Document:

exv10w1

 

Exhibit 10.1

COVAD COMMUNICATIONS GROUP, INC.

INDEMNIFICATION AGREEMENT

     This Indemnification Agreement (“Agreement”) is made as of this 8th day of December, 2006, by
and between Covad Communications Group, Inc., a Delaware corporation (the “Company”), and Diana
Leonard (“Indemnitee”).

     WHEREAS, the Company and Indemnitee recognize the increasing difficulty in obtaining
directors’ and officers’ liability insurance, the significant increases in the cost of such
insurance and the general reductions in the coverage of such insurance;

     WHEREAS, the Company and Indemnitee further recognize the substantial increase in corporate
litigation in general, subjecting officers and directors to expensive litigation risks at the same
time as the availability and coverage of liability insurance has been severely limited; and

     WHEREAS, the Company desires to attract and retain the services of highly qualified
individuals, such as Indemnitee, to serve as officers and directors of the Company and to indemnify
its officers and directors so as to provide them with the maximum protection permitted by law.

     NOW, THEREFORE, in consideration for Indemnitee’s services as an officer or director of the
Company, the Company and Indemnitee hereby agree as follows:

     1. Indemnification.

          (a) Third Party Proceedings. The Company shall indemnify Indemnitee if Indemnitee is or was a
party or is threatened to be made a party to any threatened, pending or completed action, suit,
proceeding or any alternative dispute resolution mechanism, whether civil, criminal, administrative
or investigative (other than an action by or in the right of the Company) by reason of the fact
that Indemnitee is or was a director, officer, employee or agent of the Company, or any subsidiary
of the Company, or by reason of the fact that Indemnitee is or was serving at the request of the
Company as a director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys’ fees), judgments, fines
and amounts paid in settlement (if such settlement is approved in advance by the Company, which
approval shall not be unreasonably withheld) actually and reasonably incurred by Indemnitee in
connection with such action, suit or proceeding if Indemnitee acted in good faith and in a manner
Indemnitee reasonably believed to be in or not opposed to the best interests of the Company, and,
with respect to any criminal action or proceeding, had no reasonable cause to believe Indemnitee’s
conduct was unlawful. The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself,
create a presumption that Indemnitee did not act in good faith and in a manner which Indemnitee
reasonably believed to be in or not opposed to the best interests of the Company, and, with respect
to any criminal action or proceeding, had reasonable cause to believe that Indemnitee’s conduct was
unlawful.

 

 

          (b) Proceedings By or in the Right of the Company. The Company shall indemnify Indemnitee if
Indemnitee was or is a party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the Company or any subsidiary of the Company to
procure a judgment in its favor by reason of the fact that Indemnitee is or was a director,
officer, employee or agent of the Company, or any subsidiary of the Company, or by reason of the
fact that Indemnitee is or was serving at the request of the Company as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys’ fees) and, to the fullest extent permitted by law, amounts
paid in settlement actually and reasonably incurred by Indemnitee in connection with the defense or
settlement of such action or suit if Indemnitee acted in good faith and in a manner Indemnitee
reasonably believed to be in or not opposed to the best interests of the Company, except that no
indemnification shall be made in respect of any claim, issue or matter as to which Indemnitee shall
have been adjudged to be liable to the Company unless and only to the extent that the Court of
Chancery of the State of Delaware or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in view of all the
circumstances of the case, Indemnitee is fairly and reasonably entitled to indemnity for such
expenses which the Court of Chancery of the State of Delaware or such other court shall deem
proper.

          (c) Mandatory Payment of Expenses. To the extent that Indemnitee has been successful on the
merits or otherwise in defense of any action, suit or proceeding referred to in Subsections (a) and
(b) of this Section 1, or in defense of any claim, issue or matter therein, Indemnitee shall be
indemnified against expenses (including attorneys’ fees) actually and reasonably incurred by
Indemnitee in connection therewith.

     2. Agreement to Serve. In consideration of the protection afforded by this Agreement, if
Indemnitee is a director of the Company he agrees to serve at least for the 90 days after the
effective date of this Agreement as a director and not to resign voluntarily during such period
without the written consent of a majority of the Board of Directors. If Indemnitee is an officer of
the Company not serving under an employment contract, he agrees to serve in such capacity at least
for 90 days and not to resign voluntarily during such period without the written consent of a
majority of the Board of Directors. Following the applicable period set forth above, Indemnitee
agrees to continue to serve in such capacity at the will of the Company (or under separate
agreement, if such agreement exists) so long as he is duly appointed or elected and qualified in
accordance with the applicable provisions of the Bylaws of the Company or any subsidiary of the
Company or until such time as he tenders his resignation in writing. Nothing contained in this
Agreement is intended to create in Indemnitee any right to continued employment.

     3. Expenses; Indemnification Procedure.

          (a) Advancement of Expenses. The Company shall advance all expenses incurred by Indemnitee in
connection with the investigation, defense, settlement or appeal of any civil or criminal action,
suit or proceeding referenced in Section 1(a) or (b) hereof (but not amounts actually paid in
settlement of any such action, suit or proceeding). Indemnitee hereby undertakes to repay such
amounts advanced only if, and to the extent that, it shall ultimately be determined that

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Indemnitee is not entitled to be indemnified by the Company as authorized hereby. The
advances to be made hereunder shall be paid by the Company to Indemnitee within thirty (30) days
following delivery of a written request therefor by Indemnitee to the Company.

          (b) Notice/Cooperation by Indemnitee. Indemnitee shall, as a condition precedent to his right
to be indemnified under this Agreement, give the Company notice in writing as soon as practicable
of any claim made against Indemnitee for which indemnification will or could be sought under this
Agreement. Notice to the Company shall be directed to the President of the Company at the address
shown on the signature page of this Agreement (or such other address as the Company shall designate
in writing to Indemnitee and given as provided in Section 14). In addition, Indemnitee shall give
the Company such information and cooperation as it may reasonably require and as shall be within
Indemnitee’s power.

          (c) Procedure. Any indemnification and advances provided for in Section 1 and this Section 3
shall be made no later than thirty (30) days after receipt of the written request of Indemnitee.
If a claim under this Agreement, under any statute, or under any provision of the Company’s
Certificate of Incorporation or Bylaws providing for indemnification, is not paid in full by the
Company within thirty (30) days after a written request for payment thereof has first been received
by the Company, Indemnitee may, but need not, at any time thereafter bring an action against the
Company to recover the unpaid amount of the claim and, subject to Section 14 of this Agreement,
Indemnitee shall also be entitled to be paid for the expenses (including attorneys’ fees) of
bringing such action. It shall be a defense to any such action (other than an action brought to
enforce a claim for expenses incurred in connection with any action, suit or proceeding in advance
of its final disposition) that Indemnitee has not met the standards of conduct which make it
permissible under applicable law for the Company to indemnify Indemnitee for the amount claimed.
However, Indemnitee shall be entitled to receive interim payments of expenses pursuant to
Subsection 3(a) unless and until such defense may be finally adjudicated by court order or judgment
from which no further right of appeal exists. It is the parties’ intention that if the Company
contests Indemnitee’s right to indemnification, the question of Indemnitee’s right to
indemnification shall be for the court to decide, and neither the failure of the Company (including
its Board of Directors, any committee or subgroup of the Board of Directors, independent legal
counsel, or its stockholders) to have made a determination that indemnification of Indemnitee is
proper in the circumstances because Indemnitee has met the applicable standard of conduct required
by applicable law, nor an actual determination by the Company (including it Board of Directors, any
committee or subgroup of the Board of Directors, independent legal counsel, or its stockholders)
that Indemnitee has not met such applicable standard of conduct, shall create a presumption that
Indemnitee has or has not met the applicable standard of conduct.

          (d) Notice to Insurers. If, at the time of the receipt of a notice of a claim pursuant to
Section 3(b) hereof, the Company has director and officer liability insurance in effect, the
Company shall give prompt notice of the commencement of such proceeding to the insurers in
accordance with the procedures set forth in the respective policies. The Company shall thereafter
take all necessary or desirable action to cause such insurers to pay, on behalf of the Indemnitee,
all amounts payable as a result of such proceeding in accordance with the terms of such policies.

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          (e) Selection of Counsel. In the event the Company shall be obligated under Section 3(a)
hereof to pay the expenses of any proceeding against Indemnitee, the Company, if appropriate, shall
be entitled to assume the defense of such proceeding, with counsel subject to the approval of
Indemnitee, which shall not be unreasonably withheld. After delivery of written notice of the
assumption of the defense, approval of such counsel by Indemnitee as described above and the
retention of such counsel by the Company, the Company will not be liable to Indemnitee under this
Agreement for any fees of counsel subsequently incurred by Indemnitee with respect to the same
proceeding, provided that (i) Indemnitee shall have the right to employ his counsel in any such
proceeding at Indemnitee’s expense; and (ii) if (A) the employment of counsel by Indemnitee has
been previously authorized by the Company, (B) Indemnitee shall have reasonably concluded that
there may be a conflict of interest between the Company and Indemnitee in the conduct of any such
defense, or (C) the Company shall not, in fact, have employed counsel to assume the defense of such
proceeding, then the fees and expenses of Indemnitee’s counsel shall be at the expense of the
Company.

     4. Additional Indemnification Rights; Nonexclusivity.

          (a) Scope. Notwithstanding any other provision of this Agreement, the Company hereby agrees
to indemnify the Indemnitee to the fullest extent permitted by law, notwithstanding that such
indemnification is not specifically authorized by the other provisions of this Agreement, the
Company’s Certificate of Incorporation, the Company’s Bylaws or by statute. In the event of any
change, after the date of this Agreement, in any applicable law, statute, or rule which expands the
right of a Delaware corporation to indemnify a member of its board of directors or an officer, such
changes shall be, ipso facto, within the purview of Indemnitee’s rights and Company’s obligations,
under this Agreement. In the event of any change in any applicable law, statute or rule which
narrows the right of a Delaware corporation to indemnify a member of its board of directors or an
officer, such changes, to the extent not otherwise required by such law, statute or rule to be
applied to this Agreement shall have no effect on this Agreement or the parties’ rights and
obligations hereunder.

          (b) Nonexclusivity. The indemnification provided by this Agreement shall not be deemed
exclusive of any rights to which Indemnitee may be entitled under the Company’s Certificate of
Incorporation, its Bylaws, any agreement, any vote of stockholders or disinterested Directors, the
General Corporation Law of the State of Delaware, or otherwise, both as to action in Indemnitee’s
official capacity and as to action in another capacity while holding such office. The
indemnification provided under this Agreement shall continue as to Indemnitee for any action taken
or not taken while serving in an indemnified capacity even though he may have ceased to serve in
such capacity at the time of any action, suit or other covered proceeding.

     5. Partial Indemnification. If Indemnitee is entitled under any provision of this Agreement
to indemnification by the Company for some or a portion of the expenses, judgments, fines or
penalties actually or reasonably incurred by him in the investigation, defense, appeal or
settlement of any civil or criminal action, suit or proceeding, but not, however, for the total
amount thereof, the Company shall nevertheless indemnify Indemnitee for the portion of such
expenses, judgments, fines or penalties to which Indemnitee is entitled.

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     6. Mutual Acknowledgement. Both the Company and Indemnitee acknowledge that in certain
instances, Federal law or applicable public policy may prohibit the Company from indemnifying its
directors and officers under this Agreement or otherwise. Indemnitee understands and acknowledges
that the Company has undertaken or may be required in the future to undertake with the Securities
and Exchange Commission to submit the question of indemnification to a court in certain
circumstances for a determination of the Company’s right under public policy to indemnify
Indemnitee.

     7. Officer and Director Liability Insurance. The Company shall, from time to time, make the
good faith determination whether or not it is practicable for the Company to obtain and maintain a
policy or policies of insurance with reputable insurance companies providing the officers and
directors of the Company with coverage for losses from wrongful acts, or to ensure the Company’s
performance of its indemnification obligations under this Agreement. Among other considerations,
the Company will weigh the costs of obtaining such insurance coverage against the protection
afforded by such coverage. In all policies of director and officer liability insurance, Indemnitee
shall be named as an insured in such a manner as to provide Indemnitee the same rights and benefits
as are accorded to the most favorably insured of the Company’s directors, if Indemnitee is a
director; or of the Company’s officers, if Indemnitee is not a director of the Company but is an
officer. Notwithstanding the foregoing, the Company shall have no obligation to obtain or maintain
such insurance if the Company determines in good faith that such insurance is not reasonably
available, if the premium costs for such insurance are disproportionate to the amount of coverage
provided, if the coverage provided by such insurance is limited by exclusions so as to provide an
insufficient benefit, or if Indemnitee is covered by similar insurance maintained by a subsidiary
or parent of the Company.

     8. Severability. Nothing in this Agreement is intended to require or shall be construed as
requiring the Company to do or fail to do any act in violation of applicable law. The Company’s
inability, pursuant to court order, to perform its obligations under this Agreement shall not
constitute a breach of this Agreement. The provisions of this Agreement shall be severable as
provided in this Section 8. If this Agreement or any portion hereof shall be invalidated on any
ground by any court of competent jurisdiction, then the Company shall nevertheless indemnify
Indemnitee to the full extent permitted by any applicable portion of this Agreement that shall not
have been invalidated, and the balance of this Agreement not so invalidated shall be enforceable in
accordance with its terms.

     9. Exceptions. Any other provision herein to the contrary notwithstanding, the Company shall
not be obligated pursuant to the terms of this Agreement:

          (a) Claims Initiated by Indemnitee. To indemnify or advance expenses to Indemnitee with
respect to proceedings or claims initiated or brought voluntarily by Indemnitee and not by way of
defense, except with respect to proceedings brought to establish or enforce a right to
indemnification under this Agreement or any other statute or law or otherwise as required under
Section 145 of the Delaware General Corporation Law, but such indemnification or advancement of
expenses may be provided by the Company in specific cases if the Board of Directors has approved
the initiation or bringing of such suit; or

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          (b) Lack of Good Faith. To indemnify Indemnitee for any expenses incurred by the Indemnitee
with respect to any proceeding instituted by Indemnitee to enforce or interpret this Agreement, if
a court of competent jurisdiction determines that each of the material assertions made by the
Indemnitee in such proceeding was not made in good faith or was frivolous; or

          (c) Insured Claims. To indemnify Indemnitee for expenses or liabilities of any type
whatsoever (including, but not limited to, judgments, fines, ERISA excise taxes or penalties, and
amounts paid in settlement) which have been paid directly to Indemnitee by an insurance carrier
under a policy of officers’ and directors’ liability insurance maintained by the Company.

          (d) Claims Under Section 16(b). To indemnify Indemnitee for expenses and the payment of
profits arising from the purchase and sale by Indemnitee of securities in violation of Section
16(b) of the Securities Exchange Act of 1934, as amended, or any similar successor statute.

     10. Construction of Certain Phrases.

          (a) For purposes of this Agreement, references to the “Company” shall include, in addition to
the resulting corporation, any constituent corporation (including any constituent of a constituent)
absorbed in a consolidation or merger which, if its separate existence had continued, would have
had power and authority to indemnify its directors, officers, and employees or agents, so that if
Indemnitee is or was a director, officer, employee or agent of such constituent corporation, or is
or was serving at the request of such constituent corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other enterprise, Indemnitee
shall stand in the same position under the provisions of this Agreement with respect to the
resulting or surviving corporation as Indemnitee would have with respect to such constituent
corporation if its separate existence had continued.

          (b) For purposes of this Agreement, references to “other enterprises” shall include employee
benefit plans; references to “fines” shall include any excise taxes assessed on Indemnitee with
respect to an employee benefit plan; and references to “serving at the request of the Company”
shall include any service as a director, officer, employee or agent of the Company which imposes
duties on, or involves services by, such director, officer, employee or agent with respect to an
employee benefit plan, its participants, or beneficiaries; and if Indemnitee acted in good faith
and in a manner Indemnitee reasonably believed to be in the interest of the participants and
beneficiaries of an employee benefit plan, Indemnitee shall be deemed to have acted in a manner
“not opposed to the best interests of the Company” as referred to in this Agreement.

     11. Counterparts. This Agreement may be executed in one or more counterparts, each of which
shall constitute an original.

     12. Successors and Assigns. This Agreement shall be binding upon the Company and its
successors and assigns, and shall inure to the benefit of Indemnitee and Indemnitee’s estate,
heirs, legal representatives and assigns.

     13. Attorneys’ Fees. In the event that any action is instituted by Indemnitee under this
Agreement to enforce or interpret any of the terms hereof, Indemnitee shall be entitled to be paid
all

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court costs and expenses, including reasonable attorneys’ fees, incurred by Indemnitee with
respect to such action, unless as a part of such action, the court of competent jurisdiction
determines that each of the material assertions made by Indemnitee as a basis for such action were
not made in good faith or were frivolous. In the event of an action instituted by or in the name
of the Company under this Agreement or to enforce or interpret any of the terms of this Agreement,
Indemnitee shall be entitled to be paid all court costs and expenses, including attorneys’ fees,
incurred by Indemnitee in defense of such action (including with respect to Indemnitee’s
counterclaims and cross-claims made in such action), unless as a part of such action the court
determines that each of Indemnitee’s material defenses to such action were made in bad faith or
were frivolous.

     14. Notice. All notices, requests, demands and other communications under this Agreement
shall be in writing and shall be deemed duly given (i) if delivered by hand and receipted for by
the party addressee, on the date of such receipt, or (ii) if mailed by domestic certified or
registered mail with postage prepaid, on the third business day after the date postmarked.
Addresses for notice to either party are as shown on the signature page of this Agreement, or as
subsequently modified by written notice.

     15. Consent to Jurisdiction. The Company and Indemnitee each hereby irrevocably consent to
the jurisdiction of the courts of the State of Delaware for all purposes in connection with any
action or proceeding which arises out of or relates to this Agreement and agree that any action
instituted under this Agreement shall be brought only in the state courts of the State of Delaware.

     16. Choice of Law. This Agreement shall be governed by and its provisions construed in
accordance with the laws of the State of Delaware, as applied to contracts between Delaware
residents entered into and to be performed entirely within Delaware without regard to the conflict
of law principles thereof.

     17. Period of Limitations. No legal action shall be brought and no cause of action shall be
asserted by or in the right of the Company against Indemnitee, Indemnitee’s estate, spouse, heirs,
executors or personal or legal representatives after the expiration of two years from the date of
accrual of such cause of action, and any claim or cause of action of the Company shall be
extinguished and deemed released unless asserted by the timely filing of a legal action within such
two-year period; provided, however, that if any shorter period of limitations is
otherwise applicable to any such cause of action, such shorter period shall govern.

     18. Subrogation. In the event of payment under this Agreement, the Company shall be
subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall
execute all documents required and shall do all acts that may be necessary to secure such rights
and to enable the Company effectively to bring suit to enforce such rights.

     19. Amendment and Termination. No amendment, modification, termination or cancellation of
this Agreement shall be effective unless it is in writing signed by both the parties hereto. No
waiver of any of the provisions of this Agreement shall be deemed or shall constitute a
waiver of any other provisions hereof (whether or not similar) nor shall such waiver
constitute a continuing waiver.

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     20. Integration and Entire Agreement. This Agreement sets forth the entire understanding
between the parties hereto and supersedes and merges all previous written and oral negotiations,
commitments, understandings and agreements relating to the subject matter hereof between the
parties hereto.

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

	 	 	 	 	 
	 	 	COVAD COMMUNICATIONS GROUP, INC.
	 
	 	 	 	 
	 	 	/s/ Charles Hoffman
	 	 	 
	 	 	Signature of Authorized Signatory
	 
	 	 	Charles Hoffman, President and CEO
	 	 	 
	 	 	Print Name and Title
	 
	 	 	 	 
	 

	 	Address:
	 	110 Rio Robles
	 

	 	 	 	San Jose, CA 95134

AGREED TO AND ACCEPTED:

INDEMNITEE:

	 	 	 
	/s/ Diana Leonard
 

	 	 
	Signature
	 	 
	 
	 	 
	Diana Leonard
	 	 
	 

	 	 
	Print Name
	 	 

	 	 	 
	Address:

	 	110 Rio Robles
	 

	 	San Jose, CA 95134

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Exhibit 10.1

CHANGE
IN TERMS AGREEMENT

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Principal
	 	Loan Date	 	Maturity	 	Loan No.	 	Call / Coll	 	Account	 	Officer	 	Initials
	$185,000.00
	 	 	12-02-2006	 	 	 	04-02-2007	 	 	 	479195	 	 	 	 	 	 	 	 	 	 	 	025	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	References in the shaded area are for Lender’s use only and do not limit the applicability of this document to any particular loan or item.

	Any item above containing “***’’ has been omitted due to text length limitations.

	 	 	 	 	 	 	 
	Borrower:

	 	Z-AXIS CORPORATION
	 	Lender:
	 	COLORADO BUSINESS BANK
	 

	 	THE QUADRANT — 5445 DTC PARKWAY STE. 450
	 	 	 	DENVER
	 

	 	GREENWOOD VILLAGE, CO 80111
	 	 	 	821 17TH STREET
	 

	 	 	 	 	 	DENVER, CO 80202

 

					
	Principal Amount: $185,000.00
	 	Initial Rate: 9.750%
	 	Date of Agreement: December l2,
2006

DESCRIPTION
OF EXISTING INDEBTEDNESS. AN ORIGINAL PROMISSORY NOTE DATED JUNE 2, 2003 IN THE
PRINCIPAL AMOUNT OF $500,000.00, WITH AN ORIGINAL MATURITY DATE OF JULY 2, 2004 AND INCLUDING ANY
AND ALL SUBSEQUENT EXTENSIONS AND MODIFICATIONS THEREFROM.

DESCRIPTION
OF CHANGE IN TERMS. EXTENSION OF MATURITY DATE FROM DECEMBER 2, 2006 TO APRIL 2, 2007.
IN ADDITION, THE PRINCIPAL AMOUNT IS HEREBY DECREASED FROM
$230,000.00 TO $185,000.00; FURTHERMORE THE LINE OF CREDIT WILL BE
CAPPED AT $175,000.00 AS OF JANUARY 2, 2007; $160,000.00 AS OF
FEBRUARY 2, 2007 AND $145,000.00 AS OF MARCH 2, 2007. ALL OTHER TERMS AND CONDITIONS WILL REMAIN THE SAME.

PROMISE
TO PAY. Z-AXIS CORPORATION (“Borrower”) promises to pay to COLORADO BUSINESS BANK
(“Lender”), or order, in lawful money of the United States
of America, the principal amount of One
Hundred Eighty-five Thousand & 00/100 Dollars ($185,000.00) or so much as may be outstanding, together
with interest on the unpaid outstanding principal balance of each advance. Interest shall be
calculated from the date of each advance until repayment of each
advance.

PAYMENT. Borrower will pay this loan in one payment of all outstanding principal plus all accrued
unpaid interest on April 2, 2007. In addition, Borrower will pay regular monthly payments of all
accrued unpaid interest due as of each payment date, beginning
January 2, 2007, with all
subsequent interest payments to be due on the same day of each month after that. Unless otherwise
agreed or required by applicable law, payments will be applied first to any accrued unpaid
interest; then to principal; then to any late charges; and then to any unpaid collection costs.
Interest on this loan is computed on a 365/360 simple interest basis; that is, by applying the
ratio of the annual interest rate over a year of 360 days, multiplied by the outstanding principal
balance, multiplied by the actual number of days the principal balance is outstanding. Borrower
will pay Lender at Lender’s address shown above or at such other place as Lender may designate in
writing.

VARIABLE
INTEREST RATE. The interest rate on this loan is subject to change from time to time based
on changes in an index which is the COLORADO BUSINESS BANK PRIME RATE (the “Index”). Lender will
tell Borrower the current Index rate upon Borrower’s request. The interest rate change will not
occur more often than each DAY. Borrower understands that Lender may make loans based on other
rates as well. The index currently is 8.250% per annum. The interest rate to be applied to the
unpaid principal balance during this loan will be at a rate of 1.500 percentage points over the
Index, resulting in an initial rate of 9.750% per annum. NOTICE: Under no circumstances will the
interest rate on this loan be more than the maximum rate allowed by applicable law.

PREPAYMENT. Borrower agrees that all loan fees and other prepaid finance charges are earned fully
as of the date of the loan and will not be subject to refund upon early payment (whether voluntary
or as a result of default), except as otherwise required by law. Except for the foregoing, Borrower
may pay without penalty all or a portion of the amount owed earlier than it is due. Early payments
will not, unless agreed to by Lender in writing, relieve Borrower of Borrower’s obligation to
continue to make payments of accrued unpaid interest. Rather, early payments will reduce the
principal balance due. Borrower agrees not to send Lender payments marked “paid in full”, “without
recourse”, or similar language. If Borrower sends such a payment, Lender may accept it without
losing any of Lender’s rights under this Agreement, and Borrower will remain obligated to pay any
further amount owed to Lender. All written communications concerning disputed amounts, including
any check or other payment instrument that indicates that the payment constitutes “payment in full”
of the amount owed or that is tendered with other conditions or limitations or as full satisfaction
of a disputed amount must be mailed or delivered to: COLORADO BUSINESS BANK, ATTN: LOAN OPERATIONS,
P.O. BOX 8779 DENVER, CO 80201.

LATE CHARGE. If a payment is 11 days or more late, Borrower will be charged 5.000% of the unpaid
portion of the regularly scheduled payment.

INTEREST
AFTER DEFAULT. Upon default, including failure to pay upon final maturity, the interest
rate on this loan shall be increased by adding a 5.000 percentage point margin (“Default Rate
Margin”). The Default Rate Margin shall also apply to each succeeding interest rate change that
would have applied had there been no default. However, in no event will the interest rate exceed
the maximum interest rate limitations under applicable law.

DEFAULT. Each of the following shall constitute an Event of Default under this Agreement:

Payment
Default. Borrower fails to make any payment when due under the Indebtedness.

Other
Defaults. Borrower fails to comply with or to perform any other term, obligation, covenant or
condition contained in this Agreement or in any of the Related Documents or to comply with or to
perform any term, obligation, covenant or condition contained in any other agreement between Lender
and Borrower.

False
Statements. Any warranty, representation or statement made or furnished to Lender by Borrower
or on Borrower’s behalf under this Agreement or the Related Documents is false or misleading in any
material respect, either now or at the time made or furnished or becomes false or misleading at any
time thereafter.

Insolvency. The dissolution or termination of Borrower’s existence as a going business, the
insolvency of Borrower, the appointment of a receiver for any part of Borrower’s property, any
assignment for the benefit of creditors, any type of creditor workout, or the commencement of any
proceeding under any bankruptcy or insolvency laws by or against Borrower.

Creditor
or Forfeiture Proceedings. Commencement of foreclosure or forfeiture proceedings, whether
by judicial proceeding, self-help, repossession or any other method, by any creditor of Borrower or
by any governmental agency against any collateral securing the Indebtedness. This includes a
garnishment of any of Borrower’s accounts, including deposit accounts, with Lender. However, this
Event of Default shall not apply if there is a good faith dispute by Borrower as to the validity or
reasonableness of the claim which is the basis of the creditor or forfeiture proceeding and if
Borrower gives Lender written notice of the creditor or forfeiture proceeding and deposits with
Lender monies or a surety bond for the creditor or forfeiture proceeding, in an amount determined
by Lender, in its sole discretion, as being an adequate reserve or bond for the dispute.

Events
Affecting Guarantor. Any of the preceding events occurs with
respect to any guarantor, endorser, surety, or accommodation party of
any of the indebtedness or any guarantor, endorser, surety, or
accommodation party dies or becomes incompetent, or revokes or disputes the
validity of, or liability under, any Guaranty of the Indebtedness evidenced by this Note.

Change
In Ownership. Any change in ownership of twenty-five percent (25%) or more of the common
stock of Borrower.

Adverse
Change. A material adverse change occurs in Borrower’s financial condition, or Lender
believes the prospect of payment or performance of the Indebtedness is impaired.

Insecurity. Lender in good faith believes itself insecure.

LENDER’S
RIGHTS. Upon default, Lender may declare the entire unpaid principal balance under this
Agreement and all accrued unpaid interest immediately due, and then Borrower will pay that amount.

ATTORNEYS’
FEES; EXPENSES. Lender may hire or pay someone else to help collect this Agreement if
Borrower does not pay. Borrower will pay Lender the reasonable costs of such collection. This
includes, subject to any limits under applicable law, Lender’s attorneys’ fees and Lender’s legal
expenses, whether or not there is a lawsuit, including without limitation attorneys’ fees and legal expenses for bankruptcy proceedings (including efforts
to modify or vacate any automatic stay or injunction), and appeals. If not prohibited by applicable
law, Borrower also will pay any court costs, in addition to all other sums provided by law.

JURY
WAIVER. Lender and Borrower hereby waive the right to any jury trial in any action,
proceeding, or counterclaim brought by either Lender or Borrower
against the other.

 

 

					
	 
	 	CHANGE IN TERMS AGREEMENT	 	 
	Loan No: 479195
	 	(Continued)
	 	Page 2

 

GOVERNING LAW. This Agreement will be governed by federal law applicable to Lender and, to the
extent not preempted by federal law, the laws of the State of Colorado without regard to its
conflicts of law provisions. This Agreement has been accepted by
Lender in the State of Colorado.

DISHONORED
ITEM FEE. Borrower will pay a fee to Lender of $32.00 if Borrower makes a payment on
Borrower’s loan and the check or preauthorized charge with which Borrower pays is later dishonored.

RIGHT
OF SETOFF. To the extent permitted by applicable law, Lender reserves a right of setoff in
all Borrower’s accounts with Lender (whether checking, savings, or some other account). This
includes all accounts Borrower holds jointly with someone else and all accounts Borrower may open
in the future. However, this does not include any IRA or Keogh accounts, or any trust accounts for
which setoff would be prohibited by law. Borrower authorizes Lender, to the extent permitted by
applicable law, to charge or setoff all sums owing on the debt against any and all such accounts.

LINE OF
CREDIT. This Agreement evidences a revolving line of credit. Advances under this Agreement,
as well as directions for payment from Borrower’s accounts, may be requested orally or in writing
by Borrower or by an authorized person. Lender may, but need not, require that all oral requests be
confirmed in writing. Borrower agrees to be liable for all sums either: (A) advanced in accordance
with the instructions of an authorized person or (B) credited to any of Borrower’s accounts with
Lender. The unpaid principal balance owing on this Agreement at any time may be evidenced by
endorsements on this Agreement or by Lender’s internal records, including daily computer
print-outs. Lender will have no obligation to advance funds under this Agreement if: (A) Borrower
or any guarantor is in default under the terms of this Agreement or any agreement that Borrower or
any guarantor has with Lender, including any agreement made in connection with the signing of this
Agreement; (B) Borrower or any guarantor ceases doing business or is insolvent; (C) any guarantor
seeks, claims or otherwise attempts to limit, modify or revoke such guarantor’s guarantee of this
Agreement or any other loan with Lender; (D) Borrower has applied funds provided pursuant to this
Agreement for purposes other than those authorized by Lender; or (E) Lender in good faith believes
itself insecure.

CONTINUING
VALIDITY. Except as expressly changed by this Agreement, the terms of the original
obligation or obligations, including all agreements evidenced or securing the obligation(s), remain
unchanged and in full force and effect. Consent by Lender to this Agreement does not waive Lender’s
right to strict performance of the obligation(s) as changed, nor obligate Lender to make any future
change in terms. Nothing in this Agreement will constitute a satisfaction of the obligation(s). It
is the intention of Lender to retain as liable parties all makers and endorsers of the original
obligation(s), including accommodation parties, unless a party is expressly released by Lender in
writing. Any maker or endorser, including accommodation makers, will not be released by virtue of
this Agreement. If any person who signed the original obligation does not sign this Agreement
below, then all persons signing below acknowledge that this Agreement is given conditionally, based
on the representation to Lender that the non-signing party consents to the changes and provisions
of this Agreement or otherwise will not be released by it. This waiver applies not only to any
initial extension, modification or release, but also to all such subsequent actions.

SUCCESSORS
AND ASSIGNS. Subject to any limitations stated in this Agreement on transfer of
Borrower’s interest, this Agreement shall be binding upon and inure to the benefit of the parties,
their successors and assigns. If ownership of the Collateral becomes vested in a person other than
Borrower, Lender, without notice to Borrower, may deal with Borrower’s successors with reference to
this Agreement and the Indebtedness by way of forbearance or extension without releasing Borrower
from the obligations of this Agreement or liability under the Indebtedness.

NOTIFY
US OF INACCURATE INFORMATION WE REPORT TO CONSUMER REPORTING AGENCIES. Please notify us if
we report any inaccurate information about your account(s) to a consumer reporting agency. Your
written notice describing the specific inaccuracy(ies) should be sent to us at the following
address: COLORADO BUSINESS BANK ATTN: LOAN OPERATIONS 821 17TH STREET DENVER, CO 80202.

MISCELLANEOUS
PROVISIONS. If any part of this Agreement cannot be enforced, this fact will not
affect the rest of the Agreement. Lender may delay or forgo enforcing any of its rights or remedies
under this Agreement without losing them. Borrower and any other person who signs, guarantees or
endorses this Agreement, to the extent allowed by law, waive presentment, demand for payment, and
notice of dishonor. Upon any change in the terms of this Agreement, and unless otherwise expressly
stated in writing, no party who signs this Agreement, whether as maker, guarantor, accommodation
maker or endorser, shall be released from liability. All such parties agree that Lender may renew
or extend (repeatedly and for any length of time) this loan or release any party or guarantor or
collateral; or impair, fail to realize upon or perfect Lender’s security interest in the
collateral; and take any other action deemed necessary by Lender without the consent of or notice
to anyone. All such parties also agree that Lender may modify this loan without the consent of or
notice to anyone other than the party with whom the modification is made. The obligations under
this Agreement are joint and several.

PRIOR TO SIGNING THIS AGREEMENT, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS AGREEMENT,
INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO
THE TERMS OF THE AGREEMENT.

	 	 	 	 	 	 	 
	BORROWER:	 	 	 	 
	 

	 	 	 	 	 	 
	Z-AXIS CORPORATION	 	 	 	 
	 

	 	 	 	 	 	 
	By:

	 	 
	 	By:
	 	 
	 

	 	 
	 	 	 	 
	 

	 	ALAN TREIBITZ, CEO/CFO of
Z-AXIS
	 	 	 	STEPHANIE S. KELSO, President of
Z-AXIS
	 

	 	CORPORATION
	 	 	 	CORPORATION

 

LASER PRO Landing, ver. 5.33.00.004 Copr. Harland Financial Solutions, Inc. 1997, 2006.
All Rights Reserved. -CO L:\CFI\LPL\D20C.FC TR-22546 PR-14

 

DISBURSEMENT REQUEST AND AUTHORIZATION

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Principal
	 	Loan Date	 	Maturity	 	Loan No.	 	Call / Coll	 	Account	 	Officer	 	Initials
	$185,000.00
	 	 	12-02-2006	 	 	 	04-02-2007	 	 	 	479195	 	 	 	 	 	 	 	 	 	 	 	025	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	References in the shaded area are for Lender’s use only and do not limit the applicability of this document to any particular loan or item.

	Any item above containing “***’’ has been omitted due to text length limitations.

	 	 	 	 	 	 	 
	Borrower:

	 	Z-AXIS CORPORATION
	 	Lender:
	 	COLORADO BUSINESS BANK
	 

	 	THE QUADRANT — 5445 DTC PARKWAY STE. 450
	 	 	 	DENVER
	 

	 	GREENWOOD VILLAGE, CO 80111
	 	 	 	821 17TH STREET
	 

	 	 	 	 	 	DENVER, CO 80202

 

LOAN TYPE.
This is a Variable Rate Nondisclosable Revolving Line of Credit Loan to a Corporation
for $185,000.00 due on April 2, 2007. The reference rate (COLORADO BUSINESS BANK PRIME RATE,
currently 8.250%) is added to the margin of 1.500%, resulting in an initial rate of 9.750.

PRIMARY PURPOSE OF LOAN. The primary purpose of this loan is for:

	 	o	 	Personal, Family, or Household Purposes or Personal Investment.
	 
	 	þ	 	Business (Including Real Estate Investment).

SPECIFIC PURPOSE. The specific purpose of this loan is: CHANGE IN TERMS.

DISBURSEMENT INSTRUCTIONS. Borrower understands that no loan proceeds will be disbursed until all
of Lender’s conditions for making the loan have been satisfied. Please disburse the loan proceeds
of $185,000.00 as follows:

	 	 	 	 	 
	Undisbursed Funds:
	 	 	$118.20	 
	 
	 	 	 	 
	Other Disbursements:
	 	$	184,881.80	 
	$184,881.80 EXTEND #479195 (CURRENT BALANCE)
	 	 	 	 
	 
	 	 	 
	 
	 	 	 	 
	Note Principal:
	 	$	185,000.00	 

CHARGES PAID IN CASH. Borrower has paid or will pay in cash as agreed the following charges:

	 	 	 	 	 
	Prepaid Finance Charges Paid in Cash:
	 	$	1,000.00	 
	$1,000.00 LOAN FEE
	 	 	 	 
	 
	 	 	 	 
	Other Charges Paid in Cash:
	 	$	1,502.16	 
	$1,502.16 INTEREST DUE TO 12-02-06
	 	 	 	 
	 
	 	 	 
	 
	 	 	 	 
	Total Charges Paid In Cash:
	 	$	2,502.16	 

AUTHORIZATION. BORROWER AUTHORIZES LENDER TO DISBURSE THE LOAN PROCEEDS BY WIRE TRANSFER WHERE APPROPRIATE AND THIS AUTHORIZATION SHALL CONSTITUTE A PAYMENT ORDER FOR SUCH TRANSFERS.

FINANCIAL
CONDITION. BY SIGNING THIS AUTHORIZATION, BORROWER REPRESENTS AND WARRANTS TO LENDER THAT
THE INFORMATION PROVIDED ABOVE IS TRUE AND CORRECT AND THAT THERE HAS BEEN NO MATERIAL ADVERSE
CHANGE IN BORROWER’S FINANCIAL CONDITION AS DISCLOSED IN BORROWER’S MOST RECENT FINANCIAL STATEMENT
TO LENDER. THIS AUTHORIZATION IS DATED DECEMBER 2, 2006.

	 	 	 	 	 	 	 
	BORROWER:	 	 	 	 
	 
	 	 	 	 	 	 
	Z-AXIS CORPORATION	 	 	 	 
	 
	 	 	 	 	 	 
	By:

	 	 
	 	By:
	 	 
	 

	 	 
	 	 	 	 
	 

	 	ALAN TREIBITZ, CEO/CFO of Z-AXIS
	 	 	 	STEPHANIE S. KELSO, President of Z-AXIS
	 

	 	CORPORATION
	 	 	 	CORPORATION

 

LASER PRO Landing, ver. 5.33.00.004 Copr. Harland Financial Solutions, Inc. 1997, 2006.
All Rights Reserved. -CO L:\CFI\LPL\D20C.FC TR-22546 PR-14

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