Document:

Exhibit
10.4

LEASE

THIS LEASE,
made this 1st day of
June, 2007, by and between MERRITT/BAVAR-VA, LLC, a Maryland limited liability
company, hereinafter called “Landlord,” and TESSCO Technologies, Inc.
hereinafter called “Tenant.”

WITNESSETH,
that in consideration of the rentals hereinafter agreed upon and the
performance of all the conditions and covenants hereinafter set forth on the
part of the Tenant to be performed, the Landlord does hereby lease unto the
said Tenant, and the latter does hereby rent from the former the following
premises (hereinafter sometimes called the “premises”):

BEING all those premises containing approximately
65,940 rentable square feet,  the square
footage is calculated per BOMA’s Standard Method for Measuring SQFT in
Industrial Buildings using the Exterior Wall Methodology (Method “A”), and
outlined in red on the Lease Plan attached hereto as Exhibit A, within
the building (hereinafter sometimes called the “Building”) known as 10999
McCormick Road, Hunt Valley, MD 21031, within the development known as the “Hunt
Valley Business Center” (the “Property”), which Property includes the Building
and the common areas and facilities relating thereto.

This Lease is made
subject to the following additional terms, covenants and conditions:

1.                                      Term.

The term of this Lease
shall be for a period of forty-nine (49) months, beginning on July 1, 2007 and
terminating on July 31, 2011.  Landlord
agrees that it will, at its sole cost and expense, as soon as reasonably possible
after the execution of this Lease, commence and pursue to completion the
Landlord’s Work set forth on Exhibit B, which Landlord estimates to be July 1,
2007.

2.                                      Payment
of Rental.

(a)                                  The
rent reserved under this Lease shall constitute a net payment to Landlord over
and above Tenant’s proportionate share (as hereinafter defined) of all costs
and expenses attributable to the Property during the term of this Lease.

(b)                                 The
base rental shall be as follows:

	
  Term:

  	
   

  	
  Annual Rate:

  	
   

  	
  Monthly Rate:

  	
   

  	
  Per Sq. Ft.:

  	
   

  
	
  Month 1

  	
   

  	
   

  	
  N/A

  	
   

  	
  -0-

  	
   

  	
  -0-

  	
   

  
	
  Months 2-13

  	
   

  	
   

  	
  $

  	
  428,610.00

  	
   

  	
  $

  	
  35,717.50

  	
   

  	
  $

  	
  6.50

  	
   

  
	
  Months 14-25

  	
   

  	
   

  	
  $

  	
  439,160.40

  	
   

  	
  $

  	
  36,596.70

  	
   

  	
  $

  	
  6.66

  	
   

  
	
  Months 26-37

  	
   

  	
   

  	
  $

  	
  450,370.20

  	
   

  	
  $

  	
  37,530.85

  	
   

  	
  $

  	
  6.83

  	
   

  
	
  Months 38-49

  	
   

  	
   

  	
  $

  	
  461,580.00

  	
   

  	
  $

  	
  38,465.00

  	
   

  	
  $

  	
  7.00

  	
   

  

 

Commencing on August 1,
2007, Tenant covenants and agrees to pay all rentals reserved hereunder to
Landlord, without notice or demand, in advance on the first day of each month 

during the term of this
Lease, without setoff or deduction.  The
rental for the fractional monthly periods at the beginning or at the end of
each Lease year shall be prorated on a per diem basis and shall be payable on
the first (1st) day of the month in advance.

(c)                                  All
rentals shall be paid to MERRITT/BAVAR-VA, LLC at
2066 Lord Baltimore Drive, Baltimore, Maryland 21244, or at such other place or
to such appointee of the Landlord as the Landlord may from time to time
designate in writing.

3.                                      Use.

Tenant covenants and
agrees to use and occupy the premises solely for the following purposes:  distribution, light manufacturing, and
warehouse, together with ancillary offices for the use of Tenant, its officers,
agents and employees.  Tenant agrees to
comply with all applicable zoning and other laws and regulations applicable to
Tenant’s specific use of the premises, and provide and install at its own
expense any additional equipment or alterations required to comply with all
such laws and regulations as required from time to time.  Tenant further agrees not to make, or cause or
permit to be made, any use of the premises which shall constitute a nuisance or
shall materially interfere with the rights of other tenants in the Building to
quietly enjoy, use and occupy the premises leased by them and the common areas
of the Building.  Tenant will not permit,
allow or cause any public or private auction sales or sheriffs’ or constables’
sales to be conducted on or from the premises.

4.                                      Services
and Utilities.

(a)                                  Water
and Utilities:  Landlord agrees to
provide water and other utility services for the Building subject to the
provisions of paragraph 4(d) hereof. 
Tenant agrees to pay monthly payment addressed in Section 5 (e) as
additional rent Tenant’s pro rata share of water rent and sewer service charges
chargeable to the Building based upon the size of the premises in proportion to
the total square footage of the Building, unless such utilities are separately
metered in which event Tenant shall pay the metered charges.  If, in Landlord’s sole judgment, the water
and sewer charges for the premises are substantially higher than normal due to
Tenant’s water usage, then Tenant agrees that it will, upon written notice from
Landlord, install a water meter, at Tenant’s expense, and thereafter pay all
water charges for the premises based on such meter readings.  Tenant shall pay all costs of electricity,
gas, telephone and other utilities used or consumed on the premises, together
with all taxes, levies or other charges on such utilities.  If Tenant defaults in payment of any such
utilities, charges or taxes, Landlord may, at its option, pay the same for and
on Tenant’s account, in which Tenant shall promptly reimburse Landlord
therefor.

(b)                                 HVAC
Maintenance, Trash Removal, Common Area Lighting:  Landlord agrees to provide the following
services: (i) maintenance, repair and replacement  of the HVAC system serving the premises; (ii)
trash removal from the dumpster located on the exterior of the building, it
being understood that Tenant shall have the obligation to remove all trash from
the premises and place the same within the dumpster; and (iii) reasonable
Building and exterior site maintenance and illumination of the parking and
common areas within the property, including snow and ice removal.  Tenant agrees to pay its pro rata share of
the cost of all of the foregoing services (excluding HVAC repair or replacement
which shall be paid solely by Landlord) as part of “Operating Costs” as set
forth in Section 5 hereof.

 2
 

(c)                                  Specialty
HVAC Maintenance:  Tenant shall maintain
and repair Tenant’s separate HVAC equipment and other separate climate control
equipment for any computer or similar equipment, if any, designed specifically
for Tenant (e.g. for a computer or telephone room), whether the same was
installed initially, or at a later date, by Landlord or by Tenant.

(d)                                 Failure
to Furnish Services:  Landlord shall not
be in default hereunder or be liable for any damages directly or indirectly
resulting from, nor shall the rent be abated by reason of (i) the installation,
use of interruption of use of any equipment in connection with the furnishing
of any of the services to be furnished by Landlord as set forth in this Lease;
(ii) failure to furnish or delay in furnishing any such services where such
failure or delay is caused by accident or any condition or event beyond the
reasonable control of Landlord, or by the making of necessary repairs or
improvements to the premises or Building and such failure or delay lasts for a
period of less than seventy-two (72) consecutive hours; or (iii) the
limitation, curtailment or rationing of, or restrictions on, use of water, gas
or any other form of energy serving the premises of Building.  Landlord shall not be liable under any
circumstances for a loss of or injury to property or business, however
occurring, through or in connection with or incidental to failure to furnish
any such services.

Notwithstanding
the above, Notwithstanding anything to the contrary contained in this Lease, if
any utility service to the Leased Premises is interrupted due to Landlord’s for
more than seventy-two (72) consecutive hours, then commencing with the first
full business day thereafter, there shall be an equitable abatement of minimum
annual rental and all Additional Rent and utility charges for the utility so
affected reflecting the extent of Tenant’s ability to conduct business in the
premises is impaired.  If any utility
service to the premises is interrupted for more than thirty (30) consecutive
days, then Tenant shall have the right to terminate this Lease upon thirty (30)
days prior written notice to Landlord.

5.                                      Operating
Costs.

(a)                                  Generally:  “Operating Costs” are the costs of managing,
operating and insuring the Building and all common areas and facilities within
the Property and of maintaining the exterior of the Building and all common
areas, including, but not limited to, loading areas, parking areas, pavements
(excluding any repaving) and walkways, landscaping, gardening, storm drainage
and other utility systems; trash removal services furnished by Landlord with
respect to the exterior parking and common areas; the cost of utilities for
such common areas and facilities and all utility costs for the Building which
are not separately metered; fire protection and security services, if any;
traffic control equipment; maintenance of all building systems and equipment,
including HVAC; parking lot striping; lighting; sanitary control; removal of
snow and ice, and all costs associated with such snow and ice removal (except
with respect to a fenced in area, if any, for Tenant, in which event Tenant
shall pay all such snow and ice removal costs within the fenced in area),
trash, rubbish, garbage and other refuse from the parking and common areas;
depreciation on or rentals of machinery and equipment used in such maintenance;
the cost of personnel to implement such services; all insurance of whatsoever
nature kept, or caused to be kept, by Landlord out of or in connection with the
ownership of the Building and common areas, including, but not limited to,
insurance insuring the same against loss or damage by, or abatement of rental
income resulting from, fire and other such hazards, casualties and 

 3
 

contingencies, and
liability and indemnity insurance; plus Landlord’s actual administrative and
overhead costs in connection therewith not to exceed five percent (5%) of the
other costs (excluding Taxes, as defined below).  Such costs shall not include (i) the cost of
any capital improvements to the Building as determined under generally accepted
accounting principles; and (ii) work which Landlord performs specifically for
or at the expense of any tenant of the Building.

(b)                                 Property
Taxes:  “Operating Costs” shall also
include all taxes and assessments (as hereinafter defined) levied or assessed
against the Property and Building (excluding taxes attributable to improvements
to other Tenant’s spaces), including all such taxes resulting from an increase
in the tax rate, or the levy, assessment or imposition of any tax on real
estate as such not now levied, assessed or imposed, including, without
limitation, assessments, fees or charges imposed under any declaration of
protective covenants, or similar covenants affecting the Property or any
charges or assessments of any community or neighborhood association, all of
which assessments, taxes and charges shall be considered “taxes” for the purposes
of this paragraph and shall be included in Operating Costs.  Notwithstanding the foregoing, in the event
of any new taxes or increases in real estate taxes resulting from improvements,
alterations or additions made by Tenant, Landlord may, but is not obligated to,
require Tenant to pay the entire amount of any increase in taxes resulting from
such improvements, alterations or additions. 
“Taxes” as used herein shall also include, but not by way of limitation,
all paving taxes, special paving taxes, special taxing district assessments and
any and all other benefits or assessments which may be levied on the Property
or the Building, but shall not include any income tax on the income or rent
payable hereunder, capital stock, sales or similar taxes.  “Taxes” shall also include all reasonable
expenses incurred by Landlord (including attorneys’ fees and costs) in
contesting any increase in, or applying for any reduction of, a tax assessment.

(c)                                  Common
Area Maintenance:  “CAM” shall mean the
total costs incurred by Landlord for the operation, maintenance, repair,
insuring and management of all common facilities within Landlord’s entire
property, known as Hunt Valley Business Center and consisting of approximately
twelve and seven -tenths (12.7) acres (the “Park”) and/or Park-wide common area
charges for which Landlord pays its pro rata share of maintenance costs,
including, but not limited to, common roads, snow removal, lighting of common
areas, Taxes payable by Landlord, or its successors, with respect thereto and
other similar operational and maintenance expenses.  CAM shall not include any Operating Costs.

(d)                                 Proportionate
Share of Operating Costs:  Tenant shall
pay Landlord its proportionate share of Operating Costs throughout the Lease
term, which proportionate share is the same proportion which the rentable
square foot area of the premises (65,940 square feet) bears to the total
rentable square foot area of the Building (65,940 square feet) or one hundred
percent (100%) (“Tenant’s Percentage”). 
Tenant shall also pay Landlord its proportionate share of CAM, which
shall be determined by dividing the total rentable square foot area of the
Building by the total rentable square foot area of all improvements within the
Park, and multiplying the same by Tenant’s Percentage.

 4
 

(e)                                  Estimated
Operating Costs:  Landlord shall notify
Tenant from time to time of the amount which Landlord estimates will be the
amount payable by Tenant in accordance with paragraph (d) above, and Tenant
shall pay such amounts to Landlord in equal monthly installments, in advance,
on the first day of each month, simultaneously with payments of the rent
reserved pursuant to Section 2 hereof. 
Within a reasonable period of time following the end of each annual
period of the term, Landlord shall submit to Tenant a statement showing the
actual amounts incurred by Landlord as set forth in paragraph (d), the amount
theretofore paid by Tenant, and the amount of the resulting balance due
thereon, or overpayment thereof, as the case may be.  In the event any balance may be due by
Tenant, Tenant shall pay said balance within ten (10) business days from the
date of such statement.  In the event
Tenant has made any overpayment, such overpayment shall be credited by Landlord
against the next installment or installments of rent which are due and payable
hereunder, or if the term of this Lease has expired, such overpayment shall be
refunded by Landlord to Tenant, without interest, within ten (10) business days
after the date of such statement. Each such statement submitted by Landlord
shall be final and conclusive between the parties hereto as to the matters
therein set forth, if no objection is raised with respect thereto within
fifteen (15) days after submission of each such statement.

6.                                      Repairs
and Maintenance.

(a)                                  Except
as expressly provided in Exhibit B, Landlord shall be under no liability, nor
have any obligation to do any work or make any repairs in or to the premises,
except for structural, roof, foundation, exterior walls, gutters and
downspouts, which shall be repaired or replaced at Landlord’s sole cost, and
any work which may be necessary to outfit the premises for Tenant’s occupancy
or for the operation of Tenant’s business therein is the sole responsibility of
Tenant and shall be performed by Tenant at its own cost and expense.  Tenant acknowledges that it has fully
inspected the premises prior to the execution of this Lease, and Tenant further
acknowledges that Landlord has made no warranties or representations with
respect to the condition or state of repairs of the premises.

(b)                                 Tenant,
at Tenant’s sole expense, shall maintain the interior of the premises in good
order, condition and repair, including the interior surfaces of the ceilings,
walls and floors, all doors, all interior windows, all plumbing, pipes and
fixtures, electrical wiring, switches and fixtures, Building standard
furnishings and special items and equipment installed by or at the expense of
Tenant.

(c)                                  Tenant
shall be responsible for all repairs and alterations in and to the premises and
Building and the facilities and systems thereof, the need for which arises out
of (i) Tenant’s use or occupancy of the premises other than such resulting from
normal wear and tear; (ii) the installation, removal, use or operation of
Tenant’s property in the premises; (iii) the moving of Tenant’s property into
or out of the Building; or (iv) any act, omission, misuse or negligence of
Tenant, its agents, contractors, employees or invitees not covered by insurance
carried by Landlord.

(d)                                 If
Tenant fails to maintain the premises in good order, condition and repair,
Landlord may give Tenant notice to do such acts as are reasonably required to
so maintain the premises.  If Tenant
fails to promptly commence such work and diligently prosecute it to 

 5
 

completion, then Landlord
shall have the right to do such acts and expend such funds at the expense of
Tenant as are reasonably required to perform such work.  Any amount so expended by Landlord shall be
paid by Tenant promptly after demand, with interest from the date of such work,
at a rate equal to four (4) percentage points above the prime commercial rate
of interest published by the Wall Street Journal closest to the date such work
was commenced.  Landlord shall have no
liability to Tenant for any damage, inconvenience, or interference with the use
of the premises by Tenant as a result of performing any such work.

(e)                                  Tenant
shall not place a load upon any floor of the premises which exceeds the load
per square foot, which such floor was designed to carry, as determined by
Landlord’s structural engineer.  Landlord
reserves the right to consult with its structural engineer if necessary, in
Landlord’s opinion, to resolve any questions concerning this matter, in which
event the determination of the engineer shall be conclusive and the cost of any
such determination shall be paid for by Tenant upon demand.  Tenant shall not install business machines or
mechanical equipment, which cause noise or vibration to such a degree as to be
reasonably objectionable to Landlord or other Building tenants.

(f)                                    Except
as otherwise expressly provided in this Lease, Landlord shall have no liability
to Tenant nor shall Tenant’s obligations under this Lease be reduced or abated
in any manner whatsoever by reason of any inconvenience, annoyance,
interruption or injury to business arising from Landlord’s making any repairs
or changes which Landlord is required or permitted by this Lease or by any
other tenant’s lease or required by law to make in or to any portion of the
Building or the premises.  Landlord
shall, nevertheless, use reasonable efforts to minimize any interference with
Tenant’s business in the premises.

(g)                                 Tenant
shall give Landlord prompt notice of any damage to or defective condition in
any part or appurtenance of the Building’s mechanical, electrical, plumbing,
HVAC or other systems serving, located in, or passing through the premises, or
any condition such as excessive moisture which could create an environment
conducive to mold growth.

(h)                                 Upon
the expiration or earlier termination of this Lease, Tenant shall return the
premises to Landlord clean and in the same condition as on the date Tenant took
possession, except for normal wear and tear. 
Any damage to the premises, including any structural damage, resulting
from Tenant’s use or from the removal of Tenant’s fixtures, furnishings and
equipment shall be repaired by Tenant at Tenant’s expense.  Landlord shall bill Tenant, as promptly as is
practicable, for the costs of any cleanup and/or repairs to the premises necessitated
by Tenant’s use and occupancy thereof (normal wear and tear excepted) and such
costs shall constitute additional rental due and payable hereunder
notwithstanding any expiration or termination of this Lease.

7.                                      Compliance
with Laws.

Tenant covenants and
agrees that it will, at its own expense, observe, comply with and execute all
laws, orders, rules, requirements and regulations of any and all governmental
departments, bodies, bureaus, agencies and officers, and all rules, directions,
requirements and recommendations of the local board of fire underwriters and
the fire insurance rating organizations having jurisdiction over the area in
which the premises are situated, or other bodies 

 6
 

or agencies now or
hereafter exercising similar functions in the area in which the premises are
situated, in any way pertaining to Tenant’s use and occupancy thereof.  In the event Tenant shall fail or neglect to
comply with any of the aforesaid laws, orders, rules, requirements or
recommendations, Landlord or its agents may enter the premises and take all
such action and do all such work in or to the premises as may be necessary in
order to cause compliance with such laws, orders, rules, requirements or
recommendations, and Tenant covenants and agrees to reimburse Landlord promptly
upon demand for the expense incurred by Landlord in taking such action and
performing such work.

8.                                      Assignment
and Subletting.

(a)                                  Tenant
covenants and agrees not to assign this Lease, in whole or in part, nor sublet
the premises, or any part or portion thereof, nor grant any license or
concession for all or any part thereof other than to an affiliated entity,
without the prior written consent of the Landlord in each instance first had
and obtained.  If such assignment or
subletting is permitted, Tenant shall not be relieved from any liability
whatsoever under this Lease.  In the
event that the amount of the rent or other consideration to be paid to the
Tenant by any assignee or sublessee is greater than the rent required to be
paid by the Tenant to the Landlord pursuant to this Lease, Tenant shall pay to
Landlord any such excess as is received by Tenant from such assignee or
sublessee.  Any consent by Landlord to an
assignment or subletting of this Lease shall not constitute a waiver of the
necessity of such consent as to any subsequent assignment or subletting.  An assignment for the benefit of Tenant’s
creditors or otherwise by operation of law shall not be effective to transfer
or assign Tenant’s interest under this Lease unless Landlord shall have first
consented thereto in writing.

(b)                                 In
the event Tenant desires to assign this Lease or to sublease all or any
substantial portion of the premises to an assignee for which Landlord’s consent
is required, Landlord shall have the right and option to terminate this Lease,
which right or option shall be exercisable by written notice from Landlord to
Tenant within thirty (30) days from the date Tenant gives Landlord written
notice of its desire to assign or sublease.

(c)                                  Notwithstanding
any other provisions set forth in this Lease, in the event of a “Transfer” (as
hereinafter defined) to a new or successor entity, the new entity (“Successor
Tenant”) shall be required to disclose to Landlord, not later than ten (10)
days prior to the effective date of the Transfer, such financial information as
may be reasonably required by Landlord regarding the Successor Tenant and any
parent of the Successor Tenant or any other entity, which has or will have
after the Transfer, voting or operating control over the successor Tenant
(collectively, the “Parent Company”). 
Landlord shall have the right to require the Parent Company to execute a
guaranty, on Landlord’s standard Guaranty form, guarantying the Successor
Tenant’s Lease obligations arising from and after the date of the Transfer,
whether or not Landlord has consented to the Transfer or whether or not Tenant
is permitted to assign this Lease to the Successor Tenant without Landlord’s
consent.  As used herein, Transfer shall
mean any of the following:  (i) an assignment
of Tenant’s interest under the Lease; and (ii) any other transaction which
results in a successor to Tenant having title to either Tenant’s leasehold
interest or having control over Tenant’s voting rights or operations.

 7
 

9.                                      Increase
in Landlord’s Insurance Rates.

Tenant will not do, or
suffer to be done other than in connection with the permitted use, anything in
or about the premises, or keep or suffer to be kept, anything in or about the
premises which will contravene or affect any policy of insurance against loss
by fire or other hazards, including, but not limited to, public liability, now
existing or which the Landlord may hereafter place thereon, or which will
prevent the Landlord from procuring such policies in companies acceptable to
Landlord at standard rates.

10.                               Insurance
- Indemnity.

(a)                                  Tenant
covenants and agrees that from and after the date of delivery of the premises
from Landlord to Tenant, Tenant will carry and maintain, at its sole cost and
expense and in the amounts specified and in the form hereinafter provided, the
following types of insurance:

(i)                                     Public
Liability and Property Damage.  General
Public Liability Insurance covering the premises and Tenant’s use thereof
against claims for personal injury or death and property damage occurring upon,
in or about the premises, such insurance to afford protection to the limit of
not less than $2,000,000 arising out of any one occurrence, and against
property damage to afford protection to the limit of not less than $2,000,000;
or such insurance may be for a combined single limit of $2,000,000 per
occurrence.  The insurance coverage
required under this Section 9(a)(i) shall, in addition, extend to any liability
of Tenant arising out of Tenant’s indemnities hereinafter provided, as well as
Independent Contractors’ Liability, Products/Completed Operations Liability,
Personal Injury Liability and Contractual Liability.

(ii)                                  Boilers.  If Tenant’s premises shall contain a boiler
or other pressure vessel, Tenant shall carry Boiler and Machinery Insurance
with a direct damage limit not less than the full value of the Building.  Such insurance shall be written on a “repair
and replacement” (i.e., replacement cost) basis.

(iii)                               Tenant
Improvements and Property.  Insurance
covering all leasehold improvements and other improvements installed by Tenant
upon the premises, trade fixtures and personal property from time to time in,
on or upon the premises and any alterations, improvements, additions or changes
made by Tenant thereto in an amount not less than one hundred percent (100%) of
their full replacement cost from time to time during the Lease term, providing
protection against perils included within the standard form of fire and
extended coverage insurance policy for the jurisdiction in which the premises
are located, together with insurance against sprinkler leakage or other
sprinkler damage, vandalism and malicious mischief.  Any policy proceeds from such insurance, so
long as this Lease shall remain in effect, shall be held in trust by Tenant’s
insurance company first for the repair, reconstruction, restoration or
replacement of the property damaged or destroyed.

(iv)                              Plate
Glass.  Plate glass insurance covering
all plate glass in the premises.  Tenant
shall be and remain liable for the repair and restoration of all such plate
glass.

 8
 

(v)                                 Worker’s
Compensation.  Worker’s compensation
insurance covering Tenant’s employees for statutory benefits payable in the
state in which the premises are located and including employer’s liability
insurance with limits of not less than One Hundred Thousand Dollars
($100,000.00) per accident, One Hundred Thousand Dollars ($100,000.00) per
employee for disease and Five Hundred Thousand Dollars ($500,000.00) as a
policy limit for disease.

Tenant further
covenants and agrees to carry and maintain, at all times during the term of
this Lease, the aforegoing types of insurance (and any other types of
insurance) in amounts at least equal to the minimum amounts of such insurance
coverage’s commonly required of tenants in comparable office buildings in the
area.

(b)                                 All
policies of insurance to be provided by Tenant shall be issued in form
acceptable to Landlord by insurance companies with general policyholder’s
rating of not less than A and a financial rating of AAA as rated in the most
current available “Best’s” Insurance Reports, and qualified to do business in
the jurisdiction in which the premises are located.  Each such policy shall be issued in the names
of Landlord and Tenant.  Said policies
shall be for the mutual and joint benefit and protection of each of said
parties and executed copies of each such policy of insurance or a certificate
thereof shall be delivered to Landlord within ten (10) days after delivery of
possession of the premises to Tenant and thereafter at least fifteen (15) days
prior to the expiration of each such policy. 
As often as any such policy shall expire or terminate, renewal or
additional policies shall be procured and maintained by Tenant in like manner
and to like extent.  All such policies of
insurance shall contain a provision that the company writing said policy will
give to Landlord at least thirty (30) days’ notice in writing in advance of any
cancellations, or lapse, or the effective date of any reduction in the amounts
of insurance.  In the event Tenant shall
fail to promptly furnish any insurance herein required, Landlord may effect the
same for a period not exceeding one (1) year and Tenant shall promptly
reimburse Landlord upon demand, as additional rent, the premium so paid by
Landlord.  If, upon Tenant’s failure,
rather than purchase separate insurance coverage, Landlord chooses to include
Tenant’s coverage under Landlord’s insurance policies, then Tenant shall
promptly reimburse Landlord upon demand, as additional rent, the greater of the
increase in Landlord’s premium resulting therefrom or One Thousand Dollars
($1,000.00).  All such public liability,
property damage and other casualty policies shall be written as primary
policies which do not contribute to and are not in excess of coverage which
Landlord may carry.  All such public
liability and property damage policies shall contain a provision that Landlord
shall nevertheless be entitled to recover under said policies for any loss
occasioned to it, its servants, agents and employees by reason of the
negligence of Tenant or any other named assured.  Any insurance provided for may be affected by
a policy or policies of blanket insurance, covering additional items or
locations; provided, however, that (i) Landlord shall be named as an additional
assured thereunder as its interests may appear; (ii) the coverage afforded
Landlord will not be reduced or diminished by reason of the use of such blanket
policy of insurance; (iii) any such policy or policies (except any covering the
risks referred to in paragraph (a)(i) above, shall specify therein (or Tenant
shall furnish Landlord with a written statement from the insurers under such
policy specifying) the amount of the 
total insurance allocated to the “Tenant Improvements and Property” more
specifically detailed in paragraph (iii), above; and (iv) the requirements set
forth herein are otherwise satisfied. 
Any 

 9
 

insurance policies herein
required to be procured by Tenant shall contain an express waiver of any right
of subrogation by the insurance company against the Landlord, and all other
tenants or occupants of space in the Building.

(c)                                  Tenant
shall, and does hereby, indemnify, defend and hold harmless Landlord and any
other parties in interest set forth in paragraph (b), above, from and against any
and all liabilities, fines, claims, damages and actions, costs and expenses of
any kind or nature (including attorneys’ fees) and of anyone whatsoever (i)
relating to or arising from the use and occupancy of the premises; (ii) due to
or arising out of any mechanic’s lien filed against the premises, the Building,
or any part thereof, for labor performed or for materials furnished or claimed
to be furnished to Tenant, or (iii) due to or arising out of any breach,
violation or nonperformance of any covenant, condition or agreement in this
Lease set forth and contained on the part of Tenant to be fulfilled, kept,
observed or performed, unless such damage or injury shall be occasioned by the
gross negligence or willful act or omission of the Landlord, in which event,
Landlord shall indemnify and hold harmless Tenant to the extent of such
negligence or willful act or omission. 
Notwithstanding the foregoing, Tenant shall at all times remain liable
for, and indemnify and hold harmless Landlord as aforesaid against, any damage
or injury arising from perils against which Tenant is required by this Lease to
insure, regardless of the negligence or willful acts or omissions of others.

Landlord will
indemnify Tenant, its officers, directors, members, shareholders, partners,
lenders, agents and employees against, and hold them harmless from, any and all
demands, claims, causes of action, fines, penalties, damages (including without
limitation consequential damages), losses, liabilities, judgments, and expenses
(including without limitation attorneys’ fees and court costs) arising on the
Property.

(d)                                 Waiver
of Right of Recovery.  Notwithstanding
anything to the contrary contained in this Lease, Tenant waives all rights to
recover against Landlord, its officers, directors, shareholders, partners,
joint ventures, employees or agents, for any loss or damage to Tenant’s
property to the extent covered by insurance either actually carried or required
to be carried hereunder. Landlord waives (except for the amount of any deductible)
all rights to recover against Tenant, its officers, directors, shareholders,
partners, joint ventures, employees or agents, for any loss or damage to
Landlord’s property to the extent covered by insurance either actually carried
or required to be carried hereunder. 
Neither Landlord nor Tenant shall be liable to each other or any
insurance company (by way of subrogation or otherwise) which insured any such
losses, damages or expenses.  Each party
shall use reasonable efforts to cause their respective insurers to issue
appropriate waiver of subrogation rights endorsements to all policies of
insurance carried in connection with the Property or the premises or the
contents of either of them, and if obtained then each party shall deliver to
the other party (within a reasonable period of time after a written request for
the same) adequate written proof (for example, a policy and certificate of
insurance with attached endorsement) of the issuance of the foregoing.

11.                               Alterations.

Tenant shall not make any
material alterations ($5,000 individually or $50,000 in the aggregate) to the
premises, or any part thereof, without prior written consent of Landlord in
each instance first had and obtained which consent shall not be unreasonably
withheld, conditioned or delayed 

 10
 

and shall be deemed given
if not disapproved within five (5) business days after request thereof.  If Tenant shall desire to make such
alterations, plans for the same shall first be submitted to and approved by
Landlord, and all work and installations shall be performed by Tenant at its
own expense in accordance with approved plans. 
Tenant agrees that all such work shall be done in a good and workmanlike
manner, that the structural  integrity of
the Building shall not be impaired, and that no liens shall attach to the
premises by reason thereof.  Tenant
agrees to obtain, at Tenant’s expense, all permits required for such
alterations.  Tenant shall have the right
to install rooftop antennas and/or satellite dishes with prior written consent
of Landlord, which consent shall not be unreasonably withheld, conditioned or
delayed and shall be deemed given if not disapproved within five (5) business
days after request thereof.  Tenant shall
have the right to post appropriate Company signage on the building or premises
in accordance with Landlord’s standard signage specification.

12.                               Ownership
of Alterations.

Unless Landlord shall
elect that all or part of any alteration or installation (including cabling and
wiring) made or installed by Tenant to the premises (including any alteration
consented to by Landlord pursuant to Section 11 hereof) shall remain on the
premises after the termination of this Lease, the premises shall be restored to
their original condition by Tenant before the expiration of this Lease at Tenant’s
sole expense, such election to be made at time Landlord approves said
alterations.  Upon such election by
Landlord, any such alterations, installations, improvements, betterments or
mechanical equipment, including but not limited to, heating and air
conditioning systems, shall become the property of Landlord as soon as they are
affixed to the premises, and all right, title and interest thereof of Tenant
shall immediately cease, unless otherwise agreed to in writing by Landlord.  Tenant shall promptly pay any franchise,
minor privilege or other tax or assessment resulting directly or indirectly
from any alterations or improvements made by Tenant to the premises.  Tenant shall repair promptly, at its own
expense, any damage to the premises or Building caused by bringing into the
premises any property for Tenant’s use, or by the installation or removal of
such property, regardless of fault or by whom such damage shall be caused.

13.                               Default.

(a)                                  Any
of the following events shall constitute an Event of Default by Tenant:

(i)                                     If
the rent (basic or additional) shall be in arrears, in whole or in part for
more than five (5) business days after written notice; or

(ii)                                  If
Tenant shall have failed to perform or comply with any other term, condition,
or covenant of this Lease on its part to be performed or complied with, for a
period of thirty (30) days after notice of such failure from Landlord; or

(iii)                               If
the premises are vacant, unoccupied or deserted for a period of fifteen (15)
days or more at any time during the term of this Lease; or

(iv)    If there shall occur an Act of Bankruptcy,
as defined in

 11
 

Section 38 hereof;
or

(v)                                 If
Tenant’s leasehold interest under this Lease is sold under execution,
attachment or decree of court to satisfy any debt of Tenant, or if any lien
(including a mechanic’s lien) is filed against Tenant’s leasehold interest and
is not discharged within ten (10) days thereafter.

(b)                                 Upon
the happening of an Event of Default as defined in paragraph (a) hereof,
Landlord, in addition to any and all legal and equitable remedies it may have,
shall have the following remedies:

(i)                                     To
distrain for any rent or additional rent in default;

(ii)                                  At
any time after an Event of Default, without notice, to declare this Lease
terminated and enter the premises with or without legal process; and in such
event Landlord shall have the benefit of all provisions of law now or hereafter
in force respecting the speedy recovery of possession from Tenant’s holding
over or proceedings in forcible entry and detainer, and Tenant waives any and
all provisions for notice under such laws; and

(iii)                               At
any time after an Event of Default, without notice, to re-enter the premises
without terminating the Lease, with the benefit of all laws referred to in
clause (ii) above.

Notwithstanding
such re-entry and/or termination, Tenant shall immediately be liable to
Landlord for the sum of the following: (a) all rent and additional rent then in
arrears, without apportionment to the termination date; (b) all other
liabilities of Tenant and damages sustained by Landlord as a result of Tenant’s
default, including, but not limited to, the reasonable costs of reletting the
premises and any broker’s commissions payable as a result thereof; (c) all of
Landlord’s costs and expenses (including reasonable counsel fees) in connection
with such default and recovery of possession; (d) the difference between the
rent reserved under this Lease for the balance of the term and the fair rental
value of the premises for the balance of the term to be determined as of the
date of re-entry; or at Landlord’s option in lieu thereof, Tenant shall pay the
amount of the rent and additional rent reserved under this Lease at the times
herein stipulated for payment of rent and additional rent for the balance of
the term, less any amount received by Landlord during such period from others
to whom the premises may be rented on such terms and conditions and at such
rentals as Landlord, in its sole discretion, shall deem proper; and (e) any
other damages recoverable by law.  In the
event Landlord brings any action against Tenant to enforce compliance by Tenant
with any covenant or condition of this Lease, including the covenant to pay
rent, and it is judicially determined that Tenant has defaulted in performing
or complying with any such covenant or condition, then and in such event,
Tenant shall pay to Landlord all costs and expenses incurred by Landlord in
bringing and prosecuting such action against Tenant, including Landlord’s
attorney’s fees.

 12

(c)                                  Tenant
hereby waives any right to recover possession of the premises or to redeem or
reinstate this Lease, which the Tenant would otherwise have after Landlord
recovers possession of the premises in accordance with this Section 13.

(d)                                 In
the event Tenant fails to pay Landlord any rental payment or other charge due
hereunder on the date due, Tenant shall pay a late charge equal to fifteen
percent (15%) of the rental payment or other such charge, which late charge
shall be collectible as additional rent and shall be payable by Tenant to
Landlord within five (5) days after written notice from Landlord to Tenant
assessing the same.  In addition, any
such rental payment or other charge which is delinquent for five (5) days or
more, shall bear interest from the date on which same was due at a rate equal
to four (4) percentage points above the prime rate of interest published by the
Wall Street Journal on the date closest to the date on which any such payment
was due.

14.                               Damage
or Destruction.

(a)                                  If,
during the Lease term, the premises hereby leased are damaged by fire or other
casualty, but not to the extent that Tenant is prevented from carrying on
business in more than ten percent (10%) of the premises, Landlord shall
promptly cause such damage to be repaired; if such damage renders a substantial
portion of the premises untenantable, the rent reserved hereunder shall be
reduced during the period of its untenantability proportionately to the amount
by which the area so rendered untenantable bears to the entire gross rentable
area of the premises, and such reduction shall be apportioned from the date of
the casualty to the date when the premises are rendered fully tenantable.  Notwithstanding the foregoing, in the event such
fire or other casualty damages or destroys any of Tenant’s leasehold
improvements, alterations, betterments, fixtures or equipment, Tenant shall, at
its sole election, cause the same to be repaired or restored at Tenant’s sole
cost and expense and Landlord shall have no liability for the restoration or
repair thereof.

(b)                                 If,
during the Lease term, the premises or a substantial portion of the premises
(more than ten percent (10%) of the premises) are rendered wholly untenantable
as the result of fire, the elements, unavoidable accident or other casualty, or
Tenant is otherwise unable to use the premises for its intended purpose and
such cannot be repaired or restored to use within one hundred twenty (120) days
after the casualty, the Tenant shall have the right to terminate this Lease on
written notice to Landlord.  If Tenant
does not elect to termination this Lease, then Landlord shall have the option
either to restore the premises to their condition immediately prior to the
casualty or to terminate this Lease, such option shall be exercised by Landlord
by written notice to Tenant within thirty (30) days after the fire, accident or
casualty.  In the event of such
termination, the rent reserved hereunder shall be adjusted as of the date of
the fire, accident or casualty.  If
Landlord elects to restore the premises, such restoration shall be completed as
promptly as reasonably possible and the rent reserved hereunder shall abate
until the premises are again rendered tenantable.

15.                               Possession.

In case this Lease
provides for a specifically designated commencement date, and if possession of
the premises, in whole or in part, cannot be given to Tenant on or before such
commencement date, Landlord agrees to abate the rent proportionately until
possession is given to Tenant, and 

 13
 

Tenant agrees to accept
such pro rata abatement as liquidated damages for the failure to obtain
possession on the commencement date herein specified.  If possession of the premises is not given to
Tenant by July 1, 2007, then Tenant shall have the right to terminate this
Lease immediately upon written notice to Landlord, and both parties be released
of all of their obligations under this Lease. 
The parties hereto covenant and agree that if the term of this Lease
commences on a date other than the date herein specified, they will, upon the
request of either of them, execute an agreement in recordable form setting
forth the new commencement and termination dates of the Lease term.  Under no circumstances shall Landlord be
under any liability for failure to deliver possession of the premises to Tenant
on the date herein specified.

16.                               Exterior
of Premises – Signs.

(a)                                  Tenant
covenants and agrees that it will not place or permit any window display, sign,
billboard, marquee, lights, awning, poles, placard, advertising matter, or other
thing of any kind, in or about the exterior of the premises or the Building
(including without limitation any displays on or in any motor vehicles used by
Tenant, its employees, agents and servants), nor paint or make any change in,
to or on the exterior of said premises to change the uniform architecture,
paint or appearance of the Building, without in each such instance obtaining
the prior written consent of Landlord, which shall not be unreasonably
conditioned, withheld or delayed, and, if applicable, of any owners’
association or similar entity which may govern the use of the premises.  Tenant shall obtain, at Tenant’s expense, all
permits required for such installation. 
Tenant further agrees to maintain any sign, billboard, marquee, awning,
decoration, placard, or advertising matter or other thing of any kind as may be
approved by Landlord in good condition and repair at all times.

(b)                                 Tenant
further covenants and agrees not to pile or place anything on the sidewalk,
parking lot or other exterior portion of the premises or Building in the front,
rear or sides of the building other than temporarily during normal business
hours, nor block any sidewalk, parking lot or other exterior portion of the
premises or Building, nor do anything that directly or indirectly will
materially interfere with any of the rights of ingress or egress or of light
from any other tenant, nor do anything which will, in any way, change the
uniform and general design of the Building or the Property.

17.                               Relocation.
Intentionally deleted.

18.                               For
Rent/Sale Signs.

Landlord shall have the
right to place a “For Rent” sign on any portion of said premises for six (6)
months prior to termination of this Lease and to place a “For Sale” sign
thereon at any time.  During such
six-month period, Landlord may show the premises and all parts thereof to
prospective tenants between the hours of 9:00 A.M. and 5:00 P.M. on any day
except Sunday or any legal holiday on which Tenant shall not be open for
business.

19.                               Water
and Other Damages.

Landlord shall not be
liable for, and Landlord is hereby released and relieved from, all claims and
demands of any kind by reason of or resulting from damage or injury to person
or property of Tenant or any other party, directly or indirectly caused by (a)
dampness, water, rain or snow, in any part of the premises or in any part of
any other property of Landlord or of others, and/or 

 14
 

(b) falling plaster,
steam, gas, electricity, or any leak or break in any part of the premises or
from any pipes, appliances or plumbing or from sewers or the street or
subsurface or from any other place or any part of any other property of
Landlord or of others or in the pipes of the plumbing or heating facilities
thereof, no matter how caused.

20.                               Right
of Entry.

Landlord and its agents,
servants, employees, including any builder or contractor employed by Landlord,
shall have the absolute and unconditional right, license and permission, at any
and all reasonable times, to enter and inspect the premises or any part
thereof, and at the option of Landlord, to make such reasonable repairs and/or
replacements in the premises as Landlord may deem necessary or proper and/or to
enforce and carry out any provision of this Lease.

21.                               Termination
of Term.

(a)                                  It
is agreed that the term of this Lease shall expire and terminate at the end of
the original term hereof (or at the expiration of the last renewal term, if
this Lease contains a renewal option and the same is properly exercised),
without the necessity of any notice by or to any of the parties hereto, unless
otherwise provided herein.  If Tenant
shall occupy the premises after such expiration or termination, it is
understood that Tenant shall hold the premises as a tenant from month-to-month,
subject to all the other terms and conditions of this Lease, at an amount equal
to 125% the highest monthly rental installment reserved in this Lease, plus all
additional rent required under this Lease. 
Landlord shall, upon such expiration or termination of this Lease, be
entitled to the benefit of all public general or local laws relating to the
speedy recovery of possession of lands and tenements held over by Tenants that
may be now in force or may hereafter be enacted.

(b)                                 At
the time Tenant surrenders the premises to Landlord, the premises shall be in compliance
with all applicable building code requirements insofar as such requirements
relate to Tenant’s use and occupancy of the premises or to any installations,
alterations or improvements made by Tenant thereto.

22.                               Condemnation.

(a)                                  If,
during the term of this Lease, all or a substantial part of the premises shall
be taken by police power or under power of eminent domain, this Lease shall
terminate as of, and the rent (basic and additional) shall be apportioned to
and abate from and after, the date of taking. 
Tenant shall have no right to participate in any award or damages for
such taking and hereby assigns all of its right, title and interest therein to
Landlord.  For the purposes of this
paragraph, “a substantial part of the premises” shall mean such part that the
remainder thereof is rendered inadequate for Tenant’s business and that such
remainder cannot practicably be repaired and improved so as to be rendered
adequate to permit Tenant to carry on its business with substantially the same
efficiency as before the taking.

(b)                                 If,
during the Lease term, less than a substantial part of the premises (as
hereinabove defined) is taken by police power or under power of eminent domain,
this Lease shall remain in full force and effect according to its terms; and
Tenant shall not have the right to participate in any award or damages for such
taking and Tenant hereby assigns all of its right, title and interest in and to
the award to Landlord.  In such event
Landlord shall, at its expense, 

 15
 

promptly make such repairs
and improvements as shall be necessary to make the remainder of the premises
adequate to permit Tenant to carry on its business to substantially the same
extent and with substantially the same efficiency as before the taking;
provided that in no event shall Landlord be required to expend an amount in
excess of the award received by Landlord for such taking.  If, as a result of such taking, any part of
the premises is rendered permanently unusable, the basic annual rent reserved
hereunder shall be reduced in such amount as may be fair and reasonable, which
amount shall not exceed the proportion which the area so taken or made unusable
bears to the total area which was usable by Tenant prior to the taking.  If the taking does not render any part of the
premises unusable, there shall be no abatement of rent.

(c)                                  For
purposes of this section, “taking” shall include a negotiated sale or lease and
transfer of possession to a condemning authority under bona fide threat of
condemnation for public use, and Landlord alone shall have the right to
negotiate with the condemning authority and conduct and settle all litigation
connected with the condemnation.  As
hereinabove used, the words “award or damages” shall, in the event of such sale
or settlement, include the purchase or settlement price.

(d)                                 Nothing
herein shall be deemed to prevent Tenant from claiming and receiving from the
condemning authority, if legally payable, compensation for the taking of Tenant’s
own tangible property and such amount as may be payable by statute or ordinance
toward Tenant’s damages for Tenant’s loss of business, removal and relocation
expenses.

23.                               Subordination.

This Lease shall be
subject to and subordinate at all times to the lien of any mortgages and/or
deeds of trust upon the Building now or hereafter to be made, unless the
mortgagee or holder of the deed of trust elects to have Tenant’s interest
hereunder superior to the interest of the mortgagee or holder of such deed of
trust.  This subordination provision
shall be self-operative and no further instrument of subordination shall be
required.  The Tenant agrees to execute
any documents necessary, subsequent to the execution of this Lease, which are
required to effect such subordination. 
Tenant further hereby constitutes and appoints Landlord as Tenant’s
attorney-in-fact to execute any such instrument for and on behalf of Tenant.

24.                               Attornment.

(a)                                  If
Landlord assigns this Lease or the rents hereunder to a creditor as security
for a debt, Tenant shall, after notice of such assignment and upon demand by
Landlord or the assignee, pay all sums thereafter becoming due to Landlord
hereunder either to Landlord or to such assignee, as required by such
notice.  Tenant shall also, upon receipt
of such notice, have all policies of insurance required hereunder endorsed so
as to protect the assignee’s interest as it may appear and shall deliver such
policies, or certificates thereof, to the assignee.

(b)                                 In
the event the premises are sold at any foreclosure sale or sales, by virtue of
any judicial proceedings or otherwise, this Lease shall continue in full force
and effect and Tenant agrees, upon request, to attorn to and acknowledge the
foreclosure purchaser or purchasers at such sale as the landlord hereunder.  It is understood that such purchaser or
purchasers may, at its or their option, terminate this Lease immediately, upon
giving written notice thereof to Tenant.

 16
 

25.                               Notices
to Mortgagee.

Tenant agrees that a copy
of any notice of default from Tenant to Landlord shall also be sent to the
holder of any mortgage or deed of trust on the premises, provided Tenant has
been given written notice of the fact that such mortgage or deed of trust has
been made; and Tenant shall allow said mortgagee or holder of the deed of trust
a reasonable time, not to exceed ninety (90) days from the receipt of said
notice, to cure, or cause to be cured, any such default.  If such default cannot reasonably be cured
within the time specified herein, then such additional time as may be necessary
shall be allowed, provided the curing of such default is commenced and
diligently pursued (including, but not limited to, commencement of foreclosure
proceedings if necessary to effect such cure) in which event this Lease shall
not be terminated while such remedies are being thus diligently pursued.

26.                               Estoppel
Certificate.

Tenant shall, at any time
and from time to time during the term of this Lease or any renewal thereof,
upon request of Landlord, execute, acknowledge, and deliver to Landlord (or its
designee) a statement in writing, certifying that this Lease is unmodified and
in full force and effect if such is the fact (or if there have been any
modifications thereof, that the same is in full force as modified and stating
the modifications) and the dates to which the rents and other charges have been
paid in advance, if any.  Any such
statement delivered pursuant to this paragraph may be relied upon by any
prospective purchaser of the estate of Landlord or by the mortgagee or any assignee
of any mortgagee or the trustee or beneficiary of any deed of trust
constituting a lien on the premises or the Building.

27.                               Right
to Perform Covenants.

If either party shall
fail to perform any covenant or duty required of it by this Lease beyond an
applicable cure period or by law, the non-defaulting shall have the right (but
not the obligation) to perform the same, and if necessary to enter the premises
or Property for such purposes without notice. 
The reasonable cost thereof to the non-defaulting party shall be deemed
to be additional rent hereunder payable by the defaulting party, shall be due
and payable by the defaulting party upon demand.

28.                               Non-Waiver
of Future Enforcement.

The receipt of rent by
Landlord, with knowledge of any breach of this Lease by Tenant or of any
default on the part of Tenant in the observance or performance of any of the
conditions or covenants of this Lease, shall not be deemed to be a waiver of
any provision of this Lease, including the provision breached.  No failure on the part of Landlord or of the
Tenant to enforce any covenant or provision herein contained nor any waiver of
any right hereunder by Landlord or Tenant shall discharge or invalidate such
covenant or provision or shall affect the right of Landlord or Tenant to
enforce the same in the event of any subsequent default.  The receipt by Landlord of any rent or any
sum of money or any other consideration hereunder paid by Tenant after the
termination, in any manner, of the term herein demised, or after the giving by
Landlord of any notice hereunder to effect such termination, shall not
reinstate, continue or extend the term herein demised, or destroy, or in any
manner impair the efficacy of any such notice of termination as may have been
given hereunder by Landlord to Tenant prior to the receipt of any such sum of
money or other consideration, unless so agreed to in writing and signed by 

 17
 

Landlord.  Neither acceptance of the keys nor any other
act or thing done by Landlord or any agent or employee during the term herein
demised shall be deemed to be an acceptance of a surrender of the premises,
excepting only an agreement in writing signed by Landlord accepting or agreeing
to accept such surrender.

29.                               Personal
Property Taxes.

Tenant shall be
responsible for and shall pay any taxes or assessments levied or assessed
during the term of this Lease against any leasehold interest of Tenant or
personal property or trade fixtures of Tenant of any kind, owned by Tenant or
placed in, upon or about the premises by Tenant.

30.                               Recordation
of Lease.

Tenant agrees that it
will, upon Landlord’s request, execute a Memorandum of this Lease in a form
suitable for recording under the applicable law of the jurisdiction in which
the premises are located.  The party
recording such Memorandum of Lease shall pay all costs of recordation,
including any transfer or recordation taxes thereon.

31.                               Severability.

(a)                                  It
is agreed that, for the purpose of any suit brought or based on this Lease,
this Lease shall be construed to be a divisible contract, to the end that
successive actions may be maintained thereon as successive periodic sums shall
mature or be due hereunder, and it is further agreed that failure to include in
any suit or action any sum or sums then matured or due shall not be a bar to
the maintenance of any suit or action for the recovery of said sum or sums so
omitted; and Tenant agrees that it will not, in any suit or suits brought or
arising under this Lease for a matured sum for which judgment has not
previously been obtained or entered, plead, rely on or interpose the defenses
of res adjudicata, former recovery, extinguishment, merger, election of
remedies or other similar defense as a default to said suit or suits.

(b)                                 If
any term, clause or provision of this Lease is declared invalid by a court of
competent jurisdiction, the validity of the remainder of this Lease shall not
be affected thereby but shall remain in full force and effect.

32.                               Non-Waiver.

It is understood and
agreed that nothing herein shall be construed to be a waiver of any of the
terms, covenants or conditions herein contained, unless the same shall be in
writing, signed by the party to be charged with such waiver, and no waiver of
the breach of any covenant herein shall be construed as a waiver of such
covenant or any subsequent breach thereof. 
No mention in this Lease of any specific right or remedy shall preclude
Landlord from exercising any other right or from having any other remedy or
from maintaining any action to which it may be otherwise entitled either at law
or in equity.

33.                               Successors
and Assigns.

(a)                                  Except
as herein provided, this Lease and the covenants and conditions herein
contained shall inure to the benefit of and be binding upon Landlord, its
successors and assigns; shall be binding upon Tenant, its successors and
assigns (including without limitation

 18
 

any trustee in bankruptcy
or debtor-in-possession, and any assignee of the same); and shall inure to the
benefit of Tenant and only such assignees of Tenant to whom an assignment by
Tenant has been consented to in writing by Landlord.  In the event more than one person, firm or
corporation is named herein as Tenant, the liability of all parties named
herein as Tenant shall be joint and several.

(b)                                 In
the event Landlord’s interest under this Lease is transferred or assigned and
written notice thereof is given to Tenant, Landlord (or any subsequent assignee
or transferee of Landlord’s interest under this Lease who gives such notice to
Tenant) shall automatically be relieved and released from and after the date of
such transfer or conveyance from all liability thereafter accruing or arising
hereunder.  Further, the liability of
Landlord, its successors and assigns, under this Lease shall at all times be
limited solely to Landlord’s interest in the land and improvements comprising
the Building and in the event the owner of Landlord’s interest in this Lease is
at any time an individual, partnership, joint venture or unincorporated
association, Tenant agrees that such individual or the members or partners of
such partnership, joint venture or unincorporated association shall not be
personally or individually liable or responsible for the performance of any of
Landlord’s obligations hereunder.

34.                               Security
Deposit. Intentionally deleted.

35.                               Bankruptcy.

(a)                                  An
“Act of Bankruptcy” shall mean:

(i)                                     the
application by Tenant or any guarantor of Tenant or its or their consent to the
appointment of a receiver, trustee or liquidator of Tenant or any guarantor of
Tenant or a substantial part of its or their assets;

(ii)                                  the
filing of a voluntary petition in bankruptcy or the admission in writing by
Tenant or any guarantor of Tenant of its inability to pay its debts as they
become due;

(iii)                               the
making by Tenant or any guarantor of Tenant of an assignment for the benefit of
its creditors;

(iv)                              the
filing of a petition or an answer seeking a reorganization or an arrangement
with its creditors or an attempt to take advantage of any insolvency law;

(v)                                 the
filing of an answer admitting the material allegations of a petition filed
against Tenant or any guarantor of Tenant in any bankruptcy, reorganization or
insolvency proceeding;

(vi)                              the
entering of an order, judgment or decree by any court of competent jurisdiction
adjudicating Tenant or any guarantor of Tenant, as a bankrupt or an insolvent,
approving a petition seeking such a reorganization, or appointing a receiver,
trustee or liquidator of Tenant or any guarantor of Tenant or of all or a
substantial part of its or their assets; or

 19
 

(vii)                           the
commencing of any proceeding under any bankruptcy, reorganization, arrangement,
insolvency, readjustment, receivership or similar law, and the continuation of
such order, judgment, decree or proceeding unstayed for a period of sixty (60)
days.

(b)                                 Upon
the occurrence of an Act of Bankruptcy, this Lease and all rights of Tenant
hereunder shall automatically terminate with the same force and effect as if
the date of any such event were the date stated herein for the expiration of
the term, and Tenant shall vacate and surrender the premises, but shall remain
liable as herein provided.  Landlord
reserves any and all remedies provided herein or at law or in equity.

(c)                                  If
this Lease is not terminated in accordance with subsection (b) above because
such termination is not permitted under the Bankruptcy Code, 11 U.S.C. §101 et seq.
(the “Bankruptcy Code”), then upon the filing of a petition by or against
Tenant under the Bankruptcy Code, Tenant, as debtor and as debtor in
possession, and any trustee who may be appointed, agree:

(i)                                     To
perform each and every obligation of Tenant under this Lease until such time as
this Lease is either rejected or assumed by order of the United States
Bankruptcy Court;

(ii)                                  To
pay monthly in advance on the first day of each month as reasonable
compensation for use and occupancy of the premises an amount equal to all basic
rent and all additional rent reserved hereunder;

(iii)                               To
reject or assume this Lease within sixty (60) days of the filing of such
petition under Chapter 7 of the Bankruptcy Code or within thirty (30) days of
the filing of a petition under any other Chapter;

(iv)                              To
give Landlord at least forty-five (45) days prior written notice of any
proceeding relating to any assumption of this Lease;

(v)                                 To
give Landlord at least thirty (30) days prior written notice of any abandonment
of the premises, any such abandonment to be deemed conclusively a rejection of
this Lease;

(vi)                              To
be deemed conclusively to have rejected this Lease in the event of the failure
to comply with any of the above; and

(vii)                           To be
deemed to have consented to the entry of an order by an appropriate United
States Bankruptcy Court providing all of the above, waiving notice and hearing
of the entry of same.

(d)                                 Notwithstanding
anything in this Lease to the contrary, all amounts payable by Tenant to or on
behalf of Landlord hereunder, whether or not expressly denominated 

 20
 

as rent, shall constitute
“rent” for the purposes of Section 502(b)(7) of the Bankruptcy Code, including,
without limitation, reasonable attorney’s fees incurred by Landlord by reason
of Tenant’s bankruptcy.

(e)                                  In
the event that this Lease is assigned to any person or entity pursuant to the
provisions of the Bankruptcy Code, any and all monies or other consideration
payable or otherwise to be delivered in connection with such assignment shall
be paid or delivered to Landlord, shall be and remain the exclusive property of
Landlord, and shall not constitute property of Tenant or of the estate of
Tenant within the meaning of the Bankruptcy Code.  Any and all monies or other consideration
constituting Landlord’s property under the preceding sentence not directly paid
or delivered to Landlord shall be held in trust for the benefit of Landlord by
the recipient thereof and be promptly paid to or turned over to Landlord.  If Tenant assumes this Lease and proposes to
assign the same pursuant to the provisions of the Bankruptcy Code to any person
or entity who shall have made a bona fide offer to accept an assignment of this
Lease on terms acceptable to Tenant, the notice of such proposed assignment
setting forth (i) the name and address of such person; (ii) all of the terms
and conditions of such offer; and (iii) adequate assurance to be provided to
Landlord to assure such assignee’s future performance under the Lease,
including, without limitation, the assurance referred to in Section 365(b)(3)
of the Bankruptcy Code, or any such successor or substitute legislation or rule
thereto, shall be given to landlord by Tenant no later than twenty (20) days
after receipt by Tenant, but in any event no later than ten (10) days prior to
the date that Tenant shall make application to a court of competent
jurisdiction for authority and approval to enter into such assignment and
assumption, and Landlord shall thereupon have the prior right and option, to be
exercised by notice to Tenant given at any time prior to the effective date of
such proposed assignment, to accept an assignment of this Lease upon the same
terms and conditions and for the same consideration, if any, as the bona fide
offer made by such person, less any brokerage commission which may be payable
out of the consideration to be paid by such person for the assignment of this
Lease.  Any person or entity to which
this Lease is assigned pursuant to the provisions of the Bankruptcy Code shall
be deemed without further act or deed to have assumed all of the obligations
arising under this Lease on and after the date of such assignment.  Any such assignee shall, upon demand, execute
and deliver to Landlord an instrument confirming such assumption.

(f)                                    Nothing
contained in this Section 35 shall be deemed in any manner to limited Landlord’s
rights and remedies under the Bankruptcy Code, as presently existing or as may
hereafter be amended.

(g)                                 No
default under this Lease by Tenant, either prior to or subsequent to any Act of
Bankruptcy, shall be deemed to have been waived unless expressly done so in
writing by Landlord.

(h)                                 Neither
Tenant’s interest in this Lease, nor any estate created hereby in Tenant nor
any interest herein or therein, shall pass to any trustee or receiver or assignee
for the benefit of creditors or otherwise by operation of law except as may
specifically be provided by the Bankruptcy Code.

 21
 

36.                               Broker’s
Commission.

Tenant and Landlord
warrant that they have dealt with no broker in connection with this Lease except
Richie Blue of Blue and Obrecht, and agree to indemnify, defend and save the
other harmless from all claims, actions, damages, costs and expenses and
liability whatsoever, including reasonable attorney’s fees, that may arise from
any breach of this warranty.  Landlord
shall be solely responsible for any fee or commission due to the foregoing
named broker and/or agent.

37.                               Rules
and Regulations.

Tenant shall faithfully observe and comply with the
rules and regulations attached hereto as Exhibit C, and with any amendments or
modifications thereto that Landlord shall, from time to time, promulgate with
respect to the Building.  Any such
amendments or modifications to the rules and regulations shall be binding upon
Tenant upon delivery of a copy of them to Tenant.  Landlord shall not be responsible to Tenant
for the nonperformance of any of said rules and regulations by any other
tenants or occupants.

38.                               Environmental
Provisions.

(a)                                  Tenant
and its successors and assigns shall use and operate the building, the property
and the leased premises, respectively, at all times during the term hereof,
under and in compliance with the laws of the jurisdiction in which the premises
are located and in compliance with all applicable Environmental Legal
Requirements.  “Environmental Legal
Requirements” shall mean any applicable law relating to public health, safety
or the environment, including, without limitation, relating to releases,
discharges or omissions to air, water, land or groundwater, to the withdrawal
or use of groundwater, to the use and handling of polychlorinated biphenyls (“PCBs”)
or asbestos, or asbestos containing products, to the disposal, treatment,
storage or management of solid or other hazardous or harmful wastes or to
exposure to toxic, hazardous or other harmful materials (collectively “Hazardous
Substances”) to the handling, transportation, discharge or release of gaseous
or liquid substance and any regulation or final order or directive issues
pursuant to such statute or ordinance, in each case applicable to the premises,
the building or its operation, construction or modification, including without
limitation the following: the Clean Air Act, the Federal Water Pollution
Control Act (“FWPCA”), the Safe Drinking Water Act, the Toxic Substances Control
Act, the Comprehensive Environmental Response Compensation and Liability Act,
as amended by the Solid and Hazardous Waste Amendments of 1984 (“RCRA”), the
Occupational Safety and Health Act, the Emergency Planning and Community
Right-to-Know Act of 1986, the Solid Waste Disposal Act, and any state statutes
addressing similar matters, and any state statute providing for financial
responsibility for clean-up or other actions with respect to the release or
threatened release of any of the above-referenced substances.

(b)                                 Tenant
hereby indemnifies, defends and saves Landlord harmless from all liabilities
and claims arising from the use, storage or placement of any Hazardous
Substances upon the premises or elsewhere within the building or property of
Landlord (if brought or placed thereon by Tenant, its agents, employees,
contractors or invitees); and Tenant shall (i) within fifteen (15) days after
written notice thereof, take or cause to be taken, at its sole expense, such
actions as may be necessary to comply with all Environmental Legal Requirements
and (ii) 

 22
 

within fifteen (15) days
after written demand therefor, reimburse Landlord for any amounts expended by
Landlord to comply with any Environmental Legal Requirements with respect to
the premises or with respect to any other portions of Landlord’s building or
property as the result of the placement or storage of Hazardous Substances by
Tenant, its agents, employees, contractors or invitees, or in connection with
any judicial or administrative investigation or proceeding relating thereto,
including, without limitation, reasonable attorneys’ fees, fines or other
penalty payments.

(c)                                  For
purposes of this provision, Tenant shall be conclusively deemed to have
violated the Environmental Requirements if (i) any notice or order is directed
to either Landlord or Tenant by any governmental agency, body, or court
alleging that such violation has occurred; or (ii) if Landlord obtains and
delivers to Tenant a report prepared by an engineer or other party engaged in
the business of testing or determining the existence of Hazardous Substances,
which report states that there are Hazardous Substances used, stored or placed
upon the premises.  In the event Tenant
is deemed to have violated any of the Environmental Requirements as set forth
in the preceding sentence, Landlord shall have the right and option, after
fifteen (15) days’ prior written notice to Tenant, to terminate this Lease by
written notice thereof to Tenant, in which event Landlord shall retain all
rights and remedies, and tenant shall be subject to all liabilities set forth
in Article 13 of this Lease notwithstanding such termination.

(d)                                 Tenant
further agrees that, in the event Landlord notifies Tenant of Landlord’s
intention to remediate mold in the Premises or in any adjoining property of
Landlord, Tenant will provide access to the Premises to permit Landlord to
remediate any such problem.  In the event
Landlord determines that Tenant should vacate the Premises during such
remediation which was not caused by any act or omission of Tenant, its agents,
employees, contractors or invitees, Tenant agrees to relocate, at Landlord’s
expense, to another premises owned by Landlord or an affiliate of Landlord, if
necessary, in order for Landlord to complete such remediation.

(e)                                  Tenant
hereby grants Landlord, and Landlord’s agents and employees (including, but not
limited to, any engineers or other parties engaged in the testing of Hazardous
Substances) the reasonable right to enter upon the premises for the purpose of
determining whether Tenant, its agents, employees, contractors or invitees, has
violated any of the provisions of this Section.

39.                               Captions.

The captions of the
various sections of this Lease are for convenience only and are not a part of
this Lease.  Such captions shall not be
construed to define or limit any of the provisions of this Lease.

40.                               Final
and Entire Agreement.

This Lease
contains the final and entire agreement between the parties hereto, and neither
they nor their agents shall be bound by any terms, conditions or
representations not herein written. 
Tenant acknowledges that neither Landlord nor any broker, agent or
employee of Landlord has made any representations or promises with respect to
the premises or Building, except as expressly set forth herein.  Any representation, inducement, warranty,
understanding or 

 23
 

agreement that is
not contained in this Lease shall not be of any force or effect.

41.                               Counterparts.

This Lease may be
executed in separate counterparts, each of which shall be deemed an original
and all of which taken together shall constitute one and the same document.

42.                               Authority.

The person
executing and delivering this Lease on behalf of Tenant hereby covenants and
warrants that such person is duly authorized to execute and deliver this Lease
on behalf of Tenant.

43.                               Notices.

Any notice required by
this Lease shall be sent by certified mail, postage prepaid, return receipt
requested, or by a recognized overnight delivery service such as Federal
Express with a receipt by addressee, to Landlord at Merritt Properties, LLC,
2066 Lord Baltimore Drive, Baltimore, Maryland 21244.  Any notice required by this Lease shall be
sent in the same manner to Tenant at the premises. with a copy to Robert P. Legg,
Esquire, Neuberger, Quinn, Gielen, Rubin & Gibber P.A., One South Street,
27th Floor, Baltimore, Maryland 21202. 
Either party may, at any time, and from time to time, designate in
writing a substitute address for that set forth above, and thereafter all
notices to such party shall be sent by certified mail to such substitute
address.

44.                               Tenant
Representative.

The name, address and telephone number of Tenant’s
representative to be contacted in event of emergency are as follows:

Name: Doug Rein

Business Phone:
(410) 229-1292

Cell Phone: (410) 336-1130

45.                               Waiver
of Jury Trial.

THE LANDLORD AND THE
TENANT WAIVE ALL RIGHTS TO A TRIAL BY JURY IN ANY ACTION, COUNTERCLAIM, OR
PROCEEDING BASED UPON, OR RELATED TO, THE SUBJECT MATTER OF THIS LEASE.  THIS WAIVER APPLIES TO ALL CLAIMS AGAINST ALL
PARTIES TO SUCH ACTIONS AND PROCEEDINGS, INCLUDING PARTIES WHO ARE NOT PARTIES
TO THIS LEASE.  THIS WAIVER IS KNOWINGLY,
INTENTIONALLY, AND VOLUNTARILY MADE BY THE TENANT AND THE TENANT ACKNOWLEDGES
THAT NEITHER THE LANDLORD, NOR ANY PERSON ACTING ON BEHALF OF THE LANDLORD, HAS
MADE ANY REPRESENTATIONS OF FACT TO INDUCE THIS WAIVER OF TRIAL BY JURY OR IN
ANY WAY TO MODIFY OR NULLIFY ITS EFFECT. 
THE TENANT FURTHER ACKNOWLEDGES THAT IT HAS BEEN REPRESENTED (OR HAS HAD
THE OPPORTUNITY TO BE REPRESENTED) IN THE SIGNING OF THIS LEASE AND IN THE
MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL, SELECTED OF ITS OWN FREE
WILL, IN THAT IT HAS HAD THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH COUNSEL.

46.                               Submission
Not An Offer.

The submission of
this document for examination does not constitute an option or offer to lease 

 24
 

the Premises.  This document shall have no binding effect on
the parties unless executed by both Landlord and Tenant and a fully executed
copy is delivered to each of them.

47.                               Renewal
Option.

If Tenant is not then in default under this Lease or
any of the provisions hereof, Tenant may extend the term of this Lease for one
(1) additional successive period of three (3) years, by notifying Landlord in
writing of its intention to do so at least one hundred eighty (180) days prior
to the expiration of the then current term. 
Such renewal term shall be under the same terms and conditions as are
herein set forth except that the annual rental for the renewal term shall be
adjusted as follows:

RENTAL FOR THE FIRST YEAR
OF THE RENEWAL TERM SHALL BE ONE HUNDRED THREE PERCENT (103%) OF THE RENT
DURING THE LAST YEAR OF THE INITIAL TERM. 
THEREAFTER, THE RENTAL RATE SHALL INCREASE ANNUALLY AT A RATE OF THREE
PERCENT (3%) OVER THE PRECEDING YEAR’S RENTAL RATE THROUGHOUT THE RENEWAL TERM.

48.                               Additional
Items.

Landlord shall provide a
fifty thousand dollar ($50,000.00) Tenant Improvement Allowance which shall be
used for Improvements to the premises, and shall be reimbursed to the Tenant in
the form of a rental credit.   In
addition, Landlord, at Landlord’s sole cost and expense, shall paint the
warehouse walls and polish and seal warehouse floor in a similar condition as
test strip performed by Consolidated Coatings and approved by Tenant on May 30,
2007.

49.                               Termination
Option.

Tenant is hereby granted
one (1) one (1) time option to terminate this Lease as of the end of the third
(3rd)
year of the Lease term provided all of the following conditions are complied
with: (i) Tenant shall not be in default under any of Tenant’s obligations
under the Lease as of the date Tenant exercises the option to terminate; (ii)
Tenant must give Landlord written notice of Tenant’s election to terminate not
later than one hundred and eighty (180) days prior to the expiration of the
third (3rd) year of
the Lease term and; (iii) Tenant shall pay a termination fee of twenty-five
thousand dollars ($25,000.00) thirty (30) days prior to the expiration of the
third (3rd) year of
the Lease term. Tenant shall continue to make all such rental payments when and
as the same are due and payable.  All
rentals and other charges payable by Tenant to Landlord shall be adjusted as of
the termination date.

50.                               Fees
and Costs.

In the event of a dispute
under this Lease, the prevailing party in such dispute, or litigation arising
from such dispute, shall be entitled to recover from the other its reasonable
attorneys’ and experts’ fees, costs and expenses incidental to such dispute or
litigation, including any appeal.

51.                               Time.

Time is of the essence for all purposes in this Lease.

- Signature Page to Follow -

 25

WITNESS the hands and seals of
the parties hereto as of the day and year first above written.

	
  WITNESS:

  	
   

  	
  LANDLORD:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  MERRITT/BAVAR-VA, LLC

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  Merritt Management Corporation, Agent

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  /s/

  	
   

  	
  By:

  	
    /s/

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  WITNESS/ATTEST:

  	
   

  	
  TENANT:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  TESSCO Technologies, Inc.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  /s/

  	
   

  	
  By:

  	
    /s/

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:Exhibit 4.1

Execution Copy

 

 

DUKE
ENERGY CAROLINAS, LLC

TO

THE
BANK OF NEW YORK

Trustee

Sixteenth
Supplemental Indenture

Dated
as of June 5, 2007

$500,000,000 6.10%
Senior Notes Due 2037

TABLE OF CONTENTS  (1)

ARTICLE 1

6.10% Senior Notes Due 2037

	
  SECTION 1.01  Establishment

  	
   

  	
  1

  
	
  SECTION 1.02  Definitions

  	
   

  	
  2

  
	
  SECTION 1.03  Payment
  of Principal and Interest

  	
   

  	
  2

  
	
  SECTION 1.04  Denominations

  	
   

  	
  3

  
	
  SECTION 1.05  Global
  Securities

  	
   

  	
  3

  
	
  SECTION 1.06  Redemption

  	
   

  	
  4

  
	
  SECTION 1.07  Paying
  Agent

  	
   

  	
  5

  
	
   

  	
   

  	
   

  
	
  ARTICLE 2

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Miscellaneous
  Provisions

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 2.01  Recitals
  by the Company

  	
   

  	
  5

  
	
  SECTION 2.02  Ratification
  and Incorporation of Original Indenture

  	
   

  	
  5

  
	
  SECTION 2.03  Executed
  in Counterparts

  	
   

  	
  5

  
	
   

  	
   

  	
   

  
	
  Exhibit A        Form of 6.10% Senior Note

  	
   

  	
  A-1

  
	
  Exhibit B        Certificate of Authentication of 6.10%
  Senior Note

  	
   

  	
  B-1

  

 

(1) This Table of
Contents does not constitute part of the Indenture or have any bearing upon the
interpretation of any of its terms and provisions.

 i

THIS SIXTEENTH SUPPLEMENTAL INDENTURE is made as of
the 5th day of June 2007, by and between DUKE ENERGY CAROLINAS, LLC, a North
Carolina limited liability company, having its principal office at 526 South
Church Street, Charlotte, North Carolina 28202 (the “Company”), and THE BANK OF
NEW YORK (as successor to JPMorgan Chase Bank, N.A.), a New York banking
corporation, as Trustee (herein called the “Trustee”).

WITNESSETH:

WHEREAS, Duke Energy Corporation, a North Carolina
corporation (“Old Duke Energy”), has heretofore entered into a Senior
Indenture, dated as of September 1, 1998 (the “Original Indenture”), with
JPMorgan Chase Bank, N.A. (formerly known as The Chase Manhattan Bank), as
Trustee;

WHEREAS, the Company is the successor to Old Duke
Energy;

WHEREAS, the Original Indenture is incorporated herein
by this reference and the Original Indenture, as may be amended and
supplemented to the date hereof, including by this Sixteenth Supplemental
Indenture, is herein called the “Indenture”;

WHEREAS, under the Indenture, a new series of
Securities may at any time be established in accordance with the provisions of
the Indenture and the terms of such series may be described by a supplemental
indenture executed by the Company and the Trustee;

WHEREAS, the Company hereby proposes to create under
the Indenture an additional series of Securities;

WHEREAS, additional Securities of other series
hereafter established, except as may be limited in the Indenture as at the time
supplemented and modified, may be issued from time to time pursuant to the
Indenture as at the time supplemented and modified; and

WHEREAS, all conditions necessary to authorize the
execution and delivery of this Sixteenth Supplemental Indenture and to make it
a valid and binding obligation of the Company have been done or performed.

NOW, THEREFORE, in consideration of the agreements and
obligations set forth herein and for other good and valuable consideration, the
sufficiency of which is hereby acknowledged, the parties hereto hereby agree as
follows:

ARTICLE 1

6.10% SENIOR NOTES DUE 2037

SECTION 1.01  Establishment.  There is hereby established a new series of
Securities to be issued under the Indenture, to be designated as the Company’s
6.10% Senior Notes due 2037 (the “Senior Notes”).

There are to be authenticated and delivered
$500,000,000 principal amount of the Senior Notes and no further Senior Notes
shall be authenticated and delivered except as provided by

 1
 

Section 304, 305, 306,
906 or 1106 of the Original Indenture and the last paragraph of Section 301
thereof.  The Senior Notes shall be
issued in fully registered form without coupons.

The Senior Notes shall be in substantially the form
set out in Exhibit A hereto, and the form of the Trustee’s Certificate of
Authentication for the Senior Notes shall be in substantially the form set
forth in Exhibit B hereto.

Each Senior Note shall be dated the date of
authentication thereof and shall bear interest from the date of original
issuance thereof or from the most recent Interest Payment Date to which
interest has been paid or duly provided for.

SECTION 1.02  Definitions.  The following defined terms used in this
Article 1 shall, unless the context otherwise requires, have the meanings
specified below for purposes of the Senior Notes.  Capitalized terms used herein for which no
definition is provided herein shall have the meanings set forth in the Original
Indenture.

“Business Day” means a day other than (i) a Saturday
or a Sunday, (ii) a day on which banking institutions in New York, New York are
authorized or obligated by law or executive order to remain closed or (iii) a
day on which the Corporate Trust Office is closed for business.

“Interest Payment Date” means each June 1 and December
1 of each year, commencing December 1, 2007.

“Original Issue Date” means June 5, 2007.

“Regular Record Date” means, with respect to each
Interest Payment Date, the close of business on the 15th calendar day prior to
such Interest Payment Date (whether or not a Business Day).

“Stated Maturity” means June 1, 2037.

SECTION 1.03  Payment of
Principal and Interest.  The principal of
the Senior Notes shall be due at Stated Maturity (unless earlier
redeemed).  The unpaid principal amount
of the Senior Notes shall bear interest at the rate of 6.10% per annum until
paid or duly provided for, such interest to accrue from June 5, 2007 or from
the most recent Interest Payment Date to which interest has been paid or duly
provided for.  Interest shall be paid
semi-annually in arrears on each Interest Payment Date to the Person or
Persons in whose name the Senior Notes are registered on the Regular Record
Date for such Interest Payment Date; provided
that interest payable at the Stated Maturity or on a Redemption Date as
provided herein shall be paid to the Person to whom principal is payable.  Any such interest that is not so punctually
paid or duly provided for shall forthwith cease to be payable to the Holders on
such Regular Record Date and may either be paid to the Person or Persons in
whose name the Senior Notes are registered at the close of business on a
Special Record Date for the payment of such defaulted interest to be fixed by
the Trustee (“Special Record Date”), notice whereof shall be given to Holders
of the Senior Notes not less than ten (10) days prior to such Special Record
Date, or be paid at any time in any other lawful manner not inconsistent with
the requirements of any securities exchange, if any, on which the Senior Notes
may be listed, and upon such notice as may be required by any such exchange,
all as more fully provided in the Original Indenture.

 2
 

Payments of interest on the Senior Notes shall include
interest accrued to but excluding the respective Interest Payment Dates.  Interest payments for the Senior Notes shall
be computed and paid on the basis of a 360-day year of twelve 30-day
months.  In the event that any date on
which interest is payable on the Senior Notes is not a Business Day, then
payment of the interest payable on such date shall be made on the next
succeeding day that is a Business Day (and without any interest or payment in
respect of any such delay) with the same force and effect as if made on the
date the payment was originally payable.

Payment of principal of, premium, if any, and interest
on the Senior Notes shall be made in such coin or currency of the United States
of America as at the time of payment is legal tender for payment of public and
private debts.  Payments of principal of,
premium, if any, and interest on Senior Notes represented by a Global Security
shall be made by wire transfer of immediately available funds to the Holder of
such Global Security, provided that, in the case of payments of principal and
premium, if any, such Global Security is first surrendered to the Paying
Agent.  If any of the Senior Notes are no
longer represented by a Global Security, (i) payments of principal, premium, if
any, and interest due at the Stated Maturity or earlier redemption of such
Senior Notes shall be made at the office of the Paying Agent upon surrender of
such Senior Notes to the Paying Agent and (ii) payments of interest shall be
made, at the option of the Company, subject to such surrender where applicable,
(A) by check mailed to the address of the Person entitled thereto as such
address shall appear in the Security Register or (B) by wire transfer at such
place and to such account at a banking institution in the United States as may
be designated in writing to the Trustee at least sixteen (16) days prior to the
date for payment by the Person entitled thereto.

SECTION 1.04  Denominations.  The Senior Notes shall be issued in
denominations of $1,000 or any integral multiple thereof.

SECTION 1.05  Global
Securities.  The Senior Notes shall
initially be issued in the form of one or more Global Securities registered in
the name of the Depositary (which initially shall be The Depository Trust
Company) or its nominee.  Except under
the limited circumstances described below, Senior Notes represented by such
Global Security or Global Securities shall not be exchangeable for, and shall
not otherwise be issuable as, Senior Notes in definitive form.  The Global Securities described in this
Article 1 may not be transferred except by the Depositary to a nominee of the
Depositary or by a nominee of the Depositary to the Depositary or another
nominee of the Depositary or to a successor Depositary or its nominee.

A Global Security shall be exchangeable for Senior
Notes registered in the names of persons other than the Depositary or its
nominee only if (i) the Depositary notifies the Company that it is unwilling or
unable to continue as a Depositary for such Global Security and no successor
Depositary shall have been appointed by the Company within 90 days of receipt
by the Company of such notification, or if at any time the Depositary ceases to
be a clearing agency registered under the Exchange Act at a time when the
Depositary is required to be so registered to act as such Depositary and no
successor Depositary shall have been appointed by the Company within 90 days
after it becomes aware of such cessation, (ii) an Event of Default has occurred
and is continuing with respect to the Senior Notes, or (iii) the Company in its
sole discretion, and subject to the procedures of the Depositary, determines
that such Global Security shall be so exchangeable.  Any Global Security that is exchangeable
pursuant to the preceding

 3
 

sentence shall be
exchangeable for Senior Notes registered in such names as the Depositary shall
direct.

SECTION 1.06  Redemption.  The Senior Notes shall be redeemable, in
whole or from  time to time in part, at
the option of the Company on any date (a “Redemption Date”), at a Redemption
Price equal to the greater of (i) 100% of the principal amount of the Senior
Notes to be redeemed and (ii) the sum of the present values of the remaining
scheduled payments of principal and interest thereon (exclusive of interest
accrued to such Redemption Date) discounted to such Redemption Date on a semi-annual
basis (assuming a 360-day year consisting of twelve 30-day months)
at the Treasury Rate plus 20 basis points, plus, in either case, accrued and
unpaid  interest on the principal amount
being redeemed to such Redemption Date.

“Treasury Rate” means, with respect to any Redemption
Date for the Senior Notes, (i) the yield, under the heading which represents
the average for the immediately preceding week, appearing in the most recently
published statistical release designated “H.15(519)” or any successor
publication which is published weekly by the Board of Governors of the Federal
Reserve System and which establishes yields on actively traded United States
Treasury securities adjusted to constant maturity under the caption “Treasury
Constant Maturities,” for the maturity 
corresponding to the Comparable Treasury Issue (if no maturity is within
three months before or after the Stated Maturity, yields for the two published
maturities most closely corresponding to the Comparable Treasury Issue shall be
determined, and the Treasury Rate shall be interpolated or extrapolated from
such yields on a straight-line basis, rounding to the nearest month) or
(ii) if such release (or any successor release) is not published during the
week preceding the calculation date or does not contain such yields, the rate
per annum equal to the semi-annual equivalent yield  to maturity of the Comparable Treasury Issue,
calculated using a price for the Comparable Treasury Issue (expressed as a
percentage of its principal amount) equal to the Comparable Treasury Price for
such Redemption Date.  The Treasury Rate
shall be calculated on the third Business Day preceding the Redemption Date.

“Comparable Treasury Issue” means the United States
Treasury security selected by the Quotation Agent as having a maturity
comparable to the remaining term of the Senior Notes to be redeemed that would
be utilized, at the time of selection and in accordance with customary
financial practice, in pricing new issues of corporate debt securities of
comparable maturity to the remaining term of such Senior Notes.

“Quotation Agent” means a Reference Treasury Dealer
appointed by the Company.

“Comparable Treasury Price” means, with respect to any
Redemption Date for the Senior Notes, (1) the average of five Reference
Treasury Dealer Quotations for such Redemption Date, after excluding the
highest and lowest such Reference Treasury Dealer Quotations, or (2) if fewer
than five such Reference Treasury Dealer Quotations are obtained, the average
of all such Reference Treasury Dealer Quotations.

“Reference Treasury Dealer” means each of Merrill
Lynch, Pierce, Fenner & Smith Incorporated, Morgan Stanley & Co.
Incorporated, BNP Paribas Securities Corp., Credit Suisse Securities (USA) LLC,
UBS Securities LLC, and their respective successors; provided,
however, that if any of the foregoing shall cease to be a primary
U.S. Government securities dealer in the

 4
 

United States (a “Primary
Treasury Dealer”), the Company will substitute therefor another Primary
Treasury Dealer.

“Reference Treasury Dealer Quotations” means, with
respect to each Reference Treasury Dealer and any Redemption Date, the average,
as determined by the Quotation Agent, of the bid and asked prices for the
Comparable Treasury Issue (expressed in each case as a percentage of its
principal amount) quoted in writing to the Quotation Agent by such Reference
Treasury Dealer at 5:00 p.m., New York City time, on the third Business Day
preceding such Redemption Date.

Notwithstanding Section 1104 of the Original
Indenture, the notice of redemption with respect to the foregoing redemption
need not set forth the Redemption Price but only the manner of ascertainment
thereof.

The Company shall notify the Trustee of the Redemption
Price with respect to the foregoing redemption promptly after the calculation
thereof.  The Trustee shall not be
responsible for calculating said Redemption Price.

If less than all of the Senior Notes are to be
redeemed, the Trustee shall select the Senior Notes or portions of Senior Notes
to be redeemed by such method as the Trustee shall deem fair and
appropriate.  The Trustee may select for
redemption Senior Notes and portions of Senior Notes in amounts of whole
multiples of $1,000.

The Senior Notes shall not have a sinking fund.

SECTION 1.07  Paying Agent.  The Trustee shall initially serve as Paying
Agent with respect to the Senior Notes, with the Place of Payment initially
being the Corporate Trust Office.

ARTICLE 2

MISCELLANEOUS PROVISIONS

SECTION 2.01  Recitals by the
Company.  The recitals in this Sixteenth
Supplemental Indenture are made by the Company only and not by the Trustee, and
all of the provisions contained in the Original Indenture in respect of the
rights, privileges, immunities, powers and duties of the Trustee shall be
applicable in respect of the Senior Notes and of this Sixteenth Supplemental
Indenture as fully and with like effect as if set forth herein in full.

SECTION 2.02  Ratification and
Incorporation of Original Indenture.  As
supplemented hereby, the Original Indenture is in all respects ratified and
confirmed, and the Original Indenture and this Sixteenth Supplemental Indenture
shall be read, taken and construed as one and the same instrument.

SECTION 2.03  Executed in
Counterparts.  This Sixteenth
Supplemental Indenture may be executed in several counterparts, each of which
shall be deemed to be an original, and such counterparts shall together
constitute but one and the same instrument.

 5
 

IN WITNESS WHEREOF, each party hereto has caused this
instrument to be signed in its name and behalf by its duly authorized officers,
all as of the day and year first above written.

 

	
  

  	
  Duke Energy Carolinas, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Lynn J. Good

  	
   

  
	
   

  	
  Title:

  	
  Senior Vice President and Treasurer

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Attest:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Name:

  	
  Robert T. Lucas
  III

  	
   

  
	
  Title:

  	
  Assistant
  Secretary

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  The Bank of New York,

  
	
   

  	
    as Trustee

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name: 

  	
  L. O’Brien

  	
   

  
	
   

  	
  Title: 

  	
  Vice President

  	
   

  
								

 

 6

EXHIBIT
A

FORM OF

6.10% SENIOR NOTE DUE 2037

	
  No.

  	
  CUSIP No. 26442C AA2

  

 

DUKE ENERGY
CAROLINAS, LLC

6.10% SENIOR NOTE DUE 2037

Principal Amount:  $            

Regular Record Date:  Close of business on the 15th calendar day
prior to the relevant Interest Payment Date (whether or not a Business Day)

Original Issue Date:  June 5, 2007

Stated Maturity:  June 1, 2037

Interest Payment
Dates:  Semi-annually on June 1 and
December 1 of each year, commencing December 1, 2007.

Interest Rate:  6.10% per annum

Authorized
Denomination:  $1,000 or any integral
multiples thereof

Duke Energy Carolinas, LLC, a North Carolina limited
liability company (the “Company”, which includes any successor corporation
under the Indenture referred to on the reverse hereof), for value received,
hereby promises to pay to
                 ,
or registered assigns, the principal sum of
                  
DOLLARS
($            ) on
the Stated Maturity shown above and to pay interest thereon from the Original
Issue Date shown above, or from the most recent Interest Payment Date to which
interest has been paid or duly provided for, semi-annually in arrears on
each Interest Payment Date as specified above, commencing on December 1, 2007
and on the Stated Maturity at the rate per annum shown above (the “Interest
Rate”) until the principal hereof is paid or made available for payment and on
any overdue principal and on any overdue installment of interest.  The interest so payable, and punctually paid
or duly provided for, on any Interest Payment Date  (other than an Interest Payment Date that is
the Stated Maturity or a Redemption Date) will, as provided in the Indenture,
be paid to the Person in whose name this 6.10% Senior Note due 2037 (this “Security”)
is registered on the Regular Record Date as specified above next preceding such
Interest Payment Date; provided that
any interest payable at Stated Maturity or on a Redemption Date will be paid to
the Person to whom principal is payable. 
Except as otherwise provided in the Indenture, any such interest not so
punctually paid or duly provided for will forthwith cease to be payable to the
Holder on such Regular Record Date and may either be paid to the Person in
whose name this Security is registered at the close of business on a Special
Record Date for the payment of such Defaulted Interest to be fixed by the
Trustee, notice whereof shall be given to Holders of Securities of this series
not less than 10 days prior to such Special Record Date, or be paid at any time
in any other lawful manner not inconsistent with the requirements of any
securities exchange, if any, on which the Securities

 A-1
 

shall be listed, and upon
such notice as may be required by any such exchange, all as more fully provided
in the Indenture.

Payments of interest on this Security will include
interest accrued to but excluding the respective Interest Payment Dates.  Interest payments for this Security shall be
computed and paid on the basis of a 360-day year of twelve 30-day
months and will accrue from June 5, 2007 or from the most recent Interest
Payment Date to which interest has been paid or duly provided for.  In the event that any date on which interest
is payable on this Security is not a Business Day, then payment of the interest
payable on such date will be made on the next succeeding day that is a Business
Day (and without any interest or payment in respect of any such delay) with the
same force and effect as if made on the date the payment was originally
payable.  “Business Day” means a day
other than (i) a Saturday or a Sunday, (ii) a day on which banking institutions
in New York, New York are authorized or obligated by law or executive order to
remain closed or (iii) a day on which the Corporate Trust Office is closed for
business.

Payment of principal of, premium, if any, and interest
on the Securities shall be made in such coin or currency of the United States
of America as at the time of payment is legal tender for payment of public and
private debts.  Payments of principal of,
premium, if any, and interest on the Securities of this series represented by a
Global Security shall be made by wire transfer of immediately available funds
to the Holder of such Global Security, provided that, in the case of payments
of principal and premium, if any, such Global Security is first surrendered to
the Paying Agent.  If any of the
Securities of this series are no longer represented by a Global Security, (i)
payments of principal, premium, if any, and interest due at the Stated Maturity
or earlier redemption of such Securities shall be made at the office of the
Paying Agent upon surrender of such Securities to the Paying Agent, and (ii)
payments of interest shall be made, at option of the Company, subject to such
surrender where applicable, (A) by check mailed to address of the Person
entitled thereto as such address shall appear in the Security Register or
(B) by wire transfer at such place and to such account at a banking
institution in the United States as may be designated in writing to the Trustee
at least sixteen (16) days prior to the date for payment by the Person entitled
thereto.

The Securities of this series shall be redeemable, in
whole or from time to time in part, at the option of the Company on any date (a
“Redemption Date”), at a Redemption Price equal to the greater of (i) 100% of
the principal amount of the Securities of this series to be redeemed and (ii)
the sum of the present values of the remaining scheduled payments of principal
and interest thereon (exclusive of interest accrued to such Redemption Date)
discounted to such Redemption Date on a semi-annual basis (assuming a 360-day
year consisting of twelve 30-day months) at the Treasury Rate plus 20
basis points, plus, in either case, accrued and unpaid interest on the
principal amount being redeemed to such Redemption Date.

“Treasury Rate” means, with respect to any Redemption
Date for the Securities of this series, (i) the yield, under the heading which
represents the average for the immediately preceding week, appearing in the
most recently published statistical release designated  “H.15(519)” or any successor publication
which is published weekly by the Board of 
Governors of the Federal Reserve System and which establishes yields on
actively traded United States Treasury securities adjusted to constant maturity
under the caption “Treasury Constant Maturities,” for the maturity
corresponding to the Comparable Treasury Issue (if no maturity

 A-2
 

within three months
before or after the Stated Maturity, yields for the two published maturities
most closely corresponding to the Comparable Treasury Issue shall be
determined, and the Treasury Rate shall be interpolated or extrapolated from
such yields on a straight-line basis rounding to the nearest month) or
(ii) if such release (or any successor release) is not published during the
week preceding the calculation date or does not contain such yields, the rate
per annum equal to the semi-annual equivalent yield to maturity of the
Comparable Treasury Issue calculated using a price for the Comparable Treasury
Issue (expressed as a percentage of its principal amount) equal to the
Comparable Treasury Price for such Redemption Date.  The Treasury Rate shall be calculated on the
third Business Day preceding the Redemption Date.

“Comparable Treasury Issue” means the United States
Treasury security selected by the Quotation Agent as having a maturity
comparable to the remaining term of the Senior Notes to be redeemed that would
be utilized, at the time of selection and in accordance with customary
financial practice, in pricing new issues of corporate debt securities of
comparable maturity to the remaining term of such Securities of this series.

“Quotation Agent” means a Reference Treasury Dealer
appointed by the Company.

“Comparable Treasury Price” means, with respect to any
Redemption Date for the Senior Notes, (1) the average of five Reference
Treasury Dealer Quotations for such Redemption Date, after excluding the
highest and lowest such Reference Treasury Dealer Quotations, or (2) if fewer
than five such Reference Treasury Dealer Quotations are obtained, the average
of all such Reference Treasury Dealer Quotations.

“Reference Treasury Dealer” means each of Merrill
Lynch, Pierce, Fenner & Smith Incorporated, Morgan Stanley & Co.
Incorporated, BNP Paribas Securities Corp., Credit Suisse Securities (USA) LLC,
UBS Securities LLC, and their respective successors; provided,
however, that if any of the foregoing shall cease to be a primary
U.S. Government securities dealer in the United States (a “Primary Treasury
Dealer”), the Company will substitute therefor another Primary Treasury Dealer.

“Reference Treasury Dealer Quotations” means, with
respect to each Reference Treasury Dealer and any Redemption Date, the average,
as determined by the Quotation Agent, of the bid and asked prices for the
Comparable Treasury Issue (expressed in each case as a percentage of its
principal amount) quoted in writing to the Quotation Agent by such Reference
Treasury Dealer at 5:00 p.m., New York City time, on the third Business Day
preceding such Redemption Date.

Notwithstanding Section 1104 of the Original
Indenture, the notice of redemption with respect to the foregoing redemption
need not set forth the Redemption Price but only the manner of ascertainment
thereof.

The Company shall notify the Trustee of the Redemption
Price with respect to the foregoing redemption promptly after the calculation
thereof.  The Trustee shall not be
responsible for calculating said Redemption Price.

Notice of any redemption by the Company will be mailed
at least 30 days but not more than 60 days before any Redemption Date to each
Holder of Securities of this series to be redeemed.  If Notice of a redemption is provided and
funds are deposited as required, interest

 A-3
 

will cease to accrue on
and after the Redemption Date on the Securities of this series or portions of
Securities of this series called for redemption.  In the event that any Redemption Date is not
a Business Day, the Company will pay the Redemption Price on the next Business
Day without any interest or other payment due. 
If less than all the Securities of this series are to be redeemed at the
option of the Company, the Trustee shall select, in such manner as it shall
deem fair and appropriate, the Securities of this series to be redeemed in
whole or in part.  The Trustee may select
for redemption Securities of this series and portions of the Securities of this
series in amounts of whole multiples of $1,000.

In the event of redemption of this Security in part
only, a new Security or Securities of this series and of like tenor for the
unredeemed portion hereof will be issued in the name of the Holder hereof upon
the surrender hereof.

The Securities of this series shall not have a sinking
fund.

The Securities of this series shall constitute the
direct unsecured and unsubordinated debt obligations of the Company and shall
rank equally in priority with the Company’s existing and future unsecured and
unsubordinated indebtedness.

REFERENCE IS HEREBY MADE TO THE FURTHER PROVISIONS OF
THIS SECURITY SET FORTH ON THE REVERSE HEREOF, WHICH FURTHER PROVISIONS SHALL
FOR ALL PURPOSES HAVE THE SAME EFFECT AS IF SET FORTH AT THIS PLACE.

Unless the certificate of authentication hereon has
been executed by the Trustee by manual signature, this Security shall not be
entitled to any benefit under the Indenture or be valid or obligatory for any
purpose.

 A-4
 

IN WITNESS WHEREOF, the Company has caused this
instrument to be duly executed under its corporate seal.

Dated:

	
   

  	
  Duke Energy Carolinas, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
    Name:

  	
   

  
	
   

  	
   

  	
    Title:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Attest:

  	
   

  	
   

  	
   

  
	
   

  
	
   

  
	
   

  	
   

  
	
  Name:

  
	
  Title:

  
	
   

  
	
  CERTIFICATE OF
  AUTHENTICATION

  
	
   

  
	
  This is one of the
  Securities of the series designated therein referred to in the within-mentioned
  Indenture.

  
	
   

  
	
   

  
	
   

  	
  The Bank of New York,

  	
   

  
	
   

  	
   

  	
  as Trustee

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Authorized Signatory

  	
   

  
					

 

 A-5
 

(Reverse
Side of Security)

This 6.10% Senior Note due 2037 is one of a duly
authorized issue of Securities of the Company (the “Securities”), issued and
issuable in one or more series under a Senior Indenture, dated as of September
1, 1998, as supplemented (the “Indenture”), between the Company (successor to
Duke Energy Corporation) and The Bank of New York (as successor to JPMorgan
Chase Bank, N.A. (formerly known as The Chase Manhattan Bank)), as Trustee (the
“Trustee,” which term includes any successor trustee under the Indenture), to
which Indenture and all indentures supplemental thereto reference is hereby
made for a statement of the respective rights, limitation of rights, duties and
immunities thereunder of the Company, the Trustee and the Holders of the
Securities issued thereunder and of the terms upon which said Securities are,
and are to be, authenticated and delivered. 
This Security is one of the series designated on the face hereof as
6.10% Senior Notes due 2037 initially in the aggregate principal amount of
$500,000,000.  Capitalized terms used
herein for which no definition is provided herein shall have the meanings set
forth in the Indenture.

If an Event of Default with respect to the Securities of
this series shall occur and be continuing, the principal of the Securities of
this series may be declared due and payable in the manner, with the effect and
subject to the conditions provided in the Indenture.

The Indenture permits, with certain exceptions as
therein provided, the amendment thereof and the modification of the rights and
obligations of the Company and the rights of the Holders of the Securities of
all series affected under the Indenture at any time by the Company and the
Trustee with the consent of the Holders of not less than a majority in
principal amount of the Outstanding Securities of all series affected thereby
(voting as one class).  The Indenture
contains provisions permitting the Holders of not less than a majority in
principal amount of the Outstanding Securities of all series with respect to
which a default under the Indenture shall have occurred and be continuing
(voting as one class), on behalf of the Holders of the Securities of all such
series, to waive, with certain exceptions, such default under the Indenture and
its consequences.  The Indenture also
permits the Holders of not less than a majority in principal amount of the
Securities of each series at the time Outstanding, on behalf of the Holders of
all Securities of such series, to waive compliance by the Company with certain
provisions of the Indenture affecting such series.  Any such consent or waiver by the Holder of
this Security shall be conclusive and binding upon such Holder and upon all
future Holders of this Security and of any Security issued upon the
registration of transfer hereof or in exchange hereof or in lieu hereof,
whether or not notation of such consent or waiver is made upon this Security.

No reference herein to the Indenture and no provision
of this Security or of the Indenture shall alter or impair the obligation of
the Company, which is absolute and unconditional, to pay the principal of and
interest on this Security at the times, place and rate, and in the coin or
currency, herein prescribed.

As provided in the Indenture and subject to certain
limitations therein set forth, the transfer of this Security is remittable in
the Security Register, upon surrender of this Security for registration of
transfer at the office or agency of the Company for such purpose, duly endorsed
by, or accompanied by a written instrument of transfer in form satisfactory to
the Company and the Security Registrar and duly executed by, the Holder hereof
or his attorney duly authorized in

 A-6
 

writing, and thereupon
one or more new Securities of this series, of authorized denominations and of
like tenor and for the same aggregate principal amount, will be issued by the
designated transferee or transferees.  No
service charge shall be made for any such registration of transfer or exchange,
but the Company may require payment of a sum sufficient to cover any tax or
other governmental charge payable in connection therewith.

The Indenture contains provisions for defeasance at
any time of the entire indebtedness in the Securities of this series and for
covenant defeasance at any time of certain covenants in the Indenture upon
compliance with certain conditions set forth in the Indenture.

Prior to due presentment of this Security for
registration of transfer, the Company, the Trustee and any agent of the Company
or the Trustee may treat the Person in whose name the Security is registered as
the owner hereof for all purposes, whether or not this Security be overdue, and
neither the Company, the Trustee nor any such agent shall be affected by notice
to the contrary.

The Securities of this series are issuable only in
registered form without coupons in denominations of $1,000 and any integral
multiple thereof.  As provided in the
Indenture and subject to the limitations therein set forth, Securities of this
series are exchangeable for a like aggregate principal amount of Securities of
this series of a different authorized denomination, as  requested by the Holder surrendering the same
upon surrender of the Security or Securities to be exchanged at the office or
agency of the Company.

This Security shall be governed by, and construed in
accordance with, the laws of the State of New York.

 A-7
 

ABBREVIATIONS

The following abbreviations, when used in the
inscription on the face of this instrument, shall be construed as though they
were written out in full according to applicable laws or regulations:

	
  TEN COM—as tenants in common

  	
  UNIF GIFT MIN ACT- 

  	
   

  	
  Custodian

  	
   

  	
   

  
	
   

  	
   

  	
  (Cust)

  	
   

  	
  (Minor)

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  TEN ENT—as tenants by the entireties

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  JT TEN—as joint tenants with rights of 

  	
  under Uniform Gifts to

  	
   

  
	
  survivorship and not as tenants in common

  	
  Minors Act

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  (State)

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
							

 

Additional abbreviations may also be used though not
on the above list.

FOR VALUE RECEIVED, the
undersigned hereby sell(s) and transfer(s) unto (please insert Social Security
or other identifying number of assignee)

PLEASE PRINT OR TYPEWRITE
NAME AND ADDRESS, INCLUDING POSTAL ZIP CODE OF ASSIGNEE

the within Security and
all rights thereunder, hereby irrevocably constituting and appointing

agent to transfer said
Security on the books of the Company, with full power of substitution in the
premises.

	
  Dated:

  	
   

  	
   

  

 

 

	
  

  	
  NOTICE: The signature to this assignment must
  correspond with the name as written upon the face of the within instrument in
  every particular without alteration or enlargement, or any change whatever.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Signature Guarantee:

  	
   

  	
   

  
				

 

 A-8
 

SIGNATURE
GUARANTEE

Signatures must be guaranteed by an “eligible
guarantor institution” meeting the requirements of the Security Registrar,
which requirements include membership or participation  in the Security Transfer Agent Medallion
Program (“STAMP”) or such other “signature guarantee program” as may be
determined by the Security Registrar in addition to, or in substitution for,
STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.

 A-9

EXHIBIT
B

CERTIFICATE OF
AUTHENTICATION

This is one of the
Securities of the series designated
therein referred to in the within-mentioned Indenture.

	
   

  	
  The Bank of New York,

  
	
   

  	
   

  	
  as Trustee

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Authorized Signatory

  	
   

  

 

 B-1

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