EFTA01120889

SCHEDULE OF EXCEPTIONS In connection with that certain Series 5 Preferred Stock Purchase Agreement dated as of June 9, 2011, by and among AliphCom (the "Company") and the persons and entities listed on the Schedule of Purchasers attached thereto (the "Agreement "), the Company hereby delivers this Schedule of Exceptions to the Company's representations and warranties given in the Agreement. This Schedule of Exceptions and the information and disclosures contained herein are intended only to qualify and limit the representations, warranties and covenants of the Company contained in the Agreement, and shall not be deemed to expand in any way the scope or effect of any of such representations, warranties or covenants. The section numbers in this Schedule correspond to the section numbers in the Agreement; provided, however, that any information disclosed herein under any section number shall be deemed to be disclosed and incorporated in any other section of the Agreement where such disclosure would be appropriate and reasonably apparent. Disclosure of any information or document herein is not a statement or admission that it is material or required to be disclosed herein. References to any document do not purport to be complete and are qualified in their entirety by the document itself. Capitalized terms used but not defined herein shall have the same meanings given them in the Agreement. 3.2 Subsidiaries. The Company has a wholly-owned subsidiary in the United Kingdom, Aliph Limited. In anticipation of a future reincorporation to Delaware, the Company formed a wholly owned subsidiary in Delaware in 2008, Aliph, Inc., which has no assets. The Company is in the process of establishing a Wholly-Foreign-Owned Entity ("WFOE") in Kunshan City, China, for the purpose of employing staff and conducting product development, manufacturing and operations support, sales and marketing activity in China. The Company expects the WFOE to be established in the third quarter of 2011. On February 9, 2011, the Company acquired all of the outstanding membership units of YiqYaq LLC, a California limited liability company (the "YiqYaq Acquisition"). On February 9, 2011, the Company acquired all of the issued and outstanding shares of Togeru, Inc., a Delaware corporation (the "Togeru Acquisition"). 3.3 Capitalization. (a) Due to the exercise of options or warrants outstanding as of the date of the Agreement during the period between the date of the Agreement and the date of the Initial Closing, the capitalization numbers set forth in Section 3.3 of the Agreement may not be accurate as of the date of the Initial Closing. (c) 1067404 v5/SF EFTA01120889 Pursuant to a certain letter agreement, dated as of August 29, 2007, by and between Kindred Partners, LLC ("Kindred") and the Company (as amended from time to time, the "Kindred Agreement'), the Company has agreed to issue equity to Kindred or an affiliate of Kindred equal to 1/12th of the stock and/or stock options granted to certain persons hired by the Company that were sourced by Kindred. See the disclosure in 3.20 below regarding the Acceleration Provisions (as defined below) and acceleration to non-employee directors and Board advisors. As of June 3, 2011, the Company expects the Board will approve the following proposed option grants at its next meeting (following a third party appraisal of the value of the Company's Common Stock): Vesting Name of Employee or Si of Commencement Proposed Option Grantee Contractor Type Options Date Pass, Jason Employee ISO 20,000 04/18/11 Buck, Billie Employee ISO 10,000 01/31/11 Bosson, Lewis Employee ISO 25,000 04/18/11 Kavrell, Hannah Employee ISO 4,000 04/25/11 Allen, Erica Employee ISO 3,500 04/25/11 Kikuchi, Toshi Employee ISO 45,000 05/02/11 Nada r, Prakash Employee ISO 15,000 05/04/11 Hugo, Dan Employee ISO 25,000 05/09/11 Rhuberg, Adam Employee ISO 25,000 05/09/11 Duran, Melissa Employee ISO 5,000 05/09/11 Middleton, Christian Employee ISO 65,000 05/12/11 Callender, Robin Employee ISO 25,000 05/16/11 Wei, Ed Employee ISO 60,000 05/23/11 Ivie, Chad Employee ISO 20,000 05/23/11 Mena, Oscar Employee ISO 40,000 05/23/11 Gin, Shauna Employee ISO 5,000 05/23/11 Jordan, Stephen Employee ISO 15,000 5/25/2011 Baillie, Cameron Employee ISO 25,000 5/31/2011 Duncan, Charles Employee ISO 40,000 6/1/2011 Herr, Richard Employee ISO 15,000 6/1/2011 Harris, Laurie Employee ISO 15,000 6/1/2011 3.5 Litigation. The Company is engaged in litigation involving Elizabeth Bastiaanse Hamren, the Company's former Vice President of Product Management and Marketing. The Company is both pursuing 1067404 v5'SF 2 EFTA01120890 claims against Hamren, and defending against cross-claims she has asserted against the Company, as described below. Aliph v. Hamren — On June 26, 2009, the Company filed an action against Hamren for misappropriation of the Company's trade secrets, in the California Superior Court, County of San Francisco, Case No. CGC-09-489870 (the "Trade Secrets Action"). The Complaint alleges Hamren retained, without authorization, various types of Company trade secret information, including but not limited to valuable marketing information, and was in a position to improperly use such information in connection with her work for Plantronics, Inc., a direct competitor to the Company. The Trade Secrets Action contains claims for misappropriation of trade secrets, breach of contract, breach of the implied covenant of good faith and fair dealing, violation of California Penal Code section 502(c), and breach of fiduciary duty. On January IS, 2010, the Company filed a First Amended Complaint in the Trade Secrets Action, alleging the same claims listed above, and adding new allegations that Hamren used or disclosed the Company's trade secrets and/or confidential information in connection with her work for Plantronics as a consultant and subsequently as an employee. The First Amended Complaint requests an unspecified amount of damages, a constructive trust, injunctive relief and attorneys fees. Hamren filed an Answer to the First Amended Complaint, generally denying the allegations therein and asserting various defenses. Hamren v. Aliph — On September 18, 2009, Hamren filed a cross-complaint against the Company in the same Superior Court action as the Trade Secrets Action, alleging claims arising from her employment with the Company and termination of employment, which was effective December 31, 2008 (the "Employment Action"). The Cross-Complaint alleged causes of action for sex discrimination; hostile work environment sexual harassment; retaliation; breach of contract for failing to pay a bonus, failing to accelerate unvested stock option shares upon Hamren's employment termination, and terminating Hamren's employment to prevent her from further vesting in such option; and wrongful termination in violation of public policy. In response to the Company's demurrers to the Cross-Complaint and the Court's rulings thereon, Hamren filed a First Amended Cross-Complaint. The Court sustained without leave to amend the Company's demurrer to Hamren's wrongful termination claim in the First Amended Cross-Complaint. Hamren subsequently filed a Second Amended Cross-Complaint, after the Court had twice sustained (with leave to amend) the Company's demurrers to Hamren's sex harassment claim. The Court overruled the Company's demurrer to the sex harassment claim in the Second Amended Cross-Complaint. The Second Amended Cross-Complaint requests an unspecified amount of damages, vesting of certain unvested stock option shares, injunctive relief and attorneys fees. The Company filed an Answer to the Second Amended Cross-Complaint, generally denying the allegations therein and asserting various defenses. The parties have engaged in paper discovery in the Trade Secrets and Employment Actions, and the Company has also issued document subpoenas to third-party Plantronics in the Trade Secrets Action as well as to three third-party marketing vendors of Plantronics. The parties have taken five depositions to date. The parties have scheduled a mediation for the Trade Secrets and Employment Actions for July II, 2011, and discovery in both actions is currently on hold until 1067404 vSiSF 3 EFTA01120891 the mediation occurs. In light of the pending mediation and at the parties' request, the court continued the trial date to February 6, 2012. Plant ones v. Aliph (trade secrets claim) — The Company recently settled a trade secrets claim filed by Plantronics in 2009 (the "Plantronics Settlement). Plantronics claimed that the Company had misappropriated trade secrets, including information relating to engineering development and manufacturing processes. The parties had engaged in substantial paper discovery, but no depositions had yet been taken and no substantive motions had been filed. The terms of the settlement are confidential. Plantronics v. Aliph (patent infringement claim) — In January 2009, Plantronics filed a patent infringement claim against the Company in the Eastern District of Texas. The single patent at issue claims an ear bud for headset stabilization in the ear. The case was transferred to the Northern District of California (Plantronics v. Aliph, Case No. 3:2009-CV-01843). In November 2009, the case was stayed pending reexamination of the patent. The patent recently issued from reexamination and the case began procedure in Spring 2011, commencing with claim construction procedure. The parties are engaging in paper discovery; depositions are expected to commence in July 2011. Claim construction is set for September 2011. Trial is set for Spring 2012. WI-LAN, Inc. v. Acer, In January 2010, Wi-LAN commenced a patent infringement action in the Eastern District of Texas against a number of defendants, including the company and its chip supplier CSR alleging infringement of certain patents held by Wi-LAN (Wi-LAN, Inc. v. Acer, Inc., Case No. 10-CV- 00124). Subsequently Wi-LAN sent correspondence to the Company alleging that the Company's products infringed on the same patents. The Company filed a declaratory judgment action in the US District Court for the Northern District of California asserting the invalidity of the patents held by Wi-LAN (Aliphcom v. Wi-LAN, Inc., Case No. CV-I0-02337). The action filed by the Company was subsequently transferred to the Eastern District of Texas to be consolidated with the already pending action. The Company has entered into an indemnification agreement with Cambridge Silicon Radio ("CSR"), the manufacturer of bluetooth chips in the Company's products, with respect to this action (the "CSR Indemnification Agreement). Wi-LAN has entered a settlement agreement with CSR. The settlement agreement terms extend to protect CSR's customers. All claims asserted by and against the Company have been dismissed. Aliph v. *Talk — In January 201 I, the Company filed a declaratory judgment action in the Northern District of California (Aliphcom v. MyTalk, Case No. CIO-04918 EDL) relating to a third party's purported trademark rights with respect to the "MyTalk" mark. MyTalk answered the complaint in February 2011 asserting counterclaims including trademark infringement. In March 2011, the 1067404 v561: 4 EFTA01120892 parties mediated this matter but did not reach a settlement. The Company has served written discovery and document requests on the defendant. No other procedure beyond initial pleading has yet taken place. Further mediation is anticipated in Fall 2011. 3.7 Title to Properties; Liens and Encumbrances. The Company has a capital lease with Bank of America Leasing of approximately $220,000 for its Oracle ERP license entered into in 2008. As of June 2, 2011 the lease payable balance is less than $21,421. The Company entered into a loan agreement with Wells Fargo Bank NA on November 29, 2010 (the "Wells Fargo Loan Agreement") for a Standby Letter of Credit. The Standby Letter of Credit is secured by a money market account held by the Company. In connection with the Wells Fargo Loan Agreement the Company entered into a Security Agreement with Wells Fargo Bank NA on November 29. 2010. There are currently two outstanding California UCC financing statements, filed by Dell Financial Services L.L.C. and US Bancorp, which have been provided to counsel for the Purchasers. Pursuant to the DCL Contract Services Agreement, dated as of August 5, 2009 with DisCopyLabs, Inc. (the "DCL Contract'), DisCopyLabs has a warehouse lien on any and all of the Company's property that is stored with DisCopyLabs for storage and other charges, costs and expense relating to such property. 3.8 Financial Statements. The Financial Statements for 2008 and 2009 are currently being audited by Pricewaterhouse Coopers and are therefore in draft form and subject to change. The Company's 2010 financial statements have not been audited and are not entirely GAAP compliant. Final GAAP entries to the 2010 financials will be completed as part of the audit scheduled for the middle of 2011. Modifications may be made to the Financial Statements as more data becomes available and further investigations are made. Although certain aspects of the Financial Statements are currently in draft form, to the best knowledge of the Company no future adjustments or modifications to the Financial Statements will materially adversely affect the financial position of the Company's business. [3.9 Changes.' 3.11 Status of Proprietary Assets. (a) 1067404 vS/SF 5 EFTA01120893 Reference is made to the disclosures in Section 3.11(b) of this Schedule of Exceptions. (b) The Company received letters alleging that the Company was infringing on the "MyTalk" mark, which led to the Aliph v. *Talk action disclosed in Section 3.5 of this Schedule of Exceptions. See the two Plantronics v. Aliph matters disclosed in Section 3.5 of this Schedule of Exceptions. (c) The following former employees, officers and/or consultants of the Company have not entered into proprietary information and inventions assignment agreements with the Company: Dinesh Raghavan, Christina Boyle, John McKenna, Dmitri Krakovsky, Andy Sims, James Russell, Edmund Moulton, Gerald Durand, Ginger Holt, James Carol, John Holzichler and Penny Yao. None of such former employees were involved in the creation of Proprietary Assets (other than with respect to copyrightable works of authorship developed within the scope and during the period of their employment with the Company). None of such former consultants were involved in the creation of Proprietary Assets. Elizabeth Hamren did not enter into a proprietary information and inventions assignment agreement with the Company. Five employees, Greg Burnett, Michael Luna, Richard Drysdale, John O'Brien and Rich Coulter, and one former employee, Gordon Simmons, have excluded prior inventions from their proprietary information and inventions assignment agreements with the Company. Such excluded prior inventions are not materially related to the Proprietary Assets, other than patents identified by Greg Burnett and in existence as of the entry by Burnett into his agreement in May 2003. However, none of Bumett's excluded patents cover the Company's commercial products or current technology. Clayton Williamson, Remi Adams, Christopher Anderson, Derek Barrentine, Aditya Bhasin, Roderic Campbell, Jason Fass, Steve Forestieri, Scott Fullam, Travis Geiselbrecht, Laurie Harris, Joost Kemink, Bernard Kerr, Joel Krauska, Edmund Ku, Sam Lee, Christopher McKillop, Alex Mille, Skip Orvis, Wayne Ouchida, Loren Roy, Corey Tabaka, Anil Ubale and Chris Wiebe have excluded prior inventions from their proprietary information and inventions assignment agreements with the Company. Such excluded prior inventions are not incorporated in any of the Company's current products or technology. The Company entered into two consulting agreements, the first dated as of September 18, 2005, with Andrew Einaudi, and the second dated as of January 3, 2007, with Richard Drysdale (d/b/a Pronovus Consulting LLC). Neither of these agreements contain a provision whereby the consultant assigns intellectual property rights to the Company. Andrew Einaudi was not involved in the creation of any Propriety Assets, and Richard Drysdale later assigned any inventions to the Company in his proprietary information and inventions agreement. In addition, Pronovus Consulting LLC executed a confirmatory assignment, dated March 3, 2011, in favor of the Company. 1067404 v5/SE 6 EFTA01120894 (d) The Company has the following issued patent and pending patent applications: ISSUED PATENTS: United States Detecting Voicedand UnvoicedSpeech Using Both Acoustic andNonacoustic Sensors. Reference P009. Application Number: 10/159,770. Acoustic Vibration Sensor. Reference P028. Application Number : 10/769,302. Fabric Case Carry Accessory For A Mobile Phone Device, Patent No. D609901 Fabric Pouch Carry Accessory For A Mobile Phone Device. Patent No. D610579 Hard Case Carry Accessory For A Mobile Phone Device, Patent No. D609900 Compact Hard Case Carry Accessory For A Mobile Phone Device, Patent No. D620247 Headset, Patent No. D632674 Headset, Patent No. D632675 Headset, Patent No. D632676 Earpiece Assembly, Reference D001. Application Number: 29/299,133. Earpiece. Reference D002. Application Number: 29/299,134. Earpiece Shield Reference D003. Application Number: 29/299,135. Ear Loop. Reference D004. Application Number: 29/299,139. Back Plate with Fabric Pouchfor a Mobile Phone Device. Reference 027673-002500US. Application Number: 29/333,430. China: Earpiece Assembly. Reference DOO1CN. Application Number: 200830129807.0. 1067404 v5iSI: 7 EFTA01120895 Earpiece. Reference DOO2CN. Application Number: 200830129806.6. Earpiece Shield. Reference D003CN. Application Number: 200830129805.1. Ear Loop. Reference DOO4CN. Application Number: 200830129808.5. European Union Earpiece Assembly. Reference DOOIEM. Application Number: 0009562300001. Earpiece. Reference D002EM. Application Number: 0009562300002. Earpiece Shield. Reference D003EM. Application Number: 0009562300003. Earpiece Loop. Reference D004EM Application Number: 0009562300004. Jawbone 11Headset TexturedDesign. Reference 027673-010601EU. Application Number: 1657990-0001. India Method and Apparatusfor Removing Noisefrom Electronic Signals. Reference P011IN. Application Serial No. 0032/DELNP/03. Detecting Voiced and Unvoiced Speech Using Both Acoustic and Nonacoustic Sensors. Reference P009IN. Application Serial Number: 1982/DELNP/03. Taiwan Voice Activity Detector (VAD) -BasedMultiple-Microphone Acoustic Noise Suppression. Reference POIOXTW. U.S. Application Number: 10/667,207. Korea Detecting Voiced and Unvoiced Speech using Both Acoustic and Nonacoustic Sensors. Reference POO9KR. Application Number: 2003-7015511. Method andApparatusfor Removing Noise From Electronic Signals. Reference P027KR. Application Number: 2004-7007752. Japan Earpiece Assembly. Reference DOOIJP. Application Number: 2008-15644. Earpiece. Reference DOO2JP. Application Number: 2008-15645. 1067404 v5S1, 8 EFTA01120896 PATENT APPLICATIONS: United States Microphone Array with Rear Venting. Reference P034. Application Number: 12/163,952. Microphone Array with Rear Venting. Reference P034D1. Application Number: 12/163,617. Microphone Array with Rear Venting. Reference P034D2. Application Number: 12/163,647. Microphone Array with Rear Venting. Reference P034D3. Application Number: 12/163,675. Dual Omnidirectional Microphone Array (DOMA). Reference P035. Application Number: 12/139,333. Dual Omnidirectional Microphone Array (DOMA). Reference P035D1. Application Number: 12/139,344. Dual Omnidirectional Microphone Array (DOMA). Reference P035D2. Application Number: 12/139,355. Dual Omnidirectional Microphone Array (DOMA). Reference P035D3. Application Number: 12/139,361. Wireless Handsfree Headset Method and System with Handsfree Applications. Reference P037. Application Number: 12/039,718. Acoustic Voice Activity Detection (AV,4D)for Electronic Systems. Reference P039. Application Number: 12/606,140. Acoustic Voice Activity Detection (AVAD)for Electronic Systems. Reference P039D1. Application Number: 12/606,146. Vibration Sensor and Acoustic Voice Activity Detection System (VADS)for Use with Electronic Systems. Reference P040. Application Number: 12/772,947. WindSuppression/Replacement Componentfor Use with Electronic Systems. Reference P041. Application Number: 12/772,963. 1067404 v5/SF 9 EFTA01120897 WindSuppression/Replacement Componentfor Use with Electronic Systems. Reference P04IDI. Application Number: 12/772,975. Calibrating a Dual Omnidirectional Microphone Array (DOMA). Reference P042. Application Number: 12/826,643. CalibratedDual Omnidirectional Microphone Array (DOMA). Reference P042DI. Application Number: 12/826,658. Apparatus and Methodfor Using Speech Detection to Improve Operation of Voice Recognition User Interface. Reference 027673-001110US. Application Number: 12/649,170. Headset and Audio Gateway Systemfor Execution of Voice Input Driven Applications. Reference 027673-001600US. Application Number: 12/354,689. Spatial User Interfacefor Audio System. Reference 027673-0021I OUS. Application Number: 12/756,051. Pipe Calibration ofOmnidirectional Microphones. Reference P043P. Application Number: 61/316,269. Wireless Conference Call Telephone. Reference P044P. Application Number: 61/364,675. Calibration Headset Clamping System. Reference P045P. Application Number: 61/373,071. Dynamic Enhancement ofAudio (DAE) in Headset Systems. Reference P046P. Application Number: 61/431,395. Improved Acoustic Voice Activity (AVAD)for Use with Electronic Systems. Reference P047P. Application Number: 61/431,397. System and Methodfor Controlling Access to Network Services using Biometric Authentication. Reference 027673-016800US. Application Number: 61/355,958. Bluetooth Pairingfor Networked Devices. Reference 027673-016900OS. Application Number: 61/358,610. Headset. Application Number 29/354,212. (Design Patent Application). Headset. Application Numbcr 29/353,843. (Design Patent Application). Headset. Application Number 29/353,844. (Design Patent Application). 1067404 vS/SF 10 EFTA01120898 Headset. Application Number 29/353,846. (Design Patent Application). Headset. Application Number 29/353,847. (Design Patent Application). Speaker. Application Number 29/378,325. (Design Patent Application). Speaker. Application Number 29/378,327. (Design Patent Application). Speaker. Application Number: 29/378,328. (Design Patent Application). Speaker. Application Number: 29/378,329. (Design Patent Application) Dongle. Application Number: 29/377,628. (Design Patent Application). Headset. Application Number: 29/377,627. (Design Patent Application). System andMethod ofEnabling Additional Functions or Services ofDevice by Use of Transparent Gateway or Proxy, Serial No. 12886919 Apparatus And MethodFor Using Speech Detection To Improve Operation Of Voice Recognition User Interface, Serial No. 12649170 Headset And Audio Gateway System For Execution Of Voice Input Driven Applications, Serial No. 12354689 Spatial User Interface For Audio System, Serial No. 12756051 Multi-Modal Audio System With Automatic Usage Mode Detection And Configuration Capability, Serial No. 12882482 System AndMethodFor Controlling Access To Network Services Using Biometric Authentication, Serial No. 61355958 Acoustic Transducer Including Airfoil For Generating Sound, Serial No. 61392813 Antenna Optimization Dependent On User Context, Serial No. 61439742 Portion ofan Electronic Device (Design Patent Application) Serial No. 29383495 Detecting Voice and UnvoicedSpeech Using Both Acoustic andNonacoustic Sensors. Reference P009C1. Application Number: 11/805,987. Voice Activity Detector (VAD)-Based Multiple-Microphone Acoustic Noise Suppression. Reference POIOX. Application Number: 10/667,207. 1067404 vS/SF ll EFTA01120899 Microphone and Voice Activity Detection (VAD) Configurationsfor Use with Portable Communication Systems. Reference P020. Application Number: 10/400,282. Acoustic Vibration Sensor. Reference P028. Application Number: 10/769,302. Noise Suppressing Multi-Microphone Headset. Reference P030. Application Number: 11/199,856. AdvancedSpeech Encoding Dual Microphone Configuration. Reference P032P. Application Number 60/931,637. Canada: Wireless Handsfree Headset Method and System with Handsfree Applications. Reference 027673-001600CA. International Application Number: PCT/US2009/031195. Headset. Application Number: 136334. (Design Patent Application). Headset. Application Number: 136330. (Design Patent Application). Headset. Application Number: 136332. (Design Patent Application). Headset. Application Number: 136333. (Design Patent Application). Headset. Application Number: 136331. (Design Patent Application). European Union: Dual Omnidirectional Microphone Array. Reference P035P. Application Number 08771095.0. Headset and Audio Gatewayfor Execution of Voice Input Driven Applications. Reference 027673-001600EP. Application Number 09701950.9. Acoustic Voice Activity Detection (AVAD)for Electronic Systems. Reference P039WO. International Application Number: PCT/US2009/062129. Calibrating a Dual Omnidirectional Microphone Array (DOMA). Reference P042WO. International Application Number: PCT/US2010/040501. Spatial User Inteifacefor Audio System. Reference 027673-002110PC. International Application Number: PCT/US2010/030421. 1067404 v5/S1: 12 EFTA01120900 System andMethod ofEnabling Additional Functions or Services ofDevice by Use of Transparent Gateway or Proxy, Serial No. PCTUS20 10049796 Wireless Handsfree Headset MethodAndSystem With Handsfree Applications, Serial No. PCTUS2009031195 Multi-Modal Audio System With Automatic Usage Mode Detection And Configuration Capability, Serial No. PCTUS2010049174 Headset (Various Design Patent Applications Covering Jawbone Headset Designs), Serial Nos. 0012267810001, 0012267810002, 0012267810003, 0012267810004, 0012267810005 China: Dual Omnidirectional Microphone Array. Reference P035CN. Application Number 200880103073.6. Microphone and Voice Activity Detection (VAD) Configurationsfor Use with Portable Communication Systems. Reference P020CN. International Application Number: PCT/US03/09280. India: Voice Activity Detection (VAD) Devices and Methodsfor Use with Noise Suppression Systems. Reference P015IN. Application Serial Number: 2426/DELNP/2004. Microphone and Voice Activity Detection (VAD) Configurations for Use with Portable Communication Systems. Reference P0201N. Application Serial Number: 2605/DELNP/2004. Dual Omnidirectional Microphone Array. Reference P0351)1. Application Serial Number: 104/DELNP/2010. Japan: Method and Apparatusfor Removing Noisefrom Electronic Signals. Reference POIIJP. Application Number: 2002-512971. Earpiece Shield. Application Number:15646/2008. (Design Patent Application). Ear Loop. Application Number:15647/2008. (Design Patent Application). Korea: 1067404 v5/SF l3 EFTA01120901 Voice Activity Detection (FAD) Devices and Methodsfor Use with Noise Suppression Systems. Reference P015KR. Application Number: 2004-7013890. Voice Activity Detection (VAD) Devices and Methodsfor Use with Noise Suppression Systems. Reference P015KRD1. Application Number: 2010-7028265. Microphone and Voice Activity Detection WAD) Configurationsfor Use with Portable Communication Systems. Reference P020KR. Application Number 2004- 7015441. Microphone and Voice Activity Detection (VAD) Configurationsfor Use with Portable Communication Systems. Reference P020KRDI. International Application Number: PCT/US2003/009280. Method and Apparatusfor Removing Noise From Electronic Signals. Reference P027KR. International Application Number: PCT/US02/37399. Hong Kong: Dual Omnidirectional Microphone Array. Reference P035HK. Application Number: 10109116.8. TRADEMARKS: The Company has the following issued trade dress, trademarks and trademarks applications pending: Country Trademark Classes App No. Reg No. Status Filing Date Issue Date Canada EARCANDY PA 1435661 TIAA768172 Registered 04/23/2009 05/31/2010 China EARCANDY 7391552 Pending . Published 05/13/2009 NIA European Union EARCANDY 008242174 008242174 Registered 04/24/2009 11/22/2009 None Kong EARCANDY 301331289 Pending 0424,2009 N/A Taiwan EARCANOY 98017131 01391805 Registered 04/24/2009 01101/2010 Canada WINIDASSASSIN 1433351 NIA Pending - Published 04/02/2009 1067404 95/5F 14 EFTA01120902 Country Trademark Classes App No. Reg No. Status Filing Date Issue Date China WINDASSASSIN 9 7329735 Pending • Published 04/16/2009 N/A European Union WINDASSASSIN 9. 35.42 008197519 008197519 Registered 04/03/2009 10/23/2009 Hong Kong WINDASSASSIN 9 301320236 301320238 Registered 04/07/7009 04/07/2009 Taiwan WINDASSASSIN 9 98014035 01399873 Registered 04/08/2009 03/16/2010 United States of WINDASSASSIN 9 77/723466 Pending - Atkrwed America 04/27/2009 N/A Canada Museum Case Packaging N/A 1437730 Pending Design /3-Dimensional) 0511112009 Nit, UMW MUSEUM CASE 9 7329734 Pending PACKAGING Design (3. o4/16/2oos N/A Dimensional) Hong Kong MUSEUM CASE 9 301322225 Pending PACKAGING Design (3- 04/09/2009 N/A Dimensional) United Stales of MUSEUM CASE 9 77/693761 3884763 Registered Arnefica PACKAGING Design (3- 03/18/2009 12/07/2010 Dimensional) European Union Museum Case Packaging 9. 35.42 8221855 8221855 Registered (with JAWBONE) 04116/2009 11/13/2009 Taman Museum Case Packaging 9 99048317 N/A Pending -Awaiting 09/29/2010 examination European Union Museum Case Packaging 9. 35. 42 008697484 008697484 Registered Design (3-Dimensional) 11/19/2009 05/24/2010 Brazil ALIPH 9 902500368 Pending -Published 04/15/2010 WA Canada ALIPH N/A 1434404 TMA767816 Registered 04/14/2009 05/26/2010 China ALIPH 9 7329738 Pending 04/162009 N/A European Union ALIPH 9. 35. 42 005787321 005787321 Registered 03/26/2007 02/28/2008 Hong Kong ALIPH 9 301320254 301320254 Registered 04/07/2009 04107/2009 Taiwan MPH 9 98014031 01399870 Registered 04/082009 03/16/2010 Untied States of ALIPH 9 78/344895 3541713 Registered America 12/23/2003 12102/2008 1726049 1.2iNY 15 EFTA01120903 Country Trademark Classes App No. Reg No. Status Filing Date Issue Date Canada ALIPH N/A 1458658 NA Pending 11(10/2009 Brazil EARWEAR 9 902500430 N/A Pending - Published 04/15/2010 Canada EARWEAR N/A 1435298 Pending n4/7 4171310 N/A China EARWEAR 9 7329737 Pending 04/16/2009 N/A European Union EARWEAR 9 006246731 006246731 Registered 09/07/7007 08/0712008 Taiwan EARWEAR 9 98014032 01399871 Registered 04.032%9 33:167010 United States of EARWEAR 9 77/268794 3474244 America Registered (Supplemental) 08/30/2007 07/22/2008 Hong Kong ALIPH EARWEAR 9 301544120 301544120 Registered 02/11/2010 02/11/2010 Australia JAWBONE 9. 42.45 1398180 N/A Pending. Awaiting 12/06/2010 examination Brazil JAWBONE 9 902500627 Pending -Published 04/15/2010 N/A Canada JAWBONE N/A 1434405 TAAA771142 Registered 04/14/2009 07/05/2010 China JAWBONE 9 5960563 5960563 Registered 03/26/2007 12/28/2009 European Union JAWBONE 9. 35, 42 005787346 005787346 Registered 0126/2007 03/13/2008 Hong Kong JAWBONE 9 301320272 Pending 04/07/2009 N/A Indonesia JAWBONE 9 000.2010.047587 Pending 12129a010 N/A India JAWBONE 9. 42.45 2063429 Pending 12/06/2010 N/A Japan JAWBONE 9 2007-24017 5195869 Registered 03/20/2007 01109/2009 Korea (South) JAWBONE 9. 35. 42 45.20100004012 Pending 09/16/2010 N/A Russian Federation JAWBONE 9. 42. 45 2010739479 Pending 12/07/2010 N/A I 2no sg v2 NY 16 EFTA01120904 Country Trademark Classes App No. Reg No. Status Filing Date Issue Date Taiwan JAWBONE 9 98014034 01399872 Registered 04/08/2009 03067010 United Stales of JAWBONE 9 78/340835 3046856 Registered America 12/15/2003 01/17/2006 Vietnam JAWBONE 9. 42. 45 4.2010-26938 Pending 12/21/2010 N/A Canada JAWBONE WA 1458657 Pending -Accepted 11/10/2009 N/A Indonesia JAWBONE 42 J00.2010.047581 N/A Pending 12/29/2010 Indonesia JAWBONE 45 J00,2010.047579 Pending 17/79/2010 N/A brain NUISEASSASS1N 9 902500627 Pending • Published 04/1512010 N/A Canada NOISEASSASSIN N/A 1435306 TMA767590 Registered 04/21/2009 05/21/2010 China NOISEASSASSIN 9 7329736 Pending . Published 04/16/2009 Nth European Union NOISEASSASSIN 9. 35.42 008221558 008271558 Registered 04/16/2009 12/10/2009 Hong Kong NOISEASSASSIN 9 301320245 301320245 Registered 04/07/7009 0467/2C09 Taiwan NOISEASSASSIN 9 98014036 01399874 Registered 04/08/2009 03/16/2010 United States of NOISEASSASSIN 9 77/459339 3807619 America Registered 04/28/2008 06/22/2010 United Slates of NOISEASSASSIN 9 77/977808 3694140 Registered America 04/26/2008 10/06/2009 European Linton Curved Design 8355323 Pending 06/10/2009 N/A United Stales of Curved Design 9 77/752166 Pending America 06/04/2009 N/A Canada Textured Design Trade N/A 1441073 Pendng Dress 06/10/2009 WA European Union Textured Design Trade 8355331 Pending Dress 06/10/2009 N/A United Slates of JAWBONE 9. 14 77/785787 Pending America 07/21/2009 N/A 1726049 v2/NY (7 EFTA01120905 Country Trademark Classes App No. Reg No. Status Filing Date Issue Date United Stales of JAWBONE 35.42 77/862971 Pending America I1,O22O09 N/A Canada Jawbone II Headset N/A 1467689 Pending Textured Design 01/29/2010 N/A United States of Jawbone II Headset 9 77/912073 Pending America Textured Design 01/14/2010 NIA United Stales of JAWBONE KNOW 9. 35. 38. 42 77/933001 Pending - Allowed Amenca 02/102010 N/A United Slates of The Jawbone Logo 9. 42 85/008457 Pending America dilVTALK) 04/07/2010 NIA China AitiFu in Chinese 9 8375885 N/A Pending Characters 06/092010 Braun JAWBONE THOUGHTS 9 830742662 Pending • Pubitshed 09/28/2010 N/A China JAWBONE THOUGHTS 9 Pending - Awaiting 11/18/2010 WA examination European Umon JAWBONE THOUGHTS 9.42. 43 009393752 Registered 0922/2010 N/A Hong Kong JAWBONE THOUGHTS 9. 42.45 301716570 Pending - Published 09116/2010 N/A Taiwan JAWBONE THOUGHTS 9, 42, 45 99047069 Pending - Awaiting 09/21/2010 N/A examination United States of JAWBONE THOUGHTS 9. 02. 45 85/042005 Pending America 05/18/2010 N/A Brazil JAWBONE THOUGHTS 42 830742670 N/A Pending - Published 09/28/2010 Canada JAWBONE THOUGHTS N/A 1501400 Pending 10/27/2010 N/A China JAWBONE THOUGHTS 42 Pending - Awaiting 11/18/2010 N/A examination Brazil JAWBONE THOUGHTS 45 830742689 Pending - Published 09/282010 N/A China JAWBONE THOUGHTS 45 Pending . Awaiting 11/18/2010 N/A examination Hong Kong JAWBONE WITH 9 301644831 Pending NOISEASSASSIN, ICON 06/21/2010 N/A and THE ACE & Design United States of BE FIERCE, DETAILS. 42 85/146224 Pending America SELECT (The Rogue) 10/06/2010 N/A I 726049 v2:NY 18 EFTA01120906 Country Trademark Classes App No. Reg No. Status Filing Date Issue Date United Stales of BE SMART. DETAILS 42 85/148248 Pending Arnerlos SELECT (The Thaw) 10/06/2010 N/A United States of BE SEXY. DETAILS, 42 85/146265 Pending America SELECT (The Bombshell) 10/06/2010 N/A United States of BE SUPER. DETAILS. 42 85/146272 America Pending SELECT (The Hero) 10'0612010 N/A tinted States of BE FOXY. DETAILS. 42 85/146290 America Pendng SELECT (The Catch) 10/06/2010 N/A United States of BE FLIRTY. DETAILS. 42 85/146298 N/A Pending America SELECT (The Catch) 10/06/2010 Brazil WEARABLE OS 9 830766783 Pending -Published 11122'2010 N/A Canada WEARABLE OS N/A 1503838 Pending -Awaiting 11/152010 N/A examination China WEARABLE OS 9 8868386 Pending - Awaiting 11/22/2010 NIA examination European Union WEARABLE OS 9 009524182 N/A Pending. Awaiting 11/1512010 examination Taiwan WEARABLE OS 9 99057337 Pending 11/172010 N/A United States ol WEARABLE OS 9 85/177896 America Pending 11/162010 N/A Brazil JAMBOX 9 830742654 Pending - Published 09/2872010 NIA Canada JAMBOX N/A 1496708 Pending 021/2010 N/A China JAMBOX 9 8824718 Pending 11/092010 N/A European Union JAMBOX 9 9392754 Registered 09/22/2010 NIA Hong Kong JAMBOX 9 301720610 Pending • Awaiting 09222010 NIA examination Taiwan JAMBOX 9 99047289 Pending -Awaiting 091232010 N/A examination Unted Stales of JAMBOX 9 85/128357 America Pending 09/13.2010 N/A United States of THE NERD 9 85/154145 America Pending 10/15/2010 N/A 1726019 I. 2 NY 19 EFTA01120907 Country Trademark Classes App No. Reg No. Status Filing Date Issue Date Australia JAWBONE ERA 9.42 1396450 Pending 11/22/2010 N/A Brazil JAWBONE ERA 9 630789182 Pending -Published 11/2412010 WA Canada JAWBONE ERA N/A 1504678 N/A Pending - Awaiting 11/19/2010 P11,1, .^ al ,n China JAWBONE ERA 9 8892880 WA Pending 11/29/2010 European Union JAWBONE ERA 9.42 009573411 Pending 12/03/2010 N/A Hong Kong JAWBONE ERA 9. 42 301789590 Pending-Mvatng 11/224010 N/A examination Taman JAWBONE ERA 9, 42 99058375 Pending - Awaiting 11123/2010 WA examination United States ol JAWBONE ERA 9.42 85/189346 N/A Pending America 12/02/2010 Brazil JAWBONE ERA 42 830789154 Pendirq A:fluting 11/24/2010 WA examination Coma JAWBONE ERA 42 8892679 Pending 11/29/2010 N/A United Slates of JB ERA 9.42 85/189450 WA Pending America 12;02/2010 Canada JAWBONE JAMS NIA Pending 0107/2011 N/A United States of JAWBONE JAMS 9. 42. 45 85/213075 Pending America 0107/2011 N/A Ned Due Date: Priority Filing Deadline 07/07/2011 3.12 Licenses; Other Agreements. (a) The Company has entered into a Distributorship Agreement, dated as of February 23, 2006, with Brightpoint North America L.P (the "Brightpoint Agreement"). The Company has entered into a Distribution Agreement (Nonexclusive), dated as of February 22, 2011, with TESSCO, Incorporated (the "TESSCO Agreement"). The Company has entered into a Master Services Agreement, dated as of August 6, 2007, with Foxlink International, Inc. (the "Farlink Agreement'). 1726049 v2/NY 20 EFTA01120908 The Companyreinered into a Design Consulting Services Agreement, dated as of PritieT6, 2007, with Fuse Project, LLC, and Yves Behar Studio, LLC, as amended on November 29, 2007 (the "Fuse Agreement"). The Company enters into employee confidentiality and inventions assignment agreements with its employees, the standard form of which has been provided to counsel to the Purchasers. The Company entered into a new Sales Representative Agreement, dated as of September 1, 2009, with Nirala Partners Ltd (significant shareholder of Aliphcom) for certain developing countries (the "Nirala Sales Representative Agreement"). The Company entered into a Sales Representative Agreement, dated as of December 13, 2010, with Griffin International Companies, Inc. (the "Grin Agreement") The Company entered into a Sales Representative Agreement, dated as of January 1, 2011, with Bhavesh Dattani (update and renewal of prior contract). (the "Dattani Agreement') The Company entered into a Sales Representative Agreement, dated as of July IS, 2009, with Business Development Services SARL, which was cancelled in late 2010 (the "Business Development Services Agreement'). The Company entered into an Apple Third Party Product Reseller Agreement on August 1, 2008, with Apple Inc. (the "Apple Agreement'). The Company entered into an OEM-In Hardware with Firmware agreement, dated as of August 10, 2010 with Cisco Systems (the "Cisco Agreement'). The Company entered into a Hosted Reseller Agreement, dated as of March 13, 2009 with DR globalTech, Inc., as amended by that Amendment No. I to DR globalTech Hosted Reseller Agreement (the "Digital River Agreement). See the DCL Agreement. Reference is made to the Terms and Conditions of the Amazon 2010 Reseller program (the "Amazon Terms and Conditions"). The Company entered into a Membership and License Agreement, dated as of May 23, 2011 with RPX Corporation (the "RPX Agreement"). The Company has entered into a License Agreement, dated as of May 4, 2011, with The Trustees of Princeton University (the "Princeton Agreement'). The Company has entered into a Memorandum of Understanding, dated as of March 22, 2011, with Sound Matters Inc. (the "Soundmatters MOU"). (b) 1726049 v2 NY 21 EFTA01120909 See Foxlink Agreement. The Company has entered into a Manufacturing Agreement, dated as of April 7, 2008, with Cheng Uei Precision Industry Co., Ltd. (the "Foxlink Manufacturing Agreement") The Company has entered into a Manufacturing Agreement, dated as of January 29, 2009, with Superior Communications, Inc. (the "Superior Manufacturing Agreement') The Company has entered into a Distributor Agreement, dated as of March 23, 2010, with Superior Communications, Inc. (the "Superior Distributor Agreement"). The Company has entered into a Co-marketing and License Agreement, dated as of September 23, 2005, with Skype Communications, S.A. (the "Skype Agreement). The Company has entered into a Royalty Agreement, dated as of January 7, 2011, with Freebit to license an earbud design to be used on Aliph headsets and other products (the "Freebit Agreement'). The Company enters into standard confidentiality and non-disclosure agreements in the ordinary course of business that are not the Company's standard form of agreement. OEM Agreement between the Company and Fullpower Technologies, Inc. dated as of October 5, 2009. The Company has entered into an Oracle License and Services Agreement, dated as of September 29, 2008, as amended by Amendment One to the Oracle License and Services Agreement dated September 29, 2008 (the "Oracle License"). See the Apple Agreement. See the Cisco Agreement. See the TESSCO Agreement. The Company has, in the ordinary course of business, agreed to indemnify certain of its distributors for damages arising out of claims that Aliph's intellectual property infringes on a third party's intellectual property. Sec the Fuse Agreement. See the Griffin Agreement. See the Digital River Agreement. See the DCL Agreement. See the Amazon Terms and Conditions. 1726049 v2/NY 22 EFTA01120910 Letter Agreement, dated as of March 22, 2006, with Circuit City Stores, Inc (the "Circuit City Agreement') The Company has entered into a Costco Wholesale Basic Vendor Agreement, dated as of September 28, 2009, with Costco Wholesale Canada Ltd (the "Costco Canada Agreement). The Company has entered into a Costco Wholesale Basic Vendor Agreement, dated as of July 15, 2009, with Costco Wholesale Corporation (the "Costco U.S. Agreement'). The Company entered into a Services and Consulting Agreement, dated as of May 4, 2011 with Edgar Choueiri (the"Choueiri Agreement'). See the Princeton Agreement. 3.15 Employees and Independent Contractors. (a) Reference is made to the Plans. The Company has established a 401(k) Plan pursuant to the Nonstandardized Prototype Profit Sharing/401(k) Plan Adoption Agreement. The Company enters into offer letters with its employees in the ordinary course of business, the standard form of which has been provided to counsel to the Purchasers. The Company acts as guarantor for Imogen Griffiths in connection with that certain Residential Rental Agreement by and among the Company, Trinity Management Services and Imogen Griffiths dated as of July 6, 2010 (the "Trinity Management Agreement'). See the disclosure in 3.20 below regarding the Acceleration Provisions (as defined below) and acceleration to non-employee directors and Board advisors. 3.16 Agreements; Action. (a) Hosain Rahman, an officer and director of the Company, issued a Recourse Promissory Note on September 17, 2007, to the Company in the principal amount of $179,940.24 (as amended from time to time, the "Rahman Note). Currently the maturity date of the Rahman Note is September 17, 2011. The Company enters into indemnification agreements with each of its directors. In addition, the Company enters into advisory agreements with each of its advisors to the Company's Board of Directors. 1726049 v2/NY 23 EFTA01120911 (b) The Company entered into a Production Share agreement for Mexico, dated as of June 9, 2010 with North American Production Sharing, Inc. See the Cisco Agreement. The Company entered into an OEM agreement with Full Power, dated as of October 5, 2009, which includes large dollar amount annual exclusivity and royalty payments. Reference is made to the Griffin Agreement, Dattani Agreement and Business Development Services Agreement. The Company entered into a significant number of distribution agreements in 2009, 2010 and 2011 in North America, Latin America, Europe, Middle East and Asia regions. The Company entered into a Real Property Sublease Agreement for the Sunnyvale product development location, dated as of December 22, 2008, as amended by that certain First Amendment, Second Amendment dated as of September 27, 2010, and Third Lease Amendment dated April 28, 2011. The Company entered into a Real Property Lease Agreement for office space on the r d floor of 99 Rhode Island, which was superseded by a new lease for all three floors of 99 Rhode Island, by and between the Company and Oelsner Commercial Properties, LP, dated as of November 22, 2010 (the "99 Rhode Island Lease") The Company entered into three-year sublease for the second floor with Air BnB in March 2011 (the "Air BnB Sublease"). Sequoia Capital, one of the Company's shareholders, is a major investor of Air BnB. See the Freebit Agreement See the Superior Manufacturing Agreement. See the Foxlink Manufacturing Agreement. The Company entered into a Subscription Terms and Conditions Agreement for its ERP system, dated as of May 28, 2010, with NetSuite, Inc. and The Danville Group. Reference is made to the Wells Fargo Loan Agreement. The Company entered into Stock Purchase Agreements in February of 2011 to purchase the capital stock of Togeru, Inc. The Company entered into Unit Purchase Agreements, each dated as of February 9, 2011, to purchase the outstanding membership units of YiqYaq LLC. See the Soundmatters MOU. The Company is currently negotiating a product development and royalty agreement with Full Power. 1726049 v2JNY 24 EFTA01120912 See the Fuse Agreement. See the Foxlink Agreement. The Company has entered into a Letter of Intent, dated as of March 22, 2007, with Fuse Project, LLC. See the TESSCO Agreement. The Company has entered into a Services Agreement, dated October 31, 2007, with WarmingTrend PR LLC. See the Circuit City Agreement The Company may enter into a contract manufacturing agreement with i.Tech. See the Skype Agreement. See the Superior Distributor Agreement. The Company has entered into a Master Services Agreement, dated as of October 11, 2007, with Info Partners, Inc. The Company has entered into a letter agreement, dated as of October 4, 2007, with Lefeber & Associates. The Company has entered into a letter agreement, dated as of November 2, 2007, with Frank, Rimerman & Co. LLP. The Company has entered into a Master Services Agreement, dated November 26, 2007, with BDS Marketing, Inc. See the Renovata Agreement. Sec the Kindred Agreement. See the Oracle License. See the Digital River Agreement. See the DCL Agreement. See the Amazon Terms and Conditions. The Company has entered into a Service Support Agreement, dated as of November 29, 2009, with Headsets.com. Sec the Costco Canada Agreement. 1726049 v2/NY 25 EFTA01120913 See the Costco U.S. Agreement. The Company has entered into a Memorandum of Understanding , dated as of February 3, 2011, with Deutsche Telekom AG. The Company has entered into a Marketing Agreement, dated as of May 27, 2011 with Deutsche Telekom AG. The Company has entered into a Distributor Agreement with STRAX GmbH, dated as of May 31, 2011. See the Princeton Agreement. See the Chouciri Agreement. The Company has entered into an Agreement with First Call Resolution, dated as of May 24, 2011. The Company has entered into a Master Services Agreement for Contract Center Services with Grupo Telvista, S.A. de C.V., dated as of March 16, 2011. The Company has entered into a Software and Evaluation Board Evaluation Agreement with Cirrus Logic, Inc., dated as of March 9, 2011. The Company has entered into a Non-Exclusive Distributor Agreement with The Music People, Inc., dated as of May 12, 2011. The Company has entered into a Distributor Agreement with Dugotech Co., LTD, dated as of May 23, 2011. The Company has entered into a Distributor Agreement with The Douglas Stewart Company, Inc., dated as of March 8, 2011. The Company has entered into a Non Exclusive Distributor Agreement with Almo Corporation, dated as of March 9, 2011. The Company regularly enters into Distributor and Distribution Agreements or Purchase Agreements that may result in receivables or payment obligations in excess of $250,000. The Company intends to enter into approximately three or four distribution agreements within the next couple of weeks each of which may result in receivables or payment obligations in excess of $250,000. The Company has the following additional material payment obligations as of May 31, 2010, that involve payments of $250,000 or greater, or in excess of $500,000 in the aggregate: Aliphcom liabilities greater than $250,000 at 5/31/11 1726049 v2rNY 26 EFTA01120914 55.857.571.42 60 and 80 day payment term for primary Inventory Foxtink International Inc. supplier Quinn Emanuel Urquhart Oliver & Hedges 5608006.23 law firm representing Aliphcom on Plantronics case Fuse Project LLC 5274 .386.85 industrial design and engineering firm Schenker Inc. 5258.674.33 Primary freight fowarder for transporting inventory See the Plantronics Settlement. The Company paid, on behalf of certain employees, tax amounts due for such employees in connection with the Company's amendment of its tax filings for the 2005/2006 tax year. The Company is attempting to collect such amounts from the applicable employees. As of May 31, 2011, the approximate amount owed to the Company was $21,000 (the "Tar Loans"). See the Rahman Note. The Company enters into non-disclosure agreements in the ordinary course of business. The Company's form of non-disclosure agreement has been provided to counsel to the Purchasers. (c) See the Rahman Note. See the Tax Loans. (e) See the Trinity Management Agreement. 3.17 Related Party Transactions. See 3.16(a). See disclosure re 99 Rhode Island Lease and Air Ana Sublease. See the Nirala Sales Representative Agreement. Alex Asseily, a founder, director and a shareholder of the Company and the Company's Chairman and Managing Director of Europe, is related as to both George Asseily (father) and Tony Asseily (uncle), both of whom are officers and equity holders of Howard Rhodes, Ltd. In addition, both George Asseily and Tony Asseily are affiliated with Meribel, Multitrading International Ltd. and Getraco, entities the Company currently does business with or has done business with in the past. A stockholder has a direct ownership interest in Renovata Partners Ltd, which is a contracting party with the Company under that certain Engagement Letter agreement, dated October 4, 2007 (the "Renovate Agreement'). 1726049 v2/NY 27 EFTA01120915 A stockholder has a direct ownership interest in Fuse Project, LLC, and Yves Behar Studio, LLC, and, thus, has an interest in the Fuse Agreement. 3.18 Tax Matters. The Company received a letter from the California State Board of Equalization, dated November 27, 2007, requesting a sales and use tax audit for the period from October 12, 2004 through September 30, 2007. This audit was completed in July of 2009 and the matter was closed. On March I, 2010 the Company received a notice from the IRS requiring that the Company schedule an audit of Aliphcom's 2008 and 2009 tax returns. As of June 2, 2011, the audit is still in progress and the Company is awaiting further instructions from the IRS auditor. In January of 2011. the State of New Jersey filed a levy of $58,685 against the Company's bank account for amounts that the NJ Division of Taxation claims are owed for past due sales tax remittances. The levy was removed in April 2011 and a Warrant of Satisfaction for the judgment has been issued (the Company is awaiting a copy). 3.19 Insurance. See the attached Annex 3.19. 1726049 92/NY 28 EFTA01120916 Annex 3.19 Insurance Policy description policy Number Underwriter Dollar Coverage Policy Effective Dates Directors & Officers/Employ Practics Uab 00K802449S0-09 Hartford/Twin City Fire 55M D&O, $2M EPL 8/13/ 10 - 8/15/11 Excess Directors & Officers Uab 0035-837390-002 Liberty SSM excess on D&O 8/15/10 - 8/15/11 Calif Workers Compensation HICUB-3864M87-1-10 Travelers Indemnity Co 6/6/10- 6/6/11 Out of State Workers' Compensation HKUB-3864M87-1-10 Travelers Indemnity Co 6/6/10 - 6/6/11 Commercial General liability H-630-4009R039•TIL-10 Travelers Property Casualty 52M aggregate, SIM occurrence 7/1/10 - 6/6/11 Umbrella Liability HSM•CUP-4009R039•TIL-10 Travelers Property Casualty S2OM aggregate, 520M occurrence 7/1/10 - 6/6/11 Commercial Auto H•630-4009R039•TIL•10 Travelers Property Casualty under commercial and umbrella Gab 7/1/10 • 6/6/11 Cargo MC-2409 Falvey 7/1/10 - 6/6/11 Foreign Commercial Liabi Ity H•630-40098039-TIL-10 Travelers Property Casualty under commercial and umbrella liab 7/1/10 - 6/6/11 Kidnap & Ransom 8222-4052 Federal Insurance Co $3M limit 7/13/10. 6/6/11 Building Coverage H-630.4009R039-TItr10 Travelers Property Casualty undercommercial and umbrella Bab Difference in Conditions - SF building DC260030 Colony Insurance Co Earthquake policy up to SlOM coverage 12/6/10 - 12/6/11 Difference in Conditions - excess coverage SP bldg LFICI416828 Landmark American Insurance Earthquake policy excess of 55M coverage 12/6/10 - 12/6/11 Trade Receivables insurance N06524837 ACE American Insurance Co Up to 58.5M 1/1/11- 12/31/11 1726049 v2/NY 29 EFTA01120917 3.20 Labor Matters. The Company's Board of Directors has approved "double-trigger" acceleration of any unvested stock options upon involuntary termination without Cause or resignation for Good Reason within three (3) months prior to or within twelve (12) months following an acquisition or asset transfer, (as defined in Exhibit C of the December 3, 2007 minutes of a meeting of the Company's Board of Directors), for the following current employees of the Company (the "Acceleration Provisions"): Alex Asseily, Travis Bogard, Raul Corella, Richard Drysdale, Robert Levine, Sean Ludick, Chris McKillop, Hosain Rahman, Jeremiah Robison, Scott Shillington and Michael Tamaru. The Board has also approved full acceleration upon a Change in Control of the Company (as defined in the Plans) for non-employee directors and Board advisors. 3.21 Corporate Documents. The Company's board minutes from its December 9, 2010, February 3, 2011, February 12, 2011 and April 12, 2011 meetings are still in draft form and have not been approved and ratified by the Board of Directors. 1726049 v2/NY 30 EFTA01120918