Document:

Unassociated Document

     

    $350,000,000

     

     

    MASTER
      REPURCHASE AGREEMENT

     

     

    Dated
      as
      of August 8, 2007

     

     

    among

     

     

    NRFC
      JP
      HOLDINGS, LLC

     

     

    as
      Seller,

     

     

    and

     

     

    JPMORGAN
      CHASE BANK, N.A.,

     

     

    as
      Buyer

     

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    TABLE
      OF
      CONTENTS

     

    Page

     

    
      	
              ARTICLE
                1. APPLICABILITY

            	
              1

            
	
              ARTICLE
                2. DEFINITIONS

            	
              1

            
	
              ARTICLE
                3. INITIATION; CONFIRMATION; TERMINATION; FEES; REDUCTION OF FACILITY
                AMOUNT

            	
              23

            
	
              ARTICLE
                4. MARGIN MAINTENANCE

            	
              36

            
	
              ARTICLE
                5. INCOME PAYMENTS AND PRINCIPAL PAYMENTS

            	
              37

            
	
              ARTICLE
                6. SECURITY INTEREST

            	
              41

            
	
              ARTICLE
                7. PAYMENT, TRANSFER AND CUSTODY

            	
              42

            
	
              ARTICLE
                8. SALE, TRANSFER, HYPOTHECATION OR PLEDGE OF PURCHASED
                ASSETS

            	
              50

            
	
              ARTICLE
                9. [Reserved]

            	
              51

            
	
              ARTICLE
                10. REPRESENTATIONS AND WARRANTIES OF SELLER

            	
              51

            
	
              ARTICLE
                11. NEGATIVE COVENANTS OF SELLER

            	
              59

            
	
              ARTICLE
                12. AFFIRMATIVE COVENANTS OF SELLER

            	
              61

            

    

    
      
        
        

      

      
        -i-

        
          

        

      

      
        
        

      

    

    

    
      	
              ARTICLE
                13. EVENTS OF DEFAULT; REMEDIES

            	
              65

            
	
              ARTICLE
                14. SINGLE AGREEMENT

            	
              70

            
	
              ARTICLE
                15. RECORDING OF COMMUNICATIONS

            	
              71

            
	
              ARTICLE
                16. NOTICES AND OTHER COMMUNICATIONS

            	
              71

            
	
              ARTICLE
                17. ENTIRE AGREEMENT; SEVERABILITY

            	
              71

            
	
              ARTICLE
                18. NON-ASSIGNABILITY

            	
              72

            
	
              ARTICLE
                19. GOVERNING LAW

            	
              72

            
	
              ARTICLE
                20. NO WAIVERS, ETC.

            	
              73

            
	
              ARTICLE
                21. USE OF EMPLOYEE PLAN ASSETS

            	
              73

            
	
              ARTICLE
                22. INTENT

            	
              73

            
	
              ARTICLE
                23. DISCLOSURE RELATING TO CERTAIN FEDERAL PROTECTIONS

            	
              74

            
	
              ARTICLE
                24. CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL

            	
              75

            
	
              ARTICLE
                25. NO RELIANCE

            	
              75

            
	
              ARTICLE
                26. INDEMNITY

            	
              76

            
	
              ARTICLE
                27. DUE DILIGENCE

            	
              77

            

    

    
      
        
        

      

      
        -ii-

        
          

        

      

      
        
        

      

    

    

    
      	
              ARTICLE
                28. SERVICING

            	
              78

            
	
              ARTICLE
                29. MISCELLANEOUS

            	
              79

            

    

     

    
      
        
        

      

      
        -iii-

        
          

        

      

      
        
        

      

    

     

    ANNEXES,
      EXHIBITS AND SCHEDULES

     

    
      	
              ANNEX
                I

            	
              Names
                and Addresses for Communications between Parties

            
	
              SCHEDULE
                I

            	
              Advance
                Rates and Applicable Pricing Rates

            
	
              EXHIBIT
                I

            	
              Form
                of Confirmation

            
	
              EXHIBIT
                II

            	
              Authorized
                Representatives of Seller

            
	
              EXHIBIT
                III

            	
              Monthly
                Reporting Package

            
	
              EXHIBIT
                IV

            	
              Form
                of Custodial Delivery

            
	
              EXHIBIT
                V

            	
              Form
                of Power of Attorney

            
	
              EXHIBIT
                VI

            	
              Representations
                and Warranties Regarding Individual Purchased Assets

            
	
              EXHIBIT
                VII

            	
              Asset
                Information

            
	
              EXHIBIT
                VIII

            	
              Advance
                Procedures

            
	
              EXHIBIT
                IX

            	
              Excluded
                Transferees

            
	
              EXHIBIT
                X

            	
              Form
                of Bailee Letter

            
	
              EXHIBIT
                XI

            	
              Form
                of Interim Servicing Agreement

            
	
              EXHIBIT
                XII

            	
              Form
                of Margin Deficit Notice

            
	
              EXHIBIT
                XIII

            	
              UCC
                Filing Jurisdictions

            
	
              EXHIBIT
                XIV

            	
              Form
                of Future Funding Confirmation

            
	
              EXHIBIT
                XV

            	
              Additional
                Eligible Collateral

            
	
              EXHIBIT
                XVI

            	
              Form
                of Servicer Notice

            
	
              EXHIBIT
                XVII

            	
              Form
                of Release Letter

            
	
              EXHIBIT
                XVIII

            	
              Future
                Funding Advance Procedures

            
	
              EXHIBIT
                XIX

            	
              Covenant
                Compliance Certificate

            
	
              EXHIBIT
                XX

            	
              Form
                of Depository Agreement

            
	
              EXHIBIT
                XXI

            	
              Form
                of Custodial Agreement

            

    

    

    
      
        
        

      

      
        -iv-

        
          

        

      

      
        
        

      

    

     

    

    
      	
              EXHIBIT
                XXII

            	
              Form
                of Officers’ Certificate

            

    

    

    
      
        
        

      

      
        -v-

        
          

        

      

      
        
        

      

    

     

    MASTER
      REPURCHASE AGREEMENT

     

    MASTER
      REPURCHASE AGREEMENT, dated as of August 8, 2007, by and among NRFC JP HOLDINGS,
      LLC, a Delaware limited liability company (the “Seller”
with
      respect to the Eligible Assets that it sells to Buyer) and JPMORGAN CHASE BANK,
      N.A., a banking association organized under the laws of the United States (the
      “Buyer”).

     

    ARTICLE
      1.

     

    APPLICABILITY

     

    From
      time
      to time the parties hereto may enter into transactions in which Seller and
      Buyer
      agree to the transfer from Seller to Buyer all of its rights, title and interest
      to certain Eligible Assets (as defined herein) or other assets and, in each
      case, the other related Purchased Items (as defined herein) (collectively,
      the
“Assets”)
      against the transfer of funds by Buyer to Seller, with a simultaneous agreement
      by Buyer to transfer back to Seller such Assets at a date certain or on demand,
      against the transfer of funds by Seller to Buyer. Each such transaction shall
      be
      referred to herein as a “Transaction”
and,
      unless otherwise agreed in writing, shall be governed by this Agreement,
      including any supplemental terms or conditions contained in any exhibits
      identified herein as applicable hereunder. Each individual transfer of an
      Eligible Asset shall constitute a distinct Transaction.

     

    ARTICLE
      2.

     

    DEFINITIONS

     

    “Accelerated
      Repurchase Date”
shall
      have the meaning specified in Article
      13(b)(i)
      of this
      Agreement.

     

    “Accepted
      Servicing Practices”
shall
      mean with respect to any applicable Purchased Asset, those mortgage servicing
      practices of prudent mortgage lending institutions that service mortgage and/or
      mezzanine loans of the same type as such Purchased Asset in the state where
      the
      related underlying real estate directly or indirectly securing or supporting
      such Purchased Asset is located.

     

    “Acceptable
      Attorney”
means
      an attorney-at-law that has delivered at Seller’s request a Bailee Letter, with
      the exception of an attorney whom Buyer has notified Seller is not satisfactory
      to Buyer.

     

    “Act
      of
      Insolvency”
shall
      mean, with respect to any Person, (i) the filing of a petition, commencing,
      or authorizing the commencement of any case or proceeding under any bankruptcy,
      insolvency, reorganization, liquidation, dissolution or similar law relating
      to
      the protection of creditors, or suffering any such petition or proceeding to
      be
      commenced by another which is consented to, not timely contested or results
      in
      entry of an order for relief; (ii) the seeking or consenting to the
      appointment of a receiver, trustee, custodian or similar official for such
      Person or any substantial part of the property of such Person; (iii) the
      appointment of a receiver, conservator, or manager for such Person by any
      governmental agency or authority having the jurisdiction to do so; (iv) the
      making of a general assignment for the benefit of creditors; (v) the
      admission by such Person of its inability to pay its debts or discharge its
      obligations as they become due or mature; or (vi) that any Governmental
      Authority or agency or any person, agency or entity acting or purporting to
      act
      under Governmental Authority shall have taken any action to condemn, seize
      or
      appropriate, or to assume custody or control of, all or any substantial part
      of
      the property of such Person, or shall have taken any action to displace the
      management of such Person or to curtail its authority in the conduct of the
      business of such Person.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    “Additional
      Eligible Collateral”
shall
      mean any of the items indicated on Exhibit
      XV
      hereto.

     

    “Adjusted
      Total Assets”
      shall
      mean
      the sum
      of Total Assets plus Off-Balance Sheet Assets.

     

    “Adjusted
      Total Liabilities”
shall
      mean, the sum of Total Liabilities plus Off-Balance Sheet Liabilities minus
      Trust Preferred Securities.

     

    “Advance
      Rate”
shall
      mean, with respect to each Transaction and any Pricing Rate Period, the initial
      Advance Rate selected by Seller for such Transaction as shown in the related
      Confirmation, unless otherwise agreed to by Buyer and Seller.

     

    “Affiliate”
shall
      mean, when used with respect to any specified Person, (i) any other Person
      directly or indirectly controlling, controlled by, or under common control
      with,
      such Person. Control shall mean the possession, direct or indirect, of the
      power
      to direct or cause the direction of the management and policies of a Person,
      whether through the ownership of voting securities, by contract or otherwise
      and
“controlling” and “controlled” shall have meanings correlative thereto, or (ii)
      any “affiliate” of such Person, as such term is defined in the Bankruptcy
      Code.

     

    “Affiliated
      Hedge Counterparty”
shall
      mean JPMorgan Chase Bank, N.A., or any Affiliate thereof, in its capacity
      as a party to any Hedging Transaction with Seller.

     

    “Agreement”
shall
      mean this Master Repurchase Agreement, dated as of August 8, 2007 by and among
      NRFC JP Holdings, LLC and JPMorgan Chase Bank, N.A., as such agreement may
      be
      modified or supplemented from time to time.

     

    “Alternative
      Rate”
shall
      have the meaning specified in Article
      3(h)
      of this
      Agreement.

     

    “Alternative
      Rate Transaction”
shall
      mean, with respect to any Pricing Rate Period, any Transaction with respect
      to
      which the Pricing Rate for such Pricing Rate Period is determined with reference
      to the Alternative Rate.

     

    “Applicable
      Spread”
shall
      mean, with respect to a Transaction involving a Purchased Asset in any Asset
      Type Grouping:

     

    (i) so
      long
      as no Event of Default shall have occurred and be continuing, the incremental
      per annum rate (expressed as a number of “basis points”, each basis point being
      equivalent to 1/100 of 1%) specified in Schedule
      I
      attached
      to this Agreement as being the “Applicable Spread” for Purchased Assets in such
      Asset Type Grouping for the applicable loan-to-cost ratio, the applicable net
      operating income debt yields or Rating Agency ratings shown on Schedule I,
      as
      applicable, or such lower rate as may be determined by Buyer in its sole
      discretion, in the event that the Advance Rate applicable to any Purchased
      Asset
      is less than the related Maximum Advance Rate, in each case as determined by
      Buyer on each Pricing Rate Determination Date in accordance with Article
      3(d),
      and

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    (ii) after
      the
      occurrence and during the continuance of an Event of Default, the applicable
      incremental per annum rate described in clause (i) of this definition, plus
      400
      basis points (4.00%).

     

    “Asset
      Information”
shall
      mean, with respect to each Purchased Asset, the information set forth in
Exhibit
      VII
      attached
      hereto.

     

    “Asset
      Type Grouping”
shall
      mean, with respect to the Eligible Assets, any of the types of Eligible Assets
      listed in Schedule I
      attached
      to this Agreement.

     

    “Assets”
shall
      have the meaning specified in Article
      1.

     

    “B-Note”
means
      the original promissory note, if any, that was executed and delivered in
      connection with the subordinate portion of a Senior Mortgage Loan.

     

    “Bailee
      Letter”
means
      a
      letter from an Acceptable Attorney or from a Title Company, in the form attached
      to this Agreement as Exhibit
      X,
      wherein
      such Acceptable Attorney or Title Company in possession of a Purchased Asset
      File (i) acknowledges receipt of such Purchased Asset File, (ii) confirms that
      such Acceptable Attorney, Title Company, or other Person acceptable to Buyer
      is
      holding the same as bailee of Buyer under such letter and (iii) agrees that
      such
      Acceptable Attorney or Title Company shall deliver such Purchased Asset File
      to
      the Custodian by not later than the third (3rd) Business Day following the
      Purchase Date for the related Purchased Asset.

     

    “Bankruptcy
      Code”
shall
      mean The United States Bankruptcy Code of 1978, as amended from time to
      time.

     

    “Breakage
      Costs”
shall
      have the meaning assigned thereto in Article
      3(m).

     

    “Business
      Day”
shall
      mean a day other than (i) a Saturday or Sunday, or (ii) a day in which the
      New
      York Stock Exchange or banks in the State of New York are authorized or
      obligated by law or executive order to be closed. Notwithstanding the foregoing
      sentence, when used with respect to the determination of LIBOR, “Business Day”
shall only be a day on which commercial banks are open for international
      business (including dealings in U.S. Dollar deposits) in London,
      England.

     

    “Buyer”
shall
      mean JPMorgan Chase Bank, N.A., or any successor.

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    “Buyer’s
      Margin Amount”
shall
      mean with respect to any Transaction and any Purchased Asset on any date, the
      Maximum Advance Rate available for such Purchased Asset, multiplied by the
      Market Value of such Purchased Asset as of the date of
      determination.

     

    “Capitalized
      Lease Obligations”
shall
      mean obligations under a lease that are required to be capitalized for financial
      reporting purposes in accordance with GAAP. The amount of a Capitalized Lease
      Obligation is the capitalized amount of such obligation as would be required
      to
      be reflected on the balance sheet prepared in accordance with GAAP of the
      applicable Person as of the applicable date.

     

    “CF
      Sweep Event”
shall
      mean a determination by Buyer, in accordance with Article
      4
      of this
      Agreement, that a Margin Deficit exists.

     

    “Closing
      Date”
shall
      mean August 8, 2007.

     

    “CMBS”
shall
      mean pass-through
      certificates representing beneficial ownership interests in one or more first
      lien mortgage loans secured by commercial and/or multifamily
      properties
      rated B-
      (or its equivalent) or higher by the Rating Agencies.

     

    “Code”
shall
      mean the Internal Revenue Code of 1986, as amended.

     

    “Collateral”
shall
      have the meaning specified in Article
      6
      of this
      Agreement.

     

    “Collection
      Period”
shall
      mean with respect to the Remittance Date in any month, the period beginning
      on
      the Cut-off Date in the month preceding the month in which such Remittance
      Date
      occurs and continuing to but excluding the Cut-off Date immediately preceding
      such Remittance Date.

     

    “Concentration
      Limit”
shall
      mean, on any date of determination (i) the limit on the maximum concentration
      on
      such Business Day that may be represented by a particular type of Purchased
      Asset. With respect to Construction Loans, the applicable Concentration Limit
      is
      40% of the Facility Amount, of which 50% of such Concentration Limit may be
      represented by Construction Loans structured
      as a “B-note”, “mezzanine loan” or “junior participation” in such Construction
      Loan (but in no event greater than 20%
      of
      the Facility Amount). With respect to Land Loans, the applicable Concentration
      Limit is 15% of the Facility Amount. With respect to fixed-rate Purchased Assets
      that are not subject to a Hedging Transaction, the applicable Concentration
      Limit is 10% of the aggregate Repurchase Price for all Purchased
      Assets.

     

    “Condo
      Conversion Loan”
shall
      mean a performing first-priority mortgage loan secured by properties that have
      been, or are expected to be, converted or built from the ground up to a
      condominium form of ownership for the purpose of re-development as, in whole
      or
      in part, residential apartments, commercial, office or industrial buildings
      or
      time share units.

     

    “Confirmation”
shall
      have the meaning specified in Article
      3(b)
      of this
      Agreement.

     

    “Consolidated
      Adjusted EBITDA”
shall
      mean, for any period, with respect to any Person, the sum, without duplication,
      for such period of (a) the Net Income of such Person and its consolidated
      Subsidiaries determined on a consolidated basis for such period, (b) the sum
      of
      the provisions for such period for income taxes, interest expense, and
      depreciation and amortization expense used in determining such Net Income for
      such Person and its consolidated Subsidiaries, (c) amounts deducted in
      accordance with GAAP in respect of other non-cash expenses in determining such
      Net Income for such Person and its consolidated Subsidiaries and (d) the amount
      of any aggregate net loss (or minus the amount of any gain) during such period
      arising from the sale, exchange or other disposition of capital assets by such
      Person and its consolidated Subsidiaries determined on a consolidated basis,
      in
      each event excluding unrealized gains/losses, any fees payable to advisors
      for
      raising private equity capital, amortization of financing fees and amortization
      of bond discount associated with convertible debt outstanding.

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    “Construction
      Loan”
shall
      mean a performing first priority commercial real estate mortgage loan (either
      structured as an “A-note”, “senior participation”, “B-note”, “mezzanine loan” or
“junior participation” in such a mortgage loan) secured by a Core Property Type
      that provides for periodic advances for construction of improvements on the
      real
      estate securing such mortgage loan for which a substantial portion of the
      proceeds of the mortgage loan may be for “ground up” construction.

     

    “Core
      Property Types”
shall
      mean the following types of properties: multi-family, mixed-use, retail,
      industrial, office building and hospitality, or such other types of properties
      that Buyer may agree to in its sole and absolute discretion.

     

    “Contingent
      Liabilities”
shall
      mean, with respect to any Person and its consolidated Subsidiaries (without
      duplication): (i) liabilities and obligations (including any Guarantee
      Obligations) of such Person, any Subsidiary or any other Person in respect
      of
“off-balance sheet arrangements” (as defined in the SEC Off-Balance Sheet
      Rules), (ii) any obligation, including, without limitation, any Guarantee
      Obligation, whether or not required to be disclosed in the footnotes to such
      Person’s financial statements, guaranteeing partially or in whole any
      Non-Recourse Indebtedness, lease, dividend or other obligation, exclusive of
      contractual indemnities (including, without limitation, any indemnity or
      price-adjustment provision relating to the purchase or sale of securities or
      other assets) and guarantees of non-monetary obligations (other than guarantees
      of completion, environmental indemnities and guarantees of customary carve-out
      matters made in connection with Non-Recourse Indebtedness, such as (but not
      limited to) fraud, misappropriation, bankruptcy and misapplication) which have
      not yet been called on or quantified, of such Person or of any other Person,
      and
      (iii) any forward commitment or obligation to fund or provide proceeds with
      respect to any loan or other financing which is obligatory and non-discretionary
      on the part of the lender. The amount of any Contingent Liabilities described
      in
      clause (ii) shall be deemed to be, (a) with respect to a guarantee of interest
      or interest and principal, or operating income guarantee, the sum of all
      payments required to be made thereunder (which, in the case of an operating
      income guarantee, shall be deemed to be equal to the debt service for the note
      secured thereby), through, (x) in the case of an interest or interest and
      principal guarantee, the stated date of maturity of the obligation (and
      commencing on the date interest could first be payable thereunder), or (y)
      in
      the case of an operating income guarantee, the date through which such guarantee
      will remain in effect, and (b) with respect to all guarantees not covered by
      the
      preceding clause (a), an amount equal to the stated or determinable amount
      of
      the primary obligation in respect of which such guarantee is made or, if not
      stated or determinable, the maximum reasonably anticipated liability in respect
      thereof (assuming such Person is required to perform thereunder) as recorded
      on
      the balance sheet and on the footnotes to the most recent financial statements
      of such Person. As used in this definition, the term “SEC Off-Balance Sheet
      Rules” means the Disclosure in Management’s Discussion and Analysis About
      Off-Balance Sheet Arrangements and Aggregate Contractual Obligations, Securities
      Act Release Nos. 33-8182; 34-47264; FR-67 International Series Release No.
      1266
      File No. S7-42-02, 68 Fed. Reg. 5982 (Feb. 5, 2003) (codified at 17 CFR pts.
      228, 229 and 249).

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    “Covenant
      Compliance Certificate”
shall
      have the meaning specified in Article 12(j)(ii)
      hereof.

     

    “CRE
      CDO”
shall
      mean commercial real estate collateralized debt obligations rated BB- (or its
      equivalent) or higher by the Rating Agencies.

     

    “Custodial
      Agreement”
shall
      mean the Custodial Agreement, dated as of the date hereof, by and among the
      Custodian, Seller and Buyer, the form of which is attached hereto as
Exhibit XXI.

     

    “Custodial
      Delivery”
shall
      mean the form executed by Seller in order to deliver the Purchased Asset
      Schedule and the Purchased Asset File to Buyer or its designee (including the
      Custodian) pursuant to Article
      7
      of this
      Agreement, a form of which is attached hereto as Exhibit IV.

     

    “Custodian”
shall
      mean Wells Fargo Bank, N.A., or any successor Custodian appointed by Buyer
      with
      the consent of Seller.

     

    “Cut-off
      Date”
shall
      mean the first (1st) calendar day of any month.

     

    “Default”
shall
      mean any event which, with the giving of notice, the passage of time, or both,
      would constitute an Event of Default.

     

    “Defaulted
      Mortgage Asset”
shall
      mean any loan (a) that is sixty (60) days or more delinquent in the payment
      of
      principal, interest, fees or other amounts payable under the terms of the
      related loan documents, (b) as to which an Act of Insolvency shall have occurred
      with respect to the Borrower or (c) as to which a material non-monetary event
      of
      default shall have occurred under any document included in the Purchased Asset
      File for such Purchased Asset.

     

    “Deferred
      Financing Costs”
shall
      mean the aggregate amount of deferred financing or similar costs incurred by
      a
      Person or any Subsidiary of such Person that have not been accounted for as
      expenses in accordance with GAAP.

     

    “Delinquent
      Mortgage Asset”
shall
      mean a loan that is thirty (30) or more days, but less than sixty (60) days,
      delinquent in the payment of principal, interest, fees or other amounts payable
      under the terms of the related loan documents.

     

    “Depository”
shall
      mean Wells Fargo Bank, N.A., or any successor Depository appointed by Buyer
      with
      the prior written consent of Seller (such consent to not be unreasonably
      withheld or delayed).

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    “Depository
      Account”
shall
      mean a segregated interest bearing account, in the name of Buyer, established
      at
      the Depository pursuant to the Depository Agreement.

     

    “Depository
      Agreement”
shall
      mean that certain Depository Agreement, dated as of the date hereof, among
      Buyer, Seller and the Depository, in the form attached hereto as Exhibit
      XX.
      

     

    “Draft
      Appraisal”
shall
      mean a short form appraisal, “letter opinion of value,” or any other form of
      draft appraisal acceptable to Buyer.

     

    “Early
      Repurchase”
shall
      mean a repurchase of a Purchased Asset as described in Article 3(f)
      of this
      Agreement.

     

    “Early
      Repurchase Date”
shall
      have the meaning specified in Article
      3(f)
      of this
      Agreement. 

     

    “EBITDA”
shall
      mean, for any period, the sum, without duplication, for such period of (a)
      Net
      Income of Seller for such period, (b) the sum of provisions for such period
      for
      income taxes, interest expense, and depreciation and amortization expense used
      in determining such Net Income, (c) amounts deducted in accordance with GAAP
      in
      respect of other non cash expenses in determining such Net Income and (d) the
      amount of any aggregate net loss (or minus the amount of any gain) during such
      period arising from the sale, exchange or other disposition of capital assets
      (determined in accordance with GAAP) by Seller, excluding any reporting
      implications of Financial Interpretations No. 45 and 46 and FASB 150, in each
      event excluding unrealized gains/losses, any fees payable to advisors for
      raising private equity capital, amortization of financing fees and amortization
      of bond discount associated with convertible debt outstanding. 

     

    “Eligible
      Assets”
shall
      mean any of the following types of assets or loans (i) that are acceptable
      to
      Buyer in its sole and absolute discretion exercised in good faith, (ii) with
      respect to which the representations and warranties set forth in this Agreement
      (including the exhibits hereto) are true and correct in all material respects,
      and (iii) that are secured directly or indirectly by properties that are Core
      Property Types (or any other property type acceptable to Buyer in its sole
      discretion) and is located in the United States of America, its territories
      or
      possessions (or elsewhere, in the sole discretion of Buyer):

     

    (i) Senior
      Mortgage Loans;

     

    (ii) Construction
      Loans;

     

    (iii) B-Notes/Junior
      Interests;

     

    (iv) Mezzanine
      Loans;

     

    (v) Condo
      Conversion Loans;

     

    (vi) CMBS
      rated B- (or its equivalent) or higher by the Rating Agencies and CRE CDO rated
      BB- (or its equivalent) or higher by the Rating Agencies;

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

    (vii) Land
      Loans;

     

    (viii)
      any Additional Eligible Collateral transferred to Buyer in connection with
      a
      Margin Deficit; and

     

    (ix) any
      other
      asset types or classifications that are acceptable to Buyer, subject to its
      consent on all necessary and appropriate modifications to this Agreement and
      each of the Transaction Documents, as determined by Buyer in its sole and
      absolute discretion.

     

    Notwithstanding
      anything to the contrary contained in this Agreement, the following shall not
      be
      Eligible Assets for purposes of this Agreement: (i) Non-performing loans; (ii)
      loans that are Defaulted Mortgage Assets or Delinquent Mortgage Assets; or
      (iii)
      assets secured directly or indirectly by loans described in the preceding
      clauses (i) through (ii).

     

    “Eligible
      Loans”
shall
      mean any Senior Mortgage Loans, Construction Loans, B-Notes/Junior Interests,
      Mezzanine
      Loans, Condo Conversion Loans and Land Loans that are also Eligible
      Assets.

     

    “Environmental
      Law”
shall
      mean any federal, state, foreign or local statute, law, rule, regulation,
      ordinance, code, guideline, written policy and rule of common law now or
      hereafter in effect and in each case as amended, and any judicial or
      administrative interpretation thereof, including any judicial or administrative
      order, consent decree or judgment, relating to the environment, employee health
      and safety or Hazardous Materials, including, without limitation, CERCLA; RCRA;
      the Federal Water Pollution Control Act, 33 U.S.C. § 1251 et seq.;
      the
      Toxic Substances Control Act, 15 U.S.C. § 2601 et seq.;
      the
      Clean Air Act, 42 U.S.C. § 7401 et seq.;
      the
      Safe Drinking Water Act, 42 U.S.C. § 3803 et seq.;
      the
      Oil Pollution Act of 1990, 33 U.S.C. § 2701 et seq.;
      the
      Emergency Planning and the Community Right-to-Know Act of 1986, 42 U.S.C.
§ 11001 et seq.;
      the
      Hazardous Material Transportation Act, 49 U.S.C. § 1801 et seq.
      and the
      Occupational Safety and Health Act, 29 U.S.C. § 651 et seq.;
      and
      any state and local or foreign counterparts or equivalents, in each case as
      amended from time to time.

     

    “Environmental
      Site Assessment”
shall
      have the meaning specified in paragraph 30 of the section of Exhibit
      VI
      dealing
      with Eligible Loans.

     

    “Equity
      Interest”
shall
      mean, with respect to any Person, any share of capital stock of (or other
      ownership, equity or profit interests in) such Person, any warrant, option
      or
      other right for the purchase or other acquisition from such Person of any share
      of capital stock of (or other ownership, equity or profit interests in) such
      Person, any security convertible into or exchangeable for any share of capital
      stock of (or other ownership, equity or profit interests in) such Person or
      warrant, right or option for the purchase or other acquisition from such Person
      of such shares (or such other interests), and any other ownership or profit
      interest in such Person (including, without limitation, partnership, member
      or
      trust interests therein), whether voting or nonvoting, and whether or not such
      share, warrant, option, right or other interest is authorized or otherwise
      existing on any date of determination.

     

    “ERISA”
shall
      mean the Employee Retirement Income Security Act of 1974, as amended from time
      to time, and the regulations promulgated thereunder. Article references to
      ERISA
      are to ERISA, as in effect at the date of this Agreement and, as of the relevant
      date, any subsequent provisions of ERISA, amendatory thereof, supplemental
      thereto or substituted therefor.

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    “ERISA
      Affiliate”
shall
      mean any corporation or trade or business that is a member of any group of
      organizations (i) described in Article 414(b) or (c) of the Code of which Seller
      is a member and (ii) solely for purposes of potential liability under Article
      302(c)(11) of ERISA and Article 412(c)(11) of the Code and the lien created
      under Article 302(f) of ERISA and Article 412(n) of the Code, described in
      Article 414(m) or (o) of the Code of which Seller is a member.

     

    “Event
      of Default”
shall
      have the meaning specified in Article
      13
      of this
      Agreement.

     

    “Extension
      Period”
shall
      have the meaning specified in Article
      3(n)(i)
      of this
      Agreement.

     

    “Facility
      Amount”
shall
      mean $350,000,000.

     

    “Federal
      Funds Rate”
shall
      mean, for any day, the weighted average of the rates on overnight federal funds
      transactions with members of the Federal Reserve System arranged by federal
      funds brokers, as published on the next succeeding Business Day by the Federal
      Reserve Bank of New York, or, if such rate is not so published for any day
      that
      is a Business Day, the average of the quotations for the day of such
      transactions received by Buyer from three (3) federal funds brokers of
      recognized standing selected by it.

     

    “Filings”
shall
      have the meaning specified in Article
      6(d)
      of this
      Agreement.

     

    “Final
      Maturity Date”
shall
      have the meaning specified in the definition of “Maturity
      Date”.

     

    “Financing
      Lease”
shall
      mean any lease of property, real or personal, the obligations of the lessee
      in
      respect of which are required in accordance with GAAP to be capitalized on
      a
      balance sheet of the lessee.

     

    “Fixed
      Charge Coverage Ratio”
shall
      mean, for Guarantor and its consolidated Subsidiaries during any period, EBITDA
      for such period divided
      by the
      Fixed Charges for the same period.

     

    “Fixed
      Charges”
shall
      mean, for Guarantor and its consolidated Subsidiaries determined on a
      consolidated basis during any period, the sum of (without duplication) (a)
      Debt
      Service, (b) all Preferred Dividends required to be paid during such period,
      (c)
      Capital Lease Obligations required to be paid during such period, and (d) all
      payments due under any ground lease.

     

    “Foreclosed
      Loan”
shall
      mean an Eligible Loan with respect to which the Underlying Mortgaged Property
      has been foreclosed upon by Seller or, in the case of a B-Note, Junior Interest,
      Mezzanine Loan, CMBS or CRE CDO, by the Servicer of the Underlying Mortgage
      Loan.

     

    “Future
      Funding Amount”
      shall
      mean, (i) with respect to any Construction Loan or Senior Mortgage Loan, the
      amount of additional funding obligations that were expressly identified to
      and
      approved by Buyer in connection with the initial Transaction or (ii) with
      respect to any Purchased Asset where Seller elected to apply a percentage lower
      than the Advance Rate set forth in Schedule
      I
      in
      connection with the initial Transaction, the amount of additional funds
      available to be advanced against such Purchased Asset.

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    “Future
      Funding Confirmation”
shall
      have the meaning specified in Article
      3(c)(i).

     

    “Future
      Funding Date”
shall
      mean, with respect to any Purchased Asset with respect to which a Future Funding
      Amount is outstanding, the date on which Buyer advances any portion of such
      Future Funding Amount.

     

    “Future
      Funding Due Diligence”
shall
      have the meaning set forth in Article
      3(c)(ii)
      hereof.

     

    “Future
      Funding Due Diligence Package”
shall
      have the meaning set forth in Exhibit
      XVIII
      hereto.

     

    “Future
      Funding Loan”
shall
      mean any Purchased Asset for which there is a Future Funding Amount
      outstanding.

     

    “Future
      Funding Transaction”
shall
      mean (i) an additional Transaction requested with respect to any Construction
      Loan or Senior Mortgage Loan to provide for the advance of additional funds
      that
      were expressly identified to and approved by Buyer in connection with the
      initial Transaction entered into in respect of such Construction Loan or Senior
      Mortgage Loan or (ii) an additional Transaction requested with respect to any
      Purchased Asset to provide for the advance of additional funds in the event
      that
      Seller elected to apply a percentage lower than the Advance Rate set forth
      in
Schedule
      I
      in
      connection with the initial Transaction.

     

    “GAAP”
shall
      mean United States generally accepted accounting principles consistently applied
      as in effect from time to time.

     

    “Governmental
      Authority”
shall
      mean any national or federal government, any state, regional, local or other
      political subdivision thereof with jurisdiction and any Person with jurisdiction
      exercising executive, legislative, judicial, regulatory or administrative
      functions of or pertaining to government (including any supra-national bodies
      such as the European Union or the European Central Bank).

     

    “Guarantee
      Agreement”
shall
      mean the Guarantee Agreement, dated as of the date hereof, from Guarantor in
      favor of Buyer, in form and substance acceptable to Buyer, which shall cause
      Guarantor to be jointly and severally liable with Seller to Buyer for up to
      10%
      of the maximum Facility Amount.

     

    “Guarantee
      Obligation”
shall
      mean, as to any Person (the “guaranteeing
      person”),
      any
      obligation of (a) the guaranteeing person or (b) another Person
      (including, without limitation, any bank under any letter of credit) to induce
      the creation of which the guaranteeing person has issued a reimbursement,
      counterindemnity or similar obligation, in either case guaranteeing or in effect
      guaranteeing any Indebtedness, leases, dividends or other obligations (the
      “primary
      obligations”)
      of any
      other third Person (the “primary
      obligor”)
      in any
      manner, whether directly or indirectly, including, without limitation, any
      obligation of the guaranteeing person, whether or not contingent, (i) to
      purchase any such primary obligation or any property constituting direct or
      indirect security therefor, (ii) to advance or supply funds (1) for the
      purchase or payment of any such primary obligation or (2) to maintain
      working capital or equity capital of the primary obligor or otherwise to
      maintain the net worth or solvency of the primary obligor, (iii) to
      purchase property, securities or services primarily for the purpose of assuring
      the owner of any such primary obligation of the ability of the primary obligor
      to make payment of such primary obligation or (iv) otherwise to assure or
      hold harmless the owner of any such primary obligation against loss in respect
      thereof; provided,
      however,
      that
      the term Guarantee Obligation shall not include endorsements of instruments
      for
      deposit or collection in the ordinary course of business. The terms
“guarantee”
and
      “guaranteed”
used
      as
      a verb shall have a correlative meaning. The amount of any Guarantee Obligation
      of any guaranteeing person shall be deemed to be the lower of (a) an amount
      equal to the stated or determinable amount of the primary obligation in respect
      of which such Guarantee Obligation is made and (b) the maximum amount for
      which such guaranteeing person may be liable pursuant to the terms of the
      instrument embodying such Guarantee Obligation, unless such primary obligation
      and the maximum amount for which such guaranteeing person may be liable are
      not
      stated or determinable, in which case the amount of such Guarantee Obligation
      shall be such guaranteeing person’s maximum reasonably anticipated liability in
      respect thereof as determined in good faith.

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    “Guarantor”
shall
      mean NorthStar Realty Finance Corp., a Maryland corporation.

     

    “Hedge-Required
      Asset”
shall
      mean any Eligible Asset that is a fixed rate Eligible Asset.

     

    “Hedging
      Transactions”
shall
      mean, with respect to any or all of the Purchased Assets, any short sale of
      U.S.
      Treasury Securities or mortgage-related securities, futures contract (including
      Eurodollar futures) or options contract or any interest rate swap, cap or collar
      agreement or similar arrangements providing for protection against fluctuations
      in interest rates or the exchange of nominal interest obligations, entered
      into
      by any Affiliated Hedge Counterparty or Qualified Hedge Counterparty with
      Seller, either generally or under specific contingencies that is required by
      Buyer, or otherwise pursuant to this Agreement (subject to the definition of
      Concentration Limit), to hedge a Hedge-Required Asset, or that Seller has
      elected to pledge or transfer to Buyer pursuant to this Agreement.

     

    “Income”
shall
      mean, with respect to any Purchased Asset at any time, (x) any collections
      of
      principal, interest, dividends, receipts or other distributions or collections,
      (y) all net sale proceeds received by Seller or any Affiliate of Seller in
      connection with a sale or liquidation of such Purchased Asset and (z) all
      payments actually received by Buyer on account of Hedging
      Transactions.

     

    “Indebtedness”
shall
      mean, for any Person, (a) obligations created, issued or incurred by such Person
      for borrowed money (whether by loan, the issuance and sale of debt securities
      or
      the sale of property to another Person subject to an understanding or agreement,
      contingent or otherwise, to repurchase such property from such Person); (b)
      obligations of such Person to pay the deferred purchase or acquisition price
      of
      property or services, other than trade accounts payable (other than for borrowed
      money) arising, and accrued expenses incurred, in the ordinary course of
      business so long as such trade accounts payable are payable within ninety (90)
      days of the date the respective goods are delivered or the respective services
      are rendered; (c) Indebtedness of others secured by a lien on the property
      of
      such Person, whether or not the respective Indebtedness so secured has been
      assumed by such Person; (d) obligations (contingent or otherwise) of such Person
      in respect of letters of credit or similar instruments issued or accepted by
      banks and other financial institutions for account of such Person; (e)
      obligations of such Person under repurchase agreements, sale/buy-back agreements
      or like arrangements; (f) Indebtedness of others guaranteed by such Person;
      (g)
      all obligations of such Person incurred in connection with the acquisition
      or
      carrying of fixed assets by such Person; (h) Indebtedness of general
      partnerships of which such Person is secondarily or contingently liable (other
      than by endorsement of instruments in the course of collection), whether by
      reason of any agreement to acquire such indebtedness to supply or advance sums
      or otherwise; (i) Capitalized Lease Obligations of such Person; (j) all net
      liabilities or obligations under any interest rate, interest rate swap, interest
      rate cap, interest rate floor, interest rate collar, or other hedging instrument
      or agreement; and (k) all obligations of such Person under Finance
      Leases.

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

    “Indemnified
      Amounts”
and
      “Indemnified
      Parties”
shall
      have the meaning specified in Article
      26 of
      this
      Agreement.

     

    “Interim
      Servicing Agreement”
shall
      mean the Interim Servicing Agreement, dated as of the date hereof, by and among
      the Servicer, Seller and Buyer, the form of which is attached hereto as
Exhibit XI.

     

    “Internal
      Revenue Code”
shall
      mean the Internal Revenue Code of 1986, as amended from time to time, and the
      regulations promulgated and rulings issued thereunder.

     

    “Interest
      Expense”
shall
      mean, for any period, the total of all interest expense with respect to all
      outstanding Indebtedness including, without limitation, all commissions,
      discounts and other fees and charges owed with respect to letters of credit
      and
      bankers’ acceptance financing and net costs under all Hedge Transactions with
      respect to interest rates to the extent such net costs are allocable to such
      period in accordance with GAAP, excluding amortization of deferred financing
      fees and amortization of bond discounts associated with convertible debt to
      the
      extent included in GAAP Interest Expense.

     

    “Junior
      Certificate”
shall
      mean the original participation certificate, if any, that was executed and
      delivered in connection with a Junior Interest that is a junior
      participation.

     

    “Junior
      Interest”
shall
      mean a performing junior participation interest in a stabilized or transitional
      senior commercial, multifamily fixed or floating rate mortgage loan secured
      by a
      first lien on multifamily and commercial properties or a subordinate portion
      of
      a Senior Mortgage Loan evidenced by a Junior Certificate.

     

    “Land
      Loan”
shall
      mean a performing first priority mortgage loan secured by undeveloped real
      estate intended to be developed into retail, hospitality, commercial,
      multi-family or condominium property.

     

    “Legal
      Fee Cap”
shall
      mean the maximum amount of legal fees related to due diligence of Eligible
      Assets for which Seller shall be obligated to pay. With respect to Senior
      Mortgage Loans such amount shall equal $3,500. With respect to B-Notes and
      Mezzanine Loans such amount shall equal $5,000. With respect to Construction
      Loans (or any Junior Interest or B-Note in a Construction Loan) and Land Loans
      such amount shall equal $6,000.

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

    “Leverage”
shall
      mean, for any Person, the aggregate amount of indebtedness for money borrowed
      (included purchase money mortgage loans) outstanding at any time, both secured
      and unsecured.

     

    “LIBOR”
shall
      mean the rate per annum calculated as set forth below:

     

    (i) On
      each
      Pricing Rate Determination Date, LIBOR for the next Pricing Rate Period will
      be
      the rate for deposits in United States dollars for a one-month period that
      appears on page BBAM of Bloomberg, L.P. as of 11:00 a.m., London time, on such
      date; or

     

    (ii) On
      any
      Pricing Rate Determination Date on which no such rate appears on page BBAM
      of
      Bloomberg, L.P. as described above, LIBOR for the next Pricing Rate Period
      will
      be determined on the basis of the arithmetic mean of the rates at which deposits
      in United States dollars are offered by the Reference Banks at approximately
      11:00 a.m., London time, on such date to prime banks in the London interbank
      market for a one-month period.

     

    All
      percentages resulting from any calculations or determinations referred to in
      this definition will be rounded upwards, if necessary, to the nearest multiple
      of 1/100 of 1% and all U.S. dollar amounts used in or resulting from such
      calculations will be rounded to the nearest cent (with one-half cent or more
      being rounding upwards).

     

    “LIBO
      Rate”
shall
      mean, with respect to any Pricing Rate Period pertaining to a Transaction,
      a
      rate per annum determined for such Pricing Rate Period in accordance with the
      following formula (rounded upward to the nearest 1/100th of 1%):

    

     

    LIBOR

    
      
        

      

    

    1
      -
      Reserve Requirement

     

    “LIBOR
      Transaction”
shall
      mean, with respect to any Pricing Rate Period, any Transaction with respect
      to
      which the Pricing Rate for such Pricing Rate Period is determined with reference
      to the LIBO Rate.

     

    “Lien”
shall
      mean any mortgage, pledge, hypothecation, assignment, deposit arrangement,
      encumbrance, lien (statutory or other), charge or other security interest or
      any
      preference, priority or other security agreement or preferential arrangement
      of
      any kind or nature whatsoever (including, without limitation, any conditional
      sale or other title retention agreement and any financing lease having
      substantially the same economic effect as any of the foregoing), and the filing
      of any financing statement under the UCC or comparable law of any jurisdiction
      in respect of any of the foregoing.

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

    “Liquidity”
shall
      mean, at any time, the amount equal to the sum of (i) funds standing to the
      credit of the Depository Account; plus (ii) cash or cash equivalents (excluding
      (x) cash or cash equivalents consisting of Additional Eligible Collateral
      pledged hereunder or pledged to secure a “margin deficit” or “borrowing base
      deficiency” (or the equivalent, however designated, under another warehouse
      facility) and (y) cash or cash equivalents standing to the credit of a deposit
      account or other account that is the subject of a “control agreement” (or the
      equivalent, however designated) at a time when Seller does not have the right
      unilaterally to direct the withdrawal of funds from such account (e.g., because
      a “default” or “event of default” (or the equivalent, however designated)
      exists)); plus (iii) the unused excess, if any, of the Facility Amount or
“borrowing base” (or the equivalent, however designated) of assets held under
      this Agreement, in all other warehouse facilities to which Seller is a party
      at
      such time and the Unsecured Credit Facility over
      the
      Purchase Price (less any prepayments thereof) or “unpaid principal balance” (or
      the equivalent, however designated) of such assets under this Agreement or
      such
      other warehouse facilities.

     

    “Margin
      Deadline”
has
      the
      meaning specified in Article
      4(a).

     

    “Margin
      Deficit”
shall
      have the meaning specified in Article
      4(a).

     

    “Market
      Value”
shall
      mean, with respect to any Purchased Asset as of any relevant date, the market
      value for such Purchased Asset on such date as determined by Buyer in its sole
      and absolute discretion, exercised in good faith. The Market Value shall, at
      Buyer’s option, be deemed to be zero with respect to each Purchased Asset (i)
      subject to Article 7(d),
      in
      respect of which the complete Purchased Asset File has not been delivered to
      the
      Custodian in accordance with the terms of the Custodial Agreement and (ii)
      that
      has been released from the possession of the Custodian under the Custodial
      Agreement to Seller for a period in excess of twenty (20) calendar days (except
      as may have been consented to by Buyer in its sole and absolute
      discretion).

     

    The
      Market Value of each Purchased Asset may be determined by Buyer in good faith,
      in its sole discretion, on each Business Day during the term of this
      Agreement.

     

    “Material
      Adverse Effect”
shall
      mean a material adverse effect on (a) the financial condition of Seller or
      Guarantor, (b) the ability of Seller or Guarantor to perform its obligations
      under any of the Transaction Documents, (c) the validity or enforceability
      of
      any of the Transaction Documents or (d) the rights and remedies of Buyer under
      any of the Transaction Documents.

     

    “Materials
      of Environmental Concern”
shall
      mean any toxic mold, any petroleum (including, without limitation, crude oil
      or
      any fraction thereof) or petroleum products (including, without limitation,
      gasoline) or any hazardous or toxic substances, materials or wastes, defined
      as
      such in or regulated under any Environmental Law, including, without limitation,
      asbestos, polychlorinated biphenyls, and urea-formaldehyde
      insulation.

     

    “Maturity
      Date”
shall
      mean the day that is 364 calendar days after the Closing Date, or such later
      date as may be in effect pursuant to Article
      3(n)
      hereof.
      For the sake of clarity, the Maturity Date shall not be any date beyond three
      (3) years from the Closing Date (the “Final
      Maturity Date”),
      except with respect to the exercise of the Wind Down Period option described
      in
Article
      3(n)(ii).

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

     

    “Maximum
      Advance Rate”
shall
      mean, with respect to each Purchased Asset, the “Advance Rate” specified for the
      applicable Asset Type Grouping in Schedule I
      attached
      to this Agreement for the applicable loan-to-cost ratio, the applicable net
      operating income debt yields or Rating Agency ratings shown on Schedule I,
      as
      applicable, or if not shown in Schedule I
      or
      otherwise agreed to by Seller and Buyer, as determined by Buyer in its sole
      and
      absolute discretion.

     

    “Mezzanine
      Loan”
shall
      mean
      a
      performing loan (or a participation therein) primarily secured by a pledge
      of
      full or partial equity ownership interests in one or more entities that own
      directly or indirectly multifamily or commercial properties that serve as
      collateral for Senior Mortgage Loans.

     

    “Mezzanine
      Note”
shall
      mean the original promissory note that was executed and delivered in connection
      with a particular Mezzanine Loan.

     

    “Minimum
      Transfer Amount”
shall
      mean, with respect to Seller, $500,000; provided,
      however,
      that if
      a Default or an Event of Default has occurred and is continuing hereunder,
      the
      Minimum Transfer Amount shall be U.S. $0.

     

    “Moody’s”
shall
      mean Moody’s Investors
      Service,
      Inc.

     

    “Mortgage”
shall
      mean a mortgage, deed of trust, deed to secure debt or other instrument,
      creating a valid and enforceable first Lien on or a first priority ownership
      interest in an estate in fee simple in real property and the improvements
      thereon, securing a Mortgage Note or similar evidence of
      indebtedness.

     

    “Mortgage
      Note”
shall
      mean a note or other evidence of indebtedness of a Mortgagor secured by a
      Mortgage, including any A-Note, B-Note or Junior Certificate that is a Purchased
      Asset.

     

    “Mortgagor”
shall
      mean the obligor on a Mortgage Note and the grantor of the related Mortgage,
      or
      the obligor on a Mezzanine Note or Junior Interest.

     

    “Multiemployer
      Plan”
shall
      mean a multiemployer plan defined as such in Article 3(37) of ERISA to which
      contributions have been, or were required to have been, made by Seller or any
      ERISA Affiliate and that is covered by Title IV of ERISA.

     

    “Net
      Assets”
shall
      mean, for any Person, total assets (other than intangibles) at cost, before
      deducting depreciation, reserves for bad debts or other non-cash reserves,
      less
      total liabilities.

     

    “Net
      Income”
shall
      mean, with respect to any Person for any period, the net income of such Person
      for such period as determined in accordance with GAAP.

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

     

    “Net
      Operating Income”
shall
      mean, with respect to any Underlying Mortgaged Property, for any period, the
      actual net operating income (including, but not limited to, any net income
      from
      Hedging Transactions) calculated in accordance with customary Commercial
      Mortgage Securities Association (CMSA) criteria for commercial mortgaged
      properties.

     

    “New
      Asset”
shall
      mean an Eligible Asset that a Seller proposes to be included as a Purchased
      Item.

     

    “Non-Recourse
      Indebtedness”
shall
      mean, with respect to any Person, Indebtedness for borrowed money in respect
      of
      which recourse for payment (except for customary exceptions for fraud,
      misapplication of funds, environmental indemnities, and other similar exceptions
      to non-recourse provisions (but not exceptions relating to bankruptcy,
      insolvency, receivership or other similar events)) is contractually limited
      to
      specific assets of such Person encumbered by a Lien securing such
      Indebtedness.

     

    “Off-Balance
      Sheet Liabilities”
shall
      mean, with respect to any Person, any (a) repurchase obligation or liability,
      contingent or otherwise, of such Person with respect to any mortgages, mortgage
      notes, accounts or notes receivable sold, transferred or otherwise disposed
      of
      by such Person, (b) repurchase obligation or liability, contingent or otherwise,
      of such Person with respect to Property or assets leased by such Person as
      lessee and (c) obligations, contingent or otherwise, of such Person under any
      Off-Balance Sheet Transaction, in each case, if the transaction giving rise
      to
      such obligation does not (and is not required pursuant to GAAP to) appear as
      a
      liability on the balance sheet of such Person.

     

    “Off-Balance
      Sheet Transaction”
shall
      mean, with respect to any Person, any synthetic lease, tax retention operating
      lease, commercial mortgage backed securities transaction, securitization
      transaction, collateralized debt obligation transaction, off balance sheet
      loan
      or similar off balance sheet financing.

     

    “Originated
      Asset”
shall
      mean any Eligible Asset originated by Seller. 

     

    “Other
      Warehouse Facilities”
shall
      mean loan and security agreements, repurchase agreements and similar agreements
      entered into from time to time by Seller with respect to financial assets
      similar to Eligible Assets, excluding this Agreement.

     

    “Permitted
      Liens”
shall
      have the meaning specified in Article
      11(e)
      hereof.

     

    “Person”
shall
      mean an individual, corporation, limited liability company, business trust,
      partnership, joint tenant or tenant-in-common, trust, joint stock company,
      joint
      venture, unincorporated organization, or any other entity of whatever nature,
      or
      a Governmental Authority.

     

    “Plan”
shall
      mean an employee benefit or other plan established or maintained by Seller
      or
      any ERISA Affiliate during the five year period ended prior to the date of
      this
      Agreement or to which Seller or any ERISA Affiliate makes, is obligated to
      make
      or has, within the five year period ended prior to the date of this Agreement,
      been required to make contributions and that is covered by Title IV of ERISA
      or
      Article 302 of ERISA or Article 412 of the Code, other than a Multiemployer
      Plan.

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

     

    “Plan
      Party”
shall
      have the meaning set forth in Article
      21(a)
      of this
      Agreement.

     

    “Potential
      Event of Default”
shall
      mean any condition or event that, after notice or lapse of time, would
      constitute an Event of Default.

     

    “Pre-Existing
      Asset”
shall
      mean any Eligible Asset that is not an Originated Asset.

     

    “Pre-Purchase
      Due Diligence”
shall
      have the meaning set forth in Article
      3(b)(iii)
      hereof.

     

    “Pre-Purchase
      Legal Fees”
shall
      mean all of the reasonable and necessary out of pocket legal fees (subject
      to
      any Legal Fee Cap), costs and expenses incurred by Buyer in connection with
      the
      Pre-Purchase Due Diligence associated with Buyer’s decision as to whether or not
      to enter into a particular Transaction.

     

    “Price
      Differential”
shall
      mean, with respect to any Purchased Asset as of any date, the aggregate amount
      obtained by daily application of the applicable Pricing Rate for such Purchased
      Asset to the Purchase Price of such Purchased Asset on a 360-day-per-year basis
      for the actual number of days during each Pricing Rate Period commencing on
      (and
      including) the Purchase Date for such Purchased Asset and ending on (but
      excluding) the date of determination (reduced by any amount of such Price
      Differential previously paid by Seller to Buyer with respect to such Purchased
      Asset).

     

    “Pricing
      Rate”
shall
      mean, for any Pricing Rate Period, an annual rate equal to the sum of (i) the
      LIBO Rate and (ii) the relevant Applicable Spread, in each case, for the
      applicable Pricing Rate Period for the related Purchased Asset. The Pricing
      Rate
      shall be subject to adjustment and/or conversion as provided in the Transaction
      Documents.

     

    “Pricing
      Rate Determination Date”
shall
      mean with respect to any Pricing Rate Period with respect to any Transaction,
      the second (2nd) Business Day preceding the first day of such Pricing Rate
      Period.

     

    “Pricing
      Rate Period”
shall
      mean, with respect to any Transaction and any Remittance Date (a) in the case
      of
      the first Pricing Rate Period, the period commencing on and including the
      Purchase Date for such Transaction and ending on and excluding the following
      Remittance Date, and (b) in the case of any subsequent Pricing Rate Period,
      the
      period commencing on and including the immediately preceding Remittance Date
      and
      ending on and excluding such Remittance Date; provided,
      however,
      that in
      no event shall any Pricing Rate Period for a Purchased Asset end subsequent
      to
      the Repurchase Date for such Purchased Asset.

     

    “Principal
      Payment”
shall
      mean, with respect to any Purchased Asset, any payment or prepayment received
      by
      the Depository in respect thereof.

     

    “Purchase
      Date”
shall
      mean, with respect to any Purchased Asset, the date on which Buyer purchases
      such Purchased Asset from Seller hereunder.

     

    “Purchase
      Price”
shall
      mean, with respect to any Purchased Asset, the price at which such Purchased
      Asset is transferred by Seller to Buyer on the applicable Purchase Date,
      adjusted after the Purchase Date as set forth below. The Purchase Price as
      of
      the Purchase Date for any Purchased Asset shall be an amount (expressed in
      dollars) equal to the product obtained by multiplying (i) the Market Value
      of
      such Purchased Asset (or the par amount of such Purchased Asset, if lower than
      Market Value) by (ii) the “Advance Rate” for such Purchased Asset, as set forth
      in Schedule
      I
      attached
      to this Agreement; provided,
      that
      notwithstanding the foregoing, Seller may request that the Purchase Price set
      forth in a Confirmation be determined by applying a percentage lower than the
      Advance Rate set forth in Schedule
      I
      attached
      to this Agreement and, in such event, such lower percentage shall be deemed
      the
“Advance Rate” for purposes of this Agreement. The Purchase Price of any
      Purchased Asset shall be (x) increased by any Future Funding Amounts disbursed
      by Buyer to Seller or the related borrower with respect to such Purchased Asset
      and (y) decreased by (i) the portion of any Principal Payments on such Purchased
      Asset that are applied pursuant to Article
      5
      hereof
      to reduce such Purchase Price and (ii) any other amounts paid to Buyer by Seller
      to reduce such Purchase Price.

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

     

    “Purchased
      Asset Documents”
shall
      mean, with respect to a Purchased Asset, the documents comprising the Purchased
      Asset File for such Purchased Asset.

     

    “Purchased
      Asset File”
shall
      mean the documents specified as the “Purchased Asset File” in Article
      7(b),
      together with any additional documents and information required to be delivered
      to Buyer or its designee (including the Custodian) pursuant to this Agreement;
      provided
      that to
      the extent that Buyer waives, including pursuant to Article
      7(c),
      receipt
      of any document in connection with the purchase of an Eligible Asset (but not
      if
      Buyer merely agrees to accept delivery of such document after the Purchase
      Date), such document shall not be a required component of the Purchased Asset
      File until such time as Buyer determines in good faith that such document is
      necessary or appropriate for the servicing of the applicable Purchased
      Asset.

     

    “Purchased
      Asset”
shall
      mean (i) with respect to any Transaction, the Eligible Asset sold by Seller
      to
      Buyer in such Transaction and (ii) with respect to the Transactions in general,
      all Eligible Assets sold by Seller to Buyer and any Additional Eligible
      Collateral delivered by Seller to Buyer pursuant to Article
      4(a)
      of this
      Agreement (other than Eligible Assets or Additional Eligible Collateral that
      have been repurchased by Seller).

     

    “Purchased
      Asset Schedule”
shall
      mean a schedule of Purchased Assets attached to each Trust Receipt and Custodial
      Delivery containing information substantially similar to the Asset
      Information.

     

    “Purchased
      Items”
shall
      have the meaning specified in Article
      6(a)
      of this
      Agreement.

     

    “Qualified
      Hedge Counterparty”
shall
      mean, with respect to any Hedging Transaction, any entity, other than an
      Affiliated Hedge Counterparty, that (a) qualifies as an “eligible contract
      participant” as such term is defined in the Commodity Exchange Act (as amended
      by the Commodity Futures Modernization Act of 2000), (b) the long-term debt
      of
      which is rated no less than “A+” by Standard & Poor’s Ratings Group, a
      division of the McGraw-Hill Companies, and “A1” by Moody’s Investors Service,
      Inc and (c) is reasonably acceptable to Buyer; provided,
      that
      with respect to clause (c), if Buyer has approved an entity as a counterparty,
      it may not thereafter deem such counterparty unacceptable with respect to any
      previously outstanding Transaction unless clause (a) or clause (b)
      applies.

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

     

    “Rating
      Agency”
shall
      mean any of Fitch Inc., Moody’s Investors Service, Inc. and Standard &
Poor’s Ratings Group, a division of the McGraw-Hill Companies.

     

    “Reference
      Banks”
shall
      mean banks each of which shall (i) be a leading bank engaged in transactions
      in
      Eurodollar deposits in the international Eurocurrency market and (ii) have
      an
      established place of business in London. Initially, the Reference Banks shall
      be
      JPMorgan Chase Bank, N.A., Barclays Bank, Plc and Deutsche Bank AG. If any
      such
      Reference Bank should be unwilling or unable to act as such or if Buyer shall
      terminate the appointment of any such Reference Bank or if any of the Reference
      Banks should be removed from the Reuters Monitor Money Rates Service or in
      any
      other way fail to meet the qualifications of a Reference Bank, Buyer, in its
      sole discretion exercised in good faith, may designate alternative banks meeting
      the criteria specified in clauses (i) and (ii) above.

     

    “Release
      Letter”
shall
      mean a letter substantially in the form of Exhibit
      XVII
      hereto
      (or such other form as may be acceptable to Buyer).

     

    “Relevant
      System”
shall
      mean (a) The Depository Trust Company in New York, New York, or (b) such other
      clearing organization or book-entry system as is designated in writing by
      Buyer.

     

    “REMIC”
shall
      mean a real estate mortgage investment conduit, within the meaning of Section
      860D(a) of the Internal Revenue Code.

     

    “Remittance
      Date”
shall
      mean the fourth (4th) calendar day of each month, or the immediately succeeding
      Business Day, if such calendar day shall not be a Business Day, or such other
      day as is mutually agreed to by Seller and Buyer.

     

    “REO
      Property”
shall
      mean real property acquired by Seller, including a mortgaged property acquired
      through foreclosure of an Eligible Asset or by deed in lieu of such
      foreclosure.

     

    “Repurchase
      Date”
shall
      mean, with respect to a Purchased Asset, the earliest to occur of (i) the
      Termination Date, (ii) the date set forth in the applicable Confirmation or
      (iii) the Accelerated Repurchase Date.

     

    “Repurchase
      Price”
shall
      mean, with respect to any Purchased Asset as of any Repurchase Date or any
      date
      on which the Repurchase Price is required to be determined hereunder, the price
      at which such Purchased Asset is to be transferred from Buyer to Seller; such
      price will be determined in each case as the sum of the (i) Purchase Price
      of
      such Purchased Asset (as increased by any additional funds advanced in
      connection with such Purchased Asset); (ii) the accreted and unpaid Price
      Differential with respect to such Purchased Asset as of the date of such
      determination (other than, with respect to calculations in connection with
      the
      determination of a Margin Deficit, accreted and unpaid Price Differential for
      the current Pricing Rate Period); (iii) any other amounts due and owing by
      Seller to Buyer and its Affiliates pursuant to the terms of this Agreement
      as of
      such date; (iv) any amounts that would be payable to (a positive amount) a
      Qualified Hedge Counterparty under any related Hedging Transaction, if such
      Hedging Transaction were terminated on the date of determination; (v) any
      amounts that would be payable to (a positive amount) or by (a negative amount)
      an Affiliated Hedge Counterparty under any related Hedging Transaction, if
      such
      Hedging Transaction were terminated on the date of determination, which amounts
      will be determined pursuant to the “Credit Support Annex” of any Hedging
      Transaction, if such determination is in connection with any calculation of
      Margin Deficit; and (vi) if such Repurchase Date is not a Remittance Date,
      any
      Breakage Costs payable in connection with such Repurchase other than with
      respect to the determination of a Margin Deficit.

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    

     

    “Requested
      Exceptions Report”
shall
      have the meaning assigned thereto in Article 3(b)(iii)(E).

     

    “Requirement
      of Law”
shall
      mean any law, treaty, rule, regulation, code, directive, policy, order or
      requirement or determination of an arbitrator or a court or other Governmental
      Authority whether now or hereafter enacted or in effect.

     

    “Reserve
      Requirement”
shall
      mean, with respect to any Pricing Rate Period, the aggregate (without
      duplication) of the rates (expressed as a decimal fraction) of reserve
      requirements in effect during such Pricing Rate Period (including, without
      limitation, basic, supplemental, marginal and emergency reserves under any
      regulations of the Board of Governors of the Federal Reserve System or other
      Governmental Authority having jurisdiction with respect thereto) dealing with
      reserve requirements prescribed for eurocurrency funding (currently referred
      to
      as “Eurocurrency Liabilities” in Regulation D of such Board of Governors)
      maintained by Buyer.

     

    “Responsible
      Officer”
shall
      mean any executive officer of Seller.

     

    “Seller”
shall
      mean the entity identified as “Seller” in the Recitals hereto, and such other
      sellers as may be approved by Buyer in its sole discretion from time to
      time.

     

    “Senior
      Mortgage Loans”
shall
      mean performing senior commercial or multifamily fixed or floating rate mortgage
      loans, A-notes or senior participation interests in those mortgage loans, in
      each case secured by first liens on multifamily or commercial
      properties.

     

    “Servicer”
shall
      mean Midland
      Loan Services, Inc.

     

    “Servicer
      Notice”
shall
      mean a notice substantially in the form of Exhibit
      XVI
      hereto,
      as amended, supplemented or otherwise modified from time to time.

     

    “Servicing
      Agreement”
shall
      have the meaning specified in Article
      28(b).

     

    “Servicing
      Records”
shall
      have the meaning specified in Article
      28(b).

     

    “Structuring
      Fee”
shall
      have the meaning specified in Article
      3(a)(xiii)
      of this
      Agreement.

     

    “Subordinate
      Eligible Assets”
shall
      mean Eligible Assets described in items (iii) and (iv) of the definition of
      Eligible Assets.

     

    “Subsidiary”
shall
      mean, as to any Person, a corporation, partnership or other entity of which
      shares of stock or other ownership interests having ordinary voting power (other
      than stock or such other ownership interests having such power only by reason
      of
      the happening of a contingency) to elect a majority of the board of directors
      or
      other managers of such corporation, partnership or other entity are at the
      time
      owned, or the management of which is otherwise controlled, directly or
      indirectly through one or more intermediaries, or both, by such Person. Unless
      otherwise qualified, all references to a “Subsidiary” or to “Subsidiaries” in
      this Agreement shall refer to a Subsidiary or Subsidiaries of
      Seller.

    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

    

     

    “Survey”
shall
      mean a certified ALTA/ACSM (or applicable state standards for the state in
      which
      the collateral is located) survey of the underlying real estate directly or
      indirectly securing or supporting such Purchased Asset prepared by a registered
      independent surveyor or engineer and in form and content satisfactory to Buyer
      and the company issuing the Title Policy for such Property.

     

    “Tangible
      Net Worth”
shall
      mean, as of a particular date and as to any Person: (a)
      all
      amounts that would be included under stockholder equity (or the equivalent)
      on a
      balance sheet of such Person and its consolidated subsidiaries (including
      minority interests relating to Guarantor) determined on a consolidated basis
      at
      such date determined in accordance with GAAP, plus accumulated depreciation
      on
      owned real estate assets, less
      (b)
      in
      each case with respect to such Person and its consolidated subsidiaries
      determined on a consolidated basis (i) amounts owing to such Person from
      Affiliates, or from officers, employees, partners, members, directors,
      shareholders or other Persons similarly affiliated with such Person or its
      respective Affiliates, (ii) intangible assets of such Person, as determined
      in
      accordance with GAAP, except for FAS 141 intangible assets, (iii) the value
      of
      REO Property and Foreclosed Loans of such Person, (iv) prepaid taxes and
      expenses, (v) unamortized hedging positions under Derivatives Contracts, and
      (vi) (without duplication) Related Party Loans.

     

    “Target
      Price”
shall
      mean, with respect to any Purchased Asset as of any date, the amount (expressed
      in dollars) obtained by multiplying (i) the Market Value of such Purchased
      Asset
      as of such date by (ii) the then-applicable Maximum Advance Rate for such
      Purchased Asset.

     

    “Termination
      Date”
means,
      with respect to any Transaction, the earlier of (a) 364 days from the date
      of such Transaction, or if such Transaction is extended, the date to which
      it is
      extended; (b) any Early Repurchase Date for such Transaction; (c) the
      Maturity Date (unless
      extended pursuant to the Wind Down Period in Article
      3(n)(ii));
      or
      (d) the date of the occurrence of an Event of Default.

     

    “Termination
      Date Extension
      Conditions”
shall
      have the meaning specified in Article
      3(g)
      of this
      Agreement.

     

    “Title
      Company”
shall
      mean a nationally-recognized title insurance company acceptable to
      Buyer.

     

    “Title
      Policy”
shall
      have the meaning specified in paragraph 9 of the section of Exhibit VI
      dealing
      with Eligible Loans.

     

    “Total
      Assets”
shall
      mean, at any time, an amount equal to the aggregate undepreciated book value
      of
      (a) all assets owned by any Person(s) (on a consolidated basis) and (b) the
      proportionate share of assets owned by non-consolidated Subsidiaries of such
      Person(s), less (i) amounts owing to such Person(s) from any Affiliates thereof,
      or from officers, employees, partners, members, directors, shareholders or
      other
      Persons similarly affiliated with such Person(s) or their respective Affiliates,
      (ii) intangible assets (other than Interest Rate Protection Agreements
      specifically related to the Purchased Assets, excluding FAS 141 intangible
      assets) and (iii) prepaid taxes and/or expenses.

     

    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

    

     

    “Total
      Liabilities”
shall
      mean all Indebtedness and contingent liabilities of any Person (without
      duplication) and all Subsidiaries thereof determined on a consolidated basis
      in
      accordance with GAAP.

     

    “Transaction”
shall
      mean a Transaction, as specified in Article
      1
      of this
      Agreement.

     

    “Transaction
      Documents”
shall
      mean, collectively, this Agreement, any applicable Annexes to this Agreement,
      the Custodial Agreement, the Servicing Agreement, the Depository Agreement,
      all
      Hedging Transactions and all Confirmations and assignment documentation executed
      pursuant to this Agreement in connection with specific
      Transactions.

     

    “Trust
      Receipt”
shall
      mean a trust receipt issued by Custodian to Buyer confirming the Custodian’s
      possession of certain Purchased Asset Files that are the property of and held
      by
      Custodian for the benefit of Buyer (or any other holder of such trust receipt)
      or a bailment arrangement with counsel or other third party acceptable to Buyer
      in its sole discretion.

     

    “UCC”
shall
      have the meaning specified in Article
      6(d)
      of this
      Agreement.

     

    “Underlying
      Mortgage Loan”
shall
      mean, with respect to any B-Note, Junior Interest, Mezzanine Loan, CMBS or
      CRE
      CDO, a mortgage loan made in respect of the related Underlying Mortgaged
      Property.

     

    “Underlying
      Mortgaged Property”
shall
      mean, in the case of:

     

    (a) a
      Senior
      Mortgage Loan or Condo Conversion Loan, the Mortgaged Property securing such
      Senior Mortgage Loan or Condo Conversion Loan, as applicable;

     

    (b) a
      Junior
      Interest, the Mortgaged Property securing such Junior Interest, or the Mortgaged
      Property securing the Mortgage Loan in which such Junior Interest represents
      a
      junior participation, as applicable;

     

    (c) a
      B-Note,
      the Mortgaged Property securing such B-Note;

     

    (d) a
      Mezzanine Loan, the Mortgaged Property that is owned by the Person the equity
      of
      which is pledged as collateral security for such Mezzanine Loan;

     

    (e) a
      CMBS,
      the Mortgaged Property securing the mortgage loans related to such
      security;

     

    (f) a
      CRE
      CDO, the Mortgaged Property securing the mortgage loans related to such
      security; and

    
      
        
        

      

      
        22

        
          

        

      

      
        
        

      

    

     

    (g) a
      Construction Loan or Land Loan, the real estate and any improvements securing
      such Construction Loan or Land Loan, as applicable.

     

    “Underwriting
      Issues”
shall
      mean, with respect to any Purchased Asset as to which Seller intends to request
      a Transaction, all material information that has come to Seller’s attention
      that, based on the making of reasonable inquiries and the exercise of reasonable
      care and diligence under the circumstances, would be considered a materially
      “negative” factor (either separately or in the aggregate with other
      information), or a material defect in loan documentation or closing deliveries
      (such as any absence of any material Purchased Asset Document(s)), to a
      reasonable institutional mortgage buyer in determining whether to originate
      or
      acquire the Purchased Asset in question.

     

    “Unsecured
      Credit Facility”
shall
      mean the credit facility represented by the Revolving Credit Agreement, dated
      as
      of November 3, 2006, among NorthStar Realty Finance Corp., NorthStar Realty
      Finance Limited Partnership, NRFC Sub-REIT Corp. and NS Advisors, LLC, as
      borrowers, the lenders from time to time party thereto, KeyBank National
      Association, as administrative agent, Keybanc Capital Markets and Bank of
      America, N.A., as co-lead arrangers, KeyBank Capital Markets, as sole book
      manager, Bank of America, N.A., as syndication agent, and Citicorp North
      America, Inc., as documentation agent, as amended, modified, restated, replaced,
      waived, substituted, supplemented or extended from time to time, together with
      all other documents executed in connection therewith, as the same are amended,
      modified, restated, replaced, waived, substituted, supplemented or extended
      from
      time to time.

     

    “Wind
      Down Period”
shall
      have the meaning specified in Article
      3(n)(ii)
      of this
      Agreement.

     

    All
      references to articles, schedules and exhibits are to articles, schedules and
      exhibits in or to this Agreement unless otherwise specified. The words “hereof,”
“herein” and “hereunder” and words of similar import when used in this Agreement
      shall refer to this Agreement as a whole and not to any particular provision
      of
      this Agreement. All accounting terms not specifically defined herein shall
      be
      construed in accordance with generally accepted accounting principles.
      References to “good faith” in this Agreement shall mean “good faith” as defined
      in Section 1-201(19) of the UCC as in effect in the State of New York as of
      the
      date of the Agreement.

     

    ARTICLE
      3.

     

    INITIATION;
      CONFIRMATION; TERMINATION; FEES;
      REDUCTION OF FACILITY AMOUNT

     

    Buyer’s
      agreement to enter into the initial Transaction hereunder is subject to the
      satisfaction, immediately prior to or concurrently with the making of such
      Transaction, of the condition precedent that Buyer shall have received from
      Seller payment of an amount equal to all fees and expenses payable hereunder,
      and all of the following documents, each of which shall be satisfactory in
      form
      and substance to Buyer and its counsel:

     

    (a) The
      following Transaction Documents, as well as certain other documents, delivered
      to Buyer:

    
      
        
        

      

      
        23

        
          

        

      

      
        
        

      

    

     

    (i) this
      Agreement, duly completed and executed by each of the parties
      hereto;

     

    (ii) a
      Custodial Agreement, duly executed and delivered by each of the parties
      thereto;

     

    (iii) a
      Depository Agreement, duly completed and executed by each of the parties
      thereto;

     

    (iv) a
      Guarantee Agreement, duly completed and executed by each of the parties
      thereto;

     

    (v) an
      Interim Servicing Agreement, duly completed and executed by each of the parties
      thereto;

     

    (vi) any
      and
      all consents and waivers applicable to Seller or to the Purchased
      Assets;

     

    (vii) UCC
      Financing Statements for filing in each of the UCC Filing Jurisdictions
      described on Exhibit
      XIII
      hereto,
      each naming Seller as “Debtor” and Buyer as “Secured Party” and describing as
“Collateral” all of the items set forth in the definition of Collateral and
      Purchased Items in this Agreement, together with any other documents necessary
      or requested by Buyer to perfect the security interests granted by Seller in
      favor of Buyer under this Agreement or any other Transaction
      Document;

     

    (viii) any
      documents relating to any Hedging Transactions;

     

    (ix) opinions
      of outside counsel to Seller;

     

    (x) good
      standing certificates and certified copies of the charters and by-laws (or
      equivalent documents) of Seller and Guarantor and of all corporate or other
      authority for Seller and Guarantor with respect to the execution, delivery
      and
      performance of the Transaction Documents and each other document to be delivered
      by Seller and Guarantor from time to time in connection herewith (and Buyer
      may
      conclusively rely on such certificate until it receives notice in writing from
      Seller to the contrary);

     

    (xi) with
      respect to any Eligible Asset to be purchased hereunder on the related Purchase
      Date that is not serviced by Seller, Seller shall have provided to Buyer a
      copy
      of the related Servicing Agreement, certified as a true, correct and complete
      copy of the original, together with a Servicer Notice, fully executed by Seller
      and Servicer;

     

    (xii) Buyer
      shall have received payment from Seller of an amount equal to the amount of
      actual costs and expenses, including the reasonable fees and expenses of counsel
      to Buyer, incurred by Buyer in connection with the development, preparation
      and
      execution of this Agreement, the other Transaction Documents and any other
      documents prepared in connection herewith or therewith;

    
      
        
        

      

      
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    (xiii) Buyer
      shall have received payment from Seller, as consideration for Buyer’s agreement
      to enter into this Agreement, an up-front structuring fee in an amount equal
      to
      $350,000 (calculated as ten (10) basis points (0.10%) multiplied by the Facility
      Amount), such amount to be paid to Buyer in U.S. Dollars on the Closing Date,
      in
      immediately available funds, without deduction, set-off or counterclaim (the
      “Structuring
      Fee”);
      and

     

    (xiv) all
      such
      other and further documents, documentation and legal opinions as Buyer in its
      discretion shall reasonably require.

     

    (b) Buyer’s
      agreement to enter into each Transaction (including the initial Transaction)
      is
      subject to the satisfaction of the following further conditions precedent,
      both
      immediately prior to entering into such Transaction and also after giving effect
      to the consummation thereof and the intended use of the proceeds of the
      sale:

     

    (i) The
      sum
      of (A) the unpaid Repurchase Price for all prior outstanding Transactions,
      (B)
      the requested Purchase Price for the pending Transaction and (C) all available
      and unfunded Future Funding Amounts under all prior outstanding Transactions
      shall not exceed an amount equal to the Facility Amount.

     

    (ii) Seller
      shall give Buyer no less than one (1) Business Day prior written notice of
      each
      Transaction (including the initial Transaction), together with a signed,
      properly completed, written confirmation in the form of Exhibit
      I
      attached
      hereto prior to each Transaction (a “Confirmation”)
      signed
      by a Responsible Officer of Seller. Each Confirmation shall describe the
      Purchased Assets, shall identify Buyer and Seller and shall be executed by
      both
      Buyer and Seller; provided,
      however,
      that
      Buyer shall not be liable to Seller if it inadvertently acts on a Confirmation
      that has not been signed by a Responsible Officer; and

     

    (iii) Buyer
      shall have the right to review, as described in Exhibit
      VIII
      hereto,
      the Eligible Assets Seller proposes to sell to Buyer in any Transaction and
      to
      conduct its own due diligence investigation of such Eligible Assets as Buyer
      determines (“Pre-Purchase
      Due Diligence”).
      Buyer
      shall be entitled to make a determination, in the exercise of its sole
      discretion, that, in the case of a Transaction, it shall or shall not purchase
      any or all of the assets proposed to be sold to Buyer by Seller. On the Purchase
      Date for the Transaction, which shall be not less than one (1) Business Day
      following the final approval of an Eligible Asset by Buyer in accordance with
      Exhibit
      VIII
      hereto,
      the Eligible Assets shall be transferred to Buyer or the Custodian against
      the
      transfer of the Purchase Price to an account of Seller. Buyer shall inform
      Seller of its determination with respect to any such proposed Transaction solely
      in accordance with Exhibit
      VIII
      attached
      hereto. Upon the approval by Buyer of a particular proposed Transaction, Buyer
      shall deliver to Seller a signed copy of the related Confirmation described
      in
      clause (i) above, on or before the scheduled date of the underlying proposed
      Transaction. Prior to the approval of each proposed Transaction by
      Buyer:

     

    (A) Buyer
      shall have (i) determined, in its sole and absolute discretion, that the asset
      proposed to be sold to Buyer by Seller in such Transaction is an Eligible Asset
      and (ii) obtained internal credit approval, to be granted or denied in Buyer’s
      sole and absolute discretion, for the inclusion of such Eligible Asset as a
      Purchased Asset in a Transaction, without regard for any prior credit decisions
      by Buyer or any Affiliate of Buyer, and with the understanding that Buyer shall
      have the absolute right to change any or all of its internal underwriting
      criteria at any time, without notice of any kind to Seller;

     

    
      
        
        

      

      
        25

        
          

        

      

      
        
        

      

    

     

    (B) Buyer
      shall have fully completed all external legal due diligence;

     

    (C) Buyer
      shall have determined the Pricing Rate applicable to the Transaction (including
      the Applicable Spread) in accordance with Schedule I
      hereto
      or as otherwise agreed by Buyer and Seller;

     

    (D) no
      Default or Event of Default shall have occurred and be continuing under this
      Agreement or any other Transaction Document and no event shall have occurred
      which has, or would reasonably be expected to have, a Material Adverse
      Effect;

     

    (E) Seller
      shall have delivered to Buyer a list of all exceptions to the representations
      and warranties relating to the Purchased Asset and any other eligibility
      criteria for such Purchased Asset (the “Requested
      Exceptions Report”)
      and,
      except as specifically set forth therein, all such representations and
      warranties shall be true, correct and complete;

     

    (F) Buyer
      shall have waived all exceptions in the Requested Exceptions Report;

     

    (G) both
      immediately prior to the requested Transaction and also after giving effect
      thereto and to the intended use thereof, the representations and warranties
      made
      by Seller in Article 10
      (other
      than Article
      10(b)(x)(D)),
      as
      applicable, shall be true, correct and complete on and as of such Purchase
      Date
      in all material respects with the same force and effect as if made on and as
      of
      such date (or, if any such representation or warranty is expressly stated to
      have been made as of a specific date, as of such specific date);

     

    (H) subject
      to Buyer’s right to perform one or more due diligence reviews pursuant to
Article 27,
      Buyer
      shall have completed its due diligence review of the Purchased Asset File,
      and
      such other documents, records, agreements, instruments, mortgaged properties
      or
      information relating to such Purchased Asset as Buyer in its sole discretion
      deems appropriate to review and such review shall be satisfactory to Buyer
      in
      its sole discretion and Buyer has consented in writing to the Eligible Asset
      becoming a Purchased Asset; provided,
      that if
      Buyer’s diligence review of the Purchased Asset File requires the delivery of a
      mortgage file or the equivalent, Seller shall have the benefit of such delayed
      delivery provisions as are customary in pooling and servicing agreements (e.g.,
      while a promissory note (or analogous document directly evidencing the
      obligation) must be delivered as a condition of closing, an ancillary document
      or estoppels may be delivered within a reasonable time frame
      thereafter);

    
      
        
        

      

      
        26

        
          

        

      

      
        
        

      

    

     

    (I) with
      respect to any Eligible Asset to be purchased hereunder on the related Purchase
      Date which is not serviced by Seller or an Affiliate thereof, Seller shall
      have
      provided to Buyer a copy of the related Servicing Agreement, certified as a
      true, correct and complete copy of the original, together with a Servicer
      Notice, fully executed by Seller and Servicer;

     

    (J) Seller
      shall have paid to Buyer all reasonable legal fees (subject to any Legal Fee
      Cap) and expenses and the reasonable costs and expenses incurred by Buyer in
      connection with the entering into of any Transaction hereunder, including,
      without limitation, costs associated with due diligence, recording or other
      administrative expenses necessary or incidental to the execution of any
      Transaction hereunder, which amounts, at Buyer’s option, may be withheld from
      the sale proceeds of any Transaction hereunder;

     

    (K) Buyer
      shall have determined, in its sole and absolute discretion, that no Margin
      Deficit shall exist, either immediately prior to or after giving effect to
      the
      requested Transaction;

     

    (L) Buyer
      shall have received from Custodian on each Purchase Date an Asset Schedule
      and
      Exception Report (as defined in the Custodial Agreement) with respect to each
      Purchased Asset, dated the Purchase Date, duly completed and with exceptions
      acceptable to Buyer in its sole discretion in respect of Eligible Assets to
      be
      purchased hereunder on such Business Day;

     

    (M) Buyer
      shall have received from Seller a Release Letter covering each Eligible Asset
      to
      be sold to Buyer;

     

    (N) Buyer
      shall not have reasonably determined that the introduction of, or a change
      in,
      any Requirement of Law or in the interpretation or administration of any
      Requirement of Law applicable to Buyer has made it unlawful, and no Governmental
      Authority shall have asserted that it is unlawful, for Buyer to enter into
      Transactions;

     

    (O) the
      Repurchase Date for such Transaction is not later than the Maturity Date (unless
      extended pursuant to the Wind Down Period in Article
      3(n)(ii));

     

    (P) Seller
      shall have taken such other action as Buyer shall have reasonably requested
      in
      order to transfer the Purchased Assets pursuant to this Agreement and to perfect
      all security interests granted under this Agreement or any other Transaction
      Document in favor of Buyer with respect to the Purchased Assets;

     

    (Q) with
      respect to any Eligible Asset to be purchased hereunder, if such Eligible Asset
      was acquired by Seller, Seller shall have disclosed to Buyer the acquisition
      cost of such Eligible Asset (including therein reasonable supporting
      documentation required by Buyer, if any);

    
      
        
        

      

      
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    (R) Buyer
      shall have received all such other and further documents, documentation and
      legal opinions (including, without limitation, opinions regarding the perfection
      of Buyer’s security interests) as Buyer in its reasonable discretion shall
      reasonably require;

     

    (S) Buyer
      shall have received a copy of any documents relating to any Hedging Transaction,
      and Seller shall have pledged and assigned to Buyer, pursuant to Article
      6
      hereunder, all of Seller’s rights under each Hedging Transaction included within
      a Purchased Asset, if any;

     

    (T) no
      “Termination Event”, “Event of Default”, “Potential Event of Default” or any
      similar event by Seller, however denominated, shall have occurred and be
      continuing under any Hedging Transaction; and

     

    (U) the
      counterparty to Seller in any Hedging Transaction shall be an Affiliated Hedge
      Counterparty or a Qualified Hedge Counterparty, and, in the case of a Qualified
      Hedge Counterparty, in the event that such counterparty no longer qualifies
      as a
      Qualified Hedging Counterparty, then, at the election of Buyer, Seller shall
      ensure that such counterparty posts Additional Eligible Collateral in an amount
      satisfactory to Buyer under all its Hedging Transactions with Seller, or Seller
      shall immediately terminate the Hedging Transactions with such counterparty
      and
      enter into new Hedging Transactions with a Qualified Hedge
      Counterparty.

     

    (c) Buyer’s
      agreement to enter into each Future Funding Transaction described in part (i)
      of
      the definition thereof is subject to the satisfaction of the following
      conditions precedent, both immediately prior to entering into such Future
      Funding Transaction and also after giving effect to the consummation
      thereof:

     

    (i) Seller
      shall give Buyer written notice of each Future Funding Transaction, together
      with a signed, properly completed, written confirmation in the form of
Exhibit
      XIV
      attached
      hereto prior to each Future Funding Transaction (a “Future
      Funding Confirmation”)
      signed
      by a Responsible Officer of Seller. Each Future Funding Confirmation shall
      identify the related Future Funding Loan, shall identify Buyer and Seller and
      shall be executed by both Buyer and Seller; provided,
      however,
      that
      Buyer shall not be liable to Seller if it inadvertently acts on a Future Funding
      Confirmation that has not been signed by a Responsible Officer; and

     

    (ii) Buyer
      shall have the right to, as described in Exhibit
      XVIII
      hereto,
      conduct an additional due diligence investigation of the related Future Funding
      Loan as Buyer determines (“Future
      Funding Due Diligence”).
      On
      the Future Funding Date for the Future Funding Transaction, which shall occur
      following the final approval of the Future Funding Transaction by Buyer in
      accordance with Exhibit
      XVIII
      hereto,
      the Future Funding Amount shall be transferred by Buyer to Seller or, at
      Seller’s direction, to the related borrower. Buyer shall inform Seller of its
      determination with respect to any such proposed Future Funding Transaction
      solely in accordance with Exhibit
      XVIII
      attached
      hereto. Upon the approval by Buyer of a particular Future Funding Transaction,
      Buyer shall deliver to Seller a signed copy of the related Future Funding
      Confirmation described in clause (i) above, on or before the scheduled date
      of
      the underlying proposed Future Funding Transaction. Prior to the approval of
      each proposed Future Funding Transaction by Buyer:

    
      
        
        

      

      
        28

        
          

        

      

      
        
        

      

    

     

    (A) Buyer
      shall have (i) determined, in its sole and absolute discretion, that the related
      Future Funding Loan is not a Defaulted Mortgage Asset and (ii) fully completed
      all external legal due diligence;

     

    (B) no
      Default or Event of Default shall have occurred and be continuing under this
      Agreement or any other Transaction Document and no event shall have occurred
      which has, or would reasonably be expected to have, a Material Adverse
      Effect;

     

    (C) both
      immediately prior to the requested Future Funding Transaction and also after
      giving effect thereto and to the intended use thereof, the representations
      and
      warranties made by Seller in Exhibit
      VI
      with
      respect to the related Future Funding Loan and Article
      10
      (other
      than Article
      10(b)(x)(D))
      of this
      Agreement,
      as
      applicable, shall be true, correct and complete on and as of such Future Funding
      Date with the same force and effect as if made on and as of such date (or,
      if
      any such representation or warranty is expressly stated to have been made as
      of
      a specific date, as of such specific date);

     

    (D) Buyer
      shall have completed its Future Funding Due Diligence, and its review of any
      documents, records, agreements, instruments, mortgaged properties or information
      relating to such Future Funding Loan as Buyer in its sole discretion deems
      appropriate to review and such review shall be satisfactory to Buyer in its
      sole
      discretion and Buyer has consented in writing to the advance of
      funds;

     

    (E) Seller
      shall have paid to Buyer all legal fees and expenses and the reasonable costs
      and expenses incurred by Buyer in connection with the entering into of any
      Future Funding Transaction hereunder, including, without limitation, costs
      associated with due diligence, recording or other administrative expenses
      necessary or incidental to the execution of any Future Funding Transaction
      hereunder;

     

    (F) Buyer
      shall have determined, in its sole and absolute discretion, that no Margin
      Deficit shall exist, either immediately prior to or after giving effect to
      the
      requested Future Funding Transaction;

     

    (G) Buyer
      shall not have reasonably determined that the introduction of, or a change
      in,
      any Requirement of Law or in the interpretation or administration of any
      Requirement of Law applicable to Buyer has made it unlawful, and no Governmental
      Authority shall have asserted that it is unlawful, for Buyer to enter into
      Transactions;

    
      
        
        

      

      
        29

        
          

        

      

      
        
        

      

    

     

    (H) Seller
      shall have taken any other action as Buyer shall have reasonably requested
      in
      order to perfect all security interests granted under this Agreement or any
      other Transaction Document in favor of Buyer with respect to the funds to be
      advanced;

     

    (I) Buyer
      shall have received all such other and further documents, documentation and
      legal opinions (including, without limitation, opinions regarding the perfection
      of Buyer’s security interests) as Buyer in its reasonable discretion shall
      reasonably require; and

     

    (J) Seller
      shall have delivered to Buyer a certificate of a Responsible Officer of Seller,
      certifying that the related borrower has met all conditions required under
      the
      related loan documents to be entitled to the advance of the Future Funding
      Amount.

     

    Buyer’s
      agreement to enter into each Future Funding Transaction described in part (ii)
      of the definition thereof is subject to the satisfaction of the following
      conditions precedent, both immediately prior to entering into such Future
      Funding Transaction and also after giving effect to the consummation
      thereof:

     

    (i) Seller
      shall give Buyer written notice of each Future Funding Transaction, identifying
      the related Future Funding Loan; and

     

    (ii) Prior
      to
      the approval of each proposed Future Funding Transaction by Buyer:

     

    (A) Buyer
      shall have (i) determined, in its sole and absolute discretion, that the related
      Future Funding Loan is not a Defaulted Mortgage Asset and (ii) completed any
      additional due diligence or review of any documents, records, agreements,
      instruments, mortgaged properties or information relating to such Future Funding
      Loan as Buyer deems reasonably appropriate;

     

    (B) no
      Default or Event of Default shall have occurred and be continuing under this
      Agreement or any other Transaction Document and no event shall have occurred
      which has, or would reasonably be expected to have, a Material Adverse
      Effect;

     

    (C) both
      immediately prior to the requested Future Funding Transaction and also after
      giving effect thereto and to the intended use thereof, the representations
      and
      warranties made by Seller in Exhibit
      VI
      with
      respect to the related Future Funding Loan and Article
      10
      (other
      than Article
      10(b)(x)(D))
      of this
      Agreement,
      as
      applicable, shall be true, correct and complete on and as of such Future Funding
      Date with the same force and effect as if made on and as of such date (or,
      if
      any such representation or warranty is expressly stated to have been made as
      of
      a specific date, as of such specific date);

    
      
        
        

      

      
        30

        
          

        

      

      
        
        

      

    

     

    (D) Seller
      shall have paid to Buyer all legal fees and expenses and the reasonable costs
      and expenses incurred by Buyer in connection with the entering into of any
      Future Funding Transaction hereunder, including, without limitation, costs
      associated with due diligence, recording or other administrative expenses
      necessary or incidental to the execution of any Future Funding Transaction
      hereunder;

     

    (E) Buyer
      shall have determined, in its sole and absolute discretion, that no Margin
      Deficit shall exist, either immediately prior to or after giving effect to
      the
      requested Future Funding Transaction;

     

    (F) Buyer
      shall not have reasonably determined that the introduction of, or a change
      in,
      any Requirement of Law or in the interpretation or administration of any
      Requirement of Law applicable to Buyer has made it unlawful, and no Governmental
      Authority shall have asserted that it is unlawful, for Buyer to enter into
      Transactions;

     

    (G) Seller
      shall have taken any other action as Buyer shall have reasonably requested
      in
      order to perfect all security interests granted under this Agreement or any
      other Transaction Document in favor of Buyer with respect to the funds to be
      advanced; and

     

    (H) Buyer
      shall have received all such other and further documents, documentation and
      legal opinions (including, without limitation, opinions regarding the perfection
      of Buyer’s security interests) as Buyer in its reasonable discretion shall
      reasonably require.

     

    (d) With
      respect to any Transaction, the Pricing Rate shall be determined initially
      on
      the Pricing Rate Determination Date applicable to the first Pricing Rate Period
      for such Transaction, and shall be reset on the Pricing Rate Determination
      Date
      for all of the next succeeding Pricing Rate Periods for such Transaction. Buyer
      or its agent shall determine in accordance with the terms of this Agreement
      the
      Pricing Rate on each Pricing Rate Determination Date for the related Pricing
      Rate Period taking into account any changes in the applicable loan-to-cost
      ratio, the applicable net operating income debt yields or Rating Agency ratings
      shown on Schedule I,
      as
      applicable, determined to be applicable to such Transaction in Buyer’s sole and
      absolute discretion, exercised in good faith, and notify Seller of such rate
      for
      such period each such Pricing Rate Determination Date; provided,
      however,
      that
      Buyer shall have no affirmative obligation to determine whether there has been
      any change in the related terms or quality of the Purchased Asset to cause
      any
      change in the related loan-to-cost ratio, the applicable net operating income
      debt yields or Rating Agency ratings shown on Schedule I.

     

    (e) Each
      Confirmation and Future Funding Confirmation, together with this Agreement,
      shall be conclusive evidence of the terms of the Transaction or Future Funding
      Transaction, as applicable, covered thereby. In the event of any conflict
      between the terms of such Confirmation or Future Funding Confirmation and the
      terms of this Agreement, other than with respect to the Advance Rate or the
      applicable Price Differential set forth in the related Confirmation, this
      Agreement shall prevail.

    
      
        
        

      

      
        31

        
          

        

      

      
        
        

      

    

     

    (f) Seller
      shall be entitled to terminate a Transaction on demand and repurchase the
      Purchased Asset subject to a Transaction on any Business Day prior to the
      Repurchase Date (an “Early
      Repurchase Date”);
      provided,
      however,
      that:

     

    (i) Seller
      notifies Buyer in writing of its intent to terminate such Transaction and
      repurchase such Purchased Asset, setting forth the Early Repurchase Date and
      identifying with particularity the Purchased Asset to be repurchased on such
      Early Repurchase Date, no later than two (2) Business Days prior to such Early
      Repurchase Date; and

     

    (ii) on
      such
      Early Repurchase Date, Seller pays to Buyer an amount equal to the sum of the
      Repurchase Price for the applicable Purchased Asset and any other amounts
      payable under this Agreement (including, without limitation, Article 3(j)
      of this
      Agreement) with respect to such Purchased Asset against transfer to Seller
      or
      its agent of such Purchased Assets and any related Hedging
      Transactions.

     

    Subject
      to its right to make determinations of Market Value with respect to any
      Purchased Asset that would trigger the obligation of Seller to repurchase a
      Purchased Asset prior to the scheduled Repurchase Date, or any other contractual
      right of Buyer under this Agreement to do so, Buyer shall not terminate a
      Transaction prior to the scheduled Termination Date unless an Event of Default
      has occurred.

     

    (g) On
      the
      Termination Date for any Transaction, termination of the Transaction will be
      effected by transfer to Seller or its agent of the Purchased Assets being
      repurchased and any Income in respect thereof received by Buyer (and not
      previously credited or transferred to, or applied to the obligations of, Seller
      pursuant to Article
      5
      of this
      Agreement) against the simultaneous transfer of the Repurchase Price to an
      account of Buyer. Notwithstanding the definition of Repurchase Price herein,
      with respect to any determination of Repurchase Price that is made other than
      in
      connection with any calculation of a Margin Deficit, the Repurchase Price shall
      be determined without giving effect to clause (iv) or (v) of the definition
      of
      Repurchase Price herein. Notwithstanding the foregoing, provided
      that all
      of the extension conditions listed in clauses (i) through (iv) of this
Article
      3(g)
      (collectively, the “Termination
      Date Extension Conditions”)
      shall
      have been satisfied, as determined by Buyer in its sole and absolute discretion,
      Seller may request to extend such Termination Date by no more than 364 days
      from
      the date of such extension request by giving written notice to Buyer of such
      request. Any failure by Buyer, in its sole and absolute discretion, to deliver
      to Seller an objection, rejection or consent to such extension request in
      writing within thirty (30) days of such request shall be deemed consent to
      Seller’s request to extend such Termination Date. Notwithstanding anything to
      the contrary in this Article
      3(g),
      in no
      event shall the Termination Date be extended beyond the Final Maturity Date.
      For
      purposes of the preceding sentence, the Termination Date Extension Conditions
      shall be deemed to have been satisfied if:

     

    (i) Seller
      shall have given Buyer written notice, not less than thirty (30) days prior
      but
      no more than one hundred and eighty (180) days prior to the originally scheduled
      Termination Date, of Seller’s desire to extend the Termination Date; and if
      Seller fails to give such notice, Seller shall be deemed to have elected not
      to
      extend the Termination Date;

    
      
        
        

      

      
        32

        
          

        

      

      
        
        

      

    

     

    (ii) no
      Material Adverse Effect, Margin Deficit, Default or Event of Default under
      this
      Agreement shall have occurred and be continuing as of the date notice is given
      under subclause (i) above or as of the originally scheduled Termination Date
      and
      no “Termination Event,” “Event of Default” or “Potential Event of Default” or
      any similar event by Seller, however denominated, shall have occurred and be
      continuing under any Hedging Transaction; 

     

    (iii) (A)
      with
      respect to a Purchased Asset subject to an extension described above, all
      representations and warranties contained in Exhibit
      VI
      shall be
      true, correct, complete and accurate in all material respects as of the
      scheduled Repurchase Date, subject to the applicable cure rights described
      below
      in Article
      13(a)(xv),
      and (B)
      all representations and warranties regarding Seller contained in Article
      10
      shall be
      true, correct, complete and accurate in all material respects as of the
      scheduled Repurchase Date; and

     

    (iv) on
      the
      originally scheduled Termination Date, Seller pays to Buyer, on account of
      each
      Purchased Asset, an amount sufficient to reduce the Repurchase Price for each
      Purchased Asset to an amount equal to the applicable Advance Rate used to
      calculate the Purchase Price of such Purchased Asset multiplied by the Market
      Value for each such Purchased Asset then subject to a Transaction.

     

    (h) If
      prior
      to the first day of any Pricing Rate Period with respect to any Transaction,
      (i)
      Buyer shall have determined in the exercise of its reasonable business judgment
      (which determination shall be conclusive and binding upon Seller) that, by
      reason of circumstances affecting the relevant market, adequate and reasonable
      means do not exist for ascertaining the LIBO Rate for such Pricing Rate Period,
      or (ii) the LIBO Rate determined or to be determined for such Pricing Rate
      Period will not adequately and fairly reflect the cost to Buyer (as determined
      and certified by Buyer) of making or maintaining Transactions during such
      Pricing Rate Period, Buyer shall give telecopy or telephonic notice thereof
      to
      Seller as soon as practicable thereafter. If such notice is given, the Pricing
      Rate with respect to such Transaction for such Pricing Rate Period, and for
      any
      subsequent Pricing Rate Periods until such notice has been withdrawn by Buyer,
      shall be a per annum rate equal to the Federal Funds Rate plus the Applicable
      Spread (the “Alternative
      Rate”).

     

    (i) Notwithstanding
      any other provision herein, if the adoption of or any change in any Requirement
      of Law or in the interpretation or application thereof shall make it unlawful
      for Buyer to enter into or maintain Transactions as contemplated by the
      Transaction Documents, (a) the commitment of Buyer hereunder to enter into
      new
      Transactions and to continue Transactions as such shall forthwith be canceled,
      and (b) the Transactions then outstanding shall be converted automatically
      to
      Alternative Rate Transactions on the last day of the then current Pricing Rate
      Period or within such earlier period as may be required by law.

     

    (j) Upon
      demand by Buyer, Seller shall indemnify Buyer and hold Buyer harmless from
      any
      actual, out-of-pocket loss, cost or expense (including, without limitation,
      reasonable attorneys’ fees and disbursements, but which shall exclude any lost
      opportunity costs) that Buyer may sustain or incur as a consequence of (i) 
any payment of the Repurchase Price on any day other than a Remittance Date,
      including Breakage Costs, (ii) a default by Seller in selling Eligible Assets
      after Seller has notified Buyer of a proposed Transaction and Buyer has agreed
      to purchase such Eligible Assets in accordance with the provisions of this
      Agreement, (iii)  Buyer’s enforcement of the terms of any of the
      Transaction Documents, (iv) any actions taken to perfect or continue any
      lien created under any Transaction Documents, and/or (v) Buyer entering
      into any of the Transaction Documents or owning any Purchased Item, other than,
      in each case, any loss, cost or expense sustained by Buyer as a result of
      Buyer’s gross negligence, bad faith or willful misconduct. A certificate as to
      such costs, losses, damages and expenses, setting forth the calculations
      therefor shall be submitted promptly by Buyer to Seller and shall be prima
      facie
      evidence of the information set forth therein.

    
      
        
        

      

      
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    (k) If
      the
      adoption of or any change in any Requirement of Law or in the interpretation
      or
      application thereof by any Governmental Authority or compliance by Buyer with
      any request or directive (whether or not having the force of law) from any
      central bank or other Governmental Authority having jurisdiction over Buyer
      made
      subsequent to the date hereof:

     

    (i) shall
      subject Buyer to any tax of any kind whatsoever with respect to the Transaction
      Documents, any Purchased Asset or any Transaction, or change the basis of
      taxation of payments to Buyer in respect thereof (except for income taxes and
      any changes in the rate of tax on Buyer’s overall net income);

     

    (ii) shall
      impose, modify or hold applicable any reserve, special deposit, compulsory
      loan
      or similar requirement against assets held by, deposits or other liabilities
      in
      or for the account of, advances, loans or other extensions of credit by, or
      any
      other acquisition of funds by, any office of Buyer that is not otherwise
      included in the determination of the LIBO Rate hereunder; or

     

    (iii) shall
      impose on Buyer any other condition;

     

    and
      the
      result of any of the foregoing is to increase the cost to Buyer, by an amount
      that Buyer deems, in the exercise of its reasonable business judgment, to be
      material, of entering into, continuing or maintaining Transactions or to reduce
      any amount receivable under the Transaction Documents in respect thereof; then,
      in any such case, Seller shall promptly pay Buyer, upon its demand, any
      additional amounts necessary to compensate Buyer for such increased cost or
      reduced amount receivable. Such notification as to the calculation of any
      additional amounts payable pursuant to this subsection shall be submitted by
      Buyer to Seller and shall be prima facie evidence of such additional amounts.
      This covenant shall survive the termination of this Agreement and the repurchase
      by Seller of any or all of the Purchased Assets.

     

    (l) If
      Buyer
      shall have determined that the adoption of or any change in any Requirement
      of
      Law regarding capital adequacy or in the interpretation or application thereof
      or compliance by Buyer or any corporation controlling Buyer with any request
      or
      directive regarding capital adequacy (whether or not having the force of law)
      from any Governmental Authority made subsequent to the date hereof does or
      shall
      have the effect of reducing the rate of return on Buyer’s or such corporation’s
      capital as a consequence of its obligations hereunder to a level below that
      which Buyer or such corporation could have achieved but for such adoption,
      change or compliance (taking into consideration Buyer’s or such corporation’s
      policies with respect to capital adequacy) by an amount deemed by Buyer, in
      the
      exercise of its reasonable business judgment, to be material, then from time
      to
      time, after submission by Buyer to Seller of a written request therefor, Seller
      shall pay to Buyer such additional amount or amounts as will compensate Buyer
      for such reduction. Such notification as to the calculation of any additional
      amounts payable pursuant to this subsection shall be submitted by Buyer to
      Seller and shall be prima facie evidence of such additional amounts. This
      covenant shall survive the termination of this Agreement and the repurchase
      by
      Seller of any or all of the Purchased Assets.

    
      
        
        

      

      
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    (m) If
      Seller
      repurchases Purchased Assets on a day other than the last day of a Pricing
      Rate
      Period, Seller shall indemnify Buyer and hold Buyer harmless from any actual
      losses, costs and/or expenses which Buyer sustains as a direct consequence
      thereof (“Breakage
      Costs”),
      in
      each case for the remainder of the applicable Pricing Rate Period. Buyer shall
      deliver to Seller a statement setting forth the amount and basis of
      determination of any Breakage Costs in reasonable detail, it being agreed that
      such statement and the method of its calculation shall be conclusive and binding
      upon Seller absent manifest error. This Article 3(m)
      shall
      survive termination of this Agreement and the repurchase of all Purchased Assets
      subject to Transactions hereunder.

     

    (n) (i)
      Notwithstanding the definition of Maturity Date herein, provided
      that all
      of the extension conditions listed in clauses (i) through (iv) of this
Article
      3(n)(i)
      (collectively, the “Maturity
      Date Extension Conditions”)
      shall
      have been satisfied, as determined by Buyer in its sole and absolute discretion,
      Seller may request to extend such Maturity Date by no more than 364 days from
      the date of such extension request by giving written notice to Buyer of such
      request (such extension, an “Extension
      Period”).
      Any
      failure by Buyer, in its sole and absolute discretion, to deliver to Seller
      an
      objection, rejection or consent to such extension request in writing within
      thirty (30) days of such request shall be deemed consent to Seller’s request to
      extend such Maturity Date. Notwithstanding anything to the contrary in
Article
      3(n)(i)
      hereof,
      in no event shall Seller be permitted to extend the Maturity Date for more
      than
      two (2) Extension Periods. For purposes of the preceding sentence, the Maturity
      Date Extension Conditions shall be deemed to have been satisfied
      if:

     

    (A) Seller
      shall have given Buyer written notice, not less than forty-five (45) days prior
      but no more than one hundred and eighty (180) days prior to the originally
      scheduled Termination Date, of Seller’s desire to extend the Termination Date;
      and if Seller fails to give such notice, Seller shall be deemed to have elected
      not to extend the Termination Date;

     

    (B) no
      Material Adverse Effect, Margin Deficit, Default or Event of Default under
      this
      Agreement shall have occurred and be continuing as of the date notice is given
      under subclause (i) above or as of the originally scheduled Termination Date
      and
      no “Termination Event,” “Event of Default” or “Potential Event of Default” or
      any similar event by Seller, however denominated, shall have occurred and be
      continuing under any Hedging Transaction; 

     

    (C) all
      representations and warranties shall be true, correct, complete and accurate
      in
      all material respects as of the existing Maturity Date; and

    
      
        
        

      

      
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    (D) on
      the
      originally scheduled Termination Date, Seller pays to Buyer, on account of
      each
      Purchased Asset, an amount sufficient to reduce the Repurchase Price for each
      Purchased Asset to an amount equal to the applicable Advance Rate used to
      calculate the Purchase Price of such Purchased Asset multiplied by the Market
      Value for each such Purchased Asset then subject to a Transaction.

     

    (ii) Upon
      written request of Seller delivered to Buyer at least thirty (30) days, but
      in
      no event earlier than sixty (60) days, prior to the then current Final Maturity
      Date (provided each extension has occurred in accordance with the terms of
      this
      Agreement), and so long as no Margin Deficit, Default or Event of Default and
      no
      event which has a Material Adverse Effect shall have occurred and be continuing
      on the then current Final Maturity Date, Buyer may in its sole discretion agree
      to extend the Final Maturity Date, for a period not to exceed 364 additional
      days (the “Wind
      Down Period”)
      by
      giving notice to Seller of such extension and of the end of the Wind Down Period
      determined by Buyer; provided,
      that
      any failure by Buyer to deliver notice to Seller of any objection or rejection
      to such Wind Down Period within fifteen (15) days from the date first received
      by Buyer shall be deemed to be Buyer’s consent to extend the Final Maturity
      Date. In no event shall the Final Maturity Date be extended for more than one
      (1) Wind Down Period. Prior to the Wind Down Period, Seller shall pay down
      10%
      of the drawn Facility Amount on the Final Maturity Date. During the Wind Down
      Period, (i) Buyer shall not finance any additional Eligible Assets from Seller
      and (ii) for each of the four (4) successive calendar quarters, Seller is
      required to pay down 25% of the drawn Facility Amount (measured by the drawn
      amount of the Facility once Seller pays down the Facility Amount by 10% as
      specified above) at the end of each calendar quarter. Notwithstanding any other
      provision of this Article
      3(n)(ii)
      or
      otherwise herein, neither Buyer nor any of its Affiliates shall be under any
      obligation to extend the original Maturity Date, as the same may have been
      extended pursuant to this Article
      3(n)(ii).

     

    ARTICLE
      4.

     

    MARGIN
      MAINTENANCE

     

    (a) If
      at any
      time Buyer’s Margin Amount for all Purchased Assets is less than the Repurchase
      Price for all Purchased Assets (a “Margin
      Deficit”),
      then
      Buyer may by notice to Seller in the form of Exhibit
      XII
      (a
“Margin
      Deficit Notice”)
      require Seller to, at Seller’s option, no later than three (3) Business Days
      following the receipt of a Margin Deficit Notice (the “Margin
      Deadline”)
      to the
      extent such Margin Deficit equals or exceeds the Minimum Transfer Amount, (i)
      transfer to Buyer for no additional consideration (by transfer to Buyer or
      its
      designee (including the Custodian) Additional Eligible Collateral, (ii)
      repurchase some or all of the Purchased Assets at their respective Repurchase
      Prices, (iii) make a payment in reduction of the Purchase
      Price (which payment may be paid by the withdrawal by Buyer of funds held in
      the
      Depository Account after allocation and payment of any allocated amounts then
      due and payable to Buyer and its Affiliates), or (iv) choose any combination
      of the foregoing, such that, after giving effect to such transfers, repurchases
      and payments, Buyer’s Margin Amount for all Purchased Assets, shall be equal to
      or greater than the related Repurchase Price for all Purchased
      Assets. 

    
      
        
        

      

      
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    (b) If
      at any
      time the aggregate Repurchase Price of all Purchased Assets subject to
      Transactions then outstanding exceeds the Facility Amount, then Buyer may,
      by
      delivery to Seller of a Margin Deficit Notice, require Seller to, at Seller’s
      option, no later than the Margin Deadline, (i) repurchase Purchased Assets
      at the Repurchase Price, (ii) make a payment in reduction of the Repurchase
      Price of one or more Purchased Assets, or (iii) choose any combination of
      the foregoing, so that, after giving effect to such repurchases and payments,
      the aggregate Repurchase Price of all Purchased Assets subject to Transactions
      then outstanding does not exceed the Facility Amount.

     

    (c) The
      failure of Buyer, on any one or more occasions, to exercise its rights
      hereunder, shall not change or alter the terms and conditions to which this
      Agreement is subject or limit the right of Buyer to do so at a later date.
      Seller and Buyer each agree that a failure or delay by Buyer to exercise its
      rights hereunder shall not limit or waive Buyer’s rights under this Agreement or
      otherwise existing by law or in any way create additional rights for
      Seller.

     

    ARTICLE
      5.

     

    INCOME
      PAYMENTS AND PRINCIPAL PAYMENTS

     

    (a) The
      Depository Account shall be established at the Depository pursuant to the
      Depository Agreement concurrently with the execution and delivery of this
      Agreement by Seller and Buyer. Buyer shall have sole dominion and control over
      the Depository Account, which shall be subject to the Depository Agreement.
      All
      Income in respect of the Purchased Assets and any payments made to Seller in
      respect of associated Hedging Transactions, as well as any interest received
      from the reinvestment of such Income, shall be deposited directly into the
      Depository Account and shall be remitted by the Depository in accordance with
      the applicable provisions of Articles 5(b),
      5(c),
      5(d),
      5(e),
      5(f),
      5(g)
      and
5(h)
      of this
      Agreement.

     

    (b) With
      respect to Purchased Assets, each Mortgagor, issuer of a participation, servicer
      and trustee with respect to the Purchased Asset or borrower under a Purchased
      Asset shall have previously received from Seller an irrevocable direction
      letter, instructing, as applicable, the Mortgagor, issuer of a participation,
      servicer or trustee with respect to the Purchased Asset or borrower to pay
      all
      amounts payable under the related Purchased Asset to Servicer pursuant to the
      Servicing Agreement, for immediate deposit by Servicer into the Depository
      Account pursuant to the Servicing Agreement. If a Mortgagor, issuer of a
      participation, servicer or trustee with respect to the Purchased Asset or
      borrower forwards any Income with respect to a Purchased Asset to Seller or
      any
      Affiliate of Seller rather than directly to the Depository Account, Seller
      shall, or shall cause such Affiliate to, (i) deliver an additional
      irrevocable direction letter to the applicable Mortgagor, issuer of a
      participation, servicer or trustee with respect to the Purchased Asset or
      borrower and make other best efforts to cause such Mortgagor, issuer of a
      participation, servicer or trustee with respect to the Purchased Asset or
      borrower to forward such amounts directly to the Depository Account and (ii)
      immediately deposit in the Depository Account any such amounts.

     

    (c) So
      long
      as no Event of Default or CF Sweep Event with respect to any Purchased Asset
      shall have occurred and be continuing, all Income received by the Depository
      in
      respect of the Purchased Assets (other than scheduled or unscheduled Principal
      Payments and net sale proceeds) and the associated Hedging Transactions during
      each Collection Period shall be applied by the Depository on the related
      Remittance Date in the following order of priority:

    
      
        
        

      

      
        37

        
          

        

      

      
        
        

      

    

     

    (i) first,
      pro
      rata,
      (i) to
      Buyer, an amount equal to the Price Differential that has accreted and is
      outstanding as of such Remittance Date and (ii) to any Affiliated Hedge
      Counterparty, any amount then due and payable to an Affiliated Hedge
      Counterparty under any Hedging Transaction related to a Purchased
      Asset;

     

    (ii) second,
      to
      Buyer, an amount equal to any other amounts due and owing to Buyer or its
      Affiliates under any Transaction Document; and

     

    (iii) third,
      to
      Seller, the remainder, if any.

     

    (d) So
      long
      as no Event of Default or CF Sweep Event shall have occurred and be continuing,
      any unscheduled Principal Payments and any Principal Payment due on the maturity
      date of a Purchased Asset shall be applied by the Depository on the Business
      Day
      next following the Business Day on which such funds are deposited in the
      Depository Account in the following order of priority:

     

    (i) first,
      pro
      rata,
      to
      Buyer, until the Purchase Price for such Purchased Asset has been reduced to
      the
      Target Price for such Purchased Asset as of the date of such payment (as
      determined by Buyer after giving effect to such Principal Payment and
      application of net sales proceeds, if applicable) and, solely with respect
      to
      any Hedging Transaction with an Affiliated Hedge Counterparty related to such
      Purchased Asset, an amount equal to any accrued and unpaid breakage costs under
      such Hedging Transaction related to such Purchased Asset;

     

    (ii) second,
      to
      Buyer, until the related Purchase Price for any other Purchased Asset as to
      which the Repurchase Price exceeds the Target Price (for this purpose, making
      such payment in the order of those Purchased Assets with the largest to smallest
      excess of Repurchase Price over Target Price), until the aggregate Repurchase
      Price for all of such Purchased Assets has been reduced to the aggregate Target
      Price for all of the Purchased Assets, respectively as of the date of such
      payment (as determined by Buyer after giving effect to such Principal Payment
      and application of net sale proceeds, if applicable);

     

    (iii) third,
      to make
      payment to Buyer of any other amounts due and owing to Buyer or its Affiliates
      under any Transaction Document; and

     

    (iv) fourth,
      to
      Seller, the remainder of such Principal Payments or net sale proceeds, if
      applicable.

     

    (e) So
      long
      as no Event of Default or CF Sweep Event shall have occurred and be continuing,
      any scheduled Principal Payments and any net sale proceeds in excess of the
      related Repurchase Price in respect of any Purchased Assets that is a portion
      of
      the Income received by the Depository during each Collection Period shall be
      applied by the Depository on the Remittance Date in the following order of
      priority:

    
      
        
        

      

      
        38

        
          

        

      

      
        
        

      

    

     

    (i) first,
      pro
      rata,
      to
      Buyer, until the Purchase Price for such Purchased Asset has been reduced to
      the
      Target Price for such Purchased Asset as of the date of such payment (as
      determined by Buyer after giving effect to such Principal Payment and
      application of net sales proceeds, if applicable) and, solely with respect
      to
      any Hedging Transaction with an Affiliated Hedge Counterparty related to such
      Purchased Asset, an amount equal to any accrued and unpaid breakage costs under
      such Hedging Transaction related to such Purchased Asset;

     

    (ii) second,
      to
      Buyer, until the related Purchase Price for any other Purchased Asset as to
      which the Repurchase Price exceeds the Target Price (for this purpose, making
      such payment in the order of those Purchased Assets with the largest to smallest
      excess of Repurchase Price over Target Price), until the aggregate Repurchase
      Price for all of such Purchased Assets has been reduced to the aggregate Target
      Price for all of the Purchased Assets, respectively as of the date of such
      payment (as determined by Buyer after giving effect to such Principal Payment
      and application of net sale proceeds, if applicable);

     

    (iii) third,
      to make
      payment to Buyer of any other amounts due and owing to Buyer or its Affiliates
      under any Transaction Document; and

     

    (iv) fourth,
      to
      Seller, the remainder of such Principal Payments or net sale proceeds, if
      applicable.

     

    (f) If
      Buyer
      shall have determined that a CF Sweep Event shall have occurred, but no Event
      of
      Default shall have occurred and be continuing, all Income (excluding Principal
      Payments and any net sale proceeds in excess of the related Repurchase Price)
      received by the Depository in respect of the Purchased Assets and the associated
      Hedging Transactions shall be applied by the Depository on the related
      Remittance Date in the following order of priority:

     

    (i) first,
      pro
      rata,
      (i) to
      Buyer, an amount equal to the Price Differential that has accreted and is
      outstanding in respect of all of the Purchased Assets as of such Business Day
      and (ii) to any Affiliated Hedge Counterparty, any amounts then due and payable
      to such Affiliated Hedge Counterparty under any Hedging Transaction related
      to
      such Purchased Asset;

     

    (ii) second,
      to
      Buyer, an amount equal to the Repurchase Price of each Purchased Asset until
      the
      Repurchase Price for such Purchased Asset has been reduced to the Target Price
      for such Purchased Asset as of the date of such payment (as determined by Buyer
      after giving effect to such Principal Payment and application of net sale
      proceeds, if any);

     

    (iii) third,
      to
      Buyer, an amount equal to any other amounts due and owing to Buyer or its
      Affiliates under any Transaction Document; and

     

    (iv) fourth,
      to
      Seller, any remainder.

     

    (g) Upon
      the
      occurrence and continuance of a CF Sweep Event, but no Event of Default shall
      have occurred and be continuing, all Principal Payments and any net sale
      proceeds in excess of the related Repurchase Price received by the Depository
      in
      respect of the Purchased Assets and the associated Hedging Transactions shall
      be
      applied by the Depository on the related Remittance Date in the following order
      of priority:

    
      
        
        

      

      
        39

        
          

        

      

      
        
        

      

    

     

    (i) first,
      pro
      rata,
      to
      Buyer, an amount equal to the Price Differential that has accreted and is
      outstanding in respect of all of the Purchased Assets as of such Business Day
      and any amounts then due and payable to an Affiliated Hedge Counterparty under
      any Hedging Transaction related to such Purchased Asset;

     

    (ii) second,
      to
      Buyer, on account of the Repurchase Price of each Purchased Asset until the
      Repurchase Price for such Purchased Asset has been reduced to the Target Price
      for such Purchased Asset as of the date of such payment (as determined by Buyer
      after giving effect to such Principal Payment and application of net sale
      proceeds, if any);

     

    (iii) third,
      to
      Buyer, an amount equal to any other amounts due and owing to Buyer or its
      Affiliates under any Transaction Document; and

     

    (iv) fourth,
      to
      remit to Seller any remainder.

     

    (h) If
      an
      Event of Default shall have occurred and be continuing, all Income received
      by
      the Depository in respect of the Purchased Assets and the associated Hedging
      Transactions shall be applied by the Depository on the Business Day next
      following the Business Day on which such funds are deposited in the Depository
      Account in the following order of priority:

     

    (i) first,
      pro
      rata,
      (i) to
      Buyer, an amount equal to the Price Differential that has accreted and is
      outstanding in respect of all of the Purchased Assets as of such Business Day
      and (ii) to any Affiliated Hedge Counterparty, any amounts then due and payable
      to an Affiliated Hedge Counterparty under any Hedging Transaction related to
      such Purchased Asset;

     

    (ii) second,
      to
      Buyer on account of the Repurchase Price of the Purchased Assets until the
      Repurchase Price for all of the Purchased Assets has been reduced to
      zero;

     

    (iii) third,
      to
      Buyer, an amount equal to any other amounts due and owing to Buyer or its
      Affiliates under any Transaction Document; and

     

    (iv) fourth,
      to
      remit to Seller any remainder.

     

    (i) Notwithstanding
      the provisions of this Article
      5,
      in no
      event shall any Income or other amounts be distributed to Seller pursuant to
      Article
      5
      if there
      is a Margin Deficit or an Event of Default, without regard to any applicable
      cure period, or any event which, over the passage of time, could cause a Margin
      Deficit or an Event of Default.

     

    
      
        
        

      

      
        40

        
          

        

      

      
        
        

      

    

     

    ARTICLE
      6.

     

    SECURITY
      INTEREST

     

    (a) Buyer
      and
      Seller intend that the Transactions hereunder be sales to Buyer of the Purchased
      Assets and not loans from Buyer to Seller secured by the Purchased Assets.
      However, in order to preserve Buyer’s rights under this Agreement in the event
      that a court or other forum re-characterizes the Transactions hereunder as
      loans
      and as security for the performance by Seller of all of Seller’s obligations to
      Buyer under the Transaction Documents and the Transactions entered into
      hereunder, or in the event that a transfer of a Purchased Asset is otherwise
      ineffective to effect an outright transfer of such Purchased Asset to Buyer,
      Seller hereby assigns, pledges and grants a security interest in all of its
      right, title and interest in, to and under the Purchased Items (as defined
      below) to Buyer to secure the payment of the Repurchase Price on all
      Transactions to which it is a party and all other amounts owing by it to Buyer
      hereunder, including, without limitation, amounts owing pursuant to Article
      26,
      and
      under the other Transaction Documents, including any obligations of Seller
      under
      any Hedging Transaction entered into with any Affiliated Hedge Counterparty
      (including, without limitation, all amounts anticipated to be paid to Buyer
      by
      an Affiliated Hedge Counterparty as provided for in the definition of Repurchase
      Price) (collectively, the “Repurchase
      Obligations”).
      All
      of Seller’s right, title and interest in, to and under each of the following
      items of property, whether now owned or hereafter acquired, now existing or
      hereafter created and wherever located, is hereinafter referred to as the
“Purchased
      Items”:

     

    (i) the
      Purchased Assets and all “securities accounts” (as defined in
      Article 8-501(a) of the UCC) to which any or all of the Purchased Assets
      are credited;

     

    (ii) any
      and
      all Additional Eligible Collateral transferred to Buyer in accordance with
      Article
      4(a);

     

    (iii) the
      Purchased Asset Documents, Servicing Agreements, Servicing Records, insurance
      relating to the Purchased Assets, and collection and escrow accounts and letters
      of credit relating to the Purchased Assets;

     

    (iv) all
      “general intangibles”, “accounts”, “chattel paper”, “investment property”,
“instruments” and “deposit accounts”, each as defined in the UCC, relating to or
      constituting any and all of the foregoing; and

     

    (v) all
      replacements, substitutions or distributions on or proceeds, payments, Income
      and profits of, and records (but excluding any financial models or other
      proprietary information) and files relating to any and all of any of the
      foregoing.

     

    (b) Without
      limiting Article
      6(a)
      hereto,
      to secure payment of the Repurchase Obligations owing to Buyer, Seller hereby
      grants to Buyer a security interest in all of Seller’s right, title and interest
      in, to and under each of the following items of property, whether now owned
      or
      hereafter acquired, now existing or hereafter created and wherever located,
      hereinafter referred to as the “Collateral”:

     

    (i) the
      Depository Account and all monies from time to time on deposit in the Depository
      Account;

    
      
        
        

      

      
        41

        
          

        

      

      
        
        

      

    

     

    (ii) the
      Purchased Items;

     

    (iii) any
      and
      all Additional Eligible Collateral transferred to Buyer in accordance with
      Article
      4(a);

     

    (iv) any
      and
      all replacements, substitutions, distributions on, income relating to or
      proceeds of any and all of the foregoing; and

     

    (v) Seller’s
      right under each Hedging Transaction, if any, relating to the Purchased Assets
      to secure the Repurchase Obligations.

     

    (c) Buyer
      agrees to act as agent for and on behalf of the Affiliated Hedge Counterparties
      with respect to the security interest granted hereby to secure the obligations
      owing to the Affiliated Hedge Counterparties under any Hedging Transactions,
      including, without limitation, with respect to the Purchased Assets and the
      Purchased Asset Files held by the Custodian pursuant to the Custodial
      Agreement.

     

    (d) Buyer’s
      security interest in the Collateral and Purchased Items shall terminate only
      upon termination of Seller’s obligations under this Agreement, all Hedging
      Transactions and the documents delivered in connection herewith and therewith.
      Upon such termination, Buyer shall deliver to Seller such UCC termination
      statements and other release documents as may be commercially reasonable and
      return the Purchased Assets to Seller and reconvey the Purchased Items to Seller
      and release its security interest in the Collateral. For purposes of the grant
      of the security interest pursuant to this Article
      6,
      this
      Agreement shall be deemed to constitute a security agreement under the New
      York
      Uniform Commercial Code (the “UCC”).
      Buyer
      shall have all of the rights and may exercise all of the remedies of a secured
      creditor under the UCC and the other laws of the State of New York. In
      furtherance of the foregoing, (a) Buyer, at Seller’s sole cost and expense,
      shall cause to be filed in such locations as may be necessary to perfect and
      maintain perfection and priority of the security interest granted hereby, UCC
      financing statements and continuation statements (collectively, the
“Filings”),
      and
      shall forward copies of such Filings to Seller upon completion thereof, and
      (b)
      Seller shall from time to time take such further actions as may be requested
      by
      Buyer to maintain and continue the perfection and priority of the security
      interest granted hereby (including marking its records and files to evidence
      the
      interests granted to Buyer hereunder).

     

    ARTICLE
      7.

     

    PAYMENT,
      TRANSFER AND CUSTODY

     

    (a) On
      the
      Purchase Date for each Transaction, ownership of the Purchased Asset shall
      be
      transferred to Buyer or its designee (including the Custodian) against the
      simultaneous transfer of the Purchase Price to an account of Seller specified
      in
      the Confirmation relating to such Transaction.

     

    (b) On
      or
      before each Purchase Date, Seller shall deliver or cause to be delivered to
      Buyer or its designee the Custodial Delivery in the form attached hereto as
      Exhibit
      IV,
      provided,
      that
      notwithstanding the foregoing, upon request of Seller, Buyer in its sole but
      good faith discretion may elect to permit Seller to make such delivery by not
      later than the third (3rd) Business Day after the related Purchase Date, so
      long
      as Seller causes an Acceptable Attorney, Title Company or other Person
      acceptable to Buyer to deliver to Buyer and the Custodian a Bailee Letter on
      or
      prior to such Purchase Date. Subject to Article
      7(c),
      in
      connection with each sale, transfer, conveyance and assignment of a Purchased
      Asset, on or prior to each Purchase Date with respect to such Purchased Asset,
      Seller shall deliver or cause to be delivered and released to the Custodian
      the
      following original documents (collectively, the “Purchased
      Asset File”),
      pertaining to each of the Purchased Assets identified in the Custodial Delivery
      delivered therewith, together with any other documentation in respect of such
      Purchased Asset requested by Buyer, in Buyer’s sole but good faith
      discretion:

    
      
        
        

      

      
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    With
      respect to each Purchased Asset that is a Senior Mortgage Loan, Condo Conversion
      Loan or Land Loan:

     

    (i) The
      original Mortgage Note (and if applicable, one or more allonges) bearing all
      intervening endorsements, endorsed “Pay to the order of _________ without
      recourse” and signed in the name of the last endorsee (the “Last
      Endorsee”)
      by an
      authorized Person (in the event that the Purchased Asset was acquired by the
      Last Endorsee in a merger, the signature must be in the following form: “[Last
      Endorsee], successor by merger to [name of predecessor]”; in the event that the
      Purchased Asset was acquired or originated by the Last Endorsee while doing
      business under another name, the signature must be in the following form: “[Last
      Endorsee], formerly known as [previous name]”).

     

    (ii) An
      original of any guarantee executed in connection with the Mortgage Note (if
      any).

     

    (iii) The
      original Mortgage with evidence of recording thereon, or a copy thereof together
      with an officer’s certificate of Seller certifying that such represents a true
      and correct copy of the original and that such original has been submitted
      for
      recordation in the appropriate governmental recording office of the jurisdiction
      where the underlying real estate directly or indirectly securing or supporting
      such Purchased Asset is located.

     

    (iv) The
      originals of all assumption, modification, consolidation or extension agreements
      with evidence of recording thereon, or copies thereof together with an officer’s
      certificate of Seller certifying that such represent true and correct copies
      of
      the originals and that such originals have each been submitted for recordation
      in the appropriate governmental recording office of the jurisdiction where
      the
      underlying real estate directly or indirectly securing or supporting such
      Purchased Asset is located.

     

    (v) The
      original Assignment of Mortgage in blank for each Purchased Asset, in form
      and
      substance acceptable for recording and otherwise acceptable to Buyer and signed
      in the name of the Last Endorsee (in the event that the Purchased Asset was
      acquired by the Last Endorsee in a merger, the signature must be in the
      following form: “[Last Endorsee], successor by merger to [name of predecessor]”;
      in the event that the Purchased Asset was acquired or originated while doing
      business under another name, the signature must be in the following form: “[Last
      Endorsee], formerly known as [previous name]”).

    
      
        
        

      

      
        43

        
          

        

      

      
        
        

      

    

     

    (vi) The
      originals of all intervening assignments of mortgage with evidence of recording
      thereon, or copies thereof together with an officer’s certificate of Seller
      certifying that such represent true and correct copies of the originals and
      that
      such originals have each been submitted for recordation in the appropriate
      governmental recording office of the jurisdiction where the underlying real
      estate directly or indirectly securing or supporting such Purchased Asset is
      located.

     

    (vii) The
      original attorney’s opinion of title and abstract of title or the original
      mortgagee title insurance policy, or if the original mortgagee title insurance
      policy has not been issued, the irrevocable marked commitment to issue the
      same.

     

    (viii) The
      original of any security agreement, chattel mortgage or equivalent document
      executed in connection with the Purchased Asset.

     

    (ix) The
      original assignment of leases and rents, if any, with evidence of recording
      thereon, or a copy thereof together with an officer’s certificate of Seller,
      certifying that such copy represents a true and correct copy of the original
      and
      that such original has been submitted for recordation in the appropriate
      governmental recording office of the jurisdiction where the underlying real
      estate directly or indirectly securing or supporting such Purchased Asset is
      located.

     

    (x) The
      originals of all intervening assignments of assignment of leases and rents,
      if
      any, or copies thereof, with evidence of recording thereon.

     

    (xi) A
      copy of
      the UCC financing statements, certified as true and correct by Seller, and
      all
      necessary UCC continuation statements with evidence of filing thereon or copies
      thereof certified by Seller that such financing statements have been sent for
      filing, and UCC assignments, which UCC assignments shall be in form and
      substance acceptable for filing.

     

    (xii) An
      environmental indemnity agreement (if any).

     

    (xiii)
      An
      omnibus assignment in blank (if any).

     

    (xiv)
      A
      disbursement letter from the Mortgagor to the original mortgagee (if
      any).

     

    (xv) Mortgagor’s
      certificate or title affidavit (if any).

     

    (xvi)
      A
      survey of the underlying real estate directly or indirectly securing or
      supporting such Purchased Asset (if any) as accepted by the title company for
      issuance of the Title Policy.

     

    (xvii)
      A
      copy of the Mortgagor’s opinion of counsel (if any).

     

    (xviii)
      An assignment of permits, contracts and agreements (if any).

    
      
        
        

      

      
        44

        
          

        

      

      
        
        

      

    

     

    With
      respect to each Purchased Asset that is a Construction Loan (or, at Buyer’s
      discretion, that is a Condo Conversion Loan or Land Loan), in addition to items
      (i) through (xviii) above:

     

    (i) A
      copy of
      the original general contractor consent.

     

    (ii) A
      copy of
      the original architect consent.

     

    (iii) Copies
      of
      the original trade contractors consents.

     

    (iv) A
      copy of
      the initial draw request (including the borrower’s affidavit and other backup
      documentation).

     

    (v) A
      copy of
      a feasibility study conducted by an independent architectural and/or engineering
      consultant as to the feasibility, both structural and financial, of the proposed
      construction.

     

    (vi) Certified
      copies of final plans, specifications and drawings (including existing change
      orders).

     

    (vii) A
      copy of
      the construction schedule.

     

    (viii)
      A
      certified copy of the guaranteed maximum price construction
      contract.

     

    (ix) Copies
      of
      exhibits to the general contractor contract.

     

    (x) A
      copy of
      the general contractor letter of intent.

     

    (xi) Copies
      of
      construction permits.

     

    (xii) A
      copy of
      the form of management agreement.

     

    (xiii)
      A
      certified copy of the architect contract.

     

    (xiv)
      Copies of each existing trade contract.

     

    (xv) A
      copy of
      the trade payment breakdown and schedule of other project costs.

     

    (xvi)
      A
      copy of the zoning evidence or zoning report.

     

    (xvii)
      Copies of certificates of occupancy and other permits, approvals and licenses,
      as applicable.

     

    (xviii)
      Copies of engineer’s reports on soil condition and plans and specifications
      (including any seismic reports).

     

    (xix)
      Copies of environmental reports.

    
      
        
        

      

      
        45

        
          

        

      

      
        
        

      

    

     

    (xx) Evidence
      of insurance (including for general contractor and major trade
      contractors).

     

    (xxi)
      A
      copy of the tract map and current survey.

     

    (xxii)
      A
      copy of flood hazard certifications.

     

    (xxiii)
      A
      copy of any memorandum regarding results of environmental  assessment.

     

    (xxiv)
      Evidence satisfactory to Buyer relating to utility services, electric, gas,
      water, telephone and sewerage and utility letters.

     

    (xxv)
      A
      copy of approvals of plans by zoning board, any architectural control committee,
      and tenant under any existing lease.

     

    With
      respect to each Purchased Asset that is a B-Note/Junior Interest:

     

    (i) with
      respect to a B-Note, the original Mortgage Note or participation certificate
      (or
      assignment, if a syndicated loan) and guarantee, if any, described in the second
      paragraph of this Article
      7(b),
      and
      with respect to a B-Note or a junior participation interest, to the extent
      applicable, a copy of all of the documents described in clauses (iii), (iv),
      (vii), (viii), (ix), (x), (xi), (xii), (xiii), (xiv), (xv), (xvi), (xvii) and
      (xviii) of the second paragraph of this Article
      7(b)
      with
      respect to a Purchased Asset.

     

    (ii) with
      respect to a junior participation, the original participation certificate,
      if
      any, together with the original of any participation agreement, intercreditor
      agreement and/or servicing agreement executed in connection with the Purchased
      Asset.

     

    (iii) the
      assignment of Purchased Asset, in blank, sufficient to transfer to Buyer all
      of
      Seller’s rights, title and interest in and to the Purchased Asset.

     

    With
      respect to each Purchased Asset that is a Mezzanine Loan:

     

    (i) The
      original Mezzanine Note (and if applicable, one or more allonges) signed in
      connection with the Purchased Asset bearing all intervening endorsements,
      endorsed “Pay to the order of __________ without recourse” and signed in the
      name of the Last Endorsee by an authorized Person (in the event that the
      Mezzanine Note was acquired by the Last Endorsee in a merger, the signature
      must
      be in the following form: “[Last Endorsee], successor by merger to [name of
      predecessor]”; in the event that the Purchased Asset was acquired or originated
      by the Last Endorsee while doing business under another name, the signature
      must
      be in the following form: “[Last Endorsee], formerly known as [previous
      name]”).

     

    (ii) The
      original of the loan agreement and the guarantee, if any, executed in connection
      with the Purchased Asset.

    
      
        
        

      

      
        46

        
          

        

      

      
        
        

      

    

     

    (iii) The
      original intercreditor or loan coordination agreement, if any, executed in
      connection with the Purchased Asset.

     

    (iv) The
      original security agreement executed in connection with the Purchased
      Asset.

     

    (v) Copies
      of
      all documents relating to the formation and organization of the borrower of
      such
      Purchased Asset, together with all consents and resolutions delivered in
      connection with such borrower’s obtaining the Purchased Asset.

     

    (vi) All
      other
      documents and instruments evidencing, guaranteeing, insuring or otherwise
      constituting or modifying or otherwise affecting such Purchased Asset, or
      otherwise executed or delivered in connection with, or otherwise relating to,
      such Purchased Asset, including all documents establishing or implementing
      any
      lockbox pursuant to which Seller is entitled to receive any payments from cash
      flow of the underlying real property.

     

    (vii) The
      assignment of Purchased Asset sufficient to transfer to Buyer all of Seller’s
      rights, title and interest in and to the Purchased Asset.

     

    (viii)
      A
      copy of the borrower’s opinion of counsel (if any).

     

    (ix) A
      copy of
      the UCC financing statements, certified as true and correct by Seller, and
      all
      necessary UCC continuation statements with evidence of filing thereon or copies
      thereof certified by Seller that such financing statements have been sent for
      filing, and UCC assignments, which UCC assignments shall be in form and
      substance acceptable for filing.

     

    (x) The
      original certificates representing the pledged equity interests (if
      any).

     

    (xi) Stock
      powers (or their equivalent) relating to each pledged equity interest, executed
      in blank, if an original stock certificate (or its equivalent) is
      provided.

     

    (xii) Assignment
      of any agreements among equity interest holders or other material
      contracts.

     

    (xiii)
      If
      no original stock certificate (or its equivalent) is provided, evidence (which
      may be an officer’s certificate confirming such circumstances) that the pledged
      ownership interests have been transferred to, or otherwise made subject to
      a
      first priority security interest in favor of, Seller.

     

    With
      respect to each Purchased Asset that is a CMBS:

     

    (i) With
      respect to (A) any CMBS that is in physical form, the original certificate,
      bond
      or other physical form of such CMBS, which shall (1) be endorsed (either on
      the face thereof or pursuant to a separate allonge) by the most recent endorsee
      prior to Seller, without recourse, to the order of Seller and further reflect
      a
      complete, unbroken chain of endorsement from the originator to Seller and
      (2) be accompanied by a separate allonge pursuant to which Seller has
      endorsed such certificate, without recourse, in blank, or, (B) with respect
      to
      any CMBS registered with DTC, evidence of re-registration to the securities
      intermediary in Buyer’s name, denoting same with a “repo” code.

    
      
        
        

      

      
        47

        
          

        

      

      
        
        

      

    

     

    (ii) to
      the
      extent in Seller’s possession, true and correct copies of the pooling and
      servicing agreement or indenture and all other material documents (including,
      without limitation, opinions of counsel) or agreements related to the creation
      or issuance of the CMBS or otherwise affecting the rights (including, without
      limitation, the security interests) of any holder thereof.

     

    (iii) to
      the
      extent in Seller’s possession, as applicable, true and correct copies of any
      assignment, assumption, modification, consolidation or extension made prior
      to
      the Purchase Date in respect of any document or agreement referred to in clause
      (ii) above, in each case, if the document or agreement being assigned, assumed,
      modified, consolidated or extended is recordable, with evidence of recording
      thereon (unless the particular item has not been returned from the applicable
      recording office).

     

    (iv) as
      applicable, an original assignment of each agreement referred to in clause
      (iii)
      above, in recordable form if the agreement being assigned is a recordable
      document, executed in blank by Seller.

     

    (v) with
      respect to any CMBS that is in physical form, a blank endorsement which, when
      properly completed and delivered, is sufficient to cause Buyer to become the
      registered holder of the CMBS.

     

    (vi) any
      other
      documents that Buyer may request Seller to deliver to Custodian from time to
      time with respect to any CMBS.

     

    With
      respect to each Purchased Asset that is a CRE CDO:

     

    (i) With
      respect to any (A) CRE CDO that is in physical form, the original certificate,
      bond or other physical form of such CRE CDO, which shall (1) be endorsed
      (either on the face thereof or pursuant to a separate allonge) by the most
      recent endorsee prior to Seller, without recourse, to the order of Seller and
      further reflect a complete, unbroken chain of endorsement from the originator
      to
      Seller and (2) be accompanied by a separate allonge pursuant to which
      Seller has endorsed such certificate, without recourse, in blank, or, (B) with
      respect to any CRE CDO registered with DTC, evidence of re-registration to
      the
      securities intermediary in Buyer’s name denoting same with a “repo”
code.

     

    (ii) to
      the
      extent in Seller’s possession, true and correct copies of the indenture and all
      other material documents (including, without limitation, opinions of counsel)
      or
      agreements related to the creation or issuance of the CRE CDO or otherwise
      affecting the rights (including, without limitation, the security interests)
      of
      any holder thereof.

     

    (iii) to
      the
      extent in Seller’s possession, as applicable, true and correct copies of any
      assignment, assumption, modification, consolidation or extension made prior
      to
      the Purchase Date in respect of any document or agreement referred to in clause
      (ii) above, in each case, if the document or agreement being assigned, assumed,
      modified, consolidated or extended is recordable, with evidence of recording
      thereon (unless the particular item has not been returned from the applicable
      recording office).

    
      
        
        

      

      
        48

        
          

        

      

      
        
        

      

    

     

    (iv) as
      applicable, an original assignment of each agreement referred to in clause
      (iii)
      above, in recordable form if the agreement being assigned is a recordable
      document, executed in blank by Seller.

     

    (v) with
      respect to any CRE CDO that is in physical form, a blank endorsement which,
      when
      properly completed and delivered, is sufficient to cause Buyer to become the
      registered holder of the CRE CDO.

     

    (vi) copies
      of
      any notices, distributions, consents or other documents received by Seller
      relating to clause (v) above.

     

    (vii) any
      other
      documents that Buyer may request Seller to deliver to Custodian from time to
      time with respect to any CRE CDO.

     

    With
      respect to each Purchased Asset that is of the type described in clause (viii)
      or (ix) of the definition of Eligible Asset: any of the documentation referred
      to above in this Article 7(b)
      or other
      documentation with respect to such Eligible Asset that is determined by Buyer
      to
      be necessary to effectuate the sale, transfer, conveyance and assignment of
      such
      Eligible Asset.

     

    From
      time
      to time, Seller shall forward to the Custodian additional original documents
      or
      additional documents evidencing any assumption, modification, consolidation
      or
      extension of a Purchased Asset approved in accordance with the terms of this
      Agreement, and upon receipt of any such other documents, the Custodian shall
      hold such other documents as Buyer shall request from time to time. With respect
      to any documents that have been delivered or are being delivered to recording
      offices for recording and have not been returned to Seller in time to permit
      their delivery hereunder at the time required, in lieu of delivering such
      original documents, Seller shall deliver to Buyer a true copy thereof with
      an
      officer’s certificate certifying that such copy is a true, correct and complete
      copy of the original, which has been transmitted for recordation. Seller shall
      deliver such original documents to the Custodian promptly when they are
      received. With respect to all of the Purchased Assets delivered by Seller to
      Buyer or its designee (including the Custodian), Seller shall execute an omnibus
      power of attorney substantially in the form of Exhibit
      V
      attached
      hereto irrevocably appointing Buyer its attorney-in-fact with full power to
      (i) complete and record each Assignment of Mortgage, (ii) complete the
      endorsement of each Mortgage Note or Mezzanine Note, (iii) take any action
      (including exercising voting and/or consent rights) with respect to CMBS, Junior
      Interests, or intercreditor or participation agreements, (iv)
      the
      preparation and filing, in form and substance satisfactory to Buyer, of such
      financing statements, continuation statements, and other uniform commercial
      code
      forms, as Buyer may from time to time, reasonably consider necessary to create,
      perfect, and preserve Buyer's security interest in the Purchased
      Assets
      and (v)
      take such other steps as may be necessary or desirable to enforce Buyer’s rights
      against, under or with respect to such Purchased Assets and the related
      Purchased Asset Files and the Servicing Records. Buyer shall deposit the
      Purchased Asset Files representing the Purchased Assets, or direct that the
      Purchased Asset Files be deposited directly, with the Custodian. The Purchased
      Asset Files shall be maintained in accordance with the Custodial Agreement.
      Any
      Purchased Asset Files not delivered to Buyer or its designee (including the
      Custodian) are and shall be held in trust by Seller or its designee for the
      benefit of Buyer as the owner thereof. Seller or its designee shall maintain
      a
      copy of the Purchased Asset File and the originals of the Purchased Asset File
      not delivered to Buyer or its designee. The possession of the Purchased Asset
      File by Seller or its designee is at the will of Buyer for the sole purpose
      of
      servicing the related Purchased Asset, and such retention and possession by
      Seller or its designee is in a custodial capacity only. The books and records
      (including, without limitation, any computer records or tapes) of Seller or
      its
      designee shall be marked appropriately to reflect clearly the sale of the
      related Purchased Asset to Buyer. Seller or its designee (including the
      Custodian) shall release its custody of the Purchased Asset File only in
      accordance with written instructions from Buyer, unless such release is required
      as incidental to the servicing of the Purchased Assets, is in connection with
      a
      repurchase of any Purchased Asset by Seller or as otherwise required by
      law.

    
      
        
        

      

      
        49

        
          

        

      

      
        
        

      

    

     

    (c) Upon
      the
      occurrence and during the continuation of an Event of Default, and in each
      case
      subject to the provisions of the Purchased Asset Documents, after notice to
      Seller, Buyer shall be entitled to exercise all voting and corporate rights
      with
      respect to the Purchased Assets without regard to Seller’s instructions
      (including, but not limited to, if an Act of Insolvency shall occur with respect
      to Seller, to the extent Seller controls or is entitled to control selection
      of
      any servicer, Buyer may transfer any or all of such servicing to an entity
      satisfactory to Buyer).

     

    (d) Notwithstanding
      the provisions of Article 7(b)
      above
      requiring the execution of the Custodial Delivery and corresponding delivery
      of
      the Purchased Asset File to the Custodian on or prior to the related Purchase
      Date, with respect to each Transaction involving a Purchased Asset that is
      identified in the related Confirmation as a “Table Funded” Transaction, Seller
      shall, in lieu of effectuating the delivery of all or a portion of the Purchased
      Asset File on or prior to the related Purchase Date, (i) deliver to the
      Custodian by facsimile on or before the related Purchase Date for the
      Transaction (A) the promissory note(s), original stock certificate or
      participation certificate in favor of Seller evidencing the making of the
      Purchased Asset, with Seller’s endorsement of such instrument to Buyer, (B) such
      other components of the Purchased Asset File as Buyer may require on a case
      by
      case basis with respect to the particular Transaction, and (C) evidence
      satisfactory to Buyer that all documents necessary to perfect Seller’s (and, by
      means of assignment to Buyer on the Purchase Date, Buyer’s) interest in the
      Collateral for the Purchased Asset, and (ii) not later than the third (3rd)
      Business Day following the Purchase Date, deliver to Buyer the Custodial
      Delivery and to the Custodian the entire Purchased Asset File.

     

    ARTICLE
      8.

     

    SALE,
      TRANSFER, HYPOTHECATION OR PLEDGE OF PURCHASED ASSETS

     

    (a) Title
      to
      all Purchased Assets shall pass to Buyer on the applicable Purchase Date, and
      Buyer shall have free and unrestricted use of all Purchased Assets, subject,
      however, to the terms of this Agreement. Nothing in this Agreement or any other
      Transaction Document shall preclude Buyer from engaging in repurchase
      transactions with the Purchased Assets or otherwise selling, transferring,
      pledging, repledging, hypothecating, or rehypothecating the Purchased Assets,
      but no such transaction shall relieve Buyer of its obligations to transfer
      the
      Purchased Assets to Seller pursuant to Article
      3
      of this
      Agreement or of Buyer’s obligation to credit or pay Income to, or apply Income
      to the obligations of, Seller pursuant to Article
      5
      hereof.

    
      
        
        

      

      
        50

        
          

        

      

      
        
        

      

    

     

    (b) Nothing
      contained in this Agreement or any other Transaction Document shall obligate
      Buyer to segregate any Purchased Assets delivered to Buyer by Seller.
      Notwithstanding anything to the contrary in this Agreement or any other
      Transaction Document, no Purchased Asset shall remain in the custody of Seller
      or an Affiliate of Seller.

     

    ARTICLE
      9.

     

    [RESERVED]

     

    ARTICLE
      10.

     

    REPRESENTATIONS
      AND WARRANTIES

     

    (a) Each
      of
      Buyer and Seller represents and warrants to the other that (i) it is duly
      authorized to execute and deliver this Agreement, to enter into Transactions
      contemplated hereunder and to perform its obligations hereunder and has taken
      all necessary action to authorize such execution, delivery and performance,
      (ii)
      it will engage in such Transactions as principal (or, if agreed in writing,
      in
      the form of an annex hereto or otherwise, in advance of any Transaction by
      the
      other party hereto, as agent for a disclosed principal), (iii) the person
      signing this Agreement on its behalf is duly authorized to do so on its behalf
      (or on behalf of any such disclosed principal), (iv) it has obtained all
      authorizations of any governmental body required in connection with this
      Agreement and the Transactions hereunder and such authorizations are in full
      force and effect and (v) the execution, delivery and performance of this
      Agreement and the Transactions hereunder will not violate any law, ordinance
      or
      rule applicable to it or its organizational documents or any agreement by which
      it is bound or by which any of its assets are affected. On the Purchase Date
      for
      any Transaction for the purchase of any Purchased Assets by Buyer from Seller
      and any Transaction thereunder and covenants that at all times while this
      Agreement and any Transaction thereunder is in effect, Buyer and Seller shall
      each be deemed to repeat all the foregoing representations made by
      it.

     

    (b) In
      addition to the representations and warranties in subsection (a) above, Seller
      represents and warrants to Buyer as of the date of this Agreement and will
      be
      deemed to represent and warrant to Buyer as of the Purchase Date
      for the
      purchase of any Purchased Assets by Buyer from Seller and any Transaction
      thereunder and covenants that at all times while this Agreement and any
      Transaction thereunder is in effect,
      unless
      otherwise stated herein:

     

    (i) Organization.
      Seller
      is duly organized, validly existing and in good standing under the laws and
      regulations of the state of Seller’s incorporation and is duly licensed,
      qualified, and in good standing in every state where such licensing or
      qualification is necessary for the transaction of Seller’s business, except
      where failure to so qualify could not be reasonably likely to have a Material
      Adverse Effect. Seller has the power to own and hold the assets it purports
      to
      own and hold, and to carry on its business as now being conducted and proposed
      to be conducted, and has the power to execute, deliver, and perform its
      obligations under this Agreement and the other Transaction
      Documents.

    
      
        
        

      

      
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    (ii) Due
      Execution; Enforceability.
      The
      Transaction Documents have been or will be duly executed and delivered by
      Seller, for good and valuable consideration. The Transaction Documents
      constitute the legal, valid and binding obligations of Seller, enforceable
      against Seller in accordance with their respective terms subject to bankruptcy,
      insolvency, and other limitations on creditors’ rights generally and to
      equitable principles.

     

    (iii) Ability
      to Perform.
      Seller
      does not believe, nor does it have any reason or cause to believe, that it
      cannot perform each and every covenant contained in the Transaction Documents
      applicable to it to which it is a party.

     

    (iv) Non-Contravention.
      Neither
      the execution and delivery of the Transaction Documents, nor consummation by
      Seller of the transactions contemplated by the Transaction Documents (or any
      of
      them), nor compliance by Seller with the terms, conditions and provisions of
      the
      Transaction Documents (or any of them) will conflict with or result in a breach
      of any of the terms, conditions or provisions of (i) the organizational
      documents of Seller, (ii) any contractual obligation to which Seller is now
      a
      party or the rights under which have been assigned to Seller or the obligations
      under which have been assumed by Seller or to which the assets of Seller are
      subject or constitute a default thereunder, or result thereunder in the creation
      or imposition of any lien upon any of the assets of Seller, other than pursuant
      to the Transaction Documents, (iii) any judgment or order, writ, injunction,
      decree or demand of any court applicable to Seller, or (iv) any applicable
      Requirement of Law, in the case of clauses (ii)-(iii) above, to the extent
      that
      such conflict or breach would have a Material Adverse Effect upon Seller’s
      ability to perform its obligations hereunder. 

     

    (v) Litigation;
      Requirements of Law.
      As of
      the date hereof and as of the Purchase Date for any Transaction hereunder,
      there
      is no action, suit, proceeding, investigation, or arbitration pending or, to
      the
      best knowledge of Seller, threatened against Seller or any of its assets, nor
      is
      there any action, suit, proceeding, investigation, or arbitration pending or
      threatened against Seller that may result in any Material Adverse Effect. Seller
      and Guarantor are in compliance in all material respects with all Requirements
      of Law. Neither Seller nor Guarantor is in default in any material respect
      with
      respect to any judgment, order, writ, injunction, decree, rule or regulation
      of
      any arbitrator or Governmental Authority.

     

    (vi) No
      Broker.
      Seller
      has not dealt with any broker, investment banker, agent, or other Person (other
      than Buyer or an Affiliate of Buyer) who may be entitled to any commission
      or
      compensation in connection with the sale of Purchased Assets pursuant to any
      of
      the Transaction Documents.

     

    (vii) Good
      Title to Purchased Assets.
      Immediately prior to the purchase of any Purchased Assets by Buyer from Seller,
      such Purchased Assets are free and clear of any lien, encumbrance or impediment
      to transfer (including any “adverse
      claim”
as
      defined in Article 8-102(a)(1) of the UCC), and Seller is the record and
      beneficial owner of and has good and marketable title to and the right to sell
      and transfer such Purchased Assets to Buyer and, upon transfer of such Purchased
      Assets to Buyer, Buyer shall be the owner of such Purchased Assets free of
      any
      adverse claim. In the event the related Transaction is recharacterized as a
      secured financing of the Purchased Assets, the provisions of this Agreement
      are
      effective to create in favor of Buyer a valid security interest in all rights,
      title and interest of Seller in, to and under the Purchased Assets and Buyer
      shall have a valid, perfected first priority security interest in the Purchased
      Assets (and without limitation on the foregoing, Buyer, as entitlement holder,
      shall have a “security entitlement” to the Purchased Assets).

     

    
      
        
        

      

      
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    (viii) No
      Decline in Market Value; No Margin Deficit; No Defaults.
      Seller
      is not aware of any material post-Transaction facts or circumstances that are
      reasonably likely to cause or have caused a decline in the Market Value of
      any
      Purchased Asset. No Margin Deficit exists and no Default or Event of Default
      has
      occurred or exists under or with respect to the Transaction
      Documents.

     

    (ix) Authorized
      Representatives.
      The
      duly authorized representatives of Seller are listed on, and true signatures
      of
      such authorized representatives are set forth on, Exhibit
      II
      attached
      to this Agreement.

     

    (x) Representations
      and Warranties Regarding Purchased Assets; Delivery of Purchased Asset
      File.

     

    (A) As
      of the
      date hereof, Seller has not assigned, pledged, or otherwise conveyed or
      encumbered any Purchased Asset to any other Person, and immediately prior to
      the
      sale of such Purchased Asset to Buyer, Seller was the sole owner of such
      Purchased Asset and had good and marketable title thereto, free and clear of
      all
      liens, in each case except for (1) liens to be released simultaneously with
      the
      sale to Buyer hereunder and (2) liens granted by Seller in favor of the
      counterparty to any Hedging Transaction, solely to the extent such liens are
      expressly subordinate to the rights and interests of Buyer
      hereunder.

     

    (B) The
      provisions of this Agreement and the related Confirmation are effective to
      either constitute a sale of Purchased Items to Buyer or to create in favor
      of
      Buyer a legal, valid and enforceable security interest in all right, title
      and
      interest of Seller in, to and under the Purchased Items.

     

    (C) Upon
      receipt by the Custodian of each Mortgage Note, Mezzanine Loan note, B-Note
      or
      Junior Interest certificate, endorsed in blank by a duly authorized officer
      of
      Seller, either a purchase shall have been completed by Buyer of such Mezzanine
      Loan note, B-Note or Junior Interest certificate, as applicable, or Buyer shall
      have a valid and fully perfected first priority security interest in all right,
      title and interest of Seller in the Purchased Items described
      therein.

     

    (D) Each
      of
      the representations and warranties made in respect of the Purchased Assets
      pursuant to Exhibit
      VI
      are
      true, complete and correct in all material respects, except to the extent
      disclosed in a Requested Exceptions Report.

    
      
        
        

      

      
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    (E) Upon
      the
      filing of financing statements on Form UCC-1 naming Buyer as “Secured
      Party”,
      Seller
      as “Debtor”
and
      describing the Purchased Items, in the jurisdiction and recording office listed
      on Exhibit
      XIII
      attached
      hereto, the security interests granted hereunder in that portion of the
      Purchased Items which can be perfected by filing under the Uniform Commercial
      Code will constitute fully perfected security interests under the Uniform
      Commercial Code in all right, title and interest of Seller in, to and under
      such
      Purchased Items.

     

    (F) Upon
      execution and delivery of the Depository Agreement, Buyer shall either be the
      owner of, or have a valid and fully perfected first priority security interest
      in, the “investment property” and all “deposit accounts” (each as defined in the
      Uniform Commercial Code) comprising Purchased Items or any after-acquired
      property related to such Purchased Items. Except to the extent disclosed in
      a
      Requested Exceptions Report, Seller or its designee is in possession of a
      complete, true and accurate Purchased Asset File with respect to each Purchased
      Asset, except for such documents the originals of which have been delivered
      to
      the Custodian.

     

    (xi) Adequate
      Capitalization; No Fraudulent Transfer.
      Seller
      has, as of such Purchase Date, adequate capital for the normal obligations
      foreseeable in a business of its size and character and in light of its
      contemplated business operations. Seller is generally able to pay, and as of
      the
      date hereof is paying, its debts as they come due. Seller has not become, or
      is
      presently, financially insolvent nor will Seller be made insolvent by virtue
      of
      Seller’s execution of or performance under any of the Transaction Documents
      within the meaning of the bankruptcy laws or the insolvency laws of any
      jurisdiction. Seller has not entered into any Transaction Document or any
      Transaction pursuant thereto in contemplation of insolvency or with intent
      to
      hinder, delay or defraud any creditor.

     

    (xii) No
      Conflicts or Consents.
      Neither
      the execution and delivery of this Agreement and the other Transaction Documents
      by Seller, nor the consummation of any of the transactions by it herein or
      therein contemplated, nor compliance with the terms and provisions hereof or
      with the terms and provisions thereof, will contravene or conflict with or
      result in the creation or imposition of (or the obligation to create or impose)
      any lien upon any of the property or assets of Seller pursuant to the terms
      of
      any indenture, mortgage, deed of trust, or other agreement or instrument to
      which Seller is a party or by which Seller may be bound, or to which Seller
      may
      be subject, other than liens created pursuant to the Transaction Documents.
      No
      consent, approval, authorization, or order of any third party is required in
      connection with the execution and delivery by Seller of the Transaction
      Documents to which it is a party or to consummate the transactions contemplated
      hereby or thereby which has not already been obtained.

     

    (xiii) Governmental
      Approvals.
      No
      order, consent, approval, license, authorization or validation of, or filing,
      recording or registration with, or exemption by, any Governmental Authority
      is
      required to authorize, or is required in connection with, (i) the
      execution, delivery and performance of any Transaction Document to which Seller
      is or will be a party, (ii) the legality, validity, binding effect or
      enforceability of any such Transaction Document against Seller or (iii) the
      consummation of the transactions contemplated by this Agreement (other than
      the
      filing of certain financing statements in respect of certain security
      interests).

    
      
        
        

      

      
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    (xiv) Organizational
      Documents.
      Seller
      has delivered to Buyer certified copies of its organization documents, together
      with all amendments thereto, if any.

     

    (xv) No
      Encumbrances.
      There
      are (i) no outstanding rights, options, warrants or agreements on the part
      of
      Seller for a purchase, sale or issuance, in connection with the Purchased
      Assets, (ii) no agreements on the part of Seller to issue, sell or distribute
      the Purchased Assets, and (iii) no obligations on the part of Seller (contingent
      or otherwise) to purchase, redeem or otherwise acquire any securities or
      interest therein, except as contemplated by the Transaction
      Documents

     

    (xvi) Federal
      Regulations.
      Seller
      is not required to register as an “investment company,” or a company “controlled
      by an investment company,” within the meaning of the Investment Company Act of
      1940, as amended. Seller is not a “holding company,” or a “subsidiary company of
      a holding company,” or an “affiliate” of either a “holding company” or a
“subsidiary company of a holding company,” as such terms are defined in the
      Public Utility Holding Company Act of 1935, as amended.

     

    (xvii) Taxes.
      Seller
      has filed or caused to be filed all tax returns that, to the knowledge of
      Seller, would be delinquent if they had not been filed on or before the date
      hereof and has paid all taxes shown to be due and payable on or before the
      date
      hereof on such returns or on any assessments made against it or any of its
      property and all other taxes, fees or other charges imposed on it and any of
      its
      assets by any Governmental Authority except for any such taxes as (A) are being
      appropriately contested in good faith by appropriate proceedings diligently
      conducted and with respect to which adequate reserves have been provided in
      accordance with GAAP or (B) are de
      minimis
      in
      amount; no tax liens have been filed against any of Seller’s assets and, no
      claims are being asserted with respect to any such taxes, fees or other
      charges.

     

    (xviii) Judgments/Bankruptcy.
      Except
      as disclosed in writing to Buyer, there are no judgments against Seller
      unsatisfied of record or docketed in any court located in the United States
      of
      America and no Act of Insolvency has ever occurred with respect to
      Seller.

     

    (xix) Solvency.
      Neither
      the Transaction Documents nor any Transaction thereunder are entered into in
      contemplation of insolvency or with intent to hinder, delay or defraud any
      of
      Seller’s creditors. The transfer of the Purchased Assets subject hereto and the
      obligation to repurchase such Purchased Assets is not undertaken with the intent
      to hinder, delay or defraud any of Seller’s creditors. As of the Repurchase
      Date, Seller is not insolvent within the meaning of 11 U.S.C. Section 101(32)
      or
      any successor provision thereof and the transfer and sale of the Purchased
      Assets pursuant hereto and the obligation to repurchase such Purchased Asset
      (i)
      will not cause the liabilities of Seller to exceed the assets of Seller, (ii)
      will not result in Seller having unreasonably small capital, and (iii) will
      not
      result in debts that would be beyond Seller’s ability to pay as the same mature.
      No petition in bankruptcy has been filed against Seller in the last ten (10)
      years, and Seller has not in the last ten (10) years made an assignment for
      the
      benefit of creditors or taken advantage of any debtors relief laws. Seller
      has
      only entered into agreements on terms that would be considered arm’s length and
      otherwise on terms consistent with other similar agreements with other similarly
      situated entities.

    
      
        
        

      

      
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    (xx) Use
      of
      Proceeds; Margin Regulations.
      All
      proceeds of each Transaction shall be used by Seller for purposes permitted
      under Seller’s governing documents, provided
      that no
      part of the proceeds of any Transaction will be used by Seller to purchase
      or
      carry any margin stock or to extend credit to others for the purpose of
      purchasing or carrying any margin stock. Neither the entering into of any
      Transaction nor the use of any proceeds thereof will violate, or be inconsistent
      with, any provision of Regulation T, U or X of the Board of Governors of the
      Federal Reserve System.

     

    (xxi) Full
      and Accurate Disclosure.
      No
      information contained in the Transaction Documents, or any written statement
      furnished by or on behalf of Seller pursuant to the terms of the Transaction
      Documents, contains any untrue statement of a material fact or omits to state
      a
      material fact necessary to make the statements contained herein or therein
      not
      misleading in light of the circumstances under which they were
      made.

     

    (xxii) Financial
      Information.
      All
      financial data concerning Seller and the Purchased Assets that has been
      delivered by or on behalf of Seller to Buyer is true, complete and correct
      in
      all material respects. All financial data concerning Seller has been prepared
      fairly in accordance with GAAP. All financial data concerning the Purchased
      Assets has been prepared in accordance with standard industry practices. Since
      the delivery of such data, except as otherwise disclosed in writing to Buyer,
      there has been no change in the financial position of Seller or the Purchased
      Assets, or in the results of operations of Seller, which change is reasonably
      likely to have in a Material Adverse Effect on Seller.

     

    (xxiii) Hedging
      Transactions.
      To the
      actual knowledge of Seller, as of the Purchase Date for any Purchased Asset
      that
      is subject to a Hedging Transaction, each such Hedging Transaction is in full
      force and effect in accordance with its terms, each counterparty thereto is
      an
      Affiliated Hedge Counterparty or a Qualified Hedge Counterparty, and no
“Termination Event”, “Event of Default”, “Potential Event of Default” or any
      similar event, however denominated, has occurred and is continuing with respect
      thereto.

     

    (xxiv) Servicing
      Agreements.
      Seller
      has delivered to Buyer all Servicing Agreements pertaining to the Purchased
      Assets and to the actual knowledge of Seller, as of the date of this Agreement
      and as of the Purchase Date for the purchase of any Purchased Assets subject
      to
      a Servicing Agreement, each such Servicing Agreement is in full force and effect
      in accordance with its terms and no default or event of default exists
      thereunder.

    
      
        
        

      

      
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    (xxv) No
      Reliance.
      Seller
      has made its own independent decisions to enter into the Transaction Documents
      and each Transaction and as to whether such Transaction is appropriate and
      proper for it based upon its own judgment and upon advice from such advisors
      (including without limitation, legal counsel and accountants) as it has deemed
      necessary. Seller is not relying upon any advice from Buyer as to any aspect
      of
      the Transactions, including without limitation, the legal, accounting or tax
      treatment of such Transactions.

     

    (xxvi) Patriot
      Act.
      Seller
      is in compliance, in all material respects, with the (i) the Trading with the
      Enemy Act, as amended, and each of the foreign assets control regulations of
      the
      United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended)
      and any other applicable enabling legislation or executive order relating
      thereto, and (ii) the Uniting and Strengthening America by Providing Appropriate
      Tools Required to Intercept and Obstruct Terrorism (USA Patriot Act of 2001).
      No
      part of the proceeds of any Transaction will be used, directly or indirectly,
      for any payments to any governmental official or employee, political party,
      official of a political party, candidate for political office, or anyone else
      acting in an official capacity, in order to obtain, retain or direct business
      or
      obtain any improper advantage, in violation of the United States Foreign Corrupt
      Practices Act of 1977, as amended.

     

    (xxvii)  Environmental
      Matters.

     

    (a) No
      properties owned or leased by Seller and no properties formerly owned or leased
      by Seller, its predecessors, or any former Subsidiaries or predecessors thereof
      (the “Properties”),
      contain, or have previously contained, any Materials of Environmental Concern
      in
      amounts or concentrations which constitute or constituted a violation of, or
      reasonably could be expected to give rise to liability under, Environmental
      Laws;

     

    (b) Seller
      is
      in compliance with all applicable Environmental Laws, and there is no violation
      of any Environmental Laws which reasonably would be expected to interfere with
      the continued operations of Seller;

     

    (c) Seller
      has not received any notice of violation, alleged violation, non-compliance,
      liability or potential liability under any Environmental Law, nor does Seller
      have knowledge that any such notice will be received or is being
      threatened;

     

    (d) Materials
      of Environmental Concern have not been transported or disposed by Seller in
      violation of, or in a manner or to a location which reasonably would be expected
      to give rise to liability under, any applicable Environmental Law, nor has
      Seller generated, treated, stored or disposed of at, on or under any of the
      Properties in violation of, or in a manner that reasonably would be expected
      to
      give rise to liability under, any applicable Environmental Law;

    
      
        
        

      

      
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    (e) No
      judicial proceedings or governmental or administrative action is pending, or,
      to
      the knowledge of Seller, threatened, under any Environmental Law which Seller
      is
      or will be named as a party, nor are there any consent decrees or other decrees,
      consent orders, administrative orders or other orders, or other administrative
      or judicial requirements arising out of judicial proceedings or governmental
      or
      administrative actions, outstanding under any Environmental Law to which Seller
      is a party;

     

    (f) There
      has
      been no release or threat of release of Materials of Environmental Concern
      in
      violation of or in amounts or in a manner that reasonably would be expected
      to
      give rise to liability under any Environmental Law for which Seller may become
      liable; and

     

    (g) Each
      of
      the representations and warranties set forth in the preceding clauses (A)
      through (F) is true and correct with respect to each parcel of real property
      owned or operated by Seller.

     

    (xxviii) Insider.
      Seller
      is not an “executive officer,” “director,” or “person who directly or indirectly
      or acting through or in concert with one or more persons owns, controls, or
      has
      the power to vote more than 10% of any class of voting securities” (as those
      terms are defined in 12 U.S.C. § 375(b) or in regulations promulgated pursuant
      thereto) of Buyer, of a bank holding company of which Buyer is a Subsidiary,
      or
      of any Subsidiary, of a bank holding company of which Buyer is a Subsidiary,
      of
      any bank at which Buyer maintains a correspondent account or of any lender
      which
      maintains a correspondent account with Buyer.

     

    (xxix) Office
      of Foreign Assets Control.
      Seller
      is not a person (i) whose property or interest in property is blocked or subject
      to blocking pursuant to Section 1 of Executive Order 13224 of September 23,
      2001 Blocking Property and Prohibiting Transactions With Persons Who Commit,
      Threaten to Commit, or Support Terrorism (66 Fed. Reg. 49079 (2001)), (ii)
      who
      engages in any dealings or transactions prohibited by Section 2 of such
      executive order, or to the best of Seller’s knowledge, is otherwise associated
      with any such person in any manner in violation of Section 2 of such
      executive order, or (iii) on the current list of Specially Designated Nationals
      and Blocked Persons or subject to the limitations or prohibitions under any
      other U.S. Department of Treasury’s Office of Foreign Assets Control regulation
      or executive order.

     

    (xxx) Notice
      Address; Jurisdiction of Organization.
      On the
      date of this Agreement, Seller’s address for notices is as specified on
Annex
      I.
      Seller’s jurisdiction of organization is Delaware. The location where Seller
      keeps its books and records, including all computer tapes and records relating
      to the Collateral and Purchased Items, is its notice address. Seller may change
      its address for notices and for the location of its books and records by giving
      Buyer written notice of such change.

     

    (xxxi) Ownership.
      Seller
      is and shall remain at all times an indirect wholly-owned subsidiary of
      Guarantor.

     

    
      
        
        

      

      
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    ARTICLE
      11.

     

    NEGATIVE
      COVENANTS OF SELLER

     

    On
      and as
      of the date hereof and each Purchase Date and until this Agreement is no longer
      in force with respect to any Transaction, Seller shall not without the prior
      written consent of Buyer:

     

    (a) take
      any
      action that would directly or indirectly impair or adversely affect Buyer’s
      title to the Purchased Assets;

     

    (b) transfer,
      assign, convey, grant, bargain, sell, set over, deliver or otherwise dispose
      of,
      or pledge or hypothecate, directly or indirectly, any interest in the Purchased
      Assets (or any of them) to any Person other than Buyer, or engage in repurchase
      transactions or similar transactions with respect to the Purchased Assets (or
      any of them) with any Person other than Buyer;

     

    (c) modify
      in
      any material adverse respect any Servicing Agreements to which it is a party,
      without the consent of Buyer in its reasonable discretion;

     

    (d) create,
      incur or permit to exist any lien, encumbrance or security interest in or on
      any
      of the Purchased Assets, the other Collateral or Purchased Items, other than
      the
      security interest granted by Seller pursuant to Article
      6
      of this
      Agreement;

     

    (e) create,
      incur, assume or suffer to exist any Lien upon any of its property, assets
      or
      revenues, whether now owned or hereafter acquired, except for the following,
      hereinafter referred to as the “Permitted
      Liens”:

     

    (i) Liens
      for
      taxes not yet due or which are being contested in good faith by appropriate
      proceedings, provided
      that
      adequate reserves with respect thereto are maintained on the books of the
      related borrower or its subsidiaries, as the case may be, in conformity with
      GAAP;

     

    (ii) Liens
      created pursuant to the Transaction Documents;

     

    (iii) Liens
      created pursuant to or in connection with Other Warehouse Facilities on the
      financial assets that are the subject of such Other Warehouse Facilities, solely
      to secure the obligations of Seller under such Other Warehouse Facilities;
      and

     

    (iv) Liens
      on
      the rights of Seller created pursuant to or in connection with subscription
      facilities under subscription agreements or other agreements related thereto,
      including Seller's rights to call capital from its investors;

     

    (f) enter
      into any transaction of merger or consolidation or amalgamation, or liquidate,
      wind up or dissolve itself (or suffer any liquidation, winding up or
      dissolution), sell all or substantially all of its assets without the consent
      of
      Buyer in its sole and absolute discretion;

     

    (g) consent
      or assent to any material amendment or supplement to, or termination of, any
      note, loan agreement, mortgage or guarantee relating to the Purchased Assets
      or
      other material agreement or instrument relating to the Purchased Assets other
      than in accordance with Article 28;
      

    
      
        
        

      

      
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    (h) permit
      the organizational documents or organizational structure of Seller to be amended
      in any material respect without the prior written consent of Buyer in its sole
      and absolute discretion;

     

    (i) acquire
      or maintain any right or interest in any Purchased Asset or Underlying Mortgaged
      Property that is senior to or pari passu with the rights and interests of Buyer
      therein under this Agreement and the other Transaction Documents unless the
      same
      becomes a Purchased Asset hereunder;

     

    (j) use
      any
      part of the proceeds of any Transaction hereunder for any purpose which
      violates, or would be inconsistent with, the provisions of Regulation T, U
      or X
      of the Board of Governors of the Federal Reserve System;

     

    (k) permit
      the ratio of (A) the sum of Consolidated Adjusted EBITDA for Seller for such
      period to (B) Interest Expense for Seller for such period to be less than 1:5
      to
      1:0;

     

    (l) permit
      Guarantor’s Liquidity to be less than $15,000,000 (at least $7,500,000 of which
      shall consist of cash or cash equivalents);

     

    (m) permit
      Guarantor’s and its consolidated subsidiaries’ Tangible Net Worth at any time to
      be less than the sum of (A) $700,000,000 plus (B) an amount equal to 75% of
      the
      aggregate net proceeds after costs and expenses received by Guarantor or any
      consolidated subsidiaries of Guarantor in connection with the offering or
      issuance of any Equity Interest of Guarantor or any consolidated subsidiaries
      of
      Guarantor (in each case only to the extent such Equity Interests would be
      included in Tangible Net Worth) after the Closing Date;

     

    (n) permit
      the ratio of (A) the sum of Consolidated Adjusted EBITDA for the Guarantor
      for
      such period to (B) Interest Expense for the Guarantor for such period to be
      less
      than 1:5 to 1:0;

     

    (o) permit
      the ratio of (A) Guarantor’s and its consolidated Subsidiaries’ Adjusted Total
      Liabilities to (B) Guarantor’s and its consolidated Subsidiaries’ Adjusted Total
      Assets to exceed 0.90 to 1.00;

     

    (p) permit
      the ratio of (A) Guarantor’s and its consolidated Subsidiaries’ Indebtedness
      (excluding Non-Recourse Indebtedness, borrowings under the Unsecured Credit
      Facility and trust preferred securities) to (B) Adjusted Total Assets of
      Guarantor and its consolidated Subsidiaries to exceed 0.10 to 1.00;

     

    (q) permit
      Guarantor’s minimum Fixed Charge Coverage Ratio at any time to be less than
      1.20x; and

     

    (r) enter
      into any Hedging Transaction with respect to any Purchased Asset with any entity
      that is not an Affiliated Hedging Counterparty or a Qualified Hedging
      Counterparty.

    

    
      
        
        

      

      
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    Compliance
      with covenants (k) through (q) in this Article
      11
      shall be
      evidenced by financial statements and by a compliance certificate furnished
      together therewith as further provided in Article
      12(j)(ii)
      below,
      and compliance with all such covenants are subject to verification by
      Buyer.

     

    ARTICLE
      12.

     

    AFFIRMATIVE
      COVENANTS OF SELLER

     

    (a) Seller
      shall promptly notify Buyer of any material adverse change in its business
      operations and/or financial condition; provided,
      however,
      that
      nothing in this Article
      12
      shall
      relieve Seller of its obligations under this Agreement.

     

    (b) Seller
      shall provide Buyer with copies of such documents as Buyer may reasonably
      request evidencing the truthfulness of the representations set forth in
Article
      10.

     

    (c) Seller
      shall (1) defend the right, title and interest of Buyer in and to the Collateral
      and Purchased Items against, and take such other action as is necessary to
      remove, the Liens, security interests, claims and demands of all Persons (other
      than security interests by or through Buyer) and (2) at Buyer’s reasonable
      request, take all action necessary to ensure that Buyer will have a first
      priority security interest in the Purchased Assets subject to any of the
      Transactions in the event such Transactions are recharacterized as secured
      financings.

     

    (d) Seller
      shall notify Buyer and the Depository of the occurrence of any Default or Event
      of Default with respect to Seller as soon as possible but in no event later
      than
      the immediately succeeding Business Day after obtaining actual knowledge of
      such
      event.

     

    (e) Seller
      shall cause the special servicer rating of the special servicer with respect
      to
      all mortgage loans underlying Purchased Assets to be no lower than “average” by
      Standard & Poor’s Ratings Group to the extent Seller controls or is entitled
      to control the selection of the special servicer. In the event the special
      servicer rating with respect to any Person acting as special servicer for any
      mortgage loans underlying Purchased Assets shall be below “average” by Standard
& Poor’s Rating Group, or if an Act of Insolvency occurs with respect to
      Seller or Guarantor, Buyer shall be entitled to transfer special servicing
      with
      respect to all Purchased Assets to an entity satisfactory to Buyer, to the
      extent Seller controls or is entitled to control the selection of the special
      servicer.

     

    (f) Seller
      shall promptly (and in any event not later than two (2) Business Days following
      receipt) deliver to Buyer (i) any notice of the occurrence of an Event of
      Default under or report received by Seller pursuant to the Purchased Asset
      Documents; (ii) any notice of transfer of servicing under the Purchased Asset
      Documents and (iii) any other information with respect to the Purchased Assets
      that may be requested by Buyer from time to time.

     

    (g) Seller
      will permit Buyer or its designated representative to inspect Seller’s records
      with respect to the Collateral and the Purchased Items and the conduct and
      operation of its business related thereto upon reasonable prior written notice
      from Buyer or its designated representative, at such reasonable times and with
      reasonable frequency, and to make copies of extracts of any and all thereof,
      subject to the terms of any confidentiality agreement between Buyer and Seller.
      Buyer shall act in a commercially reasonable manner in requesting and conducting
      any inspection relating to the conduct and operation of Seller’s
      business.

     

    
      
        
        

      

      
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    (h) If
      Seller
      shall at any time become entitled to receive or shall receive any rights,
      whether in addition to, in substitution of, as a conversion of, or in exchange
      for a Purchased Asset, or otherwise in respect thereof, Seller shall accept
      the
      same as Buyer’s agent, hold the same in trust for Buyer and deliver the same
      forthwith to Buyer (or the Custodian, as appropriate) in the exact form
      received, duly endorsed by Seller to Buyer, if required, together with an
      undated bond power covering such certificate duly executed in blank to be held
      by Buyer hereunder as additional collateral security for the Transactions.
      If
      any sums of money or property so paid or distributed in respect of the Purchased
      Assets shall be received by Seller, Seller shall, until such money or property
      is paid or delivered to Buyer, hold such money or property in trust for Buyer,
      segregated from other funds of Seller, as additional collateral security for
      the
      Transactions.

     

    (i) At
      any
      time from time to time upon the reasonable request of Buyer, at the sole expense
      of Seller, Seller will promptly and duly execute and deliver such further
      instruments and documents and take such further actions as Buyer may request
      for
      the purposes of obtaining or preserving the full benefits of this Agreement
      including the first priority security interest granted hereunder and of the
      rights and powers herein granted (including, among other things, filing such
      UCC
      financing statements as Buyer may request). If any amount payable under or
      in
      connection with any of the Collateral or Purchased Items shall be or become
      evidenced by any promissory note, other instrument or chattel paper, such note,
      instrument or chattel paper shall be immediately delivered to Buyer, duly
      endorsed in a manner satisfactory to Buyer, to be itself held as a Purchased
      Item and/or Collateral, as applicable, pursuant to this Agreement, and the
      documents delivered in connection herewith.

     

    (j) Seller
      or
      Guarantor, as applicable, shall provide, or to cause to be provided, to Buyer
      the following financial and reporting information:

     

    (i) Within
      fifteen (15) calendar days after each month-end, a monthly reporting package
      substantially in the form of Exhibit
      III
      attached
      hereto;

     

    (ii) Within
      forty-five (45) calendar days after the last day of each of the first three
      fiscal quarters in any fiscal year, consolidated unaudited financial statements
      of Guarantor presented fairly in accordance with GAAP or, if such financial
      statements being delivered have been filed with the SEC pursuant to the
      requirements of the 1934 Act, or similar state securities laws, presented in
      accordance with applicable statutory and/or regulatory requirements and
      delivered to Buyer within the same time frame as are required to be filed in
      accordance with such applicable statutory or regulatory requirements, in either
      case accompanied by a properly completed and executed Officers’ Certificate in
      the form attached hereto as Exhibit
      XXII,
      including a statement of operations and a statement of changes in cash flows
      for
      such quarter and statement of net assets as of the end of such quarter, also
      certified as being true and correct by an Officers’ Certificate in the form
      attached hereto as Exhibit
      XXII,
      which
      shall also include a properly completed and executed Covenant Compliance
      Certificate in the form attached hereto as Exhibit
      XIX;

    
      
        
        

      

      
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    (iii) Within
      ninety (90) calendar days after the last day of its fiscal year, Guarantor’s
      consolidated audited financial statements, prepared by a nationally recognized
      independent certified public accounting firm and presented fairly in accordance
      with GAAP or, if such financial statements being delivered have been filed
      with
      the SEC pursuant to the requirements of the 1934 Act, or similar state
      securities laws, presented in accordance with applicable statutory and/or
      regulatory requirements and delivered to Buyer within the same time frame as
      are
      required to be filed in accordance with such applicable statutory and/or
      regulatory requirements, in either case accompanied by a properly completed
      and
      executed Officers’ Certificate in the form attached hereto as Exhibit
      XXII,
      including a statement of operations and a statement of changes in cash flows
      for
      such quarter and statement of net assets as of the end of such quarter
      accompanied by an unqualified report of the nationally recognized independent
      certified public accounting firm that prepared them, which shall also include
      a
      properly completed and executed Covenant Compliance Certificate in the form
      attached hereto as Exhibit
      XIX;
      and

     

    (iv) Copies
      of
      Guarantor’s Federal Income Tax returns, if any, delivered within thirty (30)
      days after the earlier of (A) filing or (B) the last filing extension
      period.

     

    (k) Seller
      shall make a representative available to Buyer every month for attendance at
      a
      telephone conference, the date of which to be mutually agreed upon by Buyer
      and
      Seller, regarding the status of each Purchased Asset, Seller’s compliance with
      the requirements of Articles
      11
      and
12,
      and any
      other matters relating to the Transaction Documents or Transactions that Buyer
      wishes to discuss with Seller. 

     

    (l) Seller
      and Guarantor shall at all times (i) comply with all contractual obligations,
      (ii) comply in all material respects with all laws, ordinances, rules,
      regulations and orders (including, without limitation, environmental laws)
      of
      any Governmental Authority or any other federal, state, municipal or other
      public authority having jurisdiction over Seller and Guarantor or any of its
      assets and Seller and Guarantor shall do or cause to be done all things
      necessary to preserve and maintain in full force and effect its legal existence,
      and all licenses material to its business and (iii) maintain and preserve its
      legal existence and all of its material rights, privileges, licenses and
      franchises necessary for the operation of its business (including, without
      limitation, preservation of all lending licenses held by Seller and of Seller’s
      status as a “qualified transferee” (however denominated) under all documents
      which govern the Purchased Assets).

     

    (m) Seller
      and Guarantor shall at all times keep proper books of records and accounts
      in
      which full, true and correct entries shall be made of its transactions fairly
      in
      accordance with GAAP, and set aside on its books from its earnings for each
      fiscal year all such proper reserves in accordance with GAAP.

     

    (n) Seller
      shall observe, perform and satisfy all the terms, provisions, covenants and
      conditions required to be observed, performed or satisfied by it, and shall
      pay
      when due all costs, fees and expenses required to be paid by it, under the
      Transaction Documents. Seller shall pay and discharge all taxes, levies, liens
      and other charges on its assets and on the Collateral that, in each case, in
      any
      manner would create any lien or charge upon the Collateral, other than any
      such
      taxes that are being appropriately contested in good faith by appropriate
      proceedings diligently conducted and with respect to which adequate reserves
      have been provided in accordance with GAAP.

    
      
        
        

      

      
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    (o) Seller
      will maintain records with respect to the Collateral and Purchased Items and
      the
      conduct and operation of its business with no less a degree of prudence than
      if
      the Collateral and Purchased Items were held by Seller for its own account
      and
      will furnish Buyer, upon reasonable request by Buyer or its designated
      representative, with reasonable information obtainable by Seller with respect
      to
      the Collateral and Purchased Items and the conduct and operation of its
      business.

     

    (p) Seller
      shall provide Buyer with reasonable access plus any such additional reports
      as
      Buyer may reasonably request. Upon reasonable notice (unless a Default shall
      have occurred and is continuing, in which case, no prior notice shall be
      required), during normal business hours, Seller shall allow Buyer to (i) review
      any operating statements, occupancy status and other property level information
      with respect to the underlying real estate directly or indirectly securing
      or
      supporting the Purchased Assets that either is in Seller’s possession or is
      available to Seller, (ii) examine, copy (at Buyer’s expense) and make extracts
      from its books and records, to inspect any of its Properties, and (iii) discuss
      Seller’s business and affairs with its officers.

     

    (q) Seller
      shall enter into Hedging Transactions with respect to each of the Hedge-Required
      Assets (subject to the definition of Concentration Limit) to the extent
      necessary to hedge interest rate risk associated with the Purchase Price on
      such
      Hedge-Required Assets, in a manner reasonably acceptable to Buyer, to the extent
      that such Hedging Transactions will not give rise to non-qualifying REIT income
      under section 856 of the Code. 

     

    (r) Seller
      shall take all such steps as Buyer deems necessary to perfect the security
      interest granted pursuant to Article 6
      in the
      Hedging Transactions, shall take such action as shall be necessary or advisable
      to preserve and protect Seller’s interest under all such Hedging Transactions
      (including, without limitation, requiring the posting of any required Additional
      Eligible Collateral thereunder, and hereby authorizes Buyer to take any such
      action that Seller fails to take after demand therefor by Buyer. Seller shall
      provide the Custodian with copies of all documentation relating to Hedging
      Transactions with Qualified Hedge Counterparties promptly after entering into
      same. All Hedging Transactions, if any, entered into by Seller with Buyer or
      any
      of its Affiliates in respect of any Purchased Asset shall be terminated
      contemporaneously with the repurchase of such Purchased Asset on the Repurchase
      Date therefor. 

     

    (s) Seller
      shall:

     

    (i) not,
      unless it shall have provided Buyer thirty (30) days’ prior written notice
      of such change and shall have first taken all action required by Buyer for
      the
      purpose of perfecting or protecting the lien and security interest of Buyer
      established hereunder, (A) cause or permit any change to be made to its
      name, organizational identification number, identity or corporate structure,
      (B) cause or permit any change to its jurisdiction of organization, (C)
      cause or permit the opening of any new chief executive office or the closing
      any
      such office of Seller, or (D) cause or permit any change in the places where
      the
      books and records pertaining to the Purchased Assets are held; 

    
      
        
        

      

      
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    (ii) pay
      and
      discharge all taxes, assessments and governmental charges or levies imposed
      on
      it or on its income or profits or on any of its Property prior to the date
      on
      which penalties attach thereto, except for any such tax, assessment, charge
      or
      levy the payment of which is being contested in good faith and by proper
      proceedings and against which adequate reserves are being maintained;
      and

     

    (iii) not
      cause
      or permit any change of control of Seller without providing Buyer with at least
      ten (10) Business Days prior written notice thereof.

     

    (t) At
      any
      time that a Purchased Asset is no longer an Eligible Asset, Seller shall
      repurchase such Purchased Asset no later than three (3) Business Days, subject
      to the applicable cure rights set forth in Article
      13(a)(xv),
      after
      receiving notice or gaining knowledge that such Purchased Asset is no longer
      an
      Eligible Asset.

     

    ARTICLE
      13.

     

    EVENTS
      OF DEFAULT; REMEDIES

     

    (a) Each
      of
      the following events shall constitute an “Event
      of Default”
under
      this Agreement:

     

    (i) Seller
      or
      Guarantor shall fail to repurchase Purchased Assets (including, if applicable,
      any Future Funding Amounts related to a Future Funding Transaction) upon the
      applicable Repurchase Date;

     

    (ii) Buyer
      shall fail to receive on any Remittance Date the accreted value of the Price
      Differential (less any amount of such Price Differential previously paid by
      Seller to Buyer) (including, without limitation, in the event the Income paid
      or
      distributed on or in respect of the Purchased Assets is insufficient to make
      such payment and Seller does not make such payment or cause such payment to
      be
      made) (except that such failure shall not be an Event of Default by Seller
      if
      sufficient Income, including Principal Payments (solely to the extent (A) such
      Principal Payments are otherwise payable to Seller and not Buyer or its
      Affiliates as of such date in accordance with the terms of this Agreement,
      (B)
      there is no outstanding, uncured Margin Deficit or Event of Default and (C)
      no
      event shall have occurred that could, in Buyer’s sole determination, lead to a
      future Margin Deficit or Event of Default (in each case, without regard to
      any
      cure periods)), is on deposit in the Depository Account and the Depository
      fails
      to remit such funds to Buyer);

     

    (iii) Seller
      or
      Guarantor shall fail to cure any Margin Deficit, to the extent such Margin
      Deficit equals or exceeds the Minimum Transfer Amount, in accordance with
Article 4
      of this
      Agreement;

     

    (iv) Seller
      or
      Guarantor shall fail to make any payment not otherwise addressed under this
      Article 13(a)
      owing to
      Buyer that has become due, whether by acceleration or otherwise under the terms
      of this Agreement, which failure is not remedied within three (3) Business
      Days
      of notice thereof;

    
      
        
        

      

      
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    (v) Seller
      shall default in the observance or performance of any agreement contained in
      Article 11
      of this
      Agreement and, such default shall not be cured within five (5) Business Days
      after notice by Buyer to Seller thereof;

     

    (vi) an
      Act of
      Insolvency occurs with respect to Seller or Guarantor;

     

    (vii) Seller
      or
      Guarantor shall admit to any Person its inability to, or its intention not
      to,
      perform any of its obligations hereunder;

     

    (viii) the
      Custodial Agreement, the Depository Agreement or any other Transaction Document
      or a replacement therefor reasonably acceptable to Buyer shall for whatever
      reason be terminated or cease to be in full force and effect, or the
      enforceability thereof shall be contested by Seller;

     

    (ix) Guarantor
      shall be in default under (i) any Indebtedness of Guarantor, which default
      (1)
      involves the failure to pay a matured obligation in excess of $50,000,000 with
      respect to Guarantor or (2) permits the acceleration of the maturity of
      obligations by any other party to or beneficiary with respect to such
      Indebtedness, if the aggregate amount of the Indebtedness in respect of which
      such default or defaults shall have occurred is at least $50,000,000 with
      respect to Guarantor; or (ii) any other material contract to which Guarantor
      is
      a party which default (1) involves the failure to pay a matured obligation
      of at
      least $50,000,000 or (2) permits the acceleration of the maturity of obligations
      by any other party to or beneficiary of such contract if the aggregate amount
      of
      such obligations is $50,000,000 with respect to Guarantor;

     

    (x) (i)
      Seller or an ERISA Affiliate shall engage in any “prohibited transaction” (as
      defined in Section 406 of ERISA or Section 4975 of the Code) involving
      any Plan that is not exempt from such Sections of ERISA and the Code,
      (ii) any material “accumulated funding deficiency” (as defined in
      Section 302 of ERISA), whether or not waived, shall exist with respect to
      any Plan or any Lien in favor of the PBGC or a Plan shall arise on the assets
      of
      Seller or any ERISA Affiliate, (iii) a Reportable Event (as referenced in
      Section 4043(b)(3) of ERISA) shall occur with respect to, or proceedings shall
      commence to have a trustee appointed, or a trustee shall be appointed, to
      administer or to terminate, any Plan, which Reportable Event or commencement
      of
      proceedings or appointment of a trustee is, in the reasonable opinion of Buyer,
      likely to result in the termination of such Plan for purposes of Title IV of
      ERISA, (iv) any Plan shall terminate for purposes of Title IV of ERISA,
      (v) Seller or any ERISA Affiliate shall, or in the reasonable opinion of
      Buyer is likely to, incur any liability in connection with a withdrawal from,
      or
      the insolvency or reorganization of, a Multiemployer Plan or (vi) any other
      event or condition shall occur or exist with respect to a Plan; and in each
      case
      in clauses (i) through (vi) above, such event or condition, together with all
      other such events or conditions, if any, could reasonably be expected to have
      a
      Material Adverse Effect;

     

    (xi) either
      (A) the Transaction Documents shall for any reason not cause, or shall cease
      to
      cause, Buyer to be the owner free of any adverse claim of any of the Purchased
      Assets, and such condition is not cured by Seller within five (5) Business
      Days
      after notice thereof from Buyer to Seller, or (B) if a Transaction is
      recharacterized as a secured financing, and the Transaction Documents with
      respect to any Transaction shall for any reason cease to create and maintain
      a
      valid first priority security interest in favor of Buyer in any of the Purchased
      Assets and the same is not cured within five (5) Business Days;

    
      
        
        

      

      
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    (xii) an
“Event
      of Default,” “Termination Event,” “Potential Event of Default” or other default
      or breach, however denominated, occurs under any Hedging Transaction on the
      part
      of Seller, or the counterparty to Seller on any such Hedging Transaction with
      a
      Qualified Hedge Counterparty ceases to be a Qualified Hedge Counterparty, that
      is otherwise not cured within any applicable cure period thereunder or, if
      no
      cure period exists thereunder, which is not cured by Seller within five (5)
      Business Days after notice thereof from an Affiliated Hedge Counterparty or
      Qualified Hedge Counterparty to Seller;

     

    (xiii) any
      governmental, regulatory, or self-regulatory authority shall have taken any
      action to remove, limit, restrict, suspend or terminate the rights, privileges,
      or operations of Seller or Guarantor, which suspension has a Material Adverse
      Effect in the determination of Buyer and that is not cured by Seller or
      Guarantor, as applicable, within five (5) Business Days after notice thereof
      from Buyer to Seller or Guarantor, as applicable;

     

    (xiv) any
      condition shall exist that constitutes a Material Adverse Effect in Buyer’s sole
      discretion exercised in good faith that is not cured by Seller or Guarantor,
      as
      applicable, within three (3) Business Days after notice thereof from Buyer
      to
      Seller or Guarantor, as applicable;

     

    (xv) any
      representation made by Seller to Buyer shall have been incorrect or untrue
      in
      any material respect when made or repeated or deemed to have been made or
      repeated (other than the representations and warranties of Seller set forth
      in
Articles 10(b)(xxi)
      or
10(b)(xxii))
      by
      Seller, which shall not be considered an Event of Default if incorrect or untrue
      in any material respect, provided
      Seller
      terminates the related Transaction, as applicable, and repurchases the related
      Purchased Assets on an Early Repurchase Date no later than three (3) Business
      Days after receiving notice of such incorrect or untrue representation; unless
      Seller shall have made any such representation with knowledge that it was
      materially incorrect or untrue at the time made; provided,
      however,
      if
      Buyer and Seller have agreed in good faith that (i) a breach of a representation
      is curable, (ii) such breach is non-monetary in nature and (iii) such breach
      is
      related only to the Purchased Assets, Seller
      shall have a fifteen (15) Business Day period to cure the breach after notice
      thereof from Buyer. To the extent the breach remains uncured after such fifteen
      (15) Business Day period, Seller must immediately repurchase the related
      Purchased Asset within one (1) Business Day; provided,
      that if
      Buyer determines that Seller is diligently seeking a cure to such breach, Buyer
      may, in its sole and absolute discretion, provide Seller with an additional
      fifteen (15) Business Day period to cure such breach, after which Seller must
      immediately repurchase the related Purchased Asset if its attempt to cure such
      breach by the expiration of such second cure period is
      unsuccessful;

    
      
        
        

      

      
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    (xvi) a
      final
      non-appealable judgment by any competent court in the United States of America
      for the payment of money (a) rendered against Seller in an amount greater than
      $250,000 or (b) rendered against Guarantor in an amount greater than
      $50,000,000, and remained undischarged and unpaid for a period of sixty (60)
      days, during which period execution of such judgment is not effectively stayed
      by bonding over or other means acceptable to Buyer;

     

    (xvii) if
      Seller
      shall breach or fail to perform any of the terms, covenants, obligations or
      conditions of this Agreement, other than as specifically otherwise referred
      to
      in this definition of “Event
      of Default”,
      and
      such breach or failure to perform is not remedied within the earlier of seven
      (7) days after (a) delivery of notice thereof to Seller by Buyer, or (b) actual
      knowledge on the part of Seller of such breach or failure to perform;

     

    (xviii) if
      the
      Guarantor shall breach or fail to perform any of the terms, covenants,
      obligations or conditions of the Guarantee Agreement, and such breach or failure
      to perform is not remedied within the earlier of three (3) Business Days after
      (a) delivery of notice thereof to any Guarantor by Buyer, or (b) actual
      knowledge on the part of any Guarantor of such breach or failure to perform;
      and

     

    (xix) the
      Guarantee Agreement or a replacement therefor acceptable to Buyer shall for
      whatever reason be terminated or cease to be in full force and effect, or the
      enforceability thereof shall be contested by either Guarantor or
      Seller.

     

    (b) After
      the
      occurrence and during the continuance of an Event of Default, Seller hereby
      appoints Buyer as attorney-in-fact of Seller for the purpose of carrying out
      the
      provisions of this Agreement and taking any action and executing or endorsing
      any instruments that Buyer may deem necessary or advisable to accomplish the
      purposes hereof, which appointment as attorney-in-fact is irrevocable and
      coupled with an interest. If an Event of Default shall occur and be continuing
      with respect to Seller, the following rights and remedies shall be available
      to
      Buyer:

     

    (i) At
      the
      option of Buyer, exercised by written notice to Seller (which option shall
      be
      deemed to have been exercised, even if no notice is given, immediately upon
      the
      occurrence of an Act of Insolvency with respect to Seller or Guarantor), the
      Repurchase Date for each Transaction hereunder shall, if it has not already
      occurred, be deemed immediately to occur (the date on which such option is
      exercised or deemed to have been exercised being referred to hereinafter as
      the
“Accelerated
      Repurchase Date”).

     

    (ii) If
      Buyer
      exercises or is deemed to have exercised the option referred to in Article 13(b)(i)
      of this
      Agreement:

     

    (A) Seller’s
      obligations hereunder to repurchase all Purchased Assets shall become
      immediately due and payable on and as of the Accelerated Repurchase Date;
      and

     

    (B) to
      the
      extent permitted by applicable law, the Repurchase Price with respect to each
      Transaction (determined as of the Accelerated Repurchase Date) shall be
      increased by the aggregate amount obtained by daily application of, on a 360-day
      per year basis for the actual number of days during the period from and
      including the Accelerated Repurchase Date to but excluding the date of payment
      of the Repurchase Price (as so increased), (x) the Pricing Rate for such
      Transaction multiplied by (y) the Repurchase Price for such Transaction
      (decreased by (I) any amounts actually remitted to Buyer by the Depository
      or
      Seller from time to time pursuant to Article
      5
      of this
      Agreement and applied to such Repurchase Price, and (II) any amounts applied
      to
      the Repurchase Price pursuant to Article 13(b)(iii)
      of this
      Agreement); and 

    
      
        
        

      

      
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    (C) the
      Custodian shall, upon the request of Buyer, deliver to Buyer all instruments,
      certificates and other documents then held by the Custodian relating to the
      Purchased Assets.

     

    (iii) Upon
      the
      occurrence of an Event of Default with respect to Seller, Buyer may (A)
      immediately sell, at a public or private sale in a commercially reasonable
      manner and at such price or prices as Buyer may deem satisfactory any or all
      of
      the Purchased Assets, and/or (B) in its sole discretion elect, in lieu of
      selling all or a portion of such Purchased Assets, to give Seller credit for
      such Purchased Assets in an amount equal to the Market Value of such Purchased
      Assets against the aggregate unpaid Repurchase Price for such Purchased Assets
      and any other amounts owing by Seller under the Transaction Documents. The
      proceeds of any disposition of Purchased Assets effected pursuant to this
Article
      13(b)(iii)
      shall be
      applied, (v) first, to the costs and expenses incurred by Buyer in connection
      with Seller’s default; (w) second, to actual, out-of-pocket expenses, including,
      but not limited to, costs of cover and/or Hedging Transactions, if any; (x)
      third, to the Repurchase Price; (y) fourth, to any Breakage Costs; and (z)
      fifth, to return any excess to Seller. Seller may bid in any public or private
      sale of the Purchased Assets.

     

    (iv) The
      parties recognize that it may not be possible to purchase or sell all of the
      Purchased Assets on a particular Business Day, or in a transaction with the
      same
      purchaser, or in the same manner because the market for such Purchased Assets
      may not be liquid. In view of the nature of the Purchased Assets, the parties
      agree that liquidation of a Transaction or the Purchased Assets does not require
      a public purchase or sale and that a good faith private purchase or sale shall
      be deemed to have been made in a commercially reasonable manner. Accordingly,
      Buyer may elect, in its sole discretion, the time and manner of liquidating
      any
      Purchased Assets, and nothing contained herein shall (A) obligate Buyer to
      liquidate any Purchased Assets on the occurrence and during the continuance
      of
      an Event of Default or to liquidate all of the Purchased Assets in the same
      manner or on the same Business Day or (B) constitute a waiver of any right
      or
      remedy of Buyer.

     

    (v) Seller
      shall be liable to Buyer for (A) the amount of all actual out-of-pocket
      expenses, including reasonable legal fees and expenses, actually incurred by
      Buyer in connection with or as a consequence of an Event of Default with respect
      to Seller and (B) all costs incurred by Buyer in connection with Hedging
      Transactions in the event that Seller, from and after an Event of Default,
      takes
      any action to impede or otherwise affect Buyer’s remedies under this
      Agreement.

    
      
        
        

      

      
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    (vi) Buyer
      shall have, in addition to its rights and remedies under the Transaction
      Documents, all of the rights and remedies provided by applicable federal, state,
      foreign (where relevant), and local laws (including, without limitation, if
      the
      Transactions are recharacterized as secured financings, the rights and remedies
      of a secured party under the UCC of the State of New York, to the extent that
      the UCC is applicable, and the right to offset any mutual debt and claim),
      in
      equity, and under any other agreement between Buyer and Seller. Without limiting
      the generality of the foregoing, Buyer shall be entitled to set off the proceeds
      of the liquidation of the Purchased Assets against all of Seller’s obligations
      to Buyer under this Agreement, without prejudice to Buyer’s right to recover any
      deficiency.

     

    (vii) Subject
      to the notice and cure periods contained herein, where applicable, Buyer may
      exercise any or all of the remedies available to Buyer immediately upon the
      occurrence of an Event of Default with respect to Seller and at any time during
      the continuance thereof. All rights and remedies arising under the Transaction
      Documents, as amended from time to time, are cumulative and not exclusive of
      any
      other rights or remedies that Buyer may have.

     

    (viii) Buyer
      may
      enforce its rights and remedies hereunder without prior judicial process or
      hearing, and Seller hereby expressly waives any defenses Seller might otherwise
      have to require Buyer to enforce its rights by judicial process. Seller also
      waives, to the extent permitted by law, any defense Seller might otherwise
      have
      arising from the use of nonjudicial process, disposition of any or all of the
      Purchased Assets, or from any other election of remedies. Seller recognizes
      that
      nonjudicial remedies are consistent with the usages of the trade, are responsive
      to commercial necessity and are the result of a bargain at arm’s
      length.

     

    ARTICLE
      14.

     

    SINGLE
      AGREEMENT

     

    Buyer
      and
      Seller acknowledge that, and have entered hereinto and will enter into each
      Transaction hereunder in consideration of and in reliance upon the fact that,
      all Transactions hereunder constitute a single business and contractual
      relationship and have been made in consideration of each other. Accordingly,
      each of Buyer and Seller agrees (i) to perform all of its obligations in respect
      of each Transaction hereunder, and that a default in the performance of any
      such
      obligations shall constitute a default by it in respect of all Transactions
      hereunder, (ii) that each of them shall be entitled to set off claims and apply
      property held by them in respect of any Transaction against obligations owing
      to
      them in respect of any other Transactions hereunder and (iii) that payments,
      deliveries and other transfers made by either of them in respect of any
      Transaction shall be deemed to have been made in consideration of payments,
      deliveries and other transfers in respect of any other Transactions hereunder,
      and the obligations to make any such payments, deliveries and other transfers
      may be applied against each other and netted.

     

    
      
        
        

      

      
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    ARTICLE
      15.

     

    RECORDING
      OF COMMUNICATIONS

     

    EACH
      OF BUYER AND SELLER SHALL HAVE THE RIGHT (BUT NOT THE OBLIGATION) FROM TIME
      TO
      TIME TO MAKE OR CAUSE TO BE MADE TAPE RECORDINGS OF COMMUNICATIONS BETWEEN
      ITS
      EMPLOYEES, IF ANY, AND THOSE OF THE OTHER PARTY WITH RESPECT TO TRANSACTIONS;
      PROVIDED,
      HOWEVER,
      THAT SUCH RIGHT TO RECORD COMMUNICATIONS SHALL BE LIMITED TO COMMUNICATIONS
      OF
      EMPLOYEES TAKING PLACE ON THE TRADING FLOOR OF THE APPLICABLE PARTY. EACH OF
      BUYER AND SELLER HEREBY CONSENTS TO THE ADMISSIBILITY OF SUCH TAPE RECORDINGS
      IN
      ANY COURT, ARBITRATION, OR OTHER PROCEEDINGS, AND AGREES THAT A DULY
      AUTHENTICATED TRANSCRIPT OF SUCH A TAPE RECORDING SHALL BE DEEMED TO BE A
      WRITING CONCLUSIVELY EVIDENCING THE PARTIES’ AGREEMENT.

     

    ARTICLE
      16.

     

    NOTICES
      AND OTHER COMMUNICATIONS

     

    Unless
      otherwise provided in this Agreement, all notices, consents, approvals and
      requests required or permitted hereunder shall be given in writing and shall
      be
      effective for all purposes if hand delivered or sent by (a) hand delivery,
      with
      proof of delivery, (b) certified or registered United States mail, postage
      prepaid, (c) expedited prepaid delivery service, either commercial or United
      States Postal Service, with proof of delivery or (d) by telecopier (with
      answerback acknowledged) provided
      that
      such telecopied notice must also be delivered by one of the means set forth
      in
      (a), (b) or (c) above, to the address specified in Annex
      I
      hereto
      or at such other address and person as shall be designated from time to time
      by
      any party hereto, as the case may be, in a written notice to the other parties
      hereto in the manner provided for in this Article
      16.
      A
      notice shall be deemed to have been given: (w) in the case of hand delivery,
      at
      the time of delivery, (x) in the case of registered or certified mail, when
      delivered or the first attempted delivery on a Business Day, (y) in the case
      of
      expedited prepaid delivery upon the first attempted delivery on a Business
      Day,
      or (z) in the case of telecopier, upon receipt of answerback confirmation,
      provided
      that
      such telecopied notice was also delivered as required in this Article
      16.
      A party
      receiving a notice that does not comply with the technical requirements for
      notice under this Article
      16
      may
      elect to waive any deficiencies and treat the notice as having been properly
      given.

     

    ARTICLE
      17.

     

    ENTIRE
      AGREEMENT; SEVERABILITY

     

    This
      Agreement shall supersede any existing agreements between the parties containing
      general terms and conditions for repurchase transactions. Each provision and
      agreement herein shall be treated as separate and independent from any other
      provision or agreement herein and shall be enforceable notwithstanding the
      unenforceability of any such other provision or agreement.

     

    
      
        
        

      

      
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    ARTICLE
      18.

     

    NON-ASSIGNABILITY

     

    (a) Subject
      to Article
      18(b)
      below,
      Seller may not assign any of its rights or obligations under this Agreement
      without the prior written consent of Buyer (not to be unreasonably withheld
      or
      delayed) and any attempt by Seller to assign any of its rights or obligations
      under this Agreement without the prior written consent of Buyer shall be null
      and void. Buyer may, upon notice to Seller, without consent of Seller, sell
      to
      one or more banks, financial institutions or other entities (“Participants”)
      participating interests in any Transaction, its interest in the Purchased
      Assets, or any other interest of Buyer under this Agreement. Buyer may, at
      any
      time and from time to time, assign to any Person (an “Assignee”
and
      together with Participants, each a “Transferee”
and
      collectively, the “Transferees”)
      all or
      any part of its rights its interest in the Purchased Assets, or any other
      interest of Buyer under this Agreement, except that, prior to an Event of
      Default, no such Transferee shall be one of the Prohibited Transferees set
      forth
      on Exhibit
      IX
      hereto.
      Seller and Guarantor agree to cooperate with Buyer in connection with any such
      assignment, transfer or sale of participating interest, and to enter into such
      restatements of, and amendments, supplements and other modifications to, this
      Agreement in order to give effect to such assignment, transfer or
      sale.

     

    (b) Title
      to
      all Purchased Assets and Purchased Items shall pass to Buyer and Buyer shall
      have free and unrestricted use of all Purchased Assets. Nothing in this
      Agreement shall preclude Buyer from engaging in repurchase transactions with
      the
      Purchased Assets and Purchased Items or otherwise selling, pledging, repledging,
      transferring, hypothecating, or rehypothecating the Purchased Assets and
      Purchased Items, all on terms that Buyer may determine in its sole discretion;
      provided,
      however,
      that
      Buyer shall (i) provide Seller with the identity of any third party involved
      in
      such transaction, (ii) transfer the Purchased Assets to Seller on the applicable
      Repurchase Date free and clear of any pledge, lien, security interest,
      encumbrance, charge or other adverse claim on any of the Purchased Assets and
      (iii) credit Income and principal payments to Seller in accordance with
Article
      5
      hereof.
      Nothing contained in this Agreement shall obligate Buyer to segregate any
      Purchased Assets or Purchased Items transferred to Buyer by Seller.

     

    (c) In
      the
      event that Buyer sells a participating interest in any Transaction, or assigns
      any of its rights or interests in the Purchased Asset or other interests under
      this Agreement, Buyer shall retain certain decision-making rights and duties
      under this Agreement, including, among other things, that Buyer shall have
      the
      right to approve in its sole discretion any future Transactions and Future
      Funding Transactions.

     

    ARTICLE
      19.

     

    GOVERNING
      LAW

     

    THIS
      AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
      THE
      STATE OF NEW YORK PURSUANT TO SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS
      LAW.

     

    
      
        
        

      

      
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    ARTICLE
      20.

     

    NO
      WAIVERS, ETC.

     

    No
      express or implied waiver of any Event of Default by either party shall
      constitute a waiver of any other Event of Default and no exercise of any remedy
      hereunder by any party shall constitute a waiver of its right to exercise any
      other remedy hereunder. No modification or waiver of any provision of this
      Agreement and no consent by any party to a departure herefrom shall be effective
      unless and until such shall be in writing and duly executed by both of the
      parties hereto. Without limitation on any of the foregoing, the failure to
      give
      a notice pursuant to Articles 4(a)
      or
4(b)
      hereof
      will not constitute a waiver of any right to do so at a later date.

     

    ARTICLE
      21.

     

    USE
      OF EMPLOYEE PLAN ASSETS

     

    (a) If
      assets
      of an employee benefit plan subject to any provision of ERISA
      are
      intended to be used by either party hereto (the “Plan
      Party”)
      in a
      Transaction, the Plan Party shall so notify the other party prior to the
      Transaction. The Plan Party shall represent in writing to the other party that
      the Transaction does not constitute a prohibited transaction under ERISA or
      is
      otherwise exempt therefrom, and the other party may proceed in reliance thereon
      but shall not be required so to proceed.

     

    (b) Subject
      to the last sentence of subparagraph (a) of this Article
      21,
      any
      such Transaction shall proceed only if Seller furnishes or has furnished to
      Buyer its most recent available audited statement of its financial condition
      and
      its most recent subsequent unaudited statement of its financial
      condition.

     

    (c) By
      entering into a Transaction, pursuant to this Article
      21,
      Seller
      shall be deemed (i) to represent to Buyer that since the date of Seller’s
      latest such financial statements, there has been no material adverse change
      in
      Seller’s financial condition that Seller has not disclosed to Buyer, and (ii) to
      agree to provide Buyer with future audited and unaudited statements of its
      financial condition as they are issued, so long as it is Seller in any
      outstanding Transaction involving a Plan Party.

     

    ARTICLE
      22.

     

    INTENT

     

    (a) The
      parties recognize that each Transaction is a “repurchase agreement” as that term
      is defined in Section 101(47) of Title 11 of the United States Code, as amended
      (except insofar as the type of Assets subject to such Transaction or the term
      of
      such Transaction would render such definition inapplicable), and a “securities
      contract” as that term is defined in Section 741 of Title 11 of the United
      States Code, as amended (except insofar as the type of assets subject to such
      Transaction would render such definition inapplicable).

     

    (b) It
      is
      understood that either party’s right to liquidate Assets delivered to it in
      connection with Transactions hereunder or to exercise any other remedies
      pursuant to Article 13
      hereof
      is
      a contractual right to liquidate such Transaction as described in Sections
      555,
      559 and 561 of Title 11 of the United States Code, as amended.

    
      
        
        

      

      
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    (c) The
      parties agree and acknowledge that if a party hereto is an “insured depository
      institution,” as such term is defined in the Federal Deposit Insurance Act, as
      amended (“FDIA”),
      then
      each Transaction hereunder is a “qualified financial contract,” as that term is
      defined in the FDIA and any rules, orders or policy statements thereunder
      (except insofar as the type of assets subject to such Transaction would render
      such definition inapplicable).

     

    (d) It
      is
      understood that this Agreement constitutes a “netting contract” as defined in
      and subject to Title IV of the Federal Deposit Insurance Corporation Improvement
      Act of 1991 (“FDICIA”)
      and
      each payment entitlement and payment obligation under any Transaction hereunder
      shall constitute a “covered contractual payment entitlement” or “covered
      contractual payment obligation”, respectively, as defined in and subject to
      FDICIA (except insofar as one or both of the parties is not a “financial
      institution”
as
      that
      term is defined in FDICIA).

     

    (e) It
      is
      understood that this Agreement constitutes a “master netting agreement” as
      defined in Section 101(38A) of Title 11 of the United States Code, as amended,
      and as used in Section 561 of Title 11 of the United States Code, as
      amended.

     

    (f) It
      is the
      intention of the parties that, for U.S. Federal, state and local income and
      franchise tax purposes and for accounting purposes, each Transaction constitute
      a financing, and that Seller be (except to the extent that Buyer shall have
      exercised its remedies following an Event of Default) the owner of the Purchased
      Assets for such purposes. Unless prohibited by applicable law, Seller and Buyer
      agree to treat the Transactions as described in the preceding sentence on any
      and all filings with any U.S. Federal, state, or local taxing
      authority.

     

    ARTICLE
      23.

     

    DISCLOSURE
      RELATING TO CERTAIN FEDERAL PROTECTIONS

     

    The
      parties acknowledge that they have been advised that:

     

    (a) in
      the
      case of Transactions in which one of the parties is a broker or dealer
      registered with the Securities and Exchange Commission (“SEC”)
      under
      Section 15 of the Securities Exchange Act of 1934 (“1934
      Act”),
      the
      Securities Investor Protection Corporation has taken the position that the
      provisions of the Securities Investor Protection Act of 1970 (“SIPA”)
      do not
      protect the other party with respect to any Transaction hereunder;

     

    (b) in
      the
      case of Transactions in which one of the parties is a government securities
      broker or a government securities dealer registered with the SEC under Section
      15C of the 1934 Act, SIPA will not provide protection to the other party with
      respect to any Transaction hereunder; and

     

    (c) in
      the
      case of Transactions in which one of the parties is a financial institution,
      funds held by the financial institution pursuant to a Transaction hereunder
      are
      not a deposit and therefore are not insured by the Federal Deposit Insurance
      Corporation or the National Credit Union Share Insurance Fund, as
      applicable.

     

    
      
        
        

      

      
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    ARTICLE
      24.

     

    CONSENT
      TO JURISDICTION; WAIVER OF JURY TRIAL

     

    (a) Each
      party irrevocably and unconditionally (i) submits to the non-exclusive
      jurisdiction of any United States Federal or New York State court sitting in
      Manhattan, and any appellate court from any such court, solely for the purpose
      of any suit, action or proceeding brought to enforce its obligations under
      this
      Agreement or relating in any way to this Agreement or any Transaction under
      this
      Agreement and (ii) waives, to the fullest extent it may effectively do so,
      any
      defense of an inconvenient forum to the maintenance of such action or proceeding
      in any such court and any right of jurisdiction on account of its place of
      residence or domicile.

     

    (b) To
      the
      extent that either party has or hereafter may acquire any immunity (sovereign
      or
      otherwise) from any legal action, suit or proceeding, from jurisdiction of
      any
      court or from set off or any legal process (whether service or notice,
      attachment prior to judgment, attachment in aid of execution of judgment,
      execution of judgment or otherwise) with respect to itself or any of its
      property, such party hereby irrevocably waives and agrees not to plead or claim
      such immunity in respect of any action brought to enforce its obligations under
      this Agreement or relating in any way to this Agreement or any Transaction
      under
      this Agreement.

     

    (c) The
      parties hereby irrevocably consent to the service of any summons and complaint
      and any other process by the mailing of copies of such process to them at their
      respective address specified herein. The parties hereby agree that a final
      judgment in any such action or proceeding shall be conclusive and may be
      enforced in other jurisdictions by suit on the judgment or in any other manner
      provided by law. Nothing in this Article
      24
      shall
      affect the right of Buyer to serve legal process in any other manner permitted
      by law or affect the right of Buyer to bring any action or proceeding against
      Seller or its property in the courts of other jurisdictions.

     

    (d) EACH
      OF
      THE PARTIES HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY
      ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT,
      ANY OTHER TRANSACTION DOCUMENT OR ANY INSTRUMENT OR DOCUMENT DELIVERED HEREUNDER
      OR THEREUNDER.

     

    ARTICLE
      25.

     

    NO
      RELIANCE

     

    Each
      of
      Buyer and Seller hereby acknowledges, represents and warrants to the other
      that,
      in connection with the negotiation of, the entering into, and the performance
      under, the Transaction Documents and each Transaction thereunder:

     

    (a) It
      is not
      relying (for purposes of making any investment decision or otherwise) upon
      any
      advice, counsel or representations (whether written or oral) of the other party
      to the Transaction Documents, other than the representations expressly set
      forth
      in the Transaction Documents;

    
      
        
        

      

      
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    (b) It
      has
      consulted with its own legal, regulatory, tax, business, investment, financial
      and accounting advisors to the extent that it has deemed necessary, and it
      has
      made its own investment, hedging and trading decisions (including decisions
      regarding the suitability of any Transaction) based upon its own judgment and
      upon any advice from such advisors as it has deemed necessary and not upon
      any
      view expressed by the other party;

     

    (c) It
      is a
      sophisticated and informed Person that has a full understanding of all the
      terms, conditions and risks (economic and otherwise) of the Transaction
      Documents and each Transaction thereunder and is capable of assuming and willing
      to assume (financially and otherwise) those risks;

     

    (d) It
      is
      entering into the Transaction Documents and each Transaction thereunder for
      the
      purposes of managing its borrowings or investments or hedging its underlying
      assets or liabilities and not for purposes of speculation; and

     

    (e) It
      is not
      acting as a fiduciary or financial, investment or commodity trading advisor
      for
      the other party and has not given the other party (directly or indirectly
      through any other Person) any assurance, guarantee or representation whatsoever
      as to the merits (either legal, regulatory, tax, business, investment, financial
      accounting or otherwise) of the Transaction Documents or any Transaction
      thereunder.

     

    ARTICLE
      26.

     

    INDEMNITY

     

    Seller
      hereby agrees to indemnify Buyer, Buyer’s designee, Buyer’s Affiliates and each
      of its officers, directors, employees and agents (“Indemnified
      Parties”)
      from
      and against any and all actual out-of-pocket liabilities, obligations, losses,
      damages, penalties, actions, judgments, suits, taxes (including stamp, excise,
      sales or other taxes that may be payable or determined to be payable with
      respect to any of the Purchased Assets, Purchased Items or Collateral or in
      connection with any of the transactions contemplated by this Agreement and
      the
      documents delivered in connection herewith, other than income, withholding
      or
      other taxes imposed upon Buyer), fees, costs, expenses (including attorneys
      fees
      and disbursements) or disbursements (all of the foregoing, collectively
“Indemnified
      Amounts”)
      that
      may at any time (including, without limitation, such time as this Agreement
      shall no longer be in effect and the Transactions shall have been repaid in
      full) be imposed on or asserted against any Indemnified Party in any way
      whatsoever arising out of or in connection with, or relating to, this Agreement
      or any Transactions hereunder or any action taken or omitted to be taken by
      any
      Indemnified Party under or in connection with any of the foregoing other than,
      in each case, any amounts that fall within the above definition but result
      from
      the gross negligence, bad faith, willful misconduct, or breach of this Agreement
      by any Indemnified Party. Without limiting the generality of the foregoing,
      Seller agrees to hold Buyer harmless from and indemnify Buyer against all
      Indemnified Amounts with respect to all Purchased Assets relating to or arising
      out of any violation or alleged violation of any environmental law, rule or
      regulation or any consumer credit laws, including without limitation ERISA,
      the
      Truth in Lending Act and/or the Real Estate Settlement Procedures Act other
      than
      those resulting from the gross negligence, bad faith, willful misconduct, or
      breach of this Agreement by any Indemnified Party. In any suit, proceeding
      or
      action brought by Buyer in connection with any Purchased Asset for any sum
      owing
      thereunder, or to enforce any provisions of any Purchased Asset, Seller will
      save, indemnify and hold Buyer harmless from and against all expense (including
      reasonable attorney’s fees), loss or damage suffered by reason of any defense,
      set-off, counterclaim, recoupment or reduction or liability whatsoever of the
      account debtor or obligor thereunder, arising out of a breach by Seller of
      any
      obligation thereunder or arising out of any other agreement, indebtedness or
      liability at any time owing to or in favor of such account debtor or obligor
      or
      its successors from Seller. Seller also agrees to reimburse Buyer as and when
      billed by Buyer for all Buyer’s reasonable costs and out-of-pocket expenses
      incurred in connection with Buyer’s due diligence reviews with respect to the
      Purchased Assets (including, without limitation, those incurred pursuant to
      Article 27
      and
Article 3)
      which,
      for Senior Mortgage Loans shall not exceed the applicable Legal Fee Cap
      (including all Pre-Purchase Legal Expenses, even if the underlying prospective
      Transaction for which they were incurred does not take place for any reason).
      Seller hereby acknowledges that, the obligation of Seller hereunder is a
      recourse obligation of Seller.

     

    
      
        
        

      

      
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    ARTICLE
      27.

     

    DUE
      DILIGENCE

     

    Seller
      acknowledges that Buyer has the right to perform continuing due diligence
      reviews with respect to the Purchased Assets, for purposes of verifying
      compliance with the representations, warranties and specifications made
      hereunder, or otherwise, and Seller agrees that upon reasonable prior notice
      to
      Seller, Buyer or its authorized representatives will be permitted during normal
      business hours to examine, inspect, and make copies and extracts of, the
      Purchased Asset Files, Servicing Records and any and all documents, records,
      agreements, instruments or information relating to such Purchased Assets in
      the
      possession or under the control of Seller, any other servicer or subservicer
      and/or the Custodian. Seller agrees to reimburse Buyer for any and all
      out-of-pocket costs and expenses incurred by Buyer with respect to continuing
      due diligence on the Purchased Assets during the term of this Agreement, which
      shall be paid by Seller to Buyer within (10) days after receipt of an invoice
      therefor. Seller also shall make available to Buyer a knowledgeable financial
      or
      accounting officer for the purpose of answering questions respecting the
      Purchased Asset Files and the Purchased Assets. Without limiting the generality
      of the foregoing, Seller acknowledges that Buyer may enter into Transactions
      with Seller based solely upon the information provided by Seller to Buyer and
      the representations, warranties and covenants contained herein, and that Buyer,
      at its option, has the right at any time to conduct a partial or complete due
      diligence review on some or all of the Purchased Assets. Buyer may underwrite
      such Purchased Assets itself or engage a third party underwriter to perform
      such
      underwriting. Seller agrees to cooperate with Buyer and any third party
      underwriter in connection with such underwriting, including, but not limited
      to,
      providing Buyer and any third party underwriter with access to any and all
      documents, records, agreements, instruments or information relating to such
      Purchased Assets in the possession, or under the control, of Seller. Seller
      further agrees that Seller shall reimburse Buyer for any and all reasonable
      attorneys’ fees, costs and expenses incurred by Buyer in connection with
      continuing due diligence on Eligible Assets and Purchased Assets.

     

    
      
        
        

      

      
        77

        
          

        

      

      
        
        

      

    

     

    ARTICLE
      28.

     

    SERVICING

     

    (a) Notwithstanding
      the purchase and sale of the Purchased Assets hereby, Seller, Servicer or a
      third party servicer reasonably approved by Buyer shall service the Purchased
      Assets that are Eligible Loans (such Purchased Assets, “Serviced
      Assets”)
      for
      the benefit of Buyer and, if Buyer shall exercise its rights to pledge or
      hypothecate the Serviced Assets prior to the Repurchase Date pursuant to
Article
      8,
      for the
      benefit of Buyer’s assigns. Seller shall service or cause Servicer to service
      the Serviced Assets at Seller’s sole cost and for the benefit of Buyer in
      accordance with Accepted Servicing Practices approved by Buyer in the exercise
      of its reasonable business judgment and maintained by other prudent mortgage
      or
      mezzanine lenders with respect to mortgage and/or mezzanine loans similar to
      the
      Serviced Assets, provided,
      however,
      that
      the obligations of Seller to service any of the Serviced Assets shall cease,
      at
      Buyer’s option, upon the earliest of (i) an Event of Default, or (ii) the
      delivery by Buyer to Seller of at least five (5) days’ prior written notice of
      the decision by Buyer to transfer the servicing rights of any or all of the
      Serviced Assets to either Servicer or another third party servicer selected
      by
      Buyer. In either case, Seller shall take all actions necessary to effectuate
      the
      underlying servicing transfer as expeditiously as possible. Notwithstanding
      the
      foregoing, neither Seller nor Servicer shall take any material action or effect
      any modification or amendment to any Purchased Asset without first having given
      prior notice thereof to Buyer in each such instance and receiving the prior
      written consent of Buyer.

     

    (b) Seller
      agrees that Buyer is the owner of all servicing records, including but not
      limited to any and all servicing agreements and pooling and servicing agreements
      (including, without limitation any “Interim Servicing Agreement” with Servicer)
      (collectively, the “Servicing
      Agreements”),
      files, documents, records, data bases, computer tapes, copies of computer tapes,
      proof of insurance coverage, insurance policies, appraisals, other closing
      documentation, payment history records, and any other records relating to or
      evidencing the servicing of Purchased Assets (the “Servicing
      Records”)
      so
      long as the Purchased Assets are subject to this Agreement. Seller grants Buyer
      a security interest in all servicing fees and rights relating to the Purchased
      Assets and all Servicing Records to secure the obligation of Seller or its
      designee to service in conformity with this Article
      28
      and any
      other obligation of Seller to Buyer. Seller covenants to safeguard such
      Servicing Records and to deliver them promptly to Buyer or its designee
      (including the Custodian) at Buyer’s request.

     

    (c) Upon
      the
      occurrence and during the continuance of an Event of Default, Buyer may, in
      its
      sole discretion, (i) sell its right to the Purchased Assets on a servicing
      released basis or (ii) terminate Seller, Servicer or any sub-servicer of the
      Purchased Assets with or without cause, in each case without payment of any
      termination fee.

     

    (d) Seller
      shall not employ sub-servicers to service the Purchased Assets without the
      prior
      written approval of Buyer not to be unreasonably withheld. If the Purchased
      Assets are serviced by a sub-servicer, Seller shall irrevocably assign all
      rights, title and interest (if any) in the Servicing Agreements in the Purchased
      Assets to Buyer.

     

    (e) Seller
      shall cause Servicer or any sub-servicers engaged by Seller to execute a letter
      agreement with Buyer acknowledging Buyer’s security interest and agreeing that
      it shall deposit all Income with respect to the Purchased Assets in the
      Depository Account, and so long as a Purchased Asset is subject to a
      Transaction, following notice from Buyer to Seller of an Event of Default under
      this Agreement, Servicer shall take no action under this Agreement with regard
      to such Purchased Asset other than as specifically directed by
      Buyer.

    
      
        
        

      

      
        78

        
          

        

      

      
        
        

      

    

     

    (f) The
      payment of servicing fees shall be subordinate to payment of amounts outstanding
      under any Transaction and this Agreement.

     

    ARTICLE
      29.

     

    MISCELLANEOUS

     

    (a) All
      rights, remedies and powers of Buyer hereunder and in connection herewith are
      irrevocable and cumulative, and not alternative or exclusive, and shall be
      in
      addition to all other rights, remedies and powers of Buyer whether under law,
      equity or agreement. In addition to the rights and remedies granted to it in
      this Agreement, to the extent this Agreement is determined to create a security
      interest, Buyer shall have all rights and remedies of a secured party under
      the
      UCC.

     

    (b) The
      Transaction Documents may be executed in counterparts, each of which so executed
      shall be deemed to be an original, but all of such counterparts shall together
      constitute but one and the same instrument.

     

    (c) The
      headings in the Transaction Documents are for convenience of reference only
      and
      shall not affect the interpretation or construction of the Transaction
      Documents.

     

    (d) Without
      limiting the rights and remedies of Buyer under the Transaction Documents,
      Seller shall pay Buyer’s reasonable actual out-of-pocket costs and expenses,
      including reasonable fees and expenses of accountants, attorneys and advisors,
      incurred in connection with the preparation, negotiation, execution and
      consummation of, and any amendment, supplement or modification to, the
      Transaction Documents and the Transactions thereunder, whether or not such
      Transaction Document (or amendment thereto) or Transaction is ultimately
      consummated. Seller agrees to pay Buyer on demand all costs and expenses
      (including reasonable expenses for legal services of every kind) of any
      subsequent enforcement of any of the provisions hereof, or of the performance
      by
      Buyer of any obligations of Seller in respect of the Purchased Assets, or any
      actual or attempted sale, or any exchange, enforcement, collection, compromise
      or settlement in respect of any of the Collateral or Purchased Items and for
      the
      custody, care or preservation of the Collateral or Purchased Items (including
      insurance costs) and defending or asserting rights and claims of Buyer in
      respect thereof, by litigation or otherwise. In addition, Seller agrees to
      pay
      Buyer on demand all reasonable costs and expenses (including reasonable expenses
      for legal services) incurred in connection with the maintenance of the
      Depository Account and registering the Collateral and Purchased Items in the
      name of Buyer or its nominee. All such expenses shall be recourse obligations
      of
      Seller to Buyer under this Agreement.

     

    (e) In
      addition to any rights now or hereafter granted under applicable law or
      otherwise, and not by way of limitation of such rights, Seller hereby grants
      to
      Buyer and its Affiliates a right of offset, to secure repayment of all amounts
      owing to Buyer or its Affiliates by Seller under the Transaction Documents,
      upon
      any and all monies, securities, collateral or other property of Seller and
      the
      proceeds therefrom, now or hereafter held or received by Buyer or its Affiliates
      or any entity under the control of Buyer or its Affiliates and its respective
      successors and assigns (including, without limitation, branches and agencies
      of
      Buyer, wherever located), for the account of Seller, whether for safekeeping,
      custody, pledge, transmission, collection, or otherwise, and also upon any
      and
      all deposits (general or specified) and credits of Seller at any time existing.
      Buyer and its Affiliates are hereby authorized at any time and from time to
      time
      upon the occurrence and during the continuance of an Event of Default, without
      notice to Seller, to offset, appropriate, apply and enforce such right of offset
      against any and all items hereinabove referred to against any amounts owing
      to
      Buyer or its Affiliates by Seller under the Transaction Documents, irrespective
      of whether Buyer or its Affiliates shall have made any demand hereunder and
      although such amounts, or any of them, shall be contingent or unmatured and
      regardless of any other collateral securing such amounts. Seller shall be deemed
      directly indebted to Buyer and its Affiliates in the full amount of all amounts
      owing to Buyer and its Affiliates by Seller under the Transaction Documents,
      and
      Buyer and its Affiliates shall be entitled to exercise the rights of offset
      provided for above. ANY AND ALL RIGHTS TO REQUIRE BUYER OR ITS AFFILIATES TO
      EXERCISE THEIR RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL OR
      PURCHASED ITEMS THAT SECURE THE AMOUNTS OWING TO BUYER OR ITS AFFILIATES BY
      SELLER UNDER THE TRANSACTION DOCUMENTS, PRIOR TO EXERCISING THEIR RIGHT OF
      OFFSET WITH RESPECT TO SUCH MONIES, SECURITIES, COLLATERAL, DEPOSITS, CREDITS
      OR
      OTHER PROPERTY OF SELLER, ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY
      WAIVED BY SELLER.

    
      
        
        

      

      
        79

        
          

        

      

      
        
        

      

    

     

    (f) Each
      provision of this Agreement shall be interpreted in such manner as to be
      effective and valid under applicable law, but if any provision of this Agreement
      shall be prohibited by or be invalid under such law, such provision shall be
      ineffective to the extent of such prohibition or invalidity, without
      invalidating the remainder of such provision or the remaining provisions of
      this
      Agreement.

     

    (g) This
      Agreement contains a final and complete integration of all prior expressions
      by
      the parties with respect to the subject matter hereof and thereof and shall
      constitute the entire agreement among the parties with respect to such subject
      matter, superseding all prior oral or written understandings.

     

    (h) The
      parties understand that this Agreement is a legally binding agreement that
      may
      affect such party’s rights. Each party represents to the other that it has
      received legal advice from counsel of its choice regarding the meaning and
      legal
      significance of this Agreement and that it is satisfied with its legal counsel
      and the advice received from it.

     

    (i) Should
      any provision of this Agreement require judicial interpretation, it is agreed
      that a court interpreting or construing the same shall not apply a presumption
      that the terms hereof shall be more strictly construed against any Person by
      reason of the rule of construction that a document is to be construed more
      strictly against the Person who itself or through its agent prepared the same,
      it being agreed that all parties have participated in the preparation of this
      Agreement.

    
      
        
        

      

      
        80

        
          

        

      

      
        
        

      

    

     

    (j) Wherever
      pursuant to this Agreement, Buyer exercises any right given to it to consent
      or
      not consent, or to approve or disapprove, or any arrangement or term is to
      be
      satisfactory to, Buyer in its sole discretion, Buyer shall decide to consent
      or
      not consent, or to approve or disapprove or to decide that arrangements or
      terms
      are satisfactory or not satisfactory, in its sole and absolute discretion and
      such decision by Buyer shall be final and conclusive.

     

    (k) Each
      Affiliated Hedge Counterparty is an intended third party beneficiary of this
      Agreement and the parties hereto agree that this Agreement shall not be amended
      or otherwise modified without the written consent of each Affiliated Hedge
      Counterparty, such consent not to be unreasonably withheld.

     

    (l) Notwithstanding
      anything to the contrary contained herein or in any Repurchase Document,
      Guarantor and any Affiliate of Guarantor shall be entitled to disclose any
      and
      all terms of any Repurchase Document, including the public filing thereof,
      if
      the Guarantor, in its sole discretion, deems it necessary or appropriate under
      the rules or regulations of the Securities and Exchange Commission and/or the
      New York Stock Exchange.

    

     

    [REMAINDER
      OF PAGE LEFT BLANK]

    

    
      
        
        

      

      
        81

        
          

        

      

      
        
        

      

    

     

    IN
      WITNESS WHEREOF, the parties have executed this Agreement as a deed as of the
      day first written above.

     

    BUYER:

     

    JPMORGAN
      CHASE BANK, N.A., a
      national banking association

     

    By:  
      /s/
      Kanul K. Singh 

    Name:
      Kunal K. Singh

    Title:
      Vice President

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

     

    SELLER:

     

    NRFC
      JP HOLDINGS, LLC,
      a
      Delaware limited liability company

     

    By:
      /s/
      Daniel R. Gilbert

    Name:
      Daniel R. Gilbert

    Title:
      Executive Vice PresidentEXHIBIT
      10.5

    

    

    
      

      

    

    

     

      AGREEMENT
        AND PLAN OF MERGER

       

      among

       

      LIVEPERSON,
        INC.,

       

      KATO
        MERGERCO, INC.

       

      KASAMBA,
        INC.,

       

      and

       

      YOAV
        LEIBOVICH, AS STOCKHOLDERS’ REPRESENTATIVE

       

       

       

       

       

       

      Dated
        as
        of June 25, 2007

    

    

    

    
      

      

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    TABLE
      OF
      CONTENTS

     

    Page

    
      	
              I.

            	
              DEFINITIONS

            	
               

            	
              2

            
	 	
              SECTION
                1.01.

            	
              Certain
                Defined Terms

            	
              2

            
	 	
              SECTION
                1.02.

            	
              Construction

            	
              11

            
	 	 	 
	
              II.

            	
              THE
                MERGER; CONVERSION OF SECURITIES

            	
              12

            
	 	
              SECTION
                2.01.

            	
              The
                Merger; Effective Time of the Merger

            	
              12

            
	 	
              SECTION
                2.02.

            	
              Closing

            	
              12

            
	 	
              SECTION
                2.03.

            	
              Effect
                of the Merger; Certificate of Incorporation; Bylaws; Directors and
                Officers of Surviving Corporation

            	
              12

            
	 	
              SECTION
                2.04.

            	
              Merger
                Consideration; Conversion of Company Preferred Stock and Company
                Common
                Stock.

            	
              13

            
	 	
              SECTION
                2.05.

            	
              Exchange
                Procedures

            	
              16

            
	 	
              SECTION
                2.06.

            	
              Appraisal
                Rights

            	
              18

            
	 	
              SECTION
                2.07.

            	
              Fractional
                Shares

            	
              18

            
	 	
              SECTION
                2.08.

            	
              Lost,
                Stolen or Destroyed Certificates

            	
              18

            
	 	
              SECTION
                2.09.

            	
              Withholding
                Rights

            	
              19

            
	 	
              SECTION
                2.10.

            	
              Stock
                Transfer Books

            	
              19

            
	 	
              SECTION
                2.11.

            	
              Certain
                Adjustments

            	
              19

            
	 	
              SECTION
                2.12.

            	
              [Reserved.]

            	
              19

            
	 	
              SECTION
                2.13.

            	
              Net
                Balance Sheet Adjustment.

            	
              20

            
	 	
              SECTION
                2.14.

            	
              Other
                Provisions Relating to Parent Common Stock

            	
              21

            
	 	
              SECTION
                2.15.

            	
              Stockholders’
                Representative.

            	
              22

            
	 	 	 
	
              III.

            	
              REPRESENTATIONS
                AND WARRANTIES AS TO THE COMPANY

            	
              24

            
	 	
              SECTION
                3.01.

            	
              Organization
                and Qualification; Subsidiaries.

            	
              24

            
	 	
              SECTION
                3.02.

            	
              Certificate
                of Incorporation and Bylaws

            	
              24

            
	 	
              SECTION
                3.03.

            	
              Capitalization

            	
              24

            
	 	
              SECTION
                3.04.

            	
              Authority
                Relative to this Agreement

            	
              25

            
	 	
              SECTION
                3.05.

            	
              No
                Conflicts; Required Filings and Consents.

            	
              25

            
	 	
              SECTION
                3.06.

            	
              Permits;
                Compliance with Laws

            	
              26

            
	 	
              SECTION
                3.07.

            	
              Financial
                Statements.

            	
              27

            
	 	
              SECTION
                3.08.

            	
              Absence
                of Certain Changes or Events

            	
              27

            
	 	
              SECTION
                3.09.

            	
              Employee
                Matters.

            	
              28

            
	 	
              SECTION
                3.10.

            	
              Contracts

            	
              31

            
	 	
              SECTION
                3.11.

            	
              Litigation

            	
              32

            
	 	
              SECTION
                3.12.

            	
              Environmental
                Matters

            	
              32

            
	 	
              SECTION
                3.13.

            	
              Intellectual
                Property.

            	
              32

            
	 	
              SECTION
                3.14.

            	
              Taxes.

            	
              35

            
	 	
              SECTION
                3.15.

            	
              Insurance

            	
              39

            
	 	
              SECTION
                3.16.

            	
              Properties

            	
              39

            
	 	
              SECTION
                3.17.

            	
              Affiliates

            	
              39

            
	 	
              SECTION
                3.18.

            	
              Brokers

            	
              40

            
	 	
              SECTION
                3.19.

            	
              Certain
                Business Practices

            	
              40

            

    

     

    
      
        
        

      

      
        i

        
          

        

      

      
        
        

      

    

     

    
      	 	
              SECTION
                3.20.

            	
              Accounts
                Receivable

            	
              40

            
	 	
              SECTION
                3.21.

            	
              Customers
                and Suppliers

            	
              40

            
	 	
              SECTION
                3.22.

            	
              Grants,
                Incentives and Subsidies

            	
              40

            
	 	
              SECTION
                3.23.

            	
              Bank
                Accounts

            	
              40

            
	 	
              SECTION
                3.24.

            	
              Books
                and Records

            	
              41

            
	 	
              SECTION
                3.25.

            	
              Customer
                and Expert Listing

            	
              41

            
	 	
              SECTION
                3.26.

            	
              Privacy
                and Data Security

            	
              41

            
	 	
              SECTION
                3.27.

            	
              No
                Conflict with OFAC Laws

            	
              41

            
	 	
              SECTION
                3.28.

            	
              Representations
                Complete

            	
              41

            
	 	 	 
	
              IV.

            	
              REPRESENTATIONS
                AND WARRANTIES OF PARENT

            	
              42

            
	 	
              SECTION
                4.01.

            	
              Organization
                and Qualification; Subsidiaries

            	
              42

            
	 	
              SECTION
                4.02.

            	
              Capitalization.

            	
              42

            
	 	
              SECTION
                4.03.

            	
              Authority
                Relative to this Agreement

            	
              42

            
	 	
              SECTION
                4.04.

            	
              No
                Conflict; Required Filings and Consents.

            	
              43

            
	 	
              SECTION
                4.05.

            	
              SEC
                Filings.

            	
              43

            
	 	
              SECTION
                4.06.

            	
              Absence
                of Certain Changes or Events

            	
              43

            
	 	
              SECTION
                4.07.

            	
              Brokers

            	
              44

            
	 	
              SECTION
                4.08.

            	
              S-3
                Eligibility

            	
              44

            
	 	
              SECTION
                4.09.

            	
              Representations
                Complete

            	
              44

            
	
              V.

            	
              COVENANTS

            	
              44

            
	 	
              SECTION
                5.01.

            	
              Conduct
                of Business by the Company Pending the Closing

            	
              44

            
	 	
              SECTION
                5.02.

            	
              Notices
                of Certain Events

            	
              46

            
	 	
              SECTION
                5.03.

            	
              Access
                to Information; Confidentiality.

            	
              47

            
	 	
              SECTION
                5.04.

            	
              No
                Solicitation of Transactions

            	
              47

            
	 	
              SECTION
                5.05.

            	
              Further
                Action; Consents; Filings.

            	
              48

            
	 	
              SECTION
                5.06.

            	
              Certain
                Tax Matters.

            	
              48

            
	 	
              SECTION
                5.07.

            	
              Israeli
                Tax Rulings

            	
              50

            
	 	
              SECTION
                5.08.

            	
              Israel
                Securities Exemption

            	
              51

            
	 	
              SECTION
                5.09.

            	
              Public
                Announcements

            	
              52

            
	 	
              SECTION
                5.10.

            	
              Exercise
                of Certain Outstanding Company Stock Options

            	
              52

            
	 	
              SECTION
                5.11.

            	
              Trading
                Restriction Agreements Legend

            	
              52

            
	 	
              SECTION
                5.12.

            	
              Directors
                and Officers Insurance

            	
              52

            
	 	
              SECTION
                5.13.

            	
              OptionholderWaiver
                Letters

            	
              53

            
	 	
              SECTION
                5.14.

            	
              Withholding
                Instructions

            	
              53

            
	 	
              SECTION
                5.15.

            	
              Registration
                Statement on Form S-8

            	
              53

            
	
              VI.

            	
              STOCK
                MATTERS

            	
              53

            
	 	
              SECTION
                6.01.

            	
              Required
                Registration

            	
              53

            
	 	
              SECTION
                6.02.

            	
              Registration
                Procedures.

            	
              54

            
	 	
              SECTION
                6.03.

            	
              Transfer
                of Shares

            	
              57

            
	 	
              SECTION
                6.04.

            	
              Restricted
                Securities, Stock Certificate Legend

            	
              58

            
	 	
              SECTION
                6.05.

            	
              Reservation
                of Stock

            	
              58

            
	 	
              SECTION
                6.06.

            	
              No
                Stockholder Rights

            	
              58

            
	 	
              SECTION
                6.07.

            	
              Compliance
                with Law or Stock Exchange

            	
              58

            

    

     

    
      
        
        

      

      
        ii

        
          

        

      

      
        
        

      

    

     

    
      	
              VII.

            	
              CONDITIONS
                PRECEDENT

            	
              59

            
	 	
              SECTION
                7.01.

            	
              Conditions
                Precedent to the Obligations of Each Party

            	
              59

            
	 	
              SECTION
                7.02.

            	
              Conditions
                Precedent to the Obligation of the Parent

            	
              59

            
	 	
              SECTION
                7.03.

            	
              Conditions
                Precedent to the Obligations of the Company

            	
              62

            
	 	 	 
	
              VIII.

            	
              INDEMNIFICATION

            	
              63

            
	 	
              SECTION
                8.01.

            	
              Survival
                of Representations and Warranties

            	
              63

            
	 	
              SECTION
                8.02.

            	
              [Reserved.]

            	
              64

            
	 	
              SECTION
                8.03.

            	
              General
                Indemnity.

            	
              64

            
	 	
              SECTION
                8.04.

            	
              Conditions
                of Indemnification

            	
              65

            
	 	
              SECTION
                8.05.

            	
              Threshold
                for Damages

            	
              66

            
	 	
              SECTION
                8.06.

            	
              Escrow
                Funds

            	
              66

            
	 	
              SECTION
                8.07.

            	
              Exclusive
                Remedy

            	
              66

            
	 	 	 
	
              IX.

            	
              TERMINATION
                AND ABANDONMENT

            	
              67

            
	 	
              SECTION
                9.01.

            	
              Termination

            	
              67

            
	 	
              SECTION
                9.02.

            	
              Procedure
                and Effect of Termination

            	
              68

            
	 	 	 
	
              X.

            	
              MISCELLANEOUS

            	
              68

            
	 	
              SECTION
                10.01.

            	
              Expenses,
                Etc.

            	
              68

            
	 	
              SECTION
                10.02.

            	
              Notices

            	
              68

            
	 	
              SECTION
                10.03.

            	
              Waivers

            	
              70

            
	 	
              SECTION
                10.04.

            	
              Amendments,
                Supplements, Etc

            	
              70

            
	 	
              SECTION
                10.05.

            	
              Governing
                Law; Submission to Jurisdiction

            	
              71

            
	 	
              SECTION
                10.06.

            	
              Waiver
                of Jury Trial

            	
              71

            
	 	
              SECTION
                10.07.

            	
              Headings;
                Interpretation

            	
              71

            
	 	
              SECTION
                10.08.

            	
              Counterparts

            	
              71

            
	 	
              SECTION
                10.09.

            	
              Entire
                Agreement

            	
              71

            
	 	
              SECTION
                10.10.

            	
              Binding
                Effect; Benefits

            	
              71

            
	 	
              SECTION
                10.11.

            	
              Assignability

            	
              72

            
	 	
              SECTION
                10.12.

            	
              Severability

            	
              72

            

    

    

    
      	
              EXHIBITS

            	 
	 	 
	
              Exhibit
                A

            	
              Form
                of Escrow Agreement

            
	
              Exhibit
                B

            	
              Form
                of Employment Agreement

            
	
              Exhibit
                C

            	
              Form
                of Opinion of U.S. Counsel to the Company

            
	
              Exhibit
                D

            	
              Form
                of Opinion of Israeli Counsel to the Company

            
	
              Exhibit
                E

            	
              Form
                of Trading Restriction Agreement

            
	
              Exhibit
                F

            	
              Form
                of Lock-Up Agreement

            
	 	 
	
              SCHEDULES

            	 
	 	 
	
              Schedule
                I

            	
              Principal
                Stockholders

            
	
              Schedule
                II

            	
              Options
                Being Exercised Immediately Prior to the Effective Time

            
	
              Schedule
                III

            	
              Distribution
                Table

            

    

    

    
      
        
        

      

      
        iii

        
          

        

      

      
        
        

      

    

    AGREEMENT
      AND PLAN OF MERGER

     

    AGREEMENT
      AND PLAN OF MERGER,
      dated
      as of June 25, 2007 (the “Agreement”),
      among
      LIVEPERSON, INC., a Delaware corporation (“Parent”);
      Kato
      MergerCo, Inc., a Delaware corporation and an indirect subsidiary of Parent
      (“Merger
      Sub”);
      KASAMBA, INC., a Delaware corporation (the “Company”);
      and
      Yoav Leibovich (the “Stockholders’
      Representative”)
      as
      agent and attorney-in-fact for each stockholder of the Company (individually,
      a
“Stockholder”
and
      collectively, the “Stockholders”).

     

    RECITALS

     

    WHEREAS,
      the boards of directors of each of Parent, the Company and Merger Sub believe
      it
      is advisable, fair to and in the best interests of their respective corporations
      and their stockholders that the Company and Merger Sub combine into a single
      corporation through the statutory merger of Merger Sub with and into the Company
      (the “Merger”)
      and,
      in furtherance thereof, have approved the Merger, this Agreement and the
      transactions contemplated hereby and the board of directors of the Company
      has
      determined to recommend that its stockholders adopt this Agreement;

     

    WHEREAS,
      as a condition to the Closing, the requisite majority of the holders of Company
      Common Stock (as defined below) and of Company Preferred Stock (as defined
      below) shall have approved the Merger, this Agreement and the transactions
      contemplated hereby;

     

    WHEREAS,
      pursuant to the Merger, the Company Common Stock and the Company Preferred
      Stock
      shall be converted into the right to receive cash and Parent Common Stock (as
      defined below) in the amounts, on the terms and subject to the conditions set
      forth herein;

     

    WHEREAS,
      pursuant to the Merger, each vested and unvested option to purchase shares
      of
      Company Common Stock under any Company Option Plan which
      is
      outstanding and unexercised immediately prior to the Effective Time, shall
      be
      assumed by Parent, and the Company Options shall be converted into an option
      to
      purchase shares of Parent Common Stock in such number, at such exercise price
      and on the terms and
      subject to the conditions set forth herein;

     

    WHEREAS,
      Parent, Merger Sub, the Company and the Stockholders’ Representative desire to
      make certain representations and warranties and other agreements in connection
      with the Merger; and

     

    WHEREAS,
      as a condition and inducement to Parent and Merger Sub entering into this
      Agreement, each Founder (as defined below), concurrently with the execution
      and
      delivery of this Agreement, is entering into an employment agreement in the
      form
      of Exhibit
      B
      hereto
      (the “Employment
      Agreement”),
      dated
      as of the date of this Agreement, which shall be subject to the consummation
      of
      the Merger and shall become effective at the Effective Time (as defined
      below);

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    NOW,
      THEREFORE, in consideration of the premises, covenants and representations
      set
      forth herein, and for other good and valuable consideration, the receipt and
      sufficiency of which is hereby acknowledged, the parties hereby agree as
      follows:

     

    I.

     

    DEFINITIONS

     

    SECTION
      1.01. Certain
      Defined Terms.
      Unless
      the context otherwise requires, the following terms, when used in this
      Agreement, shall have the respective meanings specified below (such meanings
      to
      be equally applicable to the singular and plural forms of the terms
      defined):

     

    “Accounting
      Referee”
      has the
      meaning set forth in Section 2.13(b).

     

    “Affiliate”
      means,
      with respect to any Person, any other Person that controls, is controlled by
      or
      is under common control with the first Person.

     

    “Aggregate
      Merger Consideration”
      has the
      meaning set forth in Section 2.04(a).

     

    “Agreement”
      has the
      meaning set forth in the preamble hereto.

     

    “Assets”
      means
      all the properties, assets and contract rights (including, without limitation,
      cash, cash equivalents, accounts receivable, inventory, equipment, office
      furniture and furnishings, trade names, trademarks and patents, contracts,
      agreements, licenses and real estate) of the Company, whether tangible or
      intangible, real, personal or mixed.

     

    “Benefit
      Plan”
      means
      any “employee benefit plan” as defined in ERISA Section 3(3), whether or
      not subject to ERISA, Section 102 Plans, and any other employee benefit plan,
      policy, arrangement or individual agreement, sponsored, maintained or
      contributed to by the Company on behalf of any employee, officer, director,
      stockholder or service provider of the Company (whether current, former or
      retired) or their beneficiaries or with respect to which the Company has or
      could reasonably be expected to have any obligation or liability.

     

    “Blocked
      Period”
      has the
      meaning set forth in Section 6.02(c).

     

    “Business
      Day”
      means a
      day other than a Saturday, Sunday or other day on which banks located in New
      York, New York or Tel Aviv, Israel are authorized or required by law to
      close.

     

    “Cash
      Escrow Amount”
      means
      Seven Million Dollars ($7,000,000) to be deposited with the Escrow Agent to
      be
      held in escrow subject to the terms and conditions of the Escrow Agreement.
      

     

    “Cash
      Merger Consideration”
      means
      Nine Million Dollars ($9,000,000).

     

    “Certificate
      of Merger”
      has the
      meaning set forth in Section 2.01.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    “Certificates”
      has the
      meaning set forth in Section 2.05.

     

    “Charter
      Amendment”
means
      an amendment to the Amended and Restated Certificate of Incorporation of the
      Company, which allows for the distribution of the Aggregate Merger Consideration
      in the manner contemplated by the Distribution Table.

     

    “Closing”
      has the
      meaning set forth in Section 2.02.

     

    “Closing
      Date”
      has the
      meaning set forth in Section 2.02.

     

    “Closing
      Date Balance Sheet”
      has the
      meaning set forth in Section 2.13(b).

     

    “Closing
      Price”
      shall be
      equal to the closing
      stock price of a share of Parent
      Common Stock on the Nasdaq Capital Market as reported in The
      Wall Street Journal
      or, if
      not available, such other authoritative publication as may be reasonably
      selected by the Parent, on the trading date two Business Days preceding the
      Closing Date.

     

    “Code”
      means
      the United States Internal Revenue Code of 1986, as amended.

     

    “Company”
      has the
      meaning set forth in the preamble hereto.

     

    “Company
      Capital Stock” means
      Company Preferred Stock and Company Common Stock, taken together. 

     

    “Company
      Common Stock”
      has the
      meaning set forth in Section 3.03.

     

    “Company
      Disclosure Schedule”
      means
      the disclosure schedule delivered by the Company to the Parent prior to the
      execution of this Agreement and forming a part hereof.

     

    “Company
      Financial Statements”
      has the
      meaning set forth in Section 3.07(a).

     

    “Company
      Intellectual Property”
      means
      all patents (including, without limitation, all U.S. and foreign patents, patent
      applications, patent disclosures, and any and all divisions, continuations,
      continuations-in-part, reissues, re-examinations and extensions thereof), design
      rights, trademarks, trade names and service marks (whether or not registered),
      trade dress, Internet domain names, copyrights (whether or not registered)
      and
      any renewal rights therefor, sui
      generis
      database
      rights, statistical models, technology, inventions, supplier lists, trade
      secrets, know-how, computer software programs or applications in both source
      and
      object code form, databases, technical documentation of such software programs,
      registrations and applications for any of the foregoing and all other tangible
      or intangible proprietary information or materials that were material to the
      Company’s business or are currently used in the Company’s business in any
      product, technology or process (i) currently being or formerly manufactured,
      published or marketed by the Company or (ii) previously or currently under
      development for possible future manufacturing, publication, marketing or other
      use by the Company.

     

    “Company
      Licensed Intellectual Property”
      has the
      meaning set forth in Section 3.13(b).

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    “Company
      Material Adverse Effect”
      means
      any change in or effect on (i) the business of the Company that, individually
      or
      in the aggregate (taking into account all other such changes or effects), is,
      or
      is reasonably likely to be, materially adverse to the business, assets,
      liabilities, financial condition, results of operations or prospects of the
      Company, or (ii) the ability of the Company to perform its obligations under
      this Agreement and any other Transaction Document to which it is a party or
      to
      consummate the Merger or the other transactions contemplated by this Agreement
      or any other Transaction Document to which it is a party, in each case, other
      than any such change or effect resulting from (1) conditions generally affecting
      (A) the Internet industry or (B) the economy, the financial or securities
      markets in general, or political conditions in the United States or Israel,
      (2)
      any acts of terrorism, military actions or war or other force majeure events,
      or
      (3) the announcement of, and the pendency of, this Agreement and the
      transactions contemplated hereby; provided,
      however,
      in the
      case of clauses (1) and (2) above, such change or effect will constitute a
      Company Material Adverse Effect only if it has a disproportionate material
      adverse effect on the Company.

     

    “Company
      Options”
      has the
      meaning set forth in Section 2.04(e).

     

    “Company
      Option Plans”
      means
      the Company’s 2003 Israeli Share Option Plan adopted by the Company’s Board of
      Directors on November 25, 2003 and the Company’s 2004
      Israeli Share Option Plan adopted
      by the Company’s Board of Directors on November 29, 2004, each as in effect as
      of the date hereof or as such plan may be amended pursuant to the terms of
      this
      Agreement (provided that
      with
      respect to those employees, consultants or directors whose consent is required
      in connection with such amendments and who do not so consent, such amendments
      requiring consent for which consent is not so obtained will not apply to such
      non-consenting employees, consultants or directors).

     

    “Company
      Permits”
      has the
      meaning set forth in Section 3.06.

     

    “Company
      Preferred Stock”
      has the
      meaning set forth in Section 3.03.

     

    “Company
      Software Programs” has
      the
      meaning set forth in Section 3.13(f).

     

    “Company
      Subsidiary”
      has the
      meaning set forth in Section 3.01(b).

     

    “Competing
      Transaction”
      means
      any of the following involving the Company (other than the transactions
      contemplated by this Agreement):

     

    (i) any
      merger, consolidation, share exchange, business combination or other similar
      transaction involving 20% or more of the Assets of the Company and its
      Subsidiaries, taken as a whole or 20% or more of the outstanding voting
      securities of the Company;

     

    (ii) any
      sale,
      lease, exchange, mortgage, pledge, transfer or other disposition of 20% or
      more
      of the Assets of the Company and its Subsidiaries, taken as a whole, in a single
      transaction or series of transactions; 

     

    (iii) any
      Person having acquired beneficial ownership or the right to acquire beneficial
      ownership of, or any “group” (as such term is defined under Section 13(d)
      of the Exchange Act) having been formed that beneficially owns or has the right
      to acquire beneficial ownership of, 20% or more of the outstanding voting
      securities of the Company; or

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    (iv) any
      public announcement of a proposal, plan or intention to do any of the foregoing
      or any agreement to engage in any of the foregoing.

     

    “Confidentiality
      Agreement”
      means
      the confidentiality agreement dated March 2, 2007 between the Parent
      and the Company.

     

    “Contracts”
means,
      with respect to any Person, all agreements, undertakings, contracts,
      obligations, arrangements, promises, understandings and commitments (whether
      written or oral and whether express or implied) to which such Person is a
      party.

     

    “Corporation”
      has the
      meaning set forth in Section 2.03.

     

    “Damages”
      has the
      meaning set forth in Section 8.03.

     

    “Defaulting
      Party”
      has the
      meaning set forth in Section 9.01(b).

     

    “DGCL”
      has the
      meaning set forth in Section 2.01.

     

    “Dissenting
      Shares”
      has the
      meaning set forth in Section 2.06.

     

    “Distribution
      Table” means
      the
      table attached hereto as Schedule III which sets forth the allocation of the
      Merger Consideration among the Stockholders and the holders of Company Options.
      The Distribution Table is expected to be substantially similar to the Merger
      Consideration Allocation Certificate to be delivered at the Closing, except
      for
      changes to the Company’s capitalization caused by the exercise or forfeiture of
      outstanding options and payments, if any, to be made in accordance with Section
      2.05(a)(i).

     

    “$”
      means
      United States Dollars.

     

    “Effective
      Time”
      has the
      meaning set forth in Section 2.01.

     

    “Employment
      Agreements”
      means
      those Employment Agreements with the Founders, executed as part of the
      transactions contemplated hereby.

     

    “Environmental
      Law”
      means
      any Law and any enforceable judicial or administrative interpretation thereof,
      including any judicial or administrative order, consent decree or judgment,
      relating to pollution or protection of the environment or natural resources,
      including, without limitation, those relating to the use, handling,
      transportation, treatment, storage, disposal, release or discharge of Hazardous
      Material, as in effect as of the date hereof.

     

    “Environmental
      Permit”
      means
      any permit, approval, identification number, license or other authorization
      required under or issued pursuant to any applicable Environmental
      Law.

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

    “ERISA”
      means
      the Employee Retirement Income Security Act of 1974, as amended.

     

    “Escrow
      Agent”
      means a
      reputable escrow agent to be appointed by Parent, subject to the approval of
      the
      Company, which approval shall not unreasonably be withheld.

     

    “Escrow
      Agreement”
      means
      the Escrow Agreement substantially in the form attached hereto as Exhibit
      A
      to be
      entered into as of the Closing among the Parent, the Stockholders and the Escrow
      Agent.

     

    “Escrow
      Tax Ruling”
      has the
      meaning set forth in Section 5.07(c).

     

    “Exchange
      Act”
      means
      the Securities Exchange Act of 1934, as amended, together with the rules and
      regulations promulgated thereunder.

     

    “Exchange
      Ratio”
means
      a
      fraction, (X) the numerator of which is $40,000,000 divided by the Trailing
      Signing Average Price, and (Y) the denominator of which is the number of shares
      of capital stock of the Company on a fully-diluted basis.

     

    “Expenses”
      means,
      with respect to any party hereto, all out-of-pocket expenses (including, without
      limitation, all fees and expenses of counsel, accountants, investment bankers,
      experts and consultants to a party hereto and its Affiliates) incurred by such
      party or on its behalf in connection with or related to the authorization,
      preparation, negotiation, execution and performance of its obligations pursuant
      to this Agreement and the consummation of the transactions contemplated by
      this
      Agreement, and all other matters related to the transactions contemplated
      hereby.

     

    “Final
      Closing Balance Sheet”
      has the
      meaning set forth in Section 2.13(b).

     

    “Founders”
      means
      Inon Axel and Arthur Fuhrer.

     

    “GAAP”
      means
      generally accepted accounting principles in the United States of America as
      in
      effect as of the date hereof.

     

    “Governmental
      Entity”
      means
      any United States Federal, state or local or any foreign governmental,
      regulatory or administrative authority, agency or commission or any court,
      tribunal or arbitral body.

     

    “Governmental
      Order”
      means
      any order, writ, judgment, injunction, decree, stipulation, determination or
      award entered by or with any Governmental Entity.

     

    “Grants”
      has the
      meaning set forth in Section 3.24.

     

    “Hazardous
      Material”
      means
      (i) any petroleum, petroleum products, by-products or breakdown products,
      radioactive materials, asbestos-containing materials or polychlorinated
      biphenyls or (ii) any chemical, material or substance defined or regulated
      as
      toxic or hazardous or as a pollutant or contaminant or waste under any
      applicable Environmental Law.

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

    “Initial
      Merger Consideration”
      has the
      meaning set forth in Section 2.04(a).

     

    “Initial
      Release Date” means
      the
      date one year following the Closing Date.

     

    “Intellectual
      Property”
      means
      (a) trade secrets, inventions, know-how and processes, (b) patents
      (including all reissues, divisions, continuations and extensions thereof) and
      patent applications, (c) trademarks, trademark registrations, trademark
      applications, service marks, service mark registrations and service mark
      applications, (d) copyright registrations and copyright applications, and
      (e) domain names.

     

    “IRS”
      means
      the United States Internal Revenue Service.

     

    “ISA”
means
      the Israel Securities Authority established pursuant to the Israel Securities
      Law.

     

    “Israel
      Securities Law”
means
      the Israel Securities Law, 1968. 

     

    “Israeli
      Employees” has
      the
      meaning set forth in Section 3.09(j).

     

    “Israeli
      Escrow Tax Ruling”
      has the
      meaning set forth in Section 5.07(c).

     

    “Israeli
      Options Tax Ruling”
      has the
      meaning set forth in Section 5.07(a).

     

    “Israeli
      Securities Exemption”
      has the
      meaning set forth in Section 5.08.

     

    “Israeli
      Tax Code”
means
      the Israeli Income Tax Ordinance (New Version) - 1961 and the rules promulgated
      in connection therewith, as amended.

     

    “Israeli
      Tax Rulings” has
      the
      meaning set forth in Section 5.07(c).

     

    “Israeli
      Withholding Tax Ruling”
      has the
      meaning set forth in Section 5.07(b).

     

    “ITA”
means
      the Israel Tax Authority.

     

    “Knowledge”
      and
      words of similar import mean, with respect to the Company, the actual knowledge,
      after reasonable inquiry, of any executive officer of the Company and, with
      respect to Parent, the actual knowledge, after reasonable inquiry, of Robert
      LoCascio or Timothy E. Bixby.

     

    “Law”
      means
      any Federal, state, foreign or local statute, law, ordinance, regulation, rule,
      code, order, judgment, decree, other requirement or rule of law of the United
      States or any other jurisdiction, and any other similar act or law.

     

    “Liability”
      means
      any and all claims, debts, liabilities, obligations and commitments of whatever
      nature, whether asserted or reasonably expected to be asserted, fixed, absolute
      or contingent, matured or unmatured, accrued or unaccrued, liquidated or
      unliquidated or due or to become due, and whenever or however arising (including
      those arising out of any Contract or tort, whether based on negligence, strict
      liability or otherwise) regardless of whether the same would be required by
      GAAP
      to be reflected as a liability in financial statements or disclosed in the
      notes
      thereto.

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

    “License
      Agreement”
      has the
      meaning set forth in Section 3.13(b).

     

    “Lien”
      means
      any charge, claim, community property interest, condition, easement, covenant,
      contract, commitment, warrant, demand, encumbrance, equitable interest, lien,
      mortgage, option, purchase right, pledge, security interest, right of first
      refusal, or other rights of third parties or restriction of any kind, including
      without limitation any restriction on use, voting, transfer, receipt of income,
      or exercise of any other attribute of ownership.

     

    “Lock-up
      Agreements”
means
      those Lock-up Agreements between the Parent and the Founders substantially
      in
      the form of Exhibit F hereto, executed as part of the transactions contemplated
      hereby.

     

    “Material
      Contract”
      and
“Material
      Contracts”
      have the
      meaning set forth in Section 3.10.

     

    “Merger”
      has the
      meaning set forth in Section 2.01.

     

    “Merger
      Consideration Allocation Certificate”
      has the
      meaning set forth in Section 2.04(g).

     

    “Net
      Balance Sheet Adjustment”
has
      the
      meaning set forth in Section 2.04(a).

     

    “Net
      Working Capital”
      means
      (X) total consolidated assets of the Company and the Company
      Subsidiary as of the Effective Time, (Y) minus total consolidated liabilities
      of
      the Company and the Company Subsidiary as of the Effective Time, (Z) plus the
      amount specifically reserved on the audited consolidated balance sheet of the
      Company at December 31, 2006 in respect of the U.S. Withholding Liability,
      unless such reserve amount is changed in the preparation of the Final Closing
      Balance Sheet, in which case the actual reserve amount with regard to the U.S.
      Withholding Liability will be utilized. As used in this definition, the term
      U.S. Withholding Liability shall exclude “Damages.”

     

    “Net
      Working Capital Certificate”
      has the
      meaning set forth in Section 2.13(a).

     

    “Organizational
      Documents”
      has the
      meaning set forth in Section 3.02.

     

    “Parent”
      has the
      meaning set forth in the preamble hereto.

     

    “Parent
      Common Stock”
      means
      common stock, par value $0.01 per share, of Parent.

     

    “Parent
      Indemnified Group”
      has the
      meaning set forth in Section 8.03(a).

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

    “Parent
      Material Adverse Effect”
      means
      any change in or effect on the business of the Parent that, individually or
      in
      the aggregate (taking into account all other such changes or effects), is,
      or is
      reasonably likely to be, materially adverse to (i) the business, assets,
      liabilities, financial condition or results of operations of the Parent, or
      (ii)
      the ability of the Parent to perform its obligations under this Agreement and
      any other Transaction Document to which it is a party or to consummate the
      Merger or the other transactions contemplated by this Agreement or any other
      Transaction Document to which it is a party, in each case, other than any such
      change or effect resulting from (1) conditions generally affecting the economy,
      the financial or securities markets in general, or political conditions in
      the
      United States or Israel, (2) any acts of terrorism, military actions or war
      or
      other force majeure events, or (3) the announcement of, and the pendency of,
      this Agreement and the transactions contemplated hereby; provided,
      however,
      in the
      case of clauses (1) and (2) above, such change or effect will constitute a
      Parent Material Adverse Effect if it has a disproportionate material adverse
      effect on the Parent.

     

    “Parent
      SEC Documents”
      has the
      meaning set forth in Section 4.05(a).

     

    “Parent
      Subsidiaries”
      has the
      meaning set forth in Section 4.01.

     

    “Paying
      Agent” has
      the
      meaning set forth in Section 2.05(a).

     

    “Per
      Share Merger Consideration”
means
      the Initial Merger Consideration divided by the number of shares of capital
      stock of the Company on a fully diluted basis. 

     

    “Person”
      means an
      individual, corporation, partnership, private company, limited partnership,
      limited liability company, limited liability partnership, syndicate, person
      (including, without limitation, a “person” as defined in Section 13(d)(3)
      of the Exchange Act), trust, association, entity or government or political
      subdivision, agency or instrumentality of a government.

     

    “Principal
      Stockholder” means
      each
      of
      the persons or entities listed on Schedule I
      hereto.
      “Principal
      Stockholders” means
      each of the persons or entities listed on Schedule I
      hereto,
      collectively.

     

    “Privacy
      Laws”
      has the
      meaning set forth in Section 3.25.

     

    “Record
      Date”
      has the
      meaning set forth in Section 2.10.

     

    “Representatives”
      has the
      meaning set forth in Section 5.03(a).

     

    “Required
      Stockholder Consent”
has
      the
      meaning set forth in Section 7.01(d).

     

    “Re-Sale
      Registration Statement”
      has the
      meaning set forth in Section 6.01.

     

    “Rule
      144”
      has the
      meaning set forth in Section 6.01.

     

    “Securities
      Act”
      means
      the Securities Act of 1933, as amended, together with the rules and regulations
      promulgated thereunder.

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

    “SEC”
      means
      the United States Securities and Exchange Commission.

     

    “Section
      102 Plan”
means
      an incentive stock option plan intended to qualify under Section 102 of the
      Israeli Tax Code.

     

    “Shares”
      has the
      meaning set forth in Section 6.01.

     

    “Stock
      Escrow Amount”
      means
      766,871 shares of Parent Common Stock, which number of shares shall be deposited
      with the Escrow Agent to be held in escrow, subject to the terms and conditions
      of the Escrow Agreement. 

     

    “Stock
      Merger Consideration”
      means
      4,754,601 shares of Parent Common Stock, provided that the aggregate
      number of shares underlying the options to purchase Parent Common Stock issuable
      pursuant to Section 2.04(e) shall represent a portion of the Stock Merger
      Consideration,
      as more
      fully described in Section 2.04(e). In the event the Trailing Closing Average
      Price is less than $4.00 per share, and the parties hereto mutually agree to
      a
      different number of shares of Parent Common Stock pursuant to Section 9.01(e),
      then the number of shares of Parent Common Stock so mutually agreed upon shall
      constitute the Stock Merger Consideration. 

     

    “Stockholder”
      and
“Stockholders”
      have the
      meaning set forth in the preamble hereto.

     

    “Stockholder
      Representation Letter Agreements”
means
      the agreements executed by each Stockholder and the Parent whereby such
      Stockholder represents and covenants to certain matters relating to the
      transactions contemplated by the Transaction Documents.

     

    “Stockholders’
      Representative”
      has the
      meaning set forth in the preamble hereto and in Section 2.15(a).

     

    “Subsidiary”
      means,
      with respect to any Person, any corporation, private company, partnership,
      limited partnership, limited liability company, limited liability partnership,
      joint venture or other legal entity of which such Person (either alone or
      through or together with any other subsidiary of such Person) owns, directly
      or
      indirectly, a majority of the stock or other equity interests.

     

    “Surviving
      Corporation”
      has the
      meaning set forth in Section 2.03.

     

    “Suspension
      Event”
      has the
      meaning set forth in Section 6.02(d).

     

    “Tax”
      or
“Taxes”
      means
      (i) any and all taxes, fees, levies, duties, tariffs, imposts and other
      charges of any kind (together with any and all interest, linkage differentials
      [hefresehi
      hatzmada],
      penalties, additions to tax and additional amounts imposed with respect thereto)
      imposed by any Governmental Entity or taxing authority, including, without
      limitation, taxes or other charges on or with respect to income, franchises,
      windfall or other profits, gross receipts, property, sales, use, capital stock,
      payroll, employment, social security, national insurance, workers’ compensation,
      unemployment compensation or net worth; taxes or other charges in the nature
      of
      excise, withholding, ad valorem, stamp, transfer, value-added or gains taxes;
      license, registration and documentation fees; and customers’ duties, tariffs and
      similar charges; (ii) any liability for the payment of any amounts of the
      type described in (i) as a result of being a member of an affiliated, combined,
      consolidated or unitary group for any taxable period; and (iii) any
      liability for the payment of amounts of the type described in (i) or (ii) as
      a
      result of being a transferee of, or a successor in interest to, any Person
      or as
      a result of an express or implied obligation to indemnify any
      Person.

     

    
      
        
        

      

      
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    “Tax
      Return”
      means
      any return, statement or form (including, without limitation, any estimated
      tax
      reports or return, withholding tax reports or return and information report
      or
      return) required to be filed with respect to any Taxes.

     

    “Terminating
      Company Breach”
      has the
      meaning set forth in Section 9.01(c).

     

    “Terminating
      Parent Breach”
      has the
      meaning set forth in Section 9.01(d).

     

    “Trading
      Restriction Administrator”
      has the
      meaning set forth in Section 2.14.

     

    “Trading
      Restriction Agreements”
      has the
      meaning set forth in Section 2.14.

     

    “Trailing
      Closing Average Price” means
      the
      average of the closing stock price of a share of Parent Common Stock on the
      Nasdaq Capital Market as
      reported in The
      Wall Street Journal
      or, if
      not available, such other authoritative publication as may be reasonably
      selected by the Parent, for
      the
      twenty trading days preceding the date that is two business days prior to the
      Closing Date.

     

    “Trailing
      Signing Average Price” means
      the
      average of the closing stock price of a share of Parent Common Stock on the
      Nasdaq Capital Market as reported in The
      Wall Street Journal
      or, if
      not available, such other authoritative publication as may be reasonably
      selected by the Parent, for the twenty trading days preceding the date that
      is
      two business days prior to the date of this Agreement.

     

    “Transaction
      Documents”
      means,
      collectively, this Agreement, the Escrow Agreement, the Trading Restriction
      Agreements, the Lock-up Agreements and the Employment Agreements.

     

    “U.S.
      Withholding Liability”
      means
      any liability for (i) Taxes, including amounts arising under Sections 1441,
      1461
      or 3406 of the Code and Treasury Regulations, or (ii) Damages, in each case
      only so far as (i) and (ii) relate to the failure by the Company or the Company
      Subsidiary to report payments made to U.S. and foreign persons, withhold Taxes
      on such payments or obtain documentation from such persons. 

     

    SECTION
      1.02. Construction.
      For the
      purposes of this Agreement, except as otherwise expressly provided herein or
      unless the context otherwise requires: (a) words using the singular or
      plural number also include the plural or singular number, respectively, and
      the
      use of any gender herein shall be deemed to include the other genders;
      (b) references herein to “Articles,” “Sections,” “subsections” and other
      subdivisions, and to Exhibits, Schedules and other attachments, without
      reference to a document are to the specified Articles, Sections, subsections
      and
      other subdivisions of, and Exhibits, Schedules and other attachments to, this
      Agreement; (c) a reference to a subsection or other subdivision without
      further reference to a Section is a reference to such subsection or subdivision
      as contained in the same Section in which the reference appears; (d) the
      words “herein”, “hereof”, “hereunder”, “hereby” and other words of similar
      import refer to this Agreement as a whole and not to any particular provision;
      (e) the words “include”, “includes” and “including” are deemed to be
      followed by the phrase “without limitation”; and (f) all accounting terms
      used and not defined herein have the respective meanings given to them under
      GAAP.

     

    
      
        
        

      

      
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    II.

     

    THE
      MERGER; CONVERSION OF SECURITIES

     

    SECTION
      2.01. The
      Merger; Effective Time of the Merger. Subject
      to the provisions of this Agreement, Merger Sub will be merged with and into
      Company (the “Merger”).
      A
      certificate of merger (the “Certificate
      of Merger”)
      shall
      be duly prepared, executed, and acknowledged by the parties and thereafter
      delivered to the Secretary of State of the State of Delaware, for filing, as
      provided in the Delaware General Corporation Law (the “DGCL”)
      as
      soon as practicable on or after the Closing Date (as defined below). The Merger
      shall become effective upon the acceptance for filing of the Certificate of
      Merger by the Secretary of State of the State of Delaware or at such time
      thereafter as is provided in the Certificate of Merger (the “Effective
      Time”).
      Solely for purposes of clarification, Company and the Stockholders’
Representative acknowledge and agree that Parent will have no obligation to
      make
      any payment pursuant to this Agreement until the Certificate of Merger has
      been
      certified in writing by the Secretary of State of the State of
      Delaware.

     

    SECTION
      2.02. Closing.
      The
      closing of the Merger (the “Closing”)
      shall
      take place as soon as practicable but no later than the third Business Day
      after
      satisfaction or waiver of the conditions set forth in Article VII (the
“Closing
      Date”),
      at
      the offices of Wilmer Cutler Pickering Hale and Dorr LLP, 399 Park Avenue,
      New
      York, NY 10022, unless another date or place is agreed to in writing by the
      parties hereto.

     

    SECTION
      2.03. Effect
      of the Merger; Certificate of Incorporation; Bylaws; Directors and Officers
      of
      Surviving Corporation. At
      the
      Effective Time, (i) the separate existence of Merger Sub shall cease and Merger
      Sub shall be merged with and into Company and Company shall continue as the
      Surviving Corporation and as an indirect subsidiary of Parent (subsequent to
      the
      Merger, Company is sometimes referred to herein as the “Surviving
      Corporation”),
      (ii)
      the Certificate of Incorporation and the Bylaws of Merger Sub as in effect
      immediately prior to the Effective Time shall be the Certificate of
      Incorporation and the Bylaws of the Surviving Corporation, until thereafter
      amended as provided by Law and such Certificate of Incorporation or Bylaws;
      provided, however, that Article 1 of the Certificate of Incorporation of the
      Surviving Corporation shall be amended to read as follows: “The name of the
      corporation is Kasamba, Inc. (the “Corporation”)”;
      (iii) the directors and officers of Merger Sub immediately prior to the
      Effective Time shall be the directors and officers of the Surviving Corporation
      in each case until their respective successors shall have been duly elected,
      designated, or qualified or until their earlier death, resignation, or removal
      in accordance with the Surviving Corporation’s Certificate of Incorporation and
      Bylaws, and (iv) the Merger shall, from and after the Effective Time, have
      all
      the effects provided by applicable law.

     

    
      
        
        

      

      
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    SECTION
      2.04. Merger
      Consideration; Conversion of Company Preferred Stock and Company Common
      Stock.

     

    (a) Merger
      Consideration.
      Subject
      to adjustment as set forth in Section 2.13 below and the deposit of the Cash
      Escrow Amount and the Stock Escrow Amount in accordance with the provisions
      of
      the Escrow Agreement, the aggregate consideration to be paid by Parent and
      Merger Sub hereunder shall consist of (A) the Stock Merger Consideration, plus
      (B) the Cash Merger Consideration (collectively, the “Initial
      Merger Consideration”).
      The
      Initial Merger Consideration and any adjustment to the Initial Merger
      Consideration necessitated by Section 2.13 (the “Net
      Balance Sheet Adjustment”)
      shall
      collectively be referred to as the “Aggregate
      Merger Consideration”.
      Each
      share of Company Preferred Stock and Company Common Stock issued and outstanding
      immediately prior to the Effective Time (excluding Dissenting Shares (as defined
      below), treasury stock and those owned by any wholly-owned subsidiary of the
      Company) and all right in respect thereof shall automatically be canceled and
      retired and shall forthwith cease to exist, and each holder of a certificate
      which immediately prior to the Effective Time represented any such shares of
      Company Preferred Stock or Company Common Stock shall cease to have any rights
      with respect thereto, except the right to receive a portion of the Aggregate
      Merger Consideration as provided in Sections 2.04(c) and 2.04(d) below.

     

    (b) Merger
      Sub Common Stock.
      At the
      Effective Time and on the terms and subject to the conditions of this Agreement,
      each share of Common Stock, par value $0.01 per share, of Merger Sub issued
      and
      outstanding immediately prior to the Effective Time shall, by virtue of the
      Merger and without any action on the part of Parent, Merger Sub, or the Company,
      be converted into one (1) validly issued, fully paid and nonassessable share
      of
      common stock of the Surviving Corporation, with the same rights, powers and
      privileges as the shares so converted and shall constitute the only outstanding
      shares of capital stock of the Surviving Corporation as of the Effective Time.
      Each stock certificate of Merger Sub evidencing ownership of any such shares
      shall remain outstanding and evidence ownership of shares of Surviving
      Corporation Common Stock.

     

    (c) Company
      Preferred Stock.
      At the
      Effective Time and on the terms and subject to the conditions of this Agreement,
      (A) each share of Series A Preferred Stock of the Company issued and outstanding
      immediately prior to the Effective Time (other than Dissenting Shares) shall,
      by
      virtue of the Merger and without any action on the part of Parent, Merger Sub,
      or the Company, be converted into the right to receive a portion of the
      Aggregate Merger Consideration as set forth in the Merger Consideration
      Allocation Certificate (as defined below); (B) each share of Series A-1
      Preferred Stock of the Company issued and outstanding immediately prior to
      the
      Effective Time (other than Dissenting Shares) shall, by virtue of the Merger
      and
      without any action on the part of Parent, Merger Sub, or the Company, be
      converted into the right to receive a portion of the Aggregate Merger
      Consideration as set forth in the Merger Consideration Allocation Certificate;
      and (C) each share of Series A-2 Preferred Stock of the Company issued and
      outstanding immediately prior to the Effective Time (other than Dissenting
      Shares) shall, by virtue of the Merger and without any action on the part of
      Parent, Merger Sub or the Company, be converted into the right to receive a
      portion of the Aggregate Merger Consideration set forth in the Merger
      Consideration Allocation Certificate.

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

    (d) Company
      Common Stock.
      At the
      Effective Time and on the terms and subject to the conditions of this Agreement,
      each share of Company Common Stock issued and outstanding immediately prior
      to
      the Effective Time (other than Dissenting Shares) shall, by virtue of the Merger
      and without any action on the part of Parent, Merger Sub, or the Company, be
      cancelled and shall be converted into the right to receive a portion of the
      Aggregate Merger Consideration as set forth in the Merger Consideration
      Allocation Certificate.

     

    (e) Company
      Options.
      At the
      Effective Time, each vested and unvested option to purchase shares of Company
      Common Stock under any Company Option Plan (the “Company
      Options”)
      which
      is
      outstanding and unexercised immediately prior to the Effective Time, other
      than
      the options set forth on Schedule
      II,
      which
      shall be exercised immediately prior thereto, shall be assumed by Parent, and
      the Company Options shall be converted into an option to purchase shares of
      Parent Common Stock in such number and at such exercise price as provided below
      and otherwise having the same terms and conditions as in effect immediately
      prior to the Effective Time (except to the extent that such terms, conditions
      and restrictions may be altered in accordance with their terms as a result
      of
      the Merger contemplated hereby and except that all references in each such
      Company Option to Company shall be deemed to refer to Parent): 

     

    (i) the
      number of shares of Parent Common Stock to be subject to the new option shall
      be
      equal to the product of (x) the number of shares of Company Common Stock subject
      to the original Company Option immediately prior to the Effective Time and
      (y)
      the Exchange Ratio; 

     

    (ii) the
      exercise price per share of Parent Common Stock under the new option shall
      be
      equal to (x) the exercise price per share of Company Common Stock in effect
      under the original Company Option immediately prior to the Effective Time
      divided by (y) the Exchange Ratio; and 

     

    (iii) in
      effecting such assumption and conversion, the aggregate number of shares of
      Parent Common Stock to be subject to each assumed Company Option will
      be
      rounded down, if necessary, to the next whole share and the aggregate exercise
      price shall be rounded up, if necessary, to the next whole cent.

     

     

    The
      aggregate number of shares underlying the options to purchase Parent Common
      Stock issuable pursuant to this Section 2.04(e) shall represent a portion of
      the
      Stock Merger Consideration.

     

     

    Any
      adjustments provided herein with respect to options shall be effected in a
      manner consistent with applicable law and, to the extent applicable, that
      maintains any intended favorable tax treatment relating to such options that
      existed prior to such adjustment. The assumption of the outstanding Company
      Options in the Merger and their conversion into options for Parent Common Stock
      will not result in any accelerated vesting of those options or the shares
      purchasable thereunder, and the vesting schedule in effect for each Company
      Option immediately prior to the Effective Time (after giving effect to the
      acceleration provisions contained in the agreements identified in Sections
      3.09(c)(1) and (2) of the Company Disclosure Schedule) shall remain in full
      force after the assumption thereof by Parent.

     

    
      
        
        

      

      
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    (f) Treasury
      Stock.
      At the
      Effective Time, each share of Company Preferred Stock and Company Common Stock
      held by the Company in its treasury shall be cancelled and extinguished without
      any conversion thereof.

     

    (g) Company
      Capitalization Schedules.
      On the
      Closing Date, the Company shall deliver to Parent and Merger Sub separate
      schedules reflecting (i) a true and complete list of record holders of the
      issued and outstanding Company Preferred Stock, including the number of shares
      of each series of Company Preferred Stock held by such record holders, (ii)
      a
      true and complete list of record holders of the issued and outstanding Company
      Common Stock, including the number of shares of Company Common Stock held by
      such record holders, and (iii) a true and complete list of record holders of
      the
      Company Options, including the number of options held by such optionholders,
      as
      well as the grant dates, vesting schedules and strike prices of all outstanding
      options. Prior to the Parent making payment of the Merger Consideration, the
      Company shall execute and deliver to Parent a certificate setting forth the
      good
      faith calculation of the Company of the Per Share Merger Consideration and
      the
      aggregate Per Share Merger Consideration payable to each of the holders of
      Company Preferred Stock, Company Common Stock and Company Options (after giving
      effect to the provisions of Sections 2.05(a)(i) and (ii) hereof) (the
“Merger
      Consideration Allocation Certificate”).
      The
      Merger Consideration Allocation Certificate shall be deemed to be a
      representation and warranty of the Company hereunder. In no event shall Parent
      be required to transfer the Merger Consideration unless and until the Merger
      Consideration Allocation Certificate has been executed and delivered by the
      Company and approved by Parent. Parent shall be entitled to rely entirely upon
      the Merger Consideration Allocation Certificate in connection with making
      payment of the Merger Consideration and no holder of Company Preferred Stock,
      Company Common Stock or Company Options shall be entitled to make any claim
      in
      respect of the allocation of the Merger Consideration made by Parent to or
      for
      the benefit of any holder of Company Preferred Stock, Company Common Stock
      or
      Company Options to the extent that the payment is made in a manner consistent
      with the Merger Consideration Allocation Certificate.

     

    (h) Maximum
      Consideration to be Paid.
      Notwithstanding anything to the contrary contained in this Agreement, but
      subject, if any, to (i) the adjustment provided for in Section 2.13 hereof,
      (ii)
      the indemnification obligations of Parent contained in Article VIII and (iii)
      the provisions of Section 2.06 hereof, in no event shall Parent, Merger Sub
      or
      any Affiliate of Parent be required to pay any amount in excess of the Aggregate
      Merger Consideration. Without limiting the generality of the foregoing, in
      the
      event of any breach of the representations and warranties of the Company set
      forth in Sections 2.04(g) and 3.03 of this Agreement, whether such breach is
      as
      a result of any misstatement or omission in respect of the information set
      forth
      in Section 3.03 of the Company Disclosure Schedule or otherwise, the portion
      of
      the Aggregate Merger Consideration to be paid to each such holder under this
      Agreement shall be automatically equitably adjusted to accurately reflect the
      capitalization of the Company as of the Effective Time.

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

    (i) Tax
      Treatment.
      Notwithstanding the foregoing, if the Cash Merger Consideration is less
      than or equal to 20% of the value (determined under U.S. federal income tax
      principles) of the Initial Merger Consideration or the Aggregate Merger
      Consideration, the Parent may, in its sole discretion, increase the Cash Merger
      Consideration with a corresponding decrease to the Stock
      Merger Consideration if the Parent concludes that such adjustment
      is appropriate in order for the Merger to be treated as a taxable stock
      purchase for U.S. federal income tax purposes. For these purposes, any
      reduction in the number of shares issued as Stock Merger Consideration shall
      increase the Cash Merger Consideration using a valuation for the reduced
      number of shares equal to the Closing Price times the number of shares so
      reduced, provided, that the Closing Price shall not be less than $6.52
      .

     

    SECTION
      2.05. Exchange
      Procedures.
      

     

    (a) The
      functions of making various payments required under this Agreement and the
      Escrow Agreement including, without limitation, the payment of the Stock Merger
      Consideration and Cash Merger Consideration in exchange for Certificates, shall
      be effectuated by a paying agent (the “Paying
      Agent”).
      The
      Paying Agent shall initially be ESOP Trust Company (“ESOP Trust Company”),
      provided, however, if in the reasonable judgment of the Stockholders’
Representative ESOP Trust Company is not able to satisfactorily fulfill its
      obligations as the Paying Agent or the Parent and the Stockholders’
Representative are unable to reach an agreement with ESOP Trust Company upon
      reasonable and customary terms reasonably acceptable to both the Parent and
      the
      Stockholders’ Representative, then the Stockholders’ Representative may select a
      different trust company at any time during the term of this Agreement or the
      Escrow Agreement, which replacement Paying Agent shall be reasonably acceptable
      to the Parent.

     

    On
      the
      Closing Date, the Parent shall deliver to the Paying Agent, in trust for the
      benefit of the Stockholders, the Stock Merger Consideration and the Cash Merger
      Consideration minus (X) the Stock Escrow Amount, which shall be delivered to
      the
      Escrow Agent, and minus (Y) the Cash Escrow Amount, which shall be delivered
      to
      the Escrow Agent. 

     

    Immediately
      following the Closing, the Paying Agent shall use a portion of the Cash Merger
      Consideration to pay:

     

    (i) any
      cash
      payments mutually agreed upon by the Parent and the Stockholders’
Representative; and

     

    (ii) certain
      bonuses to current or former employees of the Company, in
      accordance with a schedule previously provided by the Company to the
      Parent
      (provided, however, that any material changes from such schedule shall be
      reasonably acceptable to the Parent), in an amount aggregating 10% of the
      difference between (X) the Cash Merger Consideration and (Y) the sum of the
      Cash
      Escrow Amount and any payments referred to in Section 2.05(a)(i), which shall
      be
      paid either by the Paying Agent or the Company, in the discretion of the
      Company.

     

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

    In
      addition, on the Escrow Fund Distribution Date (as defined in the Escrow
      Agreement), the Escrow Agent shall remit to the Paying Agent 10% of the amount
      ultimately released from the Cash Escrow Amount, for payment of bonuses to
      certain current or former employees of the Company, pursuant to a schedule
      prepared by the Stockholders’ Representative and which shall be substantially
      consistent with a schedule previously provided by the Company to the Parent,
      provided,
      however, that any material changes from such schedule shall be reasonably
      acceptable to the Parent.

     

    As
      soon
      as reasonably practicable after the Effective Time (but in no event later than
      5
      days following the Effective Time) and after the receipt by the Paying Agent
      of
      the Merger Consideration Allocation Certificate, the Parent shall cause the
      Paying Agent to mail (i) to each holder of a certificate or certificates
      which immediately prior to the Effective Time represented outstanding shares
      of
      Company Preferred Stock or Company Common Stock (the “Certificates”)
      (A) a
      letter of transmittal, in customary form, which shall specify that delivery
      shall be effective only upon delivery of the Certificates to Paying Agent and
      that risk of loss and title to the Certificates shall remain with the
      Stockholder until such delivery, and (B) instructions for effecting the
      surrender of such Certificates in exchange for a portion of the Aggregate Merger
      Consideration. Upon surrender of a Certificate and a letter of transmittal
      (or
      other documentation in compliance with Section 2.08 hereof), as applicable,
      to
      the Paying Agent together, with respect to holders of Certificates, with such
      letter of transmittal, duly executed and completed in accordance with the
      instructions thereto, and such other documents as may reasonably be required
      by
      the Paying Agent, the stockholder delivering such documents shall be entitled
      to
      receive in exchange therefor (A) its respective portion of the Aggregate Merger
      Consideration (subject
      to the provisions of Sections 2.05(a)(i) and (ii), and
      Article VIII hereof), less the portion of the Aggregate Merger Consideration
      allocable to such stockholder that has been deposited in the Cash Escrow Amount
      and Stock Escrow Amount pursuant to Section 8.06, subject to the provisions
      of
      Sections 2.05(a)(i) and (ii) hereof, and (B) cash in lieu of fractional
      shares of Parent Common Stock pursuant to Section 2.07. No later than 5 Business
      Days prior to the Closing Date, Parent shall deliver the form of letter of
      transmittal to the Company and the Stockholders’ Representative and prior to the
      Closing shall make such changes to the form as either shall reasonably request.
      The final form of letter of transmittal shall be in a form reasonably acceptable
      to the Company and the Stockholders’ Representative. If requested by the
      Stockholders’ Representative, the Paying Agent shall promptly provide the
      Stockholders’ Representative with copies of the executed letters of transmittal.
      Notwithstanding the foregoing, the foregoing exchange procedures shall comply
      with such procedures as may be required by the Israeli Withholding Tax Ruling,
      if obtained, and shall permit Parent or the Paying Agent (after consultation
      with the Company) to require holders of Certificates to provide any
      declarations, information and/or certificates of exemption (or reduced
      withholding rates) (x) that are reasonably necessary to comply with the Israeli
      Withholding Tax Ruling, if obtained, or (y) that Parent or the Paying Agent
      reasonably believes are necessary in order for it to determine whether Parent,
      the Surviving Corporation or the Paying Agent is subject to any withholding
      requirements with respect to payments made to any particular
      Stockholder.

     

    (b) If
      the
      Stock Merger Consideration and Cash Merger Consideration (or any portion
      thereof) is to be delivered to any Person other than the Person in whose name
      the Certificate formerly representing shares of Company Capital Stock
      surrendered therefor is registered, it shall be a condition to the right of
      such
      Person, other than the registered holder of a Certificate, to receive the Stock
      Merger Consideration and the Cash Merger Consideration payable with respect
      to
      such Certificate that (i) the Certificate be properly endorsed or otherwise
      be in proper form for transfer and (ii) the Person surrendering such
      Certificate shall pay any transfer or other Taxes required by reason of the
      receipt of the Stock Merger Consideration and the Cash Merger Consideration
      to a
      Person other than such registered holder or shall establish to the reasonable
      satisfaction of Parent and the Paying Agent that such Tax has been paid or
      is
      not applicable.

     

    
      
        
        

      

      
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    SECTION
      2.06. Appraisal
      Rights.
      Notwithstanding any provision of this Agreement to the contrary, any issued
      and
      outstanding shares of Company Preferred Stock or Company Common Stock held
      by
      persons who have exercised and perfected appraisal rights for such shares of
      Company Preferred Stock or Company Common Stock, as applicable, in accordance
      with applicable Law (“Dissenting
      Shares”)
      and as
      of the Effective Time have neither effectively withdrawn nor lost any right
      to
      such appraisal, shall not be converted into or represent a right to receive
      the
      Aggregate Merger Consideration payable under this Article II attributable to
      such Dissenting Shares. Such stockholders shall be entitled to receive payment
      of the appraised value of such shares of Company Preferred Stock or Company
      Common Stock held by them in accordance with applicable Law, unless and until
      such stockholders fail to perfect, effectively withdraw or otherwise lose their
      appraisal rights under applicable Law. Notwithstanding the foregoing, if any
      dissenting stockholder shall effectively withdraw or lose (through failure
      to
      perfect or otherwise) the right to appraisal, then as of the Effective Time
      or
      the occurrence of such event, whichever occurs later, such Dissenting Shares
      shall automatically be converted into and represent only the right to receive
      the Aggregate Merger Consideration and any other amounts payable under this
      Article II, without interest thereon, upon surrender of the Certificate or
      Certificates representing such Dissenting Shares in accordance with Section
      2.05. The Company shall provide Parent notice, promptly after the Company’s
      receipt thereof, of any written demands for appraisal or payment of the fair
      value of any shares of Company Preferred Stock or Company Common Stock, as
      applicable, the withdrawal of such demands and any other related instruments
      served pursuant to applicable Law.

     

    SECTION
      2.07.  Fractional
      Shares.
      No
      fractional shares of Parent Common Stock will be issued pursuant to this
      Agreement, but in lieu thereof each holder of Company Preferred Stock or Company
      Common Stock who would otherwise be entitled to a fractional share of Parent
      Common Stock hereunder (after aggregating all fractional shares of Parent Common
      Stock to be received by such holder) shall receive from Parent an amount of
      cash
      (rounded to the nearest whole cent) equal to the product of (a) such fractional
      share multiplied by (b) the Closing Price, less the amount of any withholding
      taxes which may be required thereon.

     

    SECTION
      2.08. Lost,
      Stolen or Destroyed Certificates.
      If any
      Certificate shall have been lost, stolen or destroyed, upon the making of an
      affidavit of that fact by the person claiming such Certificate to be lost,
      stolen or destroyed and, if required by Parent or the Paying Agent, an agreement
      to indemnify against any claim that may be made against the Paying Agent Parent
      or the Surviving Corporation with respect to such Certificate, the Paying Agent
      will deliver in exchange for such lost, stolen or destroyed Certificate the
      portion of the Aggregate Merger Consideration and any other amounts payable
      under this Article II with respect to the Company Preferred Stock or Company
      Common Stock formerly represented thereby.

     

    
      
        
        

      

      
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    SECTION
      2.09. Withholding
      Rights.
      Each of
      the Surviving Corporation, the Paying Agent, the Escrow Agent and Parent shall
      be entitled, with respect to payments made by each such entity, to deduct and
      withhold from the Aggregate Merger Consideration and any other amounts otherwise
      payable pursuant to this Agreement such amounts as it is required to deduct
      and
      withhold with respect to the making of such payment under the Israeli
      Withholding Tax Ruling, if obtained, the Code, the Israeli Tax Code, the rules
      and regulations promulgated thereunder or under any applicable Law, provided
      that no withholding under Israeli Tax law will be made from any consideration
      payable hereunder to a holder of Company Preferred Stock or Company Common
      Stock
      to the extent that such stockholder has provided Parent or the Paying Agent
      with
      an appropriate unequivocal exemption or confirmation of a reduced withholding
      rate issued by the ITA or such other document, opinion or form which, in the
      sole discretion of Parent, is sufficient to enable Parent or the Paying Agent
      to
      reasonably conclude that no withholding or a reduced rate of withholding, as
      applicable, of Israeli Tax is required with respect to the particular holder
      of
      Company Preferred Stock or Company Common Stock in question, prior to the time
      such payment is made.
      Upon
      delivery of the Aggregate Merger Consideration, Parent or the Paying Agent
      shall
      deliver to the Stockholders’ Representative a statement of all amounts so
      withheld. To the extent that amounts are so withheld by the Surviving
      Corporation, Parent or the Paying Agent, as the case may be, such withheld
      amounts shall be treated for all purposes of this Agreement as having been
      paid
      to the stockholders or optionholders of the Company, as the case may be, in
      respect to which such deduction and withholding was made by the Surviving
      Corporation or Parent, as the case may be. Any amounts deducted and withheld
      pursuant to this Section 2.09 shall be remitted to the appropriate Taxing
      authority in accordance with applicable Law.

     

    SECTION
      2.10. Stock
      Transfer Books.
      The
      stock transfer books of the Company shall be closed two Business Days preceding
      the Closing Date (the “Record
      Date”)
      and
      there shall be no further registration of transfers of Company Preferred Stock
      or Company Common Stock thereafter on the records of the Company. In the event
      of a transfer of ownership of Company Preferred Stock or Company Common Stock
      prior to the Record Date which is not registered in the transfer records of
      the
      Company, the Aggregate Merger Consideration and any other amounts payable under
      this Article II shall be payable to such transferee if the Certificate
      representing such shares of Company Preferred Stock or Company Common Stock
      is
      presented to Parent, accompanied by all documents required to evidence and
      effect such transfer in the sole and reasonable discretion of
      Parent.

     

    SECTION
      2.11. Certain
      Adjustments.
      If,
      between the date of this Agreement and the Effective Time, the outstanding
      shares of Parent Common Stock or Company Common Stock shall be changed into
      a
      different number of shares by reason of any reclassification, recapitalization,
      split-up, combination or exchange of shares, or any dividend payable in stock
      or
      other securities shall be declared thereon with a record date within such
      period, then, the allocation of the Aggregate Merger Consideration among the
      Stockholders shall be adjusted accordingly to provide to Parent and to the
      Stockholders the same economic effect as contemplated by this Agreement prior
      to
      such reclassification, recapitalization, split-up, combination, exchange,
      dividend or increase.

     

    SECTION
      2.12. [Reserved.]

     

    
      
        
        

      

      
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    SECTION
      2.13. Net
      Balance Sheet Adjustment. 

     

    (a) Within
      sixty (60) days after the Closing Date, Parent shall deliver to the
      Stockholders’ Representative a Closing Date Balance Sheet of the Company (the
“Closing
      Date Balance Sheet”)
      prepared as of the Closing Date, in accordance with U.S. GAAP, consistently
      applied and on a basis consistent with the accounting practices and policies
      used to prepare the audited consolidated balance sheet of the Company at
      December 31, 2006. The Closing Date Balance Sheet shall be prepared by the
      Company’s external auditor as of the date hereof (Ernst & Young LLP) unless
      Parent elects to use another accounting firm, in which case Parent will be
      required to pay the fees and disbursements charged by that other accounting
      firm. The Stockholders’ Representative shall cooperate with the Parent in the
      preparation of the Closing Date Balance Sheet, including but not limited to
      providing access to any appropriate work papers or to the Company’s accountants
      and auditors. In addition, the Company shall deliver a certificate (the
“Net
      Working Capital Certificate”)
      to the
      Stockholders’ Representative calculating the amount of Net Working Capital as of
      the Closing Date.

     

    (b) The
      Stockholders’ Representative shall deliver to the Parent within thirty (30) days
      after receiving the Closing Date Balance Sheet a reasonably detailed statement
      describing all of its objections (if any) thereto and sufficient details
      describing the basis therefor. Failure of the Stockholders’ Representative to so
      object to the Closing Date Balance Sheet within such 30-day period shall
      constitute acceptance thereof, whereupon such Closing Date Balance Sheet shall
      be deemed to be the “Final
      Closing Balance Sheet”
for
      purposes of this Agreement. If the Stockholders’ Representative does submit to
      Parent a statement of objections to the Closing Date Balance Sheet within such
      30-day period, the Parent and the Stockholders’ Representative shall use
      reasonable efforts to resolve any such objections, but if they do not reach
      a
      final resolution within thirty (30) days after Parent has received the statement
      of objections from the Stockholders’ Representative, Parent and the
      Stockholders’ Representative shall select a nationally-recognized independent
      accounting firm, other than the respective regular independent accounting firms
      of Parent and the Company, mutually acceptable to them (the “Accounting
      Referee”)
      to
      resolve any remaining objections. If Parent and the Stockholders’ Representative
      are unable to agree on the choice of Accounting Referee, they shall select
      as
      Accounting Referee an internationally-recognized accounting firm by lot (after
      excluding their respective regular independent accounting firms). Parent and
      the
      Stockholders’ Representative shall use commercially reasonable efforts to cause
      the Accounting Referee to resolve, within sixty (60) days after appointment
      of
      the Accounting
      Referee,
      the
      matters on the Closing Date Balance Sheet which are the subject of dispute
      between Parent and the Stockholders’ Representative, and the Closing Date
      Balance Sheet shall be adjusted in accordance with the Accounting Referee’
determination and, as so adjusted, shall be the “Final
      Closing Balance Sheet”
for
      purposes of this Agreement. Such determination by the Accounting Referee shall
      be conclusive and binding upon Parent and the Stockholders’ Representative.
      Parent and the Stockholders’ Representative shall share equally the fees and
      expenses of the Accounting Referee. The Parent and the Surviving Corporation
      shall make such information, personnel and resources available to the
      Stockholders’ Representative as may be reasonably necessary to enable the
      Stockholders’ Representative to review the Closing Date Balance Sheet; provided
      that the obligation of the Parent and the Surviving Corporation to provide
      such
      information, personnel and resources shall be limited to normal business hours
      with reasonable prior notice and in such a manner so as not to interfere
      unreasonably with the conduct of their business. 

     

    
      
        
        

      

      
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    (c) If
      the
      amount of Net Working Capital, as set forth in the Final Closing Balance Sheet,
      is less than $0.00, then the Initial Merger Consideration shall be reduced
      by
      the amount by which the Net Working Capital is less than $0.00; provided;
      however,
      that
      the Parent may not make a claim for such reduction unless the aggregate amount
      by which the Net Working Capital is less than $0.00 equals $500,000 or greater,
      in which case the Parent shall have the right to a reduction of the full amount
      by which the Net Working Capital is less than $0.00, which amount shall be
      remitted by the Escrow Agent back to Parent pursuant to the terms of the Escrow
      Agreement.

     

    (d) If
      the
      amount of Net Working Capital, as set forth in the Final Closing Balance Sheet,
      is greater than $0.00, then the Initial Merger Consideration shall be increased
      by the amount by which the Net Working Capital exceeds $0.00; provided;
      however,
      that
      the Stockholders’ Representative may not make a claim for such increase unless
      the aggregate amount by which the Net Working Capital exceeds $0.00 equals
      $500,000 or greater, in which case the Stockholders shall have the right to
      an
      increase of the full amount by which the Net Working Capital exceeds $0.00,
      which amount shall be paid by the Parent or the Surviving Corporation to the
      Paying Agent (for distribution to the Stockholders).

     

    SECTION
      2.14. Other
      Provisions Relating to Parent Common Stock.
      Except
      as otherwise permitted pursuant to the terms of Section 2.14(c) below, the
      shares of Parent Common Stock to be issued to the Principal Stockholders
      pursuant to this Agreement are subject to the provisions of a trading
      restriction agreement in favor of Parent substantially in the form of
Exhibit
      E
      hereto
      (the “Trading
      Restriction Agreements”)
      to be
      signed by each Principal Stockholder as set forth below in clauses (a) - (c)
      below. The Trading Restriction Agreements shall be administered by a trading
      restriction administrator (the “Trading
      Restriction Administrator”).
      The
      Trading Restriction Administrator shall initially be ESOP-EXCELLENCE, an
      affiliate of ESOP Trust Company (“ESOP-EXCELLENCE”), provided, however, if in
      the reasonable judgment of the Stockholders’ Representative ESOP-EXCELLENCE is
      not able to satisfactorily fulfill its obligations as the Trading Restriction
      Administrator or the Parent and the Stockholders’ Representative are unable to
      reach an agreement with ESOP-EXCELLENCE upon reasonable and customary terms
      reasonably acceptable to both the Parent and the Stockholders’ Representative,
      then the Parent may select a different brokerage firm at any time during the
      term of the Trading Restriction Agreements, which replacement Trading
      Restriction Administrator shall be reasonably acceptable to the Stockholders’
Representative. 

     

    (a) One
      Trading Restriction Agreement shall be executed by the Principal Stockholders
      identified in Schedule
      I
      as Group
      1 and such stockholders, collectively, shall be bound by the volume limitations
      provided therein, such Trading Restriction Agreement to govern the sales of
      Parent Common Stock by the members of Group 1 for the period commencing on
      the
      Initial Release Date and ending on the date three years after the Initial
      Release Date;

     

    (b) A
      second
      Trading Restriction Agreement shall be executed by the Principal Stockholders
      identified in Schedule
      I
      as Group
      2 and such stockholders, collectively, shall be bound by the volume limitations
      provided therein, such Trading Restriction Agreement to govern the sales of
      Parent Common Stock by the members of Group 2 for the period commencing on
      the
      Initial Release Date and ending on the date three years after the Initial
      Release Date; and

     

    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

    

    (c) A
      third
      Trading Restriction Agreement shall be executed by (a) all of the Principal
      Stockholders identified in Schedule
      I
      as Group
      3A, and (b) such other Stockholders (referred to herein as Group 3B) who
      together with Group 1, Group 2 and Group 3A in the aggregate hold at least
      90%
      of the capital stock of the Company on an outstanding shares plus vested options
      basis, provided, however, that, the Stockholders in Group 3B may not be members
      of Group 1, Group 2 or Group 3A (Group 1; Group 2; and
      Group
      3A and Group 3B
      together, each
      individually a “Group”
and,
      collectively, the “Groups”),
      and
      such stockholders and optionholders, collectively, shall be bound by the volume
      limitations provided therein, such Trading Restriction Agreement to govern
      the
      sales of Parent Common Stock by the members of Group 3A and Group 3B
for
      the
      period commencing on the Closing Date and ending on the date three years after
      the Closing Date, 

     

    it
      being
      understood that sales of Parent shares by Stockholders of any Group shall not
      be
      taken into account for purposes of the volume limitations applicable to any
      other Group. 

     

    SECTION
      2.15. Stockholders’
      Representative.

     

    (a) Subject
      to the provisions of paragraph (c) below, Yoav Leibovich, hereby is irrevocably
      constituted and appointed as the sole, exclusive, true and lawful agent,
      representative and attorney-in-fact of all Stockholders and each of them
      (“Stockholders’
      Representative”)
      with
      respect to any and all matters relating to, arising out of, or in connection
      with, the Transaction Documents (other than the Employment Agreements and
      Lock-up Agreements), including for purposes of taking any action or omitting
      to
      take action on behalf of Stockholders thereunder. All actions, notices,
      communications and determinations by or on behalf of Stockholders under such
      documents shall be given or made by Stockholders’ Representative and all such
      actions, notices, communications and determinations by Stockholders’
Representative shall conclusively be deemed to have been authorized by, and
      shall be binding upon, any of and all of the Stockholders.

     

    (b) The
      Stockholders’ Representative will not be liable to any Stockholder for any act
      taken or omitted by it as permitted under this Agreement, except if such act
      is
      taken or omitted in bad faith or by willful misconduct. The Stockholders’
Representative will also be fully protected in relying upon any written notice,
      demand, certificate or document that it in good faith believes to be genuine
      (including facsimiles thereof). The Stockholders agree, severally but not
      jointly, to indemnify the Stockholders’ Representative for, and to hold the
      Stockholders’ Representative harmless against, any loss, liability or expense
      incurred without willful misconduct or bad faith on the part of the
      Stockholders’ Representative, arising out of or in connection with the
      Stockholders’ Representative’s carrying out its duties as representative for the
      Stockholders under this Agreement, including costs and expenses of successfully
      defending the Stockholders’ Representative against any claim of liability with
      respect thereto. In the event that any such amounts are not paid to the
      Stockholder Representative, the Stockholder Representative shall be entitled
      to
      receive such amounts from the remaining balance in the Stock Escrow Account
      and
      Cash Escrow Amount, but only after the termination of the applicable escrow
      period pursuant to the terms of the Escrow Agreement and satisfaction of any
      claims made by the Parent Indemnified Group. The Stockholders’ Representative
      may consult with counsel of its own choice and will have full and complete
      authorization and protection for any action taken and suffered by it in good
      faith and in accordance with the opinion of such counsel.

     

    
      
        
        

      

      
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    (c) If
      Stockholders’ Representative dies or becomes legally incapacitated, or, if the
      Stockholders’ Representative becomes unable or unwilling, for any reason, to
      serve as representative for the Stockholders, then such other Person or Persons
      as may be designated by Stockholders holding a majority of the voting interests
      of the Company, shall succeed the Stockholders’ Representative as the
      representative of the Stockholders in all matters under this Agreement and
      the
      transactions contemplated hereby. If at any time there shall not be a
      Stockholders’ Representative or Stockholders so fail to designate a successor
      Stockholders’ Representative, then Parent may have a court of competent
      jurisdiction appoint a Stockholders’ Representative hereunder. 

     

    (d) Without
      limiting the generality of the foregoing, Stockholders’ Representative is
      designated as the sole and exclusive agent, representative and attorney-in-fact
      for Stockholders for all purposes related to this Agreement (including
      (i) service of process upon Stockholders, (ii) executing and
      delivering to Parent or any other Person on behalf of any of or all Stockholders
      any and all instruments, certificates, documents and agreements with respect
      to
      the transactions contemplated by the Transaction Documents (other than the
      Employment Agreements and Lock-up Agreements), and any other instrument,
      certificate, document or agreement referred to in Section 7.02, and
      (iii) receipt of all notices on behalf of Stockholders with respect to any
      matter, suit, claim, action or proceeding arising with respect to the sale
      of
      the Shares or any transaction contemplated by the Transaction Documents (other
      than the Lock-up Agreements and the Employment Agreements), including the
      defense, settlement or compromise of any claim, action or proceeding pursuant
      to
      Article VIII), and Stockholders may act, with respect to all matters under
      the
      Transaction Documents (other than the Lock-up Agreements and Employment
      Agreements), only through the Stockholders’ Representative. Parent shall be
      entitled to rely on the authority of the Stockholders’ Representative as the
      agent, representative and attorney-in-fact of Stockholders for all purposes
      under the Transaction Documents (other than the Employment Agreements and
      Lock-up Agreements) and shall have no liability for any such reliance. None
      of
      Stockholders may revoke the authority of Stockholders’ Representative. Each
      Stockholder hereby ratifies and confirms, and hereby agrees to ratify and
      confirm, any action taken by Stockholders’ Representative in the exercise of the
      power-of-attorney granted to Stockholders’ Representative pursuant to this
      Section 2.15, which power-of-attorney, being coupled with an interest, is
      irrevocable and shall survive the death, incapacity or incompetence of such
      Stockholder. Any payment made to Stockholders’ Representative or the Paying
      Agent pursuant to any of the Transaction Documents (other than the Employment
      Agreements and Lock-up Agreements) shall be deemed to have been made to
      Stockholders (it being understood that all payments to the Stockholders will
      be
      made via the Paying Agent unless the Parent receives specific instructions
      to
      the contrary or as is otherwise specifically provided herein). Promptly after
      receiving any such payment, Stockholders’ Representative shall deliver to each
      Stockholder his, her or its pro rata portion of such payment. Without limiting
      the foregoing, Stockholders hereby covenant and agree to defend, indemnify
      and
      hold harmless the members of the Parent Indemnified Group from and against
      any
      Losses arising out of any claim that Stockholders’ Representative failed to
      distribute to Stockholders (or properly allocate among them) any payments
      received by Stockholders’ Representative under the Transaction Documents (other
      than the Employment Agreements and Lock-up Agreements).

     

    
      
        
        

      

      
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    III.

     

    REPRESENTATIONS
      AND WARRANTIES AS TO

    THE
      COMPANY

     

    Company
      represents and warrants to Parent and Merger Sub, subject to the exceptions
      specifically disclosed in writing in the Company Disclosure Schedule
      (the
      disclosures in any section or subsection of the Company Disclosure Schedule
      shall qualify other sections and subsections in this Article III only to the
      extent it is reasonably clear from a reading of the disclosure that such
      disclosure is applicable to such other sections and subsections)
      that:

     

    SECTION
      3.01. Organization
      and Qualification; Subsidiaries. 

     

    (a) The
      Company has been duly incorporated and is validly existing and in good standing
      under the Laws of the jurisdiction of its incorporation and has the requisite
      corporate power and authority to own, lease and operate its properties and
      to
      carry on its
      business as it is now being conducted.
      Kasamba
      Ltd. is a company duly organized and validly existing under the laws of the
      State of Israel and has all requisite corporate power and authority to carry
      on
      its business as it is now being conducted. Each of the Company and the Company
      Subsidiary is duly qualified or licensed to do business, and is in good standing
      (if applicable), in each jurisdiction where the character of the properties
      owned, leased or operated by it or the nature of its business makes such
      qualification or licensing necessary, except for such failures to be so
      qualified or licensed and in good standing that would not reasonably be expected
      to have, individually or in the aggregate, a Company Material Adverse
      Effect.

     

    (b) Except
      for Kasamba Ltd. (the “Company
      Subsidiary”),
      the
      Company does not own an equity interest in any corporation, partnership or
      joint
      venture arrangement or other business entity. All of the issued and outstanding
      share capital of the Company Subsidiary is owned by the Company.

     

    (c) Neither
      the Company nor the Company Subsidiary carries on any business other than
      assisting consumers find expert help through online chat, phone service or
      e-mail communication.

     

    SECTION
      3.02. Certificate
      of Incorporation and Bylaws.
      True,
      complete and correct copies of the Company’s Certificate of Incorporation and
      bylaws and the Company Subsidiary’s charter or memorandum and articles of
      association or other organizational documents and bylaws (the “Organizational
      Documents”),
      each
      as amended, are included in Section 3.02 of the Company Disclosure Schedule.
      Such Organizational Documents are in full force and effect. Neither the Company
      nor the Company Subsidiary is in violation of any of the provisions of its
      Organizational Documents.

     

    SECTION
      3.03. Capitalization.
      The
      authorized capital stock of the Company consists of 4,000,000 shares of Common
      Stock, par value $0.01 per share (“Company
      Common Stock”),
      and
      884,400 shares of Preferred Stock, par value $0.01 per share (“Company
      Preferred Stock”),
      of
      which 332,700 are designated as “Series A Preferred Stock,” 151,700 are
      designated as “Series A-1 Preferred Stock,” and 400,000 are designated as
“Series A-2 Preferred Stock.” There are 1,382,000 shares of Company Common Stock
      currently issued and outstanding, 332,700 shares of Series A Preferred Stock
      currently issued and outstanding, 10 shares of Series A-1 Preferred Stock
      currently issued and outstanding, and 245,247 shares of Series A-2 Preferred
      Stock currently issued and outstanding. All of the currently issued and
      outstanding shares of Common Stock and Preferred Stock are duly authorized,
      validly issued, fully paid and nonassessable, and have been issued in full
      compliance with all securities laws, including the Israel Securities Law. Except
      for the Series A Preferred Stock, Series A-1 Preferred Stock, Series A-2
      Preferred Stock and the Company Common Stock and the Company Options, there
      are
      no shares of capital stock or other equity securities of the Company
      outstanding. Other than the Company Options, there are no options, warrants
      or
      other rights, agreements, arrangements or commitments of any character to which
      the Company is a party or by which the Company is bound relating to the issued
      or unissued capital stock of the Company or obligating the Company to issue
      or
      sell any shares of capital stock of, or other equity interests in, the Company.
      There are no outstanding contractual obligations of the Company to repurchase,
      redeem or otherwise acquire any shares of Company Common Stock. There are no
      material outstanding contractual obligations of the Company to provide funds
      to,
      or make any material investment (in the form of a loan, capital contribution
      or
      otherwise) in, any other Person. Set forth on Schedule
      I
      to this
      Agreement is a complete capitalization table of the Company as of the date
      of
      this Agreement, listing the name of each holder of any outstanding equity
      securities, options,
      warrants or other rights relating
      to the capital stock of the Company and the number of shares, options, warrants
      or other rights owned by such holder.

     

    
      
        
        

      

      
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    SECTION
      3.04. Authority
      Relative to this Agreement.
      The
      Company has all necessary corporate power and authority to execute and deliver
      this Agreement, the other Transaction Documents, and all other instruments,
      certificates and agreements delivered or required to be delivered pursuant
      to
      this Agreement to which the Company is a party, to perform its obligations
      hereunder and thereunder and to consummate the transactions contemplated hereby
      and thereby. With the exception of the Required Stockholder Consent, the
      execution and delivery by the Company of this Agreement and the other
      Transaction Documents to which it is a party and the consummation by the Company
      of the transactions contemplated hereby and thereby have been duly and validly
      authorized by all necessary corporate action, and no other corporate proceedings
      on the part of the Company are necessary to authorize this Agreement or such
      Transaction Documents or to consummate the transactions contemplated hereby
      and
      thereby. This Agreement and the other Transaction Documents to which it is
      a
      party has been duly and validly executed and delivered by the Company. This
      Agreement and the other Transaction Documents to which it is a party constitutes
      the legal, valid and binding obligation of the Company, enforceable against
      it
      in accordance with its terms, except to the extent that its enforceability
      may
      be limited by applicable bankruptcy, insolvency, reorganization or other Laws
      affecting the enforcement of creditors’ rights generally or by general equitable
      principles.

     

    SECTION
      3.05. No
      Conflicts; Required Filings and Consents.

     

    (a) Except
      as
      set forth in Section 3.05 of the Company Disclosure Schedule, the execution
      and
      delivery of this Agreement and the other Transaction Documents to which it
      is a
      party by the Company do not, and the performance by the Company of its
      obligations hereunder and thereunder, and the consummation of the transactions
      contemplated hereby and thereby will not, (i) conflict with or violate any
      provision of the Organizational Documents of the Company or the Company
      Subsidiary, (ii) conflict with or violate any Law applicable to the Company
      or the Company Subsidiary or by which any property or asset of the Company
      or
      the Company Subsidiary is bound or affected or (iii) result in any breach
      of or constitute a default (or an event which with the giving of notice or
      lapse
      of time or both could reasonably be expected to become a default) under, or
      give
      to others any right of termination, amendment, acceleration or cancellation
      of,
      or result in the creation of a lien or other encumbrance on any material
      property or asset of the Company or the Company Subsidiary pursuant to, any
      material note, bond, mortgage, indenture, contract, agreement, lease, license,
      permit, franchise or other instrument or obligation in each case, with respect
      to clauses (ii) and (iii) of this Section 3.05(a), which will result in a
      Company Material Adverse Effect.

     

    
      
        
        

      

      
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    (b) Except
      as
      set forth in Section 3.05 of the Company Disclosure Schedule, no filing or
      registration with, or notification to, and no permit, authorization, consent
      or
      approval of, any Government Entity is necessary for the execution and delivery
      of this Agreement by the Company or the consummation by the Company of the
      transactions contemplated by this Agreement except (i) such filings and
      consents as may be required under any Environmental Law pertaining to any
      notification, disclosure or required approval triggered by the transactions
      contemplated by this Agreement, (ii) such filings, registrations,
      notifications, permits, authorizations, consents or approvals that result from
      the specific legal or regulatory status of the Parent or as a result of any
      other facts that specifically relate to the business or activities in which
      the
      Parent is engaged other than the business of the Company and (iii) such
      other filings, registrations, notices, permits, authorizations, consents and
      approvals that if not obtained, made or given would not, individually or in
      the
      aggregate, have a Company Material Adverse Effect.

     

    (c) Except
      as
      set forth in Section 3.05(c) of the Company Disclosure Schedule, no consent
      of
      any third party is required by reason of the transactions contemplated by this
      Agreement, except where the failure to obtain such consent would not have a
      Company Material Adverse Effect.

     

    SECTION
      3.06. Permits;
      Compliance with Laws. Except
      as
      set forth in Section 3.06 of the Company Disclosure Schedule, the Company and
      the Company Subsidiary are in possession of all franchises, grants,
      authorizations, licenses, establishment registrations, product listings,
      permits, easements, variances, exceptions, consents, certificates,
      identification and registration numbers, approvals and orders of any
      Governmental Entity necessary for the Company and the Company Subsidiary to
      own,
      lease and operate its properties or to offer or perform its services or to
      develop, produce, store, distribute and market its products or otherwise to
      carry on its business as it is now being conducted (collectively, the
“Company
      Permits”),
      except where the failure to have such Company Permits would not have a Company
      Material Adverse Effect, and, as of the date of this Agreement, none of the
      Company Permits has been suspended or cancelled nor is any such suspension
      or
      cancellation pending or, to the Company’s Knowledge, threatened. Neither the
      Company nor the Company Subsidiary is in conflict with, or in default or
      violation of, (i) any Law applicable to the Company or the Company Subsidiary
      or
      by which any property or asset of the Company or the Company Subsidiary is
      bound
      or affected or (ii) any Company Permits, in each case other than as would not
      result in a Company Material Adverse Effect. Section 3.06 of the Company
      Disclosure Schedule sets forth, as of the date of this Agreement, all actions,
      proceedings or investigations pending or, to the Company’s Knowledge, threatened
      against the Company or the Company Subsidiary that could reasonably be expected
      to result in the suspension or cancellation of any other Company Permit. Since
      January 1, 2006, neither the Company nor the Company Subsidiary has received
      from any Governmental Entity any written notification with respect to possible
      conflicts, defaults or violations of Laws. To the Company’s Knowledge, the
      transactions contemplated hereby will not result in the suspension or
      cancellation of any Company Permit

     

    
      
        
        

      

      
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    SECTION
      3.07. Financial
      Statements.

     

    (a) Section
      3.07 of the Company Disclosure Schedule includes copies of (i) the audited
      consolidated balance sheet of the Company at December 31, 2006, together
      with the related statement of operations, stockholders’ equity and cash flows
      for the year ended December 31, 2006 and the notes thereto and
      (ii) the unaudited consolidated interim balance sheet of the Company at
      March 31, 2007, together with the related statement of operations,
      stockholders’ equity and cash flows for the three months ended March 31,
      2007 and the notes thereto along with a review report from the Company’s
      independent public accountants pursuant to Statement of Accounting Standards
      No. 100 (the “Company
      Financial Statements”).
      The
      Company Financial Statements: (i) were prepared in accordance with GAAP (except,
      with respect to the unaudited balance sheet and income statement, for the
      absence of notes thereto and for year-end adjustments) applied on a consistent
      basis throughout the periods covered thereby; (ii) present fairly the financial
      position, results of operations and cash flows of the Company as of such dates
      and for the periods then ended; and (iii) are correct and complete in all
      material respects, and can be reconciled with the books of account and records
      of the Company. The Company maintains and will continue to maintain an adequate
      system of internal controls established and administered in accordance with
      GAAP.

     

    (b) Except
      as
      and to the extent set forth or reserved against on
      the
      audited balance sheet of the Company at December
      31, 2006, neither the Company nor the Company Subsidiary has any liabilities
      or
      obligations of any nature (whether accrued, absolute, contingent, committed
      or
      otherwise) that would be required to be reflected on a balance sheet or in
      notes
      thereto prepared in accordance with GAAP, except for liabilities or obligations
      incurred in the ordinary course of business consistent with past practice as
      reflected on the audited balance sheet of the Company at December 31,
      2006.

     

    SECTION
      3.08. Absence
      of Certain Changes or Events.
      Except
      as set forth in Section 3.08 of the Company Disclosure Schedule, since December
      31, 2006, each of the Company and the Company Subsidiary has conducted its
      business only in the ordinary course consistent with past practice and, since
      such date, there has not been (i) any Company Material Adverse Effect, (ii)
      any
      event that could reasonably be expected to prevent or materially delay the
      performance of the Company’s obligations pursuant to this Agreement and the
      consummation of the transactions contemplated hereby by the Company, (iii)
      any
      change by the Company or the Company Subsidiary in its accounting methods,
      principles or practices, (iv) any declaration, setting aside or payment of
      any
      dividend or distribution in respect of the shares of Company Preferred Stock
      or
      Company Common Stock or any redemption, purchase or other acquisition of any
      of
      the Company’s securities, (v) any increase in the compensation or benefits or
      establishment of any bonus, insurance, severance, deferred compensation,
      pension, retirement, profit sharing, stock option (including, without
      limitation, the granting of stock options, stock appreciation rights,
      performance awards or restricted stock awards), stock purchase or other employee
      benefit plan, or any other increase in the compensation payable or to become
      payable to any employees, officers, consultants or directors of the Company
      or
      the Company Subsidiary, (vi) any issuance or sale of any stock, notes, bonds
      or
      other securities, or entering into any agreement with respect thereto, (vii)
      any
      amendment to the Company’s or the Company Subsidiary’s Organizational Documents,
      (viii) other than in the ordinary course of business consistent with past
      practice, any (x) purchase, sale, assignment or transfer of any material assets,
      (y) mortgage, pledge or existence of any lien, encumbrance or charge on any
      material assets or properties, tangible or intangible, except for liens for
      Taxes not yet delinquent and such other liens, encumbrances or charges which
      do
      not, individually or in the aggregate, have a Company Material Adverse Effect,
      or (z) waiver of any rights of material value or cancellation of any material
      debts or claims, (ix) any incurrence of any damage, destruction or similar
      loss,
      whether or not covered by insurance, materially affecting the business or
      properties of the Company or the Company Subsidiary, (x) any entering into
      any
      transaction of a material nature other than in the ordinary course of business,
      consistent with past practice, (xi) any application made to a Governmental
      Entity for an advisory ruling, monetary grant or any other application that
      would have an impact on the financial position of the Company or the Company
      Subsidiary, or negotiation of, receipt of, or termination or cancellation of
      a
      government grant, (xii) any change in any Tax election, annual Tax accounting
      period, any method of Tax accounting, any filing of amended Tax Returns or
      claims for Tax refunds, any entry into a closing agreement relating to Taxes
      or
      any settlement of any Tax claim, audit or assessment, or any application or
      negotiation for or receipt of a Tax ruling or arrangement by the Company, its
      Subsidiaries or its stockholders or on their behalf, whether or not in
      connection with the Merger, except as explicitly contemplated in this Agreement,
      or (xiii) any negotiation or agreement by the Company or the Company Subsidiary
      to do any of the things described in the preceding clauses (i) through
      (xii). 

     

    
      
        
        

      

      
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    SECTION
      3.09. Employee
      Matters. 

     

    (a) Neither
      the Company nor the Company Subsidiary is party to any Contract regarding
      collective bargaining or other Contract with any labor or trade union or
      collective bargaining group representing any employee of the Company or the
      Company Subsidiary, nor, to the Company’s Knowledge, does any labor or trade
      union or collective bargaining agent represent any employee of the Company
      or
      the Company Subsidiary. No Contract regarding collective bargaining has been
      requested by, or is under discussion between management of the Company or the
      Company Subsidiary (or any management group or association of which the Company
      or the Company Subsidiary is a member or otherwise a participant) and any group
      of employees of the Company or the Company Subsidiary, nor are there any
      representation proceedings or petitions seeking a representation proceeding
      presently pending against the Company or the Company Subsidiary, nor, to the
      Company’s Knowledge, are there any other current activities to organize any
      employees of the Company or the Company Subsidiary into a collective bargaining
      unit. There are no unfair labor practice charges or complaints pending or,
      to
      the Company’s Knowledge, threatened against the Company or the Company
      Subsidiary.

     

    (b) Section
      3.09(b) of the Company Disclosure Schedule sets forth a true, accurate and
      complete list of the Company’s and each Company Subsidiary’s directors,
      officers, employees, consultants and independent contractors, and includes
      a
      listing of each of such director’s, officer’s and employee’s compensation terms
      (including, but not limited to date of commencement of employment, salary,
      bonuses, stock options and warrants (if any), social benefits, fringe benefits
      and accrued vacation). Except as set forth in Section 3.09(b) of the Company
      Disclosure Schedule, each of the Company’s and the Company Subsidiary’s
      employees works in Israel. Neither the Company nor the Company Subsidiary is
      delinquent in any material payment to any of its employees for any wages,
      salaries, commissions, bonuses or other direct compensation for any services
      performed by any such employees. Except as indicated in Section 3.09(b) of
      the
      Company Disclosure Schedule, upon termination of the employment of any
      employees, neither the Company, the Company Subsidiary nor the Parent will
      by
      reason of the transaction contemplated pursuant to this Agreement or anything
      done prior to the Closing Date be liable to any of such directors, officer
      or
      employees for severance pay or any other payments (other than accrued salary,
      vacation or such pay in accordance with normal policies or amount required
      to be
      paid under applicable Laws). 

     

    
      
        
        

      

      
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    (c) The
      Company has previously delivered to Parent true and complete copies of all
      employment, consulting, termination and severance Contracts with or for the
      benefit of, or otherwise relating to, any directors, officers, employees,
      consultants or independent contractors of the Company and the Company
      Subsidiary. Except as set forth on Section 3.09(c) of the Company Disclosure
      Schedule, none of the execution, delivery or performance of any Transaction
      Document by the Company or the consummation by the Company of the transactions
      contemplated hereby or thereby will result in any obligation to pay any
      directors, officers, employees, consultants, independent contractors, former
      directors, officers, employees, consultants or independent contractors of the
      Company or the Company Subsidiary severance pay or termination, retention or
      other benefits.

     

    (d) Except
      as
      set forth on Section 3.09(d) of the Company Disclosure Schedule, no current
      employee has given notice to, or received notice from, the Company or any of
      its
      Representatives that any such employee’s employment or service may be terminated
      or advised the Company or any Company Subsidiary of an intention to give such
      notice to, or is expected to receive notice from, the Company, the Company
      Subsidiary or any of their Representatives that any such employee’s employment
      or service may be terminated.

     

    (e) Except
      as
      set forth on Section 3.09(e) of the Company Disclosure Schedule, the Company
      has
      never maintained, contributed to or incurred any Liability under any Benefit
      Plan that is or was subject to ERISA or the U.S. Tax Code or any Foreign Pension
      Plan. There is no, nor has there ever been any, individual, person or entity
      that together with the Company has ever been treated as a single-employer within
      the meaning of Section 414(b), (c), (m) or (o) of the U.S. Tax Code or Section
      4001(b) of ERISA.

     

    (f) Section
      3.09(f) of the Company Disclosure Schedule sets forth a current, accurate and
      complete list of each Benefit Plan.

     

    (g) The
      Company has delivered or made available to Parent current, accurate and complete
      copies of (i) each Benefit Plan that has been reduced to writing and all
      amendments thereto and (ii) all trust agreements, insurance contracts,
      investment management agreements, investment advisory agreements, administrative
      services agreements or similar agreements maintained in connection with any
      Benefit Plan.

     

    
      
        
        

      

      
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    (h) No
      person
      previously employed by the Company or the Company Subsidiary has now or may
      have
      a right to return to work or a right to be reinstated or re-engaged by any
      applicable Law. Each of the Company and the Company Subsidiary has at all
      relevant times complied in all material respects with all its obligations under
      Law with respect to any aspect of the employment of its employees, including
      with respect to the health and safety at work of its employees, and, except
      as
      set forth in Section 3.09 of the Company Disclosure Schedule, there are no
      material claims pending or, to the Company’s Knowledge, capable of arising or
      threatened by any party in respect of any accident or injury which is not fully
      covered by insurance of the Company or the Company Subsidiary.

     

    (i) To
      the
      Company’s Knowledge, no employees of the Company or the Company Subsidiary are
      in violation of any term of any employment contract, non-disclosure agreement,
      non-competition agreement, or any restrictive covenant to a former employer
      relating to the right of any such employee to be employed by the Company or
      the
      Company Subsidiary because of the nature of the business conducted or presently
      proposed to be conducted by the Company or to the use of trade secrets or
      proprietary information of others. 

     

    (j) With
      respect to employees of the Company or the Company Subsidiary who reside or
      work
      in Israel (the “Israeli
      Employees”),
      except as set forth in Section 3.09(j) of the Company Disclosure Schedule:
      (a)
      the employment of each Israeli Employee is subject to termination upon not
      more
      than thirty (30) days prior written notice under the termination notice
      provisions included in the employment agreement with such Israeli Employee
      or
      applicable legal requirements; (b) all obligations of the Company or the Company
      Subsidiary to provide statutory severance pay to all Israeli Employees pursuant
      to the Severance Pay Law (5723-1963) are fully funded or accrued on the
      Financial Statements; (c) no Israeli Employee’s employment by the Company or the
      Company Subsidiary requires any special license, permit or other governmental
      authorization; (d) there are no unwritten policies, practices or customs of
      the
      Company or the Company Subsidiary that, by extension, could reasonably be
      expected to entitle any Israeli Employee to benefits in addition to what such
      Israeli Employee is entitled to by applicable legal requirements or under the
      terms of such Israeli Employee’s employment agreement (including unwritten
      customs or practices concerning bonuses, the payment of statutory severance
      pay
      when it is not required under applicable legal requirements); (e) all amounts
      that Company or the Company Subsidiary is legally or contractually required
      either (i) to deduct from Israeli Employees’ salaries or to transfer to such
      Israeli Employees’ pension or provident, life insurance, incapacity insurance,
      continuing education fund or other similar funds or (ii) to withhold from their
      Israeli Employees’ salaries and benefits and to pay to any Governmental
      Authority as required by the ITA and National Insurance Law or otherwise, have,
      in each case, been duly deducted, transferred, withheld and paid, and neither
      the Company nor the Company Subsidiary have any outstanding obligation to make
      any such deduction, transfer, withholding or payment; (f) each of the Company
      and the Company Subsidiary is in compliance in all material respects with all
      applicable legal requirements and contracts relating to employment, employment
      practices, wages, bonuses, pension benefits and other compensation matters
      and
      terms and conditions of employment related to Israeli Employees, including
      but
      not limited to The Prior Notice to the Employee Law, 2002, The Notice to
      Employee (Terms of Employment) Law, 2002, the Prevention of Sexual Harassment
      Law, 1998, the
      Hours
      of Work and Rest Law, 1951, the Annual Leave Law, 1951, and
      The
      Employment by Human Resource Contractors Law, 1996; and (g) neither the Company
      nor the Company Subsidiary has engaged any consultants, sub-contractors or
      freelancers. The Company and the Company Subsidiary are not subject to, and
      no
      employee of the Company or the Company Subsidiary benefits from, any extension
      order [tzavei
      harchava].
      The
      Company has furnished to Parent (a) copies of all material agreements with
      Israeli human resource contractors, or with Israeli consultants, sub-contractors
      or freelancers; and (b) copies of material manuals and material written policies
      relating to the employment of Israeli Employees.

     

    
      
        
        

      

      
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    SECTION
      3.10. Contracts.
      Section
      3.10 of the Company Disclosure Schedule describes all Contracts to which the
      Company or the Company Subsidiary is a party or by which the Company or the
      Company Subsidiary is bound and that meet any of the following criteria
      (individually, a “Material
      Contract”
and
      collectively, the “Material
      Contracts”):

     

    (a) any
      sales, advertising, distribution or agency contract in excess of $24,000 over
      the life of the contract or in excess of $2,000 a month if the Contract is
      for a
      period of less than 12 months;

     

    (b) any
      continuing contract for the purchase of materials, supplies, equipment or
      services involving in the case of any such contact in excess of $24,000 over
      the
      life of the contract or in excess of $2,000 a month if the Contract is for
      a
      period of less than 12 months;

     

    (c) any
      contract providing for consideration in excess of $24,000 for which the current
      term extends beyond one year after the date of this Agreement;

     

    (d) any
      trust
      indenture, mortgage, promissory note, loan agreement or other contract for
      the
      borrowing of money, any currency exchange, commodities or other hedging
      arrangement or any leasing transaction of the type required to be capitalized
      in
      accordance with GAAP;

     

    (e) any
      contract for capital expenditures in excess of $24,000 in the
      aggregate;

     

    (f) any
      contract limiting the freedom of the Company or the Company Subsidiary to engage
      in any line of business or to compete with any other corporation, partnership,
      limited liability company, trust, individual or other entity, or any
      confidentiality, secrecy or non-disclosure contract;

     

    (g) any
      contract pursuant to which the Company or the Company Subsidiary is a lessor
      of
      any machinery, equipment, motor vehicles, office furniture, fixtures or other
      personal property, pursuant to which payments in excess of $24,000 remain
      outstanding;

     

    (h) any
      contract with an Affiliate;

     

    (i) any
      agreement of guarantee, support, indemnification, assumption or endorsement
      of,
      or any similar commitment with respect to, the obligations, liabilities (whether
      accrued, absolute, contingent, committed or otherwise) or indebtedness of any
      other Person; 

     

    
      
        
        

      

      
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    (j) any
      foreign currency forward exchange contracts;

     

    (k) any
      employment contract, arrangement or policy (including without limitation any
      collective bargaining contract or union agreement) which may not be terminated
      on thirty (30) days notice or less without penalty (or any augmentation or
      acceleration of benefits); or

     

    (l) any
      other
      contract which does not meet the foregoing criteria but which is material to
      the
      operations of the Company’s business or the Company Subsidiary’s business.

     

    Each
      of
      the Company and the Company Subsidiary, as the case may be, has performed in
      all
      material respects all of the obligations required to be performed by it and
      is
      entitled to all benefits under, and has not received notice that it is in
      default in respect of any Material Contract. Each of the Material Contracts
      is
      valid and binding and in full force and effect, and there exists no default
      or
      event of default or event, occurrence, condition or act, with respect to the
      Company or the Company Subsidiary, or to the Company’s Knowledge, with respect
      to the other contracting party, which, with the giving of notice, the lapse
      of
      the time or the happening of any other event or conditions, would become a
      default or event of default under any Material Contract. True, correct and
      complete copies of all Material Contracts have been delivered to the
      Parent.

     

    SECTION
      3.11. Litigation.
      Except
      as set forth in Section 3.11 of the Company Disclosure Schedule, there is no
      private or governmental action, suit, proceeding, claim, arbitration or
      investigation pending before any agency, court or tribunal, foreign or domestic,
      or, to the Company’s Knowledge, threatened against the Company or any of its
      properties or any of its officers or directors (in their capacities as such)
      or
      relating to the business of the Company, nor is the Company aware that there
      is
      any basis for any of the foregoing. There is no judgment, decree or order
      against the Company or, or, to the Company’s Knowledge, any of its directors or
      officers (in their capacities as such), that could prevent, enjoin, or
      materially alter or delay any of the transactions contemplated by this
      Agreement, or that could reasonably be expected to have a Company Material
      Adverse Effect. Section 3.11 of the Company Disclosure Schedule also lists
      all
      litigation that the Company has pending against other parties.

     

    SECTION
      3.12. Environmental
      Matters.
      To the
      Company’s Knowledge: (a) the Company and the Company Subsidiary are in material
      compliance with all applicable Environmental Laws and all Company Permits
      required by Environmental Laws; (b) all past noncompliance, if any, of the
      Company or the Company Subsidiary with Environmental Laws or Environmental
      Permits has been resolved without any pending, ongoing or future obligation,
      cost or liability; and (c) neither the Company nor the Company Subsidiary has
      released a Hazardous Material at, or transported a Hazardous Material to or
      from, any real property currently or formerly owned, leased or occupied by
      the
      Company or the Company Subsidiary, in violation of any Environmental
      Law.

     

    SECTION
      3.13. Intellectual
      Property.

     

    (a) Section
      3.13(a) of the Company Disclosure Schedule contains a true and complete list
      of
      the Company’s and the Company Subsidiary’s patents, patent applications,
      registered trademarks, trademark applications, trademarks, trade names,
      registered service marks, service mark applications, service marks, Internet
      domain names, Internet domain name applications, copyright registrations and
      applications and other filings and formal actions made or taken pursuant to
      Federal, state, local and foreign Laws by the Company or the Company Subsidiary
      to protect their interests in the Company Intellectual Property, and includes
      details of all due dates for further filings, maintenance, payments or other
      actions falling due in respect of the Company Intellectual Property within
      twelve (12) months of the Closing Date. All of the Company’s and the Company
      Subsidiary’s patents, patent applications, registered trademarks, trademark
      applications and registered copyrights remain in good standing with all fees
      and
      filings due as of the date hereof. 

     

    
      
        
        

      

      
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    (b) The
      Company Intellectual Property contains only those items and rights which are:
      (i) owned by the Company or
      a
      Company Subsidiary;
      (ii) in
      the public domain; or (iii) rightfully used by the Company or a Company
      Subsidiary pursuant to a valid and enforceable license or other agreement (the
      “Company
      Licensed Intellectual Property”),
      the
      parties, date, term and subject matter of each such license or other agreement
      (each, a “License
      Agreement”)
      being
      set forth on Section 3.13(b) of the Company Disclosure Schedule. The
      Company has all rights in the Company Intellectual Property, including without
      limitation, rights to make, use, reproduce, modify, adopt, create derivative
      works based on, translate, distribute (directly and indirectly), transmit,
      display and perform publicly, license, rent and lease and, other than with
      respect to the Company Licensed Intellectual Property, assign and sell, the
      Company Intellectual Property.

     

    (c) The
      use,
      reproduction, manufacturing, distribution, licensing, sublicensing, sale or
      any
      other exercise of rights in any Company Intellectual Property, product, work,
      technology, service or process as now used or offered or proposed for use,
      licensing or sale by the Company or the Company Subsidiary does not infringe
      on
      any proprietary or personal right of any Person such as patent, design right,
      trademark, trade name, service mark, trade dress, Internet domain name,
      copyright, database right, statistical model, technology, invention, supplier
      list, trade secret, know-how, computer software program or application of any
      Person, anywhere in the world. Neither the Company nor the Company Subsidiary
      has received notice of any pending or threatened claims (including offers to
      grant licenses) (i) challenging the validity, effectiveness or, other than
      with
      respect to the Company Licensed Intellectual Property, ownership by the Company
      of any Company Intellectual Property, or (ii) to the effect that the use,
      distribution, licensing, sublicensing, sale or any other exercise of rights
      in
      any product, work, technology or process as now used or offered or proposed
      for
      use, licensing, sublicensing or sale by the Company, the Company Subsidiary
      or
      their agents or use by their customers infringes or will infringe on or
      misappropriate any intellectual property or other proprietary or personal right
      of any Person. To
      the
      Company’s Knowledge,
      no such
      claims have been threatened by any Person, nor are there any valid grounds
      for
      any bona fide claim of any such kind. All of the rights within the Company
      Intellectual Property are enforceable and subsisting. To the Company’s
      Knowledge, there is no unauthorized use, infringement or misappropriation of
      any
      Company Intellectual Property by any third party, employee or former
      employee.

     

    (d) All
      personnel, including employees, agents, consultants and contractors, who have
      contributed to or participated in the conception and development of the Company
      Intellectual Property on behalf of the Company or the Company Subsidiary, have
      executed nondisclosure agreements and either (i) have been a party to an
      enforceable agreement with the Company in accordance with applicable national
      and state Law that accords the Company full, effective, exclusive and original
      ownership of all tangible and intangible property as “works-for-hire,” arising
      from the efforts of such personnel, or (ii) have executed appropriate
      instruments of assignment in favor of the Company that have conveyed to the
      Company full, effective and exclusive ownership of all tangible and intangible
      property arising from the efforts of such personnel.

     

    
      
        
        

      

      
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    (e) Neither
      the Company nor the Company Subsidiary is, nor as a result of the execution
      or
      delivery of this Agreement, or performance of the Company’s obligations
      hereunder, will the Company or the Company Subsidiary be, in violation of any
      license, sublicense, agreement or instrument to which the Company or the Company
      Subsidiary is a party or otherwise bound, nor will execution or delivery of
      this
      Agreement, or performance of the Company’s obligations hereunder, cause the
      diminution, termination or forfeiture of any the Company Intellectual
      Property.

     

    (f) Section
      3.13(f)
      of the
      Company Disclosure Schedule contains a true and complete list of all the
      software programs used by the Company or the Company Subsidiary other than
      off-the-shelf mass market software (the “Company
      Software Programs”).
      Each
      of the Company and the Company Subsidiary owns full and unencumbered right
      and
      good, valid and marketable title to such Company Software Programs that it
      owns,
      free and clear of all mortgages, pledges, liens, security interests, conditional
      sales agreements, encumbrances or charges of any kind. Each of the Company
      and
      the Company Subsidiary has full and unrestricted rights to use the Company
      Software Programs that it licenses, pursuant to license agreements listed in
      Section 3.13(b)
      of the
      Company Disclosure Schedule.

     

    (g) The
      source code and system documentation relating to the Company Software Programs
      have been maintained in strict confidence and (i) have been disclosed by the
      Company and the Company Subsidiary only to those of their employees and
      consultants who have a “need to know” the contents thereof in connection with
      the performance of their duties to the Company or the Company Subsidiary and
      who
      have executed nondisclosure agreements with the Company or the Company
      Subsidiary; and (ii) have been disclosed to only those third parties who have
      executed nondisclosure agreements with the Company or the Company
      Subsidiary.

     

    (h) The
      Company Intellectual Property is free and clear of any and all mortgages,
      pledges, liens, security interests, conditional sale agreements, encumbrances
      or
      charges of any kind.

     

    (i) Except
      as
      set forth in Section 3.13(i) of the Company Disclosure Schedule, the Company
      does not owe nor will owe any royalties or other payments to third parties
      in
      respect of the Company Intellectual Property, including any Company Licensed
      Intellectual Property. All royalties or other payments that have accrued prior
      to the Closing Date have been paid.

     

    (j) To
      the
      Company’s Knowledge, the Company Software Programs and other Company
      Intellectual Property contain no “viruses.” For the purposes of this Agreement,
“virus” means any computer code designed to disrupt, disable or harm in any
      manner the operation of any software or hardware including, without limitation,
      worms, bombs, backdoors, clocks, timers, or other disabling device code, designs
      or routines which cause the software to be erased, inoperable, or otherwise
      incapable of being used, either automatically or upon command by any
      party.

     

    
      
        
        

      

      
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    (k) Except
      as
      specified on Section
      3.13(k) of the Company Disclosure Schedule,
      no
      Company product (including any Company product currently under development)
      contains any code that is, in whole or in part, subject to the provisions of
      any
      license to software that is made generally available to the public without
      requiring payment of fees or royalties (including without limitation any
      obligation or condition under any “open source” license such as, without
      limitation, the GNU General Public License, GNU Lesser General Public License,
      Mozilla Public License or BSD licenses). No Company Intellectual Property is
      subject to any license terms that (i) require, or condition the use or
      distribution of any Company Intellectual Property on the disclosure, licensing
      or distribution of any source code for any portion of such Company Intellectual
      Property or (ii) except as set forth on Section 3.13(k) of the Company
      Disclosure Schedule, otherwise impose any limitation, restriction or condition
      on the right or ability of the Company or any Company Subsidiary to use or
      distribute any Company Intellectual Property owned by the Company.

     

    (l) No
      funding, facilities or personnel of any Governmental Entity, including the
      Office of the Chief Scientist of the Israel Ministry of Industry, Commerce
      and
      Labor, were used, directly or indirectly, to develop or create, in whole or
      in
      part, any Company Intellectual Property. Neither the Company nor the Company
      Subsidiary, nor, to the Company’s Knowledge, any of their respective
      shareholders, is or has ever been a member or promoter of, or a contributor
      to,
      any industry standards body or similar organization that could compel the
      Company or any Company Subsidiary or shareholder thereof to grant or offer
      to
      any third party any license or right to such Company Intellectual
      Property.

     

    (m) The
      business of the Company and the Company Subsidiary as currently conducted does
      not require either of them to obtain a license from the Israeli Ministry of
      Defense or an authorized body thereof pursuant to Section 2(a) of the Control
      of
      Products and Services Declaration (Engagement in Encryption), 1974, as amended,
      or otherwise.

     

    SECTION
      3.14. Taxes. 

     

    (a) All
      Tax
      Returns required to be filed by, with respect to, or on behalf of the Company,
      the Company Subsidiary or any of their predecessor corporations, or any
      consolidated, combined, affiliated or unitary group of which the Company or
      the
      Company Subsidiary is or has ever been a member, have been timely filed with
      the
      appropriate tax authorities. Except as disclosed in Section 3.14(a) of the
      Company Disclosure Schedule, any requests for extensions of time to file a
      Tax
      Return that has not been filed have been timely filed and any such extensions
      have been granted and have not expired. All such Tax Returns were true, correct
      and complete in all material respects. 

     

    (b) All
      Taxes
      required to be paid by, with respect to, or on behalf of the Company and the
      Company Subsidiary have been paid (without regard to whether a Tax Return was
      or
      is required) or are being contested in good faith (and such contest is disclosed
      on Section 3.14(b) of the Company Disclosure Schedule). The unpaid Taxes of
      the
      Company and the Company Subsidiary do not exceed the accruals and reserves
      for
      Taxes (excluding accruals and reserves for deferred Taxes established to reflect
      timing differences between book and Tax income) set forth on the Company
      Financial Statements. 

     

    
      
        
        

      

      
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    (c) To
      the
      Knowledge of the Company and the Company Subsidiary, there are no Liens on
      any
      of the assets of the Company or the Company Subsidiary that arose in connection
      with any failure (or alleged failure) to pay any Tax. 

     

    (d) Except
      as
      set forth in Section 3.14(d) of the Company Disclosure Schedule, each of the
      Company and the Company Subsidiary have timely withheld proper and accurate
      amounts from its employees, independent contractors, directors, customers,
      suppliers, stockholders and others from whom it is or was required to withhold
      Taxes, including without limitation social security and Israeli national
      insurance, in compliance in all material respects with all applicable Laws,
      have
      timely paid all such withheld amounts to the appropriate taxing authorities,
      and
      have timely complied with all information reporting and back-up withholding
      requirements including maintenance of the required records with respect thereto,
      in connection with amounts paid to any such persons.

     

    (e) Israel
      is
      the only country in which the Company Subsidiary regularly conducts trade or
      business and whose tax authorities may seek to charge Tax on the worldwide
      profits or gains of the Company Subsidiary. The United States is the only
      country in which the Company regularly conducts trade or business and whose
      tax
      authorities may seek to charge Tax on the worldwide profits or gains of the
      Company. Each of the Company and the Company Subsidiary (i) is, and has always
      been, resident for Tax purposes solely in the jurisdiction in which it is
      incorporated; and (ii) has never had any agency, branch, place of business,
      or
      representative office in any other jurisdiction. Section 3.14(e) of the Company
      Disclosure Schedule sets forth each state, federal or national jurisdiction
      in
      which, to the Knowledge of the Company, the Company or any Company Subsidiary
      is
      required to file or has been required to file a Tax Return or is or has been
      liable for any Taxes on a “nexus” basis. 

     

    (f) Neither
      the Company nor the Company Subsidiary has waived any statute of limitations
      in
      respect of Taxes or agreed to any extension of time with respect to a Tax
      assessment, collection or deficiency.

     

    (g) The
      Company has delivered to the Parent true and complete copies of all federal,
      state local and foreign income or franchise Tax Returns, and any value added
      or
      state sales and use Tax Returns for or including the Company and the Company
      Subsidiary for all periods after December 31, 2002.

     

    (h) Neither
      the Company nor the Company Subsidiary has received notice in writing that
      it
      has not filed a Tax Return or paid Taxes required to be filed or paid, and
      no
      tax authority of a jurisdiction in which it does not file Tax Returns has
      asserted that it may be obligated to file Tax Returns in that jurisdiction.
      No
      examination or audit of any Tax Return of the Company or the Company Subsidiary
      by any Governmental Entity is currently in progress, threatened in writing
      or,
      to the Knowledge of the Company, contemplated. 

     

    
      
        
        

      

      
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    (i) Neither
      the Company nor the Company Subsidiary is a party to, or bound by any Tax
      indemnity, Tax sharing, Tax allocation or similar agreement. The Company
      Subsidiary is, and has always been, classified as an association taxable as
      a
      corporation for U.S. Tax purposes. None of the assets of the Company or the
      Company Subsidiary is an interest in an entity that is characterized as a
      partnership for U.S. federal income Tax purposes. 

     

    (j) Neither
      the Company nor the Company Subsidiary has been or is required to make any
      adjustment pursuant to Code Section 481(a) or any similar provision of state,
      local or foreign tax law by reason of any change in any accounting methods,
      there is no application pending with any taxing authority requesting permission
      for any changes in any of its accounting methods for Tax purposes and no taxing
      authority has proposed any such adjustment or change in accounting
      method.

     

    (k) Neither
      the Company nor the Company Subsidiary has distributed stock of another Person,
      or has had its stock distributed by another Person, in a transaction that was
      purported or intended to be governed in whole or in part by Section 355 or
      Section 361 of the Code.

     

    (l) Neither
      the Company nor the Company Subsidiary (1) is or has been a member of an
      affiliated or similar group filing, or required to file, a consolidated,
      combined, unitary or similar income Tax Return, or (2) has any liability for
      Taxes of any person under Treasury Regulations section 1.1502-6 (or any similar
      provision of state, local or foreign law), as a transferee or successor, by
      agreement or otherwise. 

     

    (m) Neither
      the Company nor the Company Subsidiary has participated in a “reportable
      transaction” as described in Treasury Regulations section 1.6011-4. The Company
      Subsidiary has not undertaken since January 1, 2007 any transaction which will
      require special reporting in accordance with the Israeli Income Tax Regulations
      (Tax Planning Requiring Reporting)(Temporary Provisions), 2006 regarding
      aggressive tax planning.

     

    (n) Except
      as
      contemplated in Section 5.07 or with respect to the U.S. Withholding Liability,
      there are no tax rulings, requests for rulings or closing agreements relating
      to
      the Company or the Company Subsidiary that could affect their liability for
      Taxes for any period after the Closing Date, nor to the Company’s Knowledge has
      any shareholder of the Company or anyone acting on its or their behalf requested
      or received a ruling from any Tax authority or signed a closing or other
      agreement with any Tax
      authority with
      respect to such shareholder’s shares and options in the Company. Neither the
      Company nor the Company Subsidiary will be required to include in the gross
      income, or exclude any item of deduction, for a taxable period ending after
      the
      Closing Date income or gain attributable to a prior taxable period that was
      not
      recognized in that prior Taxable period as a result of the installment method,
      the completed contract method or the cash method of accounting, any other method
      of accounting, section 263A of the Code, any prepaid amount, or any intercompany
      transaction. The Company has provided to the Parent complete and correct copies
      of all private letter rulings, revenue agent reports, information document
      requests, notices of proposed deficiencies, deficiency notices, protests,
      petitions, closing agreements, settlement agreements, pending ruling requests
      and any similar documents submitted by, received by or agreed to by or on behalf
      of any of the Company or the Company Subsidiary, and relating to Taxes for
      all
      Taxable periods for which the statute of limitations has not yet
      expired.

     

    
      
        
        

      

      
        37

        
          

        

      

      
        
        

      

    

    (o) The
      shares of the Company do not constitute a United States real property interest
      within the meaning of IRC Section 897. The Company is not, and has not been,
      a
      United States real property holding corporation within the meaning of Section
      897(c)(2) of the Code during the applicable period specified in Section
      897(c)(l)(A)(ii) of the Code.

     

    (p) Neither
      the Company nor any of the Company Subsidiaries has paid or has any obligation
      to pay, and no payments will be made in connection with the transactions
      contemplated by this Agreement of, any amount that constitutes an excess
      parachute payment within the meaning of Code section 280G.

     

    (q) To
      the
      Knowledge of the Company, neither the Company nor the Company Subsidiary has
      treated as an independent contractor any Person not properly classified as
      such.

     

    (r) There
      is
      no outstanding power of attorney of the Company or the Company Subsidiary with
      respect to Taxes.

     

    (s) Neither
      the Company nor the Company Subsidiary has ever requested or received any Tax
      benefit or incentive under the laws of the State of Israel.

     

    (t) To
      the
      Company’s Knowledge, there has been no indication from any Tax authority that
      the consummation of the Merger would adversely affect the ability of the Company
      or the Company Subsidiary to set off for Tax purposes in the future any and
      all
      losses accumulated by Company or the Company Subsidiaries as of the Effective
      Time. There is no limitation on the utilization by the Company or the Company
      Subsidiary of their respective net operating losses, built-in losses, Tax
      credits, or similar items (other than any such limitation prescribed under
      applicable Law or arising as a result of the consummation of the transactions
      contemplated by this Agreement).

     

    (u) The
      Company and its shareholders are not subject to any restrictions or limitations
      pursuant to Part E2 of the Israeli Tax Code or pursuant to any tax ruling made
      with reference to the provisions of Part E2 (other than any restrictions or
      limitations contained in, or as a result of, the Israeli Withholding Tax
      Ruling).

     

    (v) The
      Company and the Company Subsidiary are in material compliance with all transfer
      pricing requirements in the United States and Israel. None of the transactions
      between the Company or the Company Subsidiary and other related Persons
      (including the Affiliates) would reasonably be expected to be subject to any
      material adjustment, apportionment, allocation or recharacterization under
      Section 482 of the Code or any similar U.S. state or local or non-U.S. Legal
      Requirement, and all of such transactions have been effected on an arm’s length
      basis. Each of the Company and the Company Subsidiary has contemporaneous
      documentation of, and the Company has made available to Parent, all transfer
      pricing methodologies, including a transfer pricing analysis or study for each
      material or ongoing intercompany or related party transaction. The Company
      has
      made available to Parent all intercompany Contracts relating to transfer
      pricing.

     

    
      
        
        

      

      
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    SECTION
      3.15. Insurance.
      Each of
      the Company and the Company Subsidiary is presently insured, and since inception
      has been insured, against such risks as companies engaged in a similar business
      would, in accordance with good business practice, customarily be insured. The
      policies of fire, theft, liability and other insurance maintained with respect
      to the assets or businesses of the Company and the Company Subsidiary provide
      adequate coverage against loss. There is no material claim pending under any
      of
      such policies as to which coverage has been questioned, denied or disputed
      by
      the underwriters of such policies. The Company has heretofore furnished to
      the
      Parent a complete and correct list as of the date hereof of all insurance
      policies maintained by the Company and the Company Subsidiary, and has made
      available to the Parent complete and correct copies of all such policies,
      together with all riders and amendments thereto. All such policies are in full
      force and effect and all premiums due thereon have been paid to the date hereof.
      Each of the Company and the Company Subsidiary has complied in all material
      respects with the terms of such policies. The Company has no Knowledge of any
      threatened termination of, or material premium increase with respect to, any
      of
      such policies. The Company is not aware of any facts or circumstances which
      could reasonably be expected to result in the denial of insurance coverage
      under
      policies issued to the Company or the Company Subsidiary in respect of such
      suits, claims, actions, proceedings and investigations. 

     

    SECTION
      3.16. Properties.
      Except
      as set forth in Section 3.16 of the Company Disclosure Schedule, each of the
      Company and the Company Subsidiary has good and marketable title to all of
      its
      properties and assets, free and clear of all material Liens, whether tangible
      or
      intangible, real, personal or mixed, reflected in the Company Financial
      Statements as being owned by the Company or the Company Subsidiary as of the
      date thereof, other than (i) any properties or assets that have been sold or
      otherwise disposed of in the ordinary course of business since the date of
      such
      financial statements, (ii) Liens disclosed in the notes to the Company Financial
      Statements and (iii) Liens arising in the ordinary course of business after
      the
      date of such financial statements. All properties used in the Company’s and the
      Company Subsidiary’s operations are reflected in the balance sheets included in
      the Company Financial Statements to the extent GAAP require the same to be
      reflected. All buildings, and all fixtures, equipment and other property and
      assets that are material to its business on a consolidated basis, and held
      under
      leases or sub-leases by the Company or the Company Subsidiary, are held under
      valid instruments enforceable against the Company or the Company Subsidiary
      in
      accordance with their respective terms, subject to applicable Laws of
      bankruptcy, insolvency or similar Laws relating to creditors’ rights generally
      and to general principles of equity (whether applied in a proceeding in law
      or
      equity). Substantially all of the Company’s and Company Subsidiary’s equipment
      in regular use has been reasonably maintained and is in serviceable condition,
      reasonable wear and tear excepted. The Company owns or has the valid and
      subsisting right to use all assets and properties necessary to operate the
      Company’s business in the manner presently conducted.

     

    SECTION
      3.17. Affiliates.
      Section 3.17 of the Company Disclosure Schedule sets forth the names and
      addresses of each Person who is, in the Company’s reasonable judgment, an
      Affiliate of the Company. The Company is not indebted to, nor does it owe any
      contractual commitment or arrangement to, with or for the benefit of, any
      director, officer, employee, Affiliate or agent of the Company or the Company
      Subsidiary (except for amounts due as normal salaries and bonuses and in
      reimbursement of ordinary expenses). To the Company’s Knowledge, no current or
      former director, officer, employee, Affiliate or agent of the Company is
      presently, or, in the last three years has been, the direct or indirect owner
      of
      an interest in any corporation, firm, association, or business organization
      which is a present (or potential) competitor, supplier or customer of the
      Company or the Company Subsidiary. Except for normal salaries and bonuses and
      reimbursement of ordinary expenses, since December 31, 2006, neither the Company
      nor the Company Subsidiary has made any payments, loans or advances of any
      kind,
      or paid any dividends or distributions of any kind, to or for the benefit of
      the
      Stockholders, or any of their respective affiliates, associates or family
      members.

     

    
      
        
        

      

      
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    SECTION
      3.18. Brokers.
      No
      broker, finder or investment banker is entitled to any brokerage, finder’s or
      other fee or commission in connection with the transactions contemplated hereby
      based upon arrangements made by or on behalf of the Company. 

     

    SECTION
      3.19. Certain
      Business Practices.
      Neither
      the Company, the Company Subsidiary, nor, to the Company’s Knowledge, any
      directors, officers, agents or employees of the Company or the Company
      Subsidiary (in their capacities as such) has (i) used any funds for unlawful
      contributions, gifts, entertainment or other unlawful expenses relating to
      political activity, (ii) made any unlawful payment to foreign or domestic
      government officials or employees or to foreign or domestic political parties
      or
      campaigns or violated any provision of the Foreign Corrupt Practices Act of
      1977, as amended, or (iii) made any other unlawful payment.

     

    SECTION
      3.20. Accounts
      Receivable.
      Subject
      to any reserves set forth in the Company Financial Statements, the accounts
      receivable shown on the Company Financial Statements represent bona fide claims
      for sales and other charges, and are not subject to discount except for normal
      cash and immaterial trade discounts. The amount carried for doubtful accounts
      and allowances disclosed in the Company Financial Statements was calculated
      in
      accordance with GAAP and in a manner consistent with prior periods and is
      sufficient to provide for any losses which may be sustained on realization
      of
      the receivables.

     

    SECTION
      3.21. Customers
      and Suppliers.
      No
      customer which individually accounted for more than 1% of the Company’s gross
      revenues during the 12-month period preceding the date hereof has canceled
      or
      otherwise terminated, or made any written threat to the Company to cancel or
      otherwise terminate or decrease its relationship with the Company, or has
      decreased materially its relationship with the Company or its usage of the
      services or products of the Company, as the case may be. 

     

    SECTION
      3.22. Grants,
      Incentives and Subsidies.
      Neither
      the Company nor the Company Subsidiary has received any grants, incentive and
      subsidy programs (“Grants”)
      from
      any Governmental Authority. Neither the Company nor the Company Subsidiary
      is
      subject to any obligation to pay royalties in connection with sales of its
      products.

     

    SECTION
      3.23. Bank
      Accounts.
      Section
      3.23 of the Company Disclosure Schedule contains a complete and correct list
      of
      each bank account or safe deposit box of the Company, the names and locations
      of
      all banks in which the Company has accounts or safe deposit boxes, and the
      names
      of all persons authorized to draw thereon or to have access
      thereto.

     

    
      
        
        

      

      
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    SECTION
      3.24. Books
      and Records.
      The
      books of accounts, minute books, stock record books, and other records of the
      Company have been maintained in accordance with sound business practices in
      all
      material respects. The stock or ownership records of the Company as presented
      to
      Parent fairly and accurately reflect the record ownership of all of its
      outstanding shares of capital stock and securities convertible or exercisable
      into shares of capital stock.

     

    SECTION
      3.25. Customer
      and Expert Listing.
      Section
      3.25 of the Company Disclosure Schedule contains a complete listing of the
      20
      largest revenue-generating customers and the 20 largest revenue-generating
      experts for each of the fiscal years ended December 31, 2004, December 31,
      2005
      and December 31, 2006.

     

    SECTION
      3.26. Privacy
      and Data Security.
      The
      Company has provided true and correct copies of all privacy policies adopted
      by
      the Company or the Company Subsidiary in connection with its operations. Each
      of
      the Company and the Company Subsidiary (i) has complied with all Privacy Laws
      and other laws regarding the disclosure of data, (ii) has not violated its
      applicable privacy policies and (iii) has taken commercially reasonable steps
      to
      protect and maintain the confidential nature of the personal information
      provided to the Company or the Company Subsidiary in accordance with its
      applicable privacy policies. For purposes of this section, “Privacy
      Laws”
shall
      mean any law related to the protection, privacy and security of sensitive
      personal information, including without limitation, the Gramm-Leach-Bliley
      Act,
      the European Union Data Protection Directive, Israel’s Protection of Privacy
      Act, 1981 and any similar federal, state or foreign law or
      regulation.

     

    SECTION
      3.27. No
      Conflict with OFAC Laws.
      Neither
      the Company nor the Company Subsidiary nor, to the knowledge of the Company,
      any
      director, officer, agent, employee or affiliate of the Company or the Company
      Subsidiary is currently subject to any U.S. sanctions administered by the Office
      of Foreign Assets Control of the U.S. Treasury Department (“OFAC”). In addition,
      neither the Company nor the Company Subsidiary nor, to the knowledge of the
      Company, any director, officer, agent, employee or affiliate of the Company
      or
      the Company Subsidiary, has undertaken any transaction that is in violation
      of
      any applicable OFAC sanctions regulations, as set forth under 31 CFR Chapter
      V.

     

    SECTION
      3.28. Representations
      Complete.
      None of
      the representations or warranties made by the Stockholders or the Company herein
      or in any Company Disclosure Schedule hereto, or certificate furnished by the
      Company pursuant to this Agreement, when all such documents are read together
      in
      their entirety, contains or will contain at the Closing Date any untrue
      statement of a material fact, or omits or will omit at the Closing Date to
      state
      any material fact necessary in order to make the statements contained herein
      or
      therein, in the light of the circumstances under which made, not
      misleading.

     

    

     

    
      
        
        

      

      
        41

        
          

        

      

      
        
        

      

    

    IV.

     

    REPRESENTATIONS
      AND WARRANTIES OF PARENT

     

    The
      Parent represents and warrants to the Company and the Stockholders as
      follows:

     

    SECTION
      4.01. Organization
      and Qualification; Subsidiaries.
      The
      Parent and each directly and indirectly owned Subsidiary of the Parent (the
      “Parent
      Subsidiaries”)
      has
      been duly incorporated or otherwise organized and is validly existing and in
      good standing (to the extent applicable) under the Laws of the jurisdiction
      of
      its incorporation or organization, as the case may be, and has the requisite
      corporate power and authority and all necessary governmental approvals to own,
      lease and operate its properties and to carry on its business as it is now
      being
      conducted. The Parent, and each Parent Subsidiary is duly qualified or licensed
      to do business, and is in good standing (to the extent applicable), in each
      jurisdiction where the character of the properties owned, leased or operated
      by
      it or the nature of its business makes such qualification or licensing
      necessary, except for such failures to be so qualified or licensed and in good
      standing that would not reasonably be expected to have, individually or in
      the
      aggregate, a Parent Material Adverse Effect.

     

    SECTION
      4.02. Capitalization.

     

    (a) The
      authorized capital stock of the Parent consists of (i) 100,000,000 shares of
      the
      Parent Common Stock, of which 42,928,944 shares were issued and outstanding
      at
      March 31, 2007, and (ii) 5,000,000 shares of Preferred Stock, par value $0.001
      per share, of which no shares were issued and outstanding at March 31, 2007.
      All
      of the outstanding shares of the Parent Common Stock have been validly issued
      and are fully paid and nonassessable and not subject to preemptive
      rights.

     

    (b) All
      of
      the shares of the Parent Common Stock to be issued to the Stockholders in
      connection with the transactions contemplated hereby, when issued in accordance
      with this Agreement, will be validly issued, fully paid and nonassessable and
      not subject to any contractual restriction, preemptive rights or similar
      contractual rights granted by the Parent (other than those restrictions set
      forth in the Lock-up Agreements and in the Trading Restriction
      Agreements).

     

    SECTION
      4.03. Authority
      Relative to this Agreement.
      The
      Parent has all necessary corporate power and authority to execute and deliver
      this Agreement and each other Transaction Document to which it is a party,
      to
      perform its obligations hereunder and thereunder and to consummate the
      transactions contemplated hereby and thereby. The execution and delivery of
      this
      Agreement and each other Transaction Document to which it is a party by the
      Parent and the consummation by the Parent of the transactions contemplated
      hereby and thereby have been duly and validly authorized by all necessary
      corporate action, and no other corporate proceedings on the part of the Parent
      are necessary to authorize this Agreement or any other Transaction Document
      to
      which the Parent is a party or to consummate such transactions. This Agreement
      has been, and each other Transaction Document to which it is a party will be,
      duly executed and delivered by the Parent. Assuming the due authorization,
      execution and delivery by the Company and the Stockholders, this Agreement
      constitutes, and each other Transaction Document to which it is a party will
      constitute, legal, valid and binding obligations of the Parent, enforceable
      against the Parent in accordance with their respective terms, except to the
      extent that enforceability may be limited by applicable bankruptcy, insolvency,
      reorganization or other Laws affecting the enforcement of creditors’ rights
      generally or by general equitable principles. 

     

    
      
        
        

      

      
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    SECTION
      4.04. No
      Conflict; Required Filings and Consents.

     

    (a) The
      execution and delivery of this Agreement by the Parent and the execution and
      delivery of each other Transaction Document to which it is a party by the
      Parent, do not, and the performance by the Parent of its obligations hereunder
      and/or thereunder, as the case may be, and the consummation of the transactions
      contemplated hereby and thereby will not, (i) conflict with or violate any
      provision of the Organizational Documents of the Parent or any equivalent
      organizational documents of any Parent Subsidiary, (ii) conflict with or violate
      any Law applicable to the Parent or any other Parent Subsidiary or by which
      any
      property or asset of the Parent or any Parent Subsidiary is bound or affected
      or
      (iii) result in any breach of or constitute a default (or an event which
      with the giving of notice or lapse of time or both could reasonably be expected
      to become a default) under, or give to others any right of termination,
      amendment, acceleration or cancellation of, or result in the creation of a
      lien
      or other encumbrance on any material property or asset of the Parent or any
      Parent Subsidiary pursuant to, any material note, bond, mortgage, indenture,
      contract, agreement, lease, license, permit, franchise or other instrument
      or
      obligation in each case, with respect to clauses (ii) and (iii) of this Section
      4.04(a), which will result in a Parent Material Adverse Effect. 

     

    (b) Assuming
      the accuracy of the representations and warranties set forth in Article III
      and
      in the Stockholder Representation Letter Agreements, the execution and delivery
      of this Agreement by the Parent do not, and the execution of each other
      Transaction Document to which it is a party will not, and the performance by
      the
      Parent of its obligations hereunder and the consummation of the transactions
      contemplated hereby will not, require any consent, approval, authorization
      or
      permit of, or filing by the Parent with or notification by the Parent to, any
      Governmental Entity.

     

    SECTION
      4.05. SEC
      Filings.

     

    (a) Parent
      has filed or furnished all forms, reports and documents (the “Parent
      SEC Documents”)
      required to be filed or furnished by it under the Exchange Act.

     

    (b) At
      the
      time of filing thereof, the Parent SEC Documents complied as to form in all
      material respects with the requirements of the Exchange Act and did not contain
      any untrue statement of a material fact or omit to state any material fact
      necessary in order to make the statements made therein, in the light of the
      circumstances under which they were made, not misleading.

     

    SECTION
      4.06. Absence
      of Certain Changes or Events.
      Except
      as disclosed in the Parent SEC Documents filed prior to the date of this
      Agreement, since the date of Parent’s most-recently filed Form 10-Q, there has
      not been (a) any condition, event, occurrence or development that has had or
      would reasonably be expected to have, individually or in the aggregate, a Parent
      Material Adverse Effect or which would reasonably be expected to prevent, hinder
      or materially delay the ability of the Parent to consummate the transactions
      contemplated hereby, or (b) any event pursuant to which the Parent or any Parent
      Subsidiary has incurred any material liabilities (direct, contingent or
      otherwise) or engaged in any material transaction or entered into any material
      agreement, in each case, outside of the ordinary course of business which,
      individually or in the aggregate, would be reasonably expected to have a Parent
      Material Adverse Effect.

     

    
      
        
        

      

      
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    SECTION
      4.07. Brokers.
      No
      broker, finder or investment banker is entitled to any brokerage, finder’s or
      other fee or commission in connection with the transactions contemplated hereby
      based upon arrangements made by or on behalf of the Parent.

     

    SECTION
      4.08. S-3
      Eligibility.
      Parent
      is currently eligible to register the resale of Parent Common Stock to be issued
      to the Stockholders in connection with this Agreement on a registration
      statement on Form S-3 under the Securities Act.

     

    SECTION
      4.09. Representations
      Complete.
      None of
      the representations or warranties made by the Parent herein or in any
      certificate furnished by the Parent pursuant to this Agreement, when all such
      documents are read together in their entirety, contains or will contain at
      the
      Closing Date any untrue statement of a material fact, or omits or will omit
      at
      the Closing Date to state any material fact necessary in order to make the
      statements contained herein or therein, in the light of the circumstances under
      which made, not misleading.

     

    V.

     

    COVENANTS

     

    SECTION
      5.01. Conduct
      of Business by the Company Pending the Closing.
      The
      Company agrees that, between the date of this Agreement and the Closing Date,
      unless the Parent shall otherwise agree in writing, (x) the businesses of the
      Company and the Company Subsidiary shall be conducted only in, and neither
      the
      Company nor the Company Subsidiary shall take any action except in, the ordinary
      course of business consistent with past practice and (y) the Company shall
      use
      its reasonable efforts to keep available the services of such of the current
      officers, significant employees and consultants of the Company and the Company
      Subsidiary and to preserve the current relationships of the Company and the
      Company Subsidiary with such of the corporate partners, customers, suppliers
      and
      other Persons with which the Company or the Company Subsidiary has significant
      business relations in order to preserve substantially intact its business
      organization. By way of amplification and not limitation, the Company shall
      not,
      between the date of this Agreement and the Closing Date, directly or indirectly,
      do, or agree to do, or cause the Company Subsidiary to do, any of the following
      without the prior written consent of the Parent, which consent shall not be
      unreasonably withheld, or as expressly contemplated by this
      Agreement:

     

    (a) amend
      or
      otherwise change its Organizational Documents;

     

    (b) (i)
      other
      than with respect to currently outstanding Company Options, issue or sell or
      authorize the issuance or sale of any shares of capital stock of the Company
      of
      any class, or securities convertible into or exchangeable or exercisable for
      any
      shares of such capital stock, or any options, warrants or other rights of any
      kind to acquire any shares of such capital stock, or any other ownership
      interest (including, without limitation, any phantom interest), of the Company;
      or (ii) pledge, dispose of, grant, transfer, lease, license, guarantee or
      encumber, or authorize the pledge, disposition, grant, transfer, lease, license
      or encumbrance of any property or assets of the Company, except sales of
      inventory in the ordinary course of business consistent with past
      practice;

     

    
      
        
        

      

      
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    (c) (i)
      acquire
      (including, without limitation, by merger, consolidation, or acquisition of
      stock or assets) any interest in any corporation, partnership, other business
      organization or Person or any division thereof; (ii) incur any indebtedness
      for borrowed money or issue any debt securities or assume, guarantee or endorse,
      or otherwise as an accommodation become responsible for, the obligations of
      any
      Person for borrowed money or make any loans or advances material to the
      business, assets, liabilities, financial condition or results of operations
      of
      the Company, other than pursuant to existing agreements which have been
      disclosed to Parent in the Company Disclosure Schedule; (iii) terminate,
      cancel or request any material change in, or agree to any material change in,
      any Material Contract or License Agreement; (iv) make or authorize any
      capital expenditure, other than capital expenditures in the ordinary course
      of
      business consistent with past practice that have been budgeted for fiscal year
      2007 and included in the 2007 budget previously provided to the Parent, and
      that
      are not, in the aggregate, in excess of $100,000 for the Company; or
      (v) enter into or amend any contract, agreement, commitment or arrangement
      that, if fully performed, would not be permitted under this
      Section 5.01(c);

     

    (d) declare,
      set aside, make or pay any dividend or other distribution, payable in cash,
      stock, property or otherwise, with respect to any of its capital stock
or
      outstanding options;

     

    (e) reclassify,
      combine, split, subdivide or redeem, purchase or otherwise acquire, directly
      or
      indirectly, any of its capital stock or outstanding options;

     

    (f) amend
      the
      terms of, repurchase, redeem or otherwise acquire, any of its securities or
      propose to do any of the foregoing;

     

    (g) except
      as
      required to comply with obligations under existing agreements of the Company
      as
      in effect on the date hereof, which obligations are specifically disclosed
      to
      Parent in the Company Disclosure Schedule, (i) increase the compensation payable
      or to become payable to its directors, officers, consultants or employees;
      (ii)
      grant any rights to severance or termination pay to its directors, officers,
      consultants or employees; or (iii) enter into any employment or severance
      agreement which provides benefits upon a change in control of the Company that
      would be triggered by the transactions contemplated hereby with, any director,
      officer, consultant or other employee of the Company or the Company Subsidiary,
      in each case who is not currently entitled to such benefits; (iv) establish,
      adopt, enter into or amend any collective bargaining, bonus, profit sharing,
      thrift, compensation, stock option, restricted stock, pension, retirement,
      deferred compensation, employment, termination, severance or other plan,
      agreement, trust, fund, policy or arrangement for the benefit of any director,
      officer, consultant or employee of the Company or the Company Subsidiary, except
      to the extent required by applicable Law or the terms of a collective bargaining
      agreement; or (v) enter into or amend any contract, agreement, commitment or
      arrangement between the Company or the Company Subsidiary and any of the
      Company’s directors, officers, consultants or employees;

     

    
      
        
        

      

      
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    (h) pay,
      discharge or satisfy any claims, liabilities or obligations (absolute, accrued,
      asserted or unasserted, contingent, committed or otherwise) in excess of
      $12,500, other than the payment, discharge or satisfaction in the ordinary
      course of business and consistent with past practice of liabilities reflected
      or
      reserved against on the audited consolidated balance sheet of the Company at
      December 31, 2006 previously presented to the Parent;

     

    (i) make
      any
      change with respect to the Company’s accounting policies, principles, methods or
      procedures, including, without limitation, revenue recognition policies, other
      than as required by GAAP;

     

    (j) make
      any
      Tax election, settlement or compromise in
      connection with any Tax liability in excess of $12,500, or make any application
      for, negotiate or receive a Tax ruling or arrangement, whether or not in
      connection with the Merger, on the Company’s own behalf or on behalf of any of
      its shareholders in connection with the Merger, in each case, except as
      explicitly contemplated in this Agreement;

     

    (k) make
      any
      Tax election, settlement or compromise with respect to the U.S. Withholding
      Liability, except in accordance with the procedures set forth in Sections
      5.06(d);

     

    (l) cancel
      or
      terminate any insurance policy naming it as a beneficiary or a loss payee,
      except in the ordinary and usual course of business;

     

    (m) maintain
      the books and records of the Company in a manner not consistent with past
      business practices; 

     

    (n) 
      take any
      action which would materially adversely affect the goodwill of its suppliers,
      customers and others with whom it has business relations;

     

    (o) fail
      to
      pay and perform all of its debts, obligations and liabilities as and when due
      and all leases, agreements, contracts and other commitments to which it is
      a
      party in accordance with the terms and provisions thereof;

     

    (p) fail
      to
      comply in all material respects with all Laws that may be applicable to its
      business; 

     

    (q) apply
      for
      or receive any Grants; or 

     

    (r) authorize
      or enter into any formal or informal agreement or otherwise make any commitment
      to do any of the foregoing or to take any action which would make any of the
      representations or warranties of the Company contained in this Agreement untrue
      or incorrect or prevent the Company from performing or cause the Company not
      to
      perform its covenants hereunder or result in any of the conditions to the
      Closing set forth herein not being satisfied.

     

    SECTION
      5.02. Notices
      of Certain Events.
      Each of
      the Parent and the Company shall give prompt notice to the other of (i) any
      notice or other communication from any Person alleging that the consent of
      such
      Person is or may be required in connection with the transactions contemplated
      hereby; (ii) any notice or other communication from any Governmental Entity
      in connection with the transactions contemplated hereby; (iii) any actions,
      suits, claims, investigations or proceedings commenced or, to its Knowledge,
      threatened (in each case, after the date hereof) against, relating to or
      involving or otherwise affecting the Parent or the Company, or that relate
      to
      the consummation of the transactions contemplated hereby; (iv) the
      occurrence of a default or event that, with the giving of notice or lapse of
      time or both, will become a default under any Material Contract; and
      (v) any change that could reasonably be expected to have a Parent Material
      Adverse Effect or a Company Material Adverse Effect, or to delay or impede
      the
      ability of the Parent, the Company or any of the Stockholders to perform their
      respective obligations under this Agreement and to effect the consummation
      of
      the transactions contemplated hereby.

     

    
      
        
        

      

      
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    SECTION
      5.03. Access
      to Information; Confidentiality.

     

    (a) Except
      as
      required pursuant to any confidentiality agreement or similar agreement or
      arrangement to which the Parent or the Company is a party or pursuant to
      applicable Law or the regulations or requirements of any stock exchange or
      other
      regulatory organization with whose rules a party hereto is required to comply,
      from the date of this Agreement to the Closing Date, the Parent and the Company
      shall (i) provide to the other (and its officers, directors, employees,
      accountants, consultants, legal counsel, agents and other representatives
      (collectively, “Representatives”))
      access at reasonable times upon reasonable prior notice to its officers,
      employees, agents, properties, offices and other facilities and to the books
      and
      records thereof, and (ii) furnish reasonably promptly such information
      concerning its business, properties, contracts, assets, liabilities and
      personnel as the other party or its Representatives may reasonably request.
      No
      investigation conducted pursuant to this Section 5.03 shall affect or be
      deemed to modify any representation or warranty made in this
      Agreement.

     

    (b) The
      parties hereto shall comply with, and shall cause their respective
      Representatives to comply with, all of their respective obligations under the
      Confidentiality Agreement with respect to the information disclosed pursuant
      to
      this Section 5.03 or pursuant to the Confidentiality Agreement. The
      Stockholders hereby agree to be bound by the terms of the Confidentiality
      Agreement as if they were parties thereto.

     

    SECTION
      5.04. No
      Solicitation of Transactions.
      Until
      the earlier of termination of this Agreement or the Closing Date, subject to
      applicable fiduciary duties, the Company shall not, directly or indirectly,
      and
      shall cause the Company’s Representatives not to, directly or indirectly,
      solicit, initiate or encourage (including by way of furnishing nonpublic
      information), any inquiries or the making of any proposal or offer (including,
      without limitation, any proposal or offer to the Stockholders) that constitutes,
      or may reasonably be expected to lead to, any Competing Transaction, or enter
      into or maintain or continue discussions or negotiate with any Person in
      furtherance of such inquiries or to obtain a Competing Transaction, or agree
      to
      or endorse any Competing Transaction, or authorize or permit any of the
      Company’s Representatives to take any such action. Any violation of the
      restrictions set forth in this Section 5.04 by any Representative of the
      Company, whether or not such Person is purporting to act on behalf of the
      Company or otherwise, shall be deemed to be a breach of this Section 5.04
      by the Company. The Company shall notify the Parent promptly if any proposal
      or
      offer, or any inquiry or contact with any Person with respect thereto, regarding
      a Competing Transaction is made, such notice to include the identity of the
      Person making such proposal, offer, inquiry or contact, and the terms of such
      Competing Transaction, and shall keep the Parent apprised, on a current basis,
      of the status of such Competing Transaction. The Company immediately shall
      cease
      and cause to be terminated all existing discussions or negotiations with any
      parties conducted heretofore with respect to a Competing Transaction. The
      Company shall not release any third party from, or waive any provision of,
      any
      confidentiality or standstill agreement to which it is a party.

     

    
      
        
        

      

      
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    SECTION
      5.05. Further
      Action; Consents; Filings.

     

    (a) Upon
      the
      terms and subject to the conditions hereof, each of the parties hereto shall
      use
      commercially reasonable efforts to (i) take, or cause to be taken, all
      appropriate action, and do, or cause to be done, all things necessary, proper
      or
      advisable under applicable Law or otherwise to consummate and make effective
      the
      transactions contemplated hereby, (ii) obtain from Governmental Entities
      any consents, licenses, permits, waivers, approvals, authorizations or orders
      required to be obtained or made by the Parent or the Company in connection
      with
      the authorization, execution and delivery of this Agreement and the consummation
      of the transactions contemplated hereby and (iii) make all necessary
      filings, and thereafter make any other required or appropriate submissions,
      with
      respect to this Agreement and the transactions contemplated hereby required
      under any applicable Laws. The parties hereto shall cooperate and consult with
      each other in connection with the making of all such filings.

     

    (b) Each
      of
      the Company and the Parent will give any notices to third Persons, and use
      commercially reasonable efforts to obtain any consents from third Persons
      necessary, proper or advisable (as determined in good faith by the Parent with
      respect to such notices or consents to be delivered or obtained by the Company)
      to consummate the transactions contemplated by this Agreement.

     

    SECTION
      5.06. Certain
      Tax Matters.

     

    (a) Transfer
      Taxes.
      All
      transfer, documentary, sales, use, stamp, registration and other such Taxes
      and
      fees (including any penalties and interest) incurred in connection with this
      Agreement, shall be paid by the Stockholders when due, and the Stockholders
      will, at their own expense, file all necessary Tax Returns and other
      documentation with respect to all such transfer, documentary, sales, use, stamp,
      registration and other Taxes and fees, and, if required by applicable law,
      the
      Parent will, and will cause its Affiliates to, join in the execution of any
      such
      Tax Returns and other documentation.

     

    
      
        
        

      

      
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    (b) Tax
      Returns.
      Except
      to the extent inconsistent with the second sentence of Section 5.06(d), the
      Parent shall prepare or cause to be prepared and file or cause to be filed
      all
      Tax Returns for the Company and the Company Subsidiary for Taxable periods
      ending on or prior to the Closing Date and for Taxable periods beginning before
      the Closing Date and ending after the Closing Date (“Straddle Returns”) which
      are filed after the Closing Date. Except with respect to Taxes relating to
      the
      U.S. Withholding Liability, the parties agree that the Escrow Agent shall pay
      to
      the Parent first from the Cash Escrow Amount, and second, if no amount remains
      in the Cash Escrow Amount, from the Stock Escrow Amount (subject to, and in
      accordance with, the provisions of Article VIII and the Escrow Agreement),
      an
      amount equal to (A) all Taxes shown on such Tax Returns for taxable periods
      ending on or prior to the Closing Date; and (B) the portion of such Taxes
      shown on Straddle Returns which relates to the portion of such Taxable period
      ending on the Closing Date, in each case only to the extent such Taxes are
      not
      reflected in the reserve for Tax liability (rather than any reserve for deferred
      Taxes established to reflect timing differences between book and Tax income)
      on
      the Final Closing Balance Sheet (as finally determined). For purposes of this
      Section, in the case of any Taxes that are imposed on a periodic basis and
      are
      payable for a Taxable period that includes (but does not end on) the Closing
      Date, the portion of such Tax which relates to the portion of such Taxable
      period ending on the Closing Date shall (x) in the case of any Taxes other
      than
      Taxes based upon or related to income or receipts, be deemed to be the amount
      of
      such Tax for the entire Taxable period multiplied by a fraction the numerator
      of
      which is the number of days in the Taxable period ending on the Closing Date
      and
      the denominator of which is the number of days in the entire Taxable period,
      and
      (y) in the case of any Tax based upon or related to income or receipts be deemed
      equal to the amount which would be payable if the relevant Taxable period ended
      on the Closing Date. All determinations necessary to give effect to the
      foregoing allocations shall be made in a manner consistent with prior practice
      of the Company and the Company Subsidiary. The Parent shall permit the
      Stockholders’ Representative, at its expense, an opportunity to review and make
      reasonable comment on any Tax Returns prepared pursuant to this Section 5.06(b)
      prior to filing if the payment of the Tax shown as due and payable on such
      Tax
      Return would give rise to an indemnification obligation by the Stockholders
      pursuant to Article VIII. The Parent agrees to consider reasonable comments
      provided by the Stockholders’ Representative to Parent within seven (7) days
      after receipt of such draft or pro forma Tax Return. If the Parent does not
      accept a reasonable comment, the Stockholders’ Representative may dispute such
      decision as part of any determination of the Stockholders’ obligation to
      indemnity the Parent for the Taxes to which such reasonable comments related;
      provided, however, that Parent shall not be required to delay, or cause to
      be
      delayed, the filing of such Tax Return pending resolution of such
      dispute.

     

    (c) Tax
      Sharing Agreements.
      All tax
      sharing agreements or similar agreements with respect to or involving the
      Company or the Company Subsidiary shall be terminated as of the Closing Date
      and, after the Closing Date, neither the Company nor the Company Subsidiary
      shall be bound thereby or have any liability thereunder.

     

    
      
        
        

      

      
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    (d) Tax
      Contests; U.S. Withholding Liability.
      The
      Parent shall have the right to control any claim, contest or assessment relating
      to Taxes and may settle such claim in its sole and absolute discretion;
      provided, however, that no claim that would give rise to an indemnification
      obligation for Taxes by the Stockholders pursuant to Article VIII shall be
      settled without the consent of the Stockholders’ Representative, which consent
      shall not be unreasonably withheld. Notwithstanding the prior sentence, with
      respect to the resolution of the U.S. Withholding Liability, the Stockholders’
Representative shall be permitted, to the extent reasonably practicable under
      the circumstances, to control the choice of the Company’s counsel and, subject
      to the conditions of this Section 5.06(d), to be principally responsible
      (through counsel) for all discussions with and/or written submissions to the
      IRS
      (it being understood that following the Closing, the Surviving Corporation
      shall
      pay the fees of such counsel but shall be reimbursed as set forth in Section
      3(l) of the Escrow Agreement); provided, however, that (a) Parent shall have
      the
      right to participate fully in preparing, formulating, conducting or submitting
      any communications to the IRS, (b) no substantive discussion or written
      submission shall be made without the prior written consent of the Parent, (c)
      the U.S. Withholding Liability may not be settled or otherwise resolved or
      compromised without the prior written consent of the Parent, which consent
      shall
      not be unreasonably withheld, and (d) if the Stockholders’ Representative has
      assumed control of the discussions with and/or written submissions to the IRS,
      the Stockholders’ Representative shall be required to use its best efforts to
      resolve the U.S. Withholding Liability expediently and in accordance with
      Section 3(i) of the Escrow Agreement. If the Stockholders’ Representative (or
      counsel chosen by the Stockholders’ Representative to represent the Company and
      Company Subsidiary) fails to comply with any of the foregoing conditions, all
      control and responsibility for resolving the U.S. Withholding Liability shall
      revert to the Parent. With respect to Taxes relating to the U.S. Withholding
      Liability, the parties agree that the Escrow Agent shall pay to the Parent
      first
      from the Cash Escrow Amount, and second, if no amount remains in the Cash Escrow
      Amount, from the Stock Escrow Amount (subject to, and in accordance with, the
      provisions of Article VIII and Section 3 of the Escrow Agreement), an amount
      equal to the amount specified in Section 3(i)(B) of the Escrow Agreement.
      Notwithstanding the foregoing provisions of this Section 5.06(d), with respect
      to the resolution of the U.S. Withholding Liability, any legal expenses incurred
      by the Company (prior to the Effective Time) or by the Surviving Corporation
      (following the Effective Time) shall be reimbursed in accordance with, and
      to
      the extent provided in, the provisions of Section 3(l) of the Escrow
      Agreement.

     

    SECTION
      5.07. Israeli
      Tax Rulings.
      As soon
      as reasonably practicable after the execution of this Agreement, the Company
      Subsidiary shall cause its Israeli counsel and/or Israeli consultants to prepare
      and file with the ITA one or more applications, or, in the case of applications
      that have previously been filed, to continue to use its best efforts to
      diligently pursue in good faith the receipt from the ITA of one or more rulings
      that:

     

    (a) confirm
      that (A) the payment of consideration pursuant to Section 2.04(e) for Company
      Options subject to the statutory holding period for Section 102 Plans will
      not
      result in a requirement for an immediate Israeli tax payment and that the
      Israeli taxation will be deferred until completion of such statutory holding
      period and release of the cash consideration, as applicable; and (B) that the
      statutory holding period under any grants under Section 102 Plans will continue
      uninterrupted from the original date of grant and will not recommence as a
      result of the transactions contemplated herein (which ruling may be subject
      to
      customary conditions regularly associated with such a ruling) (the “Israeli
      Options Tax Ruling”);

     

    (b) 
      (A)
      provides for a full exemption to the Parent, the Paying Agent, the Company
      and
      its or their agents from withholding requirements as a result of a deferral
      of
      Israeli income tax pursuant to Section 104H of the Israeli Tax Code, or (B)
      to
      the extent that the Parent is not fully exempt from withholding as a result
      of
      (A) above, that either: (x) exempts Parent, the Paying Agent, the Company and
      its or their agents from any obligation to withhold Israeli Tax at source from
      any consideration payable or otherwise deliverable pursuant to this Agreement,
      or clarifies that no such obligation exists; or (y) clearly instructs Parent,
      the Paying Agent, the Company and their agents how and when such withholding
      at
      source is to be performed, and in particular, with respect to the classes or
      categories of holders or former holders of Shares from which Tax is to be
      withheld (if any), and the rate or rates of withholding to be applied (the
      “Israeli
      Withholding Tax Ruling”),
      provided that no withholding under Israeli Tax law will be made from any
      consideration payable hereunder to a holder of Company Preferred Stock or
      Company Common Stock to the extent that such stockholder has provided Parent
      with an appropriate unequivocal exemption or confirmation of a reduced
      withholding rate issued by the ITA or such other document, opinion or form
      which, in the sole discretion of Parent, is sufficient to enable Parent to
      reasonably conclude that no withholding or a reduced rate of withholding, as
      applicable, of Israeli Tax is required with respect to the particular
      Stockholder in question, prior to the time such payment is made;
      and

     

    
      
        
        

      

      
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    (c) provides
      that the Escrow Amount shall not be subject to Israeli Tax until actually
      received by the persons entitled thereto (the “Israeli
      Escrow Tax Ruling”,
      and
      together with Israeli Options Tax Ruling and the Israeli Withholding Tax Ruling,
      the “Israeli
      Tax Rulings”).

     

    The
      Company shall, and shall instruct its representatives and advisors to, cooperate
      with the Parent and its Israeli counsel, consultants, representatives and other
      advisors with respect to the preparation and filing of such applications and
      in
      the preparation of any written or oral submissions that may be necessary, proper
      or advisable to obtain the Israeli Tax Rulings. Subject to the terms and
      conditions hereof, the Company shall use its best efforts to promptly take,
      or
      cause to be taken, all action and to do, or cause to be done, all things
      necessary, proper or advisable under applicable Law to obtain the Israeli Tax
      Rulings, as promptly as practicable. The Company, its representatives and
      advisors shall not make any application to, or conduct any negotiation with,
      the
      Israeli Tax authorities with respect to any matter relating to the subject
      matter of the Israeli Tax Rulings without prior coordination with Parent, and
      will enable Parent’s representatives and advisors to participate in all
      discussions and meetings relating thereto. Parent shall reasonably cooperate
      with the Company and its Israeli counsel, consultants, representatives and
      other
      advisors in the course of such participation and to the extent reasonably
      necessary to enable the Company to obtain the Israeli Tax Rulings. To the extent
      that the Parent’s representative and advisors elect not to participate in any
      meeting or discussion, the Company’s representatives and advisors shall provide
      a prompt and full report of the discussions held. In any event, the final text
      of the Israeli Tax Rulings shall in all circumstances be subject to the prior
      written consent
      of
      Parent, which consent shall not be unreasonably withheld, it being understood
      that Parent may withhold such consent if the Israeli Tax Rulings: (i) impose
      restrictions or limitations upon Parent or the Company; (ii) require Parent
      to
      withhold cash in excess of the difference between (x) the Cash Merger
      Consideration, and (y) the Cash Escrow Amount; or (iii) fail to fully address
      the matters described in subsections (a) through (c) above to the reasonable
      satisfaction of Parent.

     

    SECTION
      5.08. Israel
      Securities Exemption.
      As
      promptly as practicable after the date hereof, Parent shall cause its Israeli
      counsel to prepare and file with the ISA an application for an exemption from
      the requirements of the Israeli Securities Law concerning the publication of
      a
      prospectus in respect of (a) the exchange of the Company Options for options
      to
      purchase Parent Common Stock, and (b) the exchange of the Company Restricted
      Shares for Parent Restricted Shares, pursuant to Section 15D of the Securities
      Law of Israel (the “Israeli Securities Exemption”). The Company shall cooperate
      and cause its Representatives to cooperate with Parent in connection with the
      preparation and filing of such application and in the preparation of any written
      or oral submissions that may be necessary, proper or advisable to obtain the
      Israeli Securities Exemption.
      Parent
      shall use its best efforts to obtain the exemption from the requirements of
      the
      Israeli Securities Law described in the first sentence of this Section
      5.08.

     

    
      
        
        

      

      
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    SECTION
      5.09. Public
      Announcements.
      Until
      the earlier of termination of this Agreement or the Closing Date, the Parent,
      on
      the one hand, and the Company and the Stockholders, on the other hand, will
      consult with each other before issuing any press release or otherwise making
      any
      public statements with respect to the Agreement or the transactions contemplated
      hereby and shall not issue any such press release or make any such public
      statement that is not approved by the other party, which approval shall not
      be
      unreasonably withheld. Notwithstanding the foregoing, nothing contained in
      this
      Section shall impair either Party’s compliance with any Law applicable to it, or
      any requirements of the SEC or the national securities exchange or other stock
      market on which such Party’s securities are traded; and, provided further, that
      Parent may issue external media and investor communications related to the
      transactions contemplated by this Agreement if such external media or investor
      communications are in
      accordance with Parent’s past practice for disclosures related to similar
      transactions.

     

    SECTION
      5.10. Exercise
      of Certain Outstanding Company Options.
      Each
      holder of outstanding options set forth on Schedule
      II
      hereto
      shall exercise all of their outstanding options to purchase Company Preferred
      Stock and/or Company Common Stock immediately prior to the Closing.

     

    SECTION
      5.11. Trading
      Restriction Agreements Legend.
      Each
      Parent Stock Certificate issued to a Principal Stockholder, as well as any
      stock
      certificate representing Parent Common Stock issued to a Principal Stockholder
      following the Closing upon the exercise of outstanding options, shall bear
      the
      following legend:

     

    “THE
      SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A TRADING RESTRICTION
      AGREEMENT, A COPY OF WHICH MAY BE OBTAINED FROM THE SECRETARY OF LIVEPERSON,
      INC.”

     

    SECTION
      5.12. Directors
      and Officers Insurance.
      For a
      period of four years after the Closing Date, Parent will cause the
      Surviving Corporation to maintain directors’ and officers’ liability insurance
      with one or more reputable unaffiliated third-party insurers maintained by
      the
      Company covering those persons who are covered by the Company’s directors’ and
      officers’ liability insurance policy as of the date hereof for events occurring
      prior to the Closing Date, on terms and conditions that are, in the
      aggregate, no less favorable to the insured than those applicable to the current
      directors and officers of the Company; provided,
      however,
      that
      Parent shall satisfy its obligations under this section by purchasing
      a “tail” policy under the Company’s existing directors’ and officers’ insurance
      policy which (i) has an effective term of four years from
      the Closing Date, (ii) covers those persons who are currently covered
      by the Company’s directors’ and officers’ insurance policy in effect as of the
      date hereof for actions and omissions occurring on or prior to the Closing
      Date,
      and (iii) contains terms and conditions that are, in the aggregate, no less
      favorable to the insured than those of the Company’s directors’ and officers’
insurance policy in effect as of the date hereof; provided, that, if the Company
      directs the Parent no less than 30 days prior to the Closing that the Company
      wishes to maintain directors’
      and officers’ liability insurance
      coverage for a longer period of time than set forth above, the Parent will
      extend such coverage for the additional period so directed. All costs associated
      with the purchase of the “tail” policy contemplated by this Section 5.12 shall
      reduce the Cash Merger Consideration dollar for dollar to the extent the total
      costs of such policy exceeds $48,000.

     

    
      
        
        

      

      
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    SECTION
      5.13. Optionholder
      Waiver Letters.
      The
      Company shall use its best efforts to cause the sufficient number of the holders
      of Company Options to execute a waiver of their right to exercise such options
      prior to Closing as is necessary to provide for the satisfaction of the
      condition precedent set forth in Section 7.02(t); provided, however, that the
      form of such waiver must be reasonably acceptable to the Parent. 

     

    SECTION
      5.14. Withholding
      Instructions.
      The
      Stockholders’ Representative will use its best efforts to cause each holder of
      Company Common Stock, Company Preferred Stock or Company Options to provide
      the
      appropriate parties, whether the Parent or otherwise, in advance of any
      distribution with a completed Form W-9 or W-8 or any relevant information as
      described in Section 5.07, as applicable, as reasonably requested and necessary
      to comply with the Tax obligations in connection with the transactions
      contemplated by the Transaction Documents, as well as causing each recipient
      of
      other payments pursuant to Section 2.05 of this Agreement to provide the
      information required in order for the Company and/or the Paying Agent to comply
      with any and all Tax obligations in connection with those payments.

     

    SECTION
      5.15. Registration
      Statement on Form S-8. Within
      30
      days after the Effective Time, the Parent shall file a registration statement
      on
      Form S-8 (or any successor form) under the Securities Act with respect to
      all shares of Parent Common Stock subject to the Company Options assumed in
      accordance with Section 2.4(e) that may be registered on a Form S-8,
      and shall use its best efforts to maintain the effectiveness of such
      registration statement for so long as such options remain
      outstanding.

     

    SECTION
      5.16. Company
      and/or Stockholders’ Representative to Instruct Paying Agent with Respect to
      Certain Matters.
      The
      Company and/or the Stockholders’ Representative shall instruct the Paying Agent
      to make any payments referred to in Section 2.05(a)(i) and in Section 5.13
      as
      promptly as possible following the Closing. In addition, the Company and/or
      the
      Stockholders’ Representative shall instruct the Paying Agent to make the cash
      bonus payments described in Section 2.05(a)(ii) as promptly as possible
      following the Closing and the cash bonus payments described in the paragraph
      following Section 2.05(a)(ii) as promptly as possible following the Escrow
      Fund
      Distribution Date.

     

    VI.

     

    STOCK
      MATTERS

     

    SECTION
      6.01. Required
      Registration.
      As
      promptly as practicable after the Closing, unless prohibited by Law, but in
      no
      event later than forty-five (45) days after the Closing Date (or, if such date
      is any day on which the filing of documents with the SEC pursuant to the
      Exchange Act or the rules and regulations thereunder may not be made, then
      the
      next day thereafter on which the filing of such documents with the SEC may
      be
      made), Parent agrees to file a Registration Statement on Form S-3 or other
      applicable registration statement (the “Re-Sale
      Registration Statement”)
      to
      register the resale of any and all of the shares of Parent Common Stock issued
      or issuable pursuant to this Agreement (together, the “Shares”).
      Parent shall use its commercially reasonable efforts to cause the SEC to declare
      the Re-Sale Registration Statement effective no later than the 90th day after
      the Closing; provided,
      however,
      that
      not less than five days prior to the filing of the Re-Sale Registration
      Statement, Parent shall provide the Stockholders’
      Representative
      with a
      copy of the Re-Sale Registration Statement proposed to be filed and Parent
      agrees to consider all appropriate comments provided by the Stockholders’
Representative with respect to the Re-Sale Registration Statement for inclusion
      in the Re-Sale Registration Statement; provided,
      further,
      that
      Parent shall have no liability to the Stockholders’ Representative for the
      failure of the SEC to declare the Re-Sale Registration Statement effective
      no
      later than the 90th day after the Closing if such failure is a result, directly
      or indirectly, of the Stockholders’ Representative’s failure to cooperate with
      Parent pursuant to the terms of this Agreement. Parent shall thereafter maintain
      the effectiveness of the Re-Sale Registration Statement until the earlier of
      (a)
      the date on which all the Shares have been sold pursuant to the Re-Sale
      Registration Statement or Rule 144 promulgated under the Securities Act
      (“Rule
      144”),
      and
      (b) such time as Parent reasonably determines, based on an opinion of counsel,
      that the holders of the Shares will be eligible to sell under Rule 144 all
      of
      the Shares then owned by them within the volume limitations imposed by paragraph
      (e) of Rule 144 in the three-month period immediately following the termination
      of the effectiveness of the Re-Sale Registration Statement. Unless earlier
      terminated pursuant to the provisions of the preceding sentence, Parent’s
      obligations contained in this Section 6.01 shall terminate on the third
      anniversary of the Closing Date.

     

    
      
        
        

      

      
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    SECTION
      6.02. Registration
      Procedures.

     

    (a) In
      case
      of the Re-Sale Registration Statement effected by Parent subject to this Article
      VI, Parent shall keep the Seller advised in writing as to the initiation of
      such
      registration, and as to the completion thereof. In addition, subject to Section
      6.01 above, Parent shall, to the extent applicable to the Re-Sale Registration
      Statement:

     

    (i) prepare
      and file with the SEC such amendments and supplements to the Re-Sale
      Registration Statement as may be necessary to keep such registration
      continuously effective and free from any material misstatement or omission
      necessary to make the statements therein, in light of the circumstances, not
      misleading, and comply with provisions of the Securities Act with respect to
      the
      disposition of all securities covered thereby during the period referred to
      in
      Section 6.01;

     

    (ii) update,
      correct, amend and supplement the Re-Sale Registration Statement as
      necessary;

     

    (iii) notify
      the Stockholders’ Representative promptly when the Re-Sale Registration
      Statement is declared effective by the SEC, and furnish such number of
      prospectuses, including preliminary prospectuses, and other documents incident
      thereto as the Stockholders’ Representative may reasonably request from time to
      time;

     

    
      
        
        

      

      
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    (iv) use
      its
      commercially reasonable efforts to register or qualify the Shares under such
      other securities or blue sky laws of such jurisdictions of the United States
      where an exemption is not available and as the Stockholders’ Representative may
      reasonably request to enable it to consummate the disposition in such
      jurisdiction of the Shares (provided that
      Parent
      will not be required to (A) qualify generally to do business in any jurisdiction
      where it would not otherwise be required to qualify but for this provision,
      or
      (B) consent to general service of process in any such jurisdiction, or (C)
      subject itself to taxation in any jurisdiction where it is not already subject
      to taxation);

     

    (v) notify
      the Stockholders’ Representative at any time when a prospectus relating to the
      Shares is required to be delivered under the Securities Act, of the happening
      of
      any event as a result of which the prospectus included in the Re-Sale
      Registration Statement contains an untrue statement of a material fact or omits
      any fact necessary to make the statements therein not misleading, and subject
      to
      Section 6.02(d), Parent will promptly prepare a supplement or amendment to
      such
      prospectus, so that, as thereafter delivered to purchasers of such shares,
      such
      prospectus will not contain any untrue statements of a material fact or omit
      to
      state any fact necessary to make the statements therein, in light of the
      circumstances under which they were made, not misleading;

     

    (vi) cause
      all
      such Shares to be listed on each securities exchange or market on which similar
      securities issued by Parent are then listed and obtain all necessary approvals
      from such exchange or market for trading thereon;

     

    (vii) provide
      a
      transfer agent and registrar for all such Shares not later than the effective
      date of the Re-Sale Registration Statement; 

     

    (viii) upon
      the
      sale of any Shares pursuant to the Re-Sale Registration Statement, direct the
      transfer agent to remove the Securities Act legend from all certificates or
      other instruments evidencing the Shares;

     

    (ix) With
      a
      view to making available to the Stockholders’ Representative the benefits of
      certain rules and regulations of the SEC that at any time permit the sale of
      the
      Shares to the public without registration, so long as any Shares are
      outstanding, Parent shall use its commercially reasonable efforts for a period
      of three years following the Closing Date:

     

    
      	 	
              (a)

            	
              to
                make and keep public information available, as those terms are understood
                and defined in Rule 144(c) under the Securities
                Act;

            

    

     

    
      	 	
              (b)

            	
              to
                file with the SEC in a timely manner all reports and other documents
                required of Parent under the Exchange Act;
                and

            

    

     

    
      
        
        

      

      
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              (c)

            	
              to
                furnish to the Stockholders’ Representative upon any reasonable request a
                written statement by Parent as to its compliance with the public
                information requirements of Rule 144(c) under the Securities Act;
                and

            

    

     

    (x) To
      advise
      the Stockholders’ Representative promptly after it has received notice or
      obtained knowledge of the existence of any stop order by the SEC delaying or
      suspending the effectiveness of the Re-Sale Registration Statement or of the
      initiation or threat of any proceeding for that purpose, and to make every
      commercially reasonable effort to obtain the withdrawal of any order suspending
      the effectiveness of the Re-Sale Registration Statement at the earliest possible
      time.

     

    (b) Notwithstanding
      anything stated or implied to the contrary in Section 6.02(a) above, Parent
      shall not be required to consent to any underwritten offering of the Shares
      or
      to any specific underwriter participating in any underwritten public offering
      of
      the Shares.

     

    (c) The
      holders of the Shares agree that upon receipt of any notice from Parent of
      the
      happening of any event of the kind described in Section 6.02(a)(v), and subject
      to Section 6.02(d), such holders will forthwith discontinue their disposition
      of
      Shares pursuant to the registration statement relating to such Shares until
      the
      receipt by such holders of the copies of the supplemented or amended prospectus
      contemplated by Section 6.02(a)(v) (such interim period in which the holders
      of
      the Shares are unable to dispose of the Shares is hereinafter referred to as
      the
“Blocked
      Period”)
      and,
      if so directed by Parent, will deliver to Parent at Parent’s expense all copies,
      other than permanent file copies, then in such holders’ possession, of the
      prospectus relating to such Shares current at the time of receipt of such
      notice. However, if during the Blocked Period, Parent proposes to register
      on a
      registration statement (other than a resale registration statement on Form
      S-3
      or a registration statement on Form S-8 or Form S-4, or their successors, or
      any
      other form for a similar limited purpose, or any registration statement covering
      only securities proposed to be issued in exchange for securities or assets
      of
      another corporation) any of its stock or other securities in connection with
      the
      public offering of such stock or securities, then Parent shall use its best
      efforts to include such Shares as requested by the holders thereof in such
      registration statement filed by Parent with the SEC; provided, however, that
      in
      the case of an underwritten public offering, if the underwriters advise Parent
      that marketing factors require a limitation of the number of shares to be
      underwritten, Parent and its underwriters shall allocate the number of shares
      to
      be registered in such offering as follows: (i) first, to Parent; (ii)
      second, to the holders of the Shares; and (iii) thereafter, to the extent
      additional securities may be included in such offering, to any other holders
      of
      Parent securities other than the holders of the Shares. Parent’s obligation to
      maintain the effectiveness of the Re-Sale Registration Statement pursuant to
      Section 6.1 above shall be extended by the number of days during which a Blocked
      Period shall be in effect pursuant to the provisions of this Section
      6.2(c).

     

    
      
        
        

      

      
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    (d) In
      addition to any discontinuance of the disposition of Shares under Section
      6.02(c) above, Parent, upon the happening of any pending corporate development,
      public filing with the SEC or similar event, that, in the good faith judgment
      of
      Parent’s Board of Directors based on the advice of counsel, renders it advisable
      to suspend use of the prospectus, may, for no more than sixty (60) days in
      the
      aggregate per event (each a “Suspension
      Event”),
      suspend use of the prospectus, on written notice to the holders of the Shares
      (which notice will not disclose the content of any material non-public
      information and will indicate the date of the beginning and end of the intended
      period of suspension, if known), in which case the holders of the Shares shall
      discontinue disposition of Shares covered by the registration statement related
      to such Shares or prospectus until copies of a supplemented or amended
      prospectus are distributed to them or until they are advised in writing by
      Parent that sales of Shares under the applicable prospectus may be resumed
      and
      have received copies of any additional or supplemental filings that are
      incorporated or deemed incorporated by reference in any such prospectus. The
      suspension and notice thereof described in this Section 6.02(d) shall be subject
      to the confidentiality provisions of Section 5.03 herein and the Nondisclosure
      Agreement and shall not be disclosed by the Seller. Parent may not utilize
      the
      suspension described in this Section 6.02(d) for more than two (2) Suspension
      Events in any twelve-month period. Parent will use commercially reasonably
      efforts to ensure that the use of the Re-Sale Registration Statement and
      prospectus may be resumed as promptly as practicable.

     

    (e) Except
      as
      required by Law, all expenses incurred by Parent in complying with this Article
      VI, including but not limited to, all registration, qualification and filing
      fees, printing expenses, fees and disbursements of counsel and accountants
      for
      Parent, blue sky fees and expenses (including fees and disbursements of counsel
      related to all blue sky matters) incurred in connection with any registration,
      qualification or compliance pursuant to this Article VI shall be borne by
      Parent. All underwriting discounts and selling commissions applicable to a
      sale
      incurred in connection with any registration of Shares and the legal fees and
      other expenses of the holders of the Shares shall be borne by such
      holders.

     

    If
      Shares
      are included in any registration, the holders of such Shares shall furnish
      Parent such information regarding itself or themselves as Parent may reasonably
      request and as shall be required in connection with any registration (or
      amendment or supplement thereto), referred to in this Agreement, and the holders
      of such Shares shall indemnify Parent with respect thereto in accordance with
      Article VIII hereof. The holders of such Shares agree and acknowledge that
      Parent may rely on such information as being true and correct for purposes
      of
      preparing and filing the Re-Sale Registration Statement at the time of filing
      thereof and at the time it is declared effective, unless the holders of such
      Shares have notified Parent in writing to the contrary prior to such
      time.

     

    SECTION
      6.03. Transfer
      of Shares.
      A
      holder of the Shares may transfer all or any part of his or its Shares to any
      Affiliate of such holder; provided,
      that
      any such
      transfer shall be effected in full compliance with all applicable federal and
      state securities laws, including, but not limited to, the Securities Act, and
      further provided,
      that in
      any such case, it shall be a condition to any such transfer that the transferee
      execute an agreement stating that the transferee is receiving and holding the
      Shares subject to the provisions of this Agreement, and there shall be no
      further transfer of such Shares except in accordance with this Agreement. Parent
      will effect such transfer of restricted certificates and will promptly amend
      or
      supplement the Prospectus forming a part of the Re-Sale Registration Statement
      to add the transferee to the selling stockholders in the Re-Sale Registration
      Statement; provided that
      the
      transferor and transferee shall be required to provide Parent with the
      information requested by Parent in this Agreement, information reasonably
      necessary for Parent to determine that the transfer was effected in accordance
      with all applicable federal and state securities laws, including, but not
      limited to, the Securities Act, and all other information reasonably requested
      by Parent from time to time in connection with any transfer, registration,
      qualification or compliance referred to in this Article VI.

     

    
      
        
        

      

      
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    SECTION
      6.04. Restricted
      Securities, Stock Certificate Legend.
      The
      holders of the Shares acknowledge that the issuance by Parent of the shares
      of
      Common Stock to such holders hereunder has not and will not be registered under
      the Securities Act by reason of their contemplated issuance in transactions
      exempt from the registration and prospectus delivery requirements of the
      Securities Act pursuant to Section 4(2) thereof, and that such shares will
      be
      deemed “restricted securities” for purposes of the Securities Act. The holders
      of the Shares acknowledge that any certificate or certificates representing
      shares of Common Stock issued pursuant to this Agreement shall bear the
      following legend, in addition to any legend that may be required by any Law
      or
      any other provisions of this Agreement:

     

    “THE
      SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
      SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED,
      HYPOTHECATED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF (i) AN EFFECTIVE
      REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER SAID ACT OR (ii) AN OPINION
      OF
      COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED
      UNDER
      SUCH ACT.”

     

    SECTION
      6.05. Reservation
      of Stock.
      Parent
      shall at all times reserve and keep available out of its authorized but unissued
      shares of Common Stock, solely for the purpose of issuance of the shares of
      Common Stock hereunder, a sufficient number of shares of Common Stock to issue
      such shares, and if at any time the number of authorized but unissued shares
      of
      Common Stock shall not be sufficient to issue the shares of Common Stock that
      Parent is required to issue pursuant to the terms of this Agreement, in addition
      to such other remedies as shall be available to the holders of the Shares,
      Parent will use its reasonable efforts to take such corporate action as may,
      in
      the opinion of its counsel, be necessary to increase its authorized but unissued
      shares of Common Stock to such number of shares as shall be sufficient for
      such
      purposes.

     

    SECTION
      6.06. No
      Stockholder Rights.
      Prior
      to the issuance of the shares of Common Stock pursuant to the terms of this
      Agreement, the holders of the Shares shall not be entitled, by virtue of this
      Agreement, to any rights of a stockholder of Parent, including (without
      limitation) the right to vote, receive dividends or other distributions or
      be
      notified of stockholder meetings, and except as otherwise provided herein,
      the
      holders of the Shares shall not be entitled to any notice or other communication
      concerning the business or affairs of the Buyer, except as required by
      Law.

     

    SECTION
      6.07. Compliance
      with Law or Stock Exchange.
      If at
      any time after Closing, any new Law, rule or regulation is enacted or
      promulgated by (i) any national securities exchange; or (ii) any federal or
      state securities authority having jurisdiction over Parent, which must be
      satisfied in the good faith determination of the Parent as a condition of the
      issuance of any shares of Common Stock pursuant to the terms of this Agreement,
      or if the consent or approval of a Governmental Entity to the issuance of any
      shares of Common Stock must be obtained as a condition to such issuance, in
      whole or in part, then Parent may delay such issuance until such condition
      has
      been satisfied. Parent and the holders of the Shares mutually agree to cooperate
      with one another to satisfy any such condition as promptly as possible and
      to
      provide any information, representations and agreements as are required for
      such
      purpose.

     

    
      
        
        

      

      
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    VII.

     

    CONDITIONS
      PRECEDENT

     

    SECTION
      7.01. Conditions
      Precedent to the Obligations of Each Party.
      The
      obligations of the parties hereto to consummate the transactions contemplated
      by
      this Agreement are subject to the satisfaction or, if permitted by applicable
      Law, waiver of the following conditions:

     

    (a) no
      court
      of competent jurisdiction shall have issued or entered any order, writ,
      injunction or decree, and no other Governmental Entity shall have issued any
      order, which is then in effect and has the effect of making the transactions
      contemplated hereby illegal or otherwise prohibiting its consummation;

     

    (b) all
      consents, approvals and authorizations legally required to be obtained to
      consummate the transactions contemplated hereby shall have been obtained from
      all Governmental Entities, except where the failure to obtain any such consent,
      approval or authorization would not reasonably be expected to result in a Parent
      Material Adverse Effect or a Company Material Adverse Effect; and

     

    (c) The
      stockholder consent approving this Agreement required under the DGCL and the
      Company’s Certificate of Incorporation (the “Required
      Stockholder Consent”)
      was
      obtained.

     

    SECTION
      7.02. Conditions
      Precedent to the Obligation of the Parent.
      The
      obligation of the Parent to consummate the transactions contemplated by this
      Agreement is subject, at the option of the Parent, to the satisfaction at or
      prior to the Closing Date of each of the following conditions:

     

    (a) Accuracy
      of Representations and Warranties.
      The
      representations and warranties of the Company contained in this Agreement or
      in
      any certificate or document delivered to the Parent pursuant hereto shall have
      been true and correct as of the date of this Agreement and as of the Closing
      Date as though made at and as of the Closing Date (or, in the case of those
      representations and warranties that are made as of a particular date or period,
      which shall have been true and correct at and as of such date or period), except
      for inaccuracies in such representations or warranties the circumstances giving
      rise to which, individually or in the aggregate, will not have a Company
      Material Adverse Effect (disregarding any materiality or Company Material
      Adverse Effect qualification contained in any such representation or warranty),
      and, if the Closing Date shall occur on a date other than the date hereof,
      the
      Company shall have so certified to the Parent in writing.

     

    
      
        
        

      

      
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    (b) Compliance
      with Covenants.
      The
      Company shall have performed and complied in all material respects with all
      terms, agreements, covenants and conditions of this Agreement to be performed
      or
      complied with by it at or prior to the Closing Date, and, if the Closing Date
      shall occur on a date other than the date hereof, the Company shall have so
      certified to the Parent in writing.

     

    (c) All
      Proceedings To Be Satisfactory.
      All
      proceedings to be taken by the Company in connection with the transactions
      contemplated hereby and all documents incident thereto shall be reasonably
      satisfactory in form and substance to the Parent and its counsel, and the Parent
      and said counsel shall have received all such counterpart originals or certified
      or other copies of such documents as they may reasonably request.

     

    (d) No
      Material Adverse Change.
      There
      shall not have occurred since December 31, 2006 any Company Material Adverse
      Effect, and, if the Closing Date shall occur on a date other than the date
      hereof, the Company shall have so certified to the Parent in
      writing.

     

    (e) Dissenters’
      Rights.
      Holders
      of not more than 5% of the shares of Company Capital Stock entitled to vote
      on
      the Merger shall have exercised and perfected, or be entitled to exercise or
      perfect, appraisal rights in accordance with Section 262 of the
      DGCL.

     

    (f) Opinion
      of U.S. Counsel.
      The
      Parent shall have received the opinion of Pepper Hamilton LLP, counsel to the
      Company, in substantially the form of Exhibit
      C
      hereto.

     

    (g) Opinion
      of Israeli Counsel.
      The
      Parent shall have received the opinion of Goldfarb, Levy, Eran, Meiri & Co.,
      Law Offices, Israeli counsel to the Company, in substantially the form of
Exhibit
      D
      hereto.

     

    (h) Consents
      and Approvals.
      The
      authorizations, consents, waivers and approvals set forth in Section
      7.02(h) of the Company Disclosure Schedule hereto
      shall
      have been duly obtained and shall be in form and substance reasonably
      satisfactory to counsel for the Parent.

     

    (i) SAS
      100.
      The
      Parent shall have received a review report, reasonably satisfactory in form
      and
      substance to the Parent, from the Company’s independent public accountants,
      pursuant to Statement of Accounting Standards No. 100.

     

    (j) Employment
      Agreements.
      Employment Agreements in substantially the form set forth in Exhibit B hereto
      and otherwise in form and substance satisfactory to the Parent and its counsel
      shall have been executed and delivered by the Company and each of the
      Founders.

     

    (k) Charter
      Amendment.
      The
      Charter Amendment shall have been accepted as filed with the Secretary of State
      of the State of Delaware.

     

    (l) Board
      Resignations.
      The
      Parent shall have received from each Person who is, immediately prior to the
      Closing Date, a director of the Company or any of its Subsidiaries, his or
      her
      written resignation, effective as of the Closing Date, from such position.
      

     

    
      
        
        

      

      
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    (m) Termination
      of Agreements.
      All
      agreements among the Stockholders relating to the Company shall have been
      terminated and of no further force or effect as of the Closing
      Date.

     

    (n) Exercise
      of Certain Outstanding Company Options.
      Each
      holder of outstanding options set forth on Schedule
      II
      hereto
      shall exercise all of their outstanding options to purchase Company Preferred
      Stock and/or Company Common Stock immediately prior to the Closing.

     

    (o) Lock-up
      Agreement of Founders.
      Each
      Founder shall have entered into a Lock-up Agreement with the Parent,
      substantially in the form of Exhibit F hereto.

     

    (p) Trading
      Restriction Agreements.
      The
      Trading Restriction Agreements shall have been executed by each of the Principal
      Stockholders in accordance with the provisions of, and subject to the exceptions
      set forth in, Section 2.14.

     

    (q) Escrow
      Agreement.
      The
      Stockholders’ Representative and the Escrow Agent shall have executed and
      delivered the Escrow Agreement, substantially in the form of Exhibit A
      hereto.

     

    (r) Paying
      Agent Agreement.
      The
      Stockholders’ Representative and the Paying Agent shall have executed and
      delivered a Paying Agent Agreement, on reasonable and customary terms,
      consistent with the terms and conditions described in this Agreement and in
      the
      Escrow Agreement, and otherwise on terms reasonably acceptable to both the
      Parent and the Stockholders’ Representative, including, without limitation, a
      provision that the Parent and the Stockholders will share equally the fees
      and
      expenses of such Paying Agent payable under the Agreement.

     

    (s) Supporting
      Documents.
      On or
      prior to the Closing Date, the Parent and its counsel shall have received copies
      of the following supporting documents:

     

    (i) (A)
      the
      Certificate of Incorporation of the Company certified as of a recent date by
      the
      Secretary of State of the state in which the Company is incorporated and (B)
      a
      certificate of the Secretary of State of the state in which the Company is
      incorporated as to the due incorporation and existence of the Company and
      listing all documents on file with said official;

     

    (ii) a
      certificate of the Secretary of the Company, dated the Closing Date and
      certifying (A) that attached thereto is a true and complete copy of the By-laws
      of the Company as in effect on the date of such certification; (B) that the
      Certificate of Incorporation of the Company have not been amended since the
      date
      of the last amendment referred to in the certificate delivered pursuant to
      clause (i)(B) above and (C) the resolutions of the board of directors of the
      Company approving the execution, delivery and performance of this Agreement
      and
      the consummation of the transactions contemplated hereby; and

     

    
      
        
        

      

      
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    (iii) such
      additional supporting documents and other information with respect to the
      operations and affairs of the Company as the Parent or its counsel may
      reasonably request.

     

    All
      such
      documents shall be reasonably satisfactory in form and substance to the Parent
      and its counsel.

     

    (t) Maximum
      Number of Holders of Parent Common Stock Who are Resident in
      Israel.
      Parent
      shall not be required to issue Parent Common Stock to more than thirty-five
      (35)
      Stockholders resident in Israel.

     

    (u) FIRPTA.
      The
      Parent shall have received a statement, in a form reasonably acceptable to
      the
      Parent and in compliance with Treasury Regulation § 1.1445-2(c)(3)(i) and
      Treasury Regulation § 1.897-2(h), from the Company certifying that the interests
      in the Company are not U.S. real property interests and evidence from the
      Company demonstrating that the Company has complied with the requirement to
      notify the Internal Revenue Service pursuant to Treasury Regulation §
1.897-2(h)(2).

     

    (v) Israeli
      Withholding Tax Ruling.
      The
      Israeli Withholding Tax Ruling shall have been received, satisfying all of
      the
      conditions described in Section 5.07 hereof; provided, however, this condition
      shall be deemed to be satisfied if a withholding tax ruling satisfying all
      of
      the conditions described in Section 5.07 hereof has been offered by the ITA
      on
      terms and subject to conditions which are customary and standard under the
      circumstances.

     

    (w) Israeli
      Escrow Tax Ruling.
      The
      Israeli Escrow Tax Ruling shall have been received, satisfying all of the
      conditions described in Section 5.07 hereof; provided, however, this condition
      shall be deemed to be satisfied if an escrow tax ruling satisfying all of the
      conditions described in Section 5.07 hereof has been offered by the ITA on
      terms
      and subject to conditions which are customary and standard under the
      circumstances.

     

    SECTION
      7.03. Conditions
      Precedent to the Obligations of the Company.
      The
      obligations of the Company to consummate the transactions contemplated by this
      Agreement are subject, at the option of the Company, to the satisfaction at
      or
      prior to the Closing Date of each of the following conditions: 

     

    (a) Accuracy
      of Representations and Warranties.
      The
      representations and warranties of the Parent contained in this Agreement or
      in
      any certificate or document delivered to the Company pursuant hereto shall
      have
      been true and correct as of the date of this Agreement and as of the Closing
      Date as though made at and as of the Closing Date (or, in the case of those
      representations and warranties that are made as of a particular date or period,
      which shall have been true and correct at and as of such date or period), except
      for inaccuracies in such representations or warranties the circumstances giving
      rise to which, individually or in the aggregate, will not have a Parent Material
      Adverse Effect (disregarding any materiality or Parent Material Adverse Effect
      qualification contained in any such representation or warranty), and, if the
      Closing Date shall occur on a date other than the date hereof, the Parent shall
      have so certified to the Company in writing.

     

    
      
        
        

      

      
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    (b) Compliance
      with Covenants.
      The
      Parent shall have performed and complied in all material respects with all
      terms, agreements, covenants and conditions of this Agreement to be performed
      or
      complied with by it at or prior to the Closing Date, and, if the Closing Date
      shall occur on a date other than the date hereof, the Parent shall have so
      certified to the Company and the Stockholders in writing.

     

    (c) All
      Proceedings to Be Satisfactory.
      All
      proceedings to be taken by the Parent in connection with the transactions
      contemplated hereby and all documents incident thereto shall be reasonably
      satisfactory in form and substance to the Company and the Stockholders and
      their
      respective counsel, and the Company and the Stockholders and said counsel shall
      have received all such counterpart originals or certified or other copies of
      such documents as they may reasonably request.

     

    (d) Escrow
      Agreement.
      The
      Parent and the Escrow Agent shall have executed and delivered the Escrow
      Agreement, substantially in the form of Exhibit A hereto.

     

    (e) Paying
      Agent Agreement.
      The
      Parent and the Paying Agent shall have executed and delivered a Paying Agent
      Agreement, on reasonable and customary terms, consistent with the terms and
      conditions described in this Agreement and in the Escrow Agreement, and
      otherwise on terms reasonably acceptable to both the Parent and the
      Stockholders’ Representative, including,
      without limitation, a provision that the Parent and the Stockholders will share
      equally the fees and expenses of such Paying Agent payable under the
      Agreement.

     

    (f) Israeli
      Withholding Tax Ruling.
      The
      Stockholders shall have received the Israeli Withholding Tax Ruling, satisfying
      all of the conditions described in Section 5.07 hereof; provided, however,
      this
      condition shall be deemed to be satisfied even if such ruling does not satisfy
      the requirements specified in clauses (i) or (ii) of the last sentence of
      Section 5.07 hereof; provided, that such ruling (A) satisfies all of the other
      conditions described in Section 5.07 and (B) has been offered by the ITA on
      terms and subject to conditions which are customary and standard under the
      circumstances.

     

    (g) Israeli
      Escrow Tax Ruling.
      The
      Stockholders shall have received the Israeli Escrow Tax Ruling, satisfying
      all
      of the conditions described in Section 5.07 hereof; provided, however, this
      condition shall be deemed to be satisfied even if such ruling does not satisfy
      the requirements specified in clauses (i) or (ii) of the last sentence of
      Section 5.07 hereof; provided, that such ruling (A) satisfies all of the other
      conditions described in Section 5.07 and (B) has been offered by the ITA on
      terms and subject to conditions which are customary and standard under the
      circumstances.

     

    VIII.

     

    INDEMNIFICATION

     

    SECTION
      8.01. Survival
      of Representations and Warranties.
      The
      representations and warranties set forth in Articles III and IV will survive
      until the 18-month anniversary of the Closing Date. This Section 8.01 shall
      not
      limit any covenants or agreements of the parties hereto that by their terms
      contemplate performance after the Closing Date. 

     

    
      
        
        

      

      
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    SECTION
      8.02. [Reserved.] 

     

    SECTION
      8.03. General
      Indemnity.

     

    (a) Subject
      to the terms and conditions of this Article VIII and of the last sentence of
      this Section 8.03(a), the Stockholders agree to and will indemnify, defend
      and
      hold the Parent, the Company and the Company Subsidiary, and their respective
      officers, directors, advisors, Affiliates, agents, employees and each Person,
      if
      any, who controls or may control the Parent within the meaning of the Securities
      Act (the “Parent
      Indemnified Group”)
      harmless from and against all demands or claims, actions or causes of action,
      assessments, losses, damages, liabilities, costs and expenses, including,
      without limitation, Taxes, interest, penalties, and reasonable fees and expenses
      of attorneys, accountants or consultants (hereinafter collectively called
“Damages”),
      asserted against, resulting to, imposed upon or incurred by the
      Company,
      the
      Company Subsidiary
      or the
      Parent, by reason of, resulting from or arising out of:

     

    (i) a
      breach
      of any representation or warranty of the Company, the Company Subsidiary or
      any
      Stockholder contained in or made pursuant to this Agreement, or any facts or
      circumstances constituting such a breach; 

     

    (ii) any
      breach of any covenant or agreement of the Company, the Company Subsidiary
      or
      any Stockholder contained in or made pursuant to this Agreement or the Escrow
      Agreement;

     

    (iii) any
      Taxes, including without limitation, any Taxes described in Section 5.06(b),
      but
      not including any U.S. Withholding Liability, for any Taxable period (or portion
      thereof) ending on or before the Closing Date due and payable by the Company
      or
      the Company Subsidiary, in each case only to the extent such Taxes are not
      reflected in the reserve for Tax liability (rather than any reserve for deferred
      Taxes established to reflect timing differences between book and Tax income)
      on
      the Final Closing Balance Sheet (as finally determined); 

     

    (iv) any
      U.S.
      Withholding Liability; and

     

    (v) any
      liability incurred by members of the Parent Indemnified Group due to making
      the
      bonus payments described in Section 2.05(a)(ii) and in the paragraph following
      Section 2.05(a)(ii) of this Agreement, whether such liability derives from
      the
      recipients of such bonuses or from other Persons.

     

    In
      addition, all fees and expenses of attorneys, accountants or consultants
      relating to the resolution of the U.S. Withholding Liability shall be reimbursed
      in accordance with the provisions of Section 3(l) of the Escrow Agreement.
      For
      the avoidance of doubt, the threshold set forth in Section 8.05 shall not apply
      to reimbursements under Section 3(l) of the Escrow Agreement. 

     

    
      
        
        

      

      
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    Subject
      to the terms and conditions of this Article VIII, the Parent agrees to and
      will
      indemnify, defend and hold the Company (prior to the Closing Date) and the
      Stockholders (following the Closing Date) harmless from and against all Damages
      asserted against, resulting to, imposed upon or incurred by them by reason
      of or
      resulting from or arising out of (i) a breach of any representation or warranty
      of the Parent contained in or made pursuant to this Agreement, or any facts
      or
      circumstances constituting such a breach, or (ii) any breach of any covenant
      or
      agreement of the Parent contained in or made pursuant to this Agreement or
      the
      Escrow Agreement.

     

    SECTION
      8.04. Conditions
      of Indemnification.
      Except
      with respect to any claim for Taxes which shall be governed by Section 5.06,
      the
      respective obligations and liabilities of the Stockholders, on the one hand,
      and
      the Parent, on the other hand (herein sometimes called the “indemnifying
      party”),
      to
      the other (herein sometimes called the “party
      to be indemnified”
or
      the
“indemnified
      party”)
      with
      respect to claims resulting from the assertion of liability by third parties
      shall be subject to the following terms and conditions:

     

    (a) within
      30
      days after receipt of notice of commencement of any action or the assertion
      of
      any claim by a third party, the party to be indemnified shall give the
      indemnifying party written notice thereof together with a copy of such claim,
      process or other legal pleading (provided that failure so to notify the
      indemnifying party of the assertion of a claim within such period shall not
      affect its indemnity obligation hereunder except as and to the extent that
      such
      failure shall adversely affect the defense of such claim), and the indemnifying
      party shall have the right to undertake the defense thereof by representatives
      of its own choosing; 

     

    (b) in
      the
      event that the indemnifying party, by the 30th
      day
      after receipt of notice of any such claim (or, if earlier, by the tenth day
      preceding the day on which an answer or other pleading must be served in order
      to prevent judgment by default in favor of the Person asserting such claim),
      does not elect to defend against such claim, the party to be indemnified will
      (upon further notice to the indemnifying party) have the right to undertake
      the
      defense, compromise or settlement of such claim on behalf of and for the account
      and risk of the indemnifying party, subject to the right of the indemnifying
      party to assume the defense of such claim at any time prior to settlement,
      compromise or final determination thereof;

     

    (c) anything
      in this Section 8.04 to the contrary notwithstanding, (i) if there is a
      reasonable probability that a claim may materially and adversely affect the
      indemnified party other than as a result of money damages or other money
      payments, the indemnified party shall have the right, at its own cost and
      expense, to compromise or settle such claim, but (ii) the indemnified party
      shall not, without the prior written consent of the indemnifying party, settle
      or compromise any claim or consent to the entry of any judgment which does
      not
      include as an unconditional term thereof the giving by the claimant or the
      plaintiff to the indemnifying party a release from all liability in respect
      of
      such claim; 

     

    (d) any
      rights of the indemnified party under this Article VIII based on the breach
      of a
      representation, warranty or covenant or based on the failure of such
      representation or warranty to be true as of the date hereof or the Closing
      Date
      shall not be diminished or otherwise affected in any way as a result of the
      existence of such indemnified party’s Knowledge of such breach or untruth as of
      the date hereof or as of the Closing Date, regardless of whether such Knowledge
      exists as a result of the indemnified party’s investigation or as a result of
      disclosure by the Company (or any other Person), unless such disclosures were
      set forth in this Agreement or in any applicable schedules hereto;
      and

     

    
      
        
        

      

      
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    (e) in
      connection with any such indemnification, the indemnified party will cooperate
      in all reasonable requests of the indemnifying party.

     

    In
      the
      event that the “indemnifying party” or the “party to be indemnified” as
      described in this Section 8.04 is the Stockholders as a group, then any notices
      required to be given to or by, and all other actions or decisions required
      to be
      taken or made by, such “indemnifying party” or the “party to be indemnified” as
      provided in this Section 8.04, may be given to or by, or may be taken or made
      by, the Stockholders’ Representative.

     

    SECTION
      8.05. Threshold
      for Damages.
      Except
in
      the
      case of Damages in respect of fraud, and the indemnities set forth in Section
      8.03(a)(iii) or 8.03(a)(iv),
      an
      Indemnified Person may not make a claim for Damages until the aggregate amount
      of claims by Indemnified Persons exceeds $100,000; provided,
      however,
      that
      once the aggregate amount of Damages of Indemnified Persons exceed such
      threshold amount, then the Indemnified Persons shall have the right to recover
      the full amounts due without regard to the threshold. In determining the amount
      of any Damage attributable to a breach, any materiality standard contained
      in a
      representation, warranty or covenant of the Stockholders or the Company shall
      be
      disregarded.

     

    SECTION
      8.06. Escrow
      Funds. 
      On the
      Closing Date, the Parent shall deliver to the Escrow Agent the Cash
      Escrow Amount and the Stock Escrow
      Amount.
      The Cash Escrow Amount and the Stock Escrow Amount shall be held by the Escrow
      Agent in separate accounts under the Escrow Agreement pursuant to the terms
      set
      forth therein. The Cash Escrow Amount shall be available solely to satisfy
      the
      indemnification obligations of the Company pursuant to Sections 8.03(a)(iii)
      and
      (iv) and to cover amounts (if any) owing to Parent pursuant to the provisions
      of
      Section 2.13(c) hereof. The Stock Escrow Amount shall be available solely to
      satisfy the indemnification obligations of the Company pursuant to Sections
      8.03(a)(i), (ii) and (iii); provided, however, that to the extent the Cash
      Escrow Amount is insufficient or unavailable to satisfy the obligations to
      which
      the Cash Escrow relates, the Parent may seek to recover any remaining Damages
      from the Stock Escrow Amount (it being understood that the Cash Escrow Account
      shall not be available to satisfy the obligations to which the Stock Escrow
      relates). Notwithstanding anything to the contrary in this Agreement or in
      any
      Transaction Document, except
      in
      the case of
      fraud,
      criminal activity, intentional misrepresentation or intentional misconduct,
      the
      parties hereby understand and agree that Parent’s sole recourse to obtain
      satisfaction of any indemnity claim made under this Article VIII shall be by
      way
      of set-off against the Cash Escrow Amount and/or the Stock Escrow Amount, as
      applicable, pursuant to the provisions of this Article VIII and the Escrow
      Agreement.

     

    SECTION
      8.07. Exclusive
      Remedy.
      Except
      in the case of fraud, criminal activity, intentional misrepresentation or
      intentional misconduct, the sole and exclusive monetary remedy for any breach
      or
      alleged breach of any representation, warranty, covenant or agreement in this
      Agreement or any Transaction Document shall be indemnification in accordance
      with this Article VIII. Except as set forth above, and in furtherance of the
      foregoing, each party hereby waives, to the fullest extent permitted by
      applicable Law, any and all other rights, claims and causes of action (including
      rights of contribution, if any) known or unknown, foreseen or unforeseen, which
      exist or may arise in the future, that it may have against the Stockholders
      or
      the Parent, as the case may be, arising under or based upon any federal, state
      or local Law.

     

    
      
        
        

      

      
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    IX.

     

    TERMINATION
      AND ABANDONMENT

     

    SECTION
      9.01. Termination.
      This
      Agreement may be terminated at any time prior to the Closing or on the Closing
      Date:

     

    (a) by
      the
      mutual consent of the Company and the Parent; 

     

    (b) by
      the
      Parent, on the one hand, or the Company, on the other hand, if the Closing
      shall
      not have occurred on or before September 30, 2007, or such later date as may
      be
      agreed upon by the parties hereto, provided,
      however,
      that (X)
      if the only closing conditions that have not been satisfied are the receipt
      of
      the Israeli Withholding Tax Ruling and/or the Israeli Escrow Tax Ruling, then
      this date shall be extended to October 31, 2007, and (Y) the right to terminate
      this Agreement under this clause (b) shall not be available to any party (a
      “Defaulting
      Party”)
      whose
      failure to fulfill any obligation under this Agreement has been the cause of,
      or
      resulted in the failure of the Closing to occur on or before such
      date;

     

    (c) by
      the
      Parent, upon a breach of any representation, warranty, covenant or agreement
      on
      the part of the Company or any Stockholder set forth in this Agreement, or
      if
      any representation or warranty of the Company shall have become untrue,
      incomplete or incorrect, in either case such that the conditions set forth
      in
      Section 7.02 would not be satisfied (a “Terminating
      Company Breach”);
      provided,
      however,
      that if
      such Terminating Company Breach is curable by the Company through the exercise
      of its reasonable efforts within twenty (20) days and for so long as the Company
      continues to exercise such reasonable efforts, the Parent may not terminate
      this
      Agreement under this Section 9.01(c);

     

    (d) by
      the
      Company or the Stockholders, upon breach of any representation, warranty,
      covenant or agreement on the part of the Parent set forth in this Agreement,
      or
      if any representation or warranty of the Parent shall have become untrue,
      incomplete or incorrect, in either case such that the conditions set forth
      in
      Section 7.03 would not be satisfied (a “Terminating
      Parent Breach”);
      provided,
      however,
      that if
      such Terminating Parent Breach is curable by the Parent through the exercise
      of
      its reasonable efforts within twenty (20) days and for so long as the Parent
      continues to exercise such reasonable efforts, the Company may not terminate
      this Agreement under this Section 9.01(d); or

     

    (e) by
      either
      the Parent, on the one hand, or the Company, on the other hand, by written
      notice to such other Party(ies) if the
      Trailing Closing Average Price is
      less
      than $4.00, and the parties are not able to reach an agreement as to the number
      of shares that will comprise the Stock Merger Consideration within seven
      calendar days of the day that would have been the Closing Date if this provision
      had not been triggered.

     

    
      
        
        

      

      
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    (f) by
      Parent, if the Required Stockholder Consent is not obtained within an hour
      of
      execution of this Agreement.

     

    If
      the
      Closing shall not have occurred, or this Agreement shall not have been
      terminated in accordance with this Section 9.01, by December 31, 2007, this
      Agreement shall automatically terminate on said date, provided,
      however,
      that
      such termination shall not affect the liability hereunder of any Defaulting
      Party.

     

    SECTION
      9.02. Procedure
      and Effect of Termination.
      In the
      event of termination of this Agreement and abandonment of the transactions
      contemplated hereby by any or all of the parties pursuant to Section 9.01 above,
      written notice thereof shall forthwith be given to the other parties to this
      Agreement (other than in the event of an automatic termination as provided
      in
      such Section) and this Agreement (except for this Section and Sections 9.01
      and
      10.01, which shall continue) shall terminate and the transactions contemplated
      hereby shall be abandoned, without further action by any of the parties hereto.
      If this Agreement is terminated as provided in this Agreement:

     

    (a) the
      parties hereto will promptly redeliver all documents, work papers and other
      material of any other party relating to the transactions contemplated hereby,
      whether obtained before or after the execution hereof, to the party furnishing
      the same; and

     

    (b) no
      party
      shall have any liability or further obligation to any other party to this
      Agreement pursuant to this Agreement except as provided in this Article
      IX.

     

    X.

     

    MISCELLANEOUS

     

    SECTION
      10.01. Expenses,
      Etc.

     

    (a) All
      Expenses shall be paid by the party incurring such Expenses.

     

    (b) The
      Stockholders, on the one hand, and the Parent, on the other hand, will indemnify
      the other and hold it or them harmless from and against any claims for finders’
fees or brokerage commissions in relation to or in connection with this
      Agreement as a result of any agreement or understanding between such
      indemnifying party and any third party.

     

    SECTION
      10.02. Notices.
      All
      notices which are required or may be given pursuant to the terms of this
      Agreement shall be in writing and shall be sufficient and deemed to be received
      if (i) on the date of delivery, if delivered personally, (ii) 3 days after
      mailing, if mailed by registered or certified mail, return receipt requested
      and
      postage prepaid, (iii) the day after mailing, if sent via a nationally
      recognized overnight courier service or (iv) the day after transmission, if
      sent
      via facsimile or e-mail confirmed in writing to the recipient, in each case
      as
      follows:

     

    
      
        
        

      

      
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    if
      to the
      Parent, to:

     

    LivePerson,
      Inc.

    462
      Seventh Avenue, 3rd
      Floor

    New
      York,
      New York 10018

    Attention:
      Timothy E. Bixby

    Telephone:
      (212) 609-4210 

    
      	 	 	
              Facsimile:
                (212) 695-2105

            

    

    E-mail:
      bixby@liveperson.com

    

    with
      a
      copy (which shall not constitute notice) to:

     

    Wilmer
      Cutler Pickering Hale and Dorr LLP

    399
      Park
      Avenue

    New
      York,
      New York 10022

    Attention:
      Brian B. Margolis, Esq.

    
      	 	 	
              Telephone:
                (212) 230-8800

            

    

    
      	 	 	
              Facsimile:
                (212) 230-8888

            

    

    E-mail:
      brian.margolis@wilmerhale.com

     

     

    and
      a
      copy (which shall not constitute notice) to:

     

    Yigal
      Arnon & Co.

    22
      Rivlin
      Street

    Jerusalem
      94263 Israel

    Attention:
      Barry Levenfeld, Adv.

    Telephone:
      011-972-2-623-9220 

    Facsimile:
      011-972-2-623-9236

    E-mail:
      barry@arnon.co.il

     

    if
      to the
      Company, to:

     

    Kasamba,
      Inc.

    4
      Hachilazon Street

    Ramat
      Gan, 52522

    Israel

    Attention:
      Shmuel Huppert, Chief Financial Officer

    Telephone:
      011-972-3-613-4710 (x.134)

    Facsimile:
      011-972-3-613-4710

    E-mail:
      shmuelh@kasamba.com

    

    
      
        
        

      

      
        69

        
          

        

      

      
        
        

      

    

    with
      a
      copy (which shall not constitute notice) to:

    

    Goldfarb,
      Levy, Eran, Meiri & Co., Law Offices

    2
      Weizmann Street

    Tel
      Aviv,
      64236

    Israel

    Attention:
      Michael A. Heller, Esq.

    Telephone:
      011-972-3-608-9948 

    Facsimile:
      011-972-3-521-2218

    E-mail:
      michael.heller@goldfarb.com

     

    if
      to any
      Stockholder, to the Stockholder c/o the Stockholders’
Representative:

     

    Yoav
      Leibovich

    8th
      Kalisher St. 

    Rehovot
      76302

    Israel

    Telephone:
      011-972-54-7777399

    Facsimile:
      011-972-8-9363534

    E-mail:
      yoav@gilat.com

     

    or
      such
      other address or addresses as any party shall have designated by notice in
      writing to the other parties.

     

    SECTION
      10.03. Waivers.
      Either
      the Stockholders’ Representative, on the one hand, or the Parent, on the other
      hand, may, by written notice to the other, (i) extend the time for the
      performance of any of the obligations or other actions of the other under this
      Agreement, (ii) waive any inaccuracies in the representations or warranties
      of
      the other contained in this Agreement or in any document delivered pursuant
      to
      this Agreement, (iii) waive compliance with any of the conditions or covenants
      of the other contained in this Agreement, or (iv) waive performance of any
      of
      the obligations of the other under this Agreement. Except as provided in the
      preceding sentence, no action taken pursuant to this Agreement, including,
      without limitation, any investigation by or on behalf of any party, shall be
      deemed to constitute a waiver by the party taking such action of compliance
      with
      any representations, warranties, covenants or agreements contained in this
      Agreement. The waiver by any party hereto of a breach of any provision of this
      Agreement shall not operate or be construed as a waiver of any subsequent
      breach.

     

    SECTION
      10.04. Amendments,
      Supplements, Etc.
      At any
      time this Agreement may be amended or supplemented by such additional
      agreements, articles or certificates, as may be determined by the parties hereto
      to be necessary, desirable or expedient to further the purposes of this
      Agreement, or to clarify the intention of the parties hereto, or to add to
      or
      modify the covenants, terms or conditions hereof or to effect or facilitate
      any
      governmental approval or acceptance of this Agreement or to effect or facilitate
      the filing or recording of this Agreement or the consummation of any of the
      transactions contemplated hereby. Any such instrument must be in writing and
      signed by the Parent, the Company and the Stockholders’
Representative.

     

    
      
        
        

      

      
        70

        
          

        

      

      
        
        

      

    

    SECTION
      10.05. Governing
      Law; Submission to Jurisdiction.
      This
      Agreement shall be governed by, and construed and enforced in accordance with,
      the laws of the State of New York other than conflict of laws principles thereof
      directing the application of any law other than that of New York. Courts within
      the State of New York, County of New York or the United States District Court
      for the Southern District of New York will have jurisdiction over all disputes
      between the parties hereto arising out of or relating to this Agreement and
      the
      agreements, instruments and documents contemplated hereby. The parties hereby
      consent to and agree to submit to the jurisdiction of such courts. Each of
      the
      parties hereto waives, and agrees not to assert in any such dispute, to the
      fullest extent permitted by applicable law, any claim that (i) such party
      is not personally subject to the jurisdiction of such courts, (ii) such
      party and such party’s property is immune from any legal process issued by such
      courts or (iii) any litigation commenced in such courts is brought in an
      inconvenient forum.

     

    SECTION
      10.06. Waiver
      of Jury Trial.
      Each
      party hereto hereby irrevocably waives all right to trial by jury in any
      proceeding (whether based on contract, tort or otherwise) arising out of or
      relating to this Agreement or any transaction or agreement contemplated hereby
      or the actions of any party hereto in the negotiation, administration,
      performance or enforcement hereof.

     

    SECTION
      10.07. Headings;
      Interpretation.
      The
      descriptive headings contained in this Agreement are included for convenience
      of
      reference only and shall not affect in any way the meaning or interpretation
      of
      this Agreement. The parties have participated jointly in the negotiation and
      drafting of this Agreement. In the event an ambiguity or question of intent
      or
      interpretation arises, this Agreement shall be construed as if drafted jointly
      by the parties, and no presumption or burden of proof shall arise favoring
      or
      disfavoring any party by virtue of the authorship of any provisions of this
      Agreement.

     

    SECTION
      10.08. Counterparts.
      This
      Agreement may be executed and delivered (including by facsimile transmission)
      in
      one or more counterparts, and by the different parties hereto in separate
      counterparts, each of which when executed and delivered shall be deemed to
      be an
      original but all of which taken together shall constitute one and the same
      agreement.

     

    SECTION
      10.09. Entire
      Agreement.
      This
      Agreement (including the Exhibits and the Company Disclosure Schedule), the
      Transaction Documents and the Confidentiality Agreement constitute the entire
      agreement among the parties with respect to the subject matter hereof and
      supersede all prior agreements and understandings among the parties with respect
      thereto. No addition to or modification of any provision of this Agreement
      shall
      be binding upon any party hereto unless made in writing and signed by all
      parties hereto.

     

    SECTION
      10.10. Binding
      Effect; Benefits.
      This
      Agreement shall inure to the benefit of and be binding upon the parties hereto
      and their respective successors and permitted assigns. Notwithstanding anything
      contained in this Agreement to the contrary, nothing in this Agreement,
      expressed or implied, is intended to confer on any Person other than the parties
      hereto or their respective successors and assigns, any rights, remedies,
      obligations or liabilities under or by reason of this Agreement.

     

    
      
        
        

      

      
        71

        
          

        

      

      
        
        

      

    

    SECTION
      10.11. Assignability.
      Neither
      this Agreement nor any of the parties’ rights hereunder shall be assignable by
      any party hereto without the prior written consent of the other parties hereto,
      except (i) in the case of the Parent, to any Person who shall acquire
      substantially all of the assets of the Parent or a majority of the voting
      securities of the Parent, whether pursuant to a merger, consolidation, sale
      of
      stock or otherwise, and (ii) in the case of an individual Stockholder, in
      accordance with Section 6.03 or to the estate of such Stockholder upon
      death.

     

    SECTION
      10.12. Severability.
      If any
      term or other provision of this Agreement is invalid, illegal, or incapable
      of
      being enforced by any law or public policy, all other terms or provisions of
      this Agreement shall nevertheless remain in full force and effect so long as
      the
      economic or legal substance of the transactions contemplated hereby is not
      affected in any manner materially adverse to any party. Upon such determination
      that any term or other provision is invalid, illegal, or incapable of being
      enforced, the parties hereto shall negotiate in good faith to modify this
      Agreement so as to effect the original intent of the parties as closely as
      possible in an acceptable manner in order that the transactions contemplated
      hereby are consummated as originally contemplated to the greatest extent
      possible.

     

    

     

    [Remainder
      of page intentionally blank]

    
      
        
        

      

      
        72

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF, this Agreement has been duly executed and delivered by the
      parties hereto as of the day and year first above written.

     

    
      	 	
              LIVEPERSON,
                INC.

            
	 	 
	 	 
	 	
              By:

            	
              /s/
                Robert LoCascio

            
	 	 	
              Name:
                Robert LoCascio

            
	 	 	
              Title:
                Chairman and Chief Executive Officer

            
	 	 
	 	 
	 	
              KATO
                MERGERCO, INC. 

            
	 	 
	 	 
	 	
              By:

            	
              /s/
                Timothy Bixby

            
	 	 	
              Name:
                Timothy Bixby

            
	 	 	
              Title:
                Director

            
	 	 	 
	 	 	 
	 	
              KASAMBA,
                INC. 

            
	 	 
	 	 	 
	 	
              By:

            	
              /s/
                Arthur Fuhrer

            
	 	 	
              Name:
                Arthur Fuhrer

            
	 	 	
              Title:
                President

            
	 	 
	 	 

    

    
      	 	
              STOCKHOLDERS’
                REPRESENTATIVE

            
	 	 
	 	 
	 	
              By:

            	
              /s/
                Yoav Leibovich

            
	 	 	
              Name:
                Yoav Leibovich

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