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EXHIBIT 10.38    
  

	

 	 	LOAN AND SECURITY AGREEMENT

(ACCOUNTS AND INVENTORY)

 
 

	OBLIGOR#	 	NOTE #	 	AGREEMENT DATE
	

 	
 	

 	
 	

December 7, 2001
	
CREDIT LIMIT	
 	

INTEREST RATE	
 	

OFFICE NO./INITIALS
	

$5,000,000	
 	

 	
 	

 

        THIS
AGREEMENT is entered into on December 7, 2001, between Comerica Bank-California, a California banking corporation ("Bank") as secured party, whose headquarters office is 333 West
Santa Clara Street, San Jose, California, 95113 and the undersigned ("Borrower"), whose sole place of business (if it has only one), chief executive office (if it has more than one place of business)
or residence (if an individual) is located at the address set forth below its name on the signature page to this Agreement. The parties agree as follows: 

DEFINITIONS.  

        "Accounts" shall mean and includes all presently existing and hereafter arising accounts, including without limitation all accounts receivable, contract rights
and other forms of right to payment for monetary obligations or receivables for property sold or to be sold, leased, licensed, assigned or otherwise disposed of, or for services rendered or to be
rendered (including without limitation all health-care-insurance receivables) owing to Borrower, and any supporting obligations, credit insurance, guaranties or security therefor, irrespective of
whether earned by performance. 

        "Agreement"
shall mean and includes this Loan and Security Agreement (Accounts and Inventory), any concurrent or subsequent rider to this Loan and Security Agreement (Accounts and
Inventory) and any extensions, supplements, amendments or modifications to this Loan and Security Agreement (Accounts and Inventory) and/or to any such rider. 

        "Bank
Expenses" shall mean and includes: all costs or expenses required to be paid by Borrower under this Agreement which are paid or advanced by Bank; taxes and insurance premiums of
every nature and kind of Borrower paid by Bank; filing, recording, publication and search fees, appraiser fees, auditor fees and costs, and title insurance premiums paid or incurred by Bank in
connection with Bank's transactions with Borrower; costs and expenses incurred by Bank in collecting the Accounts (with or without suit) to correct any default or enforce any provision of this
Agreement, or in gaining possession of, maintaining, handling, preserving, storing, shipping, selling, disposing of, preparing for sale and/or advertising to sell the Collateral, whether or not a sale
is consummated; costs and expenses of suit incurred by Bank in enforcing or defending this Agreement or any portion hereof, including, but not limited to, expenses incurred by Bank in attempting to
obtain relief from any stay, restraining order, injunction or similar process which prohibits Bank from exercising any of its rights or remedies; and reasonable attorneys' fees and expenses incurred
by Bank in advising, structuring, drafting, reviewing, amending, terminating, enforcing, defending or concerning this Agreement, or any portion hereof or any agreement related hereto, whether or not
suit is brought. Bank Expenses shall include Bank's in-house legal charges at reasonable rates. 

        "Base
Rate" shall mean that variable rate of interest so announced by Bank at its headquarters office in San Jose, California as its "Base Rate" from time to time and which serves as the
basis upon which effective rates of interest are calculated for those loans making reference thereto. 

        "Borrower's
Books" shall mean and includes all of Borrower's books and records including but not limited to minute books; ledgers; records indicating, summarizing or evidencing
Borrower's assets (including, without limitation, the Accounts), liabilities, business operations or financial condition, and 

 

all information relating thereto, computer programs; computer disk or tape files; computer printouts; computer runs; and other computer prepared information and equipment of any kind. 

        "Borrowing
Base" shall mean the sum of: (1) seventy percent ( 70%) of the net amount of Eligible Accounts after deducting therefrom all payments, adjustments and credits applicable
thereto; and (2) the amount, if any, of the advances against Inventory agreed to be made pursuant to any Inventory Rider, or other rider, amendment or modification to this Agreement, that may now or
hereafter be entered into by Bank and Borrower; provided, however, that upon Borrower's successful
achievement of two (2) consecutive quarters in which Borrower shall report a net profit after tax, as determined in accordance with GAAP, of not less than One Dollar ($1), and provided that no Event
of Default shall have occurred or be continuing during each such quarter, then the forgoing percentage of Eligible Accounts shall thereafter be increased to seventy five percent (75%). 

        "Cash
Flow" shall mean, for any applicable period of determination, the Net Income (after deduction for income taxes and other taxes of such Person, or its subsidiaries, determined by
reference to income or profits of such Person, or its subsidiaries) for such period, plus, to the extent deducted in computation of such Net Income, the amount of depreciation and amortization expense
and the amount of deferred tax liability during such period, all as determined in accordance with GAAP. 

        "Cash
Flow Coverage Ratio" shall mean the ratio, as of any applicable period of determination, the numerator of which is Cash Flow minus dividends and the denominator of which is the
current portion of long term debt plus the current portion of capital lease payments for the same period of determination. 

        "Collateral"
shall mean and includes all personal property of Borrower, including without limitation each and all of the following: the Accounts; the Inventory; the General Intangibles;
the Negotiable Collateral; Borrower's Books; all Borrower's deposit accounts; all Borrower's investment property (including without limitation securities and securities entitlements); all goods,
instruments, documents, policies and certificates of insurance, deposits, money or other personal property of Borrower in which Bank receives a security interest and which now or later come into the
possession, custody or control of Bank; all Borrower's equipment and fixtures; all additions, accessions, attachments, parts, replacements, substitutions, renewals, interest, dividends, distributions
or rights of any kind for or with respect to any of the foregoing (including without limitation any stock splits, stock rights, voting rights and preferential rights); any supporting obligations for
any of the foregoing; and the products and proceeds
of any of the foregoing, including, but not limited to, proceeds of insurance covering the Collateral, and any and all Accounts, General Intangibles, Negotiable Collateral, Inventory, equipment,
money, deposit accounts, investment property, equipment, fixtures or other tangible and intangible property of Borrower resulting from the sale or other disposition of the Collateral and the proceeds
thereof and any supporting obligations or security therefor and any right to payment thereunder, and including, without limitation, cash or other property which were proceeds and are recovered by a
bankruptcy trustee or otherwise as a preferential transfer by Borrower. Notwithstanding anything to the contrary contained herein, Collateral shall not include any waste or other materials which have
been or may be designated as toxic or hazardous by Bank. 

        "Credit"
shall mean all Indebtedness, except that Indebtedness arising pursuant to any other separate contract, instrument, note, or other separate agreement which, by its terms,
provides for a specified interest rate and term. 

        "Credit
Limit" shall mean Five Million Dollars ($5,000,000). 

        "Current
Assets" shall mean, in respect of a Person and as of any applicable date of determination; all (a) unrestricted cash, marketable securities, or certificates of deposit; (b)
non-affiliated accounts receivable; (c) United States government securities; (d) claims against the United 

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States government; and (e) inventories (held for sale in the ordinary course of business) of such Person. 

        "Current
Liabilities" shall mean, in respect of a Person and as of any applicable date of determination, (a) all liabilities of such Person that should be classified as current in
accordance with GAAP, including, without limitation, any portion of the principal of the Indebtedness under this Agreement classified as current, plus (b) to the extent not otherwise included, all
liabilities of Borrower to any of its affiliates (including officers, directors, shareholders, subsidiaries and commonly held companies) whether or not classified as current in accordance with GAAP. 

        "Daily
Balance" shall mean the amount determined by taking the amount of the Credit owed at the beginning of a given day, adding any new Credit advanced or incurred on such date, and
subtracting any payments or collections which are deemed to be paid and are applied by Bank in reduction of the Credit on that date under the provisions of this Agreement. 

        "Debt"
shall mean, as of any applicable date of determination, all items of indebtedness, obligation or liability of a Person, whether matured or unmatured, liquidated or unliquidated,
direct or indirect, absolute or contingent, joint or several, that should be classified as liabilities in accordance with GAAP. In the case of Borrower, the term "Debt" shall include, without
limitation, the Indebtedness. 

        "Debt-to-Worth
Ratio" shall mean, in respect of a Person and as of any applicable date of determination, the ratio of (a) the total Debt of such Person at such time, to (b) the Tangible
Effective Net Worth of such Person at such time. 

        "Eligible
Accounts" shall mean and includes those Accounts of Borrower which are due and payable within ninety (90) days, or less, from the date of invoice, have been validly assigned to
Bank and strictly comply with all of Borrower's warranties and representations to Bank; but Eligible Accounts shall not include the following: (a) Accounts with respect to which the account debtor is
an officer, employee, partner, joint venturer or agent of Borrower; (b) Accounts with respect to which goods are placed on consignment, guaranteed sale, COD sale, or other terms by reason of which the
payment by the account debtor may be conditional; (c) Accounts with respect to which the account debtor is not a resident of the United States; (d) Accounts with respect to which the account debtor is
the United States or any department, agency or instrumentality of the United States; (e) Accounts with respect to which the account debtor is any State of the United States or any city, county, town,
municipality or division thereof; (f) Accounts with respect to which the account debtor is a subsidiary of, related to, affiliated or has common shareholders, officers or directors with Borrower; (g)
Accounts with respect to which Borrower is or may become liable to the account debtor for goods sold or services rendered by the account debtor to Borrower; (h) Accounts not paid by an account debtor
within ninety (90) days from the date of the invoice; (i) Accounts with respect to which account debtors dispute liability or make any claim, or have any defense, crossclaim, counterclaim, or offset;
(j) Accounts with respect to which any Insolvency Proceeding is filed by or against the account debtor, or if an account debtor becomes insolvent, fails or goes out of business; and (k) Accounts owed
by any single account debtor which exceed twenty percent (20%) of all of the Eligible Accounts; and (I) Accounts with a particular account debtor on which over twenty-five percent (25%) of the
aggregate amount owing is greater than ninety (90) days from the date of the invoice; provided, however,
anything in the forgoing to the contrary notwithstanding, during the five (5) month period beginning on the first day of October of each year, and continuing through the last day of February of the
following year, Eligible Accounts shall include Eligible Pool and Spa Accounts. 

        "Eligible
Pool and Spa Accounts" shall mean and includes those Pool and Spa Accounts of Borrower which are due and payable within one hundred eighty (180) days, or less, from the date of
invoice, have been validly assigned to Bank and strictly comply with all of Borrower's warranties and representations to Bank, and that are not otherwise ineligible for inclusion in the Eligible
Accounts; but 

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Eligible Pool and Spa Accounts shall not include any Pool and Spa Accounts not paid by the account debtor within the earlier of (a) thirty (30) days from the applicable due date under the invoice
therefor or (b) one hundred eighty (180) days from the invoice date. 

        "Event
of Default" shall mean one or more of those events described in Section 7 contained herein below. 

        "GAAP"
shall mean, as of any applicable period, generally accepted accounting principles in effect during such period. 

        "General
Intangibles" shall mean and includes all of Borrower's present and future general intangibles and other personal property (including without limitation all payment intangibles,
electronic chattel paper, contract rights, rights arising under common law, statutes, or regulations, choses or things in action, goodwill, patents, trade names, trademarks, servicemarks, copyrights,
blueprints, drawings, plans, diagrams, schematics, purchase orders, customer lists, monies due or recoverable from pension funds, route lists, rights to payment (including without limitation, rights
to payment evidenced by chattel paper, documents or instruments) and other rights under any royalty or licensing agreements, infringement claims, software (including without limitation any computer
program that is embedded in goods that consist solely of the medium in which the program is embedded), information contained on computer disks or tapes, literature, reports, catalogs, insurance
premium rebates, tax refunds, and tax refund claims), other than goods, Accounts, Inventory, Negotiable Collateral, and Borrowers Books. 

        "Indebtedness"
shall mean and includes any and all loans, advances, Letter of Credit Obligations, overdrafts, debts, liabilities (including, without limitation, any and all amounts
charged to Borrower's loan account pursuant to any agreement authorizing Bank to charge Borrower's loan account), obligations, lease payments, guaranties, covenants and duties owing by Borrower to
Bank of any kind and description whether advanced pursuant to or evidenced by this Agreement; by any note or other Instrument; or by any other agreement between Bank and Borrower and whether or not
for the payment of money, whether direct or indirect, absolute or contingent, due or to become due now existing or hereafter arising, including, without limitation, any interest, fees, expenses, costs
and other amounts owed to Bank that but for the provisions of the United States Bankruptcy Code would have accrued after the commencement of any Insolvency Proceeding, and including, without
limitation, any debt, liability, or obligations owing from Borrower to others which Bank may have obtained by assignment, participation, purchase or otherwise, and further including, without
limitation, all interest not paid when due and all Bank Expenses which Borrower is required to pay or reimburse by this Agreement, by law, or otherwise. 

        "Insolvency
Proceeding" shall mean and includes any proceeding or case commenced by or against Borrower, or any guarantor of Borrower's Indebtedness, or any of Borrower's account
debtors, under any provisions of the Bankruptcy Code, as amended, or any other bankruptcy or insolvency law, including, but not limited to assignments for the benefit of creditors, formal or informal
moratoriums, composition or extensions with some or all creditors, any proceeding seeking a reorganization, arrangement or any other relief under the Bankruptcy Code, as amended, or any other
bankruptcy or insolvency law. 

        "Inventory"
shall mean and includes all present and future inventory in which Borrower has any interest, including, but not limited to, goods held by Borrower for sale or lease or to be
furnished under a contract of service and all of Borrower's present and future raw materials, work in process, finished goods (including without limitation any computer program embedded in any of the
foregoing goods and any supporting information provided in connection therewith that (i) is associated with the goods in such a manner that the program customarily is considered part of the goods or
that (ii) by becoming the owner of the goods, a person acquires a right to use the program in connection with the
goods), together with any advertising materials and packing and shipping materials, wherever located and any documents of title representing any of the above, and any equipment, fixtures or other 

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property used in the storing, moving, preserving, identifying, accounting for and shipping or preparing for the shipping of inventory, and any and all other items hereafter acquired by Borrower by
way of substitution, replacement, return, repossession or otherwise, and all additions and accessions thereto, and the resulting product or mass, and any documents of title respecting any of the
above. 

        "Letter
of Credit Obligations" shall mean, as of any applicable date of determination, the sum of the undrawn amount of any letter(s) of credit issued by Bank upon the application of
and/or for the account of Borrower, plus any unpaid reimbursement obligations owing by Borrower to Bank in respect of any such letter(s) of credit. 

        "Net
Income" shall mean the net income (or loss) of a person for any period of determination, determined in accordance with GAAP but excluding in any event: 

        a.    any
gains or losses on the sale or other disposition, not in the ordinary course of business, of investments or fixed or capital assets, and any taxes on the excluded
gains and any tax deductions or credits on account on any excluded losses; and 

        b.    in
the case of Borrower, net earnings of any Person in which Borrower has an ownership interest, unless such net earnings shall have actually been received by Borrower in
the form of cash distributions. 

        "Negotiable
Collateral" shall mean and include all of Borrower's present and future letters of credit, advises of credit, letter-of-credit rights, certificates of deposit, notes, drafts,
money, documents (including without limitation all negotiable documents), instruments (including without limitation all promissory notes), tangible chattel paper or any other similar property. 

        "Judicial
Officer or Assignee" shall mean and includes any trustee, receiver, controller, custodian, assignee for the benefit of creditors or any other person or entity having powers or
duties like or similar to the powers and duties of trustee, receiver, controller, custodian or assignee for the benefit of creditors. 

        "Person"
or "person" shall mean and includes any individual, corporation, partnership, joint venture, firm, association, trust, unincorporated association, joint stock company,
government, municipality, political subdivision or agency or other entity. 

        "Pool
and Spa Accounts" shall mean all Accounts arising out of Borrower's sale of any inventory for use or installation in or use in connection with any swimming pool or personal spa, as
such shall be more specifically determined by Bank from time to time in its sole discretion. 

        "Quick
Assets" shall mean, as of any applicable date of determination, unrestricted cash, certificates of deposit or marketable securities and net accounts receivable arising from the
sale of goods and services, and United States government securities and/or claims against the United States government of Borrower and its subsidiaries. 

        "Subordinated
Debt" shall mean indebtedness of a Person to third parties which has been subordinated to the Indebtedness pursuant to a subordination agreement in form and content
satisfactory to Bank. 

        "Tangible
Effective Net Worth" shall mean, with respect to any Person and as of any applicable date of determination, Tangible Net Worth plus Subordinated Debt. 

        "Tangible
Net Worth" shall mean, with respect to any Person and as of any applicable date of determination, the excess of: 

        a.    the
net book value of all assets of such Person (excluding affiliate receivables, patents, patent rights, trademarks, trade names, franchises, copyrights, licenses,
goodwill, notes receivable, deferred income taxes, other assets, any unreconciled differences reflected in such Person's 

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financial statements and all other intangible assets of such Person) after all appropriate deductions in accordance with GAAP (including, without limitation, reserves for doubtful receivables,
obsolescence, depreciation and amortization), over 

        b.    all
Debt of such Person at such time. 

        "Working
Capital" shall mean, as of any applicable date of determination, Current Assets less Current Liabilities. 

        Any
and all terms used in the foregoing definitions and elsewhere in this Agreement shall be construed and defined in accordance with the meaning and definition of such terms under and
pursuant to the California Uniform Commercial Code (hereinafter referred to as the "Uniform Commercial Code") as
amended, revised or replaced from time to time. Notwithstanding the foregoing, the parties intend that the terms used herein which are defined in the Uniform Commercial Code have, at all times, the
broadest and most inclusive meanings possible. Accordingly, if the Uniform Commercial Code shall in the future be amended or held by a court to define any term used herein more broadly or inclusively
than the Uniform Commercial Code in effect on the date of this Agreement, then such term, as used herein, shall be given such broadened meaning. If the Uniform Commercial Code shall in the future be
amended or held by a court to define any term used herein more narrowly, or less inclusively, than the Uniform Commercial Code in effect on the date of this Agreement, such amendment or holding shall
be disregarded in defining terms used in this Agreement. 

LOAN AND TERMS OF PAYMENT.  

        For value received, Borrower promises to pay to the order of Bank such amount, as provided for below, together with interest, as provided for below. 

        Upon
the request of Borrower, made at any time and from time to time during the term hereof, and so long as no Event of Default has occurred, Bank shall lend to Borrower an amount equal
to the Borrowing Base; provided, however, that the Daily Balance shall not exceed the lesser of either
the Credit Limit or the Borrowing Base, minus all Letter of Credit Obligations. If at any time for any reason, the amount of Indebtedness owed by Borrower to Bank pursuant to this Section 2.1 and
Section 2.3 of this Agreement is greater than the aggregate amount available to be drawn under this Section 2.1, Borrower shall immediately pay to Bank, in cash, the amount of such excess. 

        Except
as hereinbelow provided, the Credit shall bear interest, on the Daily Balance owing, at a at a fluctuating rate of interest equal to the Base Rate plus one quarter percentage
point (.25%) per annum, or at the LIBOR rate plus three percentage points (3.00%) per annum, in accordance with the LIBOR Addendum to this Agreement, which is made a part hereof and incorporated
herein by this reference. 

        All
interest chargeable under this Agreement that is based upon a per annum calculation shall be computed on the basis of a three hundred sixty (360) day year for actual days elapsed.
The Base Rate as of the date of this Agreement is five percentage points (5.00%) per annum. In the event that the Base Rate announced is, from time to time hereafter, changed, adjustment in the Base
Rate shall be made and based on the Base Rate in effect on the date of such change. The Base Rate, as adjusted, shall apply to the Credit until the Base Rate is adjusted again. 

        All
interest payable by Borrower under the Credit shall be due and payable on the first day of each calendar month during the term of this Agreement. A late payment charge equal to five
percent (5%) of each late payment may be charged on any payment not received by Bank within ten (10) calendar days after the payment due date, but acceptance of payment of this charge shall not waive
any Event of Default under this Agreement. Upon the occurrence of an Event of Default hereunder, and without
constituting a waiver of any such Event of Default, then during the continuation thereof, at Bank's option, the Credit shall bear interest, on the Daily Balance owing, at a rate equal to three 

6

 

percent (3%) per year in excess of the rate applicable immediately prior to the occurrence of the Event of Default, and such rate of interest shall fluctuate thereafter from time to time at the same
time and in the same amount as any fluctuation in the rate of interest applicable immediately prior to any such occurrence. 

        Subject
to the terms and conditions of this Agreement, Bank agrees to issue or cause to be issued letters of credit for the account of Borrower during the term of this Agreement in the
aggregate outstanding face amount not to exceed (i) the lesser of the Credit Limit or the Borrowing Base, minus (ii) the then outstanding Daily Balance, provided that the Letter of Credit Obligations
shall not in any case exceed Nine Hundred Thousand Dollars ($900,000). All letters of credit shall be, in form and substance, acceptable to Bank in its sole discretion and shall be subject to the
terms and conditions of Bank's form of standard Letter of Credit Application and Agreement. 

        The
obligation of Borrower to immediately reimburse Bank for drawings made under letters of credit shall be absolute, unconditional and irrevocable in accordance with the terms of this
Agreement and the Letter of Credit Application and Agreement with respect to each such letter of credit. Borrower shall indemnify, defend, protect and hold Bank harmless from any loss, cost, expense,
or liability, including, without limitation, reasonable attorney's fees incurred by Bank, whether in-house or outside counsel is used, arising out of or in connection with any letters of credit. 

        Borrower
hereby authorizes Bank to collect all interest, fees, costs, or expenses due under this Agreement as follows: 

        Borrower
authorizes Bank to automatically deduct from Borrower's specified deposit account with Bank, or any other account maintained by Borrower with Bank, the full amount thereof.
Should there be insufficient funds in any such account to pay all such sums when due, the full amount of such deficiency shall be immediately due and payable by Borrower;  provided, however, that Bank shall not be obligated to advance funds to cover any such payment. In
addition, Borrower authorizes Bank at its sole option, without prior notice to Borrower, to make a revolving loan under Section 2.1 for any payment due or past due hereunder, including principal and
interest owing on the Indebtedness, and to pay the proceeds of such revolving loan to Bank for application toward such due or past due payment. 

        Any
such amounts not collected in accordance with the forgoing instructions may be paid in cash or deducted from loan proceeds; provided,  however, that Bank
shall not be obligated to advance funds to cover payment of any such amounts. 

        In
addition to any other amounts due or to become due under this Agreement concurrent with the execution hereof, Borrower shall pay to Bank the following fees: 

        In
connection with the loans provided hereunder, on the date of this Agreement, and on the first day of May in each year occurring after date hereof, an annual facility fee in an amount
equal to Ten Thousand Dollars ($10,000), which shall be fully earned and non-refundable on the date of payment thereof. 

7

   
        In addition to all Bank's customary charges, commissions, fees and costs payable to Bank in connection with the letters of credit in accordance with Letter of Credit Application and
Agreement, Borrower shall pay Bank a fee equal to two percentage points (2.00%) per annum, computed on the basis of a three hundred sixty (360) day year for actual days elapsed, of the aggregate
amount of all outstanding standby letters of credit issued by Bank hereunder. 

        In
addition to any other amounts due, or to become due, concurrently with the execution hereof, Borrower agrees to pay to Bank a documentation fee in the amount of One Thousand Five
Hundred Dollars ($1,500), together with all other costs and expenses incurred by Bank in the preparation of this Agreement, the other loan documents entered into in connection herewith, and the
perfection of any security interest granted to Bank by Borrower, including, without limitation, all reasonable attorney's fees incurred by Bank, whether in-house or outside counsel is used, in
connection therewith. 

TERM.  

        This Agreement shall remain in full force and effect until terminated by notice, by either party. Notice of such termination shall be effectuated by mailing of a
registered or certified letter not less than thirty (30) days prior to the effective date of such termination, addressed to the other party at the address set forth herein and the termination shall be
effective as of the date so fixed in such notice. 

        Notwithstanding
the foregoing, should Borrower be in default of one or more of the provisions of this Agreement, Bank may terminate this Agreement at any time without notice.
Notwithstanding the foregoing, should either Bank or Borrower become insolvent or unable to meet its debts as they mature, or fail, suspend, or go out of business, the other party shall have the right
to terminate this Agreement at any time without notice. On the date of termination all Indebtedness shall become immediately due and payable without notice or demand; no notice of termination by
Borrower shall be effective until Borrower shall have paid all Indebtedness to Bank in full. Notwithstanding termination, until all Indebtedness has been fully satisfied, Bank shall retain its
security interest in all existing Collateral and Collateral arising thereafter, and Borrower shall continue to perform all of its obligations. 

        After
termination and when Bank has received payment in full of Borrower's Indebtedness to Bank, Bank shall reassign to Borrower all Collateral held by Bank, and shall execute a
termination of all security agreements and security interests given by Borrower to Bank. 

CREATION OF SECURITY INTEREST.  

        Borrower hereby grants to Bank a continuing security interest in all presently existing and hereafter arising Collateral in order to secure prompt repayment of
any and all Indebtedness owed by Borrower to Bank and in order to secure prompt performance by Borrower of each and all of its covenants and obligations under this Agreement and otherwise created.
Bank's security interest in the Collateral shall attach to all Collateral without further act on the part of Bank or Borrower. In the event that any Collateral, including proceeds, is evidenced by or
consists of Negotiable Collateral, Borrower, immediately upon the request of Bank, shall (a) endorse or assign such Negotiable Collateral to Bank, (b) deliver actual physical possession of such
Negotiable Collateral to Bank, and (c) mark conspicuously all of its records pertaining to such Negotiable Collateral with a legend, in form and substance satisfactory to Bank (and in the case of
Negotiable Collateral consisting of tangible chattel paper, immediately mark all such tangible chattel paper with a conspicuous legend in form and substance satisfactory to Bank), indicating that the
Negotiable Collateral is subject to the security interest granted to Bank hereunder. 

        Bank's
security interest in the Accounts shall attach to all Accounts without further act on the part of Bank or Borrower. Upon request from Bank, Borrower shall provide Bank with
schedules describing all Accounts created or acquired by Borrower (including without limitation agings listing the names and addresses of, and amounts owing by date by account debtors), and shall
execute and deliver written 

8

 

assignments of all Accounts to Bank all in a form acceptable to Bank; provided, however, Borrower's
failure to execute and deliver such schedules and/or assignments shall not affect or limit Bank's security interest and other rights in and to the Accounts. Together with each schedule, Borrower shall
furnish Bank with copies of Borrower's customers' invoices or the equivalent, and original shipping or delivery receipts for all merchandise sold, and Borrower warrants the genuineness thereof. Upon
the occurrence of an Event of Default, Bank or Bank's designee may notify customers or account debtors of Bank's security interest in the Collateral and direct such customers or account debtors to
make payments directly to Bank, but unless and until Bank does so or gives Borrower other written instructions, Borrower shall collect all Accounts for Bank, receive in trust all payments thereon as
Bank's trustee, and, if so requested to do so from Bank, Borrower shall immediately deliver said payments to Bank in their original form as received from the account debtor and all letters of credit,
advices of credit, instruments, documents, chattel paper or any similar property evidencing or constituting Collateral. Notwithstanding anything to the contrary contained herein, if sales of Inventory
are made for cash, Borrower shall immediately deliver to Bank, in identical form, all such cash, checks, or other forms of payment which Borrower receives. The receipt of any check or other item of
payment by Bank shall not be considered a payment on account until such check or other item of payment is honored when presented for payment, in which event, said check or other item of payment shall
be deemed to have been paid to Bank two (2) calendar days after the date Bank actually receives such check or other item of payment. 

        Bank's
security interest in Inventory shall attach to all Inventory without further act on the part of Bank or Borrower. Borrower will at Borrower's expense pledge, assemble and deliver
such Inventory to Bank or to a third party as Bank's bailee; or hold the same in trust for Bank's account or store the
same in a warehouse in Bank's name; or deliver to Bank documents of title representing said Inventory; or evidence of Bank's security interest in some other manner acceptable to Bank. Until a default
by Borrower under this Agreement or any other Agreement between Borrower and Bank, Borrower may, subject to the provisions hereof and consistent herewith, sell the Inventory, but only in the ordinary
course of Borrower's business. A sale of Inventory in Borrower's ordinary course of business does not include an exchange or a transfer in partial or total satisfaction of a debt owing by Borrower. 

        Concurrently
with Borrower's execution of this Agreement, and at any time or times hereafter at the request of Bank, Borrower shall (a) execute and deliver to Bank security agreements,
mortgages, assignments, certificates of title, affidavits, reports, notices, schedules of accounts, letters of authority and all other documents that Bank may reasonably request, in form satisfactory
to Bank, to perfect and maintain perfected Bank's security interest in the Collateral and in order to fully consummate all of the transactions contemplated under this Agreement, (b) cooperate with
Bank in obtaining a control agreement in form and substance satisfactory to Bank with respect to all deposit accounts, electronic chattel paper, investment property, and letter-of-credit rights, and
(c) in the event that any Collateral is in the possession of a third party, Borrower shall join with Bank in notifying such third party of Bank's security interest and obtaining an acknowledgment from
such third party that it is holding such Collateral for the benefit of Bank. By authenticating or becoming bound by this Agreement, Borrower authorizes the filing of initial financing statement(s),
and any amendment(s) covering the Collateral to perfect and maintain perfected Bank's security interest in the Collateral. Upon the occurrence of an Event of Default, Borrower hereby irrevocably
makes, constitutes and appoints Bank (and any of Bank's officers, employees or agents designated by Bank) as Borrower's true and lawful attorney-in-fact with power to sign the name of Borrower on any
security agreement, mortgage, assignment, certificate of title, affidavit, letter of authority, notice of other similar documents which must be executed and/or filed in order to perfect or continue
perfected Bank's security interest in the Collateral, and to take such actions in its own name or in Borrower's name as Bank, in its sole discretion, deems necessary or appropriate to establish
exclusive possession or control (as defined in the Uniform Commercial Code) 

9

 

over any Collateral of such nature that perfection of Bank's security interest may be accomplished by possession or control. 

        Borrower
shall make appropriate entries in Borrower's Books disclosing Bank's security interest in the Accounts. Bank (through any of its officers, employees or agents) shall have the
right at any time or times hereafter, provided that reasonable notice is provided, during Borrower's usual business hours, or during the usual business hours of any third party having control over the
records of Borrower, to inspect and verify Borrower's Books in order to verify the amount or condition of, or any other matter, relating to, said Collateral and Borrower's financial condition. 

        Effective
only upon the occurrence of an Event of Default, Borrower appoints Bank or any other person whom Bank may designate as Borrower's attorney-in-fact, with power: to endorse
Borrower's name on any checks, notes, acceptances, money order, drafts or other forms of payment or security that may come into Bank's possession; to sign Borrower's name on any invoice or bill of
lading relating to any Accounts, on drafts against account debtors, on schedules and assignments of Accounts, on verifications of Accounts and on notices to account debtors; to establish a lock box
arrangement and/or to notify the post office authorities to change the address for delivery of Borrower's mail addressed to
Borrower to an address designated by Bank, to receive and open all mail addressed to Borrower, and to retain all mail relating to the Collateral and forward all other mail to Borrower; to send,
whether in writing or by telephone, requests for verification of Accounts; and to do all things necessary to carry out this Agreement. Borrower ratifies and approves all acts of the attorney-in-fact.
Neither Bank nor its attorney-in-fact will be liable for any acts or omissions or for any error of judgement or mistake of fact or law. This power being coupled with an interest, is irrevocable so
long as any Accounts in which Bank has a security interest remain unpaid and until the Indebtedness has been fully satisfied. 

        In
order to protect or perfect any security interest which Bank is granted hereunder, Bank may, in its sole discretion, discharge any lien or encumbrance or bond the same, pay any
insurance, maintain guards, warehousemen, or any personnel to protect the Collateral, pay any service bureau, or, obtain any records, and all costs for the same shall be added to the Indebtedness and
shall be payable on demand. 

        Borrower
agrees that Bank may provide information relating to this Agreement or relating to Borrower to Bank's parent, affiliates, subsidiaries and service providers. 

CONDITIONS PRECEDENT.  

        Conditions precedent to the making of the loans and the extension of the financial accommodations hereunder, Borrower shall execute, or cause to be executed, and
deliver to Bank, in form and substance satisfactory to Bank and its counsel, the following: 

        This
Agreement and other documents, instruments and agreements required by Bank, including without limitation, an Intellectual Property Security Agreement in form and substance
satisfactory to Bank; 

        If
Borrower is a corporation, limited liability company, limited partnership or other such entity, certified copies of all actions taken by Borrower, any grantor of a security interest
to Bank to secure the Indebtedness, and any guarantor of the Indebtedness, authorizing the execution, delivery and performance of this Agreement and any other documents, instruments or agreements
entered into in connection herewith, and authorizing specific officers to execute and deliver any such documents, instruments and agreements; 

        If
Borrower is a corporation, limited liability company, limited partnership or other such entity, then a certificate of good standing showing that Borrower is in good standing under the
laws of the state of its incorporation or formation and certificates indicating that Borrower is qualified to transact business and is in good standing in any other state in which it conducts
business; 

10

 

        If
Borrower is a partnership, then a copy of Borrower's partnership agreement certified by each general partner of Borrower; 

        UCC
searches and financing statements, tax lien and litigation searches, fictitious business statement filings, insurance certificates, notices or other similar documents which Bank may
require and in such form as Bank may require, in order to reflect, perfect or protect Bank's first priority security interest in the Collateral and in order to fully consummate all of the transactions
contemplated under this Agreement; 

        Evidence
that Borrower has obtained insurance and acceptable endorsements; 

        Such
control agreements from each Person as Bank may require; 

        Duly
executed certificates of title with respect to that portion of the Collateral that is subject to certificates of title; 

        Such
collateral access agreements from each lessor, warehouseman, bailee, and other Person as Bank may require, duly executed by each such Person; 

        Satisfactory
completion and acceptance of the results of Bank's pre-funding audit of Borrower's Books relating to the Accounts, Inventory and other Collateral; and 

        Warranties
and representations of officers. 

WARRANTIES. REPRESENTATIONS AND COVENANTS.  

        If so requested by Bank, Borrower shall, at such intervals designated by Bank, during the term hereof execute and deliver a Report of Accounts Receivable or
similar report, in form customarily used by Bank. The aggregate amount of the Borrowing Base at all times during the effectiveness of this Agreement shall not be less than the advances made hereunder.
Bank shall have the right to recompute the Borrowing Base in conformity with this Agreement. 

        If
any warranty is breached as to any Account, or any Account is not paid in full by an account debtor within ninety (90) days from the date of invoice, or an account debtor disputes
liability or makes any claim with respect thereto, or a petition in bankruptcy or other application for relief under the Bankruptcy Code or any other insolvency law is filed by or against an account
debtor, or an account debtor makes an assignment for the benefit of creditors, becomes insolvent, fails or goes out of business, then Bank may deem ineligible any and all Accounts owing by that
account debtor, and reduce the Borrowing Base by the amount thereof. Bank shall retain its security interest in all Accounts, whether eligible or ineligible, until all Indebtedness has been fully paid
and satisfied. Returns and allowances, if any, as between Borrower and its customers, will be on the same basis and in accordance with the usual customary practices of Borrower, as they exist at this
time. Any merchandise which is returned by an account debtor or otherwise recovered shall be set aside, marked with Bank's name, and Bank shall retain a security interest therein. Borrower shall
promptly notify Bank of all disputes and claims and settle or adjust them on terms approved by Bank. After default by Borrower hereunder, no discount, credit or allowance shall be granted to any
account debtor by Borrower and no return of merchandise shall be accepted by Borrower without Bank's consent. Bank may, after default by Borrower, settle or adjust disputes and claims directly with
account debtors for amounts and upon terms which Bank considers advisable, and in such cases Bank will credit Borrower's loan account with only the net amounts received by Bank in payment of the
Accounts, after deducting all Bank Expenses in connection therewith. 

        Borrower
warrants, represents, covenants and agrees that: 

        Borrower
has good and marketable title to the Collateral. Bank has and shall continue to have a first priority perfected security interest in and to the Collateral. The Collateral shall
at all times remain free and clear of all liens, encumbrances and security interests (except those in favor of Bank); 

11

 

        All
Accounts are and will, at all times pertinent hereto, be bona fide existing obligations created by the sale and delivery of merchandise or the rendition of services to account
debtors in the ordinary course of business, free of liens, claims, encumbrances and security interests (except as held by Bank and except as may be consented to, in writing, by Bank) and are
unconditionally owed to Borrower without defenses, disputes, offsets counterclaims, rights of return or cancellation, and Borrower shall have received no notice of actual or imminent bankruptcy or
insolvency of any account debtor at the time an Account due from such account debtor is assigned to Bank; and 

        At
the time each Account is assigned to Bank, all property giving rise to such Account shall have been delivered to the account debtor or to the agent for the account debtor for
immediate shipment to, and unconditional acceptance by, the account debtor. Borrower shall deliver to Bank, as Bank may from time to time require, delivery receipts, customer's purchase orders,
shipping instructions, bills of lading and any other evidence of shipping arrangements. Absent such a request by Bank, copies of all such documentation shall be held by Borrower as custodian for Bank. 

        At
the time each eligible Account is assigned to Bank, all such Eligible Accounts will be due and payable on terms set forth in Section 1.17 or 1.18, as applicable, or on such other
terms approved in writing by Bank in advance of the creation of such Accounts and which are expressly set forth on the face of all invoices, copies of which shall be held by Borrower as custodian for
Bank, and no such Eligible Account will then be past due. 

        Borrower
shall keep the Inventory only at the locations set forth on Schedule 6.5 to this agreement, which is incorporated herein by this reference, and the applicable owner, lessors or
mortgagee of those respective locations are as set forth on that schedule. 

        Borrower,
immediately upon demand by Bank therefor, shall now and from time to time hereafter, at such intervals as are reasonably requested by Bank, deliver to Bank, designations of
Inventory specifying Borrower's cost of Inventory, the wholesale market value thereof and such other matters and information relating to the Inventory as Bank may request; 

        All
of the Inventory is and shall remain free from all purchase money or other security interests, liens or encumbrances, except as held by Bank; 

        Borrower
does now keep and hereafter at all times shall keep correct and accurate records itemizing and describing the kind, type, quality and quantity of the Inventory, its cost
therefor and selling price thereof, and the daily withdrawals therefrom and additions thereto, all of which records shall be available upon demand to any of Bank's officers, agents and employees for
inspection and copying; 

        All
Inventory, now and hereafter at all times, shall be new Inventory of good and merchantable quality free from material defects; 

        Inventory
is not now and shall not at any time or times hereafter be located or stored with a bailee, warehouseman or other third party without Bank's prior written consent, and, in such
event, Borrower will concurrently therewith cause any such bailee, warehouseman or other third party to issue and deliver to Bank, warehouse receipts in Bank's name evidencing the storage of Inventory
and/or an acknowledgment by such bailee of Bank's prior rights in the Inventory, in each case in form and substance acceptable to Bank,. In any event, Borrower shall instruct any third party to hold
all such Inventory for Bank's account subject to Bank's security interests and its instructions; and 

        Bank
shall have the right upon demand now and/or at all times hereafter, during Borrower's usual business hours, after reasonable notice, to inspect and examine the Inventory and to
check and test the same as to quality, quantity, value and condition and Borrower agrees to reimburse Bank for Bank's reasonable costs and expenses in so doing. 

12

 

        Borrower
represents, warrants and covenants with Bank that Borrower will not, without Bank's prior written consent: 

        Grant
a security interest in or permit a lien, claim or encumbrance upon any of the Collateral to any person, association, firm, corporation, entity or governmental agency or
instrumentality; 

        Permit
any levy, attachment or restraint to be made affecting any of Borrower's assets; 

        Permit
any Judicial Officer or Assignee to be appointed or to take possession of any or all of Borrower's assets; 

        Other
than sales of Inventory in the ordinary course of Borrower's business, to sell, lease, or otherwise dispose of, move, or transfer, whether by sale or otherwise, any of Borrower's
assets; 

        Change
its name, the location of its sole place of business, chief executive office or residence, business structure, corporate identity or structure, form of organization or the state
in which it has been formed or organized; add any new fictitious names, liquidate, merge or consolidate with or into any other business organization; 

        Move
or relocate any Collateral; 

        Acquire
any other business organization; 

        Enter
into any transaction not in the usual course of Borrower's business; 

        Make
any change in Borrower's financial structure or in any of its business objectives, purposes or operations which would materially adversely affect the ability of Borrower to repay
Borrower's Indebtedness; 

        Incur
any debts outside the ordinary course of Borrower's business except renewals or extensions of existing debts and interest thereon; 

        Make
loans, advances or extensions of credit to any Person, except in the ordinary course of business; 

        Guarantee
or otherwise, directly or indirectly, in any way be or become responsible for obligations of any other Person, whether by agreement to purchase the indebtedness of any other
Person, agreement for the furnishing of funds to any other Person through the furnishing of goods, supplies or services, by way of stock purchase, capital contribution, advance or loan, for the
purpose of paying or discharging (or causing the payment or discharge of) the indebtedness of any other Person, or otherwise, except for the endorsement of negotiable instruments by Borrower in the
ordinary course of business for deposit or collection; 

        Make
any payment on account of any Subordinated Debt of Borrower or any subsidiary or affiliate of Borrower, if any, or amend any provision contained in any documentation relating to any
such Subordinated Debt without Bank's prior written consent; 

        (a)  Sell,
lease, transfer or otherwise dispose of properties and assets having an aggregate book value of more than Five Hundred Thousand Dollars ($500,000) (whether in one
transaction or in a series of transactions) except as to the sale of Inventory in the ordinary course of business; (b) change its name, consolidate with or merge into any other corporation, permit
another corporation to merge into it, acquire all or substantially all the properties or assets of any other Person, enter into any reorganization or recapitalization or reclassify its capital stock,
or (c) enter into any sale-leaseback transaction; 

        Purchase
or hold beneficially any stock or other securities of, or make any investment or acquire any securities or other interest whatsoever in, any other Person, except for the common
stock of the Subsidiaries owned by Borrower on the date of this Agreement and except for certificates of deposit with maturities of one year or less of United States commercial banks with capital,
surplus and undivided profits in excess of One Hundred Million Dollars ($100,000,000) and 

13

 

the securities or other direct obligations of the United States Government maturing within one year from the date of acquisition thereof; and 

        Allow
any fact, condition or event to occur or exist with respect to any employee pension or profit sharing plans established or maintained by it which might constitute grounds for
termination of any such plan or for the court appointment of a trustee to administer any such plan. 

        Borrower
is not a merchant whose sales for resale of goods for personal, family or household purposes exceeded seventy-five percent (75%) in dollar volume of its total sales of all goods
during the twelve (12) months preceding the filing by Bank of a financing statement describing the Collateral. At no time hereafter shall Borrower's sales for resale goods for personal, family or
household purposes exceed seventy-five percent (75%) in dollar volume of its total sales. 

        Borrower
represents, warrants, covenants and agrees that: 

        Borrower's
true and correct legal name is that set forth on the signature page to this Agreement. Except as disclosed in writing to Bank on or before the date of this Agreement, Borrower
has not done business under any name other than that set forth on the signature page to this Agreement; 

        If
Borrower is an individual, the location (as determined pursuant to the Uniform Commercial Code) of Borrower's principal residence is that set forth following Borrower's name on the
signature page to this Agreement; 

        If
Borrower is a registered organization that is organized under the laws of any one of the states comprising the United States (e.g. corporation, limited partnership, registered limited
liability partnership or limited liability company), and is located (as determined pursuant to the Uniform Commercial Code) in the state under the laws of which it was organized, Borrower's form of
organization and the state in which it has been organized are those set forth immediately following Borrower's name on the signature page to this Agreement; 

        If
Borrower is a registered organization organized under the laws of the United States, and Borrower is located in the state that United States law designates as its location or, if
United States law authorizes Borrower to designate the state for its location, the state designated by Borrower, or if neither of the foregoing are applicable, at the District of Columbia (in each
case as determined in accordance with the Uniform Commercial Code), Borrower's form of organization and the state or district in which it is located are those set forth immediately following
Borrower's name on the signature page to this Agreement; 

        If
Borrower is a domestic organization that is not a registered organization under the laws of the United States or any state thereof (e.g. general partnership, joint venture, trust,
estate or association), and Borrower is located (as determined pursuant to the Uniform Commercial Code) at its sole place of business or, if it has more than one place of business, at its chief
executive office, Borrower's form of organization and the address of that location are those set forth on the signature page to this Agreement; and 

        If
Borrower is a foreign individual or foreign organization or a branch or agency of a bank that is not organized under the laws of the United States or a state thereof, Borrower is
located (as determined pursuant to the Uniform Commercial Code) at the address set forth following Borrower's name on the signature page to this Agreement. 

14

   
        If Borrower is a corporation, Borrower represents, warrants and covenants as follows: 

        Without
the prior written consent of Bank, Borrower will not make any distribution or declare or pay any dividend (in stock or in cash) to any shareholder or on any of its capital stock,
of any class, whether now or hereafter outstanding, or purchase, acquire, repurchase, or redeem or retire any such capital stock; 

        Borrower
is and shall at all times hereafter be a corporation duly organized and existing in good standing under the laws of the state of its incorporation and qualified and licensed to
do business in California or any other state in which it conducts its business; 

        Borrower
has the right and power and is duly authorized to enter into this Agreement; and 

        The
execution by Borrower of this Agreement shall not constitute a breach of any provision contained in Borrower's articles of incorporation or by-laws. 

        The
execution of and performance by Borrower of all of the terms and provisions contained in this Agreement shall not result in a breach of or constitute an event of default under any
agreement to which Borrower is now or hereafter becomes a party. 

        Borrower
shall promptly notify Bank in writing of its acquisition by purchase, lease or otherwise of any after acquired property of the type included in the Collateral, with the
exception of purchases of Inventory in the ordinary course of business. 

        All
assessments and taxes, whether real, personal or otherwise, due or payable by, or imposed, levied or assessed against, Borrower or any of its property have been paid, and shall
hereafter be paid in full, before delinquency. Borrower shall make due and timely payment or deposit of all federal, state and local taxes, assessments or contributions required of it by law, and will
execute and deliver to Bank, on demand, appropriate certificates attesting to the payment or deposit thereof. Borrower will make timely payment or deposit of all F.I.C.A. payments and withholding
taxes required of it by applicable laws, and
will upon request furnish Bank with proof satisfactory to it that Borrower has made such payments or deposit. If Borrower fails to pay any such assessment, tax, contribution, or make such deposit, or
furnish the required proof, Bank may, in its sole and absolute discretion and without notice to Borrower, (I) make payment of the same or any part thereof, or (ii) set up such reserves in Borrower's
loan account as Bank deems necessary to satisfy the liability therefor, or both. Bank may conclusively rely on the usual statements of the amount owing or other official statements issued by the
appropriate governmental agency. Each amount so paid or deposited by Bank shall constitute a Bank Expense and an additional advance to Borrower. 

        There
are no actions or proceedings pending by or against Borrower or any guarantor of Borrower before any court or administrative agency and Borrower has no knowledge of any pending,
threatened or imminent litigation, governmental investigations or claims, complaints, actions or prosecutions involving Borrower or any guarantor of Borrower, except as heretofore specifically
disclosed in writing to Bank. If any of the foregoing arise during the term of the Agreement, Borrower shall immediately notify Bank in writing. 

Insurance. 

        Borrower,
at its expense, shall keep and maintain its assets insured against loss or damage by fire, theft, explosion, sprinklers and all other hazards and risks ordinarily insured
against by other owners who use such properties in similar businesses for the full insurable value thereof. Borrower shall also keep and maintain business interruption insurance and public liability
and property damage insurance relating to Borrower's ownership and use of the Collateral and its other assets. All such policies of insurance shall be in such form, with such companies, and in such
amounts as may be satisfactory to Bank. Borrower shall deliver to Bank certified copies of such policies of insurance and evidence of the payments of all premiums therefor. All such policies of
insurance (except those of public liability and 

15

 

property damage) shall contain an endorsement in a form satisfactory to Bank showing Bank as a loss payee thereof, with a waiver of warranties satisfactory to Bank, and all proceeds payable
thereunder shall be payable to Bank and, upon receipt by Bank, shall be applied on account of the Indebtedness owing to Bank. To secure the payment of the Indebtedness, Borrower grants Bank a security
interest in and to all such policies of insurance (except those of public liability and property damage) and the proceeds thereof, and Borrower shall direct all insurers under such policies of
insurance to pay all proceeds thereof directly to Bank. 

        Borrower
hereby irrevocably appoints Bank (and any of Bank's officers, employees or agents designated by Bank) as Borrower's attorney for the purpose of making, selling and adjusting
claims under such policies of insurance, endorsing the name of Borrower on any check, draft, instrument or other item of payment for the proceeds of such policies of insurance and for making all
determinations and decisions with respect to such policies of insurance. Borrower will not cancel any of such policies without Bank's prior written consent. Each such insurer shall agree by
endorsement upon the policy or policies of insurance issued by it to Borrower as required above, or by independent instruments furnished to Bank, that it will give Bank at least ten (10) days written
notice before any such policy or policies of insurance shall be altered or canceled, and that no act or default of Borrower, or any other person,
shall affect the right of Bank to recover under such policy or policies of insurance required above or to pay any premium in whole or in part relating thereto. Bank, without waiving or releasing any
Indebtedness or any Event of Default, may, but shall have no obligation to do so, obtain and maintain such policies of insurance and pay such premiums and take any other action with respect to such
policies which Bank deems advisable. All sums so disbursed by Bank, as well as reasonable attorneys' fees incurred by Bank, whether in-house or outside counsel is used, court costs, expenses and other
charges relating thereto, shall constitute Bank Expenses and are payable on demand. 

        All
financial statements and information relating to Borrower which have been or may hereafter be delivered by Borrower to Bank are true and correct and have been prepared in accordance
with GAAP consistently applied and there has been no material adverse change in the financial condition of Borrower since the submission of such financial information to Bank. 

Financial
Reporting. 

        Borrower
at all times hereafter shall maintain a standard and modern system of accounting in accordance with GAAP consistently applied with ledger and account cards and/or computer tapes
and computer disks, computer printouts and computer records pertaining to the Collateral which contain information as may from time to time be requested by Bank, not modify or change its method of
accounting or enter into, modify or terminate any agreement presently existing, or at any time hereafter entered into with any third party accounting firm and/or service bureau for the preparation
and/or storage of Borrower's accounting records without the written consent of Bank first obtained and without said accounting firm and/or service bureau agreeing to provide information regarding the
Accounts and Inventory and Borrower's financial condition to Bank; permit Bank and any of its employees, officers or agents, upon demand, during Borrower's usual business hours, or the usual business
hour of third persons having control thereof, to have access to and examine all of Borrower's Books relating to the Collateral, Borrower's Indebtedness to Bank, Borrower's financial condition and the
results of Borrower's operations and in connection therewith, permit Bank or any of its agents, employees or officers to copy and make extracts therefrom. 

        Borrower
shall deliver to Bank (i) within thirty (30) days after the end of each month, a company prepared consolidated and consolidating balance sheet and profit and loss statement
covering Borrower's and each of its subsidiaries' and affiliates' operations, and, (ii) within forty five (45) days after the end of each fiscal quarter, Borrower's company prepared form 10Q filed
with the United States Securities and Exchange Commission (the "SEC"), containing consolidated and consolidating balance sheet and profit and loss statement covering Borrower's operations, and (iii)
within one 

16

 

hundred and twenty (120) days after the end of each fiscal year, Borrower's form 10Q filed with the SEC, containing an audited statement of the financial condition of Borrower for each such fiscal
year, including but not limited to, a consolidated and consolidating balance sheet and profit and loss statement and any other report requested by Bank relating to the Collateral and the financial
condition of Borrower and each of its subsidiaries and affiliates, audited by a certified public accountant satisfactory to Bank, and a certificate signed by an authorized employee of Borrower to the
effect that all reports, statements, computer disk or tape files, computer printouts, computer runs, or other
computer prepared information of any kind or nature relating to the foregoing or documents delivered or caused to be delivered to Bank under this subparagraph are complete, correct and thoroughly
present the financial condition of Borrower and that there exists on the date of delivery to Bank no condition or event which constitutes a breach or Event of Default under this Agreement. 

        In
addition to the financial statements requested above, Borrower agrees to provide Bank with the following schedules, in each case in form and substance satisfactory to Bank: 

        Accounts
Receivable Agings on a monthly basis, within twenty (20) days of the end of each month, including a separate aging with respect to all Pool and Spa Accounts; 

        Accounts
Payable Agings on a monthly basis, within twenty (20) days of the end of each month; 

        Backlog/Purchase
Order/Open Account Report on a monthly basis, within twenty (20) days of the end of each month; 

        Borrowing
Base Certificate on a weekly basis, within seven (7) days of the end of each week; provided,  however, that the timing for the submission of each Borrowing
Base Certificate shall be extended to once each month, within twenty (20) days of the end
thereof, upon Borrower's successful achievement of two (2) consecutive quarters in which Borrower shall report a net profit after tax, as determined in accordance with GAAP, of not less than One
Dollar ($1), and provided that no Event of Default shall have occurred or be continuing during each such quarter; 

        Compliance
Certification on a monthly basis, within thirty (30) days of the end of each month; and 

        Copies
of each form 8K filed by Borrower with the SEC, as and when so filed, and copies of any and all other reports or disclosures filed with the SEC from time to time, as and when so
filed. 

        Borrower
shall permit representatives of Bank to conduct audits of Borrower's Books relating to the Accounts, Inventory and other Collateral and make extracts therefrom, with results
satisfactory to Bank, provided that Bank shall use its best efforts to not interfere with the conduct of Borrower's business, and to the extent possible to arrange for verification of the Accounts
directly with the account debtors obligated thereon or otherwise, all under reasonable procedures acceptable to Bank and at Borrower's sole expense;  provided, further, that, prior to an Event of Default, Borrower shall not be responsible for the expense
of more than two (2) such audits, in any fiscal year. Borrower hereby acknowledges and agrees that upon completion of any such audit Bank shall have the right to adjust any Borrowing Base percentage,
in its sole and reasonable discretion, based on its review of the results of such collateral audit. 

        Borrower
shall maintain the following financial ratios and covenants on a consolidated or non-consolidated basis with all Borrower's subsidiaries and affiliates, as applicable, which
shall be monitored on a monthly or quarterly basis, as noted below: 

        As
of the end of each month, maintain a Tangible Effective Net Worth in an amount not less than Five Million Seven Hundred Fifty Thousand Dollars ($5,750,000), as measured on a
non-consolidated basis for Borrower only, to increase to an amount not less than Six Million Five 

17

 

Hundred Thousand Dollars ($6,500,000) on June 30, 2002, and increasing annually by an amount equal to twenty five percent (25%) of Borrower's annual net profit after taxes reflected in Borrower's
consolidating annual financial statements submitted to Bank in accordance with this Agreement; provided,  however, that Tangible Effective Net Worth shall
not be decreased by the amount of any annual net loss. For the purposes of calculating the forgoing
ratio, intangible assets shall be deemed to include, but are not limited to, all notes receivable, deferred income taxes and any unreconciled differences reflected in Borrower's consolidating
financial statements; 

        As
of the end of each fiscal quarter, maintain a consolidated Tangible Effective Net Worth in an amount not less than Eight Million Dollars ($8,000,000), as measured on a consolidated
basis with Borrower's subsidiaries and affiliates, to increase to an amount not less than Eight Million Five Hundred Thousand Dollars ($8,500,000) on June 30, 2002, and increasing annually by an
amount equal to twenty five percent (25%) of Borrower's consolidated annual net profit after taxes reflected in Borrower's consolidated annual financial statements submitted to Bank in accordance with
this Agreement; provided, however, that Tangible Effective Net Worth shall not be decreased by the
amount of any annual net loss. For the purposes of calculating the forgoing ratio, intangible assets shall be deemed to include, but are not limited to, all notes receivable, deferred income taxes and
any unreconciled differences reflected in Borrower's consolidated financial statements; 

        Maintain,
as of the end of each month, in each case as measured on a non-consolidated basis for Borrower only, a ratio of Quick Assets to Current Liabilities of not less than .90:1.00,
increasing to 1.00:1.00 on June 30, 2002, and to 1.10 :1.00 on December 31, 2002; 

        Maintain,
as of the end of each fiscal quarter, in each case as measured on a consolidated basis, a ratio of Quick Assets to Current Liabilities of not less than .90:1.00, increasing to
1.00:1.00 on June 30, 2002, and to 1.10:1.00 on December 31, 2002; 

        Maintain,
as of the end of each month, as measured on a non-consolidated basis for Borrower only, a Debt-to-Worth Ratio of less than .95:1.00; 

        Maintain,
as of the end of each fiscal quarter, as measured on a consolidated basis, a Debt-to-Worth Ratio of less than .95:1.00; and 

        Borrower
shall not without Bank's prior written consent acquire or expend for or commit itself to acquire or expend for fixed assets by lease, purchase or otherwise in an aggregate
amount that exceeds Five Hundred Thousand Dollars ($500,000) in any fiscal year; and 

        All
financial covenants shall be computed in accordance with GAAP consistently applied except as otherwise specifically set forth in this Agreement. All monies due from affiliates
(including officers, directors and shareholders) shall be excluded from Borrower's assets for all purposes hereunder. 

        Borrower
shall promptly supply Bank (and cause any guarantor to supply Bank) with such other information (including tax returns) concerning its financial affairs (or that of any
guarantor) as Bank may request from time to time hereafter, and shall promptly notify Bank of any material adverse change in Borrower's financial condition and of any condition or event which
constitutes a breach of or an event which constitutes an Event of Default under this Agreement. 

        Borrower
is now and shall be at all times hereafter solvent and able to pay its debts (including trade debts) as they mature. 

        Borrower
shall immediately and without demand reimburse Bank for all sums expended by Bank in connection with any action brought by Bank to correct any default or enforce any provision
of this Agreement, including all Bank Expenses; Borrower authorizes and approves all advances and payments by Bank for items described in this Agreement as Bank Expenses. 

18

 

        Each
warranty, representation and agreement contained in this Agreement shall be automatically deemed repeated with each advance and shall be conclusively presumed to have been relied on
by Bank regardless of any investigation made or information possessed by Bank. The warranties, representations and agreements set forth herein shall be cumulative and in addition to any and all other
warranties, representations and agreements which Borrower shall give, or cause to be given, to Bank, either now or hereafter. 

        Borrower
shall keep all of its principal bank accounts with Bank and shall notify Bank immediately in writing of the existence of any other bank account, deposit account, or any other
account into which money can be deposited. 

        Borrower
shall furnish to Bank: (a) as soon as possible, but in no event later than thirty (30) days after Borrower knows or has reason to know that any reportable event with respect to
any deferred compensation plan has occurred, a statement of the chief financial officer of Borrower setting forth the details concerning such reportable event and the action which Borrower proposes to
take with respect thereto, together with a copy of the notice of such reportable event given to the Pension Benefit Guaranty Corporation, if a copy of such notice is available to Borrower; (b)
promptly after the filing thereof with the United States Secretary of Labor or the Pension Benefit Guaranty Corporation, copies of each annual report with respect to each deferred compensation plan;
(c) promptly after receipt thereof, a copy of any notice Borrower may receive from the Pension Benefit Guaranty Corporation or the Internal Revenue Service with respect to any deferred compensation
plan; provided, however, this subparagraph shall not apply to notice of general application issued by
the Pension Benefit Guaranty Corporation or the Internal Revenue Service; and (d) when the same is made available to participants in the deferred compensation plan, all notices and other forms of
information from time to time disseminated to the participants by the administrator of the deferred compensation plan. 

        Borrower
is now and shall at all times hereafter remain in compliance with all federal, state and municipal laws, regulations and ordinances relating to the handling, treatment and
disposal of toxic substances, wastes and hazardous material and shall maintain all necessary authorizations and permits. 

EVENTS OF DEFAULT.  

        Any one or more of the following events shall constitute an Event of Default by Borrower under this Agreement: 

        If
Borrower fails or neglects to perform, keep or observe any term, provision, condition, covenant, agreement, warranty or representation contained in this Agreement, or any other
present or future document, instrument or agreement between Borrower and Bank; 

        If
any representation, statement, report or certificate made or delivered by Borrower, or any of its officers, employees or agents to Bank is not true and correct; 

        If
Borrower fails to pay when due and payable or declared due and payable, all or any portion of Borrower's Indebtedness (whether of principal, interest, taxes, reimbursement of Bank
Expenses, or otherwise); 

        If
there is a material impairment of the prospect of repayment of all or any portion of Borrower's Indebtedness or a material impairment of the value or priority of Bank's security
interest in the Collateral; 

        If
all or any of Borrower's assets are attached, seized, subject to a writ or distress warrant, or are levied upon, or come into the possession of any Judicial Officer or Assignee and
the same are not released, discharged or bonded against within ten (10) days thereafter; 

        If
any Insolvency Proceeding is filed or commenced by or against Borrower without being dismissed within ten (10) days thereafter; 

19

 

        If
any proceeding is filed or commenced by or against Borrower for its dissolution or liquidation; 

        If
Borrower is enjoined, restrained or in any way prevented by court order from continuing to conduct all or any material part of its business affairs; 

        If
a notice of lien, levy or assessment is filed of record with respect to any or all of Borrower's assets by the United States Government, or any department, agency or instrumentality
thereof, or by any state, county, municipal or other government agency, or if any taxes or debts owing at any time hereafter to any one or more of such entities becomes a lien, whether inchoate or
otherwise, upon any or all of Borrower's assets and the same is not paid on the payment date thereof; 

        If
a judgment or other claim becomes a lien or encumbrance upon any or all of Borrower's assets and the same is not satisfied, dismissed or bonded against within ten (10) days
thereafter; 

        If
Borrower's records are prepared and kept by an outside computer service bureau at the time this Agreement is entered into or during the term of this Agreement such an agreement with
an outside service bureau is entered into, and at any time thereafter, without first obtaining the written consent of Bank, Borrower terminates, modifies, amends or changes its contractual
relationship with said computer service bureau or said computer service bureau fails to provide Bank with any requested information or financial data pertaining to Bank's Collateral, Borrower's
financial condition or the results of Borrower's operations; 

        If
Borrower permits a default in any material agreement to which Borrower is a party with third parties so as to result in an acceleration of the maturity of Borrower's indebtedness to
others, whether under any indenture, agreement or otherwise; 

        If
Borrower makes any payment on account of indebtedness which has been subordinated to Borrower's Indebtedness to Bank except as otherwise permitted under the terms of this Agreement; 

        If
any misrepresentation exists now or thereafter in any warranty or representation made to Bank by any officer or director of Borrower, or if any such warranty or representation is
withdrawn by any officer or director; 

        If
any party subordinating its claims to that of Bank's or any guarantor of Borrower's Indebtedness dies, terminates its subordination or guaranty, violates the terms of the
subordination or guaranty, becomes insolvent, or an Insolvency Proceeding is commenced by or against any such subordinating party or guarantor; 

        If
Borrower is an individual and Borrower dies; 

        If
there is a change of ownership or control of twenty five percent (25%) or more of the issued and outstanding stock of Borrower; or 

        If
any reportable event, which Bank determines constitutes grounds for the termination of any deferred compensation plan by the Pension Benefit Guaranty Corporation or for the
appointment by the appropriate United States District Court of a trustee to administer any such plan, shall have occurred and be continuing thirty (30) days after written notice of such determination
shall have been given to Borrower by Bank, or any such Plan shall be terminated within the meaning of Title IV of the Employment Retirement Income Security Act ("ERISA"), or a trustee shall be
appointed by the appropriate United States District Court to administer any such plan, or the Pension Benefit Guaranty Corporation shall institute proceedings to terminate any plan and in case of any
event described in this Section 7, the aggregate amount of Borrower's liability to the Pension Benefit Guaranty Corporation under Sections 4062, 4063 or 4064 of ERISA shall exceed five
percent (5%) of Borrower's Tangible Effective Net Worth. 

20

 

        Notwithstanding
anything contained in Section 7 to the contrary, Bank shall refrain from exercising its rights and remedies and Event of Default shall thereafter not be deemed to have
occurred by reason of the occurrence of any of the events set forth in Sections 7.e, 7.f or 7.j of this Agreement if, within ten (10) days from the date thereof, the same is released, discharged,
dismissed, bonded against or satisfied; provided, however, if the event is the institution of Insolvency
Proceedings against Borrower, Bank shall not be obligated to make advances to Borrower during such cure period. 

BANK'S RIGHTS AND REMEDIES.  

        Upon the occurrence of an Event of Default by Borrower under this Agreement, Bank may, at its election, without notice of its election and without demand, do any
one or more of the following, all of which are authorized by Borrower: 

        Declare
Borrower's Indebtedness, whether evidenced by this Agreement, installment notes, demand notes or otherwise, immediately due and payable to Bank; 

        Cease
advancing money or extending credit to or for the benefit of Borrower under this Agreement, or any other agreement between Borrower and Bank; 

        Terminate
this Agreement as to any future liability or obligation of Bank, but without affecting Bank's rights and security interests in the Collateral, and the Indebtedness of Borrower
to Bank; 

        Without
notice to or demand upon Borrower or any guarantor, make such payments and do such acts as Bank considers necessary or reasonable to protect its security interest in the
Collateral. Borrower agrees to assemble the Collateral if Bank so requires and to make the Collateral available to Bank as Bank may designate. Borrower authorizes Bank to enter the premises where the
Collateral is located, take and maintain possession of the Collateral and the premises (at no charge to Bank), or any part thereof, and to pay, purchase, contest or compromise any encumbrance, charge
or lien which in the opinion of Bank appears to be prior or superior to its security interest and to pay all expenses incurred in connection therewith; 

        Without
limiting Bank's rights under any security interest, Bank is hereby granted a license or other right to use, without charge, Borrower's labels, patents, copyrights, rights of use
of any name, trade secrets, trade names, trademarks and advertising matter, or any property or a similar nature as it pertains to the Collateral, in completing production of, advertising for sale and
selling any Collateral and Borrower's rights under all licenses and all franchise agreement shall inure to Bank's benefit, and Bank shall have the right and power to enter into sublicense agreements
with respect to all such rights with third parties on terms acceptable to Bank; 

        Ship,
reclaim, recover, store, finish, maintain, repair, prepare for sale, advertise for sales and sell (in the manner provided for herein) the Inventory; 

        Sell
or dispose the Collateral at either a public or private sale, or both, by way of one or more contracts or transactions, for cash or on terms, in such manner and at such places
(including
Borrower's premises) as is commercially reasonable in the opinion of Bank. It is not necessary that the Collateral be present at any such sale. At any sale or other disposition of the Collateral
pursuant to this Section, Bank disclaims all warranties which would otherwise be given under the Uniform Commercial Code, including without limitation a disclaimer of any warranty relating to title,
possession, quiet enjoyment or the like, and Bank may communicate these disclaimers to a purchaser at such disposition. This disclaimer of warranties will not render the sale commercially
unreasonable; 

        Bank
shall give notice of the disposition of the Collateral as follows: 

        (1)  Bank
shall give Borrower and each holder of a security interest in the Collateral who has filed with Bank a written request for notice, a notice in writing of the time
and place of 

21

 

public sale, or, if the sale is a private sale or some disposition other than a public sale is to be made of the Collateral, the time on or after which the private sale or other disposition is to be
made; 

        (2)  The
notice shall be personally delivered or mailed, postage prepaid, to Borrower's address appearing in this Agreement, at least ten (10) calendar days before the date
fixed for the sale, or at least ten (10) calendar days before the date on or after which the private sale or other disposition is to be made, unless the Collateral is perishable or threatens to
decline speedily in value. Notice to persons other than Borrower claiming an interest in the Collateral shall be sent to such addresses as have been furnished to Bank or as otherwise determined in
accordance with Section 9611 of the Uniform Commercial Code; and 

        (3)  If
the sale is to be a public sale, Bank shall also give notice of the time and place by publishing a notice one time at least ten (10) calendar days before the date of
the sale in a newspaper of general circulation in the county in which the sale is to be held; and 

        (4)  Bank
may credit bid and purchase at any public sale. 

        Borrower
shall pay all Bank Expenses incurred in connection with Bank's enforcement and exercise of any of its rights and remedies as herein provided, whether or not suit is commenced by
Bank; 

        Any
deficiency which exists after disposition of the Collateral as provided above will be paid immediately by Borrower. Any excess will be returned, without interest and subject to the
rights of third parties, to Borrower by Bank, or, in Bank's discretion, to any party who Bank believes, in good faith, is entitled to the excess; 

        Without
constituting a retention of Collateral in satisfaction of an obligation within the meaning of 9620 of the Uniform Commercial Code or an action under California Code of Civil
Procedure 726, apply any and all amounts maintained by Borrower as deposit accounts (as that term is defined under 9102 of the Uniform Commercial Code) or other accounts that Borrower maintains with
Bank against the Indebtedness; 

        The
proceeds of any sale or other disposition of Collateral authorized by this Agreement shall be applied by Bank first upon all expenses authorized by the Uniform Commercial Code and
all reasonable attorney fees and legal expenses incurred by Bank, whether in-house or outside counsel is used, the balance of the proceeds of the sale or other disposition shall be applied in the
payment of the Indebtedness, first to interest, then to principal, then to remaining Indebtedness and the surplus, if any, shall be paid over to Borrower or to such other person(s) as may be entitled
to it under applicable law. Borrower shall remain liable for any deficiency, which it shall pay to Bank immediately upon demand. Borrower agrees that Bank shall be under no obligation to accept any
noncash proceeds in connection with any sale or disposition of Collateral unless failure to do so would be commercially unreasonable. If Bank agrees in its sole discretion to accept noncash proceeds
(unless the failure to do so would be commercially unreasonable), Bank may ascribe any commercially reasonable value to such proceeds. Without limiting the foregoing, Bank may apply any discount
factor in determining the present value of proceeds to be received in the future or may elect to apply proceeds to be received in the future only as and when such proceeds are actually received in
cash by Bank; and 

22

  

        The
following shall be the basis for any finder of fact's determination of the value of any Collateral which is the subject matter of a disposition giving rise to a calculation of any
surplus or deficiency under Section 9615(f) of the Uniform Commercial Code: (i) The Collateral which is the subject matter of the disposition shall be valued in an "as is" condition as of the date of
the disposition, without any assumption or expectation that such Collateral will be repaired or improved in any manner; (ii) the valuation shall be based upon an assumption that the transferee of such
Collateral desires a resale of the Collateral for cash promptly (but no later than 30 days) following the disposition; (iii) all reasonable closing costs customarily borne by the seller in commercial
sales transactions relating to property similar to such Collateral shall be deducted including, without limitation, brokerage commissions, tax prorations, attorney's fees, whether in-house or outside
counsel is used, and marketing costs; (iv) the value of the Collateral which is the subject matter of the disposition shall be further discounted to account for any estimated holding costs associated
with maintaining such Collateral pending sale (to the extent not accounted for in (iii) above), and other maintenance, operational and ownership expenses; and (v) any expert opinion testimony given or
considered in connection with a determination of the value of such Collateral must be given by persons having at least 5 years experience in appraising property similar to the Collateral and who have
conducted and prepared a complete written appraisal of such Collateral taking into consideration the factors set forth above. The "value" of any such Collateral shall be a factor in determining the
amount of proceeds which would have been realized in a disposition to a transferee other than a secured party, a person related to a secured party or a secondary obligor under Section 9615(f)
of the Uniform Commercial Code. 

        In
addition to any and all other rights and remedies available to Bank under or pursuant to this Agreement or any other documents, instrument or agreement contemplated hereby, Borrower
acknowledges and agrees that (i) at any time following the occurrence and during the continuance of any Event of Default, and/or (ii) termination of Bank's commitment or obligation to make loans or
advances or otherwise extent credit to or in favor of Borrower hereunder, in the event that and to the extent that there are any Letter of Credit Obligations outstanding at such time, upon demand of
Bank, Borrower shall deliver to Bank, or cause to be delivered to Bank, cash collateral in an amount not less than such Letter of Credit Obligations, which cash collateral shall be held and retained
by Bank as cash collateral for the repayment of such Letter of Credit Obligations, together with any and all other Indebtedness of Borrower to Bank remaining unpaid, and Borrower pledges to Bank and
grants to Bank a continuing first priority security interest in such cash collateral so delivered to Bank. Alternatively, Borrower shall cause to be delivered to Bank an irrevocable standby letter of
credit issued in favor of Bank by a bank acceptable to Bank, in its sole discretion, in an amount not less than such Letter of Credit Obligations, and upon terms acceptable to Bank, in its sole
discretion. 

        Bank's
rights and remedies under this Agreement and all other agreements shall be cumulative. Bank shall have all other rights and remedies not inconsistent herewith as provided by law
or in equity. No exercise by Bank of one right or remedy shall be deemed an election, and no waiver by Bank of any
default on Borrower's part shall be deemed a continuing waiver. No delay by Bank shall constitute a waiver, election or acquiescence by Bank. 

        TAXES AND EXPENSES REGARDING BORROWER'S PROPERTY.    If Borrower fails to pay promptly when due to another person or entity,
monies which Borrower is required to pay by reason of any provision in this Agreement, Bank may, but need not, pay the same and charge Borrower's loan account therefor, and Borrower shall promptly
reimburse Bank. All such sums shall become additional indebtedness owing to Bank, shall bear interest at the rate hereinabove provided, and shall be secured by all Collateral. Any payments made by
Bank shall not constitute (I) an agreement by it to make similar payments in the future, or (ii) a waiver by Bank of any default under this Agreement. Bank need not inquire as to, or contest the
validity of, any such expense, tax, security interest, encumbrance or lien and the receipt of the usual official notice of the payment thereof shall be conclusive evidence 

23

 

that the same was validly due and owing. Such payments shall constitute Bank Expenses and additional advances to Borrower. 

WAIVERS.  

        Borrower agrees that checks and other instruments received by Bank in payment or on account of Borrower's Indebtedness constitute only conditional payment until
such items are actually paid to Bank and Borrower waives the right to direct the application of any and all payments at any time or times hereafter received by Bank on account of Borrower's
Indebtedness and Borrower agrees that Bank shall have the continuing exclusive right to apply and reapply such payments in any manner as Bank may deem advisable, notwithstanding any entry by Bank upon
its books. 

        Borrower
waives demand, protest, notice of protest, notice of default or dishonor, notice of payment and nonpayment, notice of any default, nonpayment at maturity, release, compromise,
settlement, extension or renewal of any or all commercial paper, accounts, documents, instruments, chattel paper, and guarantees at any time held by Bank on which Borrower may in any way be liable. 

        Bank
shall not in any way or manner be liable or responsible for (a) the safekeeping of the Inventory; (b) any loss or damage thereto occurring or arising in any manner or fashion from
any cause; (c) any diminution in the value thereof; or (d) any act or default of any carrier, warehouseman, bailee, forwarding agency or other person whomsoever. All risk of loss, damage or
destruction of Inventory shall be borne by Borrower. 

        Borrower
waives the right and the right to assert a confidential relationship, if any, it may have with any accountant, accounting firm and/or service bureau or consultant in connection
with any information requested by Bank pursuant to or in accordance with this Agreement, and agrees that a Bank may
contact directly any such accountants, accounting firm and/or service bureau or consultant in order to obtain such information. 

        THE
UNDERSIGNED AND THE BANK ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY IS A CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED. EACH PARTY, AFTER CONSULTING (OR HAVING HAD THE OPPORTUNITY
TO CONSULT) WITH COUNSEL OF THEIR CHOICE, KNOWINGLY AND VOLUNTARILY, AND FOR THEIR MUTUAL BENEFIT, WAIVES ANY RIGHT TO TRIAL BY JURY IN THE EVENT OF LITIGATION REGARDING THE PERFORMANCE OR ENFORCEMENT
OF, OR IN ANY WAY RELATED TO, THIS AGREEMENT OR THE INDEBTEDNESS. 

        In
the event that Bank elects to waive any rights or remedies hereunder, or compliance with any of the terms hereof, or delays or fails to pursue or enforce any term, such waiver, delay
or failure to pursue or enforce shall only be effective with respect to that single act and shall not be construed to affect any subsequent transactions or Bank's right to later pursue such rights and
remedies. 

        ONE CONTINUING LOAN TRANSACTION.    All loans and advances heretofore, now or at any time or times hereafter made by Bank to
Borrower under this Agreement or any other agreement between Bank and Borrower, shall constitute one loan secured by Bank's security interests in the Collateral and by all other security interests,
liens, encumbrances heretofore, now or from time to time hereafter granted by Borrower to Bank. 

        Notwithstanding
the above, (i) to the extent that any portion of the Indebtedness is a consumer loan, that portion shall not be secured by any deed of trust or mortgage on or other
security interest in Borrower's principal dwelling which is not a purchase money security interest as to that portion, unless expressly provided to the contrary in another place, or (ii) if
Borrower (or any of them) has (have) given or give(s) Bank a deed of trust or mortgage covering real property, that deed of trust or mortgage shall not secure the loan and any other Indebtedness of
Borrower (or any of them), unless expressly provided to the contrary in another place. 

24

 

        NOTICES.    Unless otherwise provided in this Agreement, all notices or demands by either party on the other relating to this
Agreement shall be in writing and sent by regular United States mail, postage prepaid, properly addressed to Borrower or to Bank at the addresses stated in this Agreement, or to such other addresses
as Borrower or Bank may from time to time specify to the other in writing. Requests to Borrower by Bank hereunder may be made orally. 

        AUTHORIZATION TO DISBURSE.    Bank is hereby authorized to make loans and advances hereunder upon telephonic or other
instructions received from anyone purporting to be an officer, employee, or
representative of Borrower, or at the discretion of Bank if said loans and advances are necessary to meet any Indebtedness of Borrower to Bank. Bank shall have no duty to make inquiry or verify the
authority of any such party, and Borrower shall hold Bank harmless from any damage, claims or liability by reason of Bank's honor of, or failure to honor, any such instructions. 

        PAYMENTS.    Borrower hereby authorizes Bank to deduct the full amount of any interest, fees, costs, or Bank Expenses due under
this Agreement and not paid or collected when due in accordance with the terms and conditions hereof from any account maintained by Borrower with Bank. Should there be insufficient funds in any such
account to pay all such sums when due, the full amount of such deficiency shall be immediately due and payable by Borrower; provided,  however, that Bank
shall not be obligated to advance funds to cover any such payment. 

        DESTRUCTION OF BORROWER'S DOCUMENTS.    Any documents, schedules, invoices or other papers delivered to Bank, may be destroyed
or otherwise disposed of by Bank six (6) months after they are delivered to or received by Bank, unless Borrower requests, in writing, the return of the said documents, schedules, invoices or other
papers and makes arrangements, at Borrower's expense, for their return. 

        CHOICE OF LAW.    The validity of this Agreement, its construction, interpretation and enforcement, and the rights of the
parties hereunder and concerning the Collateral, shall be determined according to the laws of the State of California. The parties agree that all actions or proceedings arising in connection with this
Agreement shall be tried and litigated only in the state and federal courts in the Northern District of California or the County of Santa Clara. 

GENERAL PROVISIONS.  

        This Agreement shall be binding and deemed effective when executed by Borrower and accepted and executed by Bank at its headquarters office. 

        This
Agreement shall bind and inure to the benefit of the respective successors and assigns of each of the parties; provided,  however, that Borrower may not
assign this Agreement or any rights hereunder without Bank's prior written consent and any prohibited assignment shall be
absolutely void. No consent to an assignment by Bank shall release Borrower or any guarantor from their obligations to Bank. Bank may assign this Agreement and its rights and duties hereunder. Bank
reserves the right to sell, assign, transfer, negotiate or grant participations in all or any part of, or any interest in Bank's rights and benefits hereunder. In connection therewith, Bank may
disclose all documents and information which Bank now or hereafter may have relating to Borrower or Borrower's business. 

        Paragraph
headings and paragraph numbers have been set forth herein for convenience only; unless the contrary is compelled by the context, everything contained in each paragraph applies
equally to this
entire Agreement. Unless the context of this Agreement clearly requires otherwise, references to the plural include the singular, references to the singular include the plural, and the term
"including" is not limiting. The words "hereof," "herein," "hereby," "hereunder," and similar terms in this Agreement refer to this Agreement as a whole and not to any particular provision of this
Agreement. 

25

 

        Neither
this Agreement nor any uncertainty or ambiguity herein shall be construed or resolved against Bank or Borrower, whether under any rule of construction or otherwise; on the
contrary, this Agreement has been reviewed by all parties and shall be construed and interpreted according to the ordinary meaning of the words used so as to fairly accomplish the purposes and
intentions of all parties hereto. 

        Each
provision of this Agreement shall be severable from every other provision of this Agreement for the purpose of determining the legal enforceability of any specific provision. 

        This
Agreement cannot be changed or terminated orally. This Agreement contains the entire agreement of the parties hereto and supersedes all prior agreements, understandings,
representations, warranties and negotiations, if any, related to the subject matter hereof, and none of the parties shall be bound by anything not expressed in writing. 

        The
parties intend and agree that their respective rights, duties, powers, liabilities, obligations and discretions shall be performed, carried out, discharged and exercised reasonably
and in good faith. 

        In
addition, if this Agreement is secured by a deed of trust or mortgage covering real property, then the trustor or mortgagor shall not mortgage or pledge the mortgaged premises as
security for any other indebtedness or obligations. This Agreement, together with all other indebtedness secured by said deed of trust or mortgage, shall become due and payable immediately, without
notice, at the option of Bank, (a) if said trustor or mortgagor shall mortgage or pledge the mortgaged premises for any other indebtedness or obligations or shall convey, assign or transfer the
mortgaged premises by deed, installment sale contract or other instrument; (b) if the title to the mortgaged premises shall become vested in any other person or party in any manner whatsoever, or (c)
if there is any disposition (through one or more transactions) of legal or beneficial title to a controlling interest of said trustor or mortgagor. 

        Each
undersigned Borrower hereby agrees that it is jointly and severally, directly, and primarily liable to Bank for payment and performance in full of all duties, obligations and
liabilities under this Agreement and each other document, instrument and agreement entered into by Borrower with or in favor of Bank in connection herewith, and that such liability is independent of
the duties, obligations and liabilities of any other Borrower or any other guarantor of the Indebtedness, as applicable. Each
reference herein to Borrower shall mean each and every Borrower party hereto, individually and collectively, jointly and severally. 

        IN
WITNESS WHEREOF, the parties hereto have caused this Loan and Security Agreement (Accounts and Inventory) to be executed as of the date first hereinabove written. 

	 	 	 	 	 	 	BORROWER:

FIBERSTARS, INC.,
	Accepted and effective as of:	 	 	 	a California corporation
	 	 	 	
	 	 	 	 
	at Bank's Headquarters Office	 	 	 	 	 
	 	 	 	 	 	 	By:	 	 
	 	 	 	 	 	 	 	 	

	COMERICA BANK-CALIFORNIA,	 	Name:	 	 
	a California banking corporation	 	 	 	

	 	 	 	 	 	 	Title:	 	 
	 	 	 	 	 	 	 	 	

	

By:	
 	

 	

 	

 	
 	

By:	
 	

 
	 	 	
	 	 	 	 	

	Name:	 	 	 	 	 	Name:	 	 
	 	 	
	 	 	 	 	

	Title:	 	 	 	 	 	Title:	 	 
	 	 	
	 	 	 	 	

26

  

	Address for Notices:	 	Address for Notices:
	

75 East Trimble Road

San Jose, California 95131

Attn: Credit Manager

Fax number: (408) 556-5097	
 	

44259 Nobel Drive

Fremont, California 94538

Attn: Robert A. Connors

Fax number: (510) 490-3247
	

With a copy to:	
 	

 
	

333 West Santa Clara Street

5th Floor

San Jose, California, 95113

Attn: Beau L. Barnes

Fax number:(408) 556-5224.	
 	

 

	

 	 	 	 	AMENDED AND RESTATED

INVENTORY RIDER

(REVOLVING ADVANCE)

Borrower(s):        FIBERSTARS,
INC. 

        Borrower
has entered into that certain Loan and Security Agreement (Accounts and Inventory) (the "Agreement") dated December 7, 2001 with Bank (Secured Party). This INVENTORY
RIDER (hereinafter referred to as this Rider) dated December 7, 2001 is hereby made a part of and incorporated into that Agreement. Unless otherwise defined, all initially capitalized terms in
this Rider shall be as defined in the Agreement. 

        1.    At
the request of Borrower, made at any time and from time to time during the term of the Agreement, and so long as no event of default under the Agreement has occurred
and Borrower is in full, faithful and timely compliance with each and all of the covenants, conditions, warranties and representations contained in the Agreement, this Rider and/or any other agreement
between Bank and Borrower, subject to Borrower's concurrent execution and delivery to Bank of a Designation of Inventory, or Certification of Borrowing Base, in form customarily used by Bank, Bank
agrees to make loans to Borrower secured by Borrower's Inventory up to a maximum advance outstanding at any one time not to exceed the lesser of Two Million and Two Hundred Fifty Thousand and no/100
Dollars ($2,250,000.00) and the Inventory Borrowing Base. For the purposes hereof, the "Inventory Borrowing Base," as of any date of determination shall mean: 

        (a)  Prior
to Borrower's successful achievement of two (2) consecutive quarters in which Borrower shall report a net profit after tax, as determined in accordance with GAAP,
of not less than One Dollar ($1), and provided that no Event of Default shall have occurred or be continuing during each such quarter, twenty five percent (25%) of the lower of cost or market value of
Borrower's raw materials and finished goods inventory, as may be adjusted by Bank, in Bank's discretion, for age and seasonality or other factors affecting the value of such Inventory; and 

        (b)  Upon
Borrower's successful achievement of two (2) consecutive quarters in which Borrower shall report a net operating profit, as determined in accordance with GAAP, of
not less than One Dollar ($1), and provided that no Event of Default shall have occurred or be continuing during each such quarter, then the lesser of (i) forty percent (40%) of the lower of cost or
market value of Borrower's raw materials and finished goods inventory, as may be adjusted by Bank, in Bank's discretion, for age and seasonality or other factors affecting the value of such Inventory;
or (ii) such lesser percentage of Borrower's adjusted raw materials and finished goods Inventory as shall be determined by Bank in its sole and reasonable discretion on the basis of a review of the
results of Bank's audit of Borrower's Books relating to the Collateral, including without limit the Inventory. 

27

 

        The
Inventory Borrowing Base shall not include, and Bank shall have no obligation to make any loans secured by, any inventory consisting of work-in process. All advances made and to be
made pursuant to this Rider are solely and exclusively to enable Borrower to acquire rights in and purchase new Inventory, and Borrower represents and warrants that all advances by Bank pursuant to
this Rider will
be used solely and exclusively for such purpose; and since such advances will be used for the foregoing purposes, Bank's security Interest in Borrower's Inventory is and shall be at all times a
purchase money security interest as that term is described in Section 9103 of the California Uniform Commercial Code. 

        2.    Advances
made by Bank to Borrower pursuant to this Rider shall be included as part of the Indebtedness of Borrower to Bank; and at Bank's option, advances pursuant to
this Rider may be evidenced by promissory note(s), in form and on terms satisfactory to Bank. All such advances shall bear interest at the rate and be payable in the manner specified in said
promissory note(s) in the event Bank exercises the aforementioned option and in the event Bank does not, such advances shall bear interest at the rate and be payable in the manner specified in the
Agreement. 

        3.    All
of the terms, covenants, warranties, conditions, agreements and representations of the Agreement are incorporated herein as though set forth in their entirety and are
hereby reaffirmed by Borrower and Bank as though fully set forth herein. 

BORROWER(S):
FIBERSTARS, INC. 

	
	 	

	By:	 	 	 	By:	 	 
	

	
 	

	By:	 	 	 	By:	 	 

Accepted
this          day of                              at
Bank's place of business in San Jose, CA 95113. 

	 	 	 	 	

	 	 	 	 	By:	 	 

28

 
 

Schedule 6.5    
    
    Collateral Locations    
  

	Address
	 	Owner of Location
	 	Brief Description of Assets

	44259 Nobel Dr.

Fremont, CA 94538	 	Catellus	 	Corporate HQ Office, factory Leasehold improvements Furniture & Fixtures
	

309 S. Cloverdate St., Ste. D-2

Seattle, WA 98108	
 	

Mara Gateway Assoc.	
 	

Office, assembly Leasehold improvements Furniture & Fixtures
	

3200 Aurora Road

Solon, OH 44139	
 	

Venture Lighting	
 	

Office, Lab, Assembly Leasehold improvements Furniture & Fixtures
	

Rivermead Industrial Estate

Unit 8, Pipers Lane

Thatcham, Berkshire RG194EP	
 	

Lyncolm Holding, PLC	
 	

Office, warehouse Leasehold improvements Furniture & Fixtures
	

Gewerbegebeit Pollanten

Gutenbergstrasse 5

92334 Berching, Germany	
 	

LBM	
 	

Office, Assembly, Leasehold improvements Furniture & Fixtures

QuickLinks

EXHIBIT 10.38

Schedule 6.5 Collateral Locations<Page>

    CONFIDENTIAL TREATMENT REQUESTED                    EXHIBIT 10.41

                  FIRST AMENDMENT TO NETWORK SERVICES AGREEMENT

       THIS FIRST AMENDMENT to the Network Services Agreement (the "AMENDMENT"),
effective as of January 8, 2002 (the "AMENDMENT EFFECTIVE DATE") is made by and
between America Online, Inc., a Delaware corporation with offices at 22000 AOL
Way, Dulles, Virginia 20166 ("AOL"), and Genuity Solutions Inc. (formerly, BBN
Corporation), a Massachusetts corporation with offices at 225 Presidential Way,
Woburn, Massachusetts 01801 ("GENUITY").

RECITALS

       WHEREAS, AOL and BBN Corporation entered into that certain Network
Services Agreement, effective as of December 31, 1999 (the "AGREEMENT");

       WHEREAS, on May 19, 2000, BBN Corporation changed its name to Genuity
Solutions Inc.;

       WHEREAS, pursuant to the terms of the Agreement, as amended hereby, AOL
agrees to purchase and Genuity agrees to provide those certain Dial-Up Access
Services through December 31, 2006, those certain Other Services through
December 31, 2005 and those certain Broadband Backhaul Services for DSL through
December 31, 2004; and

       WHEREAS, AOL and Genuity both desire to modify certain terms of the
Agreement, as provided herein.

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

TERMS

1.     DEFINED TERMS. Capitalized terms used but not otherwise defined herein
       shall have the meanings given thereto in the Agreement. Defined terms in
       this Amendment shall be deemed incorporated into the Agreement.

2.     RELEASE OF OBLIGATIONS.

       2.1. INTERNATIONAL PURCHASE COMMITMENT. Genuity hereby releases AOL from
            any and all of its obligations under Section 2.8(c) of Schedule B of
            the Agreement (such obligations, collectively, the "RELEASED
            INTERNATIONAL PURCHASE COMMITMENT"). Section 2.8(c) of Schedule B of
            the Agreement is hereby deleted in its entirety.

       2.2. DIAL-UP PURCHASE COMMITMENT. Genuity hereby releases AOL from any
            and all of its obligations with respect to Sections 2(c) and 2(d) of
            Exhibit B-1 of the Agreement (such obligations, collectively, the
            "RELEASED DIAL-UP PURCHASE COMMITMENT"). The parties hereby
            acknowledge and agree that AOL has satisfied all of its obligations
            with respect to the Dial-Up Purchase Commitment under Sections 2(a)
            and 2(b) of Exhibit B-1 of the Agreement and shall have no further
            obligations thereunder.

       2.3. OTHER BROADBAND PURCHASE COMMITMENT. Genuity hereby releases AOL
            from any and all of its obligations under Section 2.2 of Exhibit C-1
            of the Agreement (such obligations, collectively, the "RELEASED
            OTHER BROADBAND PURCHASE COMMITMENT"). Section 2.2 of Exhibit C-1 of
            the Agreement is hereby deleted in its entirety. Notwithstanding
            anything to the contrary in the Agreement, Genuity shall have no
            obligation to offer or provide to AOL Broadband Backhaul Services;
            PROVIDED, HOWEVER, that Genuity shall continue to provide Broadband
            Backhaul Services for DSL in accordance with Schedule C of the
            Agreement. In the event that Genuity agrees to provide to AOL
            Broadband Backhaul Services other than for DSL (I.E., Broadband
            Backhaul Services for broadband traffic received from cable
            networks, wireless networks, satellite networks, or other
            technologies excluding DSL traffic originating from the public
            switched telephone network) (the

                                       1

<Page>

    CONFIDENTIAL TREATMENT REQUESTED                    EXHIBIT 10.41

            "OTHER BROADBAND SERVICES") from time to time under the Agreement,
            the parties agree that the pricing set forth in Exhibit C-2 of the
            Agreement shall not apply, and that the pricing for such Other
            Broadband Services shall be as mutually agreed in writing by Genuity
            and AOL on a case-by-case basis PROVIDED, HOWEVER, that the pricing
            set forth in Exhibit C-2 shall still apply to the provision of
            Broadband Backhaul Services for DSL.

3.     AMENDED DIAL-UP PURCHASE COMMITMENT. In lieu of AOL's prior obligations
       with respect to Sections 2(c) and 2(d) of Exhibit B-1 of the Agreement,
       AOL commits to maintain a minimum of [*MATERIAL OMITTED AND SEPARATELY
       FILED PURSUANT TO AN APPLICATION FOR CONFIDENTIAL TREATMENT] Dedicated
       Dial-Up Access Ports commencing on the Amendment Effective Date and
       continuing through [*MATERIAL OMITTED AND SEPARATELY FILED PURSUANT TO AN
       APPLICATION FOR CONFIDENTIAL TREATMENT] ("INITIAL COMMITMENT") and a
       minimum of [*MATERIAL OMITTED AND SEPARATELY FILED PURSUANT TO AN
       APPLICATION FOR CONFIDENTIAL TREATMENT] Dedicated Dial-Up Access Ports
       commencing [*MATERIAL OMITTED AND SEPARATELY FILED PURSUANT TO AN
       APPLICATION FOR CONFIDENTIAL TREATMENT] and continuing through the
       remainder of the Term ("REDUCED COMMITMENT") (such commitments shall be
       collectively referred to as the "AMENDED DIAL-UP PURCHASE COMMITMENT");
       provided that AOL's rights to decommission Dedicated Dial-Up Access Ports
       are subject to Section 8.2 of Schedule B of the Agreement, as amended
       hereby. For the avoidance of doubt, the parties acknowledge and agree
       that as of the Amendment Effective Date, Genuity is providing [*MATERIAL
       OMITTED AND SEPARATELY FILED PURSUANT TO AN APPLICATION FOR CONFIDENTIAL
       TREATMENT] Dedicated Dial-Up Access Ports as further described in
       Attachment A to this Amendment. The term "Amended Dial-Up Purchase
       Commitment" shall be substituted in lieu of the term "Dial-Up Purchase
       Commitment" throughout the Agreement, effective from and after the
       Amendment Effective Date.

4.     DECOMMISSIONING. Section 8.2 of Schedule B of the Agreement is hereby
       deleted and replaced in its entirety with the following:

       "8.2. DECOMMISSIONING OF DEDICATED DIAL-UP ACCESS PORTS.

            (a)    REDUCTION OF OTHER VENDORS' DECOM SHARE. Beginning [*MATERIAL
                   OMITTED AND SEPARATELY FILED PURSUANT TO AN APPLICATION FOR
                   CONFIDENTIAL TREATMENT], Customer may decommission Dedicated
                   Dial-Up Access Ports that contribute to the satisfaction of
                   the Amended Dial-Up Purchase Commitment (that is, Customer
                   may (1) decommission any ports included in the Initial
                   Commitment (I.E., [*MATERIAL OMITTED AND SEPARATELY FILED
                   PURSUANT TO AN APPLICATION FOR CONFIDENTIAL TREATMENT]
                   Dedicated Dial-Up Access Ports); and (2) decommission any
                   number of ports that would cause the total number of ports to
                   fall below the Reduced Commitment (I.E., [*MATERIAL OMITTED
                   AND SEPARATELY FILED PURSUANT TO AN APPLICATION FOR
                   CONFIDENTIAL TREATMENT] Dedicated Dial-Up Access Ports),
                   without liability, subject to the following:

                   (i)    Customer will provide one hundred twenty (120) days
                          prior written notice of the calling areas in which
                          Dedicated Dial-Up Access Ports are to be
                          decommissioned, as well as the associated quantities
                          of Dedicated Dial-Up Access Ports to be decommissioned
                          in each such area (E.G., Customer may decommission
                          ports on [*MATERIAL OMITTED AND SEPARATELY FILED
                          PURSUANT TO AN APPLICATION FOR CONFIDENTIAL TREATMENT]
                          pursuant to this Section 8.2(a) as long as Customer
                          provides Vendor notice 120 days prior to such date);

                   (ii)   the Vendor Decom Share for a calendar quarter shall
                          not (in the cumulative and not more than a de minimis
                          amount) exceed the Other Vendors' Decom Share for such
                          quarter;

                   (iii)  the decommissioning of Dedicated Dial-Up Access Ports
                          pursuant to this Section 8.2(a) shall not materially
                          change Customer's proportional distribution of
                          Dedicated Dial-Up Access Ports across Existing Calling
                          Areas; and

                   (iv)   if the decommissioning of Dedicated Dial-Up Access
                          Ports pursuant to this Section 8.2(a) causes the
                          aggregate number of Dial-Up Access Ports to fall below
                          [*MATERIAL OMITTED AND SEPARATELY FILED PURSUANT TO AN
                          APPLICATION FOR CONFIDENTIAL TREATMENT]

                                       2

<Page>

    CONFIDENTIAL TREATMENT REQUESTED                    EXHIBIT 10.41

                          percent ([*MATERIAL OMITTED AND SEPARATELY FILED
                          PURSUANT TO AN APPLICATION FOR CONFIDENTIAL TREATMENT]
                          %) of the number of Dedicated Dial-Up Access Ports
                          comprising the Initial Commitment (I.E., fewer than
                          [*MATERIAL OMITTED AND SEPARATELY FILED PURSUANT TO AN
                          APPLICATION FOR CONFIDENTIAL TREATMENT] Dedicated
                          Dial-Up Access Ports), then Vendor may, upon six (6)
                          months' prior notice to Customer, terminate this
                          Schedule B. Commencing upon such termination, Vendor
                          shall provide Transition Assistance pursuant to
                          Section 13.4 of the Master Agreement.

            (b)    RAMP DOWN FROM INITIAL COMMITMENT TO REDUCED COMMITMENT.
                   Notwithstanding Section 8.2(a) of this Schedule B, beginning
                   [*MATERIAL OMITTED AND SEPARATELY FILED PURSUANT TO AN
                   APPLICATION FOR CONFIDENTIAL TREATMENT], Customer may
                   decommission Dedicated Dial-Up Access Ports in excess of the
                   Reduced Commitment (I.E., [*MATERIAL OMITTED AND SEPARATELY
                   FILED PURSUANT TO AN APPLICATION FOR CONFIDENTIAL TREATMENT]
                   Dedicated Dial-Up Access Ports), without liability, subject
                   to the following:

                   (i)    Customer will provide one hundred twenty (120) days
                          prior written notice of the calling areas in which
                          Dedicated Dial-Up Access Ports are to be
                          decommissioned, as well as the associated quantities
                          of Dedicated Dial-Up Access Ports to be decommissioned
                          in each such area (E.G., Customer may decommission
                          ports on [*MATERIAL OMITTED AND SEPARATELY FILED
                          PURSUANT TO AN APPLICATION FOR CONFIDENTIAL TREATMENT]
                          pursuant to this Section 8.2(b) as long as Customer
                          provides Vendor notice 120 days prior to such date);

                   (ii)   Customer will not decommission more than [*MATERIAL
                          OMITTED AND SEPARATELY FILED PURSUANT TO AN
                          APPLICATION FOR CONFIDENTIAL TREATMENT] Dedicated
                          Dial-Up Access Ports per calendar month; and

                   (iii)  the decommissioning of Dedicated Dial-Up Access Ports
                          pursuant to this Section 8.2(b) shall not materially
                          change Customer's proportional distribution of
                          Dedicated Dial-Up Access Ports across Existing Calling
                          Areas;

                   PROVIDED, HOWEVER, that AOL and Genuity agree to meet in
                   [*MATERIAL OMITTED AND SEPARATELY FILED PURSUANT TO AN
                   APPLICATION FOR CONFIDENTIAL TREATMENT] to begin discussing
                   and negotiating in good faith a plan for implementing the
                   decommissioning, if any.

            (c)    REDUCTION OF DEDICATED DIAL-UP ACCESS PORTS IN EXCESS OF
                   AMENDED DIAL-UP PURCHASE COMMITMENT. Notwithstanding Sections
                   8.2(a) and 8.2(b) of this Schedule B, Customer may
                   decommission any Dedicated Dial-Up Access Ports ordered in
                   excess of those necessary to satisfy the Amended Dial-Up
                   Purchase Commitment, without liability subject to the
                   following:

                   (i)    Customer will provide one hundred twenty (120) days
                          prior written notice of the calling areas in which
                          Dedicated Dial-Up Access Ports are to be
                          decommissioned, as well as the associated quantities
                          of Dedicated Dial-Up Access Ports to be decommissioned
                          in each such area;

                   (ii)   Customer may decommission Dedicated Dial-Up Access
                          Ports pursuant this Section 8.2(c) only to the extent
                          that the first day of the month in which Final
                          Acceptance occurred for such ports is at least twelve
                          (12) months prior to the decommissioning date
                          requested by Customer pursuant to this Subsection (c);

                   (iii)  Customer will not decommission more than [*MATERIAL
                          OMITTED AND SEPARATELY FILED PURSUANT TO AN
                          APPLICATION FOR CONFIDENTIAL TREATMENT] Dedicated
                          Dial-Up Access Ports per calendar month; and

                                       3

<Page>

    CONFIDENTIAL TREATMENT REQUESTED                    EXHIBIT 10.41

                   (iv)   the decommissioning of Dedicated Dial-Up Access Ports
                          pursuant to this Section 8.2(c) shall not materially
                          change Customer's proportional distribution of
                          Dedicated Dial-Up Access Ports across Existing Calling
                          Areas.

            (d)    Customer shall not be responsible for any charges for a
                   Dedicated Dial-Up Access Port to the extent such charges
                   correspond to the time after the requested decommissioning
                   date of which Customer provides Vendor with notification
                   pursuant to this Schedule B."

5.     AMENDED OTHER SERVICES PURCHASE COMMITMENT. Schedule D of the Agreement
       is hereby deleted and replaced in its entirety with the following:

       "1.  AMENDED OTHER SERVICES PURCHASE COMMITMENT. During the period
            beginning on the Amendment Effective Date and ending on December 31,
            2005 ("OTHER SERVICES TERM"), Customer or a Customer Affiliate
            agrees to order from Vendor services (excluding Dial-Up Access
            Services, Broadband Backhaul Services for DSL and Dial-Up Access
            Services provided outside of the United States) (such services to be
            ordered the "OTHER SERVICES") such that the aggregate charges paid
            to Vendor and Vendor's Affiliates for such Other Services are equal
            to or greater [*MATERIAL OMITTED AND SEPARATELY FILED PURSUANT TO AN
            APPLICATION FOR CONFIDENTIAL TREATMENT] (subject to the provisions
            of this Section 1 and as set forth in Section 2 below) (such
            commitment the "AMENDED OTHER SERVICES PURCHASE COMMITMENT");
            PROVIDED, HOWEVER, that the Amended Other Services Purchase
            Commitment shall be subject to the following:

            (a)    AVAILABILITY OF SERVICES AND QUARTERLY UPDATES. Vendor hereby
                   agrees that (i) the Other Services set forth in Exhibits D-1
                   and D-2 attached hereto (as may be amended by Vendor from
                   time to time) shall be available for ordering by Customer and
                   any Customer Affiliate during the Other Services Term, (ii)
                   during the first calendar month of each calendar quarter
                   during the Other Services Term, Vendor shall provide to
                   Customer an updated list of Other Services available for
                   ordering by Customer and any Customer Affiliate during the
                   Other Services Term ("QUARTERLY SERVICES UPDATE"); and (iii)
                   any Other Service which Vendor offers or provides, or is able
                   to offer or provide, on or after the Amendment Effective Date
                   shall be available for ordering by Customer and any Customer
                   Affiliate during the Other Services Term; PROVIDED, HOWEVER,
                   that subject to Section 1(b) below, nothing herein shall
                   prevent Vendor from discontinuing the offering of any of the
                   Other Services set forth in Exhibits D-1 and D-2 or in any
                   Quarterly Services Update.

            (b)    DISCONTINUANCE OF PRIMARY SERVICES. In the event that Vendor
                   discontinues, during the Other Services Term, offering any of
                   the Primary Services (as defined below), then such
                   discontinued Primary Service shall still be deemed to be an
                   Available Service (as defined below), and to the extent
                   Customer or any Customer Affiliate subsequently orders Third
                   Party Replacement Services (as defined below) from a third
                   party vendor any time during the Other Services Term, then
                   upon the provision of notice to Vendor (and to Vendor's
                   designated Account Manager) in accordance with Section 16.4
                   of the Master Agreement:

                   (i)    The Amended Other Services Purchase Commitment shall
                          be [*MATERIAL OMITTED AND SEPARATELY FILED PURSUANT TO
                          AN APPLICATION FOR CONFIDENTIAL TREATMENT] as of the
                          date on which Customer places a firm order for Third
                          Party Replacement Services, [*MATERIAL OMITTED AND
                          SEPARATELY FILED PURSUANT TO AN APPLICATION FOR
                          CONFIDENTIAL TREATMENT] PROVIDED, HOWEVER, that (A)
                          the [*MATERIAL OMITTED AND SEPARATELY FILED PURSUANT
                          TO AN APPLICATION FOR CONFIDENTIAL TREATMENT] in the
                          Amended Other Services Purchase Commitment shall be
                          verified (and adjusted, as necessary) as of the end of
                          each Biannual Period immediately following the
                          Biannual Period in which a firm order is placed by
                          Customer or a Customer Affiliate for the applicable
                          Third Party Replacement Services (or sooner to the
                          extent provided for in Section 2(c)(i) below); and (B)
                          [*MATERIAL OMITTED AND SEPARATELY FILED PURSUANT TO AN
                          APPLICATION FOR CONFIDENTIAL TREATMENT] shall be equal
                          to [*MATERIAL OMITTED AND SEPARATELY FILED PURSUANT TO
                          AN APPLICATION FOR CONFIDENTIAL TREATMENT] and for
                          which (1) Customer has been [*MATERIAL OMITTED AND
                          SEPARATELY FILED PURSUANT TO AN

                                       4

<Page>

    CONFIDENTIAL TREATMENT REQUESTED                    EXHIBIT 10.41

                          APPLICATION FOR CONFIDENTIAL TREATMENT] or (2) in the
                          case of leased services, Customer has, at a minimum,
                          received its [*MATERIAL OMITTED AND SEPARATELY FILED
                          PURSUANT TO AN APPLICATION FOR CONFIDENTIAL TREATMENT]
                          as certified by an officer of Customer (Vice President
                          level or higher), with such certification to be
                          accompanied by [*MATERIAL OMITTED AND SEPARATELY FILED
                          PURSUANT TO AN APPLICATION FOR CONFIDENTIAL TREATMENT]
                          to allow Vendor to calculate and ascertain the
                          [*MATERIAL OMITTED AND SEPARATELY FILED PURSUANT TO AN
                          APPLICATION FOR CONFIDENTIAL TREATMENT] provided that
                          [*MATERIAL OMITTED AND SEPARATELY FILED PURSUANT TO AN
                          APPLICATION FOR CONFIDENTIAL TREATMENT] as appropriate
                          in Customer's sole discretion. In the event Customer
                          has recurring payment obligations for Third Party
                          Replacement Services provided on a recurring basis
                          (E.G., leased services), [*MATERIAL OMITTED AND
                          SEPARATELY FILED PURSUANT TO AN APPLICATION FOR
                          CONFIDENTIAL TREATMENT] shall contribute to [*MATERIAL
                          OMITTED AND SEPARATELY FILED PURSUANT TO AN
                          APPLICATION FOR CONFIDENTIAL TREATMENT] the Amended
                          Other Services Purchase Commitment for the Biannual
                          Period [*MATERIAL OMITTED AND SEPARATELY FILED
                          PURSUANT TO AN APPLICATION FOR CONFIDENTIAL TREATMENT]
                          even if Customer [*MATERIAL OMITTED AND SEPARATELY
                          FILED PURSUANT TO AN APPLICATION FOR CONFIDENTIAL
                          TREATMENT] beyond the period [*MATERIAL OMITTED AND
                          SEPARATELY FILED PURSUANT TO AN APPLICATION FOR
                          CONFIDENTIAL TREATMENT] the end of the Biannual Period
                          in which such Third Party Replacement Services are
                          ordered.

                   (ii)   No [*MATERIAL OMITTED AND SEPARATELY FILED PURSUANT TO
                          AN APPLICATION FOR CONFIDENTIAL TREATMENT] the Amended
                          Other Services Purchase Commitment shall be made with
                          respect to any of the Primary Services that are
                          [*MATERIAL OMITTED AND SEPARATELY FILED PURSUANT TO AN
                          APPLICATION FOR CONFIDENTIAL TREATMENT] which are
                          discontinued by Vendor or a Vendor Affiliate because
                          the provision of such [*MATERIAL OMITTED AND
                          SEPARATELY FILED PURSUANT TO AN APPLICATION FOR
                          CONFIDENTIAL TREATMENT] causes Vendor or a Vendor
                          Affiliate to be subject to [*MATERIAL OMITTED AND
                          SEPARATELY FILED PURSUANT TO AN APPLICATION FOR
                          CONFIDENTIAL TREATMENT] as a provider of [*MATERIAL
                          OMITTED AND SEPARATELY FILED PURSUANT TO AN
                          APPLICATION FOR CONFIDENTIAL TREATMENT] if such Vendor
                          or Vendor Affiliate is not otherwise subject to such
                          [*MATERIAL OMITTED AND SEPARATELY FILED PURSUANT TO AN
                          APPLICATION FOR CONFIDENTIAL TREATMENT].

                   (iii)  The parties agree that for purposes of this Section
                          1(b), notice may be provided by email under Section
                          16.4 of the Master Agreement and shall be deemed duly
                          received upon receipt.

            (c)    FULFILLMENT OF AMENDED OTHER SERVICES PURCHASE COMMITMENT. To
                   fulfill its Amended Other Services Purchase Commitment,
                   Customer or a Customer Affiliate may request the provision by
                   Vendor of an Available Service (that is Other Services (x)
                   set forth in Exhibits D-1 and D-2 attached hereto (for
                   example, purchases by [*MATERIAL OMITTED AND SEPARATELY FILED
                   PURSUANT TO AN APPLICATION FOR CONFIDENTIAL TREATMENT] of
                   [*MATERIAL OMITTED AND SEPARATELY FILED PURSUANT TO AN
                   APPLICATION FOR CONFIDENTIAL TREATMENT] shall contribute to
                   the Amended Other Services Commitment, provided [*MATERIAL
                   OMITTED AND SEPARATELY FILED PURSUANT TO AN APPLICATION FOR
                   CONFIDENTIAL TREATMENT] is a then-current Customer
                   Affiliate), (y) set forth in any Quarterly Services Update,
                   or (z) which Vendor offers or provides, or is able to offer
                   or provide, on or after the Amendment Effective Date (for
                   example, purchases by [*MATERIAL OMITTED AND SEPARATELY FILED
                   PURSUANT TO AN APPLICATION FOR CONFIDENTIAL TREATMENT] for
                   any service which Vendor offers or provides or is able to
                   offer or provide Services shall contribute to the Amended
                   Other Services Commitment, provided [*MATERIAL OMITTED AND
                   SEPARATELY FILED PURSUANT TO AN APPLICATION FOR CONFIDENTIAL
                   TREATMENT] is a then-current Customer Affiliate); PROVIDED,
                   HOWEVER, that if any of the Other Services set forth in
                   Exhibits D-1 or D-2 or in any Quarterly Update contain (i) a
                   [*MATERIAL OMITTED

                                       5

<Page>

    CONFIDENTIAL TREATMENT REQUESTED                    EXHIBIT 10.41

                   AND SEPARATELY FILED PURSUANT TO AN APPLICATION FOR
                   CONFIDENTIAL TREATMENT] or (ii) a [*MATERIAL OMITTED AND
                   SEPARATELY FILED PURSUANT TO AN APPLICATION FOR CONFIDENTIAL
                   TREATMENT] shall be available as an offering to Customer,
                   then Customer may only request such Other Services in such
                   [*MATERIAL OMITTED AND SEPARATELY FILED PURSUANT TO AN
                   APPLICATION FOR CONFIDENTIAL TREATMENT] or[*MATERIAL OMITTED
                   AND SEPARATELY FILED PURSUANT TO AN APPLICATION FOR
                   CONFIDENTIAL TREATMENT] such [*MATERIAL OMITTED AND
                   SEPARATELY FILED PURSUANT TO AN APPLICATION FOR CONFIDENTIAL
                   TREATMENT] (subject to the terms and conditions contained in
                   Exhibits D-1 and D-2 and in any Quarterly Services Update).
                   In the event no specific city for certain Other Services is
                   listed in Exhibits D-1 or D-2 or in any Quarterly Services
                   Update, Vendor will offer such services only [*MATERIAL
                   OMITTED AND SEPARATELY FILED PURSUANT TO AN APPLICATION FOR
                   CONFIDENTIAL TREATMENT] unless otherwise specified. In the
                   event no specific [*MATERIAL OMITTED AND SEPARATELY FILED
                   PURSUANT TO AN APPLICATION FOR CONFIDENTIAL TREATMENT] for
                   certain Other Services is listed in Exhibits D-1 or D-2 or in
                   any Quarterly Services Update, Vendor will offer such
                   services as of the Amendment Effective Date (for Other
                   Services listed on Exhibits D-1 and D-2) and as of the date
                   of the Quarterly Services Update (for Other Services offered
                   by Vendor after the Amendment Effective Date). For avoidance
                   of doubt, Customer may request end-to-end Services to and
                   from specific geographic locations (such as, by way of
                   example, to and from certain POPs or colocation facilities)
                   which are not listed on Exhibit D-2 and such Services shall
                   contribute to Customer's Amended Other Services Purchase
                   Commitment, provided such Services are offered by Vendor in
                   the specific city in which the POP or colocation facility is
                   located.

            (d)    PROCESS FOR REQUESTING SERVICES; MARKET COMPETITIVE PRICING
                   FOR PRIMARY SERVICES. At any time during the Other Services
                   Term, Customer may provide notice to Vendor (and to Vendor's
                   designated Account Manager), in accordance with Section 16.4
                   of the Master Agreement, of a request that Vendor present
                   Customer with an offer to provide a particular type of
                   Service set forth in Exhibits D-1 and D-2 or in a Quarterly
                   Services Update (each such notice an "OTHER SERVICES REQUEST
                   NOTICE"). In each Other Services Request Notice, Customer
                   shall provide Vendor with sufficient information regarding
                   Customer's [*MATERIAL OMITTED AND SEPARATELY FILED PURSUANT
                   TO AN APPLICATION FOR CONFIDENTIAL TREATMENT] and, if
                   applicable, [*MATERIAL OMITTED AND SEPARATELY FILED PURSUANT
                   TO AN APPLICATION FOR CONFIDENTIAL TREATMENT] requirements to
                   enable Vendor to present a competitive offer for the
                   requested Service. To the extent feasible and subject to
                   confidentiality restrictions, the Other Services Request
                   Notice shall also include additional information that
                   Customer has relating to [*MATERIAL OMITTED AND SEPARATELY
                   FILED PURSUANT TO AN APPLICATION FOR CONFIDENTIAL TREATMENT]
                   (as defined below) sufficient to enable Vendor to present a
                   [*MATERIAL OMITTED AND SEPARATELY FILED PURSUANT TO AN
                   APPLICATION FOR CONFIDENTIAL TREATMENT] (as defined below).
                   If the Service requested in the Other Services Request Notice
                   is an Available Service, then the following offer process
                   shall take place:

                   (i)    Within fourteen (14) calendar days following receipt
                          by Vendor of an Other Services Request Notice (the
                          "REQUESTING PERIOD"), Vendor shall either (A) present
                          Customer with a written offer to provide the requested
                          Service, containing sufficient technical, business,
                          and pricing information to enable Customer to evaluate
                          the offer, or (B) notify Customer in writing that it
                          declines to bid on the Service, in which case, if the
                          Service is a Primary Service, the Amended Other
                          Services Purchase Commitment shall be subject to
                          reduction as specified in Section 1(e) below.

                   (ii)   Within [*MATERIAL OMITTED AND SEPARATELY FILED
                          PURSUANT TO AN APPLICATION FOR CONFIDENTIAL TREATMENT]
                          following receipt of Vendor's written offer for the
                          Service (the "REVIEW PERIOD"), Customer shall provide
                          Vendor with written notice (a "FIRST RESPONSE NOTICE")
                          indicating whether Customer accepts or declines
                          Vendor's offer. In the event Customer declines
                          Vendor's offer because of a reasonable determination
                          solely by Customer that Vendor's offer is not a
                          [*MATERIAL OMITTED AND SEPARATELY FILED PURSUANT TO AN
                          APPLICATION FOR CONFIDENTIAL TREATMENT] then Customer
                          shall include in the First Response Notice sufficient
                          additional technical, [*MATERIAL OMITTED AND

                                       6

<Page>

    CONFIDENTIAL TREATMENT REQUESTED                    EXHIBIT 10.41

                          SEPARATELY FILED PURSUANT TO AN APPLICATION FOR
                          CONFIDENTIAL TREATMENT] and [*MATERIAL OMITTED AND
                          SEPARATELY FILED PURSUANT TO AN APPLICATION FOR
                          CONFIDENTIAL TREATMENT] information (including
                          applicable [*MATERIAL OMITTED AND SEPARATELY FILED
                          PURSUANT TO AN APPLICATION FOR CONFIDENTIAL TREATMENT]
                          information in Customer's possession) (to the extent
                          feasible and subject to confidentiality restrictions)
                          to enable Vendor (A) to ascertain the validity of the
                          [*MATERIAL OMITTED AND SEPARATELY FILED PURSUANT TO AN
                          APPLICATION FOR CONFIDENTIAL TREATMENT] information in
                          Customer's possession, and (B) to make, in Vendor's
                          discretion, such adjustments to its initial offer to
                          make it a [*MATERIAL OMITTED AND SEPARATELY FILED
                          PURSUANT TO AN APPLICATION FOR CONFIDENTIAL
                          TREATMENT].

                   (iii)  Within [*MATERIAL OMITTED AND SEPARATELY FILED
                          PURSUANT TO AN APPLICATION FOR CONFIDENTIAL TREATMENT]
                          following receipt of a First Response Notice from
                          Customer (the "ADJUSTMENT PERIOD"), Vendor shall
                          either (A) present Customer with an adjusted written
                          offer ("SECOND BID") to provide the requested Service,
                          or (B) notify Customer in writing that it declines to
                          submit a Second Bid, in which case, if the Service is
                          a Primary Service, the Amended Other Services Purchase
                          Commitment shall be subject to reduction as specified
                          in Section 1(e) below.

                   (iv)   If Vendor presents a Second Bid during the Adjustment
                          Period, then within [*MATERIAL OMITTED AND SEPARATELY
                          FILED PURSUANT TO AN APPLICATION FOR CONFIDENTIAL
                          TREATMENT] of receipt thereof, Customer shall provide
                          Vendor with written notice (a "SECOND RESPONSE
                          NOTICE") indicating whether Customer accepts or
                          declines Vendor's Second Bid. In the event Customer
                          declines Vendor's Second Bid because of [*MATERIAL
                          OMITTED AND SEPARATELY FILED PURSUANT TO AN
                          APPLICATION FOR CONFIDENTIAL TREATMENT] Customer that
                          Vendor's Second Bid is not a [*MATERIAL OMITTED AND
                          SEPARATELY FILED PURSUANT TO AN APPLICATION FOR
                          CONFIDENTIAL TREATMENT] and if the Service is a
                          Primary Service, then the Amended Other Services
                          Purchase Commitment shall be [*MATERIAL OMITTED AND
                          SEPARATELY FILED PURSUANT TO AN APPLICATION FOR
                          CONFIDENTIAL TREATMENT] as specified in Section 1(e)
                          below.

                   (v)    The parties agree that for purposes of this Section
                          1(d), notice may be provided by email under Section
                          16.4 of the Master Agreement and shall be deemed duly
                          received upon receipt.

            (e)    NO BIDS AND NON-MARKET COMPETITIVE OFFERS FOR PRIMARY
                   SERVICES. In the event that Vendor receives an Other Services
                   Request Notice for a Primary Service during the Other
                   Services Term, and (i) Vendor declines to present an offer
                   for such Primary Service during the Requesting Period, (ii)
                   Vendor declines to submit a Second Bid for such Primary
                   Service during the Adjustment Period, or (iii) Customer
                   declines Vendor's Second Bid for such Primary Service because
                   of [*MATERIAL OMITTED AND SEPARATELY FILED PURSUANT TO AN
                   APPLICATION FOR CONFIDENTIAL TREATMENT] Customer that
                   Vendor's Second Bid is not a [*MATERIAL OMITTED AND
                   SEPARATELY FILED PURSUANT TO AN APPLICATION FOR CONFIDENTIAL
                   TREATMENT] (each such event a "THIRD PARTY SERVICE TRIGGERING
                   EVENT"), then to the extent that Customer or any Customer
                   Affiliate subsequently orders Third Party Replacement
                   Services from a third party vendor not later than [*MATERIAL
                   OMITTED AND SEPARATELY FILED PURSUANT TO AN APPLICATION FOR
                   CONFIDENTIAL TREATMENT] following the last day of the
                   [*MATERIAL OMITTED AND SEPARATELY FILED PURSUANT TO AN
                   APPLICATION FOR CONFIDENTIAL TREATMENT] in which the Third
                   Party Service Triggering Event occurs, then upon the
                   provision of notice to Vendor (and to Vendor's designated
                   Account Manager) in accordance with Section 16.4 of the
                   Master Agreement:

                   (i)    The Amended Other Services Purchase Commitment shall
                          be [*MATERIAL OMITTED AND SEPARATELY FILED PURSUANT TO
                          AN APPLICATION FOR CONFIDENTIAL TREATMENT] as of the
                          date on which Customer places a firm order for Third
                          Party Replacement Services, by the [*MATERIAL OMITTED
                          AND SEPARATELY FILED PURSUANT TO AN APPLICATION FOR
                          CONFIDENTIAL TREATMENT] of the Services ordered by
                          Customer or a Customer Affiliate from a third party

                                       7

<Page>

    CONFIDENTIAL TREATMENT REQUESTED                    EXHIBIT 10.41

                          vendor for the provision of the applicable Third Party
                          Replacement Services; PROVIDED, HOWEVER, that (A) the
                          calculation of [*MATERIAL OMITTED AND SEPARATELY FILED
                          PURSUANT TO AN APPLICATION FOR CONFIDENTIAL TREATMENT]
                          in the Amended Other Services Purchase Commitment
                          shall [*MATERIAL OMITTED AND SEPARATELY FILED PURSUANT
                          TO AN APPLICATION FOR CONFIDENTIAL TREATMENT] (and
                          adjusted, as necessary) as of the end of each
                          [*MATERIAL OMITTED AND SEPARATELY FILED PURSUANT TO AN
                          APPLICATION FOR CONFIDENTIAL TREATMENT] immediately
                          following the [*MATERIAL OMITTED AND SEPARATELY FILED
                          PURSUANT TO AN APPLICATION FOR CONFIDENTIAL TREATMENT]
                          in which a firm order is placed by Customer or a
                          Customer Affiliate for the applicable Third Party
                          Replacement Services (or sooner to the extent provided
                          for in Section 2(c)(i) below); and (B) the amount of
                          any such [*MATERIAL OMITTED AND SEPARATELY FILED
                          PURSUANT TO AN APPLICATION FOR CONFIDENTIAL TREATMENT]
                          in the Amended Other Services Purchase Commitment
                          shall be equal to [*MATERIAL OMITTED AND SEPARATELY
                          FILED PURSUANT TO AN APPLICATION FOR CONFIDENTIAL
                          TREATMENT] of the Third Party Replacement Services
                          ordered by Customer during the applicable [*MATERIAL
                          OMITTED AND SEPARATELY FILED PURSUANT TO AN
                          APPLICATION FOR CONFIDENTIAL TREATMENT] and for which
                          (1) Customer has been invoiced by the third party
                          vendor [*MATERIAL OMITTED AND SEPARATELY FILED
                          PURSUANT TO AN APPLICATION FOR CONFIDENTIAL TREATMENT]
                          following the end of such [*MATERIAL OMITTED AND
                          SEPARATELY FILED PURSUANT TO AN APPLICATION FOR
                          CONFIDENTIAL TREATMENT] or (2) in the case of leased
                          services, Customer has, at a minimum, received its
                          initial invoice from the third party vendor within
                          [*MATERIAL OMITTED AND SEPARATELY FILED PURSUANT TO AN
                          APPLICATION FOR CONFIDENTIAL TREATMENT] following the
                          end of such[*MATERIAL OMITTED AND SEPARATELY FILED
                          PURSUANT TO AN APPLICATION FOR CONFIDENTIAL
                          TREATMENT], as certified by an officer of Customer
                          (Vice President level or higher), with such
                          certification to be accompanied by [*MATERIAL OMITTED
                          AND SEPARATELY FILED PURSUANT TO AN APPLICATION FOR
                          CONFIDENTIAL TREATMENT] reasonably sufficient to allow
                          Vendor to calculate and ascertain the amount
                          [*MATERIAL OMITTED AND SEPARATELY FILED PURSUANT TO AN
                          APPLICATION FOR CONFIDENTIAL TREATMENT] in the Amended
                          Other Services Purchase Commitment (including, without
                          limitation, information and documentation [*MATERIAL
                          OMITTED AND SEPARATELY FILED PURSUANT TO AN
                          APPLICATION FOR CONFIDENTIAL TREATMENT], if
                          applicable), provided that [*MATERIAL OMITTED AND
                          SEPARATELY FILED PURSUANT TO AN APPLICATION FOR
                          CONFIDENTIAL TREATMENT]. In the event Customer has
                          recurring payment obligations for Third Party
                          Replacement Services provided on a recurring basis
                          (E.G., leased services), [*MATERIAL OMITTED AND
                          SEPARATELY FILED PURSUANT TO AN APPLICATION FOR
                          CONFIDENTIAL TREATMENT] such Third Party Services
                          shall [*MATERIAL OMITTED AND SEPARATELY FILED PURSUANT
                          TO AN APPLICATION FOR CONFIDENTIAL TREATMENT] the
                          Amended Other Services Purchase Commitment for the
                          Biannual Period in which such invoice is received by
                          Customer, even if Customer is invoiced and/or
                          continues to be invoiced beyond the period ending
                          [*MATERIAL OMITTED AND SEPARATELY FILED PURSUANT TO AN
                          APPLICATION FOR CONFIDENTIAL TREATMENT] following the
                          end of the Biannual Period in which such Third Party
                          Replacement Services are ordered.

                   (ii)   The parties agree that for purposes of this Section
                          1(e), notice may be provided by email under Section
                          16.4 of the Master Agreement and shall be deemed duly
                          received upon receipt.

            (f)    REDUCTION FOR FAILURE TO TIMELY OFFER SERVICES. In the event
                   Vendor is unable to offer an Other Service to Customer by (a)
                   the date specified in Exhibits D-1 or D-2 or in any Quarterly
                   Services Update (subject to the terms and conditions
                   contained in Exhibits D-1 and D-2 and in any Quarterly
                   Services Update) or (b) as of the Amendment Effective Date
                   (where no date is specified in Exhibits D-1 and D-2) or (c)
                   as of the date of the Quarterly Services Update (where no
                   date is specified for the Services therein) (such Service a
                   "DELAYED SERVICE"), then such Delayed Service shall still be
                   deemed to be an Available Service and to the extent Customer
                   or any Customer Affiliate subsequently purchases Third Party
                   Replacement Services from a third party vendor, any time
                   during the Other Services Term at which Vendor remains unable
                   to offer such Other Service to Customer and timely deliver,
                   then upon the provision of notice to Vendor (and to Vendor's
                   designated Account Manager) in accordance with Section 16.4
                   of the Master Agreement:

                                       8

<Page>

    CONFIDENTIAL TREATMENT REQUESTED                    EXHIBIT 10.41

                   (i)    The Amended Other Services Purchase Commitment shall
                          be [*MATERIAL OMITTED AND SEPARATELY FILED PURSUANT TO
                          AN APPLICATION FOR CONFIDENTIAL TREATMENT] as of the
                          date on which Customer places a firm order for Third
                          Party Replacement Services, by the [*MATERIAL OMITTED
                          AND SEPARATELY FILED PURSUANT TO AN APPLICATION FOR
                          CONFIDENTIAL TREATMENT] of the Services ordered by
                          Customer or a Customer Affiliate from a third party
                          vendor for the provision of the applicable Third Party
                          Replacement Services corresponding[*MATERIAL OMITTED
                          AND SEPARATELY FILED PURSUANT TO AN APPLICATION FOR
                          CONFIDENTIAL TREATMENT]; PROVIDED, HOWEVER, that (A)
                          the calculation of any such [*MATERIAL OMITTED AND
                          SEPARATELY FILED PURSUANT TO AN APPLICATION FOR
                          CONFIDENTIAL TREATMENT] Amended Other Services
                          Purchase Commitment shall be verified (and adjusted,
                          as necessary) as of the end of each Biannual Period
                          immediately following the Biannual Period in which a
                          firm [*MATERIAL OMITTED AND SEPARATELY FILED PURSUANT
                          TO AN APPLICATION FOR CONFIDENTIAL TREATMENT] (or
                          sooner to the extent provided for in Section 2(c)(i)
                          below); and (B) the amount of [*MATERIAL OMITTED AND
                          SEPARATELY FILED PURSUANT TO AN APPLICATION FOR
                          CONFIDENTIAL TREATMENT] Amended Other Services
                          Purchase Commitment shall be [*MATERIAL OMITTED AND
                          SEPARATELY FILED PURSUANT TO AN APPLICATION FOR
                          CONFIDENTIAL TREATMENT] Third Party Replacement
                          Services ordered by Customer during the applicable
                          Biannual Period and for which (1) Customer has been
                          invoiced by the third party vendor [*MATERIAL OMITTED
                          AND SEPARATELY FILED PURSUANT TO AN APPLICATION FOR
                          CONFIDENTIAL TREATMENT] following the end of such
                          [*MATERIAL OMITTED AND SEPARATELY FILED PURSUANT TO AN
                          APPLICATION FOR CONFIDENTIAL TREATMENT] or (2) in the
                          case of leased services, Customer has, at a minimum,
                          received its initial invoice from the third party
                          vendor [*MATERIAL OMITTED AND SEPARATELY FILED
                          PURSUANT TO AN APPLICATION FOR CONFIDENTIAL TREATMENT]
                          following the end of such [*MATERIAL OMITTED AND
                          SEPARATELY FILED PURSUANT TO AN APPLICATION FOR
                          CONFIDENTIAL TREATMENT] as certified by an officer of
                          Customer (Vice President level or higher), with such
                          certification to be accompanied by [*MATERIAL OMITTED
                          AND SEPARATELY FILED PURSUANT TO AN APPLICATION FOR
                          CONFIDENTIAL TREATMENT] reasonably sufficient to allow
                          [*MATERIAL OMITTED AND SEPARATELY FILED PURSUANT TO AN
                          APPLICATION FOR CONFIDENTIAL TREATMENT] to calculate
                          and ascertain the amount [*MATERIAL OMITTED AND
                          SEPARATELY FILED PURSUANT TO AN APPLICATION FOR
                          CONFIDENTIAL TREATMENT] Amended Other Services
                          Purchase Commitment, provided that such [*MATERIAL
                          OMITTED AND SEPARATELY FILED PURSUANT TO AN
                          APPLICATION FOR CONFIDENTIAL TREATMENT] shall be
                          redacted as appropriate in Customer's sole discretion.
                          In the event Customer has recurring payment
                          obligations for Third Party Replacement Services
                          provided on a recurring basis (E.G., leased services),
                          [*MATERIAL OMITTED AND SEPARATELY FILED PURSUANT TO AN
                          APPLICATION FOR CONFIDENTIAL TREATMENT] Third Party
                          Services shall contribute [*MATERIAL OMITTED AND
                          SEPARATELY FILED PURSUANT TO AN APPLICATION FOR
                          CONFIDENTIAL TREATMENT] the Amended Other Services
                          Purchase Commitment for the [*MATERIAL OMITTED AND
                          SEPARATELY FILED PURSUANT TO AN APPLICATION FOR
                          CONFIDENTIAL TREATMENT] in which such invoice is
                          received by Customer, even if Customer is invoiced
                          and/or continues to be invoiced beyond the period
                          ending [*MATERIAL OMITTED AND SEPARATELY FILED
                          PURSUANT TO AN APPLICATION FOR CONFIDENTIAL TREATMENT]
                          following the end of the [*MATERIAL OMITTED AND
                          SEPARATELY FILED PURSUANT TO AN APPLICATION FOR
                          CONFIDENTIAL TREATMENT] in which such Third Party
                          Replacement Services are ordered.

                   (ii)   The parties agree that for purposes of this Section
                          1(f), notice may be provided by email under Section
                          16.4 of the Master Agreement and shall be deemed duly
                          received upon receipt.

       2.   PAYMENT FOR OTHER SERVICES.

            (a)    BIANNUAL PAYMENT AMOUNTS. Subject to other terms set forth in
                   this Agreement (including without limitation Customer's right
                   to reduce its Amended Other Services Purchase Commitment),
                   the aggregate annual dollar amount of Other Services ordered
                   by Customer from Vendor and/or Vendor's Affiliates during
                   each year of the Other Services Term shall be equal to

                                       9

<Page>

    CONFIDENTIAL TREATMENT REQUESTED                    EXHIBIT 10.41

                   or greater than [*MATERIAL OMITTED AND SEPARATELY FILED
                   PURSUANT TO AN APPLICATION FOR CONFIDENTIAL TREATMENT]
                   dollars ($[*MATERIAL OMITTED AND SEPARATELY FILED PURSUANT TO
                   AN APPLICATION FOR CONFIDENTIAL TREATMENT]) per year for
                   calendar years 2002, 2003 and 2004 and equal to or greater
                   than [*MATERIAL OMITTED AND SEPARATELY FILED PURSUANT TO AN
                   APPLICATION FOR CONFIDENTIAL TREATMENT] dollars ($[*MATERIAL
                   OMITTED AND SEPARATELY FILED PURSUANT TO AN APPLICATION FOR
                   CONFIDENTIAL TREATMENT]) for calendar year 2005; PROVIDED,
                   HOWEVER, that Customer agrees to order from Vendor a minimum
                   dollar amount of Other Services (subject to Customer's right
                   to reduce the Amended Other Services Purchase Commitment as
                   set forth in this Schedule D) in respect of each six (6)
                   month period in years 2002, 2003, 2004 and 2005 (each such
                   six (6) month period, a "BIANNUAL PERIOD") of each such
                   calendar year of the Other Services Term (each such payment
                   during a Biannual Period, a "BIANNUAL PAYMENT AMOUNT"), as
                   set forth in the table below:

<Table>
<Caption>
                              ----------------------------------------- --------------------------------
                                          Biannual Period                   Biannual Payment Amount
                                     (SIX MONTH PERIOD ENDING)
                              ----------------------------------------- --------------------------------
<S>                                                                     <C>
                              June 30, 2002                             $[*MATERIAL OMITTED AND
                                                                        SEPARATELY FILED PURSUANT TO
                                                                        AN APPLICATION FOR
                                                                        CONFIDENTIAL TREATMENT]
                              ----------------------------------------- --------------------------------
                              December 31, 2002                         $[*MATERIAL OMITTED AND
                                                                        SEPARATELY FILED PURSUANT TO
                                                                        AN APPLICATION FOR
                                                                        CONFIDENTIAL TREATMENT]
                              ----------------------------------------- --------------------------------
                              June 30, 2003                             $[*MATERIAL OMITTED AND
                                                                        SEPARATELY FILED PURSUANT TO
                                                                        AN APPLICATION FOR
                                                                        CONFIDENTIAL TREATMENT]
                              ----------------------------------------- --------------------------------
                              December 31, 2003                         $[*MATERIAL OMITTED AND
                                                                        SEPARATELY FILED PURSUANT TO
                                                                        AN APPLICATION FOR
                                                                        CONFIDENTIAL TREATMENT]
                              ----------------------------------------- --------------------------------
                              June 30, 2004                             $[*MATERIAL OMITTED AND
                                                                        SEPARATELY FILED PURSUANT TO
                                                                        AN APPLICATION FOR
                                                                        CONFIDENTIAL TREATMENT]
                              ----------------------------------------- --------------------------------
                              December 31, 2004                         $[*MATERIAL OMITTED AND
                                                                        SEPARATELY FILED PURSUANT TO
                                                                        AN APPLICATION FOR
                                                                        CONFIDENTIAL TREATMENT]
                              ----------------------------------------- --------------------------------
                              June 30, 2005                             $[*MATERIAL OMITTED AND
                                                                        SEPARATELY FILED PURSUANT TO
                                                                        AN APPLICATION FOR
                                                                        CONFIDENTIAL TREATMENT]
                              ----------------------------------------- --------------------------------
                              December 31, 2005                         $[*MATERIAL OMITTED AND
                                                                        SEPARATELY FILED PURSUANT TO
                                                                        AN APPLICATION FOR
                                                                        CONFIDENTIAL TREATMENT]
                              ----------------------------------------- --------------------------------
</Table>

            (B)    [*MATERIAL OMITTED AND SEPARATELY FILED PURSUANT TO AN
                   APPLICATION FOR CONFIDENTIAL TREATMENT]. If the amount
                   ordered by Customer for Other Services pursuant to this
                   Schedule D during any Biannual Period [*MATERIAL OMITTED AND
                   SEPARATELY FILED PURSUANT TO AN APPLICATION FOR CONFIDENTIAL
                   TREATMENT] the Biannual Payment Amount for the corresponding
                   Biannual Period [*MATERIAL OMITTED AND SEPARATELY FILED
                   PURSUANT TO AN APPLICATION FOR

                                       10

<Page>

    CONFIDENTIAL TREATMENT REQUESTED                    EXHIBIT 10.41

                   CONFIDENTIAL TREATMENT] then Vendor shall [*MATERIAL OMITTED
                   AND SEPARATELY FILED PURSUANT TO AN APPLICATION FOR
                   CONFIDENTIAL TREATMENT] toward the Biannual [*MATERIAL
                   OMITTED AND SEPARATELY FILED PURSUANT TO AN APPLICATION FOR
                   CONFIDENTIAL TREATMENT] in the subsequent Biannual Period(s)
                   until the [*MATERIAL OMITTED AND SEPARATELY FILED PURSUANT TO
                   AN APPLICATION FOR CONFIDENTIAL Treatment]. For avoidance of
                   doubt, the aggregate amount for any Other Services ordered in
                   the Biannual Period ending June 30, 2002 [*MATERIAL OMITTED
                   AND SEPARATELY FILED PURSUANT TO AN APPLICATION FOR
                   CONFIDENTIAL TREATMENT] for the Biannual Period ending
                   December 31, 2002 and the subsequent period, if such amount
                   [*MATERIAL OMITTED AND SEPARATELY FILED PURSUANT TO AN
                   APPLICATION FOR CONFIDENTIAL TREATMENT] dollars ($[*MATERIAL
                   OMITTED AND SEPARATELY FILED PURSUANT TO AN APPLICATION FOR
                   CONFIDENTIAL TREATMENT]).

                   (i)    EXAMPLE: For example (and assuming [*MATERIAL OMITTED
                          AND SEPARATELY FILED PURSUANT TO AN APPLICATION FOR
                          CONFIDENTIAL TREATMENT] in the Amended Other Services
                          Purchase Commitment), if during the Biannual Period
                          ending June 30, 2003, Customer has ordered from Vendor
                          $[*MATERIAL OMITTED AND SEPARATELY FILED PURSUANT TO
                          AN APPLICATION FOR CONFIDENTIAL TREATMENT] in Other
                          Services, then [*MATERIAL OMITTED AND SEPARATELY FILED
                          PURSUANT TO AN APPLICATION FOR CONFIDENTIAL TREATMENT]
                          would be required by Customer in respect of such
                          Biannual Period, and the Customer would be entitled to
                          [*MATERIAL OMITTED AND SEPARATELY FILED PURSUANT TO AN
                          APPLICATION FOR CONFIDENTIAL TREATMENT] in the amount
                          of [*MATERIAL OMITTED AND SEPARATELY FILED PURSUANT TO
                          AN APPLICATION FOR CONFIDENTIAL TREATMENT] in orders
                          for Other Services [*MATERIAL OMITTED AND SEPARATELY
                          FILED PURSUANT TO AN APPLICATION FOR CONFIDENTIAL
                          TREATMENT] applicable Biannual Payment Amount of
                          [*MATERIAL OMITTED AND SEPARATELY FILED PURSUANT TO AN
                          APPLICATION FOR CONFIDENTIAL TREATMENT] would be
                          applied toward the Biannual Payment Amount due for the
                          next Biannual Period ending December 31, 2003. If, at
                          the end of the next following Biannual Period ending
                          December 31, 2002 (and assuming [*MATERIAL OMITTED AND
                          SEPARATELY FILED PURSUANT TO AN APPLICATION FOR
                          CONFIDENTIAL TREATMENT] the Amended Other Services
                          Purchase Commitment), Customer has ordered [*MATERIAL
                          OMITTED AND SEPARATELY FILED PURSUANT TO AN
                          APPLICATION FOR CONFIDENTIAL TREATMENT] in Other
                          Services, then the Customer would be required to pay
                          Vendor [*MATERIAL OMITTED AND SEPARATELY FILED
                          PURSUANT TO AN APPLICATION FOR CONFIDENTIAL TREATMENT]
                          (as defined below) for such Biannual Period in the
                          amount of $[*MATERIAL OMITTED AND SEPARATELY FILED
                          PURSUANT TO AN APPLICATION FOR CONFIDENTIAL TREATMENT]
                          (I.E., $[*MATERIAL OMITTED AND SEPARATELY FILED
                          PURSUANT TO AN APPLICATION FOR CONFIDENTIAL TREATMENT]
                          orders for Other Services, plus $[*MATERIAL OMITTED
                          AND SEPARATELY FILED PURSUANT TO AN APPLICATION FOR
                          CONFIDENTIAL TREATMENT] the previous Biannual Period,
                          [*MATERIAL OMITTED AND SEPARATELY FILED PURSUANT TO AN
                          APPLICATION FOR CONFIDENTIAL TREATMENT] applicable
                          Biannual Payment Amount of $[*MATERIAL OMITTED AND
                          SEPARATELY FILED PURSUANT TO AN APPLICATION FOR
                          CONFIDENTIAL TREATMENT] and no [*MATERIAL OMITTED AND
                          SEPARATELY FILED PURSUANT TO AN APPLICATION FOR
                          CONFIDENTIAL TREATMENT] would remain for [*MATERIAL
                          OMITTED AND SEPARATELY FILED PURSUANT TO AN
                          APPLICATION FOR CONFIDENTIAL TREATMENT] Biannual
                          Periods.

            (C)    [*MATERIAL OMITTED AND SEPARATELY FILED PURSUANT TO AN
                   APPLICATION FOR CONFIDENTIAL TREATMENT] Subject to other
                   terms set forth in this Agreement, in the event (i) the
                   Biannual Payment Amount corresponding to an applicable
                   Biannual Period is greater than (ii) the [*MATERIAL OMITTED
                   AND SEPARATELY FILED PURSUANT TO AN APPLICATION FOR
                   CONFIDENTIAL TREATMENT] orders from Customer to Vendor for
                   Other Services during the applicable Biannual Period, plus
                   (B) the [*MATERIAL OMITTED AND SEPARATELY FILED PURSUANT TO
                   AN APPLICATION FOR CONFIDENTIAL TREATMENT] Amended Other
                   Services Purchase Commitment [*MATERIAL OMITTED AND
                   SEPARATELY FILED PURSUANT TO AN APPLICATION FOR CONFIDENTIAL
                   TREATMENT] in the applicable Biannual Period in accordance
                   with the provisions of Sections 1(b), 1(e) and 1(f) of this
                   Schedule D, plus any [*MATERIAL OMITTED AND SEPARATELY FILED
                   PURSUANT TO AN APPLICATION FOR CONFIDENTIAL TREATMENT] (as
                   defined below) [*MATERIAL OMITTED AND SEPARATELY FILED
                   PURSUANT TO AN APPLICATION FOR CONFIDENTIAL TREATMENT] to
                   date

                                       11

<Page>

    CONFIDENTIAL TREATMENT REQUESTED                    EXHIBIT 10.41

                   (but excluding all amounts, [*MATERIAL OMITTED AND SEPARATELY
                   FILED PURSUANT TO AN APPLICATION FOR CONFIDENTIAL TREATMENT]
                   previously utilized[*MATERIAL OMITTED AND SEPARATELY FILED
                   PURSUANT TO AN APPLICATION FOR CONFIDENTIAL TREATMENT]), plus
                   (C) any [*MATERIAL OMITTED AND SEPARATELY FILED PURSUANT TO
                   AN APPLICATION FOR CONFIDENTIAL TREATMENT] that has been
                   carried forward from previous Biannual Periods (the aggregate
                   sum of (A), (B), and (C), collectively, [*MATERIAL OMITTED
                   AND SEPARATELY FILED PURSUANT TO AN APPLICATION FOR
                   CONFIDENTIAL TREATMENT] then Vendor may invoice Customer for
                   [*MATERIAL OMITTED AND SEPARATELY FILED PURSUANT TO AN
                   APPLICATION FOR CONFIDENTIAL TREATMENT] in an amount equal to
                   [*MATERIAL OMITTED AND SEPARATELY FILED PURSUANT TO AN
                   APPLICATION FOR CONFIDENTIAL TREATMENT] percent ([*MATERIAL
                   OMITTED AND SEPARATELY FILED PURSUANT TO AN APPLICATION FOR
                   CONFIDENTIAL Treatment]%) of the difference between the
                   [*MATERIAL OMITTED AND SEPARATELY FILED PURSUANT TO AN
                   APPLICATION FOR CONFIDENTIAL TREATMENT] corresponding to the
                   applicable Biannual Period minus the [*MATERIAL OMITTED AND
                   SEPARATELY FILED PURSUANT TO AN APPLICATION FOR CONFIDENTIAL
                   TREATMENT] for such Biannual Period [*MATERIAL OMITTED AND
                   SEPARATELY FILED PURSUANT TO AN APPLICATION FOR CONFIDENTIAL
                   TREATMENT] shall be calculated and invoiced in accordance
                   with the following procedures:

                   (i)    Vendor shall provide Customer with an invoice for the
                          [*MATERIAL OMITTED AND SEPARATELY FILED PURSUANT TO AN
                          APPLICATION FOR CONFIDENTIAL TREATMENT] for an
                          applicable Biannual Period within [*MATERIAL OMITTED
                          AND SEPARATELY FILED PURSUANT TO AN APPLICATION FOR
                          CONFIDENTIAL TREATMENT] of the end of the next
                          following Biannual Period, and Customer shall pay the
                          full amount, less any amounts disputed in good faith,
                          within [*MATERIAL OMITTED AND SEPARATELY FILED
                          PURSUANT TO AN APPLICATION FOR CONFIDENTIAL TREATMENT]
                          of receipt of such invoice. By way of example, the
                          invoice for the [*MATERIAL OMITTED AND SEPARATELY
                          FILED PURSUANT TO AN APPLICATION FOR CONFIDENTIAL
                          TREATMENT] for the Biannual Period ending June 30,
                          2002 shall be due on or before [*MATERIAL OMITTED AND
                          SEPARATELY FILED PURSUANT TO AN APPLICATION FOR
                          CONFIDENTIAL TREATMENT] provided Customer received the
                          invoice no later than [*MATERIAL OMITTED AND
                          SEPARATELY FILED PURSUANT TO AN APPLICATION FOR
                          CONFIDENTIAL TREATMENT]. In the event there is
                          complete certainty as to any or all of the amount
                          [*MATERIAL OMITTED AND SEPARATELY FILED PURSUANT TO AN
                          APPLICATION FOR CONFIDENTIAL TREATMENT] Remedy owed to
                          Vendor at the end of any Biannual Period, then Vendor
                          may invoice Customer within [*MATERIAL OMITTED AND
                          SEPARATELY FILED PURSUANT TO AN APPLICATION FOR
                          CONFIDENTIAL TREATMENT] following the end of such
                          Biannual Period for payment of such certain amount.
                          For example (assuming no [*MATERIAL OMITTED AND
                          SEPARATELY FILED PURSUANT TO AN APPLICATION FOR
                          CONFIDENTIAL TREATMENT] Amended Other Services
                          Purchase Commitment), if, in the Biannual Period
                          ending June 30, 2004, [*MATERIAL OMITTED AND
                          SEPARATELY FILED PURSUANT TO AN APPLICATION FOR
                          CONFIDENTIAL TREATMENT] Customer does not order any
                          Other Services from Vendor, [*MATERIAL OMITTED AND
                          SEPARATELY FILED PURSUANT TO AN APPLICATION FOR
                          CONFIDENTIAL TREATMENT] Customer is not invoiced (from
                          a third party vendor) for any Third Party Replacement
                          Services during the [*MATERIAL OMITTED AND SEPARATELY
                          FILED PURSUANT TO AN APPLICATION FOR CONFIDENTIAL
                          TREATMENT] Customer has no unutilized [*MATERIAL
                          OMITTED AND SEPARATELY FILED PURSUANT TO AN
                          APPLICATION FOR CONFIDENTIAL TREATMENT] or unutilized
                          [*MATERIAL OMITTED AND SEPARATELY FILED PURSUANT TO AN
                          APPLICATION FOR CONFIDENTIAL TREATMENT] from previous
                          Biannual Periods, then Vendor may invoice Customer for
                          the [*MATERIAL OMITTED AND SEPARATELY FILED PURSUANT
                          TO AN APPLICATION FOR CONFIDENTIAL TREATMENT] on or
                          before [*MATERIAL OMITTED AND SEPARATELY FILED
                          PURSUANT TO AN APPLICATION FOR CONFIDENTIAL
                          TREATMENT].

                   (ii)   In calculating the amount of the [*MATERIAL OMITTED
                          AND SEPARATELY FILED PURSUANT TO AN APPLICATION FOR
                          CONFIDENTIAL TREATMENT] in each Biannual Period, to
                          the extent that the [*MATERIAL OMITTED AND SEPARATELY
                          FILED PURSUANT TO AN APPLICATION FOR CONFIDENTIAL
                          TREATMENT] in the Amended Other Services Purchase
                          Commitment in accordance with Sections 1(b), 1(e) and
                          1(f) of this Schedule D, from the Amendment Effective
                          Date through the end of the applicable Biannual
                          Period, [*MATERIAL OMITTED AND SEPARATELY FILED
                          PURSUANT TO AN APPLICATION FOR CONFIDENTIAL TREATMENT]
                          that have actually been utilized

                                       12

<Page>

    CONFIDENTIAL TREATMENT REQUESTED                    EXHIBIT 10.41

                          in [*MATERIAL OMITTED AND SEPARATELY FILED PURSUANT TO
                          AN APPLICATION FOR CONFIDENTIAL TREATMENT] in any
                          Biannual Period from the Amendment Effective Date
                          through the end of the applicable Biannual Period,
                          [*MATERIAL OMITTED AND SEPARATELY FILED PURSUANT TO AN
                          APPLICATION FOR CONFIDENTIAL TREATMENT] shall be
                          [*MATERIAL OMITTED AND SEPARATELY FILED PURSUANT TO AN
                          APPLICATION FOR CONFIDENTIAL TREATMENT] to [*MATERIAL
                          OMITTED AND SEPARATELY FILED PURSUANT TO AN
                          APPLICATION FOR CONFIDENTIAL TREATMENT].

                   (iii)[*MATERIAL OMITTED AND SEPARATELY FILED PURSUANT TO AN
                        APPLICATION FOR CONFIDENTIAL TREATMENT] is final and
                        non-recoverable, and may not be used to [*MATERIAL
                        OMITTED AND SEPARATELY FILED PURSUANT TO AN APPLICATION
                        FOR CONFIDENTIAL TREATMENT] payments owed by Customer
                        under this Schedule D or otherwise.

            (d)    MEETINGS. For the purpose of (i) determining the Other
                   Services Credit, the Commitment Reduction Credit, and/or the
                   Take or Pay Remedy, if any, (ii) preparing the applicable
                   Vendor invoice for the period following the conclusion of the
                   applicable Biannual Period, and (iii) reducing the likelihood
                   of an invoice or payment dispute, the parties agree to hold a
                   meeting [*MATERIAL OMITTED AND SEPARATELY FILED PURSUANT TO
                   AN APPLICATION FOR CONFIDENTIAL TREATMENT] or before the
                   [*MATERIAL OMITTED AND SEPARATELY FILED PURSUANT TO AN
                   APPLICATION FOR CONFIDENTIAL TREATMENT] of the [*MATERIAL
                   OMITTED AND SEPARATELY FILED PURSUANT TO AN APPLICATION FOR
                   CONFIDENTIAL TREATMENT] following the end of each Biannual
                   Period. Each party shall nominate one senior officer of the
                   rank of Vice President or higher (or their designee) as its
                   representative at these meetings. These representatives shall
                   meet, at a mutually agreed location, and shall attempt in
                   good faith to agree on the appropriate calculations for
                   determining the Other Services Credit, the Commitment
                   Reduction Credit, and/or the Take or Pay Remedy, if any, for
                   the applicable Biannual Period. These representatives agree
                   to share necessary and appropriate information, including
                   [*MATERIAL OMITTED AND SEPARATELY FILED PURSUANT TO AN
                   APPLICATION FOR CONFIDENTIAL TREATMENT] information (to the
                   extent feasible and subject to confidentiality restrictions),
                   to enable each party to determine the appropriate invoice
                   amounts, including the applicable [*MATERIAL OMITTED AND
                   SEPARATELY FILED PURSUANT TO AN APPLICATION FOR CONFIDENTIAL
                   TREATMENT] to be included on the invoice for the applicable
                   Biannual Period.

       3.   Definitions.

            (a)    As used herein, "AVAILABLE SERVICE" means (i) any Service
                   made available by Vendor in accordance with Exhibits D-1and
                   D-2 as of the Amendment Effective Date; (ii) any Service made
                   available by Vendor after the Amendment Effective Date as
                   specified in any Quarterly Services Update; and (iii) any
                   Other Service which Vendor offers or provides, or is able to
                   offer or provide, on or after the Amendment Effective Date.

            (b)    As used herein, "COMPARABLE OTHER SERVICES" means any
                   services that are [*MATERIAL OMITTED AND SEPARATELY FILED
                   PURSUANT TO AN APPLICATION FOR CONFIDENTIAL TREATMENT] to
                   Customer or which are [*MATERIAL OMITTED AND SEPARATELY FILED
                   PURSUANT TO AN APPLICATION FOR CONFIDENTIAL TREATMENT] to
                   Customer pursuant to a bona fide response to a request for
                   proposal (RFP) or other solicitation by Customer, by a third
                   party vendor (not including a Customer Affiliate), that are
                   [*MATERIAL OMITTED AND SEPARATELY FILED PURSUANT TO AN
                   APPLICATION FOR CONFIDENTIAL TREATMENT] any Available Service
                   that may be requested by Customer from Vendor pursuant to an
                   Other Services Request Notice (including comparable
                   [*MATERIAL OMITTED AND SEPARATELY FILED PURSUANT TO AN
                   APPLICATION FOR CONFIDENTIAL TREATMENT] comparable [*MATERIAL
                   OMITTED AND SEPARATELY FILED PURSUANT TO AN APPLICATION FOR
                   CONFIDENTIAL TREATMENT] comparable [*MATERIAL OMITTED AND
                   SEPARATELY FILED PURSUANT TO AN APPLICATION FOR CONFIDENTIAL
                   TREATMENT] and other comparable[*MATERIAL OMITTED AND
                   SEPARATELY FILED PURSUANT TO AN APPLICATION FOR CONFIDENTIAL
                   TREATMENT]; PROVIDED, HOWEVER, that the Other Services
                   Request Notice and the RFP or other solicitation by Customer
                   to the third party vendor for the

                                       12

<Page>

    CONFIDENTIAL TREATMENT REQUESTED                    EXHIBIT 10.41

                   Comparable Other Services [*MATERIAL OMITTED AND SEPARATELY
                   FILED PURSUANT TO AN APPLICATION FOR CONFIDENTIAL TREATMENT].
                   For avoidance of doubt, for purposes of determining whether a
                   service is a Comparable Other Service, Customer will
                   [*MATERIAL OMITTED AND SEPARATELY FILED PURSUANT TO AN
                   APPLICATION FOR CONFIDENTIAL TREATMENT] (as set forth in the
                   RFP or other solicitation) [*MATERIAL OMITTED AND SEPARATELY
                   FILED PURSUANT TO AN APPLICATION FOR CONFIDENTIAL TREATMENT].

            (c)    As used herein, "MARKET COMPETITIVE OFFER" means, with
                   respect to a Customer request for the provision of certain
                   specified Other Services by Vendor by a specified delivery
                   date, a bona fide offer by Vendor to provide an Available
                   Service at [*MATERIAL OMITTED AND SEPARATELY FILED PURSUANT
                   TO AN APPLICATION FOR CONFIDENTIAL TREATMENT].

            (d)    As used herein, "MARKET COMPETITIVE PRICING" means the
                   [*MATERIAL OMITTED AND SEPARATELY FILED PURSUANT TO AN
                   APPLICATION FOR CONFIDENTIAL TREATMENT] price offered to
                   Customer for Comparable Other Services; PROVIDED, HOWEVER,
                   that if the [*MATERIAL OMITTED AND SEPARATELY FILED PURSUANT
                   TO AN APPLICATION FOR CONFIDENTIAL TREATMENT] price offered
                   to Customer by a vendor of Comparable Other Services is (i) a
                   price that is [*MATERIAL OMITTED AND SEPARATELY FILED
                   PURSUANT TO AN APPLICATION FOR CONFIDENTIAL TREATMENT] for
                   providing such Comparable Other Services, (ii) [*MATERIAL
                   OMITTED AND SEPARATELY FILED PURSUANT TO AN APPLICATION FOR
                   CONFIDENTIAL TREATMENT] for providing such Comparable Other
                   Services, (iii) [*MATERIAL OMITTED AND SEPARATELY FILED
                   PURSUANT TO AN APPLICATION FOR CONFIDENTIAL TREATMENT] which
                   is intended to [*MATERIAL OMITTED AND SEPARATELY FILED
                   PURSUANT TO AN APPLICATION FOR CONFIDENTIAL TREATMENT] for
                   providing such Comparable Other Services, or (iv) a price
                   offered by [*MATERIAL OMITTED AND SEPARATELY FILED PURSUANT
                   TO AN APPLICATION FOR CONFIDENTIAL TREATMENT], then such
                   [*MATERIAL OMITTED AND SEPARATELY FILED PURSUANT TO AN
                   APPLICATION FOR CONFIDENTIAL TREATMENT] price shall not be
                   deemed valid Market Competitive Pricing.

            (e)    As used herein, "PRIMARY SERVICES" means any of those certain
                   Other Services that are (i) listed by city in Exhibit D-2, or
                   (ii) listed in any Quarterly Services Update and specifically
                   identified as "Exhibit D-2 Services" therein.

            (f)    As used herein, "THIRD PARTY REPLACEMENT SERVICES" means any
                   Comparable Other Services actually purchased by Customer or
                   any Customer Affiliate from a third party vendor that are
                   comparable to a Primary Service (i) which Vendor has
                   discontinued during the Other Services Term, (ii) for which
                   Vendor declines to present an offer during the Requesting
                   Period or declines to submit a Second Bid during the
                   Adjustment Period, (iii) for which Customer declines Vendor's
                   Second Bid because of [*MATERIAL OMITTED AND SEPARATELY FILED
                   PURSUANT TO AN APPLICATION FOR CONFIDENTIAL TREATMENT] that
                   Vendor's Second Bid is not a [*MATERIAL OMITTED AND
                   SEPARATELY FILED PURSUANT TO AN APPLICATION FOR CONFIDENTIAL
                   TREATMENT], or (iv) which is a Delayed Service.

       4.   Schedule D Dispute Resolution.

            (a)    EXECUTIVE ESCALATIONS. In the event any dispute arising out
                   of or related to any matter set forth in Schedule D as
                   amended hereby (including without limitation any dispute
                   relating to (i) the validity of a determination by Customer
                   that an offer is not a Market Competitive Offer, or (ii) the
                   validity or amount of any reduction by Customer in the
                   Amended Other Services Purchase Commitment) cannot be
                   resolved to the satisfaction of both parties, then each party
                   shall nominate one senior officer of the rank of Vice
                   President or higher (or their designee) as its representative
                   for purposes of attempting to resolve the dispute (the
                   "EXECUTIVE ESCALATIONS"). These representatives shall meet in
                   person and shall attempt in good faith to resolve the dispute
                   and agree to use good faith efforts to share suitable
                   information (to the extent feasible and subject to
                   confidentiality restrictions) that would reasonably enable
                   the parties to determine matters arising under Schedule D
                   (such as whether an offer is a Market Competitive Offer or
                   the validity or amount of any proposed reduction by

                                       14

<Page>

    CONFIDENTIAL TREATMENT REQUESTED                    EXHIBIT 10.41

                   Customer in the Amended Other Services Purchase Commitment).
                   Such representatives shall meet, at a mutually agreed
                   location, within ten (10) business days from the date on
                   which either party delivers written notice of the need to
                   resolve any dispute pursuant to this Section 4(a) of Schedule
                   D. This procedure shall be a required prerequisite before
                   either party may seek resolution of the dispute through
                   arbitration under Section 4(b) below. The foregoing
                   notwithstanding, the parties may agree to pursue any other
                   additional mutually acceptable dispute resolution method, but
                   such pursuit shall not be construed to modify or eliminate
                   the prerequisite stated in this Section 4(a).

            (b)    BINDING ARBITRATION. The parties agree that to the extent a
                   dispute exists between them relating to the matters set forth
                   in Schedule D following the conclusion of the Executive
                   Escalations set forth in Section 4(a) of this Schedule D,
                   either party may demand, by written notice to the other
                   party, that such dispute be submitted to binding arbitration
                   by a single arbitrator.

                   (i)    PROCEDURE FOR ARBITRATION. The arbitration shall be
                          conducted in accordance with the Commercial
                          Arbitration Rules of the American Arbitration
                          Association. The arbitration shall take place in New
                          York, New York. The arbitrator shall be an individual
                          knowledgeable in the provision of network services,
                          and shall be chosen by mutual agreement of the parties
                          within ten (10) days from the date of the initial
                          written demand for arbitration.

                   (ii)   DISCOVERY. Discovery shall be permitted to the extent
                          set out in this paragraph, and shall be controlled by
                          the arbitrator. Each party may submit in writing to
                          the other party, and the other party shall respond to,
                          a maximum of any combination of thirty-five (35) (none
                          of which may have subparts) of the following:
                          Interrogatories, Demands to Produce Documents, or
                          Requests for Admission. Each party will be entitled to
                          take the oral deposition of one (1) representative of
                          the other party. Additional discovery may be permitted
                          upon only mutual agreement of the parties, or upon
                          order of the arbitrator for good cause shown. The
                          arbitrator shall require that all permitted discovery
                          be completed within forty-five (45) days of the
                          initial written demand for arbitration.

                   (iii)  ARBITRATION HEARING. The arbitration hearing shall
                          commence within sixty (60) days of the initial written
                          demand for arbitration. The arbitrator shall rule on
                          the dispute by issuing a written opinion within thirty
                          (30) days after the close of the hearing. Judgment
                          upon the award rendered by the arbitrator may be
                          entered in any court having jurisdiction.

                   (iv)   COSTS. Each party shall bear its own costs of the
                          arbitration. The parties shall split equally the fees
                          of the arbitration and the arbitrator.

            (c)    EQUITABLE REMEDIES. The parties agree that nothing in this
                   Section 4 shall be construed to prevent a party from
                   instituting litigation in a court of competent jurisdiction
                   to obtain preliminary injunctive relief or a temporary
                   restraining order, as appropriate under applicable law."

6.     WITHHELD AMOUNTS. As full and final settlement of all invoice and payment
       disputes with respect to Services rendered by Genuity through October 31,
       2001, including without limitation all disputes relating to withheld
       amounts, and arising out of the New Dial-Up Market Price proposed by AOL
       on October 2, 2000 and subsequently disputed by Genuity (such disputes
       shall be collectively referred to as "PRICING DISPUTES"), AOL will pay
       Genuity [*MATERIAL OMITTED AND SEPARATELY FILED PURSUANT TO AN
       APPLICATION FOR CONFIDENTIAL TREATMENT] $[*MATERIAL OMITTED AND
       SEPARATELY FILED PURSUANT TO AN APPLICATION FOR CONFIDENTIAL TREATMENT]
       plus interest in the amount of [*MATERIAL OMITTED AND SEPARATELY FILED
       PURSUANT TO AN APPLICATION FOR CONFIDENTIAL TREATMENT] dollars
       ($[*MATERIAL OMITTED AND SEPARATELY FILED PURSUANT TO AN APPLICATION FOR
       CONFIDENTIAL TREATMENT]) on or before [*MATERIAL OMITTED AND SEPARATELY
       FILED PURSUANT TO AN APPLICATION FOR CONFIDENTIAL TREATMENT] by wire
       transfer of immediately available funds.

                                       15

<Page>

    CONFIDENTIAL TREATMENT REQUESTED                    EXHIBIT 10.41

7.     INVOICING AND PAYMENT. With respect to Services rendered by Genuity on
       and after November 1, 2001, Genuity shall invoice for such Services and
       AOL shall pay such invoices in accordance with the terms of Section 9 of
       the Master Agreement (as amended hereby), and in accordance with the
       pricing specified in Section 8 of this Amendment.

8.     AMENDED PRICES FOR DEDICATED DIAL-UP ACCESS PORTS. The prices set forth
       in Exhibit B-2 of the Agreement are hereby amended as follows:

       8.1  through [*MATERIAL OMITTED AND SEPARATELY FILED PURSUANT TO AN
            APPLICATION FOR CONFIDENTIAL TREATMENT], the monthly recurring
            charge for one (1) Dedicated Dial-Up Access Port will be as set
            forth in the Agreement (that is: the [*MATERIAL OMITTED AND
            SEPARATELY FILED PURSUANT TO AN APPLICATION FOR CONFIDENTIAL
            TREATMENT] Dedicated Dial-Up Access Ports as set forth in Section
            2(b) of Exhibit B-2 of the Agreement; and the [*MATERIAL OMITTED AND
            SEPARATELY FILED PURSUANT TO AN APPLICATION FOR CONFIDENTIAL
            TREATMENT] will be [*MATERIAL OMITTED AND SEPARATELY FILED PURSUANT
            TO AN APPLICATION FOR CONFIDENTIAL TREATMENT] per port for the
            remaining [*MATERIAL OMITTED AND SEPARATELY FILED PURSUANT TO AN
            APPLICATION FOR CONFIDENTIAL TREATMENT] Dedicated Dial-Up Access
            Ports as set forth in Section 3 of Exhibit B-2 of the Agreement);

       8.2  from and after [*MATERIAL OMITTED AND SEPARATELY FILED PURSUANT TO
            AN APPLICATION FOR CONFIDENTIAL TREATMENT], the monthly recurring
            charge for one (1) Dedicated Dial-Up Access Port (regardless of
            whether or not such port is an Existing Dedicated Dial-Up Access
            Port) (the "MONTHLY PORT CHARGE") will be as follows:

            (a)    from [*MATERIAL OMITTED AND SEPARATELY FILED PURSUANT TO AN
                   APPLICATION FOR CONFIDENTIAL TREATMENT] through[*MATERIAL
                   OMITTED AND SEPARATELY FILED PURSUANT TO AN APPLICATION FOR
                   CONFIDENTIAL TREATMENT], the Monthly Port Charge will be
                   $[*MATERIAL OMITTED AND SEPARATELY FILED PURSUANT TO AN
                   APPLICATION FOR CONFIDENTIAL TREATMENT] per port for the
                   [*MATERIAL OMITTED AND SEPARATELY FILED PURSUANT TO AN
                   APPLICATION FOR CONFIDENTIAL TREATMENT] Dedicated Dial-Up
                   Access Ports;

            (b)    from [*MATERIAL OMITTED AND SEPARATELY FILED PURSUANT TO AN
                   APPLICATION FOR CONFIDENTIAL TREATMENT] through [*MATERIAL
                   OMITTED AND SEPARATELY FILED PURSUANT TO AN APPLICATION FOR
                   CONFIDENTIAL TREATMENT], the Monthly Port Charge will be
                   $[*MATERIAL OMITTED AND SEPARATELY FILED PURSUANT TO AN
                   APPLICATION FOR CONFIDENTIAL TREATMENT] per port for the
                   [*MATERIAL OMITTED AND SEPARATELY FILED PURSUANT TO AN
                   APPLICATION FOR CONFIDENTIAL TREATMENT] Dedicated Dial-Up
                   Access Ports;

            (c)    from [*MATERIAL OMITTED AND SEPARATELY FILED PURSUANT TO AN
                   APPLICATION FOR CONFIDENTIAL TREATMENT] through [*MATERIAL
                   OMITTED AND SEPARATELY FILED PURSUANT TO AN APPLICATION FOR
                   CONFIDENTIAL TREATMENT] , the Monthly Port Charge will be
                   $[*MATERIAL OMITTED AND SEPARATELY FILED PURSUANT TO AN
                   APPLICATION FOR CONFIDENTIAL TREATMENT] per port for the
                   [*MATERIAL OMITTED AND SEPARATELY FILED PURSUANT TO AN
                   APPLICATION FOR CONFIDENTIAL TREATMENT] Dedicated Dial-Up
                   Access Ports, less the aggregate number of ports
                   decommissioned, if any, pursuant to the Agreement, as
                   amended; and

            (d)    from [*MATERIAL OMITTED AND SEPARATELY FILED PURSUANT TO AN
                   APPLICATION FOR CONFIDENTIAL TREATMENT] through the remaining
                   Term of the Agreement, the Monthly Port Charge will be the
                   lower of $[*MATERIAL OMITTED AND SEPARATELY FILED PURSUANT TO
                   AN APPLICATION FOR CONFIDENTIAL TREATMENT] per port for the
                   [*MATERIAL OMITTED AND SEPARATELY FILED PURSUANT TO AN
                   APPLICATION FOR CONFIDENTIAL TREATMENT] Dedicated Dial-Up
                   Access Ports (less the aggregate number of ports
                   decommissioned, if any, pursuant to the Agreement, as
                   amended) or the New Dial-Up Market Price per port for

                                       16

<Page>

    CONFIDENTIAL TREATMENT REQUESTED                    EXHIBIT 10.41

                   the [*MATERIAL OMITTED AND SEPARATELY FILED PURSUANT TO AN
                   APPLICATION FOR CONFIDENTIAL TREATMENT] Dedicated Dial-Up
                   Access Ports (less the aggregate number of ports
                   decommissioned, if any, pursuant to the Agreement, as
                   amended) as determined in accordance with Section 8.3(a) of
                   Schedule B of the Agreement.

9.     MARKET PRICE. AOL and Genuity agree that the earliest date that a market
       price adjustment pursuant to Section 8.3(a) of Schedule B of the
       Agreement may take effect is [*MATERIAL OMITTED AND SEPARATELY FILED
       PURSUANT TO AN APPLICATION FOR CONFIDENTIAL TREATMENT] and that the
       earliest date that AOL may provide Genuity with a New Dial-Up Market
       Price Notice is [*MATERIAL OMITTED AND SEPARATELY FILED PURSUANT TO AN
       APPLICATION FOR CONFIDENTIAL TREATMENT].

10.    RELEASE OF CLAIMS.

       10.1 Upon execution of this Amendment, Genuity on behalf of itself and
            all of its officers, directors, stockholders, employees, agents,
            successors, assigns, parent and subsidiary corporations, and related
            entities and affiliates (collectively, the "GENUITY RELEASING
            PARTIES"), hereby releases and irrevocably discharges AOL and all of
            AOL's officers, directors, stockholders, employees, agents,
            successors, assigns, parent and subsidiary corporations, and related
            entities and affiliates (collectively, the "AOL RELEASED PARTIES")
            from any and all complaints, claims, causes of action, suits, costs,
            losses, liabilities, damages, and demands of any kind, whether known
            or unknown (collectively, "CLAIMS"), which any of the Genuity
            Releasing Parties has alleged or could have alleged against any of
            the AOL Released Parties as of the Amendment Effective Date, which
            relate to, or arise from the subject matter of, the Released
            International Purchase Commitment, the Released Dial-Up Purchase
            Commitment, the Released Other Broadband Purchase Commitment and the
            Pricing Disputes (collectively, the "RELEASED CLAIMS").

       10.2 Upon execution of this Amendment, AOL, on behalf of itself and all
            of its officers, directors, stockholders, employees, agents,
            successors, assigns, parent and subsidiary corporations, and related
            entities and affiliates (collectively, the "AOL RELEASING PARTIES"),
            hereby releases and irrevocably discharges Genuity and all of
            Genuity's officers, directors, stockholders, employees, agents,
            successors, assigns, parent and subsidiary corporations, and related
            entities and affiliates (collectively, the "GENUITY RELEASED
            PARTIES") from any and all Claims, which any of the AOL Releasing
            Parties has alleged or could have alleged against any of the Genuity
            Released Parties as of the Amendment Effective Date, which relate
            to, or arise from the subject matter of, the Released Claims.

       10.3 Nothing herein shall be construed to release or discharge any of the
            AOL Released Parties or the Genuity Released Parties from any Claims
            that do not relate to, or do not arise from the subject matter of
            the Released Claims.

11.    SUPPLIER PERFORMANCE. The following new Section 12.5 is added to the
       Master Agreement:

            "12.5  SUPPLIER PERFORMANCE. Vendor represents and warrants that it
                   will notify Customer if, in the sole determination of Vendor,
                   Vendor reasonably believes that the performance or
                   non-performance of any of Vendor's suppliers may have a
                   materially adverse impact on the ability of Vendor to meet
                   any Service Levels under the Agreement."

12.    EFFECTIVENESS OF AGREEMENT. Except as expressly provided herein, nothing
       in this Amendment shall be deemed to waive or modify any of the
       provisions of the Agreement, or any amendment or addendum thereto. In the
       event of any conflict between the Agreement, this Amendment or any other
       amendment or addendum thereof, the document later in time shall prevail.

13.    OTHER TERMS. Except as provided in this Amendment, all other terms and
       conditions of the Agreement (including without limitation Section 8.3(b)
       of Schedule B of the Agreement) shall remain in full force and effect,
       and the parties hereto acknowledge that such terms and conditions are in
       full force and effect as of the date hereof.

                                       17

<Page>

    CONFIDENTIAL TREATMENT REQUESTED                    EXHIBIT 10.41

14.    COUNTERPARTS AND FACSIMILE DELIVERY. This Amendment may be executed in
       two or more counterparts, each of which shall be deemed an original and
       all of which taken together shall be deemed to constitute one and the
       same document. The parties may sign and deliver this Amendment by
       facsimile transmission. Each party agrees that the delivery of the
       Amendment by facsimile shall have the same force and effect as delivery
       of original signature pages and that each party may use such facsimile
       signatures as evidence of the execution and delivery of the Amendment by
       all parties to the same extent that an original signature could be used.

       IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment
to be signed and delivered by its duly authorized representative as of the
Amendment Effective Date.

America Online, Inc.                           Genuity Solutions Inc.

By: /s/ EDWARD M. PRINCE                  By: /s/ COLIN P. BEASLEY
   ---------------------------------         ----------------------------------

Name:  Edward M. Prince                   Name:  Colin Beasley
      ------------------------------            -------------------------------

Title: VP Business Affairs &              Title: Senior Vice President, Network
       Development                               Planning & Engineering
      ------------------------------            -------------------------------

Date:  January 8, 2002                    Date:  January 8, 2002
      ------------------------------            -------------------------------

                                       18

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