fiiVirginiaTech I

MEMORANDUM

TO:

FROM: Tom Kaloupe

SUBJECT: Virginia Tech Contract # TS-030-05

Procurement Department (MC 0333) North End Center, Suite 2100, Virginia Tech 300 Turner Street NW Blacksburg, Virginia 24061 540/231-6221 Fax: 540/231-9628 www.procurement. vt. edu

Option for Renewal Number 2 through September 30, 2019 Number of Renewals Remaining: 0

May 29, 2014

The contract with Virginia Tech Foundation, Inc. for Aircraft Lease expires September 30, 2014. Since the contract contains a provision for renewal, please complete the following and return it to me (mail code 0333) by Julie 10, 2014.

1.

2.

3.

4.

Do you recommend renewal of this contract?

Has the quality of the merchandise or service been satisfactory?

Have deliveries been made on time?

If the contract requires service by the vendor, has the service been satisfactory?

If the answer to any of the above is "NO", please explain.

/

/

5. Estimated annual expenditure against this contract for:

a. Current Period October 1, 2009 - September 30,2014 $ ____ _

b. Renewal Period October 1, 2014 - September 30,2019 $ ____ _

No

6. List below any items or services currently being purchased, in this general category, which you feel should be added to or deleted from the referenced contract. Include a description and an estimated annual purchase quantity for each item or service:

Submitted by:

Date WTK/kbl c: F.M. Pro

L_ ___________________________________________________ Invent the Future

VIRGINIA POLYTECHNIC INSTITUTE AND STATE UNIVERSITY

An equal opportunity , affirmative action institution

Contract Administrator Responsibilities Notify Procurement Department if Contract Administrator Changes

PLEASE RETAIN FOR YOUR RECORDS.

This note is being sent to outline the Do 's and Don 'ts of contract administration. You have been named as the Contract Administrator in the attached contract(s). Contract administration involves ongoing activities that should be performed after a contract has been awarded to ensure that the Contractor and Virginia Tech are meeting the requirements of the contract.

The Contract Administrator is responsible for ensuring that all contract provisions are being followed. The Administrator assures quality; documents nonperformance if any, facilitates problem resolution, and coordinates actions with Procurement Department (contract renewals, contract amendments, and contract terminations) and legal staff when necessary. This includes:

• Monitoring the contractor's performance and interfacing with the contractor's representatives

• Formally meeting on a periodic basis with the contractor to review performance

• Verifying that invoices are consistent with contract terms

• Maintaining appropriate records, including documentation of any non-conformance or other

issues that may have occurred with the contractor and resolution as a result thereof, including any

significant events during the contract term

• Contacting Procurement Department for any issues, complaints, or disputes that cannot be

resolved at the department level

• Working with Procurement Department to determine if contract should be renewed (if applicable)

• Avoiding conflicts of interest and maintaining appropriate standards of conduct

• Coordinating with other university units who are users of the contract

• Documenting receipt of revenue and rebates (if applicable)

Some of these duties may be delegated to others in your organization. For example, inspection of contractor invoices may take place in your business office. You need to be knowledgeable of the delegated process such as who is doing what and do they have the information necessary to accomplish their responsibilities .

All contracts require that any change to the terms of the contract be made in writing and be accepted by both the contractor and Virginia Tech before the change is binding. Contract Administrators are not empowered to make changes to the terms of the contract. For example, you arc not authorized to change the price or add additional services. If there is a need to add or delete services, changes should be communicated to the Procurement Officer, who will prepare a written contract modification. The same applies for renewing contracts for additional time periods.

Thank you for your effo ts t ensure this contract meets the needs of the Virgini a Tech. If you have any questions, contact the P cu ement Officer assigned to this contract.

Thank you,

W. Thomas Kaloupek 1-6221

VIRGINIA POLYTECHNIC INSTITUTE AND STATE UNIVERSITY

An equal opportunity , affirmative action institution

!IJVirginiaTech I Purchasing Department 270 Southgate Center (0333) Blacksburg, Virginia 24061 540/231-6221 Fax: 540/231-9628 www.purch. vt. edu

MEMORANDUM

TO:

FROM:

SUBJECT:

Joy Heekin. Steve Mouras <11 / Tom Kaloupek AJ­V rrgm~a Tech Contract #TS-030-05 Optiori for Renewal Number I through September 30, 2014 Number of Renewals Remaining: 0

May 4, 2009

The contract with Virginia Tech Foundation, Inc. for Aircraft Lease expires September 30, 2009. Since the contract contains a provision for renewal. please complete the following and return it to me (mail code 0333) by May 15,

2009. I Yes No

J. Do you recomrend renewal of this contract?

7 2. Has the quality! of the merchandise or service been satisfactory? / __

3. Have deliverieS been made on time? _V_ _ _

4. If the contract fequires service by the vendor, has the service been satisfactoiy? _L_ If the answer td any of the above is "NO", please explain.

i

5. Estimated annUal expenditure against this contract for:

.i a. Current Penod

' '

b. Renewal Peliod

October I, 2004- September 30, 2009 $ I 'iS31 Lt'J ( October I, 2009- September 30,2014 $ \<f:,~lL\ ll

6. List below an) items or services currently being purchased, in this general category, which you feel should be added to dr deleted from the referenced contract. Include a description and an estimated annual purchase quan~ity for each item or service: .

F J: · . ~ k...-s ke..v SUW'-f_ drs~ <J;.~"'-'-f- 1<1~''17

-~~~ Departrne t

Submitted by:

~ Date I Title Di/ -res WTK/kbl c: F.M. Pro

Invent the Future

VIRGl lA POLYTECHNIC INSTITUTE AND STATE UNIVERSITY An equal opportunity, affirmative action institution

J

!IJVirginiaTech Office of Transportation Blacksburg, Virginia 24061

540/231-0~ www.ot.vt.edu

_ _...­To:\Om \Jo\oup:!k oate: 5/lo /oct

?vaur infonnation _ Review and respond

Read and return _. Handle as appropriate

__ See me

y){:_Q~ \eJ'f\0\tQ ~y ~ 61Cf1'. L\():...LA._ c.rn+oc -f-s a_nd c\ad_ ~\ [~ & (U'IL i:JvL \\Q_W~~D

[ In"'., mMllpl.

IIJlv· n_ ~· _ _ 1

'*' IrginiaTech ~

Robin McCoy Business Manager 540/231-0252 E-mail: robinmc@vt.edu

Transportation and Campus Services Virginia Polytechnic Institute and State University University Storage Facility (0372) Blacksburg, VA24061 Fax: 540/231-6991

L----------------/nvent the Future _..J

AIRCRAFT LEASE

This Aircraft Lease ("Lease") is made by and between the Virginia Tech Foundation, Inc., a Virginia non-stock corporation with a business address of 2000 Kraft Drive, Suite 2100, Blacksburg, VA 24061 ("Owner") and Virginia Polytechnic Institute

I

and State University, a political subdivision of the Commonwealth of Virginia with an address of Purchasing Department (0333), 270 Southgate Center, Blacksburg, VA 24061, Attn: Tom Kalmipek ("University" or "Operator").

WHEREAS, Owner has an ownership interest in two (2) aircraft as further described in Exhibit A (collectively, the "Aircraft");

i

WHEREAS, Owner is a party to that certain Amended and Restated Aircraft Joint Ownership 'Agreement dated August 19th, 2004, and that certain Aircraft Joint Ownership Agreement dated August 19th, 2004 for the aircraft described ("Aircraft Joint Ownership Agreements"). The Aircraft Joint Ownership Agreements are attached hereto as Exhibits "B" and "C" and made a part hereof;

I

WHEREf'\.S, the Owner's purpose is to support and promote the advancement of, and further the aims of the University; and

WHEREAS, in support of that purpose, the University desires to lease the Aircraft from O~ner and the Owner is agreeable to enter into such a lease for the Aircraft with the Operator; and

NOW THEREFORE, in consideration of ten dollars ($10.00) and other good and valuable con~ideration, the receipt and sufficiency is hereby acknowledged, the parties agree as follows:

1. LEASING

(a) Subject to the terms and conditions set forth below, Owner agrees to lease to Operator, and Operator agrees to lease from Owner, 'the Aircraft.

(b) Owner hereby assigns and Operator hereby agrees to accept all of the rights and'. obligations of the Owner as such are stated in the Aircraft Joint Ownership Agreements, except Articles 25, 27, 40-47. To the extent there is a conflict between the terms of this Lease and the terms of the Aircraft Joint Ownership Agreements, the Aircraft Joint Ownership Agreements shall control.

(c) 'operator shall be responsible for restricting its use of the Aircraft to follow the, Owner's ownership percentages stated in the Aircraft Joint Ownership Agreements.

I

2. TERM, RENT AND PAYMENT:

(a) The rent ("Rent") payable for the Aircraft and Operator's right to use the Aircraft begins on September 1, 2004 ("Commencement Date"). The term ("Term") of this Lease shall commence on the Commencement Date and shall continue, '!unless earlier terminated pursuant to the provisions of this Lease, until and including August 30, 2009, and extension or renewal term, as applicable. If any Term' is extended or renewed, the word "Term" shall be deemed to refer to all extended or renewal Terms, and all provisions of this Lease shall apply during any such extension or renewal Terms, except as may be otherwise specifically

1 provided jn writing.

(b) The Term of this Lease shall automatically renew for an additional five (5) years at the expiration of the current Term under the same terms and conditions as contained herein unless either party notifies the other party at anytime prior to the expiration of the Term of its intention not to renew the Lease.

(c) C!>perator shall pay Rent to Owner at its address stated above, except as otherwiseidirected by Owner. Rent payments shall be paid in monthly installments of Fifteen Thousand Two Hundred Eighty Nine and 18/100 dollars ($15,289.18). (Each payment of Rent is hereinafter referred to as a "Rent Payment.!" The Rent Payment may be prepaid at anytime during the Term of the Lease.

(d) Operator will also make a one-time initial payment of $58,530.88 to Owner as additional Rent.

3. TAXES AND FEES:

(a) If permitted by law and to the extent applicable, Operator shall report and pay promptly all taxes, fees and assessments due, imposed, assessed or levied against the Aircraft (or purchase, ownership, delivery, leasing, possession, use or operation thereof), this Lease (or any rents or receipts hereunder), Owner or Operator, by any domestic or foreign governmental entity or taxing authority during or related to the term of this Lease, including, without limitation, all license and registration fees, and all sales, use, personal property, excise, gross receipts, franchise, stamp, value added, custom duties, landing fees, airport charges, navigation service charges, route navigation charges or other taxes, imposts, duties and charges, together with any penalties, fines or interest thereon (collectiv"1y "Taxes"). Operator shall promptly reimburse (on an after tax basis) Owner for, any Taxes charged to or assessed against Owner. Operator shall have no liability for Taxes imposed by the United States of America or any state or political St,ibdivision thereof which are on or measured by the net income of Owner. Operator shall show Operator as the owner of the Aircraft on all tax reports or returns (including but not limited to those relating to federal and state income tax, state and local sales and use tax and all personal property tax), and

2

send Owner a copy of each report or return and evidence of Operators payment of Taxes upon request.

(b) Operator's obligations, and Owner's rights and privileges, contained in this Section 3 shall survive the expiration or other termination of this Lease.

4. DELIVERY, REGISTRATION, USE AND OPERATION:

(a) The parties acknowledge that this is a dry lease transaction, and Operator is in poss~ssion of the Aircraft as of the Commencement Date.

(b) 'ifitle and ownership of the Aircraft shall remain with Owner throughout the term Of this Lease. Operator, at its own cost and expense, shall make any other filings required under Title 49, Subtitle VII of the United States Code, as amended :(the "FAA Act"), in the name of Operator (or, if the FAA so requires, in the name :of Owner), including but not limited to the filing of this Lease and notification of the FAA as required by FAA regulations or other laws. Operator shall not impair such registration or cause it to be impaired, suspended or cancelled: nor register the Aircraft under the laws of any country except the United States of America.

(c) The possession, use and operation of the Aircraft shall be at the sole risk and expense of Operator. Operator acknowledges that it accepts full operational control of the Aircraft. Operator agrees that the Aircraft will be used and operated in compliance with any and all statutes, laws, ordinances, regulations and standards":or directives issued by any governmental agency applicable to the use or operation thereof, in compliance with any airworthiness certificate, license or registration relating to the Aircraft issued by any agency and in a manner that

' does not modify or impair any existing warranties on the Aircraft or any part thereof. Operator will operate the Aircraft predominantly in the conduct of its business ind will not use or operate, or permit the Aircraft to be used or operated, (i) in violation of any United States export control law, (ii) in a manner wherein the predominant use during any twelve month period is for a purpose other than transportation for Operator, or in a manner, for any time period, such that Owner shall be deemed to have "operational control" of the Aircraft, or (iii) for the carriage of persons or property for hire or the transport of mail or contraband. The Aircraft will, at all times be operated by duly qualified pilots holding at least a valid airline transport pilot certificate and instrument rating and any other certificate~ rating, type rating or endorsement appropriate to the Aircraft, purpose of flight, ~ondition of flight or as otherwise required by the Federal Aviation Regulations ("FAR"). The Aircraft's pilots shall be employed and/or paid and contracted for by Operator, shall meet all flight requirements and shall meet the requirements established and specified by the insurance policies required under this Lease and the FAA. The primary hangar location of the Aircraft shall be as stated in Joint Ownership Agreements. Operator shall not relocate the primary hangar location to a hangar location outside the United States. Owner may

3

examine and inspect the Aircraft (and all records and logs), wherever located, on land and in flight, after giving Operator reasonable prior notice.

(d) AT ALL TIMES DURING THE TERM OF THE LEASE, OPERATOR AGREES NOT TO OPERATE OR LOCATE THE AIRCRAFT, OR ALLOW THE AIRCRAFT TO BE OPERATED OR LOCATED, IN OR OVER ANY AREA OF GENERALLY KNOWN HOSTILITIES, ANY GEOGRAPHIC AREA WHICH IS NOT COVERED BY THE INSURANCE POLICIES REQUIRED BY THIS LEASE, OR ANY COUNTRY OR JURISDICTION FOR WHICH EXPORTS OR TRANSACTIONS ARE SUBJECT TO SPECIFIC RESTRICTIONS UNDER ANY UNITED STATES EXPORT OR OTHER LAW OR UNITED NATIONS SECURITY COUNCIL DIRECTIVE, INCLUDING WITHOUT LIMITATION, THE TRADING WITH THE ENEMY ACT, 50 U.S.C. APP. SECTIONS 1 ET SEQ., THE INTERNATIONAL EMERGENCY ECONOMIC POWERS ACT, 50 U.S.C. APP.

SECTIONS 1701 ET SEQ., AND THE EXPORT ADMINISTRATION ACT, 50 U.S. C. APP. SECTIONS 2401 ET SEQ. OR TO OTHERWISE VIOLATE, OR PERMITTHE VIOLATION OF, SUCH LAWS OR DIRECTIVES. OPERATOR ALSO AGREES TO PROHIBIT ANY NATIONAL OF SUCH RESTRICTED NATIONS FROM OPERATING THE AIRCRAFT.

(e) Owner shall not disturb Operator's quiet enjoyment of the Aircraft during the Term :of this Lease unless an Event of Default has occurred and is continuing under this Lease.

(f) Operator will promptly reimburse Owner for any costs or other expenses paid by Owner for which Operator is responsible under this Lease.

5. MAINTENANCE:

(a) Operator agrees that the Aircraft will be maintained in compliance with any and all statutes, laws, ordinances, regulations and standards or directives issued by'any governmental agency applicable to the maintenance thereof, in compliance with any airworthiness certificate, license or registration relating to the Aircraft issued by any agency and in a manner that does not modify or impair any existi!lg warranties on the Aircraft or any part thereof.

(b) Operator shall maintain, inspect, service, repair, overhaul and test the Aircraft (including each engine) in accordance with (i) all maintenance manuals initially furnished with the Aircraft, including any subsequent amendments or supplements to such manuals issued by the manufacturer from time to time, (ii) all mandatory or otherwise required "Service Bulletins" issued, supplied, or available by or through the manufacturer and/or the manufacturer of any engine or part with respect to the Aircraft, (iii) all airworthiness directives applicable to the Aircraft issued by the FAA or similar regulatory agency having jurisdictional

4

authority, and causing compliance to such directives to be completed through cotrective modification in lieu of operating manual restrictions, and (iv) all maintenance requirements set forth in the Aircraft Joint Ownership Agreements. Operator shall maintain all records, logs and other materials required by the manufacturer for enforcement of any warranties or by the FAA. All maintenance procedures required hereby shall be undertaken and completed in accordance with the manufacturer's recommended procedures, and by properly trained, licensed, and certificated maintenance sources and maintenance personnel, so as to keep the Aircraft and each engine in as good operating condition as when delivered to Operator' hereunder, ordinary wear and tear excepted, and so as to keep the Aircraft In such operating condition as may be necessary to enable the airworthiness certification of such Aircraft to be maintained in good standing at all times under the FAA.

(c) Operator agrees, at its own cost and expense, to notify Owner in writing thirty (30) days prior to making any change in the configuration (other than changes in configuration mandated by the FAA), appearance and coloring of the Aircraft from that in effect at the time the Aircraft is accepted by Operator hereunder, and in the event of such change or modification of configuration, coloring or appearance, to restore, upon request of Owner, the Aircraft to the configuration, coloring or appearance in effect on the Commencement Date or, at Owner's option to pay to Owner an amount equal to the reasonable cost of such restoration. Operator will not place the Aircraft in operation or exercise any control ot dominion over the same until such Aircraft marking has been placed thereon. Operator will replace promptly any such Aircraft marking which may be removed,' defaced or destroyed.

(d) Operator shall be entitled from time to time during the Term of this Lease to ~cquire and install on the Aircraft at Operator's expense, any additional accessory, device or equipment as Operator may desire (each such accessory, device or,equipment, an "Addition"), but only so long as such Addition (i) is ancillary to the Aircraft; (ii) is not required to render the Aircraft complete for its intended use by Operator; (iii) does not alter or impair the originally intended function or use of the Aircraft; and (iv) can be readily removed without causing material damage. Title to each Addition which is not removed by Operator prior to the return of the Aircraft to Owner shall vest in Owner upon such return. Operator shall repair all damage to the Aircraft resulting from the installation or removal of any Addition so as to restore the Aircraft to its condition prior to installation, ordinary wear and tear excepted.

(e) Any alteration or modification (each an "Alteration") with respect to the Aircraft that may at any time during the Term of this Lease be required to comply with any applicable law or any governmental rule or regulation shall be made at the expense of Operator. Any repair made by Operator of or upon the Aircraft Oj" replacement parts, including any replacement engine, installed thereon in the course of repairing or maintaining the Aircraft, or any Alteration required

5

by law or any governmental rule or regulation, shall be deemed an accession, and title thereto shall be immediately vested in Owner without cost or expense to Owner.

(f) Except as permitted under this Section 5, Operator will not modify the Aircraft or affix or remove any accessory to the Aircraft leased hereunder.

6. LIENS, SUBLEASE AND ASSIGNMENT:

(a) OPERATOR SHALL NOT SELL, TRANSFER, ASSIGN OR ENCUMBER THE AIRCRAFT, ANY ENGINE OR ANY PART THEREOF, OWNER'S TITLE OR ITS RIGHTS UNDER THIS LEASE. OPERATOR SHALL r-;!OT, WITHOUT THE PRIOR WRITTEN CONSENT OF OWNER, SUBLET, CHARTER OR PART WITH POSSESSION OF THE AIRCRAFT OR ANY ENGINE OR PART THEREOF OR ENTER INTO ANY INTERCHANGE AGREEMENT. Operator shall not permit any engine to be used on any other Aircraft. Operator shall keep the Aircraft, each engine and any part thereof free and clear 'of all liens and encumbrances other than those which result from (i) the respective rights of Owner and Operator as herein provided; (ii) liens arising from the acts of Owner; (iii) liens for taxes not yet due; and (iv) inchoate materialmen's, mechanics', workmen's, repairmen's, employees' or other like liens arising in :the ordinary course of business of Operator for sums not yet delinquent or being contested in good faith (and for the payment of which adequate assurances in Owner's judgment have been provided Owner).

(b) Owner and any assignee of Owner may assign this Lease, or any part hereof and/or the Aircraft with the Operator's prior written consent. Operator hereby waives and agrees not to assert against any such assignee, or assignee's assigns, afly defense, set-off, recoupment claim or counterclaim which Operator has or may at any time have against Owrier for any reason whatsoever.

7. LOSS AND DAMAGE: Operator hereby assumes and shall bear the entire risk of any loss, theft, co'nfiscation, expropriation, requisition, damage to, or destruction of, the Aircraft, any engine or part thereof from any cause whatsoever, except to the extent such events directly result from the gross negligence or willful misconduct of Owner. If for any reason the Aircraft, or any engine thereto becomes worn out, lost, stolen, confiscated, expropriated, requisitioned, destroyed, irreparably damaged, or unusable(" Casualty Occurrences") Operator shall promptly and fully notify Owner. If, in the opinion of Owner, a Casualt~ Occurrence has occurred which affects only the engine(s) of the Aircraft, then Operator, at its own cost and expense, shall replace such engine(s) with an engine(s) acceptable to Owner and shall cause title to such engine(s) to be transferred to Owner for lease to Operator under this Lease. Upon transfer of title to Owner of such engine(s), such er)gine(s) shall be subject to the terms and conditions of this Lease, and Operator shall execute whatever documents or filings Owner deems necessary and appropriate in coqnection with the substitution of such replacement engine(s) for the original engine(s). If, in the opinion of Owner, a Casualty Occurrence has occurred with

6

respect to the Aircraft in its entirety, on the next Rent Payment Date after a Casualty Occurrence (the "Payment Date"), Operator shall pay Owner the sum of (i) the total amount of the loss up to the then fair market value of the affected Aircraft; and (ii) all Rent and other amounts which are due under this Lease as of the Payment Date. Upon payment of all sums due hereunder, the Tenn of this Lease as to the Aircraft shall terminate.

8. INSURANCE: All insurance obligations shall be as stated in the Joint Ownership Agreements.

9. RETURN OF AIRCRAFT:

(a) Subject to the other Sections of this Lease, at expiration or termination of this Lease (the "Return Date"), Operator shall return the Aircraft to Owner, at a location within the continental United States as Owner shall direct. Operator shall also return all logs, loose equipment, manuals and data associated with the Aircraft, including without limitation, inspection, modification and overhaul records required to be maintained with respect to the Aircraft under this Lease or under the applicable rules and regulations of the FAA or the manufacturer's recommended maintenance program, along with a currently effective FAA airworthiness certificate. In addition, Operator shall, upon request, assign to Owner its rights under any manufacturer's maintenance service contract or extended warranty for the Aircraft, any engine or part thereof. The Aircraft shall be returned in the condition in which the Aircraft is required to be maintained pursuant to Section 5, but with all logos or other identifying marks of Operator removed. 'Operator shall pay for all costs to comply with this Section 9(a).

(b) Owner shall arrange for the inspection of the Aircraft on the Return Date to determine if the Aircraft has been maintained and returned in accordance with the provisions of this Lease. Operator shall be responsible for the cost of such inspection and shall pay Owner such amount as additional Rent within ten (1 0) days .of demand. If the results of such inspection indicate that the Aircraft, any engine thereto or part thereof, has not been maintained or returned in accordance with the provisions of this Lease, Operator shall pay to Owner within ten (1 0) days of demand, as liquidated damages, the estimated cost ("Estimated Cost") of, servicing or repairing the Aircraft, engine or part. The Estimated Cost shall be determined by Owner by obtaining two quotes for such service or repair work and taking their average. Operator shall bear the cost, if any, incurred by Owner in obtaining such quotes.

(c) If Operator fails to return the Aircraft on the Return Date, Owner shall be entitled to damages equal to the higher of (i) the Rent for the Aircraft, pro-rated on a per diem basis, for each day the Aircraft is retained beyond the Return Date; or (ii) the daily fair market rental for the Aircraft at the Return Date. Such damages for retention of the Aircraft after the Return Date shall not be interpreted as an extension or reinstatement of the Term.

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(d) All of Owner's rights contained in this Section shall survive the expiration or other termination of this Lease.

10. EVENTS OF DEFAULT AND REMEDIES:

(a) The term "Event of Default", wherever used herein, shall mean any of the following events under this Lease: (i) Operator breaches its obligation to pay Rent or any other sum when due and fails to cure the breach within ten (10) days; or (ii) Operator breaches any of its insurance obligations under Section 8; or (iii) Operator breaches any of its other obligations and fails to cure that breach within thirty (30) days after written notice from Owner to Operator; or (iv) any representation or warranty made by Operator in connection with this Lease shall be false or misleading in any material respect; or (v) there occurs an "Event of Default" under and as defined in any other agreement by and between Owner and Operator.

(b) Upon the occurrence of any Event of Default and so long as the same shall be continuing, Owner may, at its option, at any time thereafter, exercise one or more of the following remedies, as Owner in its sole discretion shall lawfully elect: (i) demand that Operator pay all amounts due for failure to maintain or return the Aircraft as provided herein and cause Operator to assign to Owner Operator's rights under any manufacturer's service program contract or any extended warranty contract in force for the Aircraft; (ii) proceed by appropriate court action, either at law or in equity, to enforce the performance by Operator of the applicable covenants of this Lease or to recover damages for breach hereof; (iii) by notice in writing terminate this Lease, whereupon all rights of Operator to use of the Aircraft or any part thereof shall absolutely cease and terminate, and Operator shall immediately return the Aircraft in accordance with Section 9, but Operator shall remain liable as provided in Section 9; (iv) request Operator to return the Aircraft to a designated location in accordance with Section 9; (v) sell or otherwise dispose of the Aircraft at private or public sale, in bulk or in parcels, with or without notice, and without having the Aircraft present at the place of sale; (vii) lease or keep idle all or part of the Aircraft; (viii) use Operator's premises for storage pending lease or sale or for holding a sale without liability for rent or costs; (ix) collect from Operator all costs, charges and expenses, incurred by Owner by reason of the occurrence of any Event of Default or the exercise of Owner's remedies with respect thereto; and! or (x) declare any Event of Default under the terms of this Lease to be an "Event of Default" under and as defined in any other agreement between Owner and Operator.

(c) Owner shall have the right to any proceeds of sale, lease or other disposition of the Aircraft, if any, and shall have the right to apply same in the following order of priorities: (i) to pay all of Owner's costs, charges and expenses incurred in enforcing its rights under this Lease or in taking, removing, holding, repairing, selling, leasing or otherwise disposing of the Aircraft; then, (ii) to the extent not previously paid by Operator, to pay Owner all sums due from Operator

8

under this Lease; then (iii) to reimburse to Operator any sums previously paid by Operator as liquidated damages; and (iv) any surplus shall be paid to Operator. Operator shall pay any deficiency in (i) and (ii) immediately.

(d) The foregoing remedies are cumulative, and any or all thereof may be exercised instead of or in addition to each other or any remedies at law, in equity, or under statute Waiver of any Event of Default shall not be a waiver of any other or subsequent Event of Default.

11. NET LEASE:

Operator is unconditionally obligated to pay all Rent and other amounts due for the entire Term of this Lease no matter what happens, even if the Aircraft is damaged or destroyed, if it is defective or if Operator no longer can use it. Operator is not entitled to reduce or set-off against Rent or other amounts due to Owner or to anyone to whom Owner assigns this Lease whether Operator's claim mises out of this Lease, any statement by Owner, Owner's liability or any manufacturers liability, sttict liability, negligence or otherwise.

12. DISCLAIMER:

OPERATOR ACKNOWLEDGES THAT IT HAS SELECTED THE AIRCRAFT WITHOUT ANY ASSISTANCE FROM OWNER, ITS AGENTS OR EMPLOYEES AND THAT OWNER IS LEASING THE AIRCRAFT IN AN "AS IS" CONDITION. OWNER DOES NOT MAKE, HAS NOT MADE, NOR SHALL BE DEEMED TO MAKE OR HAVE MADE, ANY WARRANTY OR REPRESENTATION, EITHER EXPRESS OR IMPLIED, WRITTEN OR ORAL, WITH RESPECT TO THE AIRCRAFT LEASED UNDER THIS LEASE OR ANY COMPONENT THEREOF, OR ANY ENGINE INSTALLED THEREON, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY AS TO CONDITION, AIRWORTHINESS, DESIGN, COMPLIANCE WITH SPECIFICATIONS, QUALITY OF MATERIALS OR WORKMANSHIP, MERCHANTABILITY, FITNESS FOR ANY PURPOSE, USE OR OPERATION, SAFETY, PATENT, TRADEMARK OR COPYRIGHT INFRINGEMENT, OR TITLE. All such risks, as between Owner and Operator, are to be borne by Operator. Without limiting the foregoing, Owner shall have no responsibility or liability to Operator or any other person with respect to any of the following: (i) any liability, loss or damage caused or alleged to be caused directly or indirectly by the Aircraft, any inadequacy thereof, any deficiency or defect (latent or otherwise) of the Aircraft, or any other circumstance in connection with the Aircraft; (ii) the use, operation or performance of the Aircraft or any risks relating to it; (iii) any interruption of service, loss of business or anticipated profits or consequential damages; or (iv) the delivery, operation, servicing, maintenance, repair, improvement or replacement of the Aircraft. If, and so long as, no Event of Default continues under this Lease, Operator shall be, and hereby is, authorized during the Term of this Lease to assert and enforce, at

9

Operator's sole cost and expense, in the name of and for the account of Owner and/or Operator, as their interests may appear, whatever claims and rights Owner may have against any manufacturer or supplier of the Aircraft.

13. REPRESENTATIONS AND WARRANTIES OF OPERATOR:

Operator hereby represents, warrants and covenants to Owner that on the date of this Lease and at all times during the Term of this Lease:

(a) Operator has adequate power and capacity to enter into, and perform under, this Lease and all related documents (together, the "Documents).

(b) The Documents have been duly authorized, executed and delivered by Operator and constitute valid, legal and binding agreements, enforceable in accordance with their terms, except to the extent that the enforcement of remedies may be limited under applicable bankruptcy and insolvency laws.

(c) No approval, consent or withholding of objections is required from any governmental authority or entity with respect to the entry into or performance by Operator:of the Documents except such as have already been obtained.

(d) The entry into and performance by Operator of the Documents will not: (i) violate any judgment, order, law or regulation applicable to Operator or any applicable state regulations.

(e) There are no suits or proceedings pending or, to the best knowledge of Operator, threatened in court or before any commission, board or other administrative agency against or affecting Operator, which will have a material adverse effect on the ability of Operator to fulfill its obligations under this Lease.

(f) A copy of this Lease and a current and valid AC Form 8050-l will be kept on the Aircraft at all times during the Term of this Lease.

(g) Operator has selected the Aircraft, manufacturer and vendor thereof, and all maintenance facilities required hereby.

(h) Operator shall maintain all logs, books and records (including any computerized maintenance records) pertaining to the Aircraft and engines and their maintenance during the Term in accordance with FAA rules and regulations.

(i) Operator shall not operate the Aircraft under Part 135 of the Federal Aviation Regulations without the prior written approval of Owner.

UJ Operator shall notify the local Flight Standards District Office of the FAA forty-eight ( 48) hours prior to the first flight of the Aircraft under this Lease.

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(k) Throughout the Term of this Lease, Operator will not use or operate and will not permit the Aircraft to be used or operated "predominately" outside the United States as that phrase is used in Section 168(g)( l)(A) of the Internal Revenue Code of 1986, as amended.

14. MISCELLANEOUS:

(a) The Aircraft shall remain Owner's property unless Operator purchases the Aircraft from Owner, and until such time Operator shall only have the right to use the Aircraft as an Operator. Any cancellation or tern1ination by Owner of this Lease, pursuant to the provisions of this Lease, shall not release Operator from any then outstanding obligations to Owner hereunder.

(b) Time is of the essence of this Lease. Operator agrees, upon Owner's request, to execute any instrument necessary or expedient for filing, recording or perfecting the interest of Owner. All notices required to be given hereunder shall be deemed adequately given if delivered in hand or sent by registered or certified mail to the addressee at its address stated herein, or at such other place as such addressee may have designated in writing. This Lease hereto constitutes the entire agreement of the parties with respect to the subject matter hereof, and all Annexes referenced herein are incorporated herein by reference. NO VARIATION OR MODIFICATION OF THIS LEASE OR ANY WAIVER OF ANY OF ITS PROVISIONS OR CONDITIONS SHALL BE VALID UNLESS IN WRITING AND SIGNED BY AN AUTHORIZED REPRESENTATIVE OF EACH PARTY TO THIS LEASE. This Lease may be executed in counterparts which collectively will constitute one document.

(d) If Operator does not comply with any provision of this Lease, Owner shall have the right, but shall not be obligated, to effect such compliance, in whole or in part. All reasonable amounts spent and obligations incurred or assumed by Owner in effecting such compliance shall constitute additional Rent due to Owner. Operator shall pay the additional Rent within five day after the date Owner sends notice to Operator requesting payment. Owners effecting such compliance shall not be a waiver of any Event of Default.

(e) Any Rent or other amount not paid to Owner when due shall bear interest from the due date until paid, at the lesser of eighteen percent (18%) per annum or the maximum rate allowed by law. Any provisions in this Lease which are in conflict with any statute, law or applicable rule shall be deemed omitted, modified or altered to conform thereto.

(f) THIS LEASE AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL IN ALL RESPECTS BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE COMMONWEALTH OF VIRGINIA, INCLUDING ALL MATTERS OF

!I

CONSTRUCTION, VALIDITY AND PERFORMANCE, REGARDLESS OF THE LOCATION OF THE AIRCRAFT.

15. TRUTH-IN-LEASING:

(a) OPERATOR HAS REVIEWED THE AIR CRAFTS' MAINTENANCE AND OPERATING LOGS FROM AUGUST I, 2003 TO SEPTEMBER I, 2004 AND HAS FOUND THAT THE AIRCRAFT HAS BEEN MAINTAINED AND INSPECTED UNDER PART 91 OF THE FEDERAL AVIATION REGULATIONS. OPERATOR CERTIFIES THAT THE AIRCRAFT PRESENTLY COMPLIES WITH THE APPLICABLE MAINTENANCE AND INSPECTION REQUIREMENTS OF PART 91 OF THE FEDERAL AVIATION REGULATIONS.

(b) OPERATOR CERTIFIES THAT OPERATOR, AND NOT OWNER, IS RESPONSIBLE FOR OPERATIONAL CONTROL OF THE AIRCRAFT UNDER THIS LEASE DURING THE TERM HEREOF. OPERATOR FURTHER CERTIFIES THAT OPERATOR UNDERSTANDS ITS RESPONSIBILITY FOR COMPLIANCE WITH APPLICABLE FEDERAL AVIATION REGULATIONS.

(c) OPERATOR CERTIFIES THAT THE AIRCRAFT WILL BE MAINTAINED AND INSPECTED UNDER PART 91 OF THE FEDERAL AVIATION REGULATIONS FOR OPERATIONS TO BE CONDUCTED UNDER THIS LEASE.

(d) OPERATOR UNDERSTANDS THAT AN EXPLANATION OF FACTORS BEARING ON OPERATIONAL CONTROL AND PERTINENT FEDERAL AVIATION REGULATIONS CAN BE OBTAINED FROM THE NEAREST FAA FLIGHT STANDARDS DISTRICT OFFICE, GENERAL AVIATION DISTRICT OFFICE, OR AIR CARRIER DISTRICT OFFICE.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

12

IN WITNESS WHEREOF, Operator and Owner have caused this Lease to be executed by their duly authorized representatives as of the date first above written.

Exhibit "A" -Aircraft Description

OWNER Virginia Tech Foundation, Inc.

By: 4- <l L) . S j.~ Raymond 'D. Smoot, Jr. Chief Operating Officer and Secretary-Treasurer Date: I 0 I Z. t;. I 0 4

I

OPERATOR Virginia Polytechnic Institute & State University

Exhibit "B"- Aircraft Joint Ownership Agt- Citation II Exhibit "C"- Aircraft Joint Ownership Agt -Ultra

13

Exhibit "A"

I. Cessna Citation II; Serial# 550-0364

2. Cessna Citation V Ultra; Serial# 560-0260; Registration No. N883RT

14

' -Exhibit g

AMENDED AND RESTATED AIRCRAFT JOINT OWNERSHIP AGREEMENT

This amended and restated aircraft joint ownership agreement ("Agreement") is effective the Jl_ of 3"p-\-'oWJbVIC , 2004, among, by and between W. Heywood Fralin, as Co-owner 1, Karen H. Waldron, as Co-owner 2, Virginia Tech Foundation, Inc., as Co-owner 3, Fralin & Waldron. Inc., as Co-owner 4, Medical Facilities of America, Inc. as Co-owner 5, Medical Facilities ofNorth Carolina, Inc. as Co-owner 6, Retirement Unlimited Inc. as Co-owner 7, and F & W Management, L.C. as Co-owner 8. Co-owners 1 through 8 are hereinafter known collectively as "Co-owners" and singly as "Co­owner".

RECITALS

WHEREAS, the Co-Owners entered in that certain Co-Ownership Agreement dated May 8, 1998 ("Original Joint Ownership Agreement") pertaining to the joint ownership of an Cessna aircraft, model type: Citation II; Serial# 550-0364;

WHEREAS, Co-Owners 1, 2, 4, 5, 6, 7 & 8 sold their ownership interests in the aircraft to Co-owner 3 pursuant to that certain Purchase and Sale Agreement dated .Se-pPmb<'4 8 , 2004;

WHEREAS, Co-Owners 1, 2, 4, 5, 6, 7 & 8 re-purchased an ownership interest in the aircraft; and

WHEREAS, the Co-Owners wish to amend and restate the Original Joint Ownership Agreement pursuant to this Agreement.

NOW THEREFORE, in consideration often dollars ($10.00) and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Co-Owners agree as follows:

ARTICLE 1 PURPOSE OF ORGANIZATION AND

CO-OWNERSHIP INTERESTS

Co-owners elect to form a co-ownership for the purpose of purchasing and owning a Cessna, Citation II aircraft. Serial Number 550-0364, and operating the aircraft for the Co-owners business, training and pleasure or any use the Co"owners may agree upon in writing by a majority vote of the Co-owners. All aircraft operations must be in strict accordance with FAA regulations. Co-owner 7 shall own two-tenths of a percent (02%) ofthe co-ownership and title in the aforesaid aircraft. Co-owners 4 and 8 shall each own four-tenths of a percent (0.4%) of the co-ownership and title in the aforesaid aircraft. Co­owners 1, 2, and 6 shall each own two percent (2%) of the co-ownership and title in the aforesaid aircraft. Co-owner 5 shall own thirteen percent (13%) of the co-ownership and title in the aforesaid aircraft and Co-owner 3 shall own eighty percent (80%) of the co­ownership and title in the aforesaid aircraft. As between the Co-owners the relationship

(RKE# 088l010.DOC-4, 999-999)

shall be and remain as tenants in common. This Agreement does not create nor is it intended to create a partnership, corporation or any other business entity among the Co­owners and is merely being entered into to own and operate the aircraft and not with expectation of any profrts whatsoever.

ARTICLE2 TERM OF THE AGREEMENT

The co-ownership structure commenced on Se o~'"'b'"' 8, 2004, and shall continue until termination by mutual consent of the Co-o'Wners or as required by the terms of this Agreement.

ARTICLE 3 USE OF FUNDS, CAPITAL ACCOUNTS, OWNERS' EQUITY

(a) Co-owners 1, 2 & 6 each shall make a capital contribution of Twenty-Nine Thousand and 00/100 dollars ($29,000.00). Co-owner 7 shall make a capital contribution of Two Thousand Nine Hundred and 00/100 dollars ($2,900.00). Co-owners 4& 8 each shall make a capital contribution of Five Thousand Eight Hundred and 00/100 dollars ($5,800.00). Co-owner 3 shall make a capital contribution of One Million One hundred and sixty thousand and 00/100 dollars ($1,160,000.00) to the co-ownership upon its formation. Co-owner 5 shall make a capital contribution of One Hundred and Eighty-Eight Thousand Five Hundred and 001100 dollars ($188,500.00) to the co-ownership upon its formation. This will constitute the beginning balance of each Co-owner's capital account which will be periodically adjusted as per ARTICLE 8 of this Agreement.

(b) The value of any other funds of the co-ownership, equipment and the like not directly related to the operation and ownership of this specific aircraft shall NOT be considered part of a Co-owner's capital account and shall be accounted for in a separate set of books and accounts.

(c) Co-owners shall contribute a monthly sum to cover regular, fixed costs including, but not limited to, tie-down rent, required inspections, taxes and insurance. These sums shall be set by mutual written consent and shall be subject to review at the Valuation Dates hereinafter specified in ARTICLE 8.

(d) Upon mutual written consent, special assessments may be made against the Co­owners for such uses as the co-ownership may decide. Each special assessment so made shall be payable on a date established by the Co-owners.

(e) Funds to cover either fixed expenses or special assessments shall be payable on or before the first day of each month during the term of this Agreement. If any Co­owner is more than sixty (60) days in arrears in the payment of the monthly contribution or special assessment the nondelinquent Co-owners may make a decision regarding the aircraft which, under the terms of this Agreement, would otherwise require mutual consent.

(f) Co-owner payments in the form of services or property, in lieu of cash, shall not be permitted unless by mutual written consent. (As an example, a Co-owner may

{ RKE# 088 10 l 0. DOC-4, 999·999}

NOT exchange such services as oil changes, washing, or other maintenance functions to pay for flight time without mutual written consent.)

(g) Any and all amounts to be paid by the Co-owners pursuant to this Agreement may be adjusted from time as is equitable and mutually agreed upon by the Co­owners.

ARTICLE4 ACCOUNTJNG CO-OWNER

Co-owner 3 shall be the Accounting Co-Owner and shall maintain possession of the books and records of the co-ownership and shall perform the necessary administrative accounting functions of the co-ownership.

ARTICLE 5 MANAGEMENT AND ADMINISTRATION

Except as otherwise stated in this Agreement, decisions regarding the sale of the co­ownership assets and operation of the aircraft shall be made by mutual written consent. Each Co-owner's percentage voting interest on those matters brought to a vote of the Co­owners shall be proportional to such Co-owner's ownership interest in the aircraft as set forth in Article 1.

ARTICLE6 BOOKS AND RECORDS

Complete accounting records of all co-ownership affairs shall be kept and shall be open to review by the other co-owners upon reasonable request.

ARTICLE 7 CUSTODY OF DOCUMENTS

Copies of registration certificate, bills of sale, or any other evidence of ownership of the aircraft relating to the co-ownership and registered or recorded in such names, shall be maintained by the Accounting Co-Owner at its offices in Blacksburg, Virginia, and made available to the other Co-owners at any reasonable time and upon reasonable notice.

ARTICLES CAPITAL ACCOUNTS & VALUATION DATE

Individual capital accounts shall be maintained for each Co-owner and shall represent the entire value of his, her or its interest. The Capital Account shall consist of his, her or its capital contribution, increased or decreased (as the case may be) on any Valuation Date due to an increase or decrease in the net value of the co-ownership assets. The net value of the co-ownership assets shall be determined as of at least January 1 each year. Such dates shall be known as the Valuation Dates. Adjustments to the capital account of each Co-owner shall be made regularly at the end of each Valuation Date interval and at other times as the Co-owners may elect.

{RKE# 088IOIO.DOC-4, 999-999)

ARTICLE 9 NOTICES

(a) Notification of Co-ownership matters relating to this agreement are to be in writing and may be served personally on the Co-dwner(s) or by certified mail addressed as follows (or to the last known address of record in the co­ownership records): I. W. Heywood Fralin, P.O. Box 40069, Roanoke, VA. 24018. 2. Karen H. Waldron, P.O. Box 20069, Roanoke, VA. 24018. 3. Virginia Tech Foundation, Inc. 312 Burruss Hall, Blacksburg, VA. 24061

attn: Dr. Raymond D. Smoot, Jr. 4. Fralin & Waldron, Inc. 2917 Penn Forest Boulevard, Roanoke, VA.

24018, attn: David W. Cotton. 5. Medical Facilities of America, Inc. 2917 Penn Forest Boulevard, Roanoke,

Va. 24018, attn: W. Heywood Fralin. 6. Medical Facilities ofNorth Carolina, Inc. 1300 S. Mint Street, Suite 201,

Charlotte, NC. 28203, attn: W. Heywood Fralin 7. Retirement Unlimited, Inc. 2917 Penn Forest Boulevard, Roanoke, Va.

24018 attn: W. Heywood Fralin 8. F & W Management, L.C. 3130 Chaparral Drive, Roanoke, VA. 24018,

attn: Charles Nimmo. (b) The Co-owners shall give notice of any change of address to each other within

5 days of such change. If notice is given by U.S. mail, it shall be considered served three (3) days after its deposit, postage prepaid, in the United States mail.

ARTICLE 10 RESTRICTION OF CO-OWNERS

No Co-owner, without the written consent of the other Co-owners, shall: a. Sell, assign, hypothecate, encumber or pledge his, her or its equity in any

of the co-ownership assets, except as provided for in this Agreement; b. Borrow or lend money on behalf of the co-ownership or any other Co­

owners(s); c. Transfer, sell, consign or grant release of any claim of the co-ownership or

any other Co-owner(s) or consent to an arbitration on any dispute involving the co-ownership or any other Co-owner(s);

d. Use the assets or identification of the co-ownership for any purpose other than that stated in ARTICLE 1; or

e. Commit an act detrimental to any co-ownership activity which would make it difficult or impossible to continue conduct of the co-ownership's stated objectives.

ARTICLE 11 UNILATERAL AUTHORITY

No Co-owner shall, without the written consent of the others, contract or obligate the co­ownership or any other Co-owner(s) to the payment of any sum of money. No Co-owner shall, without the written consent of the other Co-owners suffer any lien to be levied

(RK.E# 08810!0.DOC-4, 999-999}

against the aircraft or other co-ownership assets. If a lien is levied for a debt which did not have the written consent of all Co-owners, it shall be grounds for dissolution of the co-ownership. At the option of the non-consenting Co-owners, the costs required to satisfy the lien shall come out of the share of the consenting Co-owners(s).

ARTICLE 12 RULES AND REGULATIONS

(a) The aircraft shall at all times be flown and maintained in accordance with all applicable federal air regulations and requirements of duly constituted authority including, but not limited to all necessary FAA certifications and the required number of pilot(s). Any deficiencies which cause any civil penalties to be levied shall be borne by the Co-owners responsible for the violation. In the event that the violation is not directly attributable to the responsibility of one of the Co-owners, the cost shall be borne in proportion to their ownership interests in accordance with the formula stated in ARTICLE 13 hereof by all Co-owners causing the violation.

(b) Any Co-owner finding an equipment condition that presents a hazard to further use shall have the right and duty to declare the aircraft disabled, grounded and incapable of further flight (or ground movement, as the case may be) until the condition is remedied. The condition shall immediately be reported to the Co-owner in charge of maintenance as well as other Co­owners.

ARTICLE 13 DAMAGE DUE TO FAULTY TECHNIQUE

Except as may be paid by insurance on the aircraft, damage resulting from faulty flying and/ or handling technique will be the responsibility of that individual Co-owner causing such damage or whose control the aircraft was under at the time it was damaged. Damage caused by the negligence of a Co-owner not indemnified by insurance (such as a deductible) will be repaired at his, her or its sole expense and in an expeditious manner so as to permit the operations of the co-ownership to continue without undue delay or inconvenience. Damage caused by more than one Co-owner or arising at a time the aircraft was under the control of more than one Co-owner shall, to the extent not paid for by insurance on the aircraft, be borne by such Co-owners in proportion to their co­ownership interests as if together such interest equaled on hundred percent (100%). By way of example, if the aircraft were damaged while under the control of Co-owners I and 2, each would be responsible for fifty percent (50%) of the repair expenses. However, if the aircraft were damaged while under the control of Co-owners 1 and 7, Co-owner 7 would be responsible for sixteen and two-thirds percent (16 2/3%) and Co-owner 1 for eighty-three and one-third percent (83 1/3%) of the repair expenses. Penalties levied against any Co-owner(s) for acts in violation of any law or regulation governing the operation of the aircraft shall be borne solely by the Co-owner causing the violation or, if caused by more than one Co-owner, in the same proportion as for damage caused to the aircraft.

{RKE# 0881010.DOC-4, 999-999)

ARTICLE 14 AIRCRAFT USE RESTRICTIONS

The aircraft will not be used commercially, for air taxi or charter purposes.

ARTICLE 15 AIRCRAFT BASING

The aircraft shall be based at the Virginia Tech I Montgomery Executive Airport in Blacksburg, Virginia and the costs of storage or tie-down at said base shall be borne by the Co-owners in proportion to their co-ownership interests. Costs attributable to storage, parking, tie-down or landing fees while the aircraft is being operated away from the home base shall be borne solely by the Co-owner operating the aircraft away from the home base or if so operated by more than one Co-owner, in such proportions as such Co­owners may agree, provided that such Co-owners shall be jointly and severally liable to t~e other Co-owners for all costs attributable to storage, parking, tie-down or landing fees while the aircraft is being operated away from the home base. The decision to change the base of operations from the airport specified above requires the mutual written consent of the Co-owners.

ARTICLE 16 OVERNIGHT AWAY FROM HOME BASE

Any Co-owner(s) using the aircraft may remain overnight (RON) from the base for two (2) consecutive nights. The aircraft may be removed at any time the day before a RON but must be returned by 12 p.m. the day following a two (2) day RON.

ARTICLE 17 TYPE OF OPERATIONS, RUNWAY LENGTHS

The aircraft shall not be landed at any airport more than 150 nautical miles from the home base unless an appropriate IFR or VFR flight plan has been filed. Landings at airstrips of less than 4,500 usable feet in length shall not be attempted unless the pilot determines that under the applicable circumstances such landing can be safely made. Landings at other than paved or concrete runways shall not be attempted without the assumption of responsibility by the operating Co-owner for any resulting damage to the aircraft.

ARTICLE 18 FLIGHT INTO IFR CONDITIONS

No flights shall take place into IFR conditions unless all equipment necessary for operation appropriate to the ground facilities to be used is in proper working order or inoperative in accordance with federal aviation regulations.

ARTICLE 19 PILOTS

The Co-owners shall employ the pilots necessary for the operation of the aircraft through Virginia Polytechnic Institute and State University ("VPI") and VPI shall bill the Accounting Co-owner for the services of such pilots at a beginning rate of Forty Dollars ($40.00) per hour per pilot. Such rate shall be renegotiated no more frequently than

{RKE# 088lOlO.DOC-4. 999-999}

~~--------------------------------------,

yearly. The Accounting Co-owner shall bill the Co-owner(s) using the aircraft for the pilots services and in addition to all other sums which a Co-owner may owe, the Co­owners using the aircraft shall promptly pay to the Accounting Co-owner the amount to be reimbursed by the Accounting Co-owner to VPI for the pilots services. During flights of the aircraft, such pilots shall be under the exclusive control and direction of the Co­owner using the aircraft. In the event the VPI pilots are not available for a specific flight, the Co-owner desiring to use the aircraft may employ other pilots for such flight, provided, however, that no person other than such pilots possessing all applicable FAA certifications, mutually agreed upon in writing by the Co-owners, shall be authorized to operate the aircraft and then only if that person has the experience level required by the FAA and the approval of the underwriter for the insurance policy then in force except for flights and operation by authorized personnel incidental to testing after maintenance and repair at an FAA Authorized Repair Station.

ARTICLE20 PRIMARY RESPONSIBILITY

Co-owner 3 shall be responsible for the receipt and disbursement of all monies relating to co-ownership business, and for the initiation and implementation of maintenance activity and programs.

ARTICLE21 NUMBER OF CO-OWNERS

The co-ownership shall be limited to Co-owners 1 through 8. Mutual and written consent of all Co-owners is required before additional persons can purchase any share of the assets.

ARTICLE22 CO-OWNERS WITH MORE THAN ONE EQUAL SHARE

In the event that any Co-owner possesses more than an equal share in the co-ownership, they will be restricted to a single vote in matters that require a consensus by vote.

ARTICLE23 INTERNATIONAL OPERATIONS

The aircraft may be flown to a foreign country, other than Canada, only if the pilot makes the required documentary arrangements for the trip and has obtained prior written consent from Wachovia Bank Insurance necessary to comply with the destination country's laws must be arranged at the sole expense of the Co-owner making such trip prior to entering the airspace of that country. Under no circumstances will a country not honoring U.S. passports be entered.

ARTICLE24 AMENDMENTS

All amendments to this Agreement shall be made by mutual, written consent of the Co­owners.

{RKE# 088lOlO.DOC-4, 999-999}

-----------------------------------------------------.

ARTICLE25 ARBITRATION

If any dispute arises under or by virtue of any of the terms of this Agreement and which the Co-owners cannot resolve, the Co-owners shall submit the dispute to arbitration at Roanoke, Virginia, pursuant to the rules and regulations for the American Arbitration Association. Judgment may be entered into in any state or federal court of competent jurisdiction in City of Roanoke, Virginia upon the rendition of any final decision by the arbitrators.

ARTICLE26 SEVERABILITY

If any part of this Agreement is found to violate any laws of competent jurisdiction and is therefore rendered unenforceable the balance of the Agreement shall remain unaffected and in full force and effect. In such event, the Co-owners shall use their reasonable efforts to negotiate a substitute provision which fulfils the purpose and intent of the original provision and which is enforceable.

ARTICLE27 AIRCRAFT INSURANCE

The Accounting Co-owner shall obtain the following insurance policies in which all of the Co-owners are named insureds: (i) Public liability insurance (including without limitation contractual liability, passenger legal liability insurance and insurance for product liability or strict liability in tort) in an amount not less than $100,000,000.00 per occurrence, and (ii) property damage liability insurance in an amount of $1,500, 000.00.

ARTICLE28 SCHEDULING

Use of the aircraft shall be scheduled on a first come, frrst served basis. A Co-owner desiring to use the aircraft shall contact Air Transportation Services at Virginia Polytechnic Institute and State University (540-231-2636) to determine availability and schedule use.

ARTICLE 29 MAINTENANCE DOWN TIME

Down time for aircraft maintenance and repairs will, insofar as possible, be scheduled by the Co-owner responsible for maintenance (whose decision shall be final) at the prescribed interval in accordance with FAA regulations and specifications by the aircraft manufacturer. ·

ARTICLE 30 EQUIPMENT DEFICIENCIES

Equipment deficiencies noted by a pilot shall be submitted to the Co-owner in charge of maintenance scheduling for the aircraft. If the pilot noting the deficiency deems the aircraft unair worthy, the aircraft will not be operated in any manner which could result in further aircraft damage or the possibility of bodily injury until the deficiency is remedied the pilot first noticing a significant deficiency shall enter into a log form, which is to

{RKE# 0881010.DOC-4, 999-999}

remain in the aircraft, the nature of the deficiency and include their opinion as to whether the aircraft is safe to operate in any manner. In addition, an immediate verbal or written notice shall be given to the Co-owners.

ARTICLE31 CONDITIONING AFTER USE

Following the use of the aircraft by a Co-owner, shall install or cause the pilots to install gust locks, chains, chocks, weather covers and other devices which secure the aircraft to the ground appropriate to foreseeable weather or other physical conditions whether at home base or while at any temporary base.

ARTICLE32 AIRWORTHINESS DIRECTIVES

All Airworthiness Directives affecting the aircraft equipment and safety of operation will be instituted as soon as notification is received. Service Bulletins issued by the aircraft manufacturer shall be reviewed immediately for implementation, if necessary, for continued safe operations of any kind.

ARTICLE 33 NORMALEQ~MENTDAMAGE

Damage to the aircraft due to unforeseeable and unexpected mechanical break-down, except that caused by Faulty Technique as described in ARTICLE 13, as well as that caused by normal wear and tear shall be the joint responsibility of all Co-owners in accordance with their proportionate share of the co-ownership.

ARTICLE34 OPERATING EXPENSES

(a) Operating expenses shall include, but not be limited to, such items as periodic inspections, oil changes, replacement of tires, brakes, battery, hydraulic fluids, radios, airframe, engine, and accessory repair and maintenance. These operating expenses shall be paid by the co-ownership from funds received from fees charged each Co-owner for the use of the aircraft.

(b) Each Co-owner shall fill and service all systems at the end of each flight at his, her or its own expense. Co-owners returning to home base from nearby airports may leave up to three quarters of an hour of flight time after the last fueling on the Hobbs Meter without any changes. This will allow fueling at other nearby airports if fuel costs are substantially less than at home base.

(c) Each Co-owner shall pay to the co-ownership account an hourly fee of $770.00 for each hour of Hobbs Meter time used by that Co-owner. This fee is for operation of the aircraft and does not include the cost of fuel which is borne by each Co-owner as the aircraft is utilized by him, her or it.

{RKE# 0881010.DOC-4, 999-999}

ARTICLE 35 FIXED EXPENSES

An amount sufficient for paying the fixed expenses, as hereafter defined, shall be maintained in a fund, to be replenished quarterly by all Co-owners in proportion to their co-ownership interest in the aircraft. Out of this fund all fixed expenses will be paid. The fixed expenses are defined as, but not limited to, tie-down at the home base, insurance, licensing and taxes. The Co-owners shall agree upon a monthly fixed fee, exclusive of Hobbs Meter flight time, to be paid into the joint account as of the first of each month. The amount of the fixed fee may be adjusted from time to time by mutual consent.

ARTICLE36 NUUNTENANCERESERVE

Each month funds shall be set aside from the amounts collected pursuant to paragraph (c) of ARTICLE 34 hereof into a maintenance reserve. These funds will be set aside for ordinary and extraordinary maintenance and repairs. No portion of the maintenance reserve will be refundable to a Co-owner who transfers his interest in the aircraft.

ARTICLE 37 DELINQUENCIES

(a) Any delinquency in the payment of charges or costs/fees arising out of the terms of this Agreement, whether for fixed, operating or finance expenses, or otherwise, which are delinquent for more than ninety (90) days, shall result in the deprivation of flight privileges of the delinquent Co-owner. Any delinquency that continues thereafter for a period of one hundred and twenty (120) days shall be grounds for involuntary dissolution at the option of the non-delinquent Co-owners pursuant to the terms herein specified for involuntary dissolution.

(b) Should there be any default in the payment ofloans secured by the aircraft, the non-defaulting parties may, at their option, cure the default, and they shall be subrogated to that extent to the interest ofthe lien holder. Such default shall then be treated as a delinquency against the defaulting Co-owner.

ARTICLE 38 RESERVED

ARTICLE 39 ADDITIONAL EQUIPMENT

(a) The Co-owners may, by mutual written agreement, add additional equipment to the aircraft or support equipment inventory. However, if the Co-owners are unable to agree upon the addition of said equipment, a Co-owner(s) may add such equipment as they desire and pay the entire cost of such equipment and its installation by a competent and certified mechanic.

(b) In this event, one half of the cost of the equipment and halfthe cost of installation shall be credited to the purchasing Co-owner(s) upon dissolution

{RKE# 0881010.DOC-4, 999-999}

of the co-ownership, regardless of its then depreciated value. This shall not apply to the materials or labor expended for maintenance, repair or replacement of equipment necessary to keep the aircraft in substantially the same condition as on its acquisition and following subsequent improvement. Maintenance of equipment added by one Co-owner or several (but not all) Co­owners is at his, her, its or their sole expense. Once installed in the aircraft, any such added equipment shall become and remain part of the aircraft and removal by the installing Co-owner(s) shall not be permitted. This added equipment must be kept operational to assure flight status per the federal regulations governing in-aircraft equipment ofthis type.

ARTICLE40 SALE ABOVE AGREED VALUE

If upon sale of the entire assets of the co-ownership, whether by voluntary or involuntary dissolution, the sale price exceeds the combined value of all the Co-owners capital accounts, the balance shall be distributed proportionately among the Co-owners according to their respective percentages of ownership in said co-ownership assets after satisfying just liens and obligations with Co-owners and non Co-owners alike.

ARTICLE41 SALE BELOW AGREED VALUE

No sale of all of the co-ownership assets shall be for less than the combined value of all the Co-owners capital accounts thereof without the mutual written consent of the Co­owners. If mutual agreement cannot be reached on a sale price between the Co-owners then the provisions of ARTICLE 25 (ARBITRATION) shall apply.

ARTICLE42 VOLUNTARY WITHDRAWAL

(a) A Co-owner may withdraw from the co-ownership upon reasonable written notice to the other Co-owners. The withdrawal shall not be effective until the first valuation date following submission of such notice unless an alternate effective date is established by mutual written consent of the withdrawing Co­owner and the other Co-owners. The other Co-owners shall have the right of first option to purchase the withdrawing Co-owner's co-ownership capital account value.

(b) The value of the buy-out shall be paid for in cash and shall be equal only to the value of the withdrawing Co-owner's capital account. It is therefore essential that capital accounts be kept current. The purchasing Co-owner(s) shall pay the buy-out price within sixty (60) days after the exercise of the option to purchase. If the Co-owner(s) do not exercise the option to purchase created by these events, the co-ownership shall be terminated then liquidated in accordance with the provisions of ARTICLE 50 of this co-ownership agreement.

(c) If a withdrawing Co-owner is in arrears in the payments of any of his, her or its monthly contributions for fixed expenses, operating expenses or special

{RKE# 0881010.DOC-4, 999-999}

assessments as per ARTICLE 37 ofthis Agreement, these delinquencies shall be deducted from the amounts paid above.

ARTICLE43 RIGHT OF FIRST REFUSAL

No Co-owner shall sell his, her or its interest in the co-ownership except upon the following terms:

1. The withdrawing Co-owner shall offer his, her, or its interest in the co­ownership to the other Co-owners at the lesser of the value of his, her or its capital account or any amount tendered by a third party offeror for that Co-owner's interest. The capital account is the agreed value established by actual asset acquisition cost and add- ons.

2. The selling Co-owner shall give the co-ownership and Co-owners a written notice in accordance with ARTICLE 42 ofthis Agreement identifying the buyer price and terms of sale in accordance with the requirements of this Agreement.

3. The remaining Co-owners shall have thirty (30) days following said notice within which to give written notice of his, her, their or its election to purchase the share of the aircraft at the lesser of the selling Co-owner's capital account or the offer made by the third party offeror.

ARTICLE44 DEATH OR DISSOLUTION OF A CO-OWNER

The equity of a Co-owner in the co-ownership assets shall be considered to have been withdrawn on the last Valuation Date prior to the death or dissolution of the Co-owner. The surviving Co-owners may purchase the deceased or dissolved Co-owner's capital account by paying an amount equal to that account to the deceased Co-owners estate or dissolved Co-owners dissolution trustees. By execution of this Agreement the deceased Co-owners estate shall be bound to sell the deceased Co-owners interest and dissolved Co-owners dissolution trustees shall be bound to sell the dissolved Co-owners interest.

ARTICLE45 RESERVED

ARTICLE46 INVOLUNTARY DISSOLUTION

If any Co-owner(s) is in default of any of the terms of this Agreement and fails for thirty (30) days after receipt of written notice thereof to cure such default then the Co-owners who are not in default may initiate dissolution proceedings. In this event, the dissolution shall be considered involuntary, and the non-defaulting parties shall be considered as the remaining Co-owners and the Co-owner(s) who is in default shall be considered the withdrawing Co-owner(s) for the purposes of the procedure set out above in ARTICLE 42, "Voluntary Withdrawal".

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ARTICLE47 REINSTATEMENT OF A CO-OWNER

Should a defaulting Co-owner(s) cure the cause of such default prior to enactment of the buy-out process they shall be reinstated with all co-ownership privileges.

ARTICLE48 LIEN OR DISSOLUTION

Any just charges owed by one Co-owner to another shall become a lien upon the interest of the Co-owner indebted and shall be satisfied out of the proceeds of sale upon dissolution. Indebtedness may be satisfied by a like increase in the equity of the creditor Co-owner(s) with the mutual written consent of the other Co-owners.

ARTICLE49 CONTINUATION OF THE CO-OWNERSHIP

If the account of a withdrawing, selling, dissolved or deceased Co-owner is purchased under the terms of this Agreement, the co-ownership shall not terminate but shall be continued, as of the withdrawal date, following the required adjustment of the capital accounts of the remaining or surviving Co-owners.

ARTICLE 50 LIQUIDATION OF ASSETS

The co-ownership may be liquidated and dissolved upon mutual, written consent and shall be dissolved and terminated upon the absence of an agreement of the remaining or surviving Co-owners to exercise the option to acquire assets granted under provisions of this Agreement. Upon the dissolution and termination, the Co-owners shall promptly liquidate the assets and affairs of the co-ownership by satisfying all debts and obligations of the co-ownership and by distribution of all remaining property to the surviving Co­owners in the proportion of their equity accounts ~s of the date of the liquidation.

ARTICLE 51 BINDING EFFECT AND GOVERNING LAW

This Agreement shall be binding upon the Co-owners and their respective heirs, legal or estate representatives, successors and/or assigns. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Virginia.

ARTICLE 52 ENTIRE AGREEMENT

This Agreement constitutes the entire agreement concerning the subject matter hereof and supersedes all prior agreements, contracts, negotiations, writings, dealings or discussions among the Co-owners concerning such subject matter. This Agreement may not be amended, modified, changed or altered except by a written agreement signed by all of the Co-owners.

[Signature Page to Follow]

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In AGREEMENT THEREOF the Co-owners have signed this Agreement the day and year first stated on the first page hereof and are:

Karen H. Waldron

CO-OWNER3: VIRGINIA TECH FOUNDATION, INC.

~It;e•~ &-t2, S J A CO-OWNER4: FRALIN & WALDRON, INC.

B~jv:~ TI&;.. v; f".

ERICA, INC.

By: Title ___:_ _ _p~)d;.~,-'J::__ ___ _

CO-OWNER6: MEDICAL FACILITffiS OF NORTH

CAROIJNA~ By: ~ /lM Title

CO-OWNER 7:

RETIREM~~ INC.

By: 14 'I , Title [!,Re)-</l'd

I

(RKE# 0881010.DOC-4, 999·999)

Exhibit C AIRCRAFT JOINT OWNERSHIP AGREEMENT among W. HEYWOOD FRALIN ("Co-owner I") and KAREN H. WALDRON ("Co-owner 2"). VIRGINIA TECH FOUNDATION, INC. ("Co-Owner 3"), a Virginia nonstock corporation with an address at 312 Burruss Hall, Blacksburg, Virginia 24061. FRALIN & WALDRON, INC. ("Co-owner 4"), a Virginia corporation with an address at 2917 Penn Forest Boulevard, Roanoke, Va. 24018. MEDICAL FACILITIES OF AMERICA, INC. ("Co-owner 5"), a Virginia corporation with an address at 2917 Penn Forest Boulevard, Roanoke, Va. 24018. MEDICAL FACILITIES OF NORTH CAROLINA, INC. ("Co-owner 6") a North Carolina corporation with an address at 1300 S. Mint Street, Suite 201, Charlotte, NC. 28203. RETIREMENT UNLIMITED, INC. ("Co-owner 7"), a Virginia corporation with an address at 2917 Penn Forest Boulevard, Roanoke, Va. 24018, and F&W MANAGEMENT, L.C. ("Co-ownerS"), a Virginia limited liability company with an address at 3130 Chaparral Drive, Roanoke, Va. 24018, with regard to Make: CESSNA: Model: CITATION V ULTRA; Serial #560-0260; Date: Se.fk.,bM 6 , 2004

TABLE OF CONTENTS

ARTICLE TOPIC OR SUBJECT 1. PURPOSE OF ORGAN1ZATION AND CO-OWNERSHP INTEREST 2. TERM OF THE AGREEMENT 3. USE OF FUNDS, CAPITAL ACCOUNTS, OWNERS EQUITY 4. ACCOUNTING CO-OWNER 5. MANAGEMENT AND ADMINISTRATION 6. BOOKS AND RECORDS 7. CUSTODY OF DOCUMENTS 8. CAPITAL ACCOUNTS AND VALUATION DATE 9. NOTICES 10. RESTICTION ON CO-OWNERS 11. UNILATERAL AUTHORITY 12. RULES AND REGULATIONS 13. DAMAGE DUE TO FAULTY TECHNIQUE 14. AIRCRAFT USE RESTRICTIONS 15. AIRCRAFT BASING 16. OVERNIGHT AWAYFROMHOMEBASE 17. TYPE OF OPERATIONS, RUNAWAY LENGTHS 18. FLIGHT INTO IFR CONDITIONS 19. PILOTS 20. PRIMARY RESPONSIBILITY 21. NUMBER OF CO-OWNERS 22. CO-OWNERS WITH MORE THAN ONE EQUAL SHARE 23. INTERNATIONAL OPERATIONS 24. AMENDMENTS 25. ARBITRATION 26. SEVERABILITY 27. AIRCRAFT INSURANCE 28. SCHEDULING

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PAGE 1 1 1 2 2 2 3 3 3 4 4 5 5 5 6 6 6 6 6 7 7 7 7 7 8 8 8 8

29. MAINTENANCE DOWN TlME 8 30. EQUIPMENT DEFICIENCffiS 9 31. CONDITIONING AFTER USE 9 32. AIRWORTHINESS DIRECTNES 9 33. NORMALEQUITMENTDAMAGE 9 34. OPERATING EXPENSES 9 35. FIXED EXPENSES 10 36. OVERHAUL FUND 10 37. DELINQUENCIES 10 38. RESERVED 11 39. ADDITIONAL EQUIPMENT 11 40. SALE ABOVE AGREED VALUE 11 41. SALE BELOW AGREED VALUE 12 42. VOLUNTARY WITHDRAWAL 12 43. RIGHT OF FIRST REFUSAL 12 44. DEATH OR DISSOLUTION OF A CO-OWNER 13 45. LIFE INSURANCE 13 46. INVOLUNTARY DISSOLUTION 13 47. REINSTATEMENT OF A CO-OWNERSHIT 14 48. LIEN OR DISSOLUTION 14 49. CONTINUATION OF THE CO-OWNERSHIP 14 50. LIQUIDATION OF ASSETS 14 51. BINDING EFFECT AND GOVERNING LAW 14 52. ENTIRE AGREEMENT 15

{RKE# 08810li.DOC-4, 999-999}

This agreement ("Agreement") is effective the _8_ of )zpj-e,,beR.., 2004, by and between W. Heywood Fralin, as Co-owner 1, Karen H. Waldron,' as Co-owner 2, Virginia Tech Foundation, Inc., as Co-owner 3, Fralin & Waldron. Inc., as Co-owner 4. Medical Facilities of America, Inc. as Co-owner 5, Medical Facilities ofNorth Carolina, Inc. as Co-owner 6. Retirement Unlimited Inc. as Co-owner 7, and F & W Management, L.C. as Co-owner 8. Co-owners 1 through 8 are hereinafter known collectively as "Co-owners" and singly as "Co-owner".

ARTICLE l PURPOSE OF ORGAN1ZATION AND

CO-OWNERSHIP INTERESTS Co-owners elect to form a co-ownership for the purpose of purchasing and owning a Cessna, Citation V Ultra aircraft. Serial Number 560-0260, and operating the aircraft for the Co-owners business, training and pleasure or any use the Co-owners may agree upon in writing by a majority vote of the Co-owners. All aircraft operations must be in strict accordance with FAA regulations. Co-owners 1, 2, and 6 shall each own eight percent (8%) of the co-ownership and title in the aforesaid aircraft. Co-owners 4 and 8 shall each own one and six-tenths of one percent (1.6%) of the co-ownership and title in the aforesaid aircraft. Co-owner 7 shall own eight-tenths of one percent (0.8%) of the co­ownership and title in the aforesaid aircraft, Co-owner 5 shall own fifty-two percent (52%) of the co-ownership and title in the aforesaid aircraft and Co-owner 3 shall own twenty percent (20%) of the co-ownership and title in the aforesaid aircraft. As between the Co-owners the relationship shall be as tenants in common. This Agreement does not create nor is it intended to create a partnership, corporation or any other business entity among the Co-owners and is merely being entered into to own and operate the aircraft and not with expectation of any profits whatsoever.

ARTICLE2 TERM OF THE AGREEMENT

The co-ownership commenced on S~pJ-<.,be.tt 8, 2004, and shall continue until termination by mutual consent of the Co-owners or as required by the terms of this Agreement.

ARTICLE3 USE OF FUNDS, CAPTIAL ACCOUNTS, OWNERS' EQUITY

(a) Co-owners 1, 2, and 6 each shall make a capital contribution of three hundred and fifty thousand four hundred and 00/100 dollars ($350,400.00). Co-owners 4 and 8 each shall make a capital contribution of seventy thousand eighty and 00/l 00 dollars ($70,080.00). Co-owner 7 shall make a capital contribution of thirty- five thousand forty and 001100 dollars ($35,040.00), Co-owner 5 shall make a capital contribution of two million two hundred seventy-seven thousand six hundred and 00/100 dollars ($2,277,600.00), and Co-owner 3 shall make a capital contribution of eight hundred seventy-six thousand and 00/100 dollars ($876,000.00) to the co­ownership upon its formation. This will constitute the beginning balance of each Co-owner's capital account which will be periodically adjusted as per ARTICLE 8 of this agreement.

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(b) The value of any other funds of the co-ownership, equipment and the like not directly related to the operation and ownership of this specific aircraft shall NOT be considered part of a Co-owner's capital account and shall be accounted for in a separate set of books and accounts.

(c) Co-owners shall contribute a monthly sum to cover regular, fixed costs including, but not limited to, tie-down rent, required inspections, taxes and insurance. These sums shall be set by mutual written consent and shall be subject to review at the Valuation Dates hereinafter specified in ARTICLE 8.

(d) Upon mutual written consent, special assessments may be made against the Co­owners for such uses as the co-ownership may decide. Each special assessment so made shall be payable on a date established by the Co-owners.

(e) Funds to cover either fixed expenses or special assessments shall be payable on or before the first day of each month during the term of this Agreement. If any Co­owner is more than sixty (60) days in arrears in the payment of the monthly contribution or special assessment the non-delinquent Co-owners may make a decision regarding the aircraft which, under the terms of this Agreement, would otherwise require mutual consent.

(J) Co-owner payments in the form of services or property, in lieu of cash, shall not be permitted unless by mutual written consent. (As an example, a Co-owner may NOT exchange such services as oil changes, washing, or other maintenance functions to pay for flight time without mutual written consent.)

(g) Any and all amounts to be paid by the Co-owners pursuant to this Agreement may be adjusted from time as is equitable and mutually agreed upon by the Co­owners.

ARTICLE4 ACCOUNTING CO-OWNER

Co-owner 1 shall be the Accounting Co-Owner and shall maintain possession of the books and records of the co-ownership and shall perform the necessary administrative accounting functions of the co-ownership.

ARTICLE 5 MANAGEMENT AND ADMINISTRATION

Except as otherwise stated in this Agreement, decisions regarding the sale of the co­ownership assets and operation of the aircraft shall be made by mutual written consent. Each Co-owner regardless of share size will have an equal vote in the affairs of the co­ownership.

ARTICLE6 BOOKS AND RECORDS

(a) Complete accounting records of all co-ownership affairs shall be kept and shall be open to review by the other co-owners upon reasonable request.

(b) A checking account will be maintained at Wachovia Bank, in Roanoke Virginia. The checking account shall be opened with the names of all the Co­owners, any one of which may sign for withdrawal. The Accounting Co-

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Owner, upon mutual written consent may open a savings account. If opened, the savings account shall be maintained with the names of all Co-owners, any one of which may sign for any withdrawal up to One Hundred Dollars ($100.00) without the written consent of the other Co-owners.

ARTICLE 7 CUSTODY OF DOCUMENTS

Copies of registration certificate, bills of sale, or any other evidence of ownership of the aircraft relating to the co-ownership and registered or recorded in such names, shall be maintained by the Accounting Co-Owner at Piedmont Hawthorne Aviation, Inc. located in Roanoke, Virginia, and made available to the other Co-owners at any reasonable time and upon reasonable notice.

ARTICLE 8 CAPITAL ACCOUNTS & VALUATION DATE

Individual capital accounts shall be maintained for each Co-owner and shall represent the entire value of his, her or its interest. The Capital Account shall consist of his, her or its capital contribution, increased or decreased (as the case may be) on any Valuation Date due to an increase or decrease in the net value of the co-ownership assets. The net value of the co-ownership assets shall be determined as of at least January 1 each year. Such dates shall be known as the Valuation Dates. Adjustments to the capital account of each Co-owner shall be made regularly at the end of each Valuation Date interval and at other times as the Co-owners may elect.

ARTICLE9 NOTICES

(a) Notification of Co-ownership matters relating to this agreement are to be in writing and may be served personally on the Co-owner(s) or by certified mail addressed as follows (or to the last known address of record in the co­ownership records): 1. W. Heywood Fralin, P.O. Box 20069, Roanoke, VA 24018. 2. Karen H. Waldron, P.O. Box 20069, Roanoke, VA 24018. 3. Virginia Tech Foundation, Inc. 312 Burruss Hall, Blacksburg, VA 24061,

attn: Dr. Raymond D. Smoot, Jr. 4. Fralin & Waldron, Inc. 2917 Penn Forest Boulevard, Roanoke, VA 24018

attn: David W. Cotton. 5. Medical Facilities of America, Inc. 2917 Penn Forest Boulevard, Roanoke,

Va. 24018 attn: W. Heywood Fralin. 6. Medical Facilities of North Carolina, Inc. 1300 S. Mint Street, Suite 201,

Charlotte, NC. 28203 attn: W. Heywood Fralin. 7. Retirement Unlimited, Inc. 2917 Penn Forest Boulevard, Roanoke, Va.

24018 attn: W. Heywood Fralin. 8. F & W Management, L.C. 3130 Chaparral Drive, Roanoke, VA. 24018,

attn: Charles Nimmo. (b) The Co-owners shall give notice of any change of address to each other within

5 days of such change. If notice is given by U.S. mail, it shall be considered

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served three (3) days after its deposit, postage prepaid, in the United States mail.

ARTICLE 10 RESTRICTION OF CO-OWNERS

No Co-owner, without the written consent of the other Co-owners, shall: a. Sell, assign, hypothecate, encumber or pledge his, her or its equity in any

ofthe co-ownership assets, except as provided for in this Agreement; b. Borrow or lend money on behalf of the co-ownership or any other Co­

owners(s); c. Transfer, sell, consign or grant release of any claim of the co-ownership or

any other Co-owner( s) or consent to an arbitration on any dispute involving the co-ownership or any other Co-owner(s);

d. Use the assets or identification of the co-ownership for any purpose other than that stated in ARTICLE 1; or

e. Commit an act detrimental to any co-ownership activity which would make it difficult or impossible to continue conduct ofthe co-ownership's stated objectives.

ARTICLE 11 UNILATERAL AUTHORITY

No Co-owner shall, without the written consent of the others, contract or obligate the co­ownership or any other Co-owner(s) to the payment of any sum of money. No Co-owner shall, without the written consent of the other Co-owners suffer any lien to be levied against the aircraft or other co-ownership assets. If a lien is levied for a debt which did not have the written consent of all Co-owners, it shall be grounds for dissolution of the co-ownership. At the option of the non-consenting Co-owners, the costs required to satisfy the lien shall come out of the share of the consenting Co-owners(s).

ARTICLE 12 RULES AND REGULATIONS

(a) The aircraft shall at all times be flown and maintained in accordance with all applicable federal air regulations and requirements of duly constituted authority including, but not limited to all necessary FAA certifications and the required number of pilot(s). Any deficiencies which cause any civil penalties to be levied shall be borne by the Co-owners responsible for the violation. In tbe event that tbe violation is not directly attributable to the responsibility of one of the Co-owners, the cost shall be borne in proportion to their ownership interests in accordance with the formula stated in ARTICLE 13 hereof by all Co-owners causing the violation.

(b) Any Co-owner finding an equipment condition that presents a hazard to further use shall have the right and duty to declare the aircraft disabled, grounded and incapable of further flight (or ground movement, as the case may be) until the condition is remedied. The condition shall immediately be reported to the Co-owner in charge of maintenance as well as other Co­owners.

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ARTICLE 13 DAMAGE DUE TO FAULTY TECHNIQUE

Except as may be paid by insurance on the aircraft, damage resulting from faulty flying and/or handling technique will be the responsibility of that individual Co-owner causing such damage or whose control the aircraft was under at the time it was damaged. Damage caused by the negligence of a Co-owner not indemnified by insurance (such as a deductible) will be repaired at his, her or its sole expense and in an expeditious manner so as to permit the operations of the co-ownership to continue without undue delay or inconvenience. Damage caused by more than one Co-owner or arising at a time the aircraft was under the control of more than one Co-owner shall, to the extent not paid for by insurance on the aircraft, be borne by such Co-owners in proportion to their co­ownership interests as if together such interest equaled on hundred percent (100%). By way of example, if the aircraft were damaged while under the control of Co-owners 1 and 2, each would be responsible for fifty percent (50%) of the repair expenses. However, if the aircraft were damaged while under the control of Co-owners 1 and 4, Co-owner 4 would be responsible for sixteen and two-thirds percent (16 2/3%) and Co-owner 1 for eighty three and one-third percent (83 1/3%) of the repair expenses. Penalties levied against any Co-owner(s) for acts in violation of any law or regulation governing the operation of the aircraft shall be borne solely by the Co-owner causing the violation or, if caused by more than one Co-owner, in the same proportion as for damage caused to the aircraft.

ARTICLE 14 AIRCRAFT USE RESTRICTIONS

The aircraft will not be used commercially, for air taxi or charter purposes.

ARTICLE 15 AIRCRAFT BASING

The aircraft shall be based at the Roanoke Regional Airport and the costs of storage or tie-down at said base shall be borne by the Co-owners in proportion to their co-ownership interests. Costs attributable to storage, parking, tie-down or landing fees while the aircraft is being operated away from the home base shall be borne solely by the Co-owner operating the aircraft away from the home base or if so operated by more than one Co­owner, in such proportions as such Co-owners may agree, provided that such Co-owners shall be jointly and severally liable to the other Co-owners for all costs attributable to storage, parking, tie-down or landing fees while the aircraft is being operated away from the home base. The decision to change the base of operations from the airport specified above requires the mutual written consent of the Co-owners.

ARTICLE 16 OVERNIGHT AWAY FROM HOME BASE

Any Co-owner(s) using the aircraft may remain overnight (RON) from the base for two (2) consecutive nights. The aircraft may be removed at any time the day before a RON but must be returned by 12 p.m. the day following a two (2) day RON.

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ARTICLE 17 TY1'E OF OPERATIONS, RUNWAY LENGTHS

The aircraft shall not be landed at any airport more than 150 nautical miles from the home base unless an appropriate IFR or VFR flight plan has been filed. Landings at airstrips of less than 4,500 usable feet in length shall not be attempted unless the pilot determines that under the applicable circumstances such landing can be safely made. Landings at other than paved or concrete runways shall not be attempted without the assumption of responsibility by the operating Co-owner for any resulting damage to the aircraft.

ARTICLE 18 FLIGHT INTO IFR CONDITIONS

No flights shall take place into IFR conditions unless all equipment necessary for operation appropriate to the ground facilities to be used is in proper working order or inoperative in accordance with federal aviation regulations.

ARTICLE 19 PILOTS

The Co-owners shall employ the pilots necessary for the operation of the aircraft through Virginia Polytechnic Institute and State University ("VPI") and VPI shall bill the Accounting Co-owner for the services of such pilots at a beginning rate of Forty Dollars ($40.00) per hour per pilot. Such rate shall be renegotiated no more frequently than yearly. The Accounting Co-owner shall bill the Co-owner(s) using the aircraft for the pilots' services.

In addition to all other sums which a Co-owner may owe, the Co-owners using the aircraft shall promptly pay to the Accounting co-owner the amount to be reimbursed by the Accounting Co-owner to VPI for the pilots' services. During flights of the aircraft, such pilots shall be under the exclusive control and direction of the Co-owner using the aircraft. In the event the VPI pilots are not available for a specific flight, the Co-owner desiring to use the aircraft may employ other pilots for such flight, provided, however, that no person other than such pilots possessing all applicable FAA certifications, mutually agreed upon in writing by the Co-owners, shall be authorized to operate the aircraft and then only if that person has the experience level required by the FAA and the approval of the underwriter for the insurance policy then in force except for flights and operation by authorized personnel incidental to testing after maintenance and repair at an FAA Authorized Repair Station.

ARTICLE20 PRIMARY RESPONSJJ3ILITY

Co-owner 1 shall be responsible for the receipt and disbursement of all monies relating to co-ownership business, and for the initiation and implementation of maintenance activity and programs.

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ARTICLE21 NUMBER OF CO-OWNERS

The co-ownership shall be limited to Co-owners 1 through 8. Mutual and written consent of all Co-owners is required before additional persons can purchase any share of the assets.

ARTICLE22 CO-OWNERS WITH MORE THAN ONE EQUAL SHARE

In the event that any Co-owner possesses more than an equal share in the co-ownership, they will be restricted to a single vote in matters that require a consensus by vote.

ARTICLE23 INTERNATIONAL OPERATIONS

The aircraft may be flown to a foreign country, other than Canada, only if the pilot makes the required documentary arrangements for the trip and has obtained prior written consent from Wachovia. Insurance necessary to comply with the destination country's laws must be arranged at the sole expense of the Co-owner making such trip prior to entering the airspace of that country. Under no circumstances will a country not honoring U.S. passports be entered.

ARTICLE24 AMENDMENTS

All amendments to this Agreement shall be made by mutual, written consent of the Co­owners.

ARTICLE25 ARBITRATION

If any dispute arises under or by virtue of any of the terms of this Agreement and which the Co-owners cannot resolve, the Co-owners shall submit the dispute to arbitration at Roanoke, Virginia, pursuant to the rules and regulations for the American Arbitration Association. Judgment may be entered into in any state or federal court of competent jurisdiction in the City of Roanoke, Virginia upon the rendition of any final decision by the arbitrators.

ARTICLE26 SEVERABILITY

If any part of this Agreement is found to violate any laws of competent jurisdiction and is therefore rendered unenforceable the balance of the Agreement shall remain unaffected and in full force and effect. In such event, the Co-owners shall use their reasonable efforts to negotiate a substitute provision which fulfils the purpose and intent of the original provision and which is enforceable.

ARTICLE27 AIRCRAFT INSURANCE

The Accounting Co-owner shall obtain the following insurance policies in which all of the Co-owners are named insureds: (i) Public liability insurance (including without

{RKE# 088101\.DOC-4, 999-999}

limitation contractual liability, passenger legal liability insurance and insurance for product liability or strict liability in tort) in an amount not less than $100,000,000.00 per occurrence, and (ii) property damage liability insurance in an amount of $4,500,000.00.

ARTICLE28 SCHEDULING

Use of the aircraft shall be scheduled on a first come, first served basis. A Co-owner desiring to use the aircraft shall contact Air Transportation Services at Virginia Polytechnic Institute and State University (540-231-2636) to determine availability and schedule use.

ARTICLE29 MAINTENANCE DOWN TIME

Down time for aircraft maintenance and repairs will, insofar as possible, be scheduled by the Co-owner responsible for maintenance (whose decision shall be final) at the prescribed interval in accordance with FAA regulations and specifications by the aircraft manufacturer.

ARTICLE30 EQU1PMENT DEFICIENCIES

Equipment deficiencies noted by a pilot shall be submitted to the Co-owner in charge of maintenance scheduling for the aircraft. If the pilot noting the deficiency deems the aircraft unair worthy, the aircraft will not be operated in any manner which could result in further aircraft damage or the possibility of bodily injury until the deficiency is remedied the pilot first noticing a significant deficiency shall enter into a log form, which is to remain in the aircraft, the nature of the deficiency and include his opinion as to whether the aircraft is safe to operate in any manner. In addition, an immediate verbal or written notice shall be given to the Co-owners.

ARTICLE31 CONDITIONING AFTER USE

Following the use of the aircraft by a Co-owner, they shall install or cause the pilots to install gust locks, chains, chocks, weather covers and other devices which secure the aircraft to the ground appropriate to foreseeable weather or other physical conditions whether at home base or while at any temporary base.

ARTICLE 32 AIRWORTHINESS DIRECTNES

All Airworthiness Directives affecting the aircraft equipment and safety of operation will be instituted as soon as notification is received. Service Bulletins issued by the aircraft manufacturer shall be reviewed immediately for implementation, if necessary, for continued safe operations of any kind.

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ARTICLE 33 NORMALEQUWMENTDAMAGE

Damage to the aircraft due to unforeseeable and unexpected mechanical break-down, except that caused by Faulty Technique as described in ARTICLE 13, as well as that caused by normal wear and tear shall be the joint responsibility of all Co-owners in accordance with their proportionate share of the co-ownership.

ARTICLE 34 OPERATING EXPENSES

(a) Operating expenses shall include, but not be limited to, such items as periodic inspections, oil changes, replacement of tires, brakes, battery, hydraulic fluids, radios, airframe, engine, and accessory repair and maintenance. These operating expenses shall be paid by the co-ownership from funds received from fees charged each Co-owner for the use of the aircraft.

(b) Each Co-owner shall fill and service all systems at the end of each flight at his, her or its own expense. Co-owners returning to home base from nearby airports may leave up to three quarters of an hour of flight time after the last fueling on the Hobbs Meter without any changes. This will allow fueling at other nearby airports if fuel costs are substantially less than at home base.

(c) Each Co-owner shall pay to the co-ownership account an hourly fee of $794.00 for each hour of Hobbs Meter time used by that Co-owner. This fee is for operation of the aircraft and does not include the cost of fuel which is borne by each Co-owner as the aircraft is utilized by him, her or it.

ARTICLE35 FIXED EXPENSES

An amount sufficient for paying the fixed expenses, as hereafter defined, shall be maintained in a fund, to be replenished quarterly by all Co-owners in proportion to their co-ownership interest in the aircraft. Out of this fund all fixed expenses will be paid. The fixed expenses are defined as, but not limited to, tie-down at the home base, insurance, licensing and taxes. The Co-owners shall agree upon a monthly fixed fee, exclusive of Hobbs Meter flight time, to be paid into the joint account as of the first of each month. The amount of the fixed fee may be adjusted from time to time by mutual consent.

ARTICLE36 MAINTENANCE RESERVE

Each month funds shall be set aside from the amounts collected pursuant to paragraph (c) of ARTICLE 34 hereof into a maintenance reserve. These funds will be set aside for ordinary and extraordinary maintenance and repairs. No portion of the maintenance reserve will be refundable to a Co-owner who transfers his interest in the aircraft.

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ARTICLE37 DELINQUENCIES

(a) Any delinquency in the payment of charges or costs/fees arising out of the terms of this Agreement, whether for fixed, operating or finance expenses, or otherwise, which are delinquent for more than ninety (90) days, shall result in the deprivation of flight privileges of the delinquent Co-owner. Any delinquency that continues thereafter for a period of one hundred and twenty (120) days shall be grounds for involuntary dissolution at the option of the non-delinquent Co-owners pursuant to the terms herein specified for involuntary dissolution.

(b) Should there be any default in the payment of loans secured by the aircraft, the non-defaulting parties may, at their option, cure the default, and they shall be subrogated to that extent to the interest of the lien holder. Such default shall then be treated as a delinquency against the defaulting Co-owner.

ARTICLE38 RESERVED

ARTICLE39 ADDITIONAL EQUIPMENT

(a) The Co-owners may, by mutual written agreement, add additional equipment to the aircraft or support equipment inventory. However, if the Co-owners are unable to agree upon the addition of said equipment, a Co-owner(s) may add such equipment as they desire and pay the entire cost of such equipment and its installation by a competent and certified mechanic.

(b) In this event, one half of the cost of the equipment and half the cost of installation shall be credited to the purchasing Co-owner(s) upon dissolution of the co-ownership, regardless of its then depreciated value. This shall not apply to the materials or labor expended for maintenance, repair or replacement of equipment necessary to keep the aircraft in substantially the same condition as on its acquisition and following subsequent improvement. Maintenance of equipment added by one Co-owner or several (but not all) Co­owners is at his, her, its or their sole expense. Once installed in the aircraft, any such added equipment shall become and remain part of the aircraft and removal by the installing Co-owner(s) shall not be permitted. This added equipment must be kept operational to assure flight status per the federal regulations governing in-aircraft equipment of this type.

ARTICLE40 SALE ABOVE AGREED VALUE

If upon sale of the entire assets of the co-ownership, whether by voluntary or involuntary dissolution, the sale price exceeds the combined value of all the Co-owners capital accounts, the balance shall be distributed proportionately among the Co-owners according to their respective percentages of ownership in said co-ownership assets after satisfying just liens and obligations with Co-owners and non Co-owners alike.

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ARTICLE41 SALE BELOW AGREED VALUE

No sale of all of the co-ownership assets shall be for less than the combined value of all the Co-owners capital accounts thereof without the mutual written consent of the Co­owners. If mutual agreement cannot be reached on a sale price between the Co-owners then the provisions of ARTICLE 25 (ARBITRATION) shall apply.

ARTICLE42 VOLUNTARY WITHDRAWAL

(a) A Co-owner may withdraw from the co-ownership upon reasonable written notice to the other Co-owners. The withdrawal shall not be effective until the first valuation date following submission of such notice unless an alternate effective date is established by mutual written consent of the withdrawing Co­owner and the other Co-owners. The other Co-owners shall have the right of first option to purchase the withdrawing Co-owner's co-ownership capital account value.

(b) The value of the buy-out shall be paid for in cash and shall be equal only to the value of the withdrawing Co-owner's capital account. It is therefore essential that capital accounts be kept current. The purchasing Co-owner(s) shall pay the buy-out price within sixty (60) days after the exercise of the option to purchase. If the Co-owner( s) do not exercise the option to purchase created by these events, the co-ownership shall be terminated then liquidated in accordance with the provisions of ARTICLE 50 of this co-ownership agreement.

(c) If a withdrawing Co-owner is in arrears in the payments of any of his, her or its monthly contributions for fixed expenses, operating expenses or special assessments as per ARTICLE 37 of this Agreement, these delinquencies shall be deducted from the amounts paid above.

ARTICLE43 RIGHT OF FIRST REFUSAL

No Co-owner shall sell his, her or its interest in the co-ownership except upon the following terms:

1. The withdrawing Co-owner shall offer his, her, or its interest in the co­ownership to the other Co-owners at the lesser of the value of his, her or its capital account or any amount tendered by a third party offeror for that Co-owner's interest. The capital account is the agreed value established by actual asset acquisition cost and add-ems.

2. The selling Co-owner shall give the co-ownership and Co-owners a written notice in accordance with ARTICLE 42 ofthis Agreement identifying the buyer price and terrns of sale in accordance with the requirements of this Agreement.

3. The remaining Co-owners shall have thirty (30) days following said notice within which to give written notice of his, her, their or its election to

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purchase the share of the aircraft at the lesser of the selling Co-owner's capital account or the offer made by the third party offeror.

ARTICLE44 DEATH OR DISSOLUTION OF A CO-OWNER

The equity of a Co-owner in the co-ownership assets shall be considered to have been withdrawn on the last Valuation Date prior to the death or dissolution of the Co-owner. The surviving Co-owners may purchase the deceased or dissolved Co-owner's capital account by paying an amount equal to that account to the deceased Co-owners estate or dissolved Co-owners dissolution trustees. By execution of this Agreement the deceased Co-owners estate shall be bound to sell the deceased Co-owners interest and dissolved Co-owners dissolution trustees shall be bound to sell the dissolved Co-owners interest.

ARTICLE45 RESERVED

ARTICLE46 INVOLUNTARY DISSOLUTION

If any Co-owner(s) is in default of any of the terms of this Agreement and fails for thirty (30) days after receipt of written notice thereof to cure such default then the Co-owners who are not in default may initiate dissolution proceedings. In this event, the dissolution shall be considered involuntary, and the non-defaulting parties shall be considered as the remaining Co-owners and the Co-owner( s) who is in default shall be considered the withdrawing Co7owner(s) for the purposes of the procedure set out above in ARTICLE 42, "Voluntary Withdrawal".

ARTICLE47 REINSTATEMENT OF A CO-OWNER

Should a defaulting Co-owner(s) cure the cause of such default prior to enactment of the buy-out process they shall be reinstated with all co-ownership privileges.

ARTICLE48 LIEN OR DISSOLUTION

Any just charges owed by one Co-owner to another shall become a lien upon the interest of the Co-owner indebted and shall be satisfied out of the proceeds of sale upon dissolution. Indebtedness may be satisfied by a like increase in the equity ofthe creditor Co-owner(s) with the mutual written consent of the other Co-owners.

ARTICLE49 CONTINUATION OF THE CO-OWNERSHIP

If the account of a withdrawing, selling, dissolved or deceased Co-owner is purchased under the terms of this Agreement, the co-ownership shall not terminate but shall be continued, as of the withdrawal date, following the required adjustment of the capital accounts of the remaining or surviving Co-owners.

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ARTICLE 50 LIQUIDATION OF ASSETS

The co-ownership may be liquidated and dissolved upon mutual, written consent and shall be dissolved and terminated upon the absence of an agreement of the remaining or surviving Co-owners to exercise the option to acquire assets granted under provisions of this Agreement. Upon the dissolution and termination, the Co-owners shall promptly liquidate the assets and affairs of the co-ownership by satisfying all debts and obligations of the co-ownership and by distribution of all remaining property to the surviving Co­owners in the proportion of their equity accounts as of the date of the liquidation.

ARTICLE 51 BINDING EFFECT AND GOVERNING LAW

This Agreement shall be binding upon the Co-owners and their respective heirs, legal or estate representatives, successors and/or assigns. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Virginia.

ARTICLE 52 ENTIRE AGREEMENT

This Agreement constitutes the entire agreement concerning the subject matter hereof and supersedes all prior agreements, contracts, negotiations, writings, dealings or discussions among the Co-owners concerning such subject matter. This Agreement may not be amended, modified, changed or altered except by a written agreement signed by all of the Co-owners.

[Signature Page to Follow]

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In AGREEMENT THEREOF the Co-owners have signed this Agreement the day and year first stated on the first page hereof and are:

Karen H·. Waldron

CO-OWNER3: VIRGINIA TECH FOUNDATION, INC.

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CO-OWNER6: MEDICAL FACILITIES OF NORTH

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