Document:

Exhibit 10.1

WACHOVIA

January 11, 2008

 

Mr. Carl Valeri

The Hamilton Company

39 Brighton Avenue

Boston, Massachusetts 02134

 

	
  Re:

  	
  Project Name:

  	
  Hamilton Portfolio

  
	
   

  	
  Location:

  	
  See
  Attached Exhibit C

  
	
   

  	
  Number of Units

  	
  See
  Attached Exhibit C

  

 

	
  Borrower:

  	
  See Attached Exhibit C

  
	
  Key Principal:

  	
  Harold Brown and The Harold Brown 1999 Revocable Trust

  
	
  Proposed Loan Amount:

  	
  See Attached Exhibit C

  
	
  Loan Term:

  	
  15 years

  
	
  Interest Only/Amortization Period: 

  	
  15 years interest only

  
	
  Processed Interest Rate:

  	
  5.60%

  
	
  Accrual Basis:

  	
  Actual/360

  
	
  Prepayment Terms:

  	
  14 1/2 years Yield Maintenance

  
	
  Fannie Mae DUS Program:

  	
  DUS Cash ERL

  
	
  Maximum LTV:

  	
  See Attached Exhibit C

  
	
  Minimum DSCR:

  	
  See Attached Exhibit C

  
	
  Financing Fee:

  	
  As described in Section 7(b) below 

  
	
  Good Faith Deposit:

  	
  $929,102.00

  
	
  Completion Repair Deposit:

  	
  TBD (Subject to Final Engineering Report)

  
	
  Initial Deposit to Replacement Reserve: 

  	
  TBD (Subject to Final Engineering Report)

  
	
  Monthly Deposit to Replacement Reserve

  	
  TBD (Subject to Final Engineering Report) in accordance
  with Section 8(a)

  
	
  Commitment Acceptance Date:

  	
  No later than 7 days from date of this Commitment

  
	
  Commitment Expiration Date:

  	
  Seventy-five (75) days from the date of this Commitment

  
	
  Rate Setting Expiration Date:

  	
  No later than 30 days from the date of the Commitment
  Acceptance Date

  
	
  Special Conditions:

  	
  The provisions of the Special Conditions set forth in Exhibit A
  are incorporated into this Commitment and made a part hereof. In the event
  that the provisions of Exhibit A conflict with any other provisions of
  this Commitment, the provisions of Exhibit A shall govern and control.

  

 

 

 

 

Dear Mr. Valeri:

 

Wachovia
Multifamily Capital, Inc.  (“Lender”)
is pleased to advise you that your application
for permanent financing on the above referenced property (the “Property”)
has been approved subject to and upon strict compliance by Borrower with
each of the terms, conditions and provisions
of this commitment letter (collectively, with the “Special Conditions”, “General
Conditions” and all Exhibits attached hereto, the “Commitment”). Lender
hereby agrees to make the mortgage loan (the “Mortgage Loan”) in the
proposed amount (the “Loan Amount”) set forth above to Borrower pursuant
to the Fannie Mae Multifamily Delegated Underwriting and Servicing product line
for early rate lock execution (“DUS ERL Program”) as set forth in the
Fannie Mae Delegated Underwriting and Servicing Guide in its present form and
as amended, supplemented and reissued from time to time (the “DUS Guide”).
This Commitment is issued in material reliance upon (i) the continuing
truth and accuracy of all information and documentation furnished (or to be
furnished) to Lender in connection with the
Lender DUS Program Loan Application (“Loan Application”) or otherwise
with respect to Borrower, its principals (including the Key Principals) and the
Property; (ii) the continuing accuracy of the recitations of fact set
forth in this Commitment; and (iii) Borrower’s covenant, evidenced by its
acceptance of this Commitment, to comply with each of the terms, conditions and
provisions of this Commitment.

 

1.             (a) Borrower.
Borrower shall be the Borrower identified above. If there is any change in the
organizational structure or ownership of the Borrower from that previously
disclosed to Lender, then at Lender’s option, this Commitment shall terminate
and Lender shall have no obligations hereunder including the obligation to make
the Loan. The Borrower shall be in good standing and duly authorized to
transact business in the state of its formation and, in the event the Property
is located in a different state, the state where the Property is located. The
Borrower shall hold legal and beneficial title to the Property on the Closing
Date (hereinafter defined) and for the entire Mortgage Loan Term,
shall be a single purpose entity having no other assets, legal purpose or business other than the ownership and operation of
the Property.

 

(b) Key Principals. The Key Principals shall
be as identified above and shall be required to sign certain
loan documents to evidence their liability for the exceptions to non-recourse liability provisions contained in the loan
documents.

 

2.                                  Mortgage Loan Terms.

 

                                                     (a) Interest Rate.

 

(i) Processed Interest Rate. Based on the
related materials submitted to date to Lender, the Mortgage Loan has been
partially underwritten, and this Commitment is being issued, on the basis of
the Processed Interest Rate set forth above. Borrower understands and

 

2

 

acknowledges that as of the date hereof Lender has not
obtained a Commitment from Fannie Mae to purchase the Mortgage Loan (“Fannie
Mae Commitment”) and that the Fannie Mae Commitment will not be obtained by
Lender pursuant to this Section 2 unless and until Borrower has satisfied
all of the conditions precedent set forth in Section 3 of this Commitment.
Accordingly, since Fannie Mae interest rates and pricing options
fluctuate from time to time, the actual interest rate selected by Borrower pursuant to subsection (ii) below (“Selected
Interest Rate”) may be other than the Processed Interest Rate based on the
Fannie Mae interest rate and price quotations at the time the Fannie Mae
Commitment is obtained. Borrower acknowledges that the rates quoted by Lender
will also include the servicing fee payable to Lender in connection with
servicing of the Mortgage Loan. Any difference between the Selected Interest
Rate and the Processed Interest Rate may, in accordance with applicable Fannie
Mae DUS ERL Program underwriting guidelines, result in a corresponding change
in the Loan Amount. By accepting this Commitment, Borrower expressly
acknowledges and agrees that Lender shall have no liability for fluctuations in
the Fannie Mae interest rate and pricing options.

 

(ii) Selected Interest Rate. On the date
(subsequent to Borrower’s satisfaction of the conditions precedent set forth in
Section 3 of this Commitment and payment to Lender of the Good Faith
Deposit described in this Commitment) that Borrower selects a current interest
rate and price (“Rate Setting Date”) and immediately prior to Lender
obtaining the Fannie Mae Commitment, Borrower must sign and return by
telecopier Lender’s DUS rate setting authorization in a form to be provided on
such date by Lender (“Rate Setting Form”) by 2:00 p.m. New York,
New York time. The Rate Setting Form shall confirm the Selected Interest
Rate, Loan Amount, the monthly interest payment shall be based upon an
Actual/360 payment schedule and the date by which the Closing Date must occur.

 

If Borrower has not satisfied the preconditions set forth
in Section 3 of this Commitment and selected an interest rate and price by
2:00 p.m. New York, New York time on the Rate Setting Expiration Date,
this Commitment shall automatically terminate, Lender shall have no obligation
to make the Mortgage Loan and shall be relieved of any further obligations to
Borrower hereunder or otherwise. Unless the Rate Setting Expiration Date has
been extended, which extension may be granted or denied in Lender’s sole and
absolute discretion, Lender shall return to Borrower, without interest, the
Good Faith Deposit, if previously received from Borrower, less any amounts due
and owing by the Borrower to Lender pursuant to the terms of this Commitment.

 

Borrower hereby acknowledges that Lender has issued this Commitment
and may accept the Rate Setting Form and allow Borrower to select the
Interest Rate in reliance on Borrower’s agreement that it shall provide the
balance of the documents required for underwriting and close the Mortgage Loan
in accordance with the terms of this Commitment as such terms may be modified.
Borrower shall be liable for any and all actual damages (which amounts may
exceed the Good Faith Deposit) that Lender and/or Fannie Mae may incur as a
result of the Borrower’s failure to close the Mortgage Loan or, if the Borrower
has provided false or materially misleading information in connection with the
Loan Application.

 

(b) Maturity Date. The Mortgage Loan term
shall commence on the Closing Date and shall terminate on the date that is the
fifteenth (15th) anniversary of the first day of the first

 

 

3

 

calendar month following the Closing Date (the “Maturity
Date”).

 

(c)     Monthly
Mortgage Payment. On the Closing Date, the Borrower shall pay interest due
on the Mortgage Loan, at the Selected Interest Rate, from the Closing Date to
and including the last day of the month in which the Closing occurs.
Thereafter, commencing on the first day of the second calendar month following
the Closing Date (the “Payment Commencement  Date”), and on the
first day of each and every calendar month thereafter, the Borrower shall make
a fixed payment of interest only at the Selected Interest Rate. If the Closing
Date is the first day of a month, the monthly payments of interest only
described in this paragraph shall commence on the first day of the calendar
month that follows the month in which the Closing occurs. Interest during the
term of the Mortgage Loan shall be calculated on the basis of a 360 day year
for the actual number of calendar days elapsed during such month. The Borrower
understands that the amount allocated to interest for each month will vary
depending on the actual number of calendar days during such month. As a
result, loans using Actual/360 payment schedule amortize more slowly and generate more interest than a loan at the same
note rate using a 30/360 payment schedule. Unless sooner paid, the entire
unpaid principal balance of the Mortgage Loan and all accrued and unpaid
interest thereon shall be due and payable in full on the Maturity Date.

 

(d)     Prepayment
Terms. The Mortgage Loan may be prepaid only in accordance with the terms
and conditions contained in the Fannie Mae Multifamily Note. The Yield
Maintenance Period applicable to the Mortgage Loan Term shall be fourteen and
one-half (14.5) years and the “Specified U.S. Treasury Security” will be
determined by Fannie Mae at the time Lender obtains the Fannie Mae Commitment.

 

(e)     Late
Charges; Default Interest Rate; Notice and Cure. Any payment on the Note
that has not been received by Lender on or before the tenth (10th) day of the month shall be subject to a late
charge of five (5.0%) percent on such payment. If any payment on the Note has
not been received by Lender on or before the thirtieth (30th) day after the
scheduled payment date, the Mortgage Loan shall accrue interest on the unpaid
principal balance of the Note on a per annum rate equal to four (4%) percent
above the Selected Interest Rate. Lender shall not be obligated to include in
the Loan Documents clauses providing Borrower with notice of defaults and the
opportunity to cure such defaults.

 

3.             Conditions
Precedent for Selecting the Interest Rate and Fannie Mae Commitment. In
addition to Lender’s receipt of the Good Faith Deposit described in this
Commitment, Lender’s obtaining of the Fannie Mae Commitment shall be expressly
conditioned upon satisfaction of each of the following conditions precedent, to
the satisfaction of Lender and Lender’s Counsel (as hereinafter defined). All
documents and other instruments to be delivered hereunder shall be at Borrower’s
sole cost and expense.

 

a.               Receipt
by Lender of a fully executed DUS Cash Extended Rate Lock Borrower
Certification (the “Borrower Certification”) executed by Borrower and
Key Principal, the form of which is annexed hereto as Exhibit B.

 

4.             Conditions
Precedent to Lender completing its full underwriting and Closing the  

 

4

 

Mortgage Loan. In
addition to the satisfaction of the conditions and requirements of Section 3
and other conditions and requirements set forth in this Commitment, Lender’s
obligation to close the Mortgage Loan shall be expressly conditioned upon
compliance with each of the following conditions to the satisfaction of Lender
and Lender’s Counsel. All documents and other instruments to be delivered
hereunder shall be at Borrower’s sole cost and expense.

 

a.                    The satisfaction of all of the terms and conditions set forth in this
Commitment;

 

b.                   Receipt and approval of a current title insurance commitment;

 

c.                    Receipt and approval of complete copies of the organizational documents
of Borrower and, if applicable, each general partner or managing
member of Borrower, including, but not limited
to, agreement(s) of general or limited partnership, operating agreements,
articles of organization, certificates of limited partnership, good standing
certificates, trust documentation, certificates of authority to transact
business in the jurisdiction in which the Property is located, articles of incorporation,
corporate by-laws, resolutions and incumbency certificates, all evidencing the
due organization, valid existence and good standing of such entities, and the
full power and authority to execute, deliver and perform under the Loan
Documents;

 

d.                   Receipt and approval of a current as-built ALTA/ACSM survey of the
Property prepared in accordance with all Fannie Mae and Lender’s requirements
and containing, without amendment, the Fannie Mae promulgated form of Surveyor’s
Certificate. Borrower expressly acknowledges that any deviations from the form
provided by Fannie Mae will require Lender’s Counsel to seek the prior written
approval of Fannie Mae and will delay obtaining the Fannie Mae Commitment and
Closing;

 

e.       Receipt
and approval of a pro forma or specimen title insurance policy from a title
insurer satisfactory to Lender in its sole discretion (including legible copies
of all recorded exceptions referenced therein) issued with respect to the
Property and prepared in accordance with all Fannie Mae and Lender’s
requirements;

 

f.       Receipt
and approval of evidence of zoning compliance, ability to rebuild the Property
in the event of casualty and permanent certificates of occupancy (or the legal
equivalent in the event certificates of occupancy are not issued in the
jurisdiction in which the Property is located) with respect to all of the
improvements on the Property. In the event zoning compliance is unattainable, a zoning opinion or zoning report will be required;

 

g.      Receipt
and approval of the results of a current judgment, lien, bankruptcy and UCC
searches performed in the appropriate state and local office with respect to
the Borrower and each Key Principals (and each general partner or managing
member of the Borrower, if the Borrower is a partnership or limited liability
company);

 

h.      Receipt
and approval of a draft of Borrower’s Counsel’s opinion in the form promulgated
by Fannie Mae. Borrower expressly acknowledges that any deviations from the
form provided by Fannie Mae will require Lender’s Counsel to seek the prior
written approval of Fannie Mae and will

 

 

5

 

delay obtaining the Fannie Mae Commitment and Closing;

 

i.    Receipt
and approval by Lender and Lender’s Counsel of each lease demising a portion of
the Property for non-residential purposes, including, without limitation,
laundry leases, as well as copies of all service contracts executed in
connection with the Property, together with such estoppel certificates and
subordination and non-disturbance agreements as Lender shall require;

 

j.    Borrower’s
compliance with the insurance requirements set forth in the DUS Guide,
including, without limitation, ordinance and law coverage and evidence of flood
insurance (if applicable);

 

k.   Receipt
and approval by Lender any and all outstanding processing and underwriting due
diligence documents required by Lender in order to finalize the underwriting of
this transaction;

 

I.    Receipt
by Lender of any and all required Fannie Mae waivers;

 

m.  Receipt by
Lender’s Counsel of any and all outstanding legal due diligence documents;

 

n.   The
absence of any (i) change in federal, state or local law, (ii) decision
of any court or administrative body, (iii) ruling or regulation (if a
Treasury Regulation, including any final, temporary or proposed provisions of
the Treasury Regulation), or (iv) other action or event, which materially
adversely affects or which may, directly or indirectly, materially adversely
affect (A) the transactions to be affected pursuant to this Commitment and
the Fannie Mae Commitment or (B) Lender’s ability to deliver the Mortgage
Loan to Fannie Mae in accordance with and in the manner provided in the Fannie
Mae Commitment;

 

o.   The
execution and delivery by the Borrower and the Key Principal(s) of all
Loan Documents (as hereinafter defined); and

 

p.   Borrower’s
timely payment of all fees and other charges required by this Commitment.

 

All documents to be delivered to Lender or Lender’s
Counsel pursuant to this Section 4, other than those documents
customarily delivered at closing, shall be delivered no later than ten (10) days prior to the Closing Date. Notwithstanding
anything in this Commitment to the contrary, the effectiveness of this
Commitment shall at all times be contingent upon (i) completion of all due
diligence required by the DUS ERL Program, (ii) the issuance by Fannie Mae
of the Fannie Mae Commitment, (iii) the continued validity and
enforceability of the Fannie Mae Commitment as such Commitment may be revised
by Fannie Mae, and (iv) Borrower’s compliance with the terms and
conditions of this Commitment and the DUS ERL Program requirements then in
effect.

 

5.             Security.
The Mortgage Loan shall constitute a valid first lien, subject to no other
liens or encumbrances, on the good and marketable fee simple title to the
Property, subject only to such exceptions as shall be approved by Lender and
Lender’s Counsel, and free from all mechanics’ or materialmen’s liens, claims
or special assessments for work completed or under construction on the Closing
Date. The Mortgage Loan shall be evidenced by a promissory note of the Borrower

 

 

6

 

(including
any addendum or attachment thereto, the “Note”) which shall be secured
by, among other things, (i) a first lien mortgage, deed of trust, or deed
to secure debt (including any addendum or attachment thereto, the “Mortgage”)
on the Property, (ii) a valid and perfected security interest in all
personal property owned by the Borrower and located on or used in connection
with the Property or any improvements thereon and (iii) such other
instruments and documents as may be required by Lender or Lender’s Counsel or
as Lender or Lender’s Counsel shall determine to be necessary or desirable (the
Note, the documents described in clauses (i) through (iii) above, and
any documents relating to secondary financing, if applicable, collectively the “Loan
Documents”). Although the Loan Documents will generally be non-recourse,
there will be certain exceptions to non-recourse liability and certain
indemnification requirements contained in the Fannie Mae form of Note which
create personal liability and indemnification obligations for Borrower and/or
the Key Principals, if any, identified above. By acceptance of this Commitment,
Borrower, for itself and on behalf of its principals and the Key Principals, if
any, expressly acknowledges and agrees to such provisions.

 

6.     Closing. The date of
closing of the Mortgage Loan (the “Closing” or “Closing Date”)
shall be held on or before the date set forth in the Rate Setting Form.

 

7.     Fees and Charges To Be
Paid By Borrower.

 

a.             Application Fee.
Upon execution of this Commitment, Borrower shall pay to Lender the sum of
$0.00 which fee constitutes the Application Fee and which Borrower acknowledges
was earned by Lender upon the receipt of the executed Loan Application and is
non-refundable. Borrower acknowledges that Lender will incur out-of-pocket
expenses in connection with the processing of the Loan and Borrower agrees that
it will remit to Lender upon demand such amounts as Lender shall incur with
respect to such processing.

 

b.             Financing Fee.
Borrower shall pay Lender a Financing Fee equal to .50% of the Proposed Loan
Amount, which Financing Fee shall be deemed earned by Lender upon the Rate
Setting Date and shall be payable on the Closing Date from proceeds of the
Loan. In no event shall the Financing Fee be deemed unearned after the Rate
Setting Date unless (i) Lender determines to materially modify the terms
of this Commitment, (ii) the Closing does not occur due solely to the
willful default by Lender of its obligations under this Commitment, (iii) the
suspension of Lender’s DUS ERL Program license, (iv) Fannie Mae’s
suspension or termination of the DUS ERL Program; or (v) there occurs a
change in any law which causes the making of the Mortgage Loan by the Lender or
the acquisition thereof by Fannie Mae unlawful.

 

c.             Good-Faith
Deposit. Before the Rate Setting Date, but in no event later than 24 hours
prior to the Rate Setting Date, Borrower shall deposit with Lender, in
immediately available funds, $929,102 (the “Good Faith Deposit”) to
secure the performance of Borrower’s obligations under this Commitment and the
Fannie Mae Commitment. Lender and Fannie Mae shall deem the Good Faith Deposit
earned upon receipt. Except as set forth below, if for any reason closing and
funding of the Mortgage Loan does not occur, the Good Faith Deposit will be
forfeited to Fannie Mae. Borrower hereby acknowledges and agrees that the Good
Faith Deposit shall be refundable to Borrower only in the event:

 

7

 

(i)            Lender
materially modifies the terms of this Commitment based upon final underwriting
of the Loan and Borrower does not accept such modifications, in which event the
Good Faith Deposit will be refunded to Borrower, less Fannie Mae’s and Lender’s
actual out-of-pocket expenses incurred in connection with the underwriting and
processing of the Loan Application. For purposes of this Commitment, a “material
modification” shall mean a change that Lender and Fannie Mae deem to be
material. Borrower acknowledges that Borrower is obligated to accept all
changes to this Commitment that are not material; or

 

(ii)           purchase
of the Loan by Fannie Mae, in which event the Good Faith Deposit will be
refunded to Borrower.

 

Notwithstanding
anything in this Commitment to the contrary, Borrower acknowledges and agrees
that the greater of the Good Faith Deposit or the Pair-Off Fee (herein after
defined in Exhibit C) shall be due from Borrower if:

 

(i)            Borrower
fails to provide Lender with all required information in a timely fashion to
enable Lender to submit the full underwriting package to Lender’s loan
committee by February, 11, 2008 or

 

(ii)           Fannie
Mae rejects the Loan on the basis of Fannie Mae’s determination that any
representation, warranty, statement, certificate, or other data and information
made or furnished to Lender in connection with the proposed Loan is materially
false or misleading as of the date given; or

 

(iii)          a
material adverse change in the financial condition or credit of Borrower, any
Key Principals or any Principal has occurred subsequent to Rate Setting Date;
or

 

(iv)          a
material adverse change in the Property’s value, net operating income, title,
physical or operating condition has occurred subsequent to the Rate Setting
Date; or

 

(v)           the
third-party reports, including, without limitation, the appraisal, the
engineering reports/surveys, the environmental reports/surveys and the final
title policy, reveal material adverse conditions that were known (or should
have been known) by Borrower that were not disclosed to Lender, and such
conditions are unacceptable to Lender or Fannie Mae.

 

Borrower
hereby expressly acknowledges that Lender and/or Fannie Mae will incur certain
financial liabilities in connection with this setting the Interest Rate and
obtaining the Fannie Mae Commitment in reliance upon the truth and accuracy of
all representations, warranties, statements, certificates and other information
furnished to Lender and/or Fannie Mae, Borrower shall be liable for, and agrees
to defend, indemnify and hold Lender and Fannie Mae harmless from and against,
any and all claims, losses, and direct and consequential damages that Lender
and/or Fannie Mae may incur as a result of Borrower’s failure to close the Loan
in accordance with the terms and conditions set forth in this Convnitment. Such
direct and

 

8

 

consequential
damages may not be limited to the amount of the Good Faith Deposit. To the
extent any conflict exists between this Section 7(c) and the Borrower
Certification, the Borrower Certification shall prevail.

 

8.     FUNDS AND ACCOUNTS.

 

a.     Reserve Fund for
Replacements. On the Closing Date, Borrower shall execute and deliver a
Replacement Reserve and Security Agreement and, in accordance therewith, shall
establish a reserve fund for replacements (the “Replacement Reserve”) to
be held by Lender in escrow for major maintenance and replacements of
improvements to be designated by Lender. The Borrower shall deposit the Initial
Deposit and Monthly Deposits as set forth above. The Borrower hereby acknowledges
that the amounts of the Initial Deposit and Monthly Deposit may be revised upon
completion of underwriting the Mortgage Loan by Lender.

 

Notwithstanding
the foregoing, Lender shall waive the monthly deposits to the Replacement
Reserve however, the Loan Documents will provide that Lender may reinstate the
monthly deposits to the Replacement Reserve upon the conditions contained in
the Replacement Reserve Agreement.

 

b.     Completion/Repair Fund.
On the Closing Date, Borrower may be required to deposit with Lender an amount
which equals 150% of Lender’s estimate of the cost of certain required repairs
estimated by Lender’s engineer to correct items requiring immediate repair as
described in Lender’s engineering and environmental inspections to be performed
upon acceptance of this Commitment by Borrower. Any such escrow (the “Completion
Reserve”), will be held by Lender in accordance with the terms and
conditions of a Completion/Repair and Security Agreement to be executed and
delivered by the Borrower in the standard Fannie Mae form.

 

c.     Administration of Funds.
The Replacement Reserve and Completion Reserve, if required, shall be deposited
into respective custodial accounts in
an FDIC insured institution that meet the standards of Fannie Mae. The
Replacement Reserve and Completion Reserve, if any, shall constitute additional
security for the Mortgage Loan. The Borrower shall not make a request for
release from the Replacement Reserve or Completion Reserve more frequently than
once in any quarter. Lender may, at its option, inspect the Property prior to
releasing any funds and charge a fee for such inspection.

 

9.       Lender’s Counsel.
Lender shall be represented by its attorney, Cassin Cassin & Joseph
LLP by Dennis Mensi, Esq. (212-972-6161) 711 Third Avenue, 20th Floor, New York, New York 10017 (“Lender’s
Counsel”), in connection with the preparation and review of the an
Documents and in all matters relating to the Mortgage Loan. The Borrower’s
acceptance of this Commitment shall constitute an authorization for Lender’s
Counsel to proceed at the Borrower’s expense with the preparation of the Loan
Documents, examination of the title to the Property and to take such other
steps as may be necessary or appropriate to consummate this transaction.

 

Borrower
acknowledges that Lender’s Counsel fees, expenses and disbursements, will be
due and payable at the time of the closing of the Mortgage Loan, or upon demand
in the event the

 

9

 

Mortgage
Loan does not close.

 

10.   General Conditions and
Exhibits. The General Conditions and Exhibits attached to this Commitment
are an integral part of this Commitment and are incorporated into and made a
part hereof by this reference.

 

11.   Assignment of Commitment.
This Commitment is issued directly to the Borrower and may not be assigned by
the Borrower without the express written consent of Lender which may be
withheld in its sole and absolute discretion. This Commitment, the Mortgage
Loan and all related closing documentation may be assigned by Lender without
the Borrower’s consent. If required by Lender, the Borrower agrees to execute
and deliver all documents necessary to effectuate such assignment, assuming
that such documents will not change the economic terms of the Mortgage Loan and
will not cause any material, adverse change to the Borrower with respect to the
terms and conditions of the Mortgage Loan.

 

12.   No Change in Conditions
or Circumstances. This Commitment has been issued in full reliance upon
financial statements and other documentation submitted by the Borrower to
Lender. Lender may, at its option, terminate its obligations hereunder if any
material adverse change occurs in the business, operations, affairs, prospects,
condition or the financial position of the Borrower or the Property, or in the
financial condition of any individuals or entities listed as sponsors or
principals in the Borrower’s Loan Application.

 

13.   Borrower’s Covenant to
Close; Termination of Commitment; Damages. Borrower hereby covenants to
Lender that it shall close the Mortgage Loan with Lender in accordance with the
terms and conditions of this Commitment. In the event that any condition of
this Commitment is not met as and when such condition is required to be
satisfied under this Commitment, Lender may, in its sole and absolute
discretion and without any liability of any kind, terminate this Commitment, in
which event any fees, deposits or other sums of money previously advanced or
paid to Lender (other than the Good Faith Deposit prior to Rate Lock as provided
herein) shall be retained by Lender and the Borrower shall pay to Lender,
promptly upon demand, any other costs, fees or expenses payable by Borrower
pursuant to the terms of this Commitment. In addition, Borrower shall be liable
to Lender for any damages, losses and expenses, including reasonable attorneys’
fees, incurred by Lender as a result of Lender’s inability to deliver the
Mortgage Loan to Fannie Mae as required by the Fannie Mae Commitment resulting
directly or indirectly from a default by the Borrower hereunder.

 

14.   Complete Agreement;
Survival; Time of the Essence. This Commitment, together with the General
Conditions incorporated herein and any exhibits hereto, when executed by the
parties hereto, contains the complete and entire understanding of the parties
hereto of Lender’s agreement to provide the Mortgage Loan as indicated, and no
changes or waivers will be recognized as valid unless they are made in writing
and similarly executed. Nothing transmitted or executed by Lender shall be effective
or enforceable against Lender unless signed by the undersigned signatory, who
is the sole authorized representative of Lender with respect to this
Commitment. No specific waiver of any of the terms hereof shall be considered
as a general waiver. The terms and conditions of this Commitment shall survive
the closing of the Mortgage

 

10

 

Loan.
In the event of any conflict between the terms and conditions of this
Commitment and the terms and conditions of the Loan Documents, the Loan
Documents shall control. In the event of any conflict between the terms of this
Commitment and the terms and conditions of the Fannie Mae Commitment or the DUS
Guide, the terms and conditions of the Fannie Mae Commitment and/or the DUS
Guide shall control. Time is of the essence with respect to all of Borrower’s
covenants and obligations under this Commitment.

 

15.   Applicable Law. The
rights and obligations of the parties with respect to this Commitment shall be
determined in accordance with the laws of the State of New York.

 

16.   Counterparts. This
Commitment may be executed in any number of counterparts, each of which
together shall constitute one and the same instrument.

 

17.   Expiration of Commitment.
Unless all conditions have been met and the Closing Date has occurred, this
Commitment shall automatically expire seventy-five (75) days from the date
hereof without further notice and Lender’s offer to make the Mortgage Loan
shall be void and of no further force or effect.

 

18.   Acceptance of Commitment.
If the terms and conditions of this Commitment are satisfactory, please
acknowledge Borrower’s acceptance of this Commitment by executing and
delivering one (1) copy of this Commitment to Lender. Borrower’s
acceptance of this Commitment must be received by Lender by not later than 5:00 P.M.
New York New York Time on the seventh (7th) day following the date of this
Commitment (the “Commitment Acceptance Date”). If this Commitment has
not been received by Lender by the Acceptance Date, then this Commitment shall
automatically expire without further notice and Lender’s offer to make the
Mortgage an shall be void and of no further force or effect.

 

	
   

  	
  Very
  truly yours,

  
	
   

  	
   

  
	
   

  	
  WACHOVIA
  MULTIFAMILY CAPITAL, INC.

  
	
   

  	
  By:

  
	
   

  	
   

  
	
   

  	
  /s/
  Marie Carolo

  
	
   

  	
  Name:

  	
  Marie
  Carolo

  
	
   

  	
  Title:

  	
  Director

  

 

 

SIGNATURES CONTINUED ON THE FOLLOWING PAGES

 

11

 

EXHIBIT A

 

SPECIAL CONDITIONS

 

	
  1.

  	
  Borrower
  may be required to satisfy additional conditions set forth by Lender, Lender’s
  Counsel and/or Fannie Mae as a result of Lender’s completion of its full
  underwriting of the transaction.

  
	
  2.

  	
  Borrower
  must confirm that the student population for any Property does not exceed
  80%.

  
	
  3.

  	
  Borrower
  may be required to execute at Closing an Operations and Maintenance PIan for
  Asbestos, which Plan shall be acceptable to Lender in its sole discretion.

  
	
  4.

  	
  Borrower
  may be required execute at Closing an Operations and Maintenance Plan for
  Lead-Based Paint which Plan shall be acceptable to Lender in its sole
  discretion.

  
	
  5.

  	
  Borrower
  may be required execute at Closing an Operations and Maintenance Plan for
  Mold which Plan shall be acceptable to Lender in its sole discretion.

  
	
  6.

  	
  Confirmation
  from Borrower and Borrower’s counsel that there are no other principals other
  than the following:

  
	
   

  	
  New England Realty Associates LP

  
	
   

  	
  NewReal, Inc.

  
	
   

  	
  Harold Brown

  
	
   

  	
  Ronald Brown

  
	
   

  	
  Harold Brown 1999 Revocable Trust

  
	
   

  	
  Juilliaen Aertsen, if confirmation exists of
  Aertsen Ventures within any of the borrower structures as a principal

  
	
  7.

  	
  Confirmation
  from Borrower and Borrower’s counsel that Harold Brown and/or Ronald Brown
  has the controlling interest of NewReal, Inc.

  
	
  8.

  	
  Confirmation
  from Borrower and Borrower’s counsel as to role, if any, of Aertsen Ventures
  in ownership of the Hamilton Portfolio.

  

 

15

 

EXHIBIT B

 

DUS CASH EXTENDED RATE LOCK
BORROWER CERTIFICATION

(Preliminary Underwriting Prior to Rate Lock)

 

	
  Property Name:

  	
   

  	
  Hamilton Portfolio

  
	
  Address:

  	
   

  	
  See Attached

  
	
  Rate Lock Loan Amount:

  	
   

  	
  See Attached

  
	
  Borrower Name:

  	
   

  	
  See Attatched

  
	
  Key Principal(s):

  	
   

  	
  Harold Brown and The Harold Brown 1999 Revocable Trust

  
	
  Lender:

  	
   

  	
  Wachovia Multifamily Capital, Inc.

  

 

The undersign undersigned Borrower is entering i into a
commitment (the “Loan Commitment”) with the Lender,
specified above regarding a loan (the “Loan”), in the above-referenced amount
(the “Rate Lock Loan Amount”) to be made by the Lender to the Borrower and
secured by a first lien on the property, described above (the “Property”). The
Lender is entering into a commitment (the “DUS ERL Commitment”) to sell the
Loan to Fannie Mae pursuant to Fannie Mae’s DUS requirements even though the
Lender has not yet fully completed its underwriting of the Loan.

 

The DUS ERL Commitment entered into between Fannie Mae and
the Lender has allowed the Borrower to (i) lock the interest rate for the
Loan in the Loan Commitment prior to completion of the underwriting process,
and (ii) delay the delivery of the Loan to Fannie Mae until the date
referenced in the DUS ERL Commitment (the “DUS ERL Commitment Expiration Date”).
The Borrower agrees that it is obligated to deliver the Loan to the Lender on
or prior to February 11, 2008 (the “Loan Commitment Expiration Date”).
Borrower and Key Principal(s) acknowledge that by rate locking the Loan,
Borrower is causing Fannie Mae to take a position in the financial markets in
reliance on the delivery of the Loan in accordance with the Lender’s DUS ERL
Commitment with Fannie Mae. Failure of the Borrower to close the Loan in
accordance with the Loan Commitment will cause Fannie Mae to incur economic
damages.

 

It is a condition of the an Commitment and the DUS ERL
Commitment that the Borrower and its Key Principal(s) execute this
Certification. Therefore, in order to induce the Lender to make the Loan and to enter into the Loan Commitment and to induce Fannie Mae to
enter into the DUS ERL Commitment with the Lender,
each of the undersigned hereby certifies and agrees as follows:

 

1.                                       Representations and Warranties.
Borrower and Key Principals represent and warrant that all of the following statements are true, complete, and correct in all
material respect:

 

a.               To the
best of the undersigned’s knowledge, with regards to the Property (i) there
are no structural, mechanical, electrical, plumbing or
other building component, roofs or system  defects, latent or otherwise (“Building Components”), (ii) all
Building Components are

 

16

 

in good and proper working order, and (iii) there is
no material deferred maintenance on the Property (each except as otherwise
noted on Exhibit A).

 

b.              No part
of the Property has been taken in condemnation or other like proceeding, nor is
any such proceeding pending or known to be contemplated (except as otherwise
noted on Exhibit A).

 

c.               The
Borrower and the Property are in compliance with all provisions of all zoning,
subdivision, environmental protection, disability accommodation, land use, fire
and building code, and occupational safety and health act rules, regulations,
and statutes to which they are subject, and all licenses, permits, and
approvals necessary for the ownership of the Borrower’s Property and the
conduct of its business have been obtained (except as otherwise noted on Exhibit A).

 

d.              To the
best of the undersigned’s knowledge (i) no part of the Property contains
underground storage tanks, asbestos containing materials, or lead based paint,
and (ii) there are no hazardous waste facilities that could affect the
operation or value of the Property. In addition, the Property is not subject to
any hazardous materials operations and maintenance programs (each except as
otherwise noted on Exhibit A).

 

e.               The
Borrower is the legal and equitable owner of the Property (or will be so at the
time of Loan Closing) and there are no recorded or unrecorded leases, easements,
deed restrictions, covenants, conditions, or restrictions, or other agreements,
that could affect the marketability of title to the Property or the
Borrower’s right to occupy and operate the
Property. The Property has all reciprocal use agreements in place necessary to
use and operate the Property as represented to the Lender, and the
Lender will have the benefit of all such
agreements (in such form as the Lender shall request) at Loan closing (except
as otherwise noted on Exhibit A).

 

f.                 Each of
the undersigned have reviewed the forms of all Loan Documents that the Lender
will use to consummate the Loan, and each of the undersigned will accept and
execute, or will cause to be accepted and executed, such documents in the form
reviewed. (Subject to any subsequent changes required to comply with applicable
law.)

 

2.                                       Preliminary Underwriting. Each of
the undersigned understands that the Net Operating Income and the Property
Value developed by the Lender to determine the Rate Lock Loan Amount are
preliminary and may change once the Lender completes its underwriting of the
Loan. Such change could affect the Loan Amount available under the Loan
Commitment and the DUS ERL Commitment. The Lender is obligated to complete its
underwriting of the Loan no later than 30 days after the rate lock date and the
Borrower agrees to provide the necessary assistance and documentation to enable
the Lender to fulfill this obligation.

 

After completion of final underwriting, the Lender shall
determine if any changes to the terms of the Loan Commitment are necessary in
order to close the Loan transaction. Each of the undersigned acknowledges that
the Borrower is obligated to accept non-material

 

17

 

modifications (if any) to the Loan Commitment. The Lender,
in consultation with Fannie Mae, shall make the
determination as to whether a change to the Loan Commitment and, as a result, to the DUS ERL Commitment, is material. A modification will be
deemed to be a material change if, based on the parties’ understanding of the
transaction, a reasonable borrower or lender would find the modification to be
a substantial change to the terms and conditions of the Loan which would cause
the parties to terminate the transaction (a “Material Modification”). In the
event of any Material Modification, the Borrower may accept or reject the change. The Borrower is not obligated to accept
Material Modifications (if any) to the Loan
Commitment.

 

If the Borrower refuses to accept a proposed Material
Modification, the Borrower shall not be liable to the Lender for any damages
incurred, and the Good Faith Deposit collected by the Lender as provided in the
Loan Commitment (the “Good Faith Deposit”) will be refunded in full to the
Borrower.

 

3.                                       Replacement Reserves and Completion/Repair Deposits. The following are estimates (to be finalized
upon the Lender’s review of consultants’ reports, inspection of the Property,
and the  Lender’s final
underwriting of the Loan) of replacement reserve and repair deposits that the Borrower shall be required to make and/or maintain in connection with
the Loan:

 

	
  Replacement Reserves:

  	
   

  
	
  Initial Deposit:

  	
  TBD (Subject to Final Engineering Report)

  
	
  Monthly Deposit:

  	
  TBD (Subject to Final Engineering Report)

  
	
   

  	
   

  
	
  Completion/Repair:

  	
  TBD (Subject to Final Engineering Report)

  

 

Any changes to the required funding of deposits for
Replacement Reserves or Completion/Repair after Lender’s review of third party
reports and final underwriting shall not be deemed to be a Material
Modification. The Borrower will be required to accept such change and close the
Loan pursuant to all other terms of the Loan Commitment.

 

4.                                       Non-Delivery Prior to Completion of Underwritinn. Each of the undersigned agrees that the Lender will be entitled to
terminate the Loan Commitment upon the occurrence of any of the following prior
to the time the Lender completes its underwriting of the Loan:

 

a.               The
third party reports (i.e., Appraisal, Environmental Assessments, Physical Needs
Assessment) reveal material adverse conditions;

 

b.              The
state of title of the Property as evidenced by a title insurance commitment
reveals material adverse conditions;

 

c.               A
material adverse change in the Property’s Net Operating Income, title, physical
or operating condition has occurred since the Lender determined the Rate Lock
Loan Amount;

 

18

 

d.              A
material adverse change in the financial condition or credit of the Borrower,
Key Principals or Principals has occurred since the
Lender determined the Rate Lock Loan Amount.

 

If the Loan Commitment is terminated as a result of any
one or more of the events described above, then the Borrower and Key
Principal(s), jointly and severally, shall be liable for such failure to close
the Loan transaction in an amount equal to the Pair-Off Fee defined in Exhibit B.

 

5.                                       Events of Default. Each of the undersigned
agrees that the Borrower will be in breach of the Loan
Commitment and that the Lender will be entitled to terminate the Loan
Commitment at any time upon the occurrence of
any of the following:

 

a.               The Borrower fails to deliver the loan in accordance with the terms of
the Loan Commitment for any reason after the Lender has completed its
underwriting of the Loan and confirmed the terms of the Loan Commitment;

 

b.              The Borrower otherwise elects not to honor the terms of the Loan
Commitment, or fails to perform its obligations under the Loan Commitment;

 

c.               Any representation, warranty, statement, certificate or other data and
information provided by the Borrower to the Lender, including but not limited
to the statements made in this Certification, is materially false or misleading
as of the date given.

 

If the Loan is not delivered as a result of any one or
more of the events of default described  above, then the Borrower and Key Principal(s), jointly and severally,
shall be liable for such  failure
to close the Loan transaction in an amount equal to the Default Fee defined in Exhibit C.

 

At Fannie Mae’s election, the Lender may be required to
assign to Fannie Mae any claims the Lender may have against the Borrower and or
the Key Principal(s) relating to the Borrower’s failure to close the Loan,
and, in such respect, Fannie Mae will be deemed to be a third party
beneficiary.

 

The undersigned acknowledges that the Lender and Fannie
Mae are relying upon the truth and accuracy of all representations made in this
Certification and all representations, warranties, statements, certificates and
other information furnished to the Lender in connection with the issuance of this
Loan Commitment.

 

19

 

 

This Certification
is executed by the undersigned parties as of the          day
of                    , 2008.

 

BORROWERS:

 

	
  Olde English Apts.,
  L.P.

  	
  Tax ID #

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Ronald Brown

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Commonwealth 1137, LP

  	
  Tax ID #

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Ronald Brown

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Commonwealth 1144, LP

  	
  Tax ID #

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Ronald Brown

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Clovelly Apartments, LP

  	
  Tax ID #

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Ronald Brown

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Highland 38, LP

  	
  Tax ID #

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Ronald Brown

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  North Beacon 140, LP

  	
  Tax ID #

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Ronald Brown

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  

 

20

 

	
  River Drive, LP

  	
  Tax ID #

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Ronald Brown

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Redwood Hills, LP

  	
  Tax ID #

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Ronald Brown

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Executive Apartments, LP

  	
  Tax ID #

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Ronald Brown

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Arrow Associates, LLC

  	
  Tax ID #

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Ronald Brown

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  WCB Associates, LLC

  	
  Tax ID #

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Ronald Brown

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Hamilton Oaks Associates, LLC

  	
  Tax ID #

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Ronald Brown

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  

 

21

 

	
  Atrium on Commonwealth,
  LP

  	
  Tax ID #

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Ronald Brown

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Coach, L.P.

  	
  Tax ID #

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Ronald Brown

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  

 

 

KEY PRINCIPALS:

	
  /s/
  Harold Brown

  	
   

  	
   

  
	
  Harold
  Brown

  	
   

  	
   

  
	
  Social
  Security Number:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  /s/
  Harold Brown

  	
   

  	
   

  
	
  The Harold Brown 1999 Revocable Trust

  	
   

  	
   

  
	
  Tax
  ID Number:

  	
   

  	
   

  	
   

  
					

 

22

 

 

Exhibit A

Exceptions to Representations and Warranties

 

 

23

 

 

Exhibit B

Pair-Off Fee

 

The
“Pair-Off Fee” is the greater of

 

(1)           2% of the Rate Lock Loan Amount; or

 

(2)           an amount calculated by multiplying:

 

·                                          the difference between (i) the
Note Rate in the DUS ERL Commitment less the Guaranty Fee and Servicing Fee
(the Required Net Coupon Rate”) and (ii) the Required Net Coupon Rate
offered for purchase by Fannie Mae for an immediate funding loan with the same
terms as the Loan on the DUS ERL Commitment Expiration Date or, if terminated
prior to the DUS ERL Commitment Expiration Date, the last day of the calendar
month in which the DUS ERL Commitment is terminated; TIMES

 

·                                          the Rate Lock Loan Amount;
TIMES

 

·                                          a present value factor,
calculated using the following formula:

 

1 - (1+r)-n

r

 

·                                          where:

 

                                                r               =              the
Required Net Coupon Rate used in (ii) above; and

 

                                                n              =              the
number of years the Loan Term on the DUS ERL Commitment.

 

In
the event of a partial reduction to the Loan Amount, the Pair-Off Fee that is
due will be determined based on the amount of the reduction that exceeds 5% of
the Rate Lock Loan Amount. No Pair-Off Fee is due on a reduction to the Loan
Amount that does not exceed 5% of the Rate Lock Loan Amount.

 

24

 

Exhibit C

Default Fee

 

The
“Default Fee” is the greater of

 

(1)           2% of the Rate Lock Loan Amount; or

 

(2)           an amount calculated by multiplying:

 

·                                          the difference between (i) the
interest rate for the Loan in the DUS ERL Commitment and (ii) the yield
rate (“Yield Rate”) of the on the run U.S. Treasury security whose maturity is
closest to the maturity of the Loan, as the Yield Rate is reported in The Wall Street Journal on the DUS ERL
Commitment Expiration Date or, if terminated prior to the DUS ERL Commitment
Expiration Date, the last day of the calendar month in which the DUS ERL
Commitment is terminated; TIMES

 

·                                          the Rate Lock Loan Amount;
TIMES

 

·                                          a present value factor,
calculated using the following formula:

 

1 - (1+r)-n

r

 

·                                          where:

 

                                                r               =              the
Yield Rate; and

 

                                                n              =              the
number of years the Loan Term on the DUS ERL Commitment.

 

 

 

25

 

GENERAL CONDITIONS AND TERMS

STANDARD ADDITIONAL REQUIREMENTS

 

The
following General Conditions are incorporated into the Commitment to which such
conditions are attached and incorporated by reference therein. Capitalized
terms not defined herein shall have the respective meanings ascribed thereto in
the Commitment.

 

A.  Loan
Documents:

 

The
Loan Documents shall be prepared by, and shall be in form and substance
acceptable to, Lender’s Counsel and shall include such covenants,
representations, and warranties as are customarily required to assure the
legality of the Mortgage Loan, protection against mechanics’ and materialmen’s
liens, and full compliance with this Commitment.

 

B.  Additional
Liens; Change of Ownership:

 

Except
as otherwise approved by Lender and Fannie Mae, neither secondary financing to
be secured by the Property nor the imposition of any other junior liens on the
Property, or beneficial interests in the Borrower or Key Principals, if any,
shall be permitted without Lender’s prior written consent. The Mortgage will
provide that transfers of the Property or of the beneficial interest in the
Borrower will be prohibited and subject to applicable restrictions, limitations
and penalties as provided in the Loan Documents.

 

C.  Real Estate
Tax and Insurance Escrow:

 

The
Borrower shall be required to make escrow deposits together with the monthly
payments of principal and interest in an amount determined by Lender, which
monthly amount shall be not less than 1/ 12 of the annual real estate taxes,
hazard insurance and rent insurance premiums, special assessments (if
applicable), ground lease payments (if applicable), and water and sewer rates
(if applicable) at and in respect of the Property. Lender shall not collect
imposition deposits with respect to Personal Property Taxes, if any, and water
and sewer charges, provided such charges are metered and not deemed a frontage
or sewer tax.

 

At
closing, Borrower shall be required to fund these escrow deposits in such
amount as will, together with the monthly deposits, be sufficient, in Lender’s
determination, to make the next scheduled payments of these items and provide a
reasonable cushion against increases.

 

Notwithstanding
the foregoing, Lender shall waive the collection of escrow deposits for
impositions provided Borrower pays all such items in a timely manner, provides
Lender with proof of payment of all such impositions within five (5) days
of the date said impositions are due and is not in default of any of the terms
and covenants contained in the Loan Documents. Lender reserves the right to
require monthly escrows for all impositions should Borrower be in default under
the Loan Documents or fail to provide Lender with proof of payment as required.

 

26

 

 

D.         Annual
Statements:

 

The
Borrower will be required to furnish Lender with annual financial statements,
within 120 calendar days of the close of each fiscal year of the Borrower,
which financial statements shall be prepared by and certified by Borrower and,
at Lender’s option, prepared and certified by an independent certified public
accountant, and shall be in form satisfactory to Lender.

 

The
Borrower shall, at Lender’s option, furnish Lender with owner certified
unaudited quarterly financial statements within thirty (30) days of the end of
each calendar quarter during which any portion of the Mortgage Loan is
outstanding or more frequently as may be reasonably required by Lender.

 

The
Borrower shall furnish, on a periodic basis, operating and financial information
which shall include, without limitation, certified rent rolls, occupancy
information, operating expense and capital expenditures data, as may be
required by Lender.

 

E.         Hazard
Insurance; Eminent Domain:

 

The
Property must be continuously insured during the term of the Mortgage Loan by
carriers at all times satisfactory to Lender and Fannie Mae pursuant to
policies in form, substance and amount satisfactory to Lender and Fannie Mae.
Not less than fifteen (15) days prior to closing, Borrower shall deliver to
Lender policies acceptable to Lender, issued by companies rated A -Class V
or better in the most recent publication of Best’s Key Rating Guide
Property-Casualty, naming Fannie Mae, c/o Lender as Mortgagee.

 

The
delivery of such required policies shall be accompanied by a paid receipt
evidencing payment in full of the required premiums for at least the first full
year of the Mortgage Loan term. Evidence of acceptable coverage accompanied by
a paid premium receipt evidencing payment in full of the required renewal
premiums shall thereafter be delivered to Lender at least 30 days before the
expiration date of the existing policies. All of such policies shall provide
that they are not subject to cancellation or reduction unless Lender shall have
first received thirty (30) days prior written notice.

 

F.         No
Condemnation Proceeding or Casualty:

 

As
of closing, no proceeding shall have been threatened or commenced by any
governmental or other authority having the power of eminent domain to condemn
any part of the Property, which Lender in its sole judgment deems substantial.

 

As
of the Closing Date, no portion of the Property shall have been damaged and not
repaired to Lender’s satisfaction unless an escrow shall have been established
with Lender in an amount and on terms satisfactory to Lender and Fannie Mae to
ensure the prompt and complete repair of such damage. In the event of any such
condemnation or casualty, Lender shall have the option to terminate this
Commitment and retain all amounts previously paid by the Borrower thereunder.

 

27

 

G.         Application
of Insurance and Condemnation Proceeds:

 

Insurance
proceeds will be payable to the Lender and applied by the Lender either to the
repayment of the Mortgage Loan or the restoration of the Property in accordance
with the standard Fannie Mae provisions set forth in the Mortgage.

 

Condemnation
proceeds will be payable to the Lender and applied in accordance with the
standard Fannie Mae provisions set forth in the Mortgage.

 

H.         Taxes
and Assessments:

 

All
taxes and any assessments affecting the Property which are due and payable
within sixty (60) days of Closing shall have been paid and discharged in full
prior to Closing or an escrow established with the title insurer so that same
shall not be an exception to Lender’s title insurance policy.

 

I.          Opinions
of Borrower’s Counsel:

 

Lender
shall be furnished with opinions of the Borrower’s counsel in the form provided
and approved by Lender.

 

J.         Hazardous
Waste:

 

The
Borrower shall comply with the requirements, if any, set forth in the report
prepared by Lender’s environmental consultant. The Borrower shall maintain the
Property from and after the date of this Commitment and during the term of the
Mortgage Loan in accordance with the requirements set forth in such report and
in accordance with applicable environmental laws and regulations and any
applicable operations and maintenance plans, and shall comply with all
requirements regarding environmental hazards set forth in the Loan Documents.

 

Borrower
shall be obligated to provide at Borrower’s expense, such supplemental
environmental reports as Lender may require from time to time. In the event
Lender determines in its sole and absolute discretion at any time following the
date of the Commitment that the Property does not satisfy the environmental
requirements of Fannie Mae, Lender may cancel and terminate the Commitment and
shall be under no further obligation to make the Mortgage an, and all amounts
deposited hereunder shall be retained by Lender.

 

The
Fannie Mae Mortgage contains various covenants, representations, agreements and
indemnifications with respect to environmental issues and hazards and Borrower,
by its acceptance of this Commitment, hereby acknowledges that it will be bound
by such provisions.

 

K.         Leases:

 

All
existing and future tenant leases for residential and commercial space at the

 

28

 

Property
shall be subordinate to the lien of the Mortgage. Borrower shall deliver to
Lender a true and correct copy of its standard form of residential and
commercial lease in connection with the Property for approval by Lender. All
leases shall be executed on such approved forms of leases with only minor
non-material changes.

 

L.         Access
to Property; Inspections:

 

From
the date Borrower accepts this Commitment and during the term of the Mortgage
Loan, Lender or its designated agents and representatives shall at all
reasonable times and at Borrower’s expense, have access to the Property and the
right to inspect the condition and operations of the Property, including,
without limitation, the right to perform environmental testing on the Property
in the event Borrower has failed to perform any such tests as required by Lender
from time to time.

 

M.        Payment
of Costs:

 

The
Borrower agrees to pay, whether or not the Mortgage Loan closes, all costs
incident to the preparation of this Commitment and the closing of the Mortgage
Loan, including, without limitation, all appraisal, engineering and
environmental costs, all taxes and assessments due at Closing and all recording
fees, registration taxes, title insurance premiums, survey costs, the fees and
expenses of Lender’s Counsel and the fees and expenses of Lender’s local
counsel, if any.

 

N.         Indemnification
for Brokerage Commissions:

 

Borrower
acknowledges and agrees that any fee due for mortgage brokerage or related
mortgage origination services shall be Borrower’s sole responsibility. Borrower
shall indemnify and hold Lender harmless from any claims for brokerage
commissions, finder’s fees assignment fees or any other fees or compensation in
connection with the Commitment or the Mortgage Loan.

 

O.        Approval
of Managing Agent.

 

Lender
shall have the right to approve any existing or proposed managing agent, and
the terms of the related managing agreement, for the Property.

 

P.         No
Reliance on Underwriting.

 

Borrower
acknowledges and agrees that (a) Lender’s analysis of the Property,
including appraisals, engineering reports, environmental reports, inspections,
etc. are for the sole benefit of Lender and Fannie Mae in underwriting the
Mortgage Loan, (b) such analysis may not be relied upon by Borrower or any
other party, other than Lender and Fannie Mae, and (c) such analysis,
reports and underwriting elements do not constitute a representation or
warranty by Lender or Fannie Mae as to the value or condition of the Property
or its quality of operations. Lender shall not be responsible for or bound by
any erroneous quote or commitment given to Lender by Fannie Mae or any other
investor. Fannie Mae is not a party to this commitment letter and

 

29

 

Fannie
Mae makes no representation or warranty concerning the Loan or the Mortgaged
Property.

 

Q.        Publicity.

 

Borrower
agrees to permit Lender to issue press releases and advertising, disclose the
identity and the amount, purpose and other information pertaining to the Loan.

 

R.         Disclosure
of Information:

 

Lender
may furnish information regarding Borrower or the Property to third parties
with an existing or prospective interest in the servicing, enforcement,
evaluation, performance, purchase or securitization of the indebtedness,
including but not limited to trustees, master servicers, special servicers, rating
agencies, investors, and organizations maintaining database on the underwriting
and performance of multifamily mortgage loans. Borrower irrevocably waives any
and all rights it may have under applicable law to prohibit such disclosure,
including but not limited to any right of privacy.

 

S.         Compliance
with OFAC

 

Borrower
represents and warrants that Borrower, and to the best of Borrower’s knowledge
after having made diligent inquiry, any guarantors or indemnitors in connection
with the Loan, and all persons or entities owning an interest in Borrower (i) are
not currently identified on the United States Office of Foreign Assets Control
(“OFAC”) List, and (ii) are not persons or entities with whom a citizen of
the United States is prohibited to engage in transactions by any trade embargo,
economic sanction, or other prohibition of United States law, regulation, or
Executive Order of the President of the United States. The OFAC List currently
is accessible through the internet website http:/lwww.treas.gov/offices/eotffe/ofac/sdn/tl
1sdn.pdf

 

Important
information about opening your new account and/or entering into a business
relationship with Wachovia: To help fight the funding of terrorism and money
laundering activities, Federal law requires all financial institutions to
obtain, verify and record information that identifies each person or
corporation who opens an account and/or enters into a business relationship.

 

30

 

EXHIBIT C

 

	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Monthly

  
	
   

  	
   

  	
   

  	
   

  	
  # of

  	
   

  	
  Loan

  	
   

  	
  Minimum

  	
   

  	
  Maximum

  	
   

  	
  Replacement

  
	
  Property & Address

  	
   

  	
  Borrowing Entity

  	
   

  	
  Units

  	
   

  	
  Amount

  	
   

  	
  DSCR

  	
   

  	
  LTV

  	
   

  	
  Reserve
  Deposit

  
	
  704-718 Chelmsford Street,

  Lowell, MA

  	
   

  	
  Olde English Apts., L.P.

  	
   

  	
  84

  	
   

  	
  $

  	
  2,000,000

  	
   

  	
  1.55

  	
   

  	
  55

  	
  %

  	
  TBD

  
	
  1131-1137 Commonwealth

  Ave, Boston, MA

  	
   

  	
  Commonwealth 1137, LP

  	
   

  	
  35

  	
   

  	
  $

  	
  2,000,000

  	
   

  	
  1.55

  	
   

  	
  55

  	
  %

  	
  TBD

  
	
  1144-1160 Commonwealth

  Ave, Boston, MA

  	
   

  	
  Commonwealth 1144, LP

  	
   

  	
  262

  	
   

  	
  $

  	
  12,000,000

  	
   

  	
  1.55

  	
   

  	
  55

  	
  %

  	
  TBD

  
	
  160-170 Concord Street,

  Nashua, NH

  	
   

  	
  Clovelly Apartments, LP

  	
   

  	
  103

  	
   

  	
  $

  	
  3,000,000

  	
   

  	
  1.55

  	
   

  	
  55

  	
  %

  	
  TBD

  
	
  38-40 Highland Street,

  Lowell, MA

  	
   

  	
  Highland 38, LP

  	
   

  	
  36

  	
   

  	
  $

  	
  1,000,000

  	
   

  	
  1.55

  	
   

  	
  55

  	
  %

  	
  TBD

  
	
  140-154 North Beacon St.,

  Brighton, MA

  	
   

  	
  North Beacon 140, LP

  	
   

  	
  65

  	
   

  	
  $

  	
  6,825,000

  	
   

  	
  1.55

  	
   

  	
  55

  	
  %

  	
  TBD

  
	
  3-17 River Drive, Danvers,

  MA

  	
   

  	
  River Drive, LP

  	
   

  	
  72

  	
   

  	
  $

  	
  2,500,000

  	
   

  	
  1.55

  	
   

  	
  55

  	
  %

  	
  TBD

  
	
  376-384 Sunderland,

  Worchester, MA

  	
   

  	
  Redwood Hills, LP

  	
   

  	
  180

  	
   

  	
  $

  	
  6,700,000

  	
   

  	
  1.55

  	
   

  	
  55

  	
  %

  	
  TBD

  
	
  545-561 Worcester Road,

  Framingham, MA

  	
   

  	
  Executive Apartments, LP

  	
   

  	
  72

  	
   

  	
  $

  	
  2,300,000

  	
   

  	
  1.55

  	
   

  	
  55

  	
  %

  	
  TBD

  
	
  1200 Massachusetts Ave,

  Boston, MA

  	
   

  	
  Arrow Associates, LLC

  	
   

  	
  92

  	
   

  	
  $

  	
  11,750,000

  	
   

  	
  1.20

  	
   

  	
  65

  	
  %

  	
  TBD

  
	
  Westside Colonial- 10-70

  Westland St and 985-997

  Pleasant St, Brockton, MA

  	
   

  	
  WCB Associates, LLC

  	
   

  	
  180

  	
   

  	
  $

  	
  7,000,000

  	
   

  	
  1.55

  	
   

  	
  55

  	
  %

  	
  TBD

  
	
  Hamilton Oaks- 30-50 Oak

  Street Extension and 40-60

  Reservoir St, Brockton, MA

  	
   

  	
  Hamilton Oaks Associates,
  LLC

  	
   

  	
  268

  	
   

  	
  $

  	
  11,900,000

  	
   

  	
  1.55

  	
   

  	
  55

  	
  %

  	
  TBD

  
	
  1079 Commonwealth Ave,

  Boston, MA

  	
   

  	
  Atrium on Commonwealth, LP

  	
   

  	
  187

  	
   

  	
  $

  	
  22,000,000

  	
   

  	
  1.55

  	
   

  	
  55

  	
  %

  	
  TBD

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  $

  	
  90,975,000

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

31Exhibit
10.1

 

AMENDED AND RESTATED
EMPLOYMENT AGREEMENT

 

 

THIS AMENDED AND RESTATED
EMPLOYMENT AGREEMENT (this “Agreement”), is made and entered into as of January 17,
2008, by and between Communications & Power Industries, Inc., a
Delaware corporation (hereinafter called the “Corporation”), and Robert
A. Fickett (hereinafter called the “Executive”).

 

WITNESSETH THAT:

 

WHEREAS, the Corporation
and the Executive are party to an Employment Agreement, dated as of April 27,
2006 (the “Original Employment Agreement”), providing for the employment
of the Executive as President and Chief Operating Officer of the Corporation;
and

 

WHEREAS, the parties
desire to amend and restate the Original Employment Agreement pursuant to the
terms and provisions set forth herein;

 

NOW, THEREFORE, the
Corporation and the Executive, each intending to be legally bound, hereby
mutually covenant and agree as follows (certain defined terms are set forth in Section 8(d) hereof):

 

1.             Employment
and Term.

 

(a)           Employment.  The Corporation shall employ the Executive as
the President and Chief Operating Officer of the Corporation, and the Executive
shall so serve, for the term set forth in Section 1(b).

 

(b)           Term.  The term of the Executive’s employment under
this Agreement commenced on April 27, 2006 (the “Commencement Date”)
and shall end on the third anniversary of the Commencement Date, subject to the
extension of such term as hereinafter provided and subject to earlier
termination as provided in Section 8.  The term of this Agreement shall be extended
automatically for one (1) additional year as of the third anniversary of
the Commencement Date, and each anniversary date thereafter unless, no later
than six (6) months prior to any such renewal date, either the Corporation
or the Executive gives written notice to the other, in accordance with Section 14,
that the term of this Agreement shall not be so extended; provided, however, no
automatic extension of the term shall occur with respect to an anniversary date
if Executive has attained the age of sixty-five (65).

 

2.             Duties.  During the period of employment as provided
in Section 1(b) hereof, the Executive shall serve as President
and Chief Operating Officer of the Corporation and President and Chief
Operating Officer of the Parent and have all powers and duties consistent with
such positions, subject to the reasonable direction of the Chief Executive
Officer.  The Executive shall devote
substantially his entire time during reasonable business hours (reasonable sick
leave and vacations excepted) and reasonable best efforts to fulfill
faithfully, responsibly and to the best of his ability his duties hereunder.

 

 

3.             Salary.

 

(a)           Base
Salary.  For services performed by
the Executive for the Corporation pursuant to this Agreement during the period
of employment as provided in Section 1(b) hereof, the
Corporation shall pay the Executive a base salary at the rate of Three Hundred
Thousand U.S. dollars ($300,000 U.S.) per year, payable in substantially equal
installments in accordance with the Corporation’s regular payroll
practices.  The Executive’s base salary
(with any increases under Section 3(b), below) shall not be subject
to reduction; provided, however, in connection with an across-the-board salary
reduction that applies to substantially all of the management executives of
Parent and its subsidiaries, Executive’s base salary may be reduced by a
percentage amount equal to the average amount of the percentage decrease
affecting such other management executives, but in no event more than 10%.  Any compensation which may be paid to the
Executive under any additional compensation or incentive plan of the
Corporation or Parent or which may be otherwise authorized from time to time by
the Board (or an appropriate committee thereof) shall be in addition to the
base salary to which the Executive shall be entitled under this Agreement.

 

(b)           Salary
Increases.  During the period of
employment as provided in Section 1(b) hereof, the base salary
of the Executive shall be reviewed no less frequently than annually by the
Board to determine whether or not the same should be increased in light of the
duties and responsibilities of the Executive and the performance thereof, and
if it is determined that an increase is merited, such increase shall be
promptly put into effect and the base salary of the Executive as so increased
shall constitute the base salary of the Executive for purposes of Section 3(a).

 

4.             Annual
Bonuses.  For each fiscal year during
the term of employment, the Executive shall be eligible to receive a bonus
payable in cash and/or in Parent’s common stock.  The amount of the bonus shall be based on the
achievement of certain operating and/or financial goals, in accordance with the
terms of a bonus plan adopted and administered by the Board for senior
executives of the Parent and its subsidiaries, which plan may be amended from
time to time by the Board in its discretion. 
Executive’s target annual bonus for fiscal year 2006 will be equal to
0.75 times his current annual salary.

 

5.             Equity
Incentive Compensation.  During the
term of employment hereunder the Executive shall be eligible to participate, in
an appropriate manner relative to other senior executives of the Parent and its
subsidiaries, in any equity-based incentive compensation plan or program
approved by the Board from time to time, including (but not by way of
limitation) any plan providing for the granting of (a) options to purchase
stock of the Parent, (b) restricted stock of the Parent or (c) similar
equity-based units or interests.

 

6.             Other
Benefits.  In addition to the
compensation described in Sections 3, 4 and 5, above, the Executive
shall also be entitled to the following:

 

(a)           Participation
in Benefit Plans.  The Executive
shall be entitled to participate in all of the various retirement, welfare,
disability, fringe benefit, executive perquisite and expense reimbursement
plans, and any other programs and arrangements of the Corporation and Parent to
the extent the Executive is eligible for participation under the 

 

2

 

terms of such plans, programs and arrangements, with the participation
levels to be determined by Executive’s salary, position and tenure, and such
other factors as apply in such plans and programs.  Except as otherwise specifically provided in
this Agreement, the Executive shall also be entitled to all benefits provided
to him under the practices of the Corporation as in effect immediately prior to
the Commencement Date.

 

(b)           Vacation
and Holidays.  The Executive shall be
entitled to the number of weeks of vacation during each year of this Agreement
per the formula determined by the existing policies of the Corporation, or such
greater period as the Board may approve, and to the paid holidays given by the
Corporation to its employees generally, without reduction in salary or other
benefits.

 

7.             Covenants
of the Executive.  In order to induce
the Corporation to enter into this Agreement, the Executive hereby agrees as
follows:

 

(a)           Confidentiality.  Except for and on behalf of the Corporation
with the consent of or as directed by the Board, the Executive shall keep
confidential and shall not divulge to any other person or entity, during the
term of employment or thereafter, any of the business secrets or other
confidential information regarding the Parent and its subsidiaries which has
not otherwise become public knowledge; provided, however, that nothing in this
Agreement shall preclude the Executive from disclosing information (i) to
an appropriate extent to parties retained to perform services for the Parent or
its subsidiaries or (ii) under any other circumstances to the extent such
disclosure is, in the reasonable judgment of the Executive, appropriate or
necessary to further the best interests of the Corporation or its subsidiaries
or (iii) as may be required by law, legal process or subpoena.

 

(b)           Records.  All papers, books and records of every kind
and description relating to the business and affairs of the Parent and its
subsidiaries, whether or not prepared by the Executive, other than personal
notes prepared by or at the direction of the Executive, shall be the sole and
exclusive property of the Corporation, and the Executive shall surrender them
to the Corporation at any time upon request by the Board.

 

(c)           Non-Competition.  The Executive hereby agrees with the
Corporation that during the term of his employment hereunder, and in certain
instances, as provided below, for a period following termination of his
employment hereunder, he shall not, directly or indirectly, engage in, or be
employed by, or act as a consultant to, or be a director, officer, owner or
partner of, or acquire a substantial interest in, any business activity or
entity which competes significantly with the Parent or any of its subsidiaries,
provided, however, that as to the period after termination of the Executive’s
employment hereunder, the restrictive covenants set forth in this Section 7(c) shall
apply only in the case of terminations without Cause or resignations for Good
Reason and then only for a period beginning on the Date of Termination and
ending, as applicable, eighteen (18) months or twenty-four (24) months later
(which period will be based the applicable multiplier pursuant to subsection
(ii) of Section 9(b) of this Agreement);

 

(d)           Non-Solicitation.  During the time period after termination (if
any) during which the Executive is subject to the noncompetition covenants of Section 7(c) of
this Agreement, he shall not induce or attempt to induce any customer,
supplier, licensee or 

 

3

 

other individual, corporation or other business organization having a
business relation with the Parent or its subsidiaries to cease doing business
with the Parent or its subsidiaries or in any way interfere with the
relationship between any such customer, supplier, licensee or other person and
the Parent or its subsidiaries.  In
addition, during the eighteen (18) month period following termination of
employment for any reason (or, if longer, the period during which the Executive
is subject to the non-competition covenants of Section 7(c) of
this Agreement), the Executive shall not solicit any employee of the Parent or
any of its subsidiaries to leave the employment thereof or in any way interfere
with the relationship of such employee with the Parent or its subsidiaries.

 

(e)           Enforcement.  The Executive recognizes that the provisions
of this Section 7 are vitally important to the continuing welfare
of the Corporation and its subsidiaries and that money damages would constitute
an inadequate remedy for any violation thereof. 
Accordingly, in the event of any such violation by the Executive, the
Corporation and its subsidiaries, in addition to any other remedies they may
have, shall have the right to institute and maintain a proceeding to compel
specific performance thereof or to seek an injunction restraining any action by
the Executive in violation of this Section 7.

 

8.             Termination.  Unless earlier terminated in accordance with
the following provisions of this Section 8, the Corporation shall
continue to employ the Executive and the Executive shall remain employed by the
Corporation during the entire term of this Agreement as set forth in Section 1(b).  Section 9 hereof sets forth
certain obligations of the Corporation in the event that the Executive’s
employment is terminated.

 

(a)           Death
or Disability.  Except to the extent
otherwise provided in Section 9 with respect to certain post-Date
of Termination payment obligations of the Corporation, this Agreement shall
terminate immediately as of the Date of Termination in the event of the
Executive’s death or in the event that the Executive becomes disabled.  The Executive will be deemed to be disabled
when he is unable to engage in any substantial gainful activity by reason of
any medically determinable physical or mental impairment that can be expected
to result in death or can be expected to last for a continuous period of not
less than twelve (12) months, or begins receiving income replacement benefits
for a period of not less than three (3) months under an accident and
health plan of the Corporation or an affiliate by reason of any medically
determinable physical or mental impairment that can be expected to result in
death or can be expected to last for a continuous period of not less than
twelve (12) months.  If any question
arises as to whether the Executive is disabled, upon reasonable request
therefor by the Board, the Executive shall submit to reasonable medical
examination for the purpose of determining the existence, nature and extent of
any such disability.  In accordance with Section 14,
the Board shall promptly give the Executive written notice of any such
determination of the Executive’s disability. 
In the event of disability, until the Date of Termination, the base
salary payable to the Executive under Section 3 hereof shall be
reduced dollar-for-dollar by the amount of disability benefits, if any, paid to
the Executive in accordance with any disability policy or program of the
Corporation or its affiliates.

 

(b)           Discharge
for Cause.  In accordance with the
procedures hereinafter set forth, the Board may discharge the Executive from
his employment hereunder for Cause. Except to the extent otherwise provided in Section 9
with respect to certain post-Date of 

 

4

 

Termination obligations of the Corporation, this Agreement shall
terminate immediately as of the Date of Termination in the event the Executive
is discharged for Cause.  Any discharge
of the Executive for Cause shall be communicated by a Notice of Termination to
the Executive given in accordance with Section 14 of this
Agreement.  For purposes of this
Agreement, a “Notice of Termination” means a written notice which (i) indicates
the specific termination provision in this Agreement relied upon, (ii) sets
forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of the Executive’s employment under the provision so
indicated and (iii) if the Date of Termination is to be other than the
date of receipt of such notice, specifies the Date of Termination (which date
shall in all events be within thirty (30) days after the giving of such
notice).  In the case of a discharge of
the Executive for Cause, the Notice of Termination shall include a copy of a
resolution duly adopted by the Board at a meeting called and held for such
purpose (after reasonable notice to the Executive and reasonable opportunity
for the Executive to be heard before the Board prior to such vote), finding that,
in the reasonable and good faith opinion of the Board, the Executive was guilty
of conduct constituting Cause.  No
purported termination of the Executive’s employment for Cause shall be
effective without a Notice of Termination.

 

(c)           Termination
for Other Reasons.  The Corporation
may discharge the Executive without Cause by giving written notice to the
Executive in accordance with Section 14 at least thirty (30) days
prior to the Date of Termination.  The
Executive may resign from his employment by giving written notice to the
Corporation in accordance with Section 14 at least thirty (30) days
prior to the Date of Termination.  Except
to the extent otherwise provided in Section 9 with respect to
certain post-Date of Termination obligations of the Corporation, this Agreement
shall terminate immediately as of the Date of Termination in the event the
Executive is discharged without Cause or resigns.

 

(d)           Definitions.  For purposes of this Agreement, the following
capitalized terms shall have the meanings set forth below:

 

(i)            “Accrued
Obligations” shall mean, as of the Date of Termination, the sum of (A) the
Executive’s base salary hereunder through the Date of Termination to the extent
not theretofore paid, (B) the amount of any incentive compensation,
deferred compensation and other cash compensation accrued by the Executive as
of the Date of Termination to the extent not theretofore paid, (C) any
vacation pay, expense reimbursements and other cash entitlements accrued by the
Executive as of the Date of Termination to the extent not theretofore paid, and
(D) with respect to any bonus plans for the fiscal year of termination, if
Executive has been employed for at least six (6) months during such fiscal
year and has not been terminated for Cause or resigned without Good Reason, a
partial bonus for the fiscal year of termination equal to the bonus payable for
the full fiscal year in accordance with the applicable plan, program or policy,
multiplied by a fraction equal to the fraction of the fiscal year preceding Executive’s
termination.

 

(ii)           “Base
Salary” shall mean the annual base salary paid to Executive immediately
prior to the termination of employment, provided that such amount shall in no
event be less than the annual base salary payable to Executive during the one (1) year
period immediately prior to the termination.

 

5

 

(iii)          “Board”
means the board of directors of Parent.

 

(iv)          “Cause”
shall mean (i) acts or omissions by the Executive which constitute
intentional material misconduct or a knowing violation of a material policy of
the Parent or any of its subsidiaries, (ii) the Executive personally
receiving a benefit in money, property or services from the Parent or any of
its subsidiaries or from another person dealing with the Parent or any of its
subsidiaries, in material violation of applicable law or policy of Parent or
any of its subsidiaries, (iii) an act of fraud, conversion,
misappropriation, or embezzlement by the Executive or his conviction of, or
entering a guilty plea or plea of no contest with respect to, a felony, or the
equivalent thereof (other than DUI), or (iv) any deliberate and material
misuse or deliberate and material improper disclosure of confidential or
proprietary information of Parent or any of its subsidiaries.  Notwithstanding the foregoing, no act or
omission by the Executive shall constitute Cause hereunder unless the
Corporation has given detailed written notice thereof to the Executive, and the
Executive has failed to remedy such act or omission within a reasonable time
after receiving such notice.

 

(v)           A “Change
of Control” shall be deemed to have occurred if:

 

(A)          Any
individual or group constituting a “person”, as such term is used in Sections
l3(d) and l4(d)(2) of the Securities Exchange Act of 1934, as amended
(“Exchange Act”) (other than (A) the Parent or any of its
subsidiaries, (B) any trustee or other fiduciary holding securities under
an Executive benefit plan of the Parent or of any of its subsidiaries or (C) any
Cypress Fund(s)), is or becomes the beneficial owner, directly or indirectly,
of securities of the Parent representing fifty percent (50%) or more of the
combined voting power of the Parent’s outstanding securities then entitled
ordinarily (and apart from rights accruing under special circumstances) to vote
for the election of directors; or

 

(B)           Continuing
Directors cease to constitute at least a majority of the Board; or

 

(C)           there
occurs a reorganization, merger, consolidation or other corporate transaction
involving the Parent (a “Transaction”), in each case with respect to
which the stockholders of the Parent immediately prior to such Transaction do
not, immediately after the Transaction, own more than 50% of the combined
voting power of the Parent or other corporation resulting from such
Transaction; or

 

(D)          all
or substantially all of the assets of the Corporation or Parent are sold,
liquidated or distributed.

 

(vi)          “Continuing
Directors” shall mean (A) the directors of the Parent in office on the
date hereof and (B) any successor to any such director who (x) was
nominated or selected by a majority of the Continuing Directors in office at
the time of the director’s nomination or selection, and (y) who is not an “affiliate”
or “associate” (as defined in rule 12b-2 under the Exchange Act) of any
Ten Percent Owner.

 

(vii)         “Cypress
Fund” shall mean any investment fund which is an “affiliate” of Cypress
Associates II LLC.

 

6

 

(viii)        “Date
of Termination”  shall mean (A) in
the event of a discharge of the Executive by the Board for Cause, the date the
Executive receives a Notice of Termination, or any later date specified in such
Notice of Termination, as the case may be, (B) in the event of a discharge
of the Executive without Cause or a resignation by the Executive, the date
specified in the written notice to the Executive (in the case of discharge) or
the Corporation (in the case of resignation), which date shall be no less than
thirty (30) days from the date of such written notice, (C) in the event of
the Executive’s death, the date of the Executive’s death, and (D) in the
event of  the Executive’s disability
pursuant to Section 8(a), the date the Executive receives written
notice of determination of disability (or, if earlier, twelve (12) months from
the date the Executive’s disability began).

 

(ix)           “Good
Reason”  shall mean any of the
following (A) the assignment to the Executive of any duties inconsistent
in any respect with the Executive’s positions with the Corporation and Parent
as set forth in this Agreement (including status, offices, titles and reporting
requirements), authority, duties or responsibilities as contemplated by Section 2,
or any action by the Corporation or Parent which results in diminution in such
positions, authority, duties or responsibilities, excluding for this purpose
any action not taken in bad faith and which is remedied by the Corporation or
Parent promptly after receipt of written notice thereof given by the Executive
in accordance with Section 14; or (B) any material failure by
the Corporation to comply with any of the provisions of this Agreement, other
than any failure not occurring in bad faith and which is remedied by the
Corporation promptly after receipt of written notice thereof given by the
Executive in accordance with Section 14; or (C) the relocation
of the offices where Executive is required to report to a location that is
50 miles or more distant from the Corporation’s existing location in Palo
Alto, California; or (D) the failure to appoint Executive as President and
Chief Operating Officer of the combined or acquiring entity in connection with
a Change of Control, reporting to its Chief Executive Officer; or (E) the
Corporation giving notice to the Executive in accordance with Section 1(b) that
the term of this Agreement shall not be extended upon the expiration of the
then-current term.

 

(x)            “Parent”
shall mean CPI International, Inc.

 

(xi)           “Potential
Change of Control” shall mean the earliest to occur of (a) the
execution of an agreement or letter of intent, the consummation of the
transactions described in which would result in a Change of Control, (b) the
approval by the Board of a transaction or series of transactions, the
consummation of which would result in a Change of Control, or (c) the
public announcement of a tender offer for the Parent’s voting stock, the
completion of which would result in a Change of Control; provided, that no such
event shall be a “Potential Change of Control” unless (i) in the case of
any agreement or letter of intent described in clause (a), the transaction
described therein is subsequently consummated by the Parent and the other party
or parties to such agreement or letter of intent and thereupon constitutes a “Change
of Control”, (ii) in the case of any Board-approved transaction described
in clause (b), the transaction so approved is subsequently consummated and
thereupon constitutes a “Change of Control” or (iii) in the case of any
tender offer described in clause (c), such tender offer is subsequently
completed and such completion thereupon constitutes a “Change of Control.”

 

7

 

(xii)          “Ten
Percent Owner” shall mean any person who is the beneficial owner, directly
or indirectly, of securities representing ten percent (10%) or more of the
combined voting power of Parent’s outstanding securities then entitled
ordinarily to vote for the election of directors; provided, however, shares
held as of the date hereof by any Cypress Fund shall not be counted for
purposes of determining whether any such fund is a “Ten Percent Owner.”

 

9.             Obligations
of the Corporation Upon Termination. 
The following provisions describe the obligations of the Corporation to
the Executive under this Agreement upon termination of his employment.  However, except as explicitly provided in
this Agreement, nothing in this Agreement shall limit or otherwise adversely
affect any rights which the Executive may have under applicable law, under any
other agreement with the Parent or any of its subsidiaries, or under any
compensation or benefit plan, program, policy or practice of the Parent or any
of its subsidiaries.

 

(a)           Death,
Disability, Discharge for Cause, or Resignation Without Good Reason.  In the event this Agreement terminates pursuant
to Section 8(a) by reason of the death or disability of the
Executive, or pursuant to Section 8(b) by reason of the
discharge of the Executive by the Corporation for Cause, or pursuant to Section 8(c) by
reason of the resignation of the Executive other than for Good Reason, the
Corporation shall pay to the Executive, or his heirs or estate, in the event of
the Executive’s death, all Accrued Obligations in a lump sum in cash within
fifteen (15) days after the Date of Termination; provided, however, that any
portion of the Accrued Obligations which consists of bonus, deferred
compensation, or incentive compensation, shall be determined and paid in
accordance with the terms of the relevant plan as applicable to the Executive,
subject to the partial bonus provisions of clause (D) of the definition of
“Accrued Obligations.”

 

(b)           Discharge
Without Cause or Resignation with Good Reason.  In the event that this Agreement terminates
pursuant to Section 8(c) by reason of the discharge of the
Executive by the Corporation other than for Cause or disability or by reason of
the resignation of the Executive for Good Reason, and subject to satisfaction
of the requirements of Section 9(d):

 

(i)            The
Corporation shall pay all Accrued Obligations to the Executive in a lump sum in
cash within fifteen (15) days after the Date of Termination; provided, however,
that any portion of the Accrued Obligations which consists of bonus, deferred
compensation, or incentive compensation shall be determined and paid in
accordance with the terms of the relevant plan as applicable to the Executive,
subject to the partial bonus provisions of clause (D) of the definition of
“Accrued Obligations.”

 

(ii)           The
Corporation shall pay to the Executive, in accordance with the schedule set
forth in the next sentence, an amount equal to 1.5 times the sum of (A) the
Executive’s Base Salary and (B) the average value of the management
incentive plan and other performance bonuses (excluding the discretionary bonus
announced by the Board in December, 2005) earned by the Executive with respect
to the preceding three (3) full fiscal years; provided, however,
notwithstanding the foregoing, if the discharge or resignation occurs within
two (2) years following the date of a Change of Control or a Potential
Change of Control, then the applicable multiple shall be 2.0, and the amount in

 

8

 

clause (B) shall be based upon the highest management incentive
plan and other performance bonus earned by Executive (excluding the
discretionary bonus announced by the Board in December, 2005) with respect to
any fiscal year during the preceding three full fiscal years (rather than the
average amount).  The total amount set
forth in the preceding sentence shall be paid to the Executive in three equal
installments, with the first installment occurring thirty (30) days after the
Date of Termination, the second installment occurring six (6) months after
the Date of Termination, and the third installment occurring one (1) year
after the Date of Termination.

 

(iii)          For
a period of eighteen (18) months after the Date of Termination, the Corporation
shall continue to provide benefits to the Executive and/or the Executive’s
family at least equal to those which would have been provided to them in
accordance with the plans, programs and arrangements referred to in Section 6(a) of
this Agreement; provided, however, notwithstanding the foregoing, if the
discharge or resignation occurs within two (2) years following the date of
a Change of Control or a Potential Change of Control, then the applicable time
period shall be twenty-four (24) months; provided, however, any benefits (such
as ongoing contributions and participation in a 401(k) plan) which may not
be provided pursuant to applicable law or regulations shall not be provided
during the foregoing period; provided, further, Executive agrees to elect COBRA
coverage to the extent available under the Corporation’s health insurance plans
(and the Corporation shall reimburse the cost of any premiums for such coverage
on an after-tax basis).  Any payment or
reimbursement under this Section 9(b)(iii) that is taxable to
the Executive shall be made by December 31 of the calendar year following
the calendar year in which Executive or family member incurred the expense.

 

(iv)          All
long-term incentive compensation awards to the Executive, including (but not by
way of limitation) all equity-based incentive compensation awards (such as (A) options
to purchase stock of Parent, (B) restricted stock of Parent, or (C) similar
equity-based units or interests) shall, if not otherwise vested, vest in full
upon such termination of this Agreement.

 

(c)           Required
Delay For Certain Deferred Compensation and Section 409A.  In the event that any compensation with
respect to the Executive’s termination is “deferred compensation” within the
meaning of Section 409A of the Internal Revenue Code of 1986, as amended
(the “Code”) and the regulations thereunder (“Section 409A”),
the stock of the Corporation, Parent, or any affiliate is publicly traded on an
established securities market or otherwise, and the Executive is determined to
be a “specified employee,” as defined in Section 409A(a)(2)(B)(i), payment
of such compensation shall be delayed as required by Section 409A.  Such delay shall last six (6) months
from the Date of Termination, except in the even of the Executive’s death.  Within thirty (30) days following the end of
such six (6) month period, or, if earlier, the Executive’s death, the
Corporation will make a catch-up payment to the Executive equal to the total
amount of such payments that would have been made during the six (6) month
period but for this Section 9(c). 
Wherever payments under this Section 9 are to be made in
installments, each such installment shall be deemed to be a separate payment
for purposes of  Section 409A.

 

(d)           Release
as Condition to Payment.  As a
condition to receiving the benefits and payments under Section 9(b),
the Executive shall be required to execute a 

 

9

 

release of any claims and potential claims against the Corporation and
its affiliates and directors that the Executive might have related to his
employment.  In addition, in connection
with any such release, the Executive and the Corporation shall enter into
reasonable mutual non-disparagement covenants. 
The timing of the payments under Section 9(b) upon execution
of the release shall be governed by the following provisions:

 

(i)            The
Corporation must deliver the release to the Executive for execution no later
than fourteen (14) days after the Date of Termination.  If the Corporation fails to deliver the
release to the Executive within such fourteen (14) day period, then the
Executive will be deemed to have satisfied the release requirement and will
receive payments conditioned on execution of the release as though the
Executive had executed the release and all revocation rights had lapsed at the
end of such fourteen (14) day period.

 

(ii)           The
Executive must execute the release within forty five (45) days from its
delivery to him.

 

(iii)          If
the Executive has revocation rights, the Executive shall exercise such rights,
if at all, not later than seven (7) days after executing the release.

 

(iv)          In
any case in which the release (and the expiration of any revocation rights)
could only become effective in one (1) particular tax year of the
Executive, with respect to any cash payments that are conditioned on execution
of the release, the first of any such cash payments shall begin within thirty
(30) days after the release becomes effective and revocation rights have
lapsed.

 

(v)           In
any case in which the release (and the expiration of any revocation rights)
could become effective in one (1) of two (2) taxable years of the
Executive depending on when the Executive executes the release, with respect to
any cash payments conditioned on execution of the release, the first of any such
cash payments shall not begin before the first business day of the later of
such tax years.

 

10.           Certain
Additional Payments by the Corporation. 
The Corporation agrees that:

 

(a)           Anything
in this Agreement to the contrary notwithstanding, in the event it shall be
determined that any payment or distribution by the Corporation or Parent to or
for the benefit of the Executive (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise, but
determined without regard to any additional payments required under this Section 10)
(a “Payment”) would be subject to the excise tax imposed by Section 4999
of the Code or if any interest or penalties are incurred by the Executive with
respect to such excise tax (such excise tax, together with any such interest
and penalties, being hereinafter collectively referred to as the “Excise Tax”),
then the Executive shall be entitled to receive an additional payment (a “Gross-Up
Payment”) in an amount such that, after payment by the Executive of all
taxes (including interest or penalties imposed with respect to such taxes, but
not including interest and penalties imposed by reason of the Executive’s
failure to file timely tax returns or to pay taxes shown due on such returns
and any interest, additions, increases or penalties unrelated to the Excise Tax
or the Gross-Up Payment), including, without limitation,  the 
Excise Tax imposed upon 

 

10

 

the Gross-Up Payment, the Executive retains an amount of the Gross-Up
Payment equal to the Excise Tax imposed upon the Payment; provided, however, if
a 10% or smaller reduction in the amounts payable to Executive pursuant to Section 9(b)(ii) above
would result in no amounts owing by Executive in respect of such Excise Tax,
then the payments in Section 9(b)(ii) above shall be reduced
(but in no event by more than 10%), by an amount sufficient to eliminate the
Excise Tax.

 

(b)           Subject
to the provisions of Section 10(c), below, all determinations required
to be made under this Section 10, including whether and when a
Gross-Up Payment is required and the amount of such Gross-Up Payment and the
assumptions to be utilized in arriving at such determination, shall be made by
Ernst & Young (the “Accounting Firm”), which shall provide
detailed supporting calculations both to the Corporation and the Executive
within fifteen (15) business days of the receipt of notice from the Executive
that there has been a Payment, or such earlier time as is requested by the Corporation.  In the event that the Accounting Firm is
serving as accountant or auditor for the individual, entity or group effecting
the Change of Control in question, the Executive shall appoint another
nationally recognized accounting firm to make the determinations required
hereunder (which accounting firm shall then be referred to as the Accounting
Firm hereunder).  All fees and expenses
of the Accounting Firm shall be borne solely by the Corporation.  Any Gross-Up Payment, as determined pursuant
to this Section 10, shall be paid by the Corporation to the
Executive within five (5) days of the receipt of the Accounting Firm’s
determination.  If the Accounting Firm
determines that no Excise Tax is payable by the Executive, it shall furnish the
Executive with a written opinion that failure to report the Excise Tax on the
Executive’s applicable federal income tax return would not result in the
imposition of a negligence or similar penalty. 
Any good faith determination by the Accounting Firm shall be binding
upon the Corporation and the Executive. 
As a result of the uncertainty in the application of Section 4999
of the Code at the time of the initial determination by the Accounting Firm
hereunder, it is possible that Gross-Up Payments which will not have been made
by the Corporation should have been made (“Underpayment”), consistent
with the calculations required to be made hereunder.  In the event that the Corporation exhausts
its remedies pursuant to Section 10(c), below, and the Executive
thereafter is required to make a payment of any Excise Tax, the Accounting Firm
shall determine the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Corporation to or for the benefit of
the Executive.

 

(c)           The
Executive shall notify the Corporation in writing of any claim by the Internal
Revenue Service that, if successful, would require the payment by the
Corporation of a Gross-Up Payment.  Such
notification shall be given as soon as practicable but no later than fifteen (15)
business days after the Executive is informed in writing of such claim and
shall apprise the Corporation of the nature of such claim and the date on which
such claim is requested to be paid.  The
Executive shall not pay such claim prior to the expiration of the thirty (30)
day period following the date on which Executive gives such notice to the
Corporation (or such shorter period ending on the date that any payment of
taxes with respect to such claim is due). 
If the Corporation notifies the Executive in writing prior to the
expiration of such period that it desires to contest such claim, the Executive
shall:

 

11

 

(i)            Give
the Corporation any information reasonably requested by the Corporation
relating to such claim,

 

(ii)           Take
such action in connection with contesting such claim as the Corporation shall
reasonably request in writing from time to time, including, without limitation,
accepting legal representation with respect to such claim by an attorney reasonably
selected by the Corporation,

 

(iii)          Cooperate
with the Corporation in good faith in order effectively to contest such claim,
and

 

(iv)          Permit
the Corporation to participate in any proceedings relating to such claim;

 

provided,
however, that the Corporation shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses.  Without
limiting the foregoing provisions of this Section 10(c), the
Corporation shall control all proceedings taken in connection with such contest
and, at its sole option, may pursue or forego any and all administrative
appeals, proceedings, hearings and conferences with the taxing authority in
respect of such claim and may, at its sole option, either direct the Executive
to pay the tax claimed and sue for a refund or contest the claim in any
permissible manner; and the Executive agrees to prosecute such contest to a
determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Corporation shall
determine; provided, however, that if the Corporation directs the Executive to
pay such claim and sue for a refund, the Corporation shall (to the extent
permitted by law) advance the amount of such payment to the Executive on an
interest-free basis and shall indemnify and hold the Executive harmless, on an
after-tax basis, from any Excise Tax or income tax (including interest or
penalties with respect thereto) imposed with respect to such advance or with
respect to any imputed income with respect to such advance; and further
provided that any extension of the statute of limitations relating to payment
of taxes for the taxable year of the Executive with respect to which such
contested amount is claimed to be due is limited solely to such contested
amount.  Furthermore, the Corporation’s
control of the contest shall be limited to issues with respect to which a
Gross-Up Payment would be payable hereunder and the Executive shall be entitled
to settle or contest, as the case may be, any other issue raised by the
Internal Revenue Service or any other taxing authority.

 

(d)           If,
after the receipt by the Executive of an amount advanced by the Corporation
pursuant to Section 10(c), above, the Executive becomes entitled to
receive any refund with respect to such claim, the Executive shall (subject to
the Corporation’s complying with the requirements of said Section 10(c))
promptly pay to the Corporation the amount of such refund (together with any
interest paid or credited thereon, after taxes applicable thereto).  If, after the receipt by the Executive of an
amount advanced by the Corporation pursuant to said Section 10(c),
a determination is made that the Executive shall not be entitled to any refund
with respect to such claim and the Corporation does not notify 

 

12

 

the Executive in writing of its intent to contest such denial of refund
prior to the expiration of thirty (30) days after such determination, then such
advance shall be forgiven and shall not be required to be repaid; and the
amount of such advance shall offset, to the extent thereof, the amount of the
Gross-Up Payment required to be paid.

 

(e)           Any Gross-Up Payment shall be paid to or for the
benefit of the Executive by December 31 of the calendar year following the
calendar year in which the Excise Tax is remitted, or, if no Excise Tax is
remitted, by December 31 of the calendar year following the calendar year
in which there is a final and nonappealable settlement or other resolution of
an audit or litigation relating to the Excise Tax.

 

11.           No
Set-Off or Mitigation.  The
Corporation’s obligation to make the payments provided for in this Agreement
and otherwise to perform its obligations hereunder shall not be affected by any
set-off, counterclaim, recoupment, defense or other claim, right or action
which the Corporation may have against the Executive or others.  In no event shall the Executive be obligated
to seek other employment or take any other action by way of mitigation of the
amounts payable to the Executive under any of the provisions of this Agreement
and such amounts shall not be reduced whether or not the Executive obtains
other employment; provided, however, if Executive is employed during any
portion of the period covered by Section 9(b)(iii) above and
receives benefits in connection with such employment, the Corporation shall not
be required to provide any benefits pursuant to Section 9(b)(iii) to
the extent duplicative benefits are provided by such new employer.

 

12.           Payment
of Certain Expenses.  The prevailing
party in any dispute under this Agreement shall be entitled, to the extent
permitted by law, to reimbursement from the other party for all of the
prevailing party’s costs (including but not limited to the arbitrator’s
compensation), expenses, and attorneys’ fees.

 

13.           Binding
Effect.  This Agreement shall be
binding upon and inure to the benefit of the heirs and representatives of the
Executive and the successors and assigns of the Corporation.  The Corporation shall require any successor
(whether direct or indirect, by purchase, merger, reorganization,
consolidation, acquisition of property or stock, liquidation, or otherwise) to
all or a substantial portion of its assets, by agreement in form and substance
reasonably satisfactory to the Executive, expressly to assume and agree to
perform this Agreement in the same manner and to the same extent that the
Corporation would be required to perform this Agreement if no such succession
had taken place.  Regardless of whether
such an agreement is executed, this Agreement shall be binding upon any
successor of the Corporation in accordance with the operation of law, and such
successor shall be deemed the “Corporation” for purposes of this Agreement.

 

14.           Notices.
 All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given if delivered by hand, reputable overnight courier or mailed within
the continental United States by first class certified mail, return receipt
requested, postage prepaid, addressed as follows:

 

13

 

	
  (a)

  	
  If to the Corporation, to:

  
	
   

  	
   

  
	
   

  	
  Communications & Power
  Industries, Inc.

  
	
   

  	
  811 Hansen Way

  
	
   

  	
  Palo Alto, California 94303-1110

  
	
   

  	
  Attn: Chief Executive Officer

  
	
   

  	
   

  
	
  (b)

  	
  If to the
  Executive, to:

  
	
   

  	
   

  
	
   

  	
  Robert A.
  Fickett

  
	
   

  	
  c/o
  Communications & Power Industries, Inc.

  
	
   

  	
  811 Hansen Way

  
	
   

  	
  Palo Alto,
  California 94303-1110

  

 

Such
addresses may be changed by written notice sent to the other party at the last
recorded address of that party.

 

15.           Tax
Withholding.  The Corporation shall
provide for the withholding of any taxes required to be withheld by federal,
state, provincial or local law with respect to any payment in cash, shares of
stock and/or other property made by or on behalf of the Corporation to or for
the benefit of the Executive under this Agreement or otherwise.  The Corporation may, at its option: (a) withhold
such taxes from any cash payments owing from the Corporation to the Executive, (b) require
the Executive to pay to the Corporation in cash such amount as may be required
to satisfy such withholding obligations and/or (c) make other satisfactory
arrangements with the Executive to satisfy such withholding obligations.

 

16.           Arbitration.

 

(a)           General.  Except as to (a) actions described in Section 7(e),
any controversy, dispute, or claim between the parties to this Agreement,
including any claim arising out of, in connection with, or in relation to the
formation, interpretation, performance or breach of this Agreement shall be
settled exclusively by arbitration, before a single arbitrator, in accordance
with this Section 16 and the then most applicable rules of the
American Arbitration Association. 
Judgment upon any award rendered by the arbitrator may be entered by any
state or federal court having jurisdiction thereof.  Such arbitration shall be administered by the
American Arbitration Association. 
Arbitration shall be the exclusive remedy for determining any such
dispute, regardless of its nature. 
Notwithstanding the foregoing, either party may in an appropriate matter
apply to a court for provisional relief, including a temporary restraining
order or a preliminary injunction, on the ground that the award to which the
applicant may be entitled in arbitration may be rendered ineffectual without
provisional relief.  Unless mutually
agreed by the parties otherwise, any arbitration shall take place in the City
of Palo Alto, California.

 

(b)           Selection
of Arbitrator.  In the event the
parties are unable to agree upon an arbitrator, the parties shall select a
single arbitrator from a list of nine arbitrators (which shall be retired
judges or corporate or litigation attorneys experienced in executive employment
agreements) provided by the office of the American Arbitration Association
having jurisdiction over Palo Alto, California. 
If the parties are unable to agree upon an arbitrator from the list so
drawn, then the parties shall each strike names alternately from the 

 

14

 

list, with the first to strike being determined by lot.  After each party has used four strikes, the
remaining name on the list shall be the arbitrator.  If such person is unable to serve for any
reason, the parties shall repeat this process until an arbitrator is selected.

 

(c)           Applicability
of Arbitration; Remedial Authority. 
This agreement to resolve any disputes by binding arbitration shall
extend to claims against any parent, subsidiary or affiliate of each party,
and, when acting within such capacity, any officer, director, shareholder,
employee or agent of each party, or of any of the above, and shall apply as
well to claims arising out of state and federal statutes and local ordinances
as well as to claims arising under the common law.  In the event of a dispute subject to this
paragraph the parties shall be entitled to reasonable discovery subject to the
discretion of the arbitrator.  The remedial
authority of the arbitrator (which shall include the right to grant injunctive
or other equitable relief) shall be the same as, but no greater than, would be
the remedial power of a court having jurisdiction over the parties and their
dispute.  The arbitrator shall, upon an
appropriate motion, dismiss any claim without an evidentiary hearing if the
party bringing the motion establishes that he or it would be entitled to
summary judgment if the matter had been pursued in court litigation.  In the event of a conflict between the
applicable rules of the American Arbitration Association and these
procedures, the provisions of these procedures shall govern.

 

(d)           Fees
and Costs.  Any filing or
administrative fees shall be borne initially by the party requesting
arbitration.  The Corporation shall be
responsible for the costs and fees of the arbitration, unless the Executive
wishes to contribute (up to 50%) of the costs and fees of the arbitration.

 

(e)           Award
Final and Binding.  The arbitrator
shall render an award and written opinion, and the award shall be final and
binding upon the parties.  If any of the
provisions of this paragraph, or of this Agreement, are determined to be
unlawful or otherwise unenforceable, in whole or in part, such determination
shall not affect the validity of the remainder of this Agreement, and this
Agreement shall be reformed to the extent necessary to carry out its provisions
to the greatest extent possible and to insure that the resolution of all
conflicts between the parties, including those arising out of statutory claims,
shall be resolved by neutral, binding arbitration.  If a court should find that the arbitration
provisions of this Agreement are not absolutely binding, then the parties
intend any arbitration decision and award to be fully admissible in evidence in
any subsequent action, given great weight by any finder of fact, and treated as
determinative to the maximum extent permitted by law.

 

17.           No
Assignment.  Except as otherwise
expressly provided herein, this Agreement is not assignable by any party and no
payment to be made hereunder shall be subject to anticipation, alienation,
sale, transfer, assignment, pledge, encumbrance or other charge.

 

18.           Execution
in Counterparts.  This Agreement may
be executed by the parties hereto in two (2) or more counterparts, each of
which shall be deemed to be an original, but all such counterparts shall
constitute one and the same instrument, and all signatures need not appear on
any one counterpart.

 

15

 

19.           Governing
Law.  This Agreement shall be
construed and interpreted in accordance with and governed by the laws of the
State of California, other than the conflict of laws provisions of such laws.

 

20.           Severability.  If any provision of this Agreement shall be
adjudged by any court of competent jurisdiction to be invalid or unenforceable
for any reason, such judgment shall not affect, impair or invalidate the
remainder of this Agreement. 
Furthermore, if the scope of any restriction or requirement contained in
this Agreement is too broad to permit enforcement of such restriction or
requirement to its full extent, then such restriction or requirement shall be
enforced to the maximum extent permitted by law, and the Executive consents and
agrees that any court of competent jurisdiction may so modify such scope in any
proceeding brought to enforce such restriction or requirement.

 

21.           Prior
Understandings.  This Agreement
amends and restates the Original Employment Agreement in its entirety.  This Agreement embodies the entire
understanding of the parties hereto and supersedes all other oral or written
agreements or understandings between them regarding the subject matter
hereof.  No change, alteration or
modification hereof may be made except in a writing, signed by each of the parties
hereto.  The headings in this Agreement
are for convenience and reference only and shall not be construed as part of
this Agreement or to limit or otherwise affect the meaning hereof.

 

16

 

IN
WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement
as of the day and year first above written.

 

	
   

  	
  CORPORATION

  
	
   

  	
  Communications &
  Power Industries, Inc.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ JOEL A. LITTMAN

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
  Joel A. Littman, CFO

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  EXECUTIVE

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/
  ROBERT A. FICKETT

  	
   

  
	
   

  	
   

  
	
   

  	
  Robert A. Fickett

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