Document:

AGREEMENT

AMENDMENT TO MANUFACTURING AGREEMENT

This Amendment to Manufacturing Agreement (this "Agreement") is made as of March 29, 2002 (the "Effective Date") by and between Flextronics Malaysia SDN BHD (the "Supplier") and Com21, Inc. (the "Customer").

R E C I T A L S

The Supplier and the Customer are parties to an Manufacturing Services Contract, dated March 22, 2000 (the "Manufacturing Agreement"), and have agreed to modify certain terms of the Manufacturing Agreement as set forth specifically in this Agreement.

NOW THEREFORE, for valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows:

1.Excess Products and Excess Materials.

1.1Payments to the Supplier.  The Customer acknowledges and agrees that any materials acquired by the Supplier to support purchase orders and forecasts under the Manufacturing Agreement (the "Excess Materials") or which have been ordered by the Supplier to support such Orders and Forecasts (each, an "Excess Purchase Commitment"), have been rendered obsolete and/or surplus as of the Effective Date and the Customer agrees to pay the Supplier the actual cost of the Excess Materials and the actual value of the Excess Purchase Commitments (together, the "Material Exposure Amount") in the manner provided in Section 3 of this Agreement.  

1.2Delivery to Customer.  The Supplier shall deliver the Excess Materials to Customer as soon as practicable after the Effective Date.

2.Outstanding Accounts Payable.

2.1From the Supplier to the Customer.  The Supplier and the Customer agree that at the Effective Date the Supplier owes the Customer $212,668.31 (the "Supplier's Accounts Payable") as payment in respect of Materials purchased by the Supplier from the Customer in connection with the Manufacturing Agreement.  The parties agree that the Supplier shall pay the Supplier's Accounts Payable to the Customer in the manner provided in Section 3 of this Agreement.

2.2From the Customer to the Supplier. The Customer and the Supplier hereby agree that at the Effective Date the Customer owes the Supplier $1,956,039.30 as payment in respect of Products and Services provided by the Supplier under the Manufacturing Agreement (the "Customer's Accounts Payable Amount").  The parties agree that the Customer shall pay the Customer's Accounts Payable Amount to the Customer in the manner provided in Section 3 of this Agreement.

3.Manner of Payment.

3.1Promissory Note.  Simultaneously with the execution and delivery of this Agreement, the Customer is delivering to the Supplier (a) a duly executed promissory note (the "Note") substantially in the form of Exhibit A, dated the Effective Date and in a principal amount equal to $2,517,570.60 (the "Note Amount") which amount consists of: (i) $774,199.61, the Material Exposure Amount; plus (ii) the Customer's Accounts Payable Amount; minus (iii) the Supplier's Accounts Payable.

3.2Warrant.  Simultaneously with the execution and delivery of this Agreement, the Customer shall issue and deliver to Flextronics International Ltd. a warrant to purchase 150,000 shares of the Customer's common stock, par value $.001 per share, substantially in the form of Exhibit B (the "Warrant"), and which incorporates registration rights as mutually determined by the parties.

3.3Full Satisfaction. The Supplier acknowledges and agrees that the delivery by the Customer of the Note and the Warrant shall be in full satisfaction of all of the Customer's obligations under the Manufacturing Agreement as of the Effective Date. The Customer acknowledges and agrees that the deduction of the Supplier's Accounts Payable from the Note Amount (as provided in Section 3.1 of this Agreement) shall be in full satisfaction of the Supplier's obligation to pay the Supplier's Accounts Payable to the Customer.

4.Condition to Effectiveness.  It shall be a condition to the effectiveness of this Agreement that the Customer shall have delivered the Note and the Warrant to the Supplier simultaneously with its execution and delivery of this Agreement.

5.Miscellaneous.

5.1Severability.  If any provision or any part thereof contained in this Agreement is for any reason held to be invalid or unenforceable in any respect under the laws of any jurisdiction where enforcement is sought, such invalidity or unenforceability will not affect any other provision of this Agreement and this Agreement will be construed as if such invalid or unenforceable provision or part thereof had not been contained therein.

5.2Variations.  No purported variation or amendment of this Agreement will be valid unless made or confirmed in writing by a duly authorized representative of each party.

5.3Effect on Manufacturing Agreement.  The Manufacturing Agreement is hereby amended, but solely to the extent that any provision of this Agreement is inconsistent with the provisions of the Manufacturing Agreement.  Except as specifically amended by this Agreement, the Manufacturing Agreement remains unchanged and continues in full force and effect.

5.4Waiver.  The waiver of any term, condition or provision of this Agreement must be in writing and signed by an authorized representative of the waiving party.  Any such waiver will not be construed as a waiver of any other term, condition or provision except as provided in writing, nor a waiver of any subsequent breach of the same term, condition or provision.

5.5Assignment.  Neither party may assign this Agreement or any part thereof without the written consent of the other.

5.6Headings.  The headings in this Agreement are inserted for convenience only and do not constitute a part of any Contract nor are they to be referred to in its interpretation.

5.7Governing Law.  This Agreement and all transactions under it will be governed by the laws of the State of California exclusive of any provisions of the United Nations Convention on the International Sale of Goods and without regard to principles of conflict of laws.  The parties submit to the jurisdiction of the courts of Santa Clara County, California.  The parties hereto expressly waive any right they may have to a jury trial and agree that any proceedings under this Agreement shall be tried by a judge without a jury.

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

FLEXTRONICS MALAYSIA SDN BHD

 

By: ______________________________

Name:

Title:

 

COM21, INC.

 

 

By: ______________________________

Name:

Title:

 

 EXHIBIT A

Note

See attached.

 

 

EXHIBIT B

Warrant 

See attached.

 

 

COM21, INC.

(a Delaware corporation)

Amount: $2,517,570.60March 29, 2002

UNSECURED SUBORDINATED PROMISSORY NOTE

WHEREAS, Com21, Inc., a Delaware corporation ("Borrower"), previously entered into a Manufacturing Agreement by and between Flextronics Malaysia SDN BHD ("Lender")  and Borrower, dated as of March 22, 2000 (the "Manufacturing Agreement").

WHEREAS, Borrow and Lender desire to amend the Manufacturing Agreement with an Agreement, by and between Borrower and Lender, dated as of even date herewith (the "Amendment to Manufacturing Agreement").

WHEREAS, in order to induce Borrower and Lender to enter into the Amendment to Manufacturing Agreement, Borrower and Lender hereby agree to execute this Note and a Warrant to Purchase Common Stock of even date herewith (the "Warrant"). 

NOW, THEREFORE, in consideration of the mutual promises and covenants set forth hereinafter and in the Amendment to Manufacturing Agreement, all parties hereto agree as follows:

Principal Amount.  For value received Borrower promises to pay to the order of Lender the principal sum of two million five hundred and seventeen thousand five hundred and seventy and 60/100 Dollars ($2,517,570.60) (the "Principal Amount").

Interest Rate.   The interest rate shall accrue as simple interest on the outstanding Principal Amount at the rate of eight percent (8%) per annum, compounded monthly, with respect to the amount of the unpaid principal and interest of the Note.  

Payment.  Outstanding principal amount and accrued interest shall be due and payable in accordance with the payment schedule attached hereto as Schedule A. 

The principal amount of this Note and accrued interest thereon may be prepaid in whole or in part at any time without penalty.  All computations of interest shall be made on the basis of a year of 365 days, or 366 days, as the case may be for the actual number of days (including the first day but excluding the last day) occurring in the period for which such interest is payable.

Anything herein to the contrary notwithstanding, if during any period for which interest is computed hereunder, the amount of interest computed on the basis provided for in this Note, together with all fees, charges and other payments which are treated as interest under applicable law, as provided for herein or in any other document executed in connection herewith, would exceed the amount of such interest computed on the basis of the Highest Lawful Rate (as defined herein), Borrower shall not be obligated to pay, and Lender shall not be entitled to charge, collect, receive, reserve or take, interest in excess of the Highest Lawful Rate, and during any such period the interest payable hereunder shall be computed on the basis of the Highest Lawful Rate.  As used herein, "Highest Lawful Rate" means the maximum non-usurious rate of interest, as in effect from time to time, which may be charged, contracted for, reserved, received or collected by Lender in connection with this Note under applicable law.

All payments hereunder shall be in lawful money of the United States of America at the principal office of the Lender at its address set forth in Section 13, or at such other place as the Lender hereof may from time to time designate in writing to the Borrower, not later than 5:00 p.m. Pacific Standard Time on the due date of the payment as long as such due date is on a Business Day.  A "Business Day" means a day (i) other than Saturday or Sunday, and (ii) on which banks are not required or authorized to close in New York City.  If a payment due date does not fall on a Business Day, then such payment due date shall be the next succeeding Business Day which follows such payment due date.  

Unsecured Note.  This Note is not secured.

	Subordinated Note.  The Lender agrees that all payments on account of the principal and interest indebtedness under this Note (the "Subordinated Indebtedness") shall be subordinate and subject in right of payment, to the extent and in the manner set forth herein, to the prior payment in full in cash or cash equivalents of Senior Indebtedness.  As used herein, "Senior Indebtedness" shall mean any indebtedness, liabilities and other obligations of the Borrower (whether as primary obligor or as guarantor) to any person (each a "Senior Lender") with respect to any working capital, revolving credit or other line of credit facility, any term loan facility, or any other extension of credit by a bank, insurance company or financial institution engaged in the business of lending money, but in each case only to the extent such indebtedness, liability or obligation is secured.  The terms "indebtedness," "liabilities" and "obligations" are used herein in their most comprehensive sense and include any and all advances, debts, obligations and liabilities, now existing or hereafter arising, whether voluntary or involuntary and whether due or not due, absolute or contingent, liquidated or unliquidated, determined or undetermined.

	No Voting Rights.  This Note shall not entitle the Lender to any voting rights or other rights as a stockholder of the Borrower.

	Amendment; Waiver.  Any amendment hereto or waiver of any provision hereof may be made only with the written consent of the Borrower and the Lender.  This Note shall inure to the benefit of and bind the successors, permitted assigns, heirs, executors, and administrators of the parties hereto, provided that this Note shall not be transferable or assignable by Lender without the prior written consent of Borrower.

	Events of Default.  

(a) This Note shall become immediately due and payable upon the occurrence of an Event of Default, whereupon the Note and all such interest shall become and be immediately due and payable, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by Borrower.  For purposes hereof, the occurrence of any of the following shall constitute an "Event of Default" under this Note:

(i) the failure to make any payment of principal or any other amount payable hereunder when due under this Note or the breach of any other condition or obligation under this Note, and the continuation of such failure or breach for thirty (30) days; or

(ii) the filing of a petition by or against the Borrower under any provision of applicable bankruptcy or similar law; or appointment of a receiver, trustee, custodian or liquidator of or for all or any part of the assets or property of the Borrower; or the insolvency of the Borrower; or the making of a general assignment for the benefit of creditors by the Borrower.

 (b)If any Event of Default shall occur, the Lender may (i) by notice to the Borrower, declare the entire unpaid principal amount of this Note, all interest accrued  as of the effective date of the Event of Default and all other amounts payable hereunder to be forthwith due and payable, whereupon all unpaid principal under this Note, all such accrued interest and all such other amounts shall become and be forthwith due and payable, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by the Borrower.

	Governing Law.  This Note is made in accordance with and shall be construed under the laws of the State of California, other than the conflicts of law principles thereof.

	Replacement of Lost, Destroyed, Etc. Note.  The Borrower covenants to the Lender that upon receipt of evidence reasonably satisfactory to the Borrower of the loss, theft, destruction, or mutilation of this Note and, in the case of any such loss, theft or destruction, upon receipt of an indemnity reasonably satisfactory to the Borrower, or in the case of any such mutilation upon surrender and cancellation of such Note, the Borrower will make and deliver a new Note, or like tenor, in lieu of the lost, stolen, destroyed or mutilated Note.

	Waiver.  The Borrower hereby expressly waives presentment, demand for payment, dishonor, notice of dishonor, protest, notice of protest and any other formality.

	Notices. All notices and other communications provided for hereunder shall, unless otherwise stated herein, be in writing (including by facsimile) and mailed, sent or delivered to the respective parties hereto at or to the following addresses or facsimile numbers (or at or to such other address or facsimile number as shall be designated by any party in a written notice to the other parties hereto): 

If to the Lender:Flextronics Malaysia SDN BHD

Lot Plo 37

Kawasan Perindustrian Senai

81400 Senai

Johor, Malaysia

Attn: 

If to the Borrower:Com21, Inc.

750 Tasman Drive

Milpitas, CA  95035

Fax:  408-953-9299

Attn:  Chief Financial Officer

cc:  Corporate Counsel

All such notices and communications shall be effective (i) if delivered by hand, upon delivery; (ii) if sent by mail, upon the earlier of the date of receipt or five Business Days after deposit in the mail, first class (or air mail, with respect to communications to be sent to or from the United States), postage prepaid; and (iii) if sent by facsimile, when sent.

IN WITNESS WHEREOF, Borrower has caused this Note to be executed by its officer thereunto duly authorized, as of the date first above written.
COM21, INC.

By:

Name:  _____________________________

Title:  ______________________________

 

AGREED AND ACCEPTED:

Flextronics Malaysia SDN BHD

By:

Name:  _____________________________

Title:  ______________________________

SCHEDULE A

Payment Schedule

See attached

 

 

THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.

WARRANT TO PURCHASE 150,000 SHARES OF COMMON STOCK

of

COM21, INC.

Void after March 28, 2005

This certifies, in consideration of entering into that Amendment to Manufacturing Agreement dated March 29, 2002 by and between Com21, Inc., a Delaware corporation (the "Company") and Flextronics Malaysia SDN BHD, that Flextronics International Ltd. or its registered assigns ("Holder") is entitled, subject to the terms set forth below, to purchase from the Company 150,000 shares of the Common Stock of the Company (such shares of Common Stock, as adjusted as provided herein, the "Shares"), as constituted on the date hereof (the "Warrant Issue Date"), upon surrender hereof, at the principal office of the Company referred to below, with the Notice of Exercise attached hereto as Exhibit A duly executed, and simultaneous payment therefor in lawful money of the United States or otherwise as hereinafter provided, at the Exercise Price as set forth in Section 2 below.  The number, character and Exercise Price of such Shares are subject to adjustment as provided below.  The term "Warrant" as used herein shall include this Warrant, and any warrants delivered in substitution or exchange therefor as provided herein.

Term of Warrant.  Subject to the terms and conditions set forth herein, this Warrant shall be exercisable, in whole or in part, during the term commencing on the Warrant Issue Date and ending at 5:00 p.m., Pacific Standard Time, on March 28, 2005 (the "Expiration Date"), and shall be void thereafter.

Exercise Price.  The Exercise Price at which this Warrant may be exercised shall be $1.31 per Share, as adjusted from time to time pursuant to Section 12 hereof. 

Exercise of Warrant.

Cash Exercise.  The purchase rights represented by this Warrant are exercisable by the Holder in whole or in part; such number being subject to adjustment as provided in Section 12 below), at any time, on or prior to the Expiration Date, by the surrender of this Warrant and the Notice of Exercise duly completed and executed on behalf of the Holder, at the office of the Company (or such other office or agency of the Company as it may designate by notice in writing to the Holder at the address of the Holder appearing on the books of the Company), upon payment (i) in cash or by check acceptable to the Company, (ii) by cancellation by the Holder of indebtedness of the Company to the Holder, or (iii) by a combination of (i) and (ii), of the aggregate Exercise Price of the Shares to be purchased.

Net Exercise Election.  In lieu of exercising this Warrant by paying the Exercise Price in cash, by check or by cancellation of indebtedness, the Holder may elect, without payment of any additional consideration, to receive Shares equal to the value of this Warrant or any portion thereof by surrender of this Warrant at the principal office of the Company ("Net Exercise"), together with notice of such election, in which event the Company shall issue to the Holder such number of Shares as is computed using the following formula: 
X  =Y x (A-B)

A

Where:X =the number of Shares to be issued to Holder.
Y =the number of Shares exercised under this Warrant for which the Net Exercise election is made pursuant to this Section 3(b).

A =the Fair Market Value of one Share.

B =the then effective Exercise Price.

For purposes of this Section 3(b), "Fair Market Value" means, as to a Share, (i) the average of the closing prices of sales on all domestic securities exchanges on which the Shares may at the time be listed, or (ii) if there have been no sales on any such exchange on such day, the average of the highest bid and lowest asked prices on all such exchanges at the end of such day, or (iii) if on such day the Shares are not so listed, the average of the representative bid and ask prices quoted in the Nasdaq National Market as of 4:00 P.M., New York time, on such day, or (iv) if on any day the Shares are not quoted in the Nasdaq National Market, the average of the highest bid and lowest asked prices on such day in the domestic over-the-counter market as reported by the National Quotation Bureau, Incorporated, or any similar successor organization, in each such case averaged over the period of twenty (20) trading days immediately preceding two (2) days preceding the date of the net issue election or other exercise is made pursuant to this Section 3(b).  If at any time the Shares are not listed on any domestic securities exchange or quoted in the Nasdaq National Market or the domestic over-the counter market, the "Fair Market Value" shall be the fair value thereof determined by the Board of Directors of the Company in good faith upon the request of the Holder, and in such case, the Company will promptly respond in writing to an inquiry by the Holder as to the then Fair Market Value of the Shares.

Automatic Net Exercise on Expiration.  To the extent this Warrant is not previously exercised as to all of the Shares subject hereto, and if the Fair Market Value of a Share is greater than the Exercise Price then in effect, this Warrant shall be deemed automatically exercised pursuant to Section 3(b) above (even if not surrendered) prior to the Expiration Date.  To the extent this Warrant or any portion hereof is deemed automatically exercised pursuant to this Section 3(c), the Company shall promptly notify the Holder of the number of Shares or other securities, if any, the Holder hereof is to receive by reason of such automatic exercise.

Certificates.  This Warrant shall be deemed to have been exercised immediately prior to the close of business on the date of its surrender for exercise as provided above, and the person entitled to receive the Shares issuable upon such exercise shall be treated for all purposes as the holder of record of such Shares as of the close of business on such date. Promptly after such date and in any event within twenty (20) days thereof, the Company at its expense shall issue and deliver to the person or persons entitled to receive the same a certificate or certificates for the number of Shares issuable upon such exercise.  In the event that this Warrant is exercised in part, the Company at its expense will execute and deliver a new Warrant of like tenor exercisable for the number of Shares for which this Warrant may then be exercised.

No Fractional Shares or Scrip.  No fractional Shares or scrip representing fractional Shares shall be issued upon the exercise of this Warrant.  In lieu of any fractional Share to which the Holder would otherwise be entitled, the Company shall make a cash payment equal to the Exercise Price multiplied by such fraction, rounded up to the nearest cent. 

Replacement of Warrant.  On receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction, or mutilation of this Warrant and, in the case of loss, theft, or destruction, on delivery of an indemnity agreement reasonably satisfactory in form and substance to the Company or, in the case of mutilation, on surrender and cancellation of this Warrant, the Company at its expense shall execute and deliver, in lieu of this Warrant, a new warrant of like tenor and amount.

Rights of Stockholders.  Subject to Sections 9 and 11 of this Warrant, the Holder shall not be entitled to vote or receive dividends or be deemed the holder of Shares or any other securities of the Company that may at any time be issuable on the exercise of this Warrant for any purpose, nor shall anything contained herein be construed to confer upon the Holder, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action (whether upon any recapitalization, issuance of stock, reclassification of stock, change of par value, or change of stock to no par value, consolidation, merger, conveyance, or otherwise) or to receive notice of meetings, or to receive dividends or subscription rights or otherwise until the Warrant shall have been exercised and the Shares isssuable upon the exercise hereof shall have been issued, as provided herein.

Transfer of Warrant.

Warrant Register.  The Company will maintain a register (the "Warrant Register") containing the names and addresses of the Holder or Holders.  Any Holder of this Warrant or any portion thereof may change his address as shown on the Warrant Register by written notice to the Company of such change.  Any notice or written communication required or permitted to be given to the Holder may be delivered or given by mail to such Holder as shown on the Warrant Register and at the address shown on the Warrant Register unless the Holder has given written notice to the Company of a change of address in which case, any such notice or communication shall be delivered or given to such new address.  Until this Warrant is transferred on the Warrant Register of the Company (but in no event later than fourteen (14) days following the valid assignment or transfer of such Warrant), the Company may treat the Holder as shown on the Warrant Register as the absolute owner of this Warrant for all purposes, notwithstanding any notice to the contrary.

Transferability and Nonnegotiability of Warrant.  This Warrant may not be transferred or assigned in whole or in part without compliance with all applicable federal and state securities laws by the transferor and the transferee (including the delivery of investment representation letters, broker letters and/or legal opinions reasonably satisfactory to the Company, if such are requested by the Company).  Subject to the provisions of this Warrant with respect to compliance with the Securities Act of 1933, as amended (the "Act"), title to this Warrant, together with the rights thereunder, may be transferred by endorsement (by the Holder executing the Assignment Form annexed hereto) and delivery in the same manner as a negotiable instrument transferable by endorsement and delivery; provided, however, that this Warrant may not be transferred in part unless such transfer is to a transferee who pursuant to such transfer receives the right to purchase at least 1,000 Shares hereunder (as adjusted pursuant to Section 12 hereof).

Assignment of Warrant Upon a Transfer.  On surrender of this Warrant for exchange, properly endorsed on the Assignment Form appended hereto as Exhibit B and subject to the provisions of this Warrant with respect to compliance with the Act and with the limitations on assignments and transfers and contained in this Section 7, the Company at its expense shall issue to or on the order of the Holder a new warrant or warrants of like tenor, in the name of the Holder or as the Holder may direct, for the number of Shares issuable upon exercise thereof.

Compliance with Securities Laws.

The Holder of this Warrant, by acceptance hereof, acknowledges that this Warrant and the Shares are being acquired solely for the Holder's own account and not as a nominee for any other party, and for investment, and that the Holder will not offer, sell, or otherwise dispose of this Warrant or any Shares except under circumstances that will not result in a violation of the Act or any state securities laws.  Upon exercise of this Warrant, the Holder shall, if requested by the Company, confirm in writing, in a form satisfactory to the Company, that the shares of Common Stock so purchased are being acquired solely for the Holder's own account and not as a nominee for any other party, for investment, and not with a view toward distribution or resale.

This Warrant and all Shares issued upon exercise of this Warrant shall be stamped or imprinted with a legend in substantially the following form (in addition to any legend required by state securities laws):
THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933.  SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT.  COPIES OF THE AGREEMENT COVERING THE PURCHASE OF THESE SECURITIES AND RESTRICTING THEIR TRANSFER OR SALE MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD HEREOF TO THE SECRETARY OF THE COMPANY AT THE PRINCIPAL EXECUTIVE OFFICES OF THE COMPANY.

Reservation of Stock.  The Company covenants that until the Expiration Date, the Company shall: (a) reserve from its authorized and unissued capital stock a sufficient number of shares to provide for the issuance of the Shares upon the exercise of this Warrant, and (b) from time to time, will take all steps necessary to amend its Certificate of Incorporation (the "Certificate") to provide sufficient reserves of Shares issuable upon exercise of the Warrant.  The Company further covenants that all Shares that may be issued upon exercise of the rights represented by this Warrant and payment of the Exercise Price, all as set forth herein, will be validly issued, fully paid, non-assessable and free from all taxes, liens, and other charges in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously or otherwise specified herein).  The Company agrees that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for Shares and to distribute such other securities or property as may be issuable upon the exercise of this Warrant.

Registration Rights.

 (a)The Company shall file, as promptly as reasonably practicable and in any event within ninety (90) days of the Warrant Issue Date, a registration statement on Form S-3, (or any successor form then available covering the issuance and resale of securities with respect to this Warrant) (the "Registration Statement") covering the issuance and resale of the Shares to be issued upon exercise of this Warrant (the "Registrable Securities").  The Company shall use its reasonable best efforts to (i) cause such Registration Statement to be declared effective as soon as practicable thereafter, and (ii) to keep such Registration Statement continuously effective, supplemented and amended to the extent necessary to comply with the provisions of the Act with respect to the disposition of all of the Registrable Securities until the earlier of (A) the date which is two (2) years after the date hereof, (B) the date one year after this Warrant shall have been exercised in full (or, if this Warrant shall have been exercised in a "net exercise" pursuant to Section 3(b), one year after the Warrant Issue Date) and (C) the date when all Registrable Securities covered by such Registration Statement have been sold. 

(b)All expenses incurred in connection with the registration pursuant to this Section 9, excluding underwriters' or brokers' discounts and commissions and any fees of counsel for the Holder, but including registration fees, all fees and expenses of complying with state securities laws, and the fees and disbursements of the Company's counsel and accountants, shall be paid by the Company.  

(c)In the event any Registrable Securities are included in a Registration Statement under this Agreement:

(i)The Company shall indemnify and hold harmless the Holder, such Holder's directors and officers, each person who participates in the offering of such Registrable Securities, including underwriters (as defined in the Act), and each person, if any, who controls such Holder or participating person within the meaning of the Act (collectively, the "Holder Indemnified Parties"), against any losses, claims, damages or liabilities, joint or several, to which they may become subject under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or proceedings in respect thereof) arise out of or are based upon any untrue or alleged untrue statement of any material fact contained in the Registration Statement on the effective date thereof (including any prospectus filed under Rule 424 under the Act or any amendments or supplements thereto) or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and shall reimburse such Holder Indemnified Parties for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action, as such expenses are incurred; provided, however, that this indemnity agreement shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Company; provided, further, that the Company shall not be liable to any Holder Indemnified Party in any such case for any such loss, claim, damage, liability or action to the extent that it arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in connection with the Registration Statement, preliminary or final prospectus, or amendments or supplements thereto, in reliance upon and in conformity with written information furnished by or on behalf of such Holder Indemnified Party expressly for use in connection with such registration.  Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of any such Holder Indemnified Party and shall survive the transfer of the Registrable Securities and any termination of the Warrant.

(ii)The Holder shall indemnify and hold harmless the Company, each of its directors and officers, each person, if any, who controls the Company within the meaning of the Act, and each agent and any underwriter for the Company (within the meaning of the Act) (collectively, the "Company Indemnified Parties") against any losses, claims, damages or liabilities, joint or several, to which any such Company Indemnified Party may become subject under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or proceedings in respect thereof) arise out of or are based upon any untrue or alleged untrue statement of any material fact contained in the Registration Statement (including any prospectus filed under Rule 424 under the Act or any amendments or supplements thereto) or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in the Registration Statement, preliminary or final prospectus, or amendments or supplements thereto, in reliance upon and in conformity with written information furnished by or on behalf of the Holder expressly for use in connection with such registration; and the Holder shall reimburse any legal or other expenses reasonably incurred by any Company Indemnified Party in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that this indemnity agreement shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Holder; provided, further, that the liability of the Holder hereunder shall be limited to the proportion of any such loss, claim, damage, liability or expense which is equal to the proportion that the net proceeds from the sale of the shares sold by the Holder under such Registration Statement bears to the total net proceeds from the sale of all securities sold thereunder, but not in any event to exceed the net proceeds received by the Holder from the sale of Registrable Securities covered by such Registration Statement.

(iii)Promptly after receipt by an indemnified party under this Section 9(b) of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against any indemnifying party under this Section 9(b), notify the indemnifying party in writing of the commencement thereof and the indemnifying party shall have the right to participate in and assume the defense thereof with counsel selected by the indemnifying party and reasonably satisfactory to the indemnified party; provided, however, that an indemnified party shall have the right to retain its own counsel, with all fees and expenses thereof to be paid by such indemnified party, and to be apprised of all progress in any proceeding the defense of which has been assumed by the indemnifying party.  

(iv)To the extent any indemnification by an indemnifying party is prohibited or limited by law, the indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities in such proportion as is appropriate to reflect the relative fault of the indemnifying party and indemnified party in connection with the actions which resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations. The relative fault of such indemnifying party and indemnified party shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of material fact or omission or alleged omission to state a material fact, has been made by, or relates to information supplied by, such indemnifying party or indemnified party, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such action.  The amount paid or payable by a party as a result of the losses, claims, damages or liabilities referred to above shall be deemed to include any legal or other fees or expenses reasonably incurred by such party in connection with any investigation or proceeding.  Notwithstanding the foregoing, no person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. 

Notices.

Certificates of Adjustment.  Whenever the Exercise Price or number of shares purchasable hereunder shall be adjusted pursuant to Section 12 hereof, the Company shall issue a certificate signed by its Chief Financial Officer setting forth, in reasonable detail, the event requiring the adjustment, the amount of the adjustment, the method by which such adjustment was calculated and the Exercise Price and number of Shares purchasable hereunder after giving effect to such adjustment, and shall cause a copy of such certificate to be mailed (by first class mail, postage prepaid) to the Holder of this Warrant.

Notice of Certain Events.  In case

the Company shall take a record of the holders of its Shares (or other stock or securities at the time receivable upon the exercise of this Warrant) for the purpose of entitling them to receive any dividend or other distribution, or any right to subscribe for or purchase any shares of stock of any class or any other securities, or to receive any other right, or

of any capital reorganization of the Company, any reclassification of the capital stock of the Company, any consolidation or merger of the Company with or into another corporation, or any conveyance of all or substantially all of the assets of the Company to another corporation, or

of any voluntary dissolution, liquidation or winding-up of the Company,

then, and in each such case, the Company will mail or cause to be mailed to the Holder or Holders a notice specifying, as the case may be, (A) the date on which a record is to be taken for the purpose of such dividend, distribution or right, and stating the amount and character of such dividend, distribution or right, or (B) the date on which such reorganization, reclassification, consolidation, merger, conveyance, dissolution, liquidation or winding-up is to take place, and the time, if any is to be fixed, as of which the holders of record of shares of Common Stock (or such stock or securities at the time receivable upon the exercise of this Warrant) shall be entitled to exchange their shares of Common Stock (or such other stock or securities) for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, conveyance, dissolution, liquidation or winding-up.  Such notice shall be mailed at least 20 days prior to the date therein specified.

Notice Mechanics.  All notices and other communications required or permitted hereunder shall be in writing, shall be deemed to be given upon receipt or, if earlier, (a) five (5) days after deposit with the U.S. Postal Service or other applicable postal service, if delivered by first class mail, postage prepaid, (b) upon delivery, if delivered by hand, (c) one business day after the business day of deposit with Federal Express or similar overnight courier, freight prepaid for priority overnight delivery, or (d) one business day after the business day of facsimile transmission, if delivered by facsimile transmission with copy by first class mail, postage prepaid, and shall be addressed (i) if to the Holder, at the Holder's address as set forth on the Warrant Register, and (ii) if to the Company, at the address of its principal corporate offices (attention: Chief Financial Officer) or at such other address as a party may designate by ten days advance written notice to the other party pursuant to the provisions above.  In the event the notice requirements of this section are not complied with or waived in writing, the Company shall forthwith either cause the closing of the transaction to be postponed until such requirements have been complied with, or cancel such transaction.

Amendments.

(a)Any term of this Warrant may only be amended with the written consent of the Company and the Holder. Any amendment effected in accordance with this Section 11 shall be binding upon each holder of any of the Common Stock Warrants, each future holder of all such Common Stock Warrants, and the Company; provided, however, that such amendment must apply to all such holders equally and ratably in accordance with the number of Shares issuable upon exercise of their Common Stock Warrants.  The Company shall promptly give notice to all holders of Common Stock Warrants of any amendment effected in accordance with this Section 11. 

 (b)No waivers of or exceptions to any term, condition or provision of this Warrant, in any one or more instances, shall be deemed to be, or construed as, a further or continuing waiver of any such term, condition or provision. 

Adjustments.  The Exercise Price and the number of Shares purchasable hereunder are subject to adjustment from time to time as follows:

12.1Merger, Sale of Assets, Etc.  If at any time, while this Warrant, or any portion thereof, is outstanding and unexpired there shall be (i) a reorganization (other than a combination, reclassification, exchange or subdivision of shares otherwise provided for herein), (ii) a merger or consolidation of the Company with or into another corporation in which the Company is not the surviving entity, or a reverse triangular merger in which the Company is the surviving entity but the shares of the Company's capital stock outstanding immediately prior to the merger are converted by virtue of the merger into other property, whether in the form of securities, cash, or otherwise, or (iii) a sale or transfer of the Company's properties and assets as, or substantially as, an entirety to any other person, then, as a part of such reorganization, merger, consolidation, sale or transfer, lawful provision shall be made so that the holder of this Warrant shall thereafter be entitled to receive upon exercise of this Warrant, during the period specified herein and upon payment of the Exercise Price then in effect, the number of shares of stock or other securities or property of the successor corporation resulting from such reorganization, merger, consolidation, sale or transfer which a holder of the shares deliverable upon exercise of this Warrant would have been entitled to receive in such reorganization, consolidation, merger, sale or transfer had this Warrant been exercised immediately before such reorganization, merger, consolidation, sale or transfer, all subject to further adjustment as provided in this Section 12.  The foregoing provisions of this Section 12.1 shall similarly apply to successive reorganizations, consolidations, mergers, sales and transfers and to the stock or securities of any other corporation which are at the time receivable upon the exercise of this Warrant.  If the per share consideration payable to the holder hereof for shares in connection with any such transaction is in a form other than cash or marketable securities, then the value of such consideration shall be determined in good faith by the Company's Board of Directors.  In all events, appropriate adjustment (as determined in good faith by the Company's Board of Directors) shall be made in the application of the provisions of this Warrant with respect to the rights and interests of the Holder after the transaction, to the end that the provisions of this Warrant shall be applicable after that event, as near as reasonably may be, in relation to any shares or other property deliverable after that event upon exercise of this Warrant.

12.2Reclassification, etc.  If the Company at any time while this Warrant, or any portion thereof, remains outstanding and unexpired shall, by reclassification of securities or otherwise, change any of the securities as to which purchase rights under this Warrant exist into the same or a different number of securities of any other class or classes, this Warrant shall thereafter represent the right to acquire such number and kind of securities as would have been issuable as the result of such change with respect to the securities which were subject to the purchase rights under this Warrant immediately prior to such reclassification or other change and the Exercise Price therefor shall be appropriately adjusted, all subject to further adjustment as provided in Section 12.

12.3Split, Subdivision or Combination of Shares.  If the Company at any time while this Warrant, or any portion thereof, remains outstanding and unexpired shall split, subdivide or combine the securities as to which purchase rights under this Warrant exist, into a different number of securities of the same class, the Exercise Price for such securities shall be proportionately decreased in the case of a split or subdivision or proportionately increased in the case of a combination.

12.4Adjustments for Dividends in Stock or Other Securities or Property.  If while this Warrant, or any portion hereof, remains outstanding and unexpired the holders of the securities as to which purchase rights under this Warrant exist at the time shall have received, or, on or after the record date fixed for the determination of eligible stockholders, shall have become entitled to receive, without payment therefor, other or additional stock or other securities or property of the Company by way of dividend, then and in each case, this Warrant shall represent the right to acquire, in addition to the number of shares of the security receivable upon exercise of this Warrant, and without payment of any additional consideration therefor, the amount of such other or additional stock or other securities or property of the Company which such holder would hold on the date of such exercise had it been the holder of record of the security receivable upon exercise of this Warrant on the date of such distribution or such record date and had thereafter, during the period from the date of such distribution or such record date to and including the date of such exercise, retained such shares and/or all other additional stock available by it as aforesaid during such period, giving effect to all adjustments called for during such period by the provisions of this Section 12.

12.5Certificate as to Adjustments.  Upon the occurrence of each adjustment or readjustment pursuant to this Section 12, the Company at its expense shall promptly compute such adjustment or readjustment in accordance with the terms hereof and furnish to each holder of this Warrant a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based.  The Company shall, upon the written request, at any time, of any such holder, furnish or cause to be furnished to such holder a like certificate setting forth: (i) such adjustments and readjustments; (ii) the Exercise Price at the time in effect; and (iii) the number of Shares and the amount, if any, of other property which at the time would be received upon the exercise of the Warrant.

12.6No Impairment.  The Company will not, by any voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Company, but will at all times in good faith assist in the carrying out of all the provisions of this Section 12 and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the holders of this Warrant against impairment.

Miscellaneous.

Governing Law.  This Warrant shall be governed by and construed under the laws of the State of California, excluding that body of law relating to conflict of laws.

Counterparts.  This Warrant may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

IN WITNESS WHEREOF, Com21, Inc. has caused this Warrant to be executed by its officers thereunto duly authorized.

Dated: March 29, 2002
COM21, INC.

 

By:

George Merrick

President and Chief Executive Officer

FLEXTRONICS INTERNATIONAL, LTD.

By:

Name:

Title:

Exhibit A

NOTICE OF EXERCISE

To:  _______________

(a)The undersigned hereby elects to purchase ________ shares of Common Stock of Com21, Inc., pursuant to the terms of the attached Warrant, and:

(check one)

_____tenders herewith payment of the purchase price for such shares in full;

OR

_____tenders ________ shares of Common Stock purchasable under this Warrant pursuant to Section 3(b) of this Warrant (net-exercise).

(b)In exercising this Warrant, the undersigned hereby confirms and acknowledges that the shares of Common  Stock are being acquired solely for the account of the undersigned and not as a nominee for any other party, and for investment, and that the undersigned will not offer, sell, or otherwise dispose of any such shares of Common Stock except under circumstances that will not result in a violation of the Securities Act of 1933, as amended, or any state securities laws.

(c)Please issue a certificate or certificates representing said shares of Common Stock in the name of the undersigned or in such other name as is specified below:

	
	

	 	
[Print Name]

(d)Please issue a Warrant for the unexercised portion of the attached Warrant in the name of the undersigned or in such other name as is specified below:

	
	

	 	
[Print Name]

 

Date:

[Signature]

[Print Name]

[Title, if applicable]

Exhibit B

ASSIGNMENT FORM

FOR VALUE RECEIVED, the undersigned registered owner of this Warrant hereby sells, assigns and transfers unto the Assignee named below all of the rights of the undersigned under the within Warrant, with respect to the number of shares of Common Stock set forth below:

	
Name of Assignee
	
Address
	
No. of Shares

	 	 	 
	 	 	 
	 	 	 

and does hereby irrevocably constitute and appoint ____________________ Attorney to make such transfer on the books of Com21, Inc. maintained for the purpose, with full power of substitution in the premises.

The undersigned also represents that, by assignment hereof, the Assignee acknowledges that this Warrant and the shares of stock to be issued upon exercise hereof or conversion thereof are being acquired for investment and that the Assignee will not offer, sell or otherwise dispose of this Warrant or any shares of stock to be issued upon exercise hereof or conversion thereof except under circumstances which will not result in a violation of the Securities Act of 1933, as amended, or any state securities laws.  Further, the Assignee has acknowledged that upon exercise of this Warrant, the Assignee shall, if requested by the Company, confirm in writing, in a form satisfactory to the Company, that the shares of stock so purchased are being acquired for investment and not with a view toward distribution or resale.

DATED:  _____________________

	
	

	 	
Signature of Holder

	
	

	 	
(Witness)Exhibit 10.21(i)

                  JUNE 2001 MORTGAGE LOAN ASSIGNMENT AGREEMENT
                            (June 2001 Series 4 Loan)

         THIS MORTGAGE LOAN ASSIGNMENT AGREEMENT (this "Assignment") made as of
June 12, 2001, constitutes an assignment from NB FINANCE, LTD., a Bermuda
corporation (the "Assignor"), to NB CAPITAL CORPORATION, a Maryland corporation,
(the "Assignee"), and an agreement by and among Assignor, Assignee and NATIONAL
BANK OF CANADA, a Canadian chartered bank, as custodian and servicer on behalf
of Assignee (the "Bank").

                              W I T N E S S E T H :
                              - - - - - - - - - -

         WHEREAS, Assignor and Assignee have entered into a certain Loan
Agreement, as of June 12, 2001 (such Loan Agreement, as it may be amended or
modified from time to time, the "Loan Agreement"), under the terms of which
Assignee has, subject to the terms and conditions thereof, lent with respect to
the June 2001 Series 4 Loan (as defined in the Loan Agreement) a principal
amount of US$40,464,439.94 to Assignor, as of June 12, 2001.

         WHEREAS, to evidence and secure its obligations with respect to the
June 2001 Series 4 Loan under the Loan Agreement, Assignor shall execute and
deliver certain Loan Documents (as defined in the Loan Agreement).

         WHEREAS, Assignee has required and Assignor has agreed that Assignor
shall assign all of its right, title and interest in, to and under the mortgage
loans listed on Exhibit A attached hereto (the "Mortgage Loans"), each such
Mortgage Loan evidenced by certain agreements, deeds and proceedings (the
"Mortgage Loan Document") to Assignee and permit Assignee or its agents, to
administer, perform and enforce the Mortgage Loans upon the terms and conditions
hereinafter set forth.

         NOW, THEREFORE, in consideration of the transactions hereinabove
described, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:

<PAGE>

Assignment.
----------

Assignor as beneficial owner hereby assigns, charges and sets over to Assignee,
and its successors and assigns, without recourse to Assignor, all of Assignor's
right, title and interest now or hereafter acquired in, to and under the
Mortgage Loans and all of the real property (together with any proceeds
(including, but not limited to, any insurance, casualty and mortgage insurance
proceeds), products, substitutions, additions or replacements of any collateral
mortgaged, assigned or pledged under the Mortgage Loans) described therein
(collectively, the "Collateral").

Assignee hereby accepts the foregoing assignment, on behalf of itself and its
respective successors and assigns.

Assignor hereby appoints Assignee the true and lawful attorney-in-fact of
Assignor, with full power of substitution, in its own name, both before and/or
after any Event of Default (as defined in the Loan Agreement), to take any
action under or in connection with the Mortgage Loans. This power shall be
deemed to be coupled with an interest and shall be irrevocable.

Assignor agrees that the assignment herein provided is absolute and from and
after the date hereof, subject to Section 0, Assignee shall obtain legal title
to the Mortgage Loans and Assignor shall not have, and shall not exercise, any
rights in and to the Collateral, including, without limitation, any rights as
payee, mortgagee or assignee under any of the Mortgage Loan Documents, or any
rights to receive any payments or to exercise or omit to exercise, waive,
compromise or make any other actions or determinations or give or receive any
notices under or in respect of the Mortgage Loan Documents, except such as
Assignee may direct in order to better effectuate the rights, remedies and
security herein provided or contemplated.

Assignee, as payee under the Mortgage Loans, shall have the right, both before
and after an Event of Default (as defined in the Loan Agreement) to collect and
receive all payments of principal and interest and any other amounts due and
payable under the Mortgage Loan Documents. On each Interest Payment Date (as
defined in the Loan Agreement), Assignee shall apply the US Dollar Equivalent
(as defined in the Loan Agreement) of the funds collected under the Mortgage
Loan Documents (i) first, to the payment of any interest due and payable under
the Loan Documents, (ii) second, to the payment of any scheduled or unscheduled
principal payments due and payable under the Loan Documents, (iii) third, to the
payment of any Excess Loan Amount (as defined in the Loan Agreement) and (iv)
fourth, to any other amounts due and payable under the Loan Documents and shall,
to the extent available after payment of the amounts in clauses (i), (ii), (iii)
and (iv) above, remit the balance of any collections or payments to Assignor.

         TO HAVE AND TO HOLD the same unto Assignee, and its successors
     and assigns.

<PAGE>

Representations and Warranties of Assignor. Assignor represents and warrants as
follows:

Assignor (i) is the sole owner of the Mortgage Loans and such ownership is free
and clear of any lien, security interest or other encumbrance, (ii) has not
granted any participation or other interest or assignment, other option or
rights to the Mortgage Loans, other than to Assignee, and (iii) has not pledged,
collaterally assigned or otherwise hypothecated any interest therein or agreed
to do so, other than to Assignee.

The registered office and principal place of business of the Assignor is located
in Hamilton, Bermuda.

The execution, delivery and performance of this Assignment by Assignor are
within Assignor's power and authority, have been duly authorized by all
necessary action and do not and will not (i) require any authorization which has
not been obtained, (ii) contravene the articles of incorporation or by-laws of
the Assignor, any applicable laws or any agreement or restriction binding on or
affecting Assignor or its property, or (iii) result in or require the creation
or imposition of any lien or right of others upon or with respect to any
property now or in the future owned by Assignor (other than liens created in
favor of Assignee hereunder). No authorization which has not been obtained is
required for the assignment hereunder or the enforcement by Assignee of its
remedies under this Assignment. This Assignment, when executed and delivered,
will constitute the legal, valid and binding obligation of Assignor enforceable
against Assignor in accordance with its terms, except as enforcement may be
limited by bankruptcy, insolvency or other similar laws affecting the rights of
creditors generally.

The originals (including duplicate originals, if any) of all the Mortgage Loan
Documents, have been simultaneously herewith delivered to the Bank as custodian
for Assignee (except for any loan documents which have been or will be submitted
to public officials for filing or recording and policies of title or other
insurance which have not yet been received by Assignor, which in either case
will be delivered directly to the Bank or forthwith turned over to the Bank as
and when received by the Assignor).

Servicing. Until the satisfaction in full of all obligations of Assignor under
the Loan Agreement shall have occurred:

Assignee or its agents, shall have the sole power and authority to do or refrain
from doing any act under or in connection with the Mortgage Loan Documents and
the property described therein and/or this Assignment, including, without
limitation, the sole power and authority in its sole discretion, to (i) advance
funds thereunder, (ii) determine that all conditions to the advance of funds
thereunder have been satisfied (or to waive some or all of the conditions to
advance thereunder), and (iii) determine that a default or event of default has
occurred thereunder and to give any notice, demand or protest in respect
thereof;

Assignor acknowledges that (i) the Bank, as agent of Assignee, shall be named as
mortgagee and loss payee on all fire, extended coverage and other hazard
insurance policies required under the Mortgage Loan Documents, to the extent set
forth therein and (ii) Assignor and any mortgage and all other parties obligated
to Assignor under the Mortgage Loan Documents shall deal solely with the Bank,
acting on behalf of Assignee, under the Mortgage Loan Documents and this
Assignment, Assignor and all other parties so obligated shall be entitled to
rely on their actions so taken with respect to the Bank and upon the action
taken by the Bank, acting on behalf of Assignee, with respect to them until the
satisfaction in full of all obligations of Assignor under

<PAGE>

the Loan Agreement or until Assignee shall appoint another person to act on its
behalf (or otherwise revoke the Bank's authority to act on behalf of Assignee);

Assignor agrees that Assignee or it agents shall have the full power and
authority, in its discretion, to take, or defer from taking, any and all actions
with respect to the administration and enforcement of the Loan Documents, in
order to effectuate the purposes contemplated herein and therein, including the
right, power and authority to exercise any and all of the rights, remedies and
options reserved to Assignee or its agents in, or given by law or equity to
Assignee or it agents as holder of the Mortgage Loan Documents, to enforce the
Mortgage Loan Documents, and to take such other actions for the protection and
preservation of the lien of the Mortgages, and protect and preserve all property
described therein should Assignee or its agents become the owner thereof by
foreclosure or otherwise as may be necessary and/or appropriate.

Event of Default: Remedies. If an event of default shall occur under any
Mortgage Loan (an "Event of Default"), Assignee or its agents shall have all the
rights and remedies which would be available to Assignor (but for this
Assignment) under the Mortgage Loan Documents as set forth therein and as
permitted thereunder or otherwise available to Assignor (but for this
Assignment) in law or in equity, including, without limitation but in each
instance to the extent provided in and as conditioned by the Mortgage Loan
Documents, the right:

To accelerate the maturity of such Mortgage Loan and all other amounts due under
the applicable Mortgage Loan Documents and to declare the same to be or become
immediately due and payable and enforce payment thereof upon the happening of
any Event of Default by the mortgagor under such Mortgage Loan, as permitted
therein, after the giving of such applicable notice and/or the passage of such
time as may be provided for in such Mortgage Loan;

To take such steps, institute and prosecute such actions and proceedings and do
or omit such acts which, in its judgment, are advisable in order to enforce
payment of all amounts due under the Mortgage Loan Documents and realize upon
the security provided therefor, including, without limitation, (i) to select any
of the remedies available under the Mortgage Loan Documents or otherwise
available at law or in equity, (ii) to enter into or consent to any amendment,
modification and/or extension of the Mortgage Loan Documents, (iii) to enter
into or consent to any release, substitution or exchange of all or any part of
any security for such Mortgage Loan, (iv) to waive any claim against the
mortgagor or any person or entity obligated under the Loan Documents and (v) to
defer, extend, increase or decrease any payment, instalment or other sum
required or on account of such Mortgage Loan and/or the applicable Mortgage Loan
Documents;

To discontinue any such action or proceeding commenced as provided in subsection
0 above or to stay, delay, defer, discontinue or withdraw the same;

To enter or cause to be entered a bid at any foreclosure sale of the property
mortgaged securing such Mortgage Loan pursuant to the applicable Mortgage Loan
Documents (each such property a "Mortgaged Property") or any portion thereof;

To acquire title in and to any Mortgaged Property or any portion thereof in any
foreclosure proceeding in its name or the name of its nominee or designee;

To accept a deed to any Mortgaged Property or any portion thereof in lieu of
foreclosure and to release the mortgagor from its obligations under the Mortgage
Loan in consideration of such deed in lieu of foreclosure;

<PAGE>

To operate, manage and/or develop, or hire agents to operate, manage and/or
develop, any foreclosed or acquired Mortgaged Property and to lease all or any
portion thereof upon such terms and conditions as it deems to be in the best
interests of Assignee;

To sell any foreclosed or acquired Mortgaged Property or any portion thereof,
upon such terms as it may deem to be in the best interests of Assignee,
including, without limitation, the right to take back one or more purchase money
notes and mortgages;

To make advances for the payment for taxes, assessments, water, sewer and vault
charges, and all interest and penalties thereon, insurance premiums and other
similar or dissimilar items relating to any Mortgaged Property, to the extent
permitted by the applicable Mortgage Loan Documents;

To make advances for the account of the mortgagor under such Mortgage Loan, to
the extent permitted by the applicable Mortgage Loan Documents;

To collect, sue for, receive and, subject to applicable provisions of law,
settle or compromise any claims for loss or damage covered by insurance and/or
condemnation of all or any portion of any Mortgaged Property and to exercise its
discretion in the proper application and disposition of the net proceeds of such
insurance and/or condemnation award;

To sell the Mortgage Loan at a fair market value; and

Generally to do and take any and all actions which, but for this Assignment, the
Assignor would be entitled to do and take under or with respect to the
applicable Mortgage Loan Documents; it being understood and agreed that this
Assignment does not confer upon the Assignee any greater rights with respect to
the Mortgage Loan Documents than granted to Assignor or expand or extend such
rights, the purpose of this Assignment being, inter alia, to assign, transfer
and allocate such rights and not to create new rights against any mortgagor
under the applicable Mortgage Loan, or to limit the rights or expand the
obligations of any such mortgagor, and in the event of any conflict between the
provisions of this Assignment and the provisions of the Mortgage Loan Documents,
the provisions of the Mortgage Loan Documents, shall control.

Possession of Mortgage Loan Documents. From and after the date of this
Assignment, the Bank shall no longer hold the duly executed originals of the
Mortgage Loan Documents on its own behalf or as custodian for Assignor, but
shall hold the same as custodian for Assignee, pursuant to the terms of (i) the
custodial agreement dated as of June 12, 2001 by and between the Bank and
Assignee and (ii) the Amended and Restated Servicing Agreement dated as of June
28, 2001 by and between the Bank and Assignee.

Further Assurances.
------------------

Assignor agrees that at any time and from time to time, at the expense of
Assignor, Assignor will promptly execute and deliver all further instruments and
documents, and take all further action, that may be necessary or desirable, or
that Assignee may reasonably request, to effectuate the purpose or provisions of
this Assignment or to confirm or perfect any transaction described or
contemplated herein or to enable Assignee or its agents to exercise and enforce
its rights and remedies hereunder with respect to any Mortgage Loan Document.
Assignor and Assignee agree that Assignor shall reasonably cooperate (i) in
preparing, executing, delivering or having prepared, delivered and executed by
December 1, 2001 such documents or instruments which are necessary or desirable
to register legal title to each Mortgage Loan in the name of Assignee in the
appropriate land registry or other office of public record, and (ii) in
registering legal title to

<PAGE>

each Mortgage Loan in the name of Assignee in the event the credit rating of the
Bank (or such other agent as may hold the Mortgage Loans on behalf of Assignee)
will fall below either "BBB-" by Standard & Poor's Rating Services or "Baa" by
Moody's Investor Service, Inc.

Assignor hereby authorizes Assignee or its agents to file and record one or more
financing or continuation statements and amendments thereto, relative to all or
any part of the Loan Documents without the signature of Assignor where permitted
by the law.

Assignment. This Assignment shall be binding upon and shall inure to the benefit
of the parties and their respective successors and assigns.

Notices. All notices and other communications provided for hereunder shall be in
writing (including telegraphic, telecopy or telex communication) and mailed,
telegraphed, telecopied, telexed or delivered, if to Assignor, at its address at
c/o Codan Services Limited, Clarendon House, 2 Church Street, Hamilton, HM 11,
Bermuda, Attention: Roger Burgess; and if to Assignee, at its address at 125
West 55th Street, New York, New York 10019, Attention: Chief Financial Officer;
or as to each other party, at such other address as shall be designated by such
party in a written notice to Assignee and Assignor. All such notices and
communications shall, when mailed, telegraphed, telecopied or telexed, be
effective when deposited in the mails, delivered to the telegraph company,
transmitted by telecopier or confirmed by telex answerback, respectively.

Governing Law. This Assignment and Agreement shall be governed by and construed
in accordance with the laws of Bermuda.

Jurisdiction.
------------

Each of the parties hereto hereby irrevocably and unconditionally submits, for
itself and its property, to the nonexclusive jurisdiction of any court sitting
in Bermuda, and any appellate court thereof, in any action or proceeding arising
out of or relating to this Assignment, or for recognition or enforcement of any
judgment, and each of the parties hereto hereby irrevocably and unconditionally
agrees that all claims in respect of any such action or proceeding may be heard
and determined in any such Bermuda court. Each of the parties hereto agrees that
a final judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law. Nothing in this Assignment shall affect any right that any
party may otherwise have to bring any action or proceeding relating to this
Assignment in the courts of any jurisdiction.

Each of the parties hereto irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, any objection that it may
now or hereafter have to the laying of venue of any suit, action or proceeding
arising out of or relating to this Assignment in any Bermuda court. Each of the
parties hereto hereby irrevocably waives, to the fullest extent permitted by
law, the defense of an inconvenient forum to the maintenance of such action or
proceeding in any such court. Assignee hereby irrevocably appoints Codan
Services Limited, Clarendon House, Church Street, Hamilton HM CX, Bermuda
("Assignee's Process Agent"), as its agent to receive, on behalf of Assignee,
service of copies of the summons and complaint and any other process which may
be served in any such action or proceeding. Any such service may be made by
mailing or delivering a copy of such process, if to Assignee, in care of
Assignee's Process Agent at Assignee's Process Agent's above address. Assignee
hereby irrevocably authorizes and directs its respective process agent to accept
such service on its behalf.

<PAGE>

Counterparts. This Assignment may be executed in one or more counterparts, each
of which shall be considered an original. Delivery of an executed counterpart of
a signature page to this Assignment by telecopier shall be effective as delivery
of a manually executed counterpart of this Assignment. Any delivery of a
counterpart signature by telecopier shall, however, be promptly followed by
delivery of a manually executed counterpart.

Change and Modifications. This Assignment may not be changed, terminated or
modified orally or in any manner other than by an agreement in writing signed by
the party sought to be charged therewith.

No Waiver. No waiver by any party of any provision of this Assignment or any
right, remedy or option hereunder shall be controlling, nor shall it prevent or
estop such party from thereafter enforcing such provision, right, remedy or
option, and the failure or refusal of any party hereto to insist in any one or
more instances upon the strict performance of any of the terms or provisions of
this Assignment by any other party hereto shall not be construed as a waiver or
relinquishment for the future of any such term or provision, but the same shall
continue in full force and effect, it being understood and agreed that the
rights, remedies and options of Assignee or the Bank, acting as servicer on
behalf of Assignee, hereunder are and shall be cumulative and in addition to all
other rights, remedies and options of Assignee or the Bank, acting as servicer
on behalf of Assignee, in law or in equity or under any other agreement.

Recitals. All of the recitals hereinabove set forth are incorporated in this
Assignment by reference.

Paragraph Headings, etc. The headings of paragraphs contained in this Assignment
are provided for convenience only. They form no part of this Assignment and
shall not affect its construction or interpretation. All references to
paragraphs or subparagraphs of this Assignment refer to the corresponding
paragraphs and subparagraphs of this Assignment. All words used herein shall be
construed to be of such gender or number as the circumstances require. This
"Assignment" shall each mean this Assignment as a whole and as the same may from
time to time hereafter be amended or modified. The words "herein," "hereby,"
"hereof," "hereto," "hereinabove" and "hereinbelow," and words of similar
import, refer to this Assignment as a whole and not to any particular paragraph,
clause or other subdivision hereof, unless otherwise specifically noted.

Termination. Upon satisfaction in full of all obligations of Assignor under the
Loan Documents, this Assignment shall terminate and be of no further force and
effect and Assignee shall execute documents evidencing the assignment of any
outstanding Mortgage Loans to Assignor (without recourse), provided however,
that in the event an Event of Default under any Mortgage Loan occurs, Assignee's
obligation to assign such defaulted Mortgage Loan back to Assignor as provided
in this Section shall terminate, provided, further, however, that to the extent
any amounts collected by Assignee with respect to such defaulted Mortgage Loan
exceed an amount equal to the sum of (i) the amount by which the principal
amount of the Loan secured by such defaulted Mortgage Loan was reduced pursuant
to Section 2.04(b)(B) of the Loan Agreement, (ii) any interest accrued on such
amount at the applicable Interest Rate (as defined in the Loan Agreement)
compounded monthly, and (iii) the amount of any collection expenses (including
legal fees), such excess

<PAGE>

shall be applied against the Excess Loan Amount and any remaining amount shall
be remitted to Assignor.

Partial Invalidity. In case any provision in this Assignment shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.

National Housing Act. Subject to the terms and provisions of the Servicing
Agreement referred to above, the Mortgage Loans hereby assigned will be
administered and serviced by the Bank, as agent of Assignee, in accordance with
the National Housing Act (Canada) and National Housing Regulations (Canada).

<PAGE>

         IN WITNESS WHEREOF, the Assignor and each other party hereto has duly
executed the Mortgage Loan Assignment Agreement as of the twelfth (12th) day of
June two thousand and one (2001).

                                    ASSIGNOR

                                    NB FINANCE, LTD.

                                    By:   /s/ Jean Dagenais
                                          --------------------------------------

                                    ASSIGNEE

                                    NB CAPITAL CORPORATION

                                    By:
                                       -----------------------------------------

                                    BANK

                                    NATIONAL BANK OF CANADA

                                    By:
                                       -----------------------------------------

                                    By:
                                       -----------------------------------------

<PAGE>

PROVINCE OF QUEBEC      )
                        )  ss.:
DISTRICT OF MONTREAL    )

         On the fifteenth (15th) day of August, 2001, before me personally came
JEAN DAGENAIS to me known, who, being by me duly sworn, did depose and say that
he resides at 6010 Durocher Avenue, Apartment 4, in the City of Outremont,
Province of Quebec, H2V 3Y6, that he is the Treasurer of NB Finance, Ltd., the
corporation described in and which executed the foregoing instrument; and that
he signed his name thereto by authority of the board of directors of said
corporation.

                                    /s/ Nicole Nobert
                                    --------------------------------------------
                                    NICOLE NOBERT, attorney

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