the benefit of the Lenders a valid and perfected security interest, subject only to Permitted Liens, in the Springing Lien Collateral covered thereby to secure the Obligations. (ii) On or after any applicable Springing Lien Trigger Date, as of the date that: (a) to the extent such Springing Lien Trigger Date occurred solely as a result of a downgrade in ATI’s Debt Rating as contemplated hereunder, ATI receives an Investment Grade Rating from Standard & Poor’s or Moody’s, and (b) to the extent such Springing Lien Trigger Date occurred as a result of an Event of Default or, during the applicable Collateral Period, an Event of Default occurred, so long as no Event of Default has occurred and is continuing (each such date, a “Collateral Release Date”), the Loan Parties shall no longer be required to comply with Section 7.1.10(i) and all liens created under the Security Agreement shall automatically be deemed to be released, provided however, that if a subsequent Springing Lien Trigger Event shall occur following any such Collateral Release Date, the Loan Parties shall be required to comply with the Section 7.1.10(i) until such time as a subsequent Collateral Release Date shall have occurred. (iii) Subject to the foregoing, Springing Lien Collateral may be released from the Liens created by the Collateral Documents upon a Collateral Release Date in accordance with the provisions of the Collateral Documents or as provided herein. In addition, upon the reasonable written request of a Loan Party, and with the consent of the Administrative Agent (such consent not to be unreasonably withheld), a Loan Party shall be entitled to releases of property included in the Springing Lien Collateral from the Liens securing the Obligations under any one or more of the following circumstances (each a “Release Event”): (A) to enable a Loan Party to consummate asset dispositions not prohibited by Section 7.2.4 [Disposition of Assets or Subsidiaries]; and/or (B) if any Guarantor is released from its obligations under the Guaranty Agreement, this Agreement or any other Loan Document in accordance with the terms and conditions of this Agreement or the other Loan Documents, that Guarantor’s property will also be released from the Liens granted by it pursuant to the Loan Documents. Upon a Collateral Release Date, or upon the Administrative Agent’s consent to release any property in connection with a Release Event, as applicable, together with any necessary or proper instruments of termination, satisfaction or release prepared by the applicable Loan Party, the Administrative Agent shall, at the sole expense of the Loan Parties, execute, deliver or acknowledge such instruments or releases to evidence the release of any Springing Lien Collateral permitted to be released pursuant to this Section. (iv) Promptly following written request by the Administrative Agent which is received by a Loan Party, the applicable Loan Party will (a) correct any material defect or error that may be discovered in any Collateral Document or in the execution, acknowledgment, filing or recordation, as applicable, thereof, and (b) do, execute, acknowledge, deliver, record, re-record, file, re-file, register and re-register any and all such further acts, certificates, assurances and other instruments as the Administrative Agent may reasonably require from time to time in order to (i) carry out more effectively the purposes of the Collateral Documents, (ii) maintain the validity and effectiveness of the Collateral Documents and the Liens, including the perfection thereof during any Collateral Period, intended to be created thereunder and (iii) assure, convey, grant, assign, transfer, preserve, protect and confirm more effectively unto the Administrative Agent, for the benefit of the Lenders, the principle rights granted or now or hereafter intended to be granted to the Administrative Agent, for the benefit of the Lenders, under any Collateral Document to which any Loan Party is or is to be a party, in each case, with respect to such actions that the Administrative Agent determines are reasonable in order to achieve or maintain the benefit intended to be conferred by such Springing Lien Collateral in relation to the costs and other resources reasonably associated with such actions. 5. Effective as of June 12, 2014, Section 7.2.3(E) of the Credit Agreement is hereby deleted in its entirety and in its stead is inserted the following: (E) so long as such acquired Person is required to join this Agreement as a Guarantor under the terms and provisions of Section 7.2.5 [Subsidiaries, Partnerships and Joint Ventures], ATI shall demonstrate the following, each after giving effect to such Permitted Acquisition, by delivering at least five (5) Business Days prior to such Permitted Acquisition a certificate in the form of Exhibit 7.2.3 evidencing proforma compliance with: (x) Section 7.2.9 [Maximum Leverage Ratio], and Section 7.2.10 [Minimum Interest Coverage Ratio]; and 6. Section 7.2.9 [Maximum Leverage Ratio] of the Credit Agreement is hereby 7.2.9 Maximum Leverage Ratio. The Loan Parties shall not at any time permit the Leverage Ratio to exceed (i) 4.00 to 1.00, calculated as of December 31, 2013 and the end of each fiscal quarter thereafter through and including the fiscal quarter ending September 30, 2014, in each case for the period equal to the four (4) fiscal quarters then ended, (ii) 5.75 to 1.00, calculated as of December 31, 2014, for the period equal to the four (4) fiscal quarters then ended, (iii) 5.00 to 1.00, calculated as of March 31, 2015, for the period equal to the four (4) fiscal quarters then ended, (iv) 4.50 to 1.00, calculated as of June 30, 2015, for the period equal to the four (4) fiscal quarters then ended, (v) 3.75 to 1.00, calculated as of September 30, 2015, for the period equal to the four (4) fiscal quarters then ended, and (vi) 3.50 to 1.00, calculated as of December 31, 2015 and the end of each fiscal quarter thereafter, in each case for the four (4) fiscal quarters then ended. 7. Section 7.2.10 [Minimum Interest Coverage Ratio] of the Credit Agreement is 7.2.10 Minimum Interest Coverage Ratio. The Loan Parties shall not permit the Interest Coverage Ratio to be less than (i) 2.00 to 1.00, calculated as of March 31, 2014, and the end of each fiscal quarter thereafter through and including the fiscal quarter ending December 31, 2014, in each case for the period equal to the four (4) consecutive fiscal quarters then ended, (ii) 2.50 to 1.00, calculated as of March 31, 2015, for the period equal to four (4) consecutive fiscal quarters then ended, (iii) 3.00 to 1.00, calculated as of June 30, 2015, for the period equal to four (4) consecutive fiscal quarters then ended, (iv) 3.25 to 1.00, calculated as of September 30, 2015, for the period equal to four (4) consecutive fiscal quarters then ended, and (v) 3.50 to 1.00, calculated as of December 31, 2015, and the end of each fiscal quarter thereafter, in each case for the period equal to four (4) consecutive fiscal quarters then ended. 8. Section 8.2.5 [Application of Proceeds] of the Credit Agreement is hereby 8.2.5 Application of Proceeds. From and after the date on which the Administrative Agent has taken any action pursuant to this Section 8.2 and until all Obligations of the Loan Parties have been paid in full, any and all proceeds received by the Administrative Agent from the exercise of any remedy by the Administrative Agent, shall be applied as follows: (i) First, to payment of that portion of the Obligations constituting fees, indemnities, expenses and other amounts, including attorney fees, payable to the Administrative Agent in its capacity as such, the Issuing Lender in its capacity as such and PNC Bank in its capacity as a lender of Swing Loans, ratably among the Administrative Agent, the Issuing Lender and PNC Bank (as the lender of Swing Loans) in proportion to the respective amounts described in this clause First payable to them; (ii) Second, to payment of that portion of the Obligations constituting fees, indemnities and other amounts (other than principal and interest) payable to the Lenders under the Loan Documents, including attorney fees, ratably among the Lenders in proportion to the respective amounts described in this clause Second payable to them; (iii) Third, to payment of that portion of the Obligations constituting accrued and unpaid interest on the Loans and Reimbursement Obligations, ratably among the Lenders in proportion to the respective amounts described in this clause Third payable to them; (iv) Fourth, to payment of that portion of the Obligations constituting unpaid principal of the Loans, Reimbursement Obligations and payment obligations then owing under Lender Provided Interest Rate Hedges, Lender Provided Foreign Currency Hedges, Lender Provided Commodity Hedges, and Other Lender Provided Financial Service Products, ratably among the Lenders, the Issuing Lender, and the Lenders or Affiliates of Lenders which provide Lender Provided Interest Rate Hedges, Lender Provided Foreign Currency Hedges, Lender Provided Commodity Hedges, and Other Lender Provided Financial Service Products, in proportion to the respective amounts described in this clause Fourth held by them; (v) Fifth, to the Administrative Agent for the account of the Issuing Lender, to cash collateralize any undrawn amounts under outstanding Letters of Credit; and (vi) Last, the balance, if any, to the Loan Parties or as required by Law. Notwithstanding the foregoing, amounts received from any Loan Party that is not an Eligible Contract Participant shall not be applied to any Excluded Swap Obligations owing to any Lender providing a Lender Provided Interest Rate Hedge, Lender Provided Foreign Currency Hedges or Lender Provided Commodity Hedges, (it being understood, that in the event that any amount is applied to Obligations other than Excluded Swap Obligations as a result of this sentence, the Administrative Agent shall make such adjustments as it determines are appropriate to distributions pursuant to this Section 8.2.5 [Application of Proceeds] from amounts received from Eligible Contract Participants to ensure, as nearly as possible, that the proportional aggregate recoveries with respect to Obligations described in above paragraphs of this Section 8.2.5 [Application of Proceeds] by Lenders providing Lender Provided Interest Rate Hedges, Lender Provided Foreign Currency Hedges or Lender Provided Commodity Hedges that are the holders of any Excluded Swap Obligations are the same as the proportional aggregate recoveries with respect to other Obligations pursuant to the above paragraphs of this Section 8.2.5 [Application of Proceeds]). 9. Section 9.10 [Authorization to Release Guarantors] of the Credit Agreement is 9.10 Authorization to Release Guarantors and Collateral. (i) The Lenders and Issuing Lenders authorize the Administrative Agent to release any Guarantor from its obligations under the Guaranty Agreement if the ownership interests in such Guarantor are sold or otherwise disposed of or transferred to persons other than Loan Parties or Subsidiaries of the Loan Parties in a transaction permitted under Section 7.2.4 [Disposition of Assets or Subsidiaries] or 7.2.3 [Liquidations, Mergers, Consolidations, Acquisitions]. (ii) The Lenders and Issuing Lenders authorize the Administrative Agent, without the necessity of any notice to or further consent from such Lenders, from time to time, to take any actions with respect to any Springing Lien Collateral or Collateral Documents which may be necessary to perfect and maintain the Liens upon the Springing Lien Collateral granted pursuant to the Collateral Documents. The Administrative Agent is further authorized (but not obligated) on behalf of the Lenders, without the necessity of any notice to or further consent from the Lenders, from time to time, to take any action in exigent circumstances as may be reasonably necessary to preserve any rights or privileges of the Lenders under the Collateral Documents. By accepting the benefit of the Liens granted pursuant to the Collateral Documents, each Lender hereby agrees to the terms of this Section 9.10(ii). (iii) The Lenders and Issuing Lender hereby irrevocably authorize the Administrative Agent to terminate and release any Lien granted to or held by the Administrative Agent upon any Springing Lien Collateral upon Payment in Full or pursuant to terms and conditions of any provision of this Agreement providing for a Lien release with respect to such Springing Lien Collateral. (iv) The Administrative Agent shall not be responsible for or have a duty to ascertain or inquire into any representation or warranty regarding the existence, value or collectability of the Springing Lien Collateral, the existence, priority or perfection of the Administrative Agent’s Lien thereon, or any certificate prepared by any Loan Party in connection therewith, nor shall the Administrative Agent be responsible or liable to the Lenders for any failure to monitor or maintain any portion of the Collateral. 10. The Credit Agreement is hereby amended by inserting a new Exhibit 7.1.10 [Security Agreement] in the form set forth on Exhibit 7.1.10 to this Eighth Amendment. 11. The “List of Schedules and Exhibits” following the table of contents in the Credit Agreement is hereby deleted in its entirety and in its stead is inserted the “List of Schedules and Exhibits” as set forth on Annex A hereto. 12. The provisions of Sections 2 through 11 of this Eighth Amendment shall not become effective until the Administrative Agent has received the following items, each in form and substance acceptable to the Administrative Agent and its counsel:     (a) this Eighth Amendment, duly executed by each of the Loan Parties and the Required Lenders;     (b) the Security Agreement and any other Collateral Document, duly executed by each of the Loan Parties and the Administrative Agent;     (c) A written opinion of counsel for the Loan Parties, dated the date hereof, for the benefit of the Administrative Agent and each Lender and in form and substance satisfactory to the Administrative Agent and its counsel;     (d) A certificate of each of the Loan Parties signed by an Authorized Officer, dated the date hereof, stating that the Loan Parties are in compliance with each of their representations; warranties, covenants and conditions of the Credit Agreement and no Event of Default or Potential Default exists (prior to and after giving effect to this Eighth Amendment, the Security Agreement or any other Collateral Document), and no Material Adverse Change has occurred since the date of the last audited financial statements of ATI and its Subsidiaries delivered to the Administrative Agent;     (e) A certificate signed by the Secretary, an Assistant Secretary, Officer or Manager, as the case may be, of each of the Loan Parties, dated the date hereof, certifying as appropriate as to: (a) all action taken by each Loan Party in connection with this Eighth Amendment, the Security Agreement and any other Loan Documents; (b) the names of the Authorized Officers authorized to sign the Amendment, the Security   Agreement and the other Collateral Documents, as the case may be, and their true signatures; and (c) to the extent that an Loan Party’s organizational documents have changed since the date last certified by such Loan Party to the Administrative Agent, copies of its organizational documents as in effect on the date hereof certified by the appropriate state official where such documents are filed in a state office together with certificates from the appropriate state officials as to the continued existence and good standing of each Loan Party in each state where organized or qualified to do business;     (f) Evidence that adequate insurance required to be maintained under the Credit Agreement is in full force and effect, in form and substance satisfactory to the Administrative Agent and its counsel;     (g) Lien searches in acceptable scope and with acceptable results;     (h) All regulatory approvals and licenses have been obtained by the Loan Parties, and there are no legal or regulatory prohibitions restricting the Loan Parties from entering into this Eighth Amendment, the Security Agreement or any other Collateral Document;     (i) payment of all fees and expenses owed to the Administrative Agent, and the Administrative Agent’s counsel in connection with this Eighth Amendment, the Security Agreement and the Loan Documents (including, without limitation, any such fees and expenses payable pursuant to any fee letter entered into between the Borrowers and the Administrative Agent in connection herewith); and     (j) such other documents as may be reasonably requested by the Administrative Agent. 13. Each Loan Party hereby reconfirms and reaffirms all representations and warranties, agreements and covenants made by it pursuant to the terms and conditions of the Credit Agreement, except as such representations and warranties, agreements and covenants may have heretofore been amended, modified or waived in writing in accordance with the Credit Agreement. 14. Each Loan Party acknowledges and agrees that each and every document, instrument or agreement, which at any time has secured the Obligations including, without limitation, the Guaranty Agreements, hereby continues to secure the Obligations. 15. Each Loan Party hereby represents and warrants to the Lenders and the Administrative Agent that (i) such Loan Party has the legal power and authority to execute and deliver this Eighth Amendment, the Security Agreement and the other Collateral Documents (collectively, the “Amendment Documents”), (ii) the officers of such Loan Party executing the Amendment Documents have been duly authorized to execute and deliver the same and bind such Loan Party with respect to the provisions hereof, (iii) the execution and delivery hereof by such Loan Party and the performance and observance by such Loan Party of the provisions hereof and of the Credit Agreement and Amendment Documents do not violate or conflict with the organizational agreements of such Loan Party or any law applicable to such Loan Party or result in a breach of any provision of or constitute a default under any other agreement, instrument or document binding upon or enforceable against such Loan Party, and (iv) the Amendment Documents and the Credit Agreement constitute legal, valid and binding obligations of such Loan Party in every respect, enforceable in accordance with their respective terms. 16. Each Loan Party represents and warrants that (i) no Event of Default exists under the Credit Agreement, nor will any occur as a result of the execution and delivery of the Amendment Documents or the performance or observance of any provision hereof, and (ii) it presently has no known claims or actions of any kind at law or in equity against any Lender or the Administrative Agent arising out of or in any way relating to the Credit Agreement, the Amendment Documents or the other Loan Documents. 17. Each reference to the Credit Agreement that is made in the Credit Agreement or any other document executed or to be executed in connection therewith shall hereafter be construed as a reference to the Credit Agreement as amended hereby. 18. The agreements contained in this Eighth Amendment are limited to the specific agreements made herein. Except as amended hereby, all of the terms and conditions of the Credit Agreement and the other Loan Documents shall remain in full force and effect. This Eighth Amendment amends the Credit Agreement and is not a novation thereof. 19. Each Amendment Document may be executed in any number of counterparts and by the different parties hereto on separate counterparts each of which, when so executed, shall be deemed to be an original, but all such counterparts shall constitute but one and the same instrument. 20. This Eighth Amendment shall be governed by, and shall be construed and enforced in accordance with, the Laws of the Commonwealth of Pennsylvania without regard to the principles of the conflicts of law thereof. Each Loan Party hereby consents to the jurisdiction and venue of the Court of Common Pleas of Allegheny County, Pennsylvania and the United States District Court for the Western District of Pennsylvania with respect to any suit arising out of or mentioning this Eighth Amendment. [INTENTIONALLY LEFT BLANK] IN WITNESS WHEREOF, and intending to be legally bound, the parties hereto have caused this Eighth Amendment to be duly executed by their duly authorized officers the day and year first above written.         BORROWERS: WITNESS:       ATI FUNDING CORPORATION /s/ M. P. Earnest       By:    /s/ Rose Marie Manley       Name:    Rose Marie Manley       Title:    President WITNESS:       TDY HOLDINGS, LLC       By:          Name:    Rose Marie Manley       Title:    President       GUARANTORS: WITNESS:       ALLEGHENY TECHNOLOGIES INCORPORATED       By:    /s/ Patrick J. DeCourcy       Name:    Patrick J. DeCourcy       Title:    Senior Vice President, Finance and Chief Financial Officer WITNESS:       ATI OPERATING HOLDINGS, LLC       By:          Name:    Patrick J. DeCourcy       Title:    President WITNESS:       OREGON METALLURGICAL, LLC (formerly known as “OREGON METALLURGICAL CORPORATION”)       By:          Name:    Patrick J. DeCourcy       Title:    Executive Vice President WITNESS:       ALLEGHENY LUDLUM, LLC (formerly known as “ALLEGHENY LUDLUM CORPORATION”)       By:    WITNESS:       ATI PROPERTIES, INC.       By:    /s/ John E. Grosselin, III       Name:    John E. Grosselin, III       Title:    Vice President WITNESS:       TDY INDUSTRIES, LLC (formerly known as “TDY INDUSTRIES, INC.”)       By:          Name:    Patrick J. DeCourcy       Title:    President WITNESS:       ALC FUNDING CORPORATION       By:          Name:    Rose Marie Manley       Title:    President WITNESS:       JEWEL ACQUISITION, LLC       By:    WITNESS:       JESSOP STEEL, LLC       By:    WITNESS:       INTERNATIONAL HEARTH MELTING, LLC       By:    OREGON METALLURGICAL, LLC, its Sole Manager       By:    WITNESS:       ATI PRECISION FINISHING, LLC (formerly known as “ROME METALS, LLC”)       By:    WITNESS:       TI OREGON, INC.       By:    WITNESS:       TITANIUM WIRE CORPORATION       By:    WITNESS:       ATI CANADA HOLDINGS, INC.       By:          Name:    Patrick J. DeCourcy       Title:    President WITNESS:       ALLEGHENY TECHNOLOGIES INTERNATIONAL, INC.       By:          Name:    Patrick J. DeCourcy       Title:    President WITNESS:       AII INVESTMENT CORP.       By:          Name:    Rose Marie Manley       Title:    President WITNESS:       ENVIRONMENTAL, INC.       By:    ACQUISITION, LLC       By:          Name:    Patrick J. DeCourcy       Title:    President WITNESS:       ATI TITANIUM LLC       By:    WITNESS:       ATI FLOWFORM PRODUCTS, LLC       By:    ALLEGHENY LUDLUM, INC.       By:    AGENTS AND LENDERS: PNC BANK, NATIONAL ASSOCIATION, as a Lender and as Administrative Agent By:   /s/ David B. Gookin Name:   David B. Gookin Title:   Executive Vice President CITIBANK, N.A., as a Lender and as Co-Syndication Agent By:   /s/ John Tucker Name:   John Tucker Title:   Vice President JPMORGAN CHASE BANK, N.A., as a /s/ Peter S. Predun Name:   Peter S. Predun Title:   Executive Director BANK OF AMERICA N.A., for itself, as a Lender and as Co-Documentation Agent, and as successor by merger to LASALLE BANK NATIONAL ASSOCIATION, as a Lender By:   /s/ Mike Delaney Name:   Mike Delaney Title:   Director THE BANK OF TOKYO-MITSUBISHI UFJ, LTD., as a Lender and as Co-Documentation Agent By:   /s/ Belinda Tucker Name:   Belinda Tucker Title:   Managing Director CREDIT SUISSE AG, CAYMAN ISLANDS BRANCH, as a Lender and as a Co-Managing Agent By:   /s/ Alain Daoust Name:   Alain Daoust Title:   Authorized Signatory By:   /s/ Remy Riester Name:   Remy Riester Title:   Authorized Signatory WELLS FARGO BANK, NATIONAL ASSOCIATION, as a Lender and as Co-Managing Agent By:   /s/ James Travagline Name:   James Travagline Title:   Director THE BANK OF NEW YORK MELLON, as a Lender and as Co-Managing Agent By:   /s/ William M. Feathers Name:   William M. Feathers Title:   Vice President MORGAN STANLEY BANK, N.A., as a Lender By:   /s/ Dmitriy Barskiy Name:   Dmitriy Barskiy Title:   Authorized Signatory HSBC BANK USA, NATIONAL ASSOCIATION, as a Lender By:   /s/ Christopher S. Helmeci Name:   Christopher S. Helmeci Title:   Senior Vice President/Relationship Manager EXHIBIT 7.1.10 SECURITY AGREEMENT THIS SECURITY AGREEMENT (this “Agreement”) is made and entered into as of October 15, 2014 by and among each of the Persons listed as GRANTORS on the signature pages hereto (each a “Grantor” and collectively the “Grantors”) and PNC Bank, National Association. as administrative agent (in such capacity, the “Administrative Agent”) for the Lenders (as defined herein). Capitalized terms used herein and not otherwise defined herein shall have the respective meanings set forth in the Credit Agreement (as defined herein). WHEREAS, ATI Funding Corporation, a Delaware corporation (“ATI Funding”), TDY from time to time party thereto, the Administrative Agent and such other financial institutions from time to time party thereto (each, a “Lender” and collectively, the “Lenders”) entered into that certain Credit Agreement, dated July 31, 2007, as amended by (i) that certain First Amendment to Credit Agreement, dated May 29, 2009, among the Borrowers, the Guarantors, the Lenders and the Administrative Agent, (ii) that certain Second Amendment to Credit Agreement, dated December 22, 2010, among the Borrowers, the Guarantors, the Lenders and the Administrative Agent, (iii) that certain Third Amendment to Credit Agreement, dated March 11, 2011, among the Borrowers, the Guarantors, the Lenders and the Administrative Agent, (iv) that certain Fourth Amendment to Credit Agreement, dated November 9, 2011, among the Borrowers, the Guarantors, the Lenders and the Administrative Agent, (v) that certain Fifth Amendment to Credit Agreement, dated April 4, 2012, among the Borrowers, the Guarantors, the Lenders and the Administrative Agent, (vi) that certain Sixth Amendment to Credit Agreement, dated May 31, 2013, among the Borrowers, the Guarantors, the Lenders and the Administrative Agent, (vii) that certain Seventh Amendment to Credit Agreement, dated September 26, 2013, among the Borrowers, the Guarantors, the Lenders and the Administrative Agent, and (viii) that certain Eighth Amendment to Credit Agreement, dated October 15, 2014 (the “Eighth Amendment”), (as further amended, restated, modified or supplemented from time to time, the “Credit Agreement”); and WHEREAS, pursuant to the terms of the Credit Agreement, the Lenders have agreed to make extensions of credit to the Borrowers upon the terms and subject to the conditions set forth therein, and pursuant to the Eighth Amendment the obligations of the Lenders under the Credit Agreement are subject to the further condition, among others, that the Grantors, from time to time in accordance with the terms and provisions hereof and of the Credit Agreement, grant to and create in favor of the Administrative Agent (for itself and for the benefit of the Lenders) a first priority security interest in the Collateral (as hereinafter defined) pursuant to the terms and conditions set forth herein. NOW, THEREFORE, in consideration of the Obligations (as defined in the Credit Agreement), and of other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the Grantors, and in order to induce the Administrative Agent and the Lenders to enter into the Credit Agreement and make the Loans (as defined in the Credit Agreement) and issue the Letters of Credit (as defined in the Credit Agreement), the Grantors, intending to be legally bound hereby, covenant and agree as follows: Section 1. Definitions. In addition to the words and terms defined elsewhere in this Security Agreement: (a) words and terms defined in the Credit Agreement or the Code (as hereinafter defined) shall, unless the context hereof clearly requires otherwise, have the same meaning herein as therein provided; and (b) the following words and terms shall have the following meanings, respectively, unless the context hereof clearly requires otherwise: (i) “Accounts” shall have the meaning given to that term in the Code. (ii) “Code” shall mean the Uniform Commercial Code as in effect on the date of this Security Agreement and as amended from time to time, in the Commonwealth of Pennsylvania. (iii) “Collateral” shall mean, collectively, (a) the Accounts and Inventory, and (b) solely to the extent related to any of the foregoing items listed in subsection (a) above, Proceeds, Supporting Obligations, Chattel Paper, Documents, Electronic Chattel Paper, General Intangibles, Instruments and Letter-of-Credit Rights of each Grantor, whether now owned or acquired in the future. (iv) “Event of Default” shall mean (i) any of the Events of Default described in the Credit Agreement or any of the other Loan Documents and (ii) any default by the Grantors in the performance of their obligations under this Security Agreement. (v) “Inventory” shall have the meaning given to that term in the Code. (vi) “Prior Security Interest” shall mean a continuing, enforceable, perfected security interest under the Code which is prior and superior to all Liens and the rights of all third parties in the Collateral, except as may be otherwise (vii) “Proceeds” shall have the meaning given to that term in the Code. (viii) “Security Agreement” shall mean this Security Agreement and all documents or annexes attached hereto or referred to herein, as any or all of the foregoing may be supplemented or amended from time to time. (ix) “Supporting Obligations” shall have the meaning given to that term in the Code. Section 2. Security Interest. As security for the full and timely payment of the Obligations in accordance with the terms of this Security Agreement, the Credit Agreement and the other Loan Documents and the full and timely payment and performance of the obligations of the Grantors under this Security Agreement, the Credit Agreement and the other Loan Documents, each Grantor hereby agrees that, immediately and automatically upon the occurrence of a Springing Lien Trigger Event, each Grantor shall be deemed to have granted to the Administrative Agent and the Lenders a continuing, enforceable, perfected security interest under the Code in and to such of the Collateral as is now owned or acquired after the date of this Security Agreement by such Grantor and agrees that, upon filing of all applicable UCC-1 financing statements with the appropriate offices (based on the information set forth in Exhibit A and Exhibit B to this Security Agreement), the Administrative Agent (for itself and for the benefit of the Lenders) shall have a Prior Security Interest in and to such Collateral. If a Springing Lien Trigger Event occurs and such security interest is deemed to have been granted as set forth above, the security interest shall remain in effect until a Collateral Release Date shall have occurred; provided that if any subsequent Springing Lien Trigger Event shall occur, the Grantors shall be deemed to have again granted the security interest to the Administrative Agent and the Lenders, as set forth above and in Section 7.1.10 [Springing Lien] of the Credit Agreement. Section 3. Rights and Remedies of a Secured Party. In addition to all rights and remedies given to the Administrative Agent pursuant to the Credit Agreement, this Security Agreement and the other Loan Documents, the Administrative Agent (for itself and for the benefit of the Lenders) shall have, during each Collateral Period, all of the rights and remedies of a secured party under the Code (whether or not the Code applies to the Collateral). Section 4. Provisions Applicable to the Grantors and the Collateral. The parties agree that the following provisions shall be applicable to the Grantors and the Collateral: (a) The Grantors covenant and agree that, at all times during the term of this Security Agreement, each shall keep accurate and complete books and records concerning the Collateral that is now owned or acquired after the date of this Security Agreement by a Grantor, in accordance with GAAP, if and to the extent applicable, at the locations set forth on Exhibit A attached hereto and made a part hereof and at no other location without complying with the requirements set forth in Section 4(j) of this Security Agreement. (b) The Administrative Agent or its representatives shall, at all times during the continuance of a Collateral Period, have the right during regular business hours of the Grantors and upon twenty-four (24) hours’ advance notice to the Grantors (or at any time if an Event of Default shall have occurred and shall be continuing) to examine and inspect the Collateral and to review the books and records of the Grantors concerning the Collateral. (c) The Grantors shall, at all times during the continuance of a Collateral Period, keep the Collateral, as applicable, that is now owned or acquired after the date of this Security Agreement by the Grantors at the locations set forth on Exhibit A (which Exhibit A may be updated from time to time by the Grantors upon three (3) days’ prior notice) attached hereto and made a part hereof and at no other location without the prior written consent of the Administrative Agent, except as may be otherwise set forth in the Credit Agreement; provided, however, this subsection (c) shall not apply to Inventory: (i) in-transit in the ordinary course of business; (ii) located at third-party suppliers or processors in the ordinary course of business; or (iii) to the extent the book value of such Inventory does not exceed Fifty Million and 00/100 Dollars ($50,000,000.00), warehouseman or other bailees. (d) [Reserved]. (e) Promptly upon request of the Administrative Agent during the continuance of a Collateral Period, the Grantors shall furnish the Administrative Agent with such information and documents regarding the Collateral at such times and in such form and detail as the Administrative Agent may reasonably request. (f) Promptly upon request of the Administrative Agent during the continuance of a Collateral Period, the Grantors shall deliver to the Administrative Agent, without limitation, (1) evidence of the Grantors’ Accounts and statements showing the aging, identification, reconciliation and collection thereof and (2) reports as to the Grantors’ Inventory and sales, shipment, damage or loss thereof, all of the foregoing to be certified by an authorized officer or other employee of the Grantors. (g) Notwithstanding any Prior Security Interest in the Collateral granted to and created in favor of the Administrative Agent (for itself and for the benefit of the Lenders) under this Security Agreement, the Grantors shall have the right until one or more Events of Default shall occur, at their own cost and expense, to enforce payment of the Accounts, the Chattel Paper and the Electronic Chattel Paper and to enforce their contract rights. (h) The Administrative Agent shall have the right at any time, upon the occurrence and during the continuance of an Event of Default, to give notice of the security interest created hereby to account debtors obligated to any Grantor, to take over and direct collection of the Accounts, the Chattel Paper and the Electronic Chattel Paper, to notify such account debtors to make payment directly to the Administrative Agent and to enforce payment of the Accounts, the Chattel Paper and the Electronic Chattel Paper and to enforce such Grantor’s contract rights. It is understood and agreed by the Grantors that the Administrative Agent shall have no liability whatsoever under this Security Agreement except for its own gross negligence or willful misconduct. (i) Each Grantor represents and warrants as of the date of this Security Agreement that the exact legal name, the type of entity, the jurisdiction of organization, the organizational identification number and tax identification number of each Grantor is as set forth on Exhibit B attached hereto and made a part hereof. Each Grantor covenants and agrees that it will not change its legal name, its type of entity, its jurisdiction of organization, its organizational identification number or its tax identification number without (i) providing the Administrative Agent prior written notice of its intention to do so, (ii) providing the Administrative Agent with such information in connection therewith as the Administrative Agent may reasonably request, and (iii) taking such action, satisfactory to the Administrative Agent, as may be necessary to maintain at all times the priority of the security interest in the Collateral granted hereunder. (j) If a Grantor desires to establish a new location for its place of business or chief executive office, as the case may be, or to change its legal entity name or maintain records concerning Collateral, it shall first, with respect to each such new location or name: (i) give the Administrative Agent written notice of its intention to do so and provide the Administrative Agent with such information in connection therewith as the Administrative Agent may reasonably request; and (ii) take such action, satisfactory to the Administrative Agent including, without limitation, all action required by Section 6 hereof, as may be necessary to maintain at all times the priority of the security interest in the Collateral granted hereunder. (k) Each Grantor shall at any time during the continuance of a Collateral Period, take such commercially reasonable efforts as the Administrative Agent may request (i) to cause any bailee having possession of any of the Collateral with a book value in excess of Five Million and 00/100 Dollars ($5,000,000.00) to provide to the Administrative Agent a written acknowledgement of the Lenders’ security interest in such Collateral, in form and substance satisfactory to the Administrative Agent and (ii) otherwise to ensure the continued perfection and priority of the Lenders’ security interest in any of the Collateral and of the preservation of its rights therein. Section 5. Actions with Respect to Accounts. Upon the occurrence and during the continuance of an Event of Default,, each Grantor shall be deemed to have irrevocably and automatically appointed the Administrative Agent (and any of the Administrative Agent’s designated officers, employees or agents) as its true and lawful attorney-in-fact with power to sign its name and to take any of the following actions, in its name or in the name of the Administrative Agent, as the Administrative Agent may determine (except as expressly limited in this Section 5) without notice to such Grantor and at such Grantor’s expense: (a) Verify the validity and amount of, or any other matter relating to, the Collateral by mail, telephone, telegraph or otherwise; (b) Upon the occurrence and during the continuance of an Event of Default, notify all account debtors that the Accounts have been assigned to the Administrative Agent and that the Lenders have a security interest in the Accounts; (c) Upon the occurrence and during the continuance of an Event of Default, direct all account debtors to make payment of all Accounts directly to the Administrative Agent; (d) Upon the occurrence and during the continuance of an Event of Default, take control in any manner of any cash or non-cash items of payment or proceeds of Accounts; (e) Upon the occurrence and during the continuance of an Event of Default, in any case and for any reason, notify the United States Postal Service to change the addresses for delivery of mail addressed to the Grantor to such address as the Administrative Agent may designate; (f) Upon the occurrence and during the continuance of an Event of Default, in any case and for any reason, receive, open and dispose of all mail addressed to such Grantor; (g) Upon the occurrence and during the continuance of an Event of Default, take control in any manner of any rejected, returned, stopped-in-transit or repossessed goods relating to Accounts; (h) Upon the occurrence and during the continuance of an Event of Default, enforce payment of and collect any Accounts, by legal proceedings or otherwise, and for such purpose the Administrative Agent may: (i) Demand payment of any Accounts or direct any account debtors to make payment of Accounts directly to the Administrative Agent; (ii) Receive and collect all monies due or to become due to such Grantor; (iii) Exercise all of such Grantor’s rights and remedies with respect to the collection of Accounts; (iv) Settle, adjust, compromise, extend, renew, discharge or release Accounts; (v) Sell or assign Accounts on such terms, for such amounts and at such times as the Administrative Agent deems advisable; (vi) Prepare, file and sign such Grantor’s name on any Proof of Claim or similar documents in any proceeding filed under federal or state bankruptcy, insolvency, reorganization or other similar Law as to any account debtor; (vii) Prepare, file and sign such Grantor’s name on any Notice of Lien, Claim of Mechanic’s Lien, Assignment or Satisfaction of Lien or Mechanic’s Lien, or similar document in connection with the Collateral; (viii) Endorse the name of such Grantor upon any chattel papers, documents, instruments, invoices, freight bills, bills of lading, or similar documents or agreements relating to Accounts or goods pertaining to Accounts or upon any checks or other medium of payment or evidence of security interest that may come into the Administrative Agent’s possession; (ix) Sign the name of such Grantor to verifications of Accounts and notices of Accounts sent by account debtors to such Grantor; or (x) Take all other actions necessary or desirable to protect such Grantor’s interest(s) in the Accounts. Each Grantor ratifies and approves all acts of said attorneys and agrees that said attorneys shall not be liable for any acts of commission or omission, nor for any error of judgment or mistake of fact or law. This power, being coupled with an interest, is irrevocable until the Obligations are paid in full and the Grantors shall have performed all of their obligations under this Security Agreement. Each Grantor further agrees to use its best efforts to assist the Administrative Agent in the collection and enforcement of the Accounts and will not hinder, delay or impede the Administrative Agent in any manner in its collection and enforcement of the Accounts. Section 6. Preservation and Protection of Security Interest. Each Grantor represents and warrants that it has (or will have upon its acquisition of such Collateral), and covenants and agrees that at all times during the term of this Security Agreement it will have, good and valid title to the Collateral from time to time owned or acquired by it free and clear of all Liens, except those in favor of the Administrative Agent and those permitted under the Credit Agreement, and shall defend the Collateral against the claims and demands of all Persons whomsoever other than the holders of any Permitted Liens. Each Grantor covenants and agrees that each shall not (i) borrow against the Collateral or any portion of the Collateral from any other Person, except as may otherwise be permitted under the Credit Agreement, (ii) grant or create or permit to attach or exist any Lien on, of or in any of the Collateral or any portion of the Collateral, except those in favor of the Administrative Agent and Permitted Liens, (iii) permit any levy or attachment to be made against the Collateral or any portion of the Collateral or (iv) permit any financing statements or such other instruments or notices with respect to security interests to be on file with respect to any of the Collateral, except financing statements or such other instruments of notice in favor of the Administrative Agent and as otherwise permitted under the Credit Agreement. Upon a Springing Lien Trigger Date and at all times during a Collateral Period, each Grantor shall faithfully preserve and protect the Lenders’ security interest in the Collateral and shall, at its own cost and expense, cause or assist the Administrative Agent to cause that security interest to be perfected and continue perfected so long as the Obligations or any portion of the Obligations are outstanding, unpaid or executory. For purposes of the perfection of the Lenders’ security interest in the Collateral in accordance with the requirements of this Security Agreement, each Grantor authorizes the Administrative Agent, upon a Springing Lien Trigger Date and at any time during a Collateral Period, to file financing statements, continuation statements and amendments thereto that describe the Collateral. If any such financing statement, continuation statement or amendment requires the signature of such Grantor, it may be signed by the Administrative Agent on behalf of such Grantor. Each Grantor shall from time to time during a Collateral Period, at the request of the Administrative Agent, file or record, or cause to be filed or recorded, such other instruments, documents and notices, including financing statements, and assignments, as the Administrative Agent may reasonably deem necessary or advisable from time to time in order to perfect and continue perfected such security interest. Upon a Springing Lien Trigger Date and at any time during a Collateral Period, each Grantor shall do all such other acts and things, shall execute and deliver all such other instruments and documents, including further security agreements, pledges, endorsements, assignments and notices, and shall furnish any other information as the Administrative Agent, in its discretion, may reasonably deem necessary or advisable from time to time in order to perfect and preserve the priority of such security interest as a first lien security interest in the Collateral prior to the rights of all Persons except as may otherwise be provided in the Credit Agreement. Upon a Springing Lien Trigger Date, each Grantor shall be deemed to have automatically and irrevocably appointed the Administrative Agent (and any of the Administrative Agent’s designated officers, employees and/or agents) as the attorney-in-fact of the Grantors to take such action as the Administrative Agent may reasonably deem necessary from time to time to preserve, perfect and continue perfected the Lenders’ security interest in the Collateral in accordance with the requirements of this Security Agreement including, but not limited to, signing any financing statements or amendments to financing statements evidencing the Administrative Agent’s security interest in the Collateral for and on behalf of such Grantor. Each Grantor agrees that a carbon, photographic or other reproduction of this Security Agreement or financing statement is sufficient as a financing statement and may be filed instead of the original. Upon the occurrence of a Collateral Release Date or Release Event, as the case may be, the Administrative Agent shall, at the sole expense of the Grantors, promptly but in any event within thirty (30) days of such occurrence, take such action as is reasonably necessary to file UCC-3 termination statements or other termination documents, as applicable, with respect to filings made by or on behalf of the Administrative Agent hereunder and, in the event the Administrative Agent shall not have taken such action as required hereunder, each Grantor shall be authorized by the Administrative Agent (for itself and on behalf of the Lenders) to file such UCC-3 termination statements or such other termination documents with respect to such filings. Section 7. Insurance. Risk of loss of, damage to, or destruction of the applicable Collateral is on the Grantors. The Grantors shall insure the applicable Collateral against such risks and casualties and in such amounts and with such insurance companies as is set forth in the Credit Agreement. If the Grantors fail to effect and keep in full force and effect such insurance, or fail to pay the premiums when due, the Administrative Agent may (but shall not be obligated to) do so for the account of the Grantors and add the cost thereof to the Obligations. Upon a Springing Lien Trigger Date and at any time during a Collateral Period, each Grantor agrees to cause the Administrative Agent to be added by endorsement, in form and substance reasonably satisfactory to the Administrative Agent, as a lenders’ loss payee (for itself and the benefit of the Lenders) to all applicable policies of commercial property insurance of any Grantor, as the Administrative Agent’s interests may appear, or otherwise assign and set over to the Administrative Agent all monies which may become payable on account of such insurance with respect to any loss event(s) involving Inventory to the extent both the insurance proceeds with respect to such Inventory exceed Twenty-Five Million and 00/100 Dollars ($25,000,000.00) and no Event of Default has occurred and is continuing during such Collateral Period and agrees to pay over any such amounts to the Administrative Agent to the extent such Grantor or Grantors have not used such proceeds to purchase or produce replacement Inventory during the one hundred eighty (180) day period commencing on the date such insurance proceeds become available to the such Grantor or Grantors. In the event any such insurance proceeds are not eligible hereunder to be paid directly to the applicable Grantor or Grantors as provided for above, each such Grantor or Grantors shall direct the applicable insurer(s) to pay the Administrative Agent any such amount so due. Upon a Springing Lien Trigger Date and during the continuance of the applicable Collateral Period, the Administrative Agent shall be automatically and irrevocably appointed the attorney-in-fact of each Grantor to, following the occurrence and continuance of an Event of Default, endorse any draft or check that may be payable to such Grantor in order to collect the proceeds of such insurance. Subject to the terms and conditions of the Credit Agreement, any balance of insurance proceeds remaining in the possession of the Administrative Agent after payment in full of the Obligations shall be paid over to such Grantor or its order. Section 8. Maintenance and Repair; Control. Each Grantor shall maintain the Collateral, and every portion thereof, in good condition (reasonable wear and tear excepted), and shall pay and discharge all taxes, levies and other impositions assessed or levied thereon. If such Grantor fails to do so after a Springing Lien Trigger Date and during the continuance of the applicable Collateral Period, the Administrative Agent may (but shall not be obligated to) pay the cost of such taxes, levies or impositions for the account of such Grantor and add the amount of such payments to the Obligations. Each Grantor which owns Collateral shall adopt and conscientiously adhere to a well-designed internal control system with respect to such Collateral, and such system shall be capable of permitting such Grantor and the Administrative Agent to identify readily at any reasonable time the location and condition of each and every item of such Collateral. Section 9. Preservation of Rights Against Third Parties; Preservation of Collateral in the Administrative Agent’s Possession. Until such time as the Administrative Agent exercises its rights hereunder to effect direct collection of the Accounts, the Chattel Paper and Electronic Chattel Paper, and to effect the enforcement of the Grantors’ contract rights, each Grantor assumes full responsibility for taking any and all steps to preserve rights in respect of the Accounts, the Chattel Paper and Electronic Chattel Paper and its contracts against third parties. The Administrative Agent shall be deemed to have exercised reasonable care in the custody and preservation of such of the Collateral as may come into its possession from time to time if the Administrative Agent takes such action for that purpose as each Grantor shall request in writing, provided that such requested action shall not, in the judgment of the Administrative Agent, impair the security interest of the Administrative Agent and the Lenders in the Collateral or their rights in, or the value of, the Collateral, and, provided further, that the Administrative Agent receives such written request in sufficient time to permit the Administrative Agent to take the requested action. Section 10. Events of Default and Remedies. (a) If any one or more of the Events of Default shall occur, the Administrative Agent may then, or at any time thereafter, so long as such default shall continue, in any way permitted by Law foreclose the Lien in the Collateral granted hereby or, upon ten (10) days prior written notice to the Grantors, sell any or all Collateral at private sale at any time or place in one or more sales, at such price or prices and upon such terms, either for cash or on credit, as the Administrative Agent and the Lenders, in their sole discretion, may elect, or sell any or all Collateral at public auction, either for cash or on credit, as the Administrative Agent and the Lenders, in their sole discretion, may elect, and at any such sale, the Administrative Agent may bid for and become the purchaser of any or all such Collateral. Pending any such action, the Administrative Agent may liquidate the Collateral. (b) If any one or more of the Events of Default shall occur, the Administrative continue, grant extensions to or adjust claims of, or make compromises or settlements with, debtors, the Grantors or any other Persons with respect to the Collateral or any securities, guarantees or insurance applying thereon, without notice to or the consent of any Grantor, without affecting the Grantor’s liability under this Security Agreement, the Credit Agreement or the other Loan Documents. Each Grantor waives notice of acceptance, of nonpayment, protest or notice of protest of any Accounts, Chattel Paper or Electronic Chattel Paper or any of its contract rights and any other notices to which the Grantor may be entitled. (c) If any one or more of the Events of Default shall occur and be continuing, then in any such event, the Administrative Agent and the Lenders shall have such additional rights and remedies in respect of the Collateral or any portion thereof as are provided by the Code (whether or not the Code applies to the affected Collateral) and such other rights and remedies in respect thereof which they may have at Law or in equity or under the Loan Documents including, without limitation, the right to enter any premises where Collateral is located and take possession and control thereof without demand or notice and without prior judicial hearing or legal proceedings, which each Grantor expressly waives. (d) The Administrative Agent shall apply the Proceeds of any sale or liquidation of the Collateral and, subject to Section 7, any Proceeds received by the Administrative Agent from insurance, in accordance with Section 8.2.5 of the Credit Agreement. If such Proceeds are insufficient to pay the amounts required by Law, the Grantors shall be liable for any deficiency. (e) Upon the occurrence and during the continuance of any Event of Default, the Grantors shall promptly following demand by the Administrative Agent assemble the Collateral and make it available to the Administrative Agent at a place or places to be designated by the Administrative Agent. The right of the Administrative Agent under this paragraph to have the Collateral assembled and made available to it is of the essence of this Security Agreement and the Administrative Agent may, at its election, enforce such right by an action in equity for injunctive relief or specific performance. (f) If any one or more of the Events of Default shall occur or shall exist and be continuing, then in any event, the Administrative Agent shall have the right to use and operate under all trade names under which each Grantor does business. Section 11. Continuing Validity of Obligations. The agreements and obligations of the Grantors hereunder are continuing agreements and obligations, and are absolute and unconditional irrespective of the genuineness, validity or enforceability of the Credit Agreement, the Notes or any other instrument or instruments now or hereafter evidencing the Obligations or any part thereof or of the Loan Documents or any other agreement or agreements now or hereafter entered into by the Administrative Agent or any Lender and the Grantors pursuant to which the Obligations or any part thereof is issued or of any other circumstance which might otherwise constitute a legal or equitable discharge of such agreements and obligations. Without limitation upon the foregoing, such agreements and obligations shall continue in full force and effect as long as the Obligations or any part thereof remain outstanding and unpaid and shall remain in full force and effect without regard to and shall not be released, discharged or in any way affected by (i) any renewal, refinancing or refunding of the Obligations in whole or in part, (ii) any extension of the time of payment of the Notes or other instrument or instruments now or hereafter evidencing the Obligations, or any part thereof, (iii) any compromise or settlement with respect to the Obligations or any part thereof, or any forbearance or indulgence extended to the Grantors, (iv) any amendment to or modification of the terms of the Notes or other instrument or instruments now or hereafter evidencing the Obligations or any part thereof or any other agreement or agreements now or hereafter entered into by the Administrative Agent or any Lender and the Grantors pursuant to which the Obligations or any part thereof is issued or secured, (v) any substitution, exchange, or release of a portion of, or failure to preserve, perfect or protect, or other dealing in respect of, the Collateral or any other property or any security for the payment of the Obligations or any part thereof, (vi) any bankruptcy, insolvency, arrangement, composition, assignment for the benefit of creditors or similar proceeding commenced by or against the Grantors, (vii) any dissolution, liquidation or termination of the Grantors for any reason whatsoever or (viii) any other matter or thing whatsoever whereby the agreements and obligations of the Grantors hereunder, would or might otherwise be released or discharged. Each Grantor hereby waives notice of the acceptance of this Security Agreement by the Administrative Agent. Notwithstanding any provisions regarding joint and several liability found in any of the Credit Agreement, the Notes or any other instrument or instruments now or hereafter evidencing the Obligations or any part thereof or of the Loan Documents or any other agreement issued and without limiting the scope or extent of the liability of the applicable Grantor as set forth in any of the foregoing, this Agreement shall not constitute and shall not be construed as a guaranty by any Grantor (other than Allegheny Technologies Incorporated, a Delaware corporation (“ATI”)) of any obligations which ATI may have under this Agreement, any guaranty or any other instrument or instruments now or hereafter evidencing the Obligations or any part thereof or of the Loan Documents or any other agreement or agreements now or hereafter entered into by the Administrative Agent or any Lender and ATI with respect to the Obligations secured hereunder. Section 12. Defeasance. Notwithstanding anything to the contrary contained in this Security Agreement, upon Payment in Full, and performance of all other obligations of the Loan Parties under the Loan Documents and termination or expiration of all Lender Provided Interest Rate Hedges, Lender Provided Foreign Currency Hedges and Other Lender Provided Financial Service Products, this Security Agreement shall terminate and be of no further force and effect and at the request of the Grantors, the Administrative Agent shall thereupon terminate the Lenders’ security interest in the Collateral, if any. Until such time, however, this Security Agreement shall be binding upon and inure to the benefit of the parties, their successors and assigns, provided that the Grantors may not assign this Security Agreement or any of their rights under this Security Agreement or delegate any of their duties or obligations under this Security Agreement and any such attempted assignment or delegation shall be null and void. This Security Agreement is not intended and shall not be construed to obligate the Administrative Agent to take any action whatsoever with respect to the Collateral or to incur expenses or perform or discharge any obligation, duty or disability of the Grantors. Section 13. Joinder. Upon the execution and delivery by any other Person of a Borrower Joinder or a Guarantor Joinder, such Person shall become a “Grantor” hereunder with the same force and effect as if it were originally a party to this Security Agreement and named as a “Grantor” on the signature pages hereto. The execution and delivery of any such Borrower Joinder or Guarantor Joinder shall not require the consent of any other Loan Parties hereunder, and the rights and obligations of each Loan Party shall remain in full force and effect notwithstanding the addition of any new Loan Party as a party to this Security Agreement. Section 14. Miscellaneous. (a) The provisions of this Security Agreement are intended to be severable. If any provision of this Security Agreement shall for any reason be held invalid or unenforceable, in whole or in part, in any jurisdiction, such provision shall, as to such jurisdiction, be ineffective to the extent of such invalidity or unenforceability without in any manner affecting the validity or enforceability of such provision in any other jurisdiction or any other provision of this Security Agreement in any jurisdiction. (b) No failure or delay on the part of the Administrative Agent in exercising any right, remedy, power or privilege under this Security Agreement, the Credit Agreement or any of the other Loan Documents shall operate as a waiver thereof or of any other right, remedy, power or privilege of the Administrative Agent under this Security Agreement, the Credit Agreement, the Notes or any of the other Loan Documents; nor shall any single or partial exercise of any such right, remedy, power or privilege preclude any other right, remedy, power or privilege or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges of the Administrative Agent and the Lenders under this Security Agreement, the Credit Agreement, the Notes and the other Loan Documents are cumulative and not exclusive of any rights or remedies which they may otherwise have. (c) All notices, statements, requests and demands given to or made upon any party in accordance with the provisions of this Security Agreement shall be deemed to have been given or made when given or made as provided in the Credit Agreement. (d) The section headings contained in this Security Agreement are for reference purposes only and shall not control or affect its construction or interpretation in any respect. (e) The Code shall govern the settlement, perfection and the effect of attachment and perfection of the Lenders’ security interest in the Collateral and the rights, duties and obligations of the Administrative Agent and the Grantors with respect to the Collateral (whether or not the Code applies to the Collateral). This Security Agreement shall be deemed to be a contract under the Laws of the Commonwealth of Pennsylvania and the execution and delivery of this Security Agreement and, to the extent not inconsistent with the preceding sentence, the terms and provisions of this Security Agreement shall be governed by and construed in accordance with the Laws of the Commonwealth of Pennsylvania without regard to the principles of the conflicts of Laws thereof. (f) The Grantors consent to the exclusive jurisdiction and venue of the courts of the Commonwealth of Pennsylvania sitting in Allegheny County and of the United States District Court of the Western District of Pennsylvania in any action on, relating to or mentioning this Security Agreement. Section 15. WAIVER OF TRIAL BY JURY. THE PARTIES HERETO HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY CLAIM BASED HEREON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS SECURITY AGREEMENT OR ANY OTHER LOAN DOCUMENT CONTEMPLATED TO BE EXECUTED IN CONNECTION HEREWITH OR ANY COURSE OF CONDUCT, COURSE OF DEALINGS, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY. THIS WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR THE ADMINISTRATIVE AGENT AND THE LENDERS TO ACCEPT THIS SECURITY AGREEMENT AND MAKE THE LOANS AND ISSUE LETTERS OF CREDIT. IN WITNESS WHEREOF, and intending to be legally bound, the undersigned have executed this Security Agreement on the day and year first above written, with the intention that it constitute a document under seal.       GRANTORS: WITNESS:     ATI FUNDING CORPORATION       By:         Name:   Rose Marie Manley     Title:   President WITNESS:     TDY HOLDINGS, LLC       By:         Name:   Rose Marie Manley     Title:   President WITNESS:     ALLEGHENY TECHNOLOGIES INCORPORATED       By:         Name:   Patrick J. DeCourcy     Title:   Senior Vice President, Finance and Chief Financial Officer WITNESS:     ATI OPERATING HOLDINGS, LLC       By:     WITNESS:     OREGON METALLURGICAL, LLC (formerly known as “OREGON METALLURGICAL CORPORATION”)       By:         Name:   Patrick J. DeCourcy     Title:   Executive Vice President WITNESS:     ALLEGHENY LUDLUM, LLC (formerly known as “ALLEGHENY LUDLUM CORPORATION”)       By:       ATI PROPERTIES, INC.       By:         Name:   John E. Grosselin, III     Title:   Vice President WITNESS:     TDY       By:     WITNESS:     ALC FUNDING CORPORATION       By:     ACQUISITION, LLC       By:       JESSOP STEEL, LLC       By:       INTERNATIONAL HEARTH MELTING, LLC     By:   OREGON METALLURGICAL, LLC, its Sole Manager       By:     WITNESS:     ATI PRECISION FINISHING, LLC (formerly known as “ROME METALS, LLC”)       By:       TI OREGON, INC.       By:       TITANIUM WIRE CORPORATION       By:       ATI CANADA HOLDINGS, INC.       By:           By:     INVESTMENT CORP.       By:         Name:   Rose Marie Manley     Title:   President WITNESS:     ENVIRONMENTAL, INC.       By:     ACQUISITION, LLC       By:         Name:   Patrick J. DeCourcy     Title:   President WITNESS:     ATI TITANIUM LLC       By:           By:           By:         ADMINISTRATIVE AGENT:     PNC BANK, NATIONAL ASSOCIATION, as Administrative Agent     By:         Name:       Title:   ANNEX A LIST OF SCHEDULES AND EXHIBITS SCHEDULES   SCHEDULE 1.1(A)    –    PRICING GRID SCHEDULE 1.1(B)    –    COMMITMENTS OF LENDERS AND ADDRESSES FOR NOTICES SCHEDULE 1.1(E)    –    EXISTING LETTERS OF CREDIT SCHEDULE 1.1(P)    –    PERMITTED LIENS SCHEDULE 5.1.1    –    QUALIFICATIONS TO DO BUSINESS SCHEDULE 5.1.2    –    SUBSIDIARIES SCHEDULE 5.1.5    –    LITIGATION SCHEDULE 5.1.12    –    ERISA COMPLIANCE SCHEDULE 5.1.13    –    ENVIRONMENTAL DISCLOSURES EXHIBITS   EXHIBIT 1.1 (A)    –    ASSIGNMENT AND ASSUMPTION AGREEMENT EXHIBIT 1.1(G)(1)    –    GUARANTOR JOINDER EXHIBIT 1.1(G)(2)    –    GUARANTY AGREEMENT (ATI) EXHIBIT 1.1(G)(3)    –    GUARANTY AGREEMENT (SUBSIDIARIES) EXHIBIT 1.1(I)    –    INTERCOMPANY SUBORDINATION AGREEMENT EXHIBIT 1.1(N)(1)    –    REVOLVING CREDIT NOTE EXHIBIT 1.1(N)(2)    –    SWING NOTE EXHIBIT 2.4.1    –    REVOLVING CREDIT LOAN REQUEST EXHIBIT 2.4.2    –    SWING LOAN REQUEST EXHIBIT 7.1.10    –    SECURITY AGREEMENT EXHIBIT 7.3.3    –    QUARTERLY COMPLIANCE

Exhibit 10.04 FORM OF LOCK-UP AGREEMENT , 2012 SVS Securities 21 Wilson Street, London, EC2M 2SN United Kingdom Ladies and Gentlemen: The undersigned understands and hereby acknowledges that Pegasi Energy Resources Corporation, a Nevada corporation (the “Company”), has engaged SVS Securities (the “Agent”), as the Company’s placement agent in connection with the sale of units (the "Units"), each Unit consisting of (i) two common shares of the Company, par value $0.001 per share (the “Common Stock”), and (ii) a warrant to purchase one share of Common Stock, on a "best efforts," minimum/maximum basis a minimum of $4,000,000 of Units and up to $7,500,000 of Units (the “Offering”), through a private placement pursuant to the exemptions from registration provided in Rule 506 of Regulation D. and/or Regulation S under the Securities Act of 1933, as amended (the “Securities Act”), and the rules and regulations promulgated thereunder. In order to induce the Agent to proceed with the Offering, and to induce purchasers to purchase the Units, the undersigned hereby agrees that, should the Offering be consummated through the sale of at least the minimum Offering, for the period of time commencing on the date of the last closing of the Offering (the “Closing Date”) until the date that is six months after the Closing Date (the “Restricted Period”), the undersigned will not offer, sell, contract to sell, grant any option for the sale of, or otherwise dispose of, directly or indirectly, any shares of the Company’s Common Stock or any security or other instrument which by its terms is convertible into, or exercisable or exchangeable for, shares of Common Stock or other securities of the Company, including, without limitation, any shares of the Company’s Common Stock issuable pursuant to the terms of any stock options or warrants; provided, that the foregoing restriction shall not apply to shares of Common Stock of the Company that are transferred other than pursuant to a sale in the public market, and then only if the transferee has, prior to such transfer, delivered to the Agent the transferee’s written agreement to be bound by the terms of this lock-up agreement.The undersigned hereby agrees that the Company may impose stop-transfer instructions with respect to the securities of the Company owned beneficially or of record by the undersigned until the end of the Restricted Period.Notwithstanding the foregoing, this lock-up agreement shall not apply to shares of Common Stock currently owned by the undersigned and sold pursuant to Rule 144 of the Securities Act. It is understood that the undersigned shall be released from all obligations under this letter if the engagement letter between the Company and the Agent with respect to the Offering is terminated prior to consummation of the Offering. 1 This letter agreement shall be governed by, and construed in accordance with, the laws of the State of Texas without giving effect to conflict of law principles thereof. Very truly yours, Date Signature Print Name Title 2

UNITED STATESSECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-Q QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTEREDMANAGEMENT INVESTMENT COMPANY Investment Company Act file number: (811-00058) Exact name of registrant as specified in charter: George Putnam Balanced Fund Address of principal executive offices: One Post Office Square, Boston, Massachusetts 02109 Name and address of agent for service: Beth S. Mazor, Vice PresidentOne Post Office SquareBoston, Massachusetts 02109 Copy to:   John W. Gerstmayr, Esq.Ropes & Gray LLP800 Boylston StreetBoston, Massachusetts 02199-3600 Registrant’s telephone number, including area code: (617) 292-1000 Date of fiscal year end: July 31, 2012 Date of reporting period: October 31, 2011 Item 1. Schedule of Investments: George Putnam Balanced Fund The fund's portfolio 10/31/11 (Unaudited) COMMON STOCKS (58.6%) (a) Shares Value Banking (5.3%) Bank of New York Mellon Corp. (The) 227,400 $4,839,072 BB&T Corp. 82,800 1,932,552 Comerica, Inc. 49,700 1,269,835 Fifth Third Bancorp 195,300 2,345,553 JPMorgan Chase & Co. 606,700 21,088,892 PNC Financial Services Group, Inc. 28,900 1,552,219 State Street Corp. 228,600 9,233,154 SunTrust Banks, Inc. 38,000 749,740 U.S. Bancorp 320,100 8,191,359 Wells Fargo & Co. 413,900 10,724,149 Basic materials (1.9%) Alcoa, Inc. 123,900 1,333,164 Dow Chemical Co. (The) 56,048 1,562,618 E.I. du Pont de Nemours & Co. 132,400 6,364,468 Freeport-McMoRan Copper & Gold, Inc. Class B (Indonesia) 32,100 1,292,346 Nucor Corp. 96,700 3,653,326 PPG Industries, Inc. 65,900 5,694,419 Rio Tinto PLC ADR (United Kingdom) 34,200 1,848,852 Weyerhaeuser Co. (R) 35,072 630,595 Capital goods (3.3%) Avery Dennison Corp. 30,400 808,640 Eaton Corp. 83,100 3,724,542 Emerson Electric Co. 31,000 1,491,720 Illinois Tool Works, Inc. 76,800 3,734,784 Ingersoll-Rand PLC 72,500 2,256,925 KBR, Inc. 35,200 982,432 Lockheed Martin Corp. 22,600 1,715,340 Northrop Grumman Corp. 82,200 4,747,050 Parker Hannifin Corp. 60,400 4,925,620 Raytheon Co. 85,500 3,778,245 Staples, Inc. 236,300 3,535,048 United Technologies Corp. 86,100 6,714,077 Communication services (4.4%) AT&T, Inc. 589,382 17,274,785 Comcast Corp. Class A 316,700 7,426,615 DIRECTV Class A (NON) 29,600 1,345,616 Time Warner Cable, Inc. 49,200 3,133,548 Verizon Communications, Inc. 502,800 18,593,544 Vodafone Group PLC ADR (United Kingdom) 159,300 4,434,912 Conglomerates (2.1%) 3M Co. 38,800 3,065,976 General Electric Co. 935,000 15,623,850 Tyco International, Ltd. 128,100 5,834,955 Consumer cyclicals (5.3%) Bed Bath & Beyond, Inc. (NON) 34,400 2,127,296 Carnival Corp. 80,900 2,848,489 Clorox Co. (The) 15,800 1,057,652 Ford Motor Co. (NON) 114,300 1,335,024 Home Depot, Inc. (The) 78,600 2,813,880 Kimberly-Clark Corp. 61,700 4,301,107 Marriott International, Inc. Class A 78,820 2,482,830 News Corp. Class A 89,700 1,571,544 Omnicom Group, Inc. 46,400 2,063,872 Stanley Black & Decker, Inc. 28,000 1,787,800 Target Corp. 116,300 6,367,425 Time Warner, Inc. 267,300 9,352,825 TJX Cos., Inc. (The) 133,300 7,855,368 Viacom, Inc. Class B 156,700 6,871,295 Wal-Mart Stores, Inc. 45,900 2,603,448 Walt Disney Co. (The) 204,500 7,132,960 Consumer finance (0.5%) American Express Co. 110,900 5,613,758 Consumer staples (5.3%) Avon Products, Inc. 97,600 1,784,128 Coca-Cola Co. (The) 29,800 2,035,936 Coca-Cola Enterprises, Inc. 117,200 3,143,304 Colgate-Palmolive Co. 22,900 2,069,473 CVS Caremark Corp. 206,500 7,495,950 General Mills, Inc. 63,200 2,435,096 Hertz Global Holdings, Inc. (NON) 176,300 2,045,080 Kellogg Co. 33,000 1,788,930 Kraft Foods, Inc. Class A 110,862 3,900,125 Lorillard, Inc. 17,200 1,903,352 Newell Rubbermaid, Inc. 211,400 3,128,720 PepsiCo, Inc. 35,000 2,203,250 Philip Morris International, Inc. 198,200 13,848,233 Procter & Gamble Co. (The) 204,200 13,066,756 SYSCO Corp. 41,100 1,139,292 Energy (7.0%) Anadarko Petroleum Corp. 14,100 1,106,850 Chevron Corp. 179,800 18,887,990 ConocoPhillips 54,300 3,781,995 Devon Energy Corp. 61,900 4,020,405 Exxon Mobil Corp. 285,000 22,255,650 Hess Corp. 47,600 2,977,856 National Oilwell Varco, Inc. 29,200 2,082,836 Newfield Exploration Co. (NON) 76,400 3,075,864 Noble Corp. (Switzerland) 104,600 3,759,324 Occidental Petroleum Corp. 66,800 6,208,392 Schlumberger, Ltd. 67,995 4,995,593 Total SA ADR (France) 137,800 7,206,940 Valero Energy Corp. 68,700 1,690,020 Financials (3.2%) Aflac, Inc. 69,300 3,124,737 Citigroup, Inc. 272,150 8,597,219 Goldman Sachs Group, Inc. (The) 85,710 9,389,531 MetLife, Inc. 83,800 2,946,408 Progressive Corp. (The) 231,200 4,395,112 Prudential Financial, Inc. 176,200 9,550,040 Health care (9.6%) Abbott Laboratories 28,200 1,519,134 Aetna, Inc. 160,600 6,385,456 Baxter International, Inc. 136,900 7,526,762 Bristol-Myers Squibb Co. 113,700 3,591,783 Celgene Corp. (NON) 33,700 2,184,771 CIGNA Corp. 88,200 3,910,788 Covidien PLC (Ireland) 91,412 4,300,020 Johnson & Johnson 314,900 20,276,410 Medtronic, Inc. 90,000 3,126,600 Merck & Co., Inc. 317,300 10,946,850 Novartis AG ADR (Switzerland) 77,200 4,359,484 Pfizer, Inc. 1,058,158 20,380,122 Quest Diagnostics, Inc. 107,400 5,992,920 St. Jude Medical, Inc. 116,100 4,527,900 Stryker Corp. 89,200 4,273,572 Teva Pharmaceutical Industries, Ltd. ADR (Israel) 53,700 2,193,645 Thermo Fisher Scientific, Inc. (NON) 135,500 6,811,585 Insurance (2.1%) Allstate Corp. (The) 179,900 4,738,566 Chubb Corp. (The) 75,300 5,048,865 Marsh & McLennan Cos., Inc. 193,800 5,934,156 RenaissanceRe Holdings, Ltd. 17,000 1,158,040 Sun Life Financial, Inc. (Canada) 62,700 1,581,294 Travelers Cos., Inc. (The) 112,600 6,570,210 Investment banking/Brokerage (0.2%) Morgan Stanley 102,740 1,812,334 Real estate (0.5%) CreXus Investment Corp. (R) 100,500 960,780 Equity Residential Trust (R) 29,348 1,722,141 ProLogis, Inc. (R) 56,481 1,680,875 Simon Property Group, Inc. (R) 12,362 1,587,775 Technology (5.0%) Adobe Systems, Inc. (NON) 86,200 2,535,142 Apple, Inc. (NON) 4,300 1,740,554 Cisco Systems, Inc. 446,300 8,269,939 EMC Corp. (NON) 233,800 5,730,438 Hewlett-Packard Co. 133,800 3,560,418 Honeywell International, Inc. 130,000 6,812,000 IBM Corp. 21,500 3,969,545 Intel Corp. 166,400 4,083,456 Juniper Networks, Inc. (NON) 122,200 2,990,234 KLA-Tencor Corp. 33,400 1,572,806 Microsoft Corp. 198,200 5,278,066 Oracle Corp. 65,100 2,133,327 Qualcomm, Inc. 69,300 3,575,880 SanDisk Corp. (NON) 56,000 2,837,520 Texas Instruments, Inc. 56,000 1,720,880 Yahoo!, Inc. (NON) 89,800 1,404,472 Transportation (0.3%) FedEx Corp. 15,400 1,260,182 United Parcel Service, Inc. Class B 38,400 2,697,216 Utilities and power (2.6%) Ameren Corp. 139,200 4,437,696 American Electric Power Co., Inc. 98,000 3,849,440 Dominion Resources, Inc. 27,300 1,408,407 Duke Energy Corp. 76,300 1,558,046 Edison International 128,700 5,225,220 Entergy Corp. 88,600 6,128,462 Exelon Corp. 20,400 905,556 NextEra Energy, Inc. 39,600 2,233,440 PG&E Corp. 119,550 5,128,695 Total common stocks (cost $633,349,584) U.S. GOVERNMENT AND AGENCY MORTGAGE OBLIGATIONS (12.9%) (a) Principal amount Value U.S. Government Guaranteed Mortgage Obligations (2.8%) Government National Mortgage Association Pass-Through Certificates 4 1/2s, May 20, 2041 $19,575,162 $21,281,871 4s, February 20, 2041 10,678,340 11,399,962 U.S. Government Agency Mortgage Obligations (10.1%) Federal Home Loan Mortgage Corporation Pass-Through Certificates 6s, March 1, 2035 9,936 11,036 3 1/2s, January 1, 2041 547,105 555,974 Federal National Mortgage Association Pass-Through Certificates 6s, TBA, November 1, 2041 24,000,000 26,306,251 5 1/2s, with due dates from July 1, 2033 to November 1, 2038 9,201,489 10,009,824 5s, with due dates from August 1, 2033 to January 1, 2039 4,947,953 5,327,386 4 1/2s, TBA, November 1, 2041 47,000,000 49,702,500 3 1/2s, December 1, 2040 945,450 962,660 3 1/2s, TBA, November 1, 2041 25,000,000 25,419,923 Total U.S. government and agency mortgage obligations (cost $148,489,788) U.S. GOVERNMENT AGENCY OBLIGATIONS (0.2%) (a) Principal amount Value Wells Fargo & Co. 3s, FDIC guaranteed notes, December 9, 2011 $1,100,000 $1,103,148 2 1/8s, FDIC guaranteed notes, June 15, 2012 1,400,000 1,415,544 Total U.S. Government Agency Obligations (cost $2,504,067) U.S. TREASURY OBLIGATIONS (4.6%) (a) Principal amount Value U.S. Treasury Bonds 4 1/2s, February 15, 2036 $30,000 $37,212 U.S. Treasury Notes 3 1/2s, May 31, 2013 36,000,000 37,858,360 1 3/8s, May 15, 2013 5,900,000 6,004,979 1 1/4s, April 15, 2014 3,100,000 3,169,145 1s, August 31, 2016 7,000,000 7,013,672 Total U.S. treasury Obligations (cost $54,127,723) CORPORATE BONDS AND NOTES (17.0%) (a) Principal amount Value Basic materials (1.0%) Allegheny Technologies, Inc. sr. unsec. unsub. notes 9 3/8s, 2019 $275,000 $351,599 ArcelorMittal sr. unsec. unsub. 9.85s, 2019 (France) 1,545,000 1,778,359 Dow Chemical Co. (The) sr. unsec. unsub. notes 8.55s, 2019 1,190,000 1,545,916 Freeport-McMoRan Copper & Gold, Inc. sr. unsec. notes 8 3/8s, 2017 (Indonesia) 1,450,000 1,549,688 Georgia-Pacific, LLC sr. unsec. unsub. notes 7 3/4s, 2029 850,000 1,109,827 International Paper Co. sr. unsec. notes 9 3/8s, 2019 1,018,000 1,305,424 International Paper Co. sr. unsec. notes 8.7s, 2038 10,000 13,155 International Paper Co. sr. unsec. notes 7.95s, 2018 221,000 265,248 International Paper Co. sr. unsec. unsub. notes 7.3s, 2039 20,000 23,321 Mosaic Co. (The) sr. unsec. notes 3 3/4s, 2021 200,000 203,775 Rio Tinto Finance USA, Ltd. company guaranty sr. unsec. notes 9s, 2019 (Australia) 450,000 614,590 Rio Tinto Finance USA, Ltd. company guaranty sr. unsec. notes 5.2s, 2040 (Australia) 570,000 641,165 Rohm & Haas Co. sr. unsec. unsub. notes 7.85s, 2029 385,000 484,915 Sealed Air Corp. sr. notes 7 7/8s, 2017 585,000 624,800 Teck Resources Limited sr. notes 10 3/4s, 2019 (Canada) 35,000 43,225 Teck Resources Limited sr. notes 10 1/4s, 2016 (Canada) 51,000 59,731 Teck Resources Limited sr. notes 9 3/4s, 2014 (Canada) 16,000 19,058 Teck Resources Limited sr. unsec. unsub. notes 7s, 2012 (Canada) 30,000 31,473 Temple-Inland, Inc. sr. unsec. unsub. notes 6 5/8s, 2018 195,000 216,573 Union Carbide Corp. sr. unsec. unsub. bonds 7 3/4s, 2096 180,000 210,240 Xstrata Finance Canada, Ltd. 144A company guaranty 5.8s, 2016 (Canada) 735,000 801,407 Capital goods (0.4%) Allied Waste North America, Inc. company guaranty sr. unsec. notes 6 7/8s, 2017 1,595,000 1,708,644 Legrand SA unsec. unsub. debs. 8 1/2s, 2025 (France) 767,000 945,161 Parker Hannifin Corp. sr. unsec. unsub. notes Ser. MTN, 6 1/4s, 2038 975,000 1,214,676 Republic Services, Inc. company guaranty sr. unsec. unsub. notes 5 1/2s, 2019 240,000 275,862 United Technologies Corp. sr. unsec. notes 5.7s, 2040 100,000 122,259 Communication services (1.7%) America Movil SAB de CV company guaranty sr. unsec. unsub. notes 6 1/8s, 2040 (Mexico) 200,000 235,937 America Movil SAB de CV company guaranty unsec. unsub. notes 2 3/8s, 2016 (Mexico) 280,000 280,745 American Tower Corp. sr. unsec. notes 7 1/4s, 2019 800,000 946,243 American Tower Corp. sr. unsec. unsub. notes 4 5/8s, 2015 555,000 592,196 AT&T, Inc. sr. unsec. unsub. bonds 5 1/2s, 2018 705,000 818,804 AT&T, Inc. sr. unsec. unsub. notes 6.3s, 2038 1,194,000 1,432,804 Bellsouth Capital Funding unsec. notes 7 7/8s, 2030 1,380,000 1,796,313 CenturyLink, Inc. sr. unsec. debs. Ser. G, 6 7/8s, 2028 715,000 631,881 CenturyLink, Inc. sr. unsec. unsub. notes Ser. P, 7.6s, 2039 305,000 302,135 Comcast Cable Communications company guaranty sr. unsub. notes 8 7/8s, 2017 290,000 373,334 Comcast Corp. company guaranty sr. unsec. unsub. notes 6.95s, 2037 225,000 283,517 Cox Communications, Inc. 144A notes 5 7/8s, 2016 289,000 330,587 Crown Castle Towers, LLC 144A company guaranty sr. notes 4.883s, 2020 710,000 725,791 France Telecom sr. unsec. unsub. notes 8 1/2s, 2031 (France) 445,000 649,305 France Telecom sr. unsec. unsub. notes 5 3/8s, 2019 (France) 255,000 287,035 Koninklijke (Royal) KPN NV sr. unsec. unsub. bonds 8 3/8s, 2030 (Netherlands) 70,000 89,759 NBC Universal Media, LLC sr. unsec. unsub. notes 6.4s, 2040 (FWC) 380,000 462,938 NBC Universal Media, LLC sr. unsec. unsub. notes 5.15s, 2020 (FWC) 295,000 331,527 Qwest Corp. notes 6 3/4s, 2021 462,000 490,998 Rogers Communications, Inc. company guaranty sr. unsec. bonds 8 3/4s, 2032 (Canada) 95,000 135,850 Rogers Communications, Inc. sec. notes 6 3/8s, 2014 (Canada) 122,000 135,859 SBA Tower Trust 144A company guaranty asset backed notes 5.101s, 2017 1,125,000 1,216,363 TCI Communications, Inc. company guaranty 7 7/8s, 2026 2,120,000 2,773,838 Telecom Italia Capital SA company guaranty sr. unsec. unsub. notes 6.175s, 2014 (Italy) 300,000 304,740 Telefonica Emisiones SAU company guaranty sr. unsec. unsub. notes 6.221s, 2017 (Spain) 845,000 897,009 Time Warner Cable, Inc. company guaranty sr. notes 7.3s, 2038 640,000 823,617 Time Warner Cable, Inc. company guaranty sr. unsec. notes 7 1/2s, 2014 150,000 170,453 Time Warner Cable, Inc. company guaranty sr. unsec. unsub. notes 6 3/4s, 2039 355,000 431,501 Verizon Communications, Inc. sr. unsec. unsub. notes 8 3/4s, 2018 110,000 149,135 Verizon New Jersey, Inc. debs. 8s, 2022 770,000 966,989 Verizon Pennsylvania, Inc. debs. 8.35s, 2030 980,000 1,310,413 Consumer cyclicals (0.9%) Advance Auto Parts, Inc. company guaranty sr. unsec. notes 5 3/4s, 2020 475,000 519,161 CBS Corp. company guaranty sr. unsec. notes 7 7/8s, 2030 730,000 963,954 Choice Hotels International, Inc. company guaranty sr. unsec. unsub. notes 5.7s, 2020 430,000 469,655 DIRECTV Holdings, LLC/DIRECTV Financing Co., Inc. company guaranty sr. unsec. notes 6.35s, 2040 370,000 440,747 DIRECTV Holdings, LLC/DIRECTV Financing Co., Inc. company guaranty sr. unsec. unsub. notes 5 7/8s, 2019 820,000 941,022 Expedia, Inc. company guaranty sr. unsec. notes 7.456s, 2018 325,000 361,563 Expedia, Inc. company guaranty sr. unsec. unsub. notes 5.95s, 2020 555,000 561,560 Expedia, Inc. 144A company guaranty sr. notes 8 1/2s, 2016 800,000 876,000 FUEL Trust 144A company guaranty asset backed notes 4.207s, 2016 1,245,000 1,249,842 Grupo Televisa, S.A.B sr. unsec. bonds 6 5/8s, 2040 (Mexico) 300,000 341,862 Grupo Televisa, S.A.B sr. unsec. notes 6s, 2018 (Mexico) 290,000 323,494 Lender Processing Services, Inc. company guaranty sr. unsec. unsub. notes 8 1/8s, 2016 846,000 833,310 News America Holdings, Inc. company guaranty 7 3/4s, 2024 1,045,000 1,265,037 Owens Corning company guaranty sr. unsec. notes 9s, 2019 324,000 380,295 Time Warner Entertainment Co., LP debs. 8 3/8s, 2023 170,000 223,543 Time Warner, Inc. company guaranty sr. unsec. bonds 7.7s, 2032 520,000 677,124 Time Warner, Inc. company guaranty sr. unsec. notes 4.7s, 2021 120,000 129,040 Time Warner, Inc. debs. 9.15s, 2023 340,000 472,578 Consumer staples (1.2%) Altria Group, Inc. company guaranty sr. unsec. notes 9.7s, 2018 375,000 504,008 Altria Group, Inc. company guaranty sr. unsec. notes 9 1/4s, 2019 595,000 790,966 Anheuser-Busch InBev Worldwide, Inc. company guaranty sr. unsec. unsub. notes 8.2s, 2039 165,000 257,663 Bacardi, Ltd. 144A unsec. notes 4 1/2s, 2021 (Bermuda) 495,000 539,851 Beam, Inc. sr. unsec. unsub. notes 3s, 2012 850,000 856,375 Campbell Soup Co. debs. 8 7/8s, 2021 855,000 1,234,297 Corrections Corporation of America company guaranty sr. notes 7 3/4s, 2017 279,000 302,018 CVS Caremark Corp. jr. unsec. sub. bonds FRB 6.302s, 2037 2,293,000 2,227,076 CVS Pass-Through Trust 144A company guaranty notes 7.507s, 2032 740,094 859,042 CVS Pass-Through Trust 144A pass-through certificates 6.117s, 2013 139,197 145,464 Darden Restaurants, Inc. sr. unsec. unsub. notes 6.8s, 2037 810,000 938,323 General Mills, Inc. sr. unsec. notes 5.65s, 2019 130,000 153,551 Diageo Investment Corp. company guaranty 8s, 2022 (Canada) 820,000 1,084,912 H.J. Heinz Finance Co. 144A company guaranty 7 1/8s, 2039 360,000 488,879 Kraft Foods, Inc. sr. unsec. unsub. notes 6 1/2s, 2040 309,000 395,405 Kroger Co. company guaranty 6 3/4s, 2012 275,000 282,145 Kroger Co. company guaranty 6.4s, 2017 500,000 592,826 McDonald's Corp. sr. unsec. Ser. MTN, 6.3s, 2038 535,000 724,343 McDonald's Corp. sr. unsec. notes 5.7s, 2039 600,000 748,474 WPP Finance UK company guaranty sr. unsec. notes 8s, 2014 (United Kingdom) 690,000 788,818 Energy (1.0%) Anadarko Finance Co. company guaranty sr. unsec. unsub. notes Ser. B, 7 1/2s, 2031 985,000 1,236,496 BP Capital Markets PLC company guaranty sr. unsec. unsub. notes 4.742s, 2021 (United Kingdom) 655,000 734,672 BP Capital Markets PLC company guaranty sr. unsec. unsub. notes 4 1/2s, 2020 (United Kingdom) 175,000 192,157 Chesapeake Energy Corp. sr. unsec. notes 7 5/8s, 2013 10,000 10,700 DCP Midstream, LLC 144A sr. unsec. notes 5.35s, 2020 375,000 400,917 El Paso Pipeline Partners Operating Co., LP company guaranty sr. unsec. notes 6 1/2s, 2020 235,000 261,438 Ente Nazionale Idrocarburi (ENI) SpA 144A sr. unsec. notes 4.15s, 2020 (Italy) 825,000 828,457 EOG Resources, Inc. sr. unsec. notes 5 5/8s, 2019 205,000 243,136 Kerr-McGee Corp. company guaranty sr. unsec. unsub. notes 7 7/8s, 2031 340,000 443,171 Marathon Petroleum Corp. 144A sr. unsec. notes 6 1/2s, 2041 175,000 203,707 Motiva Enterprises, LLC 144A sr. notes 5.2s, 2012 225,000 232,726 Motiva Enterprises, LLC 144A sr. unsec. notes 6.85s, 2040 220,000 287,995 Newfield Exploration Co. sr. sub. notes 6 5/8s, 2016 650,000 667,875 Noble Holding International, Ltd. company guaranty sr. unsec. notes 6.05s, 2041 390,000 437,576 Petrobras International Finance Co. company guaranty sr. unsec. notes 6 3/4s, 2041 (Brazil) 300,000 342,900 Petrobras International Finance Co. company guaranty sr. unsec. notes 5 3/8s, 2021 (Brazil) 825,000 867,842 Petrobras International Finance Co. company guaranty sr. unsec. notes 3 7/8s, 2016 (Brazil) 355,000 363,272 Pride International, Inc. sr. unsec. notes 7 7/8s, 2040 760,000 987,001 Ras Laffan Liquefied Natural Gas Co., Ltd. 144A company guaranty sr. notes 5 1/2s, 2014 (Qatar) 675,000 730,148 Spectra Energy Partners LP sr. unsec. notes 4.6s, 2021 245,000 249,283 Statoil ASA company guaranty sr. unsec. notes 5.1s, 2040 (Norway) 480,000 556,081 Weatherford Bermuda company guaranty sr. unsec. notes 9 5/8s, 2019 180,000 234,725 Weatherford International, Inc. company guaranty sr. unsec. unsub. notes 6.8s, 2037 245,000 283,578 Weatherford International, Inc. company guaranty sr. unsec. unsub. notes 6.35s, 2017 280,000 319,439 Weatherford International, Ltd. sr. notes 5 1/2s, 2016 455,000 502,114 Financials (7.0%) Aflac, Inc. sr. unsec. notes 6.9s, 2039 500,000 549,040 Aflac, Inc. sr. unsec. notes 6.45s, 2040 345,000 366,559 American Express Bank FSB notes Ser. BKN1, 5.55s, 2012 1,160,000 1,208,961 American Express Bank FSB sr. unsec. FRN Ser. BKNT, 0.543s, 2017 545,000 489,236 American International Group, Inc. jr. sub. bonds FRB 8.175s, 2058 300,000 289,500 American International Group, Inc. sr. unsec. Ser. MTN, 5.85s, 2018 665,000 672,689 AON Corp. jr. unsec. sub. notes 8.205s, 2027 1,150,000 1,339,433 Assurant, Inc. sr. unsec. notes 6 3/4s, 2034 525,000 548,422 Bank Nederlandse Gemeenten 144A bonds 1 3/4s, 2015 (Netherlands) 12,100,000 12,232,634 Bank of America NA sub. notes Ser. BKNT, 5.3s, 2017 315,000 301,231 Bank One Corp. unsec. unsub. notes 5.9s, 2011 1,000,000 1,001,857 BankAmerica Capital III bank guaranteed jr. unsec. FRN 0.97306s, 2027 2,755,000 1,647,909 Barclays Bank PLC jr. unsec. sub. notes FRN 6.278s, 2049 (United Kingdom) 145,000 105,850 Barclays Bank PLC 144A jr. unsec. sub. notes FRN 6.86s, 2049 (United Kingdom) 280,000 222,600 Barclays Bank PLC 144A sub. notes 10.179s, 2021 (United Kingdom) 804,000 897,610 Barclays Bank PLC 144A unsec. sub. notes 6.05s, 2017 (United Kingdom) 1,415,000 1,357,967 Bear Stearns Cos., Inc. (The) sr. notes 6.4s, 2017 500,000 580,110 Bear Stearns Cos., Inc. (The) sr. unsec. notes 7 1/4s, 2018 331,000 389,796 Bosphorus Financial Services, Ltd. 144A sr. notes FRN 2.08617s, 2012 297,250 296,611 Camden Property Trust sr. unsec. notes 4 7/8s, 2023 (R) 1,040,000 1,035,376 Capital One Bank USA NA sub. notes 8.8s, 2019 385,000 456,525 Capital One Capital III company guaranty 7.686s, 2036 320,000 317,600 Capital One Capital V company guaranty jr. unsec. sub. notes 10 1/4s, 2039 450,000 465,750 Citigroup, Inc. sr. unsec. sub. FRN 0.60683s, 2016 123,000 100,274 Citigroup, Inc. sub. notes 5s, 2014 1,369,000 1,394,997 Citigroup, Inc. unsec. sub. notes 6 1/8s, 2036 200,000 194,856 Citigroup, Inc. unsec. sub. notes 5 5/8s, 2012 290,000 295,684 CNA Financial Corp. sr. unsec. unsub. notes 5 3/4s, 2021 210,000 211,934 CNA Financial Corp. unsec. notes 6 1/2s, 2016 435,000 471,835 Commonwealth Bank of Australia 144A sr. unsec. notes 3 3/4s, 2014 (Australia) 1,220,000 1,269,453 Credit Suisse Guernsey sr. unsec. notes 5.3s, 2019 475,000 510,474 Credit Suisse Guernsey, Ltd. jr. unsec. sub. notes FRN 5.86s, 2017 (United Kingdom) 934,000 807,910 DDR Corp. sr. unsec. unsub. notes 7 7/8s, 2020 (R) 605,000 654,853 Deutsche Bank AG/London sr. unsec. notes 3 7/8s, 2014 (United Kingdom) 635,000 656,352 Deutsche Bank Capital Funding Trust VII 144A jr. unsec. sub. bonds FRB 5.628s, 2016 470,000 357,200 Duke Realty LP sr. unsec. notes 6 1/2s, 2018 (R) 361,000 391,028 Duke Realty LP sr. unsec. notes 6 1/4s, 2013 (R) 19,000 19,976 Erac USA Finance, Co. 144A sr. notes 4 1/2s, 2021 785,000 802,112 Fleet Capital Trust V bank guaranteed jr. sub. FRN 1.35022s, 2028 1,057,000 640,513 GATX Financial Corp. notes 5.8s, 2016 560,000 601,341 GE Capital Trust I unsec. sub. bonds FRB 6 3/8s, 2067 355,000 350,342 General Electric Capital Corp. sr. unsec. 5 5/8s, 2018 260,000 287,475 General Electric Capital Corp. sr. unsec. FRN Ser. MTN, 0.47839s, 2016 455,000 423,330 General Electric Capital Corp. sr. unsec. notes 6 3/4s, 2032 40,000 46,777 General Electric Capital Corp. sr. unsec. notes 6.15s, 2037 1,200,000 1,320,566 Genworth Financial, Inc. sr. unsec. unsub. notes 7 5/8s, 2021 1,410,000 1,274,541 Goldman Sachs Group, Inc. (The) sr. notes 7 1/2s, 2019 805,000 911,562 Goldman Sachs Group, Inc. (The) sub. notes 6 3/4s, 2037 745,000 714,122 Hartford Financial Services Group, Inc. (The) sr. unsec. unsub. notes 6 5/8s, 2040 1,540,000 1,562,473 HBOS PLC 144A unsec. sub. bonds 6s, 2033 (United Kingdom) 890,000 579,870 Highwood Realty LP sr. unsec. bonds 5.85s, 2017 (R) 1,005,000 1,066,040 HSBC Finance Capital Trust IX FRN 5.911s, 2035 2,000,000 1,760,000 HSBC Holdings PLC sub. notes 6 1/2s, 2037 (United Kingdom) 905,000 956,475 ING Bank NV 144A sr. unsec. notes FRN 1.39711s, 2013 (Netherlands) 1,535,000 1,514,581 International Lease Finance Corp. sr. unsec. notes 6 1/4s, 2019 275,000 257,813 JPMorgan Chase Bank NA sub. notes Ser. BKNT, 6s, 2017 1,000,000 1,077,051 JPMorgan Chase Capital XVIII bonds Ser. R, 6.95s, 2036 499,000 515,428 JPMorgan Chase Capital XXIII company guaranty jr. unsec. sub. notes FRN 1.28617s, 2047 2,443,000 1,686,677 JPMorgan Chase Capital XXV bonds Ser. Y, 6.8s, 2037 523,000 522,346 Liberty Mutual Group, Inc. 144A company guaranty jr. sub. notes FRB 10 3/4s, 2058 1,285,000 1,548,425 Liberty Mutual Insurance Co. 144A notes 7.697s, 2097 1,060,000 1,022,254 Lloyds TSB Bank PLC bank guaranty sr. unsec. unsub. notes 6 3/8s, 2021 (United Kingdom) 280,000 299,904 Lloyds TSB Bank PLC company guaranty sr. unsec. sub. notes Ser. MTN, 6 1/2s, 2020 (United Kingdom) 1,850,000 1,723,064 Macquarie Bank Ltd. 144A unsec. sub. notes 6 5/8s, 2021 (Australia) 1,020,000 998,999 Massachusetts Mutual Life Insurance Co. 144A notes 8 7/8s, 2039 815,000 1,229,767 Merrill Lynch & Co., Inc. jr. sub. bonds 7 3/4s, 2038 1,565,000 1,561,264 MetLife Capital Trust IV 144A jr. sub. debs. 7 7/8s, 2037 1,300,000 1,376,240 MetLife, Inc. jr. unsec. sub. notes 6.4s, 2036 590,000 579,579 Metropolitan Life Global Funding I 144A notes 3.65s, 2018 100,000 101,942 Nationwide Financial Services, Inc. notes 5 5/8s, 2015 465,000 495,070 Nationwide Mutual Insurance Co. 144A notes 8 1/4s, 2031 415,000 459,393 Nordea Bank AB 144A jr. unsec. sub. notes FRN 5.424s, 2015 (Sweden) 525,000 488,250 Nordea Bank AB 144A sub. notes 4 7/8s, 2021 (Sweden) 1,300,000 1,166,608 OneAmerica Financial Partners, Inc. 144A bonds 7s, 2033 370,000 377,463 Pacific LifeCorp 144A sr. notes 6s, 2020 365,000 392,648 Progressive Corp. (The) jr. unsec. sub. notes FRN 6.7s, 2037 2,020,000 2,004,850 Prudential Financial, Inc. sr. notes 7 3/8s, 2019 600,000 728,497 Prudential Financial, Inc. sr. notes 6.2s, 2015 190,000 208,865 Prudential Holdings LLC sr. notes FRN Ser. AGM, 1.22522s, 2017 210,000 199,835 Royal Bank of Scotland Group PLC sr. unsec. unsub. notes 6.4s, 2019 (United Kingdom) 355,000 357,738 Santander Issuances S.A. Unipersonal 144A bank guaranty unsec. sub. notes 5.911s, 2016 (Spain) 900,000 878,660 Simon Property Group LP sr. unsec. unsub. notes 10.35s, 2019 (R) 216,000 293,643 Simon Property Group LP sr. unsec. unsub. notes 5.65s, 2020 (R) 361,000 406,379 Societe Generale SA 144A jr. unsec. sub. bonds FRB 1.12761s, 2017 (France) 385,000 210,861 Standard Chartered PLC 144A jr. sub. bonds FRB 7.014s, 2049 (United Kingdom) 800,000 716,333 State Street Capital Trust IV company guaranty jr. unsec. sub. bonds FRB 1.34711s, 2037 1,790,000 1,249,928 Tanger Properties, LP sr. unsec. notes 6 1/8s, 2020 (R) 265,000 290,910 TD Ameritrade Holding Corp. company guaranty sr. unsec. unsub. notes 5.6s, 2019 480,000 519,632 Teachers Insurance & Annuity Association of America 144A notes 6.85s, 2039 750,000 954,053 Ventas Realty LP/Capital Corp. sr. notes 6 3/4s, 2017 (R) 470,000 488,839 Vornado Realty LP sr. unsec. unsub. notes 4 1/4s, 2015 (R) 555,000 567,544 Wachovia Bank NA sub. notes Ser. BKNT, 6s, 2017 1,060,000 1,190,736 Wachovia Corp. sr. unsec. notes 5 3/4s, 2017 145,000 167,247 WEA Finance LLC/ WT Finance Aust. Pty. Ltd. 144A company guaranty sr. unsec. notes 6 3/4s, 2019 1,050,000 1,185,536 Wells Fargo Bank NA unsec. sub. notes FRN 0.50006s, 2016 710,000 640,516 Westpac Capital Trust III 144A unsec. sub. notes FRN 5.819s, 2013 (Australia) 1,010,000 970,610 Willis Group Holdings Ltd. company guaranty sr. unsec. unsub. notes 5 3/4s, 2021 (United Kingdom) 710,000 755,126 ZFS Finance USA Trust V 144A bonds FRB 6 1/2s, 2037 159,000 147,075 Government (0.5%) International Bank for Reconstruction & Development unsec. unsub. bonds 7 5/8s, 2023 4,000,000 5,774,488 Health care (0.1%) Aetna, Inc. sr. unsec. unsub. notes 6 3/4s, 2037 $95,000 120,879 Coventry Health Care, Inc. sr. unsec. notes 5.45s, 2021 450,000 494,675 Quest Diagnostics, Inc. company guaranty sr. unsec. notes 6.95s, 2037 335,000 419,683 Quest Diagnostics, Inc. company guaranty sr. unsec. notes 4 3/4s, 2020 121,000 129,285 UnitedHealth Group, Inc. sr. unsec. notes 5.8s, 2036 180,000 209,372 WellPoint, Inc. notes 7s, 2019 155,000 191,684 Technology (0.2%) Computer Sciences Corp. sr. unsec. notes 6 1/2s, 2018 281,000 308,129 Dell, Inc. sr. unsec. notes 5 7/8s, 2019 715,000 834,145 KLA-Tencor Corp. sr. unsec. notes 6.9s, 2018 915,000 1,041,620 Xerox Corp. sr. unsec. notes 4 1/2s, 2021 395,000 411,317 Transportation (0.5%) American Airlines 2011-2 Class A Pass Through Trust company guaranty secured airplanes 8 5/8s, 2021 340,000 339,150 Burlington Northern Santa Fe Corp. sr. unsec. notes 4.7s, 2019 176,000 193,611 Burlington Northern Santa Fe, LLC. sr. unsec. unsub. notes 5 3/4s, 2040 145,000 171,554 Burlington Northern Santa Fe, LLC sr. unsec. notes 5.4s, 2041 605,000 690,135 Continental Airlines, Inc. pass-through certificates Ser. 97-4A, 6.9s, 2018 167,734 171,508 Continental Airlines, Inc. pass-through certificates Ser. 98-1A, 6.648s, 2017 388,751 394,582 CSX Corp. sr. unsec. unsub. notes 4 3/4s, 2042 205,000 208,609 Norfolk Southern Corp. sr. unsec. notes 6s, 2111 390,000 448,683 Northwest Airlines Corp. pass-through certificates Ser. 00-1, 7.15s, 2019 1,283,791 1,283,791 Southwest Airlines Co. pass-through certificates Ser. 07-1, 6.15s, 2022 727,442 765,633 Union Pacific Corp. 144A pass-through certificates 5.214s, 2014 590,000 649,560 Utilities and power (2.5%) AEP Texas North Co. sr. notes Ser. B, 5 1/2s, 2013 500,000 525,424 Appalachian Power Co. sr. notes Ser. L, 5.8s, 2035 510,000 564,167 Atmos Energy Corp. sr. unsub. notes 6.35s, 2017 1,230,000 1,461,769 Beaver Valley Funding Corp. sr. bonds 9s, 2017 493,000 526,056 Boardwalk Pipelines LP company guaranty 5 7/8s, 2016 975,000 1,088,775 Bruce Mansfield Unit pass-through certificates 6.85s, 2034 2,229,339 2,385,394 Commonwealth Edison Co. 1st mtge. 6.15s, 2017 275,000 327,183 Commonwealth Edison Co. 1st mtge. sec. bonds 5 7/8s, 2033 500,000 583,488 Consolidated Natural Gas Co. sr. notes Ser. A, 5s, 2014 530,000 583,615 Dominion Resources, Inc. jr. sub. notes FRN Ser. 06-B, 2.66856s, 2066 2,310,000 1,956,270 Dominion Resources, Inc. sr. unsec. unsub. notes Ser. 07-A, 6s, 2017 10,000 11,770 EDP Finance BV 144A sr. unsec. unsub. notes 6s, 2018 (Netherlands) 685,000 614,327 El Paso Natural Gas Co. sr. unsec. unsub. bonds 8 3/8s, 2032 490,000 617,649 Electricite de France 144A notes 6.95s, 2039 (France) 655,000 837,877 Electricite de France 144A sr. notes 5.6s, 2040 (France) 640,000 704,828 Electricite de France 144A sr. notes 4.6s, 2020 (France) 440,000 468,667 Enel Finance International SA 144A company guaranty sr. unsec. notes 5 1/8s, 2019 (Luxembourg) 360,000 348,480 Energy Transfer Partners LP sr. unsec. unsub. notes 6.05s, 2041 850,000 873,598 Energy Transfer Partners LP sr. unsec. unsub. notes 4.65s, 2021 280,000 277,959 Enterprise Products Operating, LLC company guaranty sr. unsec. unsub. notes 5.7s, 2042 365,000 403,341 Enterprise Products Operating, LLC company guaranty sr. unsec. unsub. notes 3.2s, 2016 610,000 634,742 FirstEnergy Corp. notes Ser. B, 6.45s, 2011 164,000 164,267 Iberdrola International BV company guaranty sr. unsec. unsub. notes 6 3/4s, 2036 185,000 205,784 ITC Holdings Corp. 144A notes 5 7/8s, 2016 270,000 304,387 ITC Holdings Corp. 144A sr. unsec. notes 6.05s, 2018 365,000 420,625 Kansas Gas and Electric Co. bonds 5.647s, 2021 306,512 324,406 KCP&L Greater Missouri Operations Co. sr. unsec. unsub. notes 11 7/8s, 2012 735,000 784,625 Nevada Power Co. mtge. sec. notes 7 1/8s, 2019 295,000 365,959 NiSource Finance Corp. company guaranty sr. unsec. notes 10 3/4s, 2016 360,000 467,867 Pacific Gas & Electric Co. sr. unsec. notes 6.35s, 2038 350,000 451,677 Pacific Gas & Electric Co. sr. unsub. 5.8s, 2037 140,000 169,467 Potomac Edison Co. 144A 1st mtge. 5.8s, 2016 331,000 378,076 Power Receivable Finance, LLC 144A sr. notes 6.29s, 2012 184,022 184,177 PPL Energy Supply LLC bonds Ser. A, 5.7s, 2015 50,000 54,101 PPL WEM Holdings PLC 144A sr. unsec. notes 5 3/8s, 2021 (United Kingdom) 1,285,000 1,373,660 Puget Sound Energy, Inc. jr. sub. FRN Ser. A, 6.974s, 2067 656,000 649,440 Spectra Energy Capital, LLC company guaranty sr. unsec. unsub. notes 6.2s, 2018 1,080,000 1,216,165 Spectra Energy Capital, LLC sr. notes 8s, 2019 820,000 1,026,932 Teco Finance, Inc. company guaranty sr. unsec. unsub. notes 6.572s, 2017 110,000 131,012 Texas-New Mexico Power Co. 144A 1st mtge. sec. 9 1/2s, 2019 1,024,000 1,328,928 Trans-Canada Pipelines, Ltd. jr. unsec. sub. notes FRN 6.35s, 2067 (Canada) 975,000 993,695 Union Electric Co. 1st mtge. sr. sec. bonds 6.7s, 2019 960,000 1,177,427 Wisconsin Energy Corp. jr. unsec. sub. notes FRN 6 1/4s, 2067 1,945,000 1,925,550 Total corporate bonds and notes (cost $187,996,011) CONVERTIBLE PREFERRED STOCKS (1.5%) (a) Shares Value Apache Corp. Ser. D, $3.00 cv. pfd. 93,931 $5,301,231 General Motors Co. Ser. B, $2.375 cv. pfd. 89,334 3,735,278 MetLife, Inc. $3.75 cv. pfd. 48,800 3,314,008 PPL Corp. $4.75 cv. pfd. 55,331 3,105,176 PPL Corp. $4.375 cv. pfd. 43,000 2,332,320 Total convertible preferred stocks (cost $18,487,261) INVESTMENT COMPANIES (0.8%) (a) Shares Value Market Vectors Gold Miners ETF 26,800 $1,340,804 Utilities Select Sector SPDR Fund 218,400 7,609,056 Total investment Companies (cost $7,053,181) MORTGAGE-BACKED SECURITIES (0.6%) (a) Principal amount Value CS First Boston Mortgage Securities Corp. Ser. 04-C1, Class B, 4.855s, 2037 $1,407,000 $1,419,245 Federal National Mortgage Association Grantor Trust Ser. 01-79, Class BI, IO, 0.31066s, 2045 1,901,244 20,153 Federal Home Loan Mortgage Corp. Ser. T-56, Class A, IO, 0.523978s, 2043 5,773,498 104,500 Ser. T-56, Class 3, IO, 0.470982s, 2043 (FWC) 6,731,534 3,366 Ser. T-56, Class 1, IO, 0.293104s, 2043 8,992,560 5,396 Ser. T-56, Class 2, IO, 0.121236s, 2043 8,096,043 7,286 GMAC Commercial Mortgage Securities, Inc. 144A Ser. 99-C3, Class G, 6.974s, 2036 205,004 176,570 GS Mortgage Securities Corp. II 144A Ser. 98-C1, Class F, 6s, 2030 915,115 924,266 LB Commercial Conduit Mortgage Trust 144A Ser. 99-C1, Class F, 6.41s, 2031 715,303 686,691 Ser. 99-C1, Class G, 6.41s, 2031 765,731 677,672 Ser. 98-C4, Class H, 5.6s, 2035 1,074,000 1,161,182 Morgan Stanley Capital I FRB Ser. 07-HQ12, Class A2, 5.590489s, 2049 1,512,533 1,543,086 FRB Ser. 07-HQ12, Class A2FL, 0.49322s, 2049 696,001 602,806 PNC Mortgage Acceptance Corp. 144A Ser. 00-C1, Class J, 6 5/8s, 2033 456,000 18,240 Structured Adjustable Rate Mortgage Loan Trust 144A Ser. 04-NP2, Class A, 0.595s, 2034 (F) 372,446 275,547 Total mortgage-backed securities (cost $7,397,104) MUNICIPAL BONDS AND NOTES (0.2%) (a) Principal amount Value CA State G.O. Bonds (Build America Bonds), 7 1/2s, 4/1/34 $215,000 $257,751 IL State G.O. Bonds 4.421s, 1/1/15 420,000 438,375 4.071s, 1/1/14 1,250,000 1,286,763 North TX, Thruway Auth. Rev. Bonds (Build America Bonds), 6.718s, 1/1/49 350,000 428,257 OH State U. Rev. Bonds (Build America Bonds), 4.91s, 6/1/40 275,000 300,520 Total municipal bonds and notes (cost $2,511,501) ASSET-BACKED SECURITIES (0.1%) (a) Principal amount Value First Plus Home Loan Trust Ser. 97-3, Class B1, 7.79s, 2023 (In default) (NON) $194,241 $19 G-Star, Ltd. 144A FRB Ser. 02-2A, Class BFL, 2.24472s, 2037 308,000 243,320 GE Business Loan Trust 144A Ser. 04-2, Class D, 2.993s, 2032 (F) 382,795 152,895 Structured Asset Securities Corp. 144A Ser. 98-RF3, Class A, IO, 6.1s, 2028 1,216,563 176,402 TIAA Real Estate CDO, Ltd. Ser. 03-1A, Class E, 8s, 2038 1,841,397 220,968 Total asset-backed securities (cost $749,587) FOREIGN GOVERNMENT BONDS AND NOTES (0.1%) (a) Principal amount Value Hungary (Republic of) sr. unsec. unsub. notes 7 5/8s, 2041 $226,000 $220,374 Korea Development Bank (The) sr. unsec. unsub. notes 4s, 2016 450,000 454,991 Total foreign government bonds and notes (cost $683,971) SHORT-TERM INVESTMENTS (12.1%) (a) Principal amount/shares Value Putnam Money Market Liquidity Fund 0.05% (e) 117,475,193 $117,475,193 Straight-A Funding, LLC commercial paper with an effective yield of 0.188%, December 20, 2011 10,000,000 $9,997,414 Straight-A Funding, LLC commercial paper with an effective yield of 0.168%, December 27, 2011 15,000,000 $14,996,033 Total short-term investments (cost $142,468,640) TOTAL INVESTMENTS Total investments (cost $1,205,818,418) (b) TBA SALE COMMITMENTS OUTSTANDING at 10/31/11 (proceeds receivable $6,067,969) (Unaudited) Principal Settlement Agency amount date Value Federal National Mortgage Assocation Pass-Through Certificates, 3 1/2s, November 1, 2041 $6,000,000 11/14/2011 $6,100,781 Total Key to holding's abbreviations ADR American Depository Receipts ETF Exchange Traded Fund FDIC Guaranteed Federal Deposit Insurance Corp. Guaranteed FRB Floating Rate Bonds FRN Floating Rate Notes G.O. Bonds General Obligation Bonds IO Interest Only MTN Medium Term Notes SPDR S&P Depository Receipts TBA To Be Announced Commitments Notes to the fund's portfolio Unless noted otherwise, the notes to the fund's portfolio are for the close of the fund's reporting period, which ran from August 1, 2011 through October 31, 2011 (the reporting period). (a) Percentages indicated are based on net assets of $1,174,150,277. (b) The aggregate identified cost on a tax basis is $1,211,484,085, resulting in gross unrealized appreciation and depreciation of $113,836,023 and $48,715,290, respectively, or net unrealized appreciation of $65,120,733. (NON) Non-income-producing security. (FWC) Forward commitment, in part or in entirety (Note 1). (e) The fund invested in Putnam Money Market Liquidity Fund, an open-end management investment company managed by Putnam Investment Management, LLC (Putnam Management), the fund's manager, an indirect wholly-owned subsidiary of Putnam Investments, LLC. Investments in Putnam Money Market Liquidity Fund are valued at its closing net asset value each business day. Income distributions earned by the fund are recorded as interest income and totaled $26,939 for the reporting period. During the reporting period, cost of purchases and proceeds of sales of investments in Putnam Money Market Liquidity Fund aggregated $109,484,224 and $187,732,920, respectively. Management fees charged to Putnam Money Market Liquidity Fund have been waived by Putnam Management. The rate quoted in the security description is the annualized 7-day yield of the fund at the close of the reporting period. (R) Real Estate Investment Trust. At the close of the reporting period, the fund maintained liquid assets totaling $95,123,047 to cover certain derivatives contracts. Debt obligations are considered secured unless otherwise indicated. 144A after the name of an issuer represents securities exempt from registration under Rule 144A under the Securities Act of 1933, as amended. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. ADR after the name of a foreign holding represents ownership of foreign securities on deposit with a custodian bank. The rates shown on FRB and FRN are the current interest rates at the close of the reporting period. The dates shown on debt obligations are the original maturity dates. The fund had the following sector concentration greater than 10% at the close of the reporting period (as a percentage of net assets): Financials 19.4% Security valuation: Investments for which market quotations are readily available are valued at the last reported sales price on their principal exchange, or official closing price for certain markets, and are classified as Level 1 securities. If no sales are reported— as in the case of some securities traded over-the-counter— a security is valued at its last reported bid price and is generally categorized as a Level 2 security. Market quotations are not considered to be readily available for certain debt obligations and other investments; such investments are valued on the basis of valuations furnished by an independent pricing service approved by the Trustees or dealers selected by Putnam Management. Such services or dealers determine valuations for normal institutional-size trading units of such securities using methods based on market transactions for comparable securities and various relationships, generally recognized by institutional traders, between securities (which considers such factors as security prices, yields, maturities and ratings). These securities will generally be categorized as Level 2. Many securities markets and exchanges outside the U.S. close prior to the close of the New York Stock Exchange and therefore the closing prices for securities in such markets or on such exchanges may not fully reflect events that occur after such close but before the close of the New York Stock Exchange. Accordingly, on certain days, the fund will fair value foreign equity securities taking into account multiple factors including movements in the U.S. securities markets, currency valuations and comparisons to the valuation of American Depository Receipts, exchange-traded funds and futures contracts. These securities, which will generally represent a transfer from a Level 1 to a Level 2 security, will be classified as Level 2. The number of days on which fair value prices will be used will depend on market activity and it is possible that fair value prices will be used by the fund to a significant extent. Securities quoted in foreign currencies, if any, are translated into U.S. dollars at the current exchange rate. To the extent a pricing service or dealer is unable to value a security or provides a valuation that Putnam Management does not believe accurately reflects the security's fair value, the security will be valued at fair value by Putnam Management. Certain investments, including certain restricted and illiquid securities and derivatives, are also valued at fair value following procedures approved by the Trustees. These valuations consider such factors as significant market or specific security events such as interest rate or credit quality changes, various relationships with other securities, discount rates, U.S. Treasury, U.S. swap and credit yields, index levels, convexity exposures and recovery rates. These securities are classified as Level 2 or as Level 3 depending on the priority of the significant inputs. Such valuations and procedures are reviewed periodically by the Trustees. Certain securities may be valued on the basis of a price provided by a single source. The fair value of securities is generally determined as the amount that the fund could reasonably expect to realize from an orderly disposition of such securities over a reasonable period of time. By its nature, a fair value price is a good faith estimate of the value of a security in a current sale and does not reflect an actual market price, which may be different by a material amount. Stripped securities: The fund may invest in stripped securities which represent a participation in securities that may be structured in classes with rights to receive different portions of the interest and principal. Interest-only securities receive all of the interest and principal-only securities receive all of the principal. If the interest-only securities experience greater than anticipated prepayments of principal, the fund may fail to recoup fully its initial investment in these securities. Conversely, principal-only securities increase in value if prepayments are greater than anticipated and decline if prepayments are slower than anticipated. The market value of these securities is highly sensitive to changes in interest rates. TBA purchase commitments: The fund may enter into “TBA” (to be announced) commitments to purchase securities for a fixed unit price at a future date beyond customary settlement time. Although the unit price has been established, the principal value has not been finalized. However ,it is anticipated that the amount of the commitments will not significantly differ from the principal amount. The fund holds, and maintains until settlement date, cash or high-grade debt obligations in an amount sufficient to meet the purchase price, or the fund may enter into offsetting contracts for the forward sale of other securities it owns. Income on the securities will not be earned until settlement date. TBA purchase commitments may be considered securities themselves, and involve a risk of loss if the value of the security to be purchased declines prior to the settlement date, which risk is in addition to the risk of decline in the value of the fund’s other assets. Unsettled TBA purchase commitments are valued at fair value of the underlying securities, according to the procedures described under “Security valuation” above. The contract is marked to market daily and the change in market value is recorded by the fund as an unrealized gain or loss. Although the fund will generally enter into TBA purchase commitments with the intention of acquiring securities for its portfolio or for delivery pursuant to options contracts it has entered into, the fund may dispose of a commitment prior to settlement if Putnam Management deems it appropriate to do so. TBA sale commitments: The fund may enter into TBA sale commitments to hedge its portfolio positions or to sell mortgage-backed securities it owns under delayed delivery arrangements. Proceeds of TBA sale commitments are not received until the contractual settlement date. During the time a TBA sale commitment is outstanding, equivalent deliverable securities, or an offsetting TBA purchase commitment deliverable on or before the sale commitment date, are held as “cover” for the transaction. Unsettled TBA sale commitments are valued at the fair value of the underlying securities, generally according to the procedures described under “Security valuation” above. The contract is marked to market daily and the change in market value is recorded by the fund as an unrealized gain or loss. If the TBA sale commitment is closed through the acquisition of an offsetting TBA purchase commitment, the fund realizes a gain or loss. If the fund delivers securities under the commitment, the fund realizes a gain or a loss from the sale of the securities based upon the unit price established at the date the commitment was entered into. Dollar rolls: To enhance returns, the fund may enter into dollar rolls (principally using TBAs) in which the fund sells securities for delivery in the current month and simultaneously contracts to purchase similar securities on a specified future date. During the period between the sale and subsequent purchase, the fund will not be entitled to receive income and principal payments on the securities sold. The fund will, however, retain the difference between the initial sales price and the forward price for the future purchase. The fund will also be able to earn interest on the cash proceeds that are received from the initial sale on settlement date. The fund may be exposed to market or credit risk if the price of the security changes unfavorably or the counterparty fails to perform under the terms of the agreement. ASC 820 establishes a three-level hierarchy for disclosure of fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of the fund’s investments. The three levels are defined as follows: Level 1 – Valuations based on quoted prices for identical securities in active markets. Level 2 – Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly. Level 3 – Valuations based on inputs that are unobservable and significant to the fair value measurement. The following is a summary of the inputs used to value the fund’s net assets as of the close of the reporting period: Valuation inputs Investments in securities: Level 1 Level 2 Level 3 Common stocks: Basic materials $22,379,788 $— $— Capital goods 38,414,423 — — Communication services 52,209,020 — — Conglomerates 24,524,781 — — Consumer cyclicals 62,572,815 — — Consumer staples 61,987,625 — — Energy 82,049,715 — — Financials 138,338,366 — — Health care 112,307,802 — — Technology 58,214,677 — — Transportation 3,957,398 — — Utilities and power 30,874,962 — — Total common stocks — — Asset-backed securities — 793,604 — Convertible preferred stocks — 17,788,013 — Corporate bonds and notes — 200,180,845 — Foreign government bonds and notes — 675,365 — Investment Companies 8,949,860 — — Mortgage-backed securities — 7,626,006 — Municipal bonds and notes — 2,711,666 — U.S. Government Agency Obligations — 2,518,692 — U.S. Government and Agency Mortgage Obligations — 150,977,387 — U.S. Treasury Obligations — 54,083,368 — Short-term investments 117,475,193 24,993,447 — Totals by level $— Valuation inputs Other financial instruments: Level 1 Level 2 Level 3 TBA sale commitments $— $(6,100,781) Totals by level $— $— For additional information regarding the fund please see the fund's most recent annual or semiannual shareholder report filed on the Securities and Exchange Commission's Web site, www.sec.gov, or visit Putnam's Individual Investor Web site at www.putnaminvestments.com Item 2. Controls and Procedures: (a) The registrant’s principal executive officer and principal financial officer have concluded, based on their evaluation of the effectiveness of the design and operation of the registrant’s disclosure controls and procedures as of a date within 90 days of the filing date of this report, that the design and operation of such procedures are generally effective to provide reasonable assurance that information required to be disclosed by the registrant in this report is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms. (b) Changes in internal control over financial reporting: During the period, State Street Bank and Trust Company, which provides certain administrative, pricing and bookkeeping services for the Putnam funds pursuant to an agreement with Putnam Investment Management, LLC, began utilizing different accounting systems and systems support in providing services for the fund. Item 3. Exhibits: Separate certifications for the principal executive officer and principal financial officer of the registrant as required by Rule 30a-2(a) under the Investment Company Act of 1940, as amended, are filed herewith. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. George Putnam Balanced Fund By (Signature and Title): /s/ Janet C. SmithJanet C. SmithPrincipal Accounting OfficerDate: December 29, 2011 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By (Signature and Title): /s/ Jonathan S. HorwitzJonathan S. HorwitzPrincipal Executive OfficerDate: December 29, 2011 By (Signature and Title): /s/ Steven D. KrichmarSteven D. KrichmarPrincipal Financial OfficerDate: December 29, 2011

Listing Report:Supplement No. 82 dated Jun 24, 2012 to Prospectus dated Apr 30, 2012 File pursuant to Rule 424(b)(3) Registration Statement No. 333-147019 Prosper Marketplace, Inc. Borrower Payment Dependent Notes This Listing Report supplements the prospectus dated Apr 30, 2012 and provides information about each loan request (referred to as a "listing") and series of Borrower Payment Dependent Notes (the "Notes") we are currently offering. Prospective investors should read this Listing Report supplement together with the prospectus dated Apr 30, 2012 to understand the terms and conditions of the Notes and how they are offered, as well as the risks of investing in Notes. The following series of Notes are currently being offered: Borrower Payment Dependent Notes Series 550074 The following information pertains to the borrower loan being requested, that corresponds to the series of Notes to be issued upon the funding of the borrower loan, in the event the listing receives commitments to purchase Notes in an amount that equals or exceeds the minimum amount required for the loan to fund. Amount: Prosper Rating: A

  Exhibit 10.10 THE VIASAT, INC. EMPLOYEE STOCK PURCHASE PLAN ViaSat, Inc., a corporation organized under the laws of the State of Delaware (the “Company”), hereby adopts The ViaSat, Inc. Employee Stock Purchase Plan (the “Plan”). The purposes of the Plan are as follows:      (1) To assist employees of the Company and its Subsidiary Corporations (as defined below) in acquiring a stock ownership interest in the Company pursuant to a plan which is intended to qualify as an “employee stock purchase plan” within the meaning of Section 423(b) of the Internal Revenue Code of 1986, as amended.      (2) To help employees provide for their future security and to encourage them to remain in the employment of the Company and its Subsidiary Corporations. 1. DEFINITIONS      Whenever any of the following terms is used in the Plan with the first letter or letters capitalized, it shall have the following meaning unless the context clearly indicates to the contrary (such definitions to be equally applicable to both the singular and the plural forms of the terms defined):      (a) “Authorization” has the meaning assigned to that term in Section 3(b) hereof.      (b) “Board of Directors” or “Board” means the Board of Directors of the Company.      (c) “Code” means the Internal Revenue Code of 1986, as amended.      (d) “Committee” means the committee appointed to administer the Plan pursuant to Section 12 hereof.      (e) “Company” means ViaSat, Inc., a Delaware corporation.      (f) “Date of Exercise” means, with respect to any Option, the last day of the Offering Period for which the Option was granted.      (g) “Date of Grant” means, with respect to any Option, the date upon which the Option is granted, as set forth in Section 3(a) hereof.      (h) “Eligible Compensation” means the employee’s base pay.      (i) “Eligible Employee” means an employee of the Company or any Subsidiary Corporation (1) who does not, immediately after the option is granted, own stock possessing five percent or more of the total combined voting power or value of all classes of stock of the Company, a Parent Corporation or     a Subsidiary Corporation; (2) who has been employed by the Company or any Subsidiary Corporation for not less than six months; (3) whose customary employment is for more than 20 hours per week; and (4) whose customary employment is for more than five months in any calendar year. For purposes of paragraph (i), the rules of Section 424(d) of the Code with regard to the attribution of stock ownership shall apply in determining the stock ownership of an individual, and stock which an employee may purchase under outstanding options shall be treated as stock owned by the employee. During a leave of absence meeting the requirements of Treasury Regulation Section 1.421-7(h)(2), an individual shall be treated as an employee of the Company or Subsidiary Corporation employing such individual immediately prior to such leave. “Eligible Employee” shall not include any director of the Company or any Subsidiary Corporation who does not render services to the Company in the status of an employee within the meaning of Section 3401(c) of the Code.      (j) “Offering Period” shall mean the six-month periods commencing January 1 and July 1 of each Plan Year as specified in Section 3(a) hereof or such other dates which are six months apart as determined by the Committee. Options shall be granted on the Date of Grant and exercised on the Date of Exercise as provided in Sections 3(a) and 4(a) hereof.      (k) “Option” means an option granted under the Plan to an Eligible Employee to purchase shares of the Company’s Stock.      (l) “Option Period” means, with respect to any Option, the period beginning upon the Date of Grant and ending upon the Date of Exercise.      (m) “Option Price” has the meaning set forth in Section 4(b) hereof.      (n) “Parent Corporation” means any corporation, other than the Company, in an unbroken chain of corporations ending with the Company if, at the time of the granting of the Option, each of the corporations other than the Company owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.      (o) “Participant” means an Eligible Employee who has complied with the      (p) “Payday” means the regular and recurring established day for payment of cash compensation to employees of the Company or any Subsidiary Corporation.      (q) “Plan” means The ViaSat, Inc. Employee Stock Purchase Plan.      (r) “Plan Year” means the calendar year.      (s) “Stock” means the shares of the Company’s Common Stock, $0.0001 par value.      (t) “Subsidiary Corporation” means any corporation, other than the Company, in an unbroken chain of corporations beginning with the Company if, at the time of the granting of the Option, each of the corporations other than the last corporation in an unbroken chain owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.     2. STOCK SUBJECT TO THE PLAN      Subject to the provisions of Section 9 hereof (relating to adjustments upon changes in the Stock) and Section 11 hereof (relating to amendments of the Plan), the Stock which may be sold pursuant to Options granted under the Plan shall not exceed in the aggregate 1,500,000 shares, and may be unissued shares or treasury shares or shares bought on the market for purposes of the Plan. 3. GRANT OF OPTIONS      (a) General Statement. The Company shall offer Options under the Plan to all Eligible Employees in successive Offering Periods until the earlier of (i) the date when the number of shares of Stock available under the Plan have been sold or (ii) the date when the Plan is terminated. Dates of Grant shall include January 1 and July 1 of each Plan Year and/or such other date or dates as the Committee may from time to time determine. Each Option shall expire on the Date of Exercise immediately after the automatic exercise of the Option pursuant to Section 4(a) hereof. The number of shares of Stock subject to each Option shall equal the payroll deductions authorized by each Participant in accordance with subsection (b) hereof for the Option Period, divided by the Option Price, except as provided in Section 4(a); provided, however, that the maximum number of shares subject to any Option shall not exceed 100,000.      (b) Election to Participate; Payroll Deduction Authorization. Except as provided in subsection (d) hereof, an Eligible Employee shall participate in the Plan only by means of payroll deduction. Each Eligible Employee who elects to participate in the Plan shall deliver to the Company during the calendar month preceding a Date of Grant no later than five (5) working days before such Date of Grant a completed and executed written payroll deduction authorization in a form prepared by the Company (the “Authorization”). An Eligible Employee’s Authorization shall give notice of such Eligible Employee’s election to participate in the Plan for the next following Offering Period and subsequent Offering Periods and shall designate a stated whole dollar amount of Eligible Compensation to be withheld on each Payday. The amount withheld shall not be less than $10.00 each Payday and the stated amount shall not exceed 5% of Eligible Compensation. The cash compensation payable to a Participant for an Offering Period shall be reduced each Payday through a payroll deduction in an amount equal to the stated withdrawal amount specified in the Authorization payable on such Payday, and such amount shall be credited to the Participant’s account under the Plan. Any Authorization shall remain in effect until the Eligible Employee amends the same pursuant to this subsection, withdraws pursuant to Section 5 or ceases to be an Eligible Employee pursuant to Section 6.      (c) $25,000 Limitation. No Eligible Employee shall be granted an Option under the Plan which permits his or her rights to purchase stock under the Plan and under all other employee stock purchase plans of the Company, any Parent Corporation or any Subsidiary Corporation subject to Section 423 to accrue at a rate which exceeds $25,000 of fair market value of such stock (determined at the time the Option is granted) for each calendar year in which the Option is outstanding at any time. For purpose of the limitation imposed by this subsection, the right to purchase stock under an Option accrues when the Option (or any portion thereof) first becomes exercisable during the calendar year, the right to purchase stock under an Option accrues at the rate provided in the Option, but in no case may such rate exceed $25,000 of the fair market value of such stock (determined at the time such Option is granted) for any one calendar year, and a right to purchase stock which has accrued under an Option may not be     carried over to any other Option.      (d) Leaves of Absence. During a leave of absence meeting the requirements of Treasury Regulation Section 1.421-7(h)(2), a Participant may continue to participate in the Plan by making cash payments to the Company on each Payday equal to the amount of the Participant’s payroll deductions under the Plan for the Payday immediately preceding the first day of such Participant’s leave of absence. 4. EXERCISE OF OPTIONS; OPTION PRICE      (a) General Statement. Each Participant automatically and without any act on such Participant’s part shall be deemed to have exercised such Participant’s Option on the Date of Exercise to the extent that the balance then in the Participant’s account under the Plan is sufficient to purchase at the Option Price whole shares of the Stock subject to the Option. Any cash in lieu of fractional shares of Stock remaining after the purchase of whole shares of Stock upon exercise of an Option will be credited to such Participant’s account and carried forward and applied toward the purchase of whole shares of Stock pursuant to the Option, if any, granted to such Participant for the next following Offering Period. Certificates representing fractional shares will not be issued.      (b) Option Price Defined. The option price per share of Stock (the “Option Price”) to be paid by a Participant upon the exercise of the Participant’s Option shall be equal to 85% of the lesser of the fair market value of a share of Stock on the Date of Exercise or the fair market value of a share of Stock on the Date of Grant. The fair market value of a share of Stock as of a given date shall be: (i) the closing price of a share of Stock on the principal exchange on which the Stock is then trading, if any, on such date, or, if shares were not traded on such date, then on the next preceding trading day during which a sale occurred; (ii) if the Stock is not traded on an exchange but is quoted on Nasdaq or a successor quotation system, (1) the last sales price (if the Stock is then listed as a National Market Issue under the NASD National Market System) or (2) the mean between the closing representative bid and asked prices (in all other cases) for a share of the Stock on such date, or (3) if shares were not traded occurred, as reported by Nasdaq or such successor quotation system; (iii) if the Stock is not publicly traded on an exchange and not quoted on Nasdaq or a successor quotation system, the mean between the closing bid and asked prices for a share of Stock on such date, or, if shares were not traded on such date, then on the next preceding trading day during which a sale occurred, as determined in good faith by the Committee; or (iv) if the Stock is not publicly traded, the fair market value of a share of Stock established by the Committee acting in good faith.      (c) Delivery of Share Certificate. As soon as practicable after the exercise of any Option, the Company will deliver to the Participant or his or her nominee the whole shares of Stock purchased by the Participant from funds credited to the Participant’s account under the Plan. In the event the Company is required to obtain authority from any commission or agency to issue any such certificate, the Company shall seek to obtain such authority. The inability of the Company to obtain authority from any such commission or agency which the Committee in its absolute discretion deems necessary for the lawful issuance of any such certificate shall relieve the Company from liability to any Participant except to pay to the Participant the amount of the balance in the Participant’s account in cash in one lump sum without any interest thereon.          (d) Pro Rata Allocations. If the total number of shares of Stock for which Options are to be exercised on any date exceeds the number of shares remaining unsold under the Plan (after deduction of all shares for which Options have theretofore been exercised), the Committee shall make a pro rata allocation of the available remaining shares in as nearly a uniform manner as shall be practicable and any balance of payroll deductions credited to the accounts of Participants which have not been applied to the purchase of shares of Stock shall be paid to such Participants in cash in one lump sum within sixty (60) days after the Date of Exercise, without any interest thereon. 5. WITHDRAWAL FROM THE PLAN      (a) General Statement. Any Participant may withdraw from participation under the Plan at any time except that no Participant may withdraw during the last ten (10) days of any Offering Period. A Participant who wishes to withdraw from the Plan must deliver to the Company a notice of withdrawal in a form prepared by the Company (the “Withdrawal Election”) not later than ten (10) days prior to the Date of Exercise during any Offering Period. Upon receipt of a Participant’s Withdrawal Election, the Company shall pay to the Participant the amount of the balance in the Participant’s account under the Plan in cash in one lump sum within sixty (60) days, without any interest thereon. Upon receipt of a Participant’s Withdrawal Election by the Company, the Participant shall cease to participate in the Plan and the Participant’s Option shall terminate.      (b) Eligibility Following Withdrawal. A Participant who withdraws from the Plan and who is still an Eligible Employee shall be eligible to participate again in the Plan as of any subsequent Date of Grant by delivering to the Company an Authorization pursuant to Section 3(b) hereof. 6. TERMINATION OF EMPLOYMENT      (a) Termination of Employment Other than by Death. If the employment of a Participant terminates other than by death, the Participant’s participation in the Plan automatically and without any act on the Participant’s part shall terminate as of the date of the termination of the Participant’s employment. As soon as practicable after such a termination of employment, the Company will pay to the Participant the amount of the balance in the Participant’s account under the Plan without any interest thereon. Upon a Participant’s termination of employment covered by this Section 6(a), the Participant’s Authorization, interest in the Plan and Option under the Plan shall terminate.      (b) Termination By Death. If the employment of a participant is terminated by the Participant’s death, the executor of the Participant’s will or the administrator of the Participant’s estate by written notice to the Company may request payment of the balance in the Participant’s account under the Plan, in which event the Company shall make such payment without any interest thereon as soon as practicable after receiving such notice; upon receipt of such notice the Participant’s Authorization, interest in the Plan and Option under the Plan shall terminate. If the Company does not receive such notice prior to the next Date of Exercise, the Participant’s Option shall be deemed to have been exercised on such Date of Exercise and any cash remaining in such Participant’s account thereafter shall be distributed in cash without interest thereon pursuant to Section 5(a) hereof.     7. RESTRICTION UPON ASSIGNMENT      An Option granted under the Plan shall not be transferable other than by will or the laws of descent and distribution, and is exercisable during the Participant’s lifetime only by the Participant. Except as provided in Section 6(c) hereof, an Option may not be exercised to any extent except by the Participant. The Company shall not recognize and shall be under no duty to recognize any assignment or alienation of the Participant’s interest in the Plan, the Participant’s Option or any rights under the Participant’s Option. 8. NO RIGHTS OF STOCKHOLDERS UNTIL SHARES ISSUED      With respect to shares of Stock subject to an Option, a Participant shall not be deemed to be a stockholder of the Company, and the Participant shall not have any of the rights or privileges of a stockholder, until such shares have been issued to the Participant or his or her nominee following exercise of the Participant’s Option. No adjustments shall be made for dividends (ordinary or extraordinary, whether in cash securities, or other property) or distribution or other rights for which the record date occurs prior to the date of such issuance, except as otherwise expressly provided herein. 9. CHANGES IN THE STOCK; ADJUSTMENTS OF AN OPTION      Whenever any change is made in the Stock or to Options outstanding under the Plan, by reason of a stock split, stock dividend, recapitalization or other subdivision, combination, or reclassification of shares, appropriate action shall be taken by the Committee to adjust accordingly the number of shares of Stock subject to the Plan and the number and the Option Price of shares of Stock subject to the Options outstanding under the Plan to preserve, but not increase, the rights of Participants hereunder. 10. USE OF FUNDS; NO INTEREST PAID      All funds received or held by the Company under the Plan shall be included in the general funds of the Company free of any trust or other restriction and may be used for any corporate purpose. No interest will be paid to any Participant or credited to any Participant’s account under the Plan with respect to such funds. 11. AMENDMENT OF THE PLAN      The Board of Directors may amend, suspend, or terminate the Plan at any time and from time to time, provided that approval by the affirmative vote of a majority of shares of Stock at a duly held meeting of the Company’s stockholders at which a quorum is present shall be required to amend the Plan (i) to change the number of shares of Stock reserved for sale pursuant to Options under the Plan, (ii) to decrease the Option Price below a price computed in the manner stated in Section 4(b) hereof, (iii) to alter the requirements for eligibility to participate in the Plan or (iv) in any manner that would cause the Plan to no longer be an “employee stock purchase plan” within the meaning of Section 423(b) of the Code.     12. ADMINISTRATION BY COMMITTEE; RULES AND REGULATIONS      (a) Appointment of Committee. The Plan shall be administered by the Committee, which shall be composed of two or more members of the Board of Directors, each of whom is both a “non-employee director” as defined by Rule 16b-3 under the Securities Exchange Act of 1934, as amended, and an “outside director” for purposes of Section 162(m) of the Code. Each member of the Committee shall serve for a term commencing on a date specified by the Board of Directors and continuing until the member dies or resigns or is removed from office by the Board of Directors. The Committee at its option may utilize the services of an agent to assist in the administration of the Plan including establishing and maintaining an individual securities account under the Plan for each Participant.      (b) Duties and Powers of Committee. It shall be the duty of the Committee to conduct the general administration of the Plan in accordance with the provisions of the Plan. The Committee shall have the power to interpret the Plan and the terms of the Options and to adopt such rules for the administration, interpretation, and application of the Plan as are consistent therewith and to interpret, amend or revoke any such rules. In its absolute discretion, the Board may at any time and from time to time exercise any and all rights and duties of the Committee under the Plan.      (c) Majority Rule. The Committee shall act by a majority of its members in office. The Committee may act either by vote at a meeting or by a memorandum or other written instrument signed by a majority of the Committee.      (d) Compensation; Professional Assistance; Good Faith Actions. All expenses and liabilities incurred by members of the Committee in connection with the administration of the Plan shall be borne by the Company. The Committee may, with the approval of the Board, employ attorneys, consultants, accountants, appraisers, brokers or other persons. The Committee, the Company and its officers and directors shall be entitled to rely upon the advice, opinions or valuations of any such persons. All actions taken and all interpretations and determinations made by the Committee in good faith shall be final and binding upon all Participants, the Company and all other interested persons. No member of the Committee shall be personally liable for any action, determination or interpretation made in good faith with respect to the Plan or the Options, and all members of the Committee shall be fully protected by the Company in respect to any such action, determination, or interpretation. 13. NO RIGHTS AS AN EMPLOYEE      Nothing in the Plan shall be construed to give any person (including any Eligible Employee or Participant) the right to remain in the employ of the Company, a Parent Corporation or a Subsidiary Corporation or to affect the right of the Company, any Parent Corporation or any Subsidiary Corporation to terminate the employment of any person (including any Eligible Employee or Participant) at any time, with or without cause. 14. MERGER, ACQUISITION OR LIQUIDATION OF THE COMPANY      In the event of the merger or consolidation of the Company into another corporation, the acquisition by another corporation of all or substantially all of the Company’s assets or 50% or more of the Company’s then outstanding voting stock, the liquidation or dissolution of the Company or any other reorganization of the Company, the Date of Exercise with respect to outstanding Options shall be the business day immediately preceding the effective date of such merger, consolidation, acquisition, liquidation, dissolution, or reorganization unless the Committee shall, in its sole discretion, provide for the assumption or substitution of such Options in a manner complying with Section 424(a) of the Code.     15. TERM; APPROVAL BY STOCKHOLDERS      No Option may be granted during any period of suspension of the Plan or after termination of the Plan. The Plan shall be submitted for the approval of the Company’s stockholders within 12 months after the date of the Board of Directors’ adoption of the Plan. Options may be granted prior to such stockholder approval; provided, however, that such Options shall not be exercisable prior to the time when the Plan is approved by the stockholders; and provided, further, that if such approval has not been obtained by the end of said 12-month period, all Options previously granted under the Plan shall thereupon expire. 16. EFFECT UPON OTHER PLANS      The adoption of the Plan shall not affect any other compensation or incentive plans in effect for the Company, any Parent Corporation or any Subsidiary Corporation. Nothing in this Plan shall be construed to limit the right of the Company, any Parent Corporation or any Subsidiary Corporation (a) to establish any other forms of incentives or compensation for employees of the Company, any Parent Corporation or any Subsidiary Corporation or (b) to grant or assume options otherwise than under this Plan in connection with any proper corporate purpose, including, but not by way of limitation, the grant or assumption of options in connection with the acquisition, by purchase, lease, merger, consolidation or otherwise, of the business, stock or assets of any corporation, firm or association. 17. CONDITIONS TO ISSUANCE OF STOCK CERTIFICATES.      The Company shall not be required to issue or deliver any certificate or certificates for shares of Stock purchased upon the exercise of Options prior to fulfillment of all the following conditions:      (a) The admission of such shares to listing on all stock exchanges, if any, on which the Stock is then listed; and      (b) The completion of any registration or other qualification of such shares under any state or federal law or under the rulings or regulations of the Securities and Exchange Commission or any other governmental regulatory body which the Committee shall, in its absolute discretion, deem necessary or advisable; and      (c) The obtaining of any approval or other clearance from any state or federal governmental agency which the Committee shall, in its absolute discretion, determine to be necessary or advisable; and      (d) The payment to the Company of all amounts which it is required to withhold under federal, state or local law upon exercise of the Option; and      (e) The lapse of such reasonable period of time following the exercise of the Option as the Committee may from time to time establish for reasons of administrative convenience.     18. CONFORMITY TO SECURITIES LAWS      Notwithstanding any other provision of this Plan, the participation in this Plan and all elections thereunder shall be subject to, and may be limited by, such rules and restrictions as the Committee may prescribe in order to comply with all applicable federal and state securities laws. Without limiting the generality of the foregoing, this Plan and participation in this Plan by any individual who is then subject to Section 16 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) shall be subject to any additional limitations set forth in any applicable exemptive rule under Section 16 of the Exchange Act (including any amendment to Rule 16b-3 of the Exchange Act) that are requirements for the application of such exemptive rule. To the extent permitted by applicable law, the Plan shall be deemed amended to the extent necessary to conform to such applicable exemptive rule. 19. NOTIFICATION OF DISPOSITION      Each Participant shall give prompt notice to the Company of any disposition or other transfer of any shares of Stock purchased upon exercise of an Option if such disposition or transfer is made (a) within two (2) years from the Date of Grant of the Option or (b) within one (1) year after the transfer of such shares to such Participant upon exercise of such Option. Such notice shall specify the date of such disposition or other transfer and the amount realized, in cash, other property, assumption of indebtedness or other consideration, by the Participant in such disposition or other transfer. 20. NOTICES      Any notice to be given under the terms of the Plan to the Company shall be addressed to the Company in care of its Secretary and any notice to be given to any Eligible Employee or Participant shall be addressed to such Employee at such Employee’s last address as reflected in the Company’s records. By a notice given pursuant to this Section, either party may designate a different address for notices to be given to it, him or her. Any notice which is required to be given to an Eligible Employee or a Participant shall, if the Eligible Employee or Participant is then deceased, be given to the Eligible Employee’s or Participant’s personal representative if such representative has previously informed the Company of his or her status and address by written notice under this Section. Any notice shall have been deemed duly given if personally delivered or if enclosed in a properly sealed envelope or wrapper addressed as aforesaid at the time it is deposited (with postage prepaid) in a post office or branch post office regularly maintained by the United States Postal Service. 21. HEADINGS      Headings are provided herein for convenience only and are not to serve as a basis for interpretation or construction of the Plan.  

TERRITORY OF THE BRITISH VIRGIN ISLANDS THE BVI BUSINESS COMPANIES ACT, 2004 MEMORANDUM OF ASSOCIATION AND ARTICLES OF ASSOCIATION OF PORTAGE BIOTECH INC. Incorporated on 9 April 1973 in the Province of Ontario, Canada as Kamlo Gold Mines Limited and continued as a BVI Business Company on 5 July 2013 FH CORPORATE SERVICES LTD TERRITORY OF THE BRITISH VIRGIN ISLANDS BVI BUSINESS COMPANIES ACT, 2004 MEMORANDUM OF ASSOCIATION OF PORTAGE BIOTECH INC. (the “Company”) NAME 1. The name of the Company immediately before the continuation into the BVI was Bontan Corporation Inc. and the name of the Company upon continuation as a BVI Business Company is Portage Biotech Inc. CONTINUATION 2. The Company was incorporated under the laws of the Province of Ontario, Canada on 9 April 1973.The Company is continued as a BVI Business Company on 5 July 2013. CHANGE OF NAME 3. The Company may make application to the Registrar of corporate Affairs in the approved form to change its name in accordance with section 21 of the Act and the change of name takes effect from the date of the certificate of change of name issued by the Registrar of Corporate Affairs. TYPE OF COMPANY 4. The Company is a company limited by shares. REGISTERED OFFICE AND REGISTERED AGENT 5. The first registered office of the Company at the date of continuation will be situated at FH Chambers, P.O. Box 4649, Road Town, Tortola, British Virgin Islands. Thereafter, the registered office may be situated at such other place as the directors or members may from time to time determine. 6. The first registered agent of the Company at the date of continuation will be FH Corporate Services Ltd, of FH Chambers, P.O. Box 4649, Road Town, Tortola, British Virgin Islands 7. The Company may, by Resolution of Shareholders or by Resolution of Directors, change the location of its Registered Office or change its Registered Agent and any such changes shall take effect on the registration by the Registrar of Corporate Affairs of a notice of change, filed by the existing Registered Agent or a legal practitioner in the British Virgin Islands action on behalf of the Company. LIMITATIONS ON BUSINESS OF COMPANY 8. The business and activities of the Company are limited to those businesses and activities which it is not prohibited from engaging in under any law for the time being in force in the British Virgin Islands. 9. Subject to the Act, any other enactment and this Memorandum (including, without limitation, paragraph 7 immediately above this Memorandum) and the Articles, the Company has: (a) full capacity to carry on or undertake any business or activity, do any act or enter into any transaction; and (b) for the purposes of paragraph (a) immediately above, full rights, powers and privileges. NUMBER, CLASSES AND PAR VALUE OF SHARES The Company is authorized to issue an unlimited number of Ordinary Shares of no par value. RIGHTS, PRIVILEGES, RESTRICTION AND CONDITIONS OF SHARES All Shares shall (in addition to any rights, privileges, restrictions and conditions attaching to any of the Shares as provided for elsewhere in this Memorandum or in the Articles): (a) have the right to one vote on any Resolution of Shareholders; (b) have equal rights with regard to dividends; and (c) have equal rights with regard to distributions of the surplus assets of the Company. For the purposes of section 9 of the Act, any rights, privileges, restriction and conditions attaching to any of the Shares as provided for in the Articles are deemed to be set out and stated in full in this Memorandum. FRACTIONAL SHARES The Company may issue Fractional Shares. A Fractional Share shall have the corresponding fractional rights, obligation and liabilities of a whole Share of the same Class. If more than one fraction of a Share of the same Class is issued to or acquired by the same Shareholder such fractions shall be accumulated. VARIATION OF CLASS RIGHTS AND PRIVILEGES If at any time, there are different Classesor Series of Shares in issue, unless otherwise provided by the terms of issue of the Shares of that Class or Series, the rights and privileges attaching to any such Class or Series of Shares may, whether or not the Company is being wound up, be varied with the consent in writing of the holders of not less than three-fourths of the issued Shares of the Class or Series and of the holders of not less than three-fourths of the issued Shares of any other Class or Series of Shares which may be adversely affected by such variation. RIGHTS AND PRIVILEGES NOT VARIED BY THE ISSUE OF SHARES PARI PASSU The rights and privileges conferred upon the Shareholder of any Class of Shares issued with preferred or other rights and privileges shall not, unless otherwise expressly provided by the terms of issue of the Shares of that Class, be deemed to be varied by the creation or issue of further Shares ranking pari passu therewith. NO BEARER SHARES The Company is not authorized to issue bearer shares and all Shares shall be issued as registered shares. NO EXCHANGE FOR BEARER SHARES Shares may not be exchanged for, or converted into, bearer shares. TRANSFERS OF SHARES Subject to the provisions of this Memorandum and the Articles, Shares in the Company may be transferred. AMENDMENT OF MEMORANDUM AND ARTICLES OF ASSOCIATION The Company may amend its Memorandum or Articles by a Resolution of Shareholders or by a Resolution of Directors except that the Directors have no power to amend the Memorandum or the Articles: (a) to restrict the rights or powers of the Shareholders to amend the Memorandum or the Articles; (b) to change the percentage of Shareholders required to pass a resolution to amend the Memorandum or the Articles; (c) in circumstances where the memorandum or the Articles cannot be amended by the Shareholders; or (d) to change the provision of paragraphs 10, 11, 13, 14 or 18 of the Memorandum. DEFINITIONS Words used in this Memorandum and not defined herein shall have the meanings set out in the Articles. SHAREHOLDER LIABILITY The liability of a Shareholder to the Company, as shareholder, is limited to: (a) any amount unpaid on a Share held by the Shareholder; (b) (where applicable) any liability expressly provided for in this Memorandum or the Articles; and (c) Any liability to repay a distribution under section 58(1) of the Act. A Shareholder has no liability, as a member, for the liabilities of the Company. SEPARATE LEGAL ENTITY AND PERPETUAL EXISTENCE In accordance with section 27 of the Act, the Company is a legal entity in its own right separate from its Shareholders and continues in existence until it is dissolved. EFFECT OF MEMORANDUM AND ARTICLES OF ASSOCIATION In accordance with section 11(1) of the Act, this Memorandum and the Articles are binding as between: (a) the Company and each Shareholder of the Company; and (b) each Shareholder of the Company. In accordance with section 11(2) of the Act, the Company, the board of Directors, each Director and each Shareholder of the Company has the rights, powers, duties and obligations set out in the Act except to the extent that they are negated or modified, as permitted by the Act, by this Memorandum or the Articles. In accordance with section 11(3) of the Act, this Memorandum and the Articles have no effect to the extent that they contravene or are inconsistent with the Act. We, FH Corporate Services Ltd, of FH Chambers, P.O. Box 4649, Road Town, Tortola, British Virgin Islands for the purpose of continuing a Company as a BVI Business Company limited by shares under the laws of the British Virgin Islands hereby sign this Memorandum of Association on 5 July 2013 for and on behalf of the Shareholders and Directors of the Company. Authorised Signatory /s/ Jose Santos …………… By: Jose Santos Authorised Signatory FH Corporate Services Ltd TERRITORY OF THE BRITISH VIRGIN ISLANDS BVI BUSINESS COMPANIES ACT, 2004 ARTICLES OF ASSOCIATION OF PORTAGE BIOTECH INC. The following shall comprise the Articles of Association of Portage Biotech Inc. (the “Company”). INTERPRETATION 1. In these Articles the following defined terms will have the meanings ascribed to them, if not inconsistent with the subject or context: “Act” means the BVI Business Companies Act, 2004, including any modification, amendment, extension, re-enactment or renewal thereof and any regulations made thereunder; “Articles” means these articles of association of the company, as amended and/or restated from time to time; “Class” or “Classes” means any class or classes of Shares as may from time to time be issued by the Company; “Directors” means the directors of the company for the time being, or as the case may be, the directors assembled as a board or as a committee thereof, and “Director” means any one of them; “Distribution” means, in relation to a distribution by the Company to a Shareholder: (a) the direct or indirect transfer of an asset, other than Shares, to or for the benefit of the Shareholder; or (b) the incurring of a debt to or for the benefit of the Shareholder, in relation to the Shares held by the Shareholder, and whether by means of the purchase of an asset, the purchase, redemption or other acquisition of Shares, a transfer of indebtedness or otherwise, and includes a dividend; “Fractional Share” means a fraction of a Share; “Memorandum” means the memorandum of association of the Company, as amended and/or restated from time to time; “Officer” means any natural person or corporation appointed by the Directors as an officer of the Company and may include a chairman of the board of Directors, a vice chairman of the board of Directors, a president, one or more vice presidents, secretaries and treasurers and such other officers as may from time to time be deemed desirable but shall exclude any auditor appointed by the Company; “Person” means any natural person, firm, company, joint venture, partnership, corporation, association or other entity (whether or not having a separate legal personality) or any of them as the context so requires; “Register of Directors” means the register of the Directors of the company required to be kept pursuant to the Act; “Register of Members” means the register of the members of the Company required to be kept pursuant to the Act; “Registered Agent” means the registered agent of the company from time to time, as required by the Act; “Registered Office” means the registered office of the Company from time to time, as required by the Act; “Resolution of Directors” means a resolution: (a) approved at a duly convened and constituted meeting of Directors or of a committee of Directors, by the affirmative vote of a simple majority of the Directors present at such meeting who voted and did not abstain; or (b) consented to in writing or by telex, telegram, cable, facsimile or other written electronic communications by a simple majority of Directors or a simple majority of the members of a committee of Directors, as the case may be, in one or more instruments each signed by one or more of the Directors and the effective date of the resolution so adopted shall be the date on which the instrument, or the last of such instruments, if more than one, is executed. “Resolution of Shareholders” means a resolution: (a) passed by a simple majority, or such larger majority as may be specified in the memorandum or these Articles, or such Shareholders as, being entitled to do so, vote in person or, where proxies are allowed, by proxy at a meeting of Shareholders of the Company and where a poll is taken regard shall be had in computing a majority to the number of votes to which each Shareholder is entitled; or (b) approved in writing by a majority, or such larger majority as may be specified in the Memorandum or these Articles, of such Shareholders entitled to vote at a meeting of Shareholders of the Company in one or more instruments each signed by one or more of the Shareholders and the effective date of the resolution so adopted shall be the date on which the instrument, or the last of such instruments, if more than one, is executed; “Seal” means the common seal of the Company; “Secretary” means any natural person or corporation appointed by the Directors to perform any of the duties of the secretary of the Company; “Series” means a division of a Class as may from time to time be issued by the Company; “Share” means a share in the Company issued subject to and in accordance with the provisions of the Act, the Memorandum and these Articles. All references to “Shares” herein shall be deemed to be Shares of any or all classes or Series as the context may require. For the avoidance of doubt in these Articles the expression “Share” shall include any Fractional Share; “Shareholder” means a Person whose name is entered as a holder of one or more Shares in the Register of Members; “signed” means bearing a signature or representation of a signature affixed by mechanical means; “Solvency Test” means the solvency test prescribed by section 56 of the Act and set out in Article 124; “Treasury Shares” means Shares that were previously issued but were purchased, redeemed or otherwise acquired by the Company and not cancelled. 2. In these Articles, save where the context requires otherwise: (a) words importing the singular number shall include the plural number and vice versa; (b) words importing the masculine gender only shall include the feminine gender and any Person as the context may require; (c) the word “may” shall be construed as permissive and the word “shall” shall be construed as imperative; (d) reference to a statutory enactment shall include reference to any amendment or re-enactment thereof for the time being in force; (e) reference to any determination by the Directors shall be construed as a determination by the Directors in their sole and absolute discretion and shall be applicable either generally or in any particular case; and (f) reference to “in writing” shall be construed as written or represented by any means reproducible in writing, including any form of print, lithograph, email, facsimile, photograph or telex or represent by any other substitute or format for storage or transmission for writing or partly one and partly another. 3. Subject to the last two preceding Articles, any words defined in the Act shall, if not inconsistent with the subject or context, bear the same meaning in these Articles. PRELIMINARY 4. The business of the Company may be commenced at any time after incorporation. 5. The Registered office shall be at such address in the British Virgin Islands as the Shareholders or Directors may from time to time determine. The Company may in addition establish and maintain such other offices and places of business and agencies in such places as the Directors may from time to time determine. 6. The expenses incurred in the formation of the Company and in connection with the offer for subscription and issue of Shares shall be paid by the Company. 7. The Directors shall keep, or cause to be kept, the original Register of Members at such place as the Directors may from time to time determine and, in the absence of any such determination, the original Register of Members shall be kept at the office of the Registered Agent. SHARES 8. Subject to the Act and these Articles, all Shares for the time being unissued shall be under the control of the Directors who may: (a) issue, allot and dispose of the same to such Persons, in such manner, on such terms and having such rights and being subject to such restrictions as they may from time to time determine; and (b) grant options with respect to such Shares and issue warrants or similar instruments with respect thereto; and, for such purposes, the Directors may reserve and appropriate number of Shares for the time being unissued. 9. Subject to these Articles and provided that a corresponding amendment is made to paragraph 9 of the Memorandum to reflect the resulting Classes of Shares, the Directors may authorize the division of Share into any number of classes and Series and the different Classes and Series shall be authorized, established and designated (or re-designated as the case may be) as determined by a Resolution of Directors or by a Resolution of Shareholders. The pre-emption rights set out in section 46 of the Act shall not apply to the Company. The Company may insofar as may be permitted by law, pay a commission in any form to any Person in consideration of his subscribing or agreeing to subscribe whether absolutely or conditionally for any Shares. The Company may also pay such brokerage as may be lawful on any issue of Shares. The Directors may refuse to accept any application for Shares, and may accept any application in whole or in part, for any reason or for no reason. The Company may treat the holder of a Share as named in the Register of Members as the only Person entitled to: (a) exercise any voting rights attaching to the Share; (b) receive notices; (c) receive a Distribution; and (d) exercise other rights and powers attaching to the Share. The Company may, subject to the terms of the Act, paragraph 26 of the Memorandum and these Articles, issue bonus Shares, partly paid Shares and nil paid Shares. Shares may, subject to the terms of the Act and these Articles, be issued for consideration in any form, including money, a promissory note or other written obligation to contribute money or property, real property, personal property (including goodwill and know how), services rendered or a contract for future services. When the consideration in respect of the Share has been paid, the Share is for all purposes fully paid, but where the Share is not fully paid on issue that Share is subject to forfeiture in the manner prescribed in these Articles. Shares may be issued for such amount of consideration as the Directors may from time to time by Resolution of Directors determine, except that in the case of Shares issued with a par value, the consideration paid or payable shall not be less than the par value. Before issuing Shares for a consideration other than money, the Directors shall by a Resolution of Directors state: (a) the amount to be credited for the issue of Shares; (b) their determination of the reasonable present cash value of any non-money consideration for the issue; and (c) that, in their opinion, the present cash value of the non-money consideration for the issue is not less than the amount to be credited for the issue of the Shares. A Share issued by the Company upon conversion of, or in exchange for, another Share or a debt obligation or other security in the Company, shall be treated for all purposes as having been issued for money equal to the consideration received or deemed to have been received by the Company in respect of the other Share, debt obligation or security. CERTIFICATES Every Shareholder is entitled to a share certificate signed by a Director or Officer of the Company or under the Seal, with or without the signature of a Director or an Authorised Person. The signature of the Director or of the Authorised Person and the Seal may be a facsimile. A share certificate shall be manually signed by at least one Director or Officer or by or on behalf of a registrar, transfer agent, branch transfer agent or other authenticating agent of the Company. If a share certificate contains a printed or mechanically reproduced signature of a person, the Company may issue the share certificate, notwithstanding that the person has ceased to be a Director or Officer, and the share certificate is as valid as if he were a Director or Officer at the date of its issue. Any Shareholder receiving a share certificate for Shares shall indemnify and hold the Company and its Directors and Officers harmless from any loss or liability which it or they may incur by reason of the issue of that share certificate. If a share certificate for Shares is worn out or lost it may be renewed or replaced on production of the worn out certificate or on satisfactory proof of its loss together with such indemnity as may be required by a Resolution of Directors. FORFEITURE OF SHARES Where Shares are not fully paid on issue or have been issued subject to forfeiture, the following provision shall apply. Written notice of a call specifying a date for payment to be made in respect of a Share shall be served on a Shareholder who defaults in making payment in respect of that Share. The written notice referred to in the immediately preceding Article shall: (a) name a further date not earlier than the expiration of fourteen days from the date of service of the notice on or before which the payment required by the notice is to be made; and (b) contain a statement that in the event of non-payment at or before the time named in the notice the Shares, or any of them, in respect of which payment is not made will be liability to be forfeited. Where a written notice has been issued under these Articles and the requirements have not been complied with, the Directors may at any time before tender of payment forfeit and cancel the Shares to which the notice relates. The Company is under no obligation to refund any moneys to the Shareholder whose Shares have been forfeited and cancelled pursuant to these Articles. Upon forfeiture and cancellation of the Shares the Shareholder is discharged from any further obligation to the Company with respect to the Shares forfeited and cancelled. TRANSFER OF SHARES Subject to these Articles, Shares are transferred by a written instrument of transfer. The instrument of transfer of any Share shall be in any usual or common form or such other form as the Directors may, in the absolute discretion, approve and be executed by or on behalf of the transferor and if in respect of a nil or partly paid up Share, or where the transfer otherwise imposes a liability to the Company on the transferee, or if so required by the Directors, shall also be executed by or on behalf of the transferee and shall be accompanied by the certificate (if any) of the Shares to which it relates and such other evidence as the Directors may reasonably require to show the right of the transferor to make the transfer. The transferor shall be deemed to remain a Shareholder until the name of the transferee is entered in the Register of members in respect of the relevant Shares. The registration of transfers may be suspended at such times and for such periods as the Directors may from time to time determine. All instruments of transfer effecting a transfer which is registered shall be retained by the company, but any instrument of transfer relating to a transfer which the Directors decline to register shall (except in any can of fraud) be returned to the Person depositing the same. TRANSMISSION OF SHARES The legal personal representative of a deceased sole holder of a Share shall be the only Person recognised by the Company as having any title to the Share. In the case of a Share registered in the name of two or more holders, the survivors or survivor, or the legal personal representatives of the deceased survivor, shall be the only Person recognised by the Company as having any title to the Share. Any Person becoming entitled to a Share in consequence of the death or bankruptcy of a Shareholder shall upon such evidence being produced as may from time to time be required by the Directors, have the right either to be registered as a Shareholder in respect of the Share or, instead of being registered himself, to make such transfer of the Share as the deceased or bankrupt Person could have made; but the Directors shall, in either case, have the same right to decline or suspend registration as they would have had in the case of a transfer of the Share by the deceased or bankrupt Person before the death or bankruptcy. A Person becoming entitled to a Share by reason of the death or bankruptcy of a Shareholder shall be entitled to the same dividends and other advantages to which he would be entitled if her were the registered Shareholder, except that he shall not, before being registered as a Shareholder in respect of the Share, be entitled in respect of it to exercise any right conferred by membership in relation to meetings of the Company. ALTERATION OF NUMBER OF AUTHORISED SHARES The Company may amend the Memorandum to increase or reduce the number of Shares the Company is authorized to issue. The Company may: (a) divide the Shares, including issued Shares, of a Class or Series into a larger number of Shares of the same Class or Series; or (b) combine the Shares, including issued Shares, of a Class or Series into a smaller number of Shares of the same Class or Series; provided, however, that where Shares with a par value are divided or combined under (a) or (b) of this Article, the aggregate par value of the new Shares must be equal to the aggregate par value of the original Shares. REDEMPTION AND PURCHASE OF SHARES Subject to any limitations or procedures imposed by the Act, the memorandum and these Articles, including the Solvency Test where applicable, and to Article 39, the Company may purchase, redeem or otherwise acquire its own Shares from one or more or all of the Shareholders: (a) in accordance with Sections 60, 61 and 62 of the Act; or (b) in accordance with a right of a Shareholder to have his Shares redeemed or to have his Shares exchanged for money or other property of the Company; or (c) in exchange for newly issued Shares of equal value; or (d) pursuant to the provision of Section 176 of the Act. Subject to any provisions to the contrary in the Memorandum or these Articles and notwithstanding section 176 of the Act, the Company may not purchase, redeem or otherwise acquire its own Shares without the consent of the Shareholders whose Shares are to be purchased, redeemed or otherwise acquired. TREASURY SHARES Shares that the Company purchases, redeems or otherwise acquires pursuant to these Articles shall be cancelled immediately or held as Treasury Shares in accordance with the Act and Article 40. Shares may only be purchase, redeemed or otherwise acquired and held as Treasury Shares where, when aggregated with the number of Shares of the same Class already held by the Company as Treasury Shares, the total number of Treasury Shares does not exceed 50 percent of the Shares of the Class previously issued by the Company, excluding those Shares that have been cancelled. Where and for so long as Shares are held by the Company as Treasury Shares, all rights and obligations attaching to such Shares are suspended and shall not be exercised by or against the Company. Treasury Shares may be disposed of by the Company on such terms and conditions (not otherwise inconsistent with these Articles) as the Company may by Resolution of Directors determine. MEETINGS OF SHAREHOLDERS The Directors may, whenever they think fit, convene a meeting of Shareholders at such times and in such manner and places within or outside the British Virgin Islands as the Directors consider necessary or desirable, but the Directors shall call a meeting of Shareholders designated as an “annual meeting” not later than eighteen months after the Company’s registration under the laws of the British Virgin Islands and subsequently not later than fifteen months after holding the last preceding annual meeting, and no later than six months after the end of the Company’spreceding financial year. Shareholders’ meetings shall also be convened on the requisition in writing of any Shareholder or Shareholders entitled to attend an vote at a meeting of the Shareholders of the Company on the matter for which the meeting is being requested holding at least tem percent of outstanding Shares entitled to vote in the Company deposited at the Registered Office specifying the objects of the meeting for a date no earlier than twenty one days from the date of deposit of the requisition signed by the requisitionists, and if the Directors do not convene such meeting for a date not later than forty five days after the date of such deposit, the requisitionists themselves may convene the Shareholders’ meeting in the same manner, as nearly as possible, as that in which Shareholders’ meetings may be convened by the Directors, and all reasonable expenses incurred by the requisitionists as a result of the failure of the Directors to convene the Shareholders’ meeting shall be reimbursed to them by the Company. If at any time there are no Directors, any two Shareholder (or if there is only one Shareholder then that Shareholder) entitled to vote at meetings of the Shareholders of the Company may convene a Shareholders’ meeting in the same manner as nearly as possible as that in which Shareholders’ meetings may be convened by the Directors. NOTICE OF MEETINGS OF SHAREHOLDERS At least twenty-one days’ notice in writing counting from the date service is deemed to take place as provided in these Articles specifying the place, the day and the hour of the meeting and the general nature of the business to be considered at the meeting, shall be given in the manner hereinafter provided to such Persons as are, under these Articles, entitled to receive such notices from the Company.In addition, notice of the meeting shall be posted on SEDAR at least 25 days before the record date and at least 65 days before the date of the meeting. The Directors may fix as the record date for determining those Shareholders that are entitled to vote at the meeting the date notice is given of the meeting and may also fix in advance a date as the record date for determining those Shares that are entitled to vote at the meeting but the record date shall not precede by more than 60 days or by less than 40 days the date of which the meeting is to be held. A meeting of Shareholders held in contravention of the notice requirements set out above is valid if Shareholders holding not less than ninety percent majority of the: (a) total number of Shares entitled to vote on all matters to be considered at the meeting; or (b) votes of each Class of Shares where Shareholders are entitled to vote thereon as a Class together with not less than an absolute majority of the remaining votes, have waived notice of the meeting and for this purpose presence at the meeting shall be deemed to constitute a waiver. The accidental omission to give notice of a meeting to or the non-receipt of a notice of a meeting by any Shareholder shall not invalidate the proceedings at any meeting. PROCEEDINGS AT SHAREHOLDERS’ MEETINGS No business shall be transacted at any Shareholders’ meeting unless a quorum of Shareholders is present at the time when the meeting proceeds to business. Save as otherwise provided by the Articles, two or more Shareholders entitled to vote at the meeting, present in person or by proxy, shall form a quorum. If within half an hour from the time appointed for the meeting a quorum is not present, the meeting, if convened upon the requisition of Shareholders, shall be dissolved. In any other case it shall stand adjourned to the same day in the next week, at the same time and place, and if at the adjourned meeting a quorum is not present within half an hour from the time appointed for the meeting the Shareholder or Shareholders present and entitled to vote shall form a quorum. If the Directors wish to make this facility available for a specific Shareholders’ meeting or all Shareholders’ meetings of the Company, participation in any Shareholders’ meeting may be by means of a telephone or by other electronic means provided that all Persons participating in such meeting are able to hear each other and such participation shall be deemed to constitute presence in person at the meeting. The chairman, if any, of the Directors shall preside as chairman at every Shareholders’ meeting. If there is no such chairman, or if at any Shareholders’ meeting he is not present within fifteen minutes after the time appointed for holding the meeting or is unwilling to act as chairman, any Director or Person nominated by the Directors shall preside as chairman, failing which the Shareholders present in person or by proxy shall choose any Person present to be chairman of that meeting. The chairman may with the consent of any Shareholders’ meeting at which a quorum is present (and shall if so directed by the meeting) adjourn a meeting from time to time and from place to place, but no business shall be transacted at any adjourned meeting other than the business left unfinished at the meeting from which the adjournment took place. When a meeting, or adjourned meeting, is adjourned for fourteen days or more, notice of the adjourned meeting shall be given as in the case of an original meeting. Save as aforesaid it shall not be necessary to give any notice of an adjournment or of the business to be transacted at an adjourned meeting. The Directors may cancel or postpone any duly convened Shareholders’ meeting at any time prior to such meeting, except for Shareholders’ meeting requisitioned by the Shareholders in accordance with these Articles, for any reason or for no reason, upon notice in writing to Shareholders. A postponement may be for a stated period of any length or indefinitely as the Directors may determine. At any Shareholders’ meeting a resolution put to the vote of the meeting shall be decided on a show of hands, unless a poll is (before or on the declaration of the result of the show of hands) demanded by the chairman or one or more Shareholders present in person or by proxy entitled to vote, and unless a poll is so demanded, a declaration by the chairman that a resolution has, on a show of hands, been carried, or carried unanimously, or by a particular majority, or lost, and an entry to that effect in the book of the proceedings of the Company shall be conclusive evidence of the fact, without proof of the number or proportion of the votes recorded in favour of, or against, that resolution. If a poll is duly demanded it shall be taken in such manner as the chairman directs, and the result of the poll shall be deemed to be the resolution of the meeting at which the poll was demanded. In the case of an equality of votes, whether on a show of hands or on a poll, the chairman of the meeting at which the show of hands takes place or at which the poll is demanded, shall be entitled to a second or casting vote. A poll demanded on the election of a chairman of the meeting or on a question of adjournment shall be taken forthwith. A poll demanded on any other question shall be taken at such time as the chairman of the meeting directs. VOTES OF SHAREHOLDERS Subject to any rights and restrictions for the time being attached to any Share, on a show of hands every Shareholder present in person and every Person representing a Shareholder by proxy shall, at a Shareholders’ meeting, each have one vote and on a poll every Shareholder and every Person representing a Shareholder by proxy shall have one vote for each Share of which he or the Person represented by proxy is the holder. The following shall apply in respect of joint ownership of Shares: (a) if two or more Persons hold Shares jointly each of them may be present in person or by proxy at a meeting of Shareholders and may speak as a Shareholder; (b) if only one of the joint owners is present in person or by proxy he may vote on behalf of all joint owners; and (c) if two or more of the joint owners are present in person or by proxy they must vote as one. A Shareholder of unsound mind, or in respect of whom an order has been made by any court having jurisdiction in lunacy, may vote in respect of Shares carrying the right to vote held by him, whether on a show of hands or on a poll, by the Person or Persons appointed by that court, and any such Person or Persons may vote by proxy. No shareholder shall be entitled to vote at any Shareholders’ meeting unless all calls, if any, or other sums presently payable by him in respect of Shares carrying the right to vote held by him have been paid. A Shareholder may be represented at a meeting of Shareholders by a proxy who may speak and vote on behalf of the Shareholder. The instrument appointing a proxy shall comply with all applicable securities laws and shall be in writing under the hand of the appointor or of his attorney duly authorized in writing or, if the appointor is a corporation, either under Seal or under the hand of an officer or attorney duly authorized. A proxy need not be a Shareholder. An instrument appointing a proxy may be in any usual or common form or such other form as the Directors may approve. The instrument appointing a proxy shall be deposited at the Registered Office or at such other place as is specified for that purpose in the notice convening the meeting no later than the time for holding the meeting or, if the meeting is adjourned, the time for holding such adjourned meeting. The instrument appointing a proxy shall be deemed to confer authority to demand or join in demanding a poll. An action that may be taken by the Shareholders at a meeting may also be taken by a resolution of Shareholders consented to in writing or by telex, telegram, cable, facsimile or other written electronic communication, without the need for any notice, but if any such resolution is adopted otherwise than by written consent of a majority of the Shareholders, a copy of such resolution shall forthwith be sent to all Shareholders not consenting to such resolution. The consent may be in the form of counterparts in like form each counterpart being signed by one or more Shareholders. If the Company shall have only one Shareholder the provisions herein contained for meetings of the Shareholders shall not apply and in lieu of minutes of a meeting shall record in writing and sign a note or memorandum of all matters requiring a Resolution of Shareholders. Such a note or memorandum shall constitute sufficient evidence of such resolution for all purposes. CORPORATIONS ACTING BY REPRESENTATIVES AT MEETINGS Any Shareholder or Director that is a corporation or other entity may by resolution of its directors or other governing body authorise such natural person as it thinks fit to act as its representative at any meeting of the Company or of any meeting of holders of a Class or Series or of the Directors or of a committee of Directors, and the person so authorised shall be entitled to exercise the same powers on behalf of the corporation which he represents as that corporation could exercise if it were an individual Shareholder or Director. DIRECTORS The Directors shall be elected by Resolution of Shareholders or, subject to Section 77, appointed by Resolution of Directors. No person shall be appointed as a Director of the Company unless he has consented in writing to be a director. The Company may by a resolution of Shareholders from time to time fix the maximum and minimum number of Directors to be appointed but unless such numbers are fixed as aforesaid the minimum number or Directors shall be one and the maximum number of Directors shall be ten. Subject to these Articles, the Company may appoint any natural person or corporation to be a Director. The following are disqualified from appointment as a Director: (a)an individual who is under eighteen years of age; (b)a person who is a disqualified person within the meaning of section 260(4) of the Insolvency Act (or any successor provision); (c)a person who is a restricted person within the meaning of section 409 of the Insolvency Act (or any successor provision); (d)an undischarged bankrupt; and (e)any other person disqualified by the Memorandum and these Articles. Each Director holds office for the term, if any, including on an annual basis, fixed by the Resolution of Shareholders or the Resolution of Directors appointing him or until his earlier death, resignation or removal. If no term is fixed on the election or appointment of a Director, the Director shall serve for a term not exceeding the close of the next annual meeting of Shareholders following his election or appointment. In the case of a Director who is an individual the term of office of a Director shall terminate on the Director’s death, resignation or removal. The bankruptcy of a Director or the appointment of a liquidator, administrator or receiver of a corporate Director shall terminate the term of office of such Director. A director may be removed from office, with or without cause, by Resolution of Shareholders passed at meeting of Shareholders called for the purpose of removing the director or for purposes including the removal of the director or by a written Resolution of Shareholders. A Director may resign his office by giving written notice of his resignation to the Company and the resignation shall have effect from the date the notice is received by the Company or from such later date as may be specified in the notice. Subject to any Resolution of Shareholders to the contrary, the directors may at any time by a Resolution of Directors appoint any person to be a director either to fill a vacancy (except a vacancy resulting from an increase in the minimum number of Directors or from a failure of the Shareholders to elect the minimum number of Directors) or as an addition to the existing Directors. However, the Directors may not between meeting of Shareholders, appoint an additional Director if, after such appointment, the total number of Directors would be greater than one and one third time the number of Directors to have been elected at the last annual meeting of Shareholders. In the absence of a quorum of the Board of Directors or if the vacancy has arisen from a failure of the Shareholders to elect the minimum number of Directors, the Board of Directors shall forthwith call a meeting of Shareholders to fill the vacancy. If the Board of Directors fails to call such meeting or if there are no such Directors then in office, any Shareholder may call the meeting. A vacancy in the board of Directors arising as a result of the death of a Director or if a Director otherwise ceases to hold office prior to the expiration of his stipulated term of office, may be filled by a Resolution of Shareholders or by a resolution of a majority of the remaining Directors. The remuneration of the Directors may be determined by a Resolution of Directors or by a Resolution of Shareholders. There shall be no shareholding qualification for Directors unless determined otherwise by a Resolution of Shareholders. The Company shall keep a Register of Directors containing: (a) the names and addresses of the persons who are Directors or who have been nominated as reserve directors or the Company; (b) the date on which each person whose name is entered in the Register of Directors was appointed as a Director, or nominated as a reserve director, of the Company; (c) the date on which each person named as a Director ceased to be a Director; and (d) the date on which the nomination of any person nominated as a reserve director ceased to have effect. A copy of the Register of Directors shall be kept at the office of the Registered Agent and the company may determine by Resolution of Directors to register a copy of such Register of Directors with the Registrar of Corporate Affairs. ALTERNATE DIRECTOR Any Director may in writing appoint another person, who need not be a Director, to be his alternate.An alternate Director has the same rights as the appointing director in relation to any director’s meeting and any written resolution circulated for written consent. Every such alternate shall therefore be entitled to attend meetings in the absence of the Director who appointed him and to vote in the place of the Director and sign written consents. Where the alternate is a Director he shall be entitled to have a separate vote on behalf of the Director he is representing in addition to his own vote. A Director may at any time in writing revoke the appointment of an alternate appointed by him. Such alternate shall not be an Officer. The remuneration of such alternate shall be payable out of the remuneration of the Director appointing him and the proportion thereof shall be agreed between them. POWERS OF DIRECTORS The business and affairs of the Company shall be managed by, or be under the direction or supervision of, the Directors who may pay all expenses incurred preliminary to and in connection with the formation and registration of the Company and may exercise all such powers of the company as are not by the Act or the Memorandum or these Articles required to be exercised by the Shareholders, subject to any delegation of such powers as may be authorised by these Articles and to such requirements as may be prescribed by a Resolution of Shareholders, but no requirement made by a resolution of Shareholders shall prevail if it be inconsistent with these Articles nor shall such requirement invalidate any prior act of the Directors which would have been valid if such requirement had not been made. Notwithstanding section 175 of the Act, the Directors have the power to sell, transfer, lease, exchanges or otherwise dispose of the assets of the Company, without restriction and without complying with the provision of section 175, which shall not apply to the Company. The Directors may, by a Resolution of Directs, appoint any Person, including a person who is a Director, to be an Officer or agent of the Company. The Resolution of Directors appointing an agent may authorise the agent to appoint one or more substitutes or delegates to exercise some or all of the powers conferred on the agent by the Company. Every Officer or agent of the Company has such powers and authority of the Directors, including the power and authority to affix the Seal, as are set forth in these Articles or in the Resolution of Directors appointing the Officer or agent, except that no Officer or agent has any power or authority with respect to the matters requiring a Resolution of Directors under the Act or these Articles or are otherwise not permitted to be delegated under the Act. All cheques, promissory notes, drafts, bills of exchange and other negotiable instruments and all receipts for monies paid to the Company, shall be signed, drawn, accepted, endorsed or otherwise executed, as the case may be, in such manner as shall from time to time be determined by Resolution of Directors. The Directors may, by a Resolution of Directors, designate one or more committees, each consisting of one or more Directors. Each committee of Directors has such powers, and authorities of the Directors, including the power and authority to affix the Seal, as are set forth in the Resolution of Directors establishing the committee, except that no committee has any power or authority: (a) to amend the memorandum or these Articles; (b) to designate committees of Directors; (c) to delegate powers to a committee of Directors; (d) to appoint Directors; (e) to appoint agents; (f) to approve a plan of merger, consolidation or arrangement; or (g) to make a declaration of solvency or approve a liquidation plan. The Directors may from time to time and at any time by power of attorney (whether under Seal or under hand or otherwise) appoint any company, firm or Person or body of Persons, whether nominated directly or indirectly by the Directors, to be the attorney or attorneys or authorized signatory (any such Person being an “Attorney” or “Authorised Signatory”, respectively) of the Company for such purposes and with such powers, authorities and discretions (not exceeding those vested in or exercisable by the Directors under these Articles) and for such period and subject to such conditions as they may think fit, and any such power of attorney or other appointment may contain such provisions for the protection and convenience of Persons dealing with any such Attorney or Authorised Signatory as the Directors may think fit, and may also authorise any such Attorney or Authorised Signatory to delegate all or any of the powers, authorities and discretion vested in him. BORROWING POWERS OF DIRECTORS The Directors may exercise all the powers of the Company to borrow money and to mortgage or charge its undertaking, property and uncalled capital or any part thereof, to issue debentures, debenture stock and other securities whenever money is borrowed or as security for any debt, liability or obligation of the Company or of any third party. DUTIES OF DIRECTORS Subject to the following Article, the Directors when exercising their powers or performing their duties, shall act honestly and in good faith and in what the Director believes to be in the best interests of the Company. Notwithstanding the foregoing: (a) where the Company is a wholly owned subsidiary, the Directors may, when exercising their powers or performing their duties as Directors, act in a manner which they believe to be in the best interests of the Company’s holding company, even though it may not be in the best interest of the Company; (b) where the Company is a subsidiary, but not a wholly owned subsidiary, the Directors may, when exercising their powers or performing their duties, and with the prior agreement of the Shareholders other than the holding company, act in a manner which they believe to be in the best interest of the Company’s holding company, even though it may not be in the best interests of the Company; and (c) where the Shareholders are carrying out a joint venture, the Directors may, when exercising their powers or performing their duties in connection with the carrying out of the joint venture, act in a manner which they believe to be in the best interests of a Shareholder or Shareholders, even though it may not be in the best interests of the Company. PROCEEDINGS OF DIRECTORS The Directors may meet together (either within or outside of the British Virgin Islands) for the despatch of business, adjourn, and otherwise regulate their meetings and proceedings as they think fit. Questions arising at any meeting shall be decided by a majority of votes. In case of an equality of votes the chairman shall not have a second or casting vote. A Director may, and a Secretary or assistant Secretary on the requisition of a Director shall, at any time summon a meeting of the Directors. A Director may participate in any meeting of the Directors, or of any committee appointed by the Directors of which such Director is a member, by means of telephone or other electronic means provided that all persons participating in such meeting can hear one other and such participation shall be deem to constitute presence in person at the meeting. A Director shall be given not less than two days’ notice of meetings of Directors, but a meeting of Directors held without two days’ notice having been given to all Directors shall be valid if all the Directors entitled to vote at the meeting who do not attend, waive notice of the meeting, and for this purpose, the presence of a Director at the meeting shall be deemed to constitute waiver on his part. The inadvertent failure to give notice of a meeting to a Director, or the fact that a Director has not received the notice, does not invalidate the meeting. The quorum necessary for the transaction of the business of the Directors may be fixed by the Directors, and unless so fixed, shall be one-half of the total number of Directors, unless there are only two directors, in which case, the quorum shall be two. A Director represented by an alternate Director at any meeting shall be deemed to be present for the purposes of determining whether or not a quorum is present. If the Company shall have only one Director the provisions herein contained for meetings of the Directors shall not apply but such sole Director shall have full power to represent and act for the Company in all matters as are not by the Act or the Memorandum or these Articles required to be exercised by the Shareholders and in lieu of minutes of a meeting shall record in writing and sign a note or memorandum of all matter requiring a Resolution of Directors. Such a note or memorandum shall constitute sufficient evidence of such resolution for all purposes. A Director may hold any other office or place of profit under the Company (other than the office of auditor) in conjunction with his office of Director for such period and on such terms (as to remuneration and otherwise) as the Directors may by a Resolution of Directors determine. Any Director may act by himself or his firm in a professional capacity for the Company, and he or his firm shall be entitled to remuneration for professional services as if he were not a Director; provided that nothing herein contained shall authorise a Director or his firm to act as auditor to the Company. The Directors shall cause the following corporate records to be kept: (a) minutes of all meetings of Directors, Shareholders, committees of Directors, committees of Officers and committees of Shareholders; and (b) copies of all resolutions consented to by Directors, Shareholders, Classes of Shareholders, committees of Directors, committees of Officers and committees of Shareholders. The books, corporate records and minutes shall be kept at the office of the Registered Agent, at the Company’s principal place of business or at such other place as the Directors determine. When the chairman of a meeting of the Directors signs the minutes of such meeting the same shall be deemed to have been duly held notwithstanding that all the Directors have not actually come together or what there may have been a technical defect in the proceedings. An action that may be taken by the Directors or a committee of Directors at a meeting may also be taken by a resolution of Directors or a committee of Directors consented to in writing or by telex, telegram, cable, facsimile or other written electronic communication by a simple majority of the Directors or a simple majority of the members of the committee, as the case may be, without the need for any notice. The consent may be in the form of counterparts, each counterpart being signed by one or more Directors. The continuing Directors may act notwithstanding any vacancy in their body but if and for so long as their number is reduced below the number fixed by or pursuant to these Articles as the necessary quorum of Directors, the continuing Directors may act for the purpose of increasing the number of Directors, or of summoning a Shareholders’ meeting, but for no other purpose. The Directors may elect a chairman of their meetings and determine the period for which he is to hold office but if no such chairman is elected, or if at any meeting the chairman is not present within fifteen minutes after the time appointed for holding the meeting, the Directors present may choose one of their number to be chairman of the meeting. Subject to any regulations imposed on it by the Directors, a committee appointed by the Directors may elect a chairman of its meetings. If no such chairman is elected, or if at any meeting the chairman is not present within fifteen minutes after the time appointed for holding the meeting, the committee members present may choose one of their number to be chairman of the meeting. A committee appointed by the Directors may meet and adjourn as it thinks proper. Subject to any regulations imposed on it by the Directors, questions arising at any meeting shall be determined by a majority of votes of the committee members present and in case of an equality of votes the chairman shall have a second or casting vote. All acts done by any meeting of the Directors or of a committee of Directors, or by any person acting as a Director, shall notwithstanding that it be afterwards discovered that there was some defect in the appointment of any such Director or person acting as aforesaid, or that they or any of them were disqualified, be as valid as if every such person had been duly appointed and was qualified to be a Director. OFFICERS The Company may by Resolution of Directors appoint Officers at such times as shall be considered necessary or expedient. Any number of officers may be held by the same person. The Officers shall perform such duties as shall be prescribed at the time of their appointment subject to any modification in such duties as may be prescribed thereafter by Resolution of Directors or Resolution of Shareholders, but in the absence of any specific allocation of duties it shall be the responsibility of the chairman of the board of Directors to preside at meetings of Directors and Shareholders, the vice chairman to act in the absence of the chairman, the president to manage the day to day affairs of the Company, the vice presidents to act in order of seniority in the absence of the president but otherwise to perform such duties as may be delegated to them by the president, the secretaries to maintain the Register of Members, minute books and records (other than financial records) of the Company and to ensure compliance with all procedural requirements imposed on the Company by applicable law, and the treasurer to be responsible for the financial affairs of the Company. The emoluments of all Officers shall be fixed by Resolution of Directors. The Officers shall hold office until their successors are duly elected and qualified, but any Officer elected or appointed by the Directors may be removed at any time, with or without cause, by Resolution of Directors. Any vacancy occurring in any office of the Company may be filled by Resolution of Directors. CONFLICT OF INTERESTS A Director shall forthwith after becoming aware of the fact that he is interested in a transaction entered into or to be entered into by the Company, disclose the interest to the board of Directors. Where a Director’s interest in a transaction is not disclosed in accordance with this Article prior to the transaction being entered into, unless it is not required to be disclosed in accordance with Article 122 below, the transaction is voidable by the Company. Notwithstanding the previous Article, a transaction entered into by the Company is not voidable by the Company if: (a) the material facts of the interest of the Director in the transaction are known by the Shareholders entitled to vote at a meeting of Shareholders and the transaction is approved or ratified by a Resolution of Shareholders; or (b) the Company received fair value for the transaction, and such determination of fair value is made on the basis of the information known to the Company and the interest Director at the time that the transaction was entered into. A Director is not required to comply with Article 120 above, if the transaction is between the Company and the Director and the transaction or proposed transaction is or is to be entered into in the ordinary course of the Company’s business and on usual terms and conditions. A Director who is interested in a transaction entered into or to be entered into by the Company may: (a) vote on a matter relating to the transaction; (b) attend a meeting of Directors at which the matter relating to the transaction arises and be included among the Directors present at the meeting for the purpose of quorum; and (c) sign a document on behalf of the company, or do any other thing in his capacity as a Director, that relates to the transaction. REGISTER OF CHARGES The Company shall maintain at the Registered office or at the office of the Registered Agent a register of all charges created by the Company showing: (a) if the charge is a charge created by the Company, the date of its creation or, if the charge is an existing charge on property acquired by the Company, the date on which the property was acquired; (b) a short description of the liability secured by the charge; (c) a short description of the property charged; (d) the name and address of the trustee for the security, or if there is no such trustee, the name and address of the chargee; (e) unless the charge is a security to bearer, the name and address of the holder of the charge; and (f) details of any prohibition or restriction, if any, contained in the instrument creating the charge on the power of the Company to create any future charge ranking in priority to or equally with the charge. THE SEAL The Directors shall provide for the safe custody of the Seal. An imprint of the Seal shall be kept at the office of the Registered Agent. The Seal shall not be affixed to any instrument except by the authority of a Resolution of Directors provided always that such authority may be given prior to or after the affixing of the Seal and if given after may be in general form confirming a number of affixings of the Seal. The Seal shall be affixed in the presence of a Director or a Secretary (or an assistant Secretary) or in the presence of any one or more persons as the Directors may appoint for the purpose and every person as aforesaid shall sign every instrument to which the Seal is so affixed in their presence. The Company may maintain a facsimile of the Seal in such countries or places as the Directors may appoint and such facsimile Seal shall not be affixed to any instrument except by the authority of a Resolution of Directors provided always that such authority may be given prior to or after the affixing of such facsimile Seal and if given after may be in general form confirming a number of affixings of such facsimile Seal. The facsimile Seal shall be affixed in the presence of such person or persons as the Directors shall for this purpose appoint and such person or persons as aforesaid shall sign every instrument to which the facsimile Seal is so affixed in their presence and such affixing of the facsimile Seal and signing as aforesaid shall have the same meaning and effect as if the Seal had been affixed in the presence of an the instrument signed by a Director or a Secretary (or an assistant Secretary) or in the presence of any one or more persons as the Directors may appoint for the purpose. Notwithstanding the foregoing, a Secretary or any assistant Secretary shall have the authority to affix the Seal, or the facsimile Seal, to any instrument for the purposes of attesting authenticity of the matter contained therein but which does not create any obligation binding on the Company. DISTRIBUTIONS The Company may, from time to time, by a Resolution of Directors authorise a Distribution by the Company at such time, and of such amount, to any Shareholders, as it thinks fit if they are satisfied, on reasonable grounds, that immediately after the Distribution, the Company satisfies the following solvency test: (a) the value of the Company’s assets will exceed its liabilities; and (b) the Company will be able to pay its debts as they fall due. The Directors may, before making any Distribution, set aside out of the profits of the Company such sum as they think proper as a reserve fund, and may invest the sum so set apart as a reserve fund upon such securities as they may select. Notice of any Distribution that may have been authorised shall be given to each Shareholder in the manner hereinafter mentioned and all Distributions unclaimed for three years after having been declared may be forfeited by Resolution of Directors for the benefit of the Company. No Distribution shall bear interest as against the Company and no Distribution shall be authorised or made on Treasury Shares. The Directors may determine in their sole discretion to issue bonus Shares from time to time. A division of the issued and outstanding Shares of a Class or Series of Shares into a larger number of Shares of the same Class or Series having a proportionately smaller par value does not constitute the issue of a bonus Share. If several Persons are registered as joint holders of any Shares, any one of such Persons may give receipt for any Distribution made in respect of such Shares. ACCOUNTS AND AUDIT The Company shall keep such accounts and records that: (a) are sufficient to show and explain the Company’s transactions; and (b) will at any time, enable the financial position of the Company to be determined with reasonable accuracy. The books of account shall be kept at the office of the Registered Agent or at such other place or places as the Directors think fit, and shall always be open to the inspection of the Directors. The Directors may from time to time determine whether and to what extent and at what times and places and under what conditions or regulations the accounts and books of the company or any of them shall be open to the inspection of Shareholders not being Directors, and no Shareholder (not being a Director) shall have any right of inspecting any account of book or document of the Company except as conferred by law or authorised by a Resolution of Directors or by a Resolution of Shareholders. The accounts relating to the Company’s affairs shall only be audited if the Directors so determine, in which case the financial year end and the accounting principles will be determined by the Directors. The auditors of the Company shall not be deemed to be Officers. NOTICES Any notice of document may be served by the Company or by the Person entitled to give notice to any Shareholder either personally, or by posting it airmail or air courier service in a prepaid letter addressed to such Shareholder at his address as appearing in the Register of Members, or by electronic mail to any electronic mail address such Shareholder may have specified in writing for the purpose of such service of notices, or by facsimile should the Directors deem it appropriate. In the case of joint holders of a Share, all notices shall be given to that one of the joint holders whose name stands first in the Register of Members in respect of the joint holding, and notice so given shall be sufficient notice to all joint holders. Any Shareholder present, either personally or by proxy, at any Shareholders’ meeting shall for all purposes be deemed to have received due notice of such meeting and, where requisite, of the purposes for which such meeting was convened. Any notice or other document, if served by: (a) post, shall be deemed to have been served five days after the time when the letter containing the same is posted; (b) facsimile, shall be deemed to have been served upon production by the transmitting facsimile machine of a report confirming transmission of the facsimile in full to the facsimile number of the recipient; (c) recognised courier service, shall be deemed to have been served 48 hours after the time when the letter containing the same is delivered to the courier service; or (d) electronic mail, shall be deemed to have been served immediately upon the time of the transmission by electronic mail. In proving service by post or courier service it shall be sufficient to prove that the letter containing the notice or documents was properly addressed and duly posted or delivered to the courier service. Any notice or document delivered or sent by post to or left at the registered address of any Shareholder in accordance with the terms of these Articles shall notwithstanding that such Shareholder be then dead or bankrupt, and whether or not the Company has notice of his death or bankruptcy, be deemed to have been duly served in respect of any Share registered in the name of such Shareholder as sole or joint holder, unless his name shall at the time of the service of the notice or document, have been removed from the Register of Members as the holder of the Share, and such service shall for all purposes be deemed a sufficient service of such notice or document on all Persons interest (whether jointly with or as claiming through or under him) in the Share. Notice of every Shareholders’ meeting shall be given to: (a) all Shareholders holding Shares with the right to receive notice and who have supplied to the Company an address for the giving of notices to them; and (b) every Person entitled to a Share in consequence of the death or bankruptcy of a Shareholder, who but for his death or bankruptcy would be entitled to receive notice of the meeting. No other Personal shall be entitled to receive notices of Shareholders’ meetings. INDEMNITY Subject to the limitations hereinafter provided the Company may indemnify against all expenses, including legal fees, and against all judgments, fines and amounts paid in settlement and reasonably incurred in connection with legal, administrative or investigative proceedings any Person (an “Indemnifiable Person”) who: (a) is or was a party or is threatened to be made a party to any threatened, pending or completed proceedings, whether civil, criminal, administrative or investigative, by reason of the fact that the Person is or was a Director, an Officer, agent or a liquidator of the Company; or (b) is or was, at the request of the Company, serving as a director, officer, agent or liquidator of, or in any other capacity is or was acting for, another body corporate or a partnership, joint venture, trust or other enterprise. The Company may only indemnify an Indemnifiable Person if such Person acted honestly and in good faith and in what the Indemnifiable Person believed to be in the best interests of the Company and, in the case of criminal proceedings, the Indemnifiable Person had no reasonable cause to believe that his conduct was unlawful. The decision of the Directors as to whether the Indemnifiable Person acted honestly and in good faith and in what the Indemnifiable Person believed to be in the best interests of the Company and, in the case of criminal proceedings, as to whether such Person had no reasonable cause to believe that his conduct was unlawful, is in the absence of fraud, sufficient for the purposes of these Articles, unless a question of law is involved. The termination of any proceedings by any judgment, order, settlement, conviction or the entering of a nolle prosequi does not, by itself, create a presumption that the Indemnifiable Person did not act honestly and in good faith and with a view to the best interests of the Company or that such Person had reasonable cause to believe that his conduct was unlawful. Expenses, including legal fees, incurred by an Indemnifiable Person in defending any legal, administrative or investigative proceedings may be paid by the Company in advance of the final disposition of such proceedings upon receipt of an undertaking by or on behalf of the Indemnifiable Person to repay the amount if it shall ultimately be determined that the Indemnifiable person is not entitled to be indemnified by the Company in accordance with these Articles. Expenses, including legal fees, incurred by a former Director, Officer or agent in defending any legal, administrative or investigative proceedings may be paid by the Company in advance of the final disposition of such proceedings upon receipt of an undertaking by or on behalf of the former Director, Officer or agent, as the case may be, to repay the amount if it shall ultimately be determined that the former Director, Officer or agent is not entitled to be indemnified by the Company in accordance with these Articles and upon such other terms and conditions, if any, as the Company deems appropriate. The indemnification and advancement of expenses provided by, or granted pursuant to, this section is not exclusive of any other rights to which the Person seeking indemnification or advancement of expenses may be entitled under the agreement, resolution of members, resolution of disinterested Directors or otherwise, both as to acting in the Person’s official capacity and as to acting in another capacity which serving as a Director, if applicable. If a Person to be indemnified has been successful in defence of any proceedings described above the Person is entitled to be indemnified against all expenses, including legal fees, and against all judgments, fines and amounts paid in settlement and reasonably incurred by the Person in connection with the proceedings. INSURANCE The Company may purchase and maintain insurance in relation to any person who is or was a Director, or who at the request of the Company is or was serving as a Director of, or in any other capacity is or was acting for another body corporate or a partnership, joint venture, trust or other enterprise, against any liability asserted against the person and incurred by the person in that capacity, whether or not the Company has or would have had the power to indemnify the person against the liability in the preceding Article. NON-RECOGNITION OF TRUSTS Subject to the proviso hereto, no Person shall be recognised by the Company as holding any Share upon any trust and the company shall not, unless required by law, be bound by or be compelled in any way to recognise (even when having notice thereof) any equitable, contingent, future or partial interest in any Share or (except only as otherwise provided by these Articles or as required by law) any other right in respect of any Share except an absolute right to the entirety thereof in each Shareholder registered in the Register of Members, provided that, notwithstanding the foregoing, the Company shall be entitled to recognise any such interests as shall be determined by the Directors. WINDING UP If the Company shall be wound up, the liquidator may divide amongst the Shareholders in specie or kind the whole or any part of the assets of the Company (whether they shall consist of property of the same kind or not) and may, for such purpose set such value as he deems fair upon any property to be divided as aforesaid and may determine how such division shall be carried out as between the Shareholders of different Classes or Series. The liquidator may vest the whole or any part of such assets in trustees upon such trusts for the benefit of the Shareholders as the liquidator shall think fit, but so that no Shareholder shall be compelled to accept any asset whereon there is any liability. AMENDMENT OF ARTICLES OF ASSOCIATION These Articles may be amended in the manner prescribed in the Memorandum. CLOSING REGISTER OF MEMBERS OR FIXING RECORD DATE For the purpose of determining those Shareholders that are entitled to receive notice of, attend or vote at any meeting of Shareholders or any adjournment thereof, or those Shareholders that are entitled to receive payment of any Distribution, or in order to make a determination as to who is a Shareholder for any other purpose, the Directors may provide that the Register of Members shall be closed for transfer for a stated period which shall not exceed in any case forty days. If the Register of Members shall be so closed for the purpose of determining those Shareholders that are entitled to receive notice of, attend or vote at a meeting of Shareholders the Register of Members shall be so closed for at least ten days immediately preceding such meeting and the record date for such determination shall be the date of the closure of the Register of Members. In lieu of or apart from closing the Register of Members, the Directors may fix in advance a date as the record date for any such determination of those Shareholders that are entitled to receive notice of, attend or vote at a meeting of the Shareholders and for the purpose of determining those Shareholders that are entitled to receive payment of any Distribution the Directors may, at or within ninety days prior to the date of declaration of such Distribution, fix a subsequent date as the record date for such determination. If the Register of Members is not so closed and no record date is fixed for the determination of those Shareholders entitled to receive notice of, attend or vote at a meeting of Shareholders or those Shareholders that are entitled to receive payment of a Distribution, the date of which notice of the meeting is posted or the date on which the resolution of the Directors declaring such Distribution is adopted, as the case may be, shall be the record date for such determination of Shareholders. When a determination of those Shareholders that are entitled to receive notice of, attend or vote at a meeting of Shareholders has been made as provided in this Article, such determination shall apply to any adjournment thereof. REGISTRATION BY WAY OF CONTINUATION The Company may by Resolution of Directors or by Resolution of Shareholders resolve to be registered by way of continuation in a jurisdiction outside the British Virgin Islands in the manner provided under those laws. In furtherance of a resolution adopted pursuant to this Article, the Directors may cause an application to be made to the Registrar of Corporate Affairs to deregister the Company in the British Virgin Islands and may cause all such further steps as they consider appropriate to be taken to effect the transfer by way of continuation of the Company. DISCLOSURE The Directors, or any service providers (including the Officers, the Secretary and the Registered Agent of the Company) specifically authorised by the Directors, shall be entitled to disclose to any regulatory or judicial authority any information regarding the affairs of the Company including without limitation information contained in the Register of Members and books of the Company. We, FH Corporate Services Ltd, of FH Chambers, P.O. Box 4649, Road Town, Tortola, British Virgin Islands for the purpose of continuing a Company as a BVI Business Company limited by shares under the laws of the British Virgin Islands hereby sign these Articles of Association on 5 July 2013 for and on behalf of the Shareholders and Directors of the Company. Authorised Signatory /s/ Jose Santos …………… By: Jose Santos Authorised Signatory FH Corporate Services Ltd

POWER OF ATTORNEY FOR NICHOLAS HIGH INCOME FUND, INC. KNOW ALL MEN BY THESE PRESENTS , that the undersigned director of Nicholas High Income Fund, Inc. constitutes and appoints Jennifer R. Kloehn, his true and lawful attorney-in-fact and agent, for him and in his name, place and stead in any and all capacities, to sign any and all amendments (including post-effective amendments) to the Form N-1A Registration Statement of Nicholas High Income Fund, Inc., and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission and any state of the United States, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent may lawfully do or cause to be done by virtue thereof. Date: August 10, 2016 /s/ John A. Hauser John A. Hauser

Exhibit 10.1  GREAT PLAINS ENERGY INCORPORATED AMENDED LONG-TERM INCENTIVE PLAN SECTION ONE.  PURPOSE OF PLAN The purposes of the Plan are to encourage officers, employees and non-employee directors of the Company to acquire proprietary and vested interest in the growth and performance of the Company, to generate an increased incentive to enhance the value of the Company for the benefit of its customers and shareholders, and to aid in the attraction and retention of exceptionally qualified individuals upon whom the Company's success largely depends.   SECTION TWO.  DEFINITIONS The following definitions are applicable herein:   "Award" means the award to a Participant of Restricted Stock, Stock Options, Limited Stock Appreciation Rights, Performance Shares or Director Deferred Share Units.   "Award Period" means that period established by the Committee during which any performance goals specified with respect to earning any Award are to be measured.   "Board" means the Board of Directors of the Company.   "Cause" means unless otherwise defined in a Participant's employment agreement or change in control severance agreement with the Company, in which case such definition will apply, (i) the material misappropriation of any of the Company's funds or property; (ii) the conviction of, or the entering of a guilty plea or plea of no contest with respect to, a felony, or the equivalent thereof; (iii) commission of an act of willful damage, willful misrepresentation, willful dishonesty, or other willful conduct that can reasonably be expected to have a material adverse effect on the business, reputation, or financial situation of the Company; or (iv) gross negligence or willful misconduct in performance of a Participant's duties; provided, however, "cause" shall not exist under clause (iv), above, with respect to an act or failure to act unless (A) the Participant has been provided written notice describing in sufficient detail the acts or failure to act giving rise to the Company's assertion of such gross negligence or misconduct, (B) been provided a reasonable period to remedy any such occurrence and (C) failed to sufficiently remedy the occurrence.   "Code" means the Internal Revenue Code of 1986, as amended. Reference in the Plan to any section of the Code shall be deemed to include any amendments or successor provisions to such section and any regulations promulgated thereunder.   "Committee" means (i) the Compensation and Development Committee of the Board, composed of not less than two directors, each of whom is both a "non-employee director" (within the meaning of Rule 16b-3(b)(3) under the Exchange Act) and an "outside director" (within the meaning of Code Section 162(m)) or (ii) any other committee of the Board to whom the Board has delegated its authority under this Plan.   "Common Stock" means the common stock, without par value, of the Company, or such other class of shares or other securities as may be subject to the Plan as a result of an adjustment made pursuant to the provisions of Section Fifteen I.   "Company" means Great Plains Energy Incorporated and its successors, including any Company as provided in Section Fifteen J.   "Date of Disability" means the date on which a Participant is classified as disabled as defined in the Company's Long-Term Disability Plan.   "Date of Grant" means, unless the Committee otherwise specifies a later Date of Grant in the Committee's applicable granting resolution, the date on which an Award is granted by the Committee.   "Date of Retirement" means the date of normal retirement or early retirement as defined in the Company's pension plan.   "Deferred Compensation Plan" means the Great Plains Energy Incorporated Nonqualified Deferred Compensation Plan, as amended.   "Director" means a member of the Board, a member of the board of directors of any Subsidiary, or any honorary, advisory or emeritus director of the Company or any Subsidiary.   "Director Deferred Share Unit" means, pursuant to Section Twelve of this Plan, a Non-Employee Director's right to receive a payment following the Non-Employee Director's termination from service as a Director, in cash or Common Stock, of an amount equal to the Fair Market Value of one share of Common Stock.   "Director Equity Payment Fees" means any fees payable to a Non-Employee Director in the form of common stock of the Company for his or her service as a Director of the Company or any of its Subsidiaries.   "Director Shares" means, pursuant to Section Twelve of the Plan, shares of Common Stock issued to a Director, as payment for serving as a Director.   "Eligible Employee" means any person employed by the Company or a Subsidiary on a regularly scheduled basis during any portion of an Award Period and who satisfies all of the requirements of Section Six.   "Exchange Act" means the Securities Exchange Act of 1934, as amended.   "Fair Market Value" means the closing market price for the Common Stock as reported on the New York Exchange Composite Transactions for the applicable measuring date.   "Good Reason" means, without a Participant's written consent and unless otherwise defined in a Participant's employment agreement or change in control severance agreement with the Company (in which case such definition will apply), any of the following:   (1) Any material and adverse reduction or material and adverse diminution in a Participant's position (including status, offices, titles and reporting requirements), authority, duties or responsibilities held, exercised or assigned at any time during the 90-day period immediately preceding the Change in Control; (2) Any reduction in a Participant's annual base salary as in effect immediately preceding the Change in Control or as the same may be increased from time to time; or (3) A Participant being required by the Company to be based at any office or location that is more than 70 miles from the location where the Participant was employed immediately preceding the Change in Control. Provided, however, notwithstanding the occurrence of any of the events set forth above in this definition, Good Reason shall not include for the purpose of this definition (1) an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Participant, or (2) any reduction in the Participant's base annual salary or reduction in benefits received by the Participant where such reduction is in connection with a company-wide reduction in salaries or benefits. "Incentive Stock Option" means an incentive stock option within the meaning of Section 422 of the Code.   "Limited Stock Appreciation Right" means an Award granted under Section Nine.   "Non-Employee Director" means a Director who is not employed by the Company or any Subsidiary.   "Option" or "Stock Option" means either a non-qualified stock option or an Incentive Stock Option granted under Section Eight.   "Option Period" or "Option Periods" means the period or periods during which an Option is exercisable as described in Section Eight E.   "Participant" means an Eligible Employee or Non-Employee Director who has been granted an Award under the Plan.   "Plan" means the Great Plains Energy Incorporated Long-Term Incentive Plan, as amended.   "Performance Award" means any Award that will be issued or granted, or become vested or payable, as the case may be, upon the achievement of certain performance goals (as described in Section Eleven B) to a Participant pursuant to Section Eleven.   "Performance Shares" means an Award granted under Section Ten.   "Restricted Stock" means an Award granted under Section Seven.   "Subsidiary" means any corporation of which 50% or more of its outstanding voting stock or voting power is beneficially owned, directly or indirectly, by the Company.   "Termination" means resignation or discharge from employment with the Company or any one of its Subsidiaries, except in the event of death, disability, or retirement.   SECTION THREE.  EFFECTIVE DATE, DURATION AND STOCKHOLDER APPROVAL A.  Effective Date.   The Plan originally became effective on May 5, 1992 and was subsequently amended effective on May 5, 1992. This Plan is amended effective May 1, 2007 and applies only with respect to Awards granted after such date. B.  Period for Grants of Awards.   Awards may be granted until May 1, 2017. C.  Termination of the Plan.   The Plan shall continue in effect until all matters relating to the payment of Awards and administration of the Plan have been settled. SECTION FOUR.  ADMINISTRATION A.  General Powers.   The Plan shall be administered by the Committee for, and on behalf of, the Board. The Committee shall have all of the powers (other than amending or terminating this Plan as provided in Section Fifteen) respecting the Plan. All questions of interpretation and application of the Plan, or of the terms and conditions pursuant to which Awards are granted, exercised or forfeited under the provisions hereof, shall be subject to the determination of the Committee. Any such determination shall be final and binding upon all parties affected thereby. B. Delegation.   Notwithstanding the general administrative powers discussed above, the Board may, by resolution, expressly delegate to a special committee consisting of two or more directors, who may also be officers of the Company, the authority, within specified parameters, to (i) grant Eligible Employees Awards under the Plan, and (ii) determine the number of such Awards to be received by any such participants; provided, however, that if such delegation of duties and responsibilities is to officers of the Company or to directors who are not "non-employee directors" (within the meaning of Rule 16b-3(b)(3) under the Exchange Act) and "outside directors" (within the meaning of Code Section 162(m)), such officers or directors may not grant Awards to eligible participants (a) who are subject to Section 16(a) of the Exchange Act at the time of grant, or (b) who, at the time of grant, are anticipated to become during the term of the Award, "covered employees" as defined in Section 162(m)(3) of the Code. The acts of such delegates shall be treated hereunder as acts of the Board and such delegates shall report regularly to the Board and the Compensation and Development Committee regarding the delegated duties and responsibilities and any Awards so granted. SECTION FIVE. GRANT OF AWARDS AND LIMITATION OF NUMBER OF SHARES AWARDED The Committee may, from time to time, grant Awards to one or more Eligible Employees or Non-Employee Directors, provided that (i) subject to any adjustment pursuant to Section Fifteen I, the aggregate number of shares of Common Stock available for Awards under this Plan may not exceed 5,000,000 shares; (ii) to the extent that an award lapses or the rights of the Participant to whom it was granted terminate, any shares of Common Stock subject to such Award shall again be available for the grant of an Award under the Plan; and (iii) shares delivered by the Company under the Plan may be authorized but unissued Common Stock, Common Stock held in the treasury of the Company or Common Stock purchased on the open market (including private purchases) in accordance with applicable securities laws. In determining the size of the Awards, the Committee shall assess the performance of the Eligible Employees against criteria to be established by the Committee, from time to time, based on the Company's performance (such as stockholder and customer related factors) and shall take into account a Participant's responsibility level, potential, cash compensation level, and the Fair Market Value of the common stock at the time of Awards, as well as such other considerations as it deems appropriate. The maximum number of shares of Common Stock with respect to which an Award or Awards may be granted to any Participant in any one taxable year of the Company shall not exceed 100,000 shares (increased, proportionately, in the event of any stock split or stock dividend with respect to the shares in accordance with Section Fifteen I).   SECTION SIX.  ELIGIBILITY Officers, other employees and Non-Employee Directors of the Company and its Subsidiaries (including officers or salaried full-time employees who are members of the Board) who, in the opinion of the Committee, make or are expected to make significant contributions to the continued growth, development, and financial success of the Company or one or more of its Subsidiaries shall be eligible to receive Awards. Subject to the provisions of the Plan, the Committee shall from time to time select from such eligible persons those to whom Awards shall be granted and determine the amount of such Awards. In no event shall the existence of this Plan create an obligation or duty of the Committee or the Company to grant an Award to any person under this Plan.   SECTION SEVEN.  RESTRICTED STOCK A.  Grant of Restricted Stock.   The Committee may grant an Award of one or more Shares of Restricted Stock to any Eligible Employee or Non-Employee Director.   A Restricted Stock Award made pursuant to this Section Seven shall be in the form of shares of Common Stock, restricted as provided herein. The Restricted Stock shall be issued in the name of the Participant and shall bear a restrictive legend prohibiting sale, transfer, pledge or hypothecation of the Restricted Stock until the expiration of the restriction period.   The Committee may also impose such other restriction and conditions on the restricted stock as it deems appropriate.   Upon issuance to the Participant of Restricted Stock, the Participant shall have the right to vote the Restricted Stock.   B.  Restriction Period.   At the time Restricted Stock is granted, the Committee shall establish a restriction period applicable to such Award which shall not be less than one year nor more than ten years. Each Restricted Stock Award may have a different restriction period at the discretion of the Committee and the Committee is authorized, in its sole discretion and at any time, to accelerate the time at which any or all of the restrictions on the Restricted Stock shall lapse or to remove any or all of such restrictions. Notwithstanding the above, shares of Restricted Stock may not be sold or transferred by a Participant within six months of the date on which such shares become vested except to the extent necessary to satisfy any minimum withholding tax liability resulting from the vesting of the Restricted Stock. C.  Forfeiture.   Except as otherwise determined by the Committee, upon the termination of employment of a Participant holding Restricted Stock for any reason during the period of time in which some or all of the shares are subject to restrictions, all shares of Restricted Stock held by the Participant and still subject to restriction will be forfeited by the Participant and reacquired by the Company; provided that in the event of a Participant's retirement, Disability, death, or in cases of special circumstances, the Committee may, in its discretion, waive in whole or in part any or all of the remaining restrictions with respect to the Participant's shares of Restricted Stock. D.  Payout of Award.   Upon completion of the restriction period and satisfaction of any other restrictions required by the Award, all restrictions on the Restricted Stock will expire and certificates representing the underlying shares will be issued to the Participant. SECTION EIGHT.  STOCK OPTION A.  Grant of Option.   The Committee may grant an Award of one or more Options to any Eligible Employee or Non-Employee Director. B.  Stock Option Agreement.   Each Option granted under the Plan shall be evidenced by a "Stock Option Agreement" between the Company and the Participant containing such terms and conditions as may be determined by the Committee, including, without limitations, provisions to qualify Incentive Stock Options as such under Section 422 of the Code; provided, however, that each Stock Option shall be subject to the following terms and conditions: (i)  the Options are exercisable either in total or in part with a partial exercise not affecting the exercisability of the balance of the Option; (ii)  every share of Common Stock purchased through the exercise of an Option shall be paid for in full at the time of the exercise; (iii)  each Option shall cease to be exercisable, as to any share of Common Stock, at the earliest of (a) the Participant's purchase of the Common Stock to which the Option relates, (b) the exercise of a related Limited Stock Appreciation Right, or (c) the lapse of the Option; and (iv)  Options shall not be transferable by the Participant other than by will or the laws of descent and distribution or pursuant to a domestic relations order validly issued and approved by a Court of proper jurisdiction. Non-Employee Directors shall be ineligible to receive Incentive Stock Options. C.  Option Price.     The Option Price per share of Common Stock shall be set by the grant, but shall not be less than 100% of the Fair Market Value at the Date of Grant. D.  Form of Payment.   At the time of an exercise of an Option, the Option price shall be payable in cash or in previously-owned shares of Common Stock or in a combination thereof. When Common Stock is used in full or partial payment of the Option price, it shall be valued at the Fair Market Value on the date the Option is exercised. E.  Other Terms and Conditions.   Each Option shall become exercisable in such manner and within such Option Period or periods not to exceed ten years from its Date of Grant, as set forth in the Stock Option Agreement. F.  Lapse of Option.   An Option will lapse upon the first occurrence of one of the following circumstances: (i) ten years from the Date of Grant; (ii) three months following the Participant's Date of Retirement; (iii) at the time of a Participant's Termination; (iv) at the expiration of the Option Period set by the grant; or (v) twelve months from the Date of Disability. If, however, the Participant dies within the Option Period and prior to the lapse of the Option, the Option shall lapse unless it is exercised within the Option Period or twelve months from the date of the Participant's death, whichever is earlier, by the Participant's legal representative or representatives or by the person or persons entitled to do so under the Participant's will or, if the Participant shall fail to make testamentary disposition of such Option or shall die intestate, by the person or persons entitled to receive said Option under the applicable laws of descent and distribution. G.  Rights as a Stockholder.   A participant or a transferee of a Participant shall have no rights as a stockholder with respect to any shares of common stock covered by an Option, until the date the Option is exercised, except as provided in Section Fifteen A. H.  Early Disposition of Common Stock.   If a Participant shall engage in a disqualifying disposition (as such term or successor term is then used under the Code) with respect to any shares of common stock purchased pursuant to an Incentive Stock Option (presently within one year from the date the shares were acquired or within two years from the Date of Grant of the Option), then, to provide the Company with the opportunity to claim the benefit of any income tax deduction which may be available to it under the circumstances, the Participant shall, within ten days of such disposition, notify the Company of the dates of acquisition and disposition of such shares of common stock, the number of shares so disposed and the consideration, if any, received therefore. I.  Individual Dollar Limitations.   The aggregate Fair Market Value (determined at the time of Award) of the common stock, with respect to which an Incentive Stock Option is exercisable for the first time by a Participant during any calendar year (whether under this Plan or another plan or arrangement of the Company) shall not exceed $100,000 (or such other limit as may be in effect under the Code on the date of Award). J.  No Obligation to Exercise Option.   The granting of an Option shall impose no obligation on the Participant to exercise such Option. K.  Six Month Period.   At least six months must elapse between the date the Option is acquired by the Participant and the date of disposition of the Option (other than upon exercise or conversion) or the common stock for which it is exercisable. L  No Repricing of Options Unless Repricing Subject to Stockholder Approval.     In no event may the Committee grant Options in replacement of Options previously granted under this Plan or any other compensation plan of the Company, or may the Committee amend outstanding Options (including amendments to adjust an Option price) unless such replacement or adjustment (i) is subject to and approved by the Company's stockholders or (ii) would not be deemed to be a repricing under the rules of the NYSE. SECTION NINE.  LIMITED STOCK APPRECIATION RIGHTS A.  Grant of Limited Stock Appreciation Rights.   The Committee may grant Limited Stock Appreciation Rights to any Eligible Employee or Non-Employee Director provided that the Eligible Employee or Non-Employee Director is holding an Option granted under the Plan.   Limited Stock Appreciation Rights may be granted with respect to an Option at the time of the Option grant or any time thereafter up to six months prior to the Option's expiration. B.  Exercise of Limited Stock Appreciation Rights. Limited Stock Appreciation Rights will be automatically exercised one day after an event of Change of Control (as defined in Section Thirteen). A Limited Stock Appreciation Right cannot be exercised in any other manner. Notwithstanding the above, a Limited Stock Appreciation Right will only be exercised if the Change in Control event occurred six months after the date of the grant of the Limited Stock Appreciation Right and the Option to which it relates has not previously been exercised.   The exercise of a Limited Stock Appreciation Right will cancel any related Option and allow the holder to receive in cash an amount equal to the excess of the Fair Market Value on the date of exercise of one share of Common Stock over the Option price, multiplied by the number of shares of Common Stock covered by the related Option.   In the event of an exercise of a Limited Stock Appreciation Right, the number of shares reserved for issuance shall be reduced by the number of shares covered by the Stock Option Award. SECTION TEN.  PERFORMANCE SHARES A.  Grant of Performance Shares.   The Committee may grant an Award of one or more Performance Shares to any Eligible Employee or Non-Employee Director.   A Performance Share is the right to receive a payment from the Company with respect to such Performance Share subject to satisfaction of such terms and conditions as the Committee may determine. Performance Shares shall be credited to a Performance Share account to be maintained for each Participant. Each Performance Share shall be deemed to be equivalent of one share of Common Stock. The Award of Performance Shares under the Plan shall not entitle the participant to any interest in or to any dividend, voting, or other rights of a stockholder of the Company.   A grant of Performance Shares may be made by the Committee during the term of the Plan.   The Participant shall be entitled to receive payment for each Performance Share of an amount based on the achievement of performance measures for such Award Period as determined by the Committee. During or before the Award Period, the Committee shall have the right to establish requirements or other criteria for measuring such performance. B. Form and Timing of Payment.   Except in the event of a Change of Control, no payment in respect of Performance Shares shall be made before the end of an Award Period or if the Participant is not or has not been at all times since the Performance Shares were granted, an employee of the Company. Any Payment to be made shall be made as soon as practicable following the end of the Award Period.   The payment to which a Participant shall be entitled at the end of an Award Period shall be a dollar amount equal to the Fair Market Value (determined as of the business day immediately preceding the date of payment) of a number of shares of Common Stock equal in number to the quotient obtained by dividing (a) the Fair Market Value of a number of shares of Common Stock equal to the original number of Performance Shares granted by (b) the original Fair Market Value of a share of Common Stock on the Date of Grant of the Performance Shares. Stock received in settlement of Performance Shares may not be disposed of within six months of the date on which the Performance Shares were granted. Payment shall normally be made in Common Stock. The Committee, however, in its sole discretion, may authorize payment in such combinations of cash and Common Stock or all in cash as it deems appropriate. Examples: For illustration purposes only, two hypothetical examples of the application of this Section Ten B are as follows: If a Participant is granted 1,000 Performance Shares on March 1, 2004 when the Fair Market Value of a Share of Common Stock is $30, and on the date the Performance Shares become entitled to payment, the Fair Market Value of a Share of Common Stock is $40 per share, the Participant will be entitled to receive a payment (either in cash or Shares of Common Stock, or both) equal in value to $53,320 (or 1,333 Shares of Common Stock). Such amount determined as follows: · 1,000 Performance Shares (original grant) multiplied by $40 (current FMV) = $40,000. · $40,000 divided by $30 (the FMV of a Share of Common Stock on Date of Grant) = 1,333 shares. · 1,333 shares multiplied by $40 per share = $53,320.   If, on the other hand, a Participant is granted 1,000 Performance Shares on March 1, 2004 when the Fair Market Value of a Share of Common Stock is $30, and on the date the Performance Shares become entitled to payment, the Fair Market Value of a Share of Common Stock is $20 per share, the Participant will be entitled to receive a payment (either in cash or Shares of Common Stock) equal in value to $13,333.32 (or 666.666 Shares of Common Stock). Such amount being determined as follows: · 1,000 Performance Shares (original grant) multiplied by $20 (current FMV) = $20,000. · $20,000 divided by $30 (the FMV of a Share of Common Stock on Date of Grant) = 666.666 shares. · 666.666 shares multiplied by $20 per share = $13,333.32. C. Forfeiture.   employment of a Participant holding Performance Shares for any reason before some or all of the Performance Shares have been paid, all Performance Shares which are not otherwise eligible to be paid will be forfeited by the Participant; provided that in the event of a Participant's retirement, Disability, death, or in cases of special circumstances, the Committee may, in its discretion, either accelerate payment on some or all of the Performance Shares or provide that the payout of any Performance Shares will be prorated for service during the Award Period and paid at the end of the Award Period. D. Dividend Equivalents The Committee may provide in an Award agreement that, as of the date any dividend is paid to holders of shares of Common Stock, one of more Performance Share shall also be credited with a hypothetical cash credit equal to the per share dividend paid on a share of Common Stock. Unless otherwise provided in an Award agreement, if the Award agreement provides for the payment of dividend equivalents, such dividend equivalents will be equal to the dividends paid during the entire Award Period for which the Performance Shares relate and not just that period of time after the Performance Shares were granted. At the end of an Award Period and provided the Performance Shares have not been forfeited in accordance with the terms of this Plan, the Participant shall be paid, in a lump sum cash payment, the aggregate amount of such hypothetical dividend equivalents.   SECTION ELEVEN.  PERFORMANCE AWARDS; SECTION 162(M) PROVISIONS. A.  Terms of Performance Awards.   The Committee may grant one or more Performance Awards to any Eligible Employee   Except as provided in Section Thirteen, Performance Awards will be issued or granted, or become vested or payable, only after the end of the relevant Award Period. The performance goals to be achieved for each Award Period and the amount of the Award to be distributed upon satisfaction of those performance goals shall be conclusively determined by the Committee. When the Committee determines whether a performance goal has been satisfied for any Award Period, the Committee, where the Committee deems appropriate, may make such determination using calculations which alternatively include and exclude one, or more than one, "extraordinary items" as determined under U.S. generally accepted accounting principles ("GAAP"), and the Committee may determine whether a performance goal has been satisfied for any Award Period taking into account the alternative which the Committee deems appropriate under the circumstances. The Committee also may establish performance goals that are determined using GAAP or other non-GAAP financial measures and may exclude or take into account mark-to-market gains and losses on energy contracts, any unusual or non-recurring items, including the charges or costs associated with restructurings of the Company, discontinued operations, and the cumulative effects of accounting changes and, further, may take into account any unusual or non-recurring events affecting the Company, changes in applicable tax laws or accounting principles or such other items and factors as the Committee may determine reasonable and appropriate under the circumstances (including any factors that could result in the Company's paying non-deductible compensation to an Employee or Non-Employee Director). B. Performance Goals.   If an Award is subject to this Section Eleven, then the lapsing of restrictions thereon, or the vesting thereof, and the distribution of cash, shares of Common Stock or other property pursuant thereto, as applicable, shall be subject to the achievement of one or more objective performance goals established by the Committee, which shall be based on the attainment of one or any combination of the following metrics (which may be calculated on a GAAP or non-GAAP basis), and which may be established on an absolute or relative basis for the Company as a whole or any of its subsidiaries, operating divisions or other operating units:   1. Earnings measures (either in the aggregate or on a per-share basis); 2. Growth or rate of growth in earnings measures (either in the aggregate or on a per-share basis); 3. Net income or loss (either in the aggregate or on a per-share basis); 4. Cash flow provided by operations (either in the aggregate or on a per-share basis); 5. Growth or rate of growth in cash flow (either in the aggregate or on a per-share basis); 6. Cash flow measures (either in the aggregate on a per-share basis); 7. Reductions in expense levels, determined either on a Company-wide basis or in respect of any one or more subsidiaries or business units; 8. Operating and maintenance cost management and employee productivity; 9. Stockholder returns (including return on assets, investments, equity, or gross sales); 10. Return measures (including return on assets, equity, or sales); 11. Growth or rate of growth in return measures (including return on assets, equity, or sales); 12. Share price (including attainment of a specified per-share price during the Award Period; growth measures and total stockholder return or attainment by the shares of common stock of a specified price for a specified period of time); 13. Strategic business criteria, consisting of one or more objectives based on meeting specified revenue, market share, market penetration, geographic business expansion goals, objectively identified project milestones, production volume levels, cost targets, and goals relating to acquisitions or divestitures; 14. Achievement of business or operational goals such as market share and/or business development; and/or 15. Achievement of credit ratings or certain credit quality levels;     provided that applicable performance goals may be applied on a pre- or post-tax basis; and provided further that the Committee may, when the applicable performance goals are established, provide that the formula for such goals may include or exclude items to measure specific objectives, including but not limited to losses from discontinued operations, extraordinary gains or losses, the cumulative effect of accounting changes, acquisitions or divestitures, foreign exchange impacts, mark-to-market gains and losses from energy contracts, and any unusual, nonrecurring gain or loss. In addition to the foregoing performance goals, the performance goals shall also include any performance goals which are set forth in a Company bonus or incentive plan, if any, which has been approved by the Company's stockholders, which are incorporated herein by reference. Such performance goals shall be set by the Committee within the time period prescribed by, and shall otherwise comply with the requirements of, Code Section 162(m).   C. Adjustments.   Except as provided in Section Fifteen I and Section Thirteen or as provided for in the immediately following sentence, with respect to any Award that is subject to this Section Eleven, the Committee may not adjust upwards the amount payable pursuant to such Award, nor may it waive the achievement of the applicable performance goals except in the case of the death or Disability of the Participant. The Committee may, at the time it initially establishes one or more performance goals, provide that the amount payable upon achievement of such performance goal may be increased in the discretion of the Committee or that the achievement of the applicable performance goals may be waived. If the Committee does not specifically provide for such flexibility at the time it establishes a performance goal, the Committee will not be permitted to adjust upwards the amount payable pursuant to the Award nor waive the achievement of the applicable performance goal except in the case of the death or Disability of the Participant. D. Other Restrictions.   The Committee shall have the power to impose such other restrictions on Awards subject to this Section Eleven as it may deem necessary or appropriate to insure that such Awards satisfy all requirements for "performance-based compensation" within the meaning of Code Section 162(m)(4)(B). E. Section 162(m) Limitations.   Notwithstanding any other provision of this Plan, if the Committee determines at the time any Award is granted to a Participant that such Participant is, or is likely to be at the time he or she recognizes income for federal income tax purposes in connection with such Award, a "Covered Employee," then the Committee may provide that this Section Eleven is applicable to such Award. SECTION TWELVE.  DIRECTOR SHARES and DIRECTOR DEFERRED SHARE UNITS A. Election to Receive Award of Director Shares or Director Deferred Share Units.   Each Non-Employee Director may elect to have his/her Director Equity Payment Fees (i) paid on a current basis in the form of Director Shares, or, pursuant to this Section Twelve, on a deferred basis. Any election to have Director Equity Payment Fees converted into Director Deferred Share Units and paid on a deferred basis shall be made in accordance with Section Twelve B below. In the absence of any election made by a Non-Employee Director, all Director's Equity Payment Fees will be paid on a current basis though the issuance of Director Shares. B. Timing of Election to Convert Director Equity Payment Fees. Each Non-Employee Director that desires to convert all or a portion of his or her Director Equity Payment Fees into Director Deferred Share Units shall make such conversion election on the Director's Deferred Equity Payment Election Form (the "Election Form") and file such Election Form with the Plan Administrator before the first day of the calendar year in which services related to the Director Equity Payment Fees to be converted are to be performed. Any Election Form delivered by a Non-Employee Director shall be irrevocable with respect to any Director Equity Payment Fees covered by the elections set forth therein. Such Election Form shall remain in effect for subsequent calendar years until a written notice to revise the Election Form is delivered to the Plan Administrator before the first day of the calendar year in which the services related to the Director Equity Payment Fees subject to the revision are performed. As of each December 31, the election becomes irrevocable with respect to Director Equity Payment Fees payable with respect to services performed in the immediately following calendar year. Notwithstanding the preceding paragraph, an election made by an individual in the calendar year in which he or she first becomes a Non-Employee Director may be made pursuant to an Election Form delivered to the Company within thirty (30) days after the date on which he or she becomes a Non-Employee Director and shall be effective with respect to Director Equity Payment Fees earned from and after the date such Election Form is delivered to the Company. C. Director Equity Payment Fees Conversion Into Director Deferred Share Units.   Any Director Equity Payment Fees that are to be converted into Director Deferred Share Units shall be so converted on each day the Director Equity Payment Fees would otherwise have been payable to the Director. The number of Director Deferred Share Units to be granted to a Non-Employee Director shall be equal to the number of shares of Common Stock that otherwise would have been payable on such day to the Director. D. Director Deferred Share Units Account.   The Company will create and maintain on its books a Director Deferred Share Unit Account for each Non-Employee Director who has made an election to convert Director Equity Payment Fees into Director Deferred Share Units. The Company will credit to such account the number of Director Deferred Share Units earned pursuant to the Non-Employee's Director's conversion election. E. Dividends. As of the date any dividend is paid to holders of shares of Common Stock, each Director Deferred Share Unit Account, regardless of whether the Non-Employee Director is then a Director, will be credited with additional Director Deferred Share Units equal to the number of shares of the Common Stock that could have been purchased with the amount which would have been paid as dividends on a number of shares (including fractions of a share to three decimals) of the Common Stock equal to the number of Director Deferred Share Units credited to such Director Deferred Share Unit Account as of the record date applicable to such dividend. The number of additional Director Deferred Share Units to be credited will be calculated to three decimals by dividing the amount which would have been paid as dividends by the Fair Market Value of one share of Common Stock as of the applicable dividend payment date. In the case of dividends paid in property other than cash, the amount of the dividend shall be deemed to be the fair market value of the property at the time of the payment of the dividend, as determined in good faith by the Committee.   F. Distribution of Director Deferred Share Units.   On the January 31st next following the date the Non-Employee Director's service on the Board terminates for any reason, all of a Non-Employee Director's Director Deferred Share Units credited to the Non-Employee's Director Deferred Share Unit Account shall be converted into an equal amount of shares of Common Stock and all whole shares of Common Stock shall be distributed, in kind, to the Non-Employee Director, or to his beneficiaries in the event of his death, in a single lump sum. Any fractional Deferred Share Unit shall be paid in cash, calculated by multiplying the fractional Deferred Share Unit by the Fair Market Value of the Common Stock as of the business day immediately preceding the date of distribution. G. Director Deferred Share Unit Status.   Except for purposes of the Company's Director Stock Ownership guidelines, Director Deferred Share Units are not, and do not constitute, shares of Common Stock, and no right as holder of shares of Common Stock devolves upon a Non-Employee Director by reason of having Director Share Units credited to his or her account. SECTION THIRTEEN.  CHANGE IN CONTROL In the event that, within the period commencing on a Change in Control (as defined below) of the Company and ending on the second anniversary of the Change in Control, and except as the Committee may expressly provide otherwise, a Participant's employment with the Company or one of its affiliates is terminated other than for Cause, or the Participant voluntarily resigns for Good Reason, then (i) all Stock Options then outstanding shall become fully exercisable unless Limited Stock Appreciation Rights were granted in connection with the Stock Options which in such event the Limited Stock Appreciation Rights will be automatically exercised as provided for in Section Nine herein; (ii) all restrictions (other than restrictions imposed by law) and conditions of all Restricted Stock Awards then outstanding shall be deemed satisfied as of the date of the Participant's termination of employment; and (iii) all Performance Share Awards shall be deemed to have been fully earned as of the date of the Participant's termination of employment, subject to the limitation that any Award which has been outstanding less than six months on the date of the Participant's termination of employment shall not be afforded such treatment. Notwithstanding the above paragraph, if a Participant is a "specified employee," as defined in Code section 409A(a)(1)(B)(i) and the payment of any Performance Share Awards would be required under Code section 409A to be delayed for a minimum of six months following the Participant's termination of employment, the payment of any Performance Share Awards shall be so delayed.   For purposes of this Plan, a "Change in Control" means the occurrence of one of the following events, whether in a single transaction or a series of related transactions:   1. any Person (as such term is defined in Sections 13(d) and 14(d) of the Exchange Act) is or becomes the Beneficial Owner (as such term is defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such Person any securities acquired directly from the Company or its affiliates other than in connection with the acquisition by the Company or its affiliates of a business) representing 35% or more of either the then outstanding shares of common stock of the Company or the combined voting power of the Company's then outstanding securities; or 2. the following individuals cease for any reason to constitute a majority of the number of directors then serving: individuals who, on the date hereof, constitute the Board and any new director (other than a director whose initial contest, including but not limited to a consent solicitation, relating to the election of directors of the Company, as such terms are used in Rule 14a-11 of Regulation 14A under the Exchange Act) whose appointment or election by the Board or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors on the date hereof or whose appointment, election or nomination for election was previously so approved; or 3. the consummation of a merger, consolidation, reorganization or similar corporate transaction of the Company, whether or not the Company is the surviving corporation in such transaction, other than (A) a merger, consolidation, or reorganization that would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or any parent thereof), in combination with the ownership of any trustee or other fiduciary holding securities under an employee benefit plan of the Company, at least 60% of the combined voting power of the voting securities of the Company or such surviving entity or any parent thereof outstanding immediately after such merger, consolidation or reorganization, or (B) a merger, consolidation or reorganization effected to implement a recapitalization of the Company (or similar transaction) in which no Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company (not including in the securities Beneficially Owned by such Person any representing 20% or more of either the then outstanding shares of common stock securities; or 4. the occurrence of, or the stockholders of the Company approve a Plan of, a 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, other than a sale or disposition of all or substantially all of the Company's assets to an entity, at least 60% of the combined voting power of the voting securities of which are owned by Persons in substantially the same proportions as their ownership of the Company immediately prior to such sale. Notwithstanding the foregoing, no "Change in Control" shall be deemed to have occurred if there is consummated any transaction or series of integrated transactions immediately following which the record holders of the common stock of the Company immediately prior to such transaction or series of transactions continue to have substantially the same proportionate ownership in an entity which owns all or substantially all of the assets of the Company immediately following such transaction or series of transactions.   SECTION FOURTEEN.  AMENDMENT OF PLAN The Board may at any time and from time to time alter, amend, suspend or terminate the Plan in whole or in part, except (i) no such action may be taken without shareholder approval which increases the benefits accruing to Participants pursuant to the Plan, increases the number of shares of Common Stock which may be issued pursuant to the Plan (except as provided in Section Fifteen I), extends the period for granting Options under the Plan, modifies the requirements as to eligibility for participation in the Plan, or requires shareholder approval under any law or regulation in effect at the time such amendment is proposed for adoption; (ii) no such action may be taken without the consent of the Participant to whom any Award shall theretofore have been granted, which adversely affects the rights of such Participant concerning such Award, except as such termination or amendment of the Plan is required by statute, or rules and regulations promulgated thereunder; and (iii) no such action may be taken if the proposed amendment must be in the discretion of the Committee to comply with the disinterested administration requirements of Rule 16b-3 under the Exchange Act.   SECTION FIFTEEN.  MISCELLANEOUS PROVISIONS A. Dividends.   The recipient of an Award may, if so determined by the Committee, be entitled to receive, currently or on a deferred basis, dividends or their equivalents, with respect to the number of shares of Common Stock covered by the Award and subject to the terms and conditions of the Plan and any applicable Award agreement. B. Nontransferability.   No benefit provided under this Plan shall be subject to alienation or assignment by a Participant (or by any person entitled to such benefit pursuant to the terms of this Plan), nor shall it be subject to attachment or other legal process of whatever nature. Any attempted alienation, assignment or attachment shall be void and of no effect whatsoever. Notwithstanding the above, Stock Options and Limited Stock Appreciation Rights may be transferred as provided in any Stock Option Agreement.   Payment shall be made only into the hands of the Participant entitled to receive the same or into the hands of the Participant's authorized legal representative. Deposit of any sum in any financial institution to the credit of any Participant (or of a person entitled to such sum pursuant to the terms of this Plan) shall constitute payment into the hands of that Participant (or such person). C. No Employment Right.   Neither this Plan nor any action taken hereunder shall be construed as giving any right to be retained as an officer or employee of the Company or any of its Subsidiaries. D. Tax Withholding.   The Company shall be authorized to withhold under the Plan the amount of withholding taxes due in respect of an Award or payment hereunder and to take such other actions as may be necessary in the opinion of the Company to satisfy all obligations for the payment of taxes. Such withholding may be deducted in cash from the value of any Award. E. Fractional Shares.   Any fractional shares shall be eliminated at the time of payment or payout by rounding down for fractions of less than one-half and rounding up for fractions equal to or more than one-half. No cash settlements shall be made with respect to fractional shares eliminated by rounding. F. Government and Other Regulations.   The obligation of the Company to make payment of Awards in common stock or otherwise shall be subject to all applicable laws, rules, and regulations, and to such approvals by any government agencies as may be required. Except as required by law, the Company shall be under no obligation to register under the Securities Act of 1933, as amended ("Act"), any of the shares of common stock issued, delivered or paid in settlement under the Plan. If common stock granted under the Plan may in certain circumstances be exempt from registration under the Act, the Company may restrict its transfer in such manner as it deems advisable to ensure such exempt status. G. Indemnification.   Each person who is or at any time serves as a member of the Committee shall be indemnified and held harmless by the Company against and from (i) any loss, cost liability, or expenses that may be imposed upon or reasonably incurred by such person in connection with or resulting from any claim, action, suit, or proceeding to which such person may be a party or in which such person may be involved by reason of any action or failure to act under the Plan; and (ii) any and all amounts paid by such person in satisfaction of judgment in any such action, suit or proceeding relating to the Plan. Each person covered by this indemnification shall give the Company an opportunity, at its own expense, to handle and defend the same before such person undertakes to handle and defend it on such person's own behalf. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled under the Restated Articles of Consolidation or By-Laws of the Company or any of its Subsidiaries, as a matter of law, or otherwise, or any power that the Company may have to indemnify such person or hold such person harmless. H. Reliance on Reports.   Each member of the Committee shall be fully justified in relying or acting in good faith upon any report made by the independent public accountants of the Company and its Subsidiaries and upon any other information furnished in connection with the Plan. In no event shall any person who is or shall have been a member of the Committee be liable for any determination made or other action taken or any omission to act in reliance upon any such report or information or for any action taken, including the furnishing of information, or failure to act, if in good faith. I. Changes in Capital Structure.   If, without the receipt of consideration therefore by the Company, the Company shall at any time increase or decrease the number of its outstanding shares of Common Stock or change in any way the rights and privileges of such Common Stock such as, but not limited to, the payment of a stock dividend or any other distribution upon such Common Stock payable in Stock, or through a stock split, subdivision, consolidation, combination, reclassification or recapitalization involving the Common Stock, such that any adjustment is determined by the Committee to be appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan, then in relation to the Stock that is affected by one or more of the above events, the numbers, rights and privileges of (i) the shares of Common Stock as to which Awards may be granted under the Plan, and (ii) the shares of Common Stock then included in each outstanding Award granted hereunder, shall be increased, decreased or changed in like manner as if they had been issued and outstanding, fully paid and non assessable at the time of such occurrence.   If any adjustment or substitution provided for in this Section Fifteen I shall result in the creation of a fractional share of Common Stock under any Award, such fractional share shall be rounded to the nearest whole share and fractional shares shall not be issued.   In the case of any such substitution or adjustment affecting an Option or a Limited Stock Appreciation Right, such substitution or adjustments shall be made in a manner that is in accordance with the substitution and assumption rules set forth in Treasury Regulations 1.424-1 and the applicable guidance relating to Code Section 409A. J. Company Successors.   In the event the Company becomes party to a merger, consolidation, sale of substantially all of its assets or any other corporate reorganization in which the Company will not be the surviving corporation or in which the holders of the common stock will receive securities of another corporation, then such Company shall assume the rights and obligations of the Company under this Plan. K. Governing Law.   All matters relating to the Plan or to Awards granted hereunder shall be governed by the laws of the State of Missouri, without regard to the principles of conflict of laws. L. Code Section 409A. This Plan is intended to meet the requirements of Section 409A of the Code and may be administered in a manner that is intended to meet those requirements and will be construed and interpreted in accordance with such intent. All payments hereunder are subject to Section 409A of the Code and will be paid in a manner that will meet the requirements of Section 409A of the Code, including regulations or other guidance issued with respect thereto, such that the payment will not be subject to the excise tax applicable under Section 409A of the Code. Any provision of this Plan that would cause the payment to fail to satisfy Section 409A of the Code will be amended (in a manner that as closely as practicable achieves the original intent of this Plan) to comply with Section 409A of the Code on a timely basis, which may be made on a retroactive basis, in accordance with regulations and other guidance issued under Section 409A of the Code.   M. Relationship to Other Benefits.   No payment under the Plan shall be taken into account in determining any benefits under any pension, retirement, profit sharing or group insurance plan of the Company or any Subsidiary, except as may be required by Federal law and regulation or to meet other applicable legal requirements. N. Expenses.   The expenses of the Plan shall be borne by the Company and its Subsidiaries if appropriate. O. Titles and Headings.   The titles and headings of the sections in the Plan are for convenience of reference only, and in the event of any conflict, the text of the Plan, rather than such titles or headings, shall control.  

Exhibit 10(d) __________ Shares Date of Grant: _________________ RESTRICTED SHARE AWARD CLIFF VESTING AWARDS 2004 OMNIBUS STOCK AND INCENTIVE PLAN FOR DENBURY RESOURCES INC. RESTRICTED SHARE AWARD (“Award”) made effective on the Date of Grant between Denbury Resources Inc. (the “Company”) and ______________ (“Holder”). WHEREAS, the Company desires to grant to the Holder ______ (______________________________) Restricted Shares under and for the purposes of the 2004 Omnibus Stock and Incentive Plan for Denbury Resources Inc. (the “Plan”); WHEREAS, in accordance with the provisions of Section 16(d) of the Plan, the Restricted Shares will be issued by the Company in the Holder's name and be issued and outstanding for all purposes (except as provided below or in the Plan) but held by the Company (together with the stock power set forth below) until such time as such Restricted Shares are Vested by reason of the lapse of the applicable Restrictions, after which time the Company shall make delivery of the Vested Shares to Holder; and WHEREAS, the Company and Holder understand and agree that this Award is in all respects subject to the terms, definitions and provisions of the Plan, and all of which are incorporated herein by reference, except to the extent otherwise expressly provided in this Award. NOW THEREFORE, in consideration of the mutual covenants hereinafter set forth and for other good and valuable consideration, the parties agree as follows: 1.    Restricted Share Award. The Company hereby sells, transfers, assigns and delivers to the Holder an aggregate of ________ (_______________________) Restricted Shares (“Award Restricted Shares”) on the terms and conditions set forth in the Plan and supplemented in this Award, including, without limitation, the restrictions more specifically set forth in Section 2 below, subject only to Holder's execution of this Award agreement. 2.    Vesting of Award Restricted Shares. The Restrictions on the Award Restricted Shares shall lapse (Award Restricted Shares with respect to which Restrictions have lapsed being herein referred to as “Vested Shares”) and become non-forfeitable on the occurrence of the earliest of the dates (“Vesting Date”) set forth in (a) through (e) immediately below: (a)    March 31, _____; (b)    the date of Holder's death or Disability; (c)    the date of a Change in Control; (d)    the date of a Post-Separation Change in Control; and (e) the date of Holder's Retirement Vesting Date, provided that such date is at least one year from the Date of Grant. In the event that Holder's Retirement Vesting Date occurs prior to the first anniversary of the Date of Grant, vesting of this Award under this Paragraph 2(e) shall occur upon the first anniversary of the Date of Grant, unless the Award has been forfeited pursuant to Section 3.      For purposes of this Award, the term “Post-Separation Change in Control” means a Change in Control which follows the Holder's Separation, but results from the Commencement of a Change in Control that occurs prior to the Holder's Separation. For all purposes of this Award, the term “Commencement of a Change in Control” shall mean the date on which any material action, A-1 including without limitation through a written offer, open-market bid, corporate action, proxy solicitation or otherwise, is taken by a “person” (as defined in Section 13(d) or Section 14(d)(2) of the 1934 Act), or a “group” (as defined in Section 13(d)(3) of the 1934 Act), or their affiliates, to commence efforts that, within 12 months after the date of such material action, leads to a Change in Control as defined in Section 2(h)(2), (3) or (4) of the Plan involving such person, group, or their affiliates. 3.    Restrictions - Forfeiture of Award Restricted Shares. The Award Restricted Shares are subject to the Restriction that, except as provided in the following sentence, all rights of Holder to any Award Restricted Shares which have not become Vested Shares automatically, and without notice, shall terminate and shall be permanently forfeited on the date of Holder's Separation. The exception referred to in the preceding sentence is that, if there is a Post-Separation Change in Control, the previously forfeited Award Restricted Shares shall be reinstated as Vested Shares and, for all purposes of this Award, Holder will be deemed to have Separated on the day after such Post-Separation Change in Control. 4.    Withholding. On the date Award Restricted Shares become Vested Shares, the minimum withholding required to be made by the Company shall be paid by Holder to the Administrator in cash, or by delivery of Shares, which Shares may be in whole or in part Vested Shares, based on the Fair Market Value of such Shares on the date of delivery. The Holder, in his sole discretion, may direct that the Company withhold at any rate which is in excess of the minimum withholding rate described in the preceding sentence, but not in excess of the highest incremental tax rate for Holder, and such additional directed withholding will be made in the same manner as described in the preceding sentence except that such additional directed withholding may only be paid in Shares which have been previously acquired and have been held by Holder for at least six (6) months prior to the date of delivery.   5.    Issuance of Shares. Without limitation, Holder shall have all of the rights and privileges of an owner of the Award Restricted Shares (including voting rights) except that Holder shall not be entitled to delivery of the shares or the certificates evidencing any such shares unless and until they become Vested Shares, nor shall Holder be entitled to receive Restricted Share Distributions (i.e. dividends) until they become Vested Shares. The Administrator or its designee shall deliver the Vested Shares (reduced by the number of Vested Shares delivered to the Administrator to pay required withholding under Section 4 above) to the Holder as soon as reasonably possible following vesting. The Holder agrees to hold and retain the required number of Vested Shares as specified in the Company's stock ownership guidelines, as potentially modified from time to time. 6.    No Transfers Permitted. Holder may file with the Administrator a written designation of beneficiary for Awards under the Plan, which will remain in effect for all such Awards until changed in writing by the Holder. In the event that Holder does not file a written designation of beneficiary, or where such beneficiary predeceases the Holder, the following rules shall apply: (i) the Holder's beneficiary designation for the basic life insurance benefits provided by the Company shall then apply; and (ii) in the absence of such beneficiary designation, or in the event that the designated beneficiary predeceases the Holder, the Company will allow the legal representative of the Holder's estate to exercise any and all rights under an Award, including the right to receive and retain Vested Shares. The rights under this Award are not transferable by the Holder other than by beneficiary designation or the Applicable Laws of descent and distribution. 7.    No Right To Continued Employment. Neither the Plan nor this Award shall confer upon the Holder any right with respect to continuation of employment by the Company, or any right to provide services to the Company, nor shall they interfere in any way with Holder's right to terminate employment, or the Company's right to terminate Holder's employment, at any time. 8.    Governing Law. Without limitation, this Award shall be construed and enforced in accordance with and governed by the laws of Delaware. 9.    Binding Effect. This Award shall inure to the benefit of and be binding upon the heirs, executors, administrators, successors and assigns of the parties hereto. 10.    Severability. If any provision of this Award is declared or found to be illegal, unenforceable or void, in whole or in part, the remainder of this Award will not be affected by such declaration or finding and each such provision not so affected will be enforced to the fullest extent permitted by law. 11.    Committee Authority. The Award shall be administered by the Committee, which shall adopt rules and regulations for carrying out the purposes of the Award and, without limitation, may delegate all of what, in its sole discretion, it determines to be A-2 ministerial duties to the Administrator; provided, further, that the determinations under, and the interpretations of, any provision of the Award by the Committee shall, in all cases, be in its sole discretion, and shall be final and conclusive. IN WITNESS WHEREOF, the Company has caused this Award to be executed on its behalf and its corporate seal to be affixed hereto by its duly authorized representative and the Holder has hereunto set his or her hand and seal, all on   DENBURY RESOURCES INC.         Per:     Phil Rykhoek, Chief Executive Officer               Per:     Mark Allen, SVP & Chief Financial Officer A-3 Assignment Separate From Certificate FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto Denbury Resources Inc. the _________ Shares subject to this Award, standing in the undersigned's name on the books of said Denbury Resources Inc., and do hereby irrevocably constitute and appoint the corporate secretary of Denbury Resources Inc. as attorney to transfer the said stock on the books of Denbury Resources Inc. with full power of substitution in the premises. Dated ____________________ ________________________________ Holder's signature ACKNOWLEDGMENT The undersigned hereby acknowledges (i) my receipt of this Award, (ii) my opportunity to review the Plan, (iii) my opportunity to discuss this Award with a representative of the Company, and my personal advisors, to the extent I deem necessary or appropriate, (iv) my understanding of the terms and provisions of the Award and the Plan, and (v) my understanding that, by my signature below, I am agreeing to be bound by all of the terms and provisions of this Award and the Plan. Without limitation, I agree to accept as binding, conclusive and final all decisions or interpretations (including, without limitation, all interpretations of the meaning of provisions of the Plan, or this Award, or both) of the Administrator upon any questions arising under the Plan, or this Award, or both. Dated as of this ________ day of ______________, 20__. ________________________________ Holder's signature A-4

EXHIBIT 24 Old Point Financial Corporation Power of Attorney I, James Reade Chisman, do hereby constitute and appoint Robert F. Shuford, Sr and Louis G. Morris, my true and lawful attorney-in-fact, any of whom acting singly is hereby authorized for me and in my name and on my behalf as a director and/or officer of Old Point Financial Corporation (the "Corporation"), to act and to execute any and all instruments as such attorneys or attorney deem necessary or advisable to enable the Corporation to comply with the Securities Exchange Act of 1934, as amended ("Act"), and any rules, regulations, policies or requirements of the Securities Exchange Commission (the "Commission") in respect thereof in connection with the preparation and filing by the Corporation with the Commission of its Annual Report on Form 10-K for the year ended December 31, 2011 and any and all amendments to such Report, together with such other supplements, statements, instruments and documents as such attorneys or attorney deem necessary or appropriate. I do hereby ratify and confirm all my said attorneys or attorney shall do or cause to be done by virtue hereof. WITNESS my execution hereof this 10th day of January, 2012. /s/ James Reade Chisman (SEAL) James Reade Chisman Old Point Financial Corporation Power of Attorney I, Richard F. Clark, do hereby constitute and appoint Robert F. Shuford, Sr and Louis G. Morris, my true and lawful attorney-in-fact, any of whom acting singly is hereby authorized for me and in my name and on my behalf as a director and/or officer of Old Point Financial Corporation (the "Corporation"), to act and to execute any and all instruments as such attorneys or attorney deem necessary or advisable to enable the Corporation to comply with the Securities Exchange Act of 1934, as amended ("Act"), and any rules, regulations, policies or requirements of the Securities Exchange Commission (the "Commission") in respect thereof in connection with the preparation and filing by the Corporation with the Commission of its Annual Report on Form 10-K for the year ended December 31, 2011 and any and all amendments to such Report, together with such other supplements, statements, instruments and documents as such attorneys or attorney deem necessary or appropriate. I do hereby ratify and confirm all my said attorneys or attorney shall do or cause to be done by virtue hereof. WITNESS my execution hereof this 10th day of January, 2012. /s/ Richard F. Clark (SEAL) Richard F. Clark Old Point Financial Corporation Power of Attorney I, Russell S. Evans, Jr., do hereby constitute and appoint Robert F. Shuford, Sr and Louis G. Morris, my true and lawful attorney-in-fact, any of whom acting singly is hereby authorized for me and in my name and on my behalf as a director and/or officer of Old Point Financial Corporation (the "Corporation"), to act and to execute any and all instruments as such attorneys or attorney deem necessary or advisable to enable the Corporation to comply with the Securities Exchange Act of 1934, as amended ("Act"), and any rules, regulations, policies or requirements of the Securities Exchange Commission (the "Commission") in respect thereof in connection with the preparation and filing by the Corporation with the Commission of its Annual Report on Form 10-K for the year ended December 31, 2011 and any and all amendments to such Report, together with such other supplements, statements, instruments and documents as such attorneys or attorney deem necessary or appropriate. I do hereby ratify and confirm all my said attorneys or attorney shall do or cause to be done by virtue hereof. WITNESS my execution hereof this 10th day of January, 2012. /s/ Russell S. Evans, Jr. (SEAL) Russell S. Evans, Jr. Old Point Financial Corporation Power of Attorney I, Michael A. Glasser, do hereby constitute and appoint Robert F. Shuford, Sr and Louis G. Morris, my true and lawful attorney-in-fact, any of whom acting singly is hereby authorized for me and in my name and on my behalf as a director and/or officer of Old Point Financial Corporation (the "Corporation"), to act and to execute any and all instruments as such attorneys or attorney deem necessary or advisable to enable the Corporation to comply with the Securities Exchange Act of 1934, as amended ("Act"), and any rules, regulations, policies or requirements of the Securities Exchange Commission (the "Commission") in respect thereof in connection with the preparation and filing by the Corporation with the Commission of its Annual Report on Form 10-K for the year ended December 31, 2011 and any and all amendments to such Report, together with such other supplements, statements, instruments and documents as such attorneys or attorney deem necessary or appropriate. I do hereby ratify and confirm all my said attorneys or attorney shall do or cause to be done by virtue hereof. WITNESS my execution hereof this 10th day of January, 2012. /s/ Michael A. Glasser (SEAL) Michael A. Glasser Old Point Financial Corporation Power of Attorney I, Dr. Arthur D. Greene, do hereby constitute and appoint Robert F. Shuford, Sr and Louis G. Morris, my true and lawful attorney-in-fact, any of whom acting singly is hereby authorized for me and in my name and on my behalf as a director and/or officer of Old Point Financial Corporation (the "Corporation"), to act and to execute any and all instruments as such attorneys or attorney deem necessary or advisable to enable the Corporation to comply with the Securities Exchange Act of 1934, as amended ("Act"), and any rules, regulations, policies or requirements of the Securities Exchange Commission (the "Commission") in respect thereof in connection with the preparation and filing by the Corporation with the Commission of its Annual Report on Form 10-K for the year ended December 31, 2011 and any and all amendments to such Report, together with such other supplements, statements, instruments and documents as such attorneys or attorney deem necessary or appropriate. I do hereby ratify and confirm all my said attorneys or attorney shall do or cause to be done by virtue hereof. WITNESS my execution hereof this 10th day of January, 2012. /s/ Dr. Arthur D. Greene (SEAL) Dr. Arthur D. Greene Old Point Financial Corporation Power of Attorney I, Stephen D. Harris, do hereby constitute and appoint Robert F. Shuford, Sr and Louis G. Morris, my true and lawful attorney-in-fact, any of whom acting singly is hereby authorized for me and in my name and on my behalf as a director and/or officer of Old Point Financial Corporation (the "Corporation"), to act and to execute any and all instruments as such attorneys or attorney deem necessary or advisable to enable the Corporation to comply with the Securities Exchange Act of 1934, as amended ("Act"), and any rules, regulations, policies or requirements of the Securities Exchange Commission (the "Commission") in respect thereof in connection with the preparation and filing by the Corporation with the Commission of its Annual Report on Form 10-K for the year ended December 31, 2011 and any and all amendments to such Report, together with such other supplements, statements, instruments and documents as such attorneys or attorney deem necessary or appropriate. I do hereby ratify and confirm all my said attorneys or attorney shall do or cause to be done by virtue hereof. WITNESS my execution hereof this 10th day of January, 2012. /s/ Stephen D. Harris (SEAL) Stephen D. Harris Old Point Financial Corporation Power of Attorney I, John Cabot Ishon, do hereby constitute and appoint Robert F. Shuford, Sr and Louis G. Morris, my true and lawful attorney-in-fact, any of whom acting singly is hereby authorized for me and in my name and on my behalf as a director and/or officer of Old Point Financial Corporation (the "Corporation"), to act and to execute any and all instruments as such attorneys or attorney deem necessary or advisable to enable the Corporation to comply with the Securities Exchange Act of 1934, as amended ("Act"), and any rules, regulations, policies or requirements of the Securities Exchange Commission (the "Commission") in respect thereof in connection with the preparation and filing by the Corporation with the Commission of its Annual Report on Form 10-K for the year ended December 31, 2011 and any and all amendments to such Report, together with such other supplements, statements, instruments and documents as such attorneys or attorney deem necessary or appropriate. I do hereby ratify and confirm all my said attorneys or attorney shall do or cause to be done by virtue hereof. WITNESS my execution hereof this 10th day of January, 2012. s/ John Cabot Ishon (SEAL) John Cabot Ishon Old Point Financial Corporation Power of Attorney I, John B. Morgan, II, do hereby constitute and appoint Robert F. Shuford, Sr and Louis G. Morris, my true and lawful attorney-in-fact, any of whom acting singly is hereby authorized for me and in my name and on my behalf as a director and/or officer of Old Point Financial Corporation (the "Corporation"), to act and to execute any and all instruments as such attorneys or attorney deem necessary or advisable to enable the Corporation to comply with the Securities Exchange Act of 1934, as amended ("Act"), and any rules, regulations, policies or requirements of the Securities Exchange Commission (the "Commission") in respect thereof in connection with the preparation and filing by the Corporation with the Commission of its Annual Report on Form 10-K for the year ended December 31, 2011 and any and all amendments to such Report, together with such other supplements, statements, instruments and documents as such attorneys or attorney deem necessary or appropriate. I do hereby ratify and confirm all my said attorneys or attorney shall do or cause to be done by virtue hereof. WITNESS my execution hereof this 10th day of January, 2012. /s/ John B. Morgan, II (SEAL) John B. Morgan, II Old Point Financial Corporation Power of Attorney I, Louis G. Morris, do hereby constitute and appoint Robert F. Shuford, Sr and Louis G. Morris, my true and lawful attorney-in-fact, any of whom acting singly is hereby authorized for me and in my name and on my behalf as a director and/or officer of Old Point Financial Corporation (the "Corporation"), to act and to execute any and all instruments as such attorneys or attorney deem necessary or advisable to enable the Corporation to comply with the Securities Exchange Act of 1934, as amended ("Act"), and any rules, regulations, policies or requirements of the Securities Exchange Commission (the "Commission") in respect thereof in connection with the preparation and filing by the Corporation with the Commission of its Annual Report on Form 10-K for the year ended December 31, 2011 and any and all amendments to such Report, together with such other supplements, statements, instruments and documents as such attorneys or attorney deem necessary or appropriate. I do hereby ratify and confirm all my said attorneys or attorney shall do or cause to be done by virtue hereof. WITNESS my execution hereof this 10th day of January, 2012. /s/ Louis G. Morris (SEAL) Louis G. Morris Old Point Financial Corporation Power of Attorney I, Robert L. Riddle, do hereby constitute and appoint Robert F. Shuford, Sr and Louis G. Morris, my true and lawful attorney-in-fact, any of whom acting singly is hereby authorized for me and in my name and on my behalf as a director and/or officer of Old Point Financial Corporation (the "Corporation"), to act and to execute any and all instruments as such attorneys or attorney deem necessary or advisable to enable the Corporation to comply with the Securities Exchange Act of 1934, as amended ("Act"), and any rules, regulations, policies or requirements of the Securities Exchange Commission (the "Commission") in respect thereof in connection with the preparation and filing by the Corporation with the Commission of its Annual Report on Form 10-K for the year ended December 31, 2011 and any and all amendments to such Report, together with such other supplements, statements, instruments and documents as such attorneys or attorney deem necessary or appropriate. I do hereby ratify and confirm all my said attorneys or attorney shall do or cause to be done by virtue hereof. WITNESS my execution hereof this 10th day of January, 2012. /s/ Robert L. Riddle (SEAL) Robert L. Riddle Old Point Financial Corporation Power of Attorney I, Dr. H. Robert Schappert, do hereby constitute and appoint Robert F. Shuford, Sr and Louis G. Morris, my true and lawful attorney-in-fact, any of whom acting singly is hereby authorized for me and in my name and on my behalf as a director and/or officer of Old Point Financial Corporation (the "Corporation"), to act and to execute any and all instruments as such attorneys or attorney deem necessary or advisable to enable the Corporation to comply with the Securities Exchange Act of 1934, as amended ("Act"), and any rules, regulations, policies or requirements of the Securities Exchange Commission (the "Commission") in respect thereof in connection with the preparation and filing by the Corporation with the Commission of its Annual Report on Form 10-K for the year ended December 31, 2011 and any and all amendments to such Report, together with such other supplements, statements, instruments and documents as such attorneys or attorney deem necessary or appropriate. I do hereby ratify and confirm all my said attorneys or attorney shall do or cause to be done by virtue hereof. WITNESS my execution hereof this 10th day of January, 2012. /s/ Dr. H. Robert Schappert (SEAL) Dr. H. Robert Schappert Old Point Financial Corporation Power of Attorney I, Robert F. Shuford, Sr., do hereby constitute and appoint Robert F. Shuford, Sr and Louis G. Morris, my true and lawful attorney-in-fact, any of whom acting singly is hereby authorized for me and in my name and on my behalf as a director and/or officer of Old Point Financial Corporation (the "Corporation"), to act and to execute any and all instruments as such attorneys or attorney deem necessary or advisable to enable the Corporation to comply with the Securities Exchange Act of 1934, as amended ("Act"), and any rules, regulations, policies or requirements of the Securities Exchange Commission (the "Commission") in respect thereof in connection with the preparation and filing by the Corporation with the Commission of its Annual Report on Form 10-K for the year ended December 31, 2011 and any and all amendments to such Report, together with such other supplements, statements, instruments and documents as such attorneys or attorney deem necessary or appropriate. I do hereby ratify and confirm all my said attorneys or attorney shall do or cause to be done by virtue hereof. WITNESS my execution hereof this 10th day of January, 2012. /s/ Robert F. Shuford, Sr. (SEAL) Robert F. Shuford, Sr. Old Point Financial Corporation Power of Attorney I, Robert F. Shuford, Jr., do hereby constitute and appoint Robert F. Shuford, Sr and Louis G. Morris, my true and lawful attorney-in-fact, any of whom acting singly is hereby authorized for me and in my name and on my behalf as a director and/or officer of Old Point Financial Corporation (the "Corporation"), to act and to execute any and all instruments as such attorneys or attorney deem necessary or advisable to enable the Corporation to comply with the Securities Exchange Act of 1934, as amended ("Act"), and any rules, regulations, policies or requirements of the Securities Exchange Commission (the "Commission") in respect thereof in connection with the preparation and filing by the Corporation with the Commission of its Annual Report on Form 10-K for the year ended December 31, 2011 and any and all amendments to such Report, together with such other supplements, statements, instruments and documents as such attorneys or attorney deem necessary or appropriate. I do hereby ratify and confirm all my said attorneys or attorney shall do or cause to be done by virtue hereof. WITNESS my execution hereof this 10th day of January, 2012. /s/ Robert F. Shuford, Jr. (SEAL) Robert F. Shuford, Jr. Old Point Financial Corporation Power of Attorney I, Ellen Clark Thacker, do hereby constitute and appoint Robert F. Shuford, Sr and Louis G. Morris, my true and lawful attorney-in-fact, any of whom acting singly is hereby authorized for me and in my name and on my behalf as a director and/or officer of Old Point Financial Corporation (the "Corporation"), to act and to execute any and all instruments as such attorneys or attorney deem necessary or advisable to enable the Corporation to comply with the Securities Exchange Act of 1934, as amended ("Act"), and any rules, regulations, policies or requirements of the Securities Exchange Commission (the "Commission") in respect thereof in connection with the preparation and filing by the Corporation with the Commission of its Annual Report on Form 10-K for the year ended December 31, 2011 and any and all amendments to such Report, together with such other supplements, statements, instruments and documents as such attorneys or attorney deem necessary or appropriate. I do hereby ratify and confirm all my said attorneys or attorney shall do or cause to be done by virtue hereof. WITNESS my execution hereof this 10th day of January, 2012. /s/ Ellen Clark Thacker (SEAL) Ellen Clark Thacker Old Point Financial Corporation Power of Attorney I, Joseph R. Witt, do hereby constitute and appoint Robert F. Shuford, Sr and Louis G. Morris, my true and lawful attorney-in-fact, any of whom acting singly is hereby authorized for me and in my name and on my behalf as a director and/or officer of Old Point Financial Corporation (the "Corporation"), to act and to execute any and all instruments as such attorneys or attorney deem necessary or advisable to enable the Corporation to comply with the Securities Exchange Act of 1934, as amended ("Act"), and any rules, regulations, policies or requirements of the Securities Exchange Commission (the "Commission") in respect thereof in connection with the preparation and filing by the Corporation with the Commission of its Annual Report on Form 10-K for the year ended December 31, 2011 and any and all amendments to such Report, together with such other supplements, statements, instruments and documents as such attorneys or attorney deem necessary or appropriate. I do hereby ratify and confirm all my said attorneys or attorney shall do or cause to be done by virtue hereof. WITNESS my execution hereof this 10th day of January, 2012. /s/ Joseph R. Witt (SEAL) Joseph R. Witt

EXHIBIT 10.9 AGREEMENT FOR THE PURCHASE AND SALE OF ASSETS OF THE BRAINY BABY COMPANY, LLC THIS AGREEMENT (the "Agreement") made and entered into this 23rd day of September, 2010, by and among ASSET RECOVERY ASSOCIATES, LLC as Assignee for the benefit of creditors of THE BRAINY BABY COMPANY, LLC. (the "Seller") and BRAINY ACQUISITIONS, INC. a Georgia corporation (hereinafter referred to as ''Buyer"). WITNESSETH WHEREAS, prior to the execution of this Agreement, THE BRAINY BABY COMPANY, LLC (the "Assignor""), by Deed of Assignment (the "Deed of Assignment"), dated September 21, 2010, has assigned all of its assets to Seller. as Assignee, pursuant to Georgia Law; WHEREAS, Seller, as Assignee. presently continues to conduct the business of the Assignor for the benefit of the creditors of the Assignor and not for its own account; WHEREAS, the Assignor has been engaged in the business of producing and distributing DVDs and related items (the "Business"); WHEREAS, Buyer desires to purchase from Seller the certain assets of the Assignor set forth on Schedule I attached hereto (the "Purchased Assets"); WHEREAS, all sales proceeds payable to Seller, as a result of the transaction in this Agreement., shall he for the benefit of the creditors of Assignor; and WHEREAS, upon the terms and subject to the conditions hereinafter set forth, Seller desires to sell, assign, convey and transfer to Buyer, and Buyer desires to purchase and acquire from Seller, the Purchased Assets. NOW, THEREFORE, in consideration of the premises, and the mutual representations, warranties, covenants and agreements hereinafter set forth, and each intending to be legally bound hereby, the parties hereto agree as follows: 1.Sale of Assets and Excluded Assets. 1.1 Sale of Assets. The Seller shall sell, convey, assign, transfer and deliver to Buyer, free and clear from all liens, mortgages, pledges, restrictions. security interests, charges, claims and other encumbrances whatsoever, (listed on Schedule I) and Buyer agrees to purchase from Seller, all of Seiler's right, title and interest in and to the Purchased Assets. Buyer acknowledges that there is a Lien on the Purchased Assets. as listed on Schedule 2, "Liens disclosed by The Brainy Baby Company, LLC to Asset Recovery Associates as Assignee for The Brainy Baby Company, LLC". 1 1.2 Excluded Assets. The Purchased. Assets do not include any other assets of the business equipment not specifically listed on Schedule I. 2.Purchase Price and Payment. 2.1 Purchase Price. Subject to the terms and conditions set forth herein, the purchase price ( the "Purchase Price") for the Purchased Assets shall be $87,500. 2.2 Payments at Closing. On the Closing. the Buyer shall wire funds to: Asset Recovery Associates, LLC Wachot ia Bank Sandy Springs Branch Atlanta, Georgia 30328 ABA 4061000227 Account 112000028629775 2.4 Expenses. Buyer and Seller shall he solely responsible for all of its own respective expenses in order to consummate the transactions contemplated herein, including independent broker fees, legal and financial advisor's fees. 3.Buyer Does Not Assume Any Liability. Buyer is not assuming any debt. account payable. contract, agreement, commitment, or other obligation or liability of the Seller or the Business, with the exception of those listed on Schedule III, ("Retained Liabilities"). 4.Closing and Deliveries. The closing of the purchase and sale provided for herein (the "Closing") shall take place on the date hereof at a mutually agreed upon location by both parties. 4,1Closing Deliveries. At the Closing (or within thirty (30) days of Closing in the case of Section 4.1(a)(vii) below): (a) The Buyer shall deliver to the Seller: (i)the amount set' orth in Section 2.1; (ii)a counterpart to the bill of sale (the "Bill of Sale") attached hereto as Exhibit A, duly executed by the Buyer: (b) The Seller shall deliver to the Buyer: (1)physical possession of the Delivered Purchased Assets (as identified on Schedule 1); a counterpart to the Bill of Sale, duly executed by the Seller; 4.2Further Assurances. The respective parties shall, from time to time after the date of closing, execute and deliver to each other any additional instruments and documents, in a form reasonably satisfactory to counsel for Buyer and for Seller, as may he necessary or appropriate to more effectively transfer and assign to and invest in the Buyer full, good and marketable title to the Purchased Assets or to consummate the transactions contemplated by this Agreement or the Bill of Sale. 5. Representations and Warranties of the Seller. 5.1Title to Purchased Assets. The Seller has good and marketable title to all of the Purchased Assets, and the complete and unrestricted power and the unqualified right to sell, assign, transfer. convey and deliver the Purchased Assets to the Buyer, and will transfer and convey to the Buyer at the Closing, and the Buyeracquire at the Closing, good, valid and marketable title to the Purchased Assets free and clear of all known liens, restrictions, security interests, charges, claims and encumbrances except as disclosed on Schedule 2. 5.2Valid and Binding Agreement. The Seller has all requisite corporate power and authority to enter into this Agreement and the Bill of Sale (collectively, the "Transaction Documents"), to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby . All necessary action on the part of the Seller, its board of directors, its shareholders. its creditors or otherwise, has been taken to authorize the execution and delivery of the Transaction Documents, the performance of its obligations hereunder and thereunder and the consummation of the transactions contemplated hereby and thereby. The Transaction Documents have been duly and validly executed and delivered by the Seller, and each constitutes a valid and binding agreement of the Seller, enforceable in accordance with its terms. 5.3Consents and Approvals. Except as set forth on Schedule 5.3, no permit, application, notice. transfer_ consent, approval, order, qualification_ waiver from or authorization of, or declaration, filing or registration with, any governmental or regulatory authority or third party is required to be made or obtained by the Seller in connection with the execution, delivery and performance of the Transaction Documents or the consummation of the transactions contemplated hereby or thereby. 5.5No Other contracts. The Seller has not entered into any other contract o sell any of the Purchased Assets. 5.6Bulk Sales Law. The transactions contemplated by this Agreement are exempt from the provisions of the Georgia Uniform Commercial Code Bulk Transfers Act, O.C.G.A. §11-6-10, etsue. pursuant to 0.C.G.A. § 11-6-103(2) and any other bulk sale or transfer laws. 2 5.7Absence of Undisclosed Liabilities. 1 he Seller has no material liabilities or obligations of any nature, except those liabilities and obligations fully disclosed in the Deed of Assignment. 6.Seller's Obligations. 6.1Telephone and Fax Numbers. Seller will assign to the Buyer, to the extent assignable, at Closing the Seller's business telephone numbers, for the Business and fax number. Seller shall cooperate with Buy-er in obtaining a transfer of said telephone number(s) to Buyer, and Seller shall sign the necessary documents to effect such transfer. 6.2 Use of Business Name. The Seller agrees that. as of the Closing Date, it will cease to use the name "Brainy Baby", any derivative or combination thereof and any other trade names or trademarks included in the Purchased Assets in connection with their business activities. No later than five (5) business days alter the Closing Date. the Seller shall, at its expense, take all action required to change the name of the Seller in its jurisdiction of incorporation, evidence of which shall be promptly delivered to the Buyer. 7."AS IS" Transaction. BUYER HEREBY ACKNOWLEDGES AND AGREES THAT EXCEPT AS SET FORTH IN THE TRANSACTION DOCUMENTS, SELLER MAKES NO REPRESENTATIONS OR WARRANTIES WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO ANY MATTER RELATING TO THE PURCHASED ASSETS INCLUDING, WITHOUT LIMITATION, INCOME TO BE DERIVED OR EXPENSES TO BE INCURRED IN CONNECTION WITH THE PURCHASED ASSETS, THE PHYSICAL CONDITION OF ANY PURCHASED ASSETS, THE ENVIRONMENTAL CONDITION OR OTHER MATTER RELATING TO THE PHYSICAL CONDITION OF ANY REAL PROPERTY OR IMPROVEMENTS WHICH ARE THE SUBJECT OF ANY REAL PROPERTY LEASE, THE ZONING OF ANY SUCH REAL PROPERTY OR IMPROVEMENTS, THE VALUE OF 'H III PROPERTY (OR ANY PORTION 'THEREOF), THE MERCHANTABILITY OR FITNESS OF THE PERSONAL PROPERTY OR ANY OTHER PORTION OF THE PROPERTY FOR ANY PARTICULAR PURPOSE, OR ANY OTHER MATTER OR THING RELA-TING TO THE PROPERTY OR ANY PORTION THEREOF. WITHOUT IN ANY WAY LIMITING THE FOREGOING, SELI FR HEREBY DISCLAIMS ANY WARRANTY, EXPRESS OR IMPI IED OF MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE AS TO ANY PORTION OF THE PROPERTY. ACCORDINGLY, EXCEPT AS SET FORTH IN "THE TRANSACTION DOCUMENTS, BUYER WILL ACCEPT THE PROPERTY AT THE CLOSING "AS IS," "WHERE IS," AND "WITH ALL FAULTS." 3 9.Entire Agreement: Modification. This Agreement sets forth the entire agreement and understanding of the parties concerning the subject matter hereof, and supersedes all prior agreements, arrangements and understandings relative to said subject matter. No term or provision hereof may be changed, modified, terminated or discharged, in whole or in part. except by a writing which is dated and signed by all parties hereto. No waiver of any of the provisions or conditions of this Agreement or of any other rights, powers or privileges of a party hereto, shall be effective or binding unless in writing and signed by the party claimed to have consented or given such waiver. 10.Miscellaneous. (a) Survival of Representations and Ktrranties. All representations and warranties of the Seller contained in this Agreement or in any certificate executed and delivered by the Seller in connection with this Agreement shall survive one (1) year from the Closing Date; provided however that any intentional misconduct or intentional breach of representations and warranties or intentional non-fulfillment of any covenant on the part of the Seller contained in this Agreement, or any intentional misrepresentation or omission prom or non-fulfillment of any covenant on the part of the Seller contained in ally agreement, certificate or other instrument furnished or to be furnished to the Buyer from the Seller pursuant to this Agreement shall survive the Closing Date indefinitely, or for the maximum amount of time permitted by applicable law. (h)Governing Law. This Agreement shall be construed and enforced in accordance with the laws of the State of Georgia. (c)Successors and Assigns. This Agreement may not be assigned by either party without the prior written consent of the other party. provided, however, that the Buyer may assign its rights hereunder to any of its lenders. as collateral security for its obligations to any such lenders and the Seller hereby consent to each such assignment. Notwithstanding anything herein to the contrary. (a) all covenants, representations, warranties and agreements of the parties contained herein shall be binding upon, inure to the benefit of and be enforceable by their respective successors and permitted assigns and (h) all obligations of the assignor shall continue to he enforceable against any such assignor notwithstanding such assignment. (d)Notices. Should the Buyer or Seller be required under the terms of this Agreement to send notice or payment to the other party. then the Buyer or Seller may deliver such notice in person or send it certified mail, return receipt requested to: Asset Rectnery Associates ATTN: Katie Goodman Seller: 333 Sandy Springs Circle, Suite 106 Atlanta, Georgia 30328 Buyer: Brainy Acquisitions. inc. Tony Erwin 1000 Peachtree Industrial Blvd, Suite 6-482 Suwanee, GA 30024 (e) Counterparts. 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. 4 (1)Time of the Essence. Time is of the essence as to all provisions of this Agreement. (g)Further Assurances. Buyer and Seller agree to fully cooperate and adjust for clerical errors, if any, and all closing documentation if deemed necessary or desirable to correct the documents executed in accordance with the Closina. (h)Specific Performance. Each party hereto acknowledges and agrees that the other party hereto would be irreparably damaged in the event any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. Accordingly, each party agrees that, in addition to any other remedy to which such party may be entitled at law or in equity, such party shall be entitled to an injunction or injunctions to prevent breaches of the provisions of this Agreement and to enforce specifically this agreement, and the terms and provisions hereof: Entire Agreement. The Transaction Documents, the schedules and exhibits hereto and thereto, and any other agreements or certificates delivered pursuant hereto constitute the entire agreement of the parties hereto with respect to the matters contemplated hereby and supersede all previous written or oral negotiations, commitments, representations and agreements. (j)No Third Party Beneficiary. This Agreement is intended and agreed to be solely for the benefit of the parties hereto, and except as otherwise expressly set fOrth in this Agreement, no other party shall accrue any benefit, claim or right of any kind whatsoever pursuant to, under, by or through this Agreement. [Remainder 0f Page Intentionally Left Blank] 5 IN WITNESS WHEREOF, the parties duly authorized officers have executed this agreement as of the day and year first above written, SELLER: ASSET RECOVERY ASSOCIATES, LLC BUYER: BRAINY ACQUISITIONS, INC 6 Schedule I Purchased Assets All assets of The Brainy Baby Company, LLC including all of the assets conveyed to the Assignee of The Brainy Baby Company, LLC, in the Assignment for the Benefit of Creditors dated September 22. 2010. This includes any and all Accounts Receivable Chattel Paper Goods Instruments Documents Commercial Tort Claims Deposit Accounts Investment Property Inventory Furniture and Fixtures Cash Goodwill Telephone numbers Facsimile number Website Name Prepaid expenses and Deposits Customer Lists General Intangibles Film / Tape Master Libraries / DI.Ts Broadcast Licenses. to the extent assignable Computer Data and other information contained on the Seller's servers Contracts, to the extent assignable Insurance policies. to the extent assignable, and Proceeds and Products of the foregoinu [End of Text.] 7 Schedule II Liens disclosed by The Brainy Baby Company. LLC to Asset Recovery Associates as Assignee for The Brainy Baby Company, LLC Lienholder Amount JP Morgan Chase $ 49,220.76, Commercial Business Loan $ 40,077.00, Server Equipment Lease HP Financial Services Avid Business Equipment Lease which has been paid in full, UCC-1 to be released First Citizens Bank as Successor to Georgian Bank has a lien in the amount of $345,575.94, such lien will be satisfied in receipt of payment of $82,500. [End of Text.] 8 Schedule III Retained Liabilities HP Financial Services

Exhibit 10.4 EMPLOYEE MATTERS AGREEMENT BY AND BETWEEN EBAY INC. AND PAYPAL HOLDINGS, INC. DATED AS OF JULY 17, 2015   TABLE OF CONTENTS   ARTICLE I DEFINITIONS      1    Section 1.01.   Definitions      1    Section 1.02.   Interpretation      8    ARTICLE II GENERAL PRINCIPLES FOR ALLOCATION OF LIABILITIES      8    Section 2.01.   General Principles      8    Section 2.02.   Service Credit      10    Section 2.03.   Benefit Plans      10    Section 2.04.   Plan Administration and Non-U.S. Benefit Plans      11    Section 2.05.   Individual Agreements      13    Section 2.06.   Collective Bargaining      13    Section 2.07.   Non-U.S. Regulatory Compliance      13    ARTICLE III ASSIGNMENT OF EMPLOYEES      14    Section 3.01.   Employees      14    ARTICLE IV EQUITY, INCENTIVE AND EXECUTIVE COMPENSATION      15    Section 4.01.   Generally; Definitions      15    Section 4.02.   Equity Incentive Awards      18    Section 4.03.   Employee Stock Purchase Plans      28    Section 4.04.   Non-Equity Incentive Plans      29    Section 4.05.   Director Compensation      30    ARTICLE V RETIREMENT PLANS      31    Section 5.01.   PayPal 401(k) Plan      31    Section 5.02.   Non-U.S. Retirement Plans      32    ARTICLE VI NONQUALIFIED DEFERRED COMPENSATION PLAN      33    Section 6.01.   PayPal Deferred Compensation Plan      33    Section 6.02.   Participation; Distributions      33    ARTICLE VII WELFARE BENEFIT PLANS      34    Section 7.01.   Welfare Plans      34    Section 7.02.   COBRA      36    Section 7.03.   Paid Time Off, Holidays and Leaves of Absence      37    Section 7.04.   Severance and Unemployment Compensation      37    Section 7.05.   Sabbatical Plans and Sabbatical Trusts      37    Section 7.06.   Workers’ Compensation      38    Section 7.07.   Insurance Contracts      38      -i- Section 7.08.   Third-Party Vendors      38    Section 7.09.   Fringe Benefits      38    ARTICLE VIII NON-U.S. EMPLOYEES      39    ARTICLE IX MISCELLANEOUS      39    Section 9.01.   Employee Records      39    Section 9.02.   Preservation of Rights to Amend      40    Section 9.03.   Fiduciary Matters      41    Section 9.04.   Further Assurances      41    Section 9.05.   Counterparts; Entire Agreement; Corporate Power      41    Section 9.06.   Governing Law      42    Section 9.07.   Assignability      42    Section 9.08.   Third-Party Beneficiaries      42    Section 9.09.   Notices      42    Section 9.10.   Severability      43    Section 9.11.   Force Majeure      43    Section 9.12.   Headings      43    Section 9.13.   Survival of Covenants      44    Section 9.14.   Waivers of Default      44    Section 9.15.   Dispute Resolution      44    Section 9.16.   Specific Performance      44    Section 9.17.   Amendments      44    Section 9.18.   Interpretation      44    Section 9.19.   Limitations of Liability      45    Section 9.20.   Mutual Drafting      45      Schedule 1.01(a)    eBay Fringe Benefit Plans Schedule 1.01(b)    eBay Welfare Plans Schedule 2.03(a)    eBay Benefit Plans to Be Replicated by PayPal (subject to the terms of the Agreement) Schedule 2.03(b)    eBay Benefit Plans Not Required to Be Replicated by PayPal   -ii- EMPLOYEE MATTERS AGREEMENT This EMPLOYEE MATTERS AGREEMENT, dated as of July 17, 2015 (this “Agreement”), is by and between eBay Inc., a Delaware corporation (“eBay”), and PayPal Holdings, Inc., a Delaware corporation (“PayPal”). R E C I T A L S: WHEREAS, the board of directors of eBay (the “eBay Board”) has determined that it is in the best interests of eBay and its shareholders to create a new publicly traded company that shall operate the PayPal Business (as defined below); WHEREAS, in furtherance of the foregoing, the eBay Board has determined that it is appropriate and desirable to separate the PayPal Business from the eBay Business (the “Separation”) and, following the Separation, make a distribution, on a pro rata basis, to holders of eBay Shares on the Record Date of all the outstanding PayPal Shares owned by eBay (the “Distribution”); WHEREAS, in order to effectuate the Separation and Distribution, eBay and PayPal have entered into a Separation and Distribution Agreement, dated as of July 17, 2015 (the “Separation and Distribution Agreement”); and WHEREAS, in addition to the matters addressed by the Separation and Distribution Agreement, the Parties desire to enter into this Agreement to set forth the terms and conditions of certain employment, compensation and benefit matters that have been agreed by the Parties in connection with the Separation. NOW, THEREFORE, in consideration of the mutual agreements, provisions and covenants contained in this Agreement, and for other good and valuable Parties, intending to be legally bound, hereby agree as follows: ARTICLE I DEFINITIONS Section 1.01. Definitions . For purposes of this Agreement, the following terms shall have the meanings set forth below. Capitalized terms used in this Agreement but not otherwise defined herein shall have the meanings ascribed to them in the Separation and Distribution Agreement. “Action” shall have the meaning set forth in the Separation and Distribution Agreement. “Affiliate” shall have the meaning set forth in the Separation and Distribution Agreement. “Agreement” shall have the meaning set forth in the preamble to this Agreement and shall include all Schedules hereto and all amendments, modifications, and changes hereto entered into pursuant to Section 9.17. “Ancillary Agreement” shall have the meaning set forth in the Separation and Distribution Agreement. “Assets” shall have the meaning set forth in the Separation and Distribution Agreement. “Benefit Plan” shall mean any contract, agreement, policy, practice, program, plan, trust, commitment or arrangement providing for benefits, perquisites, fringe benefits or compensation of any nature from an employer to any Employee, or to any family member, dependent, or beneficiary of any such Employee, including cash or deferred arrangement plans, profit sharing plans, pension plans, thrift plans, supplemental pension plans and health and welfare plans, stock option, stock purchase, restricted stock, restricted stock units, deferred stock award and other equity and/or equity-based compensation plans and contracts, commitments and arrangements providing for terms of employment, severance benefits, change of control protections or benefits, travel and accident, life, accidental death and dismemberment, disability and accident insurance, tuition reimbursement, travel reimbursement, paid time off, sick, personal or bereavement days, leaves of absences and holidays and sabbatical leave; provided, however, the term “Benefit Plan” does not include any government-sponsored benefits, such as workers’ compensation, government-sponsored retirement plans, unemployment or any similar plans, programs or policies or Individual Agreements. “COBRA” shall mean the U.S. Consolidated Omnibus Budget Reconciliation Act of 1985, as codified at Section 601 et seq. of ERISA and at Section 4980B of the Code. “Code” shall have the meaning set forth in the Separation and Distribution Agreement. “Continuing eBay Director” shall mean each member of the eBay Board, as of the Effective Time, who continues to serve on the eBay Board immediately after the Effective Time. “Distribution” shall have the meaning set forth in the recitals to this Agreement. “Distribution Date” shall have the meaning set forth in the Separation and Distribution Agreement. “eBay” shall have the meaning set forth in the preamble to this Agreement. “eBay 401(k) Plan” shall mean the eBay Inc. 401(k) Savings Plan, as amended and restated effective January 1, 2015. “eBay 401(k) Trust” shall have the meaning set forth in Section 5.01(b). “eBay Benefit Plan” shall mean any Benefit Plan established, sponsored or maintained by eBay or any of its Subsidiaries immediately prior to the Effective Time, excluding any PayPal Benefit Plan. “eBay Board” shall have the meaning set forth in the recitals to this Agreement.   -2- “eBay Business” shall have the meaning set forth in the Separation and Distribution Agreement. “eBay Change of Control” shall have the meaning set forth in Section 4.02(g). “eBay Compensation Committee” shall mean the Compensation Committee of the eBay Board. “eBay Deferred Compensation Plan” shall mean the eBay Inc. Deferred Compensation Plan, effective January 1, 2008. “eBay Equity Plan” shall mean any equity compensation plan sponsored or maintained by eBay immediately prior to the Effective Time, including the eBay Inc. 2008 Equity Incentive Award Plan, eBay Inc. 2003 Deferred Stock Unit Plan, eBay Inc. 2001 Equity Incentive Plan eBay Inc. 1999 Global Equity Incentive Plan eBay Inc. 1998 Directors Stock Option Plan, eBay Inc. 1998 Equity Incentive Plan, Braintree, Inc. 2011 Equity Incentive Plan, Bill Me Later 2000 Stock Incentive Plan, NPX Technologies LTD Amended and Restated 2005 Share Option Plan, CyberActive Security LTD. 2014 Israeli Employee Share Option Plan, Paydiant, Inc. 2011 Stock Option and Grant Plan, Paydiant Inc. Stock Restriction Agreements, Hunch Inc. 2007 Stock Plan, Magento, Inc. 2010 Equity Incentive Plan, SHUTL Limited Enterprise Management Incentive Scheme, StubHub, Inc. 2000 Stock Plan, Venmo Inc. 2010 Equity Compensation Plan, uLocate Communications, Inc. 2003 Stock Option and Incentive Plan, and Zong S.A. Equity Incentive Plan. “eBay Fringe Benefit Plans” shall mean the eBay fringe benefit plans as in effect immediately prior to the Effective Time and listed on Schedule 1.01(a). “eBay Group” shall have the meaning set forth in the Separation and Distribution Agreement. “eBay Group Employees” shall have the meaning set forth in Section 3.01(a). “eBay HSA” shall have the meaning set forth in Section 7.01(c). “eBay Incentive Plans” shall mean the eBay Incentive Plan and any other non-equity based incentive plan maintained by eBay as in effect immediately “eBay IP” shall have the meaning set forth in the Separation and Distribution Agreement. “eBay Liability” shall have the meaning set forth in the Separation and Distribution Agreement. “eBay Non-U.S. Retirement Plan” means an eBay Benefit Plan, the primary purpose of which is to provide retirement benefits to eBay Group Employees and/or Former eBay Group Employees who are or were employed by a non-U.S. Subsidiary of eBay.   -3- “eBay Sabbatical Plans” shall mean the eBay Inc. Sabbatical Plan, as amended and restated effective December 1, 2014, and any other sabbatical policies or programs maintained by eBay outside of the United States, as applicable, as in effect immediately prior to the Effective Time and listed on Schedule 1.01(b). “eBay Sabbatical Trusts” shall mean the eBay Inc. Sabbatical Plan Trust Agreement effective June 1, 2005, and any other trusts or other funding arrangements maintained for the benefit of any eBay Sabbatical Plans outside of the United States, as applicable, as in effect immediately prior to the Effective Time and listed on Schedule 1.01(b). “eBay Welfare Plan” shall mean any Welfare Plan established, sponsored, maintained or contributed to by eBay or any of its Subsidiaries for the benefit of Employees or Former Employees, including each Welfare Plan listed on Schedule 1.01(b) but excluding any PayPal Welfare Plan. “Effective Time” shall have the meaning set forth in the Separation and Distribution Agreement. “Employee” shall mean any eBay Group Employee or PayPal Group Employee. “Employment Taxes” shall have the meaning set forth in Section 2.01(e). “ERISA” shall mean the U.S. Employee Retirement Income Security Act of 1974, as amended, and the regulations promulgated thereunder. “Exchange Act” shall have the meaning set forth in the Separation and Distribution Agreement. “Force Majeure” shall have the meaning set forth in the Separation and Distribution Agreement. “Former eBay Group Employee” shall mean any individual who is a former employee of the eBay Group as of the Effective Time and who is not a Former PayPal Group Employee. “Former Employees” shall mean Former eBay Group Employees and Former PayPal Group Employees. “Former PayPal Group Employee” shall mean (i) any individual identified as a Former PayPal Group Employee on the list previously prepared by eBay, and (ii) any individual who is a former employee of eBay or any of its Subsidiaries or former Subsidiaries as of the Effective Time, in each case, whose most recent employment with eBay was with a member of the PayPal Group or the PayPal Business. “Governmental Authority” shall have the meaning set forth in the Separation and Distribution Agreement.   -4- “HIPAA” shall mean the U.S. Health Insurance Portability and Accountability Act of 1996, as amended, and the regulations promulgated thereunder. “Individual Agreement” shall mean any individual (i) offer letter or employment contract, (ii) retention, severance or change of control agreement, (iii) expatriate (including any international assignee) contract or agreement (including agreements and obligations regarding repatriation, relocation, equalization of taxes and living standards in the host country), (iv) proprietary information and/or inventions agreement or (v) any agreement containing restrictive covenants (including confidentiality, intellectual property assignment, license, waiver and disclosure provisions, non-competition and non-solicitation provisions) between a member of the eBay Group or PayPal Group and a PayPal Group Employee or any Former PayPal Group Employee, or between a member of the eBay Group or PayPal Group and an eBay Group Employee or any Former eBay Group Employee, as applicable, as in effect immediately prior to the Effective Time. “Intellectual Property Matters Agreement” shall have the meaning set forth in the Separation and Distribution Agreement. “Intellectual Property Rights” shall have the meaning set forth in the Separation and Distribution Agreement. “IRS” shall mean the United States Internal Revenue Service. “Law” shall have the meaning set forth in the Separation and Distribution Agreement. “Liabilities” shall have the meaning set forth in the Separation and Distribution Agreement. “NASDAQ” shall have the meaning set forth in the Separation and Distribution Agreement. “Non-U.S. eBay Benefit Plan” shall mean an eBay Benefit Plan established, maintained, or contributed to by a member of the eBay Group that is primarily for the benefit of eBay Group Employees who are or were employed by a non-U.S. Subsidiary of eBay. “Non-U.S. PayPal Benefit Plan” shall mean a PayPal Benefit Plan established, maintained, or contributed to by a member of the PayPal Group that is primarily for the benefit of PayPal Group Employees who are or were employed by a non-U.S. Subsidiary of PayPal or eBay. “Offering Period” shall have the meaning set forth in the eBay ESPP or PayPal ESPP, as the context requires. “Party” shall mean a party to this Agreement. “PayPal” shall have the meaning set forth in the preamble to this Agreement.   -5- “PayPal 401(k) Plan” shall mean the PayPal 401(k) Savings Plan, to be adopted by PayPal prior to or on the Distribution as described in Section 5.01. “PayPal 401(k) Trust” shall have the meaning set forth in Section 5.01(a). “PayPal Benefit Plan” shall mean any Benefit Plan established, sponsored, maintained or contributed to by a member of the PayPal Group as of or after the Effective Time. “PayPal Board” shall mean the Board of Directors of PayPal. “PayPal Business” shall have the meaning set forth in the Separation and Distribution Agreement. “PayPal Change of Control” shall have the meaning set forth in Section 4.02(g). “PayPal Compensation Committee” shall mean the Compensation Committee of the PayPal Board. “PayPal Deferred Compensation Plan” shall mean a PayPal Deferred Compensation Plan established pursuant to Section 6.01. “PayPal Designees” shall have the meaning set forth in the Separation and Distribution Agreement. “PayPal Fringe Benefit Plans” shall mean the PayPal fringe benefit plans to be established by PayPal pursuant to Section 7.09. “PayPal Group” shall have the meaning set forth in the Separation and Distribution Agreement. “PayPal Group Employees” shall have the meaning set forth in Section 3.01(a). “PayPal HSA” shall have the meaning set forth in Section 7.01(c). “PayPal Incentive Plans” shall mean the PayPal Incentive Plans established pursuant to Section 4.04(a). “PayPal IP” shall have the meaning set forth in the Separation and Distribution Agreement. “PayPal Liabilities” shall have the meaning set forth in the Separation and Distribution Agreement. “PayPal Non-U.S. Retirement Plan” means a PayPal Benefit Plan, the primary purpose of which is to provide retirement benefits to PayPal Group Employees and/or Former PayPal Group Employees who are or were employed by a non-U.S. “PayPal Sabbatical Plans” shall mean the PayPal Sabbatical Plans established by PayPal pursuant to Section 7.05.   -6- “PayPal Sabbatical Trusts” shall mean the Sabbatical Trusts established by “PayPal Welfare Plans” shall mean the Welfare Plans established, sponsored, maintained or contributed to by any member of the PayPal Group for the benefit of PayPal Group Employees and Former PayPal Group Employees. “Person” shall have the meaning set forth in the Separation and Distribution Agreement. “QDRO” shall mean a qualified domestic relations order within the meaning of Section 206(d) of ERISA and Section 414(p) of the Code. “Qualification Requirements” shall mean, in the aggregate, the tax qualification requirements of Section 401(a) of the Code, the tax exemption requirements of Section 501(a) of the Code, and the requirements described in Sections 401(k) and 401(m) of the Code in respect of a plan intended to meet such requirements. “Record Date” shall have the meaning set forth in the Separation and Distribution Agreement. “Securities Act” shall mean the U.S. Securities Act of 1933, as amended, together with the rules and regulations promulgated thereunder. “Separation” shall have the meaning set forth in the recitals to this Agreement. “Separation and Distribution Agreement” shall have the meaning set forth in the recitals to this Agreement. “Subsidiary” shall have the meaning set forth in the Separation and Distribution Agreement. “Third Party” shall have the meaning set forth in the Separation and Distribution Agreement. “Tax” shall have the meaning set forth in Section 2.01(e). “Tax Matters Agreement” shall have the meaning set forth in the Separation and Distribution Agreement. “Transferred Account Balances” shall have the meaning set forth in Section 7.01(d). “Transferring Director” shall mean each member of the PayPal Board, as of the Effective Time, who served on the eBay Board immediately prior to the Effective Time. “Transitioning eBay Group Employee” shall mean an eBay Group Employee covered under the Transition Success and Retention Program, whose last date of employment with   -7- the eBay Group is the Distribution Date, and who is not becoming a PayPal Group Employee upon the Separation. “Transition Services Agreement” shall have the meaning set forth in the “Transition Success and Retention Program” shall mean the Transition Success and Retention Program adopted by the eBay Board on December 15, 2014. “U.S.” shall mean the United States of America. “Welfare Plan” shall mean any “welfare plan” (as defined in Section 3(1) of ERISA) or a “cafeteria plan” under Section 125 of the Code, and any benefits offered thereunder, and any other plan offering health benefits (including medical, prescription drug, dental, vision, mental health and substance abuse), disability benefits, or life, accidental death and dismemberment, and business travel insurance, pre-tax premium conversion benefits, dependent care assistance programs, employee assistance programs, paid time-off programs, contribution funding toward a health savings account, flexible spending accounts or severance. Section 1.02. Interpretation. Section 10.16 of the Separation and Distribution Agreement is hereby incorporated by reference. ARTICLE II GENERAL PRINCIPLES FOR ALLOCATION OF LIABILITIES Section 2.01. General Principles. (a) Acceptance and Assumption of PayPal Liabilities. On or prior to the Effective Time, but in any case prior to the Distribution, and except as expressly set forth in this Agreement, PayPal and the applicable PayPal Designees shall accept, assume and agree to faithfully perform, discharge and fulfill all of the following Liabilities in accordance with their respective terms (each of which shall be considered a PayPal Liability), regardless of when or where such Liabilities arose or arise, or whether the facts on which they are based occurred prior to or subsequent to the Effective Time, regardless of where or against whom such Liabilities are asserted or determined (including any Liabilities arising out of claims made by eBay’s or PayPal’s respective directors, officers, Employees, Former Employees, agents, Subsidiaries or Affiliates against any member of the eBay Group or the PayPal Group) or whether asserted or determined prior to the date hereof, and regardless of whether arising from or alleged to arise from negligence, recklessness, violation of Law, fraud or misrepresentation by any member of the eBay Group or the PayPal Group, or any of their respective directors, officers, Employees, Former Employees, agents, Subsidiaries or Affiliates: (i) any and all wages, salaries, incentive compensation (as the same may be modified by this Agreement), equity compensation (as the same may be modified by this Agreement), commissions, bonuses and any other employee compensation or benefits payable, provided or made available to or on behalf of any PayPal Group Employees and Former PayPal Group Employees after the Effective Time, without regard to when such wages, salaries, incentive compensation, equity compensation, commissions,   -8- bonuses or other employee compensation or benefits are or may have been awarded or earned; (ii) any and all Liabilities whatsoever with respect to claims made by or with respect to any PayPal Group Employees or Former PayPal Group Employees in connection with any Benefit Plan obligations not retained or assumed by any member of the eBay Group pursuant to this Agreement, the Separation and Distribution Agreement or any Ancillary Agreement or as otherwise provided in Section 7.01(e); and (iii) any and all Liabilities expressly assumed or retained by any member of the PayPal Group pursuant to this Agreement. (b) Acceptance and Assumption of eBay Liabilities. On or prior to the Effective Time, but in any case prior to the Distribution and except as set forth in this Agreement, eBay and certain members of the eBay Group designated by eBay shall accept, assume and agree to faithfully perform, discharge and fulfill all of the following Liabilities held by PayPal or any PayPal Designee and eBay and the applicable members of the eBay Group shall be responsible for such Liabilities in accordance with their respective terms (each of which shall be considered an eBay Liability), regardless of when or where such Liabilities arose or arise, or whether the facts on which they are based occurred prior to or subsequent to the Effective Time, regardless of where or against whom such Liabilities are asserted or determined (including any Liabilities arising out of claims made by eBay’s or PayPal’s respective directors, officers, Employees, Former Employees, agents, Subsidiaries or Affiliates against any member of the eBay Group or the PayPal Group) or whether asserted or determined prior to the date hereof, and regardless of whether arising from or alleged to arise from negligence, recklessness, violation of Law, fraud or misrepresentation by any member of the eBay Group or the PayPal Group, or any of their respective directors, officers, Employees, Former Employees, agents, Subsidiaries or Affiliates: benefits payable, provided or made available to or on behalf of any eBay Group Employees and Former eBay Group Employees after the Effective Time, without compensation, commissions, bonuses or other employee compensation or benefits are or may have been awarded or earned; respect to any eBay Group Employees or Former eBay Group Employees in connection with any Benefit Plan obligations not retained or assumed by any member of the PayPal Group pursuant to this Agreement, the Separation and Distribution Agreement or any Ancillary Agreement; and eBay Group pursuant to this Agreement. (c) Unaddressed Liabilities. To the extent that this Agreement does not address particular Liabilities under any Benefit Plan or with respect to any Employees and the   -9- Parties later determine that they should be allocated in connection with the Distribution, the Parties shall agree in good faith on the allocation, taking into account the handling of comparable Liabilities under this Agreement. (d) Fiduciary Liability Insurance. Treatment of claims covered by fiduciary liability insurance shall be governed by Section 5.1 of the Separation and Distribution Agreement. (e) Employment Tax Liabilities and Responsibilities for Audit. (i) The eBay Group shall be liable for, and shall indemnify and hold harmless the PayPal Group from and against any Liability for, any payroll, social security, workers compensation, unemployment, disability or other similar tax (including any fee, assessment, or other charge in the nature of or in lieu of any tax) imposed by any governmental entity or political subdivision thereof, and any interest, penalties, additions to tax, or additional amounts in respect of the foregoing (collectively, “Employment Taxes”) that relate to any eBay Group Employee, Former eBay Group Employee or Transitioning eBay Group Employee, whether any such Liability has arisen, or may arise, in respect of any taxable period (or portion thereof) that ends on or prior to the Distribution Date. (ii) The PayPal Group shall be liable for, and shall indemnify and hold harmless the eBay Group from and against any Liability for, any Employment Taxes that relate to any PayPal Group Employee or Former PayPal Group Employee, whether any such Liability has arisen, or may arise, in respect of any taxable period (or (iii) The Party that has Liability for the relevant Employment Taxes as provided in Section 2.01(e)(i) or (ii) above, as applicable, shall also be responsible for, and have exclusive control (including for purposes of settlement of Liability) over, any ongoing or future audit, review, examination, or any other administrative or judicial proceeding with the purpose or effect of redetermining such relevant Employment Taxes (including any administrative or judicial review of any claim for refund) or which may otherwise be in respect of such relevant Employment Taxes. Section 2.02. Service Credit. The PayPal Benefit Plans shall, and PayPal shall cause each member of the PayPal Group to, recognize each PayPal Group Employee’s and each Former PayPal Group Employee’s full service with eBay or any of its Subsidiaries or predecessor entities at or before the Effective Time, to the same extent that such service was recognized by eBay for similar purposes prior to the Effective Time as if such full service had been performed for a member of the PayPal Group, for purposes of eligibility, vesting and determination of level of benefits under any such PayPal Benefit Plan but only with respect to those PayPal Benefit Plans in existence immediately following the Effective Time. Section 2.03. Benefit Plans. (a) Establishment of Benefit Plans. Except as otherwise specified herein, before the Effective Time, PayPal shall, or shall cause an applicable member of the PayPal Group to, adopt Benefit Plans (and related trusts and other funding instruments, if applicable), which   -10- through December 31, 2015 shall have substantially the same terms as of immediately prior to the Effective Time (or such other standard as is specified in this Agreement with respect to any particular Benefit Plan) to those of the corresponding eBay Benefit Plans, including in particular those listed on Schedule 2.03(a); provided, however, that PayPal may limit participation in any such PayPal Benefit Plan to PayPal Group Employees and Former PayPal Group Employees who participated in the corresponding eBay Benefit Plan immediately prior to the Effective Time. Notwithstanding the foregoing, PayPal may make such changes, modifications or amendments to the PayPal Benefit Plans as may be required by applicable Law or as are necessary and appropriate to reflect the Separation or vendor limitations. (b) Benefit Plans Not Required to Be Adopted. Notwithstanding Section 2.03(a) above, PayPal shall not be required to adopt any Benefit Plan (or related trust, if applicable) (i) to the extent that such adoption would not be permitted under applicable Law, regulation, practice, or vendor limitations, (ii) if the parties agree that such Benefit Plan should not be so adopted by PayPal, or (iii) if such Benefit Plan is listed on Schedule 2.03(b). With respect to any eBay Benefit Plan not listed on Schedule 2.03(a) and Schedule 2.03(b), the parties shall agree in good faith on the treatment of such plan taking into account the handling of any comparable plan under this Agreement. (c) Information and Operation. eBay shall, subject to and in compliance with applicable Law, provide PayPal with information describing each eBay Benefit Plan election made by a PayPal Group Employee, Former PayPal Group Employee and (with respect to any fees payable after the Effective Time), any Continuing eBay Director or Transferring Director, that may have application to PayPal Benefit Plans from and after the Effective Time, and PayPal shall use its commercially reasonable efforts to administer the PayPal Benefit Plans using those elections; and, further, to the extent necessary in order for eBay to administer any eBay Benefit Plan, PayPal shall provide eBay with such same information. Each Party shall, upon reasonable request, provide the other Party and the other Party’s respective Affiliates, agents, and vendors all information reasonably necessary to the other Party’s operation or administration of its Benefit Plans. Section 2.04. Plan Administration and Non-U.S. Benefit Plans. (a) No Duplication or Acceleration of Benefits. Notwithstanding anything to the contrary in this Agreement, the Separation and Distribution Agreement or any Ancillary Agreement, (i) no participant in any PayPal Benefit Plan shall receive service credit or benefits to the extent that receipt of such service credit or benefits would result in duplication of benefits provided to such participant by the corresponding eBay Benefit Plan or any other plan, program or arrangement sponsored or maintained by a member of the eBay Group and (ii) no participant in any eBay Benefit Plan shall receive service credit or benefits to the extent receipt of such service credit or benefits would result in duplication of benefits provided to such participant in the corresponding PayPal Benefit Plan or any other plan, program or agreement sponsored or maintained by a member of the PayPal Group. Furthermore, unless expressly provided for in this Agreement, the Separation and Distribution Agreement or in any Ancillary Agreement or required by applicable Law, no provision in this Agreement shall be construed to create any right to accelerate vesting or entitlements under any Benefit Plan sponsored or maintained by a member of   -11- the eBay Group or member of the PayPal Group on the part of any Employee or Former Employee, including in connection with the termination of employment. (b) No Expansion of Participation. Unless otherwise expressly provided in this Agreement, as otherwise determined or agreed to by eBay and PayPal, as required by applicable Law, or as explicitly set forth in a PayPal Benefit Plan, a PayPal Group Employee or Former PayPal Group Employee shall be entitled to participate in the PayPal Benefit Plans at the Effective Time only to the extent that such PayPal Group Employee or Former PayPal Group Employee was entitled to participate in the corresponding eBay Benefit Plan as in effect immediately prior to the Effective Time (to the extent that such PayPal Group Employee or Former PayPal Group Employee does not participate in the respective PayPal Benefit Plan immediately prior to the Effective Time), it being understood that this Agreement does not expand (i) the number of PayPal Group Employees or Former PayPal Group Employees entitled to participate in any PayPal Benefit Plan or (ii) the participation rights of PayPal Group Employees or Former PayPal Group Employees in any PayPal Benefit Plans beyond the rights of such PayPal Group Employees or Former PayPal Group Employees under the corresponding eBay Benefit Plans, in each case, after the Effective Time. Unless otherwise expressly provided by this Agreement or otherwise agreed by the Parties, as of the Effective Time, a PayPal Group Employee or Former PayPal Group Employee shall not be a participant in an eBay Benefit Plan. (c) Transition Services. The Parties acknowledge that eBay Group and PayPal Group may (i) agree that eBay Group may provide certain PayPal Benefit Plan administration for a period of time after the Distribution Date and (ii) share certain tools and programs relating to human resource functions as specified under the Transition Services Agreement and, if required by HIPAA or other applicable privacy laws, shall enter into any applicable business associate agreement with respect to such arrangement. (d) Beneficiaries. References to eBay Group Employees, Former eBay Group Employees, PayPal Group Employees, Former PayPal Group Employees, and non-employee directors of either eBay or PayPal (including Continuing eBay Directors and Transferring Directors), shall be deemed to include reference to their beneficiaries, dependents, survivors and alternate payees, as applicable. (e) Non-U.S. Benefit Plan. Prior to the Distribution Date, the PayPal Group shall, subject to and in compliance with applicable Law, except as otherwise mutually agreed upon by the parties or as otherwise provided in Section 2.03(b), adopt the Non-U.S. PayPal Benefit Plans, with terms comparable to those of the corresponding Non-U.S. eBay Benefit Plans through December 31, 2015 or undertake negotiations to this extent within the mandatory time periods provided by applicable Law, as applicable; provided, however, that PayPal may limit participation in any Non-U.S. PayPal Benefit Plan to PayPal Group Employees who participated in the corresponding Non-U.S. eBay Benefit Plan immediately prior to the Distribution Date except where such differentiation is prohibited by applicable Law. Section 2.05. Individual Agreements. (a) Assignment by eBay. To the extent necessary, eBay shall assign, or cause an applicable member of the eBay Group to assign, to PayPal or another member of the PayPal   -12- Group, as designated by PayPal, all Individual Agreements between such member of the eBay Group and any PayPal Group Employee or Former PayPal Group Employee, with such assignment to be effective as of the Effective Time; provided, however, that to the extent that assignment of any such Individual Agreement is not permitted by the terms of such agreement or by applicable Law, effective as of the Effective Time, each member of the PayPal Group shall be considered to be a successor to each member of the eBay Group for purposes of, and a third-party beneficiary with respect to, such Individual Agreement, such that each member of the PayPal Group shall enjoy all of the rights and benefits under such agreement (including rights and benefits as a third-party beneficiary and the right to enforce any such agreement), with respect to the business operations of the PayPal Group; provided, further, that in no event shall eBay be permitted to enforce any Individual Agreement (including any agreement containing non-competition or non-solicitation covenants) against a PayPal Group Employee or Former PayPal Group Employee for action taken in such individual’s capacity as a PayPal Group Employee or Former PayPal Group Employee unless the Parties mutually agree that such action is commercially reasonable under the circumstances as they exist at such time. (b) Assumption by PayPal. Effective as of the Effective Time, PayPal will assume and honor, or will cause a member of the PayPal Group to assume and honor, any Individual Agreement to which any PayPal Group Employee or Former PayPal Group Employee is a party with any member of the eBay Group, and all obligations and responsibilities of the applicable member of the eBay Group thereunder. (c) Residual Intellectual Property Rights under any Individual Agreement. Effective as of the Effective Time, notwithstanding the fact that any Individual Agreement that contains covenants regarding Intellectual Property Rights with respect to both eBay IP and PayPal IP may be retained or assumed by either a member of the eBay Group or the PayPal Group, as applicable, the party that is not retaining or assuming any such Individual Agreement shall nevertheless retain all rights and benefits under such agreement with respect to its Intellectual Property Rights, including the right to enforce any such covenants. Section 2.06. Collective Bargaining. Effective no later than immediately prior to the Effective Time, to the extent necessary under and permitted by applicable Law, PayPal shall, in compliance with applicable Law, cause the appropriate member of the PayPal Group to (a) assume all collective bargaining agreements (including any national, sector or local collective bargaining agreement), works council and other similar labor relations agreements and arrangements that cover PayPal Group Employees and/or Former PayPal Group Employees, and all Liabilities arising under any such collective bargaining, works council and other similar labor relations agreements and arrangements, and (b) join any industrial, employer or similar association or federation if membership is required for such relevant collective bargaining, works council and other similar labor relations agreement or arrangement to continue to apply and cover the relevant PayPal Group Employees and Former PayPal Group Employees, as applicable. Section 2.07. Non-U.S. Regulatory Compliance. The Parties shall have the authority to adjust the treatment described in this Agreement, including the treatment under any Benefit Plan, with respect to PayPal Group Employees and/or Former PayPal Group Employees who are located outside of the United States in order to ensure compliance with the applicable Laws of countries   -13- outside of the United States or to preserve the Tax benefits provided under local Tax Law before the Distribution or as are necessary and appropriate to reflect the Separation or vendor limitations. ARTICLE III ASSIGNMENT OF EMPLOYEES Section 3.01. Employees. (a) Assignment and Transfer of Employees. Effective no later than immediately prior to the Effective Time and except as otherwise agreed by the Parties, (i) the applicable member of the Parties shall have taken such actions as are necessary to ensure to the extent possible that each individual who is intended to be an employee of the PayPal Group as of immediately after the Effective Time (including any such individual who is not actively working as of the Effective Time as a result of an illness, injury or leave of absence (including due to a short-term or long-term disability) approved by the eBay Human Resources department or otherwise taken in accordance with applicable Law) (collectively, the “PayPal Group Employees”) is employed by a member of the PayPal Group as of immediately after the Effective Time, on terms and conditions of employment which are substantially comparable to the terms of employment governing such individuals prior to their assignment and (ii) the Parties shall have taken such actions as are necessary to ensure to the extent possible that each individual who is intended to be an employee of the eBay Group as of immediately after the Effective Time (including any such individual who is not actively working as of the Effective Time as a result of an illness, injury or leave of absence (including due to a short-term or long-term disability) approved by the eBay Human Resources department or otherwise taken in accordance with applicable Law) and any other individual employed by the eBay Group as of the Effective Time who is not a PayPal Group Employee (collectively, the “eBay Group Employees”) is employed by a member of the eBay Group as of immediately after the Effective Time, on terms and conditions of employment which are substantially comparable to the terms of employment governing such individuals prior to their assignment. Each of the Parties agrees to execute, and to seek to have the applicable Employees execute, such documentation, if any, as may be necessary to reflect such assignment and/or to comply with applicable Law in relation to the automatic transfer of the employment of applicable Employees including, but not limited to, any transfer pursuant to any regulation or other legislation that has implemented the Acquired Rights Directive 2001. To the extent applicable, independent contractors shall also be allocated between the PayPal Group and the eBay Group by the Parties taking such actions as are necessary to ensure that each individual who is intended to be an independent contractor of either Party or both Parties immediately after the Effective Time is an independent contractor of either Party or both Parties as applicable. (b) At-Will Status. Nothing in this Agreement shall create any obligation to any Employee on the part of any member of the eBay Group or any member of the PayPal Group to (i) continue the employment of any Employee or permit the return from a leave of absence for any period after the date of this Agreement (except as required by applicable Law) or (ii) change the employment status of any Employee from “at-will,” to the extent that such Employee is an “at-will” employee under applicable Law. (c) Severance. Except as required by applicable Law the Parties acknowledge and agree that the Distribution and the assignment, transfer or continuation of the employment of   -14- Employees as contemplated by this Section 3.01 shall not be deemed an involuntary termination of employment entitling any PayPal Group Employee or eBay Group Employee to severance payments or benefits, provided that any severance payments or benefits that become payable notwithstanding the intent of the Parties shall be subject to Section 7.04. (d) Not a Change of Control/Change in Control. The Parties acknowledge and agree that neither the consummation of the Separation, Distribution nor any transaction contemplated by this Agreement, the Separation and Distribution Agreement or any other Ancillary Agreement shall be deemed a “change of control,” “change in control,” or term of similar import for purposes of any Benefit Plan sponsored or maintained by any member of the eBay Group or member of the PayPal Group. (e) Payroll and Related Taxes. Except as otherwise agreed by the Parties, for purposes of United States payroll taxes with respect to PayPal Group Employees or group of PayPal Group Employees, the Parties and their respective Affiliates agree to implement this treatment by utilizing solely Section 4 of Revenue Procedure 2004-53, STANDARD PROCEDURE FOR PREDECESSORS AND SUCCESSORS. (f) Information and Consultation. The Parties shall comply, or shall cause their respective Affiliates to comply, with any obligations to inform, consult with, negotiate and/or obtain the consent of, or formal rendering of advice from, all applicable labor or trade unions, works councils and any other employee representative bodies and shall make any notifications necessary as a result of the Separation, Distribution or any of the transactions contemplated by this Agreement, as required by applicable Law or any written agreement. ARTICLE IV EQUITY, INCENTIVE AND EXECUTIVE COMPENSATION Section 4.01. Generally; Definitions. (a) Generally. Each eBay Equity Award that is outstanding as of immediately prior to the Effective Time shall be adjusted as described below; provided, however, that, effective immediately prior to the Effective Time, the eBay Compensation Committee may provide for different adjustments with respect to some or all eBay Equity Awards to the extent that the eBay Compensation Committee deems such adjustments necessary and appropriate and in accordance with the terms of the applicable eBay Equity Plan. Any adjustments made by the eBay Compensation Committee pursuant to the foregoing sentence shall be deemed incorporated by reference herein as if fully set forth below and shall be binding on the Parties and their respective Affiliates. Before the Effective Time, the PayPal Equity Plan shall be established, with such terms as are necessary to permit the implementation of the provisions of Section 4.02. (b) Definitions. For ease of reference, the following additional terms as used in this Agreement (and specifically this Article IV) shall have the meanings set forth below. “Distributed PayPal Stock Value” shall mean the product obtained by multiplying (x) the Post-Spin PayPal Stock Value by (y) the Distribution Ratio.   -15- “Distribution Ratio” shall have the meaning set forth in the Separation and Distribution Agreement. “eBay Equity Awards” shall mean, collectively, eBay Options, eBay RSU Awards, eBay Restricted Stock Awards, eBay PSU Awards, eBay DSU Awards and eBay PBRSU Awards. “eBay DSU Award” shall mean a deferred stock unit award, granted pursuant to the eBay Equity Plan, that is outstanding immediately prior to the Effective Time. “eBay ESPP” shall mean the eBay Inc. Employee Stock Purchase Plan, effective November 1, 2012 and any sub-plan maintained outside of the U.S. “eBay ESPP Option” shall mean an option granted pursuant to the eBay ESPP, that is outstanding prior to the Effective Time. “eBay Option” shall mean an option to purchase eBay Shares granted pursuant to an eBay Equity Plan that is outstanding as of immediately prior to the Effective Time. “eBay Option Exercise Price Ratio” shall mean, with respect to an eBay Option or eBay ESPP Option, as applicable, the quotient obtained by dividing (x) the per share exercise price of such eBay Option or eBay ESPP Option, as applicable, immediately prior to the Effective Time, by (y) the Pre-Spin eBay Stock Value. “eBay PBRSU Award” shall mean a performance-based restricted stock unit award, which, for accounting purposes, has been deemed granted and outstanding as of immediately prior to the Effective Time. “eBay PSU Award” shall mean a performance stock unit award, granted pursuant to an eBay Equity Plan, that is outstanding immediately prior to the Effective Time. “eBay Restricted Stock Award” shall mean a restricted stock award, granted pursuant to an eBay Equity Plan, that is outstanding as of immediately prior to the Effective Time, which does not otherwise become vested solely by virtue of the Distribution. “eBay Retained Award Conversion Ratio” shall mean the quotient obtained by dividing (x) the Pre-Spin eBay Stock Value, by (y) the Post-Spin eBay Stock Value. “eBay RSU Award” shall mean a restricted stock unit award, granted pursuant to an eBay Equity Plan, that is outstanding as of immediately prior to the Effective Time, which is not otherwise accelerated solely by virtue of the Distribution. “eBay Shares” shall have the meaning set forth in the Separation and Distribution Agreement. “eBay Stock Value Ratio” shall mean the quotient obtained by dividing (x) the Pre-Spin eBay Stock Value by (y) the sum of (1) the Distributed PayPal Stock Value and (2) the Post-Spin eBay Stock Value.   -16- “PayPal DSU Award” shall mean a deferred stock unit award issued under the PayPal Equity Plan, in respect of a corresponding eBay DSU Award that has been assumed by PayPal in accordance with Section 4.02(e). “PayPal Equity Award Conversion Ratio” shall mean the quotient obtained by dividing (x) the Pre-Spin eBay Stock Value, by (y) the Post-Spin PayPal Stock Value. “PayPal Equity Awards” shall mean, collectively, PayPal Options, PayPal RSU Awards, PayPal PBRSU Awards, PayPal PSU Awards, PayPal Restricted Stock Awards and PayPal DSU Awards. “PayPal Equity Plan” shall mean the PayPal 2015 Equity Incentive Plan, to be adopted by PayPal prior to the Distribution Date as described in Section 4.01. “PayPal ESPP” shall mean the PayPal Employee Stock Purchase Plan, to be adopted by PayPal prior to the Distribution Date as described in Section 4.03. “PayPal ESPP Option” shall mean an option to purchase PayPal Shares issued under the PayPal ESPP in respect of a corresponding eBay ESPP Option that has been assumed by PayPal in accordance with Section 4.03. “PayPal Option” shall mean an option to purchase PayPal Shares issued under the PayPal Equity Plan in respect of a corresponding eBay Option that has been assumed by PayPal in accordance with Section 4.02(a). “PayPal PBRSU Award” shall mean a performance base restricted stock unit award issued under the PayPal Equity Plan, in respect of a corresponding eBay PBRSU Award that has been assumed by PayPal in accordance with Section 4.02(c). “PayPal PSU Award” shall mean a performance stock unit award issued under the PayPal Equity Plan in respect of a corresponding eBay PSU Award that has been assumed by PayPal in accordance with Section 4.02(c). “PayPal Restricted Stock Award” shall mean a restricted stock award issued under the PayPal Equity Plan in respect of a corresponding eBay Restricted Stock Award that has been assumed by PayPal in accordance with Section 4.02(d). “PayPal RSU Award” shall mean a restricted stock unit award issued under the PayPal Equity Plan in respect of a corresponding eBay RSU Award that has been assumed by PayPal in accordance with Section 4.02(b). “PayPal Shares” shall have the meaning set forth in the Separation and Distribution Agreement. “PayPal Stock Value Ratio” shall mean the quotient obtained by dividing (x) the Pre-Spin eBay Stock Value by (y) the sum of (1) the Post-Spin PayPal Stock Value and (2) the quotient obtained by dividing (A) the Post-Spin eBay Stock Value by (B) the Distribution Ratio.   -17- “Post-Spin eBay DSU Award” shall mean an eBay DSU Award, as adjusted as of the Effective Time in accordance with Section 4.02(e). “Post-Spin eBay Equity Awards” shall mean, collectively, Post-Spin eBay Options, Post-Spin eBay RSU Awards, Post-Spin eBay PBRSU Awards, Post-Spin eBay PSU Awards and Post-Spin eBay DSU Awards. “Post-Spin eBay ESPP Option” shall mean an eBay ESPP Option, as adjusted as of the Effective Time in accordance with Section 4.03. “Post-Spin eBay Option” shall mean an eBay Option, as adjusted as of the Effective Time in accordance with Section 4.02(a). “Post-Spin eBay PBRSU Award” shall mean an eBay PBRSU Award, as adjusted or granted, as applicable, in accordance with Section 4.02(c). “Post-Spin eBay PSU Award” shall mean an eBay PSU Award, as adjusted as of the Effective Time in accordance with Section 4.02(d). “Post-Spin eBay RSU Award” shall mean an eBay RSU Award, as adjusted as of the Effective Time in accordance with Section 4.02(b). “Post-Spin eBay Stock Value” shall mean the opening per-share price of eBay Shares on the NASDAQ on the first regular trading session (9:30 am to 4:00 pm EST) after the Distribution Date. “Post-Spin PayPal Stock Value” shall mean the opening per-share price of PayPal “Pre-Spin eBay Stock Value” shall mean the closing per-share price of eBay Shares trading “regular way with due bills” on the NASDAQ on the last regular trading session (9:30 am to 4:00 pm EST) on the Distribution Date. Section 4.02. Equity Incentive Awards. (a) Stock Options. Each eBay Option that is outstanding immediately prior to the Effective Time shall be converted as of the Effective Time into either a Post-Spin eBay Option or a PayPal Option, as described below: (i) eBay Group Employees who are not Transitioning eBay Group Employees. Each vested and unvested eBay Option held by an eBay Group Employee (and not otherwise adjusted as provided in subsection (iii) hereof) and each vested and exercisable eBay Option held by a Former eBay Group Employee (if any) shall (1) be converted, as of the Effective Time, into a Post-Spin eBay Option through an adjustment thereto as provided in this Section 4.02(a)(i), and (2) otherwise be subject to the same terms and conditions (including with respect to vesting and expiration of exercise period,   -18- as applicable) after the Effective Time as applicable to such corresponding eBay Option immediately prior to the Effective Time, in accordance with the following: (A) the number of eBay Shares subject to such Post-Spin eBay Option (rounded down to the nearest whole share) shall be equal to the product obtained by multiplying (x) the number of eBay Shares subject to the corresponding eBay Option immediately prior to the Effective Time, by (y) the eBay Retained Award Conversion Ratio; and (B) the per share exercise price of such Post-Spin eBay Option (rounded up to the nearest cent) shall be equal to the product obtained by multiplying (x) the Post-Spin eBay Stock Value, by (y) the eBay Option Exercise Price Ratio. (ii) PayPal Group Employees. Each vested and unvested eBay Option held by a PayPal Group Employee and each vested and exercisable eBay Option held by a Former PayPal Group Employee (if any) shall (1) be converted, as of the Effective Time, into a PayPal Option outstanding under the PayPal Equity Plan through an adjustment thereto as provided in this Section 4.02(a)(ii), and (2) otherwise be subject to the same terms and conditions (including with respect to vesting and expiration of exercise period, as applicable) after the Effective Time as applicable to such eBay Option immediately prior to the Effective Time, in accordance with the following: (A) the number of PayPal Shares subject to such PayPal Option (rounded down to the nearest whole share) shall be equal to the product obtained by multiplying (x) the number of eBay Shares subject to the corresponding eBay Option immediately prior to the Effective Time, by (y) the PayPal Equity Award Conversion Ratio; and (B) the per share exercise price of such PayPal Option (rounded up to the Post-Spin PayPal Stock Value, by (y) the eBay Option Exercise Price Ratio of the corresponding eBay Option. (iii) Transitioning eBay Group Employees. Each vested eBay Option that is outstanding as of immediately prior to the Effective Time and held by a Transitioning eBay Group Employee shall (1) be converted, as of the Effective Time, through an adjustment thereto as provided in this Section 4.02(a)(iii), into both a Post-Spin eBay Option outstanding under the eBay Equity Plan and a PayPal Option outstanding under the PayPal Equity Plan and (2) otherwise be subject to the same terms and conditions (including with respect to vesting and expiration of exercise period, as applicable) after the Effective Time as were applicable to such eBay Option immediately prior to the Effective Time (as such terms and conditions may be modified by the Transition Success and Retention Program) in accordance with the following: (A) the number of eBay Shares subject to such Post-Spin eBay Option shall be equal to the product (rounded down to the nearest whole share)   -19- obtained by multiplying (x) the number of eBay Shares subject to the corresponding eBay Option immediately prior to the Effective Time, by (y) the eBay Stock Value Ratio; and (B) the per share exercise price of such Post-Spin eBay Option shall be equal to the quotient (rounded up to the nearest cent) obtained by dividing (x) the per share exercise price of the corresponding eBay Option immediately prior to the Effective Time, by (y) the eBay Retained Award Conversion Ratio; and (C) the number of PayPal Shares subject to such PayPal Option shall be equal to the product (rounded down to the nearest whole share) obtained by multiplying immediately prior to the Effective Time, by (y) the PayPal Stock Value Ratio; and (D) the per share exercise price of such PayPal Option shall be equal to the exercise price of the corresponding eBay Option immediately prior to the Effective Time, by (y) the PayPal Equity Award Conversion Ratio. (iv) Directors. Each vested and unvested eBay Option that is outstanding and held by an eBay non-employee director as of immediately prior to the Effective Time shall (1) be converted, as of the Effective Time, through an adjustment thereto as provided in this Section 4.02(a)(iv), into both a Post-Spin eBay Option outstanding under the eBay Equity Plan and a PayPal Option outstanding under the PayPal Equity Plan and (2) otherwise be subject to the same terms and conditions (including with respect to vesting and expiration, as applicable) after the Effective Time as were applicable to such eBay Option immediately prior to the Effective Time, in accordance with the following: equal to the product (rounded down to the nearest whole share) obtained by Option immediately prior to the Effective Time, by (y) the eBay Stock Value Ratio;   -20- Notwithstanding anything to the contrary in this Section 4.02(a), the exercise price, the number of eBay Shares and PayPal Shares subject to each Post-Spin eBay Option and PayPal Option, as applicable, and the terms and conditions of exercise of such options, shall be determined in a manner consistent with the requirements of Section 409A of the Code; provided, further, that, in the case of any eBay Option to which Section 421 of the Code applies by reason of its qualification under Section 422 of the Code as of immediately prior to the Effective Time, the exercise price, the number of eBay Shares and PayPal Shares subject to such option, and the terms and conditions of exercise of such option shall be determined in a manner consistent with the requirements of Section 424(a) of the Code. (b) RSU Awards. Each eBay RSU Award that is outstanding immediately prior to the Post-Spin eBay RSU Award or a PayPal RSU Award, as described below: eBay RSU Award held by an eBay Group Employee who is not a Transitioning eBay Group Employee shall (1) be converted as of the Effective Time, into a Post-Spin eBay RSU Award through an adjustment thereto as provided in this Section 4.02(b)(i), and (2) otherwise be subject to the same terms and conditions (including with respect to vesting) after the Effective Time as applicable to such eBay RSU Award immediately prior to the Effective Time, in accordance with the following: the number of eBay Shares subject to each Post-Spin eBay RSU Award (rounded down to the nearest whole share) shall be equal to the product obtained by multiplying (x) the number of eBay Shares subject to the corresponding eBay RSU Award immediately prior to the Effective Time, by (y) the eBay Retained Award Conversion Ratio. (ii) Transitioning eBay Group Employees. Each eBay RSU Award that is outstanding as of immediately prior to the Effective Time and held by a Transitioning eBay Group Employee shall (1) be converted as of the Effective Time, through an adjustment thereto as provided in this Section 4.02(b)(ii), into a Post-Spin eBay RSU Award outstanding under the eBay Equity Plan and a PayPal RSU Award outstanding under the PayPal Equity Plan and (2) otherwise be subject to the same terms and conditions after the Effective Time as were applicable to such eBay RSU Award prior to the Effective Time as such terms and conditions may be modified by the Transition Success and Retention Program, in accordance with the following: (A) the number of shares subject to the Post-Spin eBay RSU Award shall remain the same number of eBay Shares subject to the eBay RSU Award immediately prior to the Effective Time; and (B) the number of shares subject to the PayPal RSU Award shall be equal to the (x) the number of eBay Shares subject to the eBay RSU Award immediately prior to the Effective Time, by (y) the Distribution Ratio.   -21- (iii) PayPal Group Employees. Each eBay RSU Award held by a PayPal Group Employee shall (1) be converted as of the Effective Time into a PayPal RSU Award outstanding under the PayPal Equity Plan through an adjustment thereto as provided in this Section 4.02(b)(iii) and (2) otherwise be subject to the same terms and conditions (including with respect to vesting) after the Effective Time as applicable to such eBay RSU Award immediately prior to the Effective Time, in accordance with the following: the number of PayPal Shares subject to such PayPal RSU Award (rounded down to the nearest share) shall be equal to the product obtained by multiplying (x) the number of eBay Shares subject to the corresponding eBay RSU Award immediately prior to the Effective Time, by (y) the PayPal Equity Award Conversion Ratio. (c) PBRSU Awards and PSU Awards. (i) Adjustment of Performance Targets of PBRSU Awards for eBay Group Employees who are not Transitioning eBay Group Employees, and PayPal Group Employees. As of the Effective Time, each target eBay PBRSU Award with a fiscal year 2014-2015 performance period or a fiscal year 2015-2016 performance period that has been granted under the applicable eBay Equity Plan and is outstanding immediately prior to the Effective Time (an “Outstanding eBay PBRSU Award”), if any, shall be converted as of the Effective Time into either a target Post-Spin eBay PBRSU Award or a target PayPal PBRSU Award, in either such case with the performance criteria for the 2014-2015 eBay PBRSU Awards being adjusted such that the performance goal for 2015 shall be based on the performance of the relevant business unit, rather than eBay Inc., in accordance with the following: (A) Target PBRSU Awards for eBay Group Employees who are not Transitioning eBay Group Employees. Any Outstanding eBay PBRSU Award held by an eBay Group Employee (and not described in subsection (iii) hereof) shall (1) be converted as of the Effective Time, through an adjustment thereto as provided in this Section 4.02(c)(i)(A), into a target Post-Spin eBay PBRSU Award and respect to vesting and performance conditions) after the Effective Time as applicable to such Outstanding eBay PBRSU Award immediately prior to the Effective Time, in accordance with the following: the target number of eBay Shares subject to such target Post-Spin eBay PBRSU Award shall be equal to the (x) the number of eBay Shares subject to the corresponding Outstanding eBay PBRSU Award immediately prior to the Effective Time, by (y) the eBay Retained Award Conversion Ratio. (B) Target PBRSU Award for PayPal Group Employees. Any Outstanding eBay PBRSU Award held by a PayPal Group Employee shall (1) be converted as of the Effective Time, into a target Post-Spin PayPal PBRSU Award through an adjustment thereto as provided in this Section 4.02(c)(i)(B), and (2) otherwise be subject to the same terms and conditions (including with respect to vesting and performance conditions) after the Effective Time as applicable to such Outstanding eBay PBRSU   -22- Award immediately prior to the Effective Time, in accordance with the following: the target number of PayPal Shares subject to such target PayPal PBRSU Award (rounded down to the nearest whole share) shall be equal to the product obtained Outstanding eBay PBRSU Award immediately prior to the Effective Time, by (y) the (ii) PBRSU Awards to be Granted to eBay Group Employees who are not Transitioning eBay Group Employees, and PayPal Employees. With respect to any target eBay PBRSU Award with a fiscal year 2014-2015 performance period or a fiscal year 2015-2016 performance period (collectively, “Future PBRSU Awards”) which has not yet been granted pursuant to the applicable eBay Equity Plan, the following provisions shall apply: (A) any eBay Group Employee who would, in accordance with the normal practices of eBay, be granted Future PBRSU Awards pursuant to the applicable eBay Equity Plan, shall be granted, subject to the eBay Group’s actual achievement of applicable performance goals and such eBay Group Employee’s continuous service with any member of the eBay Group through the date of grant, a number of RSUs subject to the Future PBRSU Awards pursuant to the applicable eBay Equity Plan, determined using the formula provided in Section 4.02(c)(i)(A) above, as if such Future PBRSU Awards had been Outstanding eBay PBRSU Awards as of immediately prior to the Effective Time and otherwise determined under the normal grant practices of eBay; and (B) any PayPal Group Employee who would, if he or she had remained an eBay Group Employee through the date Future PBRSU Awards would, in accordance with the normal practices of eBay, have been granted, shall be granted, subject to the PayPal Group’s actual achievement of applicable performance goals and such PayPal Group Employee’s continuous service with any member of the PayPal Group from the Distribution Date through the date of grant, a number of RSUs subject to the PayPal PBRSU Awards pursuant to the PayPal Equity Plan, determined using the formula provided in Section 4.02(c)(i)(B) above, as if the Future PBRSU Awards to which such PayPal PBRSU Awards correspond had been Outstanding eBay PBRSU Awards as of immediately prior to the Effective Time, and otherwise determined under the applicable grant practices of PayPal. (iii) PBRSU Awards and PSU Awards for Transitioning eBay Group Employees. Each Outstanding eBay PBRSU Award and eBay PSU Award that is outstanding as of immediately prior to the Effective Time and held by a Transitioning eBay Group PBRSU Award and Post-Spin eBay PSU Award, respectively, outstanding under the eBay Equity Plan and a PayPal PBRSU Award and a PayPal PSU Award, respectively, provided in this Section 4.02(iii), and (2) otherwise be subject to the same terms and conditions after the Effective Time as were applicable to such Outstanding eBay PBRSU Award and eBay PSU Award, respectively, prior to the Effective Time (as such terms and conditions may be modified by the Transition Success and Retention Program) in accordance with the following:   -23- (A) the number of shares subject to the Post-Spin eBay PBRSU Award and Post-Spin eBay PSU Award, respectively, shall be equal to the same number of eBay Shares subject to the Outstanding eBay PBRSU Award and eBay PSU Award, respectively, immediately prior to the Effective Time; and (B) the number of shares subject to the PayPal PBRSU Award and PayPal PSU Award, respectively, shall be equal to the product (rounded down to the nearest whole share) obtained by multiplying (x) the number of eBay Shares subject to the Outstanding eBay PBRSU Award and eBay PSU Award, respectively, immediately prior to the Effective Time, by (y) the Distribution Ratio. (d) Restricted Stock Awards. Each eBay Restricted Stock Award that is outstanding as of immediately prior to the Effective Time and held by a PayPal Group Employee shall (1) be converted, as of the Effective Time, into a PayPal Restricted Stock Award outstanding under the PayPal Equity Plan as provided in this Section 4.02(d) and (2) otherwise be subject to the same terms and conditions (including with respect to vesting) after the Effective Time as were applicable to such eBay Restricted Stock Award prior to the Effective Time, in accordance with the following: the number of PayPal Shares subject to such PayPal Restricted Stock Award shall be equal to the product (rounded down to the nearest whole share) obtained by multiplying (x) the number of eBay Shares subject to the corresponding eBay Restricted Stock Award immediately prior to the Effective Time, by (y) the PayPal Equity Award Conversion Ratio. (e) DSU Awards. Each eBay DSU Award that is outstanding and held by a non-employee director of eBay as of immediately prior to the Effective Time Award outstanding under the eBay Equity Plan and a PayPal DSU Award outstanding under the PayPal Equity Plan as provided in this Section 4.02(e) and respect to vesting) after the Effective Time as were applicable to such eBay DSU Award prior to the Effective Time, in accordance with the following: (i) the number of shares subject to the Post-Spin eBay DSU Award shall be equal to the same number of eBay Shares subject to the eBay DSU Award immediately prior to the Effective Time; and (ii) the number of shares subject to the PayPal DSU Award shall be equal to the (x) the number of eBay Shares subject to the eBay DSU Award immediately prior to the Effective Time by (y) the Distribution Ratio. (f) Miscellaneous Terms. (i) With respect to Post-Spin eBay Equity Awards and PayPal Equity Awards: (A) employment or service with the eBay Group or the PayPal Group, as applicable, prior to the Effective Time shall be treated as employment with or service to eBay with respect to Post-Spin eBay Equity Awards held by any person who is employed by or provides services to any member of the eBay Group immediately following the Effective Time (including any Continuing eBay Director); and (B) employment with or service to the eBay Group or the PayPal Group, as   -24- service to PayPal with respect to PayPal Equity Awards held by any person who is employed by or provides services to any member of the PayPal Group immediately following the Effective Time (including any Transferring Director). In addition, (I) none of the Separation, the Distribution or any employment transfer described in Section 3.01(a), nor the fact that upon Separation certain nonemployee members of the eBay Board will serve as Continuing eBay Directors but (relative to any PayPal Equity Award) cease to provide services to the PayPal Group and other nonemployee members of the eBay Board will serve as Transferring Directors but (relative to Post-Spin eBay Equity Awards) cease to provide services to the eBay Group, shall constitute a termination of employment or service for any Employee or any such nonemployee member of the eBay Board for purposes of any Post-Spin eBay Equity Award or any PayPal Equity Award, as applicable, and (II) after the Effective Time, for any equity award adjusted under this Section 4.02, any reference to a “change of control,” “change in control” or similar definition in an award agreement, offer letter, employment agreement, equity side letter or eBay Equity Plan applicable to such award (x) with respect to Post-Spin eBay Equity Awards, shall be deemed to refer to a “change of control,” “change in control” or similar definition as set forth in the applicable award agreement, offer letter, employment agreement, equity side letter or eBay Equity Plan (an “eBay Change of Control”), and (y) with respect to PayPal Equity Awards, shall be deemed to refer to a “change in control” as defined in the PayPal Equity Plan (a “PayPal Change of Control”). (ii) Any determination in respect of any Post-Spin eBay Equity Award held by a nonemployee of eBay shall be made by the Compensation Committee of the eBay Board or its designee, and any determination in respect of any Post-Spin PayPal Equity Award held by a nonemployee of PayPal shall be made by the Compensation Committee of the PayPal Board or its designee. (iii) The PayPal Equity Plan shall assume and honor the terms of all QDROs and any other domestic relations orders in effect under the eBay Equity Plan (and any award agreements granted thereunder) in respect of PayPal Group Employees and Former PayPal Group Employees immediately prior to the Distribution Date (for PayPal Group Employees and Former PayPal Group Employees, as applicable). (g) Settlement and Forfeiture of Equity Awards. (i) Allocation of Responsibility for Settlement of Equity Awards. Except as otherwise provided in this Section 4.02(h) and Section 4.02(i), after the Effective Time, Post-Spin eBay Equity Awards, regardless of whether held by Employees, Former Employees, Transitioning eBay Group Employees, Continuing eBay Directors or Transferring Directors, shall be settled by eBay, and PayPal Equity Awards, regardless of whether held by Employees, Former Employees, Transitioning eBay Group Employees, Continuing eBay Directors or Transferring Directors shall be settled by PayPal. eBay and PayPal shall cooperate, in accordance with the terms of Section 2.03(c), to coordinate the prompt settlement of any such awards that become vested on the Distribution Date and any such awards that are exercised on or after the Distribution Date, as applicable, in accordance with the terms of Section 4.02(j).   -25- (ii) Forfeiture of Equity Awards. Following the Effective Time, if any Post-Spin eBay Equity Award held by a PayPal Group Employee, Former PayPal Group Employee or Transferring Director shall fail to become vested, such Post-Spin eBay Equity Award shall be forfeited to eBay, and if any PayPal Equity Award held by an eBay Group Employee, Former eBay Group Employee or Continuing eBay Director shall fail to become vested, such PayPal Equity Award shall be forfeited to PayPal. (h) Equity Award Tax Reporting, Withholding and Deductions. (i) Tax Withholding for PayPal Equity Awards. Upon the vesting, payment or settlement, as applicable, of PayPal Equity Awards, the PayPal Group shall be solely responsible for ensuring (A) the satisfaction of all applicable tax withholding requirements with respect to each PayPal Group Employee, Former PayPal Group Employee and Transitioning eBay Group Employee and (B) the collection and remittance of applicable withholding taxes to the appropriate Governmental Authority in respect of all PayPal Equity Awards for which PayPal is entitled to claim a tax deduction pursuant to clause (v) below. Notwithstanding the foregoing, however, for all PayPal Equity Awards (other than PayPal Options) held by the Transitioning eBay Group Employees, PayPal shall be responsible for the collection of applicable withholding taxes and shall remit all such withheld amounts to the eBay Group (with eBay Group being responsible for remittance of such amounts to the appropriate Governmental Authority). (ii) Tax Withholding for Post-Spin eBay Equity Awards. Upon the vesting, payment or settlement, as applicable, of Post-Spin eBay Equity Awards, the eBay Group shall be solely responsible for ensuring (A) the satisfaction of all applicable tax withholding requirements with respect to each eBay Group Employee, Former eBay Group Employee and Transitioning eBay Group Employee and (B) the collection and remittance of applicable withholding taxes to the appropriate Governmental Authority in respect of all eBay Equity Awards for which eBay is entitled to claim a tax deduction pursuant to clause (v) below. (iii) Applicable Withholding Rates. The applicable tax withholding requirements for any Employee, Former Employee and Transitioning eBay Group Employee subject to tax in the United States shall be based on the minimum statutory rates and except as otherwise required by applicable Law, for Employees, Former Employees and Transitioning eBay Group Employees subject to tax outside the United States shall be based on the maximum statutory requirements. (iv) Tax Reporting. Following the Effective Time: (A) the eBay Group shall be responsible for all income, payroll and other tax reporting in respect of all Post-Spin eBay Equity Awards held by eBay Group Employees, Former eBay Group Employees, Transitioning eBay Group Employee, Continuing eBay Directors and Transferring Directors for which eBay is entitled to claim a tax deduction pursuant to clause (v) below, as applicable, and (B) the PayPal Group shall be PayPal Equity Awards held by PayPal Group Employees, Former PayPal Group Employees, Transitioning eBay Group Employees, Continuing eBay Directors and Transferring Directors for which PayPal is entitled to claim a tax deduction pursuant to clause (v) below. (v) Tax Deductions. Following the Effective Time, the entitlement to Tax (as defined in the Tax Matters Agreement) deductions in respect of eBay Equity Awards and PayPal Equity Awards, as applicable, shall be governed by Section 6.02 of the Tax Matters Agreement.   -26- (i) Cooperation. Each of the Parties shall establish an appropriate administration system in order to administer, in an orderly manner, (i) exercises of vested Post-Spin eBay Options and PayPal Options, (ii) the vesting and forfeiture of unvested Post-Spin eBay Equity Awards and PayPal Equity Awards, and (iii) the withholding and reporting requirements with respect to all equity awards. Each of the Parties shall use their reasonable best efforts together to unify and consolidate all indicative data and payroll and employment information on regular timetables and make certain that each applicable Person’s data and records in respect of such awards are correct and updated on a timely basis. The foregoing shall include employment status (e.g., disability or termination of employment) and other information that may be required for vesting and forfeiture of awards and tax withholding/remittance, and any proceedings referenced in Section 2.01(e), compliance with trading windows and compliance with the requirements of the Exchange Act and other applicable Laws. (j) Establishment of PayPal Equity Plan. Effective as of or prior to the Effective Time, the PayPal Board shall (i) adopt the PayPal Equity Plan under which the PayPal Options, PayPal RSU Awards, PayPal PBRSU Awards, PayPal Restricted Stock Awards, PayPal PSU Awards and PayPal DSU Awards, as applicable, shall be granted and (ii) cause PayPal to assume the obligations under the eBay Equity Awards that are, pursuant to this Agreement, being replaced with the applicable PayPal Options, PayPal RSU Awards, PayPal PBRSU Awards, PayPal Restricted Stock Awards, PayPal PSU Awards and PayPal DSU Awards. To the extent necessary for any such awards to qualify for transitional relief under Treasury Regulation Section 1.162-27(f)(4)(iii), eBay shall take the necessary action to grant or approve the PayPal Equity Awards. The PayPal Equity Plan shall have substantially comparable terms, as of immediately prior to the Effective Time, as the eBay Equity Plan under which the corresponding eBay Equity Awards were governed prior to the Distribution with such changes as are necessary and appropriate to reflect the Separation and such other changes, modifications or amendments to the PayPal Equity Plans as may be required by applicable Law. PayPal shall also assume and honor the terms of all QDROs and any other domestic relations orders in effect under the eBay Equity Plan in respect of PayPal Group Employees immediately prior to the Distribution Date (for PayPal Group Employees) for all purposes of PayPal Equity Awards under the PayPal Equity Plan. (k) Registration and Other Regulatory Requirements. PayPal agrees to file Forms S-1, S-3 and/or S-8 registration statements with respect to, and to cause to be registered pursuant to the Securities Act, the PayPal Shares authorized for issuance under the PayPal Equity Plan, as required pursuant to the Securities Act, no later than the Effective Time and in any event before the date of issuance of any PayPal Shares pursuant to the PayPal Equity Plan. The parties shall take such additional actions as are deemed necessary or advisable to effectuate the foregoing provisions of Article IV, including compliance with securities Laws and other legal requirements associated with equity compensation awards in affected non-U.S. jurisdictions.   -27- Section 4.03. Employee Stock Purchase Plans. (a) eBay ESPP. Each eBay ESPP Option that is outstanding immediately prior to the Effective Time shall be converted as of the Effective Time into either a Post-Spin eBay ESPP Option or a PayPal ESPP Option as described below: (i) Each eBay ESPP Option held by an eBay Group Employee shall (1) be converted as of the Effective Time into a Post-Spin eBay ESPP Option through an adjustment thereto as provided in this Section 4.03, and (2) otherwise be subject to the same terms and conditions (including with respect to expiration) after the Effective Time as applicable to such eBay ESPP Option immediately prior to the (A) The maximum number of eBay Shares subject to such Post-Spin eBay ESPP Option for the purchase period in effect on the Distribution Date (rounded down to the (x) the maximum number of shares subject to the eBay ESPP Option, by (y) the eBay Retained Award Conversion Ratio; and (B) the per share offering date purchase price for each Offering Period in effect on the Distribution Date of such Post-Spin eBay ESPP Option (rounded up to the nearest cent) shall be equal to the product obtained by multiplying (x) the Post-Spin eBay Stock Value, by (y) the eBay Option Exercise Price Ratio of the corresponding eBay ESPP Option. (ii) Each eBay ESPP Option held by a PayPal Group Employee shall be converted as of the Effective Time into a PayPal ESPP Option outstanding under the PayPal ESPP Plan and shall, except as otherwise provided in this Section 4.03, be subject to the same terms and conditions (including with respect to expiration) after the Effective Time as applicable to such eBay ESPP Option immediately prior to the Effective Time in accordance with the following: (A) The maximum number of PayPal Shares subject to such PayPal ESPP Option for nearest whole share), shall be equal to the product obtained by multiplying (1) the maximum number of share subject to an eBay Option, by (2) the PayPal Equity Award Conversion Ratio; and (B) the per share offering date purchase price for the Offering Period in effect on the Distribution Date of such PayPal ESPP Option (rounded up to the nearest cent), shall be equal to the product obtained by multiplying (1) the Post-Spin PayPal Stock Value, by (2) the eBay Option Exercise Price Ratio of the corresponding eBay ESPP Option. Notwithstanding anything to the contrary in this Section 4.03, in the case of any eBay ESPP Option to which Section 421 of the Code applies by reason of its qualification under Section 423 of the Code as of immediately prior to the   -28- (b) Establishment of PayPal ESPP. Prior to the Effective Time, PayPal shall (i) adopt the PayPal ESPP under which the PayPal ESPP Options shall be granted and (ii) assume the obligations under the eBay ESPP Options that are, pursuant to this Agreement, being replaced with the PayPal ESPP Options. The PayPal ESPP may have terms that are comparable to those in effect, as of immediately prior to the Effective Time, under which the corresponding eBay ESPP Options were governed prior to the Distribution, including with such changes as are necessary and appropriate to reflect the Separation and such other changes, modifications or amendments to the PayPal Equity Plans as may be required by applicable Law. The PayPal ESPP will include authority to grant options which do not meet the requirements of Section 423(b) of the Code (as well as options which meet such requirements). (c) Elections under the ESPP. PayPal and eBay shall use their reasonable best efforts to cooperate to facilitate: (i) the carryover of current elections made by each PayPal Group Employee in effect under the eBay ESPP to the PayPal ESPP and (ii) the transfer of contributions associated with such elections from the eBay ESPP to the PayPal ESPP. (d) Tax Reporting and Deductions. Following the Effective Time, (i) the eBay Group shall be responsible for all income, payroll and other tax reporting in respect of eBay shares issued (or PayPal shares received in respect of eBay shares issued) under the eBay ESPP, and (ii) the entitlement to Tax (as defined in the Tax Matters Agreement) deductions in respect of shares issued under the eBay ESPP and PayPal ESPP, as applicable, shall be governed by Section 6.02 of the Tax Matters Agreement. Section 4.04. Non-Equity Incentive Plans. (a) Corporate Bonus Plans. (i) No later than the Effective Time, PayPal shall establish the PayPal Incentive Plans, which, through December 31, 2015, shall have substantially comparable terms as of immediately prior to the Effective Time as the corresponding eBay Incentive Plans in which the PayPal Group Employee participated as of immediately prior to the Effective Time, with such changes to the applicable performance goals as may be necessary in order to reflect the PayPal Business following the Separation, and such other changes, modifications or amendments to the PayPal Incentive Plans as may be required by applicable Law. PayPal Group Employees shall be eligible to participate in the PayPal Incentive Plans as of the Effective Time to the extent that they were eligible to participate in the eBay Incentive Plans as of immediately prior to the Effective Time. (ii) The applicable determining body, person or group of persons of the PayPal Group shall be responsible for determining all bonus awards that would otherwise be payable under the PayPal Incentive Plans to PayPal Group Employees or Former PayPal Group Employees for any performance periods that are open when the Effective Time occurs. The PayPal Group shall also determine for PayPal Group Employees or Former PayPal Group Employees (A) the extent to which established performance criteria (as interpreted by the   -29- applicable determining body, person or group of persons of the PayPal Group, in its sole discretion) have been met, and (B) the payment level for each PayPal Group Employee or Former PayPal Group Employee. The PayPal Group shall assume all Liabilities with respect to any such bonus awards payable to PayPal Group Employees or Former PayPal Group Employees for any performance periods that are open when the Effective Time occurs and thereafter, and any other Liabilities relating to PayPal Group Employees or Former PayPal Group Employees under the eBay Incentive Plans and no member of the eBay Group shall have any obligations with respect thereto. (iii) The applicable determining body, person or group of persons of eBay Group shall be responsible for determining all bonus awards that would otherwise be payable under the eBay Incentive Plans to eBay Group Employees or Former eBay Group Employees for any performance periods that are open when the Effective Time occurs. The eBay Group shall also determine for eBay Group Employees or Former eBay Group Employees (A) the extent to which established performance criteria (as interpreted by the applicable determining body, person or group of persons of the eBay Group, in its sole discretion) have been met, and (B) the payment level for each eBay Group Employee or Former eBay Group Employee. The eBay Group shall retain (or assume as necessary) all Liabilities with respect to any such bonus awards payable to eBay Group Employees or Former eBay Group Employees for any performance periods that are open when the Effective Time occurs and thereafter, and no member of the PayPal Group shall have any obligations with respect thereto. (b) eBay Retained Bonus Plans. No later than the Effective Time, the eBay Group shall continue to retain (or assume as necessary) any incentive compensation plan (including any sales incentive or other incentive plans applicable at the individual business unit level) for the exclusive benefit of eBay Group Employees and Former eBay Group Employees, whether or not sponsored by the eBay Group, and, from and after the Effective Time, shall be solely responsible for all Liabilities thereunder. (c) PayPal Retained Bonus Plans. No later than the Effective Time, the PayPal Group shall continue to retain (or assume as necessary) any incentive plan (including any sales incentive or other incentive plans applicable at the individual business unit level) for the exclusive benefit of PayPal Group Employees and Former PayPal Group Employees, whether or not sponsored by the PayPal Group, and, from and after the Effective Time, shall be solely responsible for all Liabilities thereunder. Section 4.05. Director Compensation. (a) Director Compensation Allocable to Service. eBay shall be responsible for the payment of any fees for service on the eBay Board that are earned at, before, or after the Effective Time, and PayPal shall not have any responsibility for any such payments. With respect to any PayPal non-employee director, PayPal shall be responsible for the payment of any fees for service on the PayPal Board that are earned at any time after the Effective Time and eBay shall not have any responsibility for any such payments. Notwithstanding the foregoing, PayPal shall commence paying quarterly cash retainers to PayPal non-employee directors in respect of the quarter in which the calendar date immediately following the Distribution Date occurs; provided that eBay will pay PayPal an amount equal to the portion of such payment that is attributable to   -30- Transferring Directors’ service to eBay on and prior to the Effective Time (including, for the avoidance of doubt, the grant date fair value of any PayPal deferred stock units that may be issued in respect of any partial quarterly service on the eBay Board during the quarter on which the Distribution Date occurs, if applicable). For the avoidance of doubt, eBay Equity Awards held by non-employee directors as of immediately prior to the Effective Time shall be treated as described in Section 4.02. (b) Impact of Change of Control on Director Equity Awards. With respect to provisions related to vesting of eBay Equity Awards and, to the extent applicable, following the Effective Time, PayPal Equity Awards, an eBay Change of Control shall be treated as a PayPal Change of Control for purposes of PayPal Equity Awards held, after the Effective Time, by Continuing eBay Directors, and a PayPal Change of Control shall be treated as an eBay Change of Control for purposes of Post-Spin eBay Equity Awards held by Transferring Directors. ARTICLE V RETIREMENT PLANS Section 5.01. PayPal 401(k) Plan. (a) Establishment of Plan. Effective on or before the Distribution Date, the PayPal Board shall adopt and establish the PayPal 401(k) Plan and a related trust (the “PayPal 401(k) Trust”) which shall be intended to meet the Qualification Requirements (including under Sections 401(k) and (m) of the Code) and which through December 31, 2015 shall have substantially the same terms as of immediately prior to the Distribution Date as the eBay 401(k) Plan. Notwithstanding the foregoing, PayPal may make such changes, modifications or amendments to the PayPal 401(k) Plan as may be required by applicable Law or as are necessary and appropriate to reflect the Separation or which result from vendor limitations. Before the Distribution Date, PayPal shall provide eBay with (i) a copy of the PayPal 401(k) Plan, PayPal 401(k) Trust and volume submitter approval letter and (ii) a copy of certified resolutions of the PayPal Board (or its authorized committee or other delegate) evidencing adoption of the PayPal 401(k) Plan and PayPal 401(k) Trust and the assumption by the PayPal 401(k) Plan of the Liabilities described in Section 5.01(b). (b) Transfer of Account Balances. No later than 30 days following the Effective Time (or such other times as mutually agreed to by the parties), eBay shall cause the trustee of the eBay 401(k) Plan to transfer from the trust which forms a part of the eBay 401(k) Plan (the “eBay 401(k) Trust”) to the PayPal 401(k) Trust, the account balances of PayPal Group Employees under the eBay 401(k) Plan, determined as of the date of the transfer. Unless otherwise agreed by the parties, such transfers shall be made in kind, including promissory notes evidencing the transfer of outstanding loans. Any Asset and Liability transfers pursuant to this Section 5.01 shall comply in all respects with Sections 414(l) and 411(d)(6) of the Code and if required, shall be made not less than thirty (30) days after eBay shall have filed the notice under Section 6058(b) of the Code. The parties agree that to the extent that any assets are not transferred in kind, the assets transferred will be mapped into an appropriate investment vehicle.   -31- (c) PayPal 401(k) Plan Provisions. The PayPal 401(k) Plan shall provide that: (i) PayPal Group Employees shall be eligible to participate in the PayPal 401(k) Plan as of the Effective Time to the extent that they were eligible to participate in the eBay 401(k) Plan as of immediately prior to the Effective Time; (ii) the account balance of each PayPal Group Employee under the eBay 401(k) Plan as of the date of the transfer of Assets from the eBay 401(k) Plan (including any outstanding promissory notes relating to outstanding loans) shall be credited to such individual’s account under the PayPal 401(k) Plan; and (iii) the PayPal 401(k) Plan shall assume and honor the terms of all QDROs in effect under the eBay 401(k) Plan in respect of PayPal Group Employees immediately prior to the Effective Time (for PayPal Group Employees). (d) Plan Fiduciaries. For all periods at and after the Effective Time, the parties agree that the applicable fiduciaries of each of the eBay 401(k) Plan and the PayPal 401(k) Plan, respectively, shall have the authority with respect to the eBay 401(k) Plan and the PayPal 401(k) Plan, respectively, to determine the investment alternatives, the terms and conditions with respect to those investment alternatives and such other matters as are within the scope of their duties under ERISA and the terms of the applicable plan documents. (e) No Distributions. No PayPal Group Employee shall be entitled to a right to a distribution of his or her benefit under the eBay 401(k) Plan as a result of his or her transfer of employment from the eBay Group to the PayPal Group nor as a result of the completion of the Separation. Section 5.02. Non-U.S. Retirement Plans. (a) Establishment of PayPal Non-U.S. Retirement Plans. Before the Effective Time, subject to and in compliance with applicable Law or as otherwise provided in Section 2.03(b), the applicable determining body, person or group of persons of the PayPal Group shall adopt and establish PayPal Non-U.S. Retirement Plans for PayPal Group Employees and Former PayPal Group Employees which through December 31, 2015 shall have terms comparable to those terms as of immediately prior to the Distribution Date as the eBay Non-U.S. Retirement Plans. Notwithstanding the foregoing, the applicable determining body, person or group of persons of the PayPal Group may make such changes, modifications, or amendments to the PayPal Non-U.S. Retirement Plans as may be required by applicable Law or as are necessary to reflect the Separation. (b) Transfer of Assets and Assumption of Liabilities. As soon as practicable following the Effective Time, subject to and in compliance with applicable Law, account balances (including statutory contributions and funds), or contracts of the PayPal Group Employees and, if applicable, Former PayPal Group Employees, shall be transferred from a member of the eBay Group or the eBay Non-U.S. Retirement Plan to a member of the PayPal Group or the PayPal Non-U.S. Retirement Plan, as applicable. In the event any Non-U.S. Retirement Plan is a defined benefit plan, then if permissible under applicable Law, the Parties shall cooperate to transfer the Assets and Liabilities, with respect to the benefits of PayPal Group Employees and Former PayPal   -32- Group Employees, in a manner reasonably acceptable to the Parties in consultation with the applicable actuary for, or other relevant third-party administrator or other service provider of, any such plan. As of the Effective Time and subject to the transfer described herein, eBay and the eBay Non-U.S. Retirement Plans shall be relieved of all Liabilities for those benefits transferred and PayPal shall, and shall cause the PayPal Non-U.S. Retirement Plan, to assume all Liabilities under the eBay Non-U.S. Retirement Plans for the benefits of PayPal Group Employees and, if applicable, Former PayPal Group Employees determined immediately prior to the Effective Time. For the avoidance of doubt, in any non-U.S. jurisdiction where account balances, contracts or assets relating to benefits are not permitted to be transferred, eBay shall remain liable to the extent it is otherwise liable under applicable Law with respect to such benefits relating to account balances, contracts or assets not transferred. ARTICLE VI NONQUALIFIED DEFERRED COMPENSATION PLAN Section 6.01. PayPal Deferred Compensation Plan. (a) Establishment of the Deferred Compensation Plan. Before the Effective Time, PayPal shall establish the PayPal Deferred Compensation Plan, which through December 31, 2015, shall have substantially the same terms as of immediately prior to the Effective Time as the eBay Deferred Compensation Plan. amendments to the PayPal Deferred Compensation Plan as may be required by applicable Law or as are necessary and appropriate to reflect the Separation. The PayPal Deferred Compensation Plan shall assume and honor the terms of all QDROs and any other domestic relations orders in effect under the eBay Deferred Compensation Plan in respect of PayPal Group Employees immediately prior to the Effective Time. (b) Assumption of Liabilities from eBay. As of the Effective Time, PayPal shall, and shall cause the PayPal Deferred Compensation Plan to, assume all Liabilities under the eBay Deferred Compensation Plan for the benefits of PayPal Group Employees determined as of immediately prior to the Effective Time, and the eBay Deferred Compensation Plan shall be relieved of all Liabilities for those benefits. eBay shall retain all Liabilities under the eBay Deferred Compensation Plan for the benefits for eBay Group Employees, Former eBay Group Employees and Former PayPal Group Employees. From and after the Effective Time, PayPal Group Employees shall cease to be participants in the eBay Deferred Compensation Plan. Section 6.02. Participation; Distributions. The Parties acknowledge that none of the transactions contemplated by this Agreement, the Separation and Distribution Agreement or any Ancillary Agreement will trigger a payment or distribution of compensation under any of the eBay Deferred Compensation Plans or the PayPal Deferred Compensation Plans for any participant and, consequently, that the payment or distribution of any compensation to which such participant is entitled under any of the eBay Deferred Compensation Plans or the PayPal Deferred Compensation Plans will occur upon such participant’s separation from service from the PayPal Group or at such other time as provided in the applicable PayPal Nonqualified Plan or participant’s deferral election.   -33- ARTICLE VII WELFARE BENEFIT PLANS Section 7.01. Welfare Plans. (a) Establishment of PayPal Welfare Plans. Before the Effective Time and except as otherwise set forth in this Article VII, PayPal shall, or shall cause the applicable member of the PayPal Group to, or shall engage in negotiations to, establish the PayPal Welfare Plans (including statutorily required plans such as provident funds, gratuity and insurance to the extent applicable), which through December 31, 2015 shall have terms substantially similar in the aggregate as of immediately prior to the Effective Time as to those of the corresponding eBay Welfare Plans. Notwithstanding the foregoing, PayPal may make such changes, modifications or amendments to the PayPal Welfare Plans as may be required by applicable Law or as are necessary and appropriate to reflect the Separation or which result from vendor limitations. (b) Waiver of Conditions; Benefit Maximums. PayPal shall use commercially reasonable efforts to cause the PayPal Welfare Plans to: (i) with respect to initial enrollment as of the Effective Time, waive (A) all limitations as to preexisting conditions, exclusions, and service conditions with respect to participation and coverage requirements applicable to any PayPal Group Employee or Former PayPal Group Employee, other than limitations that were in effect with respect to the PayPal Group Employee or Former PayPal Group Employee under the applicable eBay Welfare Plan as of immediately prior to the Effective Time, and (B) any waiting period limitation or evidence of insurability requirement applicable to a PayPal Group Employee or Former PayPal Group Employee other than limitations or requirements that were in effect with respect to such PayPal Group Employee or Former PayPal Group Employee under the applicable eBay Welfare Plans as of immediately prior to the Effective Time; and (ii) take into account (A) with respect to aggregate annual, lifetime, or similar maximum benefits available under the PayPal Welfare Plans, a PayPal Group Employee’s or Former PayPal Group Employee’s prior claim experience under the eBay Welfare Plans and any eBay Benefit Plan that provides leave benefits; and (B) any eligible expenses incurred by a PayPal Group Employee or Former PayPal Group Employee during the portion of the plan year of the applicable eBay Welfare Plan ending as of the Effective Time to be taken into account under such PayPal Welfare Plan for purposes of satisfying all deductible, coinsurance, and maximum out-of-pocket requirements applicable to such PayPal Group Employee or Former PayPal Group Employee for the applicable plan year to the same extent as such expenses were taken into account by eBay for similar purposes prior to the Effective Time as if such amounts had been paid in accordance with such PayPal Welfare Plan. (c) Health Savings Accounts. Before the Effective Time, PayPal shall, or shall cause a member of the PayPal Group to, establish a PayPal Welfare Plan that will provide health savings account benefits to PayPal Group Employees on and after the Effective Time (a “PayPal HSA”). It is the intention of the Parties that all activity under a PayPal Group Employee’s health   -34- savings account under an eBay Welfare Plan (a “eBay HSA”) for the year in which the Effective Time occurs be treated instead as activity under the corresponding account under the PayPal HSA, such that (i) any period of participation by a PayPal Group Employee in an eBay HSA during the year in which the Effective Time occurs will be deemed a period when such PayPal Group Employee participated in the corresponding PayPal HSA; (ii) all expenses incurred during such period will be deemed incurred while such PayPal Group Employee’s coverage was in effect under the corresponding PayPal HSA; (iii) all elections and reimbursements made with respect to such period under the eBay HSA will be deemed to have been made with respect to the corresponding PayPal HSA; and (iv) for purposes of determining the total annual employer contribution made on behalf of a PayPal Group Employee, employer contributions made with respect to such period under the eBay HSA will be deemed to have been made with respect to the corresponding PayPal HSA. (d) Flexible Spending Accounts. The Parties shall use commercially reasonable efforts to ensure that as of the Effective Time any health or dependent care flexible spending accounts of PayPal Group Employees (whether positive or negative) (the “Transferred Account Balances”) under eBay Welfare Plans that are health or dependent care flexible spending account plans are transferred, as soon as practicable after the Effective Time, from the eBay Welfare Plans to the corresponding PayPal Welfare Plans. Such PayPal Welfare Plans shall assume responsibility as of the Effective Time for all outstanding health or dependent care claims under the corresponding eBay Welfare Plans of each PayPal Group Employee for the year in which the Effective Time occurs and shall assume and agree to perform the obligations of the corresponding eBay Welfare Plans from and after the Effective Time. As soon as practicable after the Effective Time, and in any event within 30 days after the amount of the Transferred Account Balances is determined or such later date as mutually agreed upon by the Parties, PayPal shall pay eBay the net aggregate amount of the Transferred Account Balances, if such amount is positive, and eBay shall pay PayPal the net aggregate amount of the Transferred Account Balances, if such amount is negative. (e) Allocation of Welfare Liabilities. Except as otherwise set forth in Article VII: (i) The eBay Group and the eBay Welfare Plans shall remain responsible for all Liabilities to, or in respect of, PayPal Group Employees and Former PayPal Group Employees relating to or arising in connection with any claims relating to medical, dental, hospitalization, vision, prescription drug or other health arrangement, long-term disability, life, accidental death and dismemberment and business travel accident insurance, which claims are incurred before the Effective Time and the PayPal Group and the PayPal Group Welfare Plans shall be responsible for all Liabilities to, or in respect of, PayPal Group Employees and Former PayPal Group Employees relating to or arising in connection with any claims for medical, dental, hospitalization, vision, prescription drug or other health arrangement, long-term disability, life, accidental death and dismemberment and business travel accident insurance, which claims are incurred at or after the Effective Time;   -35- (ii) With respect to claims for short-term disability (a) the PayPal Group shall be responsible for (i) claims incurred in respect of PayPal Group Employees and Former PayPal Group Employees, occurring at or after the Effective Time and (ii) amounts owed with respect to the period commencing on the Effective Time with respect to a claim incurred prior to the Effective Time (for the avoidance of doubt, if a PayPal Group Employee is on short-term disability on the Effective Time for a claim incurred prior to the Effective Time, the PayPal Group shall be responsible for short-term disability payments with respect to the period commencing at the Effective Time and if such claim as incurred prior to the Effective Time becomes a long-term disability claim, such claim shall be subject to the provision of subsection (i) hereof); (iii) The PayPal Group shall assume Liability relating to, arising out of or resulting from all other welfare coverage or claims incurred by or on behalf of any PayPal Group Employee or Former PayPal Group Employee under any eBay Welfare Plan or PayPal Welfare Plan before, at or after the Effective Time; (iv) For these purposes, a claim or Liability is deemed to be incurred: (a) with respect to medical, dental, vision and/or prescription drug benefits, upon the rendering of health services giving rise to such claim or Liability; (b) with respect to life insurance, accidental death and dismemberment and business travel accident insurance, upon the occurrence of the event giving rise to such claim or Liability; and (c) with respect to disability benefits, upon the date of an Employee’s disability, as determined by the disability benefit insurance carrier or claim administrator, giving rise to such claim or Liability; (v) The eBay Group and the eBay Welfare Plans shall remain liable for any Liabilities relating to audit or compliance of the eBay Welfare Plans; and (vi) At and after the Effective Time, no eBay Welfare Plan shall provide coverage to any PayPal Group Employee or Former PayPal Group Employee. (f) Establishment of High Deductible Health Plan. Effective as of the Effective Time, PayPal shall or cause a member of the PayPal Group to establish a high deductible health plan option with related health savings account and limited purpose health care spending account benefits. Section 7.02. COBRA. The eBay Group shall be responsible for complying with, and providing coverage pursuant to, the health care continuation requirements of COBRA, and the corresponding provisions of the eBay Welfare Plans with respect to any Employees and any Former Employees (and their covered dependents) who incur a qualifying event or loss of coverage (within the meaning of COBRA) before the Effective Time. Effective as of the Effective Time, the PayPal Group shall be responsibility for complying with, and providing coverage pursuant to, the health care continuation requirements of COBRA, and the corresponding provisions of the PayPal Welfare Plans with respect to any PayPal Group Employees or Former PayPal Group Employees (and their covered dependents) who incur a qualifying event or loss of coverage (within the meaning of COBRA) under the PayPal Welfare Plans at or after the Effective Time. The Parties agree that the consummation of the transactions contemplated by the Separation and Distribution Agreement shall not constitute a COBRA qualifying event for any purpose of COBRA for purposes of applying the principals set forth in this Section 7.02.   -36- Section 7.03. Paid Time Off, Holidays and Leaves of Absence. Effective as of the Effective Time, the PayPal Group shall assume all Liabilities of the eBay Group with respect to paid time off, holiday, annual leave or other leave of absence, and required payments related thereto regardless of whether such liabilities originated prior to the Effective Time, for each PayPal Group Employee or Former PayPal Group Employee unless otherwise required by applicable Law. The eBay Group shall retain all Liabilities with respect to paid time off, holiday, annual leave or other leave of absence (including sabbatical leave), and required payments related thereto, for each eBay Group Employee and Former eBay Group Employee. Section 7.04. Severance and Unemployment Compensation. Effective as of the Effective Time, the PayPal Group shall assume any and all Liabilities to, or relating to, PayPal Group Employees and Former PayPal Group Employees in respect of severance and unemployment compensation, regardless of whether the event giving rise to the Liability occurred before, at or after the Effective Time. The eBay Group shall be responsible for any and all Liabilities to, or relating to, eBay Group Employees and Former eBay Group Employees in respect of severance and unemployment compensation, regardless of whether the event giving rise to the Liability occurred before, at or after the Effective Time. Section 7.05. Sabbatical Plans and Sabbatical Trusts. Effective as of the Effective Time, the applicable determining body, person or group of persons of the PayPal Group shall establish the PayPal Sabbatical Plans, which through December 31, 2015 shall have substantially the same terms as of immediately prior to the Effective Time as the corresponding eBay Sabbatical Plans. of persons of the PayPal Group may make such changes, modifications or amendments to the PayPal Sabbatical Plans as may be required by applicable Law or as are necessary and appropriate to reflect the Separation. PayPal shall adopt the PayPal Sabbatical Trusts. From and after the Effective Time, the PayPal Group and the PayPal Sabbatical Plans and PayPal Sabbatical Trusts shall be responsible for and assume all Liabilities relating to PayPal Group Employees and Former PayPal Group Employees that would have been satisfied by the eBay Group and the eBay Sabbatical Trusts had the Distribution not occurred, and neither any member of the eBay Group nor the eBay Sabbatical Plans or eBay Sabbatical Trusts shall have any Liabilities with respect thereto. In connection with the establishment by the PayPal Group of the PayPal Sabbatical Plans, as of the Effective Time, the applicable determining body, person or group of persons of the eBay Group shall, or shall cause the eBay Sabbatical Trusts to, transfer Assets (whether in cash or in kind as determined by eBay) to the PayPal Sabbatical Trusts in an amount equal to the product of (i) the fair market value of the Assets of the eBay Sabbatical Trusts immediately prior to the Effective Time (or such other date or time as may be agreed by the Parties) and (ii) the percentage of Liabilities to be assumed by the PayPal Group under the eBay Sabbatical Plans as of April 1, 2015 (or such other date or time as may be agreed by the Parties) out of the total Liabilities of the eBay Sabbatical Plans as of April 1, 2015 (or such other date or time as may be agreed by the Parties) (for the avoidance of doubt and as an example, if PayPal Group’s portion of the liability of the eBay Sabbatical Plans is 41.24%, the PayPal Sabbatical Trusts will receive 41.24% of the Assets of the eBay Sabbatical Trusts, subject to any adjustments described below). For purposes of the preceding sentence, Liabilities under the eBay Sabbatical Plans shall be measured as of immediately prior to April 1, 2015 (or such other date or time as may be agreed by the Parties) on a target funding basis without regard to interest discounting and otherwise based on the assumptions set forth in the December 31, 2014 actuarial valuation for the eBay Sabbatical Plan   -37- prepared by Buck Consultants, LLC. The amount of assets to be transferred shall be adjusted for earnings and distributions, if any, through the actual date of transfer. Section 7.06. Workers’ Compensation. With respect to claims for workers’ compensation in the United States, (a) the PayPal Group shall be responsible for claims in respect of PayPal Group Employees and Former PayPal Group Employees, occurring at or after the Effective Time, (b) the eBay Group shall be responsible for all claims in respect of eBay Group Employees and Former eBay Group Employees, whether occurring at or after the Effective Time and (c) the eBay Group should be responsible for all claims in respect of PayPal Group Employees and Former PayPal Group Employees occurring before the Effective Time. The treatment of workers’ compensation claims by PayPal with respect to eBay insurance policies shall be governed by Section 5.1 of the Separation and Distribution Agreement; provided, that for purposes of claims referenced in this Section 7.06, a claim shall be deemed incurred when the injury giving rise to any claim made under the applicable workers compensation policy occurs. Section 7.07. Insurance Contracts. To the extent that any eBay Welfare Plan is funded through the purchase of an insurance contract or is subject to any stop loss contract, the Parties will cooperate and use their commercially reasonable efforts to replicate such insurance contracts for PayPal (except to the extent that changes are required under applicable state insurance Laws or filings by the respective insurers) and to maintain any pricing discounts or other preferential terms for both eBay and PayPal for a reasonable term. Neither Party shall be liable for failure to obtain such insurance contracts, pricing discounts, or other preferential terms for the other Party. Each Party shall be responsible for any additional premiums, charges, or administrative fees that such Party may incur pursuant to this Section 7.07. Section 7.08. Third-Party Vendors. Except as provided below, to the extent that any eBay Welfare Plan is administered by a third-party vendor, the Parties will cooperate and use their commercially reasonable efforts to replicate any contract with such third-party vendor for PayPal and to maintain any pricing discounts or other preferential terms for both eBay and PayPal for a reasonable term. Neither Party shall be liable for failure to obtain such pricing discounts or other preferential terms for the other Party. Each Party shall be responsible for any additional premiums, charges, or administrative fees that such Party may incur pursuant to this Section 7.08. Section 7.09. Fringe Benefits. Effective as of the Effective Time, PayPal shall or shall cause the applicable member of the PayPal Group to adopt the PayPal Fringe Benefit Plans, which through December 31, 2015 shall have terms that are substantially similar in the aggregate as of immediately prior to the Effective Time as those of the eBay Fringe Benefit Plans. Notwithstanding the foregoing, PayPal may make such changes, modifications or amendments to the PayPal Fringe Benefit Plans as may be required by applicable Law or as are necessary and appropriate to reflect the Separation or which result from vendor limitations. As of the Effective Time, PayPal shall, and shall cause the PayPal Fringe Benefit Plans to, assume all Liabilities under the eBay Fringe Benefit Plans for the benefits of PayPal Group Employees and Former PayPal Group Employees regardless of whether the event giving rise to the Liability occurred before, at or after the Effective Time, and the eBay Fringe Benefit Plans shall be relieved of all Liabilities for those benefits. eBay shall retain all Liabilities under the eBay Fringe Benefit Plans for the benefits for eBay Group Employees and Former eBay Group Employees and after the Effective Time,   -38- PayPal Group Employees and Former PayPal Group Employees shall cease to be participants in the eBay Fringe Benefit Plans. ARTICLE VIII NON-U.S. EMPLOYEES PayPal Group Employees and Former PayPal Group Employees who are residents outside of the United States or otherwise are subject to non-U.S. Law and their related benefits and Liabilities shall be treated in the same manner as the PayPal Group Employees and Former PayPal Group Employees, respectively, who are residents of the United States and are not subject to non-U.S. Law. Notwithstanding anything in this Agreement to the contrary, all actions taken with respect to non-U.S. Employees or U.S. Employees working in non-U.S. jurisdictions, including any action under a Benefit Plan, shall be subject to and accomplished in accordance with applicable Law in the custom of the applicable jurisdictions and PayPal may make such changes, modifications or amendments to the PayPal Benefit Plans as may be required by applicable Law, vendor limitations or as are necessary to reflect the Separation. ARTICLE IX MISCELLANEOUS Section 9.01. Employee Records. (a) Sharing of Information. Subject to and in compliance with any limitations imposed by applicable Law, eBay and PayPal (acting directly or through members of the eBay Group or the PayPal Group, respectively) shall provide to the other and their respective authorized agents and vendors all information necessary (including information for purposes of determining benefit eligibility, participation, vesting and calculation of benefits) on a timely basis under the circumstances for the parties to perform their respective duties under this Agreement. To the extent that such information is maintained by a third party vendor, each party shall use its commercially reasonable best efforts to require the third party vendor to provide the necessary information and assist in resolving discrepancies or obtaining missing data. (b) Transfer of Personnel Records and Authorization. Subject to and in compliance with any limitation imposed by applicable Law and to the extent that it has not done so before the Effective Time, eBay shall transfer to PayPal any and all employment records (including any Form I-9, Form W-2 or other IRS and relevant tax forms applicable in any non-U.S. jurisdiction) with respect to PayPal Group Employees and Former PayPal Group Employees and other records reasonably required by PayPal to enable PayPal properly to carry out its obligations under this Agreement. Subject to and in compliance with any limitation imposed by applicable Law and to the extent that it has not done so before the Effective Time, PayPal shall transfer to eBay any and all employment records (including any Form I-9, Form W-2 or other IRS and relevant Tax forms applicable in any non-U.S. jurisdiction) with respect to eBay Group Employees and Former eBay Group Employees and other records reasonably required by eBay to enable eBay properly to carry out its obligations under this Agreement. The transfer of records generally shall occur as soon as administratively practicable at or after the Effective Time. Each Party will permit the other Party reasonable access to Employee records, to the extent reasonably necessary for such accessing Party to carry out its obligations hereunder.   -39- (c) Access to Records. To the extent not inconsistent with this Agreement, the Separation and Distribution Agreement or any applicable privacy protection Laws or regulations, reasonable access to Employee-related and benefit plan-related records after the Effective Time will be provided to members of the eBay Group and members of the PayPal Group pursuant to the terms and conditions of Article VI of the Separation and Distribution Agreement. (d) Maintenance of Records. With respect to retaining, destroying, transferring, sharing, copying and permitting access to all Employee-related information, eBay and PayPal shall comply with all applicable Laws, regulations and internal policies, and shall indemnify and hold harmless each other from and against any and all Liability, claims, actions, and damages that arise from a failure (by the indemnifying Party or its Subsidiaries or their respective agents) to so comply with all applicable Laws, regulations and internal policies applicable to such information. (e) Cooperation. Each Party shall use commercially reasonable efforts to cooperate and work together to unify, consolidate and share (to the extent permissible under applicable privacy/data protection laws) all relevant documents, resolutions, government filings, data, payroll, employment and benefit plan information on regular timetables and cooperate as needed with respect to (i) any claims or reasonable inquiry under or audit of or litigation with respect to any employee benefit plan, policy or arrangement contemplated by this Agreement, (ii) efforts to seek a determination letter, private letter ruling or advisory opinion from the IRS or U.S. Department of Labor, or other comparable non-U.S. letter, ruling or opinion from any other Governmental Authority as applicable, in any such case on behalf of any employee benefit plan, policy or arrangement contemplated by this Agreement, (iii) any filings that are required to be made or supplemented to the IRS, U.S. Pension Benefit Guaranty Corporation, U.S. Department of Labor or any other Governmental Authority and (iv) any audits by a Governmental Authority or corrective actions in either case, relating to any Benefit Plan, labor or payroll practices, including but not limited to with respect to any Employment Taxes, and (v) reconciliation and administration of post-closing compensation, benefit, employment, and payroll issues; provided, however, that requests for cooperation must be reasonable and not interfere with daily business operations. (f) Confidentiality. Notwithstanding anything in this Agreement to the contrary, all confidential records and data relating to Employees to be shared or transferred pursuant to this Agreement shall be subject to Section 6.9 of the Separation and Distribution Agreement and the requirements of applicable Law. (g) Interaction with Other Agreements. To the extent not inconsistent with this Agreement or any applicable privacy protection Laws or regulations, the foregoing rights and obligations of this Section 9.01 shall be in addition to any similar or related rights and obligations that may be provided or applicable to members of the eBay Group or members of the PayPal Group, as applicable, under the Separation and Distribution Agreement, Tax Matters Agreement and/or Intellectual Property Matters Agreement, if and as applicable. Section 9.02. Preservation of Rights to Amend. The rights of each member of the eBay Group and each member of the PayPal Group to amend, waive, or terminate any plan, arrangement, agreement, program, or policy referred to herein shall not be limited in any way by this Agreement.   -40- Section 9.03. Fiduciary Matters. eBay and PayPal each acknowledges that actions required to be taken pursuant to this Agreement may be subject to fiduciary duties or standards of conduct under ERISA or other applicable Law, and no Party shall be deemed to be in violation of this Agreement if it fails to comply with any provisions hereof based upon its good-faith determination (which determination may include, but shall not be required to be, based on advice from counsel experienced in such matters) that to do so would violate such a fiduciary duty or standard. Each Party shall be responsible for taking such actions as are deemed necessary and appropriate to comply with its own fiduciary responsibilities and shall fully release and indemnify the other Party for any Liabilities caused by the failure to satisfy any such responsibility. Section 9.04. Further Assurances. Each Party hereto shall take, or cause to be taken, any and all reasonable actions, including the execution, acknowledgment, filing and delivery of any and all documents and instruments that any other Party hereto may reasonably request in order to effect the intent and purpose of this Agreement and the transactions contemplated hereby. Section 9.05. Counterparts; Entire Agreement; Corporate Power. (a) This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement, and shall become effective when one or more counterparts have been signed by each of the Parties and delivered to the other Party. (b) This Agreement, the Separation and Distribution Agreement and the Ancillary Agreements and the Exhibits, Schedules and appendices hereto and thereto contain the entire agreement between the Parties with respect to the subject matter hereof, supersede all previous agreements, negotiations, discussions, writings, understandings, commitments and conversations with respect to such subject matter, and there are no agreements or understandings between the Parties other than those set forth or referred to herein or therein. eBay represents on behalf of itself and, to the extent applicable, each other member of the eBay Group, and PayPal represents on behalf of itself and, to the extent applicable, each other member of the PayPal Group, as follows: (i) each such Person has the requisite corporate or other power and authority and has taken all corporate or other action necessary in order to execute, deliver and perform this Agreement and to consummate the transactions contemplated hereby; and (ii) this Agreement has been duly executed and delivered by it and constitutes a valid and binding agreement of it enforceable in accordance with the terms hereof. (c) Each Party acknowledges that it and each other Party is executing this Agreement by facsimile, stamp or mechanical signature and that delivery of an executed counterpart of a signature page to this Agreement (whether executed by manual, stamp or mechanical signature) by facsimile or by email in portable document format (PDF) shall be effective as delivery of such executed counterpart of this Agreement. Each Party expressly adopts and confirms each such facsimile, stamp or mechanical signature (regardless of whether delivered in person, by mail, by courier, by facsimile or by email in portable document format (PDF)) made in its respective name as if it were a manual signature delivered in person, agrees that it will not   -41- assert that any such signature or delivery is not adequate to bind such Party to the same extent as if it were signed manually and delivered in person and agrees that, at the reasonable request of the other Party at any time, it will as promptly as reasonably practicable cause this Agreement to be manually executed (any such execution to be as of the date of the initial date thereof) and delivered in person, by mail or by courier. Section 9.06. Governing Law. This Agreement (and any claims or disputes arising out of or related hereto or to the transactions contemplated hereby or to the inducement of any Party to enter herein, whether for breach of contract, tortious conduct or otherwise and whether predicated on common law, statute or otherwise) shall be governed by and construed and interpreted in accordance with the laws of the State of Delaware, irrespective of the choice of Laws principles of the State of Delaware, including all matters of validity, construction, effect, enforceability, performance and remedies. Section 9.07. Assignability. This Agreement will be binding upon and inure to the benefit of the Parties and their respective successors and permitted assigns; provided, that neither Party may assign its rights or delegate its obligations under this Agreement without the express prior written consent of the other Party. Notwithstanding the foregoing, no such consent will be required for (i) the assignment of a Party’s rights and obligations under this Agreement in whole or in part to any of its Subsidiaries; provided, that no such assignment shall release such Party from any liability or obligation under this Agreement; or (ii) the assignment of a Party’s rights and obligations under this in whole (i.e., the assignment of a party’s rights and obligations under this Agreement, the Separation and Distribution Agreement and all Ancillary Agreements all at the same time) in connection with a change of control of a Party so long as the resulting, surviving or transferee Person assumes all the obligations of the relevant party thereto by operation of Law or pursuant to an agreement in form and substance reasonably satisfactory to the other Party. Nothing herein is intended to, or will be construed to, prohibit either Party or any member of its Group from being party to or undertaking a change of control. Section 9.08. Third-Party Beneficiaries. The provisions of this Agreement are solely for the benefit of the Parties and are not intended to confer upon any other Person except the Parties any rights or remedies hereunder. There are no third-party beneficiaries of this Agreement and this Agreement shall not provide any other third person with any remedy, claim, Liability, reimbursement, claim of action or other right in excess of those existing without reference to this Agreement. Nothing in this Agreement is intended to amend any employee benefit plan or affect the applicable plan sponsor’s right to amend or terminate any employee benefit plan pursuant to the terms of such plan. The provisions of this Agreement are solely for the benefit of the Parties, and no current or former Employee, officer, director, independent contractor, consultant, alternative workforce (AWF) individual or any other individual associated therewith shall be regarded for any purpose as a third-party beneficiary of this Agreement. Section 9.09. Notices. All notices, requests, claims, demands or other communications under this Agreement shall be in writing, together with a copy by electronic mail (which shall not constitute notice) and shall be given or made (and shall be deemed to have been duly given or made upon acknowledgement of receipt) by delivery in person, by overnight courier service, by facsimile, or by registered or certified mail (postage prepaid, return receipt requested) to the   -42- 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 9.09): If to eBay, to: eBay Inc. 2065 Hamilton Avenue San Jose, California 95125 Attention: General Counsel Email: mhuber@ebay.com If to PayPal, to: PayPal Holdings, Inc. 2211 North First Street San Jose, California 95131 Attention: General Counsel Email: apentland@paypal.com A Party may, by notice to the other Party, change the address to which such notices are to be given. Section 9.10. Severability. If any provision of this Agreement or the application thereof to any Person or circumstance is determined by a court of competent jurisdiction to be invalid, void or unenforceable, the remaining provisions hereof, or the application of such provision to Persons or circumstances or in jurisdictions other than those as to which it has been held invalid or unenforceable, shall remain in full force and effect and shall in no way be affected, impaired or invalidated thereby. Upon such determination, the Parties shall negotiate in good faith in an effort to agree upon such a suitable and equitable provision to effect the original intent of the Parties. Section 9.11. Force Majeure. No Party shall be deemed in default of this Agreement or, unless otherwise expressly provided therein, any Ancillary Agreement for any delay or failure to fulfill any obligation (other than a payment obligation) hereunder or thereunder so long as and to the extent to which any delay or failure in the fulfillment of such obligation is prevented, frustrated, hindered or delayed as a consequence of circumstances of Force Majeure. In the event of any such excused delay, the time for performance of such obligation (other than a payment obligation) shall be extended for a period equal to the time lost by reason of the delay. A Party claiming the benefit of this provision shall, as soon as reasonably practicable after the occurrence of any such event, (a) provide written notice to the other Party of the nature and extent of any such Force Majeure condition; and (b) use commercially reasonable efforts to remove any such causes and resume performance under this Agreement and the Ancillary Agreements, as applicable, as soon as reasonably practicable. Section 9.12. Headings. The article, section and paragraph headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.   -43- Section 9.13. Survival of Covenants. Except as expressly set forth in this Agreement, the covenants, representations and warranties and other agreements contained in this Agreement, and Liability for the breach of any obligations contained herein, shall survive the Separation and the Distribution and shall remain in full force and effect in accordance with its terms. Section 9.14. Waivers of Default. Waiver by a Party of any default by the other Party of any provision of this Agreement shall not be deemed a waiver by the waiving Party of any subsequent or other default, nor shall it prejudice the rights of the other Party. No failure or delay by Party in exercising any right, power or privilege under this Agreement shall operate as a waiver thereof, nor shall a single or partial exercise thereof prejudice any other or further exercise thereof or the exercise of any other right, power or privilege. Section 9.15. Dispute Resolution. The dispute resolution procedures set forth in Article VII of the Separation and Distribution Agreement shall apply to any dispute, controversy or claim arising out of or relating to this Agreement. Section 9.16. Specific Performance. Subject to Article VII of the Separation and Distribution Agreement, in the event of any actual or threatened default in, or breach of, any of the terms, conditions and provisions of this Agreement, the Party or Parties who are, or are to be, thereby aggrieved shall have the right to specific performance and injunctive or other equitable relief (on an interim or permanent basis) in respect of its rights or their rights under this Agreement, in addition to any and all other rights and remedies at Law or in equity, and all such rights and remedies shall be cumulative. The Parties agree that the remedies at Law for any breach or threatened breach, including monetary damages, may be inadequate compensation for any loss and that any defense in any Action for specific performance that a remedy at Law would be adequate is waived. Any requirements for the securing or posting of any bond with such remedy are hereby waived by each of the Parties. Section 9.17. Amendments. No provisions of this Agreement shall be deemed waived, amended, supplemented or modified by a Party, unless such waiver, amendment, supplement or modification is in writing and signed by the authorized representative of the Party against whom it is sought to enforce such waiver, amendment, supplement or modification. Section 9.18. Interpretation. In this Agreement, (a) words in the singular shall be deemed to include the plural and vice versa and words of one gender shall be deemed to include the other genders as the context requires; (b) the terms “hereof,” “herein,” and “herewith” and words of similar import shall, unless otherwise stated, be construed to refer to this Agreement as a whole (including all of the Schedules, Exhibits and Appendices hereto and thereto) and not to any particular provision of this Agreement; (c) Article, Section, Schedule, Exhibit, and Appendix references are to the Articles, Sections, Schedules, Exhibits, and Appendices to this Agreement unless otherwise specified; (d) unless otherwise stated, all references to any agreement shall be deemed to include the exhibits, schedules and annexes to such agreement; (e) the word “including” and words of similar import when used in this Agreement shall mean “including, without limitation,” unless otherwise specified; (f) the word “or” shall not be exclusive; (g) unless otherwise specified in a particular case, the word “days” refers to calendar days; (h) references to “business day” shall mean any day other than a Saturday, a Sunday or a day on which banking institutions are generally authorized or required by law to close in the United States or San Jose,   -44- California; (i) references herein to this Agreement or any other agreement contemplated herein shall be deemed to refer to this Agreement or such other agreement as of the date on which it is executed and as it may be amended, modified or supplemented thereafter, unless otherwise specified; and (j) unless expressly stated to the contrary in this Agreement, all references to “the date hereof,” “the date of this Agreement,” “hereby” and “hereupon” and words of similar import shall all be references to July 17, 2015. Section 9.19. Limitations of Liability. Notwithstanding anything in this Agreement to the contrary, neither PayPal or any member of the PayPal Group, on the one hand, nor eBay or any member of the eBay Group, on the other hand, shall be liable under this Agreement to the other for any indirect, punitive, exemplary, remote, speculative or similar damages in excess of compensatory damages of the other arising in connection with the transactions contemplated hereby (other than any such Liability with respect to a Third-Party Claim). Section 9.20. Mutual Drafting. This Agreement shall be deemed to be the joint work product of both Parties and any rule of construction that a document shall be interpreted or construed against a drafter of such document shall not be applicable to this Agreement.   -45- IN WITNESS WHEREOF, the Parties have caused this Employee Matters Agreement to be executed by their duly authorized representatives.   EBAY INC. By:   /s/ John J. Donahoe   Name: John J. Donahoe   Title: President and Chief Executive Officer PAYPAL HOLDINGS, INC. By:   /s/ Daniel H. Schulman   Name: Daniel H. Schulman   Title: President and CEO-Designee [Signature Page to Employee Matters Agreement] eBay Fringe Benefit Plans Adoption Assistance Family Care Resources (Child/Eldercare, etc.) Pre-paid Legal Benefits Survivor Counseling Tuition Assistance eBay Welfare Plans   Plan / Program / Policy    Vendor Medical: PPO 300    Blue Shield CA Medical: PPO 750    Blue Shield CA Medical: EPO    Blue Shield CA Medical: CDHP    Blue Shield CA Medical: HMO    Kaiser CA Medical: HMO    Kaiser CO Medical: HMO    Select Health Medical: HMO    HealthNet Health Savings Account    Health Equity Pharmacy    CVS/Caremark Stop Loss    Voya Dental    Delta Vision    VSP EAP – National Plan (except Nebraska)    Magellan EAP – Nebraska Plan    Arbor Expert Medical Opinion    Advance Spending Account Basic Life    MetLife Supp Life – Employee    MetLife Supp Life – Spouse    MetLife Supp Life – Child    MetLife Basic AD&D    AC Newman Supp AD&D    AC Newman Healthy San Francisco    Healthy San Francisco STD    N/A SDI (NY, HI)    MetLife VDI eBay    State of CA VDI PayPal    State of CA LTD basic    MetLife LTD exec    TBD (MetLife) Sabbatical    N/A Leave Administration    Sedgwick PTO – eBay Inc.    N/A BTA    ACE American EAP Non-US    Optum International Medical, Dental, Vision    CIGNA Agreement) Equity, Incentive and Executive Compensation Plans eBay Equity Plan (including any sub-plans maintained in any non-U.S. jurisdiction) eBay Incentive Plan eBay Employee Stock Purchase Plan (including any sub-plans maintained in any non-U.S. jurisdiction) Retirement and Deferred Compensation Plans eBay Inc. 401(k) Savings Plan eBay Inc. Deferred Compensation Plan Welfare Plans Schedule 1.01(b) is incorporated herein by reference Fringe Benefit Plans Schedule 1.01(a) is incorporated herein by reference Transition Success and Retention Program Medicaid HMO HMSA PTO eBay Enterprise

Exhibit 10.2 AMENDMENT THIS AMENDMENT is made as of the 31st day of July 2006 to the Employment Agreement between Roger Jeffs, Ph.D. (“Executive”) and United Therapeutics Corporation dated November 29, 2000, as previously amended (the “Agreement”). WHEREAS, the parties desire to amend the Agreement as provided below. NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereby amend the Agreement as follows: 1.  Term of the Agreement.  The first sentence of Section 10(c) of the Agreement presently provides as follows: Executive agrees not to accept employment from, nor render services in any capacity for, nor have any other business relationships with, nor engage in any business activity in which it would be useful or helpful to Executive or others with whom he is associated for Executive to use or disclose Confidential Information of the Company with, a person or entity engaged in a business located anywhere in the world which directly competes with the Company’s then existing or planned business a period of one (1) year following Executive’s last receipt of compensation from the Company, whether the termination of Executive’s employment by either party was with or without Cause. In order to increase the term of Executive’s non-competition agreement with United Therapeutics Corporation, the foregoing first sentence of Section 10(c) shall be replaced in its entirety with the following provision: existing or planned business a period of two (2) years following Executive’s last receipt of compensation from the Company, whether the termination of Executive’s employment by either party was with or without Cause. 2.  Effect.  No other provisions of the Agreement shall be affected by this Amendment, and all other provisions of the Agreement shall remain in full force and effect. In witness whereof, the parties have executed this Amendment effective as of the date first written above.     UNITED THERAPEUTICS CORPORATION                         /s/ Roger Jeffs   /s/ Alyssa Friedrich     Roger Jeffs, Ph.D.   Alyssa Friedrich      

HZO, INC. SERIESA PREFERRED STOCK PURCHASE AGREEMENT This SeriesA Preferred Stock Purchase Agreement (this “Agreement”) is made as of September25, 2009, by and among hZo, Inc., a Delaware corporation (the “Company”), and the persons and entities (each, an “Investor” and collectively, the “Investors”) listed on the Schedule of Investors attached hereto as ExhibitA (the “Schedule of Investors”). RECITALS WHEREAS, in connection with the transactions contemplated by this Agreement, Northeast Maritime Institute, Inc. (“NMI”) (1) has entered into that certain Technology Contribution Agreement between the Company and NMI in substantially the form attached hereto as Exhibit B (the “IP Agreement”), whereby NMI will contribute and assign certain intellectual property assetsto the Company (the “Contributed IP”) and (2) has entered that certain Master Services Agreement between the Company and Transportation Security Logistics, LLC in substantially the form attached hereto as Exhibit C (the “Services Agreement”); WHEREAS, in connection with the transactions contemplated by this Agreement, ZAGG, Inc. (“ZAGG”) (1) has entered into that certain Exclusive Marketing & Distribution Agreement between the Company and ZAGG in substantially the form attached hereto as Exhibit D (the “Marketing Agreement”) and (2) has entered into that certain Note and Warrant Purchase Agreement between the Company and ZAGG in substantially the form attached hereto as Exhibit E (the “Note and Warrant Purchase Agreement” and together with the Marketing Agreement, the IP Agreement and the Services Agreement, the “Related Agreements”); WHEREAS, it is intended that the issuance of shares of the Company’s Series A Preferred Stock (the “Series A Preferred”) to NMI in exchange for the Contributed IP pursuant to this Agreement, when taken together with the sale and issuance of shares Series A Preferred to the Investors in exchange for cash and cancellation of indebtedness, will qualify as a tax-free exchange (a “351 Exchange”) within the meaning of Section 351 of the Internal Revenue Code (the “Code”); NOW, THEREFORE, in consideration of the foregoing, the mutual promises hereinafter set forth, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: SECTION 1 Authorization, Sale and Issuance of SeriesA Preferred Stock 1.1Authorization. The Company will, prior to the Closing (as defined below), authorize (a)the sale and issuance pursuant to this Agreement of up to 30,513,466 shares (the “Shares”) of the Company’s SeriesA Preferred, having the rights, privileges, preferences and restrictions set forth in the Amended and Restated Certificate of Incorporation of the Company, in substantially the form attached hereto as ExhibitF (the “Restated Certificate”) and (b)the reservation of shares of Common Stock for issuance upon conversion of the Shares (the “Conversion Shares” and, together with the Shares, the “Securities”). 1.2Sale and Issuance of Shares. Subject to the terms and conditions of this Agreement, each Investor agrees, severally and not jointly, to purchase, and the Company agrees to sell and issue to each Investor, the number of Shares set forth in the column designated “Number of SeriesA Shares” opposite such Investor’s name on the Schedule of Investors, at a purchase price of $0.4752 per share (the “Purchase Price”).The Company’s agreement with each Investor is a separate agreement, and the sale and issuance of the Shares to each Investor is a separate sale and issuance. SECTION 2 Closing

Exhibit 10.1   GOLDMAN SACHS BANK USA GOLDMAN SACHS LENDING PARTNERS LLC 200 West Street New York, New York 10282-2198   JPMORGAN CHASE BANK, N.A. J.P. MORGAN SECURITIES LLC 270 Park Avenue New York, New York 10016   CITIGROUP GLOBAL MARKETS INC. 390 Greenwich Street New York, New York 10013 PERSONAL AND CONFIDENTIAL May 11, 2012 Hologic, Inc. 35 Crosby Drive Bedford, MA 01730 Attention: Glenn P. Muir, Executive Vice President, Finance and Administration Amended and Restated Commitment Letter Ladies and Gentlemen: Reference is hereby made to the Commitment Letter, dated as of April 29, 2012 (the “Original Commitment Letter”) by and among you and Goldman Sachs (as defined below). The Original Commitment Letter is hereby amended and restated and superseded in its entirety as follows: Goldman Sachs Bank USA (“GS Bank”), Goldman Sachs Lending Partners LLC (“GS Lending Partners” and, together with GS Bank, “Goldman Sachs”), JPMorgan Chase Bank, N.A. (“JPMCB”), J.P. Morgan Securities LLC (“JPMS”) and Citigroup Global Markets Inc. (“CGMI”), on behalf of Citi (as defined below) are pleased to confirm the arrangements under which (a) (i) GS Bank, JPMS and CGMI are authorized by Hologic, Inc. (the “Company” or “you”) to act as joint lead arrangers and joint bookrunners in connection with the Senior Facilities (as defined below) (the “Senior Facilities Arrangers”), (ii) JPMS and CGMI are authorized by the Company to act as co-syndication agents in connection with the Senior Facilities and (iii) GS Bank is exclusively authorized by the Company to act as administrative agent in connection with the Senior Facilities (the “Senior Facilities Administrative Agent”), (b) (i) GS Bank is authorized by the Company to act as sole lead arranger, sole bookrunner and sole syndication agent in connection with the Bridge Loans (the “Bridge Loan Arranger” and, together with the Senior Facilities Arrangers, the “Arrangers”), (ii) CGMI is authorized by the Company to act as co-agents in connection with the Bridge Loans and (iii) GS Bank is exclusively authorized by the Company to act as administrative agent in connection with the Bridge Loans (the “Bridge Loan Administrative Agent” and, together with the Senior Facilities Administrative Agent, the “Administrative Agents”). In addition, Goldman Sachs, JPMCB and Citi (the “Initial Lenders” and, together with Lead Arrangers, the “Commitment Parties,” “we” or “us”) commit to provide the financing for, certain transactions described herein, in each case on the terms and subject to the conditions set forth in this letter and the attached Annexes A, B, C and D hereto (collectively, this “Commitment Letter”). As used herein, “Citi” means CGMI, Citibank, N.A., Citicorp USA, Inc., Citicorp North America, Inc. and/or any of their affiliates as may be appropriate to consummate the transactions described below.   1 You have informed us that the Company intends to acquire (the “Acquisition”) 100% of the equity interests of Gen-Probe Incorporated (the “Acquired Business”). You have also informed us that the Acquisition and related working capital requirements of the Company after consummation of the Acquisition will be financed from the following sources:     •   $1.0 billion under a senior secured Tranche A term loan facility (the “Tranche A Term Facility”) having the terms set forth on Annex B;     •   $2.0 billion under a senior secured Tranche B term loan facility (the “Tranche B Term Facility”; and, together with the Tranche A Term Facility, the “Term Facilities”) having the terms set forth on Annex B;     •   $300 million under a senior secured revolving credit facility (the “Revolving Facility”; and, together with the Term Facilities, the “Senior Facilities”) having the terms set forth on Annex B;     •   the issuance by the Borrower (as defined in Annex B) of $500 million of high yield securities (the “Notes”) pursuant to a registered public offering or Rule 144A or other private placement (the “Notes Offering”) or, in the event some or all of the Notes are not issued at the time the Acquisition is consummated, borrowings by the Borrower of unsecured senior increasing rate bridge loans in an aggregate principal amount of $500 million less the gross proceeds from the sale of Notes or other Permanent Debt (as defined in the Fee Letters (as defined below)) issued prior to that time (the “Bridge Loans”; and, together with the Senior Facilities, the “Facilities”) having the terms set forth on Annex C; and     •   cash on the balance sheet of the Company and the Acquired Business.   1. Commitments; Titles and Roles. The Commitment Parties are pleased to confirm their agreement to act, and you hereby appoint (a) (i) the Senior Facilities Arrangers to act as joint lead arrangers and joint bookrunners in connection with the Senior Facilities, (ii) JPMS and CGMI to act as co-syndication agents in connection with the Senior Facilities and (iii) the Senior Facilities Administrative Agent to act as administrative agent in connection with the Senior Facilities and (b) (i) the Bridge Loan Arranger to act as sole lead arranger, sole bookrunner and sole syndication agent in connection with the Bridge Loans, (ii) CGMI to act as co-agents in connection with the Bridge Loans and (iii) the Bridge Loan Administrative Agent to act as administrative agent in connection with the Bridge Loans. You agree that Goldman Sachs will have “lead left” placement in any and all marketing materials or other documentation used in connection with the Senior Facilities and shall hold the leading role and responsibilities conventionally associated with such “lead left” placement, including maintaining sole “physical books” in respect of the Facilities,. In addition, (i) GS Bank, JPMCB and Citi are pleased to commit to provide the Company, severally and not jointly, 65%, 20% and 15%, respectively, of each of the Tranche A Term Facility and the Revolving Facility, (ii) GS Lending Partners, JPMCB and Citi are pleased to commit to provide the Company, severally and not jointly, 65%, 20% and 15%, respectively, of the Tranche B Term Facility and (iii) GS Lending Partners and Citi are pleased to commit to provide the Company, severally and not jointly, 85% and 15%, respectively, of the Bridge Loans, in each case on the terms and subject to the conditions contained in this Commitment Letter and the Fee Letters (referred to below). Our fees for our commitment and for services related to the Facilities are set forth in (i) a separate amended and restated fee letter (the “Facilities Fee Letter”) entered into among the Company and the Commitment Parties on the date hereof and (ii) a separate agent fee letter entered into by the Company and GS Bank on the date   2 hereof (the “Agent Fee Letter” and, together with the Facilities Fee Letter, the “Fee Letters”). It is further agreed that each Initial Lender shall be liable solely in respect of its own commitment to the Facilities on a several, and not joint, basis with any other Lender.   2. Conditions Precedent. Each Commitment Party’s commitments and agreements are subject to there not having occurred, since December 31, 2011, an Acquired Business Material Adverse Effect (as defined below). Each Commitment Party’s commitments and agreements are also subject to (x) the “Conditions Precedent to Initial Borrowings” in Annex B, the “Conditions Precedent to Borrowing” in Annex C and the conditions precedent listed on Annex D and (y) the execution and delivery of appropriate definitive loan documents relating to the Facilities including, without limitation, a credit agreement, a bridge loan agreement (if applicable), guarantees, security agreements, pledge agreements, real property security agreements, opinions of counsel and other related definitive documents (collectively, the “Loan Documents”) that are substantially consistent with the terms set forth in this Commitment Letter and are otherwise reasonably acceptable to such Commitment Party and you. “Acquired Business Material Adverse Effect” means any event, state of facts, circumstance, development, change, effect or occurrence that is or could reasonably be expected to be materially adverse (i) to the business, financial condition or results of operations of the Acquired Business and its subsidiaries, taken as a whole, or (ii) to the ability of the Acquired Business to timely, perform any of its obligations under the Acquisition Agreement, other than in the case of clause (i) or (ii) above, any event, state of facts, circumstance, development, change, effect or occurrence resulting from (A) changes in general economic, regulatory or political conditions or in the securities, credit or financial markets in general, (B) general changes or developments in the business in which the Acquired Business and its subsidiaries operate, including any changes in applicable law affecting such business, including generally applicable rules, regulations and administrative policies of the United States Food and Drug Administration (the “FDA”), or published interpretations thereof, (C) the negotiation, execution, announcement, existence or performance of the Acquisition Agreement or the transactions contemplated thereby, including (x) any fees or expenses incurred in connection therewith, and (y) the impact of the foregoing on relationships with customers, suppliers, employees, and regulators, (D) the identity of the Company or any of its affiliates as the acquiror of the Acquired Business, (E) compliance with the terms of, or the taking of any action expressly required to be taken by the Acquired Business pursuant to the Acquisition Agreement or any other action consented to by the Company and each Commitment Party after the date of the Original Commitment Letter, (F) any acts of terrorism or war or any natural disaster or weather-related event, (G) changes in generally accepted accounting principles or the interpretation thereof, (H) changes in the price or trading volume of the common stock of the Acquired Business (provided that this clause (H) shall not be construed as providing that the change, event, circumstance, development, occurrence or state of facts giving rise to such change in price or trading volume does not constitute or contribute to an Acquired Business Material Adverse Effect), (I) any failure to meet internal or published projections, forecasts or revenue or earning predictions or any downward revisions for any period (provided that this clause (I) shall not be construed as providing that the change, event, circumstance, development, occurrence or state of facts giving rise to such failure does not constitute or contribute to an Acquired Business Material Adverse Effect), (J) any action, suit, investigation or proceeding made, brought or threatened by any holder of Company Securities (as defined in the Acquisition Agreement in effect on the date of the Original Commitment Letter and without giving effect to any amendments thereunder), on the holder’s own behalf or on behalf of the Acquired Business on a derivative basis (other than any actions, suits, investigations or proceedings made, brought or threatened by any of the Acquired Business’s officers or directors), arising out of or related to any of the transactions contemplated hereby, including the Acquisition, or (K) any determination by, or the delay of a determination by, the FDA or any panel or advisory body empowered or appointed thereby, after the date of the Original Commitment Letter, with respect to the approval or non-approval of new Medical Products (as defined in the Acquisition Agreement in effect on the date of the Original Commitment   3 Letter and without giving effect to any amendments thereunder) or new uses of existing Medical Products, in each case of the Acquired Business or its subsidiaries, as of the date of the Original Commitment Letter, except, in the case of the foregoing clause (A), (B) or (F), to the extent such changes or developments referred to therein could reasonably be expected to have a materially disproportionate negative impact on the Acquired Business and its subsidiaries, taken as a whole, compared to other comparable participants in the Acquired Business’s industries. Notwithstanding anything in this Commitment Letter to the contrary, (a) the only representations relating to the Company or the Acquired Business the accuracy of which will be a condition to the availability of the Facilities on the Closing Date will be (i) such of the representations made by or with respect to the Acquired Business in the Acquisition Agreement as are material to the interests of the Lenders and the Commitment Parties (but only to the extent that the Company or its affiliates have the right not to consummate the Acquisition, or to terminate their obligations (or otherwise do not have an obligation to close), under the Acquisition Agreement as a result of a failure of such representations in the Acquisition Agreement to be true and correct) and (ii) the Specified Representations (as defined below), and (b) the terms of the documentation for the Facilities will be such that they do not impair the availability of the Facilities on the Closing Date if the conditions set forth herein and in Annex D hereto are satisfied (it being understood that (I) to the extent any security interest in the intended collateral (other than any collateral the security interest in which may be perfected by the filing of a UCC financing statement, domestic intellectual property filings or the delivery of stock certificates with respect to the Company, the Acquired Business and its and their respective domestic subsidiaries) is not perfected on the Closing Date after your use of commercially reasonable efforts to do so, the perfection of such security interest(s) will not constitute a condition precedent to the availability of the Facilities on the Closing Date but such security interest(s) will be required to be perfected after the Closing Date pursuant to arrangements to be mutually agreed by the Senior Facilities Administrative Agent and the Company and (II) nothing in the preceding clause (a) will be construed to limit the applicability of the individual conditions set forth herein or in Annex D). As used herein, “Specified Representations” means representations relating to incorporation or formation; organizational power and authority to enter into the documentation relating to the Facilities; due execution, delivery and enforceability of such documentation; solvency; no conflicts with applicable laws in any material respect or charter documents, in each case as they relate to entering into and performance under the Facilities; Federal Reserve margin regulations; the Investment Company Act; Patriot Act; FCPA; laws applicable to sanctioned persons; use of proceeds; historical financial information (solely with respect to the Company), and, subject to the limitations on perfection of security interests set forth in the preceding sentence, the creation, perfection and priority of the security interests granted in the proposed collateral.   3. Syndication. The Arrangers intend and reserve the right to syndicate the Facilities to the Lenders (as defined in Annex B and Annex C), and you acknowledge and agree that the commencement of syndication shall occur in the discretion of Goldman Sachs (and, solely with respect to the Senior Facilities, in consultation with the other Senior Facilities Arrangers). Goldman Sachs will select the Lenders after consultation with the Company (and, solely with respect to the Senior Facilities, in consultation with the other Senior Facilities Arrangers). Goldman Sachs (and, solely with respect to the Senior Facilities, in consultation with the other Senior Facilities Arrangers) will lead the syndication, including, subject to Section 1. above, determining the timing of all offers to potential Lenders, any title of agent or similar designations or roles awarded to any Lender and the acceptance of commitments, the amounts offered and the compensation provided to each Lender from the amounts to be paid to the Commitment Parties pursuant to the terms of this Commitment Letter and the Fee Letters. Goldman Sachs (and solely in connection with the Senior Facilities, in consultation with the other Senior Facilities Arrangers) will determine the final commitment allocations and will notify the Company of such determinations. The Company agrees   4 to use commercially reasonable efforts to ensure that the Arrangers’ syndication efforts benefit from the existing lending relationships of the Company and the Acquired Business and their respective subsidiaries. To facilitate an orderly and successful syndication of the Facilities, you agree that, until the earlier of the termination of the syndication as determined by Goldman Sachs (and, solely with respect to the Senior Facilities, in consultation with the other Senior Facilities Arrangers) and 90 days following the date of initial funding under the Facilities, the Company will not, and the Company will use commercially reasonable efforts to obtain contractual undertakings from the Acquired Business that it will not, syndicate or issue, attempt to syndicate or issue, announce or authorize the announcement of the syndication or issuance of, or engage in discussions concerning the syndication or issuance of, any debt facility or any debt of the Acquired Business or the Company or any of their respective subsidiaries or affiliates (other than the Facilities, the Notes (or other Permanent Debt (as defined in the Fee Letter)) and other indebtedness contemplated hereby to remain outstanding after the Closing Date), including any renewals or refinancings of any existing debt facility or debt security, without the prior written consent of Goldman Sachs, in consultation with the other Arrangers. The Company agrees to cooperate with the Arrangers and agrees to use commercially reasonable efforts to cause the Acquired Business to cooperate with the Arrangers, in connection with (i) the preparation of one or more information packages for each of the Facilities regarding the business, operations, financial projections and prospects of the Company and the Acquired Business (collectively, the “Confidential Information Memorandum”) including, without limitation, all information relating to the transactions contemplated hereunder prepared by or on behalf of the Company or the Acquired Business deemed reasonably necessary by Goldman Sachs (and, solely with respect to the Senior Facilities, in consultation with the other Senior Facilities Arrangers) to complete the syndication of the Facilities including, without limitation, obtaining (a) a public corporate family rating from Moody’s Investor Services, Inc. (“Moody’s”), (b) a public corporate credit rating from Standard & Poor’s Ratings Group, a division of The McGraw Hill Corporation (“S&P”)) and (c) a public credit rating for each of the Facilities and the Notes from each of Moody’s and S&P prior to the launch of general syndication, and (ii) the presentation of one or more information packages for each of the Facilities acceptable in format and content to Goldman Sachs (and, solely with respect to the Senior Facilities, in consultation with the other Senior Facilities Arrangers) (collectively, the “Lender Presentation”) in meetings and other communications with prospective Lenders or agents in connection with the syndication of the Facilities (including, without limitation, direct contact between senior management and representatives, with appropriate seniority and expertise, of the Company and the Acquired Business with prospective Lenders and participation of such persons in meetings); provided however that it is understood and agreed that, without limitation of any of the conditions set forth in Annex D hereto, the Company shall not be required to disclose communications relating to any litigation or investigation, or the conduct thereof, solely to the extent that such disclosure would reasonably be expected to result in the waiver of the attorney-client privilege or work product protection applicable thereto. Notwithstanding anything to the contrary contained in the Commitment Letter or the Fee Letters or any other letter agreement or undertaking concerning the transactions contemplated hereunder to the contrary (but without limiting your obligations to assist in syndication as described above or any condition precedent expressly set forth in Section 2 above or Annex D hereto), neither of (x) obtaining the ratings referenced above or (y) the achievement of a successful syndication of the Facilities (as determined by Goldman Sachs (and, solely with respect to the Senior Facilities, in consultation with the other Senior Facilities Arrangers)), shall constitute a condition precedent to the commitments hereunder or the funding of any of the Facilities on the Closing Date. The Company will be solely responsible for the contents of any such Confidential Information Memorandum and Lender Presentation and all other information, documentation or materials delivered to the Commitment Parties in connection therewith, including with respect to the business of the Company and the Acquired Business and the transactions contemplated hereunder (collectively, the “Information”) and acknowledges that the Commitment Parties will be using and relying upon the Information without independent verification thereof (it being understood and agreed that the Company may cause the   5 Acquired Business to deliver to the Arrangers an authorization letter containing a customary “10b-5” representation with respect to the Information of the Acquired Business contained in such Confidential Information Memorandum or Lender Presentation). The Company agrees that Information regarding the Facilities and Information provided by the Company, the Acquired Business or their respective representatives to the Commitment Parties in connection with the Facilities (including, without limitation, draft and execution versions of the Loan Documents, the Confidential Information Memorandum, the Lender Presentation, publicly filed financial statements, and draft or final offering materials relating to contemporaneous or prior securities issuances by the Company or the Acquired Business) may be disseminated to potential Lenders and other persons through one or more secure internet sites (including an IntraLinks, SyndTrak or other secure electronic workspace (the “Platform”)) created for purposes of syndicating the Facilities or otherwise, in accordance with the Commitment Parties’ standard syndication practices, and you acknowledge that neither the Commitment Parties nor any of its affiliates will be responsible or liable to you or any other person or entity for damages arising from the use by others of any Information or other materials obtained on the Platform. The Company acknowledges that certain of the Lenders may be “public side” Lenders (i.e. Lenders that do not wish to receive material non-public information with respect to the Company, the Acquired Business or their respective affiliates or any of their respective securities) (each, a “Public Lender”). At the request of Goldman Sachs (and, solely with respect to the Senior Facilities, in consultation with the other Senior Facilities Arrangers) the Company agrees to prepare an additional version of the Confidential Information Memorandum and the Lender Presentation to be used by Public Lenders that does not contain material non-public information concerning the Company, the Acquired Business, or their respective affiliates or securities. The information to be included in the additional version of the Confidential Information Memorandum will be substantially consistent with the information included in any offering memorandum for the offering for the Notes. It is understood that in connection with your assistance described above, you will provide, and cause all other applicable persons (which may include the Acquired Business) to provide, authorization letters to the Arrangers authorizing the distribution of the Information to prospective Lenders and containing a customary “10b-5” representation to the Arrangers (and, in the case of the public-side version, a representation that such Information does not include material non-public information about the Company, the Acquired Business, or their respective affiliates or their respective securities). In addition, the Company will clearly designate as such all Information provided to the Commitment Parties by or on behalf of the Company or the Acquired Business which is suitable to make available to Public Lenders. The Company acknowledges and agrees that the following documents may be distributed to all Lenders (including Public Lenders) (unless the Company, after having been given a reasonable opportunity to review such documents, promptly notifies Goldman Sachs in writing prior to such distribution that any such document contains material non-public respective affiliates or securities): (a) drafts and final versions of the Loan Documents; (b) administrative materials prepared by Goldman Sachs for prospective Lenders (such as a lender meeting invitation, allocations and funding and closing memoranda); and (c) term sheets and notification of changes in the terms of the Facilities.   4. Information. The Company represents and covenants that (which representation and warranty with respect to the Information relating to the Acquired Business is made to the best of your knowledge) (i) all Information (other than financial projections, forecasts and other forward looking statements (collectively, the “Projections”)) provided directly or indirectly by the Acquired Business or the Company to the Commitment Parties or the Lenders in connection with the transactions contemplated hereunder is and will be, when taken as a whole, complete and correct in all material respects and does not and will not contain necessary to make the statements contained therein not misleading and (ii) the Projections that have been or will be made   6 available to the Commitment Parties or the Lenders by or on behalf of the Acquired Business or the Company have been and will be prepared in good faith based upon assumptions that are believed by the preparer thereof to be reasonable at the time such Projections are furnished to the Commitment Parties or the Lenders, it being understood and agreed that Projections are not a guarantee of financial performance and actual results may differ from Projections and such differences may be material. You agree that if at any time prior to the later of (i) the Closing Date and (ii) the termination of the syndication of the Facilities as determined by Goldman Sachs (and, solely with respect to the Senior Facilities, in consultation with the other Senior Facilities Arrangers) but in no event exceeding 90 days after the Closing Date, any of the representations in the preceding sentence would be incorrect in any material respect if the Information and Projections were being furnished, and such representations were being made, at such time, then you will promptly supplement, or cause to be supplemented, the Information and Projections so that such representations will be correct in all material respects under those circumstances. In arranging and syndicating the Facilities, we will be entitled to use and rely on the Information and the Projections without responsibility for independent verification thereof. We will have no obligation to conduct any independent evaluation or appraisal of the assets or liabilities of you, the Borrower, the Acquired Business or any other party or to advise or opine on any related solvency issues.   5. Indemnification and Related Matters. In connection with arrangements such as this, it is our firm’s policy to receive indemnification. The Company agrees to the provisions with respect to our indemnity and other matters set forth in Annex A, which is incorporated by reference into this Commitment Letter.   6. Assignments. This Commitment Letter may not be assigned by you without the prior written consent of each Commitment Party (and any purported assignment without such consent will be null and void), is intended to be solely for the benefit of the Commitment Parties and the other parties hereto and, except as set forth in Annex A hereto, is not intended to confer any benefits upon, or create any rights in favor of, any person other than the parties hereto. Each Commitment Party may assign its commitments and agreements hereunder, in whole or in part, to any of its affiliates and, as provided above, to any Lender prior to the Closing Date. In addition, until the termination of the syndication of the Facilities, as determined by Goldman Sachs (and, solely with respect to the each Commitment Party may, in consultation with the Company, assign its commitments and agreements hereunder, in whole or in part, to additional arrangers or other Lenders. Notwithstanding the foregoing, no assignment by a Commitment Party to any potential Lender made in accordance with this Section 6 and/or any other provisions set forth in this Commitment Letter, in each case, prior to the Closing Date, will relieve such Commitment Party of its obligations set forth herein to fund that portion of the commitments so assigned. Neither this Commitment Letter nor the Fee Letters may be amended or any term or provision hereof or thereof waived or otherwise modified except by an instrument in writing signed by each of the parties hereto or thereto, as applicable, and any term or provision hereof or thereof may be amended or waived only by a written agreement executed and delivered by all parties hereto or thereto.   7. Confidentiality. Please note that this Commitment Letter, the Fee Letters and any written communications provided by, or oral discussions with, the Commitment Parties in connection with this arrangement are exclusively for the information of the Company and may not be disclosed by you to any third party or circulated or referred to publicly without our prior written consent except, after providing written notice to the Commitment Parties, pursuant to a subpoena or order issued by a court of competent jurisdiction or by a judicial,   7 administrative or legislative body or committee; provided that we hereby consent to your disclosure of (i) this Commitment Letter, the Fee Letters and such communications and discussions, to the Company’s subsidiaries and to Company’s and the Company’s subsidiaries’ respective officers, directors, agents and advisors (including all legal counsel, independent auditors and other experts or agents) who are directly involved in the consideration of the Facilities (including, providing accounting and tax advice to Company and/or its subsidiaries with respect thereto) and who have been informed by you of the confidential nature of such advice and this Commitment Letter and the Fee Letters and who have agreed to treat such information confidentially, (ii) this Commitment Letter or the information contained herein and the Fee Letters to the Acquired Business and its affiliates to the extent you notify such persons of their obligations to keep such material confidential, and to the Acquired Business’s and its affiliates’ respective officers, directors, agents and advisors who are directly involved in the consideration of the Facilities to the extent such persons agree to hold the same in confidence (provided that any disclosure of the Fee Letters or its terms or substance to the Acquired Business or its officers, directors, agents and advisors shall be redacted in a manner satisfactory to Goldman Sachs, in consultation with the other Arrangers, and the Company), (iii) this Commitment Letter and the Fee Letters as required by applicable law or compulsory legal process (including (x) the filing of the Commitment Letter in public securities filings and (y) to the extent required by applicable law to be so disclosed, the aggregate amount of the fees payable pursuant to the terms of the Fee Letters, presented as an aggregate amount of all fees payable by the Company in connection with the Acquisition and the other transactions contemplated by this Commitment Letter, but not the Fee Letters itself or any other information contained therein (the “Public Securities Filing”)) (in which case, you agree (other than in the case of the Public Securities Filing) to inform us promptly thereof), (iv) the information contained in Annex B and Annex C, in any prospectus or other offering memorandum relating to the Notes, (v) the existence of this Commitment Letter and information about the Facilities to market data collectors, similar services providers to the lending industry, and service providers to the Commitment Parties and the Lenders in connection with the administration and management of the Facilities, (vi) upon the request or demand of any regulatory authority purporting to have jurisdiction over such person or any of its affiliates (in which case, you agree to inform us promptly thereof) and (vii) the information contained in Annex B and Annex C to Moody’s and S&P; provided that such information is supplied to Moody’s and S&P only on a confidential basis after consultation with Goldman Sachs, in consultation with the other Arrangers. Each Commitment Party agrees that it will treat as confidential all information provided to it hereunder by or on behalf of you, the Acquired Business or any of your or their respective subsidiaries or affiliates, and shall not disclose such information to any third party or circulate or refer to publicly such information without the Company’s prior written consent; provided, however, that nothing herein will prevent any Commitment Party from disclosing any such information (a) pursuant to the order of any court or administrative agency or in any pending legal or administrative proceeding, or otherwise as required by applicable law or compulsory legal process (in which case such person agrees to inform you promptly thereof to the extent not prohibited by law), (b) upon the request or demand of any regulatory authority purporting to have jurisdiction over such person or any of its affiliates, (c) to the extent that such information is publicly available or becomes publicly available other than by reason of improper disclosure by such person, (d) to such person’s affiliates and their respective officers, directors, partners, members, employees, legal counsel, independent auditors and other experts or agents who need to know such information and on a confidential basis, (e) to potential and prospective Lenders, participants and any direct or indirect contractual counterparties to any swap or derivative transaction relating to the borrower or its obligations under the Facilities, in each case, who have agreed to keep such information confidential on terms not less favorable than the provisions hereof in accordance with the standard syndication processes of such Commitment Party or customary market standards for the dissemination of such type of information, (f) to Moody’s and S&P and other rating agencies or to market data collectors as determined by such Commitment Party; provided that such information is limited to Annex B and Annex C and is supplied only on a confidential basis, (g) received by such person on a non-confidential   8 basis from a source (other than you, the Acquired Business or any of your or their affiliates, advisors, members, directors, employees, agents or other representatives) not known by such person to be prohibited from disclosing such information to such person by a legal, contractual or fiduciary obligation, (h) to the extent that such information was already in such Commitment Party’s possession or is independently developed by such Commitment Party or (i) for purposes of establishing a “due diligence” defense. Each Commitment Party’s obligations under this provision shall remain in effect until the earlier of (i) one year from the date hereof and (ii) the date the definitive Loan Documents are entered into by such Commitment Party, at which time any confidentiality undertaking in the definitive Loan Documents shall supersede this provision.   8. Absence of Fiduciary Relationship; Affiliates; Etc. As you know, each Commitment Party (together with its affiliates, a “Commitment Party Group”)) is a full service financial institution engaged, either directly or through its affiliates, in a broad array of activities, including commercial and investment banking, financial advisory, market making and trading, investment management (both public and private investing), investment research, principal investment, financial planning, benefits counseling, risk management, hedging, financing, brokerage and other financial and non-financial activities and services globally. In the ordinary course of their various business activities, each Commitment Party Group and the funds or other entities in which such Commitment Party Group invests or with which they co-invest, may at any time purchase, sell, hold or vote long or short positions and investments in securities, derivatives, loans, commodities, currencies, credit default swaps and other financial instruments for their own account and for the accounts of their customers. In addition, each Commitment Party Group may at any time communicate independent recommendations and/or publish or express independent research views in respect of such assets, securities or instruments. Any of the aforementioned activities may involve or relate to assets, securities and/or instruments of the Company, the Acquired Business and/or other entities and persons which may (i) be involved in transactions arising from or relating to the arrangement contemplated by this Commitment Letter or (ii) have other relationships with the Company or its affiliates. In addition, each Commitment Party Group may provide investment banking, commercial banking, underwriting and financial advisory services to such other entities and persons. The arrangement contemplated by this Commitment Letter may have a direct or indirect impact on the investments, securities or instruments referred to in this paragraph, and employees working on the financing contemplated hereby may have been involved in originating certain of such investments and those employees may receive credit internally therefor. Although each Commitment Party Group in the course of such other activities and relationships may acquire information about the transaction contemplated by this Commitment Letter or other entities and persons which may be the subject of the financing contemplated by this Commitment Letter, such Commitment Party Group shall have no obligation to disclose such information, or the fact that such Commitment Party Group is in possession of such information, to the Company or to use such information on the Company’ behalf. Consistent with each Commitment Party Group’s policies to hold in confidence the affairs of its customers, such Commitment Party Group will not furnish confidential information obtained from you by virtue of the transactions contemplated by this Commitment Letter to any of its other customers. Furthermore, you acknowledge that no Commitment Party Group has an obligation to use in connection with the transactions contemplated by this Commitment Letter, or to furnish to you, confidential information obtained or that may be obtained by them from any other person. Each Commitment Party Group may have economic interests that conflict with those of the Company, its equity holders and/or its affiliates. You agree that each Commitment Party Group will act under this Commitment Letter as an independent contractor and that nothing in this Commitment Letter or the Fee Letters or otherwise will be deemed to create an advisory, fiduciary or agency relationship or fiduciary or   9 other implied duty between such Commitment Party Group and the Company, its equity holders or its affiliates. You acknowledge and agree that the transactions contemplated by this Commitment Letter and the Fee Letters (including the exercise of rights and remedies hereunder and thereunder) are arm’s-length commercial transactions between each Commitment Party Group, on the one hand, and the Company, on the other, and in connection therewith and with the process leading thereto, (i) such Commitment Party Group has not assumed (A) an advisory responsibility in favor of the Company, its equity holders or its affiliates with respect to the financing transactions contemplated hereby or (B) a fiduciary responsibility in favor of the Company, its equity holders or its affiliates with respect to the transactions contemplated hereby, or in each case, the exercise of rights or remedies with respect thereto or the process leading thereto (irrespective of whether GS has advised, is currently advising or will advise the Company, its equity holders or its affiliates on other matters) or any other obligation to the Company except the obligations expressly set forth in this Commitment Letter and the Fee Letters and (ii) such Commitment Party Group is acting solely as a principal and not as the agent or fiduciary of the Company, its management, equity holders, affiliates, creditors or any other person. The Company acknowledges and agrees that the Company has consulted its own legal and financial advisors to the extent it deemed appropriate and that it is responsible for making its own independent judgment with respect to such transactions and the process leading thereto. The Company agrees that it will not claim that a Commitment Party Group has rendered advisory services of any nature or respect with respect to the financing transactions contemplated hereby, or owes a fiduciary or similar duty to the Company, in connection with such transactions or the process leading thereto. As each of the parties hereto is aware, Goldman, Sachs & Co. has been retained by the Company (or one of its affiliates) as financial advisor (in such capacity, the “Financial Advisor”) in connection with the Acquisition. Each of the parties hereto agrees to such retention, and further agrees not to assert any claim it might allege based on any actual or potential conflicts of interest that might be asserted to arise or result from, on the one hand, the engagement of the Financial Advisor or Goldman Sachs and/or its affiliates’ arranging or providing or contemplating arranging or providing financing for a competing bidder and, on the other hand, our and our affiliates’ relationships with the Company or any of the other parties hereto as described and referred to herein. In addition, the Commitment Parties may employ the services of their respective affiliates in providing services and/or performing their obligations hereunder and may exchange with such affiliates information concerning the Company, the Acquired Business and other companies that may be the subject of this arrangement, and such affiliates will be entitled to the benefits afforded to the Commitment Parties hereunder. In addition, please note that no Commitment Party Group provides accounting, tax or legal advice. Notwithstanding anything herein to the contrary, the Company (and each employee, representative or other agent of the Company) may disclose to any and all persons, without limitation of any kind, the tax treatment and tax structure of the Facilities and all materials of any kind (including opinions or other tax analyses) that are provided to the Company relating to such tax treatment and tax structure. However, any information relating to the tax treatment or tax structure will remain subject to the confidentiality provisions hereof (and the foregoing sentence will not apply) to the extent reasonably necessary to enable the parties hereto, their respective affiliates, and their respective affiliates’ directors and employees to comply with applicable securities laws. For this purpose, “tax treatment” means U.S. federal or state income tax treatment, and “tax structure” is limited to any facts relevant to the U.S. federal income tax treatment of the transactions contemplated by this Commitment Letter but does not include information relating to the identity of the parties hereto or any of their respective affiliates.   9. Miscellaneous. Each Commitment Party’s commitments and agreements hereunder will terminate upon the first to occur of (i) the consummation of the Acquisition (and the funding of all commitments provided hereunder to the extent required hereunder), (ii) the termination of the Acquisition Agreement (as defined in Annex D) in   10 accordance with the terms thereof or the public announcement by the Company, in a press release or other public filing, or by the chief executive officer, chief financial officer or head of investor relations of the Company (howsoever described) that it is abandoning the Acquisition and (iii) October 29, 2012 or, subject to the provisions of the Acquisition Agreement, such later date (not later than January 29, 2013 in the case of clause (x) below or November 30, 2012 in the case of clause (y) below) to which the “Outside Date” (as defined in the Acquisition Agreement) is extended in accordance with (x) the first “provided further” in Section 9.1(b)(i) of the Acquisition Agreement as in effect on the amendments thereunder or (y) the second “provided further” thereof, unless the closing of the Senior Facilities and (a) the Notes Offering or (b) the Bridge Loans, as applicable, on the terms and subject to the conditions contained herein, has been consummated on or before such date. In addition, each Commitment Party’s commitment hereunder to provide and arrange Bridge Loans will terminate to the extent of the issuance of the Notes or other Permanent Debt (in escrow or otherwise). The provisions set forth under Sections 3, 4, 5 (including Annex A), 7 and 8 hereof and this Section 9 (other than any provision therein that expressly terminates upon execution of the definitive Loan Documents) hereof and the provisions of the Fee Letters will remain in full force and effect regardless of whether definitive Loan Documents are executed and delivered. The provisions set forth in the Fee Letters and under Sections 5 (including Annex A) and 7 and 8 hereof and this Section 9 will remain in full force and effect notwithstanding the expiration or termination of this Commitment Letter or the Commitment Parties’ commitments and agreements hereunder. The Company for itself and its affiliates agrees that any suit or proceeding arising in respect of this Commitment Letter or the Commitment Parties’ commitments or agreements hereunder or the Fee Letters will be tried exclusively in any Federal court of the United States of America sitting in the Borough of Manhattan or, if that court does not have subject matter jurisdiction, in any state court located in the City and County of New York, and the Company agrees to submit, and hereby does submit, to the exclusive jurisdiction of, and to venue in, such court. Any right to trial by jury with respect to any action or proceeding arising in connection with or as a result of either the Commitment Parties’ commitments or agreements or any matter referred to in this Commitment Letter or the Fee Letters is hereby waived by the parties hereto. The Company for itself and its affiliates agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Service of any process, summons, notice or document by registered mail or overnight courier addressed to any of the parties hereto at the addresses above shall be effective service of process against such party for any suit, action or proceeding brought in any such court. This Commitment Letter and the Fee Letters will be governed by and construed in accordance with the laws of the State of New York without regard to principles of conflicts of laws. The Commitment Parties hereby notify the Company and the Acquired Business that pursuant to the requirements of the USA PATRIOT Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “Patriot Act”) each Commitment Party and each Lender may be required to obtain, verify and record information that identifies the Borrower and each of the Guarantors (as defined in Annex B and Annex C), which information includes the name and address of the Borrower and each of the Guarantors and other information that will allow each Commitment Party and each Lender to identify the Borrower and each of the Guarantors in accordance with the Patriot Act. This notice is given in accordance with the requirements of the Patriot Act and is effective for each Commitment Party and each Lender. This Commitment Letter may be executed in any number of counterparts, each of which when executed will be an original, and all of which, when taken together, will constitute one agreement. Delivery of an executed counterpart of a signature page of this Commitment Letter by facsimile transmission or   11 electronic transmission (in pdf format) will be effective as delivery of a manually executed counterpart hereof. This Commitment Letter and the Fee Letters are the only agreements that have been entered into among the parties hereto with respect to the Facilities and set forth the entire understanding of the parties with respect thereto and supersede any prior written or oral agreements among the parties hereto with respect to the Facilities.   12 Please confirm that the foregoing is in accordance with your understanding by signing and returning to Goldman Sachs the enclosed copy of this Commitment Letter, together, if not previously executed and delivered, with the Fee Letters, on or before the close of business on May 14, 2012, whereupon this Commitment Letter and the Fee Letters will become binding agreements between us. If this Commitment Letter and the Fee Letters have not been signed and returned as described in the preceding sentence by such date, this offer will terminate on such date. We look forward to working with you on this transaction.   Very truly yours, GOLDMAN SACHS BANK USA By:   /s/ Robert Ehudin   Authorized Signatory GOLDMAN SACHS LENDING PARTNERS LLC By:     Authorized Signatory JPMORGAN CHASE BANK, N.A. By:   /s/ Peter M. Killea   Senior Vice President, Authorized Signatory J.P. MORGAN SECURITIES LLC By:   /s/ Cornelius J. Droogan   Managing Director, Authorized Signatory CITIGROUP GLOBAL MARKETS INC. By:   /s/ Barbara Matas   Authorized Signatory CITIBANK, N.A. By:   /s/ Stuart Dickson   Authorized Signatory   13 ACCEPTED AND AGREED AS OF MAY 11, 2012: HOLOGIC, INC. By:   /s/ Glenn P. Muir Name:   Glenn P. Muir Title:   Chief Financial Officer   1 ANNEX A In the event that any Commitment Party becomes involved in any capacity in any action, proceeding or investigation brought by or against any person, including shareholders, partners, members or other equity holders of the Company or the Acquired Business in connection with or as a result of either this arrangement or any matter referred to in this Commitment Letter or the Fee Letters (together, the “Letters”), the Company agrees to periodically reimburse such Commitment Party for its reasonable legal and other expenses (including the cost of any investigation and preparation) incurred in connection therewith. The Company also agrees to indemnify and hold such Commitment Party harmless against any and all losses, claims, damages or liabilities to any such person in connection with or as a result of either this arrangement or any matter referred to in the Letters (whether or not such investigation, litigation, claim or proceeding is brought by you, your equity holders or creditors or an indemnified person and whether or not any such indemnified person is otherwise a party thereto), except to the extent that such loss, claim, damage or liability has been found by a final, non-appealable judgment of a court of competent jurisdiction to have resulted from the gross negligence or willful misconduct of such Commitment Party in performing the services that are the subject of the Letters. If for any reason the foregoing indemnification is unavailable to a Commitment Party or insufficient to hold it harmless, then the Company will contribute to the amount paid or payable by such Commitment Party as a result of such loss, claim, damage or liability in such proportion as is appropriate to reflect the relative economic interests of (i) the Company and the Acquired Business and their respective affiliates, shareholders, partners, members or other equity holders on the one hand and (ii) such Commitment Party on the other hand in the matters contemplated by the Letters as well as the relative fault of (i) the Company and the Acquired Business and their respective affiliates, shareholders, partners, members or other equity holders on the one hand and (ii) such Commitment Party with respect to such loss, claim, damage or liability and any other relevant equitable considerations. The reimbursement, indemnity and contribution obligations of the Company under this paragraph will be in addition to any liability which the Company may otherwise have, will extend upon the same terms and conditions to any affiliate of a Commitment Party and the partners, members, directors, agents, employees and controlling persons (if any), as the case may be, of such Commitment Party and any such affiliate, and will be binding upon and inure to the benefit of any successors, assigns, heirs and personal representatives of the Company, such Commitment Party, any such affiliate and any such person. The Company also agrees that neither any indemnified party nor any of such affiliates, partners, members, directors, agents, employees or controlling persons will have any liability to the Company or any person asserting claims on behalf of or in right of the Company or any other person in connection with or as a result of either this arrangement or any matter referred to in the Letters, except in the case of the Company to the extent that any losses, claims, damages, liabilities or expenses incurred by the Company or its affiliates, shareholders, partners or other equity holders have such indemnified party in performing the services that are the subject of the Letters; provided, however, that in no event will such indemnified party or such other parties have any liability for any indirect, consequential, special or punitive damages in connection with or as a result of such indemnified party’s or such other parties’ activities related to the Letters. Promptly after receipt by a Commitment Party of notice of its involvement in any action, proceeding or investigation, such Commitment Party shall, if a claim for indemnification in respect thereof is to be made against the Company under this Annex A, notify the Company of such involvement. Failure by a Commitment Party to so notify the Company shall not relieve the Company from the obligation to indemnify such Commitment Party (or any other indemnified person) under this Annex A except to the extent that the Company suffers actual prejudice as a result of such failure, and shall not relieve the Company, from its obligation to provide reimbursement and contribution to such Commitment Party. If any person is entitled to indemnification under this Annex A (an “Indemnified Person”) with respect to any action or proceeding brought by a third party that is also brought against the Company, the Company shall be entitled to assume the defense of any such action or proceeding with counsel   Annex A-1 reasonably satisfactory to the Indemnified Person. Upon assumption by the Company of the defense of any such action or proceeding, the Indemnified Person shall have the right to participate in such action or proceeding and to retain its own counsel but the Company shall not be liable for any legal expenses of other counsel subsequently incurred by such Indemnified Person in connection with the defense thereof unless (i) the Company has agreed to pay such fees and expenses, (ii) the Company shall have failed to employ counsel reasonably satisfactory to the Indemnified Person in a timely manner or (iii) the Indemnified Person shall have been advised by counsel that there are actual or potential conflicting interests between the Company and the Indemnified Person, including situations in which there are one or more legal defenses available to the Indemnified Person that are different from or additional to those available to the Company. The Company shall not consent to the terms of any compromise or settlement of any action defended by the Company in accordance with the foregoing without the prior written consent of the Indemnified Person. The provisions of this Annex A will survive any termination or completion of the arrangement provided by the Letters.   Annex A-2 ANNEX B Project Genoa Summary of the Senior Facilities This Summary outlines certain terms of the Senior Facilities referred to in the Commitment Letter, of which this Annex B is a part. Certain capitalized terms used herein are defined in the Commitment Letter.   Borrower:    Hologic, Inc. (the “Borrower”). Guarantors:    Each of the Borrower’s existing and subsequently acquired or organized domestic subsidiaries (including, without limitation, the Acquired Business) (collectively, the “Guarantors”) will guarantee (the “Guarantee”) all obligations under the Senior Facilities; provided that the Loan Documents shall contain exceptions to be agreed, including an exception for (x) any subsidiary of the Borrower that is a Massachusetts securities corporation or (y) any direct or indirect immaterial subsidiaries of the Borrower. Purpose/Use of Proceeds:    The proceeds of the Term Facilities (i) will be used to fund the Acquisition (including refinancing or retiring all existing debt (other than capital leases constituting debt to the extent that Borrower does not refinance or retire such debt) and redeeming all preferred stock of the Acquired Business and paying fees, commissions and expenses in connection with the Acquisition) and (ii) may be used to redeem the Convertible Notes (as defined below). Amounts available under the Revolving Facility will be used (i) to redeem the Convertible Notes, (ii) for permitted capital expenditures and permitted acquisitions (subject to customary conditions and pro forma financial tests to be agreed), (iii) to provide for the ongoing working capital requirements of the Borrower following the Acquisition and (iv) for general corporate purposes. Joint Lead Arrangers and Joint Bookrunners:    Goldman Sachs Bank USA (“Goldman Sachs”), J.P. Morgan Securities LLC (“JPMS”) and Citigroup Global Markets Inc. (“CGMI”) (in their capacities as Joint Lead Arrangers and Joint Bookrunners, the “Senior Facilities Arrangers”). Co-Syndication Agents    JPMS and CGMI. Administrative Agent:    Goldman Sachs (in its capacity as Administrative Agent, the “Administrative Agent”). Lenders:    Goldman Sachs, JPMCB and Citi (the “Initial Lenders”) and/or other financial institutions selected by Goldman Sachs, in consultation with the other Senior Facilities Arrangers (each, a “Lender” and, collectively, the “Lenders”). Amount of Senior Facilities:    $3.3 billion of senior secured bank financing (the “Senior Facilities”) to include:    (i)      a $1.0 billion senior secured Tranche A term loan (the “Tranche A Term Facility”);   Annex B-1    (ii)     a $2.0 billion senior secured Tranche B term loan (the “Tranche B Term Facility”; together with the Tranche A Term Facility, the “Term Facilities”); and    (iii)    a $300 million senior secured revolving credit facility (the “Revolving Facility”). Incremental Facility:    On or before the final maturity date of each of the Senior Facilities, the Borrower will have the right, but not the obligation, to increase the amount of the Senior Facilities by incurring one or more incremental term loan facilities and/or increasing the Revolving Facility (each, an “Incremental Facility”) in an aggregate principal amount not to exceed the greater of (1) $500 million and (2) the maximum amount at such time that could be incurred without causing the pro forma Net Senior Secured Leverage Ratio (to be defined in the Loan Documents, and to be net of up to $250 million of unrestricted cash and cash equivalents of the Borrower and its subsidiaries) to exceed 3.50:1.00 (and, for purposes of the test in this clause (2) to include all such incremental loans and commitments, assuming they were fully drawn, and whether or not secured and whether secured on a first-lien or junior basis), in each case under terms and conditions to be determined; provided (i) all financial covenants would be satisfied on a pro forma basis for the most recent determination period, after giving effect to such Incremental Facility, (ii) if such Incremental Facility is a term loan facility (a) the yield applicable to such term Incremental Facility will be determined by the Borrower and the lenders under such term Incremental Facility; provided that if (x) the yield applicable to a Non-Institutional Incremental Term Facility is more than 0.50% higher than the corresponding yield applicable to the Tranche A Term Facility, then the interest rate margins with respect to the Tranche A Term Facility will be increased by an amount equal to the difference between the yield with respect to such Non-Institutional Incremental Term Facility and the corresponding interest rate on the Tranche A Term Facility, minus, 0.50% or (y) the yield applicable to an Institutional Incremental Term Facility is more than 0.50% higher than the corresponding yield applicable to the Tranche B Term Facility, then the interest rate margins with respect to the Tranche B Term Facility will to such Institutional Incremental Term Facility and the corresponding interest rate on the Tranche B Term Facility, minus, 0.50%, (b) the maturity date applicable to any such term Incremental Facility will not be earlier than the latest maturity date of the existing Senior Facilities; provided that, notwithstanding the foregoing and subject to the other terms of this paragraph, the Borrower will have the right to incur term Incremental Facilities with a maturity date on or after the maturity date of the existing Tranche A   Annex B-2    Term Facility and Revolving Facility, but prior to the maturity date of the existing Tranche B Term Facility (a “Specified Incremental Term Facility”) in an aggregate amount not to exceed $250 million, (c) the weighted average life to maturity of any term Incremental Facility (other than a Specified Incremental Term Facility) will not be earlier than that of any existing Term Facility, (d) the weighted average life to maturity of any Specified Incremental Term Facility will not be earlier than that of the Tranche A Term Facility and (e) all other terms of such term Incremental Facility, if not consistent with the terms of the existing Term Facilities, must be reasonably acceptable to the Administrative Agent and (iii) if all or a portion of such Incremental Facility is a revolving Incremental Facility, such revolving facility will be documented solely as an increase to the commitments with respect to the Revolving Facility, without any change in terms. Such increased amounts will be provided by existing Lenders or other persons who become Lenders in connection therewith; provided that no existing Lender will be obligated to provide any such increased portion of the Senior Facilities.    “Institutional Incremental Term Facility” means a term Incremental Facility that is an Institutional Term Facility.    “Institutional Term Facility” means a term loan facility of the type marketed primarily to institutional term loan lenders (as opposed to commercial banks) in the primary syndication thereof (including, for the avoidance of doubt, the Tranche B Term Facility).    “Non-Institutional Incremental Term Facility” means a Incremental Facility other than an Institutional Incremental Term Facility. Availability:    Term Facilities: One drawing may be made under the Term Facilities on the Closing Date.    Revolving Facility: Amounts available under the Revolving Facility may be borrowed, repaid and reborrowed after the Closing Date until the maturity date thereof. Maturities:    Tranche A Term Facility: 5-year anniversary of the Closing Date.    Tranche B Term Facility: 7-year anniversary of the Closing Date.    Revolving Facility: 5-year anniversary of the Closing Date. Closing Date:    The date on or before October 29, 2012 (as such date may be extended in accordance with the terms of the Commitment Letter) on which the borrowings under the Term Facilities are made and the Acquisition is consummated (the “Closing Date”).   Annex B-3 Amortization:    The outstanding principal amount of the Tranche A Term Facility will be payable in equal quarterly amounts as follows, with the remaining balance due on the 5-year anniversary of the Closing Date:   Year    Amortization % (per annum)   1      5 %  2      5 %  3      10 %  4      20 %  5      20 %       The outstanding principal amount of the Tranche B Term Facility will be payable in equal quarterly amounts of 1% per annum, with the remaining balance due on the 7-year anniversary of the Closing Date. No amortization will be required with respect to the Revolving Facility. Swing Line Loans:    At the option of the Lender providing such swing line loans, a portion of the Revolving Facility to be agreed upon may be made available as swing line loans.    The definitive documentation for the Revolving Facility will include customary provisions to protect the swing line lender, in the event any Lender under the Revolving Facility is a “Defaulting Lender” (to be defined in the Loan Documents). Letters of Credit:    At the option of the issuing bank providing such Letter of Credit, a portion of the Revolving Facility to be agreed upon may be made available for the issuance of letters of credit by an issuing bank to be agreed (“Letters of Credit”).    The definitive documentation for the Revolving Facility will include customary provisions to protect the issuing bank, in the event any Lender under the Revolving Facility is a “Defaulting Lender” (to be defined in the Loan Documents). Interest Rate:    All amounts outstanding under the Senior Facilities will bear interest, at the Borrower’s option, as follows:    (A)   Initially, with respect to loans made under the Tranche A Term Facility and the Revolving Facility:    (i)     at the Base Rate plus the margin per annum set forth in the table below opposite the applicable Rating Level (as defined below) as of the Closing Date; or   Annex B-4    (ii)    at the reserve adjusted Eurodollar Rate plus the margin per annum set forth in the table below opposite the applicable Rating Level as of the Closing Date;   Rating Level    Base Rate Margin     Eurodollar Rate Margin   Level I      1.75 %      2.75 %  Level II      1.875 %      2.875 %  Level III      2.00 %      3.00 %       where: (x) “Level I” means the Borrower shall have obtained a public corporate family rating of Ba3 (with a stable or positive outlook) or better by Moody’s and a public credit rating of BB- (with a stable or positive outlook) or better by S&P, (y) “Level II” means the Borrower shall have obtained (i) a public corporate family rating of B1 (with a stable or positive outlook) by S&P or (ii) a public corporate family rating of Ba3 (with a stable or positive outlook) by Moody’s and a public credit rating of B+ (with a stable or positive outlook) by S&P and (z) “Level III” means the Borrower shall have obtained a public corporate family rating or public credit rating (or outlook) worse than Level II. Level I, Level II and Level III are sometimes referred to herein as “Rating Levels”.    (B)   With respect to loans made under the Tranche B Term Facility:    (i)     at the Base Rate plus 2.50% per annum; or   (ii)    at the reserve adjusted Eurodollar Rate plus 3.50% per annum.    Beginning on the date on which the Borrower delivers to the Lenders the required financial statements for the second full fiscal quarter after the Closing Date, the applicable margin for the Tranche A Term Facility and the Revolving Facility will be subject to step downs to be determined based on the ratio of consolidated indebtedness of the Borrower and its subsidiaries as of the date of such financial statements to EBITDA of the Borrower and its subsidiaries for the twelve-month period ended on such date (the “Leverage Ratio”).   Annex B-5    As used herein, the terms “Base Rate” and “reserve adjusted Eurodollar Rate” will have meanings customary and appropriate for financings of this type, and the basis for calculating accrued interest and the interest periods for loans bearing interest at the reserve adjusted Eurodollar Rate will be customary and appropriate for financings of this type subject to, with respect to the Tranche B Term Facility, a reserve adjusted Eurodollar Rate “floor” of 1.00% and a Base Rate “floor” of 2.00%. In no event shall the Base Rate be less than the sum of (i) the one-month reserve adjusted Eurodollar Rate (after giving effect to any reserve adjusted Eurodollar Rate “floor”) plus (ii) the difference between the applicable stated margin for reserve adjusted Eurodollar Rate loans and the applicable stated margin for Base Rate loans.    After the occurrence and during the continuance of an Event of Default, interest on overdue amounts will accrue at a rate equal to the rate then applicable thereto, or otherwise at a rate equal to the rate then applicable to loans bearing interest at the rate determined by reference to the Base Rate, in each case plus an additional two percentage points (2.00%) per annum. Such interest will be payable on demand. Interest Payments:    Quarterly for loans bearing interest with reference to the Base Rate; except as set forth below, on the last day of selected interest periods (which will be one, two, three and six months) for loans bearing interest with reference to the reserve adjusted Eurodollar Rate (and at the end of every three months, in the case of interest periods of longer than three months); and upon prepayment (solely with respect to interest accrued on such amounts prepaid), in each case payable in arrears and computed on the basis of a 360-day year (365/366-day year with respect to loans bearing interest with reference to the Base Rate). Commitment Fees:    Commitment fees equal to 0.50% per annum times the daily average undrawn portion of the Revolving Facility of each Lender (other than any Defaulting Lender) (reduced by the amount of Letters of Credit issued and outstanding) will accrue from the Closing Date and will be payable quarterly in arrears; provided that such commitment fee shall be subject to a step down to 0.375% based upon compliance with a leverage test to be determined. Letters of Credit Fees:    A fee equal to (i) the applicable margin then in effect for loans bearing interest at the reserve adjusted Eurodollar Rate made under the Revolving Facility, times (ii) the average daily maximum aggregate amount available to be drawn under all Letters of Credit, will be payable quarterly in arrears to the Lenders under the Revolving Facility (other than any Defaulting Lender). In addition, a fronting fee, to be agreed upon between the issuer of each Letter of Credit and the Borrower, will be payable to such issuer, as well as certain customary fees assessed thereby.   Annex B-6 Voluntary Prepayments:    The Senior Facilities may be prepaid in whole or in part, subject to the “Call Premium” below, without premium or penalty; provided that loans bearing interest with reference to the reserve adjusted Eurodollar Rate will be prepayable only on the last day of the related interest period unless the Borrower pays any related breakage costs. Voluntary prepayments of the Term Facilities will be applied to the Term Facilities and scheduled amortization payments as directed by the Borrower. Mandatory Prepayments:    The following mandatory prepayments will be required (subject to certain basket amounts to be negotiated in the definitive Loan Documents):    1.      Asset Sales: Prepayments in an amount equal to 100% of the net cash proceeds of the sale or other disposition of any property or assets of the Borrower or its subsidiaries (subject to certain exceptions to be determined), other than net cash proceeds of sales or other dispositions of inventory in the ordinary course of business and net cash proceeds (not in excess of an amount to be agreed upon in the aggregate) that are reinvested (or committed to be reinvested, to the extent actually reinvested within six months of such commitment) in other long-term assets useful in the business of the Borrower and its subsidiaries within one year of receipt thereof.    2.      Insurance Proceeds: Prepayments in an amount equal to 100% of the net cash proceeds of insurance paid on account of any loss of any property or assets of the Borrower or its subsidiaries, other than net cash proceeds (not in excess of an amount to be agreed upon in the aggregate) that are reinvested (or committed to be reinvested, to the extent actually reinvested within six months of such commitment) in other long-term assets useful in the business of the Borrower and its subsidiaries (or used to replace damaged or destroyed assets) within one year of receipt thereof.    3.      Equity Offerings: Prepayments in an amount equal to 50% (subject to reductions to a lower percentage upon achievement of certain financial performance measures to be determined) of the net cash proceeds received from the issuance of equity securities of the Borrower or its subsidiaries (other than issuances pursuant to employee stock plans); provided that no such prepayment of the Senior Facilities will be required to the extent such net cash proceeds are applied towards prepayment of the Bridge Loans or to the redemption of the Convertible Notes.    4.      Incurrence of Indebtedness: Prepayments in an amount equal to 100% of the net cash proceeds received from the incurrence   Annex B-7    of indebtedness by the Borrower or its subsidiaries (other than indebtedness otherwise permitted under the Loan Documents including, but not limited to, indebtedness raised to redeem the Convertible Notes), payable no later than the first business day following the date of receipt.    5.      Excess Cash Flow: Prepayments in an amount equal to 50% (subject to performance measures to be determined) of Excess Cash Flow payable within 90 days of each fiscal year-end, commencing with fiscal year-end 2013. Excess Cash Flow will be defined in the applicable Loan Document and will include deductions for amounts applied during, or to be applied within a period following, the applicable fiscal year to redeem Convertible Notes, subject to terms and conditions to be agreed.    All mandatory prepayments will be made without penalty or premium (except for breakage costs, if any) and will be applied, first, pro rata to the Term Facilities (and, with respect to each Term Facility, applied to remaining scheduled amortization payments of such Term Facility in the case of the first eight payments, in direct order of maturity and thereafter, on a pro rata basis); provided that, at the election of holders of loans under the Tranche B Term Facility, the portion of proceeds otherwise allocable thereto may be allocated to repay the loans under Tranche A Term Facility in full prior to prepayment of the loans under the Tranche B Term Facility held by such holders; and, second, to outstanding loans (without the permanent reduction of commitments) under the Revolving Facility. Call Premium:    In the event that all or any portion of the Tranche B Term Facility is (i) repaid, prepaid, refinanced or replaced or (ii) repriced or effectively refinanced through any waiver, consent or amendment (in each case, in connection with any waiver, consent or amendment to the Tranche B Term Facility directed at, or the result of which would be, the lowering of the effective interest cost or the weighted average yield of the Tranche B Term Facility or the incurrence of any debt financing having an effective interest cost or weighted average yield that is less than the effective interest cost or weighted average yield of the Tranche B Term Facility (or portion thereof) so repaid, prepaid, refinanced, replaced or repriced (a “Repricing Transaction”)) occurring on or prior to the first anniversary of the Closing Date, such repayment, prepayment, refinancing, replacement or repricing will be made at 101.0% of the principal amount so repaid, prepaid, refinanced, replaced or repriced. If all or any portion of the Tranche B Term Facility held by any Lender is repaid, prepaid, refinanced or replaced pursuant to a “yank-a-bank” or similar provision in the Loan Documents as a result of, or in connection with, such Lender not agreeing or otherwise consenting to any waiver, consent or amendment referred to in clause (ii) above (or otherwise in connection with a Repricing Transaction), such repayment, prepayment, refinancing or replacement will be made at 101.0% of the principal amount so repaid, prepaid, refinanced or replaced.   Annex B-8 Security:    The Senior Facilities, each Guarantee and any bank product obligations and any interest rate and/or currency hedging obligations of the Borrower or any Guarantor owed to the Administrative Agent, the Senior Facilities Arrangers, any Lender or any affiliate of the Administrative Agent, the Senior Facilities Arrangers or any Lender (collectively, the “Hedging Obligations”) will be secured by first priority security interests in (i) all assets, including without limitation, all personal, real and mixed property of the Borrower and the Guarantors (except as otherwise agreed to by the Administrative Agent) and (ii) 100% of the capital stock of the Borrower and each domestic subsidiary of the Borrower, 65% of the capital stock of each first tier foreign subsidiary of the Borrower and all intercompany debt (collectively, the “Collateral”); provided that the Loan Documents shall contain exceptions to be agreed, including an exception for assets as to which the Administrative Agent and the Borrower reasonably determine that the costs of obtaining security interests in such assets or perfection thereof are excessive in relation to the benefit to the Lenders of the security to be afforded thereby. All security arrangements relating to the Senior Facilities and the Hedging Obligations will be in form and substance satisfactory to the Administrative Agent and will be perfected on the Closing Date (subject to the limitations on perfection set forth in the second paragraph of Section 2 of the Commitment Letter).    Notwithstanding the foregoing, (a) the Collateral shall not include: (i) any fee-owned real property with a value of less than of $10 million and any leasehold real property, (ii) motor vehicles and other assets subject to certificates of title, (iii) any immaterial letter of credit rights and commercial tort claims, (iv) pledges and security interests prohibited or restricted by applicable law (including any requirement to obtain the consent of any governmental authority or third party), (v) any foreign intellectual property required to be perfected in a non-U.S. jurisdiction and (vi) margin stock and equity interests in any person other than wholly-owned subsidiaries to the extent not permitted by the terms of such person’s organizational or joint venture documents. No actions in any non-U.S. jurisdiction or required by the laws of any non-U.S. jurisdiction shall be required to be undertaken in order to create any security interests in assets located, registered or titled outside of the U.S. (including any foreign intellectual property) or to perfect any security interests therein (it being understood that there shall be no security agreements or pledge agreements governed by laws of any non-U.S. jurisdictions).    The foregoing requirement is subject to and limited and qualified by the second paragraph of Section 2 of the Commitment Letter. Representations and Warranties:    The credit agreement for the Senior Facilities will contain such customary and appropriate representations and warranties by the   Annex B-9    Borrower (with respect to the Borrower and its subsidiaries) as are usual and customary for financings of this kind, limited to: due organization; requisite power and authority; qualification; equity interests and ownership; due authorization, execution, delivery and enforceability of the Loan Documents; creation, perfection and priority of security interests (subject to the limitations on perfection set forth in the second paragraph of Section 2 of the Commitment Letter); no conflicts; governmental consents; historical and projected financial condition; no material adverse change; no restricted junior payments; absence of material litigation; payment of taxes; title to properties; environmental matters; no defaults under material agreements; Investment Company Act and margin stock matters; ERISA and other employee matters; absence of brokers or finders fees; solvency; compliance with laws; full disclosure; Patriot Act, FCPA, laws applicable to sanctioned persons and other related matters. Covenants:    The definitive Loan Documents for the Senior Facilities will contain such financial, affirmative and negative covenants by the Borrower (with respect to the Borrower and its subsidiaries) as are usual and customary for financings of this kind, limited to: - financial covenants:    minimum interest coverage and maximum total net leverage ratio (to be defined in the Loan Documents, and to be (x) set at levels to be agreed by the Senior Facilities Arrangers and the Borrower (with a maximum of three step downs during the term of the Senior Facilities) that represent a non-cumulative cushion of at least 25% to EBITDA set forth in the Borrower’s business plan delivered to Goldman Sachs prior to the date of the Original Commitment Letter (or such other business plan reasonably acceptable to Goldman Sachs, in consultation with the other Senior Facilities Arrangers), (y) net of up to $250 million of unrestricted cash and cash equivalents of the Borrower and its subsidiaries and (z) tested from and after the second fiscal quarter of the Borrower ended after the Closing Date). - affirmative covenants:    delivery of financial statements and other reports (including the identification of information as suitable for distribution to Public Lenders or non-Public Lenders); maintenance of existence; payment of taxes and claims; maintenance of properties; maintenance of insurance; books and records; inspections; lender meetings; compliance with laws; environmental matters; additional collateral and guarantors; maintenance of corporate level and facility level ratings; cash management and further assurances, including, in each case, exceptions and baskets to be mutually agreed upon, and - negative covenants:    limitations with respect to other indebtedness; liens; negative pledges; restricted junior payments (e.g., no dividends, distributions, buy-back redemptions or certain payments on certain debt); restrictions on subsidiary distributions; investments, mergers and acquisitions; sales of assets (including subsidiary interests); sales and lease-backs; capital expenditures; transactions with affiliates; conduct of business;   Annex B-10    amendments and waivers of organizational documents, junior indebtedness and other material agreements; and changes to fiscal year, including, in each case, exceptions and baskets to be mutually agreed upon (including a basket for the cash settlement of puts in connection with the Borrower’s senior convertible notes (the “Convertible Notes”) in 2013, 2016, and 2018). Events of Default:    The definitive Loan Documents for the Senior Facilities will include such events of default (and, as appropriate, grace periods) as are usual and customary for financings of this kind, limited to: failure to make payments when due, defaults under other material agreements or instruments of indebtedness, certain events under hedging agreements, noncompliance with covenants, breaches of representations and warranties, bankruptcy, judgments in excess of specified amounts, ERISA, impairment of security interests in collateral, invalidity of guarantees, and “change of control” (to be defined in the Loan Documents). Conditions Precedent to Initial Borrowings:    The several (and not joint) obligations of the Lenders to make, or cause one of their respective affiliates to make, loans under the Senior Facilities will be subject to the conditions precedent referred to in Section 2 of the Commitment Letter, prior written notice of borrowing and the accuracy of the representations and warranties set forth in the second paragraph of Section 2 of the Commitment Letter in all material respects (except to the extent that such representation or warranty is already qualified by “materiality,” “material adverse effect” or similar language, in which case such representation and warranty shall be true and correct in all respects). Conditions to All Subsequent Borrowings:    The conditions to all borrowings (other than the initial borrowings on the Closing Date) will be customary and appropriate for financings of this type and will include requirements relating to prior written notice of borrowing, the accuracy of representations and warranties and, prior to and after giving effect to the funding of the Facilities, the absence of any default or event of default. Assignments and Participations:    The Lenders may assign all or, in an amount of not less than (x) $2.5 million with respect to each of the Tranche A Term Facility and the Revolving Facility and (y) $1.0 million with respect to the Tranche B Term Facility, any part of, their respective shares of the Senior Facilities to their affiliates (other than natural persons) or one or more banks, financial institutions or other entities that are eligible assignees (to be defined in the Loan Documents) which, in the case of assignments with respect to the Senior Facilities (except in the case of assignments made to Goldman Sachs or in connection with the primary syndication of the Senior Facilities), are reasonably acceptable to the Administrative Agent and (except during the existence of an Event of Default) the Borrower, each such consent not to be unreasonably withheld or delayed. The Borrower’s consent shall be deemed to have been given if the Borrower has not responded   Annex B-11    within five business days of an assignment request. Upon such assignment, such affiliate, bank, financial institution or entity will become a Lender for all purposes under the Loan Documents; provided that assignments made to affiliates and other Lenders will not be subject to the above described consent or minimum assignment amount requirements. A $3,500 processing fee will be required in connection with any such assignment, with exceptions to be agreed. The Lenders will also have the right to sell participations without restriction, subject to customary limitations on voting rights, in their respective shares of the Senior Facilities.    In addition, the Loan Documents shall provide that loans under the Tranche B Term Facility (but not loans under the Revolving Facility) may be purchased by Borrower through “Dutch” auctions in which all Lenders under the Tranche B Term Facility are invited to participate on a pro rata basis in accordance with customary procedures to be agreed, subject to customary terms and conditions including without limitation: (a) any such loans acquired by Borrower shall be retired and cancelled promptly upon acquisition thereof, (b) Borrower must provide a customary representation and warranty to the effect that it is not in possession of any information that has not been disclosed to the auction manager, the Administrative Agent and non-Public Lenders and that may be material to a Lender’s decision to participate in an auction or an assignment, (c) loans may not be purchased with the proceeds of loans under the Revolving Facility, (d) no default or event of default shall exist or result therefrom and (e) any such loans acquired by Borrower shall not be deemed a repayment of loans for purposes of calculating excess cash flow. Requisite Lenders:    Amendments and waivers will require the approval of Lenders (other than “Defaulting Lenders”) holding more than 50% of total commitments or exposure under the Senior Facilities (“Requisite Lenders”), provided that, in addition to the approval of Requisite Lenders, (x) any amendment that would disproportionately affect the obligation of the Borrower to make payment of the loans under the Revolving Facility or the Term Facilities will not be effective without the approval of holders of more than 50% of such class of loans and (y) the consent of each Lender directly and adversely affected thereby will be required with respect to matters relating to (a) increases in the commitment of such Lender, (b) reductions of principal, interest, fees or premium, (c) extensions of final maturity or the due date of any amortization, interest, fee or premium payment, (d) the release of all or substantially all of the collateral or any guarantor (except as otherwise contemplate by the Loan Documents) and (e) the definition of Requisite Lenders.    On or before the final maturity date of each of the Senior Facilities, the Borrower shall have the right to extend the maturity date of all or a portion of the Senior Facilities with only the consent of the Lenders whose loans or commitments are being extended, and otherwise on terms and conditions to be mutually agreed by the Administrative   Annex B-12    Agent and the Borrower; it being understood that any such extension will be subject to a “most favored nation” provision on terms to be mutually agreed by the Administrative Agent and the Borrower and that each Lender under the tranche the maturity date of which is being extended shall have the opportunity to participate in such extension on the same terms and conditions as each other Lender under such tranche.    In addition, on or before the final maturity date of each of the Senior Facilities, the Borrower shall have the right to amend (or amend and restate) of the Loan Documents to (a) add one or more additional or replacement credit facilities thereto and changes related thereto and (b) to provide for term loans replacing all or a portion of the Term Facilities, subject to customary limitations, with the consent of the Administrative Agent, the Borrower and the Lenders providing such replacement term loans and, in connection with any of the foregoing, the right of the Borrower to prepay the outstanding loans, terminate the commitments or require the applicable Lenders to assign their Term Loans to the providers of any replacement credit facility or loans. Yield Protection:    The Senior Facilities will contain customary provisions (a) protecting the Lenders against increased costs or loss of yield resulting from changes in reserve, capital adequacy and capital requirements (or their interpretation), illegality, unavailability and other requirements of law and from the imposition of or changes in certain withholding or other taxes and (b) indemnifying the Lenders for “breakage costs” incurred in connection with, among other things, any prepayment of a Eurodollar Rate loan on a day other than the last day of an interest period with respect thereto. For all purposes of the Loan Documents, (i) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines and directives promulgated thereunder and (ii) all requests, rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States regulatory authorities, in each case, pursuant to Basel III, shall be deemed introduced or adopted after the date of the Loan Documents. The Senior Facilities will provide that all payments are to be made free and clear of any taxes (other than franchise taxes and taxes on overall net income), imposts, assessments, withholdings or other deductions whatsoever. Lenders will furnish to the Administrative Agent appropriate certificates or other evidence of exemption from U.S. federal tax withholding (with customary exceptions for FATCA). Indemnity:    The Senior Facilities will provide customary and appropriate provisions relating to indemnity and related matters in a form reasonably satisfactory to the Administrative Agent and the Lenders. Governing Law and Jurisdiction:    The Senior Facilities will provide that the Borrower will submit to the exclusive jurisdiction and venue of the federal and state courts of the   Annex B-13    State of New York (except to the extent the Collateral Agent (to be defined in the Loan Documents) requires submission to any other jurisdiction in connection with the exercise of any rights under any security document or the enforcement of any judgment) and will waive any right to trial by jury. New York law will govern the Loan Documents, except with respect to certain security documents where applicable local law is necessary for enforceability or perfection. Counsel to the Senior Facility Arrangers and Administrative Agent:    Davis Polk and Wardwell LLP The foregoing is intended to summarize certain basic terms of the Senior Facilities. It is not intended to be a definitive list of all of the requirements of the Lenders in connection with the Senior Facilities.   Annex B-14 ANNEX C Project Genoa Summary of the Bridge Loans This Summary outlines certain terms of the Bridge Loans referred to in the Commitment Letter, of which this Annex C is a part. Certain capitalized terms   Guarantors under the Senior Facilities (collectively, the “Guarantors”) will guarantee (the “Guarantee”) all obligations under the Bridge Loans. The Bridge Loans and the Guarantee will rank pari passu in right of payment with the Senior Facilities and all other senior indebtedness and guarantees of such indebtedness of the Borrower and the Guarantors (including, without limitation, the Acquired Business), if any. Sole Lead Arranger, Sole Bookrunner and Sole Syndication Agent:    Goldman Sachs Lending Partners LLC (“Goldman Sachs”, in its capacities as Sole Lead Arranger, Sole Bookrunner and Sole Syndication Agent, the “Bridge Loan Arranger”). Co-Agents:    Citigroup Global Markets Inc. (“CGMI”). Administrative Agent:    Goldman Sachs (in its capacity as Administrative Agent, the “Bridge Administrative Agent”). Lenders:    Goldman Sachs and Citi (the “Initial Lenders”) and/or other financial institutions selected by the Bridge Loan Arranger (each, a “Lender” and, collectively, the “Lenders”). Amounts of Bridge Loans:    $500 million in aggregate principal amount of senior increasing rate loans, less the amount of gross proceeds from any sale of Notes (or other Permanent Debt) received on or prior to the Closing Date (the “Bridge Loans”). Closing Date:    The date on which borrowings under the Senior Facilities are made (the “Closing Date”). Ranking:    The Bridge Loans, the Guarantee and all obligations with respect thereto will be unsecured and rank pari passu in right of payment with all obligations of the Borrower under the Senior Facilities. Security:    Not applicable. Maturity:    The Bridge Loans will mature on the 7-year anniversary of the Closing Date. At any time and from time to time, on or after the first anniversary of the Closing Date, upon reasonable prior written notice and in a minimum principal amount of at least $50 million in the aggregate principal amount of Exchange Notes, the Bridge Loans may   Annex C-1    be exchanged (each such exchange, an “Exchange”), in whole or in part, at the option of the applicable Lender, for Senior Exchange Notes (the “Exchange Notes”), in a principal amount equal to the principal amount of the Bridge Loans so exchanged and having the same maturity date as the Bridge Loans so exchanged. Each Exchange shall be made pursuant to surrender and issuance arrangements to be set forth in the definitive documents for the Bridge Loans and each holder of Bridge Loans requesting such an exchange shall be required to make customary representations and warranties in connection therewith, all in form and substance, reasonably satisfactory to the Bridge Administrative Agent and the Borrower.    The Exchange Notes will be issued pursuant to an indenture (the “Indenture”) that will have the terms set forth on Exhibit 1 to this Annex C. Interest Rate:    Until the earlier of (i) the first anniversary of the Closing Date and (ii) the occurrence of a Demand Failure Event (as defined in the Fee Letters) (such earlier date, the “Conversion Date”), the Bridge Loans will bear interest at a floating rate, reset quarterly, as follows: (i) for the first three-month period commencing on the Closing Date, the Bridge Loans will bear interest at a rate per annum equal to the reserve adjusted Eurodollar Rate, plus the margin per annum set forth in the table below opposite the applicable Rating Level as of the Closing Date (collectively, the “LIBOR Rate”), and (ii) thereafter, interest on the Bridge Loans will be payable at a floating per annum rate reset at the beginning of each subsequent three-month period, equal to the LIBOR Rate as of such reset date plus the Spread. The “Spread” will initially be 50 basis points (commencing three months after the Closing Date) and will increase by an additional 50 basis points every three months thereafter. Notwithstanding the foregoing, at no time will the per annum interest rate on the Bridge Loans exceed the Total Cap then in effect, as defined in the Fee Letters (plus default interest, if any).   Rating Level    Margin   Level I      5.75 %  Level II      6.00 %  Level III      6.25 %       From and after the Conversion Date, the Bridge Loans will bear interest at a fixed rate equal to the Total Cap (plus default interest, if any).    Prior to the Conversion Date, interest will be payable at the end of each interest period. Accrued Interest shall also be payable in arrears   Annex C-2    on the Conversion Date and on the date of any prepayment of the Bridge Loans. From and after the Conversion Date, interest will be payable quarterly in arrears and on the date of any prepayment of the Bridge Loans.    As used herein, the term “reserve adjusted Eurodollar Rate” will have the meaning customary and appropriate for financings of this type, and the basis for calculating accrued interest and the interest periods for loans bearing interest at the reserve adjusted Eurodollar Rate will be customary and appropriate for financings of this type subject to a reserve adjusted Eurodollar Rate “floor” of 1.25%.    After the occurrence and during the continuance of an Event of Default, interest on overdue amounts will accrue at a rate equal to the applicable rate set forth above, plus an additional two percentage points (2.00%) per annum and will be payable on demand. Mandatory Prepayment:    Prior to the Conversion Date, the net proceeds to the Borrower or any subsidiary of the Borrower (including, without limitation, the Acquired Business) from (a) any direct or indirect public offering or private placement of any debt or equity securities (other than issuances pursuant to employee stock plans), (b) any future bank borrowings other than under the Senior Facilities as in effect on the Closing Date and (c) any future asset sales or receipt of insurance proceeds (subject to certain ordinary course exceptions) will be used to repay the Bridge Loans subject, in the case of clauses (b) and (c) only, to the required prior repayment of any amount then outstanding under the Senior Facilities, in each case, at 100% of the principal amount of the Bridge Loans prepaid plus accrued interest to the date of prepayment; provided that in the case of an issuance of Permanent Debt (with such proceeds being applied to repay the Bridge Loans prior to the repayment of loans outstanding under the Senior Facilities) to any Lender (or any of its affiliates) or any person to whom a Lender participated an interest in the Bridge Loans (or any of such participant’s affiliates) (such Lenders, participants and affiliates, “Specified Bridge Parties”), the net cash proceeds received by the Borrower and its affiliates in respect of such Permanent Debt acquired by such Specified Bridge Parties may, at the option of such Specified Bridge Party, be applied first to prepay the Bridge Loans of such Specified Bridge Party prior to being applied to prepay the Bridge Loans held by other Lenders on a pro rata basis.    From and after the Conversion Date, the mandatory prepayment provisions in the definitive documentation governing the Bridge Loans (the “Bridge Loan Agreement”) will be automatically amended to require that the Borrower prepay the outstanding Bridge Loans, on a pro rata basis, at par plus accrued interest to the date of prepayment with the proceeds of any future asset sales (subject to any required prepayments of the Senior Facilities with such proceeds, certain ordinary course exceptions and customary reinvestment rights within 365 days); provided that, each holder of Bridge Loans may elect to reject its pro rata share of such prepayment such holder is otherwise entitled to receive pursuant to this paragraph..   Annex C-3    Nothing in these mandatory prepayment provisions will restrict or prevent any holder of Bridge Loans from exchanging Bridge Loans for Exchange Notes on or after the first anniversary of the Closing Date. Change of Control:    Upon the occurrence of a Change of Control (to be defined in the Bridge Loan Agreement), the Borrower will be required to repay all obligations under the Senior Facilities (or obtain any required consent of the lenders under the Senior Facilities to make such prepayment of the Bridge Loans) and deposit in escrow an amount necessary to prepay in full all outstanding Bridge Loans, which amount shall be prepaid 30 days after the Change of Control, at par plus accrued interest to the date of prepayment, plus with respect to any Bridge Loans so prepaid on or after the Conversion Date, a 1.00% prepayment premium. Voluntary Prepayment:    Prior to the Conversion Date, Bridge Loans may be prepaid, in whole or in part, at the option of the Borrower, at any time (except as provided below) without premium or penalty, upon five business days’ written notice, such prepayment to be made at par plus accrued interest.    From and after the Conversion Date, Bridge Loans may be prepaid, in whole or in part, at the option of the Borrower, at any time (except as provided below) upon 30 days prior written notice at par plus accrued interest to the date of repayment plus the Applicable Premium. The “Applicable Premium” will be (i) a make-whole premium based on the applicable treasury rate plus 50 basis points during the first three years following the Closing Date and (ii) 75% of the interest rate on the Bridge Loans in year four following the Closing Date declining ratably on each subsequent anniversary of the Closing Date to zero one year prior to the maturity of the Bridge Loans (it being understood and agreed that, for the avoidance of doubt, the Applicable Premium will not be payable in connection with an Exchange).    The Borrower may not make any optional prepayment of Bridge Loans (i) during the period commencing on the date of a Permanent Debt Notice (as defined in the Fee Letters) and ending upon the earliest of (x) the consummation of an issuance or incurrence of Permanent Debt in accordance with such Permanent Debt Notice, (y) the withdrawal or termination of such Permanent Debt Notice and (z) the first business day following the Conversion Date or (ii) to the extent that the holder thereof has given notice to the Borrower of its intent to elect to exchange Bridge Loans for Exchange Notes during the period commencing on the delivery of the related notice and ending upon the withdrawal of such notice or the consummation of the exchange of such holder’s Bridge Loans for Exchange Notes.   Annex C-4 Representations and Warranties:    The Bridge Loan Agreement will contain customary and appropriate representations and warranties by the Borrower (with respect to the Borrower and its subsidiaries), based on the Tranche B Term Facility’s representations and warranties. Covenants:    The Bridge Loan Agreement will contain customary and appropriate covenants by the Borrower (with Facility’s covenants but more restrictive in certain respects prior to the Conversion Date, and with such changes as are appropriate in connection with the Bridge Loans and including, without limitation, a covenant to comply with Section 3 of the Commitment Letter, the Fee Letters and the engagement letter of even date herewith between the Borrower, the sole underwriter, initial purchaser and/or placement agent and the sole bookrunner and lead arranger specified therein (the “Financial Institution”) and the other financial institutions party thereto (the “Engagement Letter”), and to use commercially reasonable efforts to refinance the Bridge Loans as promptly as practicable following the Closing Date. The Bridge Loan Agreement shall not contain any financial (maintenance) covenants. Events of Default:    Prior to the Conversion Date, the Bridge Loan Agreement will include customary and appropriate events of default (and, as appropriate, grace periods) based on the Tranche B Term Facility’s events of default (other than with respect to Change of Control), including an event of default for failure to comply with Section 3 of the Commitment Letter, the Fee Letters and the Engagement Letter and defaults under other debt (including the Senior Facilities). From and after the Conversion Date, the events of default in the Bridge Loan Agreement will be limited to failure to pay principal or interest, defaults under other debt agreements that result in the acceleration of other indebtedness prior to its stated maturity, inaccuracy of representatives and warranties noncompliance with covenants in the Bridge Loan Agreement, judgments in excess of certain specified amounts, invalidity of guarantees, failure to comply with Section 3 of the Commitment Letter, the Fee Letters or the Engagement Letter and certain bankruptcy and related events, in each case subject to materiality thresholds and grace periods where customary and appropriate. Conditions Precedent to Borrowing:    The several (and not joint) obligations of the Lenders to make, or cause one of their respective affiliates to make, the Bridge Loans will be subject to the conditions precedent referred to in Section 2 of the Commitment Letter, prior written notice of borrowing and the accuracy of the representations and warranties set forth in the second paragraph of Section 2 of the Commitment Letter in all material respects (except to the extent that such representation or warranty is already qualified by “materiality,” “material adverse effect” or similar language, in which case such representation and warranty shall be true and correct in all respects).   Annex C-5 Assignments and Participations:    Each of the Lenders may assign all or (subject to minimum assignment amount requirements) any part of its Bridge Loans to its affiliates (other than natural persons) or one or more banks, financial institutions or other entities that are “Eligible Assignees,” as defined in the Bridge Loan Agreement, that (except in the case of assignments made to Goldman Sachs) are reasonably acceptable to the Bridge Administrative Agent, such consent not to be unreasonably withheld or delayed; provided that, prior to the Conversion Date, the consent of the Borrower shall be required with respect to any assignment if, subsequent thereto, the Initial Lenders (and each of their subsidiaries) would hold, in the aggregate, less than 50.1% of the Bridge Loans.    Upon such assignment, such Eligible Assignee will become a Lender for all purposes under the Bridge Loan Agreement; provided that assignments made to affiliates and other Lenders will not be subject to the above described consent or any minimum assignment amount requirements. A $3,500 processing fee will be required in connection with any such assignment (except in the case of assignments made by or to the Initial Lenders). The Lenders will also have the right to sell participations, without restriction, subject to customary limitations on voting rights, in their respective Bridge Loans. Requisite Lenders:    Amendments and waivers will require the approval of Lenders holding more than 50% of the Bridge Loans then outstanding (“Requisite Lenders”), provided that, in addition to the approval of Requisite Lenders, no amendment may (i) extend the maturity of any Bridge Loan or change the time of payment of interest on any Bridge Loan, (ii) reduce the rate of interest or the principal amount of any Bridge Loan, (iii) alter the prepayment provisions of any Bridge Loan or (iv) reduce the percentage of holders necessary to modify or change the Bridge Loans, in each case without the consent of each Lender affected thereby. Yield Protection:    Same as Senior Facilities. Indemnities:    Same as Senior Facilities. Governing Law and Jurisdiction:    The Bridge Loan Agreement will provide that the Borrower will submit to the exclusive jurisdiction and venue of the federal and state courts of the State of New York and will waive any right to trial by jury. New York law will govern the Loan Documents. Counsel to the Arranger and Administrative Agent:    Davis Polk and Wardwell LLP. The foregoing is intended to summarize certain basic terms of the Bridge Loans. It is not intended to be a definitive list of all of the requirements of the Lenders in connection with the Bridge Loans.   Annex C-6 EXHIBIT 1 TO ANNEX C Project Genoa Summary of Exchange Notes This Summary of Exchange Notes outlines certain terms of the Exchange Notes referred to in Annex C to the Commitment Letter, of which this Exhibit 1 is a part. Capitalized terms used herein have the meanings assigned to them in Annex C to the Commitment Letter. Exchange Notes At any time on or after the first anniversary of the Closing Date, upon five or more business days prior notice, Bridge Loans may, at the option of a Lender, be exchanged for a principal amount of Exchange Notes equal to 100% of the aggregate principal amount of the Bridge Loans so exchanged. At a Lender’s option, Exchange Notes will be issued directly to its broker-dealer affiliate or other third party designated by it, upon surrender by the Lender to the Borrower of an equal principal amount of Bridge Loans. No Exchange Notes will be issued until the Borrower receives requests to issue at least $50 million in aggregate principal amount of Exchange Notes. The Borrower will issue Exchange Notes under an indenture (the “Indenture”) that complies with the Trust Indenture Act of 1939, as amended. The Borrower will appoint a trustee reasonably acceptable to the Lenders. The Indenture will be fully executed and delivered on the Closing Date and the Exchange Notes will be fully executed and deposited into escrow on the Closing Date.   Final Maturity:    Same as Bridge Loans. Security:    Not applicable Interest Rate:    Each Exchange Note will bear interest at a fixed rate equal to the Total Cap then in effect (plus default interest, if any). Interest will be payable semiannually in arrears.    After the occurrence and during the continuance of any Event of Default, interest on overdue amounts will accrue at the applicable rate plus two percentage points (2.00%) per annum. Optional Redemption:    Until the third anniversary of the Closing Date, each Exchange Note will only be callable at par plus accrued interest to the date of repayment plus the Applicable Premium. The “Applicable Premium” will be (i) a make-whole premium based on the applicable treasury rate plus 50 basis points during the first three years following the Closing Date and (ii) 75% of the interest rate on the Exchange Notes in year four following the Closing Date declining ratably on each subsequent anniversary of the Closing Date to zero one year prior to the maturity of the Exchange Notes.    In addition, prior to the third anniversary of the Closing Date, up to 35% of the original principal amount of the Exchange Notes may be redeemed from the proceeds of a qualifying equity offering by the Borrower at a redemption price equal to par plus the coupon and accrued interest.   Annex C-7 Defeasance Provisions of Exchange Notes:    Customary. Modification:    Customary. Change of Control:    Customary at 101%. Registration Rights:    The Borrower will file within 90 days after the first anniversary of the Closing Date and will use its best efforts to cause to become effective as soon thereafter as practicable, a shelf registration statement with respect to the Exchange Notes (a “Shelf Registration Statement”). If a Shelf Registration Statement is filed, the Borrower will keep such registration statement effective and available (subject to customary exceptions); provided that after a Shelf Registration Statement has been declared effective, the Borrower will be permitted to permit its effectiveness to lapse if it is no longer needed to permit unrestricted resales of all of the Exchange Notes. If within 180 days after the first anniversary of the Closing Date (the “Effectiveness Deadline”) a Shelf Registration Statement for the Exchange Notes has not been declared effective, then the Borrower will pay liquidated damages in the form of increased interest of 25 basis points per annum on the principal amount of Exchange Notes and Bridge Loans outstanding to holders of such Exchange Notes and Bridge Loans from and including the Effectiveness Deadline to but excluding the effective date of such Shelf Registration Statement. On the 90th day after the Effectiveness Deadline, the liquidated damages will increase by 25 basis points per annum, and on each 90-day anniversary of the Effectiveness Deadline thereafter, will increase by 25 basis points per annum, to a maximum increase in interest of 100 basis points per annum. The Borrower will also pay such special interest for any period of time (subject to customary exceptions) following the effectiveness of a Shelf Registration Statement that such Shelf Registration Statement is not available for sales thereunder. All accrued special interest will be paid on each semiannual interest payment date. Any registration rights agreement and related documents shall be on customary terms to be mutually agreed. Covenants:    The indenture relating to the Exchange Notes will include covenants similar to those contained in an indenture governing publicly traded high yield debt securities. The Exchange Notes shall not contain any financial (maintenance) covenants. Events of Default:    The indenture relating to the Exchange Notes will provide for Events of Default similar to those contained in an indenture governing publicly traded high yield debt securities.   Annex C-8 The foregoing is intended to summarize certain basic terms of the Exchange Notes. It is not intended to be a definitive list of all of the requirements of the Lenders in connection with the Exchange Notes.   Annex C-9 ANNEX D Project Genoa Summary of Conditions Precedent to the Facilities This Summary of Conditions Precedent outlines certain of the conditions precedent to the Facilities referred to in the Commitment Letter, of which this Annex D is a part. Certain capitalized terms used herein are defined in the Commitment Letter.   A. CONDITIONS PRECEDENT TO THE FACILITIES   1. Concurrent Transactions: The terms of the definitive documentation for the Acquisition (including the exhibits, schedules and all related documents, the “Acquisition Agreement”) will be reasonably satisfactory to the each of the Arrangers (it being agreed that the executed Acquisition Agreement dated April 29, 2012 is reasonably satisfactory to each of the Arrangers) and the Acquisition shall have been consummated pursuant to the Acquisition Agreement, in each case without giving effect to any modifications, consents, amendments or waivers thereto that are materially adverse to the Lenders and the Arrangers, unless consented to by each of the Arrangers (it being understood that a reduction of the purchase price in respect of the Acquisition will be deemed to be materially adverse to the Lenders and the Arrangers (other than to the extent any such reduction is less than 10% of the purchase price as of the of the Original Commitment Letter and the commitments in respect of the Tranche A Term Facility, the Tranche B Term Facility or the Bridge Loans are reduced dollar for dollar by the amount of such reduction (such reduction to be allocated to the Facilities at the discretion of Goldman Sachs, in consultation with the other Arrangers))). The terms of any Notes issued on or prior to the Closing Date and the agreements related to such Notes will be reasonably satisfactory to each of the Arrangers. Concurrently with the consummation of the Acquisition, the existing revolving credit facility of the Acquired Business (including any replacement, renewal, extension, refinancing or refunding thereof) shall have been repaid or repurchased in full, all commitments relating thereto shall have been terminated, and all liens or security interests related thereto shall have been terminated or released. After giving effect to the Transactions, the Company and its subsidiaries shall have outstanding no indebtedness or preferred stock other than (a) the loans and other extensions of credit under the Senior Facilities, (b) the Notes or the Bridge Loans, (c) the Convertible Notes, (d) capitalized leases, (e) additional indebtedness of the Company and its subsidiaries in an aggregate amount not to exceed $25 million, (f) indebtedness permitted by the Acquisition Agreement as in effect on the of the Original Commitment Letter and without giving effect to any amendments thereunder and (g) such other indebtedness to be mutually agreed upon.   2. Financial Statements. The Administrative Agents shall have received (i) audited financial statements of the Company and the Acquired Business for each of the three fiscal years ending at least 60 days prior to the Closing Date; (ii) unaudited financial statements of the Company and the Acquired Business for each fiscal quarter of the Company and the Acquired Business ended for each subsequent fiscal quarter at least 45 days prior to the Closing Date; and (iii) customary pro forma financial statements, in each case, to the extent required (or in the case of the Acquired Business, customary) in connection with a registered offering, and meeting the requirements of Regulation S-X for Form S-1 registration statements.   3. No Other Material Transactions. From the date of the Original Commitment Letter through the Closing Date, neither the Company nor any of its subsidiaries shall have consummated any merger (other than any merger between a domestic subsidiary of the Company into another   1   domestic subsidiary of the Company or a subsidiary of Company into the Company), acquisition or disposition (other than any disposition effected to satisfy one or more of the conditions precedent set forth in the Acquisition Agreement) or paid any dividend (other than any dividends made from a subsidiary of Company to another subsidiary of Company or made by a subsidiary of Company to Company) or effected any share buybacks (or entered into an agreement to consummate the foregoing) (each a “Specified Transaction”) other than the Acquisition and the other Transactions, except any such Specified Transactions (x) in the ordinary course of business, (y) that are not in the ordinary course of business and involve, in the aggregate across all such Specified Transactions, no more than $100 million of consideration or payments, as applicable, or (z) consented to by each of the Arrangers (such consent not to be unreasonably withheld or delayed).   4. Performance of Obligations. All costs, fees, expenses (including, without limitation, legal fees and expenses, title premiums, survey charges and recording taxes and fees) and other compensation contemplated by the Commitment Letter and the Fee Letters payable to the Arrangers, the Administrative Agent or the Lenders shall have been paid to the extent due.   5. Customary Closing Documents. The Administrative Agents shall be reasonably satisfied that the Company has complied with the following customary closing conditions: (i) the delivery of customary legal opinions, corporate records and documents from public officials, lien searches and customary officer’s certificates; (ii) evidence of authority; (iii) perfection of liens, pledges, and mortgages on the collateral securing the Senior Facilities (subject to the second paragraph of Section 2 of the Commitment Letter); (iv) evidence of insurance and (v) delivery of a solvency certificate from the chief financial officer of the Borrower in form and substance, and with supporting documentation, reasonably satisfactory to the Administrative Agents (or, solely with respect to clause (iii), the Senior Facilities Administrative Agent), certifying that the Borrower and its subsidiaries are, on a consolidated basis, solvent. Each Arranger will have received at least 3 days prior to the Closing Date all documentation and other information required by bank regulatory authorities under applicable “know-your-customer” and anti-money laundering rules and regulations, including the Patriot Act, to the extent requested by such Arranger in writing at least 10 days prior to the Closing Date.   6. Prior Marketing of Notes. The Bridge Loan Arranger (a) shall have received at least 20 consecutive business days prior to the Closing Date (i) a preliminary prospectus or preliminary offering memorandum or preliminary private placement memorandum (an “Offering Document”) suitable for use in a customary “high-yield road show”, which contains all customary information (including all audited financial statements, all unaudited financial statements (which shall have been reviewed as provided in the procedures specified by the Public Company Accounting Oversight Board in AU 722) and all appropriate pro forma financial statements prepared in accordance with generally accepted accounting principles in the United States and prepared in accordance with Regulation S-X under the Securities Act of 1933, as amended), and all other data that the Securities and Exchange Commission would require in a registered offering of the Notes or are customarily included in Offering Documents of such type, all of which shall be in a form that will enable the independent registered public accountants of the Company and the Acquired Business to render a customary comfort letter (including “negative assurance” comfort that is customary in the context of a transaction where the most recent financial statements are not more than 135 days old), (ii) a draft of such customary comfort letter from the independent accountants for the Company and the Acquired Business (and any other accountant to the extent financial statements audited or reviewed by such accountants are or would be included in any Offering Document) which such independent accountants are prepared to issue upon the completion of customary procedures and (iii) a draft of a customary “10b-5”   2   disclosure letter from counsel to the Company, which such counsel would be prepared to issue on the date of delivery thereof if the Notes were being issued as of such date, subject to satisfactory completion of customary bring-down due diligence and completion of the terms of the Notes and the receipt of other information that would be necessary in such counsel’s reasonable judgment, (b) shall be afforded a period of 20 consecutive business days following the delivery of the Offering Document and satisfaction of the conditions precedent to the Acquisition set forth in the Acquisition Agreement (in effect on the date of the Original Commitment Letter and without giving effect to any amendments thereunder, other than as consented to by the Bridge Loan Arranger (such consent not to be unreasonably withheld or delayed) and ending on the Closing Date to place the Notes with qualified purchasers thereof, during which time all such conditions precedent shall remain satisfied and (c) shall have received (i) such customary comfort letter from such accountants and (ii) such customary “10b-5” disclosure letter from counsel to the Company; provided that the period referred to in (a) and (b) above shall (i) either conclude prior to June 29, 2012 or commence after July 9, 2012, (ii) either conclude prior to August 17, 2012 or commence after September 4, 2012, (iii) either conclude prior to December 15, 2012 or commence after January 1, 2013 and (iv) exclude November 21, 2012 through and including November 23, 2012.   7. Confidential Information Memorandum. The Arrangers shall have received at least 20 consecutive business days immediately prior to the Closing Date a complete, customary Confidential Information Memorandum relating to the Facilities, including authorizations letters to Goldman Sachs authorizing the distribution of the Confidential Information Memorandum to prospective Lenders and containing a customary “10b-5” representation; provided that such period shall (i) either conclude prior to June 29, 2012 or commence after July 9, 2012, (ii) either conclude prior to August 17, 2012 or commence after September 4, 2012, (iii) either conclude prior to December 15, 2012 or commence after January 1, 2013 and (iv) exclude November 21, 2012 through and including November 23, 2012.   3

     This Agreement is entered into as of February 24, 2016, between Northwest Natural Gas Company, an Oregon corporation (the “Company”), and ____________ (“Recipient”). On February 24, 2016, the Organization and Executive Compensation Committee (the “Committee”) of the Company’s Board of Directors (the “Board”) awarded restricted stock units to Recipient with a performance threshold intended to qualify the award as a performance-based award pursuant to Section 8 of the Company’s Long Term Incentive Plan (the “Plan”). Compensation paid pursuant to the restricted stock units is intended to qualify as performance-based compensation under Section 162(m) of the Internal Revenue Code of 1986 (the “Code”). Recipient desires to accept the award subject to the terms and conditions of this Agreement. 1.Grant of Restricted Stock Units; Dividend Equivalents. Subject to the terms and conditions of this Agreement, the Company hereby grants to the Recipient _________ restricted stock units (the “RSUs”). The grant of RSUs obligates the Company, upon vesting in accordance with this Agreement, to deliver to the Recipient one share of Common Stock of the Company (a “Share”) for each RSU. Upon vesting of each RSU, the Company also agrees to make a dividend equivalent cash payment with respect to each vested RSU in an amount equal to the total amount of dividends paid per share of Company Common Stock for which the dividend record dates occurred after the date of this Agreement and before the date of delivery of the underlying Shares. The RSUs are subject to forfeiture as set forth in Sections 2.1 and 2.10 below. 2.Vesting; Forfeiture Restriction. 1.Vesting Schedule. (a)All of the RSUs shall initially be unvested. Subject to Sections 2.3, 2.4, 2.5, 2.10 and 5.2, the RSUs shall vest as follows: (1)one-fourth of the RSUs shall vest on March 1, 2017 if the Performance Threshold (as defined in Section 2.2 below) is satisfied for 2016; (2)an additional one-fourth of the RSUs shall vest on March 1, 2018 if the Performance Threshold is satisfied for 2017; (3)an additional one-fourth of the RSUs shall vest on March 1, 2019 if the Performance Threshold is satisfied for 2018; and (4)the final one-fourth of the RSUs shall vest on March 1, 2020 if the Performance Threshold is satisfied for 2019. (b)If the Performance Threshold is not satisfied for any year set forth in (1), (2), (3) or (4) above, the RSUs that would have vested if the Performance Threshold had been satisfied for that year (the “Performance Year”) shall be forfeited to the Company effective as of the last day of the Performance Year. For example, if the Performance Threshold is not satisfied for 2016, all RSUs that were scheduled to vest on March 1, 2017 shall be forfeited effective as of December 31, 2016. (c)If a Change in Control (as defined in Section 2.6 below) occurs, the Performance Threshold shall be deemed to be satisfied for all Performance Years that were not completed prior to the Change in Control, with the effect that the RSUs outstanding at the time of the Change of Control shall vest upon completion of the applicable time periods in Section 2.1(a). 2.Performance Threshold. (a)For purposes of this Agreement, the “Performance Threshold” for any year shall be satisfied if the ROE (as defined below) for that year is greater than the 5 Yr Avg Cost of LT Debt (as defined below) for that year. (b)The “ROE” for any year shall be calculated by dividing the Company’s Adjusted Net Income (as defined below) for the year by the Average Equity (as defined below) for the year. Subject to adjustment in accordance with Section 2.2(c) below, the Company’s “Adjusted Net Income” for any year shall be equal to the Company’s net income attributable to common shareholders for the year, as set forth in the audited consolidated statement of income of the Company and its subsidiaries for the year. Subject to adjustment in accordance with Section 2.2(c) below, “Average Equity” for any year shall mean the average of the Company’s total common stock equity as of the last day of the year and the Company’s total common stock equity as of the last day of the prior year, in each case as set forth on the audited consolidated balance sheet of the Company and its subsidiaries as of the applicable date. (c)The following adjustments shall be made in the calculation of ROE, if applicable: (1)Change in Accounting Principle. If the Company implements a change in accounting principle before the completion of all Performance Years either as a result of the issuance of new accounting standards or otherwise, and the effect of the accounting change was not reflected in the Company’s business plan at the time of award of the RSUs, then ROE for each affected year shall be adjusted to eliminate the impact of the change in accounting principle. (2)Gain or Loss on Sale of Business. Adjusted Net Income for each Performance Year shall be adjusted to eliminate any gain or loss on the disposition of any subsidiary, division or business during the year, as set forth in the audited consolidated financial statements of the Company and its subsidiaries for that year. (3)Impairments. Adjusted Net Income for each Performance Year shall be adjusted to eliminate any charges taken by the Company during the year for impairment of assets (excluding utility plant assets), that exceed $500,000 for any single impaired asset. (4)Tax Impacts. All adjustments for the items listed in Sections 2.2(c)(1) to 2.2(c)(3) in any year shall be net of income taxes based on the Company’s consolidated effective tax rate for the year. (5)Tax Changes. Adjusted Net Income for each Performance Year shall be adjusted to eliminate any positive or negative impacts on earnings resulting from changes to federal, state or local income tax rates or the imposition of a new tax during the period between the award of the RSUs and the completion of all Performance Years, and any resulting impact on deferred tax account balances. (d)The “5 Yr Avg Cost of LT Debt” for any year shall mean the average of five numbers consisting of the Avg Cost of LT Debt (as defined below) for that year and for each of the four preceding years. The “Avg Cost of LT Debt” for any year shall be equal to the sum of the Weighted Costs (as defined below) calculated for each series or tranche of long-term debt of the Company outstanding on the last day of the year. The “Weighted Cost” for a series or tranche of long-term debt as of any date shall be calculated by multiplying the Effective Interest Rate (as defined below) on the debt as of that date by the outstanding principal balance of the debt on that date, and then dividing the resulting amount by the Company’s total outstanding principal balance of long-term debt as of that date. The “Effective Interest Rate” for a series or tranche of long-term debt as of any date shall be the yield calculated based on the settlement date for the original issuance of the series or tranche, the maturity date of the series or tranche, the stated annual interest rate of the series or tranche in effect on that date, the number of interest payments per year under the terms of the series or tranche, the initial borrowing of an amount equal to the principal balance net of Debt Issuance Costs (as defined below) for the series or tranche, and the repayment of principal at maturity or otherwise according to the terms of the series or tranche. The “Debt Issuance Costs” for a series or tranche of long-term debt shall include the fees, commissions and expenses of issuance of such debt, any other purchase discount from the face amount of such debt, and any premiums, write-offs of unamortized debt issuance costs and other costs incurred in connection with retiring debt refinanced with the proceeds of such debt, all as reflected in the Company’s accounting records. For purposes of this Section 2.2(d), the Company’s long term debt and the interest rates and outstanding principal balances of the outstanding series or tranches of long-term debt as of any date shall be those amounts as set forth in the audited consolidated financial statements of the Company and its subsidiaries for the year ending on that date, and shall in all cases include the current portion of any long-term debt and exclude borrowings under a revolving credit facility. For the avoidance of doubt, the Effective Interest Rate for purposes of this Agreement of each series of fixed-rate long-term debt outstanding as of the date of this Agreement is set forth on Exhibit A hereto. 3.Effect of Retirement, Death, or Disability. (a)If Recipient’s employment by the Company terminates because of Retirement (as defined below), death or physical disability (within the meaning of Section 22(e)(3) of the Code and a Change in Control has not previously occurred, all outstanding RSUs shall remain outstanding and subject to potential future vesting upon satisfaction of the Performance Threshold for the applicable years. (b)If Recipient’s employment by the Company terminates because of Retirement, death or physical disability and a Change in Control subsequently occurs, all outstanding RSUs shall immediately vest. If a Change in Control occurs and Recipient’s employment by the Company subsequently terminates because of Retirement, death or physical disability, all outstanding RSUs shall immediately vest. (c)The term “Retirement” means termination of employment after the Recipient is (1) age 62 with at least five years of service as an employee of the Company, or (2) age 55 with age plus years of service (including fractions) as an employee of the Company totaling at least 70; provided, however, that a termination of Recipient’s employment by the Company for Cause (as defined in Section 2.8 below) shall not constitute a Retirement. 4.CIC Acceleration if Party to a Severance Agreement. If Recipient is a party to a Change in Control Severance Agreement with the Company, all outstanding RSUs shall immediately vest if Recipient becomes entitled to a Change in Control Severance Benefit (as defined below). A “Change in Control Severance Benefit” means the severance benefit provided for in Recipient’s Change in Control Severance Agreement with the Company; provided, however, that such severance benefit is a “Change in Control Severance Benefit” for purposes of this Agreement only if, under the terms of Recipient’s Change in Control Severance Agreement, Recipient becomes entitled to the severance benefit (a) after a change in control of the Company has occurred, (b) because Recipient’s employment with the Company has been terminated by Recipient for good reason in accordance with the terms and conditions of the Change in Control Severance Agreement or by the Company other than for cause, and (c) because Recipient has satisfied any other conditions or requirements specified in the Change in Control Severance Agreement and necessary for Recipient to become entitled to receive the severance benefit. For purposes of this Section 2.4, the terms “change in control,” “good reason,” “cause” and “disability” shall have the meanings set forth in Recipient’s Change in Control Severance Agreement. 5.CIC Acceleration if Not a Party to a Severance Agreement. If Recipient is not a party to a Change in Control Severance Agreement with the Company, all outstanding RSUs shall immediately vest if a Change in Control (as defined in Section 2.6 below) occurs and at any time after the earlier of Shareholder Approval (as defined in Section 2.7 below), if any, or the Change in Control and on or before the second anniversary of the Change in Control, (a) Recipient’s employment is terminated by the Company (or its successor) without Cause (as defined in Section 2.8 below), or (b) Recipient’s employment is terminated by Recipient for Good Reason (as defined in Section 2.9 below). 6.Change in Control. For purposes of this Agreement, a “Change in Control” of the Company shall mean the occurrence of any of the following events: (a)    The consummation of: (1)    any consolidation, merger or plan of share exchange involving the Company (a “Merger”) as a result of which the holders of outstanding securities of the Company ordinarily having the right to vote for the election of directors (“Voting Securities”) immediately prior to the Merger do not continue to hold at least 50% of the combined voting power of the outstanding Voting Securities of the surviving corporation or a parent corporation of the surviving corporation immediately after the Merger, disregarding any Voting Securities issued to or retained by such holders in respect of securities of any other party to the Merger; or (2)    any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, the assets of the Company; (b)    At any time during a period of two consecutive years, individuals who at the beginning of such period constituted the Board (“Incumbent Directors”) shall cease for any reason to constitute at least a majority thereof; provided, however, that the term “Incumbent Director” shall also include each new director elected during such two-year period whose nomination or election was approved by two-thirds of the Incumbent Directors then in office; or (c)    Any person (as such term is used in Section 14(d) of the Securities Exchange Act of 1934, other than the Company or any employee benefit plan sponsored by the Company) shall, as a result of a tender or exchange offer, open market purchases or privately negotiated purchases from anyone other than the Company, have become the beneficial owner (within the meaning of Rule 13d-3 under the Securities Exchange Act of 1934), directly or indirectly, of Voting Securities representing twenty percent (20%) or more of the combined voting power of the then outstanding Voting Securities. 7.Shareholder Approval. For purposes of this Agreement, “Shareholder Approval” shall be deemed to have occurred if the shareholders of the Company approve an agreement entered into by the Company, the consummation of which would result in the occurrence of a Change in Control. 8.Cause. For purposes of this Agreement, “Cause” shall mean (a) the willful and continued failure by Recipient to perform substantially Recipient’s assigned duties with the Company (other than any such failure resulting from incapacity due to physical or mental illness) after a demand for substantial performance is delivered to Recipient by the Company which specifically identifies the manner in which Recipient has not substantially performed such duties, (b) willful commission by Recipient of an act of fraud or dishonesty resulting in economic or financial injury to the Company, (c) willful misconduct by Recipient that substantially impairs the Company’s business or reputation, or (d) willful gross negligence by Recipient in the performance of his or her duties. 9.Good Reason. For purposes of this Agreement, “Good Reason” shall mean the occurrence after Shareholder Approval, if applicable, or the Change in Control, of any of the following circumstances, but only if (x) Recipient gives notice to the Company of Recipient’s intent to terminate employment for Good Reason within 30 days after the later of (1) notice to Recipient of such circumstances, or (2) the Change in Control, and (y) such circumstances are not fully corrected by the Company within 90 days after Recipient’s notice: (a)the assignment to Recipient of a different title, job or responsibilities that results in a decrease in the level of Recipient’s responsibility; provided that Good Reason shall not exist if Recipient continues to have the same or a greater general level of responsibility for the former Company operations after the Change in Control as Recipient had prior to the Change in Control even though such responsibilities have necessarily changed due to the former Company operations becoming a subsidiary or division of the surviving company; (b)a reduction by the Company in Recipient’s base salary as in effect immediately prior to the earlier of Shareholder Approval, if applicable, or the Change in Control; (c)the failure by the Company to continue in effect any employee benefit or incentive plan in which Recipient is participating immediately prior to the earlier of Shareholder Approval, if applicable, or the Change in Control (or plans providing Recipient with at least substantially similar benefits) other than as a result of the normal expiration of any such plan in accordance with its terms as in effect immediately prior to the earlier of Shareholder Approval, if applicable, or the Change in Control, or the taking of any action, or the failure to act, by the Company which would adversely affect Recipient’s continued participation in any of such plans on at least as favorable a basis to Recipient as is the case immediately prior to the earlier of Shareholder Approval, if applicable, or the Change in Control or which would materially reduce Recipient’s benefits in the future under any of such plans or deprive Recipient of any material benefit enjoyed by Recipient immediately prior to the earlier of Shareholder Approval, if applicable, or the Change in Control; (d)the failure by the Company to provide and credit Recipient with the number of paid vacation days to which Recipient is then entitled in accordance with the Company’s normal vacation policy as in effect immediately prior to the earlier of Shareholder Approval, if applicable, or the Change in Control; or (e)the Company’s requiring Recipient to be based more than 30 miles from where Recipient’s office is located immediately prior to the earlier of Shareholder Approval, if applicable, or the Change in Control except for required travel on the Company’s business to an extent substantially consistent with the business travel obligations which Recipient undertook on behalf of the Company prior to the earlier of Shareholder Approval, if applicable, or the Change in Control. 10.Forfeiture; Possible Restoration. If Recipient ceases to be employed by the Company for any reason or for no reason, with or without cause, other than because of Retirement, death or physical disability (within the meaning of Section 22(e)(3) of the Code), any RSUs that did not vest pursuant to this Section 2 or Section 5.2 at or prior to the time of such termination of employment shall be forfeited to the Company; provided, however, that if Recipient’s employment is terminated by the Company without Cause or by the Recipient for Good Reason after Shareholder Approval but before a Change in Control, any RSUs that are forfeited under this sentence shall be restored to the Recipient and vested if a Change in Control subsequently occurs within two years. 3.Certification and Delivery. As soon as practicable following the completion of each Performance Year, the Company shall calculate the ROE and the 5 Yr Avg Cost of LT Debt for that Performance Year, and shall submit those calculations to the Committee. At or prior to the regularly scheduled meeting of the Committee held in February of the year immediately following each Performance Year (each, a “Certification Meeting”), the Committee shall certify in writing (which may consist of approved minutes of the meeting) the levels of ROE and 5 Yr Avg Cost of LT Debt attained by the Company for that Performance Year, and whether or not the Performance Threshold was satisfied for that Performance Year. Unless otherwise required under this Agreement as a result of the occurrence of a Change in Control, no amounts shall be delivered or paid unless the Committee certifies that the Performance Threshold has been satisfied for the applicable Performance Year. Subject to applicable tax withholding, on a date (a “Payment Date”) that is on or as soon as practicable after the date any of the RSUs become vested or, if later, five business days following the Certification Meeting relating to those RSUs, the Company shall deliver to Recipient (a) the number of Shares underlying the RSUs that vested (rounded down to the nearest whole share), and (b) the dividend equivalent cash payment determined under Section 1 with respect to the number of Shares that are delivered; provided, however, that if accelerated vesting of the RSUs occurs pursuant to Section 2.3(b) as a result of Recipient’s Retirement after a Change in Control has previously occurred, the Payment Date shall be delayed until a date that is on or as soon as practicable after the earlier of (x) the date the RSUs would have vested under Section 2.1, or (y) the date that is six months after Recipient’s separation from service (within the meaning of Section 409A of the Internal Revenue Code). Notwithstanding the foregoing provisions of this Section 3, if Recipient shall have made a valid election to defer receipt of the Shares and dividend equivalent cash payment pursuant to the terms of the Company’s Deferred Compensation Plan for Directors and Executives (the “DCP”), payment of RSUs that vest shall be made in accordance with that election. 4.Tax Withholding. 1.Recipient acknowledges that, on any Payment Date when Shares are delivered to Recipient, the Value (as defined below) on that date of the Shares so delivered (as well as the amount of the related dividend equivalent cash payment) will be treated as ordinary compensation income for federal and state income and FICA tax purposes, and that the Company will be required to withhold taxes on these income amounts. To satisfy the required withholding amount, the Company shall first withhold all or part of the dividend equivalent cash payment, and if that is insufficient, the Company shall withhold the number of Shares having a Value equal to the remaining withholding amount. For purposes of this Section 4, the “Value” of a Share shall be equal to the closing market price for Company Common Stock on the last trading day preceding the Payment Date. 2.Recipient acknowledges that under current tax law, the Company is required to withhold FICA taxes with respect to the RSUs at the earlier of (a) the issuance of shares underlying the RSUs or (b) the date after a Change in Control on which Recipient becomes eligible for Retirement (or the date of the Change in Control if Recipient is eligible for Retirement at the time of the Change in Control). To satisfy the required minimum FICA withholding in the event that subsection (b) applies, Recipient shall, immediately upon notification of the amount due, pay to the Company in cash or by check amounts necessary to satisfy applicable FICA withholding requirements. If Recipient fails to pay the amount demanded, the Company may withhold that amount from other amounts payable to Recipient, including salary, subject to applicable law. 3.Notwithstanding the foregoing, Recipient may elect not to have Shares withheld to cover taxes by giving notice to the Company in writing prior to the Payment Date, in which case the Shares shall be issued or acquired in Recipient’s name on the Payment Date thereby triggering the tax consequences, but the Company shall retain the certificate for the Shares as security until Recipient shall have paid to the Company in cash any required tax withholding not covered by withholding of the dividend equivalent cash payment. 5.Sale of the Company. If there shall occur a merger, consolidation or plan of exchange involving the Company pursuant to which the outstanding shares of Common Stock of the Company are converted into cash or other stock, securities or property, or a sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, the assets of the Company, then either: 1.the unvested RSUs shall be converted into restricted stock units for stock of the surviving or acquiring corporation in the applicable transaction, with the amount and type of shares subject thereto to be conclusively determined by the Committee, taking into account the relative values of the companies involved in the applicable transaction and the exchange rate, if any, used in determining shares of the surviving corporation to be held by the former holders of the Company’s Common Stock following the applicable transaction, and disregarding fractional shares; or 2.all of the unvested RSUs shall immediately vest and the underlying Shares and related dividend equivalent cash payment shall be delivered simultaneously with the closing of the applicable transaction such that Recipient will participate as a shareholder in receiving proceeds from such transaction with respect to those Shares. 6.Changes in Capital Structure. 1.If, prior to the full vesting of all of the RSUs granted under this Agreement, the outstanding Common Stock of the Company is increased or decreased or changed into or exchanged for a different number or kind of shares or other securities of the Company by reason of any stock split, combination of shares or dividend payable in shares, recapitalization or reclassification, appropriate adjustment shall be made by the Committee in the number and kind of shares subject to the unvested RSUs so that Recipient’s proportionate interest before and after the occurrence of the event is maintained. Notwithstanding the foregoing, the Committee shall have no obligation to effect any adjustment that would or might result in the issuance of fractional shares, and any fractional shares resulting from any adjustment may be disregarded or provided for in any manner determined by the Committee. Any such adjustments made by the Committee shall be conclusive. 2.If the outstanding Common Stock of the Company is hereafter converted into or exchanged for all of the outstanding Common Stock of a corporation (the “Parent Successor”) as part of a transaction (the “Transaction”) in which the Company becomes a wholly-owned subsidiary of Parent Successor, then (a) the obligations under this Agreement shall be assumed by Parent Successor and references in this Agreement to the Company shall thereafter generally be deemed to refer to Parent Successor, (b) Common Stock of Parent Successor shall be issued in lieu of Common Stock of the Company under this Agreement, (c) the performance measured by the Performance Threshold shall be the continuous performance of the Company prior to the Transaction and Parent Successor after the Transaction, (d) employment by the Company for purposes of Section 2 of this Agreement shall include employment by either the Company or Parent Successor, and (e) the dividend equivalent cash payments under this Agreement shall be based on dividends paid on the Common Stock of the Company prior to the Transaction and Parent Successor after the Transaction. 7.Recoupment On Misconduct. 1.If at any time before a Change in Control and within three years after any date on which any RSUs vested, (a) the Company’s financial statements for the corresponding Performance Year are the subject of a restatement due to the Misconduct (as defined below) of any person (whether or not Recipient was personally involved in such Misconduct), and (b) based on the Company’s financial statements as restated, the Performance Threshold was not satisfied for that Performance Year, then Recipient shall repay to the Company the Shares (the “Excess Shares”) and dividend equivalent cash payment (the “Excess Dividends”) that vested under this Agreement on that vesting date. If any Excess Shares are sold by Recipient prior to the Company’s demand for repayment (including any shares withheld for taxes under Section 4 of this Agreement), Recipient shall repay to the Company 100% of the proceeds of such sale or sales. The Committee may, in its sole discretion, reduce the amount to be repaid by Recipient to take into account the tax consequences of such repayment for Recipient. 2.If the Committee determines that Recipient engaged in any Misconduct after the date of this Agreement and prior to a sale of any of the Shares (the “Tainted Shares”), and this determination is made before a Change in Control and within three years after the vesting of the Tainted Shares, Recipient shall repay to the Company the Excess Proceeds (as defined below). The Committee may, in its sole discretion, reduce the amount of Excess Proceeds to be repaid by Recipient to take into account the tax consequences of such repayment or any other factors. The return of Excess Proceeds is in addition to and separate from any other relief available to the Company due to Recipient’s Misconduct. 3.“Misconduct” shall mean (a) willful commission of an act of fraud or dishonesty resulting in economic or financial injury to the Company, (b) willful misconduct that substantially impairs the Company’s business or reputation, or (c) willful gross negligence in the performance of the person’s duties; provided, however, that such acts shall only constitute Misconduct if the Committee determines that such acts contributed to an obligation to restate the Company’s financial statements for any quarter or year or otherwise had (or will have when publicly disclosed) an adverse impact on the market price of the Company Common Stock. 4.“Excess Proceeds” shall mean the excess of (a) the actual aggregate sales proceeds from Recipient’s sales of Tainted Shares, over (b) the aggregate sales proceeds Recipient would have received from sales of Tainted Shares at a price per share determined appropriate by the Committee in its discretion to reflect what the market price of the Company Common Stock would have been if the restatement had occurred or other Misconduct had been disclosed prior to such sales. 5.If any portion of the Excess Shares and Excess Dividends was deferred under the DCP, that portion shall be recovered by canceling the amounts so deferred under the DCP and any dividends or other earnings credited under the DCP with respect to such cancelled amounts. The Company may seek direct repayment from Recipient of any Excess Shares, Excess Dividends and Excess Proceeds not so recovered and may, to the extent permitted by applicable law, offset such amounts against any compensation or other amounts owed by the Company to Recipient. In particular, such amounts may be recovered by offset against the after-tax proceeds of deferred compensation payouts under the DCP, the Company’s Executive Supplemental Retirement Income Plan or the Company’s Supplemental Executive Retirement Plan at the times such deferred compensation payouts occur under the terms of those plans. Amounts that remain unpaid for more than 60 days after demand by the Company shall accrue interest at the rate used from time to time for crediting interest under the DCP. 8.Approvals. The issuance by the Company of authorized and unissued shares or reacquired shares under this Agreement is subject to the approval of the Oregon Public Utility Commission and the Washington Utilities and Transportation Commission, but no such approvals shall be required for the purchase of shares on the open market for delivery to Recipient in satisfaction of its obligations under this Agreement. The obligations of the Company under this Agreement are otherwise subject to the approval of state and federal authorities or agencies with jurisdiction in the matter. The Company will use its best efforts to take steps required by state or federal law or applicable regulations, including rules and regulations of the Securities and Exchange Commission and any stock exchange on which the Company’s shares may then be listed, in connection with the award under this Agreement. The foregoing notwithstanding, the Company shall not be obligated to issue or deliver Common Stock under this Agreement if such issuance or delivery would violate applicable state or federal law. 9.No Right to Employment. Nothing contained in this Agreement shall confer upon Recipient any right to be employed by the Company or to continue to provide services to the Company or to interfere in any way with the right of the Company to terminate Recipient’s services at any time for any reason, with or without cause. 10.Miscellaneous. 1.Entire Agreement; Amendment. This Agreement constitutes the entire agreement of the parties with regard to the subjects hereof and may be amended only by written agreement between the Company and Recipient. 2.Notices. Any notice required or permitted under this Agreement shall be in writing and shall be deemed sufficient when delivered personally to the party to whom it is addressed or when deposited into the United States Mail as registered or certified mail, return receipt requested, postage prepaid, addressed to the Company, Attention: Corporate Secretary, at its principal executive offices or to Recipient at the address of Recipient in the Company’s records, or at such other address as such party may designate by ten (10) days’ advance written notice to the other party. 3.Assignment; Rights and Benefits. Recipient shall not assign this Agreement or any rights hereunder to any other party or parties without the prior written consent of the Company. The rights and benefits of this Agreement shall inure to the benefit of and be enforceable by the Company’s successors and assigns and, subject to the foregoing restriction on assignment, be binding upon Recipient’s heirs, executors, administrators, successors and assigns. 4.Further Action. The parties agree to execute such further instruments and to take such further action as may reasonably be necessary to carry out the intent of this Agreement. 5.Applicable Law; Attorneys’ Fees. The terms and conditions of this Agreement shall be governed by the laws of the State of Oregon. In the event either party institutes litigation hereunder, the prevailing party shall be entitled to reasonable attorneys’ fees to be set by the trial court and, upon any appeal, the appellate court. 6.Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original. 7.Amendment of Prior RSU Awards. Recipient and the Company agree that Section 2.2 of the Restricted Stock Unit Award Agreements for all RSUs with performance threshold granted to Recipient prior to the date hereof is hereby amended to substitute the language of Section 2.2 as set forth in this Agreement. NORTHWEST NATURAL GAS COMPANY By         Title    SVP and Chief Administrative Officer     RECIPIENT      EXHIBIT A EFFECTIVE INTEREST RATES OF OUTSTANDING FIXED-RATE LONG-TERM DEBT The outstanding series or tranches of fixed-rate long-term debt of the Company outstanding as of the date of this Agreement and the Effective Interest Rate of each such series or tranche are as follows: Series Effective Interest Rate     5.15 % Series B due 2016 5.294% 7.00 % Series B due 2017 7.089% 6.60 % Series B due 2018 7.181% 8.31 % Series B due 2019 9.479% 7.63 % Series B due 2019 7.727% 5.37 % Series B due 2020 7.327% 9.05 % Series A due 2021 9.163% 3.176% Series B due 2021 3.319% 3.542% Series B due 2023 3.696% 5.62 % Series B due 2023 6.360% 7.72 % Series B due 2025 8.336% 6.52 % Series B due 2025 6.589% 7.05 % Series B due 2026 7.121% 7.00 % Series B due 2027 7.062% 6.65 % Series B due 2027 6.714% 6.65 % Series B due 2028 6.727% 7.74 % Series B due 2030 8.433% 7.85 % Series B due 2030 8.551% 5.82 % Series B due 2032 5.913% 5.66 % Series B due 2033 5.723% 5.25 % Series B due 2035 5.316% 4.00 % Series B due 2042 4.059%                    

  Exhibit 10.89 BRACKETS, HAS BEEN OMITTED FROM PUBLIC FILING PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION. THE OMITTED INFORMATION, WHICH HAS BEEN IDENTIFIED WITH THE SYMBOL “[*],” HAS BEEN FILED SEPARATELY WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION PURSUANT   HOKU SOLAR POWER I, LLC   A CALIFORNIA LIMITED LIABILITY COMPANY   OPERATING AGREEMENT   Dated as of December 23, 2008       OPERATING AGREEMENT   This Operating Agreement of Hoku Solar Power I, LLC, a manager-managed California limited liability company (the “Company”), is made and entered into as of December 23, 2008, by and among UFA Renewable Energy Fund I, LLC, a Delaware limited liability company, as the investor member (the “Investor Member”), and Hoku Solar, Inc., a Delaware corporation, as the managing member (the “Managing Member”, and the Managing Member and Investor Members are the “Members”).   RECITALS   WHEREAS, the Managing Member caused the Company to be formed under the Act on December 16, 2008, by the filing of a certificate of formation of the Company with the Secretary of State of the State of California.  The certificate of formation was executed by an agent of Nixon Peabody LLP on behalf of the Company,  the filing of which is hereby ratified by the Investor Member and the Managing Member; and   WHEREAS, the Hawaii Department of Transportation Airports Division (“HDOT” or the “Host”)  is the owner of the following seven (7) buildings known as: (i) the Passenger Terminal at Lihue Airport located at 3901 Mokulele Loop # 6, Lihue, Hawaii (“Building 1”), (ii) the Baseyard at the Highways Kauai Baseyard located at 1680 Haleukana St., Lihue, Hawaii 96766 (“Building 2”), (iii) the Harbors Kauai Baseyard located at 3242 Waapa Road, Lihue, Hawaii 96766 (“Building 3”), (iv) the Passenger Terminal at Hilo Airport located at 2400 Kekuanaoa St., Hilo, Hawaii (“Building 4”), (v) the Cargo Building at  Kona Airport located at 73-200 Kupipi St., Kona, Hawaii (“Building 5”), (vi) the ASAP/Cargo Building located at Kahului Airport (“Building 6”), and (vii) the T-Hangar at Kahului Airport located at 1 Kahului Airport Road, Kahului Hawaii (“Building 7”).   Each of the Buildings 1 through 7 may be referred to as a  “Building” and collectively as the “Buildings”; and   WHEREAS, the Company is purchasing from the Managing Member, in the aggregate, an approximately 903 kW photovoltaic monocrystalline system, installed on the rooftops of each of the Buildings in a manner that will qualify for the energy credit under Section 48 of the Code; and   WHEREAS, the Company has received a commitment for an equity investment in the principal amount of [*] to be made to the Company by the Investor Member for the sole purpose of funding the Project; and   WHEREAS, the Company has received a commitment from the Managing Member, for an equity investment by the Managing Member of [*]; and   WHEREAS, the Company has been formed to use and occupy the rooftop of each Building (with each use and occupancy agreement providing for access to all areas of the respective Building on which the Project and its parts are located so that the Company and its agents are able to inspect, access, maintain and improve Project equipment) and to generate and supply energy in accordance with, among other things, the PPAs, as defined below; and   i   WHEREAS, the parties hereto now desire to enter into this Agreement to (i) continue the Company and admit the Members as the investor member and managing member of the Company; (ii) set forth the Members’ respective rights and obligations as Members of the Company; and (iii) set forth all of the provisions governing the Company.   NOW, THEREFORE, in consideration of the foregoing, of mutual promises of the parties hereto and of other good and valuable consideration, the receipt and sufficiency of which hereby are acknowledged, the parties hereby agree to continue the Company pursuant to the Act, as set forth in this Agreement, which reads in its entirety as follows:   ii   TABLE OF CONTENTS     Page       ARTICLE I. CONTINUATION OF THE COMPANY 1   1.01. Continuation. 1   1.02. Name. 1   1.03. Principal Executive Offices; Agent for Service of Process. 1   1.04. Term. 1   1.05. Filings. 1         ARTICLE II. DEFINED TERMS 2         ARTICLE III. PURPOSE AND BUSINESS OF THE COMPANY 15   3.01. Purpose of the Company. 15   3.02. Authority of the Company. 15         ARTICLE IV. REPRESENTATIONS, WARRANTIES AND COVENANTS; DUTIES AND OBLIGATIONS 16   4.01. Representations, Warranties and Covenants Relating to the Project and the Company. 16   4.02. Duties and Obligations Relating to the Project and the Company. 21         ARTICLE V. MEMBERS, COMPANY INTERESTS AND OBLIGATIONS OF THE COMPANY 25   5.01. Members, Capital Contributions and Company Interests. 25   5.02 Return of Capital Contribution. 29   5.03 Withholding of Capital Contribution Upon Default. 29   5.04 Legal Opinions. 29   5.05 Repurchase Obligation. 29   5.06 Subordinated Loans. 30         ARTICLE VI. CHANGES IN MEMBERS 31   6.01. Withdrawal of a Managing Member. 31   6.02. Admission of a Successor or Additional Managing Member. 31   6.03. Effect of Bankruptcy, Withdrawal or Dissolution of a Managing Member. 32         ARTICLE VII. ASSIGNMENT TO THE COMPANY 34         ARTICLE VIII. RIGHTS, OBLIGATIONS AND POWERS OF THE MANAGING MEMBER 35   8.01. Management of the Company. 35   8.02. Limitations Upon the Authority of the Managing Member. 35   8.03. Management Purposes. 37   8.04. Delegation of Authority. 37   8.05. [Reserved] 38   8.06. Other Activities. 38   8.07. Liability for Acts and Omissions. 38   8.08. Company Taxable as Partnership. 38   8.09. Excess Development Costs, Operating Deficits. 39   8.10. Development Fee. 39   iii 8.11.   39   8.12.   39   8.13. Removal of the Managing Member; Conversion of the Managing Member Interest. 39   8.14.   41   8.15.   42   8.16.   42   8.17. Loans to the Company. 42   8.18. Operating Budget and Capital Budget. 42   8.19. Reserves. 43         ARTICLE IX. TRANSFERS OF, AND RESTRICTIONS ON TRANSFERS OF INTERESTS OF INVESTOR MEMBER 44   9.01. Investment and Tax Representation. 44   9.02. No Restrictions on Transfer of Investor Member’s Interest. 44   9.03. Admission of Substitute Investor Member. 44   9.04. Rights of Assignee of Company Interest. 45   9.05. Put Option 46   9.06. Call Option 47         ARTICLE X. RIGHTS AND OBLIGATIONS OF INVESTOR MEMBER 48   10.01. 48   10.02. Limitation on Liability of Investor Member. 48         ARTICLE XI. PROFITS, LOSSES AND DISTRIBUTIONS 49   11.01. Allocation of Profits, Losses, Credits and Cash Distributions. 49   11.02. Determination of Profits or Losses. 50   11.03. Allocation of Profits or Losses from a Capital Transaction. 51   11.04. Distribution of Proceeds from a Capital Transaction. 51   11.05. Capital Accounts. 52   11.06. Authority of Managing Member to Vary Allocations to Preserve and Protect Members’ Intent. 52   11.07. Designation of Tax Matters Partner. 53   11.08. Authority of Tax Matters Partner. 53   11.09. Expenses of Tax Matters Partner. 54   11.10. Special Allocations. 55         ARTICLE XII. SALE, DISSOLUTION AND LIQUIDATION 57   12.01. Dissolution of the Company. 57   12.02. Winding Up and Distribution. 57         ARTICLE XIII. BOOKS AND RECORDS, ACCOUNTING TAX ELECTIONS, ETC. 59   13.01. Books and Records; Accounting Method. 59   13.02. Bank Accounts. 59   13.03. Accountants. 59   13.04. Reports to Members. 59   13.05. Section 754 Elections. 63   13.06. Fiscal Year. 63   13.07. Investor Member Inspection. 63         ARTICLE XIV. AMENDMENTS 64   14.01. Proposal and Adoption of Amendments. 64   iv Article XV. CONSENTS, VOTING AND MEETINGS 65   15.01. Method of Giving Consent. 65   15.02. Submissions to Investor Member. 65         ARTICLE XVI. GENERAL PROVISIONS 66   16.01. Burden and Benefit. 66   16.02. Applicable Law. 66   16.03. Counterparts. 66   16.04. Separability of Provisions. 66   16.05. Entire Agreement. 66   16.06. Liability of the Investor Member. 66   16.07. Environmental Protection. 67   16.08. Notices. 67   16.09. Legal Fees. 68   SCHEDULE A – Members, Capital Contributions and Company Interest SCHEDULE B – Insurance Requirements SCHEDULE C – Stoel Rives Legal Opinion SCHEDULE D – Projections SCHEDULE E – Source of Funds for Acquisition of the Systems v ARTICLE I. CONTINUATION OF THE COMPANY   1.01.            Continuation.   The undersigned hereby continue the Company as a manager-managed limited liability company under the Act.   1.02.            Name.   The name of the Company is Hoku Solar Power I, LLC.   1.03.            Principal Executive Offices; Agent for Service of Process.   The principal executive office of the Company shall be 1288 Ala Moana Blvd., Suite 220, Honolulu, HI 96814.  The Company may change the location of its principal executive office to such other place or places as may hereafter be determined by the Managing Member.  The Managing Member shall promptly notify all other Members of any change in the principal executive office.  The Company may maintain such other offices at such other place or places as the Managing Member may from time to time deem advisable.   The name and address of the registered agent of the Company for service of process in the formation state is CT Corporation System, 900 Fort Street Mall, Suite 1800, Honolulu, Hawaii 96813.   1.04.            Term.   The term of the Company commenced as of December 16, 2008, and shall continue in perpetuity, unless the Company is sooner dissolved by law or in accordance with the provisions of this Agreement.   1.05.            Filings.   The Managing Member shall take all necessary action required by law to perfect and maintain the Company as a limited liability company under the laws of the Formation State and shall register the Company under any assumed or fictitious name statute or similar law in force and effect in the State or the Formation State, as required.  The fees and costs associated with such matters shall be paid out of the Company’s assets.   1   ARTICLE II. DEFINED TERMS   In addition to the defined terms set forth in the Recitals to this Agreement, the following defined terms used in this Agreement shall have the meanings specified below:   “Accountants” means Novogradac & Company LLP or such other firm of independent certified public accountants as may be engaged by the Managing Member with the Consent of the Investor Member to prepare the Company’s income tax returns.   “Act” means the California Limited Liability Company Act, as the same may be amended from time to time during the term of the Company.   “Actual Credits” means, with respect to any tax year, the total amount of Tax Credits allocated by the Company to the Investor Member representing the aggregate Tax Credits available to be claimed by the Company’s Members on their respective tax returns for that tax year, as subsequently adjusted, if applicable, by any Recapture Adjustment Amount.   “Adjusted Capital Account Deficit” has the meaning set forth in Section 11.10(d). “Affiliate” means, with respect to a specified Person, (i) any Person directly or indirectly controlling, controlled by or under common control with the Person specified, (ii) any Person owning or controlling 10% or more of the outstanding voting securities or beneficial interests of the Person specified, (iii) any officer, director, partner, trustee or member of the immediate family of the Person specified, (iv) if the Person specified is an officer, director, general partner or trustee, any corporation, partnership or trust for which that Person acts in that capacity, or (v) any Person who is an officer, director, general partner, trustee or holder of 10% or more of outstanding voting securities or beneficial interests of any Person described in clauses (i) through (iv).  The term “control” (including the terms “controlled by” and “under common control ownership of voting securities, by contract or otherwise.  For purposes of this Agreement, the Company shall not be treated as, and shall be deemed not to be, an “Affiliate” of the Investor Member or the Managing Member.   “AFR” means the long-term applicable Federal rate (as defined in Section 1274(d) of the Code).   “After-Tax Basis” means, with respect to any payment to be received by the Investor Member, the amount of such payment supplemented by a further payment or payments so that, after deducting from such payments the amount of all taxes imposed on the Investor Member by any governmental authority or other taxing authority with respect to such payments, the balance of such payments shall be equal to the original payment to be received; provided, however, for the purposes of this definition, and for purposes of any payment to be made to the Investor Member on an After-Tax Basis, it shall be assumed that taxes are payable by the Investor Member at the Applicable Tax Rate, which rate shall be certified in writing by the Investor Member to the Managing Member upon request.   2   “Agreement” means this Operating Agreement, as amended from time to time.   “Applicable Tax Rate” means the combined effective federal, state, and local income tax rate of a taxpayer applicable in any given fiscal year assuming in each case the maximum tax rate applicable to the taxpayer without regard to actual taxable income.  The Applicable Tax Rate shall be deemed to be 35%.   “Articles” means the certificate of formation of the Company as in effect from time to time and any other instrument or document which may be required under the laws of the Formation State to perfect or maintain the Company as a limited liability company or to protect the limited liability of the Investor Member.   “Bankruptcy” or “Bankrupt” as to any Person means the filing of a petition for relief as to any such Person as debtor or bankrupt under the Bankruptcy Code or like provision of law (except if such petition is contested by such Person and has been dismissed within sixty (60) days); insolvency of such Person as finally determined by a court proceeding; filing by such Person of a petition or application to accomplish the same or for the appointment of a receiver or a trustee for such Person or a substantial part of its assets; commencement of any proceedings relating to such Person under any other reorganization, arrangement, insolvency, adjustment of debt or liquidation law of any jurisdiction, whether now in existence or hereinafter in effect, either by such Person or by another, provided that if such proceeding is commenced by another, such Person indicates its approval of such proceeding, consents thereto or acquiesces therein, or such proceeding is contested by such Person and has not been finally dismissed within sixty (60) days.   “Bankruptcy Code” has the meaning set forth in Section 6.03(d).   “Benefits” means the sum of (a) all cash distributions received by the Investor Member, and (b) all tax benefits (including the Energy Credits and tax losses) and detriments (including all taxable income allocated to the Investor Member included on the Investor Member’s tax return due to its investment in the Company).  In performing this calculation, all tax benefits and detriments would be calculated quarterly and based upon an effective tax rate of 35%, and the methodology for performing this calculation is set forth in the final financial forecast provided by Accountants at the time of the execution of this Agreement.    “Budget” has the meaning set forth in Section 8.18.   “Building” has the meaning set forth in the Recitals.   “Buildings” has the meaning set forth in the Recitals.   “Capital Account” means the capital account of a Member as described in Section 11.05.   “Capital Contribution” means with respect to any Member the total amount of money or the fair market value of other property (net of liabilities thereon) contributed or agreed to be contributed, as the context requires, to the Company by such Member pursuant to the terms of this Agreement.  Any reference to the Capital Contribution of a Member shall include the Capital Contribution made by a predecessor holder of the Interest of such Member.     3     “Capital Transaction” means (i) a sale, assignment, or other disposition of all or substantially all of the Project; (ii) a financing or refinancing of all or substantially all of the Project, but only to the extent of the Company’s share, if any, of any distributions, fees, loan repayments, or other amounts arising therefrom; (iii) a casualty (where the proceeds are not to be used for reconstruction), condemnation or similar event of any part of the Project, where the gross proceeds from such event exceed $20,000; or (iv) any other transaction (including but not limited to any payment under the PPA’s by HDOT of the Termination Value (as defined in the PPA’s) generating cash proceeds to the Company that are not includable in determining Net Cash Flow.   any corresponding provision or provisions of prior or succeeding law.   “Completion Date” means, with respect to each Building:   (i)           The Managing Member, in its capacity as Installer of the systems,  has completed the construction and installation of the portion of the Project being constructed and installed on such Building in accordance with the relevant Project Documents (including,  but not limited to the PPA’s), approved by the Investor Member and any consultant engaged by the Investor Member, and evidenced by a certificate in form and substance acceptable to the Investor Member indicating that construction and installation of such portion of the Project has been completed in accordance with the relevant Project Documents and that such portion of the Project is producing electricity; and (ii)          The Company has received, and the Investor Member has approved, the Preliminary Cost Certification; and (iii)         Such portion of the Project has passed all commissioning tests required under Hawaii law; (iv)         Such portion of the Project has been placed in service, and the Project has received all required local licenses and permits; and (v)          Such portion of the Project has received approval by the local electric service provider to be interconnected to the local electric distribution system.   “Compliance Period” means the period commencing upon the first portion of the Project achieving Placement In Service and ending five (5) years from the Placement In Service of the final portion of the Project.   “Consent” means the prior written consent or approval of the Investor Member, and/or any other Member, as the context may require, to do the act or thing for which the consent is solicited.     4   “Cost Certification” means the final cost certification as prepared by and certified by the Accountants, detailing actual Project costs, including, but not limited to, the depreciable basis in the Project and the basis for Energy Credits and including copies of certified invoices and evidence of placement in service and the commencement of operations, which will be certified by the Managing Member and acceptable to the Investor Member.   “Counsel” or “Counsel for the Company” means such attorneys or law firm or firms upon which the Investor Member and the Managing Member shall agree; provided, however, that if any section of this Agreement either (i) designates particular counsel for the purpose described therein, or (ii) provides that counsel for the purpose described therein shall be chosen by another method or by another Person, then such designation or provision shall prevail over this general definition.   “Credit Adjustment” has the meaning set forth in Section 5.01(e)(ii).   “Credit Determination” has the meaning set forth in Section 5.01(e)(i).   “Debt Service” means all payments of principal, interest, or other charges, or any combination thereof, due on any Loan other than such payments made with respect to any Operating Deficit Loans and Subordinated Loans.   “Depreciation” means, for each fiscal year or other period, an amount equal to the depreciation, amortization, or other cost recovery deduction allowable with respect to an asset for such Fiscal Year or other period, except that if the Gross Asset Value of an asset differs from its adjusted basis for federal income tax purposes at the beginning of such Fiscal Year or other period.  Depreciation shall be an amount which bears the same ratio to such beginning Gross Asset Value as the federal income tax depreciation, amortization, or other cost recovery deduction for such Fiscal Year or other period bears to such beginning adjusted tax basis; provided, however, that if the adjusted basis for federal income tax purposes of an asset at the beginning of such Fiscal Year is zero, Depreciation shall be determined with reference to such beginning Gross Asset Value using any reasonable method selected by the Managing Member.   “Developer” means Hoku Solar, Inc.   “Development Costs” means the costs incurred to complete the Project and achieve Placement In Service.   “Development Fee” means the fee to be paid to the Developer pursuant to the Development Agreement. “Development Agreement”  that certain Development Services Agreement between the Company and the Developer to oversee the development and completion of the Project. “Energy Credits” means the energy credit provided for under Section 48 of the Code. “Environmental Laws” means the Hazardous Materials Transportation Act, 49 U.S.C. § 1801 et seq., the Resource Conservation and Recovery Act, 42 U.S.C. § 6901 et seq., the Comprehensive Environmental Response, Compensation and Liability Act, as amended by the Superfund Amendments and Reauthorization Act, 42 U.S.C. § 9601 et seq., and/or the Toxic Substances Control Act, 15 U.S.C. § 2601 et seq., each as amended from time to time and any other federal, state, or local statute, code, ordinance, rule, regulation, permit, consent, approval, license, judgment, order, writ, judicial decision, common law rule, decree, agency interpretation, injunction or other authorization or requirement whenever promulgated, issued, or modified, including the requirement to register underground storage tanks, relating to:     5       (i) emissions, discharges, spills, releases, or threatened release of pollutants, contaminants, Hazardous Substances (as hereinafter defined), materials containing Hazardous Substances, or hazardous or toxic materials or wastes into ambient air, surface water, groundwater, watercourses, publicly or privately owned treatment works, drains, sewer systems, wetlands, septic systems or onto land; or     (ii) the use, treatment, storage, disposal, handling, manufacturing, transportation, or shipment of Hazardous Substances, materials containing Hazardous Substances or hazardous and/or toxic wastes, material, products, or by-products (or of equipment or apparatus containing Hazardous Substances).    “Excess Development Costs” mean all Development Costs (excluding the deferred portion of the Development Fee) in excess of all capital of the Company as of the date hereof or hereafter contributed by the Managing Member.  Upon the Investor Member making its contribution of capital pursuant to Section 5.01(c)(ii) of this Agreement, Excess Development Costs shall mean all Development Costs in excess of the capital of the Company comprised of the Capital Contributions of the Members.   “Extraordinary Event” means an event (i) which is not required to be covered by insurance under this Agreement; (ii) which is not covered by insurance; (iii) which is not covered by warranty; and (iv) the occurrence of which would not have been avoided by Prudent Utility Practices.   “Final Determination” means the earliest to occur of (i) the date on which a decision, judgment, decree or other order has been issued by any court of competent jurisdiction, which decision, judgment, decree or other order has become final (i.e., all allowable appeals requested by the parties to the action have been exhausted), (ii) the date on which the Internal Revenue Service (or, if applicable, any state or local taxing authority) has entered into a binding agreement with the Company with respect to such issue or on which the Internal Revenue Service (or such state or local taxing authority) has reached a final administrative or judicial determination with respect to such issue which, whether by law or agreement, is not subject to appeal, (iii) the date on which the time for instituting a claim for refund has expired, or if a claim was filed the time for instituting suit with respect thereto has expired with no such suit having been filed, or (iv) the date on which the applicable statute of limitations for raising an issue regarding a federal (or, if applicable, a state or local) income tax matter with respect to the Company has expired with such issue not having been raised.   “Flip Date” means the date upon which the Pre-Flip Target IRR has been achieved, provided, however, the Flip Date shall occur no later than the date upon which the Investor Member has exercised its Put Option under Section 9.     6     “First Installment” has the meaning set forth in Section 5.01(c)(i).   “Fiscal Year” means the calendar year or such other year that the Company is required by the Code to use as its taxable year.   “Formation State” means the State of California.   “GAAP” has the meaning set forth in Section 13.01.   “Gross Asset Value” means, with respect to any asset, the asset’s adjusted basis for federal income tax purposes, except as follows:     (i) The initial Gross Asset Value of any asset contributed by a Member to the Company shall be the gross fair market value of such asset, as determined by the contributing Member and the Company;     (ii) The Gross Asset Values of all Company assets shall be adjusted to equal their respective gross fair market values, as determined by the Managing Member, as of the following times: (a) the acquisition of an additional interest in the Company by any new or existing Member in exchange for more than a de minimis Capital Contribution; (b) the distribution by the Company to a Member of more than a de minimis amount of Company property as consideration for an interest in the Company; and (c) the liquidation of the Company within the meaning of Section 1.704-1(b)(2)(ii)(g) of the Treasury Regulations; provided, however, that the adjustments pursuant to clauses (a) and (b) above shall be made only if the Managing Member reasonably determines that such adjustments are necessary or appropriate to reflect the relative economic interests of the Members in the Company;     (iii) The Gross Asset Value of any Company asset distributed to any Member shall be the gross fair market value of such asset on the date of distribution; and     (iv) The Gross Asset Values of Company assets shall be increased (or decreased) to reflect any adjustments to the adjusted basis of such assets pursuant to Code Section 734(b) or Code Section 743(b), but only to the extent that such adjustments are taken into account in determining Capital Accounts pursuant to Section 1.704-1(b)(2)(iv)(m) of the Treasury Regulations and Section 11.05 hereof; provided, however, that Gross Asset Values shall not be adjusted pursuant to this clause (iv) to the extent the Managing Member determines that an adjustment pursuant to clause (ii) hereof is necessary or appropriate in connection with a transaction that would otherwise result in an adjustment pursuant to this clause (iv).   If the Gross Asset Value of an asset has been determined or adjusted pursuant to Section (i), (ii) or (iv) hereof, such Gross Asset Value shall thereafter be adjusted by the Depreciation taken into account with respect to such asset for purposes of computing Profits or Losses.     7     “Guarantor” means Hoku Solar, Inc., a Delaware corporation and Hoku Scientific, Inc., a Delaware corporation (the parent company of the Managing Member), on a joint and several basis, in their capacity as guarantors of certain obligations pursuant to the Guaranty.   “Guaranty” means that certain Guaranty, pursuant to which the Guarantor has guaranteed certain obligations of the Managing Member and the Company.   “Hazardous Substance” means (i) hazardous materials, hazardous wastes, and hazardous substances as those terms are defined under any applicable Environmental Laws, (ii) petroleum and petroleum products including crude oil and any fractions thereof, (iii) natural gas, synthetic gas, and any mixtures thereof, (iv) asbestos and/or any material which contains any hydrated mineral silicate, including but not limited to chrysolite, amosite, crocidolite, tremolite, anthophylite, and/or actinolite, whether friable or non-friable, (v) PCBs, or PCB-containing materials or fluids, (vi) radon, (vii) any other hazardous, radioactive, toxic, or noxious substance, materials, pollutant, or solid, liquid or gaseous waste, and (viii) any substance with respect to which a federal, state or local agency requires environmental investigation, monitoring, or remediation.   “HDOT”  means the Hawaii Department of Transportation Airports Division.   “Host” means Hawaii Department of Transportation Airports Division (“HDOT”) .   “Installer”  means Hoku Solar, Inc. a Delaware corporation.   “Installment(s)” means, as the context requires, one or more of the installments of the Investor Member’s Capital Contribution paid or payable to the Company pursuant to Section 5.01.   “Interconnection Agreements” means those certain Small Generator Interconnection Agreements entered into by the Company with the applicable Local Utility, to interconnect the solar energy generation facilities with the electric distribution system.   “Interest” or “Company Interest” means the ownership interest of a Member of the Company at any particular time, including the right of such Member to any and all benefits to which such Member may be entitled as provided in this Agreement and in the Act, together with the obligations of such Member to comply with all the terms and provisions of this Agreement and of said Act.  Such Interest of each Member shall, except as otherwise specifically provided herein, be that percentage of the aggregate of such benefit or obligation specified by Section 5.01 as such Member’s Percentage Interest.   “Investor Member” means UFA Renewable Energy Fund I, LLC, a Delaware limited liability company, or any Person who replaces it as a Substitute Investor Member.   “Lease Agreements” means for each Building, that certain Use and Occupancy Agreement entered into by the Managing Member, and to be assigned to the Company, and the State of Hawaii, as landlord, granting the Company, among other things, access to certain rooftop space on the Buildings for the construction, installation, operation, repair, replacement, removal and maintenance of  solar energy generation facilities, as the context requires.     8     “Lender” means the lender provided for in any Loan documents.   “Liquidator” means the Managing Member or, if there are none at the time in question, such other Person who may be appointed in accordance with applicable law and who shall be responsible for taking all action necessary or appropriate to wind up the affairs of, and distribute the assets of, the Company upon its dissolution.   “Loans” means the Operating Deficit Loans and the Subordinated Loans, as  the context requires.   “Loan Agreement” means the agreement with respect to the terms and conditions of the making of any Loan which is anticipated to be entered into on or after the effective date of this Agreement.   “Loan Documents” means, with respect to any Loan, any and all documents executed by the Company in connection with such Loan, including, without limitation, any of the following:  loan applications, loan commitments, notes, mortgages, regulatory agreements, building loan agreements, security agreements, and financing statements.   “Local Utility” means the Kauai Island Utility Cooperative as to Buildings 1, 2 and 3;  the Hawaiian Electric and Light Company as to Buildings 4 and 5; and Maui Electric Company as to Buildings 6 and 7.    “Managing Member” means Hoku Solar, Inc., a Delaware corporation, in its capacity as managing member and a member of the Company, and its successor(s) pursuant to this Agreement, including particularly the provisions of Sections 6.03, 8.01 and 8.12.   “Member” means any or each of the Investor Member and the Managing Member as the context shall require.   “Net Cash Flow” means for each fiscal year the sum of (i) Operating Income and (ii) any other funds deemed available for distribution by the Managing Member with the approval of the Lender, if required, less the sum of all Operating Expenses, Debt Service and all other cash expenditures (whether or not such expenditure are deducted, amortized or capitalized for tax purposes) including any management fees.  Net Cash Flow shall be determined separately for each fiscal year, commencing on the day after the Completion Date and shall not be cumulative.     9   “Net Operating Income” means for a particular period of time, as reviewed by the Accountants, Operating Income less the sum of (i) Operating Expenses, and (ii) all cash expenditures which have been incurred in the operation of the Company’s business and which are properly capitalizable (including any leasing costs, leasing commissions and related fees) but which expenditures are paid or to be paid from Operating Income.  For purposes of determining Net Operating Income, Operating Expenses shall include a ratable portion of the annual amount (as reasonably estimated by the Managing Member) of those seasonal and/or periodic expenses (such as utilities, maintenance expenses and taxes actually due and payable with respect to the Project or service charges in lieu of taxes to the extent not counted above) which might reasonably be expected to be incurred on an unequal basis during a full annual period of operation, for such period of time on an annualized basis (based on projections of the Company).  Notwithstanding the foregoing, if at any time the actual amount of taxes to be due from the Company is not known, the computation of the amount of taxes included in item (i) above, shall be based on the greater of the amount of taxes assumed in the Investor Member’s underwriting of its investment in the Company; or the projected assessed taxes on the value of the Project at the time of Placement In Service.  Net Operating Income shall be evidenced by a certification of the Managing Member with an accompanying unaudited balance sheet and income statement of the Company indicating that all trade payables have been satisfied (or with respect to trade payables within sixty (60) days of the date the services were performed or goods were delivered, the trade payables shall not be past due and the Company shall have an adequate cash reserve for the payment of such trade payables), all as shall be subject to the approval of the Investor Member.   “Notice” means a writing containing the information required by this Agreement to be communicated to a Member and either given by U.S. registered or certified mail, return receipt requested, with postage prepaid (except in the event of a postal disruption, by strike or otherwise, in the United States), or sent by telex or facsimile promptly confirmed in writing, or sent by personal delivery by a nationally recognized courier service for next day delivery; provided, however, that any written communication containing such information sent to such Member actually received by such Member shall constitute Notice for all purposes of this Agreement.   “Operating Deficit” means the amount by which Operating Income for any particular period of time is exceeded by Operating Expenses and Debt Service.  For purposes of this definition, all expenses shall be deemed payable on a ninety (90) day current basis.   “Operating Deficit Loans” means the loans made by the Managing Member to the Company pursuant to Section 8.09(b) of this Agreement.   “Operating Documents” means the Project Documents.   “Operating Expenses” mean all expenses of operation of the Project and the Company, as incurred by the Company in the reasonable discretion of the Managing Member, including without limitation, the costs of utilities, maintenance, repairs and necessary replacements, audit fees, tax preparation, accounting fees and expenses, legal fees, taxes determined to be actually due and payable with respect to the Project, insurance premiums, professional and management fees, miscellaneous expenses, and any deposit to cash reserves for working capital, capital expenditures, repairs, replacements and anticipated expenditures, in such amounts as may be required or may be determined from time to time by the Managing Member with the approval of the Investor Member to be advisable for the operation of the Company, but excluding Development Costs; Debt Service; any payments or distributions of Net Cash Flow; and depreciation, amortization deductions and other non-cash items.  For purposes of this definition, all expenses shall be deemed paid on the earlier of the stated due date or on a sixty (60) day current basis.     10     “Operating Income” means all cash received from operation of the Project and the Company in the ordinary course of business and recognizable by the Company for income tax reporting purposes, including withdrawals from reserves to the extent otherwise permitted hereunder, and all other sources; provided, however, that Operating Income shall exclude the proceeds of any loans to the Company, proceeds from Capital Transactions, and interest earned on Reserves (unless withdrawn as aforesaid).   “Operating Profits” or “Operating Losses” means, for any fiscal year, the Profits or Losses, as the case may be, of the Company for that year as determined for federal income tax purposes by the Accountants with the adjustments described in the definition of “Profits or Losses,” excluding Profits or Losses from a Capital Transaction and determined without regard to any adjustments to basis pursuant to Sections 734 or 743 of the Code.   “Ordinary Income Amount” has the meaning set forth in Section 11.03(c).   “Ownership Interest” means, with respect to each Member, the ownership interest as set forth on Schedule A.   “Percentage Interest” means with respect to the Managing Member, and with respect to the Investor Member, their interests as set forth on Schedule A.   “Person” means any individual, partnership, joint venture, limited liability company, corporation, trust or other entity, and the heirs, executors, administrators, legal representatives, successors and assigns of such Person where the context so requires.   “Placement In Service” means, unless otherwise agreed to in writing by the Members, the receipt of all required licenses and permits relating to the Project (or portion thereof), the completion of any critical tests relating to the safety and functionality of the Project (or portion thereof), the commencement of daily or regular operations, and the synchronization of the Project (or portion thereof) into a power grid for generating electricity to produce income, all consistent with the Internal Revenue Service’s published guidance interpreting the terms “placement in service” and “placed in service” for purposes of Section 48 of the Code.   “PPAs” means collectively, those  seven Power Purchase Agreements (one for each of the Buildings) each of which is dated as of September 30, 2008, initially entered into by the Managing Member, as supplier, and HDOT, as purchaser, to purchase all power that is produced by the solar generation facilities to be installed on the Buildings. Each PPA  is being assigned by the Managing Member to the Company pursuant to Article VII of this Agreement.   “Pre – Flip Target IRR” means the Investor Member’s targeted internal rate of return of [*]% per annum on an after-tax, cumulative basis over the period in which the Investor Member owns its Interest, as reflected in the Projections, which is determined as follows: the annual discount rate at which the net present value of Investor Member’s capital contributions to the Company is equal to the net present value of (a) all cash distributions received by the Investor Member, and (b) all tax benefits (including the Energy Credits, and tax losses)     11     “Preliminary Cost Certification” means the cost certification as prepared by and Credits.   “Profits” or “Losses” means, for each fiscal year or other period, an amount equal to the Company’s taxable income or loss, as the case may be, for such fiscal year or period, determined in accordance with Section 703(a) of the Code (for this purpose, all items of income, gain, loss, or deduction required to be stated separately pursuant to Section 703(a)(1) of the Code shall be included in taxable income or loss), with the following adjustments:     (i) Any items described in Sections 705(a)(1)(B) and 705(a)(1)(C) of the Code which are not otherwise taken into account in computing Profits or Losses shall be added to such taxable income or loss.     (ii) Any expenditures of the Company described in Section 705(a)(2)(B) of the Code or treated as Section 705(a)(2)(B) expenditures pursuant to Section 1.704-1(b)(2)(iv)(i) of the Treasury Regulations, and not otherwise taken into account in computing Profits or Losses, shall be subtracted from such taxable income or loss.     (iii) Gain or loss resulting from any disposition of Project with respect to which gain or loss is recognized for federal income tax purposes shall be computed by reference to the Gross Asset Value of the property disposed of, notwithstanding that the adjusted tax basis of such property differs from its Gross Asset Value.     (iv) In the event of a distribution of Company assets to a Member (whether in connection with a liquidation or otherwise), or in the event the Gross Asset Value of any Company asset is adjusted upon the acquisition of an additional interest in the Company, unrealized income, gain, loss and deduction inherent in such distributed or adjusted assets (not previously reflected in Capital Accounts) shall be allocated pursuant to Section 11.01 hereof as if there had been a taxable disposition of such distributed or adjusted assets at fair market value.     (v) In lieu of the depreciation, amortization, and other cost recovery deductions taken into account in computing such taxable income or loss, there shall be taken into account depreciation for such Fiscal Year or other period, computed in accordance with the definition of “Depreciation” set forth herein.     (vi) Notwithstanding any other provision of this definition, any items which are specially allocated pursuant to Section 11.10 hereof shall be taken into account in computing Profits or Losses only if required under the applicable provisions of the Code and Treasury Regulations.     12     “Profits or Losses from a Capital Transaction” means the Profits or Losses, if any, recognized by the Company as a result of a Capital Transaction, as adjustments described in the definition of “Profits or Losses,” but without regard to any adjustments to basis pursuant to Section 734 and 743 of the Code.   “Project” means the Company’s ownership interest in the solar energy generation facilities located on each of the Buildings up to the point of interconnection with the electrical system of the Host and all other rights and assets necessary for the ownership and operation thereof and the sale of power from the Project, together with such additions or improvements thereto as may hereafter be acquired by the Company in accordance with this Agreement.   “Projected Credits” means Energy Credits as determined to be available to the Company, although subject to recapture, based upon the Cost Certification and the Code, as applicable, as in effect upon the date the Project or any portion thereof achieves Placement In Service.   “Project Documents” means the Interconnection Agreements, together with the attachments thereto, the Purchase and Sale and O and M Agreement, the plans and specifications for each of the solar facilities the PPAs, together with the attachments thereto, the Lease Agreements, together with the attachments thereto, the Development Agreement and any other document or instrument executed by the Company for the Project or any of the aforesaid documents, but not including this Agreement.   “Projections” means the financial projections attached hereto as Schedule D.   “Prudent Utility Practices” means those practices, methods, equipment, specifications and standards of safety and performance, of which there may be more than one, and as the same may change from time to time, as are commonly used  for solar energy systems of a type and size similar to the Project and in the same geographic region as the Project that, at a particular time, in the exercise of reasonable judgment in light of the facts known at the time a decision was made, would be expected to accomplish the desired result in a manner consistent with law, regulations, codes, standards, equipment manufacturer’s recommendations, reliability, safety, environmental protection, economy and expedition.   “Purchase and Sale and O and M Agreement”  means that certain Purchase and Sale and Operation and Maintenance Agreement by and between Hoku Solar, Inc. and the Company dated as of even date herewith.   “Recapture Adjustment Amount” has the meaning set forth in Section 5.01(e)(iv).   “Recapture Event” means any event that results in the recapture of Tax Credits under the Code or any applicable state law (other than a recapture arising as a result of a sale or disposition of the Investor Member’s Interest or as a result of the tax structure of the ownership of the Company’s and the allocations provided for in this Agreement).     13     “Recapture Period” means the Compliance Period, or any longer time period during which Energy Credits attributable to the Project are subject to recapture pursuant to the Code.   “REC Purchaser” means the Person who purchased the RECs.   “RECs” means the Renewable Energy Certificates  generated by the operation of the Project, which are the property of the Company.   “Residual Percentage Interests” means with respect to the Managing Member, 95.0%, and with respect to the Investor Member, 5.0%.    “State” means the State of Hawaii.   “Subordinated Loan” means any loan made by a Member to the Company pursuant to Section 5.06.   “Substitute Investor Member” means any Person admitted to the Company as an Investor Member pursuant to Section 9.03.   “Target IRR” means the Investor Member’s targeted internal rate of return of [*]% per annum on an after-tax, cumulative basis over the period in which the Investor Member owns its Interest, as reflected in the Projections, which is determined as follows: the annual discount rate at which the net present value of Investor Member’s capital contributions to the Company is equal to the net present value of (a) all cash distributions received by the Investor Member, and (b) all tax benefits (including the Energy Credits, and tax losses) and detriments (including all taxable income allocated to the Investor Member   “Tax Credits” means the Energy Credits.   “Tax Matters Partner” shall mean the Member designated in Section 11.07 to be the Tax Matters Partner as provided for in the Code.   “Treasury Regulations” or “Treasury Reg.” means the final and temporary regulations promulgated from time to time under the Code.   14   ARTICLE III. PURPOSE AND BUSINESS OF THE COMPANY   3.01.            Purpose of the Company.   The purposes, nature, and general character of the business of the Company shall consist of (a) acquiring, owning, managing, operating, and, if appropriate or desirable, selling or otherwise disposing of the Project or any substantial part thereof, the RECs and any other environmental attribute related to the Project; (b) operating the Project in compliance with the provisions of Section 48 of the Code and all governmental requirements; and (c)  carrying on any and all activities incidental or related to the foregoing in accordance with this Agreement, including, without limitation, the leasing of portions of the Buildings from the Host.  The purposes of this Company and the nature and character of its business shall not be extended, by implication or otherwise, except by written consent of the Members. 3.02.            Authority of the Company.   In order to carry out its purpose, the Company is empowered and authorized to do any and all acts and things necessary, appropriate, proper, advisable, incidental to or convenient for the furtherance and accomplishment of its purpose, and for the protection and benefit of the Company, including but not limited to the following:    (a)        operate, maintain, improve, buy, own, sell, convey, assign, mortgage,  rent or lease any real estate and any personal property necessary to the operation of Project, including, but not limited to the authority to cause the Company to purchase the solar generation facilities installed at the Buildings from the Managing Member;    (b)        enter into any kind of activity, and perform and carry out contracts of any kind necessary to, or in connection with, or incidental to, the accomplishment of the purposes of the Company;    (c)        borrow money and issue evidences of indebtedness in furtherance of the Company’s business and secure any such indebtedness by mortgage, pledge, or other lien;    (d)        maintain and operate the Project;    (e)         subject to the approval of the Lender, if required, and to other limitations expressly set forth elsewhere in this Agreement, negotiate for and conclude agreements for the sale, exchange, assignment or other disposition of all or substantially all of the property of the Company, or for the refinancing of any Loan;    (f)         enter into the Operating Documents;    (g)        enter into the Loan Documents; and    (h)        do any and all other acts and things necessary or proper in furtherance of the Company’s business.     15     ARTICLE IV. REPRESENTATIONS, WARRANTIES AND COVENANTS; DUTIES AND OBLIGATIONS   4.01.            Representations, Warranties and Covenants Relating to the Project and the Company.   (a)               As of the date hereof, the Managing Member hereby represents, warrants and covenants to the Company and to the other Members as follows:   (i)            The Company is a duly organized limited liability company validly existing under the laws of the Formation State and has undertaken all acts, including without limitation, the filing of all certificates and the payment of all fees, taxes, and other sums necessary for the Company to operate as a limited liability company in the State of Hawaii and to enable the Company to engage in its business.   (ii)           No event has occurred that has caused, and the Managing Member has not acted in any manner that will cause (a) the Company to be treated for federal income tax purposes as an association taxable as a corporation, (b) the Company to fail to qualify as a limited liability company under the Act or (c) the Investor Member to be liable for Company obligations other than to the extent of its required Capital Contributions or as otherwise provided in the Act.   (iii)          All consents or approvals of any governmental authority, or any other Person, required to be obtained by the Company or the Managing Member  in connection with the transactions contemplated by this Agreement have been or will be obtained by the Managing Member as and when required and the Company has taken all action under the laws of the State and any other applicable jurisdiction and has complied with all filing requirements necessary under the Act for the preservation of the limited liability of the Members.   (iv)          The Managing Member has delivered to the Investor Member true copies of all documents it reasonably believes are material to the Investor Member’s investment in the Company and true copies of all amendments to such documents and all other material information relevant to the Project or to the admission of the Investor Member to the Company.  To the best of the Managing Member’s knowledge, all such information provided to the Investor Member is accurate and complete in all material respects as of the date of delivery and the Managing Member has not failed to provide the Investor Member with any information necessary to make the information provided by the Managing Member complete and accurate in all material respects as of the date of delivery.   (v)           The Company is under no obligation, and neither the Managing Member nor any of its Affiliates have taken any action that would cause the Company to be obligated, under any federal or state law, rule, or regulation to register the Interests.  The Managing Member has complied with all filings necessary to avail itself of any exemption available to it regarding the sale of Interests without registration.     16     (vi)          The Managing Member (i) is a corporation, validly existing under the laws of Delaware and authorized to do business in the State and (ii) has full power and authority to enter into, execute and deliver this Agreement and all instruments pertaining hereto and to perform all acts related thereto.  The obligations of all transactions contemplated herein and the Project Documents to be performed by the Managing Member or its Affiliates do not and will not result in any material breach or violation of, or default under, any governing instrument of the Managing Member or its Affiliates or any agreements by which the Managing Member or its Affiliates or any of its property is bound, or under any applicable law, administrative regulation, or court decree (nor has there occurred any continuing event which, with the giving of notice or the passage of time or both, would constitute such a default in any material respect).   (vii)         No event of Bankruptcy has occurred and is continuing with respect to the Managing Member.   (viii)        No litigation, action, investigation, event, or proceeding is pending or, to the best of its knowledge is threatened, that, if adversely resolved, would: (i) have a material adverse effect on the Company or the Project (or, to its knowledge, any adjacent or other property that would have a material adverse effect on the Project or the Company’s investment in the Project); (ii)  have a material adverse effect on the ability of the Managing Member to perform its obligations under this Agreement,  (iii) have a material adverse effect on the financial condition of the Managing Member; or (iv) constitute or result in a material breach of any representation, warranty, covenant, or agreement of the Managing Member set forth in this Agreement.   (ix)          In all material respects, all Project Documents are in accord with applicable laws, codes and regulations and the construction of the Project will be completed in accordance therewith in all material respects.   (x)           No default (or event that, with the giving of notice or the passage of time or both, would constitute a default) has occurred and is continuing under any of the Project Documents, or any other contract, agreement, or instrument to which the Company is subject, and the Project Documents are executed and delivered, or when entered into, will be, in full force and effect and the Company is entitled to the benefit of the Project Documents.   (xi)           Other than with respect to any Loan and the Guaranty or as contemplated by the Project Documents, neither the Managing Member nor any of its Affiliates nor the Company has entered into any agreement or contract for the payment or offset of any construction loan or loan discounts, additional interest, yield maintenance or other charges or financing fees or any agreement to incur any financial responsibility with respect to the Project or providing for the guaranty of payment of any such interest charges or financing fees other than those disclosed in this Agreement; and except for the Project Documents, and Guaranty, in no event have they or the Company entered into any such agreement or guaranty of any kind whatsoever (such as an escrow arrangement or letter of credit arrangement) that would subject the Company or any of its Members or Affiliates to personal liability or economic risk of loss as to the Loan nor has the Managing Member made any loan which shall be personally enforceable by any lender on the Loan or which may in any way affect allocation of the Projected Credit to the Investor Member.     17     (xii)         The Managing Member is not under any commitment to any real estate broker, rental agent, finder, syndicator or other intermediary with respect to any Project or any portion thereof except for the arrangements specifically described in this Agreement and the arrangements previously disclosed in writing and in the Budget to the Investor Member.   (xiii)        There are no outstanding loans or advances from the Managing Member to the Company, and the Company has no unsatisfied obligation to make any payments of any kind to the Managing Member or its Affiliates.   (xiv)        There are no restrictions on the sale or refinancing of the Project, other than the restrictions, if any, set forth in the Operating Documents, the Loan Documents, under Section 48 of the Code, the PPAs and in the Lease Agreements.   (xv)         The Company owns the Project, free and clear of any liens, charges, or encumbrances other than any mortgages, and mechanics’ or other liens that have been bonded against in such a manner as to preclude the holder of such lien from having any recourse to the Project or the Company for payment of any debt secured thereby, and the Managing Member has not received notice of any such liens, charges, or encumbrances.   (xvi)        All building, zoning, and other applicable certificates, permits, and licenses necessary to permit the construction and/or installation, use and operation of the Project will be obtained as and when required by law.  All improvements constructed or to be constructed in connection with the Project have been or will be constructed and equipped in full compliance with the requirements of all governmental authorities having jurisdiction over the Project and neither the Company nor the Managing Member has received any notice of, or has any knowledge of, any violation with respect to the Project of any law, rule, regulation, order, or decree of any governmental authority having jurisdiction that would have a material adverse effect on the Project or the Company’s investment in the Project (including the Company’s ability to transfer the Project in accordance with terms of this Agreement) or the construction and/or installation, use, or operation thereof.   (xvii)       If any Hazardous Substance is found to exist or be present on any Project, it will be either removed from the Project and disposed of or encapsulated and/or otherwise corrected, contained and made safe and inaccessible, all in strict accordance with federal, state, and local statutes, laws, regulations, rules, and ordinances.  The Managing Member further warrants and represents to the best of the Managing Member’s knowledge, after due inquiry, that the Project is in compliance with all applicable Environmental Laws and the Managing Member has not received notice of any violations of the Environmental Laws.     18     (xviii)      In the event the Federal Drug Free Workplace Act of 1988 and the Regulations promulgated thereunder, including without limitation, 54 Code of Federal Regulations 4956 (1989), as such Act and Regulations have been amended are applicable, the Managing Member has complied with and has caused the Company to comply with such Act.   (xix)         No federal appropriated funds have been paid or will be paid, by or on behalf of the Managing Member or the Company, to any Person for influencing or attempting to influence an officer or employee of any agency, a Member of Congress, an officer or employee of Congress, or an employee of a Member of Congress in connection with the awarding of any federal contract, the making of any federal grant, the making of any federal loan, the entering into of any cooperative agreement, and/or the extension, continuation, renewal, amendment or modification of any federal contract, grant, loan or cooperative agreement.   (xx)          No funds have been paid for influencing or attempting to influence an officer or employee of a Member of Congress in connection with a federal contract, grant, loan and/or cooperative agreement benefiting the Company and/or the Managing Member.  The Company and the Managing Member have complied with all restrictions, certifications and disclosure requirements contained in the Byrd Amendment to the fiscal 1990 appropriations measures for the United States Department of the Interior (P.L. 101-121) and with any guidelines and rules issued by any federal entity in connection therewith (“Byrd Amendment”), if applicable.   (xxi)         The Company will use diligent efforts to construct and/or install the Project and thereafter operate it as required by the Code in order to qualify for and maintain the Tax Credits and other tax benefits anticipated in connection therewith.   (xxii)        The Company has not made any elections under the Code without the Consent of the Investor Member that would affect the amount, timing, availability, or allocation of Energy Credits.   (xxiii)       The Managing Member has not entered into or formed a joint venture with and is not acting as an agent of any Person with respect to ownership and operation of the Project or the Company.   (xxiv)      The property being installed by the Company for the Project is new, and no portion thereof has previously been used.   (xxv)       Within the meaning of Section 48 of the Code, (i) the Project uses and will use solar energy to generate electricity, (ii) except as reflected in the Projections, no proceeds of any issue of state or local government obligations have been used to provide financing for the Project the interest on which is exempt from tax under Section 103 of the Code, (iii) the Project is receiving no financing other than that incorporated into this Agreement or the Project Documents, and (iv) no federal tax credit (other than the Energy Credits) has been or is allowed or allowable with respect to any property that is part of the Project.     19     (xxvi)      The Managing Member will indemnify and hold the Company, the Investor Member and the members thereof, their Affiliates and agents, free and harmless from any injury, loss or damage (including, but not by way of limitation, reasonable attorneys’ fees, court costs, and amounts paid in settlement of any claims, which settlement has been mutually agreed to by it and the party against whom such claim has been made) resulting from the claims of any Person or Persons other than the Investor Member and the members thereof, their Affiliates and agents, except to the extent such claim is attributable to information and actions by United Fund Advisors with respect to any liability arising under the Securities Act of 1933 or the Securities Exchange Act of 1934 or the laws or regulations of any state or other jurisdiction, which claims are based upon alleged fraud, deceit, or untrue statement or alleged untrue statement of a material fact, or the omission or alleged omission to state a material fact required to be stated or necessary to make the statements not misleading and based on statements made by the Managing Member to the Investor Member in connection with the acquisition by the Investor Member of its interest in the Company; provided, however, Managing Member shall not be required to indemnify any Person for any gross negligence, misconduct, or failure to act of the Investor Member or any members or Affiliates thereof.   (xxvii)     The Managing Member shall be responsible for the representations, warranties and covenants assigned to it hereunder, and shall not assert as a defense in any action by the Company or the Investor Member  the fact that the Managing Member may have relied on other parties in connection with matters addressed therein; provided, however that this obligation to the Investor Member and the Company shall not prevent the Managing Member from asserting such reliance in any action brought by the Managing Member against such parties on which the Managing Member has relied.    (b)              As of the date hereof, the Investor Member hereby represents,   (i)            The Investor Member (a) is a limited liability company, validly existing under the laws of the State of Delaware and (b) has full power and authority to enter into and deliver this Agreement and all instruments pertaining hereto and to perform all acts related thereto.  This Agreement has been duly executed and delivered and constitutes the legal, valid, and binding obligation of the Investor Member, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, and other 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 a proceeding is sought in equity or at law).  The obligation of all transactions contemplated herein and in the Project Documents to be performed by the Investor Member or its Affiliates do not and will not result in any material breach or violation of, or default under, any governing instrument of the Investor Member or its Affiliates or any agreements by which the Investor Member or its Affiliates or any of its property is bound, or under any applicable law, administrative regulation, or court decree  (nor has there occurred any continuing event which, with the giving of notice or the passage of time or both, would constitute such a default in any material respect).     20     (ii)           No event of Bankruptcy has occurred with respect to the Investor Member or any of its Affiliates.   (iii)          The Investor Member is purchasing its Interest for investment for the Investor Member’s own account only and not with a view to, or for resale in connection with, any “distribution” thereof within the meaning of the Securities Act of 1933, as amended (the “Securities Act”).   (iv)          The Investor Member understands that the Interests have not been registered under the Securities Act in reliance on an exemption from registration.  The Investor Member understands that the Interest must be held indefinitely unless the Interests subsequently are registered under the Securities Act or unless an exemption from registration is otherwise available.  The Investor Member understands that the Company is not obligated to register the Interest.  The Investor Member agrees that the Interest may not be offered, sold, transferred, pledged, or otherwise disposed of in the absence of an effective registration statement under the Securities Act and applicable state securities laws or an opinion of counsel acceptable to the Company that such registration is not required.   (v)           Neither the Investor Member nor any of its Affiliates have taken any action that would cause the Company to be obligated, under any state law, rule, or regulation of Missouri, California, Hawaii or Delaware to register the Interest.   (vi)          The Investor Member shall be responsible for the representations, defense in any action by the Company or the Managing Member  the fact that the Investor Member may have relied on other parties in connection with matters addressed therein; provided, however that this obligation to the Managing Member and the Company shall not prevent the Investor Member from asserting such reliance in any action brought by the Investor Member against such parties on which the Investor Member has relied.   (vii)         No litigation, action, investigation, event, or proceeding is resolved, would: (a) have a material adverse effect on the ability of the Investor Member to perform its obligations under this Agreement or  (b) covenant, or agreement of the Investor Member set forth in this Agreement.   4.02.            Duties and Obligations Relating to the Project and the Company.   The Managing Member shall have the following duties and obligations with respect to the Project and the Company:     (a)       it shall cause the Company to do all things necessary to maintain its status as a limited liability company and had, has, and shall continue to have full power and authority to acquire the Project and to develop, construct, operate, and maintain the Project in accordance with the terms of this Agreement and to enable the Company to engage in its business;     21       (b)       it shall cause to be met all requirements applicable to the Company, including, but not limited to, those set forth in [Sections 3 and 4 of the PPAs,] which are necessary to obtain all permitting, leasing and other applicable regulatory approvals.     (c)       while conducting the business of the Company, it shall not act in any manner which it knows or should have known after due inquiry will (i) cause the termination of the Company for federal income tax purposes without the Consent of the Investor Member; (ii) cause the Company to be treated for federal income tax purposes as an association taxable as a corporation, (iii) cause the Company to fail to qualify as a limited liability company under the Act, or (iv) cause the Investor Member to be liable for Company obligations;     (d)       it shall prepare and submit to the Internal Revenue Service (or any other governmental authority designated for such purpose), on a timely basis, any and all annual reports, information returns and other certifications and information required (i) to ensure that the Company (and its Members) qualifies for Tax Credits and (ii) to avoid any Recapture Event or the imposition of penalties or interest on the Company or any of its Members for failure to comply with the requirements of the Code or any other applicable laws relating to the Tax Credits;     (e)       it shall exercise good faith in all activities relating to the conduct of the business of the Company, including the operation and maintenance of the Project, and it shall take no action with respect to the business and property of the Company which is not reasonably related to the achievement of the purpose of the Company;     (f)        it will execute on behalf of the Company all documents necessary to elect, pursuant to Sections 732, 734, 743 and 754 of the Code, to adjust the basis of the Company’s property upon the request of the Investor Member, if, in the sole opinion of the Investor Member, such election would be advantageous to the Investor Member or any of its members;     (g)       it shall, during and after the period in which it is a Member provide the Company with such information and sign such documents as are necessary for the Company and the Investor Member to make timely, accurate and complete submissions of (i) federal and state income tax returns, (ii) reports to governmental agencies, and (iii) any other reports required to be delivered to the Investor Member or its members;     (h)       it shall comply and cause the Company to comply with the provisions of all state and local zoning laws, building codes, health and safety codes and all other governmental and contractual obligations applicable to the Project ;     (i)        it shall use commercially reasonable efforts consistent with sound management practice and with the terms of the Operating Documents to maximize Net Cash Flow available for distribution to the Members;     (j)        it shall provide the Investor Member with Notice of any written or oral notice of any (i) default or failure of compliance with respect to any financial, contractual or governmental obligation of the Company or the Managing Member related to the Project or Company; (ii) IRS proceeding regarding the Project or the Company; (iii) litigation, criminal action or administrative proceeding against the Managing Member or the Company related to the Project; (iv) communication from any Person or governmental authority related to the Project or Company which is not in the ordinary course of business;     22       (k)       in operating the Project, it shall use commercially reasonable efforts to obtain all contracts, materials, supplies, utilities and services required by the Project on the most advantageous terms available.  Except as otherwise approved by the Consent of the Investor Member, the Managing Member shall secure and credit to the Company, and not receive or retain for itself, its agents, employees or Affiliates, any discounts, compensation, rebates or commissions obtainable with respect to any and all purchases, service contracts, and all other transactions affecting the Project, including without limitation, any compensation received from the assignment or transfer of any contracts affecting the Project;     (l)        it or its Affiliates shall cause the Project to be completed substantially in accordance with the relevant Project Documents; it or its Affiliates shall obtain all building, zoning, and other applicable certificates, permits, and licenses necessary to permit the construction and/or installation, use and operation of the Project and the Project; and all improvements constructed or to be constructed in connection with the Project shall be constructed and equipped in full compliance with the requirements of all governmental authorities having jurisdiction over the Project;     (m)      it shall cause the Company or Host to keep all public utilities necessary to the operation of the Project;     (n)       it shall cause the Company to maintain the Project in compliance with any and all applicable Environmental Laws.  The Managing Member shall promptly deliver to the Investor Member any notice received from any source whatsoever of the alleged, potential, threatened, or actual violation of any Environmental Law with respect to the Project.  If any Hazardous Substance is found to exist or be present in violation of any Environmental Law, the Managing Member shall, at its sole expense, commence promptly the taking of action to assure it will be either removed from the Project and disposed of or inaccessible, all in strict accordance with federal, state and local statutes, laws, regulations, rules and ordinances, and any recommendations set forth in the Environmental Reports, and any requirements in the Loan Documents.  If, at any time during the term of the Company the Investor Member reasonably determines that the foregoing representations or covenants in this Agreement relating to Hazardous Substance and Environmental Laws may not have been true when made, or may have become untrue, the Company shall promptly obtain an environmental audit of the Project.  The scope of such audit and the company performing it shall be determined by the Managing Member with the Consent of the Investor Member;     (o)       in the event the Federal Drug Free Workplace Act of 1988 and the Federal Regulations 4956 (1989), as such Act and Regulations may be amended, are applicable, the Managing Member shall comply with and will cause the Company and its agents to comply with such Act and Regulations;     23       (p)       it will comply and will cause the Company to comply with the Amendment, if such Act is applicable;     (q)       it shall cause the Project to be constructed and/or installed and thereafter operated as required by the Code, and in order to comply with the covenants set forth in Sections 3 and 4 of the PPAs in order to qualify for and maintain the Tax Credits and other tax benefits anticipated in connection therewith;     (r)        it shall operate and manage the Project in accordance with Prudent Utility Practices and in the best interests of the Company;     (s)        it shall cause the Company to cause the Project to achieve Placement In Service prior to March 31, 2009, unless extended pursuant to Section 8.02(b)(xxi);     (t)        it has not and will not permit the Company to accept any federal or non-federal grants or funds and any other grants or funds which have previously been disclosed to the Investor Member without the Consent of the Investor Member;     (u)       it shall, on behalf of the Company, elect to depreciate the Project on an accelerated basis over a five (5)-year term;     (v)       it shall cause the Company to deliver all and any reports or certifications to any service or property provider or purchaser;     (w)       it shall cause the Company to maintain insurance coverages in amounts and types in accordance with the Investor Member’s stated minimum requirements, as set forth in Schedule B, and to diligently pursue all claims under such insurance;     (x)       prior to closing, the Managing Member shall provide the Investor Member with copies of all insurance coverage and/or policies in form and issued by companies satisfactory to the Investor Member as required pursuant to Section 4.02(w) and Schedule B of this Agreement and shall provide, upon the request of the Investor Member, Blue Oak or another entity named by the Investor Member (the “Construction Consultant”) with copies of all construction documents for the Construction Consultant’s review     (y)       it shall operate and maintain the Project in accordance with , the National Electrical Code and applicable standards required by the relevant Local Utility; and     (z)        it shall cause the Company to test and inspect each portion of the Project prior to interconnection in accordance with all applicable State laws.   24   ARTICLE V. MEMBERS, COMPANY INTERESTS AND OBLIGATIONS OF THE COMPANY   5.01.            Members, Capital Contributions and Company Interests.     (a)       The Managing Member, its principal address or place of business, its Capital Contribution and its Percentage Interest are set forth in Schedule A attached hereto.  The Managing Member shall be required to make an initial installment of Capital Contribution upon execution of this Agreement in the amount of [*].  During installation, the Managing Member shall be required to fund an additional [*] in the form of capital contributions as follows:   Within three (3) business days of the Managing Member submitting its application to the applicable Local Utilities for permission to operate (a “PTO”) with respect to one or more Buildings (the Buildings for which an application for PTO was submitted are referred to as the  “Initial Buildings”), but not earlier than January 8, 2009,  the Managing Member shall make a capital contribution to the Company in an amount equal to the aggregate of the amounts reflected in the column entitled “Managing Member’s Capital Contributions” on Schedule E with respect to such Initial Buildings.  The proceeds of such Managing Member’s Capital Contributions shall be used by the Company to purchase the solar systems installed at the Initial Buildings and to pay to the Developer a portion of its Development Fee, as shown on Schedule E.  For example, if a PTO was submitted only for Building 1,  then the Managing Member would contribute [*] to the Company,  of which [*] would be applied to the purchase price and [*] to pay Development Fee.   Within three (3) business days of the Company submitting its application to the applicable Local Utilities for permission to operate with respect to all Buildings other than the Initial Buildings (the “Final Buildings”), but not earlier than February 15, 2009,  the Managing Member shall make a capital contribution to the Company in an amount equal to the aggregate of the amounts reflected in the column entitled “Managing Member’s Capital Contributions” on Schedule E with respect to such Final  Buildings.  The proceeds of such Managing Member’s Capital Contributions shall be used by the Company to purchase the solar systems installed at the Final  Buildings and to pay to the Developer a portion of its Development Fee, as shown on Schedule E.   With the exception of the initial installment of [*],  the Managing Member Capital Contributions shall be deemed contributions to the Company and the amounts shall be used to offset amounts owed under the Purchase and Sale and O and M Agreement and under the Development Agreement, in accordance with Schedule E.     (b)       The Investor Member, its principal office or place of business, its attached hereto.     (c)       Subject to the provisions of this Agreement, including without limitation the provisions of Sections 5.01(d), 5.01(e) and 5.03, the Investor Member shall be obligated to make a Capital Contribution to the Company in the aggregate amount of [*] (subject to adjustment as provided in this Section 5.01) in three (3) Installments, which Installments shall be due and payable in cash by the Investor Member, as follows.     25       (i)           [*] (the “First Installment”) upon the later to occur of (A) the execution of this Agreement and (B) the date upon which the Investor Member shall have completed, to its satisfaction, due diligence as to the Company, the Guarantors and the Managing Member and the future operation of the Project.     (ii)           The Second Installment shall be payable within ten (10) business days after the latest to occur of (A) Placement In Service of the systems located at the Initial Buildings; (B)  receipt of Cost Certification with respect to the Initial Buildings; (C) execution of the PPAs, and Lease Agreements with respect to the Initial Buildings; (D) confirmation from the Company that the Company has received all  approvals required by any and all federal, state and/or local governmental, regulatory or agencies with jurisdiction over the Initial Buildings other than those as will be required or issued after Placement in Service; (E) receipt of all engineering reports with respect to the Initial Buildings relating to transmission, interconnection and solar power issues, such reports to be in form and substance satisfactory to the Investor Member; (F) receipt of insurance policies for the Project in accordance with Schedule B to this Agreement; (G) January 15, 2009; (H) Managing Member producing evidence that, with respect to the Initial Buildings, a Memorandum of Agreement has been properly recorded in the appropriate office of the State or (I) the receipt of a conditional release of lien in the form attached hereto as Exhibit F from each of the suppliers, contractors and subcontractors providing labor or materials for the systems located at the Initial Buildings evidencing that all such suppliers, contractors and subcontractors have been paid in full or will be paid in full with the proceeds of the Second Installment; provided, however, that any one or more of these subclauses (A) through (H) may be waived at the Investor Member’s sole and absolute discretion.  The proceeds of the Second Installment shall be used to purchase the solar systems for the Initial Buildings and to pay to the Developer a portion of its Development Fee, as shown on Schedule E.  The amount of the Second Installment shall be an amount equal to the aggregate of the amounts reflected in the column entitled “Investor  Member Capital Contributions” on Schedule E with respect to such Initial Buildings.     (iii)           The Third Installment shall be payable within ten (10) systems located at the Final  Buildings; (B) receipt of Cost Certification with respect to the Final  Buildings; (C) execution of the PPAs, and Lease Agreements with respect to the Final  Buildings; (D) confirmation from the Company that the Company has received all  approvals required by any and all federal, state and/or local governmental, regulatory or agencies with jurisdiction over the Final  Buildings other than those as will be required or issued after Placement in Service; (E) receipt of all engineering reports with respect to the Final  Buildings relating to transmission, interconnection and solar power issues, such reports to be in form and substance satisfactory to the Investor Member; (F) receipt of insurance policies for the Final  Buildings in accordance with Schedule B to this Agreement; (G) February 22, 2009; (H) Managing Member producing evidence that, with respect to each of the Final  Buildings, a Memorandum of Agreement has been properly recorded in the appropriate office of the State, or (I)  the receipt of a conditional release of lien in the form attached hereto as Exhibit F from each of the suppliers, contractors and subcontractors providing labor or materials for the systems located at the Final Buildings evidencing that all such suppliers, contractors and subcontractors have been paid in full or will be paid in full with the proceeds of the Third Installment; provided, however, that any one or more of these subclauses (A) through (H) may be waived at the Investor Member’s sole and absolute discretion.  The proceeds of the Third Installment shall be used to purchase the solar systems for the Final  Buildings and to pay to the Developer a portion of its Development Fee, as shown on Schedule E.  The amount of the Third Installment shall be an amount equal to the aggregate of the amounts reflected in the column entitled “Investor  Member Capital Contributions” on Schedule E with respect to such Final  Buildings.     26       (d)       Except as provided in Section 9.02 hereof, without the Consent of all of the Members, no additional Person may be admitted as an additional Investor Member and a Capital Contribution may be accepted only as and to the extent expressly provided for in this Article V.     (e)       (i)          If, as a result of a reduction or increase in costs incurred to complete the Project, or for any other reason other than (A) a Recapture Event, or (B) an event which would be a Recapture Event but for the fact it resulted from a sale or disposition  of the Company Interest of the Investor Member, the Accountants shall determine in preparing the Company’s tax returns (or an amended return), or there shall be a Final Determination, that the Actual Credits are more or less than the Projected Credits (such determination being referred to herein as the “Credit Determination”), the provisions of Sections 5.01(e)(ii) and (e)(iii) shall apply.     (ii)         After the Credit Determination is made, the Accountants shall prepare a revised set of financial projections and determine whether the Benefits can be achieved as set forth in the Projections.  In the event that the Accountants determine that the Third Installment should be increased such that the Benefits are achieved as set forth in the Projections, then the Investor Member shall make, together with the Third Installment, an additional installment of Capital Contribution as determined by the Accountants (the “Credit Adjustment”).  Notwithstanding the foregoing, positive Credit Adjustments shall not in the aggregate exceed 15% of the Investor Member’s Capital Contribution (prior to any Credit Adjustment provided for in this Section 5.01(e)(ii)).  Further, in no event shall the Credit Adjustment be an amount such that the Benefits are not achievable within six (6) years from the Completion Date.     (iii)        After the Credit Determination is made, the Accountants shall Accountants determine that the Third Installment should be decreased such that Member shall make a downward adjustment to Third Installment, as determined by the Accountants.     27    (iv)         If a Recapture Event occurs prior to the time the Investor Member has paid in its Capital Contribution, the amount of the next succeeding Installment (and any Installment(s) thereafter if necessary) of the Investor Member  shall be reduced by an amount (herein referred to as a “Recapture Adjustment Amount”) equal to any increase in taxes payable by the Investor Member as of that date solely as a result of such Recapture Event, measured by the Applicable Tax Rate, but shall be limited to the amount necessary to produce a Target IRR to the Investor Member.  Notwithstanding the aforementioned, the Recapture Adjustment Amount shall also include any interest and/or penalties due to the Internal Revenue Service from the Investor Member, reasonable attorney fees and/or reasonable professional costs associated with the Audit, as provided in Section 5.01(e)(v).  If no further Installment remains, or if the Recapture Adjustment Amount is greater than the aggregate amount of the remaining Installment(s), then the Managing Member shall contribute to the Company, for immediate distribution to the Investor Member, an amount equal to the difference between such remaining Installment(s), if any, and the Recapture Adjustment Amount, which amount shall then be immediately distributed to the Investor Member as a return of capital and Investor Member shall be relieved of making any additional Installments.  Notwithstanding the foregoing, if the effect of such a contribution of capital would be to cause Company Profits or Losses or Tax Credits arising during the Recapture Period to be allocated among the Members other than in accordance with their Percentage Interests as set forth in Section 5.01, then the portion of the Recapture Adjustment Amount that was to be contributed to the Company as aforesaid (recalculated on an After-Tax Basis) shall be paid directly by the Managing Member to the Investor Member promptly after demand is made therefor.  Any amounts not paid upon demand shall bear interest at the rate of 2% over the Designated Prime Rate in effect at the end of the preceding calendar month, until paid in full.  The Managing Member’s obligations under this Section shall expire upon the last day of the third year following the year in which the recapture period for the Tax Credits pursuant to Section 48 of the Code shall have ended.    (v)         The Investor Member covenants and agrees that it will promptly give written notice to the Managing Member of the occurrence of any audit by the IRS of the Investor Member (which notice must include copies of all correspondence, reports, and materials relevant to the controversy) if the adverse resolution of such audit (or portion thereof) could result in a Recapture Event which could lead to any payment by the Managing Member  (such audits or relevant portions thereof being hereinafter referred to as an “Audit”).   The Managing Member may participate, at its own expense, in the defense of any Audit and, throughout the Audit, will cooperate fully, comply with all requests and provide all information, documentation and other similar items to the Investor Member within ten (10) business days of the Investor Member’s request.  Throughout the Audit, the Investor Member will provide all relevant information to the Managing Member (excluding confidential proprietary tax information or corporate records) and will consult in good faith with the Managing Member about defenses, settlement options, and all other matters involving the Audit.   The Investor Member shall not settle or compromise any tax obligation which could lead to the requirement of an additional capital contribution under Section (iv) above without the written consent of the Managing Member, which consent will not be unreasonably withheld.  In its sole and absolute discretion and with written notice to the Managing Member, the Investor Member may tender the defense of any Audit to the Managing Member, and upon tender will appoint the Managing Member as its agent under a power of attorney to defend the Audit.  If the Investor Member tenders its defense in accordance with the preceding sentence, the Managing Member will consult in good faith with the Investor Member as to settlement or compromise of any tax obligation but the Managing Member will have the full authority to defend, settle or compromise such claims. If the Investor Member tenders its defense in accordance with this Section, and the results of such Audit are favorable to the Investor Member, the Investor Member shall be solely responsible for the costs associated therewith; provided however, if the results of such Audit are not favorable to the Investor Member, then the Managing Member shall be solely responsible for all costs associated therewith.     28     5.02             Return of Capital Contribution.   Except as provided in this Agreement, no Member shall be entitled to demand or receive the return of any portion of its Capital Contribution.   5.03             Withholding of Capital Contribution Upon Default.   In the event that:  (i) the Managing Member has not substantially complied with any material provisions of this Agreement, or (ii) foreclosure proceedings have been commenced against any of the Buildings or portions of the Project, then the Company and the Managing Member shall be in default of this Agreement, and the Investor Member, at its sole election, may withhold payment of any Installment otherwise payable to the Company; provided, however, that if a payment of all or any portion of the then due Installment will cure the event justifying the withholding, then the Investor Member shall pay such Installment otherwise payable if it is applied to cure such event.  At the sole election of the Investor Member, it may directly apply all or any part of any unpaid Installment to cure the event justifying the withholding, including but not limited to the failure of the Managing Member to make payments required under Sections 5.01(e), 5.05, 8.09 and/or 11.01(a).   Unless applied as set forth above, all amounts so withheld by the Investor Member under this Section 5.03 shall be promptly released to the Company only after the Managing Member or the Company has cured the default justifying the withholding, as demonstrated by evidence reasonably acceptable to the Investor Member.   5.04             Legal Opinions.   As a condition precedent to payment of the First Installment, the Investor Member shall have received such legal opinions of Stoel Rives LLP, special counsel to the Company and the Managing Member, and the General Counsel of Managing Member in form and substance as attached hereto as Schedule C.   5.05             Repurchase Obligation.     (a)        If (i) the Project has not achieved Placement In Service by April 15, 2009, unless extended pursuant to Section 8.02(b)(xxi); (ii) an event of default described in Section 5.03 occurs prior to Placement In Service; (iii) the Project will qualify for less than seventy percent (70%) of the Projected Credits; or (iv) an event of Bankruptcy has occurred with respect to the Managing Member prior to the payment of the Third Installment; then the Managing Member shall, within fifteen (15) days of the occurrence or notification thereof, as applicable, send to the Investor Member Notice of such event having occurred and the availability of an option for the Investor Member to sell its Interest to the Managing Member at a price equal to 110% of the aggregate Capital Contribution paid to-date pursuant to Section 5.01(c).  Upon receipt of such Notice, the Investor Member shall have thirty (30) days during which to notify the Managing Member whether the Investor Member elects to sell its Capital Contribution paid to-date pursuant to Section 5.01(c), and if the Investor Member does so elect, the Managing Member shall acquire the Interest of the Investor Member by making payment to the Investor Member, in cash, of an amount equal to 110% of the aggregate Capital Contribution paid to-date pursuant to Section 5.01(c) and for the Investor Member’s reasonable costs, legal or otherwise, associated therewith.  Any amounts not paid upon demand shall bear of the preceding calendar month, until paid in full.     29       (b)       Upon the purchase of the Interest of the Investor Member, the Interest of the Investor Member in the Company shall terminate and all its obligations hereunder.     (c)       The sole remedy for Investor Member with respect to the events described in Section 5.05(a)(i) through and including (iv) is the sale of its Interest as provided in Section 5.05(a) and if the Investor Member elects not to sell its Interest to the Managing Member as provided in Section 5.05(a) Investor Member shall have waived any and all claims or rights it might have against the Company, the Project, the Guarantor, or Managing Member based directly or indirectly on such events.   5.06             Subordinated Loans.      (a)        The Managing Member shall have the right, but not the obligation, after funding all other obligations under this Agreement, including, without limitation, its obligation to fund Excess Development Costs or Operating Deficits pursuant to Section 8.09 hereof, to make “Subordinated Loans” pursuant to this Section 5.06(a) to fund Operating Deficits of the Company or to fund other reasonable and necessary obligations of the Company.         (b)       Any Subordinated Loan shall be evidenced by a non-negotiable promissory note or notes reflecting any such Subordinated Loans made during the preceding calendar quarter. Subordinated Loans shall be on the following terms: (i) interest shall accrue on Subordinated Loans at an annual interest rate of eight percent (8%), compounded annually; and (ii) Subordinated Loans shall be repayable solely as set forth in Sections 11.01 and 11.04 of this Agreement.  Subordinated Loans shall be unsecured loans.  Subordinated Loans shall not be considered a part of a Member’s Capital Contribution and shall not increase such Member’s Capital Account.   30   ARTICLE VI. CHANGES IN MEMBERS   6.01.            Withdrawal of a Managing Member.     (a)        A Managing Member may withdraw from the Company or sell, transfer or assign its Interest as Managing Member (or a controlling interest in the Managing Member) only with the Consent of the Investor Member and consent of the Lender, if required, and only after being given written approval by the necessary parties as provided in Section 6.02 of the Managing Member(s) to be substituted for it or to receive all or part of its Interest as Managing Member.     (b)       In the event that a Managing Member withdraws from the Company or sells, transfers or assigns its entire Interest in compliance with Section 6.01(a), it shall be and shall remain liable for all obligations and liabilities incurred by it as Managing Member before such withdrawal, sale, transfer or assignment shall have become effective, but shall be free of any obligation or liability incurred on account of the activities of the Company from and after the time such withdrawal, sale, transfer or assignment shall have become effective.   6.02.            Admission of a Successor or Additional Managing Member.   A Person shall be admitted as a Member of the Company only if the following terms and conditions are satisfied:     (a)       the admission of such Person shall have been Consented to by the Managing Member or its successors and the Investor Member, and consented to by the Lender, if required;     (b)       the successor or additional Person shall have accepted and agreed to be bound by (i) all the terms and provisions of this Agreement, by executing a counterpart thereof, and (ii) all the terms and provisions of the Operating Documents, to the extent applicable, by executing a counterpart thereof, and (iii) all the terms and provisions of such other documents or instruments as may be required or appropriate in order to effect the admission of such Person as a Member, and an appropriate document evidencing the admission of such Person as a Member shall have been filed, if required, and all other actions required by Section 1.05 in connection with such admission shall have been performed;     (c)       if the successor or additional Person is a limited liability company or corporation, it shall have provided the Company with evidence satisfactory to counsel for the Company of its authority to become a Member, to do business in the State and to be bound by the terms and provisions of this Agreement; and     (d)       Counsel shall have rendered an opinion that the admission of the successor or additional Person is in conformity with the Act and that none of the actions taken in connection with the admission of such Person will cause the termination or dissolution of the Company or will cause it to be treated for federal income tax purposes as an association taxable as a corporation.     31     6.03.            Effect of Bankruptcy, Withdrawal or Dissolution of a Managing Member.     (a)       In the event of the Bankruptcy of a Managing Member or the withdrawal, or dissolution of a Managing Member, the business of the Company shall be continued by the other Managing Member(s), if applicable; provided however, that if the withdrawn, Bankrupt, or dissolved Managing Member is then the sole Managing Member, then the Company shall be terminated, unless a majority in Interest of the other Members, within ninety (90) days after receiving Notice of such Bankruptcy, withdrawal, or dissolution elect to designate a successor Managing Member(s) and continue the Company upon the admission of such successor Managing Member(s) to the Company.     (b)       Upon the Bankruptcy or dissolution of a Managing Member, such Managing Member shall immediately cease to be a Managing Member and its Interest shall without further action be converted to an Investor Member Interest; provided, however, that the converted Company Interest of such Managing Member shall be ratably reduced to the extent necessary to insure that the remaining or substitute Managing Member(s) hold(s) a 0.01% Percentage Interest (as set forth in Section 5.01).  If such Bankrupt or dissolved Managing Member is the sole remaining Managing Member, such Managing Member shall cease to be a Managing Member only upon the expiration of ninety (90) days after Notice to the other Members of the Bankruptcy or dissolution of such Managing Member.   Except as set forth above, such conversion of a Managing Member Interest to an Investor Member Interest shall not affect any rights, obligations or liabilities (including without limitation, any of the Managing Member’s obligations under Section 8.08 herein) of the Bankrupt or dissolved Managing Member existing prior to the Bankruptcy or dissolution of such Managing Member (whether or not such rights, obligations or liabilities were known or had matured).     (c)       If, at the time of the withdrawal, Bankruptcy or dissolution of a Managing Member, the Bankrupt or dissolved Managing Member was not the sole Managing Member of the Company, the remaining Managing Member shall immediately (i) give Notice to the Investor Member of such Bankruptcy or dissolution, and (ii) make such amendments to this Agreement and execute and file such amendments or documents or other instruments as are necessary to reflect the conversion of the Interest of the Bankrupt or dissolved Managing Member and its having ceased to be a Managing Member.  Such action or actions by the remaining Managing Member shall, in the event that permission of a bankruptcy court is necessary, be deemed to have been taken subject to the provisions of Paragraph 6.03(d) below.  The remaining Managing Member is hereby granted an irrevocable power of attorney, coupled with an interest, to execute any or all documents on behalf of the Members and the Company and to file such documents as may be required to effectuate the provisions of this Section 6.03.     (d)       The Managing Member, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, agrees that in the event the Managing Member should make application for or seek protection or relief under any of the Sections or Chapters of the United States Bankruptcy Code (the “Bankruptcy Code”), or in the event that any involuntary petition is filed against the Managing Member, then, in such event, any other Member shall thereupon be entitled to immediate relief from any automatic stay imposed by Section 362 of the Bankruptcy Code, or otherwise, on or against the exercise of the rights and remedies available to such Member pursuant to this Agreement, or otherwise.  The foregoing shall in no way preclude, restrict or prevent the Managing Member from filing for protection under the Bankruptcy Code.     32       (e)        The Members acknowledge and agree that this Agreement is a contract under which an Investor Member is excused from accepting performance from the Managing Member, its assignee or trustee, in the event that the Managing Member makes application for or seeks protection under any of the Sections or Chapters of the Bankruptcy Code, or in the event that an involuntary petition is filed against such Managing Member.  The effect of this Paragraph shall be that this Agreement is hereby deemed to be subject to the exceptions to assumption and assignment of contracts set forth in Sections 365(c)(1) and 365(e)(2)(A) of the Bankruptcy Code and that an Investor Member, by its refusal to consent to an assumption or assignment of this Agreement by the Managing Member after the filing of a petition in bankruptcy by or against such Managing Member, shall be able to prevent such assumption or assignment.     (f)        In the event that the Managing Member makes application for or seeks relief or protection under any of the Sections or Chapters of the Bankruptcy Code, or in the event that any involuntary petition is filed against said Managing Member, then, in such event, any Member may apply or move to the bankruptcy court in which such petition is filed for a change of venue to the bankruptcy court where the Company has its principal place of business, and the Managing Member hereby agrees not to oppose or object to such application or motion in any way.   33   ARTICLE VII. ASSIGNMENT TO THE COMPANY   The Managing Member acknowledges that it has or will, concurrently with the execution of this Agreement transfer and assign to the Company all of its rights, title and interest in and to the Project, including without limitation the following:     (a)       all contracts with respect to the operation of the Project and/or the Project, including the Lease Agreements and PPA’s for each of the Buildings,  and any and all warranties which have been provided to the Managing Member with respect to the solar facility panels installed at the Buildings;     (b)       all governmental approvals obtained in connection with the operations of the Project and/or the Project; and     (c)       any Operating Documents and other work product related to the Project and/or the Project.   Notwithstanding anything herein to the contrary,  the Managing Member reserves all rights granted to it under the Lease Agreement and/or the PPA’s to place kiosks within certain Buildings in order to display system information and to promote the work performed by the Managing Member with respect to the construction and installation of the solar system facilities at the Buildings.  Any rights associated with these kiosks shall be solely for the benefit of the Managing Member.   34   ARTICLE VIII. RIGHTS, OBLIGATIONS AND POWERS OF THE MANAGING MEMBER   8.01.            Management of the Company.     (a)       Except as otherwise set forth in this Agreement, the Managing Member, within the authority granted to it under this Agreement, shall have full, complete and exclusive discretion to manage and control the business of the Company for the purposes stated in Article III, shall make all decisions affecting the business of the Company and shall manage and control the affairs of the Company to the best of its ability and use its best efforts to carry out the purpose of the Company.  In so doing, the Managing Member shall take all actions necessary or appropriate to protect the interests of the Investor Member and of the Company.  The Managing Member shall devote such of its time as is necessary to the affairs of the Company.     (b)       Except as otherwise set forth in this Agreement and subject to the applicable rules and regulations and the provisions of the Operating Documents, the Managing Member (acting for and on behalf of the Company), in extension and not in limitation of the rights and powers given by law or by the other provisions of this Agreement, shall, in its sole discretion, have the full and entire right, power and authority in the management of the Company business to do any and all acts and things necessary, proper, convenient or advisable to effectuate the purpose of the Company.  In furtherance and not in limitation of the foregoing provisions, the Managing Member is specifically authorized and empowered to execute and deliver, on behalf of the Company, the Operating Documents, the Loan Documents and any bank resolution and signature card, release, discharge, or any other document or instrument in any way related thereto or necessary or appropriate in connection therewith.  All decisions made for and on behalf of the Company by the Managing Member (when acting in its capacity as the Managing Member of the Company and within the authority granted under this Agreement) shall be binding upon the Company.  No person dealing with the Managing Member shall be required to determine its authority to make any undertaking on behalf of the Company, nor to determine any facts or circumstances bearing upon the existence of such authority.     (c)       The Managing Member shall be solely responsible for causing the Company to maintain the ability for the Project to perform its intended function of producing electricity on a daily basis and will provide or cause to be provided all necessary operations and maintenance of and for the Project.     (d)       The Managing Member shall be responsible for all acts and/or omissions of its agents.   8.02.            Limitations Upon the Authority of the Managing Member.     (a)       The Managing Member shall not have any authority to:         (i)       perform any act in violation of any applicable law or regulation thereunder;     35          (ii)       perform any act in violation of the provisions of any of the Operating Documents;       (iii)      perform any act required to be approved or ratified in writing by an Investor Member under the Act unless the right to do so is expressly given in this Agreement; or        (iv)      borrow from the Company or commingle Company funds with funds of any other Person.     (b)      The Managing Member shall not, without the Consent of the Investor Member, have any authority to:        (i)       sell, refinance or otherwise dispose of all or substantially all of the assets of the Company; grant or refinance any mortgage or other indebtedness of the Company; permit or take any action that would cause a Recapture Event;        (ii)       supplement, replace, renew, cancel or materially amend any of the Operating Documents;        (iii)      incur debt in excess of $20,000 in the aggregate at any one time outstanding on the general credit of the Company, except borrowings constituting Subordinated Loans or Operating Deficit Loans, or which are provided for in an approved Budget, if any;        (iv)     undertake any rehabilitation, repairs or other work on the Project, participate or fund any rehabilitation, repairs or other work on the Building, or construct any new or replacement capital improvements on the Building or the Project which substantially alter the Project or its use or which are at a cost in excess of $20,000 in a single Fiscal Year, except (A) replacements in the ordinary course of business or under emergency conditions, (B) reconstruction paid for from insurance proceeds, or (C) as and to the extent provided for in an approved Budget;         (v)     acquire any real property;         (vi)    make any filing to begin Bankruptcy proceedings on behalf of the Company;         (vii)   make application(s) for or accept any grant funds on behalf of the Company regardless of the source of the grant, other than those with respect to which commitments have previously been obtained;         (viii)  pledge or assign any of the Investor Member’s Capital Contribution or the proceeds thereof;         (ix)     cause the Company to settle, compromise, mediate or otherwise relinquish any claim (actual or prospective), or to release, waive or diminish any material Company rights in any litigation or arbitration matter involving a claim in excess of $20,000;     36           (x)      change the nature of the Company’s business;         (xi)     dissolve and wind up the Company;         (xii)    permit the merger or termination of the Company;         (xiii)   take any action or fail to take any action that would prevent the Tax Credits from being claimable;         (xiv)   admit any Person as a Member, except as otherwise provided in this Agreement;         (xv)    permit any Person to borrow from the Company or commingle Company funds with the funds of any Person;        (xvi)   permit the Company to pay directly or indirectly the Managing Member a commission or fee in connection with the reinvestment or distribution of Capital Proceeds or liquidating distributions belonging to the Company except as provided for herein;         (xvii)  on behalf of the Company, receive any rebates or give-ups or participate in any reciprocal business relationships in circumvention of this Agreement;         (xviii) replace or dismiss the Managing Member from its duties and obligations as the Managing Member, except as provided in this Agreement;         (xix)   enter into the Project Documents, and any other similar agreements related to the Project;         (xx)    approve the form and substance of any accountant certification of the itemized amount of construction, installation, acquisition and development costs of the Project;         (xxi)   extend for any period of time beyond March 31, 2009, the date prior to which the Project must achieve Placement In Service (the Consent of the Investor Member may be withheld at its sole and absolute discretion); or         (xxii)  approve change orders to a construction or installation contract, if applicable, in excess of $20,000 in the aggregate.   8.03.            Management Purposes.   In conducting the business of the Company, the Managing Member shall be bound by the Company’s purpose(s) set forth in Article III.   37   8.04.            Delegation of Authority.   The Managing Member may delegate all or any of its powers, rights and obligations hereunder, and may appoint, employ, contract or otherwise deal with any Person for the transaction of the business of the Company, which Person may, under supervision of the Managing Member, perform any acts or services for the Company as the Managing Member may approve.   8.05.            [Reserved]   8.06.            Other Activities.   The Investor Member and the Managing Member may engage in or possess interests in other business ventures of every kind and description for their own account, including, without limitation, serving as a member of other companies which own, either directly or through interests in other companies and/or projects similar to the Project.  Neither the Company nor any other Member shall have any rights by virtue of this Agreement in or to such other business ventures or to the income or profits derived therefrom.   8.07.            Liability for Acts and Omissions.   No Managing Member shall be liable, responsible or accountable in damages or otherwise to any of the Members for any act or omission performed or omitted by it in good faith on behalf of the Company and in a manner reasonably believed by it to be within the scope of the authority granted to it by this Agreement and in the best interest of the Company, except for gross negligence, material misconduct, fraud or any breach of fiduciary duty as Managing Member with respect to such acts or omissions.  Any loss or damage incurred by the Managing Member by reason of any act or omission performed or omitted by it in good faith on behalf of the Company and in a manner reasonably believed to be within the scope of the authority granted to it by this Agreement and in the best interests of the Company (but not, in any event, any loss or damage incurred by any Managing Member by reason of gross negligence, material misconduct, fraud or any breach of its fiduciary duty as Managing Member with respect to such acts or omissions) shall be paid from Company assets to the extent available (but the Investor Member shall not have any personal liability to the Managing Member under any circumstances on account of any such loss or damage incurred by the Managing Member or on account of the payment thereof).   8.08.            Company Taxable as Partnership.   (a)         The Managing Member shall take such steps and comply with such other requirements as may from time to time be necessary to assure that all provisions of the Code (as now or hereafter interpreted by the Internal Revenue Service or the courts) are met that are necessary to assure that the Company is classified as a partnership for federal income tax purposes.   (b)         Upon request, the Managing Member shall deliver to the Investor Member financial statements or other evidence reasonably satisfactory to the Investor Member of compliance with the requirements with Section 8.08(a).  If the Managing Member is unable to comply with the requirements of Section 8.08(a) then, at the request of the Investor Member, and subject to Section 6.01, an additional or substitute Managing Member shall be admitted who shall cause the Managing Member to be in compliance with Section 8.07(a).     38     8.09.            Excess Development Costs, Operating Deficits.         (a)      The Managing Member hereby is obligated to fund Excess Development Costs.  Any amounts paid by the Managing Member pursuant to this Section 8.09(a) shall be added to the Capital Contribution of the Managing Member.      (b)       Any Operating Deficits occurring prior to the Completion Date shall be considered a Development Cost and shall be governed by Section 8.09(a).  Thereafter, in the event that an Operating Deficit exists, the Managing Member shall provide such funds to the Company as shall be necessary to pay such Operating Deficit(s) in the form of a contribution, which shall be added to the Capital Contribution of the Managing Member (“Additional Contributions”) or, at the option of the Managing Member and if permitted by law, in the form of a loan to the Company (the “Operating Deficit Loan(s)”).  The Managing Member shall make Additional Contributions or Operating Deficit Loans in such amounts and at such intervals so as to allow the Company to cover accrued accounts payable on a 60-day current basis. Any Operating Deficit Loan shall be treated as if it were a Subordinated Loan in accordance with the provisions of Section 5.06(b); provided, however, that an Operating Deficit Loan shall bear no interest, and shall be repaid only if the Managing Member is not in default with respect to its obligations under this Agreement.   8.10.            Development Fee.  The Company has entered into the Development Agreement of even date herewith with the Developer for its services in connection with the oversight of the Project.  In consideration for such services, a Development Fee in a total amount equal to [*] shall be payable by the Company, in accordance with the terms of the Development Agreement and Article XI of this Agreement.   [Reserved]   8.11.   [Reserved]   8.12.   [Reserved]   8.13.            Removal of the Managing Member; Conversion of the Managing Member Interest.     (a)        The Investor Member shall have the right to remove the Managing Member as Managing Member, and upon any such removal the Interest of the Managing Member shall convert to and become that of the Non-Managing Member without requiring further Consent from the Investor Member:        (i)       for any material misconduct, gross negligence, malfeasance, fraud, act materially outside the scope of its authority, breach of its fiduciary duty, or any failure to exercise reasonable care with respect to any matter in the discharge of its duties and obligations as Managing Member (provided the same has, or reasonably may have, a material, adverse impact on the Company, the Investor Member or the Project); or     39           (ii)      upon the occurrence of any of the following:     (A)          the Managing Member shall have violated any provisions of any of the Operating Documents, or any provisions of any state or federal regulations, or other requirements applicable to the Project any of which has a material, adverse impact on the Company, the Investor Member, or the Project;     (B)          the Managing Member shall have violated any provision of this Agreement or any provision of applicable law, provided the same has a material, adverse impact on the Company, the Investor Member;     (C)          the Managing Member shall have caused the any Loan to go into default;     (D)          the Managing Member shall have conducted its own affairs or the affairs of the Company in such manner as would:      (1)           cause the Company to fail to qualify as a limited liability company under the Act;      (2)           cause the termination of the Company for federal income tax purposes; or      (3)           cause the Company to be treated for federal income tax purposes as an association, taxable as a corporation; or     (E)          an event of Bankruptcy shall have occurred with respect to the Company; or there shall have occurred the liquidation or dissolution of the Managing Member.     (b)      the Investor Member shall give Notice to all Members of its determination that the Managing Member shall be removed as Managing Member.  The Managing Member shall have forty-five (45) days after receipt of such Notice to cure any default or other reason for such removal as Managing Member (if susceptible to cure); provided, however, that if upon the expiration of said forty-five (45) day period, the Managing Member shall not have cured such default and, if in the reasonable judgment of the Investor Member, (x) the Managing Member has made reasonable progress towards cure, and (y) the default was not capable of being cured within said forty-five (45) day period, then unless and to the extent the nature of the default is such that there is a likelihood of material loss, liability or prejudice to the Investor Member from any such delay in removal, the Managing Member shall have forty-five (45) additional days in which to cure any such default, in which event it shall remain as Managing Member.  If the default or other cause for removal shall not be susceptible to cure or shall not have been cured within any applicable cure period, the then Managing Member shall cease to be the Managing Member and the powers and authorities conferred on it as Managing Member under this Agreement shall cease and the Interest of such Managing Member shall be converted to that of Non-Managing Member.  The powers exercisable by the Managing Member under this Agreement, but not the rights arising from conversion of the Managing Member’s interest percentages as set forth with respect to the Managing Member’s Residual Percentage Interest after the Flip Date and the Call Option rights of the Managing Member, may be transferred to a Person designated by the Investor Member.  Upon the Company engaging a Person to carryout the duties of and powers exercisable by the Managing Member, such Person shall become the manager of the Company (the “Manager”).  Such Managing Member may be admitted, but need not be admitted, as a Member of the Company.     40       (c)          (i)        In the event that the Managing Member is removed as Managing Member as aforesaid prior to Placement In Service, it shall be and shall remain liable for all obligations and liabilities incurred by it as Managing Member of the Company before such removal as Managing Member became effective, including but not limited to the obligations and liabilities of the Managing Member with respect to its obligations set forth in Section 8.09 of this Agreement with regard to Excess Development Costs; provided, however, that if amounts otherwise payable to the Managing Member as fees are applied to meet the Managing Member’s obligations stated in Section 5.03 of this Agreement, such application shall serve to reduce any such liabilities of the Managing Member or any successor, except for any liability incurred as the result of its gross negligence, material misconduct, fraud or breach of fiduciary duty as Managing Member of the Company.   If the Managing Member is removed as Managing Member prior to Placement In Service as aforesaid, it shall not be entitled to payment of any further installments of any fees which otherwise would have been due and payable under various Sections of this Article VIII.        (ii)      In the event that the Managing Member is removed as Managing Member as aforesaid after the Completion Date, it shall be and shall remain liable for all obligations and liabilities incurred by it as Managing Member of the Company before such removal as Managing Member became effective, including but not limited to the Managing Member’s obligations and liabilities under Section 8.08(b) of this Agreement; provided however, that if amounts otherwise payable to the Managing Member as fees are applied by the Company at the request of the Investor Member to pay Operating Deficits, such application shall serve to reduce any such liabilities after Placement In Service, except for any liability incurred as the result of its gross negligence, material misconduct, fraud or breach of fiduciary duty as Managing Member of the Company.     (d)      the Investor Member hereby is granted an irrevocable power of attorney, coupled with an interest, to execute any and all documents on behalf of the Members and the Company as shall be legally necessary and sufficient to affect all of the foregoing provisions of this Section 8.13.  The election by the Investor Member to remove the Managing Member as Managing Member under this Section shall not limit or restrict the availability and use of any other remedy which the Investor Member or any other Member might have with respect to the Managing Member in connection with their undertakings and responsibilities under this Agreement.   8.14.   [Reserved]     41     8.15.   [Reserved]   8.16.   [Reserved]   8.17.            Loans to the Company.   The Company is authorized to receive Operating Deficit Loans and Subordinated Loans on the terms set forth in this Agreement.  In addition, if (i) additional funds are required by the Company for any purpose relating to the business of the Company or for any of its obligations, expenses, costs or expenditures, and (ii) the Company has not received an Additional Contribution, Operating Deficit Loan, or Subordinated Loan to pay such amounts, then the Company may borrow such funds as are needed from a Person or organization, in accordance with the terms of this Section 8.17, for such period of time and on such terms as the Managing Member and the Investor Member may agree; provided, however, that no such additional loans shall be secured by any security interest in or encumbrance on the Project without the Consent of the Investor Member except that such Consent shall not be required in the case of the hypothecation of personal property purchased by the Company and not included in the security agreements executed by the Company as of effective date of this Agreement.  Nothing in this Section 8.17 shall modify or affect the obligation of the Managing Member under Section 8.09 to make Additional Contribution or Operating Deficit Loans and to perform its obligations when and as required by this Agreement.   8.18.            Operating Budget and Capital Budget.   Upon request of the Investor Member, the annual operating budget and the capital budget for the Project (the “Budget”) shall be prepared by the Managing Member and submitted to the Investor Member for its review at least thirty (30) days prior to the proposed effective date of such Budget; any such proposed Budget shall be subject to the Consent of the Investor Member before they become effective.  Such Budget shall specifically provide for all budget expenses in all major categories, including, but not limited to, administration, operation, repairs and maintenance, utilities, capital improvements, taxes, insurance, interest and all budgeted expenses.  In the event that the Investor Member has requested to review the proposed Budget, the review and approval of the Budget by the Investor Member, or its objections to the Budget, shall be made and delivered to the Managing Member within twenty (20) days of the Investor Member’s receipt of the proposed Budget.  After commencement of the fiscal year covered by such Budget, the Managing Member shall notify the Investor Member in writing of any proposed modification in the allocation of funds among the specific categories in the Budget approved by the Investor Member by more than (i) the greater of 10% or $2,500 in any category, or (ii) more than 5% of the overall Budget.     42     8.19.            Reserves.   The Managing Member shall cause the Company to establish and maintain all reserves required to be maintained hereunder or pursuant to the Budget or the Operating Documents.   43   ARTICLE IX. TRANSFERS OF, AND RESTRICTIONS ON TRANSFERS OF INTERESTS OF INVESTOR MEMBER   9.01.            Investment and Tax Representation.                         Investor Member hereby represents and warrants to the Managing Member, to the Company and to any other Investor Member that the acquisition of its Interest is made as principal for its account for investment purposes only and not with a view to the resale or distribution of such Interest.   9.02.            No Restrictions on Transfer of Investor Member’s Interest.     (a)       Subject to Section 4.01(b)(iv), the offer, sale, transfer, assignment, hypothecation or pledge of the Interest of the Investor Member and/or a security interest in the Interest of the Investor Member shall be permitted at the sole discretion of the Investor Member and shall not require the Managing Member’s Consent.  In the event of an offer, sale, transfer, assignment, hypothecation or pledge pursuant to this Section 9.02(a) the Investor Member shall provide the Managing Member with Notice no later than ten (10) business days following such offer, sale, transfer, assignment, hypothecation or pledge.     (b)       The Investor Member whose Interest is being transferred shall pay such reasonable expenses as may be incurred by the Company in connection with such transfer.   Subject to Section 4.01(b)(iv), nothing in this Section 9.02 shall limit the authority of any member of the Investor Member to offer, sell, transfer or assign any interests within such member of the Investor Member in such member’s sole discretion, including, but not limited to, an Affiliate of such Investor Member.  As used in this Section, (i) the term “Affiliate” means any Person directly or indirectly Controlled by, or under direct or indirect common Control with U.S. Bancorp Community Development Corporation (“USBCDC”), (ii) the term “Person” means an individual or entity, including, but not limited to, a corporation, general partnership, joint venture, limited partnership, limited liability company, trust, cooperative, or association and the heirs, executors, where the context so requires, and (iii) the term “Control” or “Controlled” means either ten percent (10%) or more common ownership with USBCDC or, with respect to an entity which is a limited liability company, such entity has USBCDC as a managing member or manager, or with respect to a general or limited partnership, a subsidiary of a U.S. Bancorp, as its general partner.   9.03.            Admission of Substitute Investor Member.     (a)      Subject to the other provisions of this Article IX, an assignee of the Interest of an Investor Member (which shall be understood to include any purchaser, transferee, donee, or other recipient of any disposition of such Interest) shall be deemed admitted as a Substitute Investor Member of the Company only upon the satisfactory completion of the following:     44          (i)        the assignee shall have accepted and agreed to be bound by the terms and provisions of this Agreement by executing a counterpart thereof or an appropriate amendment hereto, and such other documents or instruments as the Managing Member may require in order to effect the admission of such Person as an Investor Member;        (ii)      an amended Agreement and/or Articles evidencing the admission, if necessary, of such Person as an Investor Member shall have been filed for recording, if necessary, pursuant to the requirements to the Act;         (iii)     the assignee shall have represented and agreed in writing as required by Section 9.01;         (iv)    if the assignee is a corporation, the assignee shall have provided the Managing Member with evidence satisfactory to Counsel of its authority to become an Investor Member under the terms and provisions of this Agreement; and         (v)      the assignee or the assignor shall have reimbursed the Company for all reasonable expenses, including all reasonable legal fees and recording charges, incurred by the Company in connection with such assignment.   (b)          For the purpose of allocation of Profits or Losses and Tax Credits, and for the purpose of distributing Net Cash Flow of the Company, a Substitute Investor Member shall be treated as having become, and as appearing in, the records of the Company as a Member upon its signing of an amendment to this Agreement, agreeing to be bound hereby.   (c)          The Managing Member shall cooperate with the Person seeking to become a Substitute Investor Member by preparing the documentation required by this Section and making any official filings and publications.  The Company shall take all such action, including the filing of any amended Agreement and/or Articles evidencing the admission of any Person as an Investor Member, if required, and the making of any other official filings and publications, if required, as promptly as practicable after the satisfaction by the assignee of the Interest of an Investor Member of the conditions contained in this Article IX to the admission of such Person as an Investor Member of the Company.  Any cost or expense incurred in connection with such admission shall be borne by the Substitute Investor Member.   9.04.            Rights of Assignee of Company Interest.     (a)       Except as provided in this Article and as required by operation of law, the Company shall not be obligated for any purpose whatsoever to recognize the assignment by any Investor Member of its Interest until the Company has received actual Notice thereof.     (b)      Any Person who is the assignee of all or any portion of an Investor Member’s Interest, but does not become a Substitute Investor Member and desires to make a further assignment of such Interest, shall be subject to all the provisions of this Article IX to the same extent and in the same manner as any Investor Member desiring to make an assignment of its Interest.     45     9.05.            Put Option     (a)       General.  The Investor Member is hereby granted a right to sell its Company Interest to the Managing Member (or the Managing Member’s assignee, including the Company) for cash at the purchase price specified in Section 9.05(d) (the “Put Price”), at the option of the Investor Member at any time after the date upon which the Pre-Flip Target IRR is projected to occur as reflected in the Projections (the “Put Period”), upon delivery to the Managing Member of a written Notice of purchase (a “Purchase Notice”), stating that all of such Investor Member Interest shall be purchased pursuant to the terms and conditions specified in this Section 9.05.     (b)       Cash Payment.  Any purchase required of the Managing Member pursuant to the provisions of this Section 9.05 shall be consummated by the delivery of the cash representing the Put Price to be received by the Investor Member within fifteen (15) days following receipt of the Purchase Notice.     (c)       Effective Date of Purchase.  The effective date of the purchase shall be deemed to be the date of the payment to the Investor Member described in Section 9.05(b) above.  Upon receipt by the Investor Member of such payment in full, Profits, Losses and Credits shall thereafter accrue to the then-Members of the Company and not the Investor Member.     (d)      Determination of Put Price.  The Put Price shall be in an amount equal to the greater of (i) fair market value of the Investor Member’s Interest, or (ii) $157,974 or (iii) the amount necessary for the Investor Member to achieve the Target IRR.  The fair market value of the Investor Member’s Interest shall be determined by the Managing Member.  If the Put Option is being exercised prior to the Flip Date,  the fair market value of the Investor Member’s Interest shall be determined assuming that the Flip Date has occurred.  If the Investor Member disagrees with the determination by the Managing Member, the fair market value of the Investor Member’s Interest shall be determined by one or more independent appraisers, to be selected as follows.  As soon as practicable and in any event within fifteen (15) days following the delivery by the Investor Member of the Purchase Notice to the Managing Member, the Managing Member and the Investor Member shall select an independent appraiser.  In the event the parties are unable to agree upon an independent appraiser within such fifteen (15) day period, the Managing Member and the Investor Member each, at their own expense, shall select an independent appraiser.  If the difference between the two appraisals is within ten percent (10%) of the lower of the two appraisals, the fair market value shall be the average of the two (2) appraisals.  If the difference between the two (2) appraisals is greater than ten percent (10%) of the lower of the two (2) appraisals, then the two appraisers shall jointly select a third appraiser whose determination of fair market value shall be deemed to be binding on all parties.  The cost of the third appraiser shall be borne equally by the Investor Member and the Managing Member.  The Investor Member shall pay any transfer taxes or other closing costs attributable to the exercise of the Put Option, except that each of the parties shall be responsible for their own legal and accounting expenses.     46     9.06.            Call Option.     (a)       General.  The Investor Member’s Company Interest shall be purchased by the Managing Member for cash at the purchase price specified in Section 9.06 (d) (the “Call Price”), at the option of the Managing Member at any time following the end of the Compliance Period, but prior to the dissolution of the Company, upon delivery by the Managing Member to the Investor Member of a Purchase Notice, stating that all of such Investor Member Interest shall be purchased pursuant to the terms and conditions specified in this Section 9.06.     (b)      Cash Payment.  Any purchase by the Managing Member pursuant to the provisions of Section 9.06(a) shall be consummated by the delivery of the cash to be received by the Investor Member within fifteen (15) days following receipt of the Purchase Notice and determination of the Call Price in accordance with Section 9.06(d).     (c)      Effective Date of Purchase.  The effective date of the purchase shall be deemed to be the date of the payment to the Investor Member described in Section 9.06(b) above.  Upon receipt by the Investor Member of such payment in full, Profits, Losses and Credits shall thereafter no longer accrue to the Investor Member.     (d)      Determination of Call Price.  The Call Price shall be in an amount equal to the greater of (i) the fair market value of the Investor Member’s Interest, or (ii) the amount necessary for the Investor Member to achieve the Target IRR.  The fair market value of the Investor Member’s Interest shall be determined by the Managing Member.  If the Call Option is being exercised prior to the Flip Date,  the fair market value of the Investor Member’s Interest shall be determined assuming that the Flip Date has occurred.  If the Investor Member disagrees with the determination by the Managing Member, the fair market value of the Investor Member’s Interest shall be determined by one or more independent appraisers, to be selected as follows:  As soon as practicable and in any event within fifteen (15) days following the delivery by the Managing Member of the Purchase Notice to the Investor Member, the Managing Member and the Investor Member shall select an independent appraiser.  In the event the parties are unable to agree upon an independent appraiser within such fifteen (15) day period, the Managing Member and the Investor Member each shall select an independent appraiser.  If the difference between the two appraisals is within ten percent (10%) of the lower of the two appraisals, the fair market value shall be the average of the two (2) appraisals.  If the difference between the two (2) appraisals is greater than ten percent (10%) of the lower of the two (2) parties.  The Managing Member shall pay the cost of any appraiser(s) selected pursuant to this Section 9.06(d), as well as any transfer taxes or other closing costs attributable to the exercise of the Call Option.   47   ARTICLE X. RIGHTS AND OBLIGATIONS OF INVESTOR MEMBER   10.01.          Management of the Company.   An Investor Member shall not take part in the management or control of the business of the Company nor transact any business in the name of the Company.  Except as otherwise expressly provided in this Agreement, no Investor Member shall have the power or authority to bind the Company or to sign any agreement or document in the name of the Company.  No Investor Member shall have any power or authority with respect to the Company except insofar as the consent of any Investor Member shall be expressly required and except as otherwise expressly provided in this Agreement.   10.02.          Limitation on Liability of Investor Member.   The liability of each Investor Member shall be limited to its Capital Contribution as and when payable under the provisions of this Agreement.  No Investor Member shall have any other liability to contribute money to, or in respect of the liabilities or obligations of, the Company except as provided in the Act, nor shall any Investor Member be personally liable for any obligations of the Company, including, but not limited to, any obligations, financial or otherwise, of the Company under the Project Documents.  No Investor Member shall be obligated to make loans to the Company.   48   ARTICLE XI. PROFITS, LOSSES AND DISTRIBUTIONS   11.01.          Allocation of Profits, Losses, Credits and Cash Distributions.     (a)       Prior to the Flip Date, after application of Section 11.10, all Operating Profits and Operating Losses, except those gains and losses referred to in Section 11.03, and all Tax Credits shall be allocated among the Members in accordance with their Percentage Interests, provided, however, at such time as the Investor Member’s Capital Account has been reduced to an amount equal to four times the annual Tax Credit basis reduction (after taking into account all Cash Flow distributions and Tax Credit basis reductions for such year)  all Operating Losses incurred thereafter until the Flip Date shall be allocated to the Managing Member.     (b)       On and following the Flip Date, after application of Section 11.10, all Operating Profits and Operating Losses, except those gains and losses referred to in Section 11.03, and all Tax Credits shall be allocated among the Members in accordance with Residual Percentage Interests.     (c)       In any year in which a Member sells, assigns or transfers all or any portion of an Interest to any Person who during such year is admitted as a substitute Member, the share of all Profits or Losses allocated to, and of all Net Cash Flow and of all cash proceeds distributable under Section 11.04 distributed to, all Members which is attributable to the Interest sold, assigned or transferred shall be allocated and distributed to the assignee from and after the first day of the calendar month following the month in which the assignee executes this Agreement; provided, however, that the assignor and the assignee may, by agreement, make special provisions for the allocation of items of Profits or Losses, deduction or credit as may from time to time be permitted under the Code, and for the distributions of Net Cash Flow and the proceeds of Capital Transactions, but such allocation shall be binding as to the Company only after it shall have received Notice thereof from the assignor and assignee.     (d)      The Company shall, subject to any required approval by the Lender, distribute Net Cash Flow quarterly in the manner provided in this Agreement after the reports specified in Section 13.04(b) have been received and reviewed by the Investor Member.  In particular, the Company shall distribute Net Cash Flow, following the funding of reserves, if any, pursuant to Section 8.19:        (i)       Prior to the Flip Date to the Members as follows:   (A) 75% to the Investor Member first to the repayment of any Subordinated Loans made by the Investor Member and then as a distribution, and (B) 25% to the Managing Member first to repay any amounts owed under the Development Agreement, then to repay any Operating Deficit Loans and/or Subordinated Loans made by the Managing Member and then as a distribution,  provided, however,  the Investor Member’s share of Net Cash Flow shall, to the extent necessary, increase (and the Managing Member’s share shall correspondingly decrease) in an amount necessary for the Investor Member to receive cash flow in the amount set forth in the Projections for such year; and     49           (ii)     On and following the Flip Date, to the Members as follows:  5% to the Investor Member and 95% to the Managing Member.     (e)       In the event that there is a determination that there is any original issue discount, imputed interest or stated interest attributable to the Capital Contribution of any Member, or any loan between a Member and the Company, any income or deduction of the Company attributable to such imputed interest, stated interest or original issue discount on such Capital Contribution or loan (whether stated or unstated) shall be allocated solely to such Member.     (f)        If any Member’s Interest in the Company is reduced but not eliminated because of the admission of new Members or otherwise, or if any Member is treated as receiving any items of property described in Section 751(a) of the Code, the Member’s Interest in such items of Section 751(a) property that was property of the Company while such Person was a Member shall not be reduced, but shall be retained by the Member so long as the Member has an Interest in the Company and so long as the Company has an Interest in such property.     (g)       In accordance with Section 704(c) of the Code (relating to allocations with respect to appreciated contributed property) and the Treasury Regulations thereunder, income, gain, loss, and deduction with respect to any property contributed to the capital of the Company shall be allocated, solely for tax purposes, among the Members so as to take account of any variation between the adjusted basis of such property to the Company for federal income tax purposes and its fair market value.  Any elections or other decisions relating to such allocations shall be made by the Managing Member in any manner that reasonably reflects the purpose and intention of this Agreement.     (h)       In the event that the Managing Member makes any Operating Deficit Loans pursuant to Section 8.09(b), any deductions or losses of the Company attributable to the use of those funds shall be specially allocated to the Managing Member.     (i)        Notwithstanding anything herein to the contrary,  if the Investor Member receives Net Cash Flow in any year less than the amount projected for such year as set forth in the Projections (any such shortfall being referred to as the “Annual Cash Deficiency”),  then the Managing Member shall use best efforts to cause the Company to sell RECs (then held by the Company) to a third party for an amount sufficient to distribute to the Investor Member proceeds equal to such Annual Cash Deficiency.  Upon receipt of any such sale proceeds,  the Company shall make a distribution to the Investor Member up to an amount equal to the Annual Cash Deficiency.  Any proceeds received by the Company in excess of the Annual Cash Deficiency shall be distributed to the Managing Member.   11.02.          Determination of Profits or Losses.   Profits or Losses for all purposes of this Agreement shall be determined in accordance with the accrual method of accounting for federal income tax purposes.     50     11.03.          Allocation of Profits or Losses from a Capital Transaction.   After application of Section 11.10, Profits or Losses from a Capital Transaction recognized by the Company shall be allocated in the following manner:     (a)      All Profits shall be allocated (i) first, to the Members with negative Capital Account balances, in proportion to such balances, that portion of gains (including any Profits treated as ordinary income for federal income tax purposes) which is equal in amount to such Members’ negative Capital Accounts in the Company; (ii) second, Profits in excess of the amount allocated under (i) shall be allocated to the Members in the amount and to the extent necessary to increase their Capital Accounts so that the proceeds of such Transaction, if then distributed under Section 11.04, would be distributed in proportion to the Members’ Percentage Interest or Residual Percentage Interests, as applicable.     (b)       Losses shall be allocated (i) first, to the extent of and in such proportions to the Members’ positive Capital Accounts; and (ii) second, the amount of any Losses that remain after the allocations in subparagraph (b)(i) to the Members in accordance with the manner in which they bear the economic risk of loss associated with such Losses.  In the event that no Member bears an economic risk of loss, then all Members shall be allocated Losses in excess of the amounts allocated under (i) and (ii) in accordance with their Percentage Interest or Residual Percentage Interests, as applicable, unless otherwise prohibited by this Agreement.     (c)       If any portion of the gains from a Capital Transaction are treated as ordinary income for federal income tax purposes under Sections 1245 and 1250 of the Code (“Ordinary Income Amount”) such amount of ordinary income shall be allocated on a dollar for dollar basis to those Members to whom the items of Company deduction or loss giving rise to the Ordinary Income Amount had been previously allocated.   11.04.          Distribution of Proceeds from a Capital Transaction.   Except as may be required under Section 12.02(b), the net proceeds resulting from any Capital Transaction, as the case may be, shall be distributed and applied in the following order of priority:     (a)      to the payment of all matured debts and liabilities of the Company (including amounts due pursuant to any Loan and all expenses of the Company incident to any sale or refinancing), excluding any amounts owed under the Development Agreement and any other debts and liabilities of the Company to Members or any Affiliates;     (b)      to the setting up of any reserves which the Liquidator (or the Managing Member if the distribution is not pursuant to the liquidation of the Company) deems reasonably necessary for contingent, unmatured or unforeseen liabilities or obligations of the Company;      (c)      to the Investor Member,  in an amount necessary for the Investor Member to achieve its Target IRR;     51       (d)      to the repayment of any unrepaid debts and liabilities (including unpaid fees) owed to the Members or any Affiliates by the Company for Company obligations, including any loans made pursuant to Section 5.06, any amounts owed under the Development Agreement and any Operating Deficit Loans;     (e)       to the Members in accordance with their Percentage Interests or Residual Percentage, as applicable.   11.05.          Capital Accounts.   A separate Capital Account shall be maintained and adjusted for each Member.  There shall be credited to each Member’s Capital Account the amount of its Capital Contribution, the fair market value of any property contributed to the Company (net of any liabilities secured by such property) and such Member’s distributive share of the Profits for tax purposes of the Company; and there shall be charged against each Member’s Capital Account the amount of all Net Cash Flow distributed to such Member, the fair market value of any property distributed to such Member (net of any liabilities secured by such property), the net proceeds resulting from the liquidation of the Company’s assets or from any Capital Transaction distributed to such Member, and such Member’s distributive share of the Losses for tax purposes of the Company.  Each Member’s Capital Account shall be maintained and adjusted in accordance with the Code and the Treasury Regulations thereunder.  The foregoing provisions and the other provisions of this Agreement relating to the maintenance of Capital Accounts are intended to comply with Treasury Reg. §1.704-1(b), and shall be interpreted and applied in a manner consistent with such regulations.  It is the intention of the Members that the Capital Accounts maintained under this Agreement be determined and maintained throughout the full term of this Agreement in accordance with the accounting rules of Treasury Reg. §1.704-1(b)(2)(iv).   11.06.          Authority of Managing Member to Vary Allocations to Preserve and Protect Members’ Intent.   It is the intent of the Members that each Member’s distributive share of income, gain, loss, deduction, or credit (or item thereof) shall be determined and allocated in accordance with this Article XI to the fullest extent permitted by Section 704(b) of the Code.  Subject to the Consent of the Investor Member, the Managing Member hereby is authorized and directed to allocate income, gain, loss, deduction, or credit (or item thereof) arising in any year differently than otherwise provided for in this Article XI to the extent that allocating income, gain, loss, deduction or credit (or item thereof) in the manner provided for in Article XI would, in the opinion of the tax advisor to the Company (tax counsel or the Accountants) cause the determinations and allocations of each Member’s distributive share of income, gain, loss, deduction, or credit (or item thereof) not to be permitted by Section 704(b) of the Code and Treasury Regulations promulgated thereunder.  Any allocation made pursuant to this Section 11.06 shall be deemed to be a complete substitute for any allocation otherwise provided for in this Article XI and no amendment of this Agreement or approval of any Member shall be required.     52     11.07.          Designation of Tax Matters Partner.   The Managing Member hereby is designated as Tax Matters Partner of the Company, and shall engage in such undertakings as are required of the Tax Matters Partner of the Company, as provided in Treasury Regulations pursuant to Section 6231 of the Code.  Each Member, by the execution of this Agreement, Consents to such designation of the Tax Matters Partner and agrees to execute, certify, acknowledge, deliver, swear to, file and record at the appropriate public offices such documents as may be necessary or appropriate to evidence such Consent.  In the event of a withdrawal or removal of the Managing Member pursuant to Article VI or Section 8.13 hereof, the Company shall designate a successor Tax Matters Partner and file a timely notice of such designation with the Internal Revenue Service.   Notwithstanding any other provision of this Agreement, the Investor Member hereby is granted authority at any time to be admitted as a Managing Member by converting all or portion of its Investor Member Interest to a Managing Member Interest for the purpose of acting as the Tax Matters Partner with all the authority and powers given to the Managing Member as Tax Matters Partner of the Company under the Code and under this Agreement.  Unless otherwise specifically provided or agreed, the new Tax Matters Partner Managing Member in these circumstances will not be responsible for or have the right to conduct any operational or managerial functions of the Company besides those required to discharge its responsibilities as Tax Matters Partner.  The Investor Member may exercise its right to assume the Tax Matters Partner responsibilities for the Company, as provided herewith, upon ten (10) days Notice to the then existing Tax Matters Partner and may continue as Tax Matters Partner indefinitely.  In the event that the Investor Member exercises its right to become a Managing Member and to assume duties of the Tax Matters Partner, the pre-existing Tax Matters Partner will resign in accordance with Treasury Reg. § 301.6231(a)(7)-1(i) and will redesignate the new Managing Member as Tax Matters Partner in accordance with Treasury Reg. § 301.6231(a)(7)-1(e).  Each Member, by its execution of this Agreement, Consents to such admission and designation and agrees to execute, certify, acknowledge, deliver, swear to, file and record at the appropriate public offices such documents as may be necessary or appropriate to evidence such Consent.  The Investor Member shall, upon such admission, replace the Managing Member as Tax Matters Partner and shall have thereafter all the authority and powers given to the Managing Member as Tax Matters Partner of the Company under the Code and under this Agreement.   11.08.          Authority of Tax Matters Partner.     (a)       The Tax Matters Partner shall have and perform all of the duties required under the Code, including the following duties:         (i)       furnish the name, address, Profits interest, and taxpayer identification number of each Member to the IRS; and        (ii)      within five (5) calendar days after the receipt of any correspondence or communication relating to the Company or a Member from the IRS, the Tax Matters Partner shall forward to each Member a photocopy of all such correspondence or communication(s).  The Tax Matters Partner shall, within five (5) calendar days thereafter, advise each Member in writing of the substance and form of any conversation or communication held with any representative of the IRS.     53       (b)      The Tax Matters Partner shall, upon request by the Investor Member, permit the Investor Member to include its attorney in the power of attorney (Form 2848) for the Company for any taxable years under a tax audit or in a tax administrative appeals process.     (c)       The Tax Matters Partner shall not without the Consent of the Investor Member :        (i)       extend the statute of limitations for assessing or computing any tax liability against the Company (or the amount of character of any Company tax items);        (ii)      settle any audit with the IRS concerning the adjustment or readjustment of any limited liability company items) (within the meaning of Section 6231(a)(3) of the Code);        (iii)      file a request for an administrative adjustment with the IRS at any time or file a petition for judicial review with respect to any such request;        (iv)     initiate or settle any judicial review or action concerning the amount or character of any limited liability company tax item(s) (within the meaning of Section 6231(a)(3) of the Code);        (v)      intervene in any action brought by any other Member for judicial review of a final adjustment; or        (vi)     take any other action not expressly permitted by this Article XI on behalf of the Company or any Member in connection with any administrative or judicial tax proceeding.     (d)      In the event of any Company-level proceeding instituted by the IRS pursuant to Sections 6221 through 6233 of the Code, the Tax Matters Partner shall consult with the Investor Member regarding the nature and content of all actions to be taken and defenses to be raised by the Company in response to such proceeding.  The Tax Matters Partner also shall consult with the Investor Member regarding the nature and content of any proceeding pursuant to Sections 6221 through 6233 of the Code instituted by or on behalf of the Company (including the decision to institute proceedings, whether administrative or judicial, and whether in response to a previous IRS proceeding against the Company or otherwise).   54   11.09.          Expenses of Tax Matters Partner. The Company shall indemnify and reimburse the Tax Matters Partner and the Investor Member for all expenses, including legal and accounting fees, claims, liabilities, losses and damages incurred in connection with any administrative or judicial proceeding with respect to the tax liabilities of the Members.  The payment of all such expenses shall be made before any distributions are made from Net Cash Flow or any discretionary reserves are set aside by the Managing Member. The taking of any action and the incurring of any expense by the Tax Matters Partner in connection with any such proceeding, except to the extent required by law, is a matter in the sole discretion of the Tax Matters Partner and the provisions on limitations of liability of the Managing Member and indemnification set forth in Section 8.07 of this Agreement shall be fully applicable to the Tax Matters Partner in its capacity as such.   11.10.          Special Allocations.     (a)      Notwithstanding any other provision of this Agreement, if there is a net decrease in the Company’s minimum gain attributable to nonrecourse liabilities during any taxable year, each Member shall be specifically allocated a pro rata portion of each of the Company’s items of income and gain for such year (and, if necessary for subsequent years) in proportion to, and to the extent of, an amount equal to such Member’s share of the net decrease in such minimum gain during such taxable year as determined in accordance with the provisions of Treasury Reg. §§ 1.704-2(f), 1.704-2(g)(2).     (b)      Notwithstanding any other provision of this Agreement, if there is a net decrease in the amount of the Company’s minimum gain during any taxable year with respect to a Member nonrecourse debt, the Member bearing the economic risk of loss with respect to such Member nonrecourse debt shall be specially allocated a pro rata portion of each of the Company’s items of income and gain for such taxable year (and, if necessary, for subsequent years) in proportion to, and to the extent of the amount of such Member’s share of the net decrease in such minimum gain during such taxable year as determined in accordance with the provisions of Treasury Reg. §§1.704-2(i)(4), 1.704-2(j)(2))(ii).     (c)       If in any taxable year there is a net increase in the amount of Company minimum gain attributable to a Member nonrecourse debt, the Member bearing the economic risk of loss attributable to such Member nonrecourse debt shall be specially allocated items of Company deduction and loss in proportion to and to the extent of the excess of:         (i)       the amount of such net increase, over         (ii)      the aggregate amount of any distributions during such taxable year to such Member of the proceeds of such Member nonrecourse debt that are allocable to such increase in Company minimum gain.  Items to be so allocated shall be determined in accordance with Treasury Reg. §1.704-2(j)(l).   The allocations provided for in this Section 11.10(c) are intended to comply with the allocations required by Treasury Reg. §1.704-2(i) and shall be applied consistently therewith.  The Company’s minimum gain shall be determined in accordance with Treasury Reg. § 1.704-2(d).     (d)      In the event any Member unexpectedly receives any adjustments, allocations or distributions described in Treasury Reg. §§1.704-1(b)(2)(ii)(d)(4), (5) or (6) which cause or increase an Adjusted Capital Account Deficit (as defined below) of such Member, items of Company income and gain shall be specially allocated to each such Member in an amount and manner sufficient to eliminate (to the extent required by the Treasury Regulations under Code Section 704(b)) such Member’s Adjusted Capital Account Deficit as quickly as possible.     55     For purposes of this Section 11.10, the term “Adjusted Capital Account Deficit” means, with respect to any Member, the deficit balance, if any, in such Member’s Capital Account as of the end of the relevant fiscal year, after giving effect to the following adjustments:        (i)       Credit to such Capital Account any amounts which such Member is obligated to restore pursuant to any provision of this Agreement or is otherwise treated as being obligated to restore under Treasury Reg. §1.704-1(b)(2)(ii)(c) or is deemed to be obligated to restore pursuant to the penultimate sentence of Treasury Reg. §§1.704-2(g)(1) and 1.704-2(i)(5); and        (ii)      Debit to such Capital Account the items described in Treasury Reg. §1.704-1(b)(2)(ii)(d)(4), (5) and (6).   The foregoing definition of Adjusted Capital Account Deficit is intended to comply with the provisions of Treasury Reg. §1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith.     (e)      Notwithstanding any other provision of this Section 11.10, in no event shall Losses of the Company be allocated to any Investor Member if such allocation would result in such Member having an Adjusted Capital Account Deficit at the end of any taxable year.  All Losses in excess of the limitation set forth in this Section 11.10(e) shall be allocated to each other Member that does not have an Adjusted Capital Account Deficit.     (f)       In the event that income, loss or items thereof are allocated to one or more Members pursuant to Sections 11.10(a), (b), (c), (d) or (e), subsequent income, loss or items thereof shall be allocated (subject to the provisions of Section 11.10(a), (b), (c), (d) or (e)) to the Members so that, to the extent possible in the judgment of the Managing Member and permitted by Treasury Regulations, the net amount of allocations shall be equal to the amount that would have been allocated had Section 11.10 not been applied.     (g)      Notwithstanding any other provision of this Agreement to the contrary, commencing in the year following the year in which the Investor Member’s Capital Account has been reduced to an amount equal to four times the annual Tax Credit basis reduction and continuing until the Flip Date, the Investor Member shall be allocated gross income in an amount equal to the amount of Cash flow distributed or to be distributed to the Investor Member pursuant to Section 11.01(d) of this Agreement.   56   ARTICLE XII. SALE, DISSOLUTION AND LIQUIDATION   12.01.          Dissolution of the Company.   The Company shall be dissolved upon the earlier of the expiration of the term of the Company, or upon:     (a)       the withdrawal, Bankruptcy or dissolution of a Managing Member who  is at that time the sole Managing Member, unless a majority in Interest of the other Members within ninety (90) days after receiving Notice of such withdrawal, Bankruptcy  or dissolution elects to designate a successor Managing Member(s) and continue the Company upon the admission of such successor Managing Member(s) to the Company;     (b)       the sale or other disposition of all or substantially all of the assets of the Company; or     (c)      any other event causing the dissolution of the Company under the laws of the Formation State.    12.02.          Winding Up and Distribution.     (a)      Upon the dissolution of the Company pursuant to Section 12.01, (i) a Certificate of Cancellation shall be filed in such offices within the Formation State as may be required or appropriate, and (ii) the Company business shall be wound up and its assets liquidated as provided in this Section 12.02 and the net proceeds of such liquidation shall be distributed in accordance with Section 12.02(b).     (b)      After the allocation of all Profits and Losses, including the allocation of gain or loss from Capital Transactions, the liquidator shall distribute net assets available for distribution to Members in accordance with the positive balances of their respective Capital Accounts.  It is the intent of the Members that, upon liquidation of the Company, any liquidation proceeds available for distribution to the Members shall be distributed in accordance with the Members’ respective Capital Account balances and the Members believe that distributions under Section 11.04 will effectuate such intent.     (c)      The Liquidator shall file all certificates and notices of the dissolution of the Company required by law.  The Liquidator shall proceed without any unnecessary delay to sell and otherwise liquidate the Company’s property and assets; provided however, that if the Liquidator shall determine that an immediate sale of part or all of the Company property would cause undue loss to the Members, then in order to avoid such loss, the Liquidator may, except to the extent provided by the Act, defer the liquidation as may be necessary to satisfy the debts and liabilities of the Company to Persons other than the Members.  Upon the complete liquidation and distribution of the Company assets, the Members shall cease to be Members of the Company, and the Liquidator shall execute, acknowledge and cause to be filed all certificates and notices required by the law to terminate the Company.     57       (d)      Upon the dissolution of the Company pursuant to Section 12.01, the accountants for the Company shall promptly prepare, and the Liquidator shall furnish to each Member, a statement setting forth the assets and liabilities of the Company upon its dissolution.  Promptly following the complete liquidation and distribution of the Company property and assets, the Company accountants shall prepare, and the Liquidator shall furnish to each Member, a statement showing the manner in which the Company assets were liquidated and distributed.   58   ARTICLE XIII. BOOKS AND RECORDS, ACCOUNTING TAX ELECTIONS, ETC.   13.01.          Books and Records; Accounting Method.   The books and records of the Company shall be maintained on an accrual basis in accordance with generally-accepted accounting principles (“GAAP”).  These and all other records and financial statements of the Company, including information relating to the status of the Project and information with respect to the sale of goods or services to the Company, shall be kept at the principal office of the Company and shall be available for examination there by any Member or by any member of the Investor Member, or its duly authorized representative, at any and all reasonable times.  Any Member, or its duly authorized representative, upon paying the costs of collection, duplication and mailing, shall be entitled to a copy of the list of names and addresses of each Investor Member.   13.02.          Bank Accounts.   All funds of the Company not otherwise invested shall be deposited in one or more accounts maintained at US Bank, and withdrawals shall be made only in the regular course of Company business on such signature or signatures as the Managing Member may, from time to time, determine.   13.03.          Accountants.   The Accountants shall annually prepare for execution by the Managing Member all tax returns of the Company, and shall certify, in accordance with GAAP, a balance sheet, a profits and losses statement, and a cash flow statement.  The Accountants shall annually audit the books of the Company.  With respect to each fiscal year during the Company’s operations, at such time as the Accountants shall have prepared the proposed tax return for such year, the Accountants shall provide copies of such proposed tax return to the Investor Member’s accountants for their review and comment.  Any changes in such proposed tax return recommended by the Investor Member’s accountants shall be made by the Accountants prior to the completion of such tax return for execution by the Managing Member.  A full detailed statement shall be furnished to all Members, showing such assets, properties, and net worth and the profits and losses of the Company for the preceding fiscal year.  All Members shall have the right and power to examine and copy, at any and all reasonable times, the books, records and accounts of the Company.   13.04.          Reports to Members.   The Managing Member shall, at Company expense, cause to be prepared and delivered to the Investor Member:     (a)       Within fifteen (15) business days of event specified:         (i)      a report of any reduction or termination of any reserve by application of funds therein for purposes materially different from those for which such reserve was established;     59           (ii)     a report of any notice of a material fact which may substantially affect distributions pursuant to this Agreement; and         (iii)    a listing of insurance policy changes providing coverage for the projects, detailing the type, level of coverage, deductibles, insurance carrier and term.     (b)      Within fifteen (15) business days after the end of each calendar quarter after Placement In Service:        (i)       unaudited financial statements for the Company which may be prepared and certified by the Managing Member, including a balance sheet, statement of income or loss and statement of cash sources and applications;        (ii)      reports of Company operations, including an unaudited comparison of actual expenditures during the applicable quarter with the projections for such quarter as set forth in the Budget approved pursuant to Section 8.17;        (iii)     a report of any Excess Development Costs or Operating Deficits or anticipated Excess Development Costs or Operating Deficits of the Company and the manner in which such Excess Development Costs or Operating Deficits will be funded;         (iv)    a report of any material default by the Company under any Operating Documents or in payment of any mortgage, taxes, interest or other obligation on secured or unsecured debt;         (v)     a report of fees, commissions, compensation, and other remuneration and reimbursed expenses paid by the Company;         (vi)    a report of the activities and investments of the Company during the quarter;         (vii)   a report of such other information as may be deemed by the Company to be material to the existence or operation of the Company or its business or of the Project;        (viii)   a report of the activities and investments of the Company during the quarter including a description of all transactions;         (ix)     an analytic report of the energy produced by the Project and compared to the projected production incorporated into the Projections.     (c)       By March 1 of each year:        (i)      all necessary tax reporting information regarding the Company required by the Investor Member for preparation of its respective federal, state, and local income or franchise tax or information returns, or those of its members, for the preceding fiscal year, including form K-1.     60          (ii)      a copy of the Company’s federal, state and local tax or information returns for the prior fiscal year, and proof of payment of property taxes and insurance premiums for the preceding fiscal year;        (iii)     a table reconciling taxable income to net book income, a statement showing all major categories of adjustments to the Members’ Capital Accounts in accordance with this Agreement for the fiscal year;         (iv)    with the first tax return prepared following Substantial Completion, a table comparing the actual total depreciable basis with the depreciable basis indicated in the Projections;        (v)     audited financial statements prepared by the Accountants, including: a balance sheet, a statement of operations, a statement of cash flows, a statement summarizing the calculation of Tax Credits and Depreciation; a statement of changes in Members’ capital accounts; and, if requested by the Investor Member, the Managing Member will provide copies of its most recently filed SEC Form 10Qs;        (vi)    a statement summarizing the distributions, fees, commissions, compensation and other remuneration and reimbursed expenses paid for such year to any Member or any Affiliate thereof and the services performed or goods provided therefore;        (vii)   summary report of the activities during the fiscal year with the report of the respective accountants thereon to the effect that such statements present fairly the financial position of the Company at the end of the fiscal year and the results of its operations for the year then ended, in conformity with generally accepted accounting principles applied on a consistent basis;         (viii)  a report on the balances of all reserve accounts of the Company as of the end of the fiscal year; and     (d)       Immediately:        (i)       upon the occurrence of any natural disaster and/or incident and/or widespread property, damage having an adverse impact on the Project, a report of the extent of the damage to the Project, any expected delay in the Rehabilitation, and the effect such damage might have on the operations or marketing and lease-up activity of the Project;        (ii)       the death, dissolution or Bankruptcy of the Managing Member;        (iii)     from time to time, as may be reasonably requested by the Investor Member, information on the state of the business, financial condition, and affairs of the Company or the Project or any other information required to be delivered to the members of the Investor Member ;     61          (iv)     upon learning of a condition or circumstance which is expected to reduce below the projected levels the amount of Tax Credits available to the Company, a detailed statement describing such matters; or        (v)      upon learning of any violation of any health, safety, building code, or other statute or regulation by the Company, a detailed statement describing such matters along with any written notices thereof received by the Company from any federal, state, or local governmental entity.     (e)       Within three (3) business days after receipt by the Company:        (i)       copies of all reports, notices, filings or correspondence sent or received regarding the occurrence of any event which has or may have a material adverse effect on the Company or the Project (including, without limitation, any reports, notices, filings or correspondence with any governmental agency regarding the Tax Credits; default notices, notices of reductions or elimination of benefits under any federal, state, or local program previously enjoyed by the Company; notice of any IRS proceeding involving the Company; notice of any demand for payment or draw under any construction completion guaranty, performance bond, or letter of credit regarding the Company);         (ii)     copies of all lawsuits or legal proceedings or alleged violations of law, and notices of all actions taken, or proposed to be taken, affecting the Company; and        (iii)     copies of all lawsuits or legal proceedings or alleged violations of law, and notices of all actions taken, or proposed to be taken, against the Managing Member and either related to the Company or having any material adverse consequences to the Company.     (f)       Within thirty (30) days after receipt by the Company, copies of any lender’s periodic reports.     (g)       Contemporaneously with their submission to any party, copies of all reports and information submitted.     (h)      Prior to September 1 of each year, an estimate of the Investor Member’s share of Tax Credits, Net Cash Flow, distributions and Profits or Losses of the Company for federal income tax purposes for the current fiscal year.  Such estimate shall be prepared by the Managing Member or the Accountants.     (i)        In the event that the reports or information provided for in Sections 13.04(c)(i) or (v) above are, at any time, not provided with the time period(s) specified in such Sections, the Managing Member shall be obligated to pay to the Investor Member  the sum of $25 per day, as liquidated damages, for each day from the date upon which such reports or information is (are) due pursuant to the provisions of the aforesaid Sections until the date upon which such reports or information is (are) provided.     62     13.05.          Section 754 Elections.   In the event of a transfer of all or any part of the Interest of a Managing Member or of an Investor Member (or a member or partner thereof), the Company shall elect, pursuant to Sections 743 and 754 of the Code (or any corresponding provision of succeeding law), to adjust the basis of the Company property if, in the opinion of the Investor Member, based upon the advice of the Accountants, such election would be most advantageous to the Investor Member.  Each Member agrees to furnish the Company with all information necessary to give effect to such election.  The Managing Member shall not make other elections required or permitted under the Code unless it has received the direction or prior Consent of the Investor Member.   13.06.          Fiscal Year.   Except as the Code may otherwise require, the fiscal year of the Company shall be the fiscal year of the Investor Member, which is currently the calendar year.  The Investor Member will inform the Managing Member of any change in its fiscal year.   13.07.          Investor Member Inspection.   The Investor Member shall have the right to physically inspect the interior and exterior of the Project and the Company’s books, records and sublease documents.  The Investor Member shall provide written notice to the Managing Member of any such inspection not less than two weeks prior to the inspection.  The Managing Member shall correct any deficiencies of which it received written notice from the Investor Member to the Investor Member’s reasonable satisfaction within thirty (30) days from receipt of written notice.   63   ARTICLE XIV. AMENDMENTS   14.01.          Proposal and Adoption of Amendments.     (a)       This Agreement may be amended by the Managing Member with the Consent of the Investor Member or by the Investor Member with the Consent of the Managing Member.     (b)      The Company shall bear the expense, including attorneys’ fees and filing expenses, of amendments to this Agreement provided however, that if the Company does not have sufficient Operating Income to bear such expenses the party proposing an amendment to this Agreement shall bear the expenses thereof.   64 ARTICLE XV. CONSENTS, VOTING AND MEETINGS   15.01.          Method of Giving Consent.   Any Consent required by this Agreement may be given by a written Consent of the consenting Member and received by the Managing Member at or prior to the doing of the act or thing for which the Consent is solicited.   15.02.          Submissions to Investor Member.   The Managing Member shall give Investor Member Notice of any proposal or other matter required by any provision of this Agreement or by law to be submitted for consideration and approval of such Investor Member.  Such Notice shall include any information required by the relevant provision or by law.   65   ARTICLE XVI. GENERAL PROVISIONS   16.01.          Burden and Benefit.   The covenants and agreements contained herein shall be binding upon and inure to the benefit of the heirs, executors, administrators, successors and assigns of the respective parties hereto.   16.02.          Applicable Law.   the Formation State.   16.03.          Counterparts.   This Agreement may be executed in several counterparts, each of which shall be deemed to be an original copy and all of which together shall constitute one agreement binding on all parties hereto, notwithstanding that all the parties shall not have signed the same counterpart.   16.04.          Separability of Provisions.   Each provision of this Agreement shall be considered separable and if for any reason any provision which is not essential to the effectuation of the basic purposes of this Agreement is determined to be invalid and contrary to any existing or future law, such invalidity shall not impair the operation of or affect those provisions of this Agreement which are valid.   16.05.          Entire Agreement.   This Agreement and the documents referred to herein set forth all (and is intended by all parties to be an integration of all) of the representations, promises, agreements and understandings among the parties hereto with respect to the Company, the Company business and the property of the Company, and there are no representations, promises, agreements or understandings, oral or written, express or implied, among them other than as set forth or incorporated herein or therein.   16.06.          Liability of the Investor Member .   Notwithstanding anything to the contrary contained herein, neither the Investor Member  nor any of its members, shall have any personal liability to any of the parties to this Agreement with regard to the representations and covenants extended, or the obligations undertaken, by the Investor Member  under this Agreement, or as otherwise provided  by law.  Subject to the foregoing, in the event that the Investor Member  shall be in default under any of the terms of this Agreement, the sole recourse of any party hereto for any indebtedness due hereunder, or for any damages resulting from any such default by the Investor Member, shall be against the amounts contributed or to be contributed as a Capital Contribution of the Investor Member.     66     16.07.          Environmental Protection.     (a)       The Managing Member represents and warrants to the best of its knowledge that (i) it has no knowledge of any deposit, storage, disposal, burial, discharge, spillage, uncontrolled loss, seepage or filtration of any Hazardous Substances at, upon, under or within the Building or any contiguous real estate, and (ii) it has not caused nor permitted to occur, and it shall not permit to exist, any condition which may cause a discharge of any Hazardous Substances at, upon, under or within the Building or on any contiguous real estate.     (b)      The Managing Member further represents and warrants to the best of its knowledge that (i) it has not been, nor will it be involved in operations at or, pursuant to its best efforts, near the Building, which operations could lead to (A) the imposition of liability under the Environmental Laws on the Company or on any other subsequent or former owner of the Project or (B) the creation of a lien on the Project under the Environmental Laws or under any similar laws or regulations; and (ii) the Managing Member has not permitted, and will not permit, any subtenant or occupant of the Building to engage in any activity that could impose liability under the Environmental Laws on such subtenant or     (c)      The Managing Member shall comply strictly and in all respects with the requirements of the Environmental Laws and related regulations and with all similar laws and regulations relating to the Project and/or the Company.  Further, the Managing Member shall deliver to the Investor Member  a copy of any notice relating to the Project and/or the Company it may receive that a violation of such laws or regulations exist.     (d)      The Managing Member shall at all times indemnify and hold harmless the Investor Member  and its members against and from any and all claims, suits, actions, debts, damages, costs, charges, losses, obligations, judgments, and expenses, of any nature whatsoever, suffered or incurred by the Investor Member  or its members, under or on account of the Environmental Laws or any similar laws or regulations, including the assertion of any lien thereunder relating to the Project and/or the Company.  The foregoing indemnification shall be a recourse obligation of the Managing Member and shall survive the dissolution of the Company and/or the retirement, insolvency, Bankruptcy or withdrawal of the Managing Member.   16.08.          Notices.     (a)       Any Notice required by the provisions of this Agreement to be given to the Investor Member shall be addressed as follows:       UFA Renewable Energy Fund I, LLC     24 NW First Avenue, Suite 470     Portland, Oregon 97209     Attention:  ITC Asset Manager     Telephone: (503) 226-1370     Facsimile: (503) 796-5865     67          Firstar Development LLC      1307 Washington Avenue, Suite 300     Saint Louis, MO 63103      Attention:  Director of Asset Management--Solar      Telephone:  (314) 335-2600      Facsimile:  (314) 335-2602     With copies to:      Nixon Peabody LLP      401 Ninth Street, N.W.      Suite 900      Washington, D.C. 20004      Attention:  Herbert F. Stevens, Esq.      Telephone:  (202) 585-8000      Facsimile:  (202) 585-8080       (b)       Any Notice required by the provisions of this Agreement to be given to the Company or the Managing Member shall be addressed as follows:      Hoku Solar, Inc.      1288 Ala Moana Blvd., Suite 220      Honolulu, HI  96814      Attention:  Dustin Shindo      Telephone: (808) 682-7800      Facsimile:  (808) 440-0357      With copies to:        Stoel Rives LLP      900 SW Fifth, Suite 2600      Portland, Oregon 97204      Attention:  Patrick G. Boylston      Telephone:  (503) 294-9116      Facsimile:  (503) 220-2480   16.09.          Legal Fees.   In the event an action, suit or proceeding is commenced by one Member against the other in connection with this Agreement and/or the transaction contemplated hereby, the non-prevailing Member shall be required to reimburse the prevailing Member for all legal fees, costs and expenses incurred by the prevailing Member in connection therewith.   [Remainder of Page Intentionally Blank; Signature Page Follows]     68   IN WITNESS WHEREOF, the parties have set their signatures to this Operating Agreement of Hoku Solar Power I, LLC, as of the date first written above.   MANAGING MEMBER:       HOKU SOLAR, INC.,   a Delaware corporation       By:    /s/ Scott Paul     Name: Scott Paul     Title:  Chief Operating Officer               INVESTOR MEMBER:       UFA RENEWABLE ENERGY FUND I, LLC, a Delaware limited liability company         By: United Fund Advisors LLC, its Managing Member                 By:     /s/ Chris Hasle       Name: Chris Hasle       Title:   Senior Vice President   Hoku Solar Power I, LLC, Signature Page to Operating Agreement SCHEDULE A Members, Capital Contributions and Company Interests Member   Capital Contribution     Initial Ownership Interest                 Managing Member                               [*] *     0.01 %                 Honolulu, HI 96814                                   Investor Member                                       [*] **     99.99 %                                     * [*] is being contributed upon execution of this Agreement pursuant to Section 5.01(a), and the balance is to be contributed as set forth in Section 5.01(a).    ** [*] is being contributed upon execution of this Agreement pursuant to Section 5.01(c)(i) and the balance is to be contributed as set forth in Section 5.01(c)(ii) and (iii).   Hoku Solar Power I, LLC, Operating Agreement SCHEDULE B   Insurance Requirements     · Hoku Solar Power I, LLC US Bancorp Community Development Corporation- Insurance Standards- Please provide an original policy, policy copy or an ACORD 25 Form (Certificate of Liability Insurance) signed by an agent or broker evidencing the following:   · Partnership Liability Coverage   · A Commercial General Liability (CGL) policy containing the following provisions:   § The following entity as Named Insured as of the date hereof:   § “Hoku Solar Power I, LLC”;   § The following entity as Named Insured at the time of placement in service (concurrent or prior to the Completion Date):   §   § The following entities as Additional Insured (using Form CG 20 26 or acceptable equivalent – Additional Insured – Designated Entity):   § “UFA Renewable Energy Fund I, LLC”   § “Firstar Development, LLC”;   § Please include Firstar Development, LLC as the Certificate Holder; the address for Firstar is:  Firstar Development, LLC 1307 Washington Avenue, Suite 300, St. Louis, MO  63103 Attn: Director of ITC Asset Management   § Please include UFA Renewable Energy Fund I, LLC as an additional Certificate Holder; the address for the Fund is:  UFA Renewable Energy Fund I, LLC: 24 NW First Avenue, Suite 470 Portland, Oregon 97209 Attn: Director of ITC Asset Management   § Total limits of at least $1 million per occurrence and $2 million general aggregate.  The aggregate may be a blanket policy for all seven sites.   · An Automobile Liability policy for any vehicles that may be owned by the partnership listed above as Named Insured, as well as vehicles hired or used for partnership business.  The policy must contain the following provisions:   § The following entity as Named Insured:   §   § All Additional Insured entities as in the Commercial General Liability Coverage   §       § Total limits of at least $1 million combined single limit;   · An Umbrella/Excess Liability policy with the Commercial General Liability and Automobile Liability policies scheduled as underlying policies.  Limits of the policy shall be at least $2 million per occurrence and $2 million in the aggregate as of the date hereof. Limits of the policy shall be at least $3 million per occurrence and $3 million in the aggregate prior to the end of 2008. Limits of the policy shall be at least $5 million per occurrence and $5 million in the aggregate at the time of placement in service (concurrent or prior to the Completion Date);   Contractor’s Liability Coverage   · A Commercial General Liability policy purchased by the General Contractor during construction containing the following provisions:   § Total limits of at least $1 million per occurrence and $2 million in the general aggregate;   § Completed Operations coverage shall be included on the policy;   § The following entities as Additional Insured:   §   § “UFA Renewable Energy Fund I, LLC”;   §   §   · An Umbrella/Excess Liability policy purchased by the General Contractor during construction, with the Commercial General Liability and Employers Liability policies scheduled as underlying policies.  Limits of the policy shall be at least $2 million per occurrence and $2 million in the aggregate;       · Contractor’s Workers’ Compensation Coverage   · A Workers’ Compensation and Employer’s Liability policy purchased by the General Contractor   § Evidence of “Statutory Limits” under Workers’ Compensation; $1mm Employers Liability must be included. Please provide an original policy, policy copy or an ACORD 27 Form (Evidence of Property Insurance) signed by an agent or broker evidencing the following:     · Builders Risk Coverage / Installation Floater       · A Builders Risk policy purchased by the property owner and covering the value of the rehabilitation activities and materials, and containing the following provisions and coverage:   § The buildings and structures being constructed;   § Fixtures, materials, supplies, machinery and equipment to be used in construction;   § Scaffolding, falsework, fences, forms, etc;   § Trailers and temporary structures incidental to the construction;   § Foundations and underground work;   § Sidewalks and paving;   § Personal property of others for which the Partnership may be liable; whether located at the site or elsewhere, including while in-transit. The construction site shall be specifically scheduled on the policy as a Covered Location.  Policy shall provide for claims to be paid based upon replacement cost of the lost or damaged property without deduction for depreciation; loss payment shall be to the Partnership. In addition the Builder’s Risk policy should provide:   § Please evidence Hard & Soft Costs;   § All-risk or Special Form Completed Value coverage in non-reporting form;   § $10,000 maximum deductible;   § Wind & Hurricane Coverage for full property value with a 2% deductible.   § No co-insurance; if there is a coinsurance provision, please evidence the specific percentage which applies (e.g. 100%);   § Coverage and limits shall be extended to include Soft Costs coverage for construction loan fees and refinancing charges, legal fees, design professional fees, real estate taxes, insurance premiums, and debt service payments and bond interest payments (where appropriate).   § Limits of policy will be at least the estimated replacement value of the completed rehabilitation ,plus the value of other property insured;   § The following entities as Named Insureds:   §   § The following entities as Additional Insured and Loss Payee:   §   §   §       · Property Coverage – After Completion   · A Property policy with limits at least equal to the replacement value of the existing structure(s), and containing the following provisions and coverage:   § Property value of at least [*];       § “All risk” or “Special Form” coverage;   § Claims shall be paid on a Replacement Cost basis;   §   § Earthquake coverage of $2,500,000 with a $25,000 deductible.   §   § No coinsurance; if there is a coinsurance provision, please provide evidence than an Agreed Amount endorsement will appear on the policy;   § If occupied during rehab, Business Income coverage with limits equal to at least 12 months expected loss of rents and other income.  No coinsurance is permitted;   § Limits of policy will be at least the estimated replacement value of the subject property, plus the value of other property insured;   § Ordinance or Law coverage including loss in value to the undamaged portion, demolition and increased cost of construction;   § All Named Insureds, Additional Insureds, Loss Payees, and/or Mortgagees as noted for Builder’s Risk coverage above.   §   §   §   §   §   §   § Management     · General Requirements On the ACORD 25 (Certificate of Liability Insurance), please strike the following wording from the cancellation provision: “endeavor to” and “but failure to mail such notice shall impose no obligation or liability of any kind upon the company, its agents or representatives”. The property location or description must be clearly stated on the Evidence of Property Insurance form provided. All insurance carriers shall have a rating of A- or better and a Financial Size Category IX or greater by Best’s Key Rating Guide. Full copies of all insurance policies must be provided to Traxler & Tong, Inc. upon their issuance, but not later than ninety (90) days following issuance of Certificates or Evidence forms.     SCHEDULE C   Stoel Rives LLP Legal Opinion   SCHEDULE D   Projections     Schedule E   Application of Capital Contributions to Purchase Price and Development Fee   PV                  Development Fee-Cash portion     Managing  Member Capital Contribution     Investor Member Capital Contributions   System #   Site   Location   Purchase Price     paid at PIS     Purchase Price     Dev. Fee     Purchase Price     Dev. Fee   1   Lihue Airport   Terminal Rooftop     [*]       [*]       [*]       [*]       [*]       [*]   2   Highways Kauai Baseyard   Baseyard Rooftop 3   Harbors Kauai Baseyard   Rooftop 4   Hilo Airport   Terminal Rooftop 5   Kona Airport   Cargo Building 6   Kahului Airport   ASAP/Cargo Building 7   Kahului Airport   T-Hangar Rooftop Total         Schedule F   Form of Lien Release   CONTRACTORS, SUBCONTRACTORS AND SUPPLIER CONDITIONAL RELEASE OF LIENS   Original Contract Amount:   $     Approved Change Order:   $     Adjusted Contract Amount:   $     Completed to Date:   $     Retention:   $     Total Earned (Completed Less Retention)   $     Previous Payments:   $     Current Payment:   $     Contract Balance:   $       TO: The UNDERSIGNED being duly sworn states that he is the ____________________________ (title) of _______________________________________ (firm) who has a contract with ____________________________________ for furnishing _____________________________ for the improvements being erected on real estate known and identified as ___________________________________________ located in ________________________ County, State of ___________________________ and owned by ____________________________________________.   The UNDERSIGNED, for and in consideration of the sum One Dollar ($1.00), and other good and valuable consideration, the receipt of which is hereby acknowledged, does hereby acknowledge and agree that upon the receipt of _________________________ Dollars ($__________) the undersigned shall waive and release any and all liens or claims or right of lien on the aforementioned property and improvements thereon. Signed this ____ day of _______________________, 19____.            Contractor/Supplier/Sub-Contractor           By:           Name and Title:                  

OMB APPROVAL OMB Number: 3235-0287 Expires: February 28, 2011 Estimated average burden hours per response………11 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 SCHEDULE 13G Under the Securities Exchange Act of 1934 (Amendment No. 1 )* BluePhoenix Solutions Ltd. (Name of Issuer) Ordinary Shares, NIS 0.01 per share (Title of Class of Securities) M20157109 (CUSIP Number) July 29, 2010 (Date of Event Which Requires Filing of this Statement) Check the appropriate box to designate the rule pursuant to which this Schedule is filed: [_]Rule 13d-1(b) [X]Rule 13d-1(c) [_]Rule 13d-1(d) *The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter the disclosures provided in a prior cover page. The information required in the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). CUSIP No. M20157109 1. NAME OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) Michael Self 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS) (a)[_] (b)[_] 3. SEC USE ONLY 4. CITIZENSHIP OR PLACE OF ORGANIZATION United States of America NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH 5. SOLE VOTING POWER 0 6. SHARED VOTING POWER 7. SOLE DISPOSITIVE POWER 0 8. SHARED DISPOSITIVE POWER 9. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (9) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS) [_] PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (9) 7.2% TYPE OF REPORTING PERSON (SEE INSTRUCTIONS) IN CUSIP No. M20157109 1. NAME OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) Lake Union Capital Management, LLC 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS) (a)[_] (b)[_] 3. SEC USE ONLY 4. CITIZENSHIP OR PLACE OF ORGANIZATION Delaware NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH 5. SOLE VOTING POWER 0 6. SHARED VOTING POWER 7. SOLE DISPOSITIVE POWER 0 8. SHARED DISPOSITIVE POWER 9. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (9) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (9) 7.2% TYPE OF REPORTING PERSON (SEE INSTRUCTIONS) OO CUSIP No. M20157109 1. NAME OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) Lake Union Capital Fund, LP 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS) (a)[_] (b)[_] 3. SEC USE ONLY 4. CITIZENSHIP OR PLACE OF ORGANIZATION Delaware NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH 5. SOLE VOTING POWER 0 6. SHARED VOTING POWER 7. SOLE DISPOSITIVE POWER 0 8. SHARED DISPOSITIVE POWER 9. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (9) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (9) 7.2% TYPE OF REPORTING PERSON (SEE INSTRUCTIONS) PN CUSIP No. M20157109 Item 1. (a). Name of Issuer: BluePhoenix Solutions Ltd. (b). Address of issuer's principal executive offices: 8 Maskit Street, Herzliya 46733, Israel Item 2. (a). Name of person filing: Michael Self Lake Union Capital Management, LLC Lake Union Capital Fund, LP (b). Address or principal business office or, if none, residence: Lake Union Capital Management, LLC 600 University Street, Suite 1520 Seattle, WA 98101 Lake Union Capital Fund, LP 600 University Street, Suite 1520 Seattle, WA 98101 Michael Self c/o Lake Union Capital Management, LLC 600 University Street, Suite 1520 Seattle, WA 98101 (c). Citizenship: Michael Self – United States of America Lake Union Capital Management, LLC - Delaware Lake Union Capital Fund, LP - Delaware (d). Title of class of securities: NIS 0.01 per share (e). CUSIP No.: M20157109 Item 3. If This Statement is filed pursuant to §§.240.13d-1(b) or 240.13d-2(b), or (c), check whether the person filing is a (a) [_] Broker or dealer registered under section 15 of the Act (15 U.S.C. 78o). (b) [_] Bank as defined in section 3(a)(6) of the Act (15 U.S.C. 78c). (c) [_] Insurance company as defined in section 3(a)(19) of the Act (15 U.S.C. 78c). (d) [_] Investment company registered under section 8 of the Investment Company Act of 1940 (15 U.S.C. 80a-8). (e) [_] An investment adviser in accordance with §240.13d-1(b)(1)(ii)(E); (f) [_] An employee benefit plan or endowment fund in accordance with §240.13d-1(b)(1)(ii)(F); (g) [_] A parent holding company or control person in accordance with §240.13d-1(b)(1)(ii)(G); (h) [_] A savings association as defined in Section 3(b) of the Federal Deposit Insurance Act (12 U.S.C.1813); (i) [_] A church plan that is excluded from the definition of an investment company under section 3(c)(14) of the Investment Company Act of 1940 (15 U.S.C. 80a-3); (j) [_] A non-U.S. institution in accordance with §240.13d-1(b)(1)(ii)(J); (k) [_] Group, in accordance with §240.13d-1(b)(1)(ii)(K).If filing as a non-U.S. institution in accordance with §240.13d-1(b)(1)(ii)(J), please specify the type of institution: Item 4. Ownership. Provide the following information regarding the aggregate number and percentage of the class of securities of the issuer identified in Item 1. (a) Amount beneficially owned: Michael Self – 1,670,508 Lake Union Capital Management, LLC – 1,670,508 Lake Union Capital Fund, LP – 1,670,508 (b) Percent of class: Michael Self – 7.2% Lake Union Capital Management, LLC – 7.2% Lake Union Capital Fund, LP – 7.2% (c) Number of shares as to which the person has: (i) Sole power to vote or to direct the vote Michael Self – 0 Lake Union Capital Management, LLC – 0 Lake Union Capital Fund, LP – 0 (ii) Shared power to vote or to direct the vote Michael Self – 1,670,508 Lake Union Capital Management, LLC – 1,670,508 Lake Union Capital Fund, LP – 1,670,508 (iii) Sole power to dispose or to direct the disposition of Michael Self – 0 Lake Union Capital Management, LLC – 0 Lake Union Capital Fund, LP – 0 (iv) Shared power to dispose or to direct the disposition of Michael Self – 1,670,508 Lake Union Capital Management, LLC – 1,670,508 Lake Union Capital Fund, LP – 1,670,508 Instruction:For computations regarding securities which represent a right to acquire an underlying security see §240.13d-3(d)(1) Item 5. Ownership of Five Percent or Less of a Class. If this statement is being filed to report the fact that as of the date hereof the reporting person has ceased to be the beneficial owner of more than five percent of the class of securities, check the following [_]. Instruction:Dissolution of a group requires a response to this item. Item 6. Ownership of More Than Five Percent on Behalf of Another Person. If any other person is known to have the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, such securities, a statement to that effect should be included in response to this item and, if such interest relates to more than 5 percent of the class, such person should be identified.A listing of the shareholders of an investment company registered under the Investment Company Act of 1940 or the beneficiaries of employee benefit plan, pension fund or endowment fund is not required. N/A Item 7. Identification and Classification of the Subsidiary Which Acquired the Security Being Reported on by the Parent Holding Company or Control Person. If a parent holding company or control person has filed this schedule, pursuant to Rule 13d-1(b)(1)(ii)(G), so indicate under Item 3(g) and attach an exhibit stating the identity and the Item 3 classification of the relevant subsidiary.If a parent holding company or control person has filed this schedule pursuant to Rule 13d-1(c) or Rule 13d-1(d), attach an exhibit stating the identification of the relevant subsidiary. N/A Item 8. Identification and Classification of Members of the Group. If a group has filed this schedule pursuant to §240.13d-1(b)(1)(ii)(J), so indicate under Item 3(j) and attach an exhibit stating the identity and Item 3 classification of each member of the group.If a group has filed this schedule pursuant to Rule 13d-1(c) or Rule 13d-1(d), attach an exhibit stating the identity of each member of the group. N/A Item 9. Notice of Dissolution of Group. Notice of dissolution of a group may be furnished as an exhibit stating the date of the dissolution and that all further filings with respect to transactions in the security reported on will be filed, if required, by members of the group, in their individual capacity.See Item 5. N/A Item 10. Certification. (a) The following certification shall be included if the statement is filed pursuant to §240.13d-1(b). By signing below I certify that, to the best of my knowledge and belief, the securities referred to above were acquired and are held in the ordinary course of business and were not acquired and are not held for the purpose of or with the effect of changing or influencing the control of the issuer of the securities and were not acquired and are not held in connection with or as a participant in any transaction having that purpose or effect. (b) The following certification shall be included if the statement is filed pursuant to §240.13d-1(b)(1)(ii)(J), or if the statement is filed pursuant to §240.13d-1(b)(1)(ii)(K) and a member of the group is a non-U.S. institution eligible to file pursuant to §240.13d-1(b)(1)(ii)(J): By signing below I certify that, to the best of my knowledge and belief, the foreign regulatory scheme applicable to [insert particular category of institutional investor] is substantially comparable to the regulatory scheme applicable to the functionally equivalent U.S. institution(s).I also undertake to furnish to the Commission staff, upon request, information that would otherwise be disclosed in a Schedule 13D. (c) The following certification shall be included if the statement is filed pursuant to §240.13d-1(c): By signing below I certify that, to the best of my knowledge and belief, the securities referred to above were not acquired and are not held for the purpose of or with the effect of changing or influencing the control of the issuer of the securities and were not acquired and are not held in connection with or as a participant in any transaction having that purpose or effect. SIGNATURE After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. August 4, 2010 (Date) LAKE UNION CAPITAL FUND, LP By:Lake Union Capital Management, LLC General Partner By:/s/ Michael Self Michael Self Managing Member LAKE UNION CAPITAL MANAGEMENT, LLC By:/s/ Michael Self Michael Self Managing Member /s/ Michael Self Michael Self The original statement shall be signed by each person on whose behalf the statement is filed or his authorized representative.If the statement is signed on behalf of a person by his authorized representative other than an executive officer or general partner of the filing person, evidence of the representative's authority to sign on behalf of such person shall be filed with the statement, provided, however, that a power of attorney for this purpose which is already on file with the Commission may be incorporated by reference.The name and any title of each person who signs the statement shall be typed or printed beneath his signature. Note.Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See s.240.13d-7 for other parties for whom copies are to be sent. Attention.Intentional misstatements or omissions of fact constitute Federal criminal violations (see 18 U.S.C. 1001). Exhibit A AGREEMENT The undersigned agree that this Amendment No. 1 to Schedule 13G dated August 4, 2010 relating to the NIS 0.01 per share of BluePhoenix Solutions Ltd. shall be filed on behalf of the undersigned. LAKE UNION CAPITAL FUND, LP By:Lake Union Capital Management, LLC General Partner By:/s/ Michael Self Michael Self Managing Member LAKE UNION CAPITAL MANAGEMENT, LLC By:/s/ Michael Self Michael Self Managing Member /s/ Michael Self Michael Self SK 21v2

SUPPLEMENT TO THE CURRENTLY EFFECTIVE SUMMARY PROSPECTUS OF THE LISTED FUND Deutsche LifeCompass 2020 Fund The fund’s Board of Trustees recently approved a recommendation by Deutsche Investment Management Americas Inc. (“DIMA”), the fund’s investment advisor, that the fund and DIMA enter into an Amended and Restated Investment Management Agreement (the “New IMA”) with respect to the fund. Under the New IMA, DIMA will be paid a management fee by the fund at the following rates: (a) 0.10% of the fund’s average daily net assets invested in exchange-traded funds and mutual funds; and (b) 0.65% of the fund’s average daily net assets not covered in (a) above. DIMA does not currently receive a management fee for managing the fund but does receive fees as investment advisor to underlying Deutsche funds. The proposed New IMA will be submitted for approval by shareholders of the fund at a Shareholder Meeting to be held in the third quarter of 2015. Prior to the shareholder meeting, shareholders of record on the record date for the meeting will receive (i) a proxy statement describing the proposed New IMA and the Board’s considerations in recommending that shareholders approve the New IMA, and (ii) a proxy card and instructions on how to submit a vote. If the New IMA is approved by shareholders, it will become effective on or about August 17, 2015, at which time thefollowing changes would be implemented. If the New IMA is not approved by shareholders, then thefund will continue to operate as it does currently and theBoard will take such action, if any, it considers to beinthe best interests of the fund. Subject to shareholder approval of the New IMA, the following changes will be effective on or about August 17, 2015: Deutsche LifeCompass 2020 Fund will be renamed Deutsche Multi‐Asset Global Allocation Fund. The following information replaces the existing disclosure contained in the ”INVESTMENT OBJECTIVE” section within thesummary prospectus. The fund seeks to maximize total return. The following information replaces the existing disclosure contained under the”PRINCIPAL INVESTMENT STRATEGY” section within the summary prospectus. Main investments. The fund seeks to achieve its objective by investing in a broad range of both traditional asset classes (such as equity and fixed income investments) and alternative asset classes (such as real estate, infrastructure, convertibles, commodities, currencies and absolute return strategies). Investments may be made in Deutsche funds (i.e., mutual funds, exchange‐traded funds (ETFs) and other pooled investment vehicles managed by Deutsche Investment Management Americas Inc., the fund’s investment advisor, orone of its affiliates), or directly in securities and derivatives. The fund may also invest in securities of unaffiliated mutual funds or ETFs when the economic exposure to a particular market or sector is not available through a Deutsche fund. Deutsche funds and other funds and ETFs in which the fund may invest are referred to as “underlying funds.” Thefund’s allocations among direct investments and underlying funds will vary over time. The fund will generally invest in at least three different countries and have exposure to foreign securities, foreign currencies and other foreign investments equal to at least 40% of the fund’s net assets. The fund may be appropriate for investors seeking high total investment returns. Under normal market conditions, the fund will invest in a combination of funds and direct investments comprising a broadly diversified global portfolio. April 2, 2015 PROSTKR‐480 The fund can buy many types of securities (directly or indirectly through investment in underlying funds), among themcommon stocks, including dividend‐paying stocks, convertible securities, corporate bonds, government bonds, municipal securities, inflation‐indexed bonds, mortgage‐ and asset‐backed securities and ETFs. The fund may invest in securities of any size, investment style, category or credit quality, and from any country (including emerging and frontiermarkets). Management process. Using a risk/return strategic asset allocation process, portfolio management allocates the fund’s assets among various asset categories. Portfolio management periodically reviews the fund’s allocations and may adjust them based on current or anticipated market conditions, to manage risk consistent with the fund’s overall investment strategy or based upon other relevant considerations. Portfolio management also utilizes a tactical asset allocation process to adjust allocations in response to short-term market changes from time to time. Tactical allocations reflect views from Deutsche Asset & Wealth Management’s Chief Investment Officer and global research platform. Tactical allocations, which may include derivative instruments, have shorter investment horizons as positions reflect short-term views and may be implemented as: (i) changes to a fund’s strategic asset allocation, (ii) through the addition of new allocations, or (iii) through changes to prior tactical allocations. Derivatives. Portfolio management generally may use forward currency contracts, which are a type of derivative (a contract whose value is based on, for example, indices, currencies or securities) to hedge the fund’s exposure to changes in foreign currency exchange rates on its foreign currency denominated portfolio holdings, to facilitate transactions in foreign currency denominated securities or to seek to enhance total returns. In addition, portfolio management may use futures contracts and interest rate swap contracts to gain exposure to different parts of the yield curve while managing overall duration. Futures contracts may also be used to gain exposure to a particular asset class or to keep cash on hand to meet shareholder redemptions or other needs while maintaining exposure to the stock market. In addition, portfolio management generally may use credit default swaps to seek to increase the fund’s income, to gain exposure to a bond issuer’s credit quality characteristics without directly investing in the bond, or to hedge the risk of default on bonds held in the fund’s portfolio. Portfolio management generally may also use commodity‐linked derivatives to gain exposure to commodities. Portfolio management may also use option contracts in order to gain exposure to a particular market or security, to seek to increase the fund’s income, or to hedge against changes in a particular market or security. The fund may also use various types of derivatives (i) for hedging purposes; (ii) for risk management; (iii) for non‐hedging purposes to seek to enhance potential gains; or (iv) as a substitute for direct investment in a particular asset class or to keep cash on hand to meet shareholder redemptions. Please Retain This Supplement for Future Reference April 2, 2015 PROSTKR‐480

Exhibit 10.4 DEED OF INDEMNIFICATION This Deed of Indemnification, dated as of             , 2014, is made by and between Actavis plc, an Irish public limited company (the “Company”), and              (“Indemnitee”). WHEREAS, the Company desires to ensure that the Company benefits from the services of highly qualified, experienced and otherwise competent persons such as Indemnitee; WHEREAS, the Company previously requested that Indemnitee serve the Company as a director of the Company, and, if requested to do so by the Company, as a director, officer, trustee, employee, representative or agent of another corporation, joint venture, trust or other enterprise, in each case whether organized under the laws of Ireland, any foreign nation or any political subdivision thereof; and WHEREAS, Indemnitee desires to be indemnified by the Company and has agreed to become a director of the Company in reliance upon the Company’s promise to provide indemnification on the basis (i) herein set forth and (ii) set forth in an indemnification agreement between Actavis W.C. Holding Inc. and Indemnitee. NOW, THEREFORE, in consideration of the foregoing promises and the mutual covenants herein contained, the parties hereto agree as follows: Section 1. Generally. (a) In consideration of Indemnitee agreeing to act and continue to act as director of the Company, in addition to and without prejudice to any other right of indemnity in favour of Indemnitee from time to time, the Company hereby irrevocably and unconditionally agrees and undertakes with Indemnitee subject to Section 200 of the Companies Act 1963 upon first demand to indemnify and keep Indemnitee (and any alternate director appointed by such Indemnitee to act on his behalf together with their respective estates) indemnified and held harmless from and against, and to assume all liability for, any and all proceedings (including, without limitation, claims, demands and actions), liability, damage, loss, charge, detriment, cost, Expenses, judgments or fines suffered, incurred or sustained by Indemnitee (or any such alternate director or their respective estates) arising directly or indirectly out of or in connection with his acting as a director or alternate director (as the case may be) of the Company otherwise than by reason of the dishonesty, fraud, breach of fiduciary duty, negligence or wilful misconduct of Indemnitee or such alternate director (as the case may be). For the avoidance of doubt, the foregoing indemnity shall extend to any liability incurred by Indemnitee in defending proceedings, whether civil or criminal, in which judgement is given in his favour in which he is acquitted, in connection with any application under Section 391 of the Companies Act 1963 or Section 42 of the Companies (Amendment) Act 1983 in which relief is granted to him by the court. (b) The indemnification provided by this Section 1 shall be from and against Expenses, judgments and fines actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection with such proceeding and any appeal therefrom, but shall only be provided 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. (c) The rights of Indemnitee hereunder shall be in addition to any rights Indemnitee may now or hereafter have to indemnification by the Company or otherwise. Section 2. Successful Defense; Partial Indemnification. (a) To the extent that Indemnitee has been successful on the merits or otherwise in defense of any proceeding or in defense of any claim, issue or matter therein, Indemnitee shall be indemnified against Expenses actually and reasonably incurred in connection therewith. (b) If Indemnitee is entitled under any provision of this Deed to indemnification by the Company for some or a portion of the Expenses, judgments and fines actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection with any proceeding or investigation, or in defense of any claim, issue or matter therein, and any appeal therefrom but not, however, for the total amount thereof, the Company shall nevertheless indemnify Indemnitee for the portion of such Expenses, judgments and fines. Section 3. Determination That Indemnification Is Proper. Any indemnification hereunder shall (unless otherwise ordered by a court) be made by the Company unless a determination is made that indemnification of such person is not proper in the circumstances because he or she has not met the applicable standard of conduct set forth in Section 1(b) of this Deed. Any such determination shall be made (i) by a majority vote of the directors who are not parties to the proceeding in question (“disinterested directors”), even if less than a quorum, (ii) by a majority vote of a committee of disinterested directors designated by majority vote of disinterested directors, even if less than a quorum, (iii) by independent legal counsel, or (iv) by a court of competent jurisdiction. Section 4. Notification and Defense of Claim. (a) Promptly after receipt by Indemnitee of notice of the commencement of any proceeding, Indemnitee shall notify the Company of the commencement thereof. The failure to promptly notify the Company of the commencement of the proceeding, or Indemnitee’s request for indemnification, will not relieve the Company from any liability that it may have to Indemnitee hereunder, except to the extent the Company is prejudiced in its defense of such proceeding as a result of such failure. (b) If any action, proceeding, claim or demand shall be brought or asserted against Indemnitee or any alternate director appointed by him to act on his behalf in respect of which indemnity may be sought against the Company, the Company, if appropriate, shall be entitled to assume the defense of such proceeding, with counsel reasonably acceptable to Indemnitee, upon the delivery to Indemnitee of written notice of its election to do so. After delivery of such notice, approval of such counsel by Indemnitee and the retention of such counsel by the Company, the Company will not be liable to Indemnitee under this Deed for any fees of counsel subsequently incurred by Indemnitee with respect to the same proceeding, provided that (1) Indemnitee shall have the right to employ Indemnitee’s own counsel in such proceeding at Indemnitee’s expense and (2) if (i) the employment of counsel by Indemnitee has been previously authorized in writing by the Company, (ii) counsel to the Company or Indemnitee shall have reasonably concluded that there may be a conflict of interest or position, or reasonably believes that a conflict is likely to arise, on any significant issue between the Company and Indemnitee in the conduct of any such defense or (iii) the Company shall not, in   2 fact, have employed counsel to assume the defense of such proceeding, then the Expenses of Indemnitee’s counsel shall be at the expense of the Company, except as otherwise expressly provided by this Deed. Notwithstanding the foregoing, in the case of clause (iii) of the preceding sentence, Indemnitee acknowledges that, in connection with any one such proceeding involving at least one other party to whom the Company owes obligations identical or similar to those owed to Indemnitee under this Deed, or separate but substantially similar proceedings arising out of the same general allegations and involving at least one other Indemnitee under this Deed, the Company will not be liable for the Expenses of more than one separate firm of attorneys (in addition to any local counsel necessary for the representation). The Company shall not be entitled, without the consent of Indemnitee, to assume the defense of any claim brought by or in the right of the Company or as to which counsel for the Company or Indemnitee shall have reasonably made the conclusion provided for in clause (ii) above. Section 5. Warranty. The Company warrants by its execution hereof that it has power to enter into and has duly authorised the execution and delivery of this Indemnity and that its obligations hereunder constitute legal, valid and binding obligations enforceable against the Company in accordance with its terms. Section 6. Procedure for Indemnification. (a) To obtain indemnification, Indemnitee shall promptly submit to the Company a written request, including therein or therewith such documentation and information as is reasonably available to Indemnitee and is reasonably necessary to determine whether and to what extent Indemnitee is entitled to indemnification. The Company shall, promptly upon receipt of such a request for indemnification, advise the Board of Directors of the Company in writing that Indemnitee has requested indemnification. (b) The Company’s determination whether to grant Indemnitee’s indemnification request shall be made promptly, and in any event within sixty (60) days following receipt of a request for indemnification pursuant to Section 6(a). The right to indemnification as granted by Section 1 of this Deed shall be enforceable by Indemnitee in any court of competent jurisdiction if the Company denies such request, in whole or in part, or fails to respond within such 60-day period. It shall be a defense to any such action that Indemnitee has not met the standard of conduct set forth in Section 1 hereof, but the burden of proving such defense by clear and convincing evidence shall be on the Company. Neither the failure of the Company (including its Board of Directors or one of its committees, its independent legal counsel, and its stockholders) to have made a determination prior to the commencement of such action that indemnification of Indemnitee is proper in the circumstances because Indemnitee has met the applicable standard of conduct set forth in Section 1, nor the fact that there has been an actual determination by the Company (including its Board of Directors or one of its committees, its independent legal counsel, and its stockholders) that Indemnitee has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that Indemnitee has or has not met the applicable standard of conduct. (c) Subject to the limitations set forth in Section 8, Indemnitee shall be presumed to be entitled to indemnification under this Deed upon submission of a request for   3 indemnification pursuant to this Section 6, and the Company shall have the burden of proof in overcoming that presumption in reaching a determination contrary to that presumption. Such presumption shall be used as a basis for a determination of entitlement to indemnification unless the Company overcomes such presumption by clear and convincing evidence. Section 7. Insurance and Subrogation. (a) The Company may purchase and maintain insurance on behalf of Indemnitee who is or was or has agreed to serve at the request of the Company as a director or officer of the Company against any liability asserted against, and incurred by, Indemnitee or on Indemnitee’s behalf in any such capacity, or arising out of Indemnitee’s status as such, whether or not the Company would have the power to indemnify Indemnitee against such liability under the provisions of this Deed. If the Company has such insurance in effect at the time the Company receives from Indemnitee any notice of the commencement of a proceeding, the Company shall give prompt notice of the commencement of such proceeding to the insurers in accordance with the procedures set forth in the policy. The Company shall thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of Indemnitee, all amounts payable as a result of such proceeding in accordance with the terms of such policy. (b) In the event of any payment by the Company under this Deed, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee with respect to any insurance policy, who shall execute all papers required and take all action necessary to secure such rights, including execution of such documents as are necessary to enable the Company to bring suit to enforce such rights in accordance with the terms of such insurance policy. The Company shall pay or reimburse all Expenses actually and reasonably incurred by Indemnitee in connection with such subrogation. (c) The Company shall not be liable under this Deed to make any payment of amounts otherwise indemnifiable hereunder (including, but not limited to, judgments, fines and excise taxes or penalties if and to the extent that Indemnitee has otherwise actually received such payment under this Deed or any insurance policy, contract, agreement or otherwise. Section 8. Limitation on Indemnification. Notwithstanding any other provision herein to the contrary, the Company shall not be obligated pursuant to this Deed: (a) Claims Initiated by Indemnitee. To indemnify to Indemnitee with respect to a proceeding (or part thereof) initiated by Indemnitee. (b) Action for Indemnification. To indemnify Indemnitee for any Expenses incurred by Indemnitee with respect to any proceeding instituted by Indemnitee to enforce or interpret this Deed. (c) Section 16 Violations. To indemnify Indemnitee on account of any proceeding with respect to which final judgment is rendered against Indemnitee for payment or an accounting of profits arising from the purchase or 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. (d) Non-compete and Non-disclosure. To indemnify Indemnitee in connection with proceedings involving the enforcement of non-compete and/or non-disclosure agreements or the non-compete and/or non-disclosure provisions of employment, consulting or similar agreements Indemnitee may be a party to with the Company. (e) Additional Limitations. To indemnify Indemnitee in circumstances where Indemnitee is a defendant or a respondent in a proceeding and (i) Indemnitee is not acquitted or judgment is not given in Indemnitee’s favour and (ii) the court does not grant relief to Indemnitee in connection with any application under Section 391 or Section 42 of the Companies Act.   4 Section 9. Savings Clause. If any provision or provisions of this Deed shall be invalidated on any ground by any court of competent jurisdiction, then the Company shall nevertheless indemnify Indemnitee as to Expenses, judgments and fines with respect to any proceeding, including an action by or in the right of the Company, to the full extent permitted by any applicable portion of this Deed that shall not have been invalidated and to the full extent permitted by applicable law. Section 10. Certain Definitions. For purposes of this Deed, the following definitions shall apply: (a) The term “Expenses” shall include all reasonable attorneys’ fees (applying the Company’s billing guidelines, if any, and otherwise consistent with the Company’s past practice for payment of legal fees for outside counsel), retainers, court costs, transcript costs, fees of experts, witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees, any federal, state, local or foreign taxes imposed on Indemnitee as a result of the actual or deemed receipt of any payments under this Deed, excise taxes and penalties, and all other disbursements or expenses of the types customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating, being or preparing to be a witness in, or otherwise participating in, a proceeding. Expenses also shall include (i) Expenses incurred in connection with any appeal resulting from any proceeding, including without limitation the premium, security for, and other costs relating to any cost bond, supersedeas bond, or other appeal bond or its equivalent, and (ii) Expenses incurred by Indemnitee in connection with the interpretation, enforcement or defense of Indemnitee’s rights under this Deed, by litigation or otherwise, in accordance with Section 16. Expenses, however, shall not include the amount of judgments or fines against Indemnitee. (b) The term “Company” shall include, without limitation and 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 and officers, so that any person who is or was a director or officer of such constituent corporation, or is or was serving at the request of such constituent corporation as a director or officer shall stand in the same position under the provisions of this Deed with respect to the resulting or surviving corporation as he or she would have with respect to such constituent corporation if its separate existence had continued. (a) 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 shall be deemed to have acted in a manner “not opposed to the best interests of the Company” as referred to in this Deed.   5 Section 11. Form and Delivery of Communications. Any notice, request or other communication required or permitted to be given to the parties under this Deed shall be in writing and either delivered in person or sent by telecopy, telex, telegram, overnight mail or courier service, or certified or registered mail, return receipt requested, postage prepaid, to the parties at the following addresses (or at such other addresses for a party as shall be specified by like notice): Actavis plc Morris Corporate Center III, 400 Interpace Parkway Parsippany, NJ 07054 Attn: Chief Legal Officer – Global and Secretary Facsimile: If to Indemnitee: c/o Actavis plc Parsippany, NJ 07054 Section 12. Subsequent Legislation. If the Companies Act 1963 is amended after adoption of this Deed to expand further the indemnification permitted to directors or officers, then the Company shall indemnify Indemnitee to the fullest extent permitted by the Companies Act 1963, as so amended. Section 13. Effective Date and Release. This Indemnity shall be effective and shall remain in full force and effect until Indemnitee confirms in writing to the Company that it is released from its obligations hereunder. The resignation of Indemnitee shall not terminate or otherwise prejudice his continuing rights hereunder. Section 14. Nonexclusivity; No Duplication of Payments. (a) The provisions for indemnification set forth in this Deed shall not be deemed exclusive of any other rights which Indemnitee may have under any provision of law, the Company’s Memorandum and Articles of Association (as may be amended from time to time), in any court in which a proceeding is brought, the vote of the Company’s stockholders or disinterested directors, other agreements or otherwise, and Indemnitee’s rights hereunder shall continue after Indemnitee has ceased acting as director or officer of the Company and shall inure to the benefit of the heirs, executors and administrators of Indemnitee. However, no amendment or alteration of the Company’s Memorandum or Articles of Association or any other agreement shall adversely affect the rights provided to Indemnitee under this Deed. (b) The Company shall not be liable under this Deed to make any payment to Indemnitee in respect of any expenses, judgments and fines or any other amounts paid to or incurred by Indemnitee to the extent Indemnitee has otherwise received payment, including, without limitation, under any insurance policy, the Company’s Memorandum or Articles of   6 Association, the organizational documents of any of the Company’s subsidiaries or any agreement between Indemnitee and any of the Company’s subsidiaries (each, an “Alternative Source”), for such expenses, judgments and fines or amounts that are otherwise indemnifiable by the Company hereunder. In the event that Indemnitee receives from the Company and an Alternative Source a duplicate payment in respect of the same expenses, judgments and fines or any other amounts incurred by Indemnitee, Indemnitee shall promptly reimburse the Company in the amount of such duplicate payment. Section 15. Enforcement. The Company shall be precluded from asserting in any judicial proceeding that the procedures and presumptions of this Deed are not valid, binding and enforceable. The Company agrees that its execution of this Deed shall constitute a stipulation by which it shall be irrevocably bound in any court of competent jurisdiction in which a proceeding by Indemnitee for enforcement of his rights hereunder shall have been commenced, continued or appealed, that its obligations set forth in this Deed are unique and special, and that failure of the Company to comply with the provisions of this Deed will cause irreparable and irremediable injury to Indemnitee, for which a remedy at law will be inadequate. As a result, in addition to any other right or remedy Indemnitee may have at law or in equity with respect to breach of this Deed, Indemnitee shall be entitled to injunctive or mandatory relief directing specific performance by the Company of its obligations under this Deed. Section 16. Interpretation. (a) It is understood that the parties hereto intend this Deed to be interpreted and enforced so as to provide indemnification to Indemnitee to the fullest extent now or hereafter permitted by law. (b) In this Deed any reference to any statute shall be construed as a reference to that statute as extended, modified, replaced or re-enacted from time to time (whether before or after the date hereof) and all statutory instruments, regulations and orders from time to time made thereunder or deriving validity therefrom (whether before or after the date hereof). Section 18. Entire Agreement. This Deed and the documents expressly referred to herein constitute the entire agreement between the parties hereto with respect to the matters covered hereby, and any other prior or contemporaneous oral or written understandings or agreements with respect to the matters covered hereby are expressly superseded by this Deed. Section 19. Modification and Waiver. No supplement, modification or amendment of this Deed shall be binding unless executed in writing by both of the parties hereto. No waiver of any of the provisions of this Deed shall be deemed or shall constitute a waiver of any other provision hereof (whether or not similar) nor shall such waiver constitute a continuing waiver. Section 20. Successor and Assigns. All of the terms and provisions of this Deed shall be binding upon, shall inure to the benefit of and shall be enforceable by the parties hereto and their respective successors, assigns, heirs, executors, administrators and legal representatives. The Company shall require and cause any direct or indirect successor (whether by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company, by written agreement in form and substance reasonably satisfactory to Indemnitee, expressly to assume and agree to perform this Deed in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place.   7 Section 21. Service of Process and Venue. For purposes of any claims or proceedings to enforce this Deed, the Company consents to the jurisdiction and venue of any court of competent jurisdiction in Ireland, and waives and agrees not to raise any defense that any such court is an inconvenient forum or any similar claim. Section 22. Supersedes Prior Agreement. This Deed supersedes any prior deed of indemnification or indemnification agreement between Indemnitee and the Company or its predecessors; provided, however, for the avoidance of doubt, that this Deed does not supersede or otherwise affect Indemnitee’s rights under any indemnification agreement between Indemnitee and Actavis W.C. Holding Inc., a Delaware corporation and wholly-owned subsidiary of the Company. Section 23. Governing Law. This Deed shall be governed exclusively by and construed according to the laws of Ireland, as applied to contracts between Irish residents entered into and to be performed entirely within Ireland. If a court of competent jurisdiction shall make a final determination that the provisions of the law of any jurisdiction other than Ireland govern indemnification by the Company of its officers and directors, then the indemnification provided under this Deed shall in all instances be enforceable to the fullest extent permitted under such law, notwithstanding any provision of this Deed to the contrary. Section 25. Employment Rights. Nothing in this Deed is intended to create in Indemnitee any right to employment or continued employment. Section 26. Counterparts. This Deed may be executed in two or more counterparts, each of which shall be deemed to be an original and all of which together shall be deemed to be one and the same instrument, notwithstanding that both parties are not signatories to the original or same counterpart. Section 27. Headings. The section and subsection headings contained in this Deed are for reference purposes only and shall not affect in any way the meaning or interpretation of this Deed.   8 IN WITNESS WHEREOF, this Deed has been duly executed and delivered to be effective as of the date first above written.   GIVEN UNDER THE COMMON SEAL OF ACTAVIS PLC By:       Name:   David A. Buchen   Title:   Executive Vice President Commercial, North American Generics and International [Signature Page to Actavis plc Director Indemnification Agreement] INDEMNITEE: By:       Name:     Title:   Director