Document:

exv10w46

 

Silicon Valley Bank

Amended and Restated

Loan and Security Agreement

	 	 	 
	Borrower:

	 	TELECOMMUNICATION SYSTEMS, INC.
	

	 	(the “Company” or the “Borrower”)
	 
	 	 
	Address:

	 	275 West Street, Suite 400
	

	 	Annapolis, Maryland 21401
	 
	 	 
	Date:

	 	July 24, 2003

THIS AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (this “Agreement”) is
entered into on the above date (the “Closing Date”) between SILICON VALLEY BANK
(“Silicon”), whose address is 3003 Tasman Drive, Santa Clara, California, 95054
and with a loan production office located at 3343 Peachtree Road, N.W., Suite
312, Atlanta, Georgia 30326 TeleCommunication Systems, Inc. (the “Borrower”),
whose chief executive office is located at the above address (“Borrower’s
Address”). The Schedule to this Agreement (the “Schedule”) shall for all
purposes be deemed to be a part of this Agreement, and the same is an integral
part of this Agreement. (Definitions of certain terms used in this Agreement
are set forth in Section 8 below.)

RECITALS

Silicon and Borrower have entered into that certain Loan and Security Agreement
dated as of May 1, 2002, which Loan and Security Agreement was amended by that
certain Loan Modification Agreement dated as of September 25, 2002 by and
between Borrower and Silicon (collectively, the “Original Loan Agreement”).
Pursuant to the Original Loan Agreement, Silicon agreed to make certain loans
including, the “Revolving Facility” and the “Equipment Loan Sublimit” described
therein, and other financial accommodations to Borrower. Borrower has
requested and Silicon has agreed pursuant to this Agreement to (i) decrease the
maximum principal amount of the Revolving Facility from Fifteen Million Dollars
($15,000,000) to Twelve Million Five Hundred Thousand Dollars ($12,500,000)
(ii) terminate the existing Equipment Loan Sublimit, (iii) to make a new
Equipment Loan to Borrower in the principal amount of Two Million Five Hundred
Thousand Dollars ($2,500,000), and (iv) amend and restate the Original Loan
Agreement.

NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, Silicon and Borrower agree that the Original
Loan Agreement is amended and restated in its entirety as follows:

1. LOANS.

     1.1 Loans. Silicon will make revolving loans to Borrower (the “Revolving
Loan”), issue Letters of Credit, enter into FX Forward Contracts and provide
Cash Management Services to Borrower (collectively the “Loans”), in amounts
determined by Silicon in its good faith business judgment, up to the amounts
(the “Credit Limit”) shown on the Schedule, provided no

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	 	Amended and Restated Loan and Security Agreement

Default or Event of Default has occurred and is continuing, and subject to
deduction of Reserves for accrued interest and such other Reserves as Silicon
deems proper from time to time in its good faith business judgment. The
Borrower may from time to time, by giving Silicon prior written notice (a
“Non-Borrowing Notice”), elect to cease requesting Loans under this Agreement
and during such period, Silicon shall have no further obligation to make any
such Loans (such periods each being called a “Non-Borrowing Period”). Each
Non-Borrowing Notice shall be given to Silicon in accordance with Section 9.5
of this Agreement and shall set forth the date on which the Non-Borrowing
Period shall commence, which date must be not earlier than one (1) Business
Days after the date on which Silicon receives such notice and shall be signed
by an officer of the Borrower. The Borrower may terminate a Non-Borrowing
Period by giving Silicon not less than thirty (30) days prior written notice of
its desire to terminate such Non-Borrowing Period, which notice once received,
is not revocable.

     1.2 Interest. All Loans and all other monetary Obligations shall bear
interest at the rate shown on the Schedule, except where expressly set forth to
the contrary in this Agreement. Interest shall be payable monthly, on the last
day of the month. Interest may, in Silicon’s discretion, be charged to
Borrower’s loan account, and the same shall thereafter bear interest at the
same rate as the other Loans. Silicon may, in its discretion, charge interest
to Borrower’s Deposit Accounts maintained with Silicon. Silicon will provide
Borrower with notice prior to any debit of Borrower’s loan account for any
regularly scheduled payment.

     1.3 Overadvances. If at any time or for any reason the total of all
outstanding Loans and all other monetary Obligations, including, without
limitation, Exim Loans, Cash Management Services and the face amount of all
outstanding Letters of Credit, exceeds the Credit Limit (an “Overadvance”),
Borrower shall immediately pay the amount of the excess to Silicon, without
notice or demand. Without limiting Borrower’s obligation to repay to Silicon
the amount of any Overadvance, Borrower agrees to pay Silicon interest on the
outstanding amount of any Overadvance, on demand, at the Default Rate.

     1.4 Fees. Borrower shall pay Silicon the fees shown on the Schedule,
which are in addition to all interest and other sums payable to Silicon and are
not refundable.

     1.5 Loan Requests. To obtain a Loan, Borrower shall make a request to
Silicon by facsimile or telephone. Loan requests received after 12:00 Noon
(Pacific standard time) will not be considered by Silicon until the next
Business Day. Silicon may rely on any telephone request for a Loan given by a
person whom Silicon believes is an authorized representative of Borrower, and
Borrower will indemnify Silicon for any loss Silicon suffers as a result of
that reliance.

     1.6 Letters of Credit Exposure.

          (a) At the request of Borrower, and as part of the Loans, Silicon may, in
its good faith business judgment, issue or arrange for the issuance of letters
of credit for the account of Borrower, in each case in form and substance
satisfactory to Silicon in its sole discretion (collectively, “Letters of
Credit”). The aggregate face amount of all Letters of Credit from time to time
outstanding shall not exceed the amount shown on the Schedule (the “Letter of
Credit Sublimit”), and shall be reserved against Loans which would otherwise be
available hereunder, and in the event at any time there are insufficient Loans
available to Borrower for such reserve, Borrower shall deposit and maintain
with Silicon cash collateral in an amount at all times equal to such
deficiency, which shall be held as Collateral for all purposes of this
Agreement. Borrower shall pay all bank charges (including charges of Silicon)
for the issuance of Letters of Credit, together with such additional fee as
Silicon’s letter of credit department shall charge in connection with the
issuance of the Letters of Credit. Any payment by Silicon under or in
connection with a Letter of Credit shall constitute a Loan hereunder on the
date such payment is made. Each Letter of Credit shall have an expiry date no
later than thirty days prior to the Maturity Date. Borrower hereby agrees to
indemnify and hold Silicon harmless from any loss, cost, expense, or liability,
including payments made by Silicon, expenses, and reasonable attorneys’ fees
incurred by Silicon arising out of or in connection with any Letters of Credit.
Borrower agrees to be bound by the regulations and interpretations of the
issuer of any Letters of Credit guaranteed by Silicon and opened for Borrower’s
account or by Silicon’s interpretations of any Letter of Credit issued by
Silicon for Borrower’s account, and Borrower understands and agrees that
Silicon shall not be liable for any error, negligence, or mistake, whether of
omission or commission, in following Borrower’s instructions or those contained
in the Letters of Credit or any modifications, amendments, or supplements
thereto. Borrower understands that Letters of Credit may require Silicon to
indemnify the issuing bank for certain costs or liabilities arising out of
claims by Borrower against such issuing bank. Borrower hereby agrees to
indemnify and hold Silicon harmless with respect to any loss, cost, expense, or
liability incurred by Silicon under any Letter of Credit as a result of
Silicon’s indemnification of any such issuing bank. The provisions of this
Loan Agreement, as it pertains to Letters of Credit, and any other Loan
Documents relating to Letters of Credit are cumulative.

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     1.7 Foreign Exchange As part of the Loans, Borrower may enter in foreign
exchange forward contracts with Silicon under which Borrower commits to
purchase from or sell to Silicon a set amount of foreign currency more than one
(1) Business Day after the contract date (the “FX Forward Contract”). The
aggregate face amount of all FX Forward Contracts and FX Reserve from time to
time outstanding shall not exceed the amount shown on the Schedule (the
“Foreign Exchange Sublimit”), and shall be reserved against Loans which would
otherwise be available hereunder, and in the event at any time there are
insufficient Loans available to Borrower for such reserve, Borrower shall
deposit and maintain with Silicon cash collateral in an amount at all times
equal to such deficiency, which shall be held as Collateral for all purposes of
this Agreement. Silicon will subtract ten percent (10%) of each outstanding FX
Forward Contract (the “FX Reserve”) from the Foreign Exchange Sublimit. “).
The total FX Forward Contracts at any one time may not exceed ten (10) times
the amount of the FX Reserve. Silicon may terminate the FX Forward Contracts
if a Default or an Event of Default occurs and is continuing.

     1.8 Cash Management/ACH Services.

     Borrower may use up to One Million Five Hundred Thousand Dollars
($1,500,000) of the Loans for Lender’s cash management services, which may
include merchant services, direct deposit of payroll, business credit card, and
check cashing services identified in various cash management services
agreements related to such services (the “Cash Management Services”). Such
aggregate amounts utilized under the Cash Management Services Sublimit will at
all times reduce the amount otherwise available to be borrowed under the Loans.
Any amounts Silicon pays on behalf of Borrower or any amounts that are not
paid by Borrower for any Cash Management Services will be treated as Loans and
will accrue interest at the Prime Rate in effect from time to time, plus one
percent (1.00%) per annum.

     1.9 EximBank Loans. At the request of Borrower, as part of the Loans,
Silicon may, subject to the satisfaction of certain conditions set forth
herein, make certain Loans against Eligible Foreign Accounts (collectively,
“Exim Loans” and each an “Exim Loan”). The aggregate face amount of all Exim
Loans from time to time outstanding shall not exceed the amount shown on the
Schedule (the “Exim Loan Sublimit”), and shall be reserved against Loans which
would otherwise be available hereunder. Prior to making any Exim Loan, Silicon
shall have received (a) a fully executed Borrower Agreement in form and
substance satisfactory to Silicon, (b) a fully executed Loan Authorization
Notice in form and substance satisfactory to Silicon, (c) payment of the Exim
Bank Loan Fee, (d) a fully executed Exim Bank Loan and Security Agreement, and
(e) such other documents as Silicon may deem necessary in connection with the
Exim Loans (collectively, the “Exim Loan Documents”).

     1.10 Equipment Loans. In addition to the Loans, at the request of
Borrower, Silicon will make equipment term loans to Borrower (the “Equipment
Loans”), in amounts determined by Silicon in its good faith business judgment,
up to the Equipment Loan Amount shown on the Schedule, provided no Default or
Event of Default has occurred and is continuing. Equipment Loans shall be
repaid in accordance with the Schedule.

2. SECURITY INTEREST. To secure the payment and performance of all of the
obligations when due, Borrower hereby grants to Silicon a security interest in
all of the following (collectively, the “Collateral”): all right, title and
interest of Borrower in and to all of the following, whether now owned or
hereafter arising or acquired and wherever located: all Accounts; all
Inventory; all Equipment; all Deposit Accounts; all General Intangibles; all
Investment Property; all other property; and any and all claims, rights and
interests in any of the above, and all guaranties and security for any of the
above, and all substitutions and replacements for, additions, accessions,
attachments, accessories, and improvements to, and proceeds (including
proceeds of any insurance policies, proceeds of proceeds and claims against
third parties) of, any and all of the above, and all Borrower’s books relating
to any and all of the above. Notwithstanding the foregoing, the Collateral
shall not be deemed to include any Intellectual Property, except that the
Collateral shall include the proceeds of all the Intellectual Property that are
Accounts of Borrower, or General Intangibles consisting of rights to payment,
if a judicial authority (including a U.S. Bankruptcy Court) holds that a
security interest in the underlying Intellectual Property is necessary to have
a security interest in such Accounts and General Intangibles of Borrower that
are proceeds of the Intellectual Property, then the Collateral shall
automatically, and effective as of the date hereof, include the Intellectual
Property to the extent necessary to permit perfection of Silicon’s security
interest in such Accounts and General Intangibles of Borrower that are proceeds
of the Intellectual Property.

3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF BORROWER.

     In order to induce Silicon to enter into this Agreement and to make Loans
and other Obligations under the Loan Documents, Borrower represents and
warrants to Silicon as follows, and Borrower covenants that the following

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	 	Amended and Restated Loan and Security Agreement

representations will continue to be true, and that Borrower will at all
times comply with all of the following covenants, throughout the term of this
Agreement and until all Obligations have been paid and performed in full:

     3.1 Corporate Existence and Authority. Borrower is and will continue to
be, duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation. Borrower is and will continue to be
qualified and licensed to do business in all jurisdictions in which any failure
to do so would result in a Material Adverse Change. The execution, delivery
and performance by Borrower of this Agreement, and all other documents
contemplated hereby (i) have been duly and validly authorized, (ii) are
enforceable against Borrower in accordance with their terms (except as
enforcement may be limited by equitable principles and by bankruptcy,
insolvency, reorganization, moratorium or similar laws relating to creditors’
rights generally), and (iii) do not violate Borrower’s articles or certificate
of incorporation, or Borrower’s by-laws, or any law or any material agreement
or instrument which is binding upon Borrower or its property, and (iv) do not
constitute grounds for acceleration of any material indebtedness or obligation
under any agreement or instrument which is binding upon Borrower or its
property.

     3.2 Name; Trade Names and Styles. The name of Borrower set forth in the
heading to this Agreement is its correct name. Listed in the Representations
are all prior names of Borrower and all of Borrower’s present and prior trade
names. Borrower shall give Silicon ten (10) days’ prior written notice before
changing its name or doing business under any other name. Borrower has
complied, and will in the future comply, in all material respects, with all
laws relating to the conduct of business under a fictitious business name,
except where the failure to so comply would not reasonably be expected to
result in a Material Adverse Change.

     3.3 Place of Business; Location of Collateral. The address set forth in
the heading to this Agreement is Borrower’s chief executive office. In
addition, Borrower has places of business and Collateral is located only at the
locations set forth in the Representations. Borrower will notify Silicon
within thirty (30) days of opening any additional place of business, changing
its chief executive office, or moving any of the Collateral to a location other
than Borrower’s Address or one of the locations set forth in the
Representations, except that Borrower may maintain sales offices in the
ordinary course of business at which not more than a total of $10,000 fair
market value of Equipment is located.

     3.4 Title to Collateral; Perfection; Permitted Liens.

          (a) Borrower is now, and will at all times in the future be, the sole
owner of all the Collateral, except for items of Equipment which are leased to
Borrower. The Collateral now is and will remain free and clear of any and all
liens, charges, security interests, encumbrances and adverse claims, except for
Permitted Liens. Silicon now has, and will continue to have, a first-priority
perfected and enforceable security interest in all of the Collateral, subject
only to the Permitted Liens, and Borrower will at all times defend Silicon and
the Collateral against all claims of others.

          (b) Borrower has set forth in the Representations all of Borrower’s
Deposit Accounts, and Borrower will give Silicon three (3) Business Days
advance written notice before establishing any new Deposit Accounts and will
cause the institution where any such new Deposit Account is maintained to
execute and deliver to Silicon a control agreement in form sufficient to
perfect Silicon’s security interest in the Deposit Account and otherwise
satisfactory to Silicon in its good faith business judgment. Nothing herein
limits any requirements which may be set forth in the Schedule as to where
Deposit Accounts will be maintained.

          (c) In the event that Borrower shall at any time after the date hereof
have any commercial tort claims against others, which it is asserting or
intends to assert, and in which the potential recovery exceeds $500,000,
Borrower shall promptly notify Silicon thereof in writing and provide Silicon
with such information regarding the same as Silicon shall request (unless
providing such information would waive the Borrower’s attorney-client
privilege). Such notification to Silicon shall constitute a grant of a
security interest in the commercial tort claim and all proceeds thereof to
Silicon, and Borrower shall execute and deliver all such documents and take all
such actions as Silicon shall request in connection therewith.

          (d) None of the Collateral now is or will be affixed to any real property
in such a manner, or with such intent, as to become a fixture. Borrower is not
and will not become a lessee under any real property lease pursuant to which
the lessor may obtain any rights in any of the Collateral and no such lease now
prohibits, restrains, impairs or will prohibit, restrain or impair Borrower’s
right to remove any Collateral from the leased premises. Whenever any
Collateral is located upon premises in which any third party has an interest,
Borrower shall, whenever requested by Silicon, use its best efforts to cause
such third party to execute and deliver to Silicon, in form acceptable to
Silicon, such waivers and subordinations as Silicon

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	 	Amended and Restated Loan and Security Agreement

shall specify in its good faith business judgment. Borrower will keep in
full force and effect, and will comply with all material terms of, any lease of
real property where any of the Collateral now or in the future may be located.

     3.5 Maintenance of Collateral. Borrower will maintain the Collateral in
good working condition (ordinary wear and tear excepted), and Borrower will not
use the Collateral for any unlawful purpose. Borrower will promptly advise
Silicon in writing of any material loss or damage to the Collateral.

     3.6 Books and Records. Borrower has maintained and will maintain at
Borrower’s Address complete and accurate books and records, comprising an
accounting system in accordance with GAAP.

     3.7 Financial Condition, Statements and Reports. All financial
statements now or in the future delivered to Silicon have been, and will be,
prepared in conformity with GAAP and now and in the future will fairly present
the results of operations and financial condition of Borrower, in accordance
with GAAP, at the times and for the periods therein stated. Between the last
date covered by any such statement provided to Silicon and the date hereof,
there has been no Material Adverse Change.

     3.8 Tax Returns and Payments; Pension Contributions. Borrower has timely
filed, and will timely file, all required tax returns and reports, and Borrower
has timely paid, and will timely pay, all foreign, federal, state and local
taxes, assessments, deposits and contributions now or in the future owed by
Borrower. Borrower may, however, defer payment of any contested taxes,
provided that Borrower (i) in good faith contests Borrower’s obligation to pay
the taxes by appropriate proceedings promptly and diligently instituted and
conducted, (ii) notifies Silicon in writing of the commencement of, and any
material development in, the proceedings, and (iii) posts bonds or takes any
other steps required to keep the contested taxes from becoming a lien upon any
of the Collateral. Borrower is unaware of any claims or adjustments proposed
for any of Borrower’s prior tax years which could result in additional taxes
becoming due and payable by Borrower. Borrower has paid, and shall continue to
pay all amounts necessary to fund all present and future pension, profit
sharing and deferred compensation plans in accordance with their terms, and
Borrower has not and will not withdraw from participation in, permit partial or
complete termination of, or permit the occurrence of any other event with
respect to, any such plan which could reasonably be expected to result in any
liability of Borrower, including any liability to the Pension Benefit Guaranty
Corporation or its successors or any other governmental agency.

     3.9 Compliance with Law. Borrower has, to the best of its knowledge,
complied, and will comply, in all material respects, with all provisions of all
foreign, federal, state and local laws and regulations applicable to Borrower,
including, but not limited to, those relating to Borrower’s ownership of real
or personal property, the conduct and licensing of Borrower’s business, and all
environmental matters.

     3.10 Litigation. Except as set forth in the Schedule, there is no claim,
suit, litigation, proceeding or investigation pending or (to best of Borrower’s
knowledge) threatened against or affecting Borrower in any court or before any
governmental agency (or any basis therefor known to Borrower) which could
reasonably be expected to result, either separately or in the aggregate, in any
Material Adverse Change. Borrower will promptly inform Silicon in writing of
any claim, proceeding, litigation or investigation in the future threatened or
instituted against Borrower involving any single claim of $50,000 or more, or
involving $100,000 or more in the aggregate.

     3.11 Use of Proceeds. All proceeds of all Loans shall be used solely for
lawful business purposes. Borrower is not purchasing or carrying any “margin
stock” (as defined in Regulation U of the Board of Governors of the Federal
Reserve System) and no part of the proceeds of any Loan will be used to
purchase or carry any “margin stock” or to extend credit to others for the
purpose of purchasing or carrying any “margin stock.”

     3.12 Operating Subsidiaries. All of Borrower’s operating Subsidiaries are
parties to this Agreement.

4. Accounts.

     4.1 Representations Relating to Accounts. Borrower represents and
warrants to Silicon as follows: Each Account with respect to which Loans are
requested by Borrower shall, on the date each Loan is requested and made, (i)
represent an undisputed bona fide existing unconditional obligation of the
Account Debtor created by the sale, delivery, and acceptance of goods or the
rendition of services, or the non-exclusive licensing of Intellectual Property,
in the ordinary course of Borrower’s business, and (ii) meet the Minimum
Eligibility Requirements set forth in Section 8 below.

     4.2 Representations Relating to Documents and Legal Compliance. Borrower
represents and warrants to Silicon as follows: All statements made and all
unpaid balances appearing in all invoices, instruments and other documents
evidencing the Accounts are and shall be true and correct and all such
invoices, instruments and other documents and all of Borrower’s

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books and records are and shall be genuine and in all respects what they
purport to be. All sales and other transactions underlying or giving rise to
each Account shall comply in all material respects with all applicable laws and
governmental rules and regulations. To the best of Borrower’s knowledge, all
signatures and endorsements on all documents, instruments, and agreements
relating to all Accounts are and shall be genuine, and all such documents,
instruments and agreements are and shall be legally enforceable in accordance
with their terms.

     4.3 Schedules and Documents Relating to Accounts. Borrower shall deliver
to Silicon transaction reports and schedules of collections, as provided in the
Schedule, on Silicon’s standard forms; provided, however, that Borrower’s
failure to execute and deliver the same shall not affect or limit Silicon’s
security interest and other rights in all of Borrower’s Accounts, nor shall
Silicon’s failure to advance or lend against a specific Account affect or limit
Silicon’s security interest and other rights therein. If requested by Silicon
in its reasonable judgment, Borrower shall furnish Silicon with copies (or, at
Silicon’s request, originals) of all contracts, orders, invoices, and other
similar documents, and all shipping instructions, delivery receipts, bills of
lading, and other evidence of delivery, for any goods the sale or disposition
of which gave rise to such Accounts, and Borrower warrants the genuineness of
all of the foregoing. Borrower shall also furnish to Silicon an aged accounts
receivable trial balance as provided in the Schedule. In addition, Borrower
shall deliver to Silicon, on its request, the originals of all instruments,
chattel paper, security agreements, guarantees and other documents and property
evidencing or securing any Accounts, in the same form as received, with all
necessary endorsements, and copies of all credit memos.

     4.4 Collection of Accounts. Borrower shall have the right to collect all
Accounts, unless and until a Default or an Event of Default has occurred and is
continuing. Whether or not an Event of Default has occurred and is continuing,
Borrower shall hold all payments on, and proceeds of, Accounts in trust for
Silicon, and Borrower shall immediately deliver all such payments and proceeds
to Silicon in their original form, duly endorsed, to be applied to the
Obligations in such order as Silicon shall determine. Silicon may, in its good
faith business judgment, require that all proceeds of Collateral be deposited
by Borrower into a lockbox account, or such other “blocked account” as Silicon
may specify, pursuant to a blocked account agreement in such form as Silicon
may specify in its good faith business judgment.

     4.5. Remittance of Proceeds. All proceeds arising from the disposition
of any Collateral shall be delivered, in kind, by Borrower to Silicon in the
original form in which received by Borrower not later than the following
Business Day after receipt by Borrower, to be applied to the Obligations in
such order as Silicon shall determine; provided that, if no Default or Event of
Default has occurred and is continuing, Borrower shall not be obligated to
remit to Silicon the proceeds of the sale of worn out or obsolete Equipment
disposed of by Borrower in good faith in an arm’s length transaction for a
purchase price of $25,000 or less (for all such transactions in any fiscal
year). Borrower agrees that it will not commingle proceeds of Collateral with
any of Borrower’s other funds or property, but will hold such proceeds separate
and apart from such other funds and property and in an express trust for
Silicon. Nothing in this Section limits the restrictions on disposition of
Collateral set forth elsewhere in this Agreement.

     4.6 Disputes. Borrower shall notify Silicon promptly of all disputes or
claims relating to Accounts. Borrower shall not forgive (completely or
partially), compromise or settle any Account for less than payment in full, or
agree to do any of the foregoing, except that Borrower may do so, provided
that: (i) Borrower does so in good faith, in a commercially reasonable manner,
in the ordinary course of business, and in arm’s length transactions, which are
reported to Silicon on the regular reports provided to Silicon; (ii) no Default
or Event of Default has occurred and is continuing; and (iii) taking into
account all such discounts, settlements and forgiveness, the total outstanding
Loans will not exceed the Credit Limit.

     4.7 Returns. Provided no Event of Default has occurred and is
continuing, if any Account Debtor returns any Inventory to Borrower, Borrower
shall promptly determine the reason for such return and promptly issue a credit
memorandum to the Account Debtor in the appropriate amount. In the event any
attempted return occurs after the occurrence and during the continuance of any
Event of Default, Borrower shall hold the returned Inventory in trust for
Silicon, and immediately notify Silicon of the return of the Inventory.

     4.8 Verification. Silicon may, from time to time, verify directly with
the respective Account Debtors the validity, amount and other matters relating
to the Accounts, by means of mail, telephone or otherwise, either in the name
of Borrower or Silicon or such other name as Silicon may choose. Silicon will
provide Borrower with notice of any such action.

     4.9 No Liability. Silicon shall not be responsible or liable for any
shortage or discrepancy in, damage to, or loss or destruction of, any goods,
the sale or other disposition of which gives rise to an Account, or for any
error, act, omission, or delay of any kind occurring in the settlement, failure
to settle, collection or failure to collect any Account, or for settling any
Account in good faith for less than the full amount thereof, nor shall Silicon
be deemed to be responsible for any of

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Borrower’s obligations under any contract or agreement giving rise to an
Account. Nothing herein shall, however, relieve Silicon from liability for its
own gross negligence or willful misconduct.

     4.10 Exim Insurance. If required by Silicon, at all times that any Exim
Loans are outstanding, Borrower will obtain, and pay when due all premiums with
respect to, and maintain uninterrupted foreign credit insurance. In addition,
Borrower will execute in favor of Silicon an assignment of proceeds of any
insurance policy obtained by Borrower and issued by Exim Bank insuring against
comprehensive commercial and political risk (the “EXIM Bank Policy”). The
insurance proceeds from the EXIM Bank Policy assigned or paid to Silicon will
be applied to the balance outstanding of Exim Loans made under this Agreement.
Borrower will immediately notify Bank and Exim Bank in writing upon submission
of any claim under the Exim Bank Policy. Then Silicon will not be obligated to
make any further Loans to Borrower without prior approval from Exim Bank.

     4.11 Subsidiaries. Borrower will cause any operating Subsidiaries in
existence after the date hereof, to promptly become parties to this Agreement.

5. ADDITIONAL DUTIES OF BORROWER.

     5.1 Financial and Other Covenants. Borrower shall at all times comply
with the financial and other covenants set forth in the Schedule.

     5.2 Insurance. Borrower shall, at all times insure all of the tangible
personal property Collateral and carry such other business insurance, with
insurers reasonably acceptable to Silicon, in such form and amounts as Silicon
may reasonably require and that are customary and in accordance with standard
practices for Borrower’s industry and locations, and Borrower shall provide
evidence of such insurance to Silicon. All such insurance policies shall name
Silicon as an additional loss payee, and shall contain a lenders loss payee
endorsement in form reasonably acceptable to Silicon. Upon receipt of the
proceeds of any such insurance, Silicon shall apply such proceeds in reduction
of the Obligations as Silicon shall determine in its good faith business
judgment, except that, provided no Default or Event of Default has occurred and
is continuing, Silicon shall release to Borrower insurance proceeds with
respect to Equipment totaling less than $100,000, which shall be utilized by
Borrower for the replacement of the Equipment with respect to which the
insurance proceeds were paid. Silicon may require reasonable assurance that
the insurance proceeds so released will be so used. If Borrower fails to
provide or pay for any insurance, Silicon may, but is not obligated to, obtain
the same at Borrower’s expense. Borrower shall promptly deliver to Silicon
copies of all material reports made to insurance companies.

     5.3 Reports. Borrower, at its expense, shall provide Silicon with the
written reports set forth in the Schedule, and such other written reports with
respect to Borrower (including budgets and forecasts), as Silicon shall from
time to time specify in its good faith business judgment.

     5.4 Access to Collateral, Books and Records. At reasonable times, and on
one Business Day’s notice, Silicon, or its agents, shall have the right to
inspect the Collateral, and the right to audit and copy Borrower’s books and
records. Silicon shall take reasonable steps to keep confidential all
information obtained in any such inspection or audit, but Silicon shall have
the right to disclose any such information to its auditors, regulatory
agencies, and attorneys, and pursuant to any subpoena or other legal process.
The foregoing inspections and audits shall be at Borrower’s expense and the
charge therefor shall be $750 per person per day (or such higher amount as
shall represent Silicon’s then current standard charge for the same), plus
reasonable out of pocket expenses, provided however that it is agreed that the
cost of the first inspection and audit will not exceed $7,500, and further
provided, that if at the time of such inspection and audit no Event of Default
has occurred and is continuing, the cost of such inspections and audits will
not exceed $15,000 in any twelve (12) month period and such inspections and
audits will not be conducted more frequently than once in any calendar quarter.

     5.5 Negative Covenants. Except as may be permitted in the Schedule,
Borrower shall not, without Silicon’s prior written consent (which shall be a
matter of its good faith business judgment), do any of the following: (i)
merge or consolidate with another corporation or entity (each an “Acquisition”
and collectively, the “Acquisitions”) during the existence of this Agreement
unless each of the following conditions precedent are in Silicon’s discretion
satisfied: (a) Bank shall have received and reviewed the pro forma projections
of the Borrower (in form and detail satisfactory to Silicon in its reasonable
discretion) taking into effect the Acquisition, which pro forma projections
demonstrate the Borrower’s continued compliance with all of the material terms
of this Agreement throughout the term hereof; (b) Silicon shall have received
and reviewed a copy of the current financial statement of the acquired Person
(the “Target”); (c) the aggregate amount of all Acquisitions does not exceed
Two Million Dollars ($2,000,000) (the “Acquisition Cap”); and (d) Silicon shall
have received a written certification,

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	 	Amended and Restated Loan and Security Agreement

in form and substance satisfactory to Silicon, from the chief financial
officer of Borrower that: (aa) the Target is a going concern; (bb) the Target
is in the same line of business as the Borrower;(cc) after completion of the
Acquisition, the Borrower will own at all times not less than fifty-one percent
(51%) of the Target; (dd) after giving affect to the Acquisition, the Borrower
shall not be in default under this Agreement or any of the Loan Documents; (ee)
the Borrower does not directly or indirectly assume any indebtedness of the
Target, other than current accounts payable arising in the ordinary course of
the Target’s business; (ff) the Target is not subject to any litigation, which,
if adversely determined, could when taken as a whole, have a material adverse
effect on the financial condition of the Target; and (gg) the Target is not
subject to contingent liabilities, in an amount which could, when taken as a
whole, have a material adverse effect on the financial condition of the
Target. Borrower further understands and agrees that in the event any
Acquisition satisfies the foregoing conditions, Silicon shall not include any
Accounts of such Target in the Eligible Accounts unless and until Silicon has
performed an audit of such Accounts, the results of which are satisfactory to
Silicon; (ii) acquire any assets in excess of $1,000,000 in the aggregate
except in the ordinary course of business; (iii) enter into any other
transaction outside the ordinary course of business; (iv) sell or transfer any
Collateral, except for the sale of finished Inventory in the ordinary course of
Borrower’s business, and except for the sale of obsolete or unneeded Equipment
in the ordinary course of business; (v) store any Inventory or other Collateral
with any warehouseman or other third party; (vi) sell any Inventory on a
sale-or-return, guaranteed sale, consignment, or other contingent basis; (vii)
make any loans of any money or other assets; (viii) incur any debts, outside
the ordinary course of business, which would result in a Material Adverse
Change; (ix) guarantee or otherwise become liable with respect to the
obligations of another party or entity; (x) pay or declare any dividends on
Borrower’s stock (except for dividends payable solely in stock of Borrower);
(xi) redeem, retire, purchase or otherwise acquire, directly or indirectly, any
of Borrower’s stock in an aggregate amount to exceed $1,000,000, provided that
at the time of any such redemption, retirement, purchase or other acquisition,
and after giving effect thereto, no Event of Default has occurred and is
continuing; (xii) make any change in Borrower’s capital structure which would
result in a Material Adverse Change; or (xiii) engage, directly or indirectly,
in any business other than the businesses currently engaged in by Borrower or
reasonably related thereto; (xiv) dissolve or elect to dissolve; (xv) at such
times as any Exim Loans are outstanding, violate or fail to comply with any
provision of the Borrower Agreement; (xvi) at such times as any Exim Loans are
outstanding, take an action, or permit any action to be taken, that causes, or
could be expected to cause, the Exim Guarantee to not be in full force and
effect; or (xvii) make any loans, advances or transfer any assets to any
Affiliate or subsidiary of any Borrower which has not become a party to this
Agreement and the Loan Documents. Transactions permitted by the foregoing
provisions of this Section are only permitted if no Default or Event of Default
would occur as a result of such transaction.

     5.6 Litigation Cooperation. Should any third-party suit or proceeding be
instituted by or against Silicon with respect to any Collateral or relating to
Borrower, Borrower shall, without expense to Silicon, make available Borrower
and its officers, employees and agents and Borrower’s books and records, to the
extent that Silicon may deem them reasonably necessary in order to prosecute or
defend any such suit or proceeding.

     5.7 Further Assurances. Borrower agrees, at its expense, on request by
Silicon, to execute all documents and take all actions, as Silicon, may, in its
good faith business judgment, deem necessary or useful in order to perfect and
maintain Silicon’s perfected first-priority security interest in the Collateral
(subject to Permitted Liens), and in order to fully consummate the transactions
contemplated by this Agreement.

6. TERM.

     6.1 Maturity Date. This Agreement shall continue in effect until the
maturity date set forth on the Schedule (the “Maturity Date”), subject to
Section 6.3 below.

     6.2 Early Termination. This Agreement may be terminated prior to the
Maturity Date as follows: (i) by Borrower, effective three Business Days after
written notice of termination is given to Silicon; or (ii) by Silicon at any
time after the occurrence and during the continuance of an Event of Default,
without notice, effective immediately. If this Agreement is terminated by
Borrower or by Silicon under this Section 6.2, Borrower shall pay to Silicon a
termination fee in an amount equal to one half percent (.50%) of the Maximum
Credit Limit, provided that no termination fee shall be charged if the credit
facility hereunder is replaced with a new facility from another division of
Silicon Valley Bank. The termination fee shall be due and payable on the
effective date of termination and thereafter shall bear interest at a rate
equal to the highest rate applicable to any of the Obligations.

     6.3 Payment of Obligations. On the Maturity Date or on any earlier
effective date of termination, Borrower shall pay and perform in full all
Obligations, including, without limitation all Exim Loans and all Equipment
Loans, whether evidenced by

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installment notes or otherwise, and whether or not all or any part of such
Obligations are otherwise then due and payable. Without limiting the
generality of the foregoing, if on the Maturity Date, or on any earlier
effective date of termination, there are any outstanding Letters of Credit
issued by Silicon or issued by another institution based upon an application,
guarantee, indemnity or similar agreement on the part of Silicon, then on such
date Borrower shall provide to Silicon cash collateral in an amount equal to
105% of the face amount of all such Letters of Credit plus all interest, fees
and cost due or to become due in connection therewith (as estimated by Silicon
in its good faith business judgment), to secure all of the Obligations relating
to said Letters of Credit, pursuant to Silicon’s then standard form cash pledge
agreement. Notwithstanding any termination of this Agreement, all of Silicon’s
security interests in all of the Collateral and all of the terms and provisions
of this Agreement shall continue in full force and effect until all Obligations
have been paid and performed in full; provided that Silicon may, in its sole
discretion, refuse to make any further Loans after termination. No termination
shall in any way affect or impair any right or remedy of Silicon, nor shall any
such termination relieve Borrower of any Obligation to Silicon, until all of
the Obligations have been paid and performed in full. Upon payment and
performance in full of all the Obligations and termination of this Agreement,
Silicon shall promptly terminate its financing statements with respect to the
Borrower and deliver to Borrower such other documents as may be required to
fully terminate Silicon’s security interests.

7. EVENTS OF DEFAULT AND REMEDIES.

     7.1 Events of Default. The occurrence of any of the following events
shall constitute an “Event of Default” under this Agreement, and Borrower shall
give Silicon immediate written notice thereof: (a) Any warranty,
representation, statement, report or certificate made or delivered to Silicon
by Borrower or any of Borrower’s officers, employees or agents, now or in the
future, shall be untrue or misleading in a material respect when made or deemed
to be made; or (b) Borrower shall fail to pay when due any Loan or any interest
thereon or any other monetary Obligation; or (c) the total Loans and other
Obligations outstanding at any time shall exceed the Credit Limit; or (d)
Borrower shall fail to comply with any of the financial covenants set forth in
the Schedule, or shall fail to perform any other non-monetary Obligation which
by its nature cannot be cured, or shall fail to permit Silicon to conduct an
inspection or audit as specified in Section 5.4 hereof; or (e) Borrower shall
fail to perform any other non-monetary Obligation, which failure is not cured
within five Business Days after the date due; or (f) any levy, assessment,
attachment, seizure, lien or encumbrance (other than a Permitted Lien) is made
on all or any part of the Collateral which is not cured within 10 days after
the occurrence of the same; or (g) any default or event of default occurs under
any obligation secured by a Permitted Lien, which is not cured within any
applicable cure period or waived in writing by the holder of the Permitted
Lien; or (h) Borrower breaches any material contract or obligation, which has
resulted or may reasonably be expected to result in a Material Adverse Change;
or (i) Dissolution, termination of existence, insolvency or business failure of
Borrower; or appointment of a receiver, trustee or custodian, for all or any
part of the property of, assignment for the benefit of creditors by, or the
commencement of any proceeding by Borrower under any reorganization,
bankruptcy, insolvency, arrangement, readjustment of debt, dissolution or
liquidation law or statute of any jurisdiction, now or in the future in effect;
or (j) the commencement of any proceeding against Borrower or any guarantor of
any of the Obligations under any reorganization, bankruptcy, insolvency,
arrangement, readjustment of debt, dissolution or liquidation law or statute of
any jurisdiction, now or in the future in effect, which is not cured by the
dismissal thereof within 30 days after the date commenced; or (k) revocation or
termination of, or limitation or denial of liability upon, any guaranty of the
Obligations or any attempt to do any of the foregoing, or commencement of
proceedings by any guarantor of any of the Obligations under any bankruptcy or
insolvency law; or (l) revocation or termination of, or limitation or denial of
liability upon, any pledge of any certificate of deposit, securities or other
property or asset of any kind pledged by any third party to secure any or all
of the Obligations, or any attempt to do any of the foregoing, or commencement
of proceedings by or against any such third party under any bankruptcy or
insolvency law; or (m) Borrower makes any payment on account of any
indebtedness or obligation which has been subordinated to the Obligations other
than as permitted in the applicable subordination agreement, or if any Person
who has subordinated such indebtedness or obligations terminates or in any way
limits his subordination agreement; or (n) Borrower shall generally not pay its
debts as they become due, or Borrower shall conceal, remove or transfer any
part of its property, with intent to hinder, delay or defraud its creditors, or
make or suffer any transfer of any of its property which may be fraudulent
under any bankruptcy, fraudulent conveyance or similar law; or (o) a Material
Adverse Change shall occur; or (p) Silicon, acting in good faith and in a
commercially reasonable manner, deems itself insecure because of the occurrence
of an event prior to the effective date hereof of which Silicon had no
knowledge on the effective date or because of the occurrence of an event on or
subsequent to the effective date, or (q) if the Exim Guarantee ceases for any
reason to be in full force and effect, or (r) if the Exim Bank declares the
Exim Guarantee void or revokes any obligations under the Exim Guarantee.
Silicon may cease making any Loans hereunder during any of the above cure
periods, and thereafter if an Event of Default has occurred and is continuing.

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	 	Amended and Restated Loan and Security Agreement

     7.2 Remedies. Upon the occurrence and during the continuance of any
Event of Default, and at any time thereafter, Silicon, at its option, and
without notice or demand of any kind (all of which are hereby expressly waived
by Borrower), may do any one or more of the following: (a) Cease making Loans
or otherwise extending credit to Borrower under this Agreement or any other
Loan Document; (b) Accelerate and declare all or any part of the Obligations to
be immediately due, payable, and performable, notwithstanding any deferred or
installment payments allowed by any instrument evidencing or relating to any
Obligation; (c) Take possession of any or all of the Collateral wherever it may
be found, and for that purpose Borrower hereby authorizes Silicon without
judicial process to enter onto any of Borrower’s premises without interference
to search for, take possession of, keep, store, or remove any of the
Collateral, and remain on the premises or cause a custodian to remain on the
premises in exclusive control thereof, without charge for so long as Silicon
deems it necessary, in its good faith business judgment, in order to complete
the enforcement of its rights under this Agreement or any other agreement;
provided, however, that should Silicon seek to take possession of any of the
Collateral by court process, Borrower hereby irrevocably waives: (i) any bond
and any surety or security relating thereto required by any statute, court rule
or otherwise as an incident to such possession; (ii) any demand for possession
prior to the commencement of any suit or action to recover possession thereof;
and (iii) any requirement that Silicon retain possession of, and not dispose
of, any such Collateral until after trial or final judgment; (d) Require
Borrower to assemble any or all of the Collateral and make it available to
Silicon at places designated by Silicon which are reasonably convenient to
Silicon and Borrower, and to remove the Collateral to such locations as Silicon
may deem advisable; (e) Complete the processing, manufacturing or repair of any
Collateral prior to a disposition thereof and, for such purpose and for the
purpose of removal, Silicon shall have the right to use Borrower’s premises,
vehicles, hoists, lifts, cranes, and other Equipment and all other property
without charge; (f) Sell, lease or otherwise dispose of any of the Collateral,
in its condition at the time Silicon obtains possession of it or after further
manufacturing, processing or repair, at one or more public and/or private
sales, in lots or in bulk, for cash, exchange or other property, or on credit,
and to adjourn any such sale from time to time without notice other than oral
announcement at the time scheduled for sale. Silicon shall have the right to
conduct such disposition on Borrower’s premises without charge, for such time
or times as Silicon deems reasonable, or on Silicon’s premises, or elsewhere
and the Collateral need not be located at the place of disposition. Silicon
may directly or through any affiliated company purchase or lease any Collateral
at any such public disposition, and if permissible under applicable law, at any
private disposition. Any sale or other disposition of Collateral shall not
relieve Borrower of any liability Borrower may have if any Collateral is
defective as to title or physical condition or otherwise at the time of sale;
(g) Demand payment of, and collect any Accounts and General Intangibles
comprising Collateral and, in connection therewith, Borrower irrevocably
authorizes Silicon to endorse or sign Borrower’s name on all collections,
receipts, instruments and other documents, to take possession of and open mail
addressed to Borrower and remove therefrom payments made with respect to any
item of the Collateral or proceeds thereof, and, in Silicon’s good faith
business judgment, to grant extensions of time to pay, compromise claims and
settle Accounts and the like for less than face value; (h) Offset against any
sums in any of Borrower’s general, special or other Deposit Accounts with
Silicon against any or all of the Obligations; and (i) Demand and receive
possession of any of Borrower’s federal and state income tax returns and the
books and records utilized in the preparation thereof or referring thereto.
All reasonable attorneys’ fees, expenses, costs, liabilities and obligations
incurred by Silicon with respect to the foregoing shall be added to and become
part of the Obligations, shall be due on demand, and shall bear interest at a
rate equal to the highest interest rate applicable to any of the Obligations.
Without limiting any of Silicon’s rights and remedies, from and after the
occurrence and during the continuance of any Event of Default, the interest
rate applicable to the Obligations shall be increased by an additional four
percent per annum (the “Default Rate”).

     7.3 Standards for Determining Commercial Reasonableness. Borrower and
Silicon agree that a sale or other disposition (collectively, “sale”) of any
Collateral which complies with the following standards will conclusively be
deemed to be commercially reasonable: (i) Notice of the sale is given to
Borrower at least ten days prior to the sale, and, in the case of a public
sale, notice of the sale is published at least five days before the sale in a
newspaper of general circulation in the county where the sale is to be
conducted; (ii) Notice of the sale describes the collateral in general,
non-specific terms; (iii) The sale is conducted at a place designated by
Silicon, with or without the Collateral being present; (iv) The sale commences
at any time between 8:00 a.m. and 6:00 p.m.; (v) Payment of the purchase price
in cash or by cashier’s check or wire transfer is required; (vi) With respect
to any sale of any of the Collateral, Silicon may (but is not obligated to)
direct any prospective purchaser to ascertain directly from Borrower any and
all information concerning the same. Silicon shall be free to employ other
methods of noticing and selling the Collateral, in its discretion, if they are
commercially reasonable.

     7.4 Power of Attorney. Upon the occurrence and during the continuance of
any Event of Default, without limiting Silicon’s other rights and remedies,
Borrower grants to Silicon an irrevocable power of attorney coupled with an
interest,

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	 	Amended and Restated Loan and Security Agreement

authorizing and permitting Silicon (acting through any of its employees,
attorneys or agents) at any time, at its option, but without obligation, with
or without notice to Borrower, and at Borrower’s expense, to do any or all of
the following, in Borrower’s name or otherwise, but Silicon agrees that if it
exercises any right hereunder, it will do so in good faith and in a
commercially reasonable manner: (a) Execute on behalf of Borrower any
documents that Silicon may, in its good faith business judgment, deem advisable
in order to perfect and maintain Silicon’s security interest in the Collateral,
or in order to exercise a right of Borrower or Silicon, or in order to fully
consummate all the transactions contemplated under this Agreement, and all
other Loan Documents; (b) Execute on behalf of Borrower, any invoices relating
to any Account, any draft against any Account Debtor and any notice to any
Account Debtor, any proof of claim in bankruptcy, any Notice of Lien, claim of
mechanic’s, materialman’s or other lien, or assignment or satisfaction of
mechanic’s, materialman’s or other lien; (c) Take control in any manner of any
cash or non-cash items of payment or proceeds of Collateral; endorse the name
of Borrower upon any instruments, or documents, evidence of payment or
Collateral that may come into Silicon’s possession; (d) Endorse all checks and
other forms of remittances received by Silicon; (e) Pay, contest or settle any
lien, charge, encumbrance, security interest and adverse claim in or to any of
the Collateral, or any judgment based thereon, or otherwise take any action to
terminate or discharge the same; (f) Grant extensions of time to pay,
compromise claims and settle Accounts and General Intangibles for less than
face value and execute all releases and other documents in connection
therewith; (g) Pay any sums required on account of Borrower’s taxes or to
secure the release of any liens therefor, or both; (h) Settle and adjust, and
give releases of, any insurance claim that relates to any of the Collateral and
obtain payment therefor; (i) Instruct any third party having custody or control
of any books or records belonging to, or relating to, Borrower to give Silicon
the same rights of access and other rights with respect thereto as Silicon has
under this Agreement; and (j) Take any action or pay any sum required of
Borrower pursuant to this Agreement and any other Loan Documents. Any and all
reasonable sums paid and any and all reasonable costs, expenses, liabilities,
obligations and attorneys’ fees incurred by Silicon with respect to the
foregoing shall be added to and become part of the Obligations, shall be
payable on demand, and shall bear interest at a rate equal to the highest
interest rate applicable to any of the Obligations. In no event shall
Silicon’s rights under the foregoing power of attorney or any of Silicon’s
other rights under this Agreement be deemed to indicate that Silicon is in
control of the business, management or properties of Borrower.

     7.5 Application of Proceeds. All proceeds realized as the result of any
sale of the Collateral shall be applied by Silicon first to the reasonable
costs, expenses, liabilities, obligations and attorneys’ fees incurred by
Silicon in the exercise of its rights under this Agreement, second to the
interest due upon any of the Obligations, and third to the principal of the
Obligations, in such order as Silicon shall determine in its sole discretion.
Any surplus shall be paid to Borrower or other persons legally entitled
thereto; Borrower shall remain liable to Silicon for any deficiency. If,
Silicon, in its good faith business judgment, directly or indirectly enters
into a deferred payment or other credit transaction with any purchaser at any
sale of Collateral, Silicon shall have the option, exercisable at any time, in
its good faith business judgment, of either reducing the Obligations by the
principal amount of purchase price or deferring the reduction of the
Obligations until the actual receipt by Silicon of the cash therefor.

     7.6 Remedies Cumulative. In addition to the rights and remedies set
forth in this Agreement, Silicon shall have all the other rights and remedies
accorded a secured party under the Maryland Uniform Commercial Code and under
all other applicable laws, and under any other instrument or agreement now or
in the future entered into between Silicon and Borrower, and all of such rights
and remedies are cumulative and none is exclusive. Exercise or partial
exercise by Silicon of one or more of its rights or remedies shall not be
deemed an election, nor bar Silicon from subsequent exercise or partial
exercise of any other rights or remedies. The failure or delay of Silicon to
exercise any rights or remedies shall not operate as a waiver thereof, but all
rights and remedies shall continue in full force and effect until all of the
Obligations have been fully paid and performed.

8. Definitions. As used in this agreement, the following terms have the
following meanings:

     “Account Debtor” means the obligor on an Account.

     “Accounts” means all present and future “accounts” as defined in the Code
in effect on the date hereof with such additions to such term as may hereafter
be made, and includes without limitation all accounts receivable and other sums
owing to Borrower.

     “Affiliate” means, with respect to any Person, a relative, partner,
shareholder, director, officer, or employee of such Person, or any parent or
subsidiary of such Person, or any Person controlling, controlled by or under
common control with such Person.

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	 	Amended and Restated Loan and Security Agreement

     “Borrower Agreement” means an Export-Import Bank of the United States
Working Capital Guarantee Program Borrower Agreement between Borrower and
Silicon, as amended, modified, supplemented or restated from time to time.

     “Business Day” means a day on which Silicon is open for business.

     “Buyer” shall mean a Person that has entered into one or more Export
Orders with Borrower.

     “Code” means the Uniform Commercial Code as adopted and in effect in the
State of Maryland from time to time.

     “Collateral” has the meaning set forth in Section 2 above.

     “continuing” and “during the continuance of” when used with reference to a
Default or Event of Default means that the Default or Event of Default has
occurred and has not been either waived in writing by Silicon or cured within
any applicable cure period.

     “Default” means any event which with notice or passage of time or both,
would constitute an Event of Default.

     “Default Rate” has the meaning set forth in Section 7.2 above.

     “Deposit Accounts” means all present and future “deposit accounts” as
defined in the Code in effect on the date hereof with such additions to such
term as may hereafter be made, and includes without limitation all general and
special bank accounts, demand accounts, checking accounts, savings accounts and
certificates of deposit.

     “Eligible Accounts” means Accounts and General Intangibles arising in the
ordinary course of Borrower’s business from the sale of goods or the rendition
of services, or the non-exclusive licensing of Intellectual Property, which
Silicon, in its good faith business judgment, shall deem eligible for
borrowing. Without limiting the fact that the determination of which Accounts
are eligible for borrowing is a matter of Silicon’s good faith business
judgment, the following (the “Minimum Eligibility Requirements”) are the
minimum requirements for an Account to be an Eligible Account: (i) the Account
must not be outstanding for more than 90 days from its invoice date (the
“Eligibility Period”), (ii) the Account must not represent progress billings,
or be due under a fulfillment or requirements contract with the Account Debtor,
unless the Account Debtor on any progress billing has agreed that payment of
such invoice is due and payable without offset or defense, (iii) the Account
must not be subject to any contingencies (including Accounts arising from sales
on consignment, guaranteed sale or other terms pursuant to which payment by the
Account Debtor may be conditional), (iv) the Account must not be owing from an
Account Debtor with whom Borrower has any dispute (whether or not relating to
the particular Account), (v) the Account must not be owing from an Affiliate of
Borrower, (vi) the Account must not be owing from an Account Debtor which is
subject to any insolvency or bankruptcy proceeding, or whose financial
condition is not acceptable to Silicon, or which, fails or goes out of a
material portion of its business, (vii) the Account must not be owing from the
United States or any department, agency or instrumentality thereof (unless
there has been compliance, to Silicon’s satisfaction, with the United States
Assignment of Claims Act), (viii) the Account must not be owing from an Account
Debtor located outside the United States or Canada (unless pre-approved by
Silicon in its discretion in writing, or backed by a letter of credit
satisfactory to Silicon, or FCIA insured satisfactory to Silicon), (ix) the
Account must not be owing from an Account Debtor to whom Borrower is or may be
liable for goods purchased from such Account Debtor or otherwise (but, in such
case, the Account will be deemed not eligible only to the extent of any amounts
owed by Borrower to such Account Debtor), (x) the Account must not be subject
to any lien in favor of any other Person, including without limitation, Tatonka
Capital Corporation (“Tatonka”). Unless otherwise agreed to by Silicon,
Accounts owing from one Account Debtor will not be deemed Eligible Accounts to
the extent they exceed twenty five percent (25%) of the total Accounts
outstanding. In addition, if more than 50% of the Accounts owing from an
Account Debtor are outstanding for a period longer than their Eligibility
Period (without regard to unapplied credits) or are otherwise not eligible
Accounts, then all Accounts owing from that Account Debtor will be deemed
ineligible for borrowing. Silicon may, from time to time, in its good faith
business judgment, revise the Minimum Eligibility Requirements, upon written
notice to Borrower.

     “Equipment” means all present and future “equipment” as defined in the
Code in effect on the date hereof with such additions to such term as may
hereafter be made, and includes without limitation all machinery, fixtures,
goods, vehicles (including motor vehicles and trailers), and any interest in
any of the foregoing.

     “Exim Bank” is the Export-Import Bank of the United States.

     “Exim Borrowing Base” shall have the meaning set forth in the Exim Loan
Documents.

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	 	Amended and Restated Loan and Security Agreement

     “Exim Eligible Foreign Accounts” shall have the meaning set forth in the
Exim Loan Documents.

     “Exim Eligible Foreign Inventory” shall have the meaning set forth in the
Exim Loan Documents.

     “Exim Guarantee” is that certain Master Guarantee Agreement between Exim
Bank and Silicon dated August 11, 1999 or other agreement, as amended,
modified, supplemented or restated from time to time, the terms of which are
incorporated into this Exim Agreement.

     “Export Order” is a written export order or contract for the purchase by
the Buyer from the Borrower of any finished goods or services which are
intended for export.

     “Event of Default” means any of the events set forth in Section 7.1 of
this Agreement.

     “GAAP” means generally accepted accounting principles consistently
applied.

     “General Intangibles” means all present and future “general intangibles”
as defined in the Code in effect on the date hereof with such additions to such
term as may hereafter be made, and includes, without limitation payment
intangibles, royalties, contract rights, goodwill, franchise agreements,
purchase orders, customer lists, route lists, telephone numbers, domain names,
claims, income tax refunds, security and other deposits, options to purchase or
sell real or personal property, rights in all litigation presently or hereafter
pending (whether in contract, tort or otherwise), insurance policies (including
without limitation key man, property damage, and business interruption
insurance), payments of insurance and rights to payment of any kind.

     “good faith business judgment” means honesty in fact and good faith (as
defined in Section 1201 of the Code) in the exercise of Silicon’s business
judgment.

     “including” means including (but not limited to).

     “Intellectual Property” means all present and future (a) copyrights,
copyright rights, copyright applications, copyright registrations and like
protections in each work of authorship and derivative work thereof, whether
published or unpublished, (b) trade secret rights, including all rights to
unpatented inventions and know-how, and confidential information; (c) mask work
or similar rights available for the protection of semiconductor chips; (d)
patents, patent applications and like protections including without limitation
improvements, divisions, continuations, renewals, reissues, extensions and
continuations-in-part of the same; (e) trademarks, servicemarks, trade styles,
and trade names, whether or not any of the foregoing are registered, and all
applications to register and registrations of the same and like protections,
and the entire goodwill of the business of Borrower connected with and
symbolized by any such trademarks; (f) computer software and computer software
products; (g) designs and design rights; (h) technology; (i) all claims for
damages by way of past, present and future infringement of any of the rights
included above; (j) all licenses or other rights to use any property or rights
of a type described above.

     “Inventory” means all present and future “inventory” as defined in the
Code in effect on the date hereof with such additions to such term as may
hereafter be made, and includes without limitation all merchandise, raw
materials, parts, supplies, packing and shipping materials, work in process and
finished products, including without limitation such inventory as is
temporarily out of Borrower’s custody or possession or in transit and including
any returned goods and any documents of title representing any of the above.

     “Investment Property” means all present and future investment property,
securities, stocks, bonds, debentures, debt securities, partnership interests,
limited liability company interests, options, security entitlements, securities
accounts, commodity contracts, commodity accounts, and all financial assets
held in any securities account or otherwise, and all options and warrants to
purchase any of the foregoing, wherever located, and all other securities of
every kind, whether certificated or uncertificated.

     “Loan Authorization Notice” is that certain Loan Authorization Notice
between Bank and Export-Import Bank of the United States; as amended, modified,
supplemented or restated from time to time

     “Loan Documents” means, collectively, this Agreement, the Representations,
and all other present and future documents, instruments and agreements between
Silicon and Borrower, including, but not limited to those relating to this
Agreement, and all amendments and modifications thereto and replacements
therefor.

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	 	Amended and Restated Loan and Security Agreement

     “Material Adverse Change” means any of the following: (i) a material
adverse change in the business, operations, or financial or other condition of
the Borrower, or (ii) a material impairment of the prospect of repayment of any
portion of the Obligations; or (iii) a material impairment of the value or
priority of Silicon’s security interests in the Collateral.

     “Obligations” means all present and future Loans, advances, debts,
liabilities, obligations, guaranties, covenants, duties and indebtedness at any
time owing by Borrower to Silicon, whether evidenced by this Agreement or any
note or other instrument or document, or otherwise, whether arising from an
extension of credit, opening of a letter of credit, banker’s acceptance, loan,
guaranty, indemnification or otherwise, whether direct or indirect (including,
without limitation, those acquired by assignment and any participation by
Silicon in Borrower’s debts owing to others), absolute or contingent, due or to
become due, including, without limitation, all interest, charges, expenses,
fees, attorney’s fees, expert witness fees, audit fees, letter of credit fees,
collateral monitoring fees, closing fees, facility fees, termination fees,
minimum interest charges and any other sums chargeable to Borrower under this
Agreement or under any other Loan Documents.

     “Other Property” means the following as defined in the Code in effect on
the date hereof with such additions to such term as may hereafter be made, and
all rights relating thereto: all present and future “commercial tort claims”
(including without limitation any commercial tort claims identified in the
Representations), “documents”, “instruments”, “promissory notes”, “chattel
paper”, “letters of credit”, “letter-of-credit rights”, “fixtures”, “farm
products” and “money”; and all other goods and personal property of every kind,
tangible and intangible, whether or not governed by the Code.

     “Permitted Liens” means the following: (i) purchase money security
interests in specific items of Equipment; (ii) leases of specific items of
Equipment; (iii) liens for taxes not yet payable; (iv) additional security
interests and liens consented to in writing by Silicon, including, without
limitation, liens on Equipment in favor of Tatonka, which consent may be
withheld in its good faith business judgment; (v) security interests being
terminated substantially concurrently with this Agreement; (vi) liens of
materialmen, mechanics, warehousemen, carriers, or other similar liens arising
in the ordinary course of business and securing obligations which are not
delinquent; (vii) liens incurred in connection with the extension, renewal or
refinancing of the indebtedness secured by liens of the type described above in
clauses (i) or (ii) above, provided that any extension, renewal or replacement
lien is limited to the property encumbered by the existing lien and the
principal amount of the indebtedness being extended, renewed or refinanced does
not increase; (viii) Liens in favor of customs and revenue authorities which
secure payment of customs duties in connection with the importation of goods.
Silicon will have the right to require, as a condition to its consent under
subparagraph (iv) above, that the holder of the additional security interest or
lien sign an intercreditor agreement on Silicon’s then standard form,
acknowledge that the security interest is subordinate to the security interest
in favor of Silicon, and agree not to take any action to enforce its
subordinate security interest so long as any Obligations remain outstanding,
and that Borrower agree that any uncured default in any obligation secured by
the subordinate security interest shall also constitute an Event of Default
under this Agreement.

     “Person” means any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association, corporation,
government, or any agency or political division thereof, or any other entity.

     “Representations” means the written Representations and Warranties
provided by Borrower to Silicon referred to in the Schedule.

     “Reserves” means, as of any date of determination, such amounts as Silicon
may from time to time establish and revise in its good faith business judgment,
reducing the amount of Loans, Letters of Credit and other financial
accommodations which would otherwise be available to Borrower under the lending
formula(s) provided in the Schedule: (a) to reflect events, conditions,
contingencies or risks which, as determined by Silicon in its good faith
business judgment, do or may adversely affect (i) the Collateral or any other
property which is security for the Obligations or its value (including without
limitation any increase in delinquencies of Accounts), (ii) the assets,
business or prospects of Borrower or any Guarantor, or (iii) the security
interests and other rights of Silicon in the Collateral (including the
enforceability, perfection and priority thereof); or (b) to reflect Silicon’s
good faith belief that any collateral report or financial information furnished
by or on behalf of Borrower or any Guarantor to Silicon is or may have been
incomplete, inaccurate or misleading in any material respect; or (c) in respect
of any state of facts which Silicon determines in good faith constitutes an
Event of Default or may, with notice or passage of time or both, constitute an
Event of Default.

     Other Terms. All accounting terms used in this Agreement, unless
otherwise indicated, shall have the meanings given to such terms in accordance
with GAAP, consistently applied. All other terms contained in this Agreement,
unless otherwise indicated, shall have the meanings provided by the Code, to
the extent such terms are defined therein.

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	 	Amended and Restated Loan and Security Agreement

9. GENERAL PROVISIONS.

     9.1 Interest Computation. In computing interest on the Obligations, all
wire transfers shall be deemed applied on account of the Obligations on the day
of receipt by Silicon thereof and all checks and other items of payment
received by Silicon (including proceeds of Accounts and payment of the
Obligations in full) shall be deemed applied by Silicon on account of the
Obligations two (2) Business Days after receipt by Silicon. For purposes of
the foregoing, any such funds received after 12:00 Noon (Pacific standard time)
on any day shall be deemed received on the next Business Day. Silicon shall
not, however, be required to credit Borrower’s account for the amount of any
item of payment which is unsatisfactory to Silicon in its good faith business
judgment, and Silicon may charge Borrower’s loan account for the amount of any
item of payment which is returned to Silicon unpaid.

     9.2 Application of Payments. All payments with respect to the
Obligations may be applied, and in Silicon’s good faith business judgment
reversed and re-applied, to the Obligations, in such order and manner as
Silicon shall determine in its good faith business judgment.

     9.3 Charges to Accounts. Silicon may, in its discretion, require that
Borrower pay monetary Obligations in cash to Silicon, or charge them to
Borrower’s Loan account with notice, prior to the occurrence and continuance of
an Event of Default, but without notice thereafter, in which event they will
bear interest at the same rate applicable to the Loans. Silicon may also, in
its discretion, charge any monetary Obligations to Borrower’s Deposit Accounts
maintained with Silicon.

     9.4 Monthly Accountings. Silicon shall provide Borrower monthly with an
account of advances, charges, expenses and payments made pursuant to this
Agreement. Such account shall be deemed correct, accurate and binding on
Borrower and an account stated (except for reverses and reapplications of
payments made and corrections of errors discovered by Silicon), unless Borrower
notifies Silicon in writing to the contrary within 60 days after such account
is rendered, describing the nature of any alleged errors or omissions.

     9.5 Notices. All notices to be given under this Agreement shall be in
writing and shall be given either personally or by reputable private delivery
service or by fax or email or by regular first-class mail, or certified mail
return receipt requested, addressed to Silicon or Borrower at each of the
addresses shown in the heading to this Agreement, or at any other address
designated in writing by one party to the other party. Any notices given by
fax or email must be followed by notice by another of the means set forth above
to be effective. Notices to Silicon shall be directed to the Commercial
Finance Division, to the attention of the Division Manager or the Division
Credit Manager. All notices shall be deemed to have been given upon delivery
in the case of notices personally delivered, or at the expiration of one
Business Day following delivery to the private delivery service, or two
Business Days following the deposit thereof in the United States mail, with
postage prepaid.

     9.6 Severability. Should any provision of this Agreement be held by any
court of competent jurisdiction to be void or unenforceable, such defect shall
not affect the remainder of this Agreement, which shall continue in full force
and effect.

     9.7 Integration. This Agreement and such other written agreements,
documents and instruments as may be executed in connection herewith are the
final, entire and complete agreement between Borrower and Silicon and supersede
all prior and contemporaneous negotiations and oral representations and
agreements, all of which are merged and integrated in this Agreement. There
are no oral understandings, representations or agreements between the parties
which are not set forth in this Agreement or in other written agreements signed
by the parties in connection herewith.

     9.8 Waivers; Indemnity. The failure of Silicon at any time or times to
require Borrower to strictly comply with any of the provisions of this
Agreement or any other Loan Document shall not waive or diminish any right of
Silicon later to demand and receive strict compliance therewith. Any waiver of
any default shall not waive or affect any other default, whether prior or
subsequent, and whether or not similar. None of the provisions of this
Agreement or any other Loan Document shall be deemed to have been waived by any
act or knowledge of Silicon or its agents or employees, but only by a specific
written waiver signed by an authorized officer of Silicon and delivered to
Borrower. Borrower waives the benefit of all statutes of limitations relating
to any of the Obligations or this Agreement or any other Loan Document, and
Borrower waives demand, protest, notice of protest and notice of default or
dishonor, notice of payment and nonpayment, release, compromise, settlement,
extension or renewal of any commercial paper, instrument, account, General
Intangible, document or guaranty at any time held by Silicon on which Borrower
is or may in any way be liable, and notice of any action taken by Silicon,
unless expressly required by this Agreement. Borrower hereby agrees to
indemnify Silicon and its affiliates, subsidiaries, parent, directors,
officers, employees, agents, and attorneys, and to hold them harmless from and
against any and all claims, debts, liabilities, demands, obligations, actions,
causes of action, penalties, costs and expenses (including reasonable
attorneys’

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	Silicon Valley Bank

	 	Amended and Restated Loan and Security Agreement

fees), of every kind, which they may sustain or incur based upon or
arising out of any of the Obligations, or any relationship or agreement between
Silicon and Borrower, or any other matter, relating to Borrower or the
Obligations; provided that this indemnity shall not extend to damages
proximately caused by the indemnitee’s own gross negligence or willful
misconduct and further provided that in any action or proceeding between
Borrower and Silicon arising out of this Agreement or any Loan Documents, the
prevailing party will be entitled to recover its reasonable attorneys’ fees and
other reasonable costs and expenses incurred, in addition to any other relief
to which it may be entitled. Notwithstanding any provision in this Agreement
to the contrary, the indemnity agreement set forth in this Section shall
survive any termination of this Agreement and shall for all purposes continue
in full force and effect.

     9.9 No Liability for Ordinary Negligence. Neither Silicon, nor any of
its directors, officers, employees, agents, attorneys or any other Person
affiliated with or representing Silicon shall be liable for any claims,
demands, losses or damages, of any kind whatsoever, made, claimed, incurred or
suffered by Borrower or any other party through the ordinary negligence of
Silicon, or any of its directors, officers, employees, agents, attorneys or any
other Person affiliated with or representing Silicon, but nothing herein shall
relieve Silicon from liability for its own gross negligence or willful
misconduct.

     9.10 Amendment. The terms and provisions of this Agreement may not be
waived or amended, except in a writing executed by Borrower and a duly
authorized officer of Silicon.

     9.11 Time of Essence. Time is of the essence in the performance by
Borrower of each and every obligation under this Agreement.

     9.12 Attorneys Fees and Costs. Borrower shall reimburse Silicon for all
reasonable attorneys’ fees and all filing, recording, search, title insurance,
appraisal, audit, and other reasonable costs incurred by Silicon, pursuant to,
or in connection with, or relating to this Agreement (whether or not a lawsuit
is filed), including, but not limited to, any reasonable attorneys’ fees and
costs Silicon incurs in order to do the following: prepare and negotiate this
Agreement and all present and future documents relating to this Agreement;
obtain legal advice in connection with this Agreement or Borrower; enforce, or
seek to enforce, any of its rights; prosecute actions against, or defend
actions by, Account Debtors; commence, intervene in, or defend any action or
proceeding; initiate any complaint to be relieved of the automatic stay in
bankruptcy; file or prosecute any probate claim, bankruptcy claim, third-party
claim, or other claim; examine, audit, copy, and inspect any of the Collateral
or any of Borrower’s books and records; protect, obtain possession of, lease,
dispose of, or otherwise enforce Silicon’s security interest in, the
Collateral; and otherwise represent Silicon in any litigation relating to
Borrower. In satisfying Borrower’s obligation hereunder to reimburse Silicon
for attorneys fees, Borrower may, for convenience, issue checks directly to
Silicon’s attorneys, Troutman Sanders LLP, but Borrower acknowledges and agrees
that Troutman Sanders LLP is representing only Silicon and not Borrower in
connection with this Agreement. If either Silicon or Borrower files any
lawsuit against the other predicated on a breach of this Agreement, the
prevailing party in such action shall be entitled to recover its reasonable
costs and attorneys’ fees, including (but not limited to) reasonable attorneys’
fees and costs incurred in the enforcement of, execution upon or defense of any
order, decree, award or judgment. All attorneys’ fees and costs to which
Silicon may be entitled pursuant to this Paragraph shall immediately become
part of Borrower’s Obligations, shall be due on demand, and shall bear interest
at a rate equal to the highest interest rate applicable to any of the
Obligations.

     9.13 Benefit of Agreement. The provisions of this Agreement shall be
binding upon and inure to the benefit of the respective successors, assigns,
heirs, beneficiaries and representatives of Borrower and Silicon; provided,
however, that Borrower may not assign or transfer any of its rights under this
Agreement without the prior written consent of Silicon, and any prohibited
assignment shall be void. No consent by Silicon to any assignment shall
release Borrower from its liability for the Obligations.

     9.14 Joint and Several Liability. If Borrower consists of more than one
Person, their liability shall be joint and several, and the compromise of any
claim with, or the release of, any Borrower shall not constitute a compromise
with, or a release of, any other Borrower.

     9.15 Limitation of Actions. Any claim or cause of action by Borrower
against Silicon, its directors, officers, employees, agents, accountants or
attorneys, based upon, arising from, or relating to this Loan Agreement, or any
other Loan Document, or any other transaction contemplated hereby or thereby or
relating hereto or thereto, or any other matter, cause or thing whatsoever,
occurred, done, omitted or suffered to be done by Silicon, its directors,
officers, employees, agents, accountants or attorneys, shall be barred unless
asserted by Borrower by the commencement of an action or proceeding in a court
of competent jurisdiction by the filing of a complaint within one year after
the first act, occurrence or omission upon which such claim or cause of action,
or any part thereof, is based, and the service of a summons and complaint on an
officer of Silicon, or

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	Silicon Valley Bank

	 	Amended and Restated Loan and Security Agreement

on any other person authorized to accept service on behalf of Silicon,
within thirty (30) days thereafter. Borrower agrees that such one-year period
is a reasonable and sufficient time for Borrower to investigate and act upon
any such claim or cause of action. The one-year period provided herein shall
not be waived, tolled, or extended except by the written consent of Silicon in
its sole discretion. This provision shall survive any termination of this Loan
Agreement or any other Loan Document.

     9.16 Paragraph Headings; Construction. Paragraph headings are only used
in this Agreement for convenience. Borrower and Silicon acknowledge that the
headings may not describe completely the subject matter of the applicable
paragraph, and the headings shall not be used in any manner to construe, limit,
define or interpret any term or provision of this Agreement. This Agreement has
been fully reviewed and negotiated between the parties and no uncertainty or
ambiguity in any term or provision of this Agreement shall be construed
strictly against Silicon or Borrower under any rule of construction or
otherwise.

     9.17 Governing Law; Jurisdiction; Venue. This Agreement and all acts and
transactions hereunder and all rights and obligations of Silicon and Borrower
shall be governed by the laws of the State of Maryland. As a material part of
the consideration to Silicon to enter into this Agreement, Borrower (i) agrees
that all actions and proceedings relating directly or indirectly to this
Agreement shall, at Silicon’s option, be litigated in courts located within
Maryland, and that the exclusive venue therefor shall be Santa Clara County;
(ii) consents to the jurisdiction and venue of any such court and consents to
service of process in any such action or proceeding by personal delivery or any
other method permitted by law; and (iii) waives any and all rights Borrower may
have to object to the jurisdiction of any such court, or to transfer or change
the venue of any such action or proceeding.

     9.18 Mutual Waiver of Jury Trial. Borrower and Silicon each hereby
waives the right to trial by jury in any action or proceeding based upon,
arising out of, or in any way relating to, this Agreement or any other present
or future instrument or agreement between Silicon and Borrower, or any conduct,
acts or omissions of Silicon or Borrower or any of their directors, officers,
employees, agents, attorneys or any other persons affiliated with Silicon or
Borrower, in all of the foregoing cases, whether sounding in contract or tort
or otherwise.

     9.19 Exim Notification. Silicon has the right to immediately notify Exim
Bank in writing if it has knowledge of any of the following events: (1) any
failure to pay any amount due under this Agreement; (2) the Exim Borrowing Base
is less than the sum of the outstanding Exim Loans; (3) any failure to pay when
due any amount payable to Silicon under any Loan owing by Borrower to Silicon;
(4) the filing of an action for debtor’s relief by, against or on behalf of
Borrower; (5) any threatened or pending material litigation against Borrower,
or any dispute involving Borrower. If Silicon sends a notice to Exim Bank,
Silicon has the right to send Exim Bank a written report on the status of
events covered by the notice every thirty (30) days after the date of the
original notification, until Silicon files a claim with Exim Bank or the
defaults have been cured (but no Loans may be required during the cure period
unless Exim Bank gives its written approval). If directed by Exim Bank,
Silicon will have the right to exercise any rights it may have against Borrower
to demand the immediate repayment of all amount outstanding under the Loans.

[SIGNATURES APPEAR ON THE FOLLOWING PAGE]

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	Silicon Valley Bank

	 	Amended and Restated Loan and Security Agreement

	 	 	 	 	 	 	 
	Borrower:	 	Silicon:
	 
	 	 	 	 	 	 
	TELECOMMUNICATION SYSTEMS, INC.	 	SILICON VALLEY BANK
	 
	 	 	 	 	 	 
	By

	 	/s/Thomas M. Brandt, Jr.	 	 	 	 
	

	 	
	 	 	 	 
	

	 	President or Vice President
	 	By
	 	Larry Singer

	

	 	 	 	Title
	 	VP
	 
	 	 	 	 	 	 
	By

	 	/s/Bruce A. White	 	 	 	 
	

	 	
	 	 	 	 
	

	 	Secretary or Ass’t Secretary	 	 	 	 

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	Silicon Valley Bank

	 	Amended and Restated Loan and Security Agreement

Silicon Valley Bank

Schedule to

Amended and Restated Loan and Security Agreement

	 	 	 
	Borrower:

	 	TELECOMMUNICATION SYSTEMS, INC.
	 
	 	 
	Address:

	 	275 West Street, Suite 400
	

	 	Annapolis, Maryland 21401
	 
	 	 
	Date:

	 	July 24, 2003

This Schedule forms an integral part of the Amended and Restated Loan and
Security Agreement between Silicon Valley Bank and the above-borrower of even
date.

1. CREDIT LIMIT

     (Section 1.1):

	 	 	 
	Revolving Loans:

	 	An amount not to exceed the lesser of: (i) Twelve
Million Five Hundred Thousand Dollars ($12,500,000) at
any one time outstanding (the “Maximum Credit Limit”),
less the amount of any outstanding Letters of Credit, FX
Forward Contracts, FX Reserves, Exim Loans and the Cash
Management Sublimit; or (ii) eighty percent (80%) (the
“Advance Rate”) of the amount of Borrower’s Eligible
Receivables (as defined in Section 8 above), less the
amount of any outstanding Letters of Credit, FX Forward
Contracts, FX Reserves, Equipment Loans, Exim Loans and
the Cash Management Sublimit (such amount being called
the “Borrowing Base”).

	 
	 	 
	

	 	Notwithstanding anything set forth herein to the
contrary, during any Default or after the occurrence and
during the continuance of any Event of Default, the
outstanding amount of all Equipment Loans shall be
incorporated in the calculation of the Borrowing Base in
the immediately preceding paragraph.
	 
	 	 
	

	 	Silicon may, from time to time, modify the Advance
Rate, in its good faith business judgment, upon
notice to the Borrower, based on changes in
collection experience with respect to Accounts or
other issues or factors relating to the Accounts or
other Collateral.
	 
	 	 
	Letters of Credit Sublimit

(Section 1.6):

	 	Four Million Dollars ($4,000,000).

 

 

	 	 	 
	Silicon Valley Bank

	 	Amended and Restated Loan and Security Agreement

	 	 	 
	Foreign Exchange
Sublimit

(Section 1.7)

	 	Seven Hundred Fifty Thousand Dollars ($750,000)
	 
	 	 
	Cash Management
Sublimit

(Section 1.8)

	 	One Million Five Hundred Thousand Dollars ($1,500,000)
	 
	 	 
	Exim Loan Sublimit

(Section 1.9):

	 	Three Million Dollars ($3,000,000).
	 
	 	 
	Equipment Loan Amount

(Section 1.10):

	 	Two Million Five Hundred Thousand Dollars ($2,500,000).

     2. INTEREST.

	  	Interest Rate (Section 1.2):

	 	 	 
	

	 	Except as set forth below with respect to Equipment
Loans, all Loans shall bear interest at a rate
equal to the “Prime Rate” in effect from time to
time per annum plus one percent (1.0%) per annum.
	 
	 	 
	

	 	Interest on all Equipment Loans shall bear interest
at a fixed rate equal to the Prime Rate in effect
on the date of such Equipment Loan, plus one and
one quarter of one percent (1.25%) per annum.
	 
	 	 
	

	 	“Prime Rate” means the rate announced from time to
time by Silicon as its “prime rate;” it is a base
rate upon which other rates charged by Silicon are
based, and it is not necessarily the best rate
available at Silicon, but for purposes of this
Agreement the Prime Rate shall at all times be not
less than four and one quarter of one percent
(4.25%) per annum. The interest rate applicable to
the Obligations shall change on each date there is
a change in the Prime Rate.
	 
	 	 
	

	 	Interest shall be calculated on the basis of a
360-day year for the actual number of days elapsed.

3. FEES (Section 1.4):

	 	 	 
	Loan Fee:

	 	One Hundred Eighty Seven Thousand Five Hundred
Dollars ($187,500), payable concurrently herewith,
less $93,750 already paid in connection with the
Original Loan Agreement.

 

 

	 	 	 
	Silicon Valley Bank

	 	Amended and Restated Loan and Security Agreement

	 	 	 
	Equipment

Loan Fee:

	 	Twenty Five Thousand Dollars ($25,000), payable
concurrently herewith.
	 
	 	 
	Collateral Monitoring

Fee:

	 	One Thousand Dollars ($1,000), per month, payable in
arrears (prorated for any partial month at the
beginning and at termination of this Agreement).
Silicon agrees to waive the Collateral Monitoring
Fee for any month in which the Borrower maintains
monthly average balances in deposit and investment
accounts with Silicon in excess of Ten Million
Dollars ($10,000,000).
	 
	 	 
	Unused Portion Fee:

	 	The Borrower shall pay to Silicon a fee
(collectively, the “Unused Line Fees” and
individually, a “Unused Line Fee”) in an amount
equal to one quarter of one percent (0.25%) per
annum of the average daily unused and undisbursed
portion of the Maximum Credit Limit accruing during
each month. The accrued and unpaid portion of the
Unused Line Fee shall be paid by the Borrower to
Silicon on the first day of each month, commencing
on the first such date following the date hereof,
and on the Maturity Date. Silicon agrees to waive
the Unused Line Fee for any month in which the
Borrower maintains monthly average balances in
deposit and investment accounts with Silicon in
excess of Ten Million Dollars ($10,000,000).
	 
	 	 
	Exim Bank Loan Fee

	 	One and one half percent (1.50%) of the Exim Bank
Loan Sublimit is due and payable in accordance with
Section 1.8 of the Agreement, and annually
thereafter.

4. REPAYMENT OF EQUIPMENT LOANS (Section 1.10):

	 	 	 
	

	 	Borrower may request Equipment Loans from the
Closing Date through December 31, 2003 (the
“Equipment Availability End Date”), and Silicon
will make Equipment Loans not exceeding the
Equipment Loan Amount. To obtain an Equipment
Loan, Borrower will deliver to Silicon copies of
invoices for the Equipment being financed, and such
additional information as Bank may request at least
five (5) Business Days before the proposed funding
date. The Equipment Loans may only be used to
finance or refinance Equipment purchased three
hundred sixty five (365) days before the date of
each Equipment Loan (the “Funding Date”) and may
not exceed one hundred percent (100%) of the
equipment invoice, including taxes, shipping,
warranty charges, freight discounts and
installation expense. Each Equipment Loan must be
for a minimum of Two Hundred Thousand Dollars
($200,000).

 

 

	 	 	 
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	 	Amended and Restated Loan and Security Agreement

	 	 	 
	

	 	Interest accrues from the Funding Date of each
Equipment Loan at the rate in Section 1.2 and is
payable monthly. Equipment Loans are payable in
thirty six (36) equal monthly installments of
principal and accrued interest, beginning on the
first day of each month (each date being called a
“Payment Date”), after the Funding Payment Date.
On the Funding Date (unless such Funding Date is
the first Business Day of the month) Borrower shall
pay to Silicon an amount (the “Interim Payment”)
equal the number of days from the Funding Date
until the first Payment Date with respect to such
Equipment Advance.

5. MATURITY DATE

        (Section 6.1):

	 	 	 
	Loans

	 	April 30, 2006
	 
	 	 
	Exim Bank Loans

	 	April 30, 2004
	 
	 	 
	Equipment Loans

	 	Thirty six (36) months from the date of each Equipment
Loan.

6. FINANCIAL
COVENANTS

	(Section 5.1):

	 	Borrower shall comply with each of the following covenants.
Compliance shall be determined as of the end of each month, except as
otherwise specifically provided below:
	 
	 	 
	Minimum Tangible

Net Worth:

	 	Borrower shall maintain a Tangible Net Worth of not less than the following amounts at the following times:

	 	 	 
	 	 	Minimum Tangible
	Period
	 	Net Worth:

	May 1, 2003-April 30, 2004
	 	$23,000,000;
	May 1, 2004-April 30, 2005
	 	$25,000,000;
	May 1, 2005-April 30, 2006
	 	$25,000,000, plus seventy five
percent (75%) of Borrower’s net income (without regard to any loss) commencing with the quarter ending June 30, 2005.

	 	 	 
	Definitions.

	 	For purposes of the foregoing financial covenants, the following term shall have the following meaning:
	 
	 	 
	

	 	“Tangible Net Worth” shall mean the excess of total assets over total liabilities, determined in accordance
with GAAP, with the following adjustments:

 

 

	 	 	 
	Silicon Valley Bank

	 	Amended and Restated Loan and Security Agreement

(A) there shall be excluded from assets: (i)
notes, accounts receivable and other obligations
owing to Borrower from its officers or other
Affiliates, and (ii) all assets which would be
classified as “intangible assets” under GAAP,
including without limitation goodwill, licenses,
patents, trademarks, trade names, copyrights and
organizational costs, licenses and franchises,
capitalized software costs (net of related
accumulated amortization), provided however, that
only capitalized software costs in excess of the
following amounts at the following times will be
considered intangible assets:

	 	 	 	 	 
	May 1, 2003-April 30, 2004
	 	$	7,000,000;	 
	May 1, 2004-April 30, 2005
	 	$	4,000,000;	 
	May 1, 2005-June 30, 2005
	 	$	2,000,000;	 
	May 1, 2005 and thereafter
	 	$	0;	 

(B) there shall be excluded from liabilities: all
indebtedness which is subordinated to the
Obligations under a subordination agreement in
form specified by Silicon or by language in the
instrument evidencing the indebtedness which
Silicon agrees in writing is acceptable to Silicon
in its good faith business judgment.

7. REPORTING.

   (Section 5.3):

Borrower shall provide Silicon with the following:

	 	1.	 	Weekly transaction
reports and schedules of collections, on
Silicon’s standard form shall be provided
weekly (and upon each Loan request), provided,
however, that during any Non-Borrowing
Period, the transaction shall be provided
monthly, within fifteen (15) days after the
end of each month.
	 
	 	2.	 	Monthly accounts
receivable agings, aged by invoice date,
within fifteen days after the end of each
month.
	 
	 	3.	 	Monthly accounts
payable agings, aged by invoice date, and
outstanding or held check registers, if any,
within fifteen days after the end of each
month.
	 
	 	4.	 	Monthly
reconciliations of accounts receivable agings
(aged by invoice date), transaction reports,
and general ledger, within fifteen days after
the end of each month.
	 
	 	5.	 	Monthly perpetual
inventory reports for the Inventory valued on
a first-in, first-out basis at the lower of
cost or market (in accordance with GAAP) or
such other inventory

 

 

	 	 	 
	Silicon Valley Bank

	 	Amended and Restated Loan and Security Agreement

	 	 	 	reports as are requested by Silicon in its good
faith business judgment, all within fifteen days
after the end of each month.
	 
	 	6.	 	Monthly unaudited
financial statements, as soon as available,
and in any event within thirty days after the
end of each month.
	 
	 	7.	 	Monthly Compliance
Certificates, within thirty days after the end
of each month, in such form as Silicon shall
reasonably specify, signed by the Chief
Financial Officer, Vice President, Finance,
Treasurer or Corporate Controller of Borrower,
certifying that as of the end of such month
Borrower was in full compliance with all of
the terms and conditions of this Agreement,
and setting forth calculations showing
compliance with the financial covenants set
forth in this Agreement and such other
information as Silicon shall reasonably
request, including, without limitation, a
statement that at the end of such month there
were no held checks.
	 
	 	8.	 	Quarterly
unaudited financial statements, as soon as
available, and in any event within forty-five
days after the end of each fiscal quarter of
Borrower.
	 
	 	9.	 	Annual forecasts
prior to each fiscal year end of Borrower and
operating budgets (including income
statements, balance sheets and cash flow
statements, by month) for the current fiscal
year of Borrower within sixty (60) days after
the end of each fiscal year of Borrower.
	 
	 	10.	 	Annual financial
statements, as soon as available, and in any
event within 120 days following the end of
Borrower’s fiscal year, certified by, and with
an unqualified opinion of, independent
certified public accountants acceptable to
Silicon.

8. BORROWER INFORMATION:

	 	 	 	Borrower represents and warrants that the
information set forth in the Representations and
Warranties of the Company dated April 5, 2002,
previously submitted to Silicon (the
“Representations”) is true and correct as of the
date hereof.

9. ADDITIONAL PROVISIONS

	 	1.	 	Depository and
Operating Accounts. Borrower shall maintain
its primary depository and operating accounts
with Silicon. As to any Deposit Accounts and
investment

 

 

	 	 	 
	Silicon Valley Bank

	 	Amended and Restated Loan and Security Agreement

	 	 	 	accounts maintained with another institution,
Borrower shall cause such institution, within
30 days after the date of this Agreement, to
enter into a control agreement in form
acceptable to Silicon in its good faith
business judgment in order to perfect
Silicon’s first-priority security interest in
said Deposit Accounts and investment accounts.
	 
	 	2.	 	Subordination of
Inside Debt. All present and future
indebtedness of Borrower to its officers,
directors and shareholders (“Inside Debt”)
shall, at all times, be subordinated to the
Obligations pursuant to a subordination
agreement on Silicon’s standard form.
Borrower represents and warrants that there is
no Inside Debt presently outstanding. Prior
to incurring any Inside Debt in the future,
Borrower shall cause the person to whom such
Inside Debt will be owed to execute and
deliver to Silicon a subordination agreement
on Silicon’s standard form.
	 
	 	3.	 	Intellectual
Property Negative Pledge Agreement. As a
condition precedent to the effectiveness of
this Agreement, the Borrower shall have
executed and delivered an Intellectual
Property Negative Pledge Agreement (the “IP
Negative Pledge Agreement”), substantially in
the form attached hereto as Exhibit B.
	 
	 	4.	 	Minimum Cash and
Excess Availability. The Borrower shall at all
times maintain a sum of (i) unencumbered cash
on deposit with Silicon and (ii) availability
under the Loans of not less than Ten Million
Dollars ($10,000,000).

	 	 	 	 	 	 	 
	Borrower:	 	Silicon:
	 
	 	 	 	 	 	 
	TELECOMMUNICATION SYSTEMS, INC.	 	SILICON VALLEY BANK
	 
	 	 	 	 	 	 
	By

	 	/s/Thomas M. Brandt, Jr.	 	 	 	 
	

	 	
	 	 	 	 
	

	 	President or Vice President
	 	By
	 	Larry Singer 

	

	 	 	 	Title
	 	VP
	 
	 	 	 	 	 	 
	By

	 	/s/Bruce A. White	 	 	 	 
	

	 	
	 	 	 	 
	

	 	Secretary or Ass’t Secretaryexv10w1

 

Exhibit 10.1

MARKETING AND SERVICES AGREEMENT

BY AND BETWEEN

CAPITAL ONE BANK

CAPITAL ONE SERVICES, INC.

AND

INTERSECTIONS INC.

DATED AS OF SEPTEMBER 1, 2004

 

 

MARKETING AND SERVICES AGREEMENT

     This MARKETING AND SERVICES AGREEMENT (this “Agreement”) is entered into
as of September 1, 2004 the (“Effective Date”), by and between Intersections
Inc., a Delaware corporation (“Intersections”), on the one hand, and, on the
other hand, Capital One Bank, a Virginia banking corporation (“COB”), and
Capital One Services, Inc., a Delaware corporation (“COSI”) (COSI and COB are
collectively referred to as “Capital One”).

     WHEREAS, Intersections is in the business of, inter alia, providing credit
reporting products and related services (the “Intersections Products”); and

     WHEREAS, Capital One is in the business of, inter alia, issuing, managing
and servicing credit card accounts; and

     WHEREAS, Intersections desires to offer certain Intersections Products to
Capital One’s customers or other customers mutually agreed by the parties, and
Capital One desires to make such Intersections Products available to certain of
its customers or other customers mutually agreed by the parties; and

     WHEREAS, Intersections and Capital One (each, a “Party” and collectively,
the “Parties”) desire to enter into certain joint marketing and servicing
arrangements as described below.

     NOW, THEREFORE, in consideration of the mutual covenants and promises in
this Agreement, and other good and valuable consideration, the receipt and
sufficiency of which are hereby mutually acknowledged, the Parties agree as
follows:

ARTICLE I

PROGRAM MARKETING

     Section 1.1. Programs. From time to time during the Term (as
defined in Section 8.1 below), the Parties will design and implement programs
for the purpose of marketing the Intersections Products to certain Capital One
customers chosen by Capital One in its sole discretion or other customers
mutually agreed by the Parties (each, a “Program” and collectively, the
“Programs”). The first two of such Programs will be conducted pursuant to the
terms and conditions set forth on Schedule A (“Program One”) and Schedule B
(“Program Two”) attached hereto (collectively, the “Initial Program Orders”).
The Programs described in the Initial Program Orders shall be referred to as
the “Initial Programs”. Subject to the approval of Capital One, which shall
not be unreasonably withheld, Intersections may employ third party vendors for
the purposes of meeting Intersections’ obligations under this Agreement (each
such vendor, an “Intersections Vendor”). Intersections will use its best
efforts to ensure that each Intersections Vendor is fully aware of, and
complies with, all of the terms and conditions of this Agreement that are
pertinent to the work to be performed by such Intersections Vendor.
Intersections will be
liable to Capital One for any action of an Intersections Vendor that is in
violation of the terms

2

 

and conditions of this Agreement. Subject to the
approval of Intersections, which shall not be unreasonably withheld, Capital
One may employ third party vendors for the purposes of meeting Capital One’s
obligations under this Agreement (each such vendor, a “Capital One Vendor”).
Capital One will use its best efforts to ensure that each Capital One Vendor is
fully aware of, and complies with, all of the terms and conditions of this
Agreement that are pertinent to the work to be performed by such Capital One
Vendor. Capital One will be liable to Intersections for any action of a
Capital One Vendor that is in violation of the terms and conditions of this
Agreement.

     Section 1.2. Future Programs. Except for the Initial Programs,
prior to commencing a Program the Parties will agree on the terms and
conditions of such Program and will execute a mutually agreed upon program
order signed by both parties (each, a “Program Order”). Each Program Order
shall be deemed to be incorporated into and be subject to the terms of this
Agreement. Such Program Orders shall be substantially in the form of Exhibit B
attached hereto.

     Section 1.3. Marketing Collateral. Neither Party shall publish or
distribute in any manner any advertising, marketing or promotional material
pertaining to a Program unless the other Party has approved such materials in
writing. The foregoing is a general condition that shall apply in addition to
any specific approval requirements set forth in any Program Order.

ARTICLE II

FULFILLMENT AND CUSTOMER SERVICE

     Section 2.1. Fulfillment and Customer Service. Intersections will
have sole responsibility for the fulfillment of orders of products and services
sold pursuant to the Programs. Intersections will fulfill, and will ensure
that any Intersections Vendor fulfills, all orders in compliance with any
fulfillment standards set forth in the Program Order with respect to each
Program, and in compliance with all promises made by Intersections to Capital
One’s customers. Intersections will perform, and will ensure that any
Intersections Vendor performs, customer service for customers who participate
in the Programs (each such customer, a “Program Customer”) in compliance with
any customer service standards set forth in the Program Order with respect to
each Program. If any of the performance standards set forth in this Agreement
or each such Program Order are not met by Intersections or any Intersections
Vendor, Intersections will use all commercially reasonable efforts, at its sole
expense, to remedy the default. Notwithstanding anything in this Agreement or
any Program Order to the contrary, Intersections shall be under no obligation
to provide credit information to a Capital One customer who fails to provide
Intersections with proper identification or otherwise fails to pass
Intersections’ authentication or verification requirements; provided,
however, that Intersections provides any such Capital One customer with an
additional opportunity to provide Intersections with proper identification or
to pass Intersections’ authentication or verification requirements.

     Section 2.2. Inquiries regarding Other Party’s Products and
Services. Intersections will refer inquiries concerning products and
services sold by Capital One (i.e., products and services other than the
Intersections Products) to the customer service telephone numbers provided by
Capital One. Capital One will refer inquiries concerning the Intersections
Products to the
Intersections or Intersections Vendor customer service telephone numbers
provided by Intersections. Each Party will use reasonable efforts to address
inquiries referred by the other

3

 

Party in a timely and effective manner.
Intersections will ensure that any Intersections Vendor receiving inquiries
concerning products and services sold by Capital One (i.e., products and
services other than the Intersections Products) will refer such inquiries to
the customer service telephone numbers provided by Capital One to
Intersections.

ARTICLE III

COMPENSATION

     The Parties will pay such fees to one another as are set forth on the
Program Order with respect to each Program (the “Program Fees”).

ARTICLE IV

REPORTS, RECORDS AND AUDITS; TELEMARKETING REGULATIONS

     Section 4.1. Reports. Each Party will provide to the other Party
the reports set forth on the Program Order with respect to each Program (the
“Program Reports”).

     Section 4.2. Records and Audit. Each Party will keep and
maintain at its principal place of business appropriate books and records
relating to its activities under this Agreement for a minimum of three (3)
years after their creation. Subject to reasonable security requirements of
each Party, during the Term (as defined in Section 8.1 below) and for three (3)
years following termination, each Party will make available to the other Party
and its designated representatives and Capital One’s primary regulatory
agencies, upon reasonable advance notice, during business hours, at its own
place of business, the books and records of such Party relating in any way to
this Agreement for the purpose of inspection, audits and reproduction. Any
such audit, inspection and reproduction by a Party will be conducted in a
manner that does not impede the ability of the other Party to meet its
obligations hereunder. Each Party will be responsible for its own costs and
expenses in connection with such audits and inspections. Capital One’s
approval of any Intersections Vendor is subject to Capital One’s ability to
inspect, audit and reproduce the books and records of such Intersections Vendor
as if such Intersections Vendor were a party to this Agreement and bound by the
terms and conditions of this Section 4.2. Information made available pursuant
to this Article IV shall be deemed to be Confidential Information pursuant to
Section 6.1 below.

     Section 4.3 Consumer Authorizations; Records.

          (a) The Parties acknowledge that the Intersections Products consist of,
among other things, consumer credit reports. Prior to the collection and
delivery of any portion of the Intersections Products that consists of consumer
credit reports, Intersections requires the authorization of the Program
Customer to obtain the Program Customer’s credit report on behalf of such
Program Customer (the “Authorization”). Because the Party responsible for
obtaining Authorization and the manner in which Authorization is obtained may
vary depending on the specifics terms of each Program, the Parties shall
specify such matters in each Program Order.
A Party designated in a Program Order as responsible for Authorizations
shall comply with the applicable provisions of the Program Order and this
Section 4.3. The form of Authorization shall in all cases be subject to the
mutual written agreement of the Parties. Capital One

4

 

acknowledges and agrees
that all credit report authorizations are obtained on behalf of Intersections
as Intersections’ agent.

          (b) The Party responsible for obtaining Authorization records under a
Program Order shall maintain the records for each Program Customer for which
such Party was responsible for obtaining such Authorization, and store and
maintain those records for a minimum of two years after the Program Customer’s
enrollment expires or is terminated or, for single-time delivery products, the
date of the order by the Program Customer. Within thirty (30) days following
the termination of this Agreement or any Program hereunder, Capital One agrees
to provide Intersections with the records of Authorization for each Program
Customer for which Capital One was responsible for obtaining Authorization
during the Term.

          (c) This Section 5(c) shall apply when Capital One is responsible for
maintaining Authorization records. For in-bound telemarketing sales through
Capital One customer service representatives, Capital One must verify each
Authorization prior to sending the enrollment to Intersections. For outbound
telemarketing sales, each Authorization recording must be verified by a second
person after a sale is completed. Authorizations for other channels must be
verified in the manner agreed upon by the Parties. The authorization method
shall be identified in the enrollment file using a mutually agreed upon format.
Upon notice from Intersections, or an Intersections Vendor mutually agreed
upon by the Parties for purposes of this Section 4.3(c), of a request for
Authorization records due to request or inquiry from a Program Customer,
governmental body or agency, a credit bureau, or a marketing partner of Capital
One, Capital One will provide Intersections or any such agreed upon
Intersections Vendor with a copy of the requested Authorization records before
the close of business of the fifth business day following, and including, the
business day of the request. If a request for such Authorization records is
made by Intersections or any such agreed upon Intersections Vendor in
connection with routine audit procedures and not due to the request or inquiry
of a Program Customer, governmental body or agency, a credit bureau, or a
marketing partner of Capital One, Capital One will provide Intersections or any
such agreed upon Intersections Vendor with a copy of the requested
Authorization records before the close of business of the sixth business day
following, and including, the business day of the request. Such requests shall
be limited to no more than 10% of the Program Customers for whom at that time
Capital One is required to maintain Authorization records and be made no more
frequently than monthly unless such audits result in less than one hundred
percent (100%) compliance. In the event of less than one hundred percent
(100%) compliance, Intersections or any such agreed upon Intersections Vendor
may audit any and all records, and may discontinue its obligation to fulfill
orders for Intersections Products until it is confident, in its sole
discretion, that Capital One is complying with Intersections’ requirements
regarding the collection and maintenance of such Authorization records. This
provision shall be applicable to the collection of Authorization records
through written or digital means, including pursuant to the federal Digital
Signature Act and any state acts consistent with the Uniform Electronic
Transaction Act.

          (d) This Section 5(d) shall apply when Intersections is responsible for
maintaining Authorization records: Upon notice from Capital One of a request
for Authorization records due to request or inquiry from a Program Customer,
governmental body or agency, or a credit bureau, Intersections will provide
Capital One with a copy of the requested Authorization

5

 

records before the close
of business of the fifth business day following, and including, the business
day of the request. If a request for such Authorization records is made by
Capital One in connection with routine audit procedures and not due to the
request of a Program Customer, governmental body or agency, or a credit bureau,
Intersections will provide Capital One with a copy of the requested
Authorization records before the close of business of the sixth business day
following, and including, the business day of the request. Such requests shall
be limited to no more than 10% of the Program Customers for whom at that time
Intersections is required to maintain records and be made no more frequently
than monthly unless such audits result in less than one hundred percent (100%)
compliance. In the event of less than one hundred percent (100%) compliance,
Capital One may audit any and all records until it is confident, in its sole
discretion that Intersections is complying with Capital One’s requirements
regarding the collection and maintenance of such Authorization records. This
provision shall be applicable to the collection of Authorization records
through written or digital means, including pursuant to the federal Digital
Signature Act and any state acts consistent with the Uniform Electronic
Transaction Act.

          (e) Upon notice from a Party of a request for a Program Customer’s proof
of enrollment due to request or inquiry from a Program Customer, governmental
body or agency, or a credit bureau, the other Party will provide the requesting
Party with a copy of the requested proof of enrollment before the close of
business of the fifth business day following, and including, the business day
of the request. If a request for such proof of enrollment is made by the
requesting Party in connection with routine audit procedures and not due to the
request of a Program Customer, governmental body or agency, or a credit bureau,
the other Party will provide the requesting Party with a copy of the requested
proof of enrollment before the close of business of the sixth business day
following, and including, the business day of the request. Such requests shall
be limited to no more than 10% of the Program Customers for whom at that time
the Party is required to maintain such records and be made no more frequently
than monthly unless such audits result in less than one hundred percent (100%)
compliance. In the event of less than one hundred percent (100%) compliance,
the requesting Party may audit any and all records until it is confident, in
its sole discretion that Intersections is complying with requirements under
this Agreement regarding the collection and maintenance of such proof of
enrollment records.

          (f) By written notice, Intersections may modify or add procedures as it
determines to be necessary to ensure compliance with applicable laws and
regulations, government agency rulings and directives, and credit reporting
agency requirements. Such additional requirements include without limitation,
requiring that all authorization records be sent to Intersections on a periodic
basis.

     Section 4.4 Telemarketing Regulations. The Parties agree solely
for purposes of this Agreement that Intersections will be deemed to be a
“Seller” of the Intersections Products as that term is defined in the Federal
Trade Commission’s amended Telemarketing Sales Rule, 310
C.F.R. §310.2(z) (the “TSR”), and any other applicable federal or state
telemarketing laws or regulations. In accordance with the foregoing, for any
telemarketing conducted by Capital One or a Capital One Vendor, Capital One
agrees to comply, and will ensure that any Capital One Vendor complies, with
the requirements applicable to Capital One or any Capital One Vendor as

6

 

set
forth in the TSR or other applicable law or regulation. The Parties will work
together reasonably and in good faith to agree on written procedures governing
such compliance prior to commencement of telemarketing. Notwithstanding the
foregoing, if a court or government agency with appropriate jurisdiction
alleges or finds that Intersections is not a “Seller” under the TSR or other
applicable law or regulation, then the Parties shall work together reasonably
and in good faith to make such changes as are reasonably necessitated by such
finding or allegation.

ARTICLE V

INTELLECTUAL PROPERTY

     Section 5.1. Use of Capital One Marks. Intersections will include,
at Capital One’s option, the tag line “‘Capital One’ is a federally registered
service mark. All rights reserved.” or any other appropriate disclosure that
may be provided or required by Capital One in all communications that contain a
Capital One Mark. Intersections will append the symbol “®” to the first use in
any document of any federally-registered Capital One Mark. For purposes of
this Agreement, “Mark” shall mean, as to a Party, such Party’s trademarks,
trade names, logos, service marks, trade styles, trade dress, domain names and
other proprietary identifying marks whether or not registered or otherwise
legally determined to be owned by such Party.

     Section 5.2. Use of Intersections Marks. Capital One will include
in all communications that contain an Intersections Mark appropriate disclosure
information regarding any such Intersections Mark as provided or required by
Intersections. Capital One will append the symbol “®” to the first use in any
document of any federally-registered Intersections Mark. Marks of any
Intersections Vendor will be deemed to be Intersections Marks for purposes of
this Article V.

     Section 5.3. Trademarks; Goodwill. Each Party acknowledges the
other Party’s (and its Affiliates’) proprietary interest in such other Party’s
(and such Affiliates’) Marks. For purposes of this Agreement, “Affiliate”
shall have the same meaning as that term is defined in Rule 12b-2 promulgated
by the Securities and Exchange Commission under the Securities Exchange Act of
1934, as amended. Subject to the terms and conditions hereof, during the Term
(as defined in Section 8.1 below), each Party (the “Granting Party”) hereby
grants to the other Party (the “Grantee”) a limited nonexclusive license to use
the Granting Party’s Marks solely as is necessary to perform the Grantee’s
obligations under this Agreement. Each Intersections Vendor is a Grantee of
Capital One hereunder. Each Party recognizes and acknowledges that it acquires
no right, title or interest in or to any of the Marks of the Granting Party by
virtue of this Agreement or any use of such Marks and hereby waives any right
to or interest in such Marks other than the specific limited rights granted
hereunder.

     Section 5.4. Use of Marks. The Granting Party will have the right
to require that the Grantee’s use of its Marks be done in accordance with
graphic standards and similar criteria
provided by the Granting Party. The Grantee is familiar with the high
quality standards employed by the Granting Party in the promotion and sale of
its products and services. The Grantee hereby approves and adopts, and Grantee
agrees to maintain, that standard of quality maintained by the Granting Party
on the Effective Date of this Agreement as the overall standard of quality for
the products and services sold under the Granting Party’s Marks;
provided,

7

 

however, that the Granting Party’s sole and exclusive remedy
for a breach of the foregoing obligation shall be to terminate this Agreement
pursuant to Section 8.2(a) below. The Granting Party shall have the right,
upon reasonable notice and at all reasonable times during business hours, to
inspect the Grantee’s use of the Granting Party’s Marks, and representative
samples of the products, services and/or promotional materials Grantee offers
and sells in connection with the Granting Party’s Marks. In the event that the
Granting Party reasonably believes that the Grantee’s use of the Granting
Party’s Marks or the Grantee’s manner of conducting its operations risks a
disparagement or other loss of protection in the Granting Party’s Marks, the
Granting Party will provide notice to the Grantee of such deficient use and a
method of cure. The Grantee will use commercially reasonable efforts to cure
the deficiency as expeditiously as possible.

     Section 5.5. Program Marks. Capital One will design and develop
certain trademarks, trade names, logos, service marks, trade styles, trade
dress, domain names and other proprietary identifying marks that are not
considered Marks for the purposes of this Agreement, but will be used by the
Parties under this Agreement and any Program hereunder (the “Program Marks”).
Capital One will be responsible for conducting any and all trademark, service
mark and/or service design searches and clearances related to the Program
Marks, and Capital One will own all rights, title and interest in the Program
Marks. Capital One hereby grants to Intersections a limited nonexclusive
license to use any Program Marks solely as is necessary to perform
Intersections’ obligations under this Agreement. Intersections recognizes and
acknowledges that it acquires no right, title or interest in or to any of the
Program Marks by virtue of this Agreement or any use of such Program Marks and
hereby waives any right to or interest in such Program Marks other than the
specific limited rights granted hereunder.

     Section 5.6. Marketing and Fulfillment Materials. Responsibility
for the creation of marketing and fulfillment materials will be shared by the
Parties according to the terms set forth in the Program Order with respect to
each Program. The Parties will own the marketing and fulfillment materials
according to the terms set forth in the Program Order with respect to each
Program, except any portion of such marketing and fulfillment materials that
consists of the other Party’s Marks. To the extent ownership is not specified
in the Program Order with respect to each Program, the Party with primary
responsibility for creating the marketing and fulfillment materials will own
any such marketing and fulfillment materials, except any portion of such
marketing and fulfillment materials that consists of the other Party’s Marks.

     Section 5.7. Links. Intersections agrees to provide Capital One
with, and consents to Capital One’s placement and operation of, Links from any
of Capital One’s Web Sites and from other electronic marketing channels such as
email, to a Web Site for the Intersections Products that is owned and operated
by Intersections or an Intersections Vendor. For the purposes of this
Agreement, “Link” shall mean any visible graphic or textual indication located
within a Web Site page, email, or other electronic medium now known or later
developed which, when selected by
a user, directs the user’s Internet browser connection to a specified page
or file on the same or any other Web Site via a URL and which establishes a
direct connection between the browser and the specified page. For the purposes
of this Agreement, “Web Site” shall mean a collection of HTML documents and
related files publicly available and/or hosted or stored on the World Wide Web
which may consist of one or more pages. The Parties will work together in

8

 

good
faith to ensure that the transfer of the customer from Capital One’s Web Sites
to and from Intersections’ Web Sites, including any Capital One and
Intersections co-branded Web Sites, is seamless in appearance and function;
provided, however, that any such transfer will include a “pop-up” dialog
box containing cautionary language to be mutually agreed upon by the Parties.

     Section 5.8. Intersections Products. As between Intersections and
Capital One, Intersections is the owner of all right, title and interest in and
to the Intersections Products and the automated credit reporting system and
appurtenances thereto that are used to process, format and deliver the
Intersections Products. Without limiting the foregoing, Intersections reserves
the right to market, promote and sell the Intersections Products in its own
name and under other private labeling agreements; provided, however,
that Intersections shall not use any Capital One Mark or Program Mark in
connection with such activities.

ARTICLE VI

CONFIDENTIAL INFORMATION

     Section 6.1. Confidential Information.

          (a) Scope of Confidential Information. In connection with its
performance under this Agreement, each Party (a “Recipient Company”) may be
supplied with materials and information concerning the other Party (the
“Providing Company”) and its Affiliates which is non-public, confidential or
proprietary in nature (the “Confidential Information”) and which may include,
but is not limited to, information about or concerning the Providing Company’s
or its Affiliates’: (i) financial condition and projections; (ii) business
ventures and strategic plans; (iii) marketing strategies and programs; (iv)
customers and prospective customers and information related to both; (v)
strategic insights or statistical models about such customers or prospective
customers and their behavior and (vi) business partners. Confidential
Information includes, but is not limited to, (i) information transmitted in
written, oral, magnetic form or any other medium, (ii) all copies and
reproductions, in whole or in part, of such information and (iii) all
summaries, analyses, compilations, studies, notes or other records which
contain, reflect, or are generated from such information. Confidential
Information does not include information that: (w) has become part of the
public domain through no act or omission of the Recipient Company; (x) was
lawfully disclosed to the Recipient Company without restriction on disclosure
by a third party; (y) was developed independently by the Recipient Company or
(z) is or was lawfully and independently provided to the Recipient Company
prior to disclosure hereunder from a third party who is not and was not subject
to an obligation of confidentiality or otherwise prohibited from transmitting
such information. Intersections acknowledges that the following are the
Confidential Information of Capital One: the Program Reports, any data
contained in the Program Reports (the “Transaction Data”) and the names,
addresses, credit card numbers and other identifying information of the
customers solicited under each Program (“Customer Data”).
Intersections agrees that, without Capital One’s prior written consent, it
will not use or disclose to any third party, in any manner, whether in
individual or aggregated form, the Program Reports, the Transaction Data or the
Customer Data for any purpose other than performing its obligations under the
terms of this Agreement, including, without limitation, for the purpose of
soliciting or permitting third parties to solicit the Capital One customers
solicited under a Program for any services or products; provided,
however, that Intersections may use aggregated

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information and data regarding a
Program for Intersections’ own internal business purposes so long as any such
use is in accordance with Intersections’ obligations under Section 6.2 hereto
and does not involve marketing activities. Nothing in this paragraph is
intended to or shall be deemed to apply to data received by Intersections or
its Affiliates or an Intersections Vendor independent of Intersections’
performance of its obligations hereunder, even if such data is identical to any
given item of Transaction Data or Customer Data.

          (b) Nondisclosure of Information. The Recipient Company agrees
that the Confidential Information of the Providing Company will be used solely
for the purpose of performing its obligations under this Agreement and agrees
not to disclose any of the Confidential Information of the Providing Company
now or hereafter received or obtained by it without the Providing Company’s
prior written consent; provided, however, that the Recipient Company may
disclose any such Confidential Information to its Affiliates, representatives,
agents, accountants, attorneys and other confidential advisors, but excluding
any issuer of credit card accounts (collectively, “Advisors”) who need to know
the Confidential Information for the purpose of assisting the Recipient Company
in performing its obligations under this Agreement. The Recipient Company
agrees to be responsible for any breach of this Agreement by its Advisor, and
the Recipient Company agrees that its Advisors will be advised by the Recipient
Company of the confidential nature of such information and shall agree to be
bound by the provisions of this Article VI.

          (c) Ownership of Information. The Recipient Company acknowledges
and agrees that any Confidential Information of the Providing Company, in
whatever form, is the sole property of the Providing Company. The Recipient
Company agrees that upon the request of, and as directed by, the Providing
Company it shall either return such Confidential Information to the Providing
Company or shall destroy such Confidential Information.

          (d) Compelled Disclosure. If the Recipient Company or any of its
Advisors is legally compelled (whether by deposition, interrogatory, request
for documents, subpoena, civil investigation, demand or similar process, or
required in a case brought by or against a Party) to disclose any of the
Confidential Information, the Recipient Company shall immediately notify the
Providing Company in writing of such requirement so that the Providing Company
may seek a protective order or other appropriate remedy and/or waive compliance
with the provisions hereof. The Recipient Company will use its best efforts,
at the Providing Company’s expense, to obtain or assist the Providing Company
in obtaining any such protective order. Failing the entry of a protective
order or the receipt of a waiver hereunder, the Recipient Company may disclose,
without liability hereunder, that portion (and only that portion) of the
Confidential Information that the Recipient Company has been advised by opinion
of counsel, such opinion to be reasonably acceptable to the Providing Company,
that it is legally compelled to disclose;
provided, however, that the Recipient Company agrees to use its
best efforts to obtain assurance that confidential treatment will be accorded
such Confidential Information by the person or persons to whom it was
disclosed. Further, each Party may make any public disclosure or government
filing required by law, regulation, a court or regulatory authority, or rules
of any stock exchange, provided such Party notifies the other Party and makes a
reasonable effort to seek confidential treatment for the information disclosed.

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          (e) Remedies. The Recipient Company acknowledges that all
Confidential Information is considered to be proprietary and of competitive
value, and in many instances trade secrets. The Recipient Company agrees that
because of the unique nature of the Confidential Information any breach of this
Article VI would cause the Providing Company irreparable harm and money damages
and other remedies available at law in the event of a breach would not be
adequate to compensate the Providing Company for any such breach. Accordingly,
the Providing Company shall be entitled, without the requirement of posting a
bond or other security, to equitable relief, including, without limitation,
injunctive relief and specific performance, as a remedy for any such breach.
Such relief shall be in addition to, and not in lieu of, all other remedies
available at law or in equity to the Providing Company.

     Section 6.2. Intersections’ Compliance With The Gramm-Leach-Bliley
Act.

          (a) Intersections shall protect and keep confidential all personally
identifiable information about or pertaining to Capital One’s customers and all
other individuals about whom Capital One has collected personally identifiable
information, that is disclosed by Capital One or otherwise obtained by
Intersections in the performance of its duties under this Agreement. For
purposes of this Section 6.2, “nonpublic personal information” shall refer to
the personally identifiable information described in the preceding sentence and
shall have the same meaning as that term is defined in the Gramm-Leach-Bliley
Act, Title V, and applicable regulations promulgated thereunder. During the
Term (as defined in Section 8.1 below), Intersections shall collect and use
nonpublic personal information only to exercise the rights and perform the
obligations for which such information was disclosed to Intersections, as
specifically set forth in or clearly implied by this Agreement. Intersections
shall not retain such nonpublic personal information and shall destroy it or
return it to Capital One, at Capital One’s option (i) during the term of the
Agreement if Intersections does not have a specific business purpose under the
Agreement to retain it, and (ii) within sixty (60) days after the later of
termination of (A) the Agreement or (B) Intersections’ applicable obligations
that survive termination of the Agreement; provided, however, that
Intersections may retain nonpublic personal information about an individual who
has purchased a product or service from Intersections and is thereby a customer
of Intersections during the Agreement or at the time of termination of the
Agreement.

          (b) Unless prohibited elsewhere in this Agreement, Intersections may
redisclose nonpublic personal information (i) to Affiliates of Capital One;
(ii) in the ordinary course of its business to its affiliates or third party
service providers to carry out the specific purposes for which such nonpublic
personal information was disclosed to Intersections; or (iii) if such
redisclosure is compelled by law, in which case Intersections will provide
prior notice of such disclosure to Capital One. If Intersections uses an
Intersections Vendor to perform the
duties assigned to it by this Agreement, Intersections shall have
appropriate controls in place to ensure that any subcontractor used by an
Intersections Vendor meets the objectives of this Section 6.2, and shall
exercise oversight over each such subcontractor to ensure ongoing compliance
with the objectives of this Section 6.2; provided, however, if the
Intersections Vendor, or any subcontractor thereof, is outside the United
States, Capital One shall give its prior approval prior to Intersections’ use
of such Intersections Vendor or subcontractor under the Agreement.

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          (c) Intersections represents and warrants that it has, and will continue
to have for so long as it retains nonpublic personal information, adequate
administrative, technical, and physical safeguards (i) to insure the security
and confidentiality of customer records and information, (ii) to protect
against any anticipated threats or hazards to the security or integrity of such
records, and (iii) to protect against unauthorized access to or use of such
records or information which could result in substantial harm or inconvenience
to any customer. Intersections shall develop, implement and maintain, at
Intersections’ own expense, a proven system or methodology to audit for
compliance with the requirements in the preceding sentence. Intersections shall
at all times during the term of the Agreement and for at least two years after
termination thereof, keep books and records sufficient to show its compliance
with the terms of this Section 6.2. Upon reasonable notice to Intersections,
Capital One and its representatives may audit the books, records, personnel and
operations of Intersections during normal business hours at Intersections’
offices, and perform physical and electronic reviews, including a review of
Intersections’ IT infrastructure security, or review an independent audit
provided by Intersections, in order to monitor Intersections’ compliance with
the terms of this Section 6.2. Intersections shall develop, implement, and
maintain, at Intersections’ own expense, appropriate mitigation strategies to
address issues identified as a result of these reviews.

          (d) Intersections shall immediately notify Capital One if Intersections
discovers there has been a material breach or a serious attempt to breach its
security safeguards required by this Section, or if the security of nonpublic
personal information has been or may be compromised for any reason. Capital
One may take all reasonable and appropriate steps to protect nonpublic personal
information in such event, including but not limited to an audit of
Intersections’ security safeguards required by this Section, and Intersections’
security and system log files from workstations and supporting servers
containing or facilitating the flow of nonpublic personal information.
Intersections shall have a business continuity plan that enables Intersections
to take appropriate actions to address incidents of unauthorized access to or
misuse of nonpublic personal information. Such plan shall also enable Capital
One to expeditiously implement its own response program.

          (e) Breach of this Section 6.2 is a material breach of this Agreement.
Intersections’ obligations under this Section 6.2 shall not apply to
information obtained or received by Intersections independent of this
Agreement, including without limitation information received by Intersections
in connection with products or services provided by Intersections independent
of Capital One (“Independent Intersections Information”).

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     Section 6.3. Capital One’s Compliance With The Gramm-Leach-Bliley
Act.

          (a) For purposes of this Section 6.3, “Intersections NPI” shall refer to
the nonpublic personal information received by Intersections directly from
actual or prospective Program Customers and disclosed by or on behalf of
Intersections directly to Capital One. During the Term (as defined in Section
8.1 below), Intersections shall collect and use Intersections NPI only to
exercise the rights and perform the obligations for which such information was
disclosed to Capital One, as specifically set forth in or clearly implied by
this Agreement. Capital One shall not retain such Intersections NPI and shall
destroy it or return it to Intersections, at Intersections’ option (i) during
the term of the Agreement if Capital One does not have a specific business
purpose under the Agreement to retain it, and (ii) within sixty (60) days after
the later of termination of (A) the Agreement or (B) Capital One’s applicable
obligations that survive termination of the Agreement.

          (b) Unless prohibited elsewhere in this Agreement, Capital One may
redisclose Intersections NPI (i) to Affiliates of Intersections; (ii) in the
ordinary course of its business to its affiliates or third party service
providers to carry out the specific purposes for which such Intersections NPI
was disclosed to Capital One; or (iii) if such redisclosure is compelled by
law, in which case Capital One will provide prior notice of such disclosure to
Intersections. If Capital One uses a Capital One Vendor to perform the duties
assigned to it by this Agreement, Capital One shall have appropriate controls
in place to ensure that any subcontractor used by a Capital One Vendor meets
the objectives of this Section 6.3, and shall exercise oversight over each such
subcontractor to ensure ongoing compliance with the objectives of this Section
6.3; provided, however, if the Capital One Vendor, or any subcontractor
thereof, is outside the United States, Intersections shall give its prior
approval prior to Capital One’ use of such Capital One Vendor or subcontractor
under the Agreement.

          (c) Capital One represents and warrants that it has, and will continue to
have for so long as it retains nonpublic personal information, adequate
administrative, technical, and physical safeguards (i) to insure the security
and confidentiality of customer records and information, (ii) to protect
against any anticipated threats or hazards to the security or integrity of such
records, and (iii) to protect against unauthorized access to or use of such
records or information which could result in substantial harm or inconvenience
to any customer. Capital One shall develop, implement and maintain, at Capital
One’s own expense, a proven system or methodology to audit for compliance with
the requirements in the preceding sentence. Capital One shall at all times
during the term of the Agreement and for at least two years after termination
thereof, keep books and records sufficient to show its compliance with the
terms of this Section 6.3. Upon reasonable notice to Capital One,
Intersections and its representatives may audit the books, records, personnel
and operations of Capital One during normal business hours at Intersections’
offices, and perform physical and electronic reviews, including a review of
Capital One’s IT infrastructure security, or review an independent audit
provided by Intersections, in order to monitor Capital One’s compliance with
the terms of this Section 6.3. Capital One shall develop, implement, and
maintain, at Capital One’s own expense, appropriate mitigation strategies to
address issues identified as a result of these reviews.

13

 

          (d) Capital One shall immediately notify Intersections if Capital One
discovers there has been a material breach or a serious attempt to breach its
security safeguards required by this Section, or if the security of nonpublic
personal information has been or may be compromised for any reason.
Intersections may take all reasonable and appropriate steps to protect
Intersections NPI in such event, including but not limited to an audit of
Capital One’s security safeguards required by this Section, and Capital One’s
security and system log files from workstations and supporting servers
containing or facilitating the flow of nonpublic personal information. Capital
One shall have a business continuity plan that enables Capital One to take
appropriate actions to address incidents of unauthorized access to or misuse of
Intersections NPI. Such plan shall also enable Intersections to expeditiously
implement its own response program.

          (e) Breach of this Section 6.3 is a material breach of this Agreement.
Capital One’s obligations under this Section 6.3 shall not apply to information
obtained or received by Capital One independent of this Agreement, including
without limitation information received by Capital One in connection with
products or services provided by Capital One independent of Intersections
(“Capital One Independent Information”). To the extent required under the
Gramm-Leach Bliley Act, Capital One shall distribute its privacy policy to
Program Customers from whom it receives or obtains nonpublic personal
information without such information being delivered to it by or on behalf of
Intersections.

ARTICLE VII

REPRESENTATIONS AND WARRANTIES

     Section 7.1. Representations and Warranties of the Parties. Each
Party represents and warrants to the other Party that: (a) the representing
Party is duly organized, validly existing and in good standing under the laws
of the jurisdiction in which it is organized; (b) the representing Party has
all necessary power and authority to enter into this Agreement and to perform
all of its obligations under this Agreement; (c) this Agreement has been duly
authorized, executed and delivered by, and constitutes the valid and binding
obligation of the representing Party, enforceable in accordance with its terms
(except as such enforcement may be limited by laws relating to or affecting
creditors’ rights generally and by general principles of equity); (d) neither
the execution, delivery or performance of this Agreement, nor the consummation
of the transactions contemplated herein, by the representing Party will (i)
result in the breach of, or constitute a default under, the terms of any
contract to which the representing Party is a party or by which it is bound,
(ii) violate the charter or bylaws of the representing Party, or (iii) require
any consent or approval of a third party; (e) there is no pending or, to the
actual knowledge of the representing Party, threatened claim, litigation,
proceeding, arbitration, or investigation or controversy before any
governmental agency which may adversely and materially affect the ability of
the representing Party to perform its obligations hereunder; and (f) the
representing Party or its Affiliates own the entire right, title, and interest
in and to all Marks licensed to the other Party hereunder, none of the Marks
are subject to any outstanding or pending orders, decrees, judgments,
stipulations, claims, settlements, security interests, encumbrances or any
other adverse claims or restrictions, and the representing Party and its
Affiliates have full right,
power and authority to provide the other Party with the license set forth
in Article V of this Agreement.

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     Section 7.2. Additional Representations and Warranties of
Intersections. Intersections hereby represents and warrants to Capital One
that each of the Intersections Products sold under a Program will conform in
all material respects to (i) the descriptions and specifications contained in
the marketing materials provided by Intersections to Capital One customers
under each such Program and (ii) the Intersections-approved descriptions and
specifications contained in any marketing materials provided by Capital One to
Capital One customers under each such Program.

     Section 7.3. Disclaimer. EXCEPT FOR THE EXPRESS WARRANTIES SET
FORTH IN SECTIONS 7.1 AND 7.2 OF THIS AGREEMENT, NEITHER PARTY MAKES ANY
REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, UNDER THIS AGREEMENT. TO
THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, EACH PARTY DISCLAIMS ALL OTHER
REPRESENTATIONS AND WARRANTIES, WHETHER EXPRESS, IMPLIED, OR STATUTORY,
INCLUDING, WITHOUT LIMITATION, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE, NONINFRINGEMENT, NONINTERFERENCE WITH DATA,
ACCURACY, OR THAT THE SERVICE IS ERROR-FREE. WITHOUT LIMITING THE GENERALITY
OF THE FOREGOING, AND NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE
CONTRARY, INTERSECTIONS DOES NOT GUARANTEE OR WARRANT THE CORRECTNESS,
COMPLETENESS OR CURRENTNESS OF CREDIT INFORMATION OR ANY PORTION OF THE
INTERSECTIONS PRODUCTS THAT CONSISTS OF OR IS DERIVED FROM CREDIT INFORMATION.

ARTICLE VIII

TERM AND TERMINATION

     Section 8.1. Term. This Agreement will commence on the Effective
Date and will continue in full force and effect for a term of one year from the
Effective Date or until all Program Orders have expired in accordance with the
terms set forth in each Program Order (whichever is later) (the “Initial
Term”), unless sooner terminated as provided herein. Upon expiration of the
Initial Term, this Agreement will automatically renew for successive one year
terms (each such term, a “Renewal Term”) (the Initial Term as may be extended
by a Renewal Term, the “Term”), until and unless sooner terminated as provided
herein. Each Program Order will be in effect as of the date executed by both
Parties, except as set forth in the Program Order, and shall continue until
terminated as provided herein or in such Program Order. The termination of
this Agreement or any Program Order will not terminate, affect or impair any
rights, obligations or liabilities of any Party which may accrue prior to such
termination or which, under the terms of this Agreement, continue after the
termination. All Program Orders then in effect will terminate as of the
termination of this Agreement.

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     Section 8.2. Early Termination.

          (a) Discretionary Termination. Either Party may terminate this
Agreement, or any Program hereunder, at any time by providing the other Party
with at least one hundred twenty (120) days’ prior written notice.

          (b) Immediate Termination. Either Party may terminate this
Agreement immediately upon notice to the other Party as follows: (i) in the
event of fraud, willful misconduct, gross negligence or misappropriation of any
funds or other property by the other Party in the performance of its obligation
under this Agreement; (ii) if the other Party is in material breach of this
Agreement and such breach has not been cured within thirty (30) days after
notice of such breach is delivered; (iii) in the event that the other Party is
subject to any petition in bankruptcy or for reorganization or debt
consolidation, or upon the other Party’s making of an assignment of its assets
for the benefit of creditors, or upon the application of the other Party for
the appointment of a receiver or a trustee of its assets; or (iv) in the event
that the non-terminating Party’s performance under this Agreement is prevented
or significantly delayed in a material respect by a force majeure event as set
forth in Section 11.2 and such inability continues for at least ninety (90)
days.

          (c) Insolvency. Either Party may terminate this Agreement at any
time upon notice to the other Party if any of the following events occurs (each
such event, an “Insolvency Event”): (i) the filing by the other Party of any
petition in bankruptcy or for reorganization, debt consolidation, adjustment of
debt, relief of debtors, dissolution, insolvency or liquidation under
bankruptcy laws or under any comparable law with respect to such Party and such
petition or proceeding is not dismissed within sixty (60) days after its
commencement, (ii) the appointment of a custodian (as defined under bankruptcy
laws) over all or substantially of the property of the other Party, (iii) the
adjudication that the other Party is insolvent or bankrupt, (iv) the other
Party’s making of an assignment of its assets for the benefit of creditors, or
the application of the other Party for the appointment of a receiver or a
trustee of its assets or (v) the failure of the other Party to pay its debts in
the ordinary course as they become due.

          (d) Change of Control. Upon the occurrence of a Change of Control
with respect to either Party, the Party subject to such Change of Control will
promptly give the other Party notice of such Change of Control and thereafter
the other Party may terminate this Agreement within ninety (90) days of the
date of such notice by giving at least thirty (30) days’ prior notice to the
Party subject to such Change of Control. For purposes of this Agreement,
“Change of Control” shall mean, with respect to any Party, any event or series
of events by which any Person who is not an Affiliate of such Party as of the
Effective Date, whether singly or in concert with one or more persons, will for
any reason (i) beneficially own, acquire or have acquired, directly or
indirectly, 50% or more of the outstanding capital stock, or substantially all
of the assets, of such Party or (ii) have, acquire, or have acquired the power,
directly or indirectly, to direct or cause the direction of the management and
policies of such Party. For purposes of this definition, “Person” shall mean
any individual, corporation, limited liability company, partnership, joint
venture, association, joint stock company, trust, unincorporated organization,
government or any group or political subdivision thereof or other entity.

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     Section 8.3. Joint Communiqué. In the event either Party gives
notice of termination, any communication with respect to a Program or the
Agreement given by either Party after notice of termination will be subject to
the terms and conditions of a joint communication plan agreed to by the
Parties; provided any Party may make any public disclosure or government filing
required by law, regulation, a court or regulatory authority, or rules of any
stock exchange, subject to Section 6.1(d) above.

     Section 8.4. Termination Rights. Except as otherwise provided
herein, the right to terminate this Agreement and the rights upon termination
contained herein are in addition to and not in lieu of any other rights or
remedies the Parties may posses at law or in equity for money damages or other
relief.

     Section 8.5. Customer Relationship. Upon termination of a Program
or the Agreement, as the case may be, any continuing relationship with Program
Customers will be owned exclusively by Capital One, subject to Section 4.3(a)
above and the applicable provisions of any Program Order. The terms and
conditions governing the continued provision of Intersections Products (and all
customer service and fulfillment services related thereto) will be set forth in
the termination provisions of the Program Order with respect to the applicable
Program. If not set forth in the Program Order, Intersections will continue to
provide the applicable Intersections Product to each Program Customer that has
subscribed to a monitoring product under the terminated Program Order(s) for
the remainder of such Program Customer’s applicable subscription term.

     Section 8.6. Survival of Provisions. The terms and conditions of
Articles V, VI, VIII and IX, Sections 4.2, 11.3, 11.4 and 11.8 and any terms
which by their nature survive termination will survive termination of each
Program and termination of the Agreement and will remain in full force and
effect notwithstanding such termination.

ARTICLE IX

INDEMNIFICATION AND LIMITATION OF LIABILITY

     Section 9.1. Indemnification.

          (a) Indemnification by Capital One. Capital One will indemnify and
hold Intersections, their Affiliates and their respective officers, directors,
employees, successors and permitted assigns, harmless from and against any all
out-of-pocket costs, fees, losses, damages, claims and expenses, including
outside and in-house attorneys’ fees, disbursements and court costs
(collectively, “Losses”) arising out of, relating to or incurred as a result of
any third-party claims, demands, actions, suits or other proceedings
(hereinafter “Claims”) that result in whole or in part from (i) any failure by
Capital One to perform its obligations under this Agreement, (ii) the breach or
inaccuracy of a representation or warranty made by Capital One under this
Agreement, and (iii) the negligence or willful misconduct of Capital One in the
performance of its obligations under this Agreement.

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          (b) Indemnification By Intersections. Intersections will indemnify
and hold Capital One, its Affiliates and their respective officers, directors,
employees, successors and permitted assigns, harmless from and against any
Losses arising out of, relating to or incurred as a result of any Claims that
result in whole or in part from (i) any failure by Intersections to perform its
obligations under this Agreement, (ii) any failure by an Intersections Vendor
to perform any of Intersections’ obligations under this Agreement, (iii) the
breach or inaccuracy of a representation or warranty made by Intersections
under this Agreement, (iv) the negligence or willful misconduct of
Intersections in the performance of its obligations under this Agreement, (v)
the negligence or willful misconduct of an Intersections Vendor in the
performance of any of Intersections’ obligations under this Agreement and (vi)
the purchase, sale and/or use of the Intersections Products, except any portion
of the Intersections Products that consists of or is derived from credit
information.

     Section 9.2 Limitation of Liability.

          (a) No Party hereunder will be liable to any other Party, its Affiliates
or their respective officers, directors, employees, successors and permitted
assigns for indirect or other consequential losses (including loss of business
or loss of profits) whether arising from negligence, breach of contract, tort,
or statutory duty or otherwise, even if advised of the possibility of such
loss.

          (b) The maximum liability of Intersections with respect to Claims asserted
by Capital One customers shall be equal to the aggregate refunds payable by
Capital One to such customers in respect of such Claims pursuant to the
applicable terms of service, not to exceed amounts received by Intersections
from Capital One.

          (c) The maximum liability of Capital One with respect to Claims asserted
by Intersections in respect of customer Claims shall be equal to the aggregate
amount collected by Capital One from such customers, net of amounts paid to
Intersections.

          (d) The limitations on liability set forth in Sections 9.2(b) and 9.2(c)
above shall not apply to Claims based on an event that gives rise to a right of
indemnification as set forth in Section 9.1 above or a Party’s (i) breach of
Article V, (ii) breach of Article VI, (iii) violation of applicable law or (iv)
negligence or willful misconduct (including the negligence or willful
misconduct of an Intersections Vendor).

     Section 9.3. Procedures For Indemnification. The Parties will
follow the procedures set forth in Exhibit A with respect to any and all
indemnification claims under this Article IX.

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ARTICLE X

NOTICES

     All correspondence from Intersections to Capital One shall be submitted as
follows:

Capital One Services, Inc.

ATTN: 12071-0310

11011 West Broad Street

Glen Allen, VA 23060

Attention: Joe Mason

With a copy to:

Capital One Services, Inc.

1680 Capital One Drive

McClean, VA 20136

Attention: Amy Cook

     All correspondence from Capital One to Intersections shall be submitted as follows:

Intersections Inc.

14901 Bogle Drive

Chantilly, VA 20151

Attention: Chief Financial Officer

With a copy to:

Intersections Inc.

14901 Bogle Drive

Chantilly, VA 20151

Attention: Chief Legal Officer

ARTICLE XI

GENERAL PROVISIONS

     Section 11.1. Relationship of the Parties. The Parties agree that
in performing their responsibilities pursuant to this Agreement they are in the
position of independent contractors. This Agreement is not intended to create,
nor does it create and will not be construed to create, a partnership, joint
venture or any association for profit between and among Capital One and
Intersections.

     Section 11.2. Force Majeure. Non-performance by a Party of its
obligations hereunder to the extent such performance is prevented by acts of
God, fire, explosion, strikes, accident, floods, embargoes, epidemics, war,
nuclear disaster or civil unrest or any other cause beyond its
reasonable control, whether similar or dissimilar to the foregoing, will
not be considered a

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breach of this Agreement during the period of such
disability. The affected Party will promptly notify the other Party if it is
unable to perform its duties or obligations hereunder due to a force majeure
event.

     Section 11.3. Press Releases. Except as may be required by law,
regulation, a court or regulatory authority or rules of any stock exchange, no
Party will issue a press release or make any public announcement related to
this Agreement or any Program Order contemplated hereunder without the prior
written consent of the other Party, which consent will not be unreasonably
withheld or delayed.

     Section 11.4. No Demeaning Actions or Statements. No Party will
publish any public statement or undertake any activity which would demean,
tarnish, or negatively affect in any way the services, products and/or image of
the other Party or its Affiliates.

     Section 11.5. Assignment. This Agreement may not be assigned, in
whole or in part, by a Party, without the prior written consent of the other
Party; provided, that either Party may assign this Agreement, at its
discretion, to an Affiliate without the consent of the other Party. This
Agreement will be binding upon and will inure to the benefit of the Parties and
their representatives and respective successors and permitted assigns.

     Section 11.6. Waivers. No Party will be deemed to have waived any
of its rights, powers or remedies hereunder unless such Party approves such
waiver in writing. Any delay, waiver or omission by a Party to exercise any
right or power arising from any breach or default in any of the terms,
provisions or covenants of this Agreement will not be construed to be a waiver
by that Party of any subsequent breach or default of the same or other terms,
provisions or covenants.

     Section 11.7. Amendment and Replacement of Prior Agreement; Entire
Agreement; Amendments. This Agreement amends and replaces that certain
Marketing and Services Agreement dated May 31, 2002, by and between
Intersections Inc., on the one hand, and Capital One Bank, Capital One, F.S.B.,
and Capital One Services, Inc., on the other hand. The Exhibits, Schedules and
other attachments referenced hereunder or attached hereto are incorporated into
and made a part of this Agreement by reference as if fully set forth herein.
This Agreement (including the Exhibits , Schedules and other attachments
referenced hereunder) constitutes the entire agreement between the Parties
relating to the subject matter hereof, and all prior negotiations and
understandings, whether oral or written, are superseded hereby. The Parties
acknowledge that Capital One Bank (Canada Branch) and Intersections have
entered into that certain Marketing and Services Agreement dated as of July 1,
2004 to offer Intersections Products to certain of Capital One Bank (Canada
Branch)’s customers with mailing addresses in Canada (the “Canada Agreement”).
The Parties agree that the Canada Agreement will remain in full force and
effect pursuant to the terms thereof and will not be affected by this Agreement
or any Program hereunder. No modification or amendment of this Agreement will
be effective unless and until set forth in writing and signed by the Parties.

     Section 11.8. Governing Law. This Agreement will be governed by
and construed in accordance with the laws of the Commonwealth of Virginia,
without reference to the choice of

20

 

law principles thereof. However, the
Virginia Uniform Computer Information Transactions Act (“UCITA”) will not
govern any aspect of this Agreement or any license granted hereunder,
regardless of the Effective Date. To the extent that any aspect of this
Agreement is unclear or disputed by the Parties and UCITA, if applied, would
clarify the issue or resolve the dispute, the Parties agree to clarify the
issue or resolve the dispute independently of UCITA by applying the intent of
the Parties at the time they entered into this Agreement.

     Section 11.9. Compliance with Applicable Law. Each Party will
comply with all applicable laws and regulations in performing their respective
obligations under this Agreement.

     Section 11.10. Severability. If any provision of this Agreement or
portion thereof is held invalid, illegal, void or unenforceable by reason of
any rule of law, administrative or judicial provision or public policy, all
other provisions of this Agreement will nevertheless remain in full force and
effect to the extent such remaining provisions accurately reflect the intent of
the Parties.

     Section 11.11. Expenses. Except as otherwise specifically provided
herein, each Party will bear its own legal, accounting and other costs,
including taxes, if any, in connection with the Agreement and the transactions
contemplated herein.

     Section 11.12. Execution. This Agreement may be executed in
multiple counterparts, all of which together will constitute one original
document.

     Section 11.13. Agreement Executed by Facsimile. This Agreement may
be executed as facsimile originals and each copy of this Agreement bearing the
facsimile transmitted signature of the authorized representatives of each of
the Parties will be deemed to be an original.

21

 

     IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
executed by their respective authorized representatives.

INTERSECTIONS INC.

		
	By: 	

		
	Name: 	

		
	Title: 	

CAPITAL ONE BANK

		
	By: 	

		
	Name: 	

		
	Title: 	

CAPITAL ONE SERVICES, INC.

		
	By: 	

		
	Name: 	

		
	Title: 	

22

 

EXHIBIT A

Procedures for Indemnification

     (a) Notice of Claims. The Parties agree that in the event any
Claim is made or asserted, any suit or action is commenced, or an officer of
either Party has actual knowledge of a state of facts which, if not corrected,
would give rise to a right of indemnification (“Indemnity Claim”) for such
Party (the “Indemnified Party”) under this Agreement from another Party (the
“Indemnifying Party”), the Indemnified Party will give notice (via facsimile
with a copy sent by standard overnight carrier) to the Indemnifying Party,
which notice will contain, in reasonable detail, the facts giving rise to a
claim for indemnification hereunder, as promptly as practicable, but in no
event later than twenty (20) days after the receipt by the Indemnified Party of
such notice or knowledge of such Indemnity Claim.

     (b) Assumption of Defense and Selection of Counsel. Except as
otherwise provided herein, the Indemnifying Party has the right to assume the
defense of an Indemnity Claim with respect to which it has received a notice
pursuant to Section (a) of this Exhibit A and may select counsel reasonably
satisfactory to the Indemnified Party in connection with such defense. The
Indemnified Party may assume the defense of such Indemnity Claim if it promptly
notifies the Indemnifying Party of its desire to assume the defense of such
Indemnity Claim and the Indemnifying Party consents to such assumption of the
defense by the Indemnified Party, which consent may not be unreasonably
withheld or delayed, in which case the Indemnified Party will have the right to
assume the defense and to select counsel reasonably satisfactory to the
Indemnifying Party at the cost and expense of the Indemnifying Party. If the
Indemnified Party does not so control the defense of any Indemnity Claim and
the Indemnifying Party assumes the defense of such Indemnity Claim, the
Indemnified Party will not thereafter have the right to employ its own counsel
and have the fees and expenses of such counsel paid by the Indemnifying Party,
unless (i) the employment of such counsel is authorized in writing by the
Indemnifying Party; (ii) the Indemnifying Party has not employed counsel to
take charge of the defense of such action within a reasonable period of time
after electing to assume the defense thereof; or (iii) the Indemnified Party
has reasonably concluded that there may be defenses available to it which are
different from or additional to those available to the Indemnifying Party (in
which case the Indemnifying Party will not have the right to direct the defense
of such action on behalf of the Indemnified Party), in any of which events such
reasonable fees and expenses of the counsel employed by the Indemnified Party
will be borne by the Indemnifying Party. The Party defending any Indemnity
Claim will institute and maintain any such defense diligently and will keep the
other parties fully advised of the status thereof.

     (c) Cooperation. The Indemnified Party will make available to the
Indemnifying Party and its counsel, accountants and other consultants during
normal business hours all books and records of the Indemnified Party relating
to any Indemnity Claim. Each Party hereunder will render to the other parties
such reasonable assistance as may be requested by the other parties (at the
expense of the Party requesting assistance) in order to provide prompt and
adequate defense of any Indemnity Claim under this Exhibit A.

A-1

 

     (d) Settlement of Indemnity Claims. The Indemnifying Party
will have the right to defend, compromise and settle any Indemnity Claim in the
name of the Indemnified Party to the extent that the Indemnifying Party may be
liable to the Indemnified Party under this Exhibit A; provided, however, that
the Indemnifying Party will not compromise or settle an Indemnity Claim (i)
unless it assumes the obligation to indemnify for all Losses arising out of or
relating thereto; (ii) if such settlement or compromise would grant any
non-monetary relief, without the consent of the Indemnified Party, which
consent may not be unreasonably withheld or delayed, and (iii) unless there is
an unqualified release of the Indemnified Party. The Indemnified Party may not
settle or compromise any Indemnity Claim without the consent of the
Indemnifying Party, which consent may not be unreasonably withheld or delayed.

     (e) Subrogation. Any settlement or compromise of any Indemnity
Claim in accordance with Section (d) of this Exhibit A or any final judgment or
decree entered in connection with any Indemnity Claim which the Indemnifying
Party did not assume the defense of in accordance herewith, will be deemed to
have been consented to by, and will be binding upon, the Indemnifying Party as
fully as if the Indemnifying Party had assumed the defense thereof and a final
decree had been entered with regard to such Indemnity Claim by a court of
competent jurisdiction for the amount of such settlement, compromise, judgment
or decree. The Indemnifying Party will be subrogated to any claims or rights
of the Indemnified Party against any other Persons with respect to any amount
paid by the Indemnifying Party under Article IX of the Agreement and this
Exhibit A. The Indemnified Party will cooperate with the Indemnifying Party,
at the Indemnifying Party’s expense, in the assertion by the Indemnifying Party
of any such claim against such other Persons.

     (f) Indemnification Payments. Amounts owing under Article IX of the
Agreement and this Exhibit A will be paid promptly when due.

A-2

 

EXHIBIT B

Form of Program Order

Schedule [INSERT #]

Program [INSERT #]: [INSERT TITLE]

     Upon completion and execution by the Parties identified below and
effective as of [INSERT DATE OF PROGRAM ORDER] (the “Program Effective Date”),
this Schedule will become incorporated into and made a part of that certain
Marketing and Services Agreement dated as of September 1, 2004 by and between
Intersections Inc. (“Intersections”) on the one hand, and on the other hand,
Capital One Bank (“COB”) and Capital One Services, Inc. (“COSI”) (COB and COSI
are collectively referred to as “Capital One”) (the “Agreement”) and will be
subject to the terms and conditions thereof. Any capitalized term used but not
defined herein shall have the meaning assigned to it in the Agreement.

	 	 	 
	I.

	 	Program Description:
	II.

	 	Products and/or Services:
	III.

	 	Marketing:
	IV.

	 	Fulfillment and Customer Service Standards:
	V.

	 	Compensation:
	VI.

	 	Reports:
	VII

	 	Term and Termination:
	VIII.

	 	[Additional Terms:]

 

 

     IN WITNESS WHEREOF, the Parties hereto have caused this Schedule to be
executed by their respective authorized representatives.

INTERSECTIONS INC.

		
	By: 	

		
	Name: 	

		
	Title: 	

CAPITAL ONE BANK

		
	By: 	

		
	Name: 	

		
	Title: 	

CAPITAL ONE SERVICES, INC.

		
	By: 	

		
	Name: 	

		
	Title:

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