10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

(Mark One)

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2006

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             

Commission File Number: 000-51023

INPHONIC, INC.

(Exact name of Registrant as specified in its Charter)

Delaware	52-2199384
(State or other jurisdiction of incorporation or organization)	(I.R.S. employer identification number)
1010 Wisconsin Avenue, Suite 600 Washington, D.C.	20007
(Address of principal executive offices)	(Zip Code)

(202) 333-0001

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class	Name of Each Exchange on Which Registered
Common Stock, par value $0.01 per share	NASDAQ Stock Market LLC

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ¨ No x

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ¨   Accelerated filer x   Non-accelerated filer ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨ No x

As of June 30, 2006, the aggregate market value of the common stock held by non-affiliates of the registrant was approximately $117,332,977.

As of May 21, 2007, 36,964,003 shares of the registrant’s common stock were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

None.

INPHONIC, INC.

INDEX

FORM 10-K

		Page
PART I
Item 1.	Business	3
Item 1A	Risk Factors	12
Item 1B	Unresolved Staff Comments	25
Item 2.	Properties	25
Item 3.	Legal Proceedings	25
Item 4.	Submission of Matters to a Vote of Security Holders	26
PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	27
Item 6.	Selected Financial Data	30
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	32
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	47
Item 8.	Financial Statements and Supplementary Data	48
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	48
Item 9A.	Controls and Procedures	48
Item 9B.	Other Information	51
PART III
Item 10.	Directors, Executive Officers and Corporate Governance	52
Item 11.	Executive Compensation	59
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	71
Item 13.	Certain Relationships and Related Transactions, and Director Independence	73
Item 14.	Principal Accounting Fees and Services	74
PART IV
Item 15.	Exhibits, Financial Statement Schedules	77

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PART I

ITEM 1. BUSINESS

This annual report on Form 10-K contains forward-looking statements, within the meaning of the Securities Exchange Act of 1934 and the Securities Act of 1933, that involve risks and uncertainties. In some cases, forward-looking statements are identified by words such as “believe,” “anticipate,” “expect,” “intend,” “plan,” “will,” “may” and similar expressions. You should not place undue reliance on these forward-looking statements, which speak only as of the date of this report. All of these forward-looking statements are based on information available to us at this time, and we assume no obligation to update any of these statements. Actual results could differ from those projected in these forward-looking statements as a result of many factors, including those identified in the section titled “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere. We urge you to review and consider the various disclosures made by us in this report, and those detailed from time to time in our filings with the Securities and Exchange Commission, that attempt to advise you of the risks and factors that may affect our future results.

Overview

We are a leading online seller of wireless services in the United States, based upon the number of activations. For 2006, we reported revenue from continuing operations of $369.6 million and a loss from continuing operations of $63.5 million. Since we began operations in 1999, we have grown our business, expanded our services and broadened our customer base through internal growth and acquisitions. We operate our business through three business units: Wireless Activation and Services (“WAS”); Mobile Virtual Network Enabler (“MVNE”) Services; and Data Services.

WAS. We sell wireless service plans, devices and accessories and satellite television service plans through our own branded websites, which include Wirefly.com and VMCSatellite.com. We also sell services and devices to consumers through websites that we create and manage for third parties under their own brands. These third parties include online businesses, member-based organizations and associations and national retailers, whom we refer to collectively as marketers. We use our proprietary e-commerce information technology platform to activate, configure and ship wireless services and devices to customers. The WAS business unit accounted for $355.7 million or approximately 96% of our total revenue in 2006.

MVNE Services and Data Services. We offer marketers the ability to sell mobile virtual network operator (“MVNO”) services to their customers under their own brands using our e-commerce platform and operational infrastructure. Under MVNE agreements, we give marketers the ability to sell wireless voice and data services and devices. This service utilizes the same e-commerce platform, operational infrastructure and marketing relationships we have developed for our WAS segment to sell wireless services and devices, resulting in what we believe is a cost-effective means of acquiring customers. Our unified communications services, or “data services,” allow wireless carriers and us to provide customers with the ability to organize personal communications by providing access to e-mail, voicemail, faxes, contacts, scheduling, calendar and conference calling functionality through a website or telephone. The MVNE Services and Data Services business unit accounted for $13.9 million or 4% of our total revenue in 2006.

We believe our online business model connects wireless carriers, marketers and consumers of wireless services and devices more effectively and efficiently than traditional retail channels. Wireless carriers benefit from broader access to consumers who purchase wireless services and devices on the Internet, through our own branded websites, as well as through our marketing relationships with high-traffic websites. Marketers benefit by generating additional revenue from the marketing fees that we pay them for selling wireless services and devices through websites that we create and manage for them, using their brands. Marketers also benefit from our broad carrier relationships and selection of service plans and devices. Consumers benefit from competitive pricing, broad selection and the convenience of using the websites we create and manage, for purchasing wireless

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services and devices. Through agreements we have with the five largest wireless carriers in the United States, Cingular, Sprint Nextel, T-Mobile, Verizon and Alltel, as well as with several regional wireless carriers and MVNOs, we offer consumers a selection of at least four carriers in each of the top 100 U.S. metropolitan markets. Collectively, these carriers’ networks cover 99.9% of the U.S. population.

Our proprietary e-commerce information technology platform integrates merchandising, provisioning, procurement, customer care and billing operations into a single system for the online sales of wireless services and devices. This platform, which includes a combination of internally developed and licensed technologies, has been designed to serve as a foundation for us to build upon, allowing us to offer additional products and services to maximize performance, scalability, reliability and security. For example, this platform supports both our own branded websites as well as the websites that we create and manage for third-party marketers. This allows us to manage the sale of wireless services and devices offered from wireless carriers as well as MVNO services offered by marketers under their own brands.

Industry Overview

The Internet and Online Commerce

Online shopping has grown substantially over recent years, providing businesses with a lower cost sales channel. This growth is primarily a result of the convenience, broader selection and breadth of product information available on the Internet. In addition, continued improvements in payment security and growing access to high-speed Internet connections have made online shopping increasingly efficient and attractive to consumers. According to Forrester Research, Inc., an independent research company, online retail sales will grow from $172 billion in 2005 to $329 billion in 2010, a compound annual growth rate of 14%.

Online businesses have a number of competitive advantages over traditional “bricks and mortar” businesses, including broader consumer reach, lower infrastructure costs and personalized, low-cost customer interaction. In addition, online businesses may quickly and efficiently adjust to changing consumer tastes and preferences by adjusting content, shopping interfaces, the product and service offerings and the prices of the offerings they feature on their websites. Furthermore, online businesses can more easily compile consumer data to increase opportunities for direct marketing and personalized services.

The Wireless Services Industry

Consumers increasingly understand that wireless communications provide enhanced convenience, mobility and personal safety. As a result of these factors, wireless services have achieved widespread adoption, aided in part by the increasing availability and affordability of mobile communications products. According to Ovum Limited (“Ovum”), an independent research company, the estimated number of wireless subscribers in the United States has more than doubled over the past five years, from 97.0 million subscribers in 2000 to 216.8 million in 2006, representing 77% of the U.S. population. Ovum expects that by 2010, there will be 256.0 million wireless subscribers in the U.S, representing additional growth opportunities going forward.

This future growth in wireless subscribers is expected to come from a mix of services, including traditional post-paid and pre-paid service plans and wireless subscribers who purchase handset upgrades from the same wireless carrier. Ovum expects the handset service upgrade market, which represents current wireless subscribers who commit to a new contract with their current wireless carrier instead of switching to a new carrier, to grow from 71.7 million units in 2006 to 98.8 million in 2010. According to Compete, Inc, an independent research company, these upgrade subscribers spend 27% more on their wireless devices than first-time purchasers. According to Ovum, total annual gross subscriber additions will decrease from 72.8 million in 2006 to 71.9 million in 2010. Combined, these opportunities represented 144.6 million transactions in 2006, and Ovum expects this to grow to 170.7 million transactions in 2010, a 4.3% compound annual growth rate.

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The Opportunity

Increased competition has resulted in consolidation among wireless carriers. As a result, carriers are under pressure to reduce their costs while remaining competitive. To combat these challenges, the wireless carriers continue to turn to the Internet as a cost-effective channel for the acquisition of customers, allowing them to boost profitability and increase their return on investment. Additionally, in order to increase network utilization, carriers continue to seek out new subscribers through new product offerings, such as family shared plans and mobile content and through mobile virtual network operators.

Because of these trends, consumers are faced with an increasingly complex and constantly changing selection of wireless service plans and devices. As the number of service plans offered by wireless carriers has increased, traditional retail channels have been unable to adequately satisfy customers’ needs for real-time information regarding wireless services and devices. Retail stores typically feature wireless services and devices from only one or a limited number of wireless carriers, resulting in fewer options at any given store for consumers. As a result, consumers must either visit multiple stores or select from a limited choice of wireless offerings. In addition, traditional wireless retail stores typically offer higher wireless device prices to customers due to the costs of maintaining, managing and staffing a physical storefront. In contrast to the physical retail environment, the Internet offers consumers a number of advantages for purchasing wireless services and devices, including lower prices, broader service and device selection, convenience of comparison shopping and the ability to research available plans and devices. According to Compete, Inc., an independent research company, 80% of future wireless buyers indicated they will use the Internet to support their next wireless purchase. Almost 5 million of the prospective shoppers visiting the major carriers’ wireless retail stores every month conduct detailed research on wireless handsets or service plans.

Our Value Proposition

Value to Consumers

We offer consumers a superior shopping experience, competitive prices, broad selection and the convenience of comparing and purchasing wireless services and devices on the Internet. Key advantages for consumers include:

• Superior Shopping Experience. Our websites provide consumers with access to an extensive amount of information on wireless services and devices. These websites contain user-friendly search functions and navigation tools to help consumers quickly and conveniently identify the wireless services and devices that match their selection criteria, such as monthly service cost, network coverage quality and device features. We also simplify the buying experience for consumers by allowing them to complete the transaction with an easy-to-use, one-page order form. We ship products directly to customers generally within 24 hours of order and credit approval and provide customers with updates throughout the provisioning and shipping processes. We also offer consumers the opportunity to order and test-drive their wireless phone, PDA/Smartphone or wireless PC card for 30 days, and, if they are not completely satisfied they can return the phone for another model or receive a refund.

• Competitive Pricing. We are able to offer consumers competitive pricing on wireless devices when they purchase a service plan due to the lower cost structure of our online business model. In addition, consumers also benefit from the ability to research and comparison shop for the best prices offered by the five largest wireless carriers in the U.S. and several regional carriers.

• Broad Selection. We are able to offer wireless service plans and equipment to consumers across the U.S. We have agreements with the five largest wireless carriers that provide service coverage to 99.9% of the U.S. population. In each of the top 100 U.S. metropolitan markets we offer service plans from at least four wireless carriers. Our websites also feature a broad selection of the latest wireless devices and accessories from the leading device manufacturers.

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• Knowledgeable Customer Support. Customers can request assistance at any point in the purchase process from our customer service representatives. Our customer service representatives have access to information about the service plans offered through our carrier relationships. As a result, our customer service representatives are better able to suggest service plans that meet the customers’ requirements.

Value to Marketers

We provide our marketers with websites, branded to their specifications, which allow them to sell wireless services and devices to consumers. Key advantages for marketers include:

• Expanded Services. Our e-commerce platform enables marketers to focus on marketing and branding, while relieving them of the operational burden associated with merchandising, provisioning, procurement, customer care and billing of wireless services.

• Ability to Monetize Customers. Our online business model creates new opportunities for marketers to monetize their customers by generating revenue from the sale of wireless services and devices. Our broad selection of products and services also allows marketers to address multiple demographic segments within their customer base, thus increasing their revenue opportunities.

Value to Wireless Carriers

We provide wireless carriers, as well as one of the leading providers of satellite television services, with new subscribers to their networks. Key advantages for these carriers include:

• Growing Customer Acquisition Channel. The Internet is one of the fastest growing channels for selling wireless services and devices. We provide the wireless carriers and a satellite television provider with broader access to this channel through our own branded websites and through the private-labeled websites we create and manage for marketers. These providers also benefit from our ability to offer multiple service plan and device combinations on our websites and effectively implement marketing campaigns or special offers.

• Lower Customer Acquisition Cost. We believe that our online business model enables wireless carriers to acquire customers at a lower cost than they would incur using traditional retail channels.

Our Strategy

Our objective is to become the leading online seller of wireless services and other communication services in the U.S. Key elements of our strategy to achieve this objective include:

Focus on the Customer Shopping Experience. We continue to refine our operations to provide a superior customer experience. We have enhanced navigation tools to help consumers quickly and conveniently identify the wireless services and devices that match their selection criteria, and have developed an online resource that gives consumers updates throughout the provisioning and shipping processes. The customer shopping experience is an important element in retaining customers and expanding the relationships we have developed with marketers who use their brands to market our products and services on their websites.

Transition to Residual Compensation Model. We continue to modify our agreements with the wireless carriers to enable us to be compensated based on the time period that a wireless subscriber remains a customer of the wireless carrier, which we refer to as residual compensation. Residual compensation agreements with the wireless carriers enable us to receive long-term recurring revenue associated with our wireless subscribers. Under these agreements with the wireless carriers, we generally receive a residual payment for each subscriber we activate for every month they pay their wireless bill. These residual payments continue for either the entire term of the subscriber’s agreement with the wireless carrier or some other pre-determined time period. As of December 31, 2006, we had residual compensation agreements with three of the five largest wireless carriers in the U.S. In early 2007, we added a fourth major wireless carrier. In addition, we have residual compensation agreements with two MVNOs and a satellite provider.

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Increase Our Customer Base. We plan to target additional marketers in order to expand our sources of customers. We also plan to build consumer and market awareness by expanding the direct marketing of our wireless services and devices. Our plans include expanding our use of the “Powered by InPhonic” brand on the websites that we create and manage for marketers, purchasing online advertising to support our existing brands, such as Wirefly.com, VMCSatellite.com and mFly.com, and creating additional brands.

Enhance Our Wireless Carrier Relationships. As the wireless industry continues to consolidate, we continue to improve the automated interface between our e-commerce platform and the wireless carriers’ systems as well as cooperate further with wireless carriers on marketing efforts.

Sell Device Upgrades. As wireless subscribers increasingly choose to upgrade their existing devices with their current wireless service providers, we will market device upgrade services. Currently, we have agreements with two major wireless carriers to enable us to provide device upgrade services.

Cross-Sell Our Full Range of Products and Services to Existing Customers. Most of our customers initially purchase a single product or service. We increase our revenue opportunities by offering additional products and services, such as satellite television service through VMCSatellite.com, mobile content through mFly.com, wireless accessories, enhanced wireless content, device protection plans and other communications services, to these customers at the point of sale or through follow-up communications such as opt-in emails, outbound calls and direct mail.

Develop New Products and Services. We believe that much of the future subscriber growth within the wireless services industry will be driven by consumer demands that are not served by the products and services currently offered by the wireless carriers. We have begun to market new products and services, including mobile content, device protection, accessories and other add-on services to address additional consumer demand. In 2007, we plan to explore opportunities to develop and launch new products, services and marketing opportunities.

Our Services

Wireless Activation and Services

We offer customers the ability to purchase wireless services, including satellite television, and devices directly from websites that we operate under our own brands, such as Wirefly.com and VMCSatellite.com. We use our proprietary e-commerce platform to activate, configure and ship wireless services and devices to customers.

We also sell wireless service plans and devices through websites that we create and manage for marketers. These private-labeled websites allow marketers to leverage their brands to sell wireless products and services to their customers. For each marketer for which we create and manage a website, we use that marketer’s brand on the website and throughout the sales and customer support process. To acquire customers through marketer-branded websites, we leverage the same e-commerce platform, operational infrastructure and wireless carrier relationships that we use for our own branded websites.

MVNE Services and Data Services

We utilize our e-commerce platform and operational infrastructure to extend our MVNE capabilities to marketers who want to offer branded wireless services to their customers through an MVNO without having to own or operate a wireless network or operational infrastructure. The MVNE services we offer include:

• merchandising, which includes creating, pricing and branding the voice and data service plans to be marketed to potential subscribers and the systems to support sales via e-commerce sites, call centers and retail stores;

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• provisioning, which includes determining subscriber credit-worthiness and service activation for both data and voice services;

• procurement, which includes the purchasing, order processing, programming, packaging and delivery of wireless devices to subscribers and managing returns;

• customer care, which includes pre-sale and post-sale customer service using Internet and Interactive Voice Response (IVR) self-service technologies;

• billing for voice and data services, which may also include collections; and

• mobile data applications including Wireless Application Protocol (WAP) services, Short Message Service (SMS) and Multi-media Messaging Service (MMS) messaging, and Over the Air (OTA) data service activation and content delivery such as ring tones and graphics.

Our unified communications service allows customers to organize and access email, voicemail, faxes, contacts, scheduling, calendar and conference calling functionality through both a website and a telephone.

Relationships with Wireless Carriers

We sell our customers wireless service plans of the five largest and several regional carriers in the U.S. Collectively, these carriers’ networks cover 99.9% of the U.S. population. Through our agreements with these carriers, we offer consumers a selection of wireless subscription plans from at least four carriers in each of the top 100 U.S. metropolitan markets. We also purchase wireless devices directly from these carriers and their designated distributors for sale to customers. We sell devices in conjunction with wireless service plans from the leading wireless device manufacturers including Audiovox, Kyocera, LG Electronics, Motorola, Nokia, palmOne, Research in Motion (RIM), Samsung, Sanyo and Sony Ericsson.

We provide wireless carriers with a cost-effective online channel to acquire subscribers for their service plans. The wireless carriers pay us commissions and bonuses for activating wireless subscribers onto their networks. We also receive additional financial benefits from the wireless carriers through market development funds and residual compensation generally paid on a monthly basis during the time period a subscriber remains a customer of the wireless carrier, wireless device discounts and other marketing incentives. For 2006, revenue from Cingular, T-Mobile and Sprint Nextel represented 36%, 17% and 15% of our total revenue, respectively. For 2004 and 2005, revenue from our top three wireless carriers represented 76% and 67% of our total revenue, respectively.

Marketing

We have developed a marketing strategy designed to use our own branded websites as well as to use our marketers’ brands to generate sales through their private-labeled websites that we create and manage. Our marketing and advertising efforts include online and offline initiatives, which primarily consist of the following:

• Brand Development. We continue to invest in the brands we own, such as Wirefly.com, VMCSatellite.com and mFly.com, in order to build brand awareness and attract new and repeat customers.

• Online Search and Advertising. We utilize online search engine advertising and targeted online advertising on highly-trafficked websites to acquire customers. We also utilize online marketing partners to generate customer leads to our own branded websites and we pay these marketers fees for successful customer leads.

• Private-Labeled Websites. We create and manage websites for online businesses, member-based organizations and associations and national retailers to sell wireless products and services on their websites using their own brands. We either share a portion of revenue with marketers or pay these marketers fees for wireless service plans and devices sold on their websites.

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• Direct Marketing. We utilize direct marketing programs to reach additional consumer segments for our products and services. These marketing programs include permission-based email and call transfer programs.

• Affiliate Program. We also acquire customers through an affiliate program that extends the reach of our advertising, drawing customers from a variety of websites. By joining our affiliate program, operators of other websites earn a fee for each wireless device and service plan sold through their website. We utilize a third-party vendor to manage the affiliate program.

Operations and Technology

Our operations leverage a common, proprietary e-commerce information technology platform, which we have built using a combination of internally developed and licensed technologies. Our e-commerce platform integrates our merchandising, provisioning, procurement, customer care and billing operations into a single system for the online sale of wireless services and devices. Our e-commerce platform has been designed to serve as a foundation for us to build and offer additional products and services and to maximize performance, scalability, reliability and security.

Merchandising

We sell wireless services and devices through our own branded websites as well as through private-labeled websites that we create and manage for marketers. Since we manage all these websites using the same e-commerce platform, we can update device and service plan pricing information across all the websites in real time. Additionally, we can tailor the wireless service and device offerings presented on any particular website in order to better target each marketer’s customer base. The websites we create and manage contain user-friendly search functions and navigation tools to help customers quickly and conveniently identify the wireless service plans and devices that match their selection criteria.

Provisioning

We process orders using a combination of our own proprietary software and commercially available software that we license from third parties. We believe that one of our key competitive advantages is our automated order processing system. Orders from customers are delivered in a common data format that permits us to exchange data with wireless carriers through our automated credit risk assessment and activation interfaces. We have customized these interfaces to integrate with each of our wireless carriers’ networks for a fast, seamless exchange of data. Once the customer’s risk profile has been determined, the order status management process system either activates the customer on the wireless carrier of their choice or automatically suggests an alternative service plan from another wireless carrier for which the customer is eligible.

We have designed systems we believe to be secure to protect our corporate data and the information we collect from consumers. Our websites operate on hardware and software co-located at a Tier-1 hosting facility offering redundant and reliable network connections, power, security and other essential services. To minimize downtime, we manage and monitor our websites 24 hours a day. Our operations center located in our Largo, Maryland facility has back-up power, including batteries and diesel-fueled generators. We have a disaster recovery plan that documents the necessary steps to recover critical systems if a disaster were to occur.

Procurement

All customer orders are fulfilled at our operations center located in Largo, Maryland. When an order is approved for service by the wireless carrier, our automated order processing system assigns a wireless device to the order, activates the selected service plan and configures the device to the customer’s specifications. We ship orders generally within 24 hours of approval by the wireless carrier.

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We track orders in real-time throughout the procurement process to enable us to maintain the appropriate levels of inventory. We use rigorous quality control processes and dedicated quality assurance personnel to minimize errors.

Customer Care and Billing

We are focused on providing a high quality customer shopping experience. As part of these efforts, we monitor and track interactions with each customer through our proprietary customer relationship management system. We deliver customer care through self-service websites, call center representatives, email correspondence and our interactive voice response system.

Our easy-to-navigate, self-service websites enable our customers to check order, rebate, return and exchange status in addition to reviewing service plan information. We operate call center facilities in Largo, Maryland and Reston, Virginia offering customer service, direct sales support and technical assistance by telephone or email. We have also entered into outsourcing agreements with vendors in India to provide additional support services. Using our call management system, our call center representatives can respond to inbound calls using scripts tailored to each marketer’s specifications. To further improve efficiency, we employ an integrated voice response system to provide self-service capabilities to consumers for pre-sale and post-sale activities.

Real-Time Measurement and Reporting Systems

We have developed software applications to monitor the effectiveness of our marketing campaigns on a real-time basis. These applications produce reports that we share with marketers. These reports provide us with the number of unique visitors to our marketers’ websites, numbers of orders taken, number of orders approved or pending approval and orders shipped. These reports allow us to measure the effectiveness of our marketing efforts and respond quickly to changes in market demand.

Competition

The wireless services industry continues to evolve rapidly and, despite consolidation among carriers, remains highly fragmented and competitive. We believe we compete on the basis of selection of wireless carriers; devices and service plans; convenience; price; customer service and experience; network coverage; and website features and functionality. We believe we compete favorably on all of these terms.

Companies that compete with our wireless activation and services business include:

• wireless carriers, including those from which we procure services and devices, which sell their wireless services and devices to consumers through their own websites, traditional retail operations and direct sales forces;

• online distributors that sell wireless services and devices for a limited number of wireless carriers to consumers through their own websites, such as Amazon.com, Inc.; and

• mass market retailers that sell wireless services and devices to consumers from their retail store locations, such as Radio Shack, Best Buy, Circuit City and Wal-Mart.

We believe we compete favorably against others in the wireless activation and services business because we have agreements with the major wireless carriers and device manufacturers. These agreements enable us to provide consumers with a comprehensive selection of wireless services and devices that our competitors do not provide.

Companies that currently or potentially compete with our private-labeled MVNE business include:

• companies that provide billing and customer care for MVNO services that may potentially compete with us, if we begin to provide support for branded billing and customer call solutions for companies that sell private-labeled wireless services to their customer base, such as Amdocs, Comverse, Convergys, VeriSign and Visage; and

• back-office systems providers such as Accenture and IBM.

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We believe our ability to provide a single vendor solution for MVNE services that includes wireless carrier network integration, mobile data application billing, customer care and distribution services compares favorably to our competitors.

In our data services business, we compete against a variety of companies, including CallWave and j2 Global Communications and Parus Holdings. Our unified communications service bundles voicemail, email and fax services with additional services, including our wireless activation services. Our competitors provide voicemail, email and fax services, but we believe our ability to bundle these data services with additional services enables us to compete favorably because we can present an expanded service offering to potential customers.

Many of our existing and potential competitors have substantially greater financial, technical and marketing resources than we do. Additionally, many of these companies have greater name recognition and more established relationships in many of our market segments. These competitors may be able to adopt more aggressive pricing policies and offer customers more attractive terms than we can. We may face increasing price pressure from the wireless carriers. In addition, current and potential competitors have established or may establish cooperative relationships among themselves or with third parties to compete more effectively.

Intellectual Property Rights

Our ability to compete and continue to provide technological innovation is substantially dependent upon our technology. We rely on general intellectual property law and contractual restrictions and to a limited extent, copyrights and patents to protect our proprietary rights and technology. These contractual restrictions include confidentiality agreements, invention assignment agreements and nondisclosure agreements with employees, contractors, suppliers and marketers. In addition, we pursue the registration of our trademarks and service marks in the United States and certain other countries. In the United States, we have registered “InPhonic,” “Powered by InPhonic,” “Wirefly,” “Welcome to our Wireless World” and other service marks. We also have unregistered copyrights with respect to images and information set forth on our website and the computer code incorporated into our website. To date, we have obtained registration of four U.S. patents.

We cannot assure you that any of our service marks, patents or copyrights will not be challenged or invalidated. Despite the protection of general intellectual property law and our contractual restrictions, steps we have taken to protect our intellectual property may not prove sufficient to prevent misappropriation of our technology or to deter third-parties from copying or otherwise obtaining and using our intellectual property without our authorization.

Government Regulation

We are not currently subject to direct Federal, state or local government regulation, other than regulations that apply to businesses generally. The wireless network carriers we contract with are subject to regulation by the Federal Communications Commission, or FCC. Changes in FCC regulations could affect the availability of wireless coverage these wireless network carriers are willing or able to sell. Also, changes in these regulations could create uncertainty in the marketplace that could reduce demand for our services or increase the cost of doing business as a result of costs of litigation or increased service delivery cost or could in some other manner have a material adverse effect on our business, financial condition or results of operations.

Any new legislation or regulation, or the application of laws or regulations from jurisdictions whose laws do not currently apply to our business, could have an adverse effect on our business.

Employees

As of April 30, 2007, we had a total of 551 employees. None of our employees is covered by a collective bargaining agreement. We believe our relations with our employees are good.

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ITEM 1A. RISK FACTORS

There are a number of important factors that could cause our actual results to differ materially from those that are indicated by forward-looking statements. These factors include, without limitation, those listed below and elsewhere in this Annual Report on Form 10-K.

Risks Related to Our Business

We have historically incurred significant losses and may not be profitable in the future.

We have experienced significant net losses each year since our inception in 1999. For the year ended December 31, 2006 we had net losses of $63.7 million. As of December 31, 2006, we had an accumulated deficit of $228.4 million. We may continue to incur net losses, and we cannot assure you that we will be profitable in future periods. We may not be able to adequately control costs and expenses or achieve or maintain adequate operating margins. Our financial results may also be impacted by stock-based compensation charges and possible limitations on the amount of net operating loss carryforwards that we can utilize annually in the future to offset any taxable income. Our ability to achieve and sustain profitability will depend on our ability to generate and sustain substantially higher revenue while maintaining reasonable cost and expense levels. If we fail to generate sufficient revenue or achieve profitability, we will continue to incur significant losses. We may then be forced to reduce operating expenses by taking actions not contemplated in our business plan, such as discontinuing sales of certain of our wireless services and devices, curtailing our marketing efforts or reducing the size of our workforce.

Many of our expenses, such as compensation for employees and lease payments for facilities and equipment, are relatively fixed. We base these expense levels, in part, on our expectations of future revenue. A softening in demand for our product and service offerings, whether caused by changes in consumer spending, consumer preferences, weakness in the U.S. or global economies or other factors, may result in decreased revenue, significant changes in our operating results from period to period and may cause our net losses to increase.

We expect our financial results to fluctuate, which may lead to volatility in our stock price.

Our revenue and operating results may vary significantly from period to period due to a number of factors, including:

• the timing of introduction of popular devices by mobile phone manufacturers and our ability to accurately forecast and procure an adequate supply of such devices;

• timing of bonuses paid to us by wireless carriers;

• collectibility of our accounts receivable;

• seasonal fluctuations in both Internet usage and purchases of wireless services and devices;

• our ability to attract visitors to our websites and our ability to convert those visitors into customers;

• economic conditions specific to online commerce and the wireless communications industry;

• our ability to retain existing customers;

• delays in market acceptance or adoption by consumers of our services, including our MVNE services;

• delays in our development and offering of new wireless services and devices;

• changes in our use of sales and distribution channels;

• our ability to obtain wireless devices at competitive prices;

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• our ability to manage our activation, delivery and procurement operations and their related costs;

• the amount of our marketing and other advertising costs;

• our or our competitors’ pricing and marketing strategies;

• our competitors’ introduction of new or enhanced products and services;

• the extent to which overall Internet use is affected by spyware, viruses, and “phishing,” spoofing and other spam emails directed at Internet users, viruses and “denial of service” attacks directed at Internet companies and service providers, and other events; and

• the amount and timing of operating costs relating to expansion of our operations.

If we are unable to maintain strong relationships with wireless carriers, our business would be adversely affected.

We depend upon a small number of wireless carriers for a substantial portion of our revenue and the loss of any one of these relationships could cause our revenue to decline substantially. In addition, the increasing consolidation in the wireless industry, as evidenced by Cingular’s acquisition of AT&T Wireless and Sprint’s merger with Nextel, has caused the number of wireless carriers to decline and could result in further revenue and pricing pressure. For fiscal years 2006 and 2005, revenue from Cingular, T-Mobile and Sprint Nextel each represented greater than 10% of our total revenue and an aggregate of 68% and 67%, respectively. Our wireless carriers could terminate their agreements with us without penalty and with little notice. Our agreements with these carriers are non-exclusive, and they have entered into similar agreements with our competitors, which may be on more favorable terms. Our revenue may decline if:

• one or more of the wireless carriers terminates its agreement with us or we are unable to negotiate extensions of these agreements on acceptable terms; or

• there is a downturn in the business of any of these wireless carriers; or

• there is continued significant consolidation in the wireless services industry.

In addition, if the wireless carriers were to discontinue allowing us to sell and activate wireless service plans on their networks and instead were to provide these activation services exclusively themselves, this would have a significant adverse effect on our revenue.

At December 31, 2006 and 2005, the three wireless carriers accounted for approximately 69% and 74% of our total accounts receivable, net of deactivation reserves. If we are unable to collect amounts due from these and the other wireless carriers, our business could be adversely affected. Collection of our accounts receivable is critical as such cash is a key source of our liquidity.

The restatements of our consolidated financial statements may subject us to actions or additional litigation which could have an adverse effect on our business, results of operations, financial condition and liquidity.

We have recently restated our unaudited financial statements for the quarterly periods ended March 31, 2006, June 30, 2006 and September 30, 2006 each as filed on Form 10-Q as well as the unaudited financial results for the quarter and year-ended December 31, 2006 included in the Company’s earnings release issued on February 22, 2007. These restatements may result in civil litigation or other actions which could require us to pay fines or other penalties or damages and could have an adverse effect on our business, results of operations, financial condition and liquidity. The restatements may also result in negative publicity and we may lose or fail to attract and retain key customers, employees and management personnel as a result of these matters.

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Certain consequences of our late filing of our Annual Report on Form 10-K for the 2006 fiscal year and our Quarterly Report in Form 10-Q for the fiscal quarter-ended March 31, 2007 under the federal securities laws may adversely affect our financial condition and results of operations, including our ability to raise capital.

Our failure to file timely our Annual Report on Form 10-K for the 2006 fiscal year and our Quarterly Report on Form 10-Q for the fiscal quarter-ended March 31, 2007 may adversely affect our ability to access the capital markets. We are ineligible to use a “short-form” registration that allows us to incorporate by reference future reports on Form 10-K, Form 10-Q and other SEC reports into our registration statements, or shelf registration until we have filed all of our periodic reports in a timely manner for a period of twelve months. As a result, any attempt to access the capital markets could be more expensive or be subject to delays compared to if we were able to use a short-from registration.

Because of the delayed filing of our periodic reports, we face delisting from NASDAQ which would adversely affect the trading price of our common stock.

As a result of the restatement and the delayed filing of our periodic reports with the SEC, on May 14, 2007, we received a NASDAQ staff determination letter indicating that we had failed to comply with the filing requirement for continued listing set forth in NASDAQ Marketplace Rule 4310(c)(14) due to our failure to timely file our Form 10-Q for the period ended March 31, 2007, and that our securities are, therefore, subject to delisting from the Nasdaq Global Market. We previously received and announced a NASDAQ staff determination letter with respect to our failure to timely file this Form 10-K for the fiscal year ended December 31, 2006. We requested and subsequently attended a hearing before the NASDAQ Listing Qualifications Panel on May 24, 2007 to appeal both staff determinations and presented a plan to cure both filing deficiencies and regain compliance. The filing of this Annual Report on Form 10-K is part of that plan of compliance. Both Nasdaq delisting actions have been automatically stayed pending the Nasdaq Panel’s decision, and our stock will continue to be listed on the Nasdaq Global Market until the Panel issues its decision and during any extension that is allowed by the Panel.

If the Nasdaq Panel does not grant our request for an extension and continued listing, the extension is not for the duration we requested, or we are unable to fulfill the plan to regain compliance or otherwise meet or maintain compliance with all of the NASDAQ listing requirements, our securities will be delisted from the NASDAQ Global Market. If we are delisted, we may apply for listing on another exchange, however, there is no assurance that we will meet the requirements for initial listing or maintain compliance with the continued listing requirements of such an exchange. Delisting from the Nasdaq Global Market would adversely affect the trading price of our common stock, significantly limit the liquidity of our common stock and impair our ability to raise additional funds.

Our internal control and procedures for financial reporting may not ensure that our public filings include timely and reliable financial information.

As discussed in Item 9A, Controls and Procedures, we identified and reported to our Audit Committee and independent registered public accounting firm six material weaknesses in our internal control over financial reporting, as of December 31, 2006.

These material weaknesses included the following:

• We did not maintain sufficient staffing of operational and financial resources;

• We did not always effectively communicate information to our finance department;

• We did not maintain effective controls over the recordation, accuracy and completeness of activations and services revenue and related accounts receivable;

• We did not maintain effective controls over the determination and accuracy of equipment revenue and related accounts receivable;

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• We did not maintain effective controls over the accuracy and completeness of consumer product rebate liabilities; and

• We did not maintain effective controls over the accuracy and completeness of costs of goods sold and amounts due from vendors.

As a result of these material weaknesses, we determined that our internal control over financial reporting was not effective as of December 31, 2006. These material weaknesses resulted in adjustments to our revenue, accounts receivable, inventories and cost of sales that cause us to restate our unaudited financial statements for the quarterly periods ended March 31, 2006, June 30, 2006 and September 30, 2006 each as filed on Form 10-Q as well as the unaudited financial results for the quarter and year-ended December 31, 2006 included in the Company’s earnings release issued on February 22, 2007.

The effectiveness of our controls and procedures could be limited by a variety of factors, and the remedial measures that we adopted in response to the weaknesses identified may not be successful to prevent similar events from recurring. These factors could include the following:

• Faulty human judgment and simple error, omission or mistake;

• Fraudulent action of an individual or collusion of two or more people;

• Inappropriate override of procedures; and

• The possibility that our enhanced controls and procedures may still not be adequate to assure the timely and accurate preparation of information and the timely filing of our periodic reports with the SEC.

A failure to successfully implement and maintain effective internal control over financial reporting, including any ineffectiveness of the remedial measures we have implemented to address the material weaknesses in internal control over financial reporting, could result in a material misstatement of our financial statements that would not be prevented or detected or otherwise cause us to fail to meet our financial reporting obligations. This, in turn, could result in a loss of investor confidence in the accuracy and completeness of our financial reports, which could have an adverse effect on our stock price.

Ongoing consolidation among wireless carriers could result in revenue and pricing pressure and adversely impact our results of operations.

In recent years, there has been a trend in the wireless industry toward consolidation of wireless carriers. Ongoing consolidation among the wireless carriers would reduce the number of companies whose wireless services we offer, which could adversely affect our results of operations. We rely on the leading wireless carriers for a substantial portion of our revenue, and we expect this to continue for the foreseeable future. We may be subject to pricing pressures that may result from a further consolidation among wireless carriers, which could have an adverse effect on our operations. If consolidation continues, the commissions and bonuses paid to us by wireless carriers could decrease or the prices charged to us for the supply of wireless devices could increase, resulting in a decrease in our gross margin.

A failure to continue to improve our customer experience could adversely affect our operating results.

We operate in a very competitive environment and we believe that maintaining high overall customer satisfaction is a critical part of our ongoing efforts to promote the use of our own branded websites, as well as the private-labeled websites that we create and manage for our marketers, and to improve our operating results. We have had certain problems with our customer support operations and in fulfillment of orders and experienced some customer satisfaction issues related to rebates. To date, these problems have resulted in several lawsuits and federal and state investigations. If the efforts we have undertaken to improve our customer experience are unsuccessful, we could be subject to additional customer complaints, litigation, and investigations by state and

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federal regulatory authorities, which could be costly, could divert the attention of our management from our core business and could damage our reputation. If these issues are not resolved, our revenues and results of operations could be adversely affected.

In the event we do not meet our financial or affirmative covenants under our term loan, we cannot ensure the receipt of a waiver of or extension of time to comply with our covenants

We have recently had to request waivers and or extensions of time to comply with the financial and affirmative covenants under our term loan. In the event that we do not meet the covenants under our term loan, we cannot ensure that our lending group will provide additional waivers or extensions in the future.

A decrease in the growth rate of our wireless service activations could adversely affect our operating results.

A substantial portion of our revenue consists of commissions we earn from the wireless carriers for the activation of new customer accounts. We may also receive bonuses for meeting volume and other performance based targets. If the growth rate in the number of new activations declines or the customer churn rates increase, we may not earn these additional bonuses and our revenue could decline in the future.

We may require additional cash to upgrade and expand our operations, which may not be available on terms acceptable to us, or at all.

Since our inception, our operating and investing activities have used more cash than they have generated. We expect our uses of cash over the next 12 months to include funding our operations, expanding our customer base, maintaining and enhancing our e-commerce platform and focusing on customer service. As of December 31, 2006, we had cash and cash equivalents of $90.0 million, including borrowings under our term loan of $75.0 million. While we believe that our current cash and cash equivalents, short-term investments, and amounts available under our term loan and trade credit available from wireless carriers and handset manufacturers will be sufficient to fund our working capital and capital expenditures through the foreseeable future, our revenue may not meet our expectations, we may be unable to control costs or we may incur additional expenses, including capital expenditures. In addition, for the 2006 fiscal year we entered into multiple amendments of our credit facility to extend the required date of delivery of audited financial statements for the year-ended December 31, 2006 to May 31, 2007. These amendments when applicable, also extended the required date for the delivery of financial statements for the quarter-ended March 31, 2007 to June 15, 2007. Although we have been able to obtain an extension of the period for compliance with this covenant, there is no assurance that we will be in compliance with our covenants in the future, and if we are not in compliance, that our lenders will agree to amend them. To remain competitive, we must continue to use cash to enhance and improve the functionality and features of our e-commerce platform and the websites we create and manage. If competitors introduce new services embodying new technologies, or if new industry standards and practices emerge, we may have to spend resources on the purchase or development of new functionalities or technologies. If we incur additional expenses or experience a revenue shortfall, our current resources may not be sufficient. We may then find it necessary to obtain additional financing. In the event that additional financing is required, we may not be able to raise it on terms acceptable to us, if at all.

The market for our services is becoming increasingly competitive with the emergence of additional retail and online distributors of wireless services and devices, which could adversely affect our business.

We face substantial competition in the wireless services industry. We expect competition to intensify as a result of the entrance of new competitors and the development of new technologies, products and services. We compete with wireless carriers’ retail stores and online websites, as well as other retail stores and online businesses that provide similar products and services in competition with us. All of our agreements with wireless carriers and wireless device suppliers are non-exclusive, and these parties may provide the same or similar services and devices to our competitors on terms more favorable than ours. Due to the low barriers to entry in

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this industry, with sufficient time and capital, it would be possible for additional competitors to replicate our services.

Many of our existing and potential competitors have substantially greater financial, technical and marketing resources than we do. Additionally, many of these companies have greater name recognition and more established relationships in many of our market segments. These competitors may be able to adopt more aggressive pricing policies and offer customers more attractive terms than we can. We may face increasing price pressure from the wireless carriers. In addition, current and potential competitors have established, or may establish, cooperative relationships among themselves or with third parties to compete more effectively.

Increasing costs of online advertising and or misjudgments in making advance commitments to purchase online advertising could have an adverse affect on our financial results.

Online advertising, the cost of which continues to increase, composes a significant portion of our marketing expenses. If the effectiveness of our online advertising does not keep pace with the increased costs, our financial results could be adversely affected. In addition, in order to secure more favorable terms or advertising placement, we sometimes make significant advanced financial commitments for advertising purchases based upon our anticipated needs. If our actual needs do not match such financial commitments, our results could be adversely affected.

We depend on Internet search engines to attract a substantial portion of the customers who use our websites, and losing these customers would adversely affect our revenue and financial results.

Many consumers access our services by clicking through on search results displayed by Internet search engines. Internet search engines typically provide two types of search results, algorithmic listings and purchased listings. Algorithmic listings cannot be purchased, and instead are determined and displayed solely by a set of formulas designed by the search engine. Purchased listings can be purchased by advertisers in order to attract users to their websites. We rely on both algorithmic and purchased listings to attract and direct consumers to our websites. Search engines revise their algorithms from time to time in an attempt to optimize their search results. If one or more search engines which we rely on for algorithmic listings modifies its algorithms, resulting in fewer consumers clicking through to our websites, we would need to increase our marketing expenditures or we would experience a reduction in our revenue, which would adversely affect our financial results. If one or more of the search engines which we rely on for purchased listings modifies or terminates its relationship with us, our expenses could rise and our financial results may suffer.

Any unanticipated increase in our rate of deactivation of active accounts could result in a decrease in our revenue.

Under our agreements with wireless carriers, commissions are not earned if the customer’s service is deactivated with the carrier before a pre-determined period of time, usually between 90 and 180 calendar days. We maintain a reserve to cover the commissions expected to be lost through deactivations based upon our historical experience. We monitor a number of factors in determining this reserve. For example, our experience has been that customers who participate in a promotion that allows them to obtain a phone and activate an account with no up-front payment have a higher deactivation rate than customers who pay amounts in advance. If the rate of our deactivations increases in excess of our historical experience, we would have to increase our deactivation reserve, which, in turn, would cause our revenue to decline. Further, if our estimates vary materially for a future period or periods in relation to revenue and/or net income so that we conclude that our method of determining estimates is not sufficiently accurate, we may be required to change our method of accounting for these estimates. While a change in accounting for deactivations would have no impact on our cash flow, any such change may negatively impact our net income for particular periods and cause a decline in stock price. An increase in our deactivation rate could also cause carriers to modify the commission terms with us or even terminate our agreements.

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If we do not continue to attract customers through our existing online marketing programs, our revenue may be affected adversely and our marketing expenses may increase.

We obtain a large portion of our customers through incentive-based online marketing programs. We engage third parties to acquire customers through different marketing initiatives, including the use of websites that we create and manage under our marketers’ brands. We also use online advertising and other forms of direct marketing. Our marketers may not continue to participate in our marketing programs if the programs do not provide sufficient value, our competitors offer better terms, the third parties elect to provide these products and services directly or the market for incentive-based advertising decreases. If our marketers do not market our services to their customers, our revenues will not grow as anticipated and our marketing expenses may increase.

We face inventory risk.

We are exposed to inventory risks as a result of seasonality, new product launches by equipment manufacturers, rapid changes in product cycles and changes in consumer tastes with respect to wireless devices. In order to be successful, we must accurately predict these trends and avoid overstocking or under-stocking wireless devices. Demand for wireless devices, however, can change significantly between the time we order the wireless devices and the date we sell these to customers. As a result, we may have too many or too few of certain inventory items, which may affect our revenues and ability to meet customer demands.

The acquisition of certain types of inventory, or inventory from certain sources, may require significant lead-time and prepayment, and such inventory may not be returnable. We carry a broad selection of wireless devices and maintain significant inventory levels of certain popular devices and we may be unable to sell products in sufficient quantities or during the relevant selling seasons.

Any one of the inventory risk factors set forth above may adversely affect our operating results.

Announcements and delays relating to the release of new wireless devices could adversely affect our revenue.

From time to time, the wireless industry is significantly affected by the introduction of new wireless devices that quickly capture a large share of the market. Announcements of new devices can result in customers deferring purchase decisions until such devices are available. Likewise, our ability to have access to a sufficient supply of such devices when available is important in order for us to meet customer demand. If customers delay purchases due to the announcement of new products or if we do not have access to a sufficient supply of new products to meet demand, it could have an adverse effect on our revenues and results of operations.

An interruption in the supply of wireless devices could hinder our ability to fulfill customer orders and cause a decline in our revenue.

We rely on wireless carriers and wireless device suppliers in fulfilling customer orders for wireless devices. These suppliers may experience difficulty in providing us sufficient wireless devices to meet our needs or they may terminate or fail to renew contracts for supplying us these devices on terms we find acceptable. Our agreements with these suppliers are non-exclusive, and these suppliers have entered into similar agreements with our competitors, which may be on more favorable terms. From time to time, we may experience delays in receiving shipments of wireless devices from one or more of the wireless device suppliers, thereby preventing us from offering a wireless device until the shipment is received. Any significant interruption in the supply of any of these devices could hinder our ability to fulfill customer orders and result in the loss of customers, causing a decline in our revenues.

If our distribution operations are interrupted for any significant period of time, our business and results of operations would be substantially harmed.

Our success depends on our ability to successfully receive and fulfill orders and to promptly deliver our products to our customers. Our packaging, labeling and product return processes are performed both internally

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through our own distribution operations and to a lesser extent, by a third party. Our distribution operations are located in a single facility that is susceptible to damage or interruption from human error, fire, flood, power loss, telecommunications failure, theft, terrorist attacks and similar events. In 2003, we experienced a one-day interruption in our distribution operations due to Hurricane Isabel. Any future interruptions in our distribution center operations for a significant period of time could damage our reputation and substantially harm our business and results of operations.

Interruptions or delays in service from third parties could impair our service offerings.

We rely on third parties for both our primary network operations hosting center and our back-up facility. Any disruption of our access to Internet service could result in delays in our ability to receive information or transact business. We also rely on third-party software, suppliers and wireless carriers to process applications for credit approval and to bill our customers. If we are unable to process credit applications in a timely manner or if our billing software fails and we are unable to bill customers on a timely basis, our business will be affected adversely. While we do have backup systems for certain aspects of our operations, our systems are not fully redundant and our disaster recovery planning may not be sufficient for all eventualities. From time to time we have experienced interruptions in these or other third-party services and if such disruptions were to occur in the future or their performances were to deteriorate, it could impair the quality of our services. If our arrangement with any of these third parties was terminated or if a third party ceased operations, discontinued business or altered the terms on which it does business with us, we might not be able to find an alternative provider on a timely basis or on reasonable terms, which would adversely affect our operating results.

We have grown rapidly, and we must manage additional growth and the demands on our resources and personnel in order to be successful.

We began operations in October 1999 and have grown rapidly since that time. Our growth has resulted, and any future growth will result, in increased responsibility for our management and increased demands on our resources. Our business strategy is based on the assumption that we will continue to retain qualified personnel who can expand our customer base and continue to develop and deliver innovative customer-driven solutions. We must continue to enhance and expand our business processes, information systems and operations to accommodate this growth. To manage future growth, we will need to:

• implement additional and improved management information systems;

• retain qualified personnel to manage our operating, administrative, financial and accounting systems;

• maintain and expand our wireless service and device activation capacity;

• continue to train, motivate, manage and retain our existing employees and attract and integrate new employees;

• expand our sales force to sell our new and existing offerings; and

• maintain close coordination among our executive, information technology, accounting and finance, sales and operations organizations.

If we are unable to manage future expansion, our ability to provide a high quality customer experience could be harmed, which would damage our reputation and substantially harm our business and results of operations.

If we do not adequately protect our intellectual property, others could copy aspects of our services and operational technology, which could force us to become involved in expensive and time-consuming litigation.

Our ability to compete and continue to provide technological innovation is substantially dependent upon our technology. We rely on a combination of intellectual property laws and confidentiality agreements to protect our technology. We generally enter into confidentiality and nondisclosure agreements with our employees, consultants and prospective and existing marketers. In addition, we seek to control access to our proprietary

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information. Despite our efforts to protect our intellectual property, unauthorized parties may attempt to copy or otherwise obtain and use our services or technology. Although we are not aware of any unauthorized use of our intellectual property to date, effectively policing against the unauthorized use of our technology is time consuming and costly, and we cannot assure you that the steps taken by us will prevent misappropriation of our technology. Our failure to adequately protect our intellectual property rights could harm our business by making it easier for others to duplicate our services.

If we are unable to maintain the integration of our services with the wireless carriers’ existing credit and activation systems, we will be unable to process orders in a timely manner and our business may suffer.

To activate wireless services for customers, we rely on access to the wireless carriers’ proprietary credit and activation systems through direct data, online and telephone interfaces. If, as a result of technology enhancements or upgrades of these systems by the wireless carriers, we are unable to integrate our services with these systems, we could be required to redesign or upgrade our information systems or software which could be costly and negatively affect our operating results. If we are unable to gain access to these systems, we would be unable to process orders, the wireless carriers could terminate their underlying agreements with us, and our business may suffer.

Our failure to protect our customers’ confidential information and our network against security breaches could damage our reputation and substantially harm our business and results of operations.

A significant barrier to online commerce is concern regarding the secure transmission of confidential information over public networks. Currently, a majority of our wireless service activations and device sales are billed to our customers’ credit card accounts directly. We rely on encryption and authentication technology licensed from third parties to securely transmit confidential information, including credit card numbers. Advances in computing capabilities, new discoveries in the field of cryptography or other developments may result in a compromise or breach of the technology used by us to protect customer transaction data. Although we are not aware of any security breaches, any compromise of our security could damage our reputation and expose us to a risk of loss or litigation and possible liability which would substantially harm our business and results of operations. Although we carry general liability insurance, our insurance may not cover potential claims of this type or may not be adequate to cover all costs incurred in defense of potential claims or to indemnify us for all liability that may be imposed. In addition, anyone who is able to circumvent our security measures could misappropriate proprietary information or cause interruptions in our operations. We may need to expend significant resources to protect against security breaches or to address problems caused by breaches.

If the technology we use infringes upon the proprietary rights of others, we may be forced to seek expensive licenses, reengineer our services, engage in expensive and time-consuming litigation or stop selling our services.

If we were to discover that our services violated or potentially violated the proprietary rights of others, we might not be able to obtain licenses to continue offering those services without substantial reengineering. Any reengineering effort may not be successful, nor can we be certain that any licenses would be available on commercially reasonable terms. Although we have not been named a party in any litigation concerning the infringement of another party’s rights, a claim of infringement against us, with or without merit, could be time consuming and expensive to litigate or settle, and could divert management’s attention from executing our business plan. An adverse determination against us could prevent us from offering our services. From time to time, we receive notices from others claiming we have infringed upon their intellectual property rights. The number of these claims may increase. Responding to these claims may require us to seek expensive licenses, reengineer our services, engage in expensive and time-consuming litigation or stop selling our services.

If we are unable to attract and retain management and key personnel, we may not be able to implement our business plan.

We believe that the successful implementation of our business plan will depend on our management team, particularly the chairman of our board of directors and our chief executive officer, David A. Steinberg. Losing

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the services of one or more members of our management team could adversely affect our business and our expansion efforts, and possibly prevent us from further improving our information management, financial and operational systems and controls. As we continue to grow, we may need to hire and retain qualified sales, marketing, administrative, operating and technical personnel with knowledge of the wireless services industry and online marketing, and to train and manage new personnel. We may not be able to identify and hire qualified personnel due to competition for such personnel. The failure to hire and retain these personnel would have an adverse effect on our business.

Our failure to identify and integrate successfully any businesses or technologies that we acquire may increase our costs and reduce our revenue.

As part of our business strategy, we continue to seek to expand our service offerings through investments in, or acquisitions of, other businesses or technologies that we believe are complementary to our business. Although we regularly engage in discussions relating to potential acquisitions, we may not be able to identify, negotiate or finance any future acquisitions. If we do identify acquisitions, it may be necessary for us to raise additional funds to finance those acquisitions. Additional funds may not be available on terms that are favorable to us, or at all. If we issue our stock as consideration, our stockholders would experience dilution of their percentage ownership in our stock. Upon completion of any acquisitions, we may be unsuccessful in integrating and operating such acquired businesses profitably or otherwise implementing our strategy successfully. If we are unable to integrate any newly-acquired entities or technologies effectively, our business and results of operations could suffer. The time and expense associated with finding suitable and compatible businesses, technologies or services could also disrupt our ongoing business and divert our management’s attention. In addition, we may be required to reduce the carrying amount on our balance sheet of any acquired intangible assets; this reduction would adversely affect our financial results in the period in which it occurs.

Vendors in India support our operating activities. Any difficulties experienced with these services could result in additional expense or loss of customers and revenue.

We have outsourcing agreements with vendors in India to provide additional activation and call center support. As a result, we rely on these vendors to provide customer service and interface with our customers. If these vendors are unable to perform satisfactory customer service, we could lose customers and would have to pursue alternative strategies to provide these services, which could result in delays, interruptions, additional expense and loss of customers. A variety of proposed federal and state legislation, if enacted, could restrict or discourage U.S. companies from outsourcing their services to companies outside the U.S. This legislation, if enacted, may impact our ability to use internationally outsourced services to support our call center activities.

Risks Related to Our Industry

If the online market for wireless services and devices does not gain widespread acceptance, our business would suffer.

Our success will depend in part on our ability to attract consumers who have historically purchased wireless services and devices through traditional retail stores. Furthermore, we may have to incur significantly higher and more sustained advertising and promotional expenditures or price our products more competitively than we currently anticipate in order to attract additional online consumers and sell wireless services and devices to more customers. Specific factors that could deter consumers from purchasing wireless services and devices from us include:

• concerns about buying wireless devices without a face-to-face interaction with sales personnel and the ability to physically handle and examine the devices;

• pricing that does not meet their expectations;

• concerns about the security of online transactions and the privacy of personal information;

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• delivery time associated with Internet orders;

• delayed shipments or shipments of incorrect or damaged products;

• inconvenience associated with returning or exchanging purchased items;

• inability to maintain good standing with business rating services;

• failure to provide a positive customer experience for consumers; and

• possible disruptions, computer viruses or other damage to the Internet servers or to the consumers’ computers.

We may be exposed to risks associated with credit card fraud and identity theft that could cause us to incur unexpected expenditures and loss of revenue.

Under current credit card practices, a merchant is liable for fraudulent credit card transactions when, as is the case with the transactions we process, that merchant does not obtain a cardholder’s signature. Any failure to prevent fraudulent credit card transactions would adversely affect our business and our revenue. We do not currently carry insurance to protect us against this risk. We do not receive any revenue from fraudulently placed orders. We bear the risk of future losses as a result of orders placed with fraudulent credit card data or fraudulent identity information, even though the associated financial institution approved payment of the orders. In the event our credit card chargebacks from the processors exceed levels set by VISA, Mastercard or other credit card companies, we may lose our ability to process transactions which would have an adverse effect on our business.

Our net sales may be negatively affected if we are required to charge taxes on purchases.

We are not required to collect or are not subject to sales or other taxes related to the products we sell, except for certain corporate level taxes and sales taxes with respect to purchases by customers located in a limited number of states. However, one or more states or foreign countries may seek to impose sales or other tax collection obligations on us in the future. A successful assertion by one or more states or foreign countries that we should be collecting sales or other taxes on the sale of our products could result in substantial tax liabilities for past sales, discourage customers from purchasing products from us, decrease our ability to compete with traditional retailers or otherwise substantially harm our business and results of operations. Currently, decisions of the U.S. Supreme Court restrict the imposition of obligations to collect state and local sales and use taxes with respect to sales made over the Internet. However, a number of states, as well as the U.S. Congress, have been considering various initiatives that could limit or supersede the Supreme Court’s position regarding sales and use taxes on Internet sales. If any of these initiatives addressed the Supreme Court’s constitutional concerns and resulted in a reversal of its current position, we could be required to collect sales and use taxes in additional states. The imposition by state and local governments of various taxes upon Internet commerce could create administrative burdens for us, put us at a competitive disadvantage if they do not impose similar obligations on all of our online competitors and decrease our future sales.

Government regulation of the Internet and e-commerce is evolving and unfavorable changes could substantially harm our business and results of operations.

We are subject to general business regulations and laws as well as regulations and laws specifically governing the Internet and e-commerce. Existing and future laws and regulations may impede the growth of the Internet or other online services. These regulations and laws may cover taxation, restrictions on imports and exports, customs, tariffs, user privacy, data protection, pricing, content, copyrights, distribution, electronic contracts and other communications, consumer protection, the provision of online payment services, broadband residential Internet access and the characteristics and quality of products and services. It is not clear how existing laws governing issues such as property ownership, sales and other taxes, libel and personal privacy apply to the Internet and e-commerce. Laws or regulations may be enacted that prohibit use of mass emails or similar

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marketing activities. We may not be able to support the marketing of our products and services by mass email or other online means if such activities are adverse to our business. Even if no relevant law or regulation is enacted, we may discontinue use or support of these activities if we become concerned that customers deem them intrusive or they otherwise adversely affect our goodwill. Unfavorable resolution of these issues may substantially harm our business and results of operations.

The wireless services industry may experience a decline in new subscriber growth rate.

The wireless services industry has faced an increasing number of challenges, including a slowdown in new subscriber growth. According to Ovum, total annual gross subscriber additions will decrease slightly, for example showing a decrease in gross additions from 72.8 million in 2006 to 71.9 million in 2010. If the wireless services industry experiences a decline in subscribers, our business may suffer.

We may be unable to effectively market our wireless services if wireless carriers do not deliver acceptable wireless networks and service plans, which would cause our revenue to decline.

The success of our business depends on the capacity, affordability and reliability of wireless voice and data access provided by wireless carriers. Growth in demand for wireless voice and data services may be limited if wireless carriers fail to maintain sufficient capacity to meet demand for these services, delay the expansion of their wireless networks and services, fail to offer and maintain reliable wireless network services or fail to market their services effectively. We also depend on wireless carriers to provide credit verification and approval to activate wireless service for customers. If wireless carriers are unable to verify credit information in a timely manner, we may lose marketers and customers.

Use of wireless devices may pose health risks or cause injuries, which could increase our exposure to litigation and result in increased operating expenses.

Radio frequency emissions from wireless devices may be linked to various health concerns, including cancer, and may interfere with various electronic medical devices, including hearing aids and pacemakers. In addition, there have been reports that people have been injured by explosions of refurbished batteries in wireless devices. The actual or perceived risk of radio frequency emissions from wireless devices or the potential for battery explosions or other injuries could adversely affect our business through a decline in sales of wireless services and increased exposure to potential litigation.

Other Risks

The market price of our common stock has been and will likely continue to be subject to fluctuation.

We have a rapidly evolving and unpredictable business model. The trading price of our common stock fluctuates significantly. Trading prices of our common stock may fluctuate in response to a number of events and factors, such as:

• quarterly and seasonal variations in operating results;

• changes in financial estimates and ratings by securities analysts;

• announcements by us or our competitors of new product and service offerings, significant contracts, acquisitions or strategic relationships;

• publicity about our company, our products and services, our competitors or e-commerce in general;

• additions or departures of key personnel;

• any future sales of our common stock or other securities; and

• stock market price and fluctuations in trading volume of publicly-traded companies in general and Internet-related companies and specialty retailers in particular.

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The trading prices of Internet-related companies and e-commerce companies have been especially volatile. In the past, securities class action litigation has often been brought against a company following periods of volatility in the market price of its securities. We may be the target of similar litigation in the future. Securities litigation could result in significant costs and divert management’s attention and resources, which could substantially harm our business and results of operations.

If securities or industry analysts do not continue to publish research or reports about our business, our stock price and trading volume could decline.

The trading market for our common stock will depend in part on the research and reports that securities or industry analysts publish about us or our business. If one or more of the analysts who covers us downgrades our stock, our stock price would likely decline. If one or more of these analysts ceases coverage of our company or fails to regularly publish reports on us, interest in the purchase of our stock could decrease, which could cause our stock price or trading volume to decline.

Anti-takeover provisions and other restrictions in our certificate of incorporation, bylaws and applicable law might discourage, delay or prevent a change of control of our company or changes in our management that our stockholders might find desirable.

Our certificate of incorporation and bylaws provide for, among other things:

• a classified board of directors;

• restrictions on the ability of our stockholders to call special meetings of stockholders;

• restrictions on the ability of our stockholders to act by written consent;

• restrictions on the ability of our stockholders to remove any director or the entire board of directors without cause;

• restrictions on the ability of our stockholders to fill a vacancy on the board of directors; and

• advance notice requirements for stockholder proposals.

These provisions may have the effect of delaying or preventing an acquisition of us or changes in our management, even if stockholders of our company deem such changes to be advantageous. In addition, our board of directors is permitted to authorize the issuance of undesignated capital stock without any vote or further action by the stockholders. Because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which prohibits us from engaging in a business combination with an interested stockholder for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the business combination is approved in a prescribed manner. These provisions and other provisions of the Delaware General Corporation Law applicable to us may restrain large stockholders, in particular those owning 15% or more of our outstanding voting stock, from consummating a merger or business combination with us without the approval of the board of directors, even if doing so would benefit our stockholders.

Our ability to utilize net operating loss carryforwards to offset future taxable income may be limited.

As of December 31, 2006, we had approximately $196.1 million of federal and state net operating loss carryforwards. Under the provisions of the Internal Revenue Code, substantial changes in our ownership may limit the amount of net operating loss carryforwards that can be utilized annually in the future to offset taxable income. If such a change in our ownership occurs, our ability to use our net operating loss carryforwards in any fiscal year may be significantly limited under these provisions.

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ITEM 1B. UNRESOLVED STAFF COMMENTS

As part of a review by the Division of Corporation Finance of the Securities and Exchange Commission (“SEC”) of a Current Report on Form 8-K filed by the Company on April 3, 2007 and subsequently amended on May 4, 2007 (the “Form 8-K”), the Company received a number of comments regarding the Form 8-K and certain annual and quarterly reports filed in 2006. These comments include questions related to the Company’s accounting policy for revenue recognized related to equipment discount provision termination fees earned in 2006 that could impact disclosures included in certain of its Forms 10-Q filed in 2006. The Company is working to address the questions raised by the SEC. The SEC has also requested additional information from the Company related to the Form 8-K that, upon further review by the SEC, may result in additional comments from the SEC. Specifically, the SEC has requested information related to: (i) the error in recording accrued expenses and reserves for consumer product rebates; (ii) additional expenses for rebates paid to consumers as “goodwill” or “customer accommodations”; (iii) additional details related to accounting adjustments of approximately $3.0 million; and (iv) information regarding an error in marketing expenses of approximately $1.2 million that pertained to the fiscal year ended December 31, 2005.

ITEM 2. PROPERTIES

Our principal offices are located in Washington, D.C., where we lease 15,780 square feet of office space under a lease that expires in November 2008. Our technology and operations centers are located in Largo, Maryland, where we lease approximately 51,667 square feet under a lease that expires in September 2009. We have operations in Reston, Virginia, where we lease approximately 32,552 square feet under multiple operating leases that expire between June 2007 and January 2008; and in Great Falls, Virginia, where we lease approximately 4,150 square feet under a lease that expires in August 2007.

ITEM 3. LEGAL PROCEEDINGS

Legal Matters

On May 7 and 18, 2007, two putative federal securities law class actions were filed in the United States District Court for the District of Columbia on behalf of persons who purchased our common stock between August 2, 2006, and May 3, 2007. These substantially similar lawsuits assert claims pursuant to Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder, against us, our chief executive officer and our chief financial officer. These claims are related to our April 3, 2007, and May 4, 2007 announcements concerning our restatement of certain previously issued financial statements. Potential plaintiffs have until July 6, 2007, to move the court for appointment as lead plaintiff. We have not yet responded to the complaints. We believe that the allegations contained within these class action lawsuits are without merit and intend to vigorously defend the litigation.

On August 5, 2004, Avesair, Inc., one of the companies the assets of which we acquired, filed suit against us demanding, among other matters, that we issue to Avesair shares of our common stock valued at approximately $4.0 million as of June 30, 2004. The stock demanded by Avesair represents the maximum value of shares that they could have earned for achieving certain performance-based targets under the asset purchase agreement. We believe the performance-based targets were not achieved and intend to vigorously contest this matter. However, any adverse resolution of this matter could have a material adverse impact on our financial results if we are required to issue additional shares and would result in dilution to our stockholders.

On May 3, 2007, the Federal Communications Commission (FCC) issued an Order of Forfeiture and Further Notice of Apparent Liability in which it imposed a forfeiture of $819,905 against us for being late in complying with certain regulatory obligations that arose in 2004 and 2005 from a business that we sold in December 2005. Those obligations included: registering with the FCC, filing certain reports, and paying certain Universal Service Fund fees. The FCC’s order also proposed imposing an additional fine of $100,000 for not having maintained in 2006 and 2007 a license necessary to conduct the business that was discontinued by us in 2005. As we did not

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operate the business in 2006 and 2007 we will request that the proposed fine be dismissed. With regard to the forfeiture itself, we are evaluating our legal options, which include appealing the ruling in federal court and/or negotiating a different and possibly lesser forfeiture. This forfeiture issue was initially raised by the FCC in July 2005. We advised the FCC then, and believe now, that no fine is appropriate under the circumstances.

Fifteen related putative federal court class actions have been filed against us arising out of InPhonic-sponsored rebate offers for online purchases of wireless telephones. Several of these lawsuits also name either our current or former third-party rebate processor as a defendant. On October 25, 2006 we received a decision by the Judicial Panel on Multidistrict Litigation (“JPML”) granting our motion to consolidate the federal court actions in the United States District Court for the District of Columbia before the Honorable Ellen Segal Huvelle. The consolidated amended class action complaint alleges, among other things, that we and our current or former third-party rebate processor (depending on the particular claim) violated the consumer protection laws of various states, various D.C. state laws and the federal RICO (anti-racketeering) statute in connection with our disclosure and implementation of the terms and conditions of rebate offers. The class action plaintiffs seek compensatory damages and/or restitution, statutory penalties and treble damages under D.C. consumer protection laws and RICO, attorneys’ fees and punitive damages, as well as injunctions concerning the content of our websites. The federal lawsuit is in an early stage. We intend to vigorously defend that action but cannot predict its outcome.

On April 27, 2007 we and the Federal Trade Commission (FTC) announced that we had entered into a consent agreement with the FTC in which InPhonic agreed to clearly and prominently disclose certain information regarding its rebate offers, such as when consumers can expect to receive their rebates, any time period that consumers must wait before submitting a rebate request, and certain information that would disqualify a consumer from receiving a rebate. We also agreed to provide rebates within time frames and under terms and conditions reasonably specified by us in our communications with our customers. We also agreed to provide rebates to certain customers whom had previously been denied them. As required by its rules, the FTC has requested comment on the consent agreement and we expect that it will become effective shortly.

On February 15, 2007, we reached a final settlement with the District of Columbia Attorney General’s Office concerning our use of mail-in rebates.

From time to time we are party to other disputes or legal proceedings. We do not believe that any of the pending proceedings are likely to have a material adverse effect on our business.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of our security holders during the fourth quarter of 2006.

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PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our common stock has been traded on The NASDAQ Global Market under the symbol “INPC” since November 16, 2004. Prior to that time, there was no public market for our common stock. The following table sets forth the high and low intraday sales prices for our common stock for the periods indicated as reported by the NASDAQ Global Market.

Because of the delayed filing of our periodic reports, we face delisting from NASDAQ which would adversely affect the trading price of our common stock. We requested and subsequently attended a hearing before the NASDAQ Listing Qualifications Panel on May 24, 2007 to appeal both staff determinations and presented a plan to cure both filing deficiencies and regain compliance. Both NASDAQ delisting actions have been automatically stayed pending the NASDAQ Panel’s decision, and our stock will continue to be listed on the NASDAQ Global Market until the Panel issues its decision and during any extension that is allowed by the Panel. If the Nasdaq Panel does not grant our request for an extension and continued listing, the extension is not for the duration we requested, or we are unable to fulfill the plan to regain compliance or otherwise meet or maintain compliance with all of the NASDAQ listing requirements, our securities will be delisted from the NASDAQ Global Market.

	Stock Price
	High		Low
Year ended December 31, 2005
First Quarter	$	28.29	$	19.13
Second Quarter		23.98		12.21
Third Quarter		18.20		12.43
Fourth Quarter		15.84		8.45
Year ended December 31, 2006
First Quarter		9.53		5.02
Second Quarter		9.28		5.88
Third Quarter		8.50		5.66
Fourth Quarter		12.45		7.34

As of May 21, 2007, there were approximately 147 holders of record of our common stock. This figure does not represent the actual number of beneficial owners of our common shares because shares are frequently held in “street name” by securities dealers and others for the benefit of beneficial owners who may vote the shares.

We have never declared or paid cash dividends on our common stock. We currently intend to retain future earnings, if any, for use in the operation and expansion of our business and do not anticipate paying cash dividends in the foreseeable future. The declaration and payment of any dividends in the future will be determined by our board of directors, in its discretion, and will depend on a number of factors, including our earnings, capital requirements and overall financial condition. In addition, our ability to declare and pay dividends is substantially restricted under our secured credit facility.

During the quarter ended December 31, 2006, we issued the following shares of our equity securities that were not registered under the Securities Act of 1933:

(1) Warrants to purchase an aggregate of 1,250,000 shares of our common stock at an exercise price of $0.01 per share to our secured lenders;

(2) 2,247 shares of our common stock pursuant to the net exercise of warrants at an exercise price of $2.49 per share that were issued prior to our initial public offering; and

(3) 14,080 shares of our common stock pursuant to the net exercise of warrants at an exercise price of $0.03 per share that were issued prior to our initial public offering.

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The above-described issuances were exempt from registration (1) pursuant to Section 4(2) of the Securities Act, or Regulation D or Rule 144A promulgated thereunder, as transactions not involving a public offering, (2) pursuant to Rule 701 promulgated under the Securities Act or (3) as transactions not involving a sale of securities. With respect to each transaction listed above, no general solicitation was made by either us or any person acting on our behalf, the securities sold are subject to transfer restrictions and the certificates for the equity securities contained an appropriate legend stating such securities have not been registered under the Securities Act and may not be offered or sold absent registration or pursuant to an exemption therefrom. No underwriters were involved in connection with the sales of securities referred to above.

The following table provides information about purchases we made during the fourth quarter of 2006 of our equity securities that are registered by us pursuant to Section 12 of the Exchange Act. We purchased our common stock pursuant to the stock repurchase plan we announced in November 2006 authorizing the purchase of up to $30.0 million of shares of our common stock.

Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plan	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plan
November 1, 2006 to November 30, 2006	90,000	$	11.37	90,000	$	28,976,273
December 1, 2006 to December 31, 2006	197,500		11.20	197,500		26,764,448
Fourth quarter 2006 totals	287,500	$	11.25	287,500	$	26,764,448

Repurchases may take place in the open market or in privately negotiated transactions, including derivative transactions, and may be made under a Rule 10b5-1 plan. Outside of the stock repurchase program, we acquired 13,453 shares of our common stock during the fourth quarter of 2006 from certain of our employees in satisfaction of their payroll tax withholding obligations related to restricted stock awards that had lapsed during the period. The average market price per share acquired was $11.39.

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STOCK PERFORMANCE GRAPH

This performance graph shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) or otherwise subject to the liabilities under that Section and shall not be deemed to be incorporated by reference into any filing of InPhonic under the Securities Act of 1933, as amended or the Exchange Act.

The following graph shows the cumulative total return resulting from a hypothetical $100 investment in the Company’s common stock on November 16, 2004, the date of its initial public offering, through December 31, 2006. Stock price performance over this period is compared to the same amount invested in the Nasdaq Composite Index and the Goldman Sachs Internet Index over the same period (in each case, assuming reinvestment of dividends). This graph is presented as required by SEC rules. Past performance might not be indicative of future results. While total stockholder return can be an important indicator of corporate performance, we believe it is not necessarily indicative of its degree of success in executing its business plan, particularly over short periods.

	Measurement Point
	11/16/04		12/04		3/05		6/05		9/05		12/05		3/06		6/06		9/06		12/06
INPHONIC, INC.	$	100.00	$	114.50	$	94.65	$	63.54	$	57.29	$	36.21	$	29.13	$	26.25	$	33.00	$	46.21
NASDAQ COMPOSITE		100.00		104.66		96.18		98.96		103.52		106.10		112.56		104.50		108.65		116.20
GOLDMAN SACHS INTERNET		100.00		110.23		96.40		99.69		110.34		126.85		120.44		108.34		108.15		123.49

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ITEM 6. SELECTED FINANCIAL DATA

The following tables set forth certain of our historical consolidated financial data for the five years ended December 31, 2006. The Selected Financial Data should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Business,” and our consolidated financial statements, related notes thereto and other financial information included in the consolidated financial statements.

In December 2005, we sold the operating assets of our MVNO business. As a result and in accordance with Statement of Financial Accounting Standards No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (“SFAS No. 144”), we classified these operations as discontinued operations and, accordingly, have segregated the revenue and expenses of the discontinued operation in the selected consolidated statement of operations for all periods presented. Please refer to Note 4 of the notes to the consolidated financial statements included elsewhere in this annual report on Form 10-K. (In thousands except share and per share amounts).

	Years Ended December 31,
	2002			2003			2004			2005			2006
Revenue:
Activations and services	$	46,701		$	86,825		$	123,265		$	233,730		$	298,090
Equipment		10,604			13,251			31,603			86,809			71,484
Total revenue		57,305			100,076			154,868			320,539			369,574
Cost of revenue, exclusive of depreciation and amortization:
Activations and services		5,609			3,866			1,752			1,221			2,653
Equipment		30,269			45,426			83,075			190,509			215,201
Total cost of revenue		35,878			49,292			84,827			191,730			217,854
Operating expenses:
Sales and marketing, exclusive of depreciation and amortization		17,559			26,398			42,867			93,726			118,756
General and administrative, exclusive of depreciation and amortization		27,363			31,422			34,942			63,131			76,571
Depreciation and amortization		2,600			5,434			6,444			9,840			17,067
Restructuring costs		—			—			—			847			2,551
Loss on investment		—			—			150			228			—
Impairment of goodwill and intangibles		3,315			2,431			—			—			—
Total operating expenses		50,837			65,685			84,403			167,772			214,945
Operating loss		(29,410	)		(14,901	)		(14,362	)		(38,963	)		(63,225	)
Other income (expense):
Interest income		289			287			757			2,167			2,329
Interest expense		(737	)		(1,252	)		(980	)		(970	)		(2,638	)
Total other income (expense)		(448	)		(965	)		(223	)		1,197			(309	)
Loss from continuing operations		(29,858	)		(15,866	)		(14,585	)		(37,766	)		(63,534	)
Discontinued operations:
Income (loss) from discontinued operations		849			(4,356	)		4,346			(1,784	)		(193	)
Gain on sale		—			—			—			1,355			—
Total income (loss) from discontinued operations		849			(4,356	)		4,346			(429	)		(193	)
Net loss		(29,009	)		(20,222	)		(10,239	)		(38,195	)		(63,727	)
Preferred stock dividends and accretion		(8,048	)		(7,309	)		(22,049	)		—			—
Net loss attributable to common stockholders	$	(37,057	)	$	(27,531	)	$	(32,288	)	$	(38,195	)	$	(63,727	)
Basic and diluted net loss per share:
Net loss from continuing operations	$	(3.64	)	$	(2.07	)	$	(2.60	)	$	(1.10	)	$	(1.75	)
Net gain (loss) from discontinued operations		0.08			(0.39	)		0.31			(0.01	)		—
Basic and diluted net loss per share	$	(3.56	)	$	(2.46	)	$	(2.29	)	$	(1.11	)	$	(1.75	)
Basic and diluted weighted average shares outstanding		10,406,584			11,204,791			14,074,505			34,417,954			36,312,970

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	As of December 31,
	2002			2003			2004		2005		2006
Consolidated Balance Sheet Data
Cash and cash equivalents	$	12,626		$	29,048		$	100,986	$	70,783	$	89,972
Working capital (deficit) (1)		(14,751	)		(2,425	)		93,284		56,238		60,472
Total assets		40,320			63,540			163,789		196,097		264,405
Long-term obligations, less current portion		6,276			2,804			261		15,474		63,826
Redeemable preferred stock		36,297			67,794			—		—		—
Non-redeemable preferred stock		3,325			5,209			—		—		—
Total stockholders’ (deficit) equity		(40,006	)		(55,431	)		112,102		99,850		73,597

(1) Working capital (deficit) consists of total currents assets, including cash and equivalents, less current liabilities.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with the consolidated financial statements and related notes and the discussions under “Application of Critical Accounting Policies,” which describes key estimates and assumptions we make in the preparation of its financial statements, Item 1A “Risk Factors”, which describes key risks associated with our operations and industry, as well as our other filings with the Securities and Exchange Commission

Overview

We are a leading online seller of wireless services and devices based on the number of activations of wireless services sold online in the U.S. Through our wireless activation and services (“WAS”) business unit, we sell service plans, devices and accessories, including satellite television services through our own branded websites; including Wirefly.com and VMCsatellite.com. We offer marketers the ability to sell wireless voice and data services and devices, under mobile virtual network enabler (“MVNE”) agreements. This service utilizes the same e-commerce platform, operational infrastructure and marketing relationships that we use in our operations. We provide customers the ability to organize personal communications by providing real-time wireless access to e-mail, voicemail, faxes, contacts, scheduling, calendar and conference calling functionality through a website or telephone.

We measure our performance based on our financial results and various non-financial measures. Key financial factors that we focus on in evaluating our performance include revenue growth within a period, contribution margin (defined as revenue less cost of revenue and sales and marketing expenses), and operating income (defined as contribution margin less other operating expenses including general and administrative and depreciation and amortization expenses). Our financial results can, and do, vary significantly from quarter-to-quarter as a result of a number of factors which include economic conditions specific to online commerce and wireless communications industries, the timing of introduction of popular devices by mobile phone manufacturers, our ability to attract visitors to our websites, changes in wireless carrier commission and bonus structures, the timing of recognition of bonuses paid to us by wireless carriers and our competitors’ pricing and marketing strategies.

Key non-financial measures of our success are customer feedback and customer satisfaction ratings compiled by third parties. We believe that maintaining high overall customer satisfaction is critical to our ongoing efforts to promote the use of the private-labeled websites that we create and manage for our marketers, as well as our own branded websites, and to improve our operating results. We actively solicit customer feedback on our website functionality as well as the entire purchase experience. To maintain a high level of performance by our customer service representatives, we also undertake an ongoing customer feedback process. If we are unable to meet customer expectations with respect to price or do not successfully expand our product lines or otherwise fail to maintain high overall customer satisfaction, our business and results of operations would be harmed.

Our revenue includes commissions, bonuses and other payments we receive from wireless carriers, including a satellite television provider, in connection with the activation of customers on their networks, as well as payments from customers for wireless services and devices. Our revenue continues to increase as a result of internal growth and acquisitions. As further described below, total revenue and net loss from continuing operations for the year ended December 31, 2006 were $369.6 million and $63.5 million, respectively, compared to total revenue and net loss from continuing operations of $320.5 million and $37.8 million, respectively, for the year ended December 31, 2005. Revenue from our top three wireless carriers represented 68% and 67% of our total consolidated revenue for the year ended December 31, 2006 and 2005, respectively.

In 2007, we expect the commissions we earn from four of the five largest wireless carriers will include an increasing amount of residual-based compensation. In exchange for a recurring monthly residual commission,

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these carriers will pay a lower up-front commission. Depending on the carrier, the monthly residual commission will be based on a percentage of the monthly recurring charges for authorized rate plans, authorized features and additional local airtime charges the carrier bills to the customer or a flat fixed fee per subscriber. Under these arrangements, we receive a monthly residual payment for as long as the activated subscriber remains a customer of that carrier under the original services contract, or a specified period of time, depending on the carrier. Accordingly, we expect that the amount of activations revenue recognized when a subscriber activates service will decrease, but expect that the decrease will be partially offset by the recurring monthly residual commission. In addition, based on a residual commission structure, the amount of total revenue we recognize on a subscriber activation over the life of the residual relationship may exceed the amount of revenue that would otherwise have been realized based on the full up-front commission.

In addition, future revenue and cash collections may be impacted by our ability to successfully resolve differences with wireless carriers between our sales information and subscriber activation data and similar information maintained in the respective carriers’ systems which they use to determine our commission and other amounts due us. Although in most instances our records match, differences do exist which may create delays in our collections of such differences. Although we believe we have adequate reserves in place for such differences and potential collection shortfalls based on our collection experience, as our business volume increases and commission and feature plans become more numerous or complex with each carrier, our automated systems may not be updated as quickly as required or our workforce trained as promptly as needed to investigate such differences. In the event that we are slow to research such amounts, our cash collections may be affected. In the last half of 2006, we experienced an increase in such matters requiring specific attention and increasing reserves of accounts receivable which caused our net loss to increase.

A major determinant of our revenue is the extent and success of our marketing efforts and expenditures. Our marketing efforts are conducted mainly through Internet search engines which display links to our websites based on search results and through third-party, incentive-based online marketing initiatives, including the use of websites that we create and manage under our marketers’ brands. We also use online advertising, search engines and third-party marketing partners based on orders and activations including Google, Yahoo, MSN and AOL. We incurred total advertising and other marketing costs of approximately $104.8 million and $80.3 million in 2006 and 2005, respectively. Online marketing initiatives are an important aspect of our business strategy because the underlying promotions attract consumers to our websites or our partners’ websites.

The nature of our sales promotions and extent of our marketing initiatives also have a correlation to the quality of customer we attract or activation we place with the carrier. For instance, subsidizing the equipment sale that may lead to higher deactivation experience than activations we provision through our own websites or more traditional marketing partners.

Since we began operations in 1999, we have incurred significant losses and had negative cash flow from operations. As of December 31, 2006, we had an accumulated deficit of $228.4 million and a total stockholders’ equity of $73.6 million. In order to achieve profitability in the future, we are depending upon our ability to continue to increase our revenue at levels that exceed the costs of that revenue plus operating expenses. There can be no assurances that we will operate profitably in the future.

In 2005, we acquired certain assets and assumed certain liabilities of A1 Wireless USA, Inc. (“A1 Wireless”); VMC Satellite, Inc. (“VMC”); and FONcentral.com, Inc. (“FC”). We accounted for these transactions using the purchase method of accounting in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 141, Business Combinations. Accordingly our results of operations include the operating results of A1 Wireless effective January 1, 2005, VMC as of April 26, 2005 and FC as of May 26, 2005, their respective acquisition dates.

In 2005, we also sold the assets of our MVNO operations, which are reflected as discontinued operations in the accompanying financial statements. As a result of this sale, we operate primarily in one segment and we no

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longer believe that segment information in accordance with SFAS No. 131, Disclosures About Segments of an Enterprise and Related Information, is applicable as our WAS business unit represented approximately 96% and 99% of our total revenue and cost of revenue for 2005. Our management’s discussion and analysis of results of operations will continue to provide a comparison of our revenue and cost of revenue of our wireless activation and services and other components of revenue and cost of revenue to the extent MVNE and data services fluctuations appear significant in explaining and describing such results of operations.

In 2006, we grew our wireless activations business, expanded our services and broadened our customer base primarily through internal growth. Five key goals for us in 2007 include (i) increased efforts to improve collections with the wireless carriers to generate cash; (ii) reduce operating and employee expense as well as capitalized expenditures in the near-term to improve cash flow; (iii) to continue to improve the customer experience platform that we utilize for order processing, customer service and rebate handling to refine existing automation and increase efficiency and effectiveness of our back-office systems, internal workforce and outsourced call center; (iv) to further balance spending on marketing initiatives with customer activation and revenue generation characteristics; and (v) to utilize our existing customer database, website traffic and online marketing capabilities to sell new products and services. We expect to continue our growth in 2007 through internal means. In addition, we may continue to be opportunistic in our acquisition of strategic assets as we seek to build our business. In evaluating potential acquisitions, we assess our expectations regarding the impact of a transaction on our cash flows, revenue and net income, among other factors. We cannot assure you that any acquisitions that we may complete in the future will have a positive impact on our revenue, net cash provided by operating activities, the valuation of our common stock or our efforts to attain and maintain profitability.

Restatement

As described in our Quarterly Reports on Forms 10-Q/A for the first, second and third quarters of 2006 and in this Annual Report on Form 10-K, we restated our financial statements for each of the quarters ended March 31, June 30, and September 30, 2006. The financial statements for the year ended December 31, 2006 included in this Form 10-K reflect the adjustments associated with this restatement. (See Note 13 to the Consolidated Financial Statements.)

Comparison of the Results of Operations for the years ended December 31, 2006 and 2005

	Year Ended December 31,								Change Between 2005 and 2006
	2005				2006
(amounts in thousands)	Amount		% of Revenue		Amount		% of Revenue		Amount			%
Revenue:
Activation and services	$	233,730	73	%	$	298,090	81	%	$	64,360		28	%
Equipment		86,809	27	%		71,484	19	%		(15,325	)	-18	%
Total revenue	$	320,539	100	%	$	369,574	100	%	$	49,035		15	%
Cost of revenue:
Activation and services	$	1,221	1	%	$	2,653	1	%	$	1,432		117	%
Equipment		190,509	59	%		215,201	57	%		24,692		13	%
Total cost of revenue	$	191,730	60	%	$	217,854	58	%	$	26,124		14	%
Selected operating expenses:
Sales and marketing	$	93,726	29	%	$	118,756	32	%	$	25,030		27	%
General and administrative		63,131	20	%		76,571	21	%		13,440		21	%
Depreciation and amortization		9,840	3	%		17,067	5	%		7,227		73	%
Restructuring		847	0	%		2,551	1	%		1,704		201	%

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REVENUE

Revenue

Revenue consists of activations and services revenue, and equipment revenue. Activations and services revenue consists of (i) revenue from commissions, bonuses and other payments for the activation of services of wireless carriers and a satellite television carrier through private-labeled websites that we create and manage for marketers as well as through our own branded websites; (ii) revenue from the provisioning of MVNE services which provide marketers the ability to sell MVNO services to their customers under their own brands using our e-commerce platform and operational infrastructure; and, (iii) revenue from data services under which we provide subscribers with real-time wireless access to work and personal information, including email, calendar, corporate directories, personal contacts and documents in addition to wireless entertainment and content. Equipment revenue consists mainly of revenue from the sale of wireless devices to our customers that subscribe to wireless services through our private-labeled websites or those websites that we manage for other marketers. The following further details the components of our revenue and a comparative discussion of performance:

	Year Ended December 31,								Change Between 2005 and 2006
	2005				2006
(amounts in thousands)	Amount		% of Revenue		Amount		% of Revenue		Amount			%
Activations and services:
Wireless activation	$	222,047	69	%	$	284,208	77	%	$	62,161		28	%
MVNE and data services		11,683	4	%		13,882	4	%		2,199		19	%
		233,730	73	%		298,090	81	%		64,360		28	%
Equipment:
Wireless activation	$	86,809	27	%	$	71,484	19	%	$	(15,325	)	-18	%
Total Revenue:
Wireless activation	$	308,856	96	%	$	355,692	96	%	$	46,836		15	%
MVNE and data services		11,683	4	%		13,882	4	%		2,199		19	%
	$	320,539	100	%	$	369,574	100	%	$	49,035		15	%

Activations and Services

Activations and services revenue increased 28% to $298.1 million for the year ended December 31, 2006 from $233.7 million for the year ended December 31, 2005. The increase in activations and services revenue of $64.4 million was attributable to an increase in the number of wireless activations that we generated through marketing partners and increased advertising efforts compared to the prior period. Gross carrier commissions for activations subject to chargeback increased 22% to $331.0 million for the year ended December 31, 2006 from $270.6 million for the year ended December 31, 2005. Activations and services revenue of MVNE and data services increased $2.2 million to $13.9 million for the year ended December 31, 2006, primarily as a result of increased MVNE revenue resulting from additional recurring revenue transactions for back-office support and the completion of certain development work in 2006. Recurring revenue transactions increased due to increased subscribers and a strategic business partnership beginning in April 2006.

Equipment

Revenue from sales of equipment for the year ended December 31, 2006 decreased 18% to $71.5 million from $86.8 million for the year ended December 31, 2005. The decrease in equipment revenue of $15.3 million was attributable to lower average sales prices due to an increase in point-of-sale discounts and other incentives provided to customers as compared to the year ended December 31, 2005.

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Total revenue

Total revenue increased 15% to $369.6 million for the year ended December 31, 2006 from $320.5 million for the year ended December 31, 2005. Revenue generated from the sale and activation of wireless devices and services accounted for approximately 96% of consolidated revenue for the years ended December 31, 2006 and 2005. Revenue from our top three wireless carriers represented 68% of consolidated revenue for the year ended December 31, 2006 compared to 67% for the comparable period of 2005. Wireless activations and services revenue and equipment sales revenue may vary from period to period based on our promotional efforts, which include subsidizing the costs of devices purchased by our customers. In 2006, total revenue was impacted by dollar increases in deactivation experience and carrier disputed amounts. We expect that such reserves will be significant in the future as our business grows. We expect that revenue from the sale and activation of wireless devices and services will continue to increase during 2007 compared to 2006 performance.

COST OF REVENUE

Cost of revenue consists mainly of the cost of wireless devices (equipment) sold to our wireless activations and services customers. Our cost of revenue related to wireless equipment sales increased to $215.2 million for the year ended December 31, 2006 as a result of a higher volume of devices sold during the period at a lower average cost compared to sales of such devices in the year ended December 31, 2005. Total cost of revenue increased 14% to $217.9 million for the year ended December 31, 2006 compared to $191.7 million for the year ended December 31, 2005. Cost of revenue from the sale of wireless devices accounted for approximately 99% of consolidated cost of revenue for the years ended December 31, 2006 and 2005. As a percentage of total revenue, cost of equipment revenue decreased to 57% of total revenue for the year ended December 31, 2006 compared to 59% for the year ended December 31, 2005.

OPERATING EXPENSES

Sales and Marketing

Sales and marketing expenses increased 27% to $118.8 million for the year ended December 31, 2006 from $93.7 million for the corresponding period of 2005. The increase of $25.0 million included a $25.3 million increase from the growth of existing marketing relationships and the addition of new marketing partner relationships since December 31, 2005. Our marketing expenses largely comprise payments to on-line advertisers, search engines and third-party marketing partners based on orders or activations. We incurred approximately $104.8 million of third-party marketing expenses in the year ended December 31, 2006. Such expenses were higher in the year ended December 31, 2006 than corresponding periods of 2005 due to increased wireless activation competition, and increased rates and volume of advertising, which caused our customer acquisition costs to increase. In addition, advertising placement and search costs also increased. We expect that marketing expenses will continue to represent a significant percentage of our revenue in future periods.

General and Administrative

General and administrative expenses increased 21% to $76.6 million for the year ended December 31, 2006 from $63.1 million for the corresponding period of 2005. General and administrative expenses increased $13.4 million for year ended December 31, 2006 mainly as a result of $11.2 million of costs incurred to evaluate, research and settle rebate matters associated with the District of Columbia attorney general’s action including $8.0 million paid to certain customers without regard to their eligibility to receive a rebate; a $4.3 million increase in employee related costs due to a larger workforce; a $3.7 million increase in costs incurred for other professional services; $1.7 million increase in stock-based compensation; and a $0.7 million increase for earn-out and settlement costs related to the A1 Wireless acquisition. These increases were partially offset by an $8.2 million decrease in severance costs.

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Depreciation and Amortization

Depreciation and amortization expenses, which are amortized over periods ranging from 18 months to 7 years, increased 73% to $17.1 million for the year ended December 31, 2006 from $9.8 million for the year ended December 31, 2005. The increase was primarily due to the costs associated with developing new functionality related to our websites, product offerings, and normal fixed asset depreciation on an increased amount of capital expenditures as compared to the corresponding period of 2005. In addition, 2005 expenses were reduced by a $0.9 million adjustment to correct a computational error in the fixed asset system that caused depreciation expense to be overstated.

Restructuring

In 2005, we implemented a restructuring plan following the acquisition of A1 Wireless, to take advantage of synergies gained through the acquisition and to restructure our operations for efficiency purposes. For the year ended December 31, 2005, we recognized $0.8 million in restructuring costs which related to workforce reduction and excess facilities. All costs related to this plan were paid out in 2005. For the year ended December 31, 2006, we incurred $2.6 million of restructuring costs primarily due to severance costs and stock-based compensation for certain employees related to a plan completed in 2006.

Loss from Continuing Operations

Loss from continuing operations increased to $63.5 million for the year ended December 31, 2006 from $37.8 million for the year ended December 31, 2005 as a result of increasing revenue and decreasing cost of revenue and general operating expenses as a percentage of revenue.

Net Loss

Net loss increased to $63.7 million for the year ended December 31, 2006 from $38.2 million for the year ended December 31, 2005.

Comparison of the Results of Operations for the years ended December 31, 2005 and 2004

	Year Ended December 31,								Change Between 2004 and 2005
	2004				2005
(amounts in thousands)	Amount		% of Revenue		Amount		% of Revenue		Amount			%
Revenue:
Activation and services	$	123,265	80	%	$	233,730	73	%	$	110,465		90	%
Equipment		31,603	20	%		86,809	27	%		55,206		175	%
Total revenue	$	154,868	100	%	$	320,539	100	%	$	165,671		107	%
Cost of revenue:
Activation and services	$	1,752	1	%	$	1,221	0	%	$	(531	)	-30	%
Equipment		83,075	54	%		190,509	59	%		107,434		129	%
Total cost of revenue	$	84,827	55	%	$	191,730	59	%	$	106,903		126	%
Selected operating expenses:
Sales and marketing	$	42,867	28	%	$	93,726	29	%	$	50,859		119	%
General and administrative		34,942	23	%		63,131	20	%		28,189		81	%
Depreciation and amortization		6,444	4	%		9,840	3	%		3,396		53	%
Restructuring		—	0	%		847	0	%		847		100	%

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REVENUE

	Year Ended December 31,								Change Between 2004 and 2005
	2004				2005
(amounts in thousands)	Amount		% of Revenue		Amount		% of Revenue		Amount		%
Activations and services:
Wireless activation	$	115,924	75	%	$	222,047	69	%	$	106,123	92	%
MVNE and data services		7,341	5	%		11,683	4	%		4,342	59	%
		123,265	80	%		233,730	73	%		110,465	90	%
Equipment:
Wireless activation	$	31,603	20	%	$	86,809	27	%	$	55,206	175	%
Total Revenue:
Wireless activation	$	147,527	95	%	$	308,856	96	%	$	161,329	109	%
MVNE and data services		7,341	5	%		11,683	4	%		4,342	59	%
	$	154,868	100	%	$	320,539	100	%	$	165,671	107	%

Activations and Services

Our activations and services revenue increased 90% to $233.7 million for 2005 from $123.3 million for 2004. The increase in activations and services revenue of $110.5 million was attributable to a $109.7 million increase in revenue from our WAS business unit, which was primarily grown through existing marketing partners and increased advertising efforts; $3.4 million of revenue from the provisioning of MVNE Services offset by a $2.7 million decrease in revenue from our Data Services business unit.

Equipment

Our revenue from sales of equipment increased 175% to $86.8 million for 2005 from $31.6 million for 2004. The increase in equipment revenue of $55.2 million was primarily attributable to an increase in revenue from equipment sales in connection with our WAS business unit due to an increase in the volume of activations.

Revenue

Total revenue increased 107% to $320.5 million for 2005 from $154.9 million for 2004. Approximately $165.0 million of the increase was attributable to increases in business volume, as a result of increased activations in our WAS segment which was primarily grown through existing marketing partners and increased advertising efforts. The remaining net increase was the result of revenue reductions from our Data Services business unit of $2.7 million offset by revenue generated from our MVNE Services business unit of $3.4 million.

COST OF REVENUE

Total cost of revenue increased 126% to $191.7 million for 2005 from $84.8 million for 2004. The increase in cost of revenue was attributable to a $107.4 million increase in cost of revenue in our WAS business unit due to increase in the number of devices sold and the average device cost, partially offset by a $0.5 million decrease in cost of activations and services revenue.

OPERATING EXPENSES

Sales and Marketing

Our sales and marketing expenses increased 119% to $93.7 million for 2005 from $42.9 million for 2004. This increase was comprised mainly of the following: $42.6 million from growth of existing marketing

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relationships and adding new marketing partner relationships during 2005; $4.6 million from increased payroll related costs and benefits associated with a greater number of sales related positions in 2005 to support the WAS and MVNE Services business units. Sales and marketing expenses also included stock-based compensation expense of $2.2 million for 2005.

Our marketing expenses largely comprise payments to on-line advertisers, search engines and third-party marketing partners based on orders or activations. We incurred approximately $16.7 million of the increase in these third-party marketing expenses in the fourth quarter of 2005. Such expenses were higher in our fourth quarter as wireless activation competition with the wireless carriers, retail outlets and other e-commerce providers intensified, which caused our subscriber acquisition costs to increase from prior quarters in 2005. In addition, advertising placement and search costs also increased from comparable prior periods during the fourth quarter.

General and Administrative

Our general and administrative expenses increased 81% to $63.1 million for 2005 from $34.9 million for 2004. The expense increase of $28.2 million mainly comprised of the following: $10.5 million related to stock-based compensation expense primarily related to the modification of stock-based awards to certain employees; $4.2 million was the result of professional fees incurred related to our initial compliance efforts with Section 404 of the Sarbanes-Oxley Act of 2002; $3.9 million related to increased payroll related expenses from a larger workforce; $3.3 million from increased credit card processing fees and other costs associated with a higher volume of shipments and orders in 2005; $1.8 million related to increased facilities costs and telecommunication related expenses and $4.5 million related to other expenses. Stock-based compensation expense included in general and administrative expenses for 2005 was $15.6 million. Of the expense approximately $7.8 million related to stock-based compensation expense associated with the accelerated vesting of options and stock awards for certain employees that were terminated during 2005.

Depreciation and Amortization

Our depreciation and amortization expenses increased 53% to $9.8 million for 2005 from $6.4 million for 2004, which are amortized over a period ranging from 18 months to 7 years. The increase was due to the costs associated with developing new functionality related to our websites and product offerings, increased amortization related to intangible assets acquired during 2005 and partially offset by a $0.9 million adjustment to revise cumulative depreciation on various assets acquired over the past three years.

Restructuring Costs

In 2005, and subsequent to the acquisition of A1 Wireless, we entered into a restructuring plan to take advantage of synergies gained through the acquisition of A1 Wireless and to restructure other operating segments for efficiency purposes. We recognized $0.8 million in restructuring costs for 2005, which primarily related to workforce reduction. All such costs were incurred in 2005.

Loss from Continuing Operations

Loss from continuing operations increased to $37.8 million for 2005 from $14.6 million for 2004. The increase in the loss was the result of increases in our cost of revenue and operating expenses as a percentage of revenue. Although we experienced a significant growth in revenue for 2005, cost of revenue and operating expenses both increased as described above in order to support the revenue growth we experienced.

Net Loss

Net loss increased to $38.2 million for 2005 from $10.2 million for 2004.

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Liquidity and Capital Resources

Overview

Since inception, we have funded our operations principally through the sale of equity securities and to a lesser extent, subordinated debt, credit facilities, capital leases and term loans. The significant components of our working capital are inventory and liquid assets such as cash and trade accounts receivable, reduced by accounts payable, accrued expenses and deferred revenue.

Our future capital and operating requirements will depend on many factors, including the level of our revenue, the expansion of our sales and marketing activities, the cost of our fulfillment operations, potential investments in businesses or technologies and continued market acceptance of our products. Additionally, poor financial results, unanticipated expenses, acquisitions of technologies or businesses or strategic investments could give rise to additional financing requirements sooner than we expect. In the event that cash on hand and borrowings on our term loan are not sufficient to fund working capital requirements that are not satisfied through net cash provided by operating activities or future cash requirements, we could be required, or could elect, to seek additional funding through a public or private equity or debt financing in the future. There can be no assurance that we would be able to secure additional funding in the future.

We analyze our working capital requirements very closely as nearly $43.8 million or 69% of our December 31, 2006 accounts receivable was generated from revenue earned from three wireless carriers. Generally, we collect our monthly commissionable and residual revenue from these carriers within 30 to 60 days of the month-end following a subscriber’s activation net of commission chargebacks that occurred during the period. The timing of our collections from the wireless carriers is also influenced by our ability to reconcile our billing records with that of the respective carrier. Our matching and resolution process is an iterative process and although the substantial majority of our sales information readily matches, some records may require additional research which may delay collection beyond a 30-60 day period of time. The timing of collection of our accounts receivable influences the timing of payment to our vendors.

Our major uses of cash consist of payments made for inventory, marketing and payroll expenses and capital expenditures. Costs incurred for marketing and advertising is generally paid on the date the advertising occurs or shortly thereafter. We have payment terms with most other vendors we deal with that generally extend up to 45-60-days from service provisioning. Payroll expenses are generally funded semi-monthly. As of December 31, 2006, we owed the three wireless carriers referred to above approximately $39.2 million for wireless devices and accessories we procured from them or their affiliates in the fourth quarter.

Given the timing and significance of payments for advertising costs incurred in promoting our websites compared to the timing of collection of our accounts receivable, we monitor cash balances very closely and may slow payment to certain vendors while awaiting collection of accounts receivable from carrier customers. In addition, to the extent we have difficulties collecting accounts receivable, we may have to defer advertising promotions, inventory purchases or other costs which could impact our ability to generate revenue.

Cash balances at December 31, 2006 were $90.0 million an increase of $19.2 million from December 31, 2005. Cash balances at March 31, 2007 were approximately $53.4 million. We have an additional $25 million of liquidity remaining to be borrowed under our term loan. The funds may be drawn prior to July 31, 2007.

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Consolidated Cash Flows

	Year Ended December 31,
	2004			2005			2006
	(amounts in thousands)
Net cash used in operating activities	$	(6,590	)	$	(20,077	)	$	(15,008	)
Net cash used in investing activities		(15,466	)		(23,141	)		(25,554	)
Net cash provided by financing activities		93,994			13,015			59,751
Change in cash and cash equivalents	$	71,938		$	(30,203	)	$	19,189

Net cash used in operating activities was $15.0 million, $20.1 million and $6.6 million in 2006, 2005 and 2004, respectively. For the year ended December 31, 2006, net loss after adjustments for items to reconcile net loss to net cash provided by operating activities was $23.7 million. Such items include depreciation and amortization, increase in our allowance for doubtful accounts, non-cash interest expense and other expenses and stock-based compensation.

Changes in operating assets and liabilities from December 31, 2005 decreased net cash used in operating activities by approximately $8.7 million. Changes in working capital balances included an increase of current assets of approximately $39.0 million, excluding cash and cash equivalents, short-term investments and cash collected from notes receivable related to discontinued operations. The increase in these current assets was primarily the result of increased accounts receivable balances from December 31, 2005. The accounts receivable increase at December 31, 2006 was primarily the result of higher commission balances owed to us by the carriers as a result of increased revenue and the timing of collections at the end of the month of December.

Current liabilities, excluding debt and capital lease balances and acquisition earn-out obligations accrued during the period increased $48.9 million from December 31,2005. The increase was mainly the result of an increase in accounts payable offset by decreases in accrued liabilities and deferred revenue. A significant portion of the company’s accounts payable represent payables for inventory with the wireless carriers, original equipment manufacturers and third party distributors. The increase in accounts payable reflects the growth in business expenses and increased inventory balances on hand at December 31, 2006 as a result of higher year-end accounts receivable balances and the timing of payments made on accounts payable.

Net cash used in investing activities was $25.6 million, $23.1 million and $15.5 million in 2006, 2005 and 2004, respectively. Net cash used in investing activities in 2006 consisted mainly of $22.2 million of capital expenditures and $4.7 million paid for contingent consideration as a result of minimum EBITDA benchmarks for prior year acquisitions. Capital expenditures for 2006 consisted of $16.4 million of capitalized software labor and web development costs incurred primarily associated with enhancing our e-commerce infrastructure; $4.9 million of computer and other equipment and software, and $0.9 million of other furniture, equipment and leasehold improvements. Cash paid in 2006 for asset acquisitions included $4.0 million and $0.7 million related to the purchases of VMC and A1 Wireless, respectively. In 2007, planned capital expenditures are expected to approximate 2006 levels.

Net cash provided by financing activities was $59.8 million, $13.0 million and $94.0 million in 2006, 2005 and 2004, respectively. Cash provided by financing activities in 2006 consisted mainly of borrowings under our term loan of $73.6 million net of fees paid and less a $19.9 million re-payment of our credit facilities; proceeds from the exercise of warrants and options of $5.3 million partially offset by cash payments used to repurchase shares of our common stock for $3.7 million.

Borrowings Under our Term Loan. As of December 31, 2006, we maintained a term loan with Goldman Sachs Credit Partners L.P., Citicorp North America, Inc. and AP InPhonic Holdings, LLC which allowed for aggregate borrowing of up to $100.0 million. During 2006, we borrowed an aggregate principal amount of $75.0 million under the agreement. As of December 31, 2006, we have the ability to borrow an additional $25.0 million. This facility is secured by a first priority lien on substantially all of our assets. Interest on borrowings

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under the term loan is payable quarterly at a fixed rate of 9.0%. Interest expense during 2006 also included $0.5 million of amortization of the discount on the term loan resulting from the allocation of a portion of the $75.0 million proceeds to detachable warrants.

Under the provisions of the term loan and the executed amendments, we are required to maintain certain minimum levels of EBITDA on a quarterly basis beginning December 31, 2006, and maintain a minimum cash balance by July 31, 2007, of $25.0 million at an institution designated by the lenders. The Company may draw the remaining $25.0 million of funds under the credit agreement before July 31, 2007. We also received an extension of the financial statement delivery requirements for the full year 2006 audited financials and associated compliance certificates to May 31, 2007, and the first quarter 2007 financials to June 15, 2007.

Common Stock Repurchase Program. From time to time during 2006, we repurchased 350,261 shares of our common stock for approximately $3.7 million under two separate share repurchase programs authorized by our Board of Directors. As of December 31, 2006, we were authorized by the Board of Directors to repurchase up to an additional $26.8 million of our common stock through November 3, 2007. From January 1 through May 29, 2007, we repurchased an additional 1,021,074 shares for approximately $10.7 million. There can be no assurance that we will repurchase up to the full amount that we have been authorized by our Board of Directors over this time period.

In February 2007, outstanding warrants of 627,390 were exercised resulting in the issuance of 150,735 shares of our common stock.

Contractual Obligations

The following table summarizes our contractual obligations, including interest on operating leases, and the expected effect on liquidity and cash flows as of December 31, 2006.

	Total		Less than 1 year		1 -3 years		4 - 5 years		Over 5 years
			(amounts in thousands)
Term loan including fixed interest costs (a)	$	95,512	$	7,856	$	87,656	$	—	$	—
Capital leases		574		301		248		25		—
Operating leases		4,079		1,806		2,273		—		—
Obligation to purchase certain advertising (b)		4,531		4,531		—		—		—
Obligations under VMC APA (c)		1,300		1,300		—		—		—
	$	105,996	$	15,794	$	90,177	$	25	$	—

(a) Under the term loan agreement, we may repay or the lender may require the repayment of the debt on the third anniversary of the agreement. For the purpose of this presentation, we have included the contractual obligation due on the third anniversary. If not prepaid, the debt matures in November 2011. The term loan incurs interest at 9.00% per annum.

(b) We have a commitment to purchase a minimum level of advertising and media services from a vendor by March 31, 2007. Such commitment period may be extended at the option of the vendor.

(c) Under the VMC Asset Purchase Agreement, as amended, we have agreed to pay shareholders of VMC an additional $1.3 million in cash to settle any remaining contingent consideration. Of the $1.3 million, $0.2 million represents legal fees incurred during the settlement.

Inflation

We do not believe that inflation has materially affected our operations.

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Recent Accounting Pronouncements

In June, 2006, the FASB issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109 (“FIN 48”). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with SFAS No. 109, Accounting for Income Taxes. FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. FIN 48 will apply to fiscal years beginning after December 15, 2006, with earlier adoption permitted. We will adopt FIN 48 effective January 1, 2007. As prescribed in the interpretation, the cumulative effect of applying the provisions of FIN No. 48 should be reflected as an adjustment to the opening balance of Stockholders’ Equity. We do not believe the adoption of this pronouncement will have any material effects on our consolidated financial position, results of operations, or cash flows from operations.

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (“SFAS No. 157”). SFAS 157 defines fair value, establishes a framework for measuring fair value under generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS 157 emphasizes that fair value is a market-based measurement, not an entity-specific measurement, and states that a fair value measurement should be determined based on the assumptions that market participants would use in pricing the asset or liability. SFAS 157 will become effective for our fiscal year beginning January 1, 2008. We do not believe the adoption of this pronouncement will have any material effects on our consolidated financial position, results of operations, or cash flows.

In February 2007, the Financial Accounting Standards Board issued SFAS 159, The Fair Value Option for Financial Assets and Financial Liabilities—including an amendment of FASB Statement No. 115( “SFAS No. 159”), which allows measurement at fair value of eligible financial assets and liabilities that are not otherwise measured at fair value. If the fair value option for an eligible item is elected, unrealized gains and losses for that item will be reported in current earnings at each subsequent reporting date. SFAS 159 also establishes presentation and disclosure requirements designed to draw comparison between the different measurement attributes the company elects for similar types of assets and liabilities. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. Early adoption is permitted. We do not believe the adoption of this pronouncement will have any material effects on our consolidated financial position, results of operations, or cash flows.

In June 2006, the FASB ratified the EITF Issue No. 06-3, How Taxes Collected from Customers and Remitted to Governmental Authorities Should Be Presented in the Income Statement” (“EITF 06-3”). EITF No. 06-3 requires an entity to disclose transactional tax amounts assessed by government authorities that are considered significant. EITF No. 06-3 is effective for interim and annual reporting periods beginning after December 15, 2006. We have determined that the adoption of this pronouncement will have no material impact to our consolidated financial position, results of operations, or cash flows.

Application of Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the U.S. The preparation of these statements requires us to make estimates and judgments that affect the reported amount of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making the judgments about our revenues, cost of revenues and the carrying values of assets and liabilities that are not readily apparent from other sources. Because this can vary in each situation, actual results may differ from the estimates under different assumptions and conditions. The following is a summary of these critical estimates.

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Revenue Recognition

Activation and Services—We generate revenue primarily from wireless carriers, as well as a satellite television carrier, who pay commissions and volume and performance-based bonuses, for activating wireless services and features on their networks. We recognize commissions from wireless carriers upon shipment of activated devices to the customer. In addition to activation commissions, under certain conditions, certain carriers pay us a monthly residual fee for as long as a customer we activate for the carrier continues to be its subscriber, or for a fixed period of time depending on the carrier. Revenue from satellite television customers includes commissions earned at the time of the satellite service activation, net of an estimate for deactivations, as we are acting as an agent in the transaction.

Our revenue is reduced for estimated deactivations of the wireless services by customers prior to the expiration of a time period that ranges 90 to 180 days from the date of activation, depending on the wireless carrier. We estimate deactivations based on historical experience, which we have developed based on our experience with carriers, customer behavior and sources of customers, among other factors, allowing us to accrue estimates with what we believe is a high degree of certainty. Our estimated deactivation rates for the year ended December 31, 2006 and 2005 were 23.5% and 22.2% of gross carrier commission revenue for the respective periods. Any increase or decrease in the deactivation amount will cause a corresponding dollar-for-dollar increase or decrease in revenue. As an example, the impact of a 1% change in the deactivation rate applied to the year ended December 31, 2006 would have an increase or decrease in revenue and the corresponding reserve of $3.3 million. Any decrease in revenue resulting from an increase in deactivations would also be offset, in part, by returns of wireless devices. Our reserve for deactivations is reflected as a component of deferred revenue on our balance sheet. If we determine that we cannot accurately predict future deactivation experience, we may be required to defer 100% of our carrier commission revenue until the expiration of the appropriate chargeback period. New channels for which we have insufficient historical data to adequately estimate deactivation experience will be deferred through the expiration period for a period of 24 months, until such time that we can accurately estimate the deactivation experience for the new channel.

In addition to receiving commissions for each wireless subscriber activated, we earn performance bonuses from the wireless carriers based on negotiated performance targets. The most significant bonuses we earn are the quarterly volume bonus, which we collect from our wireless carriers on a monthly basis, based on current month activations. We record these bonuses as deferred revenue at the time of billing until we achieve the quarterly targets. We earn other quarterly bonuses from certain carriers for maintaining low customer churn and signing up wireless customers for certain additional monthly “features” such as data service or text messaging. Wireless carriers also periodically offer bonuses for achieving monthly volume and other performance targets and also formerly provided some bonus compensation under annual volume based plans. We recognize these monthly bonuses as earned in accordance with the provisions of SAB No. 104, Revenue Recognition in Financial Statements (“SAB No. 104”). Revenue is recognized only when all of the following criteria are met: (1) persuasive evidence of an arrangement exists, (2) delivery has occurred or services have been rendered; (3) the seller’s price to the buyer is fixed or determinable, and (4) collectibility is reasonably assured. Amounts collected in cash prior to meeting the above criteria are recorded as deferred revenue. Through 2005, commission revenue earned from the activation of carrier features had been deferred until the contractual chargeback period had lapsed and we did not have adequate historical collection data to reasonably estimate an allowance for uncollectible amounts. Beginning in 2006, we began to estimate commission revenue earned from feature activations based on historical experience which we have developed based on our experience with carriers and customer behavior over a period of time in excess of 24 months. As of December 31, 2005, $1.4 million of feature activations revenue was deferred, which would have been accrued for less an estimated reserve for deactivations, in the event that we had the appropriate experience with carriers and customer behavior at December 31, 2005. As of December 31, 2006, our estimated reserve for deactivations of feature activations was $0.6 million.

In the ordinary course of recording and collecting commissions from our wireless carrier partners, we engage in an active matching and reconciling process (the “matching process”) between source information for

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customer wireless carrier activations generated and maintained in our back-office sales information systems and each carrier’s billing system. Although the substantial majority of our sales information matches to that of the carriers, matching differences do arise. Examples of such differences include (i) instances in which an activation per our records does not correlate to a commission fee payment schedule submitted by the carrier; (ii) commission fee payment collected from the carrier that is different than the expected payment per our sales records; and (iii) a deactivation identified on a carrier statement that does not match the carrier’s original commission fee payment for such activation.

Data files supported by our billing records related to differences are submitted monthly to each carrier for resolution. Resolution of these differences is usually an iterative process and it can take up to 12 months or longer for final resolution of any difference. Information is exchanged between us and the carrier throughout this process. We recognize revenue based on the underlying data maintained in our back-office sales information systems unless the carrier provides us details that supersede our information. Given the nature of these differences and based on our experience in resolving such items with the carriers, we are also able to determine an appropriate reserve against revenue to reflect the likely success or failure of resolving these differences. In certain instances when a wireless carrier denies a claim we may file in resolving differences of this nature, we will write-off the related accounts receivable while pursuing further collection efforts and will record into income at a future date if collected. To the extent that we collect commission or other fee payments in excess of what we have recorded, we will record revenue in the period of receipt net of estimated chargeback requirements.

Equipment revenue—Revenue from the sale of wireless devices and accessories in a multiple-element arrangement with services is recognized at the time of sale in accordance with EITF No. 00-21, Revenue Arrangements with Multiple Deliverables, when fair value of the services element exists. Customers have the right to return devices within a specific period of time or usage, whichever occurs first. We provide an allowance for estimated returns of devices based on historical experience. Return rights of indirect retailers for wireless devices are limited to warranty claims, which are generally covered by the device manufacturers’ original warranties. In accordance with the provisions of SAB No. 104, we determined we have sufficient operating history to estimate equipment returns. In connection with wireless activations, we sell the wireless device to the customer at a significant discount (“equipment discount provisions” or “EDP”).

In the event a customer terminates their wireless service with the carrier within six months of activation and opts not to return the wireless device to us within the time frames permitted within our return policy, in many instances our sales contracts with the customer permit us to charge the customer an EDP termination fee. During 2004 and 2005 and prior to the three months ended June 30, 2006, revenue recognition of such fee was deferred until such fee was collected from the customer pursuant to SAB 104 as we did not have adequate historical collection data to reasonably estimate the ultimate collectibility of the receivable. Beginning April 1, 2006, we began to estimate EDP termination fee revenue based on historical experience of customer collection behavior which we have developed over a time period of 24 months which provides the basis on which to accrue revenue with an appropriate assurance of collectibility pursuant to SAB 104. As of March 31, 2006, $0.3 million of such revenue was deferred, which would have been accrued for in the event that we had adequate customer collection history, less an estimated reserve for uncollectible amounts. As of December 31, 2006, we had accrued as accounts receivable approximately $1.7 million in such EDP fees.

During the most recent quarter ended December 31, 2006, our handset return rate was 15.1% of handset revenue. We have recorded handset return rates of 11.7% and 10.4% for the years ended December 31, 2006 and 2005, respectively. Any increase or decrease in the actual handset return experience will cause a corresponding dollar-for-dollar decrease or increase in revenue. The impact of a 1% change in the handset returns rate applied to the year ended December 31, 2006 would have resulted in an increase or decrease in revenue of approximately $0.5 million with a corresponding increase or decrease in our cost of revenue.

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Under certain conditions, consumers purchasing wireless devices from us may be eligible for a product rebate depending on the wireless device purchased, service contract activated and the consumer maintaining their service with the wireless carrier for a period of up to six months. We estimate and record an accrued consumer liability and cost of revenue for such rebate at the time of sale based on the terms of the rebate and our rebate redemption experience over the most recent 18 months for which the contractual rebate redemption period has lapsed. Our rebate redemptions are processed by a third party vendor that validates the consumer’s rebate redemption materials to ensure that the redemption request satisfies all terms and conditions of the rebate program to be eligible for payment. Only consumers that satisfy the redemption requirements of the rebate program earn the rebate amount under our normal terms and conditions.

During the last six months of 2006, we incurred and paid $8.0 million of payments made to consumers outside our customary rebate redemption process to parties that we believed generally had not satisfied all the terms and conditions of the respective rebate redemption program. Such amounts were paid to satisfy customer complaints and are viewed by us as “customer accommodation credits” and reflected in general and administrative expenses.

Inventory Valuation

Our inventory consists of wireless devices and accessories. The carrying value of inventory is stated at the lower of its cost or market value. Cost is determined using a method which approximates the first-in-first-out accounting method. We write down inventory for estimated obsolescence or unmarketable inventory equal to the difference between the cost of inventory and the estimated market value or replacement cost based upon assumptions about future demand and market conditions. If actual market conditions are less favorable than those projected, additional inventory write-downs may be required. Historically, we have not experienced significant write-offs, with the exception of returned, unmarketable inventory. During the year ended December 31, 2006, we have written off or fully reserved for credits due for wireless devices returned to our equipment providers totaling $4.0 million for which credit has yet to be received.

Stock-based Compensation

We adopted SFAS No. 123(R) on January 1, 2006 using the modified prospective application (“MPA”) method. SFAS No. 123(R) established standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. SFAS No. 123(R) requires us to measure the cost of employee services received in exchange for an award of equity instruments usually stock options or unvested (restricted) stock awards based on the grant date fair value of the award. That cost is recognized over the period during which an employee is required to provide service in exchange for the award—the requisite service period (usually the vesting period). The amount of compensation expense recognized using the fair value method requires us to exercise judgment and make assumptions relating to the factors that determine the fair value of our stock option grants.

Prior to the adoption of SFAS No. 123(R), we applied the intrinsic value method of accounting for employee stock-based compensation as prescribed by Accounting Principles Board (“APB”) Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations including FASB Interpretation (“FIN”) No. 44, Accounting for Certain Transactions involving Stock Compensation an Interpretation of APB Opinion No. 25, issued in March 2000, to account for the equity grants to employees. Under this method, compensation expense was recorded on the date of grant only if the current market price of the underlying stock exceeded the exercise price. SFAS No. 123, Accounting for Stock-Based Compensation (“SFAS No. 123”), established accounting and disclosure requirements using a fair value-based method of accounting for stock-based employee compensation plans. As permitted by SFAS No. 123, we elected to continue to apply the intrinsic value-based method of accounting described above, and adopted the disclosure requirements of SFAS No. 123. All equity-based awards granted to non-employees were accounted for at fair value in accordance with SFAS No. 123. We incurred stock-based compensation expenses from grants of stock options, warrants and restricted stock awards.

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In 2004, we recorded approximately $2.0 million in compensation expense related to the cashless exercise of approximately 1,250,000 stock options by certain employees in connection with the sale of Series E preferred stock. At our discretion, the cashless exercise was permitted in this unique circumstance resulting in the application of variable accounting to the transaction in accordance with Financial Accounting Standards Board Interpretation No. 44 for the options being exercised.

Goodwill and Intangible Assets

Goodwill and other intangible assets with indefinite useful lives are not amortized and are evaluated for impairment at least annually, or when events or circumstances suggest a potential impairment may have occurred. In accordance with SFAS No. 142, Goodwill and Other Intangible Assets (“SFAS No. 142”), we have selected the fourth quarter to perform the annual impairment test. SFAS No. 142 requires us to compare the fair value of the reporting unit to its carrying amount on an annual basis to determine if there is a potential impairment. If the fair value of the reporting unit is less than its carrying value, an impairment loss is recorded to the extent that the fair value of the goodwill within the reporting unit is less than the carrying value. The fair value for goodwill and other intangible assets not subject to amortization is determined based on discounted cash flows, market multiples or other measures, as appropriate. Based on our assessment for the year ended December 31, 2006, no impairments of goodwill or other intangible assets were noted.

For the year ended December 31, 2005, we determined that a supplier relationship valued at $3.7 million had an indefinite useful life as of the April 26, 2005 acquisition date of VMC Satellite, Inc. During 2006, we determined that as of the acquisition date, the supplier relationship had a useful life of ten years in accordance with SFAS No. 142. During the fourth quarter of 2006, we recognized $0.3 million of amortization expense for the period from April 26, 2005 to December 31, 2005. We do not believe the impact of this adjustment in 2006 to be material to the fiscal year 2006 or 2005 as a result of this change.

Provision for Income Taxes

SFAS No. 109, Accounting for Income Taxes, establishes financial accounting and reporting standards for the effect of income taxes. During the years ended December 31, 2004, 2005 and 2006, we did not have any income tax expense or benefit because a full valuation allowance was provided against net deferred tax assets. Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized as a component of net income in the period that includes the enactment date.

As of December 31, 2006, we had approximately $196.1 million of net operating loss carryforwards, which may be available to offset any future taxable income, subject to ownership change limitations. Net operating loss carryforwards may be used to offset up to 90% of our alternative minimum taxable income. Alternative minimum taxes are allowed as credit carryovers against regular tax in the future in the event that the regular tax exceeds alternative minimum tax expense. The net operating loss carryforwards will begin to expire in 2019. Certain of these net operating losses obtained through our acquisitions are not included in the components of the deferred tax assets, as the use of these losses will be significantly limited under Section 382 of the Internal Revenue Code.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We currently do not hedge interest rate exposures and have not used derivative financial instruments for speculation or trading purposes. At December 31, 2006, our debt financing consisted primarily of principal amounts outstanding under our fixed rate term loan. Our borrowings under the term loan are secured by substantially all of our assets.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The information required by this item is set forth on pages F-1 to F-31.

ITEM 9. CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

On September 12, 2005, our Audit Committee of the Board of Directors (the “Audit Committee”) dismissed KPMG LLP (“KPMG”) as our independent registered public accounting firm.

The audit reports of KPMG on our consolidated financial statements as of and for the year ended December 31, 2004, did not contain an adverse opinion or a disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles, except that the audit reports as of and for the year ended December 31, 2004, contained separate paragraphs stating that we adopted EITF 00-21, Revenue Arrangements with Multiple Deliverables, effective July 1, 2003.

During the two most recently completed fiscal years prior to their dismissal and through September 12, 2005, there were no disagreements with KPMG on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of KPMG, would have caused KPMG to make reference to the subject matter of the disagreement in connection with its reports on our financial statements for the past two fiscal years. In addition, there were no “reportable events” (as defined in Item 304(a)(1)(v) of Regulation S-K) during the two most recently completed fiscal years prior to their dismissal and through September 12, 2005.

We requested KPMG to furnish us with a letter addressed to the Securities and Exchange Commission stating whether or not it agreed with the above statements. A copy of that letter, dated September 20, 2005, was included with our current report on Form 8-K filed with the Securities and Exchange Commission on September 20, 2005.

On September 19, 2005, our Audit Committee engaged Grant Thornton LLP (“Grant Thornton”) as our independent registered public accounting firm to audit the financial statements and internal control over financial reporting for the year ended December 31, 2005.

ITEM 9A. CONTROLS AND PROCEDURES

Our management, including our principal executive and principal financial officer, has evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2006. Our disclosure controls and procedures are designed to provide reasonable assurance that the information required to be disclosed in this annual report on Form 10-K has been appropriately recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive and principal financial officers, to allow timely decisions regarding required disclosure. Based on that evaluation, our principal executive and principal financial officer have concluded that our disclosure controls and procedures are effective at the reasonable assurance level.

Management’s Annual Report on Internal Control over Financial Reporting

Our Management, including our principal executive and principal financial officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), as of December 31, 2006. Our disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer

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and Chief Financial Officer, to allow timely decisions regarding required disclosures. Based on the evaluation and the identification of the material weaknesses in internal control over financial reporting described below, as well as our inability to file this Annual Report on Form 10-K for the year ended December 31, 2006 (the “Form 10-K”) within the statutory time period, management concluded that our disclosure controls and procedures were not effective as of December 31, 2006.

The Company is in the process of implementing several improvements to remediate and remove the material weaknesses identified below. The Company will continue to strengthen its accounting resources, including the hiring of additional accounting personnel, the adoption of an internal audit department charter and improving general computer processes, procedures and controls.

Management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Securities Exchange Act of 1934, as amended, as a process designed by, or under the supervision of, our principal executive and principal financial officers and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

Management assessed the effectiveness of the internal control over financial reporting as of December 31, 2006 using the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

A material weakness is a control deficiency, or combination of control deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. Management identified material weaknesses in our internal controls including the following:

• We did not maintain sufficient staffing of operational and financial resources. We did not maintain staffing in operational and financial resources sufficient to provide the level of controls and analysis required on a timely basis in light of the increasing complexity and growth of our business. This resulted in certain accounting processes and controls not being performed on a timely basis and the inability to maintain an adequate control environment, resulting in numerous material adjusting entries being made after year end. This material weakness contributed to errors such as those relating to revenue recognition and accounts receivable, accrual of rebates and other liabilities and adjustments made to properly account for certain amounts due from our vendors described below.

• We did not always effectively communicate information to our finance department. Specifically, we failed to maintain effective communication channels to adequately identify and record certain transactions during 2006. The failure to provide this communication contributed to errors relating to accounting and reporting of expenses and liabilities. This material weakness caused or contributed to, adjustments necessary to appropriately record amounts due to marketing partners, accounts receivable allowances and reserves for deactivations.

• We did not maintain effective controls over the recordation, accuracy and completeness of activations and services revenue and related accounts receivable.

We did not take steps to adequately identify and appropriately record certain commission and bonus revenue received during the year from various wireless carriers in a timely and accurate manner. Recording amounts received from carriers in the appropriate accounts in a timely and accurate manner is an important business process control that is essential to the correct reporting of amounts in the financial statements. This material weakness contributed to errors relating to accounting and reporting for revenue and accounts receivable.

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We did not utilize an appropriate methodology during the year in recording receivables from wireless carriers associated with disputed deactivations, churn bonuses and other carrier related fees. We overstated accounts receivable by using a methodology that anticipated future improvements in collections beyond that supported by past experience, and which did not consider certain current factors and other information. As a result of this material weakness, an adjustment was necessary to properly record revenue and related receivables from these fees.

We recorded additional allowances for doubtful accounts receivable during our restatement process. The proper accounting for the allowance for doubtful accounts requires that estimates must be made on the future collectibility of receivables. Specifically after analysis we concluded that reserves were required for doubtful collections on disputed accounts receivable, an additional reserve was necessary to provide for disputed accounts receivable arising from the most recent month of carrier commissions arising from December activations. In addition, our estimating process failed to take into account all information from ongoing collections processes in order to properly state our reserves. An addition to our reserves was necessary as a result of this material weakness.

• We did not maintain effective controls over the determination and accuracy of equipment revenue and related accounts receivable. We did not utilize an appropriate methodology during the year in recording certain fees due from consumers when contracts are cancelled within specified time periods or the wireless device is not returned to us. Specifically, related accounts receivable were overstated to the extent that we used collection percentages which anticipated improvements in excess of past experience. As a result of this material weakness, an adjustment was necessary to properly record revenue and related receivables from these fees.

• We did not maintain effective controls over the accuracy and completeness of consumer product rebate liabilities. Specifically we did not utilize an appropriate methodology during the year in recording rebates payable to eligible consumers. We understated the consumer product rebate liability by not considering the appropriate amount of open periods eligible for rebates and the backlog of possible eligible rebates that had been delivered to outsourced payment service providers. As a result of this material weakness, an adjustment was necessary to properly record product rebate expenses and related payables.

• We did not maintain effective controls over the accuracy and completeness of costs of goods sold and amounts due from vendors. Specifically, we did not maintain adequate documentation to support the proper accounting for inventory movements related to support phone shipments for refitting and refurbishment. We overstated inventory or receivables in-kind by not maintaining adequate documentation of these phones provided to outside services providers. As a result of this material weakness, an adjustment was necessary to properly record costs of goods sold and amounts due from vendors.

These material weaknesses resulted in adjustments to our revenue and accounts receivable and certain other financial statement line items as referred to above and resulted in the restatement of previously issued consolidated financial statements for the three, six and nine-month periods ended March 31, 2006, June 30, 2006 and September 30, 2006, respectively.

Based on the COSO criteria in Internal Control-Integrated Framework and because of these material weaknesses, we have concluded that as of December 31, 2006, internal control over financial reporting was not effective. As a result of this conclusion, management performed significant additional substantive review of those areas described above where it identified material weaknesses to gain assurance that the financial statements as included herein are fairly stated in all material respects.

Management’s assessment of the effectiveness of our internal control over financial reporting as of December 31, 2006 has been audited by Grant Thornton LLP, an independent registered public accounting firm, as stated in their Report which is included in Item 8 of this Annual Report on Form 10-K.

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Remediation Efforts to Address Material Weaknesses

While we have taken and are in the process of taking appropriate actions with respect to our internal control over financial reporting, such deficiencies will not be considered remediated until the new internal controls operate for a period of time and are tested by both management and our independent registered public accounting firm such that we both can conclude these controls are operating effectively. In addition, we will continue to monitor the effectiveness and sustainability of new controls on an ongoing basis and seek to identify improvements to existing controls. Accordingly, we are in the process of implementing the following actions to remediate the material weaknesses identified in our “Management’s Annual Report on Internal Control over Financial Reporting”:

• Replacement of our chief financial officer;

• Appointment of a chief accounting officer and refinement of the accounting function to improve execution and monitoring of accounting processes, review procedures, GAAP application and identified controls;

• Hiring of a greater number of industry skilled and technically experienced employees in the accounting and finance organization to supplement existing employee base;

• Development of a comprehensive training program to ensure all accounting employees receive periodic training and continuing education in requisite areas and generally accepted accounting principles;

• Refinement of communications programs and contract review policies and procedures to ensure accounting department is timely and routinely informed of operating matters;

• Continued enhancement of our general computer processes, procedures and controls;

• Continued emphasis of the importance of establishing the appropriate environment in relation to accounting, financial reporting and internal control over financial reporting, and the importance of identifying areas of improvement;

• Complementing resources of our internal audit department and taking steps to enhance the independence of internal audit by strengthening its reporting relationship to the Audit Committee; and

• As approved by the Audit Committee, adoption of a charter setting forth the purpose, authority and responsibility of the internal audit activity. The charter defines the role of internal audit as providing independent, objective assurance and consulting services designed to add value and improve operations. The internal audit department (“Internal Audit”) will perform specific audits to assess whether objectives are being achieved in the areas of operations, financial reporting and compliance with applicable laws, regulations and policies. Internal Audit will report functionally to the Audit Committee and administratively to the chief executive officer. Internal Audit will have unrestricted access to our records, property and personnel and have full and free access to the Audit Committee.

Our testing and evaluation of the operating effectiveness and sustainability of these changes to our internal control over financial reporting have not yet been completed as the above-referenced remediation actions are still in the implementation process. In addition, our efforts to remediate deficiencies surrounding the levels of our staffing and related levels of expertise may take some time to remediate over the next several quarters.

ITEM 9B. OTHER INFORMATION

None.

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PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The Company’s executive officers, key employees and directors are as follows:

Name	Age	Position with the Company
Executive Officers:
David A. Steinberg (4)	37	Chairman of the Board and Chief Executive Officer
Andrew B. Zeinfeld	46	President, E-Commerce
Brian J. Curran	43	Chief Operating Officer
George Z. Moratis	41	Executive Vice President and Chief Accounting Officer
Non-Management Directors:
John Sculley (1)(2)(4)	68	Vice Chairman of the Board
Blake Bath (2)(3)	41	Director
Ira Brind (1)(2)(3)	66	Director
Laurence E. Harris (3)	71	Director
Jack F. Kemp (1)	71	Director
Key Employees:
Frank C. Bennett III	48	President, MVNE Services
Gregory S. Cole	37	Senior Vice President and Corporate Treasurer
Walter W. Leach III	44	General Counsel and Corporate Secretary
Gary J. Smith	40	Chief Information Officer
Michael E. Walden	37	President, 1010 Interactive LLC
Brian T. Westrick	38	President, Wireless Activation and Services

(1) Member of the Compensation Committee.

(2) Member of the Nominating and Governance Committee.

(3) Member of the Audit Committee.

(4) Member of the Mergers and Acquisitions Committee.

Set forth below is certain information regarding the positions and business experience of each executive officer, director and key employee of the Company.

Executive Officers

David A. Steinberg, our founder, has served as our chairman of the board of directors and chief executive officer since our inception and served as president from August 2002 until March 2004. Prior to founding InPhonic, Mr. Steinberg was chairman, president and chief executive officer of Sterling Cellular, Inc., a distributor of wireless products that he founded in November 1993. In April 2004, Mr. Steinberg was appointed to the board of the United States Chamber of Commerce. In June 2002, Mr. Steinberg was named the Greater Washington Ernst & Young Entrepreneur of the Year in the communications category. Mr. Steinberg holds a B.A. from Washington & Jefferson College.

Andrew B. Zeinfeld has served as our President of E-Commerce since April 2006. Prior to joining us in April 2006, Mr. Zeinfeld served in a variety of management positions at RadioShack Corporation during a 28-year term that began in 1978, and served most recently as senior vice president and chief retail services officer of radioShack corporation.

Brian J. Curran has served as our chief operating officer since May 2006. From August 2000 to May 2006, Mr. Curran was the vice president of customer centricity of Best Buy Co., Inc. While at Best Buy, Mr. Curran was responsible for the fulfillment and customer service operations of the 100 million customer service phone

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calls that Best Buy receives annually. Mr. Curran was also uniquely instrumental in managing the launch of BestBuy.com. Prior to joining Best Buy, Mr. Curran was employed by Comp USA Management Co. from December 1992 until August 2000 where he served in increasingly senior roles culminating in vice president of direct sales. Mr. Curran was employed by Checkered Flag, Inc. as the sales and finance manager from 1986 to 1992. Mr. Curran began his career with the United States Navy where he remained until 1986.

George Z. Moratis, has served as our senior vice president of financial reporting and analysis since October 2005 and chief accounting officer since May 2007. From November 2004 to June 2005, Mr. Moratis served as senior vice president and treasurer of USA Mobility, a provider of wireless communications solutions to the healthcare, government, large enterprise and emergency response sectors. From December 1998 to November 2004, Mr. Moratis served in several management positions and most recently was chief financial officer, treasurer and principal accounting officer of Metrocall Holdings, Inc., a provider of traditional paging and advanced wireless data and messaging services, until its acquisition by USA Mobility in November 2004. Prior to joining Metrocall, Mr. Moratis spent several years with MCI Communications Corporation, the U.S. Securities and Exchange Commission, and Deloitte & Touche in several different roles. Mr. Moratis holds a B.A. degree from the University of Pittsburgh and is a certified public accountant.

Non-Management Directors

John Sculley is vice chairman of our board of directors and has served on our board of directors since February 2000. Since June 1994 until 2004, Mr. Sculley served as a partner of Sculley Brothers LLC, a private investment and advisory services company. Since 2004, he has been Venture Partner at Rho Capital Partners. Prior to forming Sculley Brothers, Mr. Sculley was chief executive officer of Apple Computer, Inc. from 1983 until 1993. From 1967 to 1983, Mr. Sculley held marketing and management positions at the Pepsi-Cola Company, including serving as its president and chief executive officer from 1978 to 1983. Mr. Sculley serves on the board of directors of MetroPCS, Inc., Transforma Acquisition Group Inc. and several private companies. Mr. Sculley holds a B.A. from Brown University and an M.B.A. from The Wharton School of the University of Pennsylvania.

Blake Bath has served on our board since October 2006. Mr. Bath most recently served as managing director and senior equity research analyst for Lehman Brothers, a financial services firm, where he has covered wireline and wireless telecommunications services since January 1996. From September 1992 to September 2006, Mr. Bath held several equity research positions, including as the senior analyst for telecommunications at Lehman Brothers. Prior to joining Lehman Brothers as a senior analyst in January 1996, Mr. Bath was the primary telecommunications analyst at Sanford C. Bernstein & Co., LLC, an investment research firm, from 1992 to 1996. From 1989 to 1992, Mr. Bath served as an analyst in the strategic planning and corporate finance organizations at MCI Communications Corporation, a telecommunications carrier. Mr. Bath holds an M.B.A. from Columbia University and a B.S. degree from the University of Michigan.

Ira Brind has served on our board of directors since December 2000. Since May 1989, Mr. Brind has served as president and chief executive officer of Brind Investments, Inc. Mr. Brind was the president and co-founder of Brind-Lindsay & Co., Inc., a private equity and venture capital firm, from 1987 to December 2004. From 1967 until 1983, Mr. Brind was the chief executive officer of Brind Leasing Corporation, a full service truck leasing company, which he sold to McDonnell Douglas. He was chief executive officer and president of McDonnell Douglas Truck Services, a truck leasing company, from 1983 until 1987. Mr. Brind is currently the chairman emeritus of the board of trustees of Thomas Jefferson University Hospital, vice chairman of the Board of Trustees of University of the Arts, member of the Board of Trustees of the Wistar Institute, the Connelly Foundation, Thomas Jefferson University and the Jefferson Health System. Mr. Brind serves on the board of directors of several private companies. Mr. Brind holds a B.A. and a J.D. from the University of Pennsylvania.

Laurence E. Harris has served as a director since March 2006. He is “of counsel” at the law firm Patton Boggs LLP and was a partner with the firm from May 2001 until December 2004. From December 1996 to April 2001, Mr. Harris was senior vice president and general counsel of Teligent, Inc., an international

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telecommunications company. Teligent, Inc. filed a voluntary petition for bankruptcy in May 2001. From 1992 to 1996, Mr. Harris served as senior vice president of law and public policy for MCI Communications Corporation. From 1982 to 1992, Mr. Harris was president and chief operating officer of Metromedia Telecommunications, Inc. and CRICO Communications, a privately-held paging company. Prior to Metromedia, Mr. Harris served as chief of the Federal Communication Commission’s Mass Media Bureau. From 1972 to 1982, Mr. Harris served as a vice president of law and public policy for MCI, managing corporate relations for the Federal Communications Commission (FCC) and the office of telecommunications policy at the White House. Mr. Harris was a lieutenant in the U.S. Navy, serving in the destroyer fleet. Mr. Harris serves on the board of directors of MCI, where he is a member of the risk and corporate governance committees. Mr. Harris also serves on the board of directors and is chairman of the audit committee for Sports Brands International, Inc. Mr. Harris holds a B.A. degree from Columbia College and J.D. from Georgetown University.

Jack F. Kemp has served on our board of directors since June 2002. Mr. Kemp is founder and chairman of Kemp Partners, a strategic consulting firm which seeks to provide clients with strategic counsel, relationship development, and marketing advice in helping them accomplish business and policy objectives. From January 1993 until July 2004, Mr. Kemp was co-director of Empower America, Inc., a Washington, D.C.-based public policy and advocacy organization he co-founded with William Bennett and Ambassador Jeane Kirkpatrick. In 1996, Mr. Kemp was the Republican Party candidate for Vice President. Prior to founding Empower America, Mr. Kemp served as U.S. Secretary of Housing and Urban Development from 1989 to 1992, and in the U.S. House of Representatives from 1971 to 1989. Mr. Kemp also serves as a director of Hawk Corporation, Oracle Corporation, Six Flags, Inc. and WorldSpace, Inc. Mr. Kemp holds a B.A. from Occidental College.

Key Employees

Frank C. Bennett III has served as our president of MVNE services since March 2004, and prior to that he served as our chief operating officer from April 2002. From August 2000 to August 2001, Mr. Bennett was the senior vice president and group operations officer for the retail group of Verizon. From October 1999 to August 2000, Mr. Bennett served as vice president, e-commerce and technology of Bell Atlantic Corporation (now part of Verizon). From February 1998 to October 1999, he was vice president, customer billing of Bell Atlantic. In addition, from July 1996 to December 1998, Mr. Bennett served as a founder and vice president, call center development of Bell Atlantic Plus, a provider of bundled wireline and wireless services. Mr. Bennett holds a B.A. from the University of Virginia and an M.B.A. from The Wharton School of the University of Pennsylvania.

Gregory S. Cole, our senior vice president and corporate treasurer joined us in May 2006. Prior to joining us, from September 1998 to August 2005, Mr. Cole served as vice president, treasurer for XM Satellite Radio Holdings Inc., a provider of satellite radio services. From September 1994 to September 1998, Mr. Cole was a member of the finance department and privatization team at USEC, Inc., an energy company. Mr. Cole began his career as a certified public accountant in 1991, working for both local and national accounting firms including Coopers and Lybrand LLC. Mr. Cole holds an M.B.A. from the University of Maryland and BBA from James Madison University in Virginia.

Walter W. Leach, III has served as our general counsel since January 2001. Mr. Leach served as corporate counsel of Snyder Communications, a marketing and communications solution provider from June 1997 to January 2001. From October 1992 to June 1997, Mr. Leach served as deputy corporate counsel for Inductotherm Industries, Inc., a privately held manufacturer. Mr. Leach holds a B.A. from Syracuse University and a J.D. from Vermont Law School.

Gary J. Smith has served as our chief information officer since July 2000. From July 1999 to July 2000, Mr. Smith served as chief information officer and vice president of technology of Varsity Group Inc., formerly known as VarsityBooks.com, LLC, an online retailer of textbooks. From September 1987 to July 1999,

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Mr. Smith served in various technology management positions at Discovery Communications Inc., an international media company, including most recently vice president of technology. Mr. Smith holds a B.S. from the University of Maryland.

Michael E. Walden has served in various executive-level positions at our company since joining us in October 2000 and is currently the President of our subsidiary 1010 Interactive LLC. Mr. Walden previously served as our vice president and executive vice president of Corporate Development from October 2000 until January 2007. December 1999 to October 2000, Mr. Walden served as vice president of new media and entertainment at Etensity, Inc., an e-business consulting firm. From October 1998 to December 1999, Mr. Walden served as vice president of operations for Professional Resource Services, a technology consulting and recruiting firm, a spin-out of NDC Group, a technology consulting firm. From November 1995 to October 1998, Mr. Walden served as director of telecommunications services for NDC Group. From 1991 to 1994, Mr. Walden served on the Washington D.C. legislative staff of U.S. Senator Arlen Specter. Mr. Walden holds a B.S. in Business Administration from the University of Richmond.

Brian T. Westrick has served as president of our wireless activation and services division since July 2002 and has held various executive-level positions since joining us in June 2000. From December 1994 to June 2000, Mr. Westrick was vice president of sales and marketing for Universal Jet Trading. From July 1991 to December 1994, Mr. Westrick was marketing director for Lease Audit and Analysis Services, a real estate consulting company. From June 1990 to July 1991, Mr. Westrick was a marketing representative with Xerox Corporation. Mr. Westrick holds a B.S. from the Wallace E. Carroll School of Management at Boston College.

Information Regarding the Board of Directors and Certain Committees

Our board of directors currently consists of six members. Our board of directors is divided into three classes of directors who serve in staggered three-year terms, as follows:

• The Class I directors are Messrs. Steinberg and Harris, and their terms will expire at the annual meeting of stockholders to be held in 2008.

• The Class II directors are Messrs. Brind and Bath, and their terms will expire at the annual meeting of stockholders to be held in 2009.

• The Class III directors are Messrs. Kemp and Sculley, and their terms will expire at the annual meeting of stockholders to be held in 2007.

The Board of Directors held 13 meetings during 2006. No director attended fewer than 75% of the total number of meetings of the Board of Directors and of the committees of which he was a member during 2006. It is our policy to have each director attend all meetings of stockholders. In 2006, two of our seven directors attended the annual meeting of stockholders. The Board of Directors has determined that each member of the Board of Directors, other than Mr. Steinberg, is independent in accordance with applicable rules of The Nasdaq Global Market and the rules and regulations of the Securities and Exchange Commission. The Board of Directors has an Audit Committee, a Compensation Committee, a Nominating and Governance Committee and a Mergers and Acquisitions Committee. The Board of Directors has adopted a charter for the Audit Committee, Compensation Committee and the Nominating and Governance Committee, copies of which are available on our website at http://investor.inphonic.com/corpgov/corpgov.cfm.

The Audit Committee consists of Messrs. Harris, Bath and Brind. The Board of Directors has determined that each of the members of the Audit Committee is independent in accordance with applicable rules of The NASDAQ Global Market and the rules and regulations of the Securities and Exchange Commission. The Board of Directors has determined that each of the members of the Audit Committee is an “audit committee financial expert” as that term is defined in Item 407 of Regulation S-K under the Securities Exchange Act of 1934. The

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Audit Committee held 17 meetings during 2006. The Audit Committee oversees our corporate accounting and financial reporting process and the audits of our financial statements. Among other matters, the Audit Committee:

• is responsible for the appointment, compensation and retention of our Independent Registered Public Accounting Firm and reviews and evaluates the auditors’ qualifications, independence and performance;

• oversees the Independent Registered Public Accounting Firm’s audit work and reviews and pre-approves all audit and non-audit services that may be performed by them;

• reviews and approves the planned scope of our annual audit;

• monitors the rotation of partners of the Independent Registered Public Accounting Firm on our engagement team as required by law;

• reviews our consolidated financial statements and discusses with management and the Independent Registered Public Accounting Firm the results of the annual audit and the review of our unaudited quarterly financial statements;

• reviews our critical accounting policies and estimates;

• oversees the adequacy of our accounting and financial controls;

• annually reviews the Audit Committee charter and the committee’s performance;

• reviews and approves all related-party transactions; and

• establishes and oversees procedures for the receipt, retention and treatment of complaints regarding accounting, internal controls or auditing matters and oversees enforcement, compliance and remedial measures under our code of conduct.

The Compensation Committee consists of Messrs. Brind, Kemp and Sculley. The Board of Directors has determined that each of the members of the Compensation Committee is independent in accordance with applicable rules of The NASDAQ Global Market. The Compensation Committee held three meetings during 2006. The Compensation Committee approves, administers and interprets our compensation and benefit policies, and administers our stock option and benefit plans. The Compensation Committee:

• reviews and approves corporate goals and objectives relevant to compensation of the chief executive officer and the other executive officers;

• evaluates the performance of the chief executive officer and the other executive officers in light of those goals and objectives;

• sets compensation of the chief executive officer and the other executive officers;

• approves all executive officer employment, severance, or change-in-control agreements, including all special or supplemental benefits, and all agreements to indemnify executive officers or directors;

• administers the issuance of stock options and other awards to executive officers and directors under our stock plans; and

• reviews and evaluates, annually, the performance of the Compensation Committee and its members.

The Nominating and Governance Committee consists of Messrs. Brind, Bath and Sculley. The Board of Directors has determined that each of the members of the Nominating and Governance Committee is independent in accordance with applicable rules of The NASDAQ Global Market. The Nominating and Governance Committee was formed in May 2004 and held one meeting during 2006. The Nominating and Governance Committee:

• identifies individuals qualified to become directors;

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• recommends to the Board of Directors director nominees for each election of directors;

• develops and recommends to the Board of Directors criteria for selecting qualified director candidates;

• considers committee member qualifications, appointment and removal;

• recommends corporate governance guidelines applicable to the Company; and

• provides oversight in the evaluation of the Board of Directors and each committee.

The Mergers and Acquisitions Committee consists of Messrs. Sculley and Steinberg. The Mergers and Acquisitions Committee held one meeting during 2006. The Mergers and Acquisitions Committee reviews, monitors and advises the Board of Directors in connection with potential mergers and acquisitions.

Director Nominations

Consistent with its charter, the Nominating and Governance Committee will evaluate and recommend to the Board of Directors director nominees for each election of directors.

In fulfilling its responsibilities, the Nominating and Governance Committee considers the following factors in reviewing possible candidates for nomination as director:

• the appropriate size of our Board of Directors and its committees;

• the perceived needs of the Board of the Directors for particular skills, background and business experience;

• the skills, background, reputation, and business experience of nominees compared to the skills, background, reputation, and business experience already possessed by other members of the Board of Directors;

• nominees’ independence from management;

• applicable regulatory and listing requirements, including independence requirements and legal considerations, such as antitrust compliance;

• the benefits of a constructive working relationship among directors; and

• the desire to balance the considerable benefit of continuity with the periodic injection of the fresh perspective provided by new members.

The Nominating and Governance Committee’s goal is to assemble a Board of Directors that brings to the Company a variety of perspectives and skills derived from high quality business and professional experience. Directors should possess the highest personal and professional ethics, integrity and values, and be committed to representing the best interests of our stockholders. They must also have an inquisitive and objective perspective and mature judgment. Director candidates, in the judgment of the Nominating and Governance Committee, must have sufficient time available to perform all Board of Directors and committee responsibilities. Members of the Board of Directors are expected to prepare for, attend and participate in all meetings of the Board of Directors and applicable committee meetings.

Other than the foregoing, there are no stated minimum criteria for director nominees, although the Nominating and Governance Committee may also consider such other factors as it may deem, from time to time, to be in the best interests of the Company and its stockholders.

Identifying and Evaluating Candidates for Nomination as Director

The Nominating and Governance Committee annually evaluates the current members of the Board of Directors whose terms are expiring and who are willing to continue in service against the criteria set forth above

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in determining whether to recommend these directors for election. The Nominating and Governance Committee regularly assesses the optimum size of the Board of Directors and its committees and the needs of the Board of Directors for various skills, background and business experience in determining whether it is advisable to consider additional candidates for nomination.

Candidates for nomination as director may come to the attention of the Nominating and Governance Committee from time to time through incumbent directors, management, stockholders or third parties. These candidates may be considered at meetings of the Nominating and Governance Committee at any point during the year. Such candidates are evaluated against the criteria set forth above. If the Nominating and Governance Committee believes at any time that it is desirable that the Board of Directors consider additional candidates for nomination, the committee may poll directors and management for suggestions or conduct research to identify possible candidates and may, if the Nominating and Governance Committee believes it is appropriate, engage a third party search firm to assist in identifying qualified candidates. In March 2006, the Nominating and Governance Committee nominated, and the Board of Directors appointed, Mr. Harris as a director and in October 2006, the Nominating and Governance Committee nominated, and the Board of Directors appointed, Mr. Bath as a director. Messrs. Harris and Bath were recommended as nominees by the Nominating and Governance Committee.

The Nominating and Governance Committee will evaluate any recommendation for director nominee proposed by a stockholder. In order to be evaluated in connection with the Nominating and Governance Committee’s established procedures for evaluating potential director nominees, any recommendation for director nominee submitted by a stockholder must be sent in writing to: InPhonic, Inc., Attention: Walter W. Leach III, Corporate Secretary, 1010 Wisconsin Avenue, Suite 600, Washington, DC 20007, at least 120 days prior to the anniversary of the date definitive proxy materials were mailed to stockholders in connection with the prior year’s annual meeting of stockholders and must contain the following information:

• the candidate’s name, age, contact information and present principal occupation or employment; and

• a description of the candidate’s qualifications, skills, background, and business experience during, at a minimum, the last five years, including his/her principal occupation and employment and the name and principal business of any corporation or other organization in which the candidate was employed or served as a director.

In addition, our by-laws permit stockholders to nominate directors for consideration at an annual meeting provided they notify us at least 120 days prior to the anniversary of the date when definitive proxy materials were mailed to stockholders in connection with the prior year’s annual meeting of stockholders.

All directors and director nominees must submit a completed form of directors’ and officers’ questionnaire as part of the nomination process. The evaluation process may also include interviews and additional background and reference checks for non-incumbent nominees, at the discretion of the Nominating and Governance Committee.

Stockholder Communications with the Board of Directors

Stockholders may communicate with directors of the Company by transmitting correspondence by mail or facsimile, addressed to the director or the full Board of Directors as follows:

Board of Directors

c/o Walter W. Leach III, General Counsel

InPhonic, Inc.

1010 Wisconsin Avenue

Suite 600

Washington, DC 20007

Fax: 202-333-8280

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The Corporate Secretary will maintain a log of such communications and transmit as soon as practicable such communications to the identified director(s), except where security concerns militate against further transmission of the communication or the communication relates to commercial matters not related to the sender’s interest as a stockholder, as determined by the General Counsel, Walter W. Leach III. The Board of Directors or individual directors so addressed will be advised of any communication withheld for such reasons.

Code of Conduct

We have adopted a code of business conduct and ethics, and a policy providing for the reporting of potential violations of the code, for directors, officers (including our principal executive officer, principal financial officer and controller) and employees, known as the Code of Conduct and Policy Regarding Reporting of Possible Violations (the “Code of Conduct”). The Code of Conduct is available on our website at

http://investor.inphonic.com/profiles/investor Governance.

Additionally, stockholders may request a free copy of the Code of Conduct from:

InPhonic, Inc.

Attention: Investor Relations

1010 Wisconsin Avenue

Suite 600

Washington, DC 20007

(202) 333-0001

Compliance with Section 16(a) of the Exchange Act

Section 16(a) of the Exchange Act requires that the Company’s executive officers and directors, and persons who own more than ten percent of a registered class of the Company’s equity securities, file reports of ownership and changes in ownership with the SEC and provide the Company with copies of such reports. The Company has reviewed such reports received by it and written representations from its directors and executive officers. Based solely on such review, the Company believes that the following person did not make the following timely filings pursuant to Section 16(a) of the Exchange Act: Goldman Sachs Group Inc. filed a Form 4 November 20, 2006 with respect to multiple purchases of the Company’s common stock November 6, 2006.

ITEM 11. EXECUTIVE COMPENSATION

Compensation Committee Interlocks and Insider Participation

None of the members of our Compensation Committee has at any time been one of our officers or employees. None of our executive officers serves or in the past has served as a member of the board of directors or compensation committee of any entity that has one or more of its executive officers serving on our Board of Directors or our compensation committee. See “Certain Relationships and Related Transactions.”

COMPENSATION DISCUSSION AND ANALYSIS

Philosophy & Objectives

The primary goals of the compensation committee of our board of directors with respect to executive compensation are to attract and retain the most talented and dedicated executives possible, to tie annual and long-term cash and stock incentives to achievement of specified performance objectives, and to align executives’ incentives with stockholder value creation. To achieve these goals, the compensation committee has implemented a compensation plan that ties a significant portion of executives’ overall compensation to key strategic targets such as the number of new activations of wireless devices and services, a positive customer experience, establishing and maintaining key strategic relationships and our financial and operational

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performance, as measured by metrics such as our revenue growth cash flow, pursuit of profitability, and operational and financial measures specific to our business divisions. The compensation committee evaluates individual executive performance with a goal of setting compensation at levels the committee believes are comparable with executives in other companies of similar size and stage of development operating in the communications industry, while taking into account our relative performance and our own strategic goals.

We have retained a compensation consultant to provide us a compensation survey for our use in creating our policies and procedures with respect to executive compensation. We conduct an annual benchmark review of the aggregate level of our executive compensation, as well as the mix of elements used to compensate our executive officers. This review is based on a summary of published survey data compiled by Watson Wyatt & Company for technology companies with annual revenues of approximately $300 million, as well as reports published by the Mercer Group International. Utilizing this information, we created salary and stock option grant ranges for certain executive-level positions, which were approved by the Compensation Committee and are updated annually. The mix of cash and equity incentive compensation for our chief executive officer and chief financial officer are based on separate analysis of the compensation surveys by the Compensation Committee.

Elements of Compensation

Executive compensation consists of following elements:

Base Salary. Base salaries for our executives are established based on the scope of their responsibilities, taking into account competitive market compensation paid by other companies for similar positions. Generally, we believe that executive base salaries should be targeted near the median of the range of salaries for executives in similar positions with similar responsibilities at comparable companies. Base salaries are reviewed annually, and adjusted from time to time to realign salaries with market levels after taking into account individual responsibilities, performance and experience. For 2007, this review has not yet occurred.

Discretionary Annual Bonus. The compensation committee has the authority to award discretionary, annual cash bonuses to our executive officers. These awards are intended to compensate officers for achieving financial and operational goals and for achieving individual annual performance objectives. These objectives vary depending on the individual executive, but relate generally to strategic factors such as the number of new activations of wireless devices and services, a positive customer experience, establishing and maintaining key strategic relationships and our financial and operational performance, as measured by metrics such as our revenue growth, pursuit of profitability, and operational and financial measures specific to our business divisions. Each fiscal year the compensation committee selects, in its discretion, our executive officers who are eligible to receive a discretionary bonus. The compensation committee will establish the terms and conditions applicable to any award granted under the plan and a participant will be eligible to receive an award under the plan in accordance with such terms and conditions. Awards will be paid in whole or in part in cash or restricted stock. Similar to bonuses paid in the past, the actual amount of discretionary bonus will be determined following a review of each executive’s individual performance and contribution to our strategic goals. The actual amount of discretionary bonus is determined following a review of each executive’s individual performance and contribution to our strategic goals conducted during the first quarter of each fiscal year. The compensation committee has not fixed a maximum payout for any officer’s annual discretionary bonus.

Based on the compensation committee’s review of individual and company performance in 2006, the compensation committee awarded two named executive officers, Michael Walden and Brian Westrick, cash bonuses in the amounts indicated in the table entitled “Summary Compensation Table.”

2004 Equity Incentive Plan. We believe that stock-based awards encourage our named executive officers to provide superior performance. We established our 2004 Equity Incentive Plan to provide certain of our employees, including our executive officers, with incentives to help align those employees’ interests with the interests of stockholders. The compensation committee believes that the use of stock-based awards offers the best

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approach to achieving our compensation goals. Other than Mr. Steinberg’s stock that he acquired as founder of our company, our 2004 Equity Incentive Plan provides the principal method for our named executive officers to acquire equity or equity-linked interests in our company. We believe that the annual aggregate value of these awards should be set near competitive median levels for comparable companies. However, due to the relatively early stage of our business, we expect to provide a greater portion of total compensation to our executives through our stock compensation plans than through cash-based compensation. Periodic awards are made at the discretion of the compensation committee to eligible employees and, in appropriate circumstances, the compensation committee considers the recommendations of members of management.

Stock Options. Our 2004 Equity Incentive Plan authorizes us to grant options to purchase shares of common stock to our employees, directors and consultants. Our compensation committee is the administrator of the 2004 Equity Incentive Plan. Beginning January 1, 2006 due to our adoption of SFAS No. 123(R), which changed the accounting for stock option grants, we generally award executive-level employees restricted stock, rather than grant them stock options. We made this change in philosophy because under SFAS No. 123(R) both types of awards receive the same accounting treatment and thus we are able to give an amount of equity value while awarding fewer shares relative to a stock option grant that would require the executive to tender an exercise price. We continue to grant stock options to non-executive employees. Prior to January 1, 2006, stock options were granted to executive officers at the commencement of employment and, in connection with annual salary increases and bonuses. Stock options typically vest over a four-year period with 25% vesting on the first anniversary of the date of grant and the remainder in equal installments every 90 days thereafter over the remainder of the period, and generally expire ten years after the date of grant. Incentive stock options also include certain other terms necessary to assure compliance with the Internal Revenue Code of 1986, as amended.

Restricted Stock Awards. Our compensation committee has and may in the future make grants of restricted stock to our named executive officers. The compensation committee reviewed and approved restricted stock awards to executive officers based upon a review of competitive compensation data, its assessment of individual performance, a review of each executive’s existing long-term incentives, and retention considerations. Restricted stock awards typically vest over a four-year period with 25% vesting on the first anniversary of the date of grant and the remainder in equal installments every 90 days thereafter over the remainder of the period.

2006 Awards. In 2006, certain named executive officers were awarded restricted stock in the amounts indicated in the section entitled “Grants of Plan Based Awards”. In connection with the negotiation and closing of the $100 million term loan with Goldman Sachs Credit Partners, L.P. and Citicorp North America, Inc. and to provide further incentive to attain the company’s strategic, financial and operational goals, the compensation committee made restricted stock awards to Messrs. Steinberg, Walden, Westrick, Winkler and Zeinfeld in the amounts indicated in the section entitled “Grants of Plan Based Awards”. These restricted stock awards vest over a four-year period with 25% vesting on the first anniversary of the date of grant and the remainder in equal installments every 90 days thereafter over the remainder of the period.

1999 Stock Incentive Plan. Our 1999 Stock Incentive Plan was terminated upon our adoption of our 2004 Equity Incentive Plan in connection with the closing of our initial public offering November 2004. The only equity incentive we issued under the 1999 Stock Incentive plan was stock options. The option exercise price and the term of each option were determined by the compensation committee. The compensation committee also determined at what time or times each option may be exercised and, the period of time, if any, after retirement, death, disability or termination of employment during which options may be exercised. Stock options granted under the 1999 Stock Incentive Plan typically vest over a four-year period with 25% vesting on the first anniversary of the date of grant and the remainder in equal installments every 90 days thereafter over the remainder of the period, and generally expire ten years after the date of grant. As of May 21, 2007, we had outstanding options to purchase 1,909,911 shares of our common stock under the 1999 Stock Incentive Plan.

Benefits. We provide additional benefits to our executive officers in order to remain competitive with compensation packages available in our industry generally and foster an attractive working environment. In

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many cases, these benefits are identical or substantially identical to those provided to all employees at the same location. For named executive officers, we generally provide benefits such as life insurance, medical insurance, auto allowances, use of Company courier and driver services, use of executive assistants for personal errands, and payment of club membership and professional organization fees. In connection with the hiring of a new executive officer, we may also provide for reimbursement of relocation expenses. The payment of personal benefits to our named executive officers varies based on the executive level.

Tax and Accounting Implications

Compensation Deduction Limit. As part of its role, the Compensation Committee considers the deductibility of executive compensation under Section 162(m) of the Internal Revenue Code, which provides that we may not deduct compensation of more than $1,000,000 that is paid to certain individuals. The Compensation Committee has considered the $1 million limit for federal income tax purposes on deductible executive compensation that is not performance-based, and believes that the executive compensation paid in 2006 and prior years satisfied the requirements of federal tax law and thus the compensation should be fully deductible.

COMPENSATION COMMITTEE REPORT

The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and, based on such review and discussions, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this Annual Report.

Compensation Committee

Ira Brind, Chairman        

Jack F. Kemp                   

John Sculley                    

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SUMMARY COMPENSATION TABLE

The following table sets forth information concerning the compensation earned during the fiscal year ended December 31, 2006 by our Chief Executive Officer, former Chief Financial Officer, and our three other most highly-compensated executive officers:

Name and Principal Position	Year	Salary ($)	Bonus ($)	Stock Awards ($)(2)	Option Awards ($)(3)	Non-Equity Incentive Plan Compensation ($)(7)	Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)	All Other Compensation ($)	Total ($)
David A. Steinberg (1)	2006	346,250	—	457,636	1,130,269	—	—	46,405	1,980,560
Chairman of the Board and Chief Executive Officer
Lawrence S. Winkler (4)	2006	300,000	—	1,122,097	298,960	—	—	13,278	1,734,335
Former Chief Financial Officer, Executive Vice President and Treasurer
Brian Westrick (5)	2006	237,000	20,000	170,165	288,908	—	—	6,709	722,782
President, Wireless Activation & Services
Michael Walden	2006	225,000	20,175	170,165	203,936	20,000	—	—	639,276
Executive VP Corporate Development
Andrew Zeinfeld (6)	2006	205,769	—	381,932	—	—	—	40,000	627,701
President

(1) Other Compensation includes the following: $18,851 for life insurance; $12,000 for courier and driver services; $8,000 for the use of an executive assistant for personal errands; $7,554 for the payment of club membership dues and professional membership fees.

(2) Reflects the dollar amount recognized for financial reporting purposes in accordance with FAS 123(R) and thus may include amounts from awards granted in and prior to 2006. Assumptions used in the calculation of these amounts are included in Note (o) to our audited financial statements included in our Annual Report on Form 10-K.

(3) Reflects the dollar amount recognized for financial reporting purposes in accordance with FAS 123(R) and thus includes amounts from awards granted in and prior to 2006. Assumptions used in the calculation of these amounts are included in Note (o) to our audited financial statements included in our Annual Report on Form 10-K.

(4) Other Compensation includes $13,278 for medical insurance. Effective May 31, 2007, Mr. Winkler’s employment with us has terminated.

(5) Other Compensation includes $6,709 auto allowance.

(6) Other Compensation includes $40,000 relocation and legal expense reimbursement.

(7) Commissions paid in 2006.

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GRANTS OF PLAN BASED AWARDS

The following table sets forth certain information with respect to option awards and other plan-based awards granted during the fiscal year ended December 31, 2006 to our named executive officers:

Name	Grant Date ($)	All Other Stock Awards: Number of Shares of Stock or Units (#)	Exercise or Base Price of Option Awards ($)	Grant Date Fair Value of Stock Awards ($)
David A. Steinberg (1)	12/28/2006	500,000	—	$	11.11
Lawrence S. Winkler (2)	06/13/2006	25,000	—	$	6.51
	12/28/2006	100,000	—	$	11.11
Brian T. Westrick (3)	03/22/2006	28,000	—	$	6.46
	12/28/2006	50,000	—	$	11.11
Michael Walden (4)	03/22/2006	28,000	—	$	6.46
	12/28/2006	50,000	—	$	11.11
Andrew Zeinfeld (5)	06/13/2006	350,000	—	$	6.51
	12/28/2006	50,000	—	$	11.11

(1) Grant date fair value of 12/28/06 restricted stock grant as prescribed by FAS123(R) is $5,555,000. No option awards were granted.

(2) Grant date fair value of 6/13/06 and 12/28/06 restricted stock grants as prescribed by FAS123(R) are $162,750 and $1,111,000, respectively. No option awards were granted. Effective May 31, 2007 Mr. Winkler’s employment with us has terminated.

(3) Grant date fair value of 3/22/06 and 12/28/06 restricted stock grants as prescribed by FAS123(R) are $180,880 and $555,500, respectively. No option awards were granted.

(4) Grant date fair value of 3/22/06 and 12/28/06 restricted stock grants as prescribed by FAS123(R) are $180,880 and $555,500, respectively. No option awards were granted.

(5) Grant date fair value of 6/13/06 and 12/28/06 restricted stock grants as prescribed by FAS123(R) are $2,278,500 and $555,500, respectively. No option awards were granted.

Employment Agreements

We have entered into employment agreements with our named executive officers. The following discussion provides an overview of these agreements; it is not a complete description of all terms of the agreements. For the location of the agreements discussed below in our public SEC filings, please refer to the exhibit index in our Form 10-K for the year ended December 31, 2006.

In February 2000, we entered into an employment agreement with Mr. Steinberg, which was subsequently amended in March and May 2004. The agreement provides that we will employ Mr. Steinberg as our chief executive officer until May 31, 2008. The terms can be extended if we and Mr. Steinberg agree to do so 30 days prior to the end of the current term. Under this agreement, Mr. Steinberg receives an annual base salary to be established from time to time by the board of directors, which shall not be less than $290,000 per year, and he is eligible for an annual bonus equal to 65% of his then current annual salary based on the attainment of reasonable performance objectives established by the Compensation Committee of the Board of Directors. Mr. Steinberg’s annual base salary is currently $320,000. Pursuant to the May 2004 amendment, Mr. Steinberg was granted options to purchase 666,667 shares of our Common Stock, at an exercise price of $5.88 per share, 25% of which vested on the first anniversary of the date of grant and the remainder vest in equal quarterly installments over the following three years.

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Effective May 31, 2007, Mr. Winkler’s employment with us was terminated.

We entered into an employment agreement with Mr. Walden effective as of May 1, 2004. This employment agreement provided that we will employ Mr. Walden as Senior Vice President of Corporate Development. Under this agreement, Mr. Walden received an annual base salary of $150,000 to be reviewed annually, and is eligible for a bonus to be determined by the good faith discretion of the CEO based on Mr. Walden’s overall performance. Mr. Walden shall be eligible to participate in such profit-sharing, stock option, bonus, incentive and performance based award programs as are made available to any other executive employees of the Company. In 2006, Mr. Walden’s base salary was $225,000. Mr. Walden is currently President of InPhonic’s Subsidiary, 1010 Interactive LLC.

If Mr. Walden’s employment is terminated without cause, he would be entitled to three (3) month’s salary at the rate in effect at the time of termination either in one lump sum or three equal payments commencing as of the effective date of the termination.

During the term of his employment and for 12 months thereafter, Mr. Walden has agreed not to (i) render any service ( as an employee, officer, director, consultant or otherwise) to any unit or division of any entity involved directly in the Business (as defined in the Employment Agreement); (ii) make or hold any investment in any entity in the Business other than the ownership of not more than 5% of the listed stock of any publicly traded entity; or (iii) contact any customer or employee to request, induce or attempt to induce any such customer or employee to terminate its business relationship, agreement, or employment with the Company.”

We entered into an employment agreement with Mr. Zeinfeld on December 20, 2006. This agreement provides that we will employ Mr. Zeinfeld as President of E-Commerce. Under the agreement, Mr. Zeinfeld will receive an initial base salary of $300,000 per annum. In addition, Mr. Zeinfeld will have the opportunity to earn an annual bonus of $100,000 for on-target performance, as such terms shall be defined by the CEO and Mr. Zeinfeld. We also agreed to reimburse Mr. Zeinfeld for up to $15,000 of third party moving expenses incurred by Mr. Zeinfeld in connection with his relocation to the Washington, D.C. area and up to $20,000 for any interim housing expenses. In addition, we agreed to reimburse Mr. Zeinfeld for up to $5,000 in legal expenses incurred in negotiating the employment agreement. On June 13, 2006, pursuant to his employment, Mr. Zeinfeld received 350,000 shares of our restricted common stock. The shares will vest over a four-year period, such that 25% of the shares will vest on the first anniversary of May 1, 2006 (the vesting commencement date) and the remainder will vest ratably every 90 days over the remainder of the four-year period.

During the term of his employment and for 12 months thereafter, Mr. Zeinfeld has agreed not to (i) render any service (as an employee, officer, director, consultant or otherwise) to any unit or division of any entity involved directly in the Business (as defined in the employment agreement)); (ii) make or hold any investment in any entity in the Business other than the ownership of not more than 5% of the listed stock of any publicly traded entity; or (iii) contact any customer or employee of the Company to request, induce or attempt to induce such customer or employee to terminate any business relationship, agreement or employment with the Company, provided however, if Mr. Zeinfeld is terminated for Good Reason or without Cause, the 12 month period shall be reduced to six months.

We enter into agreements with substantially all of our employees containing confidentiality provisions. We enter into non-competition agreements with our executive officers and key employees. The non-competition agreements prohibit these employees from competing with us or disclosing confidential information about us for a period up to 12 months after their employment with our company ends.

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OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END

The following table summarizes the outstanding option awards and other plan-based awards held by our named executive officers.

Name	Option Awards						Stock Awards
	Number of Securities Underlying Unexercised Options (#) Exercisable	Number of Securities Underlying Unexercised Options (#) Unexercisable	Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#)	Option Exercise Price ($)		Option Expiration Date	Number of Shares or Units of Stock That Have Not Vested (#)(1)	Market Value of Shares or Units of Stock That Have Not Vested ($)		Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)	Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested
David A. Steinberg	458,332	208,335	—	$	5.88	5/13/2014	500,000	$	5,545,000	—	—
							56,241	$	623,713	—	—
Lawrence S. Winkler(2)	133,334	—	—	$	5.88	1/29/2014	112,482	$	1,247,425	—	—
	95,833	4,167	—	$	5.88	5/13/2014	34,369	$	381,152	—	—
							25,000	$	277,250	—	—
							100,000	$	1,109,000	—	—
Brian T. Westrick	2,709	—	—	$	7.80	3/07/2012	28,000	$	310,520	—	—
	2,606	10,417	—	$	5.88	1/29/2014	16,874	$	187,133	—	—
	5,031	25,152	—	$	5.88	5/13/2014	50,000	$	554,500	—
	10,938	15,315	—	$	10.00	10/26/2014
	8,750	11,250	—	$	16.49	7/25/2015
Michael Walden	2,605	10,419	—	$	5.88	1/29/2014	16,874	$	187,133	—	—
	1,835	10,774		$	5.88	5/13/2014	28,000	$	310,520	—	—
	—	17,500	—	$	10.00	10/26/2014	50,000	$	554,500	—	—
	8,750	11,250	—	$	16.49	7/25/2015
Andrew Zeinfeld	—	—	—		—	—	350,000	$	3,881,500	—	—
							50,000	$	554,500	—	—

(1) Each restricted stock award vests over a 4 year period with 25% vesting at year one and the remainder vesting quarterly over the next 3 years.

(2) Effective May 31, 2007, Mr. Winkler’s employment with us has terminated.

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OPTION EXERCISES AND STOCK VESTED

The following table sets forth certain information concerning option exercises by our named executive officers and vesting of our Common Stock held by them during the fiscal year ended December 31, 2006:

Name	Option Awards			Stock Awards
	Number of Shares Acquired on Exercise (#)	Value Realized on Exercise ($)(1)		Number of Shares Acquired on Vesting (#)	Value Realized on Vesting ($)(2)
David A. Steinberg	—		—	6,248	$	71,977
				6,248		38,488
				6,248		51,858
				25,015		144,837
				43,759	$	307,160
Lawrence S. Winkler (3)	100,000	$	496,500	50,000	$	289,674
				12,496		103,717
				12,496		76,975
				12,507		141,204
				12,496		143,954
				100,025	$	755,524
Brian T. Westrick	975	$	5,762	7,504	$	43,448
	2,604		15,429	1,874		15,554
	7,812		45,432	1,874		11,544
	19,145		107,960	1,874		21,588
	30,536	$	174,583	13,126	$	92,135
Michael Walden	5,114	$	11,064	7,504	$	58,531
	1,250		3,763	1,874		15,554
	2,196		10,852	1,874		11,544
	3,780		18,680	1,874		21,588
	8,750		7,192	13,126	$	107,218
	2,526		12,455
	5,615		27,686
	29,231	$	91,693
Andrew Zeinfeld	—		—	—		—

(1) Based on the difference between the market price of our Common Stock on the date of exercise and the exercise price.

(2) Based on the market price of our Common Stock on the vesting date.

(3) Effective May 31, 2007, Mr. Winkler’s employment with us has terminated.

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POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE OF CONTROL

If we terminate Mr. Steinberg’s employment without cause or Mr. Steinberg terminates his employment for good reason, Mr. Steinberg is entitled to continue to receive his base salary for one year. If Mr. Steinberg’s employment is terminated without cause within 180 days of a change of control, he is entitled to continue to receive his base salary for one year and 50% of his unvested options will immediately become vested and exercisable.

If Mr. Walden’s employment is terminated without cause, he would be entitled to three (3) month’s salary at the rate in effect at the time of termination provided that Mr. Walden does not obtain employment or a consulting engagement during such three (3) month period and any rights or benefits available under applicable employee benefit programs then in effect in which Mr. Walden participates.

If Mr. Zeinfeld’s employment is terminated coincident with or within 180 days of a Change in Control (as defined in the employment agreement), fifty percent (50%) of the unvested shares of Restricted Stock will vest immediately following the Change in Control.

The initial term of the employment agreement is four years, and shall renew upon mutual agreement of Mr. Zeinfeld and the Company within 30 days prior to expiration of the term. If we terminate Mr. Zeinfeld’s employment (i) without Cause, or (ii) if Mr. Zeinfeld resigns for Good Reason, Mr. Zeinfeld is entitled to receive (i) an amount equal to his base salary for a one-year period; (ii) the pro rata portion of any bonus in effect at the time of termination; (iii) any rights or benefits available under employee benefit plans then in effect, in which Mr. Zeinfeld participated; (iv) reimbursement of expenses in accordance with section 5.2 of the employment agreement; and (v) any vested stock options or restricted stock.

Termination Upon a Change in Control

Name	Cash Payment		Equity Acceleration		Benefits and Perquisites
David A. Steinberg	$	320,000	$	3,627,069	$	15,000
Michael Walden	$	56,250		—		15,000
Andrew Zeinfeld	$	300,000	$	2,218,000		—

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DIRECTOR COMPENSATION

The following table sets forth information concerning the compensation earned during the last fiscal year by each individual who served as a director at any time during the fiscal year:

Name	Fees Earned or Paid in Cash ($)		Stock Awards ($)		Option Awards ($)		Non-Equity Incentive Plan Compensation ($)	Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)	All Other Compensation ($)	Total ($)
John Sculley	$	89,583	$	115,366	$	9,167	—	—	—	$	214,117
Blake Bath (1)	$	15,000	$	8,796		—	—	—	—	$	23,796
Ira Brind	$	109,000	$	115,366	$	9,167	—	—	—	$	233,534
Robert A. Fox (2)	$	15,000	$	60,900	$	9,167	—	—	—	$	85,067
Laurence E. Harris (3)	$	94,000	$	54,466		—	—	—	—	$	148,466
Jay C. Hoag (4)	$	102,500	$	115,366	$	9,167	—	—	—	$	227,034
Jack F. Kemp	$	76,833	$	115,366	$	23,260	—	—	—	$	215,459
Thomas E. Wheeler (5)	$	20,000	$	153,063	$	29,230	—	—	—	$	202,293
Mark Levine	$	8,750		—		—	—	—	—	$	8,750

(1) Mr. Bath was appointed our Board of Directors on October 13, 2006 and was granted 10,000 shares of restricted stock with 70% vesting at year 1 and 30% vesting at year 2.

(2) Mr. Fox retired from the Board of Directors on March 22, 2006.

(3) Mr. Harris was appointed our Board of Directors on March 22, 2006 and was granted 15,480 shares of restricted stock with 70% vesting at year 1 and 30% vesting at year 2.

(4) Mr. Hoag retired from the Board of Directors on October 13, 2006.

(5) Mr. Wheeler retired from the Board of Directors on June 22, 2006.

In 2006, members of our Board of Directors received $10,000 in annual cash compensation for their service on the Board of Directors. In addition, members of the Board of Directors serving on the Compensation Committee, Nominating and Governance Committee or Mergers and Acquisitions Committee received annual cash compensation of $5,000 per committee. Members of the Audit Committee received $7,500 in annual cash compensation and the chairman of the Audit Committee received $10,000 in annual cash compensation. The employee member of our Board of our Directors received no additional compensation for his service on the Board. The members of our Board of Directors were reimbursed for travel, lodging and other reasonable expenses incurred in attending Board of Directors and committee meetings. Under our 2004 Equity Incentive Plan, non-employee directors received grants of options to purchase up to 30,000 shares of our Common Stock upon joining our Board of Directors, and awards of 7,000 shares of restricted stock and grants of options to purchase 3,000 shares of our Common Stock annually.

In March 2006, the Compensation Committee approved a new outside director compensation program for non-employee directors for the 2006 fiscal year. Pursuant to this program, directors who are not employees receive an annual cash retainer fee of $50,000 and a fee of $1,000 for participation in each meeting of the Board of Directors or meeting of a committee of the Board of Directors. For service on the Audit Committee, each regular member shall receive annual cash compensation of $10,000, while the chairman of the Audit Committee will receive $50,000 annual cash compensation, in recognition of the additional time commitment required of the chairman in reviewing the Company’s continuing compliance with Section 404 of the Sarbanes-Oxley Act of 2002. Non-employee directors will also receive annual restricted stock awards valued at approximately $100,000 on the date of approval of the award, which will be issued under the 2004 Equity Incentive Plan and will vest over a two-year period. For the 2006 fiscal year, members of the Board of Directors received an award of an aggregate of 15,480 shares of restricted stock, with 10,836 shares vesting on March 22, 2007 and the remainder vesting on March 22, 2008. Directors will also be reimbursed for travel, lodging and other reasonable expenses related to attendance at Board of Directors and committee meetings.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table sets forth information regarding the beneficial ownership of our Common Stock as of May 21, 2007, unless otherwise indicated, by (1) all stockholders known by us to beneficially own more than five percent of the outstanding Common Stock, (2) each of the directors, (3) each of our executive officers named in the Summary Compensation Table and (4) all of our directors and executive officers as a group. We have relied upon information provided to us by our directors and executive officers and copies of documents sent to us that have been filed with the Securities and Exchange Commission by others for purposes of determining the number of shares each person beneficially owns. Beneficial ownership is determined in accordance with the rules and regulations of the Securities and Exchange Commission and generally includes those persons who have voting or investment power with respect to the securities. Except as otherwise indicated, and subject to applicable community property laws, the persons named in the table have sole voting and investment power with respect to all shares of the Company’s Common Stock beneficially owned by them. Shares of our Common Stock subject to options or warrants that are exercisable within 60 days of May 21, 2007 are also deemed outstanding for purposes of calculating the percentage ownership of that person, and if applicable, the percentage ownership of executive officers and directors as a group, but are not treated as outstanding for the purpose of calculating the percentage ownership of any other person. Percentages of shares beneficially owned are based on 36,964,003 shares of our Common Stock outstanding as of May 21, 2007.

Name and Address of Beneficial Owner (1)	Number of Shares Owned	Percent Owned
Directors, Nominees and Executive Officers
David A. Steinberg (2)	4,973,575	13.3	%
Brian T. Westrick (3)	137,867	*
Brian J. Curran (4)	257,797	*
Lawrence S. Winkler (5)	475,778	1.3	%
Andrew B. Zeinfeld (6)	401,500	1.1	%
Michael Walden (7)	106,841	*
Blake Bath (8)	20,000	*
Ira Brind (9)	139,288	*
Laurence E. Harris (10)	15,480	*
Jack F. Kemp (11)	69,731	*
John Sculley (12)	443,664	1.2	%
Thomas Wheeler (13)	24,898	*
All directors and executive officers as a group (12 persons) (14)	7,066,419	18.6	%
Five Percent Stockholders (15):
The Goldman Sachs Group, Inc. (16)	5,095,806	13.8	%
FMR Corporation (17)	3,924,800	10.6	%
Trafelet & Company, LLC (18)	2,561,100	6.9	%
S.A.C. Capital Advisors. LLC (19)	1,904,346	5.2	%
MSD Capital, LP (20)	1,864,700	5.0	%
Vardon Capital, LLC (21)	1,852,225	5.0	%

 * less than 1%

(1) Unless otherwise indicated, the address of each stockholder is c/o InPhonic, Inc., 1010 Wisconsin Avenue, Suite 600, Washington, DC 20007.

(2) Includes (1) 296,817 shares beneficially owned by a trust created for the benefit of Mr. Steinberg’s children, (2) 50,000 shares held by a family-owned limited liability company created for estate planning purposes, (3) 541,665 shares issuable upon exercise of vested stock options and (4) 549,993 shares of restricted stock that are subject to vesting. Mr. Steinberg shares dispositive and voting control over these shares. Mr. Steinberg disclaims beneficial ownership of these shares except to the extent of his pecuniary interest.

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(3) Includes (a) 44,867 shares issuable upon exercise of vested stock options and (b) 93,000 shares of restricted stock that are subject to vesting.

(4) Includes 250,000 shares of restricted stock that are subject to vesting.

(5) Includes (a) 133,334 shares issuable upon exercise of vested stock options and (b) 259,355 shares of restricted stock that are subject to vesting. Effective May 31, 2007, Mr. Winkler’s employment with us has terminated.

(6) Includes 400,000 shares of restricted stock that are subject to vesting.

(7) Includes (a) 22,716 shares issuable upon exercise of vested stock options and (b) 84,125 shares of restricted stock that are subject to vesting.

(8) Includes 10,000 shares of restricted stock that are subject to vesting.

(9) Includes (a) 7,667 shares issuable upon exercise of vested options, (b) 17,480 shares of restricted stock that are subject to vesting, (c) 23,490 shares beneficially owned by Brind Investment Partners II, of which Mr. Brind is a partner, and as to which shares Mr. Brind shares dispositive and voting control. Mr. Brind disclaims beneficial ownership of these shares except to the extent of his pecuniary interest. The address of Mr. Brind is c/o Brind Investment Partners II, 1926 Arch Street, Philadelphia, PA 19103.

(10) Includes 15,480 shares of restricted stock that are subject to vesting.

(11) Includes (a) 11,455 shares of common stock beneficially owned by the Jack Kemp Family Trust, of which Mr. Kemp disclaims beneficial ownership of these shares except to the extent of his pecuniary interest, (b) 52,251 shares issuable upon exercise of vested options, and (c) 17,480 shares of restricted stock that are subject to vesting .

(12) Includes (a) 130,002 shares issuable upon exercise of vested options and (b) 17,480 shares of restricted stock subject to vesting. Also includes (c) 2,292 shares owned by John Sculley Irrevocable Trust Udt 12/30/97 FBO Oliver Allnatt, and (d) 2,292 shares owned by John Sculley Irrevocable Trust Udt 12/30/97 FBO Madeline Allnatt of which Mr. Sculley disclaims beneficial ownership of these shares except to the extent of his pecuniary interest. The address of Mr. Sculley is 152 West 57th Street, 23rd floor, New York, New York 10019.

(13) Includes (a) 9,750 shares issuable upon exercise of vested options and (b) 15,148 shares of restricted stock that are subject to vesting.

(14) Includes (a) 943,252 shares issuable upon exercise of vested options and (b) 1,729,541 shares of restricted stock that are subject to vesting.

(15) Mr. Steinberg is also a holder of greater than 5% of our Common Stock.

(16) As reported on Form 4 filed on April 5, 2007 by The Goldman Sachs Group, Inc. (“GS Group”) and Goldman, Sachs & Co. (“Goldman Sachs” and together with GS Group, the “Reporting Persons”). Goldman Sachs is a wholly-owned subsidiary of GS Group. The shares reported herein may be deemed to be beneficially owned indirectly by GS Group by reason of the direct ownership of such securities by Goldman Sachs or another wholly-owned subsidiary of GS Group (collectively, “Goldman”). The “Reporting Persons” have shared voting and dispositive power. The address is 85 Broad Street, New York, New York 10004.

(17) As reported on a Schedule 13G filed on March 12, 2007 by FMR Corp. (“FMR”) and Edward C. Johnson 3d, Chairman and principal shareholder of FMR (“Mr. Johnson”), the shares are beneficially owned by Fidelity Management & Research Company (“Fidelity Research”) as an investment adviser to various investment companies (the “Funds”), with Mr. Johnson, FMR and the Funds each having the sole power to dispose of such shares and the Funds’ Boards of Trustees having the sole power to vote or direct the vote of such shares. The address is 82 Devonshire Street, Boston, Massachusetts 02109.

(18) As reported on a Schedule 13G filed on February 14, 007 by Trafelet & Company, LLC, and Remy W. Trafelet, its managing member. Represents shares as to which Trafelet has shared voting and dispositive power. The address is 900 Third Avenue, 5 th Floor, New York, NY 10022.

(19) As reported on a Schedule 13G filed on March 7, 2007 by: (i) S.A.C. Capital Advisors, LLC, (“SAC Capital Advisors”) with respect to shares of Common Stock, beneficially owned by S.A.C. Capital Associates, LLC (“SAC Capital Associates”) and S.A.C. MultiQuant Fund, LLC (“SAC MultiQuant”); (ii) S.A.C. Capital Management, LLC, (“SAC Capital Management”) with respect to shares beneficially owned by SAC Capital Associates and SAC MultiQuant; (iii) CR Intrinsic Investors, LLC (“CR Intrinsic Investors”) with respect to shares beneficially owned by CR Intrinsic Investments, LLC (“CR Intrinsic Investments”); and

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(iv) Steven A. Cohen with respect to shares beneficially owned by SAC Capital Advisors, SAC Capital Management, SAC Capital Associates, SAC MultiQuant, CR Intrinsic Investors and CR Intrinsic Investments. The address of the principal business office of (i) SAC Capital Advisors, CR Intrinsic Investors and Mr. Cohen is 72 Cummings Point Road, Stamford, Connecticut 06902 and (ii) SAC Capital Management is 540 Madison Avenue, New York, New York 10022.

(20) As reported on a Schedule 13G filed on May 7, 2007 by MSD Capital, LP and PT Investments I, LP. Represents shares as to which MSD Capital, LP and PT Investments I, LP have shared voting and dispositive power. The address of both is 645 Fifth Avenue, 21st Floor, New York, NY 10022.

(21) As reported on a Schedule 13G filed on February 14, 2007 by (i) Vardon Partners, L.P., a Delaware limited partnership; (ii) Vardon Partners II, L.P., a Delaware limited partnership; (iii) Vardon Focus Fund, L.P., a Delaware limited partnership; (iv) Vardon Focus Fund II, L.P., a Delaware limited partnership; (v) Vardon Continuum Fund, L.P. (formerly known as Vardon Hybrid Fund, L.P.), a Delaware limited partnership (together the “Domestic Funds”); (vi) Vardon International, Ltd., a Cayman Islands exempted company; (vii) Vardon International BP, Ltd., a Cayman Islands exempted company; (viii) Vardon Focus Fund International, Ltd., a Cayman Islands exempted company; (ix) Vardon Focus International BP, Ltd., a Cayman Islands exempted company (together the “Offshore Funds”); (x) Vardon Capital, L.L.C., a Delaware limited liability company (“VC”), with respect to shares of Common Stock held in the Domestic Funds; (xi) Vardon Capital Management, L.L.C., a Delaware limited liability company an SEC registered Investment Adviser (“VCM”), with respect to shares of Common Stock held in the accounts of the Domestic Funds, Offshore Funds and certain other separate account clients managed by VCM (the “Managed Accounts”, and together with the Domestic Funds and Offshore Funds, the “Advisory Clients”) for which VCM serves as the investment manager and (xii) Richard W. Shea, Jr. (“Mr. Shea”), the sole managing member of VC and VCM, with respect to shares of Common Stock deemed to be beneficially owned by VC and VCM. The address of the Domestic Funds, is 120 West 45th Street, 17th Floor, New York, NY 10036, and the address of the Offshore Funds, is Admiral Financial Center, P.O. Box 32021 SMB, 90 Fort Street, Grand Cayman, Cayman Islands, B.W.I.

EQUITY COMPENSATION PLAN INFORMATION

The following table provides information with respect to the equity securities that are authorized for issuance under our equity compensation plans as of December 31, 2006:

Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants and rights	Weighted-average exercise price of outstanding options, warrants and rights		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in first column)
Equity compensation plans approved by security holders	7,007,752	$	5.20	434,272
Equity compensation plans not approved by security holders	—		—	—
Total	7,007,752	$	5.20	434,272

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Policy Statement

We have a policy whereby all transactions between us and our officers, directors and affiliates will be on terms no less favorable to us than could be obtained from unrelated third parties. These transactions must be approved by the Audit Committee of our Board of Directors. The transactions set forth below were conducted

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under application of this policy and we believe were no less favorable to us than we would have obtained in an arms length transaction with an unaffiliated third party.

Issuance of Options and Restricted Stock

In March 2006, we awarded each of Messrs. Brind, Hoag, Kemp, Sculley, Wheeler and Harris 15,480 shares of restricted stock.

In November 2006, we awarded Mr. Wheeler, a former director, 8,504 shares of restricted stock for serving as chair of our advisory committee and Mr. Bath was awarded 10,000 shares of restricted stock.

Law Firm “Of Counsel” Serving on Board of Directors

Mr. Laurence E. Harris, a director of the Company since March 2006, is “of counsel” in the law firm of Patton Boggs LLP (“Patton Boggs”). The total cost of various legal services provided by Patton Boggs in 2006 was $2,219,315. Mr. Harris does not share in any of the fees received by Patton Boggs from the Company.

Investments by Executive Officers

Mr. Steinberg is a trustee of the KKS DAS DES TRUST, which is a limited partner of TCV V, L.P. and TCV VI, L.P. Mr. Hoag, one of our former directors, is a member of Technology Crossover Management V, L.L.C., (“TCM”). TCM is the general partner of TCV V, L.P. and TCV VI, L.P. The KKS DAS DES TRUST’s investment comprises less than 0.1% of the capital under management of TCV V, L.P. and TCV VI, L.P., respectively. Neither TCV V, L.P. nor TCV VI, L.P. owns shares of our common stock.

Sale of Stock by Executive Officers to our Lending Group

Concurrent with our entering into our term loan in November 2006, affiliates of Mr. Steinberg established for trusts and estates purposes and Mr. Winkler sold an aggregate of 450,000 and 100,000 shares of common stock to our lending group, respectively.

Director Independence

The Board of Directors has determined that each member of the Board of Directors, other than Mr. Steinberg, is independent in accordance with applicable rules of The NASDAQ Global Market and the rules and regulations of the Securities and Exchange Commission and have made such determination based on the fact that none of such persons have had, or currently have, any relationship with the Company or its affiliates or any executive officer of the Company or his or her affiliates, that would currently impair their independence, including, without limitation, any commercial, industrial, banking, consulting, legal, accounting, charitable or familial relationship. The Board of Directors has an Audit Committee, a Compensation Committee, a Nominating and Governance Committee and a Mergers and Acquisitions Committee. Each member of the Audit Committee, Compensation Committee and the Nominating and Governance Committee is independent as defined under current NASDAQ listing standards.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

Independent Registered Public Accounting Firm

The Audit Committee has selected the firm of Grant Thornton LLP (“Grant Thornton”) to serve as the Independent Registered Public Accounting Firm for the fiscal year ending December 31, 2007, subject to the ratification by our stockholders. Grant Thornton currently serves as the Company’s Independent Registered Public Accounting Firm.

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On September 12, 2005, the Audit Committee of the Board of Directors dismissed KPMG LLP (“KPMG”) as our Independent Registered Public Accounting Firm, effective immediately.

The audit reports of KPMG on our consolidated financial statements as of and for the years ended December 31, 2004 and 2003, did not contain an adverse opinion or disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles, except that the audit reports as of and for the years ended December 31, 2004 and 2003, contained separate paragraphs stating that we adopted EITF 00-21, Revenue Arrangements with Multiple Deliverables, effective July 1, 2003.

During the two most recently completed fiscal years prior to KPMG’s dismissal and through September 12, 2005, there were no disagreements with KPMG on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of KPMG, would have caused KPMG to make reference to the subject matter of the disagreement in connection with its reports on our financial statements for the fiscal years ended December 31, 2004 and 2003. In addition, there were no “reportable events” (as defined in Item 304(a)(1)(v) of Regulation S-K) during the two most recently completed fiscal years prior to KPMG’s dismissal and through September 12, 2005.

We provided KPMG with a copy of the disclosures above and requested that KPMG furnish us with a letter addressed to the SEC stating whether or not it agreed with the above statements. A copy of that letter, dated September 20, 2005, was filed as Exhibit 16.1 to our report on Form 8-K filed with the SEC on September 20, 2005.

On September 19, 2005, our Audit Committee engaged Grant Thornton as our Independent Registered Public Accounting Firm to audit our financial statements and internal controls over financial reporting for the year ending December 31, 2005.

Prior to engaging Grant Thornton, we did not consult with Grant Thornton during the two most recently completed fiscal years prior to KPMG’s dismissal and through September 19, 2005 regarding (i) either the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on our financial statements, and neither was a written report nor oral advice provided to us that Grant Thornton concluded was an important factor considered by us in reaching a decision as to the accounting, auditing or financial reporting; or (ii) any matter which was the subject of either a “disagreement” or a “reportable event” (as each is defined in Items 304(a)(1)(iv) and (v) of Regulation S-K, respectively).

Fees and Services

The following table summarizes fees billed to the Company by Grant Thornton for the fiscal year 2006 and the fees billed to the Company by Grant Thornton and KPMG for audit and other work performed in fiscal year 2005 ($’s in thousands):

	2006				2005
Services	Grant Thornton		KPMG		Grant Thornton		KPMG
Audit Fees (a)	$	2,136	$	—	$	1,437	$	1,381
Audit-Related Fees (b)		—		—		62		—
Tax Fees (c)		—		—		—		101
All Other Fees (d)		—		—		—		—
Total Fees	$	2,136	$		$	1,499	$	1,482

(a) The audit fees for the years ended December 31, 2006 and 2005 were for professional services rendered during the audits of the Company’s consolidated financial statements and its controls over financial

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reporting, for reviews of the Company’s consolidated financial statements included in the Company’s quarterly reports on Form 10-Q and for reviews of other filings made by the Company with the Securities and Exchange Commission (“SEC”).

(b) Audit-related fees consist of fees for assurance and related services that are reasonably related to the performance of the audit and the review of our financial statements and which are not reported under “Audit Fees.” These services relate to due diligence and accounting advice related to mergers and acquisitions and other accounting-related matters.

(c) Tax fees consist of fees for tax compliance, tax advice and tax planning services.

(d) All other fees consist of fees for products and services other than the services reported above.

Pre-Approval of Non-Audit Services

Our Audit Committee has established a policy governing our use of Grant Thornton for non-audit services. Under the policy, management may use Grant Thornton for non-audit services that are permitted under SEC rules and regulations, provided that management obtains the Audit Committee’s approval before such services are rendered. In fiscal years 2006 and 2005, all audit, audit related, and tax fees were pre-approved by the Audit Committee. Under SEC rules, subject to certain permitted de minimis criteria, pre-approval is required for all professional services rendered by our principal accountant for all services rendered on or after May 6, 2003. We are in compliance with these SEC rules.

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PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

The following documents are filed as part of this Annual Report:

(1) Index to Financial Statements

	Page Number
Report of Grant Thornton LLP, Independent Registered Public Accounting Firm	F-2
Report of KPMG, LLP, Independent Registered Public Accounting Firm	F-4
Consolidated Balance Sheets as of December 31, 2005 and 2006	F-5
Consolidated Statements of Operations for the years ended December 31, 2004, 2005 and 2006	F-6
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2004, 2005 and 2006	F-7
Consolidated Statements of Cash Flows for the years ended December 31, 2004, 2005 and 2006	F-8
Notes to Consolidated Financial Statements	F-9

(2) Financial Statement Schedules

The following consolidated financial statement schedule of InPhonic, Inc. and subsidiaries is filed herewith:

	Page Number
Report of Grant Thornton LLP, Independent Registered Public Accounting Firm	S-1
Report of KPMG LLP, Independent Registered Public Accounting Firm	S-2
Schedule II—Valuation and Qualifying Accounts	S-3

All other schedules have been omitted because the information required to be shown in the schedules is not applicable or is included elsewhere in our financial statements or the notes thereto.

(3) Exhibits

Exhibit No.	Description
2.1(c)(d)	Asset Purchase Agreement dated as of December 17, 2004, between A1 Wireless USA, Inc. and CAIS Acquisition LLC
2.2(d)	First Amendment to the Asset Purchase Agreement dated as of December 17, 2004, between A1 Wireless USA, Inc., CAIS Acquisition LLC and InPhonic, Inc.
2.3(c)(e)	Asset Purchase Agreement dated as of April 26, 2005, between VMC Satellite, Inc., InPhonic, Inc. and CAIS Acquisition II, LLC
2.4(f)(g)	First Amendment to the Asset Purchase Agreement dated as of September 1, 2005, by and among CAIS Acquisition II, LLC, InPhonic, Inc., RR Holding, Inc. (formerly known as VMC Satellite, Inc.) and Rick Rahim
3.1(a)	Eleventh Amended and Restated Certificate of Incorporation of InPhonic, Inc.
3.2(a)	Third Amended and Restated Bylaws of InPhonic, Inc.

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Exhibit No.	Description
4.1(a)	Specimen stock certificate for shares of common stock of InPhonic, Inc.
10.1(a)	Seventh Amended and Restated Investor Rights Agreement dated as of June 12, 2003 by and among InPhonic, Inc. and the Purchasers listed therein
10.2	Credit Agreement dated as of November 7, 2006 among InPhonic, Inc., The lenders from time to time, Goldman Sachs Credit Partners L.P., and Citicorp North America Inc, as Administrative Agent.
10.3	Amendment No. 1 dated February 6, 2007 to Credit Agreement dated as of November 7, 2006 among InPhonic, Inc., the lenders from time to time, Goldman Sachs Credit Partners, L.P. and Citicorp North America Inc., as Administrative Agent.
10.4(c)	Amendment No. 2 to Credit Agreement dated as of March 30, 2007, to the Credit Agreement dated as of November 7, 2006 among InPhonic, Inc. the lenders from time to the and Citicorp North America, Inc. as Administrative Agent.
10.5	Amendment No. 3 to Credit Agreement dated as of April 9, 2007, to the Credit Agreement dated as of November 7, 2006, as amended, among InPhonic, Inc. the lenders from time to the and Citicorp North America, Inc. as Administrative Agent.
10.6	Amendment No. 4 to Credit Agreement dated as of April 23, 2007, to the Credit Agreement dated as of November 7, 2006, as amended, among InPhonic, Inc. the lenders from time to the and Citicorp North America, Inc. as Administrative Agent.
10.7	Amendment No. 5 to Credit Agreement dated as of May 1, 2007, to the Credit Agreement dated as of November 7, 2006, as amended, among InPhonic, Inc. the lenders from time to the and Citicorp North America, Inc. as Administrative Agent.
10.8	Warrant Agreement dated as of November 7, 2006 by and between InPhonic, Inc., Goldman, Sachs & Co., Citicorp North America, Inc. and AP InPhonic Holdings, LLC
10.9(a)	Form of Assignment of Invention, Nondisclosure and Noncompetition Agreement
10.10(a)	Employment Agreement dated as of February 4, 2000 by and between InPhonic, Inc. and David A. Steinberg, as amended by Amendment No. 1 dated March 1, 2004 and Amendment No. 2 dated May 14, 2004
10.11(k)	Employment Agreement between InPhonic, Inc. and Lawrence S. Winkler, entered into on July 25, 2005 and effective as of January 19, 2004
10.12(n)	Employment Agreement between InPhonic, Inc. and Andrew B. Zeinfeld, entered into on December 20, 2006
10.13(n)	Employment Agreement between InPhonic, Inc. and Brian J. Curran, entered into on December 20, 2006
10.14(a)	Employment Agreement effective April 2, 2002, by and between InPhonic, Inc. and Frank C. Bennett, III
10.15(a)	Lease dated as of February 26, 2001 by and between Rouse Commercial Properties, LLC, Rouse Office Management, LLC and InPhonic, Inc., as amended by First Amendment to Lease, dated May 29, 2002
10.16(l)	Second Amendment to Lease dated September 23, 2004 by and between Inglewood Business Park III, LLC and Inglewood Business Park IV, LLC (assignees of Rouse Commercial Properties, LLC), by MTM Builder/Developer, Inc. and InPhonic, Inc., as amended by Third Amendment to Lease made and entered into as of July 19, 2005
10.17(a)	Lease Agreement dated April 29, 2003 by and between Waterfront Center Limited Partnership and InPhonic, Inc., as amended by Addendum No. 1, dated September 9, 2003 and Addendum No. 2, dated May 14, 2004

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Exhibit No.	Description
10.18(l)	Deed of Lease by and between Parkridge Phase Two Associates Limited Partnership and InPhonic, Inc. dated July 27, 2005
10.19(m)	First Amendment to Lease by and between Parkridge Phase Two Associates Limited Partnership and InPhonic, Inc. dated November 8, 2005
10.20(h)	Sublease dated November 17, 2004, by and between CareerBuilder, LLC and InPhonic, Inc.
10.21(a)(b)	Premier I-Dealer Agreement dated March 1, 2001 by and between T-Mobile USA, Inc., and its subsidiaries and affiliates and InPhonic, Inc. and its affiliates and related entities, as amended
10.22(o)(r)	Cingular Wireless Non-Exclusive Dealer Agreement and Cingular Wireless Internet Dealer and Master Dealer Addendum (“the Agreements”) with Cingular Wireless II, LLC (“Cingular”), effective October 1, 2006
10.23(c)(j)	Asset Purchase Agreement dated as of May 26, 2005, between FONcentral.com, Inc. and FON Acquisition, LLC
10.24(a)	1999 Amended and Restated Stock Incentive Plan
10.25(h)	2004 Equity Incentive Plan
10.26(k)	Form of Stock Option Agreement for options granted under the 2004 Equity Incentive Plan
10.27(k)	Form of Restricted Stock Agreement for awards granted under the 2004 Equity Incentive Plan
10.28(q)	Outside Director Compensation Summary
10.29(p)	First Amendment to Employment Agreement effective March 16, 2006 by and between InPhonic, Inc. and Lawrence S. Winkler
10.30	Employment Agreement effective May 1, 2004 by and between InPhonic, Inc. and Michael Walden.
16.1(n)	Letter from KPMG LLP to the Securities and Exchange Commission dated September 20, 2005
21.1	Subsidiaries of InPhonic, Inc.
23.1	Consent of Grant Thornton LLP, Independent Registered Public Accounting Firm
23.2 (s)	Consent of KPMG LLP, Independent Registered Public Accounting Firm
31.1	Rule 13a-14(a) Certification of Principal Executive Officer.
31.2	Rule 13a-14(a) Certification of Principal Financial Officer.
32.1	Section 1350 Certification of Principal Executive Officer.
32.2	Section 1350 Certification of Principal Financial and Accounting Officer.

(a) Incorporated by reference to our Registration Statement on Form S-1 (File No. 333-116420).

(b) Confidential treatment granted for certain portions of this Exhibit pursuant to Rule 406 under the Securities Act of 1933, as amended which portions are omitted and filed separately with the Securities and Exchange Commission.

(c) Confidential treatment granted for certain portions of this Exhibit pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended, which portions are omitted and filed separately with the Securities and Exchange Commission.

(d) Incorporated by reference to our Current Report on Form 8-K filed on January 10, 2005.

(e) Incorporated by reference to our Current Report on Form 8-K/A filed on December 22, 2006.

(f) Appendix 1 to this First Amendment to Asset Purchase Agreement has been omitted in reliance upon the rules of the Securities and Exchange Commission. A copy will be delivered to the Securities and Exchange Commission upon request.

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(g) Incorporated by reference to our Current Report on Form 8-K/A filed on December 22, 2006.

(h) Incorporated by reference to our Annual Report on Form 10-K for the year ended December 31, 2004.

(i) Incorporated by reference to our Quarterly Report on Form 10-Q for the three months ended March 31, 2005.

(j) Incorporated by reference to our Current Report on Form 8-K filed on June 3, 2005.

(k) Incorporated by reference to our Current Report on Form 8-K filed on July 29, 2005.

(l) Incorporated by reference to our Quarterly Report on Form 10-Q for the three months ended June 30, 2005.

(m) Incorporated by reference to our Quarterly Report on Form 10-Q for the three months ended September 30, 2005.

(n) Incorporated by reference to our Current Report on Form 8-K filed on December 22, 2006

(o) Incorporated by reference to our Quarterly Report on Form 10-Q for the three months ended September 30, 2006

(p) Incorporated by reference to our Annual Report on Form 10-K for the year ended December 31, 2005.

(q) Incorporated by reference to our Current Report on Form 8-K filed on March 24, 2006.

(r) Confidential treatment requested for certain portions of this Exhibit pursuant to Rule 24b-2 under the Securities Exchange Act of 1939, as amended which portions are omitted and filed separately with the Securities and Exchange Commission.

(s) To be filed by amendment.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

INPHONIC, INC.
By:	/S/ DAVID A. STEINBERG
	David A. Steinberg Chairman of the Board and Chief Executive Officer

Dated: May 31, 2007

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and the dates indicated:

Signature	Title	Date
/S/ DAVID A. STEINBERG David A. Steinberg	Chairman of the Board and Chief Executive Officer (Principal Executive Officer)	May 31, 2007
/S/ GEORGE Z. MORATIS George Z. Moratis	Principal Financial and Accounting Officer	May 31, 2007
/S/ JOHN SCULLEY John Sculley	Vice Chairman of the Board	May 31, 2007
/S/ BLAKE BATH Blake Bath	Director	May 31, 2007
/S/ IRA BRIND Ira Brind	Director	May 31, 2007
/S/ LAURENCE E. HARRIS Laurence E. Harris	Director	May 31, 2007
/S/ JACK F. KEMP Jack F. Kemp	Director	May 31, 2007

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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Page Number
Reports of Grant Thornton LLP, Independent Registered Public Accounting Firm	F-2
Report of KPMG LLP, Independent Registered Public Accounting Firm	F-6
Consolidated Balance Sheets at December 31, 2005 and 2006	F-7
Consolidated Statements of Operations for the years ended December 31, 2004, 2005 and 2006	F-8
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2004, 2005 and 2006	F-9
Consolidated Statements of Cash Flows for the years ended December 31, 2004, 2005 and 2006	F-10
Notes to Consolidated Financial Statements	F-11

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and shareholders

Inphonic, Inc.

We have audited the accompanying consolidated balance sheets of Inphonic, Inc. and subsidiaries (the Company) as of December 31, 2006 and 2005, and the related consolidated statements of operations, common stockholders’ equity, and cash flows for each of the two years in the period ended December 31, 2006. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2006 and 2005, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2006 in conformity with accounting principles generally accepted in the United States of America.

Our audits were conducted for the purpose of forming an opinion on the basic consolidated financial statements taken as a whole. Schedule II is presented for the purpose of additional analysis and is not a required part of the basic consolidated financial statements. This schedule has been subjected to the auditing procedures applied in the audit of the basic consolidated financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic consolidated financial statements taken as a whole.

As discussed in Note 2 to the Notes to Consolidated Financial Statements, the Company adopted SFAS No. 123R, “Share-Based Payment,” effective January 1, 2006.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of the Company’s internal control over financial reporting as of December 31, 2006, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and our report dated May 31, 2007 expressed an unqualified opinion on management’s assessment of the effectiveness of the Company’s internal control over financial reporting and an adverse opinion on the effectiveness of the Company’s internal control over financial reporting.

/s/ Grant Thornton LLP

McLean, Virginia

May 31, 2007

F-2

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Shareholders

Inphonic, Inc.

We have audited management’s assessment, included in the accompanying Management’s Report on Internal Control Over Financial Reporting, that Inphonic, Inc. (a Delaware Corporation) and subsidiaries did not maintain effective internal control over financial reporting as of December 31, 2006, because of the effect of material weaknesses in the lack of the appropriate level of financial and operational support or adequate internal communications to process internal controls, the revenue recognition of carrier commissions, bonuses and related allowances, revenue recognition of consumer cancellation fees and accounting for certain inventories based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Inphonic’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

A material weakness is a control deficiency, or combination of control deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. The following material weaknesses have been identified and included in management’s assessment:

• The Company did not maintain an appropriate level of staffing in operational and financial resources to provide the level of controls and analysis required on a timely basis. The failure to provide an adequate level of staffing resulted in certain accounting processes not being performed on a timely basis and the inability to maintain an adequate control environment. Maintaining appropriate levels of staffing is an important entity level control that is essential to maintaining the operating effectiveness of the underlying process level controls. This material weakness contributed to errors such as those relating to proper revenue recognition.

F-3

• The Company failed to establish effective communication channels between operations and finance to adequately identify and record certain transactions during 2006. The failure to provide this communication manifested itself in situations such as 1) a 2005 liability not being recorded on a timely basis, and 2) accounts receivable reserves not being appropriately stated based on the status of collection efforts involving operational personnel and 3) the deactivation reserve being understated due to the fact that certain consumer focused marketing programs impacting the customer deactivation behavior not being properly reflected in the underlying data and the deactivation reserve model. Establishing effective communication between the Finance Department and operational departments will allow the company to reflect any necessary commitments in the financial statements. This material weakness contributed to errors relating to accounting and reporting of revenue, expenses and liabilities.

• The Company did not utilize an appropriate methodology during the year in recording receivables from carriers associated with disputed deactivations, churn bonuses and other carrier related fees. Similar to other newly disputed amounts with carriers, revenue should not be recorded until the carrier agrees to pay the amount or collection is probable. The Company overstated accounts receivable by using a methodology that could not be supported by past experience and failed to include current results and other information received from the carriers.

In addition, the Company did not take steps to adequately identify and appropriately record certain commission and bonus revenues received during the year from various carriers in a timely and accurate manner. Recording amounts received from carriers in the appropriate accounts in a timely and accurate manner is an important business process control that is essential to the correct reporting of amounts in the financial statements. This material weakness contributed to errors relating to accounting and reporting for revenue and accounts receivable. This material weakness contributed to errors relating to accounting and reporting of revenues.

• The Company did not utilize an appropriate methodology during the year in recording certain Equipment Discount Provision fees due from consumers when contracts are cancelled within specified time periods and the wireless device is not returned to the Company. Specifically, the Company overstated revenue and account receivable by using collection percentages in excess of that which could be supported by past collection experience. As a result of this material weakness, an adjustment was necessary to properly record revenue and related receivables from these fees.

• The Company did not utilize an appropriate methodology during the year in recording rebates payable to eligible consumers. The Company understated the product rebate liability by not considering the appropriate amount of open periods eligible for rebates and the backlog of possible eligible rebates that had been delivered to outsourced payment service providers. Additionally, the Company failed to reflect actual rebate payments made to customers in its calculation of accrued product rebate liability. As a result of this material weakness, an adjustment was necessary to properly record product rebate expense and the related liability.

• The Company did not maintain adequate documentation to support the proper accounting for inventory movements related to phone shipments for refitting and refurbishment. Consequently, the Company overstated inventory or receivables by not maintaining adequate documentation of track phones provided to outside services providers. As a result of this material weakness, an adjustment was necessary to properly record costs of goods sold and amounts due from vendors.

• The Company did not consider all of the factors in determining its estimate of allowance for doubtful accounts. The proper accounting for the allowance for doubtful accounts requires that estimates must be made on the future collectibility of receivables. In the course of concluding on its analysis of reserves necessary related to accounts receivable, the Company concluded that an additional reserve was necessary for current receivables which based on historical experience will not be paid in the initial carrier payment. Receivables not paid in initial carrier payments are reclassified to disputed receivables and the related collection efforts are addressed through a specific process. We recommend that in future periods, management consider in its reserve an estimate of current

F-4

receivables expected to be reclassified as disputed receivables and the related collection experience. As a result of this material weakness, an adjustment was necessary to properly record the allowance for doubtful accounts and bad debt expense.

These material weaknesses were considered in determining the nature, timing, and extent of audit tests applied in our audit of the 2006 financial statements, and this report does not affect our report dated May 31, 2007, which expressed an unqualified opinion on those financial statements.

In our opinion, management’s assessment that Inphonic, Inc. and Subsidiaries did not maintain effective internal control over financial reporting as of December 31, 2006, is fairly stated, in all material respects, based on Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Also in our opinion, because of the effect of the material weaknesses described above on the achievement of the objectives of the control criteria, Inphonic, Inc. and Subsidiaries has not maintained effective internal control over financial reporting as of December 31, 2006, based on Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

/s/    Grant Thornton LLP

McLean, Virginia

May 31, 2007

F-5

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders

InPhonic, Inc. and subsidiaries:

We have audited the accompanying consolidated statement of operations, stockholders’ equity (deficit), and cash flows of InPhonic, Inc. and subsidiaries for the year ended December 31, 2004. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the results of operations and the cash flows of InPhonic, Inc. and subsidiaries for the year ended December 31, 2004, in conformity with U.S. generally accepted accounting principles.

KPMG LLP

McLean, Virginia

March 8, 2005, except

as to note 1(c) and note 4,

which are as of March 16, 2006

F-6

INPHONIC, INC. & SUBSIDIARIES

Consolidated Balance Sheets

As of December 31, 2005 and 2006

(in thousands, except per share and share amounts)

	2005			2006
Assets
Current assets:
Cash and cash equivalents	$	70,783		$	89,972
Accounts receivable (net of allowance of $2,042 and $9,749, respectively)		34,606			63,820
Inventory, net		19,680			23,164
Prepaid expenses		2,405			6,507
Deferred costs and other current assets		6,823			3,122
Current assets of discontinued operations		2,430			391
Total current assets		136,727			186,976
Restricted cash and cash equivalents		400			38
Property and equipment, net		12,121			22,746
Goodwill		31,140			38,223
Intangible assets, net		12,651			8,092
Deposits and other assets		3,058			8,330
Total assets	$	196,097		$	264,405
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	31,543		$	85,975
Accrued expenses and other current liabilities		31,588			22,521
Current portion of deferred revenue		13,851			16,604
Current maturities of capital leases		377			301
Current liabilities of discontinued operations		3,130			1,103
Total current liabilities		80,489			126,504
Long-term debt and capital lease obligations, net of current maturities		15,474			63,826
Deferred revenue, net of current portion		284			478
Total liabilities		96,247			190,808
Commitments and Contingencies		—			—
Stockholders’ equity:
Common stock, $0.01 par value
Authorized 200,000,000 shares at December 31, 2005 and 2006; issued and outstanding 35,232,869 and 37,138,480 shares at December 31, 2005 and 2006, respectively		353			371
Additional paid-in capital		264,155			301,611
Accumulated deficit		(164,658	)		(228,385	)
Total stockholders’ equity		99,850			73,597
Total liabilities and stockholders’ equity	$	196,097		$	264,405

See accompanying notes to consolidated financial statements

F-7

INPHONIC, INC. & SUBSIDIARIES

Consolidated Statements of Operations

Years Ended December 31, 2004, 2005 and 2006

(in thousands, except per share and share amounts)

	2004			2005			2006
Revenue:
Activations and services	$	123,265		$	233,730		$	298,090
Equipment		31,603			86,809			71,484
Total revenue		154,868			320,539			369,574
Cost of revenue, exclusive of depreciation and amortization:
Activations and services		1,752			1,221			2,653
Equipment		83,075			190,509			215,201
Total cost of revenue		84,827			191,730			217,854
Operating expenses:
Sales and marketing, exclusive of depreciation and amortization		42,867			93,726			118,756
General and administrative, exclusive of depreciation and amortization		34,942			63,131			76,571
Depreciation and amortization		6,444			9,840			17,067
Restructuring costs		—			847			2,551
Loss on investment		150			228			—
Total operating expenses		84,403			167,772			214,945
Operating loss		(14,362	)		(38,963	)		(63,225	)
Other income (expense):
Interest income		757			2,167			2,329
Interest expense		(980	)		(970	)		(2,638	)
Total other income (expense)		(223	)		1,197			(309	)
Loss from continuing operations		(14,585	)		(37,766	)		(63,534	)
Discontinued operations:
Income (loss) from discontinued operations		4,346			(1,784	)		(193	)
Gain on sale		—			1,355			—
Total income (loss) from discontinued operations		4,346			(429	)		(193	)
Net loss		(10,239	)		(38,195	)		(63,727	)
Preferred stock dividends and accretion		(22,049	)		—			—
Net loss attributable to common stockholders	$	(32,288	)	$	(38,195	)	$	(63,727	)
Basic and diluted net loss per share:
Net loss from continuing operations	$	(2.60	)	$	(1.10	)	$	(1.75	)
Net income (loss) from discontinued operations		0.31			(0.01	)		—
Basic and diluted net loss per share	$	(2.29	)	$	(1.11	)	$	(1.75	)
Basic and diluted weighted average shares outstanding		14,074,505			34,417,954			36,312,970

See accompanying notes to consolidated financial statements

F-8

INPHONIC, INC. & SUBSIDIARIES

Consolidated Statements of Stockholders’ Equity

Years Ended December 31, 2004, 2005 and 2006

(in thousands, except share amounts)

	Series D-5 convertible preferred stock					Series D-3 convertible preferred stock					Series D-2 convertible preferred stock					Series A convertible preferred stock					Common stock					Additional paid-in capital			Note receivable from stockholder			Accumulated deficit			Total
	Shares		Amount			Shares		Amount			Shares		Amount			Shares		Amount			Shares		Amount
Balance, January 1, 2004	672,389		$	1,884		792,775		$	2,137		416,667		$	688		668,782		$	500		11,547,514		$	115		$	34,540		$	(1,120	)	$	(94,175	)	$	(55,431	)
Issuance of common stock	—			—		—			—		—			—		—			—		8,504			1			49			—			—			50
Warrants issued in connection with long-term debt	—			—		—			—		—			—		—			—		—			—			817			—			—			817
Stock-based compensation expense	—			—		—			—		—			—		—			—		—			—			7,381			—			—			7,381
Proceeds of initial public offering, net of costs	—			—		—			—		—			—		—			—		6,500,000			65			110,773			—			—			110,838
Conversion of preferred stock upon initial public offering	(672,389	)		(1,884	)	(792,775	)		(2,137	)	(416,667	)		(688	)	(668,782	)		(500	)	13,619,536			136			92,172			—			—			87,099
Conversion of preferred stock to common stock warrants	—			—		—			—		—			—		—			—		—			—			2,744			—			—			2,744
Note receivable from stockholder	—			—		—			—		—			—		—			—		—			—			—			1,120			—			1,120
Dividends and accretion on redeemable preferred stock	—			—		—			—		—			—		—			—		—			—			—			—			(22,049	)		(22,049	)
Preferred stock dividends declared	—			—		—			—		—			—		—			—		—			—			(10,306	)		—			—			(10,306	)
Exercise of common stock warrants and options	—			—		—			—		—			—		—			—		577,019			7			71			—			—			78
Net loss	—			—		—			—		—			—		—			—		—			—			—			—			(10,239	)		(10,239	)
Balance, December 31, 2004	—			—		—			—		—			—		—			—		32,252,573			324			238,241			—			(126,463	)		112,102
Issuance of common stock in connection with the acquisition of:
A1 Wireless, Inc.	—			—		—			—		—			—		—			—		236,526			2			4,907			—			—			4,909
VMC Satellite, Inc.	—			—		—			—		—			—		—			—		257,215			3			3,297			—			—			3,300
FONcentral.com, Inc.	—			—		—			—		—			—		—			—		131,876			1			1,548			—			—			1,549
Costs related to initial public offering	—			—		—			—		—			—		—			—		—			—			(292	)		—			—			(292	)
Stock-based compensation expense	—			—		—			—		—			—		—			—		—			—			17,886			—			—			17,886
Repurchase and retirement of common stock	—			—		—			—		—			—		—			—		(1,081,487	)		(11	)		(13,077	)		—			—			(13,088	)
Exercise of common stock warrants, options, restricted stock awards and other	—			—		—			—		—			—		—			—		3,436,166			34			11,645			—			—			11,679
Net loss	—			—		—			—		—			—		—			—		—			—			—			—			(38,195	)		(38,195	)
Balance, December 31, 2005	—			—		—			—		—			—		—			—		35,232,869			353			264,155			—			(164,658	)		99,850
Issuance of common stock in connection with the acquisition of:
A1 Wireless, Inc.	—			—		—			—		—			—		—			—		15,408			—			235			—			—			235
VMC Satellite, Inc.	—			—		—			—		—			—		—			—		697,045			7			4,960			—			—			4,967
Issuance of common stock warrant	—			—		—			—		—			—		—			—		—			—			15,173			—			—			15,173
Stock-based compensation expense	—			—		—			—		—			—		—			—		—			—			15,551			—			—			15,551
Repurchase and retirement of common stock	—			—		—			—		—			—		—			—		(350,261	)		(4	)		(3,734	)		—			—			(3,738	)
Exercise of common stock warrants, options, restricted stock awards and other	—			—		—			—		—			—		—			—		1,543,419			15			5,271			—			—			5,286
Net loss	—			—		—			—		—			—		—			—		—			—			—			—			(63,727	)		(63,727	)
Balance, December 31, 2006	—		$	—		—		$	—		—		$	—		—		$	—		37,138,480		$	371		$	301,611		$	—		$	(228,385	)	$	73,597

See accompanying notes to consolidated financial statements

F-9

INPHONIC, INC. & SUBSIDIARIES

Consolidated Statements of Cash Flows

Years Ended December 31, 2004, 2005 and 2006

(in thousands)

	2004			2005			2006
Cash flows from operating activities:
Net loss	$	(10,239	)	$	(38,195	)	$	(63,727	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		6,444			9,840			17,067
Non-cash interest expense, sales and marketing expense and other		306			594			954
Stock-based compensation		7,381			18,618			14,274
Increase in allowance for doubtful accounts		—			—			7.707
Gain from the sale of Liberty Wireless		—			(1,355	)		—
Write off of investment		150			228			—
Changes in operating assets and liabilities, net of assets and liabilities received from business acquisition:
Accounts receivable		(8,428	)		(15,916	)		(36,575	)
Inventory		(7,255	)		(7,540	)		(1,167	)
Prepaid expenses		(321	)		(1,721	)		(5,577	)
Deferred costs and other current assets		(120	)		(4,152	)		4,276
Deposits and other assets		167			(2,595	)		(1,167	)
Accounts payable		3,217			8,956			53,236
Accrued expenses and other liabilities		4,143			8,973			(7,297	)
Deferred revenue		(2,035	)		4,188			2,947
Net cash used in operating activities		(6,590	)		(20,077	)		(15,008	)
Cash flows from investing activities:
Capitalized expenditures, including internal capitalized labor		(5,544	)		(11,836	)		(22,172	)
Cash paid for acquisitions		(11,142	)		(8,781	)		(4,662	)
Cash paid for purchase of intangible assets		—			(2,725	)		(193	)
Purchase of short-term investments		—			—			(5,000	)
Proceeds from the maturity of short-term investments		—			—			5,000
Proceeds from the sale of assets		—			101			1,111
Note receivable from stockholder		1,120			—			—
Reduction in restricted cash and cash equivalent		100			100			362
Net cash used in investing activities		(15,466	)		(23,141	)		(25,554	)
Cash flows from financing activities:
Principal repayments on long-term debt and capital leases		(11,046	)		(284	)		(21,784	)
Borrowings on line of credit		—			15,000			6,355
Proceeds from term loan and other debt, net of fees		3,976			—			73,632
Cash paid for repurchase of common stock		—			(13,088	)		(3,738	)
Proceeds from exercise of warrants and options		91			11,679			5,286
Net proceeds (costs) of initial public offering, net of costs		110,838			(292	)		—
Preferred stock dividend payments		(9,865	)		—			—
Net cash provided by financing activities		93,994			13,015			59,751
Net increase (decrease) in cash and cash equivalents		71,938			(30,203	)		19,189
Cash and cash equivalents, beginning of year		29,048			100,986			70,783
Cash and cash equivalents, end of year	$	100,986		$	70,783		$	89,972
Supplemental disclosure of cash flows information:
Cash paid during the period for:
Interest	$	849		$	253		$	917
Income taxes		—			—			—
Supplemental disclosure of non-cash activities:
Issuance of warrants to purchase common stock with debt	$	817		$	—		$	11,945
Issuance of warrant to purchase common stock to vendor		—			—			3,228
Inventory exchanged for advertising credits		—			—			2,323
Stock-based compensation capitalized as website and internal use software costs		—			—			616
Issuance of common stock in business acquisitions		—			8,209			5,202
Issuance of common stock in intangible asset purchase		—			1,549			—
Issuance of common stock to settle a liability		50			—			—
Equipment purchase on capital lease		635			595			152
Release of funds in escrow related to acquisitions		—			10,700			—
Purchase consideration included in accrued liabilities		—			3,000			1,120
Preferred stock dividends and accretion to redemption value		22,049			—			—
Conversion of preferred stock, total preferred shares converted into 13,619,536 shares of common stock		92,308			—			—

See accompanying notes to consolidated financial statements

F-10

INPHONIC, INC. & SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share and share amounts)

(1) The Company

(a) Business Description

We are a leading online seller of wireless services and devices based on the number of activations of wireless services sold online in the United States. We are headquartered in Washington D.C. and maintain our technology and operations centers in Largo, Maryland and Reston and Great Falls, Virginia. We sell wireless service plans, including satellite television services through our branded websites; including Wirefly.com, A1 Wireless.com, and VMCsatellite.com and through websites that we create and manage for third parties. We offer marketers the ability to sell wireless voice and data services and devices under mobile virtual network enabler (“MVNE”) agreements. We provide customers the ability to organize personal communication by providing real time wireless access to e-mail, voicemail, faxes, contacts, scheduling, calendar and conference calling functionality through a website or telephone.

(b) Risk and Uncertainties

Our operations are subject to certain risks and uncertainties including, among others, actual and potential competition by entities with greater financial resources, rapid technological changes, the need to retain key personnel and protect intellectual property and the availability of additional capital financing on terms acceptable to us.

Since inception, we have incurred net losses attributable to common stockholders of approximately $228,385. To date, management has relied on debt and equity financings to fund our operating deficit. We had $89,972 of cash and cash equivalents on hand at December 31, 2006. We may require additional financing to fund future operations.

(c) Discontinued Operations

On December 31, 2005, we sold the operating assets of our mobile virtual network operator (“MVNO”) Liberty Wireless (“Liberty”) to Teleplus Wireless Corp., a subsidiary of Teleplus Enterprises, Inc. The sale of Liberty has enabled us to streamline and focus our resources on our other operations including the growth of our MVNE business. The sale of Liberty was recorded as a discontinued operation in the financial statements pursuant to Statement of Financial Accounting Standards (“SFAS”) No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (“SFAS No. 144”). We have classified these operations as discontinued operations and, accordingly, have segregated assets and liabilities of the discontinued operations in the accompanying Consolidated Balance Sheets as of December 31, 2005 and 2006 and the revenue and expenses of the discontinued operation in the accompanying Consolidated Statements of Operations for each of the three years ended December 31, 2006. Cash flows pertaining to discontinued operations were not disclosed separately in the Consolidated Statements of Cash Flows.

(2) Summary of Significant Accounting Policies

(a) Principles of Consolidation and Basis of Presentation

The consolidated financial statements include the accounts of InPhonic, Inc. and its subsidiaries. All significant intercompany accounts and transactions are eliminated upon consolidation.

F-11

INPHONIC, INC. & SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(in thousands, except per share and share amounts)

(b) Use of Estimates

The preparation of consolidated financial statements in conformity with generally accepted accounting principles in the United States requires management to make estimates and assumptions that affect the reported amounts of certain assets and liabilities, revenue and expenses, and the related disclosure of contingent assets and liabilities in the consolidated financial statements and accompanying notes. The most significant of such estimates include our reserve for future deactivations, allowance for rebates, allowance for uncollectible accounts receivable, valuation of inventory, estimated useful life of assets, impairment of long-lived assets and goodwill, valuation of deferred tax assets and reserves for contingent tax liabilities. Actual results could differ from those estimates.

In preparation of the accompanying financial statements for the year ended December 31, 2005, we recorded an adjustment to reduce depreciation and amortization expense by $891. These adjustments to depreciation were made to correct a computational error in the fixed asset subledger that caused depreciation expense to be overstated in each prior period between fiscal years 2001 and 2005. We do not believe the impact of the adjustment was material to fiscal year 2005 or any period prior.

(c) Cash and Cash Equivalents

We consider all highly liquid investments with an original maturity of three months or less to be cash equivalents.

(d) Financial Instruments

Fair Value of Financial Instruments

Our financial instruments, as defined under SFAS No. 107, Disclosures about Fair Value of Financial Instruments, include our cash, accounts receivable, accounts payable, borrowings under our line of credit with Comerica and our term loan. The fair value of cash, accounts receivable, and accounts payable were equal to their respective carrying values at December 31, 2005 and 2006. At December 31, 2005, the borrowings outstanding under our line of credit were equal to the respective carrying value. We retired our line of credit in November 2006. We hold cash and cash equivalents primarily in four financial institutions, which often exceed FDIC insured limits. Historically, we have not experienced any losses due to such concentration of credit risk.

As of December 31, 2006, the carrying value of the term loan was $63.6 million and the fair value of the debt approximated $72.4 million. The carrying value of the debt was recorded at a discount primarily as the result of a portion of the proceeds allocated to the fair value of detachable warrants issued with the debt. See Note 6 for further discussion.

Concentration Risk

Financial instruments that potentially subject us to a concentration risk consist principally of accounts receivable and accounts payable. We extend credit to wireless network carriers (“carriers”) on an unsecured basis in the normal course of business. Three carriers accounted for approximately 74% and 69% of accounts receivable, net of the deactivation reserve, as of December 31, 2005 and 2006, respectively.

F-12

INPHONIC, INC. & SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(in thousands, except per share and share amounts)

For each of the years ended December 31, 2004, 2005 and 2006, revenue from three carriers exceeded 10% of the total revenue. Revenue as a percentage of total revenues for these carriers was as follows:

	2004	2005	2006
Carrier A	22%	30%	36%
Carrier B	28%	16%	17%
Carrier C	26%	21%	15%
Total	76%	67%	68%

We are extended credit from wireless carriers at up to 60 day trade payable terms in the normal course of business to purchase certain handset equipment. The three carriers described above accounted for approximately 31% and 46% of accounts payable as of December 31, 2005 and 2006, respectively.

We depend primarily on our carriers to supply cellular phones and accessories in a timely manner in adequate quantities and consistent quality. If we are unable to obtain cellular phones in adequate quantities, we may incur delays in shipment or be unable to meet demand for our products. At December 31, 2005 and 2006, one carrier accounted for approximately 32% and 25% of our total purchases of cellular phones.

(e) Allowance for Doubtful Accounts

We maintain allowances for doubtful accounts for estimated losses resulting from the inability of customers to pay. The amount of the allowance is based on a combination of factors including the status of collection efforts with the respective wireless carriers on balances in which additional source information or other transaction details continue to be exchanged between us and the carrier. Our allowance for receivables due from carriers is estimated based on previous experience with collection efforts of similar nature. If the financial condition of any of the larger carrier customers we do business with were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.

(f) Inventory

Inventory consists primarily of wireless devices. The carrying value of inventory is stated at the lower of its cost or market value. Cost is determined using a consistent method which approximates the first-in-first-out method. We write down inventory for estimated obsolescence or unmarketable inventory equal to the difference between the cost of inventory and the estimated market value or replacement cost based upon assumptions about future demand and market conditions. If actual market conditions are less favorable than those projected, additional inventory write-downs may be required. During the years ended December 31, 2004, 2005, and 2006, we wrote down inventory approximately $423, $506, and $179, respectively, in order to record certain inventory to a fair market value, which was lower than our cost. In addition during the year ended December 31, 2006, we have written-off or fully reserved for amounts due from equipment vendors for wireless devices returned to them totaling $3,990 for which credit has yet to be received.

Effective January 1, 2006, we adopted SFAS No. 151, Inventory Costs that is an amendment to ARB No. 43, Chapter 4 (“SFAS No. 151”), amends chapter 4 “Inventory Pricing” of ARB No. 43 and paragraph A3 of SFAS No. 144. Previously, ARB 43 did not define the term “so abnormal” which could lead to unnecessary incomparable financial reporting. SFAS No. 151 clarifies that abnormal costs related to idle facility expense, freight, handling costs, and wasted materials (spoilage) should be recognized as period costs. There was no material effect on our consolidated financial position, result of operations or cash flows as a result of this adoption.

F-13

INPHONIC, INC. & SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(in thousands, except per share and share amounts)

(g) Long-Lived Assets

Property and Equipment

Property and equipment is recorded at cost or at fair value if it is acquired in a business acquisition. Replacements and improvements that extend the useful life of property and equipment are capitalized. Property and equipment is depreciated over the following useful lives. Leasehold improvements are depreciated over the stated useful life or the contractually stated period of the underlying lease.

	Estimated useful life (in years)
Computer and equipment	3
Software	3
Furniture and fixtures	7
Leasehold improvements	3
Website development	1.5
Internal software development	2

We account for the costs relating to the development of our e-commerce platform for internal use based on AICPA Statement of Position (“SOP”) No. 98-1, Accounting for the Costs of Computer Software Developed or Obtained for Internal Use, and the Emerging Issues Task Force (“EITF”) No. 00-02, Accounting for Web Site Development Costs. Website development costs consist of internal and external costs incurred to purchase and implement the web software and enhancements to the functionality of the web software, used in our business.

In accordance with SFAS No. 144, we are required to evaluate the carrying value of long-lived assets and certain intangible assets. SFAS No. 144 first requires an assessment of whether circumstances currently exist which suggest the carrying value of long-lived assets may not be recoverable. At December 31, 2005 and 2006, we did not believe any such conditions existed. Had these conditions existed, we would have assessed the recoverability of the carrying value of our long-lived assets and amortizable intangible assets based on estimated undiscounted cash flows to be generated from such assets. In assessing the recoverability of these assets, we would have projected estimated cash flows based on various operating assumptions such as average revenue per activation, deactivation rates, and sales and workforce productivity ratios. If the projection of undiscounted cash flows did not exceed the carrying value of the long-lived assets, we would have been required to record an impairment charge to the extent the carrying value exceeded the fair value of such assets.

Goodwill and Intangible Assets

Goodwill and intangible assets with indefinite useful lives are not amortized and are evaluated for impairment at least annually, or when events or circumstances suggest a potential impairment may have occurred. In accordance with SFAS No. 142, Goodwill and Other Intangible Assets (“SFAS No. 142”), we have selected the fourth quarter to perform the annual impairment test. SFAS No. 142 requires us to compare the fair value of the reporting unit to its carrying amount on an annual basis to determine if there is a potential impairment. If the fair value of the reporting unit is less than its carrying value, an impairment loss is recorded to the extent that the fair value of the goodwill within the reporting unit is less than the carrying value. The fair value for goodwill and other intangible assets not subject to amortization is determined based on discounted cash flows, market multiples or other measures, as appropriate. Based on our assessment for the year ended December 31, 2006, no impairments of goodwill or other intangible assets were noted.

F-14

INPHONIC, INC. & SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(in thousands, except per share and share amounts)

For the year ended December 31, 2005, we originally determined that a supplier relationship valued at $3,730 had an indefinite useful life as of the April 26, 2005 acquisition date of VMC Satellite, Inc. During 2006, we determined that as of the acquisition date, the supplier relationship had a useful life of ten years in accordance with SFAS No. 142. During the fourth quarter of 2006, we recognized $255 of amortization expense for the period from April 26, 2005 to December 31, 2005. We do not believe the impact of this adjustment in 2006 to be material to the fiscal year 2006 or 2005 as a result of this change.

Intangible assets with determinable useful lives, which primarily consist of software and technology, customer contracts, affiliate relationships, a supplier relationship and a non-compete agreement, were recorded at fair value at the date of acquisition and amortized over the following economic lives:

	Estimated economic life (in years)
Software and technology	1.5 to 5
Customer contracts	1.5 to 3
Affiliate relationships	5
Non-compete agreement	2 to 5
Supplier relationship	10
Other	1.5 to 5

Intangible assets not subject to amortization include trade names.

(h) Revenue Recognition

Activations and Services Revenue

We recognize revenue from the sale of wireless services and the provisioning of MVNE and data services.

Wireless Services: We generate revenue from wireless carriers, including a satellite television carrier, who pay commissions and volume and performance-based bonuses, for activating wireless services and features on their networks. We recognize commissions from wireless carriers upon shipment of activated devices to the customer. In addition to activation commissions, certain carriers pay us a monthly residual fee either for as long as a customer who we activate for that carrier continues to be its subscriber, or for a fixed period of time depending on the carrier. Within our Satellite Television business unit, we receive satellite activation certificates evidencing activation rights in advance of their resale to customers. Revenue from satellite television customers includes commissions earned at the time of the satellite service activation, net of an estimate for deactivations, as we are acting as an agent in the transaction. Revenue is reduced for estimated deactivations of its wireless services by customers prior to the expiration of a time period that ranges 90 to 180 days from the date of activation, depending on the wireless carrier. We estimate deactivations based on historical experience, which we developed based on our experience with carriers, customer behavior and sources of customers, among other factors, allowing us to accrue estimates with what we believe is a high degree of certainty. If we determine that we cannot accurately predict future deactivation experience, we may be required to defer 100% of our carrier commissions revenue until the expiration of the appropriate chargeback period. Our reserves for deactivations are included in accounts receivable and deferred revenue on the accompanying balance sheets. Accounts receivable at December 31, 2005 and 2006 included reserve for deactivations of $7,540 and $7,639, respectively. Deferred revenue at December 31, 2005 and 2006 included reserve for deactivations of $10,796 and $14,546, respectively.

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INPHONIC, INC. & SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(in thousands, except per share and share amounts)

In addition to receiving commissions for each wireless subscriber activated, we earn performance bonuses from the wireless carriers based on negotiated performance targets. The most significant bonuses we earn are the quarterly volume bonuses, which we collect from wireless carriers on a monthly basis, based on current month activations. We record these bonuses as deferred revenue at the time of billing until we achieve the quarterly targets. We also earn other quarterly bonuses from certain carriers for maintaining low customer churn and signing up wireless customers for certain additional monthly “features” such as data service or text messaging. Wireless carriers also periodically offer bonuses for achieving monthly volume and other performance targets. We recognize these monthly bonuses as earned in accordance with the provisions of the Securities and Exchange Commission’s (“SEC”) Staff Accounting Bulletin (“SAB”) No. 104, Revenue Recognition in Financial Statements (“SAB No. 104”). Revenue is recognized only when all of the following criteria are met: (1) persuasive evidence of an arrangement exists, (2) delivery has occurred or services have been rendered, (3) the seller’s price to the buyer is fixed or determinable, and (4) collectibility is reasonably assured. Amounts collected in cash prior to meeting the above criteria are recorded as deferred revenue. Through 2005, commission revenue earned from the activation of carrier features had been deferred until the contractual chargeback period had lapsed as we did not have adequate historical information to estimate a reserve. Beginning in 2006, we began to estimate commission revenue earned from feature activations based on historical experience which we have developed based on our experience with carriers and customer behavior over a period of time in excess of 24 months. As of December 31, 2005, $1,383 of feature activations revenue was deferred, which would have been accrued for less an estimated reserve for deactivations, in the event that we had the appropriate experience with carriers and customer behavior at December 31, 2005. As of December 31, 2006, our estimated reserve for deactivations of feature activations was $629.

In the ordinary course of recording and collecting commissions from our wireless carrier partners, we engage in a matching and reconciling process (the “matching process”) between source information for customer wireless carrier activations generated and maintained in our back-office sales information systems and each carrier’s billing system. Although the substantial majority of our sales information matches to that of the carriers, matching differences do arise. Examples of such differences include (i) instances in which an activation per our records does not correlate to a commission fee payment schedule submitted by the carrier; (ii) commission fee payment collected from the carrier that is less than the expected payment per our sales records; (iii) a deactivation identified on a carrier statement that does not match the carrier’s original commission fee payment for such activation and (iv) commission or other fee payment we collect that is in excess of expected payment per our sales records.

Data files supported by our billing records related to differences are submitted monthly to each carrier for resolution. Resolution of these differences is usually an iterative process and it can take up to 12 months or longer for final resolution of any difference. Information is exchanged between us and the carrier throughout this process. We recognize revenue based on the underlying data maintained in our back-office sales information systems unless the carrier provides us details that supersedes our information. Given the nature of these differences and based on our experience in resolving such items with the carriers, we are also able to determine an appropriate reserve against revenue to reflect the likely success or failure of resolving these differences. In certain instances when a wireless carrier denies a claim we may file in resolving differences of this nature, we will write-off the related accounts receivable while pursuing further collection efforts and will record into income at a future date if collected. To the extent that we collect commission or other fee payments in excess of expectations, we will record revenue in the period of receipt net of estimated chargeback requirements.

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INPHONIC, INC. & SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(in thousands, except per share and share amounts)

MVNE Services:

We offer marketers the ability to sell wireless services to their customers under their own brands using our e-commerce platform and operational infrastructure through MVNE contracts. We receive fees for development of the network platform, as well as for operational support services. We defer the fees attributable to the production of the network platform and recognize these fees and costs over the expected life of the agreement (typically 12 to 48 months). Fees received for custom functional enhancements to the network platform and for operational services are deferred until all revenue criteria have been satisfied. Deferred revenue from MVNE contracts as of December 31, 2005 and 2006 included $1,852 and $1,195, respectively.

Other Revenue:

We sell data services, including a service that allows customers to access email, voicemail, facsimiles, contacts and personal calendar information through a website or a telephone. We bill customers monthly and revenue is recognized monthly, as the services are performed.

Equipment Revenue:

Revenue from the sale of wireless devices and accessories in a multiple-element arrangement with services is recognized at the time of sale in accordance with EITF No. 00-21, Revenue Arrangements with Multiple Deliverables, when fair value of the services element exists. Customers have the right to return devices within a specific period of time or usage, whichever occurs first. We provide an allowance for estimated returns of devices based on historical experience. Return rights of indirect retailers for wireless devices are limited to warranty claims, which are generally covered by the device manufacturers’ original warranties. In accordance with the provisions of SAB No. 104, we determined we have sufficient operating history to estimate equipment returns. In connection with wireless activations, we sell the wireless device to the customer at a significant discount, which is generally in the form of a rebate (“equipment discount provisions” or “EDP”). Rebates are recorded as a reduction of revenue. We recognize equipment revenue net of rebate costs based on historical experience of rebates claimed. Future experience could vary based upon rates of consumers redeeming rebates.

In the event a customer terminates their wireless service with the carrier within six months of activation and opts not to return the wireless device to us within the time frames permitted within our return policy, in many instances our sales contracts with the customer permit us to charge the customer an EDP termination fee for each unreturned device. Prior to the three months ended June 30, 2006, revenue recognition of such fee was deferred until such fee was collected from the customer pursuant to SAB 104 as we did not have adequate historical collection data to reasonably estimate the ultimate collectibility of the receivable. Beginning April 1, 2006, we began to estimate EDP termination fee revenue based on historical experience of customer collection behavior which we have developed over a time period of 24 months which provides the basis on which to accrue revenue with an appropriate assurance of collectibility pursuant to SAB 104. As of March 31, 2006, $293 of such revenue was deferred, which would have been accrued for in the event that we had adequate customer collection history, less an estimated reserve for uncollectible amounts. As of December 31, 2006, we had accrued as accounts receivable approximately $1,686 in such EDP fees.

(i) Cost of Revenue

The major components of cost of revenue, exclusive of depreciation and amortization, are:

Activations and services. Cost of activations and services revenue includes costs incurred from providers of telecommunications and data center services.

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INPHONIC, INC. & SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(in thousands, except per share and share amounts)

Equipment. We purchase wireless devices and accessories from wireless carriers, device manufacturers and third-party vendors to sell to customers and indirect retailers in the WAS business unit. We sell these wireless devices and accessories at a price below cost to encourage the sale and use of the services. We do not manufacture any of this equipment. Costs from the sale of wireless devices and accessories sold directly to customers are recognized at the time of sale. From time to time, we receive price protection credits on equipment purchased from certain vendors. We recognize price protection credits received for equipment that has been sold and shipped as a reduction of cost of revenue. Cost of revenue included shipping expenses of $4,677, $8,575 and $11,385 for the years ended December 31, 2004, 2005 and 2006, respectively.

(j) Advertising Costs

We expense advertising and other marketing costs as incurred and principally include amounts paid to marketing partners based on the delivery of customers to our websites for wireless activation and services. Advertising and other marketing costs for the years ended December 31, 2004, 2005 and 2006 were $36,185, $79,078 and $104,351, respectively.

Beginning in 2007, we expect to begin capitalizing and amortizing a portion of our advertising costs (as direct response advertising) associated with activity pursuant to an agreement with a vendor.

(k) Accrued Consumer Liabilities

Under certain conditions, consumers’ purchasing wireless devices from us may be eligible for a product rebate depending on the wireless device purchased, service contract activated and the consumer maintaining their service with the wireless carrier for a period of up to six months. We estimate and record an accrued consumer liability and cost of revenue for such rebate at the time of sale based on the terms of the rebate and our rebate redemption experience over the most recent 18 months following the lapse of the contractual rebate redemption period. Our rebate redemptions are generally processed by a third party vendor that validates the consumer’s rebate redemption materials to ensure that the redemption request satisfies all terms and conditions of the rebate program to be eligible for payment. Only consumers that satisfy the redemption requirements of the rebate program receive the rebate amount.

During the last six months of 2006, we incurred and paid $7,950 of payments made to consumers outside our customary rebate redemption process to parties that we believed generally had not satisfied all the terms and conditions of the respective rebate redemption program. Such amounts were paid to satisfy customer complaints and are viewed by us as “customer credits” and reflected in general and administrative expenses.

(l) Accounts payable

Accounts payable at December 31, 2005 and 2006 consisted of:

	2005		2006
Trade payables for inventory	$	14,353	$	50,989
Other accounts payable		17,190		34,986
	$	31,543	$	85,975

F-18

INPHONIC, INC. & SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(in thousands, except per share and share amounts)

(m) Accrued Expenses and Other Current Liabilities

Accrued expenses and other liabilities at December 31, 2005 and 2006 consisted of:

	2005		2006
Accrued consumer liabilities, including accrued rebates	$	18,289	$	8,203
Accrued payroll and related expenses		1,452		1,685
Accrued acquisition costs and severance costs		5,063		1,674
Accrued sales taxes payable		593		443
Accrued interest		83		995
Accrued product costs		697		2,245
Other		5,411		7,276
	$	31,588	$	22,521

(n) Restructuring Costs

In the first quarter of 2005, we implemented a restructuring plan to take advantage of synergies gained through the acquisition of A1 Wireless and to restructure other operating segments. During the year ended December 31, 2005, we recognized $847 in restructuring costs, $811 of which related to workforce reduction and $36 related to exited facilities and contracts. We paid all restructuring costs related to this plan by December 31, 2005.

During 2006, we implemented a restructuring plan related to changes in our management and operations structure. We recognized $2,551 related to the termination of our former president and chief operating officer and thirty-four other senior executives and employees. Of this amount, $1,017 related to severance benefits that will be paid out in cash to the recipients on a monthly or semi-monthly basis over the terms of their respective severance agreements, $1,513 related to expenses incurred as a result of the modification of stock-based compensation awards under which vesting of 50% of unvested restricted share and option awards was accelerated for three of the former employees, and $21 related to other costs. As of December 31, 2006, we have $303 included in accrued expenses and other current liabilities for these expenses which have not yet been paid. We expect all remaining costs will be paid by June 30, 2007.

(o) Income Taxes

SFAS No. 109, Accounting for Income Taxes (“SFAS No. 109”), establishes financial accounting and reporting standards for the effect of income taxes. During the years ended December 31, 2004, 2005 and 2006, we did not have any income tax expense or benefit because a full valuation allowance was provided against our net deferred tax assets. Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized as a component of net income in the period that includes the enactment date.

(p) Stock-Based Compensation

We adopted SFAS No. 123 (revised 2004), Share Based Payment (“SFAS No. 123(R)”) on January 1, 2006 using the modified prospective application method (“MPA”). SFAS No. 123(R)

F-19

INPHONIC, INC. & SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(in thousands, except per share and share amounts)

established standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. SFAS No. 123(R) requires us to measure the cost of employee services received in exchange for an award of equity instruments (usually stock options or unvested (restricted) stock awards based on the grant-date fair value of the award. That cost is recognized over the period during which an employee is required to provide service in exchange for the award—the requisite service period (usually the vesting period). In March 2005, the SEC issued SAB No. 107, Valuation of Share-Based Payment Arrangements for Public Companies (“SAB 107”) relating to the interaction of the adoption of SFAS No. 123(R) and the SEC rules and regulations. We have applied the provisions of SAB 107 in our adoption of SFAS 123(R).

Prior to our adoption of SFAS No. 123(R), we applied the intrinsic value method of accounting for employee stock-based compensation as prescribed by Accounting Principles Board (“APB”) Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations including FASB Interpretation (“FIN”) No. 44, Accounting for Certain Transactions involving Stock Compensation an Interpretation of APB Opinion No. 25, to account for our stock option grants to employees. Under this method, compensation expense was recorded on the date of the grant only if the current market price of the underlying stock exceeded the exercise price. SFAS No. 123, Accounting for Stock-Based Compensation (“SFAS No. 123”), established accounting and disclosure requirements using a fair value-based method of accounting for stock-based employee compensation plans. As permitted by SFAS No. 123, we have elected to continue to apply the intrinsic value-based method of accounting described above, and had adopted the disclosure requirements of SFAS No. 123. All shares of restricted stock awarded to employees were accounted for at fair value in accordance with SFAS No. 123.

Under the MPA method, compensation cost for all share-based payments granted prior to, but not vested as of December 31, 2005, is based on the grant date fair value estimated in accordance with the pro forma provisions of SFAS No. 123, and compensation cost for all share based payments granted or modified subsequent to December 31, 2005, will be based on the grant date fair value estimated in accordance with the provisions of SFAS No. 123(R). Results for prior periods have not been restated. We use the ratable method of attributing the value of stock-based compensation to expense. SFAS No. 123(R) requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. In our pro forma information required under SFAS No. 123 for the periods prior to January 1, 2006, we accounted for forfeitures as they occurred. The fair value of each option granted is estimated on the grant date using the Black-Scholes option pricing model which takes into account as of the grant date the exercise price and expected life of the option, the current price of the underlying stock and its expected volatility, expected dividends on the stock and the risk-free interest rate for the term of the option.

For the year ended December 31, 2006 as a result of our adoption of SFAS No. 123(R), we recognized stock-based compensation expense related to employee options granted prior to January 1, 2006 of $6,260, of which $405 was capitalized in accordance with our compensation policies and SFAS No. 123(R).

F-20

INPHONIC, INC. & SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(in thousands, except per share and share amounts)

In addition, we granted options to certain of our employees to purchase 1,012,200 shares of our common stock during the year ended December 31, 2006. The options granted were granted at a weighted average exercise price of $7.14. The grant date fair value of employee share options was estimated using the Black-Scholes option-pricing model with the following assumptions:

	2004		2005		2006
Expected volatility	70.00	%	70.00	%	72.00	%
Risk free interest rate	3.12	%	3.82	%	4.72	%
Expected dividend rate	0.00	%	0.00	%	0.00	%
Expected life (in years)	4.0		4.0		5.6

The weighted average fair value per share of options granted using these assumptions was $4.65. Compensation cost of the grant was reduced by an estimated forfeiture amount based on an annual experience rate of 9.93%. As of the date of grants, total compensation cost related to the grants including estimated forfeitures was approximately $4,705 for the stock options granted during the year ended December 31, 2006. Stock-based compensation expense for these grants for the year ended December 31, 2006 was $670.

The impact of adopting SFAS No. 123(R) increased stock-based compensation expense included in our operating expenses and increased net loss from continuing operations by approximately $2,464 for the year ended December 31, 2006 or $0.07 per basic and diluted share. There was no impact from the adoption on cash flow from operations or cash flows from financing activities.

Our pro forma net loss applicable to common shareholders, and pro forma net loss per common share, basic and diluted, for periods prior to our adoption of SFAS No. 123(R) was as follows.

	For the year ended
	2004			2005
Net loss attributable to common stockholders, as reported	$	(32,288	)	$	(38,195	)
Add: Stock-based compensation expense included in net loss attributable to common stockholders, as reported		5,289			17,482
Less: Total stock-based compensation expense determined under fair value based methods for all stock awards, net of related tax effects		(6,472	)		(15,599	)
Pro forma net loss attributable to common stockholders	$	(33,471	)	$	(36,312	)
Net loss per common share, basic and diluted, as reported	$	(2.29	)	$	(1.11	)
Net loss per common share, basic and diluted, pro forma	$	(2.38	)	$	(1.06	)

We account for equity grants issued to non-employees at fair value, in accordance with the provisions of SFAS No. 123 and EITF No. 96-16, Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services. We use a Black-Scholes model to estimate the fair value of such awards and compensation expense relating to such equity issuances is recognized over the applicable vesting period of the options, warrants, or stock, in accordance with the method prescribed by FIN No. 28, Accounting for Stock Appreciation Rights and Other Variable Stock Option of Award Plans.

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INPHONIC, INC. & SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(in thousands, except per share and share amounts)

Stock-based compensation, which includes compensation recognized on stock option grants and restricted stock awards for employees and non-employees was included in the following line items on the accompanying financial statements. We have capitalized $616 of stock-based compensation as internally developed software for the year ended December 31, 2006. No such costs were capitalized in 2005. There were no tax benefits recognized in the statements of operations for stock based awards in any periods:

Balance Sheets:

Statements of operations:

	For the year ended December 31,
	2004		2005		2006
Sales and marketing	$	2,111	$	2,201	$	2,891
General and administrative		5,096		15,585		9,860
Restructuring costs		—		—		1,513
Income (loss) from discontinued operations		174		832		112
	$	7,381	$	18,618	$	14,376

Stock-based compensation from continuing operations in 2005 included $7,851 related to the modification of the terms of original restricted stock awards or option grants related to six employees that were terminated in 2005. Stock based compensation from continuing operations in 2006 included $1,370 related to the modification of stock-based awards for five employees. Such modifications accelerated the vesting of 81,035 shares of restricted stock and options underlying 122,258 shares of our common stock. Unrecognized compensation cost for all unvested options and restricted stock awards was $36,459 as of December 31, 2006 which will be recognized over a weighted average period of 1.5 years.

(q) Net Loss Per Common Share

We calculate net loss per common share in accordance with SFAS No. 128, Earnings Per Share (“SFAS No. 128”). Basic net loss per common share excludes any dilutive effects of options, warrants, restricted stock awards and convertible securities and is calculated by dividing net loss attributable to common stockholders by the weighted average number of common shares outstanding for the period. Diluted net loss per common share equals basic net loss per common share as the effects of options, warrants, restricted stock awards and convertible securities would have been anti-dilutive.

F-22

INPHONIC, INC. & SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(in thousands, except per share and share amounts)

The following table reconciles net loss attributable to common stockholders and basic and diluted weighted average common shares outstanding to the historical or pro forma net loss attributable to common stockholders and the historical or pro forma basic and diluted weighted average common shares outstanding for the years ended December 31, 2004, 2005 and 2006. Information presented for 2004 has been prepared on a pro forma basis assuming outstanding preferred stock was converted into common stock at the beginning of the period in connection with our initial public offering. Weighted average shares outstanding presented for 2006 includes the effect 1,250,000 shares representing detachable warrants issued with the term loan on November 7, 2006, as described in Note 6. These warrants are exercisable at $0.01 per share.

	2004			2005			2006
Numerator:
Net loss from continuing operations	$	(14,585	)	$	(37,766	)	$	(63,534	)
Preferred stock dividends and accretion		(22,049	)		—			—
Net loss from continuing operations attributable to common stockholders		(36,634	)		(37,766	)		(63,534	)
Income (loss) from discontinued operations		4,346			(429	)		(193	)
Net loss attributed to common stockholders	$	(32,288	)	$	(38,195	)	$	(63,727	)
Denominator:
Weighted average shares outstanding		14,074,505			34,417,954			36,312,970
Basic and diluted net gain (loss) per share:
Net loss from continuing operations attributable to common stockholders	$	(2.60	)	$	(1.10	)	$	(1.75	)
Net income (loss) from discontinued operations		0.31			(0.01	)		—
Basic and diluted earnings per share:	$	(2.29	)	$	(1.11	)	$	(1.75	)

For the years ended December 31, 2004, 2005 and 2006, we incurred a net loss. If our outstanding common stock equivalents were exercised or converted into common stock, the result would have been anti-dilutive and, accordingly, basic and diluted net loss attributable to common stockholders per share are identical for all periods presented in the accompanying condensed consolidated statements of operations. The following summarizes our potential outstanding common stock equivalents as of the end of each period.

	December 31,
	2004	2005	2006
Options to purchase common stock	6,629,469	5,115,969	4,043,103
Restricted stock awards	—	1,137,878	2,964,649
Warrants to purchase common stock	1,780,923	787,863	2,754,740
Total common stock equivalents convertible into common stock	8,410,392	7,041,710	9,762,492

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INPHONIC, INC. & SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(in thousands, except per share and share amounts)

(r) Adoption of SAB 108

In September 2006, the SEC released Staff Accounting Bulletin No. 108, Considering the Effects of Prior Year Misstatements When Quantifying Misstatements in Current Year Financial Statements (“SAB 108”). SAB 108 provides guidance on how the effects of the carryover or reversal of prior year financial statement misstatements should be considered in quantifying a current year misstatement. Prior practice allowed the evaluation of materiality on the basis of (1) the error quantified as the amount by which the current year income statement was misstated (rollover method) or (2) the cumulative error quantified as the cumulative amount by which the current year balance sheet was misstated (iron curtain method). SAB 108 is effective for fiscal years ending after November 15, 2006. SAB 108 requires a dual approach that consists of both the rollover and iron curtain methods. We adopted SAB 108 effective in the fourth quarter ended December 31, 2006. There was no material effect on our financial position, results of operations or cash flows as a result of this adoption.

(s) Recent Accounting Pronouncements

In May 2005, the Financial Accounting Standards Board (“FASB”) FASB issued SFAS No. 154, Accounting Changes and Error Corrections (“SFAS No. 154”), a replacement of APB Opinion No. 20, Accounting Changes, and SFAS No. 3, Reporting Accounting Changes in Interim Financial Statements. SFAS No. 154 changes the requirements for the accounting for, and reporting of, a change in accounting principle. Previously, voluntary changes in accounting principles were generally required to be recognized by way of a cumulative effect adjustment within net income during the period of the change. SFAS No. 154 requires retrospective application to prior periods’ financial statements of changes in accounting principles, unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change. SFAS No. 154 is effective for accounting changes made in fiscal years beginning after December 15, 2005; however, the statement does not change the transition provisions of any existing accounting pronouncements. We adopted the pronouncement effective January 1, 2006. There was no material effect on our financial position, results of operations or cash flows as a result of this adoption.

In June 2006, the FASB ratified the EITF Issue No. 06-3, How Taxes Collected from Customers and Remitted to Governmental Authorities Should Be Presented in the Income Statement” (“EITF 06-3”). EITF No. 06-3 requires an entity to disclose transactional tax amounts assess by government authorities that are considered significant. EITF No. 06-3 is effective for interim and annual reporting periods beginning after December 15, 2006. We have determined that the adoption of this pronouncement will have no material impact to our consolidated financial position, results of operations, or cash flows.

In June, 2006, the FASB issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109 (“FIN 48”). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with SFAS No. 109. FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. FIN 48 will apply to fiscal years beginning after December 15, 2006, with earlier adoption permitted. We will adopt FIN 48 effective January 1, 2007. As prescribed in the interpretation, the cumulative effect of applying the provisions of FIN No. 48 should be reflected as an adjustment to the opening balance of Stockholders' Equity. We do not believe the adoption of this pronouncement will have any material effects on our consolidated financial position, results of operations, or cash flows.

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INPHONIC, INC. & SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(in thousands, except per share and share amounts)

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (“SFAS No. 157”). SFAS 157 defines fair value, establishes a framework for measuring fair value under generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS 157 emphasizes that fair value is a market-based measurement, not an entity-specific measurement, and states that a fair value measurement should be determined based on the assumptions that market participants would use in pricing the asset or liability. SFAS 157 will become effective for our fiscal year beginning January 1, 2008. We do not believe the adoption of this pronouncement will have any material effects on our consolidated financial position, results of operations, or cash flows.

In February 2007, the Financial Accounting Standards Board issued SFAS 159, The Fair Value Option for Financial Assets and Financial Liabilities—including an amendment of FASB Statement No. 115( “SFAS No. 159”), which allows measurement at fair value of eligible financial assets and liabilities that are not otherwise measured at fair value. If the fair value option for an eligible item is elected, unrealized gains and losses for that item will be reported in current earnings at each subsequent reporting date. SFAS 159 also establishes presentation and disclosure requirements designed to draw comparison between the different measurement attributes the company elects for similar types of assets and liabilities. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. Early adoption is permitted. We do not believe the adoption of this pronouncement will have any material effects on our consolidated financial position, results of operations, or cash flows.

(3) Business Acquisitions

(a) Acquisition of A1 Wireless

On January 4, 2005, we acquired certain assets and assumed certain obligations of A1 Wireless, Inc. in a transaction accounted for using the purchase method of accounting in accordance with SFAS No. 141, Business Combinations (“SFAS No. 141”). A1 Wireless activated and sold wireless services and devices to consumers through their own branded websites, branded partner websites, that it created and managed, and through sophisticated online search advertising campaigns. This acquisition enhanced our existing distribution channels in the WAS business unit. The results of A1 Wireless’ operations were included in our financial statements beginning January 1, 2005, and are reported in the WAS business unit.

Purchase consideration consisted of cash and shares of common stock for an aggregate purchase price of $24,582, including acquisition costs of $2,148 and contingent consideration of $5,173. At the closing, we paid approximately $10,700 in cash, which was held by an escrow agent as of December 31, 2004 and issued 160,226 shares of common stock with a fair value of $3,736. The contingent consideration included cash of $4,000 and 76,300 shares of our common stock with a fair value of $1,173.

(b) Acquisition of VMC Satellite, Inc.

On April 26, 2005, we completed the acquisition of certain assets and liabilities of VMC Satellite, Inc., (“VMC”) in a transaction accounted for using the purchase method of accounting in accordance with SFAS No. 141. VMC is a marketer of digital broadcast satellite services. This acquisition has enabled us to expand our service offerings, creating additional revenue opportunities from consumers that visit its portfolio of websites and marketing partners each month. The results of VMC’s operations were included in our financial statements beginning April 26, 2005, and are reported in the WAS business unit.

F-25

INPHONIC, INC. & SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(in thousands, except per share and share amounts)

The aggregate consideration for the net assets acquired was approximately $10,979 which consisted of $4,679 in cash paid and includes acquisition costs of approximately $725 and shares of our common stock, with a fair value of $6,300, issuable in two tranches. The first tranche of stock consideration was distributed in July and September 2005 and included a total of 257,215 shares of our common stock with a fair value of approximately $3,300. Pursuant to the asset purchase agreement, as amended, the second tranche of stock consideration was to be distributed by us no later than April 26, 2006, and required us to issue common stock or cash with a fair value of $3,000 on the distribution date. We recorded the second tranche of stock consideration in accrued liabilities as of December 31, 2005 and reclassified the amount to additional paid in capital when the distribution was made in April 2006.

In addition, we agreed to pay up to an aggregate of $5,050 in cash plus 334,288 shares of our common stock upon the acquired operations attaining certain EBITDA (earnings before interest, tax, depreciation and amortization) benchmarks between April 26, 2005 and April 30, 2007. For the year ended December 31, 2006, certain EBITDA benchmarks were met and $5,116 of cash (of which $1,120 was accrued as of December 31, 2006) and shares of common stock with a fair value of $1,967 were issued as a result of VMC attaining certain EBITDA targets. This contingent consideration increased the carrying value of goodwill by $7,083. The goodwill recorded in connection with the transaction is deductible for tax purposes.

(4) Discontinued Operations

On December 31, 2005, we completed the sale of substantially all of the operating assets of our Liberty Wireless business for approximately $2,318 including consideration payable in cash of up to $1,491 and notes receivable of approximately $755, net of $35 discount. Of the consideration payable at closing in cash, approximately $784 was received in January 2006 and $707 was offset against service liabilities assumed by the buyer in the transaction. We recorded a net gain on the sale of $1,355. In connection with this gain recognition on the sale, we considered the guidance of SAB Topic 5:E, Accounting for a Divesture Of A Subsidiary or Other Business Operation.

Under the terms of the notes receivable, we received proceeds due in installments through 2006. Although the notes do not bear interest, we have recorded the notes at a discount and accreted interest income over their outstanding terms. Between January 1, 2006 and December 31, 2006, we received scheduled principal repayments of $1,111 on the notes receivable, and have offset certain payables in amounts of $130 regarding collection of the notes receivable. As of December, 31, 2006, $250 of receivables have not yet been collected. However, we believe these amounts are fully collectible.

Summary operating results for the discontinued operating segment were as follows:

	For the Year Ended December 31,
	2004		2005			2006
Revenue	$	49,332	$	23,221		$	—
Costs and expenses		44,986		23,650			193
Income (loss) from discontinued operations	$	4,346	$	(429	)	$	(193	)

F-26

INPHONIC, INC. & SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(in thousands, except per share and share amounts)

Balance sheet data included:

	As of December 31,
	2005		2006
Accounts and notes receivable, net	$	1,848	$	391
Other current assets		4		—
Other non-current assets		578		—
Assets of discontinued operations	$	2,430	$	391
Accounts payable	$	931	$	—
Other accrued expenses		2,199		1,103
Liabilities of discontinued operations	$	3,130	$	1,103

(5) Long-lived Assets

Property and Equipment

Property and equipment, stated net of accumulated depreciation and amortization, consisted of the following as of December 31, 2005 and 2006:

	2005			2006
Computer and equipment	$	7,117		$	10,187
Software		5,117			6,367
Furniture and fixtures		834			785
Leasehold improvements		1,675			2,039
Other equipment		—			554
Capitalized leases		1,243			1,397
Less: Accumulated depreciation and amortization		(9,504	)		(13,101	)
		6,482			8,228
Website and internal software development costs		14,162			31,169
Less: Accumulated depreciation and amortization		(8,523	)		(16,651	)
Website and internal software development costs, net		5,639			14,518
Total property and equipment, net	$	12,121		$	22,746

Depreciation expense for the years ended December 31, 2004, 2005 and 2006 was $5,373, $6,702 and $12,315, respectively. The cost of property and equipment under capital leases was $1,243 and $1,397 at December 31, 2005 and 2006, respectively. Accumulated depreciation for assets under capital leases was $278 and $751 at December 31, 2005 and 2006, respectively.

Website and internal software development costs

We capitalized a total of approximately $253, $647 and $1,385 during 2004, 2005 and 2006, respectively, relating to the development of the e-commerce platform. In addition, we capitalized costs incurred to develop certain internal use software of approximately $3,008, $6,729 and $15,622 in 2004, 2005 and 2006, respectively. We are amortizing the web development costs over a period of 18 months and internal use software costs over a period of 24 months. These costs are included in depreciation and amortization in the accompanying consolidated statements of operations. Amortization expense on

F-27

INPHONIC, INC. & SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(in thousands, except per share and share amounts)

the e-commerce platform and other internal use software development costs was approximately $2,784, $3,749, and $8,127 during 2004, 2005 and 2006, respectively.

Goodwill and intangible assets

Amortizable intangible assets were comprised of the following:

	December 31, 2005
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Software and technology	$	1,123	$	1,045	$	78
Customer contracts		885		885		—
Affiliate and carrier relationships		3,960		676		3,284
Non-compete agreement (a)		5,049		1,431		3,618
Other		1,935		1,104		831
Total	$	12,952	$	5,141	$	7,811

(a) On May 27, 2005, we completed the purchase of certain intangible assets of FONcentral.com, Inc. The aggregate consideration for the assets acquired was approximately $4,139 which consisted of $2,590 in cash, which included acquisition costs and accrued expenses of $151, plus 131,876 shares of common stock with a fair value equal to approximately $1,549.

	December 31, 2006
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Software and technology	$	90	$	31	$	59
Affiliate and carrier relationships		3,960		1,496		2,464
Non-compete agreement		5,049		3,788		1,261
Supplier relationships		3,730		628		3,102
Other		2,128		2,032		96
Total	$	14,957	$	7,975	$	6,982

Aggregate amortization expense for intangible assets subject to amortization was approximately $3,138 in 2005 and $4,752 in 2006. Estimated amortization expense based on current intangible balances is $2,301, $1,303, $1,303, $465, and $373 for the years ended December 31, 2007, 2008, 2009, 2010 and 2011, respectively.

The carrying value of intangible assets with indefinite lives was $4,840 and $1,110 for December 31, 2005 and 2006, respectively. Intangible assets with indefinite lives consisted of trade names. For the year ended December 31, 2005, we originally determined that a supplier relationship valued at $3,730 had an indefinite life as of the acquisition date. During 2006, we determined that as of the acquisition date, the supplier relationship had a useful life of ten years in accordance with SFAS No. 142. During the fourth quarter of 2006, we recognized $255 of amortization expense for the period from April 26, 2005 to December 31, 2005. We do not believe the impact of this adjustment in 2006 to be material to fiscal year 2006 or 2005 as a result of this change.

F-28

INPHONIC, INC. & SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(in thousands, except per share and share amounts)

The following table reflects the changes to goodwill for the years ended December 31, 2005 and 2006:

	WAS Segment		Data Services Segment			Total
Balance as of January 1, 2005	$	9,258	$	221		$	9,479
Goodwill arising from the A1 Wireless acquisition		17,988		—			17,988
Goodwill arising from the VMC acquisition		3,894		—			3,894
Sale of Data Services software assets		—		(221	)		(221	)
Balance as of December 31, 2005		31,140		—			31,140
Goodwill arising from the VMC acquisition		7,083		—			7,083
Balance as of December 31, 2006	$	38,223	$	—		$	38,223

(6) Debt

Debt consisted of the following:

	December 31,
	2005			2006
Borrowings under credit facility	$	15,000		$	—
Borrowings under term loan		—			75,000
Capital leases		851			574
		15,851			75,574
Less discount from warrant issuance		—			(11,447	)
Less current maturities		(377	)		(301	)
Long-term debt	$	15,474		$	63,826

(a) $100 million term loan

On November 7, 2006, we executed a $100,000 aggregate principal amount senior secured term loan with Goldman Sachs Credit Partners, L.P., Citicorp North America, Inc. and AP Inphonic Holdings Inc. bearing a fixed rate of interest of nine percent per annum and secured by substantially all our assets. As of November 7, 2006, the Goldman Sachs Group, Inc., an affiliate of Goldman Sachs Credit Partners, L.P., beneficially-owned approximately 15.5% of our common stock. This term loan matures in November 2011. Beginning in November 2009, we have the ability to repay principal on the loan without penalty and conversely, the lenders have the right to call the remaining outstanding principal of the debt without penalty. As additional consideration, we also granted the lenders warrants to purchase 1,250,000 shares of our common stock at an exercise price of $0.01 per share. We received proceeds of $75,000 aggregate principal amount of the term loan proceeds on November 7, 2006, and have the option to draw-down the remaining amount at a later date. Proceeds from the term loan will be used to repay all indebtedness under the existing credit facility, fund share repurchases of our common stock, and for general corporate and working capital needs. In conjunction with the loan transaction above, we terminated our credit facility with Comerica Bank and used proceeds from the term loan to repay the outstanding principal obligation of $19,924 plus accrued interest. For the period November 7, 2006 to December 31, 2006, we accrued $994 of interest on the term loan, which was included as accrued expenses and other current liabilities on the accompanying balance sheet at December 31, 2006.

F-29

INPHONIC, INC. & SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(in thousands, except per share and share amounts)

Under the terms of the term loan, we are required to maintain certain minimum levels of EBITDA on a quarterly basis beginning December 31, 2006, maintain a minimum $25,000 cash balance at a certain financial institution beginning July 31, 2007, maintain a maximum level of capitalized expenditures and maintain certain other financial and non-financial covenants, including our delivery of our audited financial statements with the opinion of our independent registered public accounting firm within 90 days of our year-end in accordance with the financial statement delivery requirements under the term loan agreement. On May 1, 2007, we amended the term loan agreement to extend the draw date for an additional $25 million of borrowings to July 31, 2007. Additionally, we received an extension of time to satisfy the delivery requirements of our annual 2006 and first quarter 2007 financial statements and related certificates under the term loan agreement to May 31, 2007 and June 15, 2007, respectively. We were in compliance with the covenants under the term loan agreement.

The warrants to purchase 1,250,000 shares of common stock at $0.01 per share were valued at $13,715 using a Black-Scholes model. Assumptions used in the model included a five year term based on the contractual life, 72% volatility and a risk free rate of 4.6%. We estimated the fair value of our long-term fixed rate term loan using a discounted cash flow analysis based on a current borrowing rate of companies with a similar debt rating. We assumed a life of the debt equal to the earliest period in which we can repay or refinance the debt. The estimated fair value of the term loan with a fixed interest rate at 9.00% was $72,400. In accordance with APB No. 14, Accounting for Convertible Debt and Debt Issued with Stock Purchase Warrants, we allocated the $75,000 proceeds to the term loan and detachable warrants based on the relative fair value of each on a standalone basis. As such, $63,055 and $11,945 of the $75,000 proceeds were allocated to the term loan and the detachable warrants, respectively. The amount of proceeds allocated to the fair value of the detachable warrants has resulted in a discount of $11,945 on the term loan as of November 7, 2006. For the year ended December 31, 2006, $498 of this discount has been amortized using the effective interest method and reflected in interest expense. As of December 31, 2006, the remaining unamortized discount on the debt was $11,447.

As a result of the completion of the financing transaction, we incurred $1,368 of financing costs. For the period of November 7, 2006 to December 31, 2006, we have amortized $76 of these costs, which was reflected as interest expense. As of December 31, 2006, $495 and $797 of these costs are deferred and included in deferred costs and other current assets and deposits and other assets, respectively, on the accompanying balance sheet. Additionally, we are required to pay a $75 management fee on an annual basis. This fee is amortized over the annual period and included in interest expense on the accompanying consolidated statements of operations.

(b) $25 million Credit Facility

As of December 31, 2005, we maintained a revolving operating line of credit with Comerica Bank, (“Comerica”), which allowed for aggregate borrowing of up to $25,000 subject to certain limits based on accounts receivable and inventory levels and secured by substantially all our assets. At December 31, 2005, we had $15,000 outstanding the revolving line of credit and we had an additional $1,700 of availability under the line of credit based on the limits described above. Borrowings outstanding under the revolving line of credit accrued interest at the bank’s LIBOR rate plus a margin of 2%. Interest payments were made on the last business day of each month. We were assessed a line of credit commitment fee quarterly by Comerica, based on the availability under the line of credit. We paid commitment fees of $25 during 2005. The revolving line of credit was repaid on November 7, 2006. At that time, the agreement with Comerica was terminated.

F-30

INPHONIC, INC. & SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(in thousands, except per share and share amounts)

(c) Standby Letters of Credit

At December 31, 2005 and 2006, we had approximately $400 and $38, respectively, of standby letters of credit in connection with vendor obligations.

(c) Capital Leases

In 2004, 2005 and 2006, we entered into capital leases for the purchase of $635, $595 and $152 of leased computer equipment, respectively. Capital lease obligations totaled $851 as of December 31, 2005 and $574 as of December 31, 2006.

(d) Maturities of Long-Term Debt

The aggregate maturities of long-term debt which included amounts outstanding under the term loan and capital lease obligations, at December 31, 2006, approximate the following: $301 in 2007; $216 in 2008; $75,031 in 2009 and $25 in 2010. Under the term loan agreement, we may repay or the lender may require the repayment of the debt on the third anniversary of the agreement. For the purpose of this presentation, we have included the contractual obligation due on the third anniversary. If not prepaid, the debt matures in November 2011.

(7) Capital Stock

As of December 31, 2006, we had 200,000,000 and 10,000,000 authorized shares of common and preferred stock, respectively. At December 31, 2005 and 2006, there were 35,232,869 and 37,138,480 shares of common stock issued and outstanding, respectively. There were no shares of preferred stock outstanding as of December 31, 2005 and 2006.

During the year ended December 31, 2006, we issued 712,453 shares of our common stock related to contingent consideration related to business acquisitions in prior years as described in Notes 3 and 5; repurchased 350,261 shares under a stock repurchase program; issued 998,389 and 539,564 shares in connection with stock option exercises and lapses of restrictions on common stock, respectively; and 33,597 shares were issued in exercise of warrants and other events.

During the year ended December 31, 2005, we issued 625,617 shares of our common stock related to business and intangible asset acquisitions during 2005 as described in Notes 3 and 5; repurchased 1,081,487 shares under a stock repurchase program; issued 2,450,495 and 75,226 shares in connection with stock option exercises and lapses of restrictions on common stock, respectively; and 910,418 shares were issued in exercise of warrants and other events.

On November 19, 2004, we issued 6,500,000 additional shares of our common stock in an initial public offering, at a price of $19.00 per share for proceeds of $110,838 net of issuance costs of $4,017. In connection with this offering, we also issued 13,619,536 shares of common stock in exchange for all outstanding preferred stock.

(a) Preferred Stock

In November 2004, upon the closing of the initial public offering, all issued and outstanding shares of our redeemable convertible preferred stock were automatically converted into approximately 13.6 million shares of common stock. Each share of Series A and B preferred stock outstanding was converted into common stock at an exchange ratio of 0.83 shares of common stock for 1 share of preferred stock. Each share of Series C, D, and D-1 preferred stock outstanding was converted into

F-31

INPHONIC, INC. & SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(in thousands, except per share and share amounts)

common stock at an exchange ratio of 0.42 shares of common stock for 1 share of preferred stock. All other shares of preferred stock outstanding were converted into common stock at an exchange ratio of 0.33 shares of common stock for 1 share of preferred stock, as follows:

	Shares of common stock issued
Series A	557,320
Series B	1,902,239
Series C	2,808,696
Series D and D-1	4,412,779
Series D-2	138,892
Series D-3	264,261
Series D-4	—
Series D-5	224,132
Series E	3,311,217
Shares of common stock issued for preferred stock	13,619,536

(b) Common Stock

Holders of shares of common stock are entitled to one vote per common share held on all matters voted on by the stockholders. Dividends may be declared and paid on common stock shares at the discretion of our board of directors and are subject to any preferential dividend rights of any outstanding preferred stockholders. No dividends on shares of common stock have been declared or paid through December 31, 2006.

(c) Repurchase of Common Stock

In 2005 and 2006, our board had authorized us to repurchase shares of our common stock. For the period August 17, 2005 to December 31, 2005, we repurchased 1,018,487 shares of our common stock at an average price of $12.10 per share for approximately $13,088. In 2006, through August 6, 2006, we purchased an additional 62,761 shares of common stock at an average price of $8.01 per share for approximately $502.

On November 3, 2006, our board of directors authorized the repurchase of up to an additional $30,000 of our common stock through November 2007. The shares may be repurchased from time to time at prevailing market prices. The timing and amount of any shares repurchased will be based on market conditions and other factors. Repurchases may also occur under a Rule 10b5-1 plan, which permit shares to be repurchased when we may otherwise be precluded from doing so by laws prohibiting insider trading or by self imposed trading black out periods. There is no guarantee as to the exact number of shares that will be repurchased under the stock repurchase program, and we may discontinue purchases at any time. We intend to fund the share repurchases with cash on hand, proceeds from the term loan and cash generated from future operations. Between November 3, 2006 and December 31, 2006, we repurchased 287,500 shares of common stock at an average price of $11.25 per share for approximately $3,236.

(d) Stock-Based Benefit Plans

1999 Stock Incentive Plan

Our 1999 Stock Incentive Plan (the “1999 Plan”), which was adopted by the board of directors in December 1999, provided for grants of stock-based awards from time to time to our employees,

F-32

INPHONIC, INC. & SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(in thousands, except per share and share amounts)

officers, directors and consultants at exercise prices determined by the board of directors. Options granted under the 1999 Plan generally vest over a four-year period and expire ten years from the grant date. As of November 19, 2004, no additional options were available for grant under the 1999 Plan due to the adoption of the 2004 Equity Incentive Plan (the “2004 Plan”).

2004 Equity Incentive Plan

The 2004 Plan, which was adopted by the board of directors and approved by the stockholders in September 2004, allows for grants of stock-based awards from time to time to our employees, officers, directors and consultants at exercise prices determined by the board of directors. Options to purchase a total of 3,000,000 shares of common stock were originally authorized for issuance under the 2004 Plan, which number was increased by up to an additional 3,987,853 as of December 31, 2006 from the following sources: (1) shares subject to options or other awards outstanding under the 1999 Plan as of the date of its termination which expire or otherwise terminate for any reason, without having been exercised or settled in full and (2) shares acquired under the 1999 Plan forfeited to us on or after the date of its termination.

For incentive stock options, the exercise price must be at least equal to fair market value at the date of grant. For nonqualified stock options, the option may be granted with an exercise price less than fair market value. Options granted under the 2004 Plan generally vest over a period to be determined by the administrator and expire ten years from the grant date. As of December 31, 2006, 434,272 options were available for future grant under the 2004 Plan.

During 2004, 2005 and 2006, we granted to non-employees options to purchase 86,600, 18,000 and 51,000, respectively, shares or our common stock, pursuant to the Plans. The estimated fair value of the options was determined using the Black-Scholes Model (see note 2(n)). The 51,000 options issued in 2006 only had a contractually stated life of 5 months. We recorded compensation expense relating to the options of approximately $1,232, $243 and $229, respectively, for the years ended December 31, 2004, 2005 and 2006.

The following table summarizes the activity for stock options granted to employees and non-employees for the year ended December 31, 2006. The intrinsic value of options exercised for the years ended December 31, 2005 and 2006 was $24,462 and $4,156, respectively.

	Number of options		Weighted average exercise price		Range of exercise		Weighted average contractual term (years)	Aggregate intrinsic value
Balance January 1, 2006	5,115,969			9.47	$	0.60 – 25.36
Granted	1,063,200			7.36		6.46 – 11.76
Exercised	(998,389	)		5.74		0.60 – 10.07
Forfeited	(1,137,677	)		12.44		1.80 – 25.36
Balance December 31, 2006	4,043,103		$	9.01	$	0.60 –25.36	7.67	$	14,673
Ending vested & expected to vest	3,830,535		$	8.97			7.62	$	14,021
Exercisable at December 31, 2006	2,164,739		$	8.63			6.95	$	8,405

F-33

INPHONIC, INC. & SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(in thousands, except per share and share amounts)

Weighted average grant date fair value per share was $12.36, $10.26 and $4.65 as of December 31, 2004, 2005 and 2006, respectively.

Information regarding options outstanding at December 31, 2006 was as follows:

	Options Outstanding		Options Exercisable
Range of exercise price	Number of options	Weight average remaining contractual life (in years)	Number of options	Weighted average exercise price
$   0.60 – $3.90	289,290	6.0	209,751	$	2.26
$   5.88 – $ 5.88	1,459,157	7.3	1,005,660		5.88
$   6.46 – $ 6.46	504,200	9.2	3,000		6.46
$   6.51 – $ 7.80	545,688	6.6	377,188		7.80
$ 10.00 – $ 14.04	463,938	8.5	197,678		12.13
$ 15.25 – $ 15.28	303,410	8.5	122,139		15.26
$ 15.60 – $ 15.60	19,168	5.7	19,168		15.60
$ 16.00 – $ 16.00	98,512	7.8	55,467		16.00
$ 16.49 – $ 16.49	128,500	8.6	62,250		16.49
$ 25.36 – $ 25.36	231,200	8.1	112,438		25.36
	4,043,103	7.7	2,164,739	$	8.63

As of December 31, 2005 and 2006, the weighted average remaining contractual life of the options outstanding was approximately 8.2, and 7.7 years, respectively. Options to purchase 2,146,924 and 2,164,739 shares of common stock with a weighted average exercise price of $7.74 and $8.63 were exercisable at December 31, 2005 and 2006, respectively.

Restricted Common Stock

During the twelve months ended December 31, 2006, we granted 2,643,048 shares of restricted common stock to certain of our key employees. The restrictions on this common stock lapse and the stock vests over periods ranging up to 4 years from the grant date. The weighted average grant date fair value for such awards was $15.70 and $9.16 for 2005 and 2006, respectively. The following table summarizes the activity for restricted stock awards granted in 2006:

	Number of Restricted Stock Awards		Weighted-average grant date fair value
Non-vested at January 1, 2006	1,137,878		$	15.58
Granted	2,643,048			9.16
Vested	(539,564	)		14.38
Surrendered for taxes	(51,221	)		15.19
Forfeited	(225,492	)		14.02
Non-vested at December 31, 2006	2,964,649		$	10.20

At December 31, 2005 and 2006 shares that have vested were included as outstanding shares in the calculations of basic and diluted weighted average shares.

F-34

INPHONIC, INC. & SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(in thousands, except per share and share amounts)

Stock Purchase Warrants

Warrants to purchase shares of common stock were granted with exercise prices ranging between $0.01 and $15.60, and terms ranging between 5 and 9 years. The estimated fair value of the warrants granted was determined using the Black-Scholes Model. Weighted average grant date fair value per share of warrants granted in 2004 and 2006 were $11.44 and $8.36, respectively. There were no warrants granted in 2005.

The following table summarizes the activity for warrants to purchase common stock, including warrants granted in connection with long-term debt (see Note 6) in 2006:

	Number of warrants		Weighted average exercise price		Range of exercise
Balance January 1, 2006	787,863			8.44	$	0.03 - 24.00
Granted	1,816,324			2.30		0.01 -   7.35
Exercised	(33,597	)		0.29		0.03 -   2.49
Surrendered for cashless exercise	(1,291	)		2.30		0.03 -   2.49
Forfeited	(3,334	)		24.00		24.00
Balance December 31, 2006	2,565,965		$	4.48	$	0.01 - 15.60

In April 2006, we issued an additional warrant to purchase 188,775 shares of our common stock to a vendor that is exercisable upon certain minimum performance conditions. The exercise price of the warrant will be based on the trading price of our common stock at the time the performance conditions are met by the vendor. Once it is probable that the vendor will achieve the performance conditions set forth under the terms of the warrant, the fair value of the warrant will be amortized to sales and marketing expense over the remaining contractual term of the vendor commitment. This warrant is excluded from the table above.

Pursuant to SFAS No. 128, warrants to purchase 1,250,000 shares of our common stock at $0.01 issued in connection with our term loan in November 2006 were included in the calculation of our basic weighted average shares outstanding for the purposes of calculating earnings per share as these warrants were exercisable for little cash consideration.

F-35

INPHONIC, INC. & SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(in thousands, except per share and share amounts)

(8) Income Taxes

SFAS No. 109 establishes financial accounting and reporting standards for the effects of income taxes. During the years ended December 31, 2004, 2005 and 2006, we did not have any income tax expense or benefit because a full valuation allowance was provided against our net deferred tax assets. As of December 31, 2005 and 2006, the components of the net deferred tax asset were as follows:

	2005			2006
Deferred tax assets:
Accrued compensation	$	2,482		$	7,953
Capitalized costs & other items		2,931			2,666
Net operating loss carryforwards		50,353			75,019
Total deferred tax assets		55,766			85,638
Deferred tax liabilities:
Depreciation		(2,003	)		(5,379	)
Acquired intangibles		(340	)		(631	)
Other		(1,916	)		(645	)
Total deferred tax liabilities		(4,259	)		(6,655	)
Net deferred tax assets		51,507			78,982
Less: Valuation allowance		(51,507	)		(78,982	)
	$	—		$	—

SFAS No. 109 requires us to evaluate the recoverability of our deferred tax assets on an ongoing basis. The assessment is required to consider all available positive and negative evidence to determine whether, based on such evidence, it is more likely than not that some portion or all of our net deferred assets will be realized in future periods. The ultimate recoverability of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based upon such factors as the lack of a significant history of material profits, possible increases in expense levels to support growth, the fact that the market in which we compete is intensely competitive and characterized by rapidly changing technology, the lack of carryback capacity to realize the deferred tax assets, and the uncertainty regarding the market acceptance of new product offerings, management does not at this time believe it is more likely than not that we will realize the benefits of these net deferred tax assets. Therefore, a full valuation allowance against the net deferred tax assets has been provided as of December 31, 2005 and 2006.

The net changes in the total valuation allowance, for the years ended December 31, 2005 and 2006 were an increase of $12,962 and $27,475, respectively. Approximately $5,465 of the valuation allowance relates to acquired deferred tax assets, and pursuant to the requirements of FAS 109 any subsequent recognition of these deferred tax assets will be applied to reduce goodwill and other intangibles.

As of December 31, 2006, we had approximately $196,128 of available net operating loss (NOL) carryforwards. Due to ownership changes, certain of these NOL carryforwards are subject to limitations under Section 382 of the Internal Revenue Code. Generally, these limitations restrict the availability of NOL carryforwards on an annual basis. The net operating loss carryforwards will begin to expire in 2019.

F-36

INPHONIC, INC. & SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(in thousands, except per share and share amounts)

We did not have any income tax expense or benefit nor make any cash payments for income taxes for the years ended December 31, 2004, 2005 and 2006. The difference between the expected income tax benefit for the years ended December 31, 2004, 2005 and 2006, computed by applying the U.S. federal income tax rate of 35%, and actual income tax benefit, was as follows:

	2004			2005			2006
Expected Federal income tax benefit	$	(3,584	)	$	(13,368	)	$	(22,305	)
Permanent differences		45			76			(25	)
State income taxes, net of Federal benefit		(505	)		(1,234	)		(2,073	)
Change in valuation allowance		4,044			12,962			27,475
Change in provisional rate/other		—			1,564			(3,072	)
Income tax expense	$	—		$	—		$	—

(9) Segment Information

As a result of the sale of our MVNO operations on December 31, 2005, we believe we no longer have reportable segments as MVNE and Data Service Segments are immaterial to the consolidated entity.

(10) Commitments and Contingencies

Operating Leases

We lease office and warehouse space under various operating leases through 2009. Rent expense was approximately $1,088, $1,760, and $1,923 for the years ended December 31, 2004, 2005 and 2006, respectively. Minimum future lease payments under these operating leases as of December 31, 2006 approximate the following: $1,806 for 2007; $1,272 for 2008; and $1,001 for 2009.

Legal Matters

On May 7 and 18, 2007, two putative federal securities law class actions were filed in the United States District Court for the District of Columbia on behalf of persons who purchased our common stock between August 2, 2006, and May 3, 2007. These substantially similar lawsuits assert claims pursuant to Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder, against us, our chief executive officer and our chief financial officer. These claims are related to our April 3, 2007, and May 4, 2007 announcements concerning our restatement of certain previously issued financial statements. Potential plaintiffs have until July 6, 2007, to move the court for appointment as lead plaintiff. We have not yet responded to the complaints. We are unable to estimate the amount of any potential claim arising from these matters at this time. We believe that the allegations contained within these class action lawsuits are without merit and intend to vigorously defend the litigation.

On August 5, 2004, Avesair, Inc., one of the companies the assets of which we acquired, filed suit against us demanding, among other matters, that we issue to Avesair shares of our common stock valued at approximately $4.0 million as of June 30, 2004. The stock demanded by Avesair represents the maximum value of shares that they could have earned for achieving certain performance-based targets under the asset purchase agreement. We believe the performance-based targets were not achieved and intend to vigorously contest this matter. However, any adverse resolution of this matter could have a material adverse impact on our financial results if we are required to issue additional shares and would result in dilution to our stockholders.

F-37

INPHONIC, INC. & SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(in thousands, except per share and share amounts)

On May 3, 2007, the Federal Communications Commission (FCC) issued an Order of Forfeiture and Further Notice of Apparent Liability in which it imposed a forfeiture of $819,905 against us for being late in complying with certain regulatory obligations that arose in 2004 and 2005 from a business that we sold in December 2005. Those obligations included: registering with the FCC, filing certain reports, and paying certain Universal Service Fund fees. The FCC’s order also proposed imposing an additional fine of $100,000 for not having maintained in 2006 and 2007 a license necessary to conduct the business that was discontinued by us in 2005. As we did not operate the business in 2006 and 2007 we will request that the proposed fine be dismissed. With regard to the forfeiture itself, we are evaluating our legal options, which include appealing the ruling in federal court and/or negotiating a different and possibly lesser forfeiture. This forfeiture issue was initially raised by the FCC in July 2005. We advised the FCC then, and believe now, that no fine is appropriate under the circumstances.

Fifteen related putative federal court class actions have been filed against us arising out of InPhonic-sponsored rebate offers for online purchases of wireless telephones. Several of these lawsuits also name either our current or former third-party rebate processor as a defendant. On October 25, 2006 we received a decision by the Judicial Panel on Multidistrict Litigation (“JPML”) granting our motion to consolidate the federal court actions in the United States District Court for the District of Columbia before the Honorable Ellen Segal Huvelle. The consolidated amended class action complaint alleges, among other things, that we and our current or former third-party rebate processor (depending on the particular claim) violated the consumer protection laws of various States, various D.C. state laws and the federal RICO (anti-racketeering) statute in connection with our disclosure and implementation of the terms and conditions of rebate offers. The class action plaintiffs seek compensatory damages and/or restitution, statutory penalties and treble damages under D.C. consumer protection laws and RICO, attorneys’ fees and punitive damages, as well as injunctions concerning the content of our websites. The federal lawsuit is in an early stage. We intend to vigorously defend that action but cannot predict its outcome.

On April 27, 2007 we and the Federal Trade Commission (FTC) announced that we had entered into a consent agreement with the FTC in which InPhonic agreed to clearly and prominently disclose certain information regarding its rebate offers, such as when consumers can expect to receive their rebates, any time period that consumers must wait before submitting a rebate request, and certain information that would disqualify a consumer from receiving a rebate. We also agreed to provide rebates within time frames and under terms and conditions reasonably specified by us in our communications with our customers. We also agreed to provide rebates to certain customers whom had previously been denied them. As required by its rules, the FTC has requested comment on the consent agreement and we expect that it will become effective shortly. We have accrued an estimate of our liability associated with this consent agreement in the accompanying financial statements.

On February 15, 2007, we reached a final settlement with the District of Columbia Attorney General's Office concerning our use of mail-in rebates. We have accrued for the settlement and estimated costs of compliance in the accompanying financial statements at December 31, 2006.

From time to time we are party to other disputes or legal proceedings. We do not believe that any of the pending proceedings are likely to have a material adverse effect on our business.

(11) Related-Party Transactions

Goldman Sachs Credit Partners, L.P., Citicorp North America Inc. and AP InPhonic Holdings, LLC hold shares of our common stock and are the lending agents with regards to our term loan. See Note 6.

F-38

INPHONIC, INC. & SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(in thousands, except per share and share amounts)

Mr. Laurence E. Harris, a member of our board of directors since March 2006, is “of counsel” in the law firm of Patton Boggs LLP (“Patton Boggs”). The total cost of various legal services provided to us by Patton Boggs in 2006 was approximately $2,219. Mr. Harris does not share in any profits of Patton Boggs or any of the fees paid by us to Patton Boggs.

(12) InPhonic, Inc., 401(k) Plan

Our 401(k) Plan provides retirement and incidental benefits for its employees. As allowed under Section 401(k) of the Internal Revenue Code, the 401(k) plan provides tax-deferred salary deductions of up to 15% of compensation for eligible employees. Employees are eligible to participate beginning the first day of the quarter subsequent to their start of employment. We may make discretionary matching contributions to the 401(k) plan. We did not make any discretionary matching contributions during 2004, 2005 and 2006.

(13) Quarterly Results (unaudited)

The following sets forth unaudited selected financial data on a quarterly basis for the years ended December 31, 2005 and 2006.

	Quarters Ended 2005
	March 31			June 30			September 30			December 31
Revenue	$	68,151		$	75,226		$	91,960		$	85,202
Cost of revenue		40,123			42,004			53,753			55,850
Loss from continuing operations		(7,418	)		(1,162	)		(4,366	)		(24,820	)
Income (loss) from discontinued operations		424			(490	)		(587	)		(1,131	)
Net loss		(6,994	)		(1,652	)		(4,953	)		(24,596	)
Basic and diluted loss per share:
Net loss from continuing operations	$	(0.22	)	$	(0.04	)	$	(0.12	)	$	(0.70	)
Net gain (loss) from discontinued operations		0.01			(0.01	)		(0.02	)		0.01
Basic and diluted net loss per share	$	(0.21	)	$	(0.05	)	$	(0.14	)	$	(0.69	)
Basic and diluted weighted average shares		32,901,398			33,847,007			35,515,210			35,463,559

F-39

INPHONIC, INC. & SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(in thousands, except per share and share amounts)

	Quarters Ended 2006
	March 31			June 30			September 30			December 31
Revenue	$	86,978		$	92,128		$	95,103		$	95,365
Cost of revenue		48,181			51,575			53,521			64,577
Loss from continuing operations		(4,348	)		(9,370	)		(15,591	)		(34,225	)
Income (loss) from discontinued operations		35			(206	)		72			(94	)
Net loss		(4,313	)		(9,576	)		(15,519	)		(34,319	)
Basic and diluted loss per share:
Net loss from continuing operations	$	(0.12	)	$	(0.26	)	$	(0.43	)	$	(0.91	)
Net gain (loss) from discontinued operations		0.00			(0.01	)		0.00			0.00
Basic and diluted net loss per share	$	(0.12	)	$	(0.27	)	$	(0.43	)	$	(0.91	)
Basic and diluted weighted average shares		35,348,335			35,856,253			36,304,160			37,688,951

Restatement

The unaudited selected financial data for the quarters ended March 31, June 30, and September 30, 2006 have been adjusted to reflect corrections of accounting errors that occurred in the respective periods from amounts originally reported in our Forms 10-Q for those periods as filed with the SEC. The following provides a summary of the corrections within each quarterly reporting period. We have amended our quarterly reports on Forms 10-Q for these periods to reflect these corrections:

Quarter ended March 31, 2006 — During the three months ended March 31, 2006, we had recorded revenue for certain of our features activations and services commissions in which it was subsequently determined that collectibility was not reasonably assured pursuant to SAB 104. As a result we reduced our revenue and accounts receivable by approximately $393 for this adjustment. The impact on the unaudited selected financial data for the quarter ended March 31, 2006 was as follows:

	Quarter Ended March 31, 2006
	Reported			Adjustment			Restated
Revenue	$	87,371		$	(393	)	$	86,978
Loss from continued operations		(3,955	)		(393	)		(4,348	)
Net loss		(3,920	)		(393	)		(4,313	)
Net loss from continuing operations per basic and diluted share		(0.11	)		(0.01	)		(0.12	)
Net loss per basic and diluted share		(0.11	)		(0.01	)		(0.12	)

Quarter ended June 30, 2006 — During the three months ended June 30, 2006, we had recorded activations and services revenue net of related reserves as a change in estimate of certain carrier commissions in dispute which we had previously deemed as collectible. Upon further evaluation, we believe that it was inappropriate to have recorded revenue associated with this matter until such commissions are collected from the carrier. In addition, we identified other errors related to the recording of activations and services revenue of approximately $923 as it was subsequently determined

F-40

INPHONIC, INC. & SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(in thousands, except per share and share amounts)

that collectibility of these amounts was not reasonably assured based on our collection experience. Accordingly, we reduced our revenue and accounts receivable by approximately $3,674 for this matter.

In addition, we identified errors that occurred in the recordation of cost of revenue and accounts receivable in the amount of $627 that have been corrected in the accompanying financial statements. The impact on the unaudited selected financial data for the quarter ended June 30, 2006 was as follows:

	Quarter Ended June 30, 2006
	Reported			Adjustment			Restated
Revenue	$	95,802		$	(3,674	)	$	92,128
Loss from continued operations		(5,069	)		(4,301	)		(9,370	)
Net loss		(5,275	)		(4,301	)		(9,576	)
Net loss from continuing operations per basic and diluted share		(0.14	)		(0.12	)		(0.26	)
Net loss per basic and diluted share		(0.15	)		(0.12	)		(0.27	)

Quarter ended September 30, 2006 — During the three months ended September 30, 2006, we identified errors in accounting for our activations and services revenue, equipment revenue and rebates and amounts paid to consumers as “customer accommodation credits” prior to our settlement with the Attorney General of the District of Columbia.

Activations and services revenue — We had recorded revenue for certain types of residual and churn bonuses due from wireless carriers for activations which occurred during the quarter. Upon further evaluation, we subsequently determined revenue recognition was in error as collectibility of such amounts was not reasonably assured pursuant to SAB 104 based on the nature of the amounts due and our lack of collection experience of similar items. Accordingly, we reduced revenue and accounts receivable by $2,916 and will not record revenue on such amounts until collections are received.

In addition, upon further evaluation of carrier commission receivable balances, we identified several receivable balances that the respective carriers were disputing. Based on correspondence and other information received from the carrier during the three months ended September 30, 2006, although we may continue our collection pursuits, we now believe that based on the nature of the carrier response we should have written off these balances during our third quarter. Accordingly we have reduced activation and services revenue and accounts receivable by $1,551 and will not record revenue on such items until collections are received.

Equipment revenue — We identified a deficiency in our process for recording certain fees due from consumers when they cancel their wireless service contract within specified time periods or the wireless device is not returned to us as is required under the contract with the customer. Specifically, in the third quarter we accrued revenue using estimated collection rates which were higher than our prior historical experience, in part because we were implementing new collection processes. As a result of this deficiency we reduced equipment revenue and accounts receivable $1,961 during the quarter.

Consumer product rebates and rebates paid to consumers as “customer accommodation credits” — We identified an error in accounting for accrued expenses and reserves for consumer product rebates (“accrued consumer liabilities”) totaling $3,950 for the quarter. Of this amount, we determined that our reserve for such liabilities was understated $3,297 from payments made to consumers during the three month period which were outside our customary rebate validation process (“customer accommodation credits”) which erroneously reduced accrued consumer liabilities when

F-41

INPHONIC, INC. & SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(in thousands, except per share and share amounts)

paid rather than expensing such amounts. Accordingly, we increased general and administrative expenses and accrued consumer liabilities by $3,297 as of September 30, 2006. In addition, we identified that we underestimated our accrued consumer liability reserve requirements $653 as a result of misestimating the number of periods that continued to be subject to consumer rebate eligibility. Accordingly, we decreased equipment revenue and increased our reserve for accrued consumer liabilities for this amount.

Other — We identified of errors that occurred in the recordation of selling and marketing and general and administrative expenses cost of revenue and accounts receivable in the amount of $325 that also have been corrected in the accompanying financial statements. The impact on the unaudited selected financial data for the quarter ended September 30, 2006 was as follows:

	Quarter Ended September 30, 2006
	Reported			Adjustment			Restated
Revenue	$	102,184		$	(7,081	)	$	95,103
Loss from continued operations		(4,888	)		(10,703	)		(15,591	)
Net loss		(4,816	)		(10,703	)		(15,519	)
Net loss from continuing operations per basic and diluted share		(0.13	)		(0.29	)		(0.43	)
Net loss per basic and diluted share		(0.13	)		(0.29	)		(0.43	)

F-42

See report of Grant Thornton LLP, Independent Registered Public Accounting Firm on page F-2.

S-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders

InPhonic, Inc. and subsidiaries:

Under date of March 8, 2005, except as to note 1(c) and note 4, which are as of March 16, 2006, we reported on the consolidated statements of operations, stockholders’ equity (deficit), and cash flows for the year ended December 31, 2004, as contained in the 2006 annual report on Form 10-K. In connection with our audit of the aforementioned consolidated financial statements, we also audited the related consolidated financial statement schedule. This financial statement schedule is the responsibility of the Company’s management. Our responsibility is to express an opinion on this financial statement schedule based on our audit.

In our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.

KPMG LLP

McLean, Virginia

March 8, 2005, except

as to note 1(c) and note 4,

which are as of March 16, 2006

S-2

INPHONIC, INC. & SUBSIDIARIES

SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS

			Additions
Description	Balance at beginning of period		Charged to costs and expenses		Charged to other accounts			Deductions		Balance at end of period
			(in thousands)
Year ended December 31, 2004
Deferred tax asset valuation allowance	$	33,626	$	4,919	$	—		$	—	$	38,545
Reserve for doubtful accounts		246		706		—			—		952
Year ended December 31, 2005
Deferred tax asset valuation allowance		38,545		12,962		—			—		51,507
Reserve for doubtful accounts		952		1,702		(612	)(a)		—		2,042
Year ended December 31, 2006
Deferred tax asset valuation allowance		51,507		27,475		—			—		78,982
Reserve for doubtful accounts		2,042		7,707		—			—		9,749

(a) Represents amount included in discontinued operations due to the sale of Liberty Wireless in December 2005.

S-3

EX-10.2

EXHIBIT 10.2

$100,000,000

CREDIT AGREEMENT

dated as of November 7, 2006

among

InPhonic, Inc.,

THE LENDERS FROM TIME TO TIME PARTY HERETO,

Goldman Sachs Credit Partners L.P.,

as Lead Arranger, Lead Bookrunner and Lead Syndication Agent,

and

Citicorp North America, Inc.,

as Administrative Agent,

TABLE OF CONTENTS

		Page
ARTICLE I DEFINITIONS AND ACCOUNTING TERMS
Section 1.01	Defined Terms	1
Section 1.02	Other Interpretative Provisions	24
Section 1.03	Accounting Terms and Determinations.	25
Section 1.04	Times of Day	25
ARTICLE II
THE COMMITMENTS AND LOAN
Section 2.01	The Loans	25
Section 2.02	Prepayments.	26
Section 2.03	Repayment of Loans.	27
Section 2.04	Interest.	27
Section 2.05	Administrative Agent Fees	28
Section 2.06	Computation of Interest and Fees	28
Section 2.07	Evidence of Debt	28
Section 2.08	Payments Generally; Administrative Agent’s Clawback.	28
Section 2.09	Sharing of Payments by Lenders	29
ARTICLE III
TAXES, YIELD PROTECTION AND ILLEGALITY
Section 3.01	Taxes.	30
Section 3.02	Increased Costs.	31
Section 3.03	Mitigation Obligations.	32
Section 3.04	Survival	33
ARTICLE IV
CONDITIONS PRECEDENT TO LOANS
Section 4.01	Conditions to Loan	33
Section 4.02	Additional Conditions to Loan	37
ARTICLE V
REPRESENTATIONS AND WARRANTIES
Section 5.01	Existence, Qualification and Power	37
Section 5.02	Authorization; No Contravention.	38
Section 5.03	Governmental Authorization; Other Consents	38
Section 5.04	Binding Effect	38
Section 5.05	Financial Condition; No Material Adverse Effect; No Internal Control Event.	38
Section 5.06	Litigation	39
Section 5.07	No Default	40
Section 5.08	Ownership of Property; Liens; Investments.	40
Section 5.09	Environmental Compliance.	40
Section 5.10	Insurance	41

Table of Contents (cont.)

		Page
Section 5.11	Taxes	41
Section 5.12	ERISA; Employee Benefit Arrangements.	41
Section 5.13	Subsidiaries; Equity Interests; Loan Parties	42
Section 5.14	Margin Regulations; Investment Company Act.	42
Section 5.15	Disclosure	43
Section 5.16	Compliance with Law	43
Section 5.17	Intellectual Property	43
Section 5.18	Solvency	43
Section 5.19	Labor Matters	43
Section 5.20	Collateral Documents.	44
Section 5.21	No Broker’s Fee	44
ARTICLE VI
AFFIRMATIVE COVENANTS
Section 6.01	Financial Statements	44
Section 6.02	Certificates; Other Information	45
Section 6.03	Notices	47
Section 6.04	Payment of Obligations	48
Section 6.05	Preservation of Existence Etc	48
Section 6.06	Maintenance of Properties	48
Section 6.07	Maintenance of Insurance	49
Section 6.08	Compliance with Laws	49
Section 6.09	Books and Records	49
Section 6.10	Inspection Rights	49
Section 6.11	Use of Proceeds	49
Section 6.12	Covenant to Guarantee Obligations and Give Security.	49
Section 6.13	Compliance with Environmental Laws	52
Section 6.14	Further Assurances	52
Section 6.15	Compliance with Terms of Leaseholds and Co-Location Agreement	52
Section 6.16	Cash Collateral Accounts	52
ARTICLE VII
NEGATIVE COVENANTS
Section 7.01	Restriction on Liens	52
Section 7.02	Limitation on Indebtedness	54
Section 7.03	Investments	56
Section 7.04	Fundamental Changes	58
Section 7.05	Dispositions	59
Section 7.06	Restricted Payments, etc	60
Section 7.07	Change in Nature of Business	61
Section 7.08	Transactions with Affiliates	61
Section 7.09	Burdensome Agreements	61
Section 7.10	Use of Proceeds	62
Section 7.11	Financial Covenants.	62
Section 7.12	Capital Expenditures	62
Section 7.13	Amendment of Organizational Documents; Change of Jurisdiction	63
Section 7.14	Accounting Changes	63
Section 7.15	Prepayments/Amendments of Certain Indebtedness, etc	63

- ii -

Table of Contents (cont.)

		Page
Section 7.16	Certain Activities	63
Section 7.17	Operating Leases	63
Section 7.18	Sale and Leaseback Transactions	63
Section 7.19	Limitation on Foreign Operations	64
Section 7.20	Independence of Covenants	64
ARTICLE VIII
DEFAULTS
Section 8.01	Events of Default	64
Section 8.02	Remedies upon Event of Default	66
Section 8.03	Application of Funds	67
ARTICLE IX
AGENCY PROVISIONS
Section 9.01	Appointment and Authority.	67
Section 9.02	Rights as a Lender	68
Section 9.03	Exculpatory Provisions	68
Section 9.04	Reliance by Administrative Agent	69
Section 9.05	Delegation of Duties	69
Section 9.06	Resignation of Administrative Agent	69
Section 9.07	Non-Reliance on Administrative Agent and Other Lenders	70
Section 9.08	Reserved.	70
Section 9.09	Administrative Agent May File Proofs of Claim	70
Section 9.10	Collateral and Guaranty Matters	70
ARTICLE X
MISCELLANEOUS
Section 10.01	Amendments, Etc	71
Section 10.02	Notices; Effectiveness; Electronic Communication.	72
Section 10.03	No Waiver; Cumulative Remedies	74
Section 10.04	Expenses; Indemnity; Damage Waiver.	74
Section 10.05	Payments Set Aside	75
Section 10.06	Successors and Assigns.	76
Section 10.07	Treatment of Certain Information; Confidentiality	79
Section 10.08	Right of Setoff	80
Section 10.09	Interest Rate Limitation	80
Section 10.10	Counterparts; Integration; Effectiveness	80
Section 10.11	Survival of Representations and Warranties	81
Section 10.12	Severability	81
Section 10.13	Replacement of Lenders	81
Section 10.14	Governing Law; Jurisdiction Etc.	82
Section 10.15	Waiver of Jury Trial	82
Section 10.16	No Advisory or Fiduciary Responsibility	83
Section 10.17	USA Patriot Act Notice	83
Section 10.18	Entire Agreement	83

- iii -

Table of Contents (cont.)

				Page
Schedules:
	Schedule 1.01	-	Refinanced Agreements
	Schedule 1.01(b)	-	Carried Residual Payments
	Schedule 2.01	-	Commitments and Applicable Percentage
	Schedule 5.02	-	Contracts
	Schedule 5.03	-	Certain Authorizations
	Schedule 5.05	-	Supplement to Interim Financial Statements
	Schedule 5.06	-	Litigation
	Schedule 5.08(b)	-	Existing Liens
	Schedule 5.08(c)	-	Owned Real Property
	Schedule 5.08(d)(i)	-	Leased Real Property (Lessee)
	Schedule 5.08(d)(ii)	-	Leased Real Property (Lessor)
	Schedule 5.08(e)	-	Existing Investments
	Schedule 5.09	-	Environmental Matters
	Schedule 5.12	-	Certain ERISA Matters
	Schedule 5.13	-	Subsidiaries and Other Equity Investments; Loan Parties
	Schedule 5.17	-	Intellectual Property Matters
	Schedule 6.12	-	Guarantors
	Schedule 7.01	-	Existing Liens
	Schedule 7.02	-	Existing Indebtedness
	Schedule 7.09	-	Burdensome Agreements
	Schedule 10.02	-	Administrative Agent’s Office; Certain Addresses for Notices
Exhibits:
	Exhibit A	–	Form of Committed Loan Notice
	Exhibit B	–	Form of Note
	Exhibit C	–	Form of Assignment and Assumption
	Exhibit D	–	Form of Compliance Certificate
	Exhibit E-1	–	Form of Opinion of Counsel for the Borrower and the Other Loan Parties
	Exhibit E-2	–	Form of Opinion of the General Counsel of the Borrower
	Exhibit F	–	Form of Guaranty
	Exhibit G-1	–	Form of Security Agreement
	Exhibit G-2	–	Form of Pledge Agreement
	Exhibit G-3	–	Form of Perfection Certificate
	Exhibit G-4	–	Form of Mortgage
	Exhibit G-5	–	Form of Leasehold Mortgage
	Exhibit H	–	Form of Loan Party Accession Agreement
	Exhibit I	–	Form of Solvency Certificate

- iv -

CREDIT AGREEMENT

This Credit Agreement (“Agreement”) is entered into as of November 7, 2006, among InPhonic, Inc., a Delaware corporation (the “Borrower”), each lender from time to time party hereto (collectively, the “Lenders” and, individually, a “Lender”), and Citicorp North America, Inc., as Administrative Agent (in such role, the “Administrative Agent”).

The Borrower has requested that the Lenders extend credit on the terms and conditions set forth herein. The Lenders are willing to make the requested credit facility available on the terms and conditions set forth herein. Accordingly, in consideration of the mutual covenants and agreements herein contained, the parties hereto covenant and agree as follows:

ARTICLE I

DEFINITIONS AND ACCOUNTING TERMS

Section 1.01 Defined Terms. As used in this Agreement, the following terms have the meanings set forth below:

“Accession Agreement” means a Loan Party Accession Agreement, substantially in the form of Exhibit H hereto, executed and delivered by an Additional Subsidiary Guarantor after the Closing Date in accordance with Section 6.12(a).

“Account Control Agreement” has the meaning assigned to such term in the Security Agreement.

“Additional Subsidiary Guarantor” means each Person that becomes a Subsidiary Guarantor after the Closing Date by execution of an Accession Agreement as provided in Section 6.12.

“Administrative Agent” means Citicorp North America, Inc. in its capacity as administrative agent under any of the Loan Documents, or any successor administrative agent.

“Administrative Agent’s Office” means the Administrative Agent’s address and, as appropriate, account as set forth on Schedule 10.02, or such other address or account as the Administrative Agent may from time to time notify the Borrower and the Lenders.

“Administrative Questionnaire” means an Administrative Questionnaire in a form supplied by the Administrative Agent.

“Affiliate” means, with respect to any Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified; provided, however, that the Goldman Sachs Group, Inc. and its Affiliates (including Goldman Sachs & Co. and Goldman Sachs Credit Partners) shall not be considered an Affiliate of any Loan Party.

“Agreement” means this Credit Agreement.

“Applicable Percentage” means, with respect to any Lender at any time, the percentage (carried out to the ninth decimal place) of the Facility represented by the principal amount of such Lender’s Loans at such time.

“Approved Fund” means any Fund that is administered or managed by (i) a Lender, (ii) an Affiliate of a Lender or (iii) an entity or an Affiliate of an entity that administers or manages a Lender.

“Assignee Group” means two or more Eligible Assignees that are Affiliates of one another or two or more Approved Funds managed by the same investment advisor.

“Assignment and Assumption” means an assignment and assumption entered into by a Lender and an Eligible Assignee (with the consent of any party whose consent is required by Section 10.06(b)), and accepted by the Administrative Agent, in substantially in the form of Exhibit C-1 hereto or any other form approved by the Administrative Agent.

“Attributable Indebtedness” means, at any date, (i) in respect of any Capital Lease of any Person, the capitalized amount thereof that would appear on a balance sheet of such Person prepared as of such date in accordance with GAAP, (ii) in respect of any Synthetic Lease Obligation of any Person, the capitalized or principal amount of the remaining lease payments under the relevant lease that would appear on a balance sheet of such Person prepared as of such date in accordance with GAAP if such lease or other agreement were accounted for as a Capital Lease, (iii) in respect of any Sale/Leaseback Transaction, the present value, discounted in accordance with GAAP at the interest rate implicit in the related lease, of the obligations of the lessee for net rental payments over the remaining term of such lease (including any period for which such lease has been extended or may, at the option of the lessor be extended) and (iv) all Synthetic Debt of such Person.

“Audited Financial Statements” means the audited consolidated balance sheet of the Borrower and its Consolidated Subsidiaries for the fiscal year ended December 31, 2005, and the related consolidated statements of income or operations, shareholders’ equity and cash flows for such fiscal year of the Borrower and its Consolidated Subsidiaries, including the notes thereto.

“Availability Period” means the period from and including the Closing Date to the earliest of (A) the Maturity Date, (B) the date of termination of the Commitments pursuant to Section 8.02 and (C) the date that falls 90 days after the Closing Date.

“Borrower” means InPhonic, Inc. and its successors.

“Borrower Materials” has the meaning specified in Section 6.02.

“Business Day” means any day other than a Saturday, Sunday or other day on which commercial banks are authorized to close under the Laws of, or are in fact closed in, the state where the Borrower’s chief executive office or the Administrative Agent’s Office is located.

“Capital Lease” of any Person means any lease of (or other arrangement conveying the right to use) property (whether real, personal or mixed) by such Person as lessee which would, in accordance with GAAP, be required to be accounted for as a capital lease on the balance sheet of such Person.

“Capital Lease Obligations” means, with respect to any Person, all obligations of such Person as lessee under Capital Leases, in each case taken at the amount thereof accounted for as liabilities in accordance with GAAP.

“Carried Residual Payments” means the amount of residual based revenue recognized in accordance with GAAP for the given quarterly period and as defined more precisely in Schedule 1.01B.

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“Cash Collateral Account” means a deposit or securities account of the Borrower at Goldman, Sachs & Co. or one of its Affiliates, as to which the Administrative Agent for the benefit of the Secured Parties has a first priority, perfected security interest and otherwise established in a manner satisfactory to the Administrative Agent and the Required Lenders.

“Cash Equivalents” means any of the following types of Investments, to the extent owned by the Borrower or any of its Subsidiaries free and clear of all Liens (other than Liens created under the Collateral Documents):

(i) readily marketable obligations issued or directly and fully guaranteed or insured by the United States of America or any agency or instrumentality thereof having maturities of not more than 90 days from the date of acquisition thereof; provided that the full faith and credit of the United States of America is pledged in support thereof;

(ii) time deposits with, or insured certificates of deposit or bankers’ acceptances of, any commercial bank that (A) (x) is a Lender or (y) is organized under the laws of the United States of America, any state thereof or the District of Columbia or is the principal banking subsidiary of a bank holding company organized under the laws of the United States of America, any state thereof or the District of Columbia, and is a member of the Federal Reserve System, (B) issues (or the parent of which issues) commercial paper rated as described in clause (iii) of this definition and (C) has combined capital and surplus of at least $1,000,000,000, in each case with maturities of not more than 90 days from the date of acquisition thereof;

(iii) commercial paper or auction rate securities issued by any Person not an Affiliate of the Borrower organized under the laws of any state of the United States of America and rated at least “Prime-1” (or the then equivalent grade) by Moody’s or at least “A-1” (or the then equivalent grade) by S&P, in each case with maturities of not more than 180 days from the date of acquisition thereof; and

(iv) Investments, classified in accordance with GAAP as current assets of the Borrower or any of its Subsidiaries, in money market investment programs registered under the Investment Company Act of 1940, which are administered by any Lender or their Affiliates or financial institutions that have the highest rating obtainable from either Moody’s or S&P, and the portfolios of which are limited substantially to Investments of the character, quality and maturity described in clauses (i), (ii) and (iii) of this definition.

“Casualty” means any casualty, loss, damage, destruction or other similar loss with respect to real or personal property or improvements.

“Casualty Insurance Policy” means any insurance policy maintained by any Group Company covering losses with respect to Casualties.

“CERCLA” means the Comprehensive Environmental Response, Compensation and Liability Act of 1980.

“CERCLIS” means the Comprehensive Environmental Response, Compensation and Liability Information System maintained by the U.S. Environmental Protection Agency.

“CFC” means a Person that is a controlled foreign corporation under Section 957 of the Code.

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“Change in Law” means the occurrence, after the date of this Agreement, of any of the following: (i) the adoption or taking effect of any law, rule, regulation or treaty, (ii) any change in any law, rule, regulation or treaty or in the administration, interpretation or application thereof by any Governmental Authority or (iii) the making or issuance of any request, guideline or directive (whether or not having the force of law) by any Governmental Authority.

“Change of Control” means the occurrence of any of the following events:

(v) any “person” or “group” (as such terms are used in Section 13(d) and 14(d) of the Exchange Act) (other than any Permitted Investor) has become the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a person or group shall be deemed to have “beneficial ownership” of all securities that any such person or group has the right to acquire, whether such right is exercisable immediately or only after the passage of time (such right, an “option right”)), directly or indirectly, by way of merger, consolidation or otherwise, of 25% or more of the Voting Securities of the Borrower on a fully-diluted basis after giving effect to the conversion and exercise of all outstanding Equity Equivalents (whether or not such securities are then currently convertible or exercisable and talking into account all such securities that such “person” or “group” has the right to acquire pursuant to any option right); or

(vi) during any period of 12 consecutive months, a majority of the members of the board of directors or other equivalent governing body of the Borrower ceases to be composed of individuals (A) who were members of that board or equivalent governing body on the first day of such period, (B) whose election or nomination to that board or equivalent governing body was approved by individuals referred to in clause (A) above constituting at the time of such election or nomination at least a majority of that board or equivalent governing body or (C) whose election or nomination to that board or other equivalent governing body was approved by individuals referred to in clauses (A) and (B) above constituting at the time of such election or nomination at least a majority of that board or equivalent governing body (excluding, in the case of both clause (B) and clause (C), any individual whose initial nomination for, or assumption of office as, a member of that board or equivalent governing body occurs as a result of an actual or threatened solicitation of proxies or consents for the election or removal of one or more directors by any person or group other than a solicitation for the election of one or more directors by or on behalf of the board of directors); or

(vii) any Person or two or more Persons acting in concert (other than any Permitted Investor) shall have acquired by contract or otherwise, or shall have entered into a contract or arrangement that, upon consummation thereof, will result in its or their acquisition of the power to exercise, directly or indirectly, a controlling influence over the management or policies of the Borrower, or control over the Voting Securities of the Borrower on a fully-diluted basis (and taking into account all such securities that such Person or Persons have the right to acquire pursuant to any option right) representing 25% or more of the Voting Securities of the Borrower; or

(viii) a “Rule 13e-3 transaction” within the meaning of Rule 13e-3 of the General Rules and Regulations under the Securities Exchange Act of 1934 shall occur, or the Borrower is no longer required to file periodic reports under Section 13(a) or 15(d) of the Exchange Act; or

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(ix) a “change of control” or comparable term in any document pertaining to any Permitted Subordinated Indebtedness with an aggregate outstanding principal amount in excess of the Threshold Amount occurs.

“Closing Date” means November 7, 2006.

“Closing Date Commitment” means as to each Closing Date Lender, its obligation to make a Loan to the Borrower pursuant to Section 2.01 in an aggregate principal amount at any one time outstanding not to exceed the amount requested by the Borrower prior to the Closing Date and set forth opposite such Lender’s name on Schedule 2.01 under the caption “Closing Date Commitment” or opposite such caption in the Assignment and Assumption pursuant to which such Lender becomes a party hereto, as applicable, as such amount may be adjusted from time to time in accordance with this Agreement.

“Closing Date Lender” means each Lender making a Loan to the Borrower on the Closing Date.

“Code” means the Internal Revenue Code of 1986.

“Collateral” means all of the “Collateral” referred to in the Collateral Documents and all of the other property and assets that are or are required under the terms hereof or of the Collateral Documents to be subject to Liens in favor of the Administrative Agent for the benefit of the Secured Parties.

“Collateral Documents” means, collectively, the Security Agreement, the Pledge Agreement, the Depositary Bank Agreement, the Secured Cash Management Agreement, each Mortgage, any Additional Collateral Documents, any additional pledges, security agreements, patent, trademark or copyright filings or mortgages that create or purport to create a Lien in favor of the Administrative Agent for the benefit of the Secured Parties and any instruments of assignment, control agreements, lockbox letters or other instruments or agreements executed pursuant to the foregoing.

“Commitment” means, as to each Lender, the sum of its Closing Date Commitment and its Delayed Draw Commitment, in any event not to exceed for all Lenders an aggregate of $100,000,000.

“Compliance Certificate” means a certificate substantially in the form of Exhibit D.

“Condemnation” means any taking by a Governmental Authority of property or assets, or any part thereof or interest therein, for public or quasi-public use under the power of eminent domain, by reason of any public improvement or condemnation or in any other manner.

“Condemnation Award” means all proceeds of any Condemnation or transfer in lieu thereof.

“Consolidated Capital Expenditures” means, with respect to any Person for any period, the aggregate amount of all expenditures (whether paid in cash or other consideration or accrued as a liability) that would, in accordance with GAAP, be included as additions to property, plant and equipment and other capital expenditures of such Person and its Consolidated Subsidiaries for such period, as the same are or would be set forth in a consolidated statement of cash flows of such Person and its Consolidated Subsidiaries for such period (including the amount of assets leased under any Capital Lease), but excluding (to the extent that they would otherwise be included):

(i) any such expenditures made for the replacement or restoration of assets to the extent paid for by any Casualty Insurance Policy or Condemnation Award with respect to the asset or assets being replaced or restored to the extent such expenditures are permitted under the Loan Documents;

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(ii) for purposes of Section 7.12 only, capital expenditures for Permitted Acquisitions; and

(iii) the purchase price of equipment that is purchased substantially contemporaneously with the trade-in of existing equipment to the extent that the gross amount of such purchase price is reduced by the credit granted by the seller of such equipment for the equipment being traded in at such time.

“Consolidated EBITDA” means at any date, with respect to any Person and its Subsidiaries, the sum of:

(i) Consolidated Net Income for the relevant period excluding therefrom (x) any extraordinary items of gain and (y) any gain from discontinued operations; plus

(ii) without duplication, those amounts which, in the determination of Consolidated Net Income for such period, have been deducted for:

(A) Consolidated Interest Expense;

(B) provisions for Federal, state, local and foreign income, value added and similar taxes;

(C) depreciation, amortization (including, without limitation, amortization of goodwill and other intangible assets), impairment of goodwill and other non-recurring non-cash charges or expenses (excluding any such non-cash charge or expense to the extent that it represents amortization of a prepaid cash expense that was paid in a prior period or an accrual of, or a reserve for, cash charges or expenses in any future period and any such charge that results from the write-down or write-off of inventory); and

(D) non-cash compensation expense, or other non-cash expenses or charges, arising from the granting of stock options, the granting of stock appreciation rights and similar arrangements (including any repricing, amendment, modification, substitution or change of any such stock option, stock appreciation rights or similar arrangements); and

(E) one-time charges occurring no more than one time per fiscal year for restructurings, settlements of pending or threatened litigation or governmental investigations and losses from discontinued operations not to exceed in the aggregate $10,000,000 during any period of four fiscal quarters; minus

(iii) any amount which, in the determination of Consolidated Net Income for such period, has been added for (A) interest income and (B) any non-cash income or non-cash gains, all as determined in accordance with GAAP; minus

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(iv) the aggregate amount of cash payments made during such period in respect of any non-cash accrual, reserve or other non-cash charge or expense accounted for in a prior period which were added to Consolidated Net Income to determine Consolidated EBITDA for such prior period and which do not otherwise reduce Consolidated Net Income for the current period.

For purposes of calculating Consolidated EBITDA for any fiscal quarter, if during such fiscal quarter (or in the case of pro-forma calculations, during the period from the last day of such fiscal quarter to and including the date as of which such calculation is made) any Group Company shall have made a Material Asset Disposition or a Material Permitted Acquisition, Consolidated EBITDA for such fiscal quarter shall be calculated after giving effect thereto on a Pro-Forma Basis. As used in this definition, “Material Permitted Acquisition” means any Permitted Acquisition which involves consideration in excess of $5,000,000, and “Material Asset Disposition” means any Disposition or series of related Dispositions that (i) involves assets comprising all or substantially all of an operating unit of a business or constitutes all or substantially all of the common stock of a Subsidiary and (ii) yields gross proceeds to any Group Company in excess of $5,000,000.

“Consolidated Interest Expense” means at any date, with respect to any Person and its Subsidiaries, the total interest expense of such Person and its Consolidated Subsidiaries for the most recently completed fiscal quarter, whether paid or accrued, (including, without limitation, amortization of debt issuance costs, including the Warrants, and original issue discount, non-cash interest payments, the interest component of any deferred payment obligations and the interest component of all payments under Capital Leases), all commissions, discounts and other fees and charges owed with respect to bankers’ acceptances).

“Consolidated Net Income” means at any date, with respect to any Person and its Subsidiaries, the net income (or net loss) after taxes of such Person and its Consolidated Subsidiaries for the most recently completed fiscal quarter, determined on a consolidated basis in accordance with GAAP; provided that there shall be excluded from the calculation of Consolidated Net Income for such period (i) the income (or loss) of any Person in which any other Person (other than such Person or any of its Wholly-Owned Consolidated Subsidiaries) has an ownership interest, except to the extent that any such income is actually received in cash by such Person or such Wholly-Owned Consolidated Subsidiary in the form of Restricted Payments during such period, (ii) the income (or loss) of any Person accrued prior to the date it becomes a Consolidated Subsidiary of such Person or is merged with or into or consolidated with such Person or any of its Consolidated Subsidiaries or that Person’s assets are acquired by such Person or any of its Consolidated Subsidiaries, except as provided in the definitions of “Consolidated EBITDA” and “Pro-Forma Basis” herein and (iii) the income of any Subsidiary of such Person to the extent that the declaration or payment of Restricted Payments or similar distributions by that Subsidiary of that income is not at the time permitted by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Subsidiary.

“Consolidated Subsidiary” means with respect to any Person at any date any Subsidiary of such Person or other entity the accounts of which would be consolidated with those of such Person in its consolidated financial statements if such statements were prepared as of such date in accordance with GAAP.

“Contractual Obligation” means, as to any Person, any provision of any security issued by such Person or of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound.

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“Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise; provided, however, that in the case of the Borrower and its Subsidiaries beneficial ownership of 10% or more of the aggregate outstanding Voting Securities of such Personal shall be deemed to constitute control. “Controlling” and “Controlled” have meanings correlative thereto.

“Debt Equivalents” of any Person means (i) any Equity Interest of such Person which by its terms (or by the terms of any security for which it is convertible or for which it is exchangeable or exercisable), or upon the happening of any event or otherwise (including an event which would constitute a Change of Control), (A) matures or is mandatorily redeemable or subject to any mandatory repurchase requirement, pursuant to a sinking fund or otherwise, in whole or in part, on or prior to the first anniversary of the Maturity Date, (B) is convertible into or exchangeable for Indebtedness or Debt Equivalents or (C) is redeemable or subject to any repurchase requirement arising at the option of the holder thereof, in whole or in part, on or prior to the first anniversary of the Maturity Date and (ii) if such Person is a Subsidiary of the Borrower, any Preferred Stock of such Person.

“Debt Issuance” means the issuance by any Group Company of any Indebtedness.

“Debtor Relief Laws” means the Bankruptcy Code of the United States, and all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization, or similar debtor relief Laws of the United States or other applicable jurisdictions from time to time in effect and affecting the rights of creditors generally.

“Default” means any event or condition that constitutes an Event of Default or that, with the giving of any notice, the passage of time, or both, would be an Event of Default.

“Default Rate” means an interest rate equal to (A) the Interest Rate plus (B) 2.00% per annum.

“Delayed Draw Commitment” means as to any Delayed Draw Lender, its obligation, subject to the terms and conditions hereof (including Section 10.06(h)), to make a Loan to the Borrower pursuant to Section 2.01 in an aggregate principal amount not to exceed the amount set forth opposite such Lender’s name on Schedule 2.01 under the caption “Delayed Draw Commitment” or opposite such caption in the Assignment and Assumption pursuant to which such Lender becomes a party hereto, as applicable.

“Delayed Draw Lender” means each Lender with a Delayed Draw Commitment to make a Loan to the Borrower after the Closing Date and prior to the termination of the Availability Period (subject to the terms and conditions hereof (including Section 10.06(h))).

“Depositary Bank Agreement” means an agreement between a Loan Party and any bank or other depositary institution, substantially in the form of Exhibit D to the Security Agreement, as the same may be amended, modified or supplemented from time to time.

“Deposit Account” has the meaning assigned to such term in the Security Agreement.

“Disclosed Litigation” has the meaning specified in Section 5.06.

“Disposition” or “Dispose” means the sale, transfer, license, lease or other disposition of any property by any Person (including any Sale/Leaseback Transaction and any sale of Equity Interests, but excluding any issuance by such Person of its own Equity Interests), including any sale, assignment, transfer or other disposal, with or without recourse, of any notes or accounts receivable or any rights and claims associated therewith.

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“Dollars” and “$” means lawful money of the United States of America.

“Domestic Subsidiary” means with respect to any Person each Subsidiary of such Person that is organized under the laws of the United States or any political subdivision thereof, and “Domestic Subsidiaries” means any two or more of them.

“Eligible Assignee” means any Person that meets the requirements to be an assignee under Section 10.06(b)(iii), (v) and (vi) (subject to such consents, if any, as may be required under Section 10.06(b)(iii)).

“Employee Benefit Arrangements” means in any jurisdiction the benefit schemes or arrangements in respect of any employees or past employees operated by any Group Company or in which any Group Company participates and which provide benefits on retirement, ill-health, injury, death or voluntary withdrawal from or termination of employment, including termination indemnity payments and life assurance and post-retirement medical benefits, other than Plans.

“Environmental Laws” means any and all Federal, state, local, and foreign statutes, Laws, regulations, ordinances, rules, judgments, orders, decrees, permits, concessions, grants, franchises, licenses, agreements or governmental restrictions relating to pollution and the protection of the environment or the release of any materials into the environment, including those related to hazardous substances or wastes, air emissions and discharges to waste or public systems.

“Environmental Liability” means any liability, contingent or otherwise (including any liability for damages, costs of remediation, fines, penalties or indemnities), of any Group Company directly or indirectly resulting from or based on (i) violation of any Environmental Law, (ii) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Material, (iii) exposure to any Hazardous Material, (iv) the release or threatened release of any Hazardous Material into the environment or (v) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing.

“Environmental Permit” means any permit, approval, identification number, license or other authorization required under any Environmental Law.

“Equipment” has the meaning specified in Section 1.01 of the Security Agreement.

“Equity Equivalents” means with respect to any Person any rights, warrants, options, convertible securities, exchangeable securities, indebtedness or other rights, in each case exercisable for or convertible or exchangeable into, directly or indirectly, Equity Interests of such Person or securities exercisable for or convertible or exchangeable into Equity Interests of such Person, whether at the time of issuance or upon the passage of time or the occurrence of some future event.

“Equity Interests” means, with respect to any Person, all of the shares of capital stock of (or other ownership or profit interests in) such Person, all of the warrants, options or other rights for the purchase or acquisition from such Person of shares of capital stock of (or other ownership or profit interests in) such Person, all of the securities convertible into or exchangeable for shares of capital stock of (or other ownership or profit interests in) such Person or warrants, rights or options for the purchase or acquisition from such Person of such shares (or such other interests), and all of the other ownership or profit interests in such Person (including partnership, member or trust interests therein), whether voting or nonvoting, and whether or not such shares, warrants, options, rights or other interests are outstanding on any date of determination.

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“ERISA” means the Employee Retirement Income Security Act of 1974.

“ERISA Affiliate” means any trade or business (whether or not incorporated) under common control with the Borrower within the meaning of Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of the Code for purposes of provisions relating to Section 412 of the Code).

“ERISA Event” means: (i) a Reportable Event with respect to a Pension Plan; (ii) a withdrawal by the Borrower or any ERISA Affiliate from a Pension Plan subject to Section 4063 of ERISA during a plan year in which it was a substantial employer (as defined in Section 4001(a)(2) of ERISA) or a cessation of operations that is treated as such a withdrawal under Section 4062(e) of ERISA; (iii) a complete or partial withdrawal by the Borrower or any ERISA Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan is in reorganization; (iv) the filing of a notice of intent to terminate, the treatment of a Plan amendment as a termination under Section 4041 or 4041A of ERISA, or the commencement of proceedings by the PBGC to terminate a Pension Plan or Multiemployer Plan; (v) an event or condition which constitutes grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan or Multiemployer Plan; or (vi) the imposition of any liability under Title IV of ERISA, other than for PBGC premiums due but not delinquent under Section 4007 of ERISA, upon the Borrower or any ERISA Affiliate.

“Event of Default” has the meaning specified in Section 8.01.

“Excess Cash Flow” means the amount equal to (a) cash flows generated/lost from operations, minus (b) cash provided from/used in investment activities, in each case of the Borrower and its consolidated subsidiaries for the relevant year.

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

“Excluded Taxes” means, with respect to the Administrative Agent, any Lender, or any other recipient of any payment to be made by or on account of any obligation of the Borrower hereunder, (i) taxes imposed on or measured by its overall net income (however denominated), and franchise taxes imposed on it (in lieu of net income taxes), by the jurisdiction (or any political subdivision thereof) under the laws of which such recipient is organized or in which its principal office is located or, in the case of any Lender, in which its Lending Office is located, (ii) any branch profits taxes imposed by the United States or any similar tax imposed by any other jurisdiction in which the Borrower is located and (iii) in the case of a Foreign Lender, any withholding tax that is imposed on amounts payable to such Foreign Lender at the time such Foreign Lender becomes a party hereto (or designates a new Lending Office) or is attributable to such Foreign Lender’s failure or inability (other than as a result of a Change in Law) to comply with Section 3.01(e), except to the extent that such Foreign Lender (or its assignor, if any) was entitled, at the time of designation of a new Lending Office (or assignment), to receive additional amounts from the Borrower with respect to such withholding tax pursuant to Section 3.01(a).

“Existing Debt” has the meaning specified in Section 7.02(iii).

“Extraordinary Receipt” means any cash received by or paid to or for the account of any Person not in the ordinary course of business, including pension plan reversions, Condemnation Awards (and payments in lieu thereof) and indemnity payments; provided that (i) with respect to cash receipts or payments relating to damage to equipment used or useful in the business of such Person, “Extraordinary

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Receipt” shall mean such cash to the extent it exceeds amount actually expended to replace such equipment, and (ii) with respect to cash receipts or payments provided by the landlord of space rented by the Company or its Subsidiaries, “Extraordinary Receipt” shall mean such cash to the extent it exceeds amounts actually expended to refurbish, construct, or acquire improvements to such leased space.

“Facility” means, at any time (i) during the Availability Period, the sum of (A) the aggregate amount of Commitments at such time and (B) the aggregate principal amount of all Loans outstanding at such time, and (ii) thereafter, the aggregate principal amount of the Loans outstanding at such time.

“Federal Funds Rate” means, for any day, the rate per annum equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day; provided that (i) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day, and (ii) if no such rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day shall be the average rate (rounded upward, if necessary, to a whole multiple of 1/100 of 1%) charged to the Administrative Agent on such day on such transactions as determined by the Administrative Agent.

“Foreign Subsidiary” means with respect to any Person any Subsidiary of such Person that is not a Domestic Subsidiary of such Person.

“Foreign Lender” means any Lender that is organized under the laws of a jurisdiction other than that in which the Borrower is a resident for tax purposes. For purposes of this definition, the United States, each State thereof and the District of Columbia shall be deemed to constitute a single jurisdiction.

“Foreign Plan” has the meaning specified in Section 5.12(d).

“Fund” means any Person (other than a natural person) that is (or will be) engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course.

“GAAP” means generally accepted accounting principles in the United States set forth in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board as of the date of determination, consistently applied.

“Governmental Authority” means the government of the United States or any other nation, or of any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government (including any supra-national bodies such as the European Union or the European Central bank).

“Group Company” means any of the Borrower or any of its Subsidiaries (regardless of whether or not consolidated with the Borrower for purposes of GAAP), and “Group Companies” means all of them, collectively.

“Guarantee” means, with respect to any Person, without duplication, any obligation (other than endorsements in the ordinary course of business of negotiable instruments for deposit or

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collection) guaranteeing, intended to guarantee, or having the economic effect of guaranteeing, any Indebtedness or other obligation of any other Person in any manner, whether direct or indirect, and including, without limitation, any obligation, whether or not contingent, (i) to purchase any such Indebtedness or other obligation or any property constituting security therefor, (ii) to advance or provide funds or other support for the payment or purchase of such Indebtedness or obligation or to maintain working capital, solvency or other balance sheet condition of such other Person (including, without limitation, maintenance agreements, comfort letters, take or pay arrangements, put agreements or similar agreements or arrangements) for the benefit of the holder of Indebtedness or other obligation of such other Person, (iii) to lease or purchase property, securities or services primarily for the purpose of assuring the owner of such Indebtedness or other obligation or (iv) to otherwise assure or hold harmless the owner of such Indebtedness or obligation against loss in respect thereof. The amount of any Guarantee hereunder shall (subject to any limitations set forth therein) be deemed to be an amount equal to the outstanding principal amount (or maximum principal amount, if larger) of the Indebtedness or other obligation in respect of which such Guarantee is made.

“Guarantors” means, collectively, the Subsidiaries of the Borrower listed on Schedule 5.13 and each other Subsidiary of the Borrower that shall be required to execute and deliver an Accession Agreement or other guaranty or guaranty supplement pursuant to Section 6.12.

“Guaranty” means, collectively, the Guaranty made by the Guarantors in favor of the Secured Parties, substantially in the form of Exhibit F, together with each other guaranty and guaranty supplement delivered pursuant to Section 6.12.

“Hazardous Materials” means all explosive or radioactive substances or wastes and all hazardous or toxic substances, wastes or other pollutants, including petroleum or petroleum distillates, asbestos or asbestos-containing materials, polychlorinated biphenyls, radon gas, infectious or medical wastes and all other substances or wastes of any nature regulated pursuant to any Environment Law.

“Indebtedness” means, as to any Person at a particular time, without duplication, all of the following, whether or not included as indebtedness or liabilities in accordance with GAAP:

(i) all obligations of such Person for borrowed money;

(ii) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments;

(iii) all obligations of such Person under conditional sale or other title retention agreements relating to property purchased by such Person to the extent of the value of such property (other than customary reservations or retentions of title under agreements with suppliers entered into in the ordinary course of business);

(iv) all obligations, other than intercompany items, of such Person to pay the deferred purchase price of property or services (other than trade accounts payable and accrued expenses arising in the ordinary course of business and due within four months of the incurrence thereof);

(v) the Attributable Indebtedness of such Person in respect of Capital Lease Obligations, Sale/Leaseback Transactions and Synthetic Lease Obligations (regardless of whether accounted for as indebtedness under GAAP);

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(vi) all obligations of such Person to purchase securities or other property which arise out of or in connection with the sale of the same or substantially similar securities or property;

(vii) all obligations, contingent or otherwise, of such Person to reimburse any bank or other Person in respect of amounts paid under a letter of credit, bankers’ acceptance or similar instrument;

(viii) all obligations of others secured by (or for which the holder of such obligations has an existing right, contingent or otherwise, to be secured by) a Lien on, or payable out of the proceeds of production from, any property or asset of such Person, whether or not such obligation is assumed by such Person; provided that the amount of any Indebtedness of others that constitutes Indebtedness of such Person solely by reason of this clause (viii) shall not for purposes of this Agreement exceed the greater of the book value or the fair market value of the properties or assets subject to such Lien;

(ix) all Guarantees of such Person with respect to any other Indebtedness;

(x) all Debt Equivalents of such Person; and

(xi) the Indebtedness of any other Person (including any partnership in which such Person is a general partner and any unincorporated joint venture in which such Person is a joint venturer) to the extent such Person would be liable therefor under applicable Law or any agreement or instrument by virtue of such Person’s ownership interest in or other relationship with such entity, except to the extent the terms of such Indebtedness provide that such person shall not be liable therefor;

provided that Indebtedness shall not include (A) deferred compensation arrangements, (B) earn-out obligations until matured or earned or (C) non-compete or consulting obligations incurred in connection with Permitted Acquisitions.

“Indemnified Taxes” means taxes other than Excluded Taxes.

“Indemnitee” has the meaning specified in Section 10.04(b).

“Information” has the meaning specified in Section 10.07.

“Insurance Proceeds” means all insurance proceeds (other than proceeds of business interruption insurance to the extent such proceeds constitute compensation for lost earnings), damages, awards, claims and rights of action with respect to any Casualty.

“Interest Payment Date” means the last Business Day of each March, June, September and December and the Maturity Date.

“Interest Rate” means 9.00% per annum.

“Internal Control Event” means a material weakness in, or fraud that involves management or other employees who have a significant role in, the Borrower’s internal controls over financial reporting, in each case as described in the Securities Laws.

“Inventory” has the meaning specified in Section 1.01 of the Security Agreement.

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“Investment” in any Person means (i) the acquisition (whether for cash, property, services, assumption of Indebtedness, securities or otherwise and in one transaction or a series of transactions) of assets, Equity Interests, Equity Equivalents, Debt Equivalents, Indebtedness or other securities of such Person, (ii) any deposit with, or advance, loan or other extension of credit to or for the benefit of such Person (other than deposits made in connection with the purchase of equipment or inventory in the ordinary course of business) or (iii) any other capital contribution to or investment in such Person, including by way of Guarantee of any obligation of such Person, any support for a letter of credit issued on behalf of such Person incurred for the benefit of such Person or in the case of any Subsidiary of the Borrower, any release, cancellation, compromise or forgiveness in whole or in part of any Indebtedness owing by such Person. The outstanding amount of any Investment shall be deemed to equal the difference of (i) the aggregate initial amount of such Investment less (ii) all returns of principal thereof or capital with respect thereto and all dividends and other distributions of income received in respect thereof and all liabilities expressly assumed by another Person (and with respect to which the Borrower and its Subsidiaries, as applicable, shall have received a novation) in connection with the sale of such Investment.

“IP Rights” has the meaning specified in Section 5.17.

“Joint Venture” means (i) any Person which would constitute an “equity method investee” of the Borrower or any of its Subsidiaries, (ii) any other Person designated by the Borrower in writing to the Administrative Agent (which designation shall be irrevocable) as a “Joint Venture” for purposes of this Agreement and at least 50% but less than 100% of whose Equity Interests are directly owned by the Borrower or any of its Subsidiaries and (iii) any Person in whom the Borrower or any of its Subsidiaries beneficially owns any Equity Interest that is not a Subsidiary.

“Landlord Consent and Estoppel” means with respect to any Material Real Property, a letter, certificate or other instrument in writing from the lessor under the related lease, satisfactory in form and substance to the Administrative Agent, pursuant to which such lessor agrees, for the benefit of the Administrative Agent, (i) that without any further consent of such lessor or any further action on the part of the Loan Party holding such Material Real Property, such Material Real Property may be encumbered pursuant to a Mortgage and may be assigned to the purchaser at a foreclosure sale or in a transfer in lieu of such a sale (and to a subsequent third party assignee if the Administrative Agent, any Lender or an Affiliate of either so acquires such Material Real Property), (ii) that such lessor shall not terminate such lease as a result of a default by such Loan Party thereunder without first giving the Administrative Agent notice of such default and at least 60 days (or, if such default cannot reasonably be cured by the Administrative Agent within such period, such longer period as may reasonably be required) to cure such default and (iii) to such other matters relating to such Material Real Property as the Administrative Agent may request.

“Laws” means, collectively, all international, foreign, Federal, state and local statutes, treaties, rules, guidelines, regulations, ordinances, codes and administrative or judicial precedents or authorities, including the interpretation or administration thereof by any Governmental Authority charged with the enforcement, interpretation or administration thereof, and all applicable administrative orders, directives, requests, licenses, authorizations and permits of, and agreements with, any Governmental Authority, in each case whether or not having the force of Law.

“Leaseholds” means with respect to any Person all of the right, title and interest of such Person as lessee or licensee in, to and under leases or licenses of land, buildings, improvements and/or fixtures.

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“Lender” means each bank or other lending institution listed on Schedule 2.01, each Eligible Assignee that becomes a Lender pursuant to Section 10.06(b), and their respective successors.

“Lending Office” means with respect to any Lender, the “Lending Office” of such Lender (or of an Affiliate of such Lender) designated in such Lender’s Administrative Questionnaire or in any applicable Assignment and Assumption pursuant to which such Lender became a Lender hereunder or such other office of such Lender (or of an Affiliate of such Lender) as such Lender may from time to time specify to the Administrative Agent and the Borrower as the office by which its Loans are to be made and maintained.

“Lien” means any security interest, mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or otherwise), charge, or preference, priority or other security interest or preferential arrangement in the nature of a security interest of any kind or nature whatsoever (including any conditional sale or other title retention agreement, any easement, right of way or other encumbrance on title to Real Property, and any financing lease having substantially the same economic effect as any of the foregoing).

“Loan” means an advance by any Lender to the Borrower under Article II under the Facility.

“Loan Documents” means, collectively, this Agreement, the Notes, the Guaranty, the Collateral Documents, the Perfection Certificate and each Accession Agreement.

“Loan Party” means each of the Borrower and each Subsidiary Guarantor, and “Loan Parties” means any combination of the foregoing.

“Make-Whole Premium” means, with respect to any prepayment of Loans, an amount equal to (i) the present value of the remaining payments of interest on and principal of the Loans being prepaid, assuming prepayment of such principal amount on the 3 year anniversary of the Closing Date at par, and using an annual discount factor (applied quarterly) equal to the applicable Treasury Rate plus 0.50% per annum less (ii) the principal of the Loan being prepaid; provided, however, that in no case shall the Make-Whole Premium be less than zero. For purposes of this definition, “Treasury Rate” means a rate equal to the then current yield to maturity on the most actively traded U.S. Treasury security having a maturity nearest the 3 year anniversary of the Closing Date.

“Margin Stock” means “margin stock” as such term is defined in Regulation U.

“Material Adverse Effect” means (i) any material adverse effect upon the business, assets, condition (financial or otherwise) or results of operations of the Borrower and its Consolidated Subsidiaries, taken as a whole, (ii) a material impairment of the ability of the Borrower or the Loan Parties, taken as a whole, to perform any of its or their obligations under any Loan Document to which it is a party, (iii) a material impairment of the rights and remedies of the Lenders under the Loan Documents taken as a whole or (iv) a material adverse effect upon the legality, validity, binding effect or enforceability against any Loan Party of any Loan Documents to which it is a party.

“Material Real Property” means (i) (a) any fee-owned Real Property having a fair market value in excess of $250,000 as of the date of the acquisition thereof and (b) all Leaseholds other than those with respect to which the aggregate payments under the terms of the lease are less than $250,000 per year, or (ii) any Real Property that the Administrative Agent or the Required Lenders have determined in their reasonable judgment is material to the business, operations properties, assets or condition (financial or otherwise) of the Borrower and its Subsidiaries taken as a whole.

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“Maturity Date” means November 7, 2011; provided, however, that if such date is not a Business Day, the Maturity Date shall be the next preceding Business Day.

“Minimum Cash Collateral Amount” has the meaning specified in Section 7.11(b).

“Moody’s” means Moody’s Investors Service, Inc., a Delaware corporation, and its successors or, absent any such successor, such nationally recognized statistical rating organization as the Borrower and the Administrative Agent may select.

“Mortgage” means (i) in the case of owned real property interests, a mortgage or deed of trust, substantially in the form of, or otherwise substantially identical in substance to, the provisions of Exhibit G-4 hereto, among any Loan Party, the Administrative Agent and one or more trustees, as the same may be amended, modified or supplemented from time to time, or (ii) in the case of a Leasehold, a Leasehold mortgage or Leasehold deed of trust, substantially in the form of, or otherwise substantially identical in substance to, the provisions of Exhibit G-4 hereto, among any Loan Party, the Administrative Agent and one or more trustees, as the same may be amended, modified or supplemented from time to time.

“Mortgaged Property” means any Real Property of a Group Company that is (or is required to be) subject to a Mortgage.

“Multiemployer Plan” means any employee benefit plan of the type described in Section 4001(a)(3) of ERISA, to which the Borrower or any ERISA Affiliate makes or is obligated to make contributions, or during the preceding five plan years, has made or been obligated to make contributions.

“Net Cash Proceeds” means:

(i) with respect to the Disposition of any asset by any Group Company, any Casualty or any Condemnation, the excess, if any, of (A) the sum of cash and Cash Equivalents received in connection with such Disposition, Casualty or Condemnation (including any cash or Cash Equivalents received by way of deferred payment pursuant to, or by monetization of, a note receivable or otherwise, but only as and when so received and, with respect to any Casualty or Condemnation, any Insurance Proceeds or Condemnation Awards actually received by or paid to or for the account of such Group Company) over (B) the sum of (1) the principal amount of any Indebtedness that is secured by the asset subject to such Disposition, Casualty or Condemnation and that is repaid in connection with such Disposition, Casualty or Condemnation (other than Indebtedness under the Loan Documents), (2) the out-of-pocket expenses (including attorneys’ fees, investment banking fees, survey costs, title insurance premiums, and related search and recording charges, transfer taxes, deed or mortgage recording taxes, other customary expenses and brokerage, consultant and other customary fees) actually incurred or reasonably expected to be incurred by such Group Company in connection with and within 90 days of such Disposition, Casualty or Condemnation and as to which notice has been provided to the Administrative Agent, (3) taxes paid or reasonably estimated to be payable within two years of the date of the relevant transaction as a result of any gain recognized in connection therewith by such Group Company or any of the direct or indirect members thereof and attributable to such Disposition, Casualty or Condemnation; provided that, if the amount of any estimated taxes pursuant to this subclause (3) exceeds the amount of taxes actually required to be paid in cash, the aggregate amount of such excess shall constitute “Net Cash Proceeds”, and (4) any reserve for adjustment in respect of (x) the sale price of such asset or assets established in accordance with GAAP and (y) any liabilities associated with such asset or assets and retained by such Group Company after such sale or other disposition thereof, including pension and other post-employment benefit liabilities and liabilities

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related to environmental matters or against any indemnification obligations associated with such transaction and it being understood that “Net Cash Proceeds” shall include any cash or Cash Equivalents (x) received upon the Disposition of any non-cash consideration received by such Group Company in any such Disposition and (y) upon the reversal (without the satisfaction of any applicable liabilities in cash in a corresponding amount) of any reserve described in clause (4) above or, if such liabilities have not been satisfied in cash and such reserve not reversed within 365 days after such Disposition, Casualty or Condemnation, the amount of such reserve; provided that (x) no proceeds realized in a single transaction or series of related transactions shall constitute Net Cash Proceeds unless such proceeds shall exceed $100,000 and (y) no proceeds shall constitute Net Cash Proceeds under this clause (i) in any fiscal year until the aggregate amount of all such proceeds in such fiscal year shall exceed $250,000 (and thereafter only proceeds in excess of such amount shall constitute Net Cash Proceeds under this proviso); and

(ii) with respect to any Debt Issuance by any Group Company, the excess, if any, of (A) the sum of the cash received in connection with such sale over (B) the investment banking fees, underwriting discounts, commissions, costs and other out-of-pocket expenses and other customary expenses, incurred by such Group Company in connection with such incurrence or issuance.

“Note” means a promissory note, substantially in the form of Exhibit B, evidencing the obligation of the Borrower to repay outstanding Loans made by a Lender, as such note may be amended, modified or supplemented from time to time.

“NPL” means the National Priorities List under CERCLA.

“Obligations” means, with respect to each Loan Party, without duplication:

(i) in the case of the Borrower, all principal of and interest (including, without limitation, any interest which accrues after the commencement of any proceeding under any Debtor Relief Law with respect to the Borrower, whether or not allowed or allowable as a claim in any such proceeding) on any Loan, any Note or any other Loan Document;

(ii) in the case of each Subsidiary Guarantor, all amounts now or hereafter payable by such Subsidiary Guarantor and all other obligations or liabilities now existing or hereafter arising or incurred (including, without limitation, any amounts which accrue after the commencement of any proceeding under any Debtor Relief Law with respect to the Borrower or such Subsidiary Guarantor, whether or not allowed or allowable as a claim in any such proceeding) on the part of such Subsidiary Guarantor pursuant to this Agreement, the Guaranty or any other Loan Document;

(iii) all fees, expenses, indemnification obligations and other amounts of whatever nature now or hereafter payable by any Loan Party (including, without limitation, any amounts which accrue after the commencement of any proceeding under any Debtor Relief Law with respect to such Loan Party, whether or not allowed or allowable as a claim in any such proceeding) pursuant to this Agreement or any other Loan Document;

(iv) all expenses of the Administrative Agent as to which the Administrative Agent has a right to reimbursement by any Loan Party under Section 10.04(a) of this Agreement or under any other similar provision of any other Loan Document, including, without limitation, any and all sums advanced by the Administrative Agent to preserve the Collateral or preserve its security interests in the Collateral to the extent permitted under any Loan Document or applicable Law; and

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(v) all amounts paid by any Indemnitee as to which such Indemnitee has the right to reimbursement by any Loan Party under Section 10.04(b) of this Agreement or under any other similar provision of any other Loan Document;

together in each case with all renewals, modifications, consolidations or extensions thereof.

“Operating Lease” means, as applied to any Person, a lease (including leases which may be terminated by the lessee at any time) of any property (whether real, personal or mixed) by such Person as lessee which is not a Capital Lease.

“Organization Documents” means: (i) with respect to any corporation, the certificate or articles of incorporation and the bylaws (or equivalent or comparable constitutive documents with respect to any non-United States jurisdiction); (ii) with respect to any limited liability company, the certificate or articles of formation or organization and operating agreement; and (iii) with respect to any partnership, joint venture, trust or other form of business entity, the partnership, joint venture or other applicable agreement of formation or organization and any agreement, instrument, filing or notice with respect thereto filed in connection with its formation or organization with the applicable Governmental Authority in the jurisdiction of its formation or organization and, if applicable, any certificate or articles of formation or organization of such entity.

“Other Taxes” means all present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies arising from any payment made hereunder or under any other Loan Document or from the execution, delivery or enforcement of, or otherwise with respect to, this Agreement or any other Loan Document.

“Outstanding Amount” means with respect to Loans the aggregate outstanding principal amount thereof after giving effect to any borrowings and prepayments or repayments of Loans, as the case may be, occurring on such date.

“Participant” has the meaning specified in Section 10.06(d).

“PBGC” means the Pension Benefit Guaranty Corporation.

“PCAOB” means the Public Company Accounting Oversight Board.

“Pension Plan” means any “employee pension benefit plan” (as such term is defined in Section 3(2) of ERISA), other than a Multiemployer Plan, that is subject to Title IV of ERISA and is sponsored or maintained by the Borrower or any ERISA Affiliate or to which the Borrower or any ERISA Affiliate contributes or has an obligation to contribute, or in the case of a multiple employer or other plan described in Section 4064(a) of ERISA, has made contributions at any time during the immediately preceding five plan years.

“Perfection Certificate” means with respect to any Loan Party a certificate, substantially in the form of Exhibit G-3 to this Agreement, completed and supplemented with the schedules and attachments contemplated thereby to the satisfaction of the Administrative Agent and duly executed by the chief executive officer and the chief financial officer of such Loan Party.

“Permitted Acquisition” has the meaning set forth in Section 7.03(viii).

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“Permitted Encumbrances” means (i) those liens, encumbrances and other matters affecting title to any Mortgaged Property listed in the Mortgage Policies in respect thereof and found, on the date of delivery of such Mortgage Policies to the Administrative Agent in accordance with the terms hereof, reasonably acceptable by the Administrative Agent, (ii) zoning, building codes, land use and other similar Laws and municipal ordinances which are not violated in any material respect by the existing improvements and the present use by the mortgagor of the Premises (as defined in the respective Mortgage) and (iii) such other items on any Mortgaged Property to which the Administrative Agent may consent (such consent not to be unreasonably withheld).

“Permitted Investors” means David A. Steinberg and his Affiliates, The Goldman Sachs Group, Inc. and its Affiliates, and Technology Crossover Ventures and its Affiliates.

“Permitted Joint Venture” means a Joint Venture, in the form of a corporation, limited liability company, business trust, joint venture, association, company or partnership, entered into by the Borrower or any of its Subsidiaries which (i) is engaged in a line of business related to those engaged in by the Borrower and its Subsidiaries and (ii) is formed or organized in a manner that limits the exposure of the Borrower and its Subsidiaries for the liabilities thereof to (A) the Investments of the Borrower and its Subsidiaries therein permitted under Section 7.03(x) and (B) any Indebtedness of any Permitted Joint Venture or any Guarantee by the Borrower or any of its Subsidiaries in respect of such Indebtedness, which Indebtedness or Guarantee are permitted at the time under Section 7.02.

“Permitted Liens” means those Liens permitted by Section 7.01.

“Permitted Refinancing” means, with respect to any Person, any modification, refinancing, refunding, renewal or extension of any Indebtedness of such Person; provided that (i) the principal amount (or accreted value, if applicable) thereof does not exceed the principal amount (or accreted value, if applicable) of the Indebtedness so modified, refinanced, refunded, renewed or extended except by an amount equal to a reasonable premium or other reasonable amount paid, and fees and expenses reasonably incurred, in connection with such modification, refinancing, refunding, renewal or extension and by an amount equal to any existing commitments unutilized thereunder or as otherwise permitted pursuant to Section 7.02, (ii) such modification, refinancing, refunding, renewal or extension has a final maturity date equal to or later than the final maturity date of, and has a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of, the Indebtedness being modified, refinanced, refunded, renewed or extended, (iii) if the Indebtedness being modified, refinanced, refunded, renewed or extended is subordinated in right of payment to the Obligations, such modification, refinancing, refunding, renewal or extension is subordinated in right of payment to the Obligations on terms at least as favorable to the Lenders as those contained in the documentation governing the Indebtedness being modified, refinanced, refunded, renewed or extended, (iv) the terms and conditions (including, if applicable, as to collateral) of any such modified, refinanced, refunded, renewed or extended Indebtedness are not materially less favorable to the Loan Parties or the Lenders, taken as a whole, than the terms and conditions of the Indebtedness being modified, refinanced, refunded, renewed or extended, (v) such modification, refinancing, refunding, renewal or extension is incurred by the Person who is the obligor on the Indebtedness being modified, refinanced, refunded, renewed or extended and such new or additional obligors as are or become Loan parties in accordance with Section 6.12 and with respect to subordinated Indebtedness the obligations of such obligors shall be subordinated in right of payment to the Obligations on terms, taken as a whole, at least as favorable to the Lenders as those contained in documentation governing the Indebtedness being modified, refinanced, refunded, renewed or extended, and (vi) at the time thereof, no Default shall have occurred and be continuing.

“Person” means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity.

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“Plan” means any “employee benefit plan” (as such term is defined in Section 3(3) of ERISA) established, or required to be contributed to by, the Borrower or, with respect to any such plan that is subject to Section 412 of the Code or Title IV of ERISA, any ERISA Affiliate.

“Pledge Agreement” means the Pledge Agreement, substantially in the form of Exhibit G-2 hereto, dated as of the date hereof among the Borrower, the Subsidiary Guarantors and the Administrative Agent, as the same may be amended, modified or supplemented from time to time.

“Pledged Collateral” has the meaning specified in the Pledge Agreement.

“Preferred Stock” means, as applied to the Equity Interests of a Person, Equity Interests of any class or classes (however designated) which is preferred as to the payment of dividends or distributions, or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of such Person, over the Equity Interests of any other class of such Person.

“Pro-Forma Basis” and “Pro-Forma Compliance” means, for purposes of calculating compliance with the each of the financial covenants set forth in Section 7.11 in respect of a Specified Transaction, or for purposes of determining compliance with the condition precedent set forth in Section 4.01(e), that such Specified Transaction and the following transactions in connection therewith shall be deemed to have occurred as of the first day of the applicable period of measurement in such covenant: (i) income statement items (whether positive or negative) attributable to the property or Person subject to such Specified Transaction, in the case of a Permitted Acquisition or Investment described in the definition of “Specified Transaction”, shall be included, (ii) any retirement of Indebtedness and (iii) any Indebtedness incurred or assumed by any Group Company in connection with such Specified Transaction, and if such Indebtedness has a floating or formula rate, shall have an implied rate of interest for the applicable period for purposes of this definition determined by utilizing the rate which is or would be in effect with respect to such Indebtedness as at the relevant date of determination; provided that the foregoing pro-forma adjustments may be applied to the financial covenants set forth in Section 7.11 to the extent that such adjustments are consistent with the definition of Consolidated EBITDA and may not take into account projected cost savings or revenue enhancements.

“Purchase Money Indebtedness” means Indebtedness of the Borrower or any of its Subsidiaries incurred for the purpose of financing all or any part of the purchase price or cost of construction or improvement of property used in the business of the Borrower or such Subsidiary; provided that such Indebtedness is incurred within 120 days after such property is acquired or, in the case of improvements, constructed.

“Real Property” means, with respect to any Person, all of the right, title and interest of such Person in and to land, buildings, improvements and fixtures, including Leaseholds.

“Refinanced Agreements” means those instruments, documents and agreements listed on Schedule 1.01.

“Register” has the meaning specified in Section 10.06(c).

“Registered Public Accounting Firm” has the meaning specified in the Securities Laws and shall be independent of the Borrower as prescribed by the Securities Laws.

“Regulation D, O, T, U or X” means Regulation D, O, T, U or X, respectively, of the Board of Governors of the Federal Reserve System as amended, or any successor regulation.

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“Related Parties” means, with respect to any Person, such Person’s Affiliates and the partners, directors, officers, employees, agents and advisors of such Person and of such Person’s Affiliates.

“Reportable Event” means any of the events set forth in Section 4043(c) of ERISA, other than events for which the 30 day notice period has been waived.

“Required Lenders” means, as of any date of determination, Lenders holding more than 50% of the Facility on such date; provided, however, that notwithstanding anything herein to the contrary, for purposes of approving any amendment or waiver with respect to the provisions of Article VII hereof (and any related definitions), “Required Lenders” shall mean at least two Lenders (that are not Affiliates of each other) holding more than 50% of the Facility on such date.

“Responsible Officer” means the chief executive officer, president, chief financial officer, treasurer, assistant treasurer or controller of a Loan Party and any other officer or employee of the applicable Loan Party so designated by any of the foregoing officers in a notice to the Administrative Agent. Any document delivered hereunder that is signed by a Responsible Officer of a Loan Party shall be conclusively presumed to have been authorized by all necessary corporate, partnership and/or other action on the part of such Loan Party and such Responsible Officer shall be conclusively presumed to have acted on behalf of such Loan Party.

“Restricted Payment” means any dividend or other distribution (whether in cash, securities or other property) with respect to any capital stock or other Equity Interest of any Person or any of its Subsidiaries, or any payment (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, defeasance, acquisition, cancellation or termination of any such capital stock or other Equity Interest, or on account of any return of capital to any Person’s stockholders, partners or members (or the equivalent of any thereof), or any option, warrant or other right to acquire any such dividend or other distribution or payment.

“Sale/Leaseback Transaction” means any direct or indirect arrangement with any Person or to which any such Person is a party providing for the leasing to the Borrower or any of its Subsidiaries of any property, whether owned by the Borrower or any of its Subsidiaries as of the Closing Date or later acquired, which has been or is to be sold or transferred by the Borrower or any of its Subsidiaries to such Person or to any other Person from whom funds have been, or are to be, advanced by such Person on the security of such property.

“Sarbanes-Oxley” means the Sarbanes-Oxley Act of 2002.

“S&P” means Standard & Poor’s Ratings Group, a division of McGraw Hill, Inc., a New York corporation, and any successor thereto.

“SEC” means the Securities and Exchange Commission, or any Governmental Authority succeeding to any of its principal functions.

“Secured Cash Management Agreement” means the securities account control agreement or cash management agreement, in form and substance satisfactory to the Administrative Agent and the Required Lenders, dated as of the date hereof entered into by and between the Borrower, Goldman Sachs & Co., as securities intermediary, and the Administrative Agent.

“Secured Parties” means, collectively, the Lenders and the Administrative Agent.

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“Securities Laws” means the Securities Act of 1933, the Securities Exchange Act of 1934, Sarbanes-Oxley and the applicable accounting and auditing principles, rules, standards and practices promulgated, approved or incorporated by the SEC or the PCAOB.

“Security Agreement” means the Security Agreement, substantially in the form of Exhibit G-1 hereto, dated as of the date hereof among the Borrower, the Subsidiary Guarantors and the Administrative Agent, as the same may be amended, modified or supplemented from time to time.

“Solvent” and “Solvency” mean, with respect to any Person on any date of determination, that on such date (i) the fair value of the property of such Person is greater than the total amount of liabilities, including contingent liabilities, of such Person, (ii) the present fair salable value of the assets of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured, (iii) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person’s ability to pay such debts and liabilities as they mature, (iv) such Person is not engaged in business or a transaction, and is not about to engage in business or a transaction, for which such Person’s property would constitute an unreasonably small capital and (v) such Person is able to pay its debts and liabilities, contingent obligations and other commitments as they mature in the ordinary course of business. The amount of contingent liabilities at any time shall be computed as the amount that, in the light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability.

“Specified Transaction” means any closing condition, Investment, incurrence of Indebtedness or Sale/Leaseback Transaction in respect of which compliance with the financial covenants set forth in Section 7.11 is by the terms of this Agreement required to be calculated on a Pro-Forma Basis.

“Subsidiary” of a Person means a corporation, partnership, joint venture, limited liability company or other business entity of which a majority of the shares of securities or other interests having ordinary voting power for the election of directors or other governing body (other than securities or interests having such power only by reason of the happening of a contingency) are at the time beneficially owned, or the management of which is otherwise controlled, directly, or indirectly through one or more intermediaries, or both, by such Person. Unless otherwise specified, all references herein to a “Subsidiary” or to “Subsidiaries” shall refer to a Subsidiary or Subsidiaries of the Borrower.

“Subsidiary Guarantor” means each Subsidiary of the Borrower on the Closing Date and each Subsidiary of the Borrower that becomes a party to the Guaranty after the Closing Date by execution of an Accession Agreement, and “Subsidiary Guarantors” means any two or more of them.

“Substitute Delayed Draw Lender” shall mean Goldman Sachs Credit Partners, L.P.

“Swap Contract” means (i) any and all rate swap transactions, basis swaps, credit derivative transactions, forward rate transactions, commodity swaps, commodity options, forward commodity contracts, equity or equity index swaps or options, bond or bond price or bond index swaps or options or forward bond or forward bond price or forward bond index transactions, interest rate options, forward foreign exchange transactions, cap transactions, floor transactions, collar transactions, currency swap transactions, cross-currency rate swap transactions, currency options, spot contracts, or any other similar transactions or any combination of any of the foregoing (including any options to enter into any of the foregoing), whether or not any such transaction is governed by or subject to any master agreement, and (ii) any and all transactions of any kind, and the related confirmations, which are subject to the terms and conditions of, or governed by, any form of master agreement published by the International Swaps and Derivatives Association, Inc., any International Foreign Exchange Master Agreement, or any other master agreement (any such master agreement, together with any related schedules, a “Master Agreement”), including any such obligations or liabilities under any Master Agreement.

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“Swap Obligations” of any Person means all obligations (including, without limitation, any amounts which accrue after the commencement of any bankruptcy or insolvency proceeding with respect to such Person, whether or not allowed or allowable as a claim under any proceeding under any Debtor Relief Law) of such Person in respect of any Swap Contract, excluding any amounts which such Person is entitled to set-off against its obligations under applicable Law.

“Swap Termination Value” means, in respect of any one or more Swap Contracts, after taking into account the effect of any legally enforceable netting agreement relating to such Swap Contracts, (i) for any date on or after the date such Swap Contracts have been closed out and termination value(s) determined in accordance therewith, such termination value(s), and (ii) for any date prior to the date referenced in clause (i), the amount(s) determined as the mark-to-market value(s) for such Swap Contracts, as determined based upon one or more mid-market or other readily available quotations provided by any recognized dealer in such Swap Contracts (which may include a Lender or any Affiliate of a Lender).

“Synthetic Debt” means, with respect to any Person as of any date of determination thereof, all obligations of such Person in respect of transactions entered into by such Person that are intended to function primarily as a borrowing of funds (including any minority interest transactions that function primarily as a borrowing) but are not otherwise included in the definition of “Indebtedness” or as a liability on the consolidated balance sheet of such Person and its Subsidiaries in accordance with GAAP.

“Synthetic Lease Obligation” means the monetary obligation of a Person under (i) a so-called synthetic, off-balance sheet or tax retention lease, or (ii) an agreement for the use or possession of property (including Sale/Leaseback Transactions), in each case, creating obligations that do not appear on the balance sheet of such Person but which, upon the application of any Debtor Relief Laws to such Person, would be characterized as the indebtedness of such Person (without regard to accounting treatment).

“Taxes” means all present or future taxes, levies, imposts, duties, deductions, withholdings, assessments, fees or other charges imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto.

“Threshold Amount” means $500,000.

“Transactions” means the events contemplated by this Agreement, the other Loan Documents and the Warrant Agreement or otherwise referred to herein or therein.

“Unfunded Pension Liability” means, with respect to Pension Plans, the excess of the present value of a Pension Plan’s benefit liabilities under Section 4001(a)(16) of ERISA, over the current value of that Pension Plan’s assets, determined in accordance with the assumptions used for funding the Pension Plan pursuant to Section 412 of the Code for the applicable plan year.

“UCC” means the Uniform Commercial Code as in effect in the State of New York; provided that, if perfection or the effect of perfection or non-perfection or the priority of any security interest in any Collateral is governed by the Uniform Commercial Code as in effect in a jurisdiction other than the State of New York, “UCC” means the Uniform Commercial Code as in effect from time to time in such other jurisdiction for purposes of the provisions hereof relating to such perfection, effect of perfection or non-perfection or priority.

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“United States” and “US” mean the United States of America.

“U.S. Loan Party” means any Loan Party that is organized under the laws of one of the states of the United States of America and that is not a CFC.

“Voting Securities” means Equity Interests of any Person having ordinary power to vote in the election of members of the board of directors, managers, trustees or other controlling Persons of such Person (irrespective of whether, at the time, Equity Interests of any other class or classes of such Person shall have or might have voting power by reason of the happening of any contingency.

“Warrant Agreement” means that certain Warrant Agreement, dated the date hereof, between the Borrower and each of the initial Lenders (or their respective designees).

“Weighted Average Life to Maturity” means, when applied to any Indebtedness at any date, the number of years obtained by dividing: (i) the sum of the products obtained by multiplying (A) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect thereof, by (B) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment; by (ii) the then outstanding principal amount of such Indebtedness.

“Wholly-Owned Subsidiary” means, with respect to any Person at any date, any Subsidiary of such Person all of the shares of capital stock or other ownership interests of which (except directors’ qualifying shares) are at the time directly or indirectly owned by such Person.

Section 1.02 Other Interpretative Provisions. With reference to this Agreement and each other Loan Document, unless otherwise specified herein or in such other Loan Document:

(a) The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include,” “includes” and “including” shall be deemed to be followed by the phrase “without limitation.” The word “will” shall be construed to have the same meaning and effect as the word “shall.” Unless the context requires otherwise, (i) any definition of or reference to any agreement, instrument or other document (including any Organization Document) shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein or in any other Loan Document), (ii) any reference herein to any Person shall be construed to include such Person’s successors and assigns, (iii) the words “herein,” “hereof” and “hereunder,” and words of similar import when used in any Loan Document shall be construed to refer to such Loan Document in its entirety and not to any particular provision thereof, (iv) all references in a Loan Document to Articles, Sections, Preliminary Statements, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Preliminary Statements, Exhibits and Schedules to, the Loan Document in which such references appear, (v) any reference to any Law shall include all statutory and regulatory provisions consolidating, amending, replacing or interpreting such Law and any reference to any law or regulation shall, unless otherwise specified, refer to such Law or regulation as amended, modified or supplemented from time to time and (vi) the words “asset” and “property” shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights.

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(b) In the computation of periods of time from a specified date to a later specified date, the word “from” means “from and including,” the words “to” and “until” each mean “to but excluding,” and the word “through means “to and including.”

(c) Section headings herein and in the other Loan Documents are included for convenience of reference only and shall not affect the interpretation of this Agreement or any other Loan Document.

Section 1.03 Accounting Terms and Determinations.

(a) Generally. All accounting terms not specifically or completely defined herein shall be construed in conformity with, and all financial data (including financial ratios and other financial calculations) required to be submitted pursuant to this Agreement shall be prepared in conformity with, GAAP applied on a consistent basis, as in effect from time to time, applied in a manner consistent with that used in preparing the Audited Financial Statements, except as otherwise specifically prescribed herein.

(b) Changes in GAAP. If at any time any change in GAAP would affect the computation of any financial ratio or requirement set forth in any Loan Document, and either the Borrower or the Required Lenders shall so request, the Administrative Agent, the Lenders and the Borrower shall negotiate in good faith to amend such ratio or requirement to preserve the original intent thereof in light of such change in GAAP (subject to the approval of the Required Lenders); provided that, until so amended, (i) such ratio or requirement shall continue to be computed in accordance with GAAP prior to such change therein and (ii) the Borrower shall provide to the Administrative Agent and the Lenders financial statements and any other documents required under this Agreement or as reasonably requested hereunder setting forth a reconciliation between calculations of such ratio or requirement made before and after giving effect to such change in GAAP.

(c) Consolidation of Variable Interest Entities. All references herein to consolidated financial statements of the Borrower and its Subsidiaries or to the determination of any amount of the Borrower and its Subsidiaries on a consolidated basis or any similar reference shall, in each case, be deemed to include each variable interest entity that the Borrower is required to consolidate pursuant to FASB Interpretation No. 46 – Consolidation of Variable Interest Entities; an interpretation of ARB No. 51 (January 2003) as if such variable interest entity were a Subsidiary as defined herein.

(d) Computation of Certain Financial Covenants. Unless otherwise specified herein, all defined financial terms (and all other definitions used to determine such terms) shall be to those determined and computed in respect of the Borrower and its Subsidiaries.

Section 1.04 Times of Day. Unless otherwise specified, all references herein to times of day shall be references to Eastern time (daylight or standard, as applicable).

ARTICLE II

THE COMMITMENTS AND LOAN

Section 2.01 The Loans. Subject to the terms and conditions set forth herein, (a) each Closing Date Lender severally agrees to make a Loan to the Borrower on the Closing Date in an aggregate amount not to exceed each such Lender’s Closing Date Commitment and (b) each Delayed Draw Lender severally agrees to make a Loan to the Borrower from time to time at the Borrower’s option, upon 2 Business Days’ notice by the Borrower, on any Business Day during the Availability Period for the Facility, in an aggregate amount not to exceed such Lender’s Delayed Draw Commitment.

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Each Loan requested by the Borrower shall be in an amount which is a whole integral multiple of $25,000,000, and the aggregate Loans requested by the Borrower shall not exceed the aggregate amount of the Commitment. The Delayed Draw Lender shall not be required to make any Loans until the other Lenders, either previously or concurrently therewith, shall have funded Loans in a total aggregate principal amount of $75,000,000, at which time the Delayed Draw Lender shall (subject to the terms and conditions set forth herein) be required to make a Loan, when requested by the Borrower, in the amount of the Delayed Draw Commitment, subject to the provisions of Section 10.06(h). The Borrower shall, within 90 days of the Closing Date, have made up to two requests for Loans which, in the aggregate, equal the full amount of the Facility. Amounts borrowed under this Section 2.01 and repaid or prepaid may not be reborrowed.

Section 2.02 Prepayments.

(a) Optional.

The Borrower may, upon notice to the Administrative Agent, at any time or from time to time voluntarily prepay Loans in whole or in part; provided that (A) such notice must be received by the Administrative Agent not later than 11:00 a.m. two Business Days prior to the date of prepayment; and (B) any prepayment of Loans shall be in a principal amount of $5,000,000 or a whole multiple of $1,000,000 in excess thereof or, in each case, if less, the entire principal amount thereof then outstanding. Each such notice shall specify the date and amount of such prepayment. Any such prepayment shall include all accrued and unpaid interest on the principal amount of the Loans so prepaid plus, if prior to the third anniversary of the Closing Date, a Make-Whole Premium on the principal amount of the Loans so prepaid. The Administrative Agent will promptly notify each Lender of its receipt of each such notice, and of the amount of such Lender’s ratable portion of such prepayment (based on such Lender’s Applicable Percentage). If such notice is given by the Borrower, the Borrower shall make such prepayment and the payment amount specified in such notice shall be due and payable on the date specified therein.

(b) Mandatory.

(i) Dispositions. If the Borrower or any of its Subsidiaries Disposes of any property (other than any Disposition of any property permitted by Section 7.05(i), (iii), (v), (vi) or (viii)) which results in the realization by such Person of Net Cash Proceeds, the Borrower shall prepay an aggregate principal amount of Loans equal to 100% of such Net Cash Proceeds within two Business Days after receipt thereof by such Person.

(ii) Debt Issuances. Upon the incurrence or issuance by the Borrower or any of its Subsidiaries of any Indebtedness (other than Indebtedness expressly permitted to be incurred or issued pursuant to Section 7.02), the Borrower shall prepay an aggregate principal amount of Loans equal to 100% of all Net Cash Proceeds received therefrom immediately upon receipt thereof by the Borrower or such Subsidiary.

(iii) Extraordinary Receipts. Upon any Extraordinary Receipt received by or paid to or for the account of the Borrower or any of its Subsidiaries, and not otherwise included in clause (i) or (ii) of this Section 2.02(b), the Borrower shall prepay an aggregate principal amount of Loans equal to 100% of all Net Cash Proceeds received therefrom within two Business Days after receipt thereof by the Borrower or such Subsidiary.

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(c) Make-Whole Premium. Whenever any prepayment or repayment of principal of any Loans is (i) made pursuant to Section 2.02(a) or (b)(ii), (ii) required as a result of a declaration pursuant to Article VIII that such Loans are due and payable or (iii) in any other circumstance (other than prepayments made pursuant to Section 2.02(b)(i) or (b)(iii)), in each case within three years after the Closing Date, the Borrower shall on the date of such prepayment or repayment pay to the Administrative Agent for the ratable accounts of the Lenders a Make-Whole Premium in respect of the principal amount of the Loans so prepaid or repaid.

Section 2.03 Repayment of Loans.

(a) The Borrower shall repay to the Administrative Agent for the ratable accounts of the Lenders the aggregate principal amount of all Loans outstanding on the Maturity Date, all accrued and unpaid interest thereon and any other amounts owing hereunder.

(b) Upon receipt of notice from the Required Lenders at any time after the third anniversary of the Closing Date, the Administrative Agent shall provide a notice (“Required Prepayment Notice”) to the Borrower, which Required Prepayment Notice shall indicate that the Required Lenders have chosen, in their sole discretion, to require repayment in full of the Loans and shall specify a date, not earlier than 91 days after delivery of such Required Prepayment Notice, upon which date (the “Required Prepayment Date”) the Loans shall become due and payable. On such Required Prepayment Date, the Borrower shall repay to the Administrative Agent for the ratable accounts of the Lenders the aggregate principal amount of all Loans then outstanding, all accrued and unpaid interest thereon and any other amounts owing hereunder.

Section 2.04 Interest.

(a) Stated Interest. Subject to the provisions of Section 2.04(b), Loans shall bear interest on the outstanding principal amount thereof at a rate per annum equal to the Interest Rate.

(b) Default Interest.

(i) If any amount of principal of any Loan is not paid when due (without regard to any applicable grace periods), whether at stated maturity, by acceleration or otherwise, such amount shall thereafter bear interest at the Default Rate to the fullest extent permitted by applicable Laws.

(ii) If any amount (other than principal of any Loan) payable by the Borrower under any Loan Document is not paid when due (without regard to any applicable grace periods), whether at stated maturity, by acceleration or otherwise, then upon the request of the Required Lenders such amount shall thereafter bear interest at the Default Rate to the fullest extent permitted by applicable Laws.

(iii) While any Event of Default exists, the Borrower shall pay interest on the principal amount of all outstanding Obligations at the Default Rate to the fullest extent permitted by applicable Laws.

(iv) Accrued and unpaid interest on past due amounts (including interest on past due interest) shall be due and payable upon demand.

(c) Payments of Interest. Interest on the Loans shall be due and payable in arrears on each Interest Payment Date applicable thereto and at such other times as may be specified herein. Interest hereunder shall be due and payable in accordance with the terms hereof before and after judgment, and before and after the commencement of any proceeding under any Debtor Relief Law.

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Section 2.05 Administrative Agent Fees. The Borrower shall pay to the Administrative Agent for its own account a fee in the amount of $75,000 per year, payable in advance on the Closing Date and each anniversary of such date thereafter. Such fee is fully earned when paid and is non-refundable.

Section 2.06 Computation of Interest and Fees. Interest shall accrue on the Loan for the day on which the Loan is made, and shall not accrue on the Loan, or any portion thereof, for the day on which the Loan or such portion is paid. All interest will be calculated based upon a year of 360 days and actual days elapsed. Each determination by the Administrative Agent of an interest rate or fee hereunder shall be conclusive and binding for all purposes, absent manifest error.

Section 2.07 Evidence of Debt. The Loans made by each Lender shall be evidenced by one or more accounts or records maintained by such Lender and by the Administrative Agent in the ordinary course of business. The accounts or records maintained by the Administrative Agent and each Lender shall be conclusive absent manifest error of the amount of the Loans made by the Lenders to the Borrower and the interest and payments thereon. Any failure to so record or any error in doing so shall not, however, limit or otherwise affect the obligation of the Borrower hereunder to pay any amount owing with respect to the Obligations. In the event of any conflict between the accounts and records maintained by any Lender and the accounts and records of the Administrative Agent in respect of such matters, the accounts and records of the Administrative Agent shall control in the absence of manifest error. Upon the request of any Lender made through the Administrative Agent, the Borrower shall execute and deliver to such Lender (through the Administrative Agent) a Note, which shall evidence such Lender’s Loan in addition to such accounts or records. Each Lender may attach schedules to its Note and endorse thereon the date, amount and maturity of its Loan and payments with respect thereto.

Section 2.08 Payments Generally; Administrative Agent’s Clawback.

(a) General. All payments to be made by the Borrower shall be made without condition or deduction for any counterclaim, defense, recoupment or setoff. Any prepayment of the Loans shall be accompanied by all accrued interest on the principal amount prepaid, together with any additional amounts required pursuant to Sections 2.02(c), 3.01 and 3.02. Except as otherwise expressly provided for herein, all payments by the Borrower hereunder shall be made to the Administrative Agent, for the account of the respective Lenders to which such payment is owed, at the Administrative Agent’s Office in Dollars and in immediately available funds not later than 2:00 P.M. on the date specified herein. The Administrative Agent will promptly distribute to each Lender its Applicable Percentage in respect of the Facility (or other applicable share as provided herein) of such payment in like funds as received by wire transfer to such Lender’s Lending Office. All payments received by the Administrative Agent after 2:00 PM shall be deemed received on the next succeeding Business day and any applicable interest or fee shall continue to accrue. If any payment to be made by the Borrower shall come due on a day other than a Business Day, payment shall be made on the next following Business day, and such extension of time shall be reflected in computing interest or fees, as the case may be.

(b) Failure to Satisfy Conditions Precedent. If any Lender makes available to the Administrative Agent funds for any Loan to be made by such Lender as provided in the foregoing provisions of this Article II, and such funds are not made available to the Borrower by the Administrative Agent because the conditions set forth in Article IV are not satisfied or waived in accordance with the terms hereof, the Administrative Agent shall return such funds (in like funds as received from such Lender) to such Lender without interest.

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(c) Obligations of Lenders Several. The obligations of the Lenders hereunder to make Loans and to make payments pursuant to Section 10.04(c) are several and not joint. The failure of any Lender to make any Loan, to fund any such participation or to make any payment under Section 10.04(c) on any date required hereunder shall not relieve any other Lender of its corresponding obligation to do so on such date, and no Lender shall be responsible for the failure of any other Lender to so make its Loan, to purchase its participation or to make its payment under Section 10.04(c).

(d) Funding Source. Nothing herein shall be deemed to obligate any Lender to obtain the funds for any Loan in any particular place or manner or to constitute a representation by any Lender that it has obtained or will obtain the funds for any Loan in any particular place or manner.

(e) Insufficient Funds. If at any time insufficient funds are received by and available to the Administrative Agent to pay fully all amounts of principal, interest and fees then due hereunder, such funds shall be applied (i) first, toward payment of interest and fees then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of interest and fees then due to such parties, and (ii) second, toward payment of principal then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of principal then due to such parties.

Section 2.09 Sharing of Payments by Lenders. If any Lender shall, by exercising any right of setoff or counterclaim or otherwise, including by the receipt of payment in a proceeding conducted pursuant to any Debtor Relief Laws or the receipt of any Collateral, obtain payment in respect of (i) Obligations due and payable to such Lender hereunder and under the other Loan Documents at such time in excess of its ratable share (according to the proportion of (x) the amount of such Obligations due and payable to such Lender at such time to (y) the aggregate amount of the Obligations due and payable to all Lenders hereunder and under the other Loan Documents at such time) of payments on account of the Obligations due and payable to all Lenders hereunder and under the other Loan Documents at such time obtained by all the Lenders at such time or (ii) Obligations owing (but not due and payable) to such Lender hereunder and under the other Loan Documents at such time in excess of its ratable share (according to the proportion of (x) the amount of such Obligations owing (but not due and payable) to such Lender at such time to (y) the aggregate amount of the Obligations owing (but not due and payable) to all Lenders hereunder and under the other Loan Parties at such time) of payment on account of the Obligations owing (but not due and payable) to all Lenders hereunder and under the other Loan Documents at such time obtained by all of the Lenders at such time then the Lender receiving such greater proportion shall (A) notify the Administrative Agent of such fact, and (B) purchase (for cash at face value) participations in the Loans of the other Lenders, or make such other adjustments as shall be equitable, so that the benefit of all such payments shall be shared by the Lenders ratably in accordance with the aggregate amount of Obligations then due and payable to the Lenders or owing (but not due and payable) to the Lenders, as the case may be, provided that:

(i) if any such participations or subparticipations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations or subparticipations shall be rescinded and the purchase price restored to the extent of such recovery, without interest; and

(ii) the provisions of this Section shall not be construed to apply to (A) any payment made by the Borrower pursuant to and in accordance with the express terms of this Agreement or (B) any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Loans to any assignee or participant, other than to the Borrower or any Subsidiary thereof (as to which the provisions of this Section shall apply).

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The Borrower consents to the foregoing and agrees, to the extent it may effectively do so under applicable Law, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against such Loan Party rights of setoff and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of such Loan Party in the amount of such participation.

ARTICLE III

TAXES, YIELD PROTECTION AND ILLEGALITY

Section 3.01 Taxes.

(a) Payments Free of Taxes. Any and all payments by or on account of any obligation of the Borrower hereunder or under any other Loan Document shall be made free and clear of and without reduction or withholding for any Indemnified Taxes or Other Taxes; provided that if the Borrower shall be required by applicable Law to deduct any Indemnified Taxes (including any Other Taxes) from such payments, then (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section) the Administrative Agent or any Lender, as the case may be, receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make such deductions and (iii) the Borrower shall timely pay the full amount deducted to the relevant Governmental Authority in accordance with applicable Law.

(b) Payment of Other Taxes by the Borrower. Without limiting the provisions of subsection (a) above, the Borrower shall timely pay any Other Taxes to the relevant Governmental Authority in accordance with applicable Law.

(c) Indemnification by the Borrower. The Borrower shall indemnify the Administrative Agent and each Lender within 10 days after demand therefor, for the full amount of any Indemnified Taxes or Other Taxes (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section) paid by the Administrative Agent or such Lender, as the case may be, and any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount (setting forth the basis therefore and the calculation thereof in reasonable detail) of such payment or liability delivered to the Borrower by a Lender (with a copy to the Administrative Agent), or by the Administrative Agent on its own behalf or on behalf of a Lender, shall be conclusive absent manifest error.

(d) Evidence of Payments. As soon as practicable after any payment of Indemnified Taxes or Other Taxes by the Borrower to a Governmental Authority, the Borrower shall deliver to the Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent.

(e) Status of Lenders. Any Foreign Lender that is entitled to an exemption from or reduction of withholding tax under the law of the jurisdiction in which the Borrower is resident for tax purposes, or any treaty to which such jurisdiction is a party, with respect to payments hereunder or under any other Loan Document shall deliver to the Borrower (with a copy to the Administrative Agent), at the time or times prescribed by applicable law or reasonably requested by the Borrower or the Administrative Agent, such properly completed and executed documentation prescribed by applicable law as will permit such payments to be made without withholding or at a reduced rate of withholding. In addition, any Lender, if requested by the Borrower or the Administrative Agent, shall deliver such other documentation prescribed by applicable law or reasonably requested by the Borrower or the Administrative Agent as will enable the Borrower or the Administrative Agent to determine whether or not such Lender is subject to backup withholding or information reporting requirements.

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Without limiting the generality of the foregoing, if the Borrower is resident for tax purposes in the United States, any Foreign Lender shall deliver to the Borrower and the Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon the request of the Borrower or the Administrative Agent, but only if such Foreign Lender is legally entitled to do so), whichever of the following is applicable:

(i) duly completed copies of Internal Revenue Service Form W-8BEN claiming eligibility for benefits of an income tax treaty to which the United States is a party;

(ii) duly completed copies of Internal Revenue Service Form W-8ECI;

(iii) in the case of a Foreign Lender claiming the benefits of the exemption for portfolio interest under section 881(c) of the Code, (A) a certificate to the effect that such Foreign Lender is not (x) a “bank” within the meaning of section 881(c)(3)(A) of the Code, (y) a “10 percent shareholder” of the Borrower within the meaning of section 881(c)(3)(B) of the Code, or (z) a “controlled foreign corporation” described in section 881(c)(3)(C) of the Code and (B) duly completed copies of Internal Revenue Service Form W-8BEN, or

(iv) any other form prescribed by applicable Law as a basis for claiming exemption from or a reduction in United States Federal withholding tax duly completed together with such supplementary documentation as may be prescribed by applicable law to permit the Borrower to determine the withholding or deduction required to be made.

(f) Treatment of Certain Refunds. If the Administrative Agent or any Lender determines, in its sole discretion, that it has received a refund of any Taxes or Other Taxes as to which it has been indemnified by the Borrower or with respect to which the Borrower has paid additional amounts pursuant to this Section, it shall pay to the Borrower an amount equal to such refund (but only to the extent of indemnity payments made, or additional amounts paid, by the Borrower under this Section with respect to the Taxes or Other Taxes giving rise to such refund), net of all out-of-pocket expenses of the Administrative Agent or such Lender, as the case may be, and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund), provided that the Borrower, upon the request of the Administrative Agent or such Lender, agrees to repay the amount paid over to the Borrower (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to the Administrative Agent or such Lender if the Administrative Agent or such Lender is required to repay such refund to such Governmental Authority. This subsection shall not be construed to require the Administrative Agent or any Lender to make available its tax returns (or any other information relating to its taxes that it deems confidential) to the Borrower or any other Person.

Section 3.02 Increased Costs.

(a) Increased Costs Generally. If any Change in Law shall:

(i) impose, modify or deem applicable any reserve, special deposit, compulsory loan, insurance charge or similar requirement against assets held by, deposits with or for the account of, or credit extended or participated in by, any Lender (or its Lending Office);

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(ii) subject any Lender (or its Lending Office) to any tax of any kind whatsoever with respect to this Agreement, or change the basis of taxation of payments to such Lender in respect thereof (except for Indemnified Taxes or Other Taxes covered by Section 3.01 and the imposition of, or any change in the rate of, any Excluded Tax payable by such Lender);

(iii) impose on any Lender (or its Lending Office) any other condition, cost or expense affecting this Agreement made by such Lender or participation therein;

and the result of any of the foregoing shall be to reduce the amount of any sum received or receivable by such Lender hereunder (whether of principal, interest or any other amount) then, upon request of such Lender, the Borrower will pay to such Lender, as the case may be, such additional amount or amounts as will compensate such Lender, as the case may be, for such additional costs incurred or reduction suffered.

(b) Capital Requirements. If any Lender determines that any Change in Law affecting such Lender or any Lending Office of such Lender or such Lender’s holding company, if any, regarding capital requirements has or would have the effect of reducing the rate of return on such Lender’s capital or on the capital of such Lender’s holding company, if any, as a consequence of this Agreement, the Commitments of such Lender or the Loans made by such Lender, to a level below that which such Lender or such Lender’s holding company could have achieved but for such Change in Law (taking into consideration such Lender’s policies and the policies of such Lender’s holding company with respect to capital adequacy), then from time to time the Borrower will pay to such Lender, as the case may be, such additional amount or amounts as will compensate such Lender or such Lender’s holding company for any such reduction suffered.

(c) Certificates for Reimbursement. A certificate of a Lender setting forth the amount or amounts necessary to compensate such Lender or its holding company, as the case may be, as specified in subsection (a) or (b) of this Section and delivered to the Borrower shall be conclusive absent manifest error. The Borrower shall pay such Lender, as the case may be, the amount shown as due on any such certificate within 10 days after receipt thereof.

(d) Delays in Requests. Failure or delay on the part of any Lender to demand compensation pursuant to the foregoing provisions of this Section shall not constitute a waiver of such Lender’s right to demand such compensation; provided that the Borrower shall not be required to compensate a Lender pursuant to the foregoing provisions of this Section for any increased costs incurred or reductions suffered more than nine months prior to the date that such Lender notifies the Borrower of the Change in Law giving rise to such increased costs or reductions and of such Lender’s intention to claim compensation therefor (except that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the nine-month period referred to above shall be extended to include the period of retroactive effect thereof).

Section 3.03 Mitigation Obligations.

(a) Designation of a Different Lending Office. If any Lender requests compensation under Section 3.02, or the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 3.01, then such Lender shall use reasonable efforts to designate a different Lending Office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the judgment of such Lender, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 3.01 or 3.02, as the case may be, in the future, and (ii) in each case, would not subject such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender. The Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment.

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(b) Replacement of Lenders. If a Lender requests compensation under Section 3.02 or if the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of a Lender pursuant to Section 3.01, the Borrower may replace such Lender in accordance with Section 10.13.

Section 3.04 Survival. All of the Borrower’s obligations under this Article III shall survive termination of the Commitments and repayment of all other Obligations hereunder.

ARTICLE IV

CONDITIONS PRECEDENT TO LOANS

Section 4.01 Conditions to Loan. The obligation of each Lender to honor its Closing Date Commitment hereunder is subject to the satisfaction of the following conditions precedent:

(a) Deliverables. The Administrative Agent’s receipt of the following, each of which shall be originals or telecopies (followed by originals) unless otherwise specified, each properly executed by a Responsible Officer of the signing Loan Party, each dated the Closing Date (or, in the case of certificates of governmental officials, a recent date before the Closing Date) and each in form and substance satisfactory to the Administrative Agent and each of the Lenders:

(i) executed counterparts of this Agreement and the Guaranty, sufficient in number for distribution to the Administrative Agent, each Lender and the Borrower;

(ii) a Note executed by the Borrower in favor of each Lender requesting a Note;

(iii) executed counterparts of the Security Agreement, the Pledge Agreement and all other Collateral Documents, duly executed by each Loan Party, together with:

(A) a Perfection Certificate for all of the Loan Parties;

(B) appropriate financing statements (Form UCC-1 or such other financing statements or similar notices as shall be required by local Law) authenticated and authorized for filing under the Uniform Commercial Code or other applicable local Law of each jurisdiction in which the filing of a financing statement or giving of notice may be required, or reasonably requested by the Administrative Agent, to perfect the security interests intended to be created by the Collateral Documents;

(C) copies of reports from CT Corporation or another independent search service reasonably satisfactory to the Administrative Agent listing all effective financing statements, notices of tax, or judgment liens or similar notices that name the Borrower or any other Loan Party, as such (under its present name and any previous name and, if requested by the Administrative Agent, under any trade names), as debtor that are filed in the jurisdictions referred to in clause (B) above or in any other jurisdiction having files which must be searched in order to determine fully the existence of the Uniform Commercial Code security interests, notices of the filing of federal tax Liens (filed pursuant to Section 6323 of the Code), or judgment Liens on any Collateral, together with copies of such financing statements, notices of tax, or judgment Liens or

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similar notices (none of which shall cover the Collateral except to the extent evidencing Permitted Liens or for which the Administrative Agent shall have received termination statements (Form UCC-3 or such other termination statements as shall be required by local Law) authenticated and authorized for filing);

(D) searches of ownership of intellectual property in the appropriate governmental offices and such patent, trademark and/or copyright filings as may be requested by the Administrative Agent to the extent necessary or reasonably advisable to perfect the Administrative Agent’s security interest in intellectual property Collateral; provided that searches required by this clause (D) delivered within 30 days after the Closing Date shall be deemed delivered as of the Closing Date;

(E) all of the Pledged Collateral, which Pledged Collateral shall be in suitable form for transfer by delivery, or shall be accompanied by duly executed instruments of transfer or assignment in blank, with signatures appropriately guaranteed, accompanied in each case by any required transfer tax stamps, all in form and substance reasonably satisfactory to the Administrative Agent; and

(F) evidence of the completion of all other filings and recordings of or with respect to the Collateral Documents and of all other actions as may be necessary or, in the opinion of the Administrative Agent, desirable to perfect the security interests intended to be created by the Collateral Documents (including receipt of duly executed payoff letters and UCC-3 termination statements);

(iv) a short form assignment or grant of security interest in intellectual property, in substantially the form of Exhibit A to the Security Agreement (for patents and trademarks) or Exhibit B to the Security Agreement (for copyrights), duly executed by each Loan Party, together with evidence that all action that the Administrative Agent may deem necessary or desirable in order to perfect the Liens in intellectual property created under Security Agreement and under such short form assignments or grants of security interests has been taken;

(v) executed counterparts of the Warrant Agreement and of each of the Warrant certificates for the respective Purchasers referenced therein, duly executed by the Borrower and the other parties thereto;

(vi) a copy of the Organization Documents, including all amendments thereto, of each Loan Party, certified as of a recent date by the Secretary of State or other applicable Governmental Authority of its respective jurisdiction of organization, together with:

(A) a certificate as to the good standing of each Loan Party, as of a recent date, from the Secretary of State or other applicable authority of its respective jurisdiction of organization and from each other jurisdiction in which such Loan Party is qualified or is required to be qualified to do business, together in each case, to the extent generally available, with a certificate or other evidence of good standing as to payment of any applicable franchise or similar taxes from the appropriate taxing authority of each such jurisdiction;

(B) a certificate of the Secretary or Assistant Secretary of each Loan Party dated the Closing Date and certifying (1) that the Organization Documents of such Loan Party have not been amended since the date of the last amendment thereto shown on the certificate of good standing from its jurisdiction of organization furnished pursuant

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to clause (A) above; (2) that attached thereto is a true and complete copy of the agreement of limited partnership, operating agreement or by-laws of such Loan Party, as applicable, as in effect on the Closing Date and at all times since a date prior to the date of the resolutions described in clause (3) below, (3) that attached thereto is a true and complete copy of resolutions duly adopted by the board of directors or other governing body of such Loan Party authorizing the execution, delivery and performance of the Loan Documents to which it is to be a party and, in the case of the Borrower, the borrowings hereunder, and that such resolutions have not been modified, rescinded or amended and are in full force and effect; and (4) as to the incumbency and specimen signature of each officer executing any Loan Document or any other document delivered in connection herewith on behalf of such Loan Party; and

(C) a certificate of another officer as to the incumbency and specimen signature of the Secretary or Assistant Secretary executing the certificate pursuant to clause (B) above.

(vii) a favorable written opinion of Skadden, Arps, Slate, Meagher & Flom LLP, special counsel to the Loan Parties, addressed to the Administrative Agent and each Lender, dated the Closing Date, substantially in the form of Exhibit E-1 hereto and covering such additional matters incident to the Transactions as the Administrative Agent or the Required Lenders may reasonably request;

(viii) a favorable written opinion of the General Counsel of the Borrower, addressed to the Administrative Agent and each Lender, dated the Closing Date, substantially in the form of Exhibit E-2 hereto and covering such additional matters incident to the Transactions as the Administrative Agent or the Required Lenders may reasonably request;

(ix) evidence satisfactory to each Lender that appropriate approvals have been obtained in order that The Goldman Sachs Group, Inc., Goldman Sachs & Co. and their respective affiliates become “interested stockholders” with the approval of the board of directors of the Borrower for purposes of Section 203 of the General Corporation Law of the State of Delaware;

(x) [reserved];

(xi) certificates attesting to the Solvency of (a) the Borrower, and (b) all of the Loan Parties taken as a whole, before and after giving effect to the Transactions, from its chief financial officer;

(xii) evidence that all insurance required to be maintained pursuant to this Agreement has been obtained and is in effect together with the certificates of insurance, naming the Administrative Agent, on behalf of the Lenders, as an additional insured or loss payee, as the case may be, under all insurance policies maintained with respect to the assets and properties of the Loan Parties that constitutes Collateral;

(xiii) such other assurances, certificates, documents, consents or opinions as the Administrative Agent or any Lender reasonably may require.

(b) Administrative Agent Fees. All fees required to be paid to the Administrative Agent on or before the Closing Date shall have been paid.

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(c) Counsel Fees. Unless waived by the Administrative Agent and each Lender, the Borrower shall have paid all fees, charges and disbursements of counsel to the Administrative Agent and each lender (or directly to such counsel if requested by the Administrative Agent or such Lender) to the extent invoiced prior to or on the Closing Date, plus such additional amounts of such fees, charges and disbursements as shall constitute its reasonable estimate of such fees, charges and disbursements incurred or to be incurred by it through the closing proceedings (provided that such estimate shall not thereafter preclude a final settling of accounts between the Borrower and the Administrative Agent and each Lender).

(d) Financial Information. Each Lender shall have received: (i) forecasts prepared by management of the Loan Parties, each in form reasonably satisfactory to the Required Lenders, of balance sheets, income statements and cash flow statements on a quarterly basis for the first year following the Closing Date and on an annual basis for each year thereafter prior to the Maturity Date; (ii) evidence satisfactory to the Required Lenders that the consolidated earnings before interest, taxes, depreciation and amortization (reported in accordance with GAAP, i.e., without other add-backs or adjustments) for the three-fiscal quarter period ended September 30, 2006, for the Borrower and its Subsidiaries, is not less than $9,000,000; and (ii) written certifications from the chief executive officer and chief financial officer of the Borrower satisfying the requirements of each of Section 906 and Section 302 of Sarbanes-Oxley; provided that written certifications required by this clause (ii) delivered within 10 days after the Closing Date shall be deemed delivered as of the Closing Date.

(e) Refinancing of Certain Existing Indebtedness; Other Indebtedness. On the Closing Date, the commitments under all Refinanced Agreements shall have been terminated or will be terminated concurrently therewith, all loans and other obligations outstanding thereunder shall have been repaid in full or will be repaid in full concurrently therewith (other than contingent indemnification obligations not yet due and payable), together with accrued interest thereon (including, without limitation, any prepayment premium), all letters of credit issued thereunder shall have been terminated or cash collateralized in a manner satisfactory to the Required Lenders and the Administrative Agent, and all other amounts owing pursuant to each Refinanced Agreement shall have been repaid in full, or will be repaid in full concurrently therewith and the Administrative Agent shall have received evidence in form, scope and substance reasonably satisfactory to it that the matters set forth in this subsection (e) have been satisfied at such time. In addition, on the Closing Date, the creditors under each Refinanced Agreement shall have terminated and released all applicable Liens on the capital stock of and assets owned by the Borrower and its Subsidiaries, and the Administrative Agent shall have received all such releases as may have been requested by the Administrative Agent, which releases shall be in form and substance satisfactory to the Administrative Agent.

(f) Consents and Approvals. On the Closing Date, all necessary governmental (domestic or foreign), regulatory and third party approvals (including, without limitation, with respect to real property leases and license agreements relating to intellectual property) in connection with the Transactions shall have been obtained and remain in full force and effect, and all applicable waiting and appeal periods, if any, shall have expired, in each case without any action being taken by any competent authority which have or could have a reasonable likelihood of restraining, preventing or imposing materially burdensome conditions on such transactions or impose, in the reasonable judgment of the Administrative Agent, materially burdensome conditions upon the consummation of such transactions. Each Loan Party shall provide a certificate of a Responsible Officer either (A) attaching copies of all such consents and approvals or (B) stating that no such consents or approvals are so required.

(g) Material Adverse Effect. Each Loan Party shall provide a certificate of a Responsible Officer stating that no Material Adverse Effect upon the Borrower and its Subsidiaries, taken as a whole (both before and after giving effect to the Transactions), has occurred since December 31, 2005.

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Without limiting the generality of the provisions of Section 9.04, for purposes of determining compliance with the conditions specified in this Section 4.01, each Lender that has signed this Agreement shall be deemed to have consented to, approved or accepted or to be satisfied with, each document or other matter required thereunder to be consented to or approved by or acceptable or satisfactory to a Lender unless the Administrative Agent shall have received notice from such Lender prior to the proposed Closing Date specifying its objection thereto.

(h) TCV Investor Right Agreement. The Borrower shall have received a consent and/or waiver with respect to Section 2.12 of that certain Seventh Amended and Restated Investor Rights Agreement, dated as of June 12, 2003, by and among the Borrower and the other parties thereto, in form and substance satisfactory to the initial purchasers of the Warrants under the Warrant Agreement, and such consent and/or waiver shall be in full force and effect and not subject to any unsatisfied conditions precedent.

(i) Representations and Warranties. The representations and warranties of the Borrower and each other Loan Party contained in Article V or any other Loan Document, or which are contained in any document furnished at any time under or in connection herewith or therewith, shall be true and correct on and as of the Closing Date and the date of the making of any Loan, except to the extent that such representations and warranties specifically refer to an earlier date, in which case they shall be true and correct as of such earlier date.

(j) No Default. No Default shall exist as of the Closing Date or would result from the making of the Loans or from the application of the proceeds thereof.

Section 4.02 Additional Conditions to Loan. The obligation of the Delayed Draw Lender to honor its Delayed Draw Commitment is subject to the satisfaction of the following condition:

(a) No Default. No Default shall exist, or would result from the making of the Loans or from the application of the proceeds thereof, either as of the Closing Date or the date of the making of any Loan.

ARTICLE V

REPRESENTATIONS AND WARRANTIES

The Borrower represents and warrants to the Administrative Agent and the Lenders on the date of this Agreement on the Closing Date and on the date any Loan is made:

Section 5.01 Existence, Qualification and Power. Each Loan Party and each of its Subsidiaries (i) is duly organized or formed, validly existing and, as applicable, in good standing under the Laws of the jurisdiction of its incorporation or organization, (ii) has all requisite power and authority and all requisite governmental licenses, authorizations, consents and approvals to (A) own or lease its assets and carry on its business and (B) execute, deliver and perform its obligations under the Loan Documents to which it is a party and consummate the Transactions, and (iii) is duly qualified and is licensed and, as applicable, in good standing under the Laws of each jurisdiction where its ownership, lease or operation of properties or the conduct of its business requires such qualification or license; except in each case referred to in clause (ii)(A) or (iii), to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect.

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Section 5.02 Authorization; No Contravention.

(a) The execution, delivery and performance by each Loan Party of each Related Document to which such Person is party have been duly authorized by all necessary corporate, partnership, limited liability company or other organizational action, and do not and will not (i) contravene the terms of any of such Person’s Organization Documents; (ii) conflict with or result in any breach or contravention of, or the creation of any Lien under, (A) any Contractual Obligation to which such Person is a party or (B) any order, injunction, writ or decree of any Governmental Authority or any arbitral award to which such Person or its property is subject; or (iii) violate any Law.

(b) Except as set forth in Schedule 5.02, the rights and interests of each Loan Party in, to or under any agreement, contract, license, instrument, document or other general intangible (referred to solely for purposes of this subsection 5.02(b) as a “Contract”) are not subject by the express terms of such Contract to a restriction, prohibition, consent right or any other condition in favor of a Person who is not a Group Company with respect to an assignment thereof or a grant of a security interest therein by a Loan Party, except where the contravention or violation of such provision, either individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.

Section 5.03 Governmental Authorization; Other Consents. No approval, consent, exemption, authorization, or other action by, or notice to, or filing with, any Governmental Authority or any other Person is necessary or required in connection with (i) the execution, delivery or performance by, or enforcement against, any Loan Party of this Agreement or any other Loan Document, (ii) the grant by any Loan Party of the Liens granted by it pursuant to the Collateral Documents, (iii) the perfection or maintenance of the Liens created under the Collateral Documents (including the first priority nature thereof) or (iv) the exercise by the Administrative Agent or any Lender of its rights under the Loan Documents or the remedies in respect of the Collateral pursuant to the Collateral Documents, except for (i) such filings as may be necessary to perfect the liens in the Collateral and (ii) the authorizations, approvals, actions, notices and filings listed on Schedule 5.03, all of which have been duly obtained, taken, given or made and are in full force and effect. All applicable waiting periods in connection with the Transactions have expired without any action having been taken by any Governmental Authority restraining, preventing or imposing materially adverse conditions upon the Transactions or the rights of the Loan Parties or their Subsidiaries freely to transfer or otherwise dispose of, or to create any Lien on, any properties now owned or hereafter acquired by any of them.

Section 5.04 Binding Effect. This Agreement has been, and each other Loan Document, when delivered hereunder, will have been, duly executed and delivered by each Loan Party that is party thereto. This Agreement constitutes, and each other Loan Document when so delivered will constitute, a legal, valid and binding obligation of such Loan Party, enforceable against each Loan Party that is party thereto in accordance with its terms, except (i) as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors’ rights generally and (ii) that rights of acceleration and the availability of equitable remedies may be limited by equitable principles of general applicability (regardless of whether enforcement is sought by proceedings in equity or at law).

Section 5.05 Financial Condition; No Material Adverse Effect; No Internal Control Event.

(a) Audited Financial Statements. The Audited Financial Statements: (i) were prepared in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein; (ii) fairly present the financial condition of the Borrower and its Subsidiaries as of the date thereof and their results of operations for the period covered thereby in

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accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein; and (iii) show all material indebtedness and other liabilities, direct or contingent, of the Borrower and its Subsidiaries as of the date thereof, including liabilities for taxes, material commitments and Indebtedness.

(b) Interim Financial Statements. The unaudited consolidated balance sheets of the Borrower and its Subsidiaries dated September 30, 2006, and the related consolidated statements of income or operations, shareholders’ equity and cash flows for the fiscal quarter ended on that date (i) were prepared in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein, and (ii) fairly present the financial condition of the Borrower and its Subsidiaries as of the date thereof and their results of operations for the period covered thereby, subject, in the case of clauses (i) and (ii), to the absence of footnotes and to normal year-end audit adjustments. Schedule 5.05 sets forth all material indebtedness and other liabilities, direct or contingent, of the Borrower and its consolidated Subsidiaries as of the date of such financial statements, including liabilities for taxes, material commitments and Indebtedness. Schedule 7.02 is complete and accurate as of the Closing Date.

(c) Material Adverse Change. There has been no event or circumstance since the date of the Audited Financial Statements, either individually or in the aggregate, that has had or could reasonably be expected to have a Material Adverse Effect.

(d) Internal Control Event. To the best knowledge of the Borrower, no Internal Control Event exists or has occurred since the date of the Audited Financial Statements that has resulted in or could reasonably be expected to result in a misstatement in any material respect, in any financial information delivered or to be delivered to the Administrative Agent or the Lenders, of (i) covenant compliance calculations provided hereunder or (ii) the assets, liabilities, financial condition or results of operations of the Borrower and its Subsidiaries on a consolidated basis.

(e) [Reserved.]

(f) Projections. The consolidated forecasted balance sheets, statements of income and cash flows of the Borrower and its Subsidiaries delivered pursuant to Section 4.01 or Section 6.01(d) were prepared in good faith on the basis of the assumptions stated therein, which assumptions were fair and reasonable in light of the conditions existing at the time of delivery of such forecasts, and represented, at the time of delivery, the Borrower’s best estimate of its future financial condition and performance.

(g) Post-Closing Financial Statements. The financial statements delivered to the Lenders pursuant to Section 6.01(a) and (b), if any, (i) have been prepared in accordance with GAAP (except as may otherwise be permitted under Section 6.01(a) and (b)) and (ii) present fairly (on the basis disclosed in the footnotes to such financial statements, if any) in all material respects the consolidated (and, if presented therein, consolidating) financial condition, results of operations and cash flows of the Borrower and its Consolidated Subsidiaries as of the respective dates thereof and for the respective periods covered thereby.

Section 5.06 Litigation. There are no actions, suits, proceedings, claims or disputes pending or, to the knowledge of any Loan Party after due and diligent investigation, threatened or contemplated, at law, in equity, in arbitration or before any Governmental Authority, by or against any Group Company or against any of their properties or revenues that (i) purport to affect or pertain to this Agreement or any other Loan Document, or any of the Transactions, (ii) except as specifically disclosed in Schedule 5.06 (the “Disclosed Litigation”), either individually or in the aggregate, if determined

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adversely, could reasonably be expected to have a Material Adverse Effect, or (iii) either individually or in the aggregate are reasonably expected by the Borrower to have a Material Adverse Effect, and there has been no adverse change in the status, or financial effect on any Group Company as a result, of the matters described on Schedule 5.06. The Borrower has agreed in principle with the Attorney General of the District of Columbia with respect to the matter identified in Schedule 5.06 as the “DCAG Action” to settle such matter for the payment of money in an amount disclosed to the Lenders prior to the Closing Date.

Section 5.07 No Default. No Group Company is in default under or with respect to any Contractual Obligation that could, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. No Default has occurred and is continuing or would result from the consummation of the Transactions.

Section 5.08 Ownership of Property; Liens; Investments.

(a) Title. Each Loan Party and each of its Subsidiaries has good record and marketable title in fee simple to, or valid leasehold interests in, all real property necessary or used in the ordinary conduct of its business, except for such defects in title as could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

(b) Liens. Schedule 5.08(b) sets forth a complete and accurate list of all Liens on the property or assets of each Loan Party and each of its Subsidiaries, showing as of the date hereof the lienholder thereof, the principal amount of the obligations (or the facility or arrangement) secured thereby and the property or assets of such Loan Party or such Subsidiary subject thereto. The property of each Loan Party and each of its Subsidiaries is subject to no Liens, other than Liens set forth on Schedule 5.08(b), and as otherwise permitted by Section 7.01.

(c) Owned Realty. Schedule 5.08(c) sets forth a complete and accurate list of all real property owned by each Loan Party and each of its Subsidiaries, showing as of the date hereof the street address, county or other relevant jurisdiction, state, record owner and book and estimated fair value thereof.

(d) Leases.

(i) Schedule 5.08(d)(i) sets forth a complete and accurate list of all leases of real property under which any Loan Party or any Subsidiary of a Loan Party is the lessee, showing as of the date hereof the street address, county or other relevant jurisdiction, state, lessor, lessee, expiration date and annual rental cost thereof.

(ii) Schedule 5.08(d)(ii) sets forth a complete and accurate list of all leases of real property under which any Loan Party or any Subsidiary of a Loan Party is the lessor, showing as of the date hereof the street address, county or other relevant jurisdiction, state, lessor, lessee, expiration date and annual rental cost thereof.

(e) Investments. Schedule 5.08(e) sets forth a complete and accurate list of all Investments held by any Loan Party or any Subsidiary of a Loan Party on the date hereof, showing as of the date hereof the amount, obligor or issuer and maturity, if any, thereof.

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Section 5.09 Environmental Compliance.

(a) The Loan Parties and their respective Subsidiaries conduct in the ordinary course of business a review of the effect of existing Environmental Laws and claims alleging potential liability or responsibility for violation of any Environmental Law on their respective businesses, operations and properties, and as a result thereof the Borrower has reasonably concluded that, except as specifically disclosed in Schedule 5.09, such Environmental Laws and claims could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

(b) None of the properties currently or formerly owned or operated by any Loan Party or any of its Subsidiaries is listed or proposed for listing on the NPL or on the CERCLIS or any analogous foreign, state or local list or is adjacent to any such property; there are no and never have been any underground or above-ground storage tanks or any surface impoundments, septic tanks, pits, sumps or lagoons in which Hazardous Materials are being or have been treated, stored or disposed on any property currently owned or operated by any Loan Party or any of its Subsidiaries or, to the best of the knowledge of the Loan Parties, on any property formerly owned or operated by any Loan Party or any of its Subsidiaries; there is no asbestos or asbestos-containing material on any property currently owned or operated by any Loan Party or any of its Subsidiaries; and Hazardous Materials have not been released, discharged or disposed of on any property currently or formerly owned or operated by any Loan Party or any of its Subsidiaries.

(c) Neither any Loan Party nor any of its Subsidiaries is undertaking, and has not completed, either individually or together with other potentially responsible parties, any investigation or assessment or remedial or response action relating to any actual or threatened release, discharge or disposal of Hazardous Materials at any site, location or operation, either voluntarily or pursuant to the order of any Governmental Authority or the requirements of any Environmental Law; and all Hazardous Materials generated, used, treated, handled or stored at, or transported to or from, any property currently or formerly owned or operated by any Loan Party or any of its Subsidiaries have been disposed of in a manner not reasonably expected to result in material liability to any Loan Party or any of its Subsidiaries.

Section 5.10 Insurance. The properties of each Group Company are insured with financially sound and reputable insurance companies not Affiliates of the Borrower, in such amounts (after giving effect to any self-insurance compatible with the following standards), with such deductibles and covering such risks as are customarily carried by companies engaged in similar businesses and owning similar properties in localities where the applicable Group Company operates.

Section 5.11 Taxes. The Borrower and its Subsidiaries have filed all Federal, state and other material tax returns and reports required to be filed, and have paid all Federal, state and other material taxes, assessments, fees and other governmental charges levied or imposed upon them or their properties, income or assets otherwise due and payable, except those which are being contested in good faith by appropriate proceedings diligently conducted and for which adequate reserves have been provided in accordance with GAAP. There is no proposed tax assessment against the Borrower or any Subsidiary that would, if made, reasonably be expected to have a Material Adverse Effect. Neither any Loan Party nor any Subsidiary thereof is party to any tax sharing agreement.

Section 5.12 ERISA; Employee Benefit Arrangements.

(a) Each Plan is in compliance in all material respects with the applicable provisions of ERISA, the Code and other Federal or state Laws. Each Plan that is intended to qualify under Section 401(a) of the Code has received a favorable determination letter from the IRS or an application for such a letter is currently being processed by the IRS with respect thereto and, to the best knowledge of the Borrower, nothing has occurred which would prevent, or cause the loss of, such qualification. The Borrower and each ERISA Affiliate have made all required contributions to each Plan subject to Section 412 of the Code, and no application for a funding waiver or an extension of any amortization period pursuant to Section 412 of the Code has been made with respect to any Plan.

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(b) There are no pending or, to the best knowledge of the Borrower, threatened claims, actions or lawsuits, or action by any Governmental Authority, with respect to any Plan that could reasonably be expected to have a Material Adverse Effect. There has been no prohibited transaction or violation of the fiduciary responsibility rules with respect to any Plan that has resulted or could reasonably be expected to result in a Material Adverse Effect.

(c)(i) No ERISA Event has occurred or is reasonably expected to occur; (ii) there is no Unfunded Pension Liability; (iii) neither the Borrower nor any ERISA Affiliate has incurred, or reasonably expects to incur, any liability under Title IV of ERISA with respect to any Pension Plan (other than premiums due and not delinquent under Section 4007 of ERISA); (iv) neither the Borrower nor any ERISA Affiliate has incurred, or reasonably expects to incur, any liability (and no event has occurred which, with the giving of notice under Section 4219 of ERISA, would result in such liability) under Section 4201 or 4243 of ERISA with respect to a Multiemployer Plan; and (v) neither the Borrower nor any ERISA Affiliate has engaged in a transaction that could be subject to Section 4069 or 4212(c) of ERISA.

(d) There is no employee benefit scheme or arrangement mandated by a government other than the United States and no employee benefit plan maintained or contributed to by any Loan Party or any Subsidiary of any Loan Party that is not subject to United States law (each, a “Foreign Plan”).

Section 5.13 Subsidiaries; Equity Interests; Loan Parties. As of the Closing Date, no Loan Party has any Subsidiaries other than those specifically disclosed in Part (a) of Schedule 5.13, and all of the outstanding Equity Interests in such Subsidiaries have been validly issued, are fully paid and non-assessable and are owned by a Loan Party in the amounts specified on Part (a) of Schedule 5.13 free and clear of all Liens except those created under the Collateral Documents. No Loan Party has any equity investments in any other corporation or entity other than those specifically disclosed in Part (a) or Part (b) of Schedule 5.13. All of the outstanding Equity Interests in the Borrower have been validly issued and are fully paid and non-assessable. Set forth on Part (c) of Schedule 5.13 is a complete and accurate list of all Loan Parties, showing as of the Closing Date (as to each Loan Party) the jurisdiction of its incorporation, the address of its principal place of business and its U.S. taxpayer identification number or, in the case of any non-U.S. Loan Party that does not have a U.S. taxpayer identification number, its unique identification number issued to it by the jurisdiction of its incorporation. The copy of the charter of each Loan Party and each amendment thereto provided pursuant to Article IV is a true and correct copy of each such document, each of which is valid and in full force and effect.

Section 5.14 Margin Regulations; Investment Company Act.

(a) The Borrower is not engaged and will not engage, principally or as one of its important activities, in the business of purchasing or carrying margin stock (within the meaning of Regulation U issued by the Board of Governors of the Federal Reserve System), or extending credit for the purpose of purchasing or carrying margin stock. Following the application of the proceeds of the Loan, not more than 25% of the value of the assets (either of the Borrower only or of the Borrower and its Subsidiaries on a consolidated basis) subject to the provisions of Section 7.01 or Section 7.05 or subject to any restriction contained in any agreement or instrument between the Borrower and any Lender or any Affiliate of any Lender relating to Indebtedness and within the scope of Section 8.01(e) will be margin stock.

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(b) None of the Borrower or any Subsidiary is required to be registered under the Investment Company Act of 1940, as amended.

Section 5.15 Disclosure. The Borrower has disclosed to the Administrative Agent and the Lenders all agreements, instruments and corporate or other restrictions to which it or any of its Subsidiaries is subject, and all other matters known to it, that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect. No report, financial statement, certificate or other information furnished (whether in writing or orally) by or on behalf of any Loan Party to the Administrative Agent or any Lender in connection with the Transactions and the negotiation of this Agreement or delivered hereunder or under any other Loan Document (in each case as modified or supplemented by other information so furnished) contains any material misstatement of fact or omits to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that, with respect to projected financial information, the Borrower represents only that such information was prepared in good faith based upon assumptions believed to be reasonable at the time. No report or other information filed with the SEC contains any material misstatement of fact or omits to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading.

Section 5.16 Compliance with Law. Each Loan Party and each Subsidiary thereof is in compliance with the requirements of all Laws and all orders, writs, injunctions and decrees applicable to it or to its properties, except in such instances in which (i) such requirement of Law or order, writ, injunction or decree is being contested in good faith by appropriate proceedings diligently conducted or (ii) the failure to comply therewith, either individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.

Section 5.17 Intellectual Property. The Borrower and each of its Subsidiaries own, or possess the right to use, all of the trademarks, service marks, trade names, copyrights, patents, patent rights, franchises, licenses and other intellectual property rights (collectively, “IP Rights”) that are used or reasonably necessary for the operation of their respective businesses, without conflict with the rights of any other Person and Schedule 5.17 sets forth a complete and accurate list of all such IP Rights owned or used by the Borrower and each of its Subsidiaries. To the best knowledge of the Borrower, no slogan or other advertising device, product, process, method, substance, part or other material now employed, or now contemplated to be employed, by the Borrower or any of its Subsidiaries infringes upon any rights held by any other Person. No claim or litigation regarding any of the foregoing is pending or, to the best knowledge of the Borrower, threatened, which, either individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.

Section 5.18 Solvency. Each Loan Party is, individually and together with its Subsidiaries on a consolidated basis, Solvent.

Section 5.19 Labor Matters. There are no strikes against the Borrower or any of its Subsidiaries, other than any strikes that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. The consummation of the Transactions will not give rise to a right of termination or right of renegotiation on the part of any union under any collective bargaining agreement to which the Borrower or any of its Subsidiaries is a party or by which the Borrower or any of its Subsidiaries (or any predecessor) is bound, other than collective bargaining agreements which, individually or in the aggregate, are not material to the Borrower and its Subsidiaries taken as a whole.

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Section 5.20 Collateral Documents.

(a) Article 9 Collateral. Each of the Security Agreement, the Pledge Agreement and the Secured Cash Management Agreement is effective to create in favor of the Administrative Agent, for the ratable benefit of the Secured Parties, a legal, valid and enforceable security interest in the Collateral described therein and, when financing statements in appropriate form are filed in the offices specified on Schedule 4.01 to the Security Agreement and the Pledged Collateral is delivered to the Administrative Agent, each of the Security Agreement and the Pledge Agreement shall constitute a fully perfected Lien on, and security interest in, all right, title and interest of the grantors thereunder in such of the Collateral in which a security interest can be perfected under Article 9 of the Uniform Commercial Code, in each case prior and superior in right to any other Person, other than with respect to Permitted Liens.

(b) Intellectual Property. When financing statements in the appropriate form are filed in the offices specified on Schedule 4.01 to the Security Agreement, the Assignment of Patents and Trademarks, substantially in the form of Exhibit A to the Security Agreement, is filed in the United States Patent and Trademark Office and the Assignment of Copyrights, substantially in the form of Exhibit B to the Security Agreement, is filed in the United States Copyright Office, the Security Agreement shall constitute a fully perfected Lien on, and security interest in, all right, title and interest of the grantors thereunder in the United States patents, trademarks, copyrights, licenses and other intellectual property rights covered in such Assignments, in each case prior and superior in right to any other Person (it being understood that subsequent recordings in the United States Patent and Trademark Office and the United States Copyright Office may be necessary to perfect a lien on registered trademarks, trademark applications and copyrights acquired by the Loan Parties after the Closing Date).

(c) Status of Liens. The Administrative Agent, for the ratable benefit of the Secured Parties, will at all times have the Liens provided for in the Collateral Documents and, subject to the filing by the Administrative Agent of continuation statements to the extent required by the Uniform Commercial Code, the Collateral Documents will at all times constitute valid and continuing liens of record and first priority perfected security interests in all the Collateral referred to therein, except as priority may be affected by Permitted Liens.

Section 5.21 No Broker’s Fee. Other than fees payable to the Administrative Agent hereunder, none of the Loan Parties or any of their respective Subsidiaries has paid, or is obligated to pay, to any Person any broker’s or finder’s fees in connection with the Transactions.

ARTICLE VI

AFFIRMATIVE COVENANTS

So long as any Lender shall have any Commitment hereunder or any Loan shall remain unpaid or unsatisfied, the Borrower shall, and shall (except in the case of the covenants set forth in Sections 6.01, 6.02, 6.03 6.11 and 6.16) cause each Subsidiary to:

Section 6.01 Financial Statements. Deliver to the Administrative Agent and each Lender, in form and detail satisfactory to the Administrative Agent and the Required Lenders:

(a) Annual Financial Statements. As soon as available, but in any event within 90 days after the end of each fiscal year of the Borrower (commencing with the fiscal year ended December 31, 2006), a consolidated and consolidating balance sheet of the Borrower and its Subsidiaries as at the end of such fiscal year, and the related consolidated and consolidating statements of income or operations, shareholders’ equity and cash flows for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year, all in reasonable detail and prepared in accordance with GAAP, such

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consolidated statements to be audited and accompanied by (i) a report and opinion of a Registered Public Accounting Firm of nationally recognized standing reasonably acceptable to the Required Lenders, which report and opinion shall be prepared in accordance with generally accepted auditing standards and applicable Securities Laws and shall not be subject to any “going concern” or like qualification or exception or any qualification or exception as to the scope of such audit or with respect to the absence of any material misstatement and (ii) an opinion of such Registered Public Accounting Firm independently assessing the Borrower’s internal controls over financial reporting in accordance with Item 308 of SEC Regulation S-K, PCAOB Auditing Standard No. 2, and Section 404 of Sarbanes-Oxley expressing a conclusion that contains no statement that there is a material weakness in such internal controls, except for such material weaknesses as to which the Required Lenders do not object.

(b) Quarterly Financial Statements. As soon as available, but in any event within 45 days after the end of each of the first three fiscal quarters of each fiscal year of the Borrower (commencing with the fiscal quarter ended March 31, 2007), a consolidated and consolidating balance sheet of the Borrower and its Subsidiaries as at the end of such fiscal quarter, and the related consolidated and consolidating statements of income or operations, shareholders’ equity and cash flows for such fiscal quarter and for the portion of the Borrower’s fiscal year then ended, setting forth in each case in comparative form the figures for the corresponding fiscal quarter of the previous fiscal year and the corresponding portion of the previous fiscal year, all in reasonable detail, such consolidated statements to be certified by the chief executive officer, chief financial officer, treasurer or controller of the Borrower as fairly presenting the financial condition, results of operations, shareholders’ equity and cash flows of the Borrower and its Subsidiaries in accordance with GAAP, subject only to normal year-end audit adjustments and the absence of footnotes and such consolidating statements to be certified by the chief executive officer, chief financial officer, treasurer or controller of the Borrower to the effect that such statements are fairly stated in all material respects when considered in relation to the consolidated financial statements of the Borrower and its Subsidiaries.

(c) Key Business Indicators. As soon as available, but in any event within 30 days after the end of each of the first 11 months of each fiscal year of the Borrower (commencing with the fiscal month ended January 31, 2007), internally prepared key business indicator reports of the Borrower and its Subsidiaries as of the end of such month in the form customarily prepared by management and previously provided to the Lenders prior to the Closing Date, all in reasonable detail and duly certified by the chief executive officer, chief financial officer, treasurer or controller of the Borrower.

(d) Business Plan and Budget. As soon as available, but in any event no later than 45 days after the end of each fiscal year of the Borrower, an annual business plan and budget of the Borrower and its Subsidiaries on a consolidated basis, including forecasts prepared by management of the Borrower, in form satisfactory to the Administrative Agent and the Required Lenders, of consolidated balance sheets and statements of income or operations and cash flows of the Borrower and its Subsidiaries on a monthly basis for the immediately following fiscal year (including the fiscal year in which the Maturity Date occurs).

As to any information contained in materials furnished pursuant to Section 6.02(d), the Borrower shall not be separately required to furnish such information under Section 6.01(a) or (b) above, but the foregoing shall not be in derogation of the obligation of the Borrower to furnish the information and materials described in Sections 6.01(a) and (b) above at the times specified therein.

Section 6.02 Certificates; Other Information. Deliver to the Administrative Agent and each Lender, in form and detail satisfactory to the Administrative Agent and the Required Lenders:

(a) Auditors’ Certificate. Concurrently with the delivery of the financial statements referred to in Section 6.01(a) (commencing with the delivery of the financial statements for the fiscal year ended December 31, 2006), a certificate of its independent certified public accountants certifying such financial statements and stating that, subject to conditions and qualifications required by such accountants and customary for such statements, in making the examination necessary therefor no knowledge was obtained of any Default or, if any such Default shall exist, stating the nature and status of such event.

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(b) Compliance Certificate. Concurrently with the delivery of the financial statements referred to in Sections 6.01(a) and (b) (commencing with the delivery of the financial statements for the fiscal year ended December 31, 2006), a duly completed Compliance Certificate signed by the chief executive officer, chief financial officer, treasurer or controller of the Borrower, and in the event of any change in generally accepted accounting principles used in the preparation of such financial statements, the Borrower shall also provide, if necessary for the determination of compliance with Section 7.11, a statement of reconciliation conforming such financial statements to GAAP. If the Borrower is no longer filing reports with the SEC, a report containing information equivalent to the information required to be included in a Form 10-K in the management’s discussion and analysis section with respect to such financial statements..

(c) Auditor’s Reports. Promptly after any request by the Administrative Agent or any Lender, copies of any detailed audit reports, management letters or recommendations submitted to the board of directors (or the audit committee of the board of directors) of any Group Company by independent accountants in connection with the accounts or books of any Group Company, or any audit of any of them.

(d) SEC Reports. Promptly after the same are available, copies of each annual report, proxy or financial statement or other report or communication sent to the stockholders of the Borrower, and copies of all annual, regular, periodic and special reports and registration statements which any Group Company may file or be required to file with the SEC under Section 13 or 15(d) of the Securities Exchange Act of 1934, and not otherwise required to be delivered to the Administrative Agent pursuant hereto.

(e) Insurance. as soon as available, but in any event within 45 days after the end of each fiscal year of the Borrower, a report summarizing the insurance coverage (specifying type, amount and carrier) in effect for each Loan Party and its Subsidiaries and containing such additional information as the Administrative Agent, or any Lender through the Administrative Agent, may reasonably specify.

(f) Investigations. Promptly, and in any event within five Business Days after receipt thereof by any Loan Party or any Subsidiary thereof, copies of each notice or other correspondence received from the SEC (or comparable agency in any applicable non-United States jurisdiction) concerning any investigation or possible investigation or other inquiry by such agency regarding financial or other operational results of any Loan Party or any Subsidiary thereof.

(g) Certain Environmental Reports. Promptly after the assertion or occurrence thereof, notice of any action or proceeding against or of any noncompliance by any Loan Party or any of its Subsidiaries with any Environmental Law or Environmental Permit that could (i) reasonably be expected to have a Material Adverse Effect or (ii) cause any property described in the Mortgages to be subject to any restrictions on ownership, occupancy, use or transferability under any Environmental Law.

(h) Certain Properties. As soon as available, but in any event within 105 days after the end of each fiscal year of the Borrower, (i) a report supplementing Schedules 5.08(c), 5.08(d)(i) and 5.08(d)(ii), including an identification of all owned and leased real property disposed of by the Borrower

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or any Subsidiary during such fiscal year, a list and description (including the street address, county or other relevant jurisdiction, state, record owner, book value thereof and, in the case of leases of property, lessor, lessee, expiration date and annual rental cost thereof) of all real property acquired or leased during such fiscal year and a description of such other changes in the information included in such Schedules as may be necessary for such Schedules to be accurate and complete; (ii) a report supplementing Schedule 5.17, setting forth (A) a list of registration numbers for all patents, trademarks, service marks, trade names and copyrights awarded to the Borrower or any Subsidiary thereof during such fiscal year and (B) a list of all patent applications, trademark applications, service mark applications, trade name applications and copyright applications submitted by the Borrower or any Subsidiary thereof during such fiscal year and the status of each such application; and (iii) a report supplementing Schedules 5.08(e) and 5.13 containing a description of all changes in the information included in such Schedules as may be necessary for such Schedules to be accurate and complete, each such report to be signed by a Responsible Officer of the Borrower and to be in a form reasonably satisfactory to the Administrative Agent.

(i) Reserved.

(j) Other Information. Promptly, such additional information regarding the business, financial, legal or corporate affairs of any Loan Party or any Subsidiary thereof, or compliance with the terms of the Loan Documents, as the Administrative Agent or any Lender may from time to time reasonably request.

Documents required to be delivered pursuant to Section 6.01(a) or (b) or Section 6.02(d) (to the extent any such documents are included in materials otherwise filed with the SEC) may be delivered electronically and if so delivered, shall be deemed to have been delivered on the date (i) on which the Borrower posts such documents, or provides a link thereto on the Borrower’s website on the Internet at the website address listed on Schedule 11.02; or (ii) on which such documents are posted on the Borrower’s behalf on an Internet or Intranet website, if any, to which each Lender and the Administrative Agent have access (whether a commercial, third-party website or whether sponsored by the Administrative Agent and including the SEC website); provided that: (i) the Borrower shall deliver paper copies of such documents to the Administrative Agent or any Lender that requests the Borrower to deliver such paper copies until a written request to cease delivering paper copies is given by the Administrative Agent or such Lender and (ii) the Borrower shall notify (which may be by facsimile or electronic mail) the Administrative Agent and each Lender of the posting of any such documents and provide to the Administrative Agent by electronic mail electronic versions (i.e., soft copies) of such documents. Notwithstanding anything contained herein, in every instance the Borrower shall be required to provide paper copies of the Compliance Certificates required by Section 6.02(b) to the Administrative Agent. Except for such Compliance Certificates, the Administrative Agent shall have no obligation to request the delivery or to maintain copies of the documents referred to above, and in any event shall have no responsibility to monitor compliance by the Borrower with any such request for delivery, and each Lender shall be solely responsible for requesting delivery to it or maintaining its copies of such documents.

Section 6.03 Notices. Promptly notify the Administrative Agent and each Lender of:

(i) the occurrence of any Default or Event of Default;

(ii)(A) the breach or non-performance of, or any default under, any material Contractual Obligation of the Borrower or any of its Subsidiaries, (B) any dispute, litigation, investigation, proceeding or suspension between the Borrower or any of its Subsidiaries and any Governmental Authority, (C) the commencement of, or any adverse development in, any litigation or proceeding affecting the Borrower or any of its Subsidiaries, including pursuant to

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any applicable Environmental Law, (D) any litigation, investigation or proceeding affecting any Group Company and (E) and any other matter, event or circumstance, in each case of subclauses (C), (D) and (E) to the extent that the same have resulted or could reasonably be expected to result in a Material Adverse Effect;

(iii) the occurrence of any ERISA Event;

(iv) any material change in accounting policies or financial reporting practice by the Borrower or any of its Subsidiaries provided, that any change to any internally generated reports which does not impact externally-reported financial information shall not constitute a material change;

(v) the determination by the Registered Public Accounting Firm providing the opinion required under Section 6.01(a)(ii) (in connection with its preparation of such opinion) or the Borrower’s determination at any time of the occurrence or existence of any Internal Control Event; and

(vi) the (A) occurrence of any Disposition of property or assets for which the Borrower is required to make a mandatory prepayment pursuant to Section 2.02(b)(i), (B) incurrence or issuance of any Indebtedness for which the Borrower is required to make a mandatory prepayment pursuant to Section 2.02(b)(ii), and (C) receipt of any Extraordinary Receipt for which the Borrower is required to make a mandatory prepayment pursuant to Section 2.02(b)(iii).

Each notice pursuant to this Section 6.03 (other than Section 6.03 (vi)) shall be accompanied by a statement of a Responsible Officer of the Borrower setting forth details of the occurrence referred to therein and stating what action the Borrower has taken and proposes to take with respect thereto. Each notice pursuant to Section 6.03(i) shall describe with particularity any and all provisions of this Agreement or the other Loan Documents that have been breached.

Section 6.04 Payment of Obligations. Pay and discharge as the same shall become due and payable (i) all Federal and other material tax liabilities, assessments and governmental charges or levies upon it or its properties or assets, unless the same are being contested in good faith by appropriate proceedings diligently conducted and adequate reserves in accordance with GAAP are being maintained by the Borrower or such Subsidiary; (ii) all material lawful claims which, if unpaid, would by law become a Lien upon its property; and (iii) any other liabilities or Indebtedness, except, in the case of this subclause(iii), to the extent that the failure to pay or discharge such liabilities or Indebtedness could not reasonably be expected to have a Material Adverse Effect.

Section 6.05 Preservation of Existence Etc. (i) Preserve, renew and maintain in full force and effect its legal existence and good standing under the Laws of the jurisdiction of its organization except in a transaction permitted by Section 7.04 or 7.05; (ii) take all reasonable action to maintain all rights, privileges, permits, licenses and franchises necessary or desirable in the normal conduct of its business, except to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect; and (iii) preserve or renew all of its registered patents, trademarks, trade names and service marks, the non-preservation of which could reasonably be expected to have a Material Adverse Effect.

Section 6.06 Maintenance of Properties. (i) Maintain, preserve and protect all of its material properties and material equipment necessary in the operation of its business in good working order and condition, ordinary wear and tear excepted; (ii) make all necessary repairs thereto and renewals

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and replacements thereof except where the failure to do so could not reasonably be expected to have a Material Adverse Effect; and (iii) use the standard of care typical in the industry in the operation and maintenance of its facilities.

Section 6.07 Maintenance of Insurance. Maintain with financially sound and reputable insurance companies not Affiliates of the Borrower, insurance with respect to its properties and business against loss or damage of the kinds customarily insured against by Persons engaged in the same or similar business in the same geographic locales, of such types and in such amounts as are customarily carried under similar circumstances by such other Persons and providing for not less than 30 days’ prior notice to the Administrative Agent of termination, lapse or cancellation of such insurance.

Section 6.08 Compliance with Laws. Comply in all material respects with the requirements of all Laws and all orders, writs, injunctions and decrees applicable to it or to its business or property, except in such instances in which (i) such requirement of Law or order, writ, injunction or decree is being contested in good faith by appropriate proceedings diligently conducted or (ii) the failure to comply therewith could not reasonably be expected to have a Material Adverse Effect.

Section 6.09 Books and Records. (i) Maintain proper books of record and account, in which full, true and correct entries in conformity with GAAP consistently applied shall be made of all financial transactions and matters involving the assets and business of the Borrower or such Subsidiary, as the case may be; and (ii) maintain such books of record and account in material conformity with all applicable requirements of any Governmental Authority having regulatory jurisdiction over the Borrower or such Subsidiary, as the case may be.

Section 6.10 Inspection Rights. Permit representatives and independent contractors of the Administrative Agent and each Lender to visit and inspect any of its properties, to examine its corporate, financial and operating records, and make copies thereof or abstracts therefrom, and to discuss its affairs, finances and accounts with its directors, officers, and independent public accountants, all at the expense of the Borrower and at such reasonable times during normal business hours; provided, so long as no Event of Default exists, such visitation and inspection rights shall be granted to the Administrative Agent and the Lenders no more than two (2) times per year, upon reasonable advance notice to the Borrower; provided, however, that when an Event of Default exists the Administrative Agent or any Lender (or any of their respective representatives or independent contractors) may do any of the foregoing at the expense of the Borrower at any time during normal business hours, as often as may be reasonably desired and without advance notice. The Borrower hereby irrevocably authorizes and directs all accountants and auditors employed by it at any time during the term of this Agreement to exhibit and deliver to the Administrative Agent and the Lenders copies of any of the financial statements, trial balances or other accounting records of any sort of any Group Company in the accountant’s or auditor’s possession, and to disclose to the Administrative Agent and the Lenders any information they may have concerning the financial status and business operations of any Group Company.

Section 6.11 Use of Proceeds. Use the proceeds of the Loans solely (a) to repay all obligations arising under Refinanced Agreements, (b) to fund repurchases by the Borrower of its shares of common stock in an amount not to exceed $50,000,000 and (c) for general corporate purposes and working capital needs (not in contravention of any Law or of any Loan Document).

Section 6.12 Covenant to Guarantee Obligations and Give Security.

(a) Additional Subsidiary Guarantors. The Borrower will take, and will cause each of its Subsidiaries to take, such actions from time to time as shall be necessary to ensure that all Subsidiaries of the Borrower are Subsidiary Guarantors. Without limiting the generality of the foregoing,

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if any Group Company shall form or acquire any new Subsidiary, the Borrower, as soon as practicable and in any event within 30 days after such formation or the execution of the definitive acquisition agreement, will provide the Administrative Agent with notice of such formation or acquisition setting forth in reasonable detail a description of all of the assets of such new Subsidiary and will cause such new Subsidiary to:

(i) within 10 days after such formation or acquisition, execute an Accession Agreement pursuant to which such new Subsidiary shall agree to become a “Guarantor” under the Subsidiary Guaranty, an “Obligor” under the Security Agreement and an “Obligor” under the Pledge Agreement and/or an obligor under such other Collateral Documents as may be applicable to such new Subsidiary;

(ii) within 10 days after such formation or acquisition, furnish to the Administrative Agent a description of the real and personal properties of such Subsidiary, in detail satisfactory to the Administrative Agent;

(iii) within 15 days after such formation or acquisition, cause such Subsidiary and each direct and indirect parent of such Subsidiary (if it has not already done so) to duly execute and deliver to the Administrative Agent deeds of trust, trust deeds, deeds to secure debt, mortgages, leasehold mortgages, leasehold deeds of trust and other security and pledge agreements, as specified by and in form and substance satisfactory to the Administrative Agent (including delivery of all Pledged Collateral (as defined in the Pledge Agreement) in and of such Subsidiary, and other instruments of the type specified in Section 4.01(a)(iii)), securing payment of all the Obligations of such Subsidiary or such parent, as the case may be, under the Loan Documents and constituting Liens on all such real and personal properties;

(iv) within 30 days after such formation or acquisition, cause such Subsidiary and each direct and indirect parent of such Subsidiary (if it has not already done so) to take whatever action (including the recording of mortgages, the filing of Uniform Commercial Code financing statements, the giving of notices and the endorsement of notices on title documents) may be necessary or advisable in the opinion of the Administrative Agent to vest in the Administrative Agent (or in any representative of the Administrative Agent designated by it) valid and subsisting Liens on the properties purported to be subject to the Collateral Documents and any other security and pledge agreements delivered pursuant to this Section 6.12, enforceable against all third parties in accordance with their terms;

(v) within 60 days after such formation or acquisition, deliver to the Administrative Agent, upon the request of the Administrative Agent in its sole discretion, a signed copy of a favorable opinion, addressed to the Administrative Agent and the other Secured Parties, of counsel for the Loan Parties acceptable to the Administrative Agent as to the matters contained in clauses (i), (iii) and (iv) above, and as to such other matters as the Administrative Agent may reasonably request;

(vi) as promptly as practicable after such formation or acquisition, deliver, upon the request of the Administrative Agent in its sole discretion, to the Administrative Agent with respect to each parcel of Material Real Property owned or held by the entity that is the subject of such formation or acquisition title reports, surveys and environmental assessment reports, each in scope, form and substance satisfactory to the Administrative Agent, provided, however, that to the extent that any Loan Party or any of its Subsidiaries shall have otherwise received any of the foregoing items with respect to such real property, such items shall, promptly after the receipt thereof, be delivered to the Administrative Agent; and

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(vii) deliver such proof of organizational authority, incumbency of officers, opinions of counsel and other documents as is consistent with those delivered by each Loan Party pursuant to Section 4.01 on the Closing Date or as the Administrative Agent or the Required Lenders shall have requested.

(b) Post Closing Real Estate Matters.

(i) Landlord Lien Waiver and Access Agreements. The Borrower shall use commercially reasonable efforts to obtain fully executed landlord lien waiver and access agreements in form and substance reasonable satisfactory to the Administrative Agent and the Required Lenders (x) for a period of 90 days after the Closing Date with respect to Leaseholds leased by the Borrower or its Subsidiaries on the Closing Date; and (y) prior to entering into and for a period of 90 days after entering into any Leaseholds leased by the Borrower or its Subsidiaries after the Closing Date.

(ii) Mortgages, etc. on all Material Real Estate Assets. In the event that any Loan Party acquires a Material Real Property or any Real Property owned or leased on the Closing Date becomes a Material Real Property and such interest has not otherwise been made subject to the Lien of the Collateral Documents in favor of the Administrative Agent, for the benefit of the Secured Parties, then such Loan Party, within sixty (60) days of acquiring such Material Real Property or such Real Property becoming a Material Real Property, shall take all actions and execute and deliver, or cause to be executed and delivered, Mortgages, Landlord Consents and Estoppels and all such other documents, instruments, agreements, opinions and certificates with respect to such Material Real Property that the Administrative Agent (or the Required Lenders) shall reasonably request to create in favor of the Administrative Agent, for the benefit of the Secured Parties, a valid, and, subject to any filing and/or recording referred to herein, perfected first priority mortgage/security interest in such Material Real Property.

(c) Time for Taking Certain Actions. The Borrower agrees that if no deadline for taking any action required by this Section 6.12 is specified herein, such action shall be completed no later than 60 days after such action is either requested to be taken by the Administrative Agent or the Required Lenders or required to be taken by the Borrower or any of its Subsidiaries pursuant to the terms of this Section 6.12.

(d) Post Closing Deposit and Securities Account Matters. Borrower shall, and shall cause each other Loan Party to, within 60 days after the Closing Date and all times thereafter, enter into and cause all deposit banks and securities intermediaries at which any Loan Party has any account to enter into and maintain Account Control Agreements substantially in the form attached to the Security Agreement with respect to each Account (as defined in the Security Agreement) of the Borrower or such Loan Party, as the case may be. The Lenders and the Administrative Agent agree that the Administrative Agent shall not issue entitlement orders (as defined in the UCC), directions regarding disposition of the funds in such accounts or instructions to any such securities intermediary or any such deposit bank which is a party to any such Account Control Agreement unless and until the earliest to occur of (x) 15 days after the occurrence and continuation of an Event of Default under Section 8.01(a) or (y) the occurrence and continuation of an Event of Default under Section 8.01(f) or (g); provided, however, that notwithstanding anything herein or in the other Loan Documents to the contrary, the Administrative Agent may issue Entitlement Orders (as defined in the Secured Cash Management Agreement) or instructions to the Approved Securities Intermediary (as defined in the Secured Cash Management Agreement) to ensure compliance by the Borrower with the provisions of Section 7.11(b) hereof.

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(e) Post Closing Insurance Matters. Borrower shall, and shall cause each other Loan Party to, within 15 days after the Closing Date, obtain an endorsement to add the Administrative Agent as an additional insured party in respect of each liability insurance policy to which the Borrower or any of its Subsidiaries is a party.

Section 6.13 Compliance with Environmental Laws. Except, in each case, to the extent that the failure to do so could not reasonably be expected to have a Material Adverse Effect, comply, and cause all lessees and other Persons operating or occupying its properties to comply, with all applicable Environmental Laws and Environmental Permits; obtain and renew all Environmental Permits necessary for its operations and properties; and conduct any investigation, study, sampling and testing, and undertake any cleanup, removal, remedial or other action necessary to remove and clean up all Hazardous Materials from any of its properties, in accordance with the requirements of all Environmental Laws; provided, however, that neither the Borrower nor any of its Subsidiaries shall be required to undertake any such cleanup, removal, remedial or other action to the extent that its obligation to do so is being contested in good faith and by proper proceedings and appropriate reserves are being maintained with respect to such circumstances in accordance with GAAP.

Section 6.14 Further Assurances. Promptly upon request by the Administrative Agent, or any Lender through the Administrative Agent, (i) correct any material defect or error that may be discovered in any Loan Document or in the execution, acknowledgment, filing or recordation thereof, and (ii) do, execute, acknowledge, deliver, record, re-record, file, re-file, register and re-register any and all such further acts, deeds, certificates, assurances and other instruments as the Administrative Agent, or any Lender through the Administrative Agent, may reasonably require from time to time in order to (A) carry out more effectively the purposes of the Loan Documents, (B) to the fullest extent permitted by applicable law, subject any Loan Party’s or any of its Subsidiaries’ properties, assets, rights or interests to the Liens now or hereafter intended to be covered by any of the Collateral Documents and (C) perfect and maintain the validity, effectiveness and priority of any of the Collateral Documents and any of the Liens intended to be created thereunder.

Section 6.15 Compliance with Terms of Leaseholds and Co-Location Agreement. Make all payments and otherwise perform all obligations in respect of all leases of real property and co-location agreements to which the Borrower or any of its Subsidiaries is a party, keep such leases and co-location agreements in full force and effect and not allow such leases or co-location agreements to lapse or be terminated or any rights to renew such leases to be forfeited or cancelled, notify the Administrative Agent of any default by any party with respect to such leases and co-location agreements and cooperate with the Administrative Agent in all respects to cure any such default, and cause each of its Subsidiaries to do so, except, in any case, where the failure to do so, either individually or in the aggregate, could not be reasonably likely to have a Material Adverse Effect.

Section 6.16 Cash Collateral Accounts. Maintain the Cash Collateral Account.

ARTICLE VII

NEGATIVE COVENANTS

So long as any Lender shall have any Commitment hereunder or any Loan hereunder shall remain unpaid or unsatisfied, the Borrower shall not, nor shall they permit any Subsidiary to, directly or indirectly:

Section 7.01 Restriction on Liens. Create, incur, assume or suffer to exist any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired, or sign or file or suffer to exist under the Uniform Commercial Code of any jurisdiction a financing statement that names the Borrower or any of its Subsidiaries as debtor, or assign any accounts or other right to receive income, other than the following:

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(i) Liens pursuant to any Loan Document;

(ii) Liens existing on the Closing Date and listed on Schedule 7.01 hereto and any modifications, replacements, renewals or extensions thereof; provided that (A) the Lien does not extend to any additional property, (B) the amount secured or benefited thereby is not increased, (C) the direct or any contingent obligor with respect thereto is not changed and (D) any renewal, extension or modification of the obligations secured or benefited by such Liens is permitted by Section 7.02(iii), provided, that any such replacement, extension or renewal of any Lien permitted by this clause (ii) above must be upon or in the same property theretofore subject thereto or the replacement, extension or renewal (without increase in the amount or change in any direct or contingent obligor) of the Indebtedness secured thereby.

(iii) Liens for taxes, assessments or governmental charges not yet due or which are being contested in good faith and by appropriate proceedings diligently conducted if adequate reserves with respect thereto are maintained on the books of the applicable Person in accordance with GAAP;

(iv) warehousemen’s, mechanics’, materialmen’s, repairmen’s or other like Liens arising by operation of law in the ordinary course of business which are not overdue for a period of more than 60 days or which are being contested in good faith and by appropriate proceedings diligently conducted, if adequate reserves with respect thereto are maintained on the books of the applicable Person;

(v) pledges or deposits in the ordinary course of business in connection with workers’ compensation, unemployment insurance and other social security legislation, other than any Lien imposed by ERISA;

(vi) deposits to secure the performance of bids, trade contracts and leases (other than Indebtedness), statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business; provided that in the case of Liens on cash and Cash Equivalents, the amount of all cash and Cash Equivalents subject to such Liens pursuant to this clause (vi) may at no time exceed $100,000 in the aggregate;

(vii) deposits of cash and Cash Equivalents to secure reimbursement obligation in connection with letters of credit obtained in the ordinary course of business; provided that the amount of all cash and Cash Equivalents subject to such Liens pursuant to this clause (vii) may at no time exceed $2,000,000 in the aggregate;

(viii) easements, rights-of-way, restrictions and other similar encumbrances affecting real property which, in the aggregate, are not substantial in amount, and which do not in any case materially detract from the value of the property subject thereto or materially interfere with the ordinary conduct of the business of the applicable Person;

(ix) Liens securing judgments for the payment of money not constituting an Event of Default under Section 8.01(h); provided that no enforcement proceedings are commenced by any creditor upon such judgment or oder;

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(x) Liens securing Indebtedness permitted under Section 7.02(v); provided that (A) such Liens do not at any time encumber any property other than the property financed by such Indebtedness and (B) the Indebtedness secured thereby does not exceed the cost or fair market value, whichever is lower, of the property being acquired on the date of acquisition;

(xi) Liens on property of a Person existing at the time such Person is merged into or consolidated with the Borrower or any Subsidiary of the Borrower or becomes a Subsidiary of the Borrower; provided that such Liens do not encumber equity Interests of any Subsidiaries of such Person and were not created in contemplation of such merger, consolidation or Investment and do not extend to any assets other than those of the Person merged into or consolidated with the Borrower or such Subsidiary or acquired by the Borrower or such Subsidiary, and the applicable Indebtedness secured by such Lien is permitted under Section 7.02(vi);

(xii) Liens arising from precautionary Uniform Commercial Code financing statements regarding, and any interest or title of a licensor, lessor or sublessor under, operating leases;

(xiii) Permitted Encumbrances;

(xiv) Liens to secure accounts payable obligations from carriers arising in connection with the purchase of inventory under existing and future agreements entered into in the ordinary course of business between the Borrower or one of its Subsidiaries and any supplier of inventory sold by the Borrower in the ordinary course of business; provided, that the amount of such obligations may at no time exceed $10,000,000 in the aggregate; provided, further, that if the Lien in favor of these carriers is restricted to inventory purchased from such carrier and no UCC financing statements inconsistent with a Lien only on such inventory shall be filed or remain effective, then the aggregate amount shall not be limited by this clause (xiv); and

(xv) other Liens incurred by the Borrower and its Subsidiaries not securing Indebtedness, so long as the aggregate fair market value of the property subject to such Liens, and the aggregate amount of the obligations secured thereby, do not exceed $500,000.

Section 7.02 Limitation on Indebtedness. Create, incur, assume or suffer to exist any Indebtedness except:

(i) Indebtedness of a Subsidiary of the Borrower owed to the Borrower or a wholly-owned Subsidiary of the Borrower, which Indebtedness shall (A) in the case of Indebtedness owed to a Loan Party, constitute “Pledged Notes” under the Pledge Agreement, (B) be on terms (including subordination terms) acceptable to the Administrative Agent and (C) be otherwise permitted under the provisions of Section 7.03;

(ii) Indebtedness under the Loan Documents;

(iii) Indebtedness of the Borrower and its Subsidiaries outstanding on the Closing Date and disclosed on Schedule 7.02 (collectively, the “Existing Debt”);

(iv) Indebtedness consisting of Guarantees (A) by the Borrower in respect of Indebtedness, leases and other ordinary course obligations permitted to be incurred by Wholly-Owned Domestic Subsidiaries of the Borrower, and (B) by Domestic Subsidiaries of the Borrower of Indebtedness, leases or other ordinary course obligations permitted to be incurred by, or obligations in respect of Permitted Acquisitions of, the Borrower or Wholly-Owned Domestic Subsidiaries of the Borrower;

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(v) Purchase Money Indebtedness and Attributable Indebtedness in respect of Capital Leases and Synthetic Lease Obligations of the Borrower and its Subsidiaries incurred after the Closing Date to finance Consolidated Capital Expenditures permitted by Section 7.12; provided that (A) the aggregate amount of all such Indebtedness does not exceed $3,000,000 at any time outstanding, (B) the Debt when incurred shall not be more than 100% of the lesser of the cost or fair market value as of the time of acquisition of the asset financed, (C) such Indebtedness is issued and any Liens securing such Indebtedness are created concurrently with the acquisition of the asset financed and (D) no Lien securing such Indebtedness shall extend to or cover any property or asset of any the Borrower or any Subsidiary other than the asset so financed;

(vi) Indebtedness of the Borrower or its Subsidiaries secured by Liens permitted by Section 7.01(xi) and any other Indebtedness of a Person whose Equity Interests or assets are acquired in a Permitted Acquisition which is acquired or assumed by the Borrower or a Subsidiary of the Borrower in such Permitted Acquisition and any Permitted Refinancing thereof; provided that (A) such Indebtedness was not incurred in connection with, or in anticipation of, such Permitted Acquisition and (B) such Indebtedness (other than pre-existing Attributable Indebtedness and Purchase Money Indebtedness) does not constitute indebtedness for borrowed money;

(vii)(A) contingent liabilities in respect of any indemnification, adjustment of purchase price, earn-out, non-compete, consulting, deferred compensation and similar obligations of the Borrower and its Subsidiaries incurred in connection with Permitted Acquisitions and Dispositions and (B) Indebtedness incurred by the Borrower or its Subsidiaries in a Permitted Acquisition or Dispositions under agreements providing for earn-outs or the adjustment of the purchase price or similar adjustments;

(viii) Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument drawn against insufficient funds in the ordinary course of business; provided that (A) such Indebtedness (other than credit or purchase cards) is extinguished within three Business Days of its incurrence and (B) such Indebtedness in respect of credit or purchase cards is extinguished within 60 days from its incurrence;

(ix) Indebtedness representing deferred compensation to employees of the Borrower and its Subsidiaries;

(x) obligations in respect of performance, stay, customs, appeal and surety bonds and performance and completion guarantees provided by the Borrower or a Subsidiary of the Borrower in the ordinary course of business or consistent with past practice;

(xi) Indebtedness of the Borrower representing the obligation of the Borrower to make payments with respect to the cancellation or repurchase of certain Equity Interests of officers, employees or directors (or their estates) of the Borrower and its Subsidiaries, to the extent permitted by Section 7.06(iv);

(xii) Indebtedness of the Borrower consisting of reimbursement obligations in connection with letters of credit obtained in the ordinary course of business; provided that the aggregate amount of all reimbursement obligations, contingent or otherwise, may at no time exceed $2,000,000; and

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(xiii) unsecured Indebtedness of the Borrower and its Subsidiaries not otherwise permitted by this Section 7.02 incurred after the Closing Date in an aggregate principal amount not to exceed $500,000 at any time outstanding; provided that (A) the credit documentation with respect to such Indebtedness shall not contain covenants or default provisions relating to the Borrower or any Subsidiary of the Borrower that are more restrictive than the covenants and default provisions contained in the Loan Documents, and (B) no Default or Event of Default shall have occurred and be continuing immediately before and immediately after giving effect to such incurrence.

Section 7.03 Investments. Make or hold any Investments, except:

(i) Investments held by the Borrower and its Subsidiaries in the form of Cash Equivalents;

(ii) advances to officers, directors and employees of the Borrower and Subsidiaries in an aggregate amount not to exceed $250,000 at any time outstanding, for travel, entertainment, relocation and analogous ordinary business purposes;

(iii) (A) Investments by the Borrower and its Subsidiaries in their respective Subsidiaries outstanding on the date hereof, and (B) additional Investments by the Borrower and its Domestic Subsidiaries in Loan Parties;

(iv) Investments consisting of extensions of credit in the nature of accounts receivable or notes receivable arising from the grant of trade credit in the ordinary course of business, and Investments received in satisfaction or partial satisfaction thereof in the ordinary course of business to the extent reasonably necessary in order to prevent or limit loss;

(v) Guarantees permitted by Section 7.02;

(vi) Investments existing on the date hereof (other than those referred to in Section 7.03(iii)(A)) and set forth on Schedule 5.08(e);

(vii) [reserved];

(viii) the purchase or other acquisition of all or substantially all of the property and assets or business of, any Person or of assets constituting a business unit, a line of business or division of such Person, or of all of the Equity Interests in a Person that, upon the consummation thereof, will be owned directly by the Borrower or one or more of its wholly-owned Subsidiaries (including as a result of a merger or consolidation); provided that, with respect to each purchase or other acquisition made pursuant to this Section 7.03(viii) (each, a “Permitted Acquisition”):

(A) each applicable Loan Party and any such newly created or acquired Subsidiary shall, or will within the times specified therein, have complied with the requirements of Section 6.12;

(B) the lines of business of the Person to be (or the property of which is to be) so purchased or otherwise acquired shall be substantially the same lines of business as one or more of the principal businesses of the Borrower and its Subsidiaries in the ordinary course;

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(C) at least ten (10) Business Days prior to entering into any binding purchase agreement for such proposed acquisition, a Responsible Officer of the Borrower has consulted with representatives for the Required Lenders as to the terms of and business strategy for the proposed acquisition;

(D) the total cash and noncash consideration (including the fair market value of all Equity Interests issued or transferred to the sellers thereof, all indemnities, earnouts and other contingent payment obligations to, and the aggregate amounts paid or to be paid under noncompete, consulting and other affiliated agreements with, the sellers thereof, all write-downs of property and reserves for liabilities with respect thereto and all assumptions of debt, liabilities and other obligations in connection therewith) paid by or on behalf of the Borrower and its Subsidiaries for any such purchase or other acquisition, when aggregated with the total cash and noncash consideration paid by or on behalf of the Borrower and its Subsidiaries for all other purchases and other acquisitions made by the Borrower and its Subsidiaries pursuant to this Section 7.03(viii), shall not exceed $20,000,000;

(E)(x) immediately before and immediately after giving pro forma effect to any such purchase or other acquisition, no Default shall have occurred and be continuing and (y) immediately after giving effect to such purchase or other acquisition, the Borrower and its Subsidiaries shall be in Pro-Forma Compliance with all of the covenants set forth in Section 7.11, such compliance to be determined on the basis of the financial information most recently delivered to the Administrative Agent and the Lenders pursuant to Section 6.01(a) or (b) as though such purchase or other acquisition had been consummated as of the first day of the fiscal period covered thereby;

(F) such purchase or other acquisition was not preceded by, or effected pursuant to, a hostile offer; and

(G) if the total consideration of such Permitted Acquisition exceeds $2,500,000, the Borrower shall have delivered to the Administrative Agent and each Lender, at least five Business Days prior to the date on which any such purchase or other acquisition is to be consummated, a certificate of a Responsible Officer, in form and substance reasonably satisfactory to the Administrative Agent and the Required Lenders, certifying that all of the requirements set forth in this clause (viii) have been satisfied or will be satisfied on or prior to the consummation of such purchase or other acquisition;

(ix) the Borrower may repurchase stock to the extent permitted by Section 7.06(iii),(iv) or (v);

(x) the Borrower and its Subsidiaries may make Investments in Permitted Joint Ventures in an aggregate amount, determined based on the greater of the book value or the fair market value thereof as certified in a certificate of a financial officer of the Borrower delivered to the Administrative Agent, not in excess of $3,000,000 in the aggregate during the period since the Closing Date;

(xi) Investments arising out of the receipt by the Borrower or any of its Subsidiaries of non-cash consideration for the sale of assets permitted under Section 7.05; and

(xii) so long as immediately before and immediately after giving effect to any such Investment, no Event of Default has occurred and is continuing, other Investments by the

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Borrower and its Subsidiaries that (net of any cash repayment of or return on such Investments theretofore received) do not exceed $100,000 in any fiscal year; provided that with respect to each purchase or other acquisition made pursuant to this clause (xii):

(A) such Investment shall not include or result in any contingent liabilities that could reasonably be expected to be material to the business, financial condition, operations or prospects of the Borrower and its Subsidiaries, taken as a whole (as determined in good faith by the board of directors (or persons performing similar functions) of the Borrower or such Subsidiary if the board of directors is otherwise approving such transaction and, in each other case, by a Responsible Officer);

(B) such Investment shall be in property that is part of, or in lines of business that are, substantially the same lines of business as one or more of the principal businesses of the Borrower and its Subsidiaries in the ordinary course;

(C) any determination of the amount of such Investment shall include all cash and noncash consideration (including the fair market value of all Equity Interests issued or transferred to the sellers thereof, all indemnities, earnouts and other contingent payment obligations to, and the aggregate amounts paid or to be paid under noncompete, consulting and other affiliated agreements with, the sellers thereof, all write-downs of property and reserves for liabilities with respect thereto and all assumptions of debt, liabilities and other obligations in connection therewith) paid by or on behalf of the Borrower and its Subsidiaries in connection with such Investment; and

(D)(x) immediately before and immediately after giving pro forma effect to any such purchase or other acquisition, no Default shall have occurred and be continuing and (y) immediately after giving effect to such purchase or other acquisition, the Borrower and its Subsidiaries shall be in Pro-Forma Compliance with all of the covenants set forth in Section 7.11, such compliance to be determined on the basis of the financial information most recently delivered to the Administrative Agent and the Lenders pursuant to Section 6.01(a) or (b) as though such Investment had been consummated as of the first day of the fiscal period covered thereby;

provided that no Group Company may make or own any Investment in Margin Stock.

Section 7.04 Fundamental Changes. Merge, dissolve, liquidate, consolidate with or into another Person, or Dispose of (whether in one transaction or in a series of transactions) all or substantially all of its assets (whether now owned or hereafter acquired) to or in favor of any Person, except that, so long as no Default exists or would result therefrom:

(i) any Subsidiary may merge or consolidate with (A) the Borrower, provided that the Borrower shall be the continuing or surviving Person, or (B) any one or more other Subsidiaries, provided that when any Loan Party is merging with another Subsidiary, such Loan Party shall be the continuing or surviving Person;

(ii) any Loan Party may Dispose of all or substantially all of its assets (upon voluntary liquidation or otherwise) to the Borrower or to another Loan Party;

(iii) [reserved];

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(iv) in connection with any acquisition permitted under Section 7.03, any Subsidiary of the Borrower may merge into or consolidate with any other Person or permit any other Person to merge into or consolidate with it; provided that (A) the Person surviving such merger shall be a Wholly-Owned Subsidiary of the Borrower and (B) in the case of any such merger to which any Loan Party (other than the Borrower) is a party, such Loan Party is the surviving Person; and

(v) so long as no Default has occurred and is continuing or would result therefrom, each of the Borrower and any of its Subsidiaries may merge into or consolidate with any other Person or permit any other Person to merge into or consolidate with it; provided, however, that in each case, immediately after giving effect thereto (x) in the case of any such merger to which the Borrower is a party, the Borrower is the surviving corporation and (y) in the case of any such merger to which any Loan Party (other than the Borrower) is a party, such Loan Party is the surviving corporation.

Notwithstanding anything to the contrary contained above in this Section 7.04, no action shall be permitted which results in a Change of Control.

Section 7.05 Dispositions. Make any Disposition or enter into any agreement to make any Disposition, except:

(i) Dispositions of (A) inventory or (B) obsolete or worn out property, whether now owned or hereafter acquired, in each case in the ordinary course of business;

(ii) Dispositions of equipment or real property to the extent that such property is exchanged for credit against the purchase price of similar replacement property;

(iii) Dispositions of property by any Subsidiary to the Borrower or to a Wholly-Owned Subsidiary; provided that if the transferor of such property is a Subsidiary Guarantor, the transferee thereof must either be the Borrower or a Subsidiary Guarantor;

(iv) Dispositions permitted by Section 7.04 or 7.06;

(v) the Borrower and its Subsidiaries may liquidate or sell Cash Equivalents;

(vi) leases, subleases, licenses or sublicenses of property in the ordinary course of business and which do not materially interfere with the business of the Group Companies;

(vii) transfers of property subject to Casualty Events upon receipt of the Net Cash Proceeds of such Casualty Event;

(viii) Dispositions in the ordinary course of business consisting of the abandonment of intellectual property rights which, in the reasonable good faith determination of the Borrower, are not material to the conduct of the business of the Group Companies; and

(ix) Dispositions by the Borrower and its Subsidiaries not otherwise permitted under this Section 7.05; provided that (A) at least 85% of the consideration therefor is cash or Cash Equivalents; (B) such transaction does not involve the sale or other disposition of a minority Equity Interest in any Group Company; (C) the aggregate fair market value of all assets sold or otherwise disposed of in all such transactions in reliance on this clause (ix) shall not

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exceed $25,000,000 in any fiscal year of the Borrower; and (D) no Default or Event of Default shall have occurred and be continuing immediately before or immediately after giving effect to such transaction; provided, that the sale by the Borrower of its Mobile Virtual Network Enabler line of business shall not be subject to subclause (A) of this clause (ix);

provided, that any Disposition pursuant to this Section 7.05 shall be for fair market value. Upon consummation of any Disposition permitted under this Section 7.05, the Lien created thereon under the Collateral Documents (but not the Lien on any proceeds thereof) shall be (except for a Disposition pursuant to clause (ix)) automatically released, and the Administrative Agent shall (or shall cause the Administrative Agent to) (to the extent applicable) deliver to the Borrower, upon the Borrower’s request and at the Borrower’s expense, such documentation as is reasonably necessary to evidence the release of the Administrative Agent’s security interests, if any, in the assets being disposed of, including amendments or terminations of Uniform Commercial Code Financing Statements, if any, the return of stock certificates, if any, and the release of any Subsidiary being disposed of in its entirety from all of its obligations, if any, under the Loan Documents.

Section 7.06 Restricted Payments, etc. Declare or make, directly or indirectly, any Restricted Payment, or incur any obligation (contingent or otherwise) to do so, or issue or sell any Equity Interests or accept any capital contributions, except that, so long as no Default shall have occurred and be continuing at the time of any action described below or would result therefrom:

(i) each Subsidiary may make Restricted Payments to the Borrower, any Subsidiaries of the Borrower that are Guarantors and any other Person that owns a direct Equity Interest in such Subsidiary, ratably according to their respective holdings of the type of Equity Interest in respect of which such Restricted Payment is being made;

(ii) the Borrower and each Subsidiary may declare and make dividend payments or other distributions payable solely in the common stock or other common Equity Interests (but not Debt Equivalents) of such Person;

(iii) the Borrower and each Subsidiary may purchase, redeem or otherwise acquire its common Equity Interests with the proceeds received from the substantially concurrent issue of new common Equity Interests;

(iv) with the approval of the board of directors of the Borrower and if the Borrower is Solvent after giving effect to such Restricted Payment, the Borrower may redeem or repurchase Equity Interests (or Equity Equivalents) from officers, employees and directors of any Group Company (or their estates, spouses or former spouses) upon the death, permanent disability, retirement or termination of employment of any such Person or otherwise; provided, that the aggregate amounts spent on redemptions or repurchases made pursuant to this Section 7.06(iv), when aggregated with repurchases of the Borrower’s common stock permitted by Section 7.06(v), shall not exceed the sum of (i) $50,000,000 plus (ii) starting with the fiscal year ending December 31, 2007, 50% of the Excess Cash Flow of the Borrower and its Subsidiaries for the immediately preceding fiscal year; and

(v) with the approval of the board of directors of the Borrower and if the Borrower is Solvent after giving effect to such Restricted Payment, the Borrower may make Restricted Payments consisting of the repurchase of its common stock; provided, that the aggregate amounts spent on repurchases of the Borrower’s common stock permitted by this Section 7.06(v) when aggregated with redemptions or repurchases made pursuant to Section 7.06(iv), shall not exceed the sum of (i) $50,000,000 plus (ii) starting with the fiscal year ending December 31, 2007, 50% of the Excess Cash Flow of the Borrower and its Subsidiaries for the immediately preceding fiscal year.

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Section 7.07 Change in Nature of Business. Engage in any material line of business substantially different from those lines of business conducted by the Borrower and its Subsidiaries on the date hereof or any business substantially related, complimentary or incidental thereto.

Section 7.08 Transactions with Affiliates. Enter into any transaction of any kind with any Affiliate of the Borrower, whether or not in the ordinary course of business, other than:

(i) on fair and reasonable terms substantially as favorable to the Borrower or such Subsidiary as would be obtainable by the Borrower or such Subsidiary at the time in a comparable arm’s length transaction with a Person other than an Affiliate;

(ii) transactions among the Loan Parties;

(iii) transfers of assets to any Loan Party permitted by Section 7.05;

(iv) Restricted Payments expressly permitted by Section 7.06; and

(v) any transaction entered into among the Borrower and its Wholly-Owned Domestic Subsidiaries or among such Wholly-Owned Domestic Subsidiaries.

Section 7.09 Burdensome Agreements. Enter into or permit to exist any Contractual Obligation (other than this Agreement or any other Loan Document) that: (i) limits the ability (A) of any Subsidiary to make Restricted Payments to the Borrower or any Guarantor or to otherwise transfer property to or invest in the Borrower or any Guarantor, except for any agreement in effect (x) on the date hereof and set forth on Schedule 7.09 or (y) at the time any Subsidiary becomes a Subsidiary of the Borrower, so long as such agreement was not entered into solely in contemplation of such Person becoming a Subsidiary of the Borrower, (B) of any Subsidiary to Guarantee the Indebtedness of the Borrower or (C) of the Borrower or any Subsidiary to create, incur, assume or suffer to exist Liens on property of such Person; or (ii) requires the grant of a Lien to secure an obligation of such Person if a Lien is granted to secure another obligation of such Person, except in each case for prohibitions or restrictions existing under or by reason of:

(i) this Agreement and the other Loan Documents;

(ii) applicable Law;

(iii) restrictions imposed by any agreement relating to secured Indebtedness permitted pursuant to Section 7.02(v) to the extent that such restrictions apply only to the property or assets securing such Indebtedness

(iv) any negative pledges and restrictions on Liens in favor of any holder of Indebtedness permitted under Section 7.02 but solely to the extent any negative pledge relates to the property financed by or the subject of such Indebtedness or expressly permits Liens for the benefit of the Administrative Agent and the Lenders with respect to the credit facilities established hereunder and the Obligations under the Loan Documents on a senior basis and without a requirement that such holders of such Indebtedness be secured by such Liens equally and ratably or on a junior basis;

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(v) customary non-assignment provisions with respect to leases or licensing agreements entered into by the Borrower or any of its Subsidiaries, in each case entered into in the ordinary course of business and consistent with past practices;

(vi) any restriction or encumbrance with respect to any asset of the Borrower or any of its Subsidiaries or a Subsidiary of the Borrower imposed pursuant to an agreement which has been entered into for the sale or disposition of such assets or all or substantially all of the capital stock or assets of such Subsidiary, so long as such sale or disposition is permitted under this Agreement; and

(vii) customary provisions in joint venture agreements and other similar agreements entered into in the ordinary course of business in connection with Permitted Joint Ventures.

Section 7.10 Use of Proceeds. Use the proceeds of the Loan, whether directly or indirectly, and whether immediately, incidentally or ultimately, to purchase or carry Margin Stock or to extend credit to others for the purpose of purchasing or carrying Margin Stock or to refund indebtedness originally incurred for such purpose.

Section 7.11 Financial Covenants.

(a) Minimum EBITDA. For each fiscal quarter of the Borrower ending after the Closing Date, fail to satisfy the following:

(i) Consolidated EBITDA for such fiscal quarter is $2,500,000 or greater or

(ii)(x) Consolidated EBITDA for such fiscal quarter is $1 or greater and (y) Carried Residual Payments for such fiscal quarter are $3,000,000 or greater.

(b) Minimum Cash Collateral Account Balance Commencing on the earlier of (i) 90 days after the Closing Date and (ii) the date a Loan under the Delayed Draw Commitment has been made, permit the balance in the Cash Collateral Account to be at any time less than $25,000,000 (the “Minimum Cash Collateral Amount”); provided, however, that the Borrower shall not be required to maintain the Minimum Cash Collateral Amount if the ratio of (i) total Indebtedness of the Borrower and its Subsidiaries on a consolidated basis as reported in financial statements required to be delivered pursuant to Section 6.01(a) or (b) for the fiscal quarter of the Borrower most recently then ended to (ii) Consolidated EBITDA of the Borrower and its Subsidiaries for the trailing four fiscal quarters of the Borrower most recently then ended is less than 1.0:1.0.

Section 7.12 Capital Expenditures. Make or become legally obligated to make any Consolidated Capital Expenditures, except that during any of the fiscal years set forth below, the Borrower and its Subsidiaries may make Consolidated Capital Expenditures so long as the aggregate amount of such Consolidated Capital Expenditures does not exceed the amount indicated opposite such period plus, in the case of each fiscal year other than 2006, an amount equal to 50% of the Excess Cash Flow for the immediately preceding fiscal year:

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Fiscal Year	Amount
2006	$25,000,000
2007	$25,000,000
2008	$25,000,000
2009	$25,000,000
2010	$25,000,000
2011	$25,000,000

Section 7.13 Amendment of Organizational Documents; Change of Jurisdiction. Amend any of its Organization Documents in a manner adverse to the rights or interests of the Administrative Agent or the Lenders. Change (i) the jurisdiction of incorporation of any Loan Party which is a corporation or (ii) the jurisdiction of formation of any Loan Party which is a limited liability company.

Section 7.14 Accounting Changes. Make any material change in accounting policies or reporting practices, except as required by GAAP, the SEC or the PCAOB (i) (it being agreed that, if permitted by GAAP, the Borrower may change its method of accounting for inventory from the FIFO method to the weighted average method) or (ii) change its fiscal year.

Section 7.15 Prepayments/Amendments of Certain Indebtedness, etc. Prepay, redeem, purchase, defease or otherwise satisfy prior to the scheduled maturity thereof in any manner, or make any payment in violation of any subordination terms of, any Indebtedness, except (i) the prepayment of the Loans in accordance with the terms of this Agreement and (ii) regularly scheduled or required repayments or redemptions of Indebtedness set forth in Schedule 7.02 and refinancings and refundings of such Indebtedness in compliance with Section 7.02(iii) or (b) amend, modify or change, in a manner adverse to Lenders, any term or condition of any Indebtedness set forth in Schedule 7.02, except for any refinancing, refunding, renewal or extension thereof permitted by Section 7.02(iii).

Section 7.16 Certain Activities. (i) Permit any Person (other than the Borrower or any Wholly-Owned Subsidiary of the Borrower) to own any Equity Interest of any Subsidiary of the Borrower, (ii) permit any Subsidiary of the Borrower to issue Equity Interests to any Person, except the Borrower or any Wholly-Owned Subsidiary of the Borrower or (iii) permit any Subsidiary of the Borrower to issue any shares of Preferred Stock.

Section 7.17 Operating Leases. Create, incur, assume or suffer to exist (whether pursuant to a Guarantee or otherwise) any liability for rental payments under a lease with a lease term (as defined in Financial Accounting Standards Board Statement No. 13, as in effect on the date hereof) of one year or more if, after giving effect thereto, the aggregate amount of minimum lease payments that the Borrower and its Subsidiaries have so incurred or assumed will exceed $5,000,000 for any calendar year under all such leases (excluding Capital Leases).

Section 7.18 Sale and Leaseback Transactions. Engage in any Sale/Leaseback Transaction; provided, however, that the Group Companies may enter into such transactions with respect to personal property, if (i) after giving effect on a Pro-Forma Basis to any such transaction the Borrower shall be in compliance with all other provisions of this Agreement, including Sections 7.01 and 7.02, (ii) the gross cash proceeds of any such transaction are at least equal to the fair market value of such property (as determined in good faith by the board of directors of the Borrower), and (iii) the Net Cash Proceeds are applied to prepay the Loan pursuant to Section 2.02(b)(i). The Sale/Leaseback Transaction shall deemed to be the sale of the assets subject to the transaction (and any Net Cash Proceeds arising from such sale shall be subject to application by the Borrower or its Subsidiaries pursuant to Section 2.02(b)(i)), and the incurrence of Indebtedness in a principal amount equal to the Attributable Indebtedness thereof.

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Section 7.19 Limitation on Foreign Operations. Acquire or permit to exist any Foreign Subsidiary of Borrower.

Section 7.20 Independence of Covenants. All covenants contained herein shall be given independent effect so that if a particular action or condition is not permitted by any of such covenants, the fact that such action or condition would be permitted by an exception to, or otherwise be within the limitations of, another covenant shall not avoid the occurrence of a Default if such action is taken or condition exists.

ARTICLE VIII

DEFAULTS

Section 8.01 Events of Default. An Event of Default shall exist upon the occurrence of any of the following specified events or conditions (each an “Event of Default”):

(a) Non-Payment. The Borrower or any other Loan Party fails to (i) pay when and as required to be paid herein, any amount of principal of any Loan, or (ii) pay within three days after the same becomes due, any interest on any Loan or any fee due hereunder, or (iii) pay within five days after the same becomes due, any other amount payable hereunder or under any other Loan Document.

(b) Covenants. Any Loan Party shall:

(i) default in the due performance or observance of any term, covenant or agreement contained in Section 6.01, 6.02, 6.03, 6.05, 6.10, 6.11, 6.12, 6.14 and 6.16 or Article VII;

(ii) default in the due performance or observance by it of any term, covenant or agreement contained in Article VI (other than those referred to in subsection (a) or (b)(i) of this Section 8.01) and such default shall continue unremedied for a period of five Business Days after the earlier of an executive officer of a Loan Party becoming aware of such default or notice thereof given by the Administrative Agent; or

(iii) default in the due performance or observance by it of any term, covenant or agreement (other than those referred to in subsection (a), (b)(i) or (ii) of this Section 8.01) contained in this Agreement and such default shall continue unremedied for a period of 30 days after the earlier of an executive officer of a Loan Party becoming aware of such default or notice thereof given by the Administrative Agent.

(c) Other Loan Documents. Any Loan Party shall default in the due performance or observance of any term, covenant or agreement (other than those referred to in subsection (a), (b) or (d) of this Section 8.01) in any of the other Loan Documents and such default shall continue unremedied for a period of 30 days after the earlier of an executive officer of a Loan Party becoming aware of such default or notice thereof given by the Administrative Agent.

(d) Representations and Warranties. Any representation, warranty or statement made or deemed to be made by any Loan Party herein, in any of the other Loan Documents, or in any statement or certificate delivered or required to be delivered pursuant hereto or thereto shall prove untrue in any material respect on the date as of which it was made or deemed to have been made.

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(e) Cross-Default.

(i) any Loan Party or any Subsidiary thereof (A) fails to make payment when due (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise), regardless of amount, in respect of any Indebtedness or Guarantee (other than in respect of (x) Indebtedness outstanding under the Loan Documents and (y) Swap Contracts) having an aggregate principal amount (including undrawn committed or available amounts and including amounts owing to all creditors under any combined or syndicated credit arrangement) of more than the Threshold Amount, (B) fails to perform or observe any other condition or covenant, or any other event shall occur or condition shall exist, under any agreement or instrument relating to any such Indebtedness or Guarantee, if the effect of such failure, event or condition is to cause, or to permit the holder or holders or beneficiary or beneficiaries of such Indebtedness or Guarantee (or a trustee or agent on behalf of such holder or holders or beneficiary or beneficiaries) to cause, such Indebtedness to be declared to be due and payable prior to its stated maturity, or such Guarantee to become payable, or cash collateral in respect thereof to be demanded or (C) shall be required by the terms of such Indebtedness or Guarantee to offer to prepay or repurchase such Indebtedness or the primary Indebtedness underlying such Guarantee (or any portion thereof) prior to the stated maturity thereof; or

(ii) there occurs under any Swap Contract or Swap Obligation an Early Termination Date (as defined in such Swap Contract) resulting from (A) any event of default under such Swap Contract as to which any Group Company is the Defaulting Party (as defined in such Swap Contract) or (B) any Termination Event (as so defined) as to which any Group Company is an Affected Party (as so defined), and, in either event, the Swap Termination Value owed by a Group Company as a result thereof is greater than the Threshold Amount.

(f) Insolvency Proceedings. Any Loan Party or any Subsidiary thereof institutes or consents to the institution of any proceeding under any Debtor Relief Law, or makes an assignment for the benefit of creditors; or applies for or consents to the appointment of any receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar officer for it or for all or any material part of its property; or any receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar officer is appointed without the application or consent of such Person and the appointment continues undischarged or unstayed for 60 calendar days; or any proceeding under any Debtor Relief Law relating to any such Person or to all or any material part of its property is instituted without the consent of such Person and continues undismissed or unstayed for 60 calendar days, or an order for relief is entered in any such proceeding.

(g) Inability to Pay Debts; Attachment. (i) Any Loan Party or any Subsidiary thereof becomes unable or admits in writing its inability or fails generally to pay its debts as they become due, or (ii) any writ or warrant of attachment or execution or similar process is issued or levied against all or any material part of the property of any such Person and is not released, vacated or fully bonded within 30 days after its issue or levy.

(h) Judgments. There is entered against any Loan Party or any Subsidiary thereof (i) one or more final judgments or orders for the payment of money in an aggregate amount (as to all such judgments and orders) exceeding the Threshold Amount (to the extent not covered by independent third-party insurance as to which the insurer is rated at least “A” by A.M. Best Company, has been notified of the potential claim and does not dispute coverage), or (ii) any one or more non-monetary final judgments that have, or could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect and, in either case, (A) enforcement proceedings are commenced by any creditor upon such judgment or order, or (B) there is a period of 14 consecutive days during which a stay of enforcement of such judgment, by reason of a pending appeal or otherwise, is not in effect.

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(i) ERISA. (i) An ERISA Event occurs with respect to a Pension Plan or Multiemployer Plan which has resulted or could reasonably be expected to result in liability of the Borrower under Title IV of ERISA to the Pension Plan, Multiemployer Plan or the PBGC in an aggregate amount in excess of the Threshold Amount, (ii) there shall exist an amount of Unfunded Pension Liabilities, individually or in the aggregate, (excluding for purposes of such computation any Pension Plans with respect to which assets exceed benefit liabilities) in an aggregate amount in excess of the Threshold Amount, (iii) the Borrower or any ERISA Affiliate fails to pay when due, after the expiration of any applicable grace period, any installment payment with respect to its withdrawal liability under Section 4201 of ERISA under a Multiemployer Plan in an aggregate amount in excess of the Threshold Amount, or (iv) any event has occurred or condition exists with respect to any Foreign Plan that has resulted or could result in any Foreign Plan being ordered or required to be wound up in whole or in part pursuant to any applicable laws or having any applicable registration revoked or refused for the purposes of any applicable pension benefits or tax laws or being placed under the administration of the relevant pension benefits regulatory authority or being required to pay any taxes or penalties under applicable pension benefits and tax laws and which could reasonably be expected to have a Material Adverse Effect.

(j) Invalidity of Loan Documents. Any provision of any Loan Document, at any time after its execution and delivery and for any reason other than as expressly permitted hereunder or thereunder or satisfaction in full of all the Obligations, ceases to be in full force and effect; or any Loan Party or any other Person contests in any manner the validity or enforceability of any provision of any Loan Document; or any Loan Party denies that it has any or further liability or obligation under any provision of any Loan Document, or purports to revoke, terminate or rescind any provision of any Loan Document.

(k) Change of Control. A Change of Control shall occur.

(l) Collateral Documents. Any Collateral Document after delivery thereof pursuant to Section 4.01 or 6.12 shall for any reason (other than pursuant to the terms thereof) cease to create a valid and perfected first priority Lien (subject to Liens permitted by Section 7.01) on the Collateral purported to be covered thereby.

Section 8.02 Remedies upon Event of Default. If any Event of Default occurs and is continuing, the Administrative Agent shall, at the request of, or may, with the consent of, the Required Lenders, take any or all of the following actions:

(i) declare the commitment of each Lender to make Loans to be terminated, whereupon such commitments and obligation shall be terminated;

(ii) declare the unpaid principal amount of all outstanding Loans, all interest accrued and unpaid thereon, and all other amounts owing or payable hereunder or under any other Loan Document to be immediately due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived by the Borrower;

(iii) exercise on behalf of itself and the Lenders all rights and remedies available to it and the Lenders under the Loan Documents;

provided, however, that upon the occurrence of an actual or deemed entry of an order for relief with respect to the Borrower under the Bankruptcy Code of the United States, the obligation of each Lender to

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make Loans shall automatically terminate, the unpaid principal amount of all outstanding Loans and all interest and other amounts as aforesaid shall automatically become due and payable, in each case without further act of the Administrative Agent or any Lender.

Section 8.03 Application of Funds. After the exercise of remedies provided for in Section 8.02 (or after the Loans have automatically become immediately due and payable as set forth in the proviso to Section 8.02), any amounts received on account of the Obligations shall be applied by the Administrative Agent in the following order:

FIRST, to payment of that portion of the Obligations constituting fees, indemnities, expenses and other amounts (including fees, charges and disbursements of counsel to the Administrative Agent and amounts payable under Article III) payable to the Administrative Agent in its capacity as such;

SECOND, to payment of that portion of the Obligations constituting fees, indemnities and other amounts (other than principal and interest) payable to the Lenders (including fees, charges and disbursements of counsel to the respective Lenders (including fees and time charges for attorneys who may be employees of any Lender) and amounts payable under Article III, ratably among them in proportion to the respective amounts described in this clause Second payable to them;

THIRD, to payment of that portion of the Obligations constituting interest on the Loans, ratably among the Lenders in proportion to the respective amounts described in this clause Third;

FOURTH, to payment of that portion of the Obligations constituting unpaid principal of the Loans, ratably among the Lenders in proportion to the respective amounts described in this clause Fourth held by them;

LAST, the balance, if any, after all of the Obligations have been indefeasibly paid in full, to the Borrower or as otherwise required by Law.

ARTICLE IX

AGENCY PROVISIONS

Section 9.01 Appointment and Authority.

(a) Administrative Agent. Each of the Lenders hereby irrevocably appoints Citicorp North America, Inc. to act on its behalf as the Administrative Agent hereunder and under the other Loan Documents and authorizes the Administrative Agent to take such actions on its behalf and to exercise such powers as are delegated to the Administrative Agent by the terms hereof or thereof, together with such actions and powers as are reasonably incidental thereto. The provisions of this Article are solely for the benefit of the Administrative Agent and the Lenders, and neither the Borrower nor any other Loan Party shall have rights as a third party beneficiary of any of such provisions.

(b) Administrative Agent. The Administrative Agent shall also act as the “collateral agent” under the Loan Documents, and each of the Lenders hereby irrevocably appoints and authorizes the Administrative Agent to act as the agent of such Lender for purposes of acquiring, holding and enforcing any and all Liens on Collateral granted by any of the Loan Parties to secure any of the Obligations, together with such powers and discretion as are reasonably incidental thereto. In this connection, the Administrative Agent, as “collateral agent” and any co-agents, sub-agents and attorneys-

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in-fact appointed by the Administrative Agent pursuant to Section 9.05 for purposes of holding or enforcing any Lien on the Collateral (or any portion thereof) granted under the Collateral Documents, or for exercising any rights and remedies thereunder at the direction of the Administrative Agent), shall be entitled to the benefits of all provisions of this Article IX and Article X (including Section 10.04(c), as though such co-agents, sub-agents and attorneys-in-fact were the “collateral agent” under the Loan Documents) as if set forth in full herein with respect thereto.

Section 9.02 Rights as a Lender. The Person serving as the Administrative Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not the Administrative Agent and the term “Lender” or “Lenders” shall, unless otherwise expressly indicated or unless the context otherwise requires, include the Person serving as the Administrative Agent hereunder in its individual capacity. Such Person and its Affiliates may accept deposits from, lend money to, act as the financial advisor or in any other advisory capacity for and generally engage in any kind of business with the Borrower or any Subsidiary or other Affiliate thereof as if such Person were not the Administrative Agent hereunder and without any duty to account therefor to the Lenders.

Section 9.03 Exculpatory Provisions. The Administrative Agent shall not have any duties or obligations except those expressly set forth herein and in the other Loan Documents. Without limiting the generality of the foregoing, the Administrative Agent:

(i) shall not be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing;

(ii) shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby or by the other Loan Documents that the Administrative Agent is required to exercise as directed in writing by the Required Lenders (or such other number or percentage of the Lenders as shall be expressly provided for herein or in the other Loan Documents); provided that the Administrative Agent shall not be required to take any action that, in its opinion or the opinion of its counsel, may expose the Administrative Agent to liability or that is contrary to any Loan Document or applicable Law; and

(iii) shall not, except as expressly set forth herein and in the other Loan Documents, have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to the Borrower or any of its Affiliates that is communicated to or obtained by the Person serving as the Administrative Agent or any of its Affiliates in any capacity.

The Administrative Agent shall not be liable for any action taken or not taken by it (i) with the consent or at the request of the Required Lenders (or such other number or percentage of the Lenders as shall be necessary, or as the Administrative Agent shall believe in good faith shall be necessary, under the circumstances as provided in Sections 10.01 and 8.02) or (ii) in the absence of its own gross negligence or willful misconduct. The Administrative Agent shall be deemed not to have knowledge of any Default unless and until notice describing such Default is given to the Administrative Agent by the Borrower or a Lender.

The Administrative Agent shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with this Agreement or any other Loan Document, (ii) the contents of any certificate, report or other document delivered hereunder or thereunder or in connection herewith or therewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth herein or therein or the occurrence

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of any Default, (iv) the validity, enforceability, effectiveness or genuineness of this Agreement, any other Loan Document or any other agreement, instrument or document, (v) the value or the sufficiency of any Collateral or (vi) the satisfaction of any condition set forth in Article IV or elsewhere herein, other than to confirm receipt of items expressly required to be delivered to the Administrative Agent.

Section 9.04 Reliance by Administrative Agent. The Administrative Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing (including any electronic message, Internet or intranet website posting or other distribution) believed by it to be genuine and to have been signed, sent or otherwise authenticated by the proper Person. The Administrative Agent also may rely upon any statement made to it orally or by telephone and believed by it to have been made by the proper Person, and shall not incur any liability for relying thereon. In determining compliance with any condition hereunder to the making of a Loan, which by its terms must be fulfilled to the satisfaction of a Lender, the Administrative Agent may presume that such condition is satisfactory to such Lender unless the Administrative Agent shall have received notice to the contrary from such Lender prior to the making of such Loan. The Administrative Agent may consult with legal counsel (who may be counsel for the Borrower), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts.

Section 9.05 Delegation of Duties. The Administrative Agent may perform any and all of its duties and exercise its rights and powers hereunder or under any other Loan Document by or through any one or more sub-agents appointed by the Administrative Agent. The Administrative Agent and any such sub-agent may perform any and all of its duties and exercise its rights and powers by or through their respective Related Parties. The exculpatory provisions of this Article shall apply to any such sub-agent and to the Related Parties of the Administrative Agent and any such sub-agent, and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as Administrative Agent.

Section 9.06 Resignation of Administrative Agent. The Administrative Agent may at any time give notice of its resignation to the Lenders and the Borrower. Upon receipt of any such notice of resignation, the Required Lenders shall have the right, in consultation with the Borrower, to appoint a successor, which shall be a bank with an office in the United States, or an Affiliate of any such bank with an office in the United States. If no such successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within 30 days after the retiring Administrative Agent gives notice of its resignation, then the retiring Administrative Agent may on behalf of the Lenders appoint a successor Administrative Agent meeting the qualifications set forth above; provided that if the Administrative Agent shall notify the Borrower and the Lenders that no qualifying Person has accepted such appointment, then such resignation shall nonetheless become effective in accordance with such notice and (i) the retiring Administrative Agent shall be discharged from its duties and obligations hereunder and under the other Loan Documents (except that in the case of any collateral security held by the Administrative Agent on behalf of the Lenders under any of the Loan Documents, the retiring Administrative Agent shall continue to hold such collateral security until such time as a successor Administrative Agent is appointed) and (ii) all payments, communications and determinations provided to be made by, to or through the Administrative Agent shall instead be made by or to each Lender directly, until such time as the Required Lenders appoint a successor Administrative Agent as provided for above in this Section. Upon the acceptance of a successor’s appointment as Administrative Agent hereunder, such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of the retiring (or retired) Administrative Agent, and the retiring Administrative Agent shall be discharged from all of its duties and obligations hereunder or under the other Loan Documents (if not already discharged therefrom as provided above in this Section). The fees payable by the Borrower to a successor Administrative Agent shall be the same as those payable to its predecessor unless otherwise agreed

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between the Borrower and such successor. After the retiring Administrative Agents’ resignation hereunder and under the other Loan Documents, the provisions of this Article and Section 10.04 shall continue in effect for the benefit of such retiring Administrative Agent, its sub-agents and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while the retiring Administrative Agent was acting as Administrative Agent.

Section 9.07 Non-Reliance on Administrative Agent and Other Lenders. Each Lender acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Lender or any of their Related Parties and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Lender or any of their Related Parties and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any other Loan Document or any related agreement or any document furnished hereunder or thereunder.

Section 9.08 Reserved.

Section 9.09 Administrative Agent May File Proofs of Claim. In case of the pendency of any proceeding under any Debtor Relief Law or any other judicial proceeding relative to any Loan Party, the Administrative Agent (irrespective of whether the principal of any Loan shall then be due and payable as herein expressed or by declaration or otherwise and irrespective of whether the Administrative Agent shall have made any demand on the Borrower) shall be entitled and empowered, by intervention in such proceeding or otherwise:

(i) to file and prove a claim for the whole amount of the principal and interest owing and unpaid in respect of the Loans and all other Obligations that are owing and unpaid and to file such other documents as may be necessary or advisable in order to have the claims of the Lenders and the Administrative Agent (including any claim for the reasonable compensation, expenses, disbursements and advances of the Lenders and the Administrative Agent and their respective agents and counsel and all other amounts due the Lenders and the Administrative Agent under Sections 2.05 and 10.04) allowed in such judicial proceeding; and

(ii) to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same;

and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Lender to make such payments to the Administrative Agent and, in the event that the Administrative Agent shall consent to the making of such payments directly to the Lenders, to pay to the Administrative Agent any amount due for the reasonable compensation, expenses, disbursements and advances of the Administrative Agent and its agents and counsel, and any other amounts due the Administrative Agent under Section 10.04.

Nothing contained herein shall be deemed to authorize the Administrative Agent to authorize or consent to or accept or adopt on behalf of any Lender any plan of reorganization, arrangement, adjustment or composition affecting the Obligations or the rights of any Lender or to authorize the Administrative Agent to vote in respect of the claim of any Lender in any such proceeding.

Section 9.10 Collateral and Guaranty Matters. The Lenders irrevocably authorize the Administrative Agent, at its option and in its discretion:

(i) to release any Lien on any property granted to or held by the Administrative Agent under any Loan Document (A) upon termination of the Commitments and payment in full of all Obligations (other than contingent indemnification obligations), (B) that is sold or to be sold as part of or in connection with any sale permitted hereunder or under any other Loan Document, or (C) if approved, authorized or ratified in accordance with Section 10.01;

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(ii) to release any Guarantor from its obligations under the Guaranty if such Person ceases to be a Subsidiary as a result of a transaction permitted hereunder; and

(iii) to subordinate any Lien on any property granted to or held by the Administrative Agent under any Loan Document to the holder of any Lien on such property that is permitted by Section 7.01(ix).

Upon request by the Administrative Agent at any time, the Required Lenders will confirm in writing the Administrative Agent’s authority to release or subordinate its interest in particular types or items of property, or to release any Guarantor from its obligations under the Guaranty pursuant to this Section 9.10. In each case as specified in this Section 9.10, the Administrative Agent will, at the Borrower’s expense, execute and deliver to the applicable Loan Party such documents as such Loan Party may reasonably request to evidence the release of such item of Collateral from the assignment and security interest granted under the Collateral Documents or to subordinate its interest in such item, or to release such Guarantor from its obligations under the Guaranty, in each case in accordance with the terms of the Loan Documents and this Section 9.10.

ARTICLE X

MISCELLANEOUS

Section 10.01 Amendments, Etc. No amendment or waiver of any provision of this Agreement or any other Loan Document, and no consent to any departure by the Borrower or any other Loan Party therefrom, shall be effective unless in writing signed by the Required Lenders (or by the Administrative Agent with the consent or ratification of the Required Lenders or such other number or percentage of Lenders as may be specified herein) and the Borrower or the applicable Loan Party, as the case may be, and acknowledged by the Administrative Agent, and each such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided that no such amendment, waiver or consent shall:

(i) waive any condition set forth in Section 4.01 or Section 4.02, without the written consent of each Lender;

(ii) extend or increase the Commitment of any Lender (or reinstate any Commitment terminated pursuant to Section 8.02) without the written consent of such Lender;

(iii) postpone any date fixed by this Agreement or any other Loan Document for any payment (excluding mandatory prepayments) of principal, interest, fees or other amounts due to the Lenders (or any of them) hereunder or under such other Loan Document without the written consent of each Lender entitled to such payment;

(iv) reduce the principal of, or the rate of interest specified herein on, any Loan, or any fees or other amounts payable hereunder or under any other Loan Document, without the written consent of each Lender entitled to such amount; provided, however, that only the consent of the Required Lenders shall be necessary to amend the definition of “Default Rate” or to waive any obligation of the Borrower to pay interest at the Default Rate;

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(v) change Section 2.09 or Section 8.03 in a manner that would alter the pro rata sharing of payments required thereby without the written consent of each Lender;

(vi) change (A) any provision of this Section 10.01 or the definition of “Required Lenders” or any other provision hereof specifying the number or percentage of Lenders required to amend, waive or otherwise modify any rights hereunder or make any determination or grant any consent hereunder (other than the definitions specified in clause (B) of this Section 10.01(vi)), without the written consent of each Lender or (B) “Required Lenders” without the written consent of each Lender;

(vii) release all or substantially all of the Collateral in any transaction or series of related transactions, without the written consent of each Lender; provided that (x) the Administrative Agent may, without consent from any other Lender, release any Collateral that is sold or transferred by a Loan Party in compliance with Section 7.05 or released in compliance with Section 9.10(i) or (ii) and (y) the Administrative Agent may release any or all of the cash or Cash Equivalents in the Cash Collateral Account with the consent of the Required Lenders;

(viii) release all or substantially all of the value of the Guaranty, without the written consent of each Lender; provided that the Administrative Agent may, without the consent of any other Lender, release any Guarantor that is sold or transferred in compliance with Section 7.05;

(ix) impose any greater restriction on the ability of any Lender to assign any of its rights or obligations hereunder without the written consent of each Lender affected thereby; or

(x) permit the Borrower or any of its Subsidiaries to assign its Obligations to any other entity;

and provided, further, that (i) no amendment, waiver or consent shall, unless in writing and signed by the Administrative Agent in addition to the Lenders required above, affect the rights or duties of the Administrative Agent under this Agreement or any other Loan Document and (ii) the fee payable to the Administrative Agent pursuant to Section 2.05 may be amended, or waived, in a writing executed only by the Administrative Agent and the Borrower.

If any Lender does not consent to a proposed amendment, waiver, consent or release with respect to any Loan Document that requires the consent of each Lender and that has been approved by the Required Lenders, the Borrower may replace such non-consenting Lender in accordance with Section 10.13; provided that such amendment, waiver, consent or release can be effected as a result of the assignment contemplated by such Section (together with all other such assignments required by the Borrower to be made pursuant to this paragraph).

Section 10.02 Notices; Effectiveness; Electronic Communication.

(a) Notices Generally. Except in the case of notices and other communications expressly permitted to be given by telephone (and except as provided in subsection (b) below), all notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by telecopier as follows, and all notices and other communications expressly permitted hereunder to be given by telephone shall be made to the applicable telephone number, as follows:

(i) if to the Borrower or the Administrative Agent, to the address, telecopier number, electronic mail address or telephone number specified for such Person on Schedule 10.02; and

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(ii) if to any other Lender, to the address, telecopier number, electronic mail address or telephone number specified in its Administrative Questionnaire.

Notices sent by hand or overnight courier service, or mailed by certified or registered mail, shall be deemed to have been given when received; notices sent by telecopier shall be deemed to have been given when sent (except that, if not given during normal business hours for the recipient, shall be deemed to have been given at the opening of business on the next business day for the recipient). Notices delivered through electronic communications to the extent provided in subsection (b) below, shall be effective as provided in such subsection (b).

(b) Electronic Communications. Notices and other communications to the Lenders hereunder may be delivered or furnished by electronic communication (including e-mail and Internet or intranet websites) pursuant to procedures approved by the Administrative Agent; provided that the foregoing shall not apply to notices to any Lender pursuant to Article II if such Lender Issuer, as applicable, has notified the Administrative Agent that it is incapable of receiving notices under such Article by electronic communication. The Administrative Agent or the Borrower may, in its discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it; provided that approval of such procedures may be limited to particular notices or communications.

Unless the Administrative Agent otherwise prescribes, (i) notices and other communications sent to an e-mail address shall be deemed received upon the sender’s receipt of an acknowledgement from the intended recipient (such as by the “return receipt requested” function, as available, return e-mail or other written acknowledgement); provided that if such notice or other communication is not sent during the normal business hours of the recipient, such notice or communication shall be deemed to have been sent at the opening of business on the next business day for the recipient, and (ii) notices or communications posted to an Internet or intranet website shall be deemed received upon the deemed receipt by the intended recipient at its e-mail address as described in the foregoing clause (i) of notification that such notice or communication is available and identifying the website address therefor.

(c) Reserved.

(d) Change of Address, Etc. Each of the Borrower and the Administrative Agent, may change its address, telecopier or telephone number for notices and other communications hereunder by notice to the other parties hereto. Each other Lender may change its address, telecopier or telephone number for notices and other communications hereunder by notice to the Borrower and the Administrative Agent,. In addition, each Lender agrees to notify the Administrative Agent from time to time to ensure that the Administrative Agent has on record (i) an effective address, contact name, telephone number, telecopier number and electronic mail address to which notices and other communications may be sent and (ii) accurate wire instructions for such Lender.

(e) Reliance by Administrative Agent and Lenders. The Administrative Agent and the Lenders shall be entitled to rely and act upon any notices (including telephonic notices) purportedly given by or on behalf of the Borrower or any other Loan Party even if (i) such notices were not made in a manner specified herein, were incomplete or were not preceded or followed by any other form of notice specified herein or (ii) the terms thereof, as understood by the recipient, varied from any confirmation

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thereof. The Borrower shall indemnify the Administrative Agent, each Lender and the Related Parties of each of them from all losses, costs, expenses and liabilities resulting from the reliance by such Person on each notice purportedly given by or on behalf of the Borrower. All telephonic notices to and other communications with the Administrative Agent may be recorded by the Administrative Agent, and each of the parties hereto hereby consents to such recording.

Section 10.03 No Waiver; Cumulative Remedies. No failure by any Lender or by the Administrative Agent to exercise, and no delay by any such Person in exercising, any right, remedy, power or privilege hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by Law.

Section 10.04 Expenses; Indemnity; Damage Waiver.

(a) Costs and Expenses. The Borrower agrees to pay (i) all reasonable out-of-pocket expenses incurred by the Administrative Agent or any Lender (including the reasonable fees, charges and disbursements of counsel for the Administrative Agent and each Lender), in connection with (x) the syndication of the credit facilities provided for herein, the preparation, negotiation, execution, delivery and administration of this Agreement and the other Loan Documents or (y) any amendments, modifications or waivers of the provisions hereof or thereof (whether or not the Transactions shall be consummated), and (ii) all out-of-pocket expenses incurred by the Administrative Agent or any Lender, and shall pay all fees and time charges for attorneys who may be employees of the Administrative Agent or any Lender, in connection with the enforcement or protection of its rights (A) in connection with this Agreement and the other Loan Documents, including its rights under this Section, or (B) in connection with any workout, restructuring or negotiations after or in anticipation of Defaults in respect of the Loan; provided, that the Borrower shall not be responsible for costs and expenses under subclause (i)(x) above through and including the Closing Date in excess of $200,000.

(b) Indemnification. The Borrower shall indemnify the Administrative Agent (and any sub-agent thereof), each Lender, and each Related Party of any of the foregoing Persons (each such Person being called an “Indemnitee”) against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses (including the fees, charges and disbursements of any counsel for any Indemnitee), and shall indemnify and hold harmless each Indemnitee from all fees and time charges and disbursements for attorneys who may be employees of any Indemnitee, incurred by any Indemnitee or asserted against any Indemnitee by any third party or by the Borrower or any other Loan Party arising out of, in connection with, or as a result of (i) the execution or delivery of this Agreement, any other Loan Document or any agreement or instrument contemplated hereby or thereby, the performance by the parties hereto of their respective obligations hereunder or thereunder or the consummation of the Transactions or, in the case of the Administrative Agent (and any sub-agent thereof) and its Related Parties only, the administration of this Agreement and the other Loan Documents, (ii) any Loan or the use or proposed use of the proceeds, (iii) any actual or alleged presence or release of Hazardous Materials on or from any property owned or operated by the Borrower or any of its Subsidiaries, or any Environmental Liability related in any way to the Borrower or any of its Subsidiaries, or (iv) any actual or prospective claim, litigation, investigation or proceeding brought by a third party or by the Borrower or any other Loan Party or any of the Borrower’s or such Loan Party’s directors, shareholders or creditors, and regardless of whether any Indemnitee is a party thereto, in all cases, whether or not caused by or arising, in whole or in part, out of the comparative, contributory or sole negligence of the Indemnitee; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses (x) are determined by a court

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of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or willful misconduct of such Indemnitee or (y) result from a claim brought by the Borrower or any other Loan Party against an Indemnitee for breach in bad faith of such Indemnitee’s obligations hereunder or under any other Loan Document, if the Borrower or such Loan Party has obtained a final and nonappealable judgment in its favor on such claim as determined by a court of competent jurisdiction.

(c) Reimbursement by Lenders. To the extent that the Borrower for any reason fails indefeasibly to pay any amount required under subsection (a) or (b) of this Section to be paid by it or them to the Administrative Agent (or any sub-agent thereof), or any Related Party of any of the foregoing, each Lender severally agrees to pay to the Administrative Agent (or any such sub-agent), or such Related Party, as the case may be, such Lender’s Applicable Percentage (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought) of such unpaid amount; provided that the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against the Administrative Agent (or any such sub-agent) in its capacity as such, or against any Related Party of any of the foregoing acting for the Administrative Agent (or any such sub-agent). The obligations of the Lenders under this subsection (c) are subject to the provisions of Section 2.08(c).

(d) Waiver of Consequential Damages. To the fullest extent permitted by applicable Law, the Borrower shall not assert, and hereby waives, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement, any other Loan Document or any agreement or instrument contemplated hereby, the Transactions, the Loan or the use of the proceeds thereof. No Indemnitee referred to in subsection (b) above shall be liable for any damages arising from the use by unintended recipients of any information or other materials distributed by it through telecommunications, electronic or other information transmission systems in connection with this Agreement or the other Loan Documents or the Transactions other than for direct or actual damages resulting from the gross negligence or willful misconduct of such Indemnitee as determined by a final and nonappealable judgment of a court of competent jurisdiction.

(e) Payments. All amounts due under this Section shall be payable not later than ten Business Days after demand therefor.

(f) Survival. The agreements in this Section shall survive the resignation of the Administrative Agent, the termination of the Commitments and the repayment, satisfaction or discharge of all the other Obligations.

Section 10.05 Payments Set Aside. To the extent that any payment by or on behalf of the Borrower or any other Loan Party is made to the Administrative Agent or any Lender, or the Administrative Agent or any Lender exercises its right of set-off, and such payment or the proceeds of such set-off or any part thereof is subsequently invalidated, declared to be fraudulent or preferential, set aside or required (including pursuant to any settlement entered into by the Administrative Agent or such Lender in its discretion) to be repaid to a trustee, receiver or any other party, in connection with any proceeding under any Debtor Relief Law or otherwise, then (i) to the extent of such recovery, the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such set-off had not occurred, and (ii) each Lender severally agrees to pay to the Administrative Agent upon demand its applicable share of any amount so recovered from or repaid by the Administrative Agent, plus interest thereon from the date of such demand to the date such payment is made at a rate per annum equal to the Federal Funds Rate from time to time in effect. The obligations of the Lenders under clause (ii) of the preceding sentence shall survive the payment in full of the Obligations and the termination of this Agreement.

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Section 10.06 Successors and Assigns.

(a) Successors and Assigns Generally. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that neither the Borrower nor any other Loan Party may assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of the Administrative Agent and each Lender and no Lender may assign or otherwise transfer any of its rights or obligations hereunder except (i) to an assignee in accordance with the provisions of Section 10.06(b), (ii) by way of participation in accordance with the provisions of Section 10.06(d), or (iii) by way of pledge or assignment of a security interest subject to the restrictions of Section 10.06(f) (and any other attempted assignment or transfer by any party hereto shall be null and void). Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby, Participants to the extent provided in subsection (d) of this Section and, to the extent expressly contemplated hereby, the Related Parties of each of the Administrative Agent and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement.

(b) Assignments by Lenders. Any Lender may at any time assign to one or more assignees all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment(s) and the Loans at the time owing to it); provided that any such assignment shall be subject to the following conditions:

(i) Minimum Amounts.

(A) in the case of an assignment of the entire remaining amount of the assigning Lender’s Commitment under the Facility and the Loans at the time owing to it under such Facility or in the case of an assignment to a Lender, an Affiliate of a Lender or an Approved Fund, no minimum amount need be assigned; and

(B) in any case not described in subsection (b)(i)(A) of this Section, the aggregate amount of the Commitment (which for this purpose includes Loans outstanding thereunder) or, if the Commitment is not then in effect, the principal outstanding balance of the Loans of the assigning Lender subject to each such assignment, determined as of the date the Assignment and Assumption with respect to such assignment is delivered to the Administrative Agent or, if “Trade Date” is specified in the Assignment and Assumption, as of the Trade Date, $1,000,000, in the case of any assignment in respect of the Facility, unless each of the Administrative Agent and, so long as no Default or Event of Default has occurred and is continuing, the Borrower otherwise consents (each such consent not to be unreasonably withheld or delayed); provided, however, that concurrent assignments to members of an Assignee Group and concurrent assignments from members of an Assignee Group to a single Eligible Assignee (or to an Eligible Assignee and members of its Assignee Group) will be treated as a single assignment for purposes of determining whether such minimum amount has been met.

(ii) Proportionate Amounts. Each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender’s rights and obligations under this Agreement with respect to the Loans or the Commitment assigned;

(iii) Required Consents. No consent shall be required for any assignment except to the extent required by subsection (b)(i)(B) of this Section and, in addition:

(A) the consent of the Borrower (such consent not to be unreasonably withheld or delayed) shall be required unless (1) a Default or an Event of Default has occurred and is continuing at the time of such assignment or (2) such assignment is to a Lender, an Affiliate of a Lender or an Approved Fund; and

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(B) the consent of the Administrative Agent (such consent not to be unreasonably withheld or delayed) shall be required for assignments in respect of (i) any Commitment if such assignment is to a Person that is not a Lender, an Affiliate of such Lender or an Approved Fund with respect to such Lender or (ii) any Loan to a Person that is not a Lender, an Affiliate of a Lender or an Approved Fund;

(iv) Assignment and Assumption. The parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Assumption, together with a processing and recordation fee in the amount of $3,500; provided, however, that the Administrative Agent may, in its sole discretion, elect to waive such processing and recordation fee in the case of any assignment. The assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire.

(v) No Assignment to Borrower. No such assignment shall be made to the Borrower or any of the Borrower’s Affiliates or Subsidiaries.

(vi) No Assignment to Natural Persons. No such assignment shall be made to a natural person.

Subject to acceptance and recording thereof by the Administrative Agent pursuant to subsection (c) of this Section, from and after the effective date specified in each Assignment and Assumption, the assignee thereunder shall be a party to this Agreement and, to the extent of the interest assigned by such Assignment and Assumption, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Assumption, be released from its obligations under this Agreement (and, in the case of an Assignment and Assumption covering all of the assigning Lender’s rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Sections 3.01, 3.02 and 10.04 with respect to facts and circumstances occurring prior to the effective date of such assignment). Upon request, the Borrower (at its expense) shall execute and deliver a Note to the assignee Lender. Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this subsection shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with Section 10.06(d).

(c) Register. The Administrative Agent, acting solely for this purpose as an agent of the Borrower, shall maintain at the Administrative Agent’s Office a copy of each Assignment and Assumption delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitments of, and principal amounts of the Loans owing to, each Lender pursuant to the terms hereof from time to time (the “Register”). The entries in the Register shall be conclusive, and the Borrower, the Administrative Agent and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by the Borrower and any Lender, at any reasonable time and from time to time upon reasonable prior notice. In addition, at any time that a request for a consent for a material or other substantive change to the Loan Documents is pending, (i) any Lender may request and receive from the Administrative Agent a copy of the Register and (ii) upon request of the Administrative Agent and receipt of a list of the names of each Person named as a Lender in the then current Register, the Borrower will identify to the Administrative Agent each such Lender which is an Affiliate of Borrower.

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(d) Participations. Any Lender may at any time, without the consent of, or notice to, the Borrower or the Administrative Agent, sell participations to any Person (other than a natural person or the Borrower or any of the Borrower’s Affiliates or Subsidiaries) (each, a “Participant”) in all or a portion of such Lender’s rights and/or obligations under this Agreement (including all or a portion of its Commitment and/or the Loans (owing to it); provided that (i) such Lender’s obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (iii) the Borrower and the Administrative Agent shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement. Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, waiver or other modification described in the first proviso to Section 10.01 that affects such Participant. Subject to subsection (e) of this Section, the Borrower agrees that each Participant shall be entitled to the benefits of Sections 3.01 and 3.02 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to Section 10.06(b). To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 10.08 as though it were a Lender, provided such Participant agrees to be subject to Section 2.09 as though it were a Lender.

(e) Limitation Upon Participant Rights. A Participant shall not be entitled to receive any greater payment under Section 3.01 or 3.02 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with the Borrower’s prior written consent. A Participant that would be a Foreign Lender if it were a Lender shall not be entitled to the benefits of Section 3.01 unless the Borrower is notified of the participation sold to such Participant and such Participant agrees, for the benefit of the Borrower, to comply with Section 3.01(e) as though it were a Lender.

(f) Certain Pledges. Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement (including under its Note, if any) to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank; provided that no such pledge or assignment shall release such Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto.

(g) Electronic Execution of Assignments. The words “execution,” “signed,” “signature,” and words of like import in any Assignment and Assumption shall be deemed to include electronic signatures or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature or the use of a paper-based record keeping system, as the case may be, to the extent and as provided for in any applicable Law, including the Federal Electronic Signatures in Global and National Commerce Act, the New York State Electronic Signatures and Records Act or any other similar state laws based on the Uniform Electronic Transactions Act.

(h) Replacement of Delayed Draw Lender. If at the time a Delayed Draw Lender is required to make a Loan to the Borrower in the amount of its Delayed Draw Commitment pursuant to Section 2.01 (including satisfaction of the conditions in Section 4.02(a)), such Delayed Draw Lender is unwilling or unable to do so, such Delayed Draw Lender shall be deemed to have automatically assigned all of its rights and obligations hereunder to the Substitute Delayed Draw Lender and shall thereupon be released automatically from any and all obligations as a Lender hereunder, and the Substitute Delayed

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Draw Lender shall become the Delayed Draw Lender hereunder and shall make such Loan to the Borrower in the amount of the Delayed Draw Commitment on the next Business Day (and the Borrower and each other party hereto hereby consent for all purposes hereof to such assignment, release and substitution as described in this clause (h). The parties hereto agree that no claim or liability whatsoever shall be asserted or arise against any Delayed Draw Lender (other than, if the conditions in Section 4.02(a) have been satisfied and nonetheless the Substitute Delayed Draw Lender fails to fund as and to the extent required by this Section 10.06, the Substitute Delayed Draw Lender) in respect of any of the foregoing events described in this clause (h).

Section 10.07 Treatment of Certain Information; Confidentiality. Each of the Administrative Agent and the Lenders agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed: (i) to its Affiliates and to it and its Affiliates’ respective partners, directors, officers, employees, agents, advisors and representatives (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential); (ii) to the extent requested by any regulatory authority purporting to have jurisdiction over it (including any self-regulatory authority, such as the National Association of Insurance Commissioners); (iii) to the extent required by applicable Laws or regulations or by any subpoena or similar legal process; (iv) to any other party hereto; (v) in connection with the exercise of any remedies hereunder or under any other Loan Document or any action or proceeding relating to this Agreement or any other Loan Document or the enforcement of rights hereunder or thereunder, (vi) subject to an agreement containing provisions substantially the same as those of this Section, to (A) any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights or obligations under this Agreement or (B) any actual or prospective counterparty (or its advisors) to any swap or derivative transaction relating to the Borrower and its obligations, (vii) with the consent of the Borrower or (viii) to the extent such Information (A) becomes publicly available other than as a result of a breach of this Section or (B) becomes available to the Administrative Agent, any Lender, or any of their respective Affiliates on a nonconfidential basis from a source other than the Borrower.

For purposes of this Section, “Information” means all information received from the Borrower or any of its Subsidiaries relating to the Borrower or any Subsidiary or any of their respective businesses, other than any such information that is available to the Administrative Agent or any Lender on a nonconfidential basis prior to disclosure by the Borrower or any Subsidiary; provided that, in the case of information received from the Borrower or any Subsidiary after the date hereof, such information is clearly identified at the time of delivery as confidential. Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information. Notwithstanding the foregoing, any Agent and any Lender may place advertisements in financial and other newspapers and periodicals or on a home page or similar place for dissemination of information on the Internet or worldwide web as it may choose, and circulate similar promotional materials, after the closing of the Transactions in the form of a “tombstone” or otherwise describing the names of the Loan Parties, or any of them, and the amount, type and closing date of such transactions, all at their sole expense.

Each of the Administrative Agent and the Lenders acknowledges that (i) the Information may include material non-public information concerning the Borrower or one or more Subsidiaries, as the case may be, (ii) it has developed compliance procedures regarding the use of material non-public information and (iii) it will handle such material non-public information in accordance with applicable Laws, including Federal and state securities Laws.

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The Borrower shall not, and shall not permit its Subsidiaries or agents to, refer (in any press release, public disclosure, investor conference call or other written or oral communication) to any of the Lenders or any of their respective Affiliates or their role in connection with the transactions contemplated by this Agreement or the Warrants, in each case unless such Lender or its Affiliate has given its prior approval as to the substance and form of such reference. Each Lender agrees that it shall not withhold its consent to such reference unreasonably. Notwithstanding the foregoing, (a) the Borrower and its Subsidiaries and agents may accurately refer to the Lenders or any of their respective Affiliates or their role in connection with the transactions contemplated by this Agreement or the Warrants (i) to their officers, employees, directors, attorneys and advisors and other internal communications within the Borrower and its Subsidiaries, or (ii) as required by applicable law, requested by any governmental authority or compulsory legal process or in the prosecution of any proceeding initiated by one or more of the parties hereto; provided that in the case of this clause (ii) the Borrower provides (to the extent reasonably practical) to the relevant Lender a reasonable opportunity to review and comment upon any reference to them or their role in connection with the transactions contemplated by this Agreement or the Warrants, prior to such reference.

Section 10.08 Right of Setoff. If an Event of Default shall have occurred and be continuing, each Lender and each of their respective Affiliates is hereby authorized at any time and from time to time, after obtaining the prior written consent of the Administrative Agent, to the fullest extent permitted by applicable Law, to set off and apply any and all deposits (general or special, time or demand, provisional or final, in whatever currency) at any time held and other obligations (in whatever currency) at any time owing by such Lender or any such Affiliate to or for the credit or the account of the Borrower or any other Loan Party against any and all of the obligations of the Borrower or such Loan Party now or hereafter existing under this Agreement or any other Loan Document to such Lender, irrespective of whether or not such Lender shall have made any demand under this Agreement or any other Loan Document and although such obligations of the Borrower or such Loan Party may be contingent or unmatured or are owed to a branch or office of such Lender different from the branch or office holding such deposit or obligated on such indebtedness. The rights of each Lender and their respective Affiliates under this Section are in addition to other rights and remedies (including other rights of setoff) that such Lender or their respective Affiliates may have. Each Lender agrees to notify the Borrower and the Administrative Agent promptly after any such setoff and application; provided that the failure to give such notice shall not affect the validity of such setoff and application.

Section 10.09 Interest Rate Limitation. Notwithstanding anything to the contrary contained in any Loan Document, the interest paid or agreed to be paid under the Loan Documents shall not exceed the maximum rate of non-usurious interest permitted by applicable Law (the “Maximum Rate”). If the Administrative Agent or any Lender shall receive interest in an amount that exceeds the Maximum Rate, the excess interest shall be applied to the principal of the Loans or, if it exceeds such unpaid principal, refunded to the Borrower. In determining whether the interest contracted for, charged, or received by the Administrative Agent or a Lender exceeds the Maximum Rate, such Person may, to the extent permitted by applicable Law, (i) characterize any payment that is not principal as an expense, fee, or premium rather than interest, (ii) exclude voluntary prepayments and the effects thereof and (iii) amortize, prorate, allocate, and spread in equal or unequal parts the total amount of interest throughout the contemplated term of the Obligations hereunder.

Section 10.10 Counterparts; Integration; Effectiveness. This Agreement may be executed in counterparts (and by different parties hereto in different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Agreement and the other Loan Documents constitute the entire contract among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof. Except as provided in Section 4.01, this Agreement shall become

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effective when it shall have been executed by the Administrative Agent and when the Administrative Agent shall have received counterparts hereof that, when taken together, bear the signatures of each of the other parties hereto. Delivery of an executed counterpart of a signature page of this Agreement by telecopy shall be effective as delivery of a manually executed counterpart of this Agreement.

Section 10.11 Survival of Representations and Warranties. All representations and warranties made hereunder and in any other Loan Document or other document delivered pursuant hereto or thereto or in connection herewith or therewith shall survive the execution and delivery hereof and thereof. Such representations and warranties have been or will be relied upon by the Administrative Agent and each Lender, regardless of any investigation made by any Agent or any Lender or on their behalf and notwithstanding that the Agent or any Lender may have had notice or knowledge of any Default or Event of Default at the time of the making of the Loan, and shall continue in full force and effect as long as any Loan or any other Obligation shall remain unpaid or unsatisfied.

Section 10.12 Severability. If any provision of this Agreement or the other Loan Documents is held to be illegal, invalid or unenforceable, (i) the legality, validity and enforceability of the remaining provisions of this Agreement and the other Loan Documents shall not be affected or impaired thereby and (ii) the parties shall endeavor in good faith negotiations to replace the illegal, invalid or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the illegal, invalid or unenforceable provisions. The invalidity of a provision in a particular jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

Section 10.13 Replacement of Lenders. If any Lender requests compensation under Section 3.02, or if the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 3.01 or the Borrower is entitled to replace a Lender pursuant to the last paragraph of Section 10.01, then the Borrower may, at its sole expense and effort, upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in, and consents required by, Section 10.06), all of its interests, rights and obligations under this Agreement and the related Loan Documents to an assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment), provided that:

(i) the Borrower shall have paid to the Administrative Agent the assignment fee specified in Section 10.06(b)(iv);

(ii) such Lender shall have received payment of an amount equal to the outstanding principal of its Loans, accrued interest thereon and all other amounts payable to it hereunder and under the other Loan Documents from the assignee (to the extent of such outstanding principal and accrued interest) or the Borrower (in the case of all other amounts);

(iii) in the case of any assignment resulting from a claim for compensation under Section 3.04 or payments required to be made pursuant to Section 3.01, such assignment will result in a reduction in such compensation or payments thereafter; and

(iv) such assignment does not conflict with applicable Laws.

A Lender shall not be required to make any such assignment or delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrower to require such assignment and delegation cease to apply.

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Section 10.14 Governing Law; Jurisdiction Etc.

(a) Governing Law. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING, WITHOUT LIMITATION, SECTION 5-1401 AND SECTION 5-1402 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK).

(b) Submission to Jurisdiction. THE BORROWER AND EACH OTHER LOAN PARTY IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK SITTING IN NEW YORK COUNTY AND OF THE UNITED STATES DISTRICT COURT OF THE SOUTHERN DISTRICT OF NEW YORK AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATE COURT OR, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, IN SUCH FEDERAL COURT. EACH OF THE PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. NOTHING IN THIS AGREEMENT OR IN ANY OTHER LOAN DOCUMENT SHALL AFFECT ANY RIGHT THAT THE ADMINISTRATIVE AGENT OR ANY LENDER MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AGAINST THE BORROWER OR ANY OTHER LOAN PARTY OR ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION.

(c) Waiver of Venue. THE BORROWER AND EACH OTHER LOAN PARTY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT IN ANY COURT REFERRED TO IN PARAGRAPH (B) OF THIS SECTION. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT.

(d) Service of Process. EACH PARTY HERETO IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION 10.02. NOTHING IN THIS AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY HERETO TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY APPLICABLE LAW.

Section 10.15 Waiver of Jury Trial. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR

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OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

Section 10.16 No Advisory or Fiduciary Responsibility. In connection with all aspects of each transaction contemplated hereby, the Borrower acknowledges and agrees, and acknowledge its Affiliates’ understanding, that: (i) the credit facility provided for hereunder and any related arranging or other services in connection therewith (including in connection with any amendment, waiver or other modification hereof or of any other Loan Document) are an arm’s-length commercial transaction between the Borrower and its Affiliates, on the one hand, and the Administrative Agent and the Lenders, on the other hand, and the Borrower is capable of evaluating and understanding and understands and accepts the terms, risks and conditions of the transactions contemplated hereby and by the other Loan Documents (including any amendment, waiver or other modification hereof or thereof); (ii) in connection with the process leading to such transaction, each of the Administrative Agent and each Lender is and has been acting solely as a principal and is not the financial advisor, agent or fiduciary, for the Borrower or any of its Affiliates, stockholders, creditors or employees or any other Person; (iii) neither the Administrative Agent nor any Lender has assumed or will assume an advisory, agency or fiduciary responsibility in favor of the Borrower with respect to any of the transactions contemplated hereby or the process leading thereto, including with respect to any amendment, waiver or other modification hereof or of any other Loan Document (irrespective of whether the Administrative Agent or the Arranger has advised or is currently advising the Borrower or any of its Affiliates on other matters) and neither the Administrative Agent nor the Arranger has any obligation to the Borrower or any of its Affiliates with respect to the transactions contemplated hereby except those obligations expressly set forth herein and in the other Loan Documents; (iv) the Administrative Agent and each Lender and their respective Affiliates may be engaged in a broad range of transactions that involve interests that differ from those of the Borrower and its Affiliates, and neither the Administrative Agent nor any Lender has any obligation to disclose any of such interests by virtue of any advisory, agency or fiduciary relationship; and (v) the Administrative Agent and each Lender have not provided and will not provide any legal, accounting, regulatory or tax advice with respect to any of the transactions contemplated hereby (including any amendment, waiver or other modification hereof or of any other Loan Document) and the Borrower has consulted its own legal, accounting, regulatory and tax advisors to the extent it has deemed appropriate. The Borrower hereby waives and releases, to the fullest extent permitted by law, any claims that it may have against the Administrative Agent or any Lender with respect to any breach or alleged breach of agency or fiduciary duty.

Section 10.17 USA Patriot Act Notice. Each Lender that is subject to the Act (as hereinafter defined) and the Administrative Agent (for itself and not on behalf of any Lender) hereby notifies the Borrower that pursuant to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “Act”), it is required to obtain, verify and record information that identifies the Borrower, which information includes the name and address of the Borrower and other information that will allow such Lender or the Administrative Agent, as applicable, to identify the Borrower in accordance with the Act.

Section 10.18 Entire Agreement. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES.

[Signature Pages Follow]

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Schedule 10.02 to Credit Agreement

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written.

INPHONIC, INC.
By:	/s/ David A. Steinberg
Name:	David A. Steinberg
Title:	Chairman and CEO
CITICORP NORTH AMERICA, INC.,
	as Administrative Agent
By:	/s/ Scot P. French
Name:	Scot P. French
Title:	Managing Director/Vice President
GOLDMAN SACHS CREDIT PARTNERS, L.P.,
	as a Lender
By:	/s/Kenneth M. Eberts
Name:	Kenneth M. Eberts
Title:	Managing Director, Attorney-in-Fact
CITICORP NORTH AMERICA, INC.,
	as a Lender
By:	/s/ Scot P. French
Name:	Scot P. French
Title:	Managing Director/Vice President
AP INPHONIC HOLDINGS, LLC,
	as a Lender
By:	/s/ David J. Berkman
Name:	David J. Berkman
Title:	Managing Partner

EX-10.3

EXHIBIT 10.3

EXECUTION COPY

AMENDMENT TO CREDIT AGREEMENT

AMENDMENT, dated as of February 6, 2007 (this “Amendment”), to the Credit Agreement, dated as of November 7, 2006 (the “Agreement”), among InPhonic, Inc., a Delaware corporation (the “Borrower”), the Lenders listed on the signature pages hereof as Lenders, and Citicorp North America, Inc., as Administrative Agent.

WHEREAS, the parties hereto have previously entered into the Agreement; and

WHEREAS, the parties have agreed to amend the Agreement pursuant to the terms and conditions set forth herein.

NOW, THEREFORE, in consideration of the mutual agreements, provisions and covenants contained herein, the parties agree as follows:

Section 1.    Definitions. Capitalized terms used but not otherwise defined herein shall have the respective meanings given to them in the Agreement.

Section 2.    Effectiveness of the Amendment. This Amendment shall become effective upon receipt by the Administrative Agent of (x) counterparts hereof duly executed by: (i) the Borrower, (ii) each of the Guarantors, (iii) the Administrative Agent, and (iv) each Lender, and (y) confirmation of the due authorization of this Amendment by the Borrower and each Guarantor in form and substance satisfactory to the Administrative Agent and the Lenders.

Section 3.    Amendment to the Agreement -.Definitions.

(a) The definition of “Availability Period in Section 1.01 is hereby amended and restated in its entirety as follows:

“Availability Period” means the period from and including the Closing Date to the earliest of (A) the Maturity Date, (B) the date of termination of the Commitments pursuant to Section 8.02 and (C) March 30, 2007.

(b) The definition of “Interest Payment Date” in Section 1.01 is hereby amended and restated in its entirety as follows:

“Interest Payment Date” means the first Business Day of each April, July, October and January and the Maturity Date.

Section 4.    Amendments to Agreement – Delayed Draw. The penultimate sentence of Section 2.01 is hereby amended and restated in its entirety as follows:

The Borrower shall, not later than March 30, 2007, have made up to two requests for Loans which, in the aggregate, equal the full amount of the Facility.

Section 5.    Amendments to Agreement – Post-Closing Covenants and Cash Collateral Account.

(a) Section 6.12(b)(i). The phrase “for a period of 90 days after the Closing Date” in clause (x) of Section 6.12(b)(i) shall be replaced with the phrase: “for a period commencing on the Closing Date and ending on February 28, 2007”.

(b) Section 6.12(d). The phrase “within 60 days after the Closing Date and at all times thereafter” in the first sentence of Section 6.12(d) shall be replaced with the phrase: “by February 28, 2007 and at all times thereafter”.

(c) Section 6.16. Section 6.16 is hereby amended and restated in its entirety as follows:

“By March 30, 2007 and at all times thereafter, maintain the Cash Collateral Account.”

(d) Section 7.11(b). The phrase “90 days after the Closing Date” in Section 7.11(b) shall be replaced with the phrase: “March 30, 2007”.

Section 6.    Representations and Warranties. The Borrower hereby repeats and restates those representations and warranties set forth in Article V of the Agreement, as if made on and as of the date hereof (except to the extent such representations and warranties expressly relate to an earlier date), which representations and warranties are hereby incorporated herein by reference, as if specifically set forth herein; provided that references to “the Agreement” in any Loan Documents shall be and are deemed to mean the Agreement as amended hereby. The Borrower hereby represents and warrants that, after giving effect to this Amendment, no Default or Event of Default exists on the date of this Amendment.

Section 7.    Consent of Guarantors. By signing below, each of the Guarantors irrevocably consents and agrees to this Amendment.

Section 8.    Miscellaneous. This Amendment may be executed by one or more of the parties to this Amendment on any number of counterparts (including by facsimile), and all of said counterparts taken together shall be deemed to constitute one and the same instrument. This Amendment is a Loan Document. The Borrower shall pay or reimburse each of the Lenders and the Administrative Agent for all of their reasonable out-of-pocket expenses in connection with the negotiation, preparation, execution and delivery of this Amendment, including without limitation, the reasonable fees and expenses of Fried, Frank, Harris, Shriver & Jacobson, LLP. The provisions of Sections 10.14 and 10.15 of the Agreement are incorporated

by reference into this Amendment mutatis mutandis. This Amendment shall not constitute an amendment or waiver of any of the terms and provisions of the Agreement and shall not be construed as a waiver or consent to any further or future action on the part of the Borrower or any Guarantor, except to the extent expressly set forth herein. Except as specifically set forth herein, all of the terms and provisions of the Agreement and the other Loan Documents are and shall remain in full force and effect and the Borrower and the Guarantors shall continue to be bound by such terms and provisions.

[Signature Pages Follow]

IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to be duly executed and delivered as of the date first above written.

Borrower:
INPHONIC, INC.
By:	/s/ David A. Steinberg
	Name: David A. Steinberg
	Title: Chief Executive Officer
Guarantors:
CAIS ACQUISITION, LLC
By:	/s/ David A. Steinberg
	Name: David A. Steinberg
	Title: President
CAIS ACQUISITION II, LLC
By:	/s/ David A. Steinberg
	Name: David A. Steinberg
	Title: President
FON ACQUISITION, LLC
By:	/s/ David A. Steinberg
	Name: David A. Steinberg
	Title: President
MOBILE TECHNOLOGY SERVICES, LLC
By:	/s/ David A. Steinberg
	Name: David A. Steinberg
	Title: President

[Signature Page to Amendment to InPhonic Credit Agreement]

SIMIPC ACQUISITION CORP.
By:	/s/ David A. Steinberg
	Name: David A. Steinberg
	Title: Chief Executive Officer
STAR NUMBER, INC.
By:	/s/ David A. Steinberg
	Name: David A. Steinberg
	Title: Chief Executive Officer
1010 INTERACTIVE, LLC.
By:	/s/ David A. Steinberg
	Name: David A. Steinberg
	Title: Chief Executive Officer
CITICORP NORTH AMERICA, INC., as Administrative Agent and as a Lender
By:	/s/ Scot P. French
	Name: Scot P. French
	Title: Managing Director / Vice President
GOLDMAN SACHS CREDIT PARTNERS, L.P., as a Lender
By:	/s/ Kenneth Eberts
	Name: Kenneth Eberts
	Title: Managing Director Goldman Sachs & Co., Attorney-in-Fact Goldman Sachs Credit Partners
AP INPHONIC HOLDINGS, LLC, as a Lender
By:	/s/ David J. Berkman
	Name: David J. Berkman
	Title: Managing Partner

[Signature Page to Amendment to InPhonic Credit Agreement]

EX-10.4

EXHIBIT 10.4

CONFIDENTIAL TREATMENT REQUESTED

EXECUTION COPY

AMENDMENT NO. 2 TO CREDIT AGREEMENT

AMENDMENT, dated as of March 30, 2007 (this “Amendment”), to the Credit Agreement, dated as of November 7, 2006, as amended by Amendment to Credit Agreement dated as of February 6, 2007 (the “Agreement”), among InPhonic, Inc., a Delaware corporation (the “Borrower”), the Lenders listed on the signature pages hereof as Lenders, and Citicorp North America, Inc., as Administrative Agent.

WHEREAS, the parties hereto have previously entered into the Agreement; and

WHEREAS, the parties have agreed to amend the Agreement pursuant to the terms and conditions set forth herein.

NOW, THEREFORE, in consideration of the mutual agreements, provisions and covenants contained herein, the parties agree as follows:

Section 1.    Definitions. Capitalized terms used but not otherwise defined herein shall have the respective meanings given to them in the Agreement.

Section 2. Effectiveness of the Amendment. This Amendment shall become effective upon receipt by the Administrative Agent of (x) counterparts hereof duly executed by: (i) the Borrower, (ii) each of the Guarantors, (iii) the Administrative Agent, and (iv) each Lender, and (y) confirmation of the due authorization of this Amendment by the Borrower and each Guarantor in form and substance satisfactory to the Administrative Agent and the Lenders.

Section 3.    Amendment to the Agreement-Definitions.

(a) The definition of “Availability Period” in Section 1.01 is hereby amended and restated in its entirety as follows:

“Availability Period” means the period from and including the Closing Date to the earliest of (A) the Maturity Date, (B) the date of termination of the Commitments pursuant to Section 8.02 and (C) May 30, 2007.

(b) The definition of “Make-Whole Premium” in Section 1.01 is hereby amended and restated in its entirety as follows:

“Make-Whole Premium” means, with respect to any prepayment of Loans, an amount equal to one percent (1.00%) of the principal of the Loans being prepaid.

***Confidential Treatment has been requested for portions of this exhibit. The copy filed herewith omits the information subject to the confidentiality request. Omissions are designated as [***]. A complete version of this exhibit has been filed separately with the Securities Exchange Commission.

Section 4.    Amendments to Agreement – Delayed Draw.

The penultimate sentence of Section 2.01 is hereby amended and restated in its entirety as follows:

“The Borrower shall, not later than May 30, 2007, have made up to two requests for Loans which, in the aggregate, equal the full amount of the Facility.”

Section 5.    Amendments to Agreement – Post-Closing Covenants and Cash Collateral Account.

(a) Section 6.01(a). The phrase “within 90 days after the end of each fiscal year” shall be replaced with the phrase: “within 100 days after the end of the fiscal year ended December 31, 2006 and within 90 days after the end of each other fiscal year”.

(b) Section 6.12(d). The phrase “within 60 days after the Closing Date and at all times thereafter” in the first sentence of Section 6.12(d) shall be replaced with the phrase: “by May 30, 2007 and at all times thereafter”.

(c) Section 6.16. Section 6.16 is hereby amended and restated in its entirety as follows: “By May 30, 2007 and at all times thereafter, maintain the Cash Collateral Account.”

(d) Section 7.11(b). The phrase “90 days after the Closing Date” in Section 7.11(b) shall be replaced with the phrase: “May 30, 2007”.

Section 6.    Amendment to Agreement – Subsequent Financings.

(a) Section 10.18. A new Section 10.18 is hereby to the Agreement to read as follows:

“If the Borrower seeks to prepay the Loans at any time prior to December 31, 2007 [***], the Borrower will provide a reasonable opportunity for the Lenders to provide (in proportion to their Commitments or on any other basis as the Lenders may agree among themselves) such refinancing. Neither the Administrative Agent nor any of the Lenders shall have any obligation to provide any such refinancing, and the obligations of the Borrower and the other Loan Parties under this Agreement and the other

Loan Documents to pay and perform the Obligations in accordance with their terms shall be unaffected by any such refinancing (whether or not one or more of the Lenders or their Affiliates are involved in such refinancing). The agreements in this Section shall survive the termination of the Commitments and the repayment, satisfaction or discharge of the Loans an all the other Obligations.”

(b) Section 10.18. The current Section 10.18, as it stands prior to the effectiveness of this Amendment is hereby renumbered as Section 10.19

Section 7.    Waiver. With respect to the annual financial statements for the year-ended December 31, 2006, the Administrative Agent and the Lenders hereby waive the requirement set forth in Section 6.01(a) of the Agreement that Borrower deliver an opinion (the “Internal Controls Opinion for 2007”) of a Registered Public Accounting Firm independently assessing the Borrower’s internal controls over financial reporting in accordance with Item 308 of SEC Regulation S-K, PCAOB Auditing Standard No. 2, and Section 404 of Sarbanes-Oxley expressing a conclusion that contains no statement that there is a material weakness in such internal controls to the extent that the Internal Controls Opinion for 2007 (x) is delivered later than March 31, 2007 and (y) mentions that there are material weaknesses in such internal controls; provided that the waiver in this Section 6 shall terminate and be of no force or effect unless (i) the Borrower cures the material weakness in internal controls relating to personnel staffing requirements (identified on Schedule A referred to below) by July 1, 2007, (ii) the Borrower cures all other material weaknesses in internal controls (identified in Schedule A referred to below or in the Internal Controls Opinion for 2007) by April 10, 2007, and (iii) the Borrower receives the Internal Controls Opinion for 2007 (and delivers a copy to the Administrative Agent and the Lenders) by April 10, 2007 .

Section 8.    Representations and Warranties. The Borrower hereby repeats and restates those representations and warranties set forth in Article V of the Agreement, as if made on and as of the date hereof (except to the extent such representations and warranties expressly relate to an earlier date), which representations and warranties are hereby incorporated herein by reference, as if specifically set forth herein; provided that references to “the Agreement” in any Loan Documents shall be and are deemed to mean the Agreement as amended hereby. The Borrower represents and warrants that attached hereto as Schedule A is a brief description of the material weaknesses in the Borrower’s internal controls over financial reporting in accordance with Item 308 of SEC Regulation S-K, PCAOB Auditing Standard No. 2, and Section 404 of Sarbanes-Oxley identified with respect to the annual financial statements for the year-ended December 31, 2006. The Borrower hereby represents and warrants that, after giving effect to this Amendment, no Default or Event of Default exists on the date of this Amendment.

Section 9.    Consent of Guarantors. By signing below, each of the Guarantors irrevocably consents and agrees to this Amendment.

Section 10.    Miscellaneous. This Amendment may be executed by one or more of the parties to this Amendment on any number of counterparts (including by facsimile), and all of said counterparts taken together shall be deemed to constitute one and the same instrument. This Amendment is a Loan Document. The Borrower shall pay or reimburse each of the Lenders and the Administrative Agent for all of their reasonable out-of-pocket expenses in connection with the negotiation, preparation, execution and delivery of this Amendment, including without limitation, the reasonable fees and expenses of Fried, Frank, Harris, Shriver & Jacobson, LLP. The provisions of Sections 10.14 and 10.15 of the Agreement are incorporated by reference into this Amendment mutatis mutandis. This Amendment shall not constitute an amendment or waiver of any of the terms and provisions of the Agreement and shall not be construed as a waiver or consent to any further or future action on the part of the Borrower or any Guarantor, except to the extent expressly set forth herein. Except as specifically set forth herein, all of the terms and provisions of the Agreement and the other Loan Documents are and shall remain in full force and effect and the Borrower and the Guarantors shall continue to be bound by such terms and provisions.

[Signature Pages Follow]

IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to be duly executed and delivered as of the date first above written.

Borrower:
INPHONIC, INC.
By:	/s/ David A. Steinberg
	Name: David A. Steinberg
	Title: Chief Executive Officer

Guarantors:
CAIS ACQUISITION, LLC
By:	/s/ David A. Steinberg
	Name: David A. Steinberg Title: President

CAIS ACQUISITION II, LLC
By:	/s/ David A. Steinberg
	Name: David A. Steinberg Title: President

FON ACQUISITION, LLC
By:	/s/ David A. Steinberg
	Name: David A. Steinberg Title: President

MOBILE TECHNOLOGY SERVICES, LLC
By:	/s/ David A. Steinberg
	Name: David A. Steinberg Title: President

SIMIPC ACQUISITION CORP.
By:	/s/ David A. Steinberg
	Name: David A. Steinberg Title: Chief Executive Officer

STAR NUMBER, INC.
By:	/s/ David A. Steinberg
	Name: David A. Steinberg Title: Chief Executive Officer

1010 INTERACTIVE, LLC.
By:	/s/ David A. Steinberg
	Name: David A. Steinberg Title: Chief Executive Officer

CITICORP NORTH AMERICA, INC.,     as Administrative Agent and as a Lender
By:	/s/ Scot P. French
	Name: Scot P. French Title: Managing Director/Vice President

GOLDMAN SACHS CREDIT PARTNERS, L.P.,     as a Lender
By:	/s/ Kenneth Eberts
	Name: Kenneth Eberts Title: Managing Director, Goldman, Sachs & Co. – Attorney in fact, Goldman Sachs Credit Partners

AP INPHONIC HOLDINGS, LLC,     as a Lender
By:	/s/ Scott G. Bruce
	Name: Scott G. Bruce Title: Managing Director

EX-10.5

EXHIBIT 10.5

EXECUTION COPY

AMENDMENT NO. 3 TO CREDIT AGREEMENT

AMENDMENT, dated as of April 9, 2007 (this “Amendment”), to the Credit Agreement, dated as of November 7, 2006, as amended by Amendment to Credit Agreement, dated as of February 6, 2007 and by Amendment No. 2 to Credit Agreement, dated as of March 30, 2007 (the “Agreement”), among InPhonic, Inc., a Delaware corporation (the “Borrower”), the Lenders listed on the signature pages hereof as Lenders, and Citicorp North America, Inc., as Administrative Agent.

WHEREAS, the parties hereto have previously entered into the Agreement; and

WHEREAS, the parties have agreed to amend the Agreement pursuant to the terms and conditions set forth herein.

NOW, THEREFORE, in consideration of the mutual agreements, provisions and covenants contained herein, the parties agree as follows:

Section 1.    Definitions. Capitalized terms used but not otherwise defined herein shall have the respective meanings given to them in the Agreement.

Section 2.    Effectiveness of the Amendment. This Amendment shall become effective upon receipt by the Administrative Agent of (x) counterparts hereof duly executed by: (i) the Borrower, (ii) each of the Guarantors, (iii) the Administrative Agent, and (iv) each Lender, and (y) confirmation of the due authorization of this Amendment by the Borrower and each Guarantor in form and substance satisfactory to the Administrative Agent and the Lenders.

Section 3.    Amendment to Agreement – Post-Closing Covenants

Section 6.01(a). The phrase “within 100 days after the end of the fiscal year ended December 31, 2006 and within 90 days after the end of each other fiscal year” shall be replaced with the phrase: “by April 16, 2007 (or, if the Borrower has timely paid the 2006 Financials Delay Fee, as defined in Section 4 of Amendment No. 3 to Credit Agreement, by April 23, 2007) with respect to the fiscal year ended December 31, 2006 and within 90 days after the end of each other fiscal year.”

Section 4.    Amendment to Agreement – 2006 Financials Delay Fee

If the Borrower does not comply with the Sections 6.01(a), 6.02(a) and 6.02(b) with respect to the fiscal year ended December 31, 2006 by April 16, 2007, the

Borrower shall (on April 17, 2007) pay a fee of $100,000 (the “2006 Financials Delay Fee”) to the Administrative Agent for the accounts of the Lenders (to be distributed to the Lenders in proportion to each such Lender’s Applicable Percentage in respect of the Facility). Such 2006 Financials Delay Fee is non-refundable. The Borrower’s timely payment of the 2006 Financials Delay Fee shall automatically modify the requirements of Section 6.01(a) as expressly set forth in Section 3 of Amendment No. 3 to Credit Agreement, without the need for any further action or consent by any Person. The Borrower’s payment, and the Administrative Agent’s and the Lenders’ receipt, of such 2006 Financials Delay Fee shall not waive any Default or Event of Default nor waive any rights or remedies of the Administrative Agent or the Lenders under the Agreement as hereby amended, the other Loan Documents or applicable law, all of which are cumulative and expressly reserved.

Section 5.    Representations and Warranties. The Borrower hereby repeats and restates those representations and warranties set forth in Article V of the Agreement, as if made on and as of the date hereof (except to the extent such representations and warranties expressly relate to an earlier date), which representations and warranties are hereby incorporated herein by reference, as if specifically set forth herein; provided that references to “the Agreement” in any Loan Documents shall be and are deemed to mean the Agreement as amended hereby. The Borrower hereby represents and warrants that, after giving effect to this Amendment, no Default or Event of Default exists on the date of this Amendment.

Section 6.    Consent of Guarantors. By signing below, each of the Guarantors irrevocably consents and agrees to this Amendment.

Section 7.    Miscellaneous. This Amendment may be executed by one or more of the parties to this Amendment on any number of counterparts (including by facsimile), and all of said counterparts taken together shall be deemed to constitute one and the same instrument. This Amendment is a Loan Document. The Borrower shall pay or reimburse each of the Lenders and the Administrative Agent for all of their reasonable out-of-pocket expenses in connection with the negotiation, preparation, execution and delivery of this Amendment, including without limitation, the reasonable fees and expenses of Fried, Frank, Harris, Shriver & Jacobson, LLP. The provisions of Sections 10.14 and 10.15 of the Agreement are incorporated by reference into this Amendment mutatis mutandis. This Amendment shall not constitute an amendment or waiver of any of the terms and provisions of the Agreement and shall not be construed as a waiver or consent to any further or future action on the part of the Borrower or any Guarantor, except to the extent expressly set forth herein. Except as specifically set forth herein, all of the terms and provisions of the Agreement and the other Loan Documents are and shall remain in full force and effect and the Borrower and the Guarantors shall continue to be bound by such terms and provisions.

[Signature Pages Follow]

IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to be duly executed and delivered as of the date first above written.

Borrower:
INPHONIC, INC.
By:	/s/ David A. Steinberg
	Name: David A. Steinberg Title: Chief Executive Officer

Guarantors:
CAIS ACQUISITION, LLC
By:	/s/ David A. Steinberg
	Name: David A. Steinberg Title: President

CAIS ACQUISITION II, LLC
By:	/s/ David A. Steinberg
	Name: David A. Steinberg Title: President

FON ACQUISITION, LLC
By:	/s/ David A. Steinberg
	Name: David A. Steinberg Title: President

MOBILE TECHNOLOGY SERVICES, LLC
By:	/s/ David A. Steinberg
	Name: David A. Steinberg Title: President

SIMIPC ACQUISITION CORP.
By:	/s/ David A. Steinberg
	Name: David A. Steinberg Title: Chief Executive Officer

STAR NUMBER, INC.
By:	/s/ David A. Steinberg
	Name: David A. Steinberg Title: Chief Executive Officer

1010 INTERACTIVE, LLC.
By:	/s/ David A. Steinberg
	Name: David A. Steinberg Title: Chief Executive Officer

CITICORP NORTH AMERICA, INC.,     as Administrative Agent and as a Lender
By:	/s/ Scot P. French
	Name: Scot P. French Title: Managing Director/Vice President

GOLDMAN SACHS CREDIT PARTNERS,     L.P.,     as a Lender
By:	/s/ Kenneth Eberts
	Name: Kenneth Eberts Title: Managing Director, Goldman, Sachs & Co. – Attorney in fact, Goldman Sachs Credit Partners

AP INPHONIC HOLDINGS, LLC,     as a Lender
By:	/s/ Scott G. Bruce
	Name: Scott G. Bruce Title: Managing Director

EX-10.6

EXHIBIT 10.6

EXECUTION COPY

AMENDMENT NO. 4 TO CREDIT AGREEMENT

AMENDMENT, dated as of April 23, 2007 (this “Amendment”), to the Credit Agreement, dated as of November 7, 2006, as amended by Amendment to Credit Agreement, dated as of February 6, 2007, by Amendment No. 2 to Credit Agreement, dated as of March 30, 2007 and by Amendment No. 3 to Credit Agreement, dated as of April 9, 2007 (the “Agreement”), among InPhonic, Inc., a Delaware corporation (the “Borrower”), the Lenders listed on the signature pages hereof as Lenders, and Citicorp North America, Inc., as Administrative Agent.

WHEREAS, the parties hereto have previously entered into the Agreement; and

WHEREAS, the parties have agreed to amend the Agreement pursuant to the terms and conditions set forth herein.

NOW, THEREFORE, in consideration of the mutual agreements, provisions and covenants contained herein, the parties agree as follows:

Section 1.    Definitions. Capitalized terms used but not otherwise defined herein shall have the respective meanings given to them in the Agreement.

Section 2.    Effectiveness of the Amendment. This Amendment shall become effective upon receipt by the Administrative Agent of (x) counterparts hereof duly executed by: (i) the Borrower, (ii) each of the Guarantors, (iii) the Administrative Agent, and (iv) each Lender, and (y) confirmation of the due authorization of this Amendment by the Borrower and each Guarantor in form and substance satisfactory to the Administrative Agent and the Lenders.

Section 3.    Amendment to Agreement – Post-Closing Covenants

Section 6.01(a). The phrase: “by April 16, 2007 (or, if the Borrower has timely paid the 2006 Financials Delay Fee, as defined in Section 4 of Amendment No. 3 to Credit Agreement, by April 23, 2007) with respect to the fiscal year ended December 31, 2006 and within 90 days after the end of each other fiscal year” shall be replaced with the phrase, “by April 23, 2007 (or, if the Borrower has timely paid all of the required 2006 Financial Daily Delay Fee, as defined in Section 4 of Amendment No. 4 to Credit Agreement, by May 1, 2007) with respect to the fiscal year ended December 31, 2006 and within 90 days after the end of each other fiscal year.”

Section 4.    Amendment to Agreement – 2006 Financials Daily Delay Fee

If the Borrower does not comply with the Sections 6.01(a), 6.02(a) and 6.02(b) with respect to the fiscal year ended December 31, 2006 by April 23, 2007, the Borrower shall (on April 24, 2007 and on each Business Day thereafter on which it has not yet complied with Sections 6.01(a), 6.02(a) and 6.02(b) with respect to the fiscal year ended December 31, 2006) pay a fee of $20,000 for each calendar day from and including April 24, 2007 until (and including) May 1, 2007 (the “2006 Financials Daily Delay Fee”) to the Administrative Agent for the accounts of the Lenders (to be distributed to the Lenders in proportion to each such Lender’s Applicable Percentage in respect of the Facility). Such 2006 Financials Daily Delay Fee is non-refundable. For the avoidance of doubt, (i) the 2006 Financials Delay Fee and the 2006 Financials Daily Delay Fee are independent obligations and neither is credited toward payment of the other, and (ii) for illustrative purposes, if the Borrower complies with Sections 6.01(a), 6.02(a) and 6.02(b) with respect to the fiscal year ended December 31, 2006 on April 27, 2007 or May 1, 2007, the aggregate of the 2006 Financials Daily Delay Fee would be $80,000 or $160,000, respectively. The Borrower’s timely payment of the 2006 Financials Daily Delay Fee shall automatically modify the requirements of Section 6.01(a) as expressly set forth in Section 3 of Amendment No. 4 to Credit Agreement, without the need for any further action or consent by any Person. The Borrower’s payment, and the Administrative Agent’s and the Lenders’ receipt, of such 2006 Financials Daily Delay Fee shall not waive any Default or Event of Default nor waive any rights or remedies of the Administrative Agent or the Lenders under the Agreement as hereby amended, the other Loan Documents or applicable law, all of which are cumulative and expressly reserved.

Section 5.    Representations and Warranties. The Borrower hereby repeats and restates those representations and warranties set forth in Article V of the Agreement, as if made on and as of the date hereof (except to the extent such representations and warranties expressly relate to an earlier date), which representations and warranties are hereby incorporated herein by reference, as if specifically set forth herein; provided that references to “the Agreement” in any Loan Documents shall be and are deemed to mean the Agreement as amended hereby. The Borrower hereby represents and warrants that, after giving effect to this Amendment, no Default or Event of Default exists on the date of this Amendment.

Section 6.    Consent of Guarantors. By signing below, each of the Guarantors irrevocably consents and agrees to this Amendment.

Section 7.    Miscellaneous. This Amendment may be executed by one or more of

the parties to this Amendment on any number of counterparts (including by facsimile), and all of said counterparts taken together shall be deemed to constitute one and the same instrument. This Amendment is a Loan Document. The Borrower shall pay or reimburse each of the Lenders and the Administrative Agent for all of their reasonable out-of-pocket expenses in connection with the negotiation, preparation, execution and delivery of this Amendment, including without limitation, the reasonable fees and expenses of Fried, Frank, Harris, Shriver & Jacobson, LLP. The provisions of Sections 10.14 and 10.15 of the Agreement are incorporated by reference into this Amendment mutatis mutandis. This Amendment shall not constitute an amendment or waiver of any of the terms and provisions of the Agreement and shall not be construed as a waiver or consent to any further or future action on the part of the Borrower or any Guarantor, except to the extent expressly set forth herein. Except as specifically set forth herein, all of the terms and provisions of the Agreement and the other Loan Documents are and shall remain in full force and effect and the Borrower and the Guarantors shall continue to be bound by such terms and provisions.

[Signature Pages Follow]

IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to be duly executed and delivered as of the date first above written.

Borrower: INPHONIC, INC.
By:	/s/    Walter W. Leach III
	Name: Walter W. Leach III Title: General Counsel and Secretary
Guarantors: CAIS ACQUISITION, LLC
By:	/s/    Walter W. Leach III
	Name: Walter W. Leach III Title: Secretary
CAIS ACQUISITION II, LLC
By:	/s/    Walter W. Leach III
	Name: Walter W. Leach III Title: Secretary
FON ACQUISITION, LLC
By:	/s/    Walter W. Leach III
	Name: Walter W. Leach III Title: Secretary
MOBILE TECHNOLOGY SERVICES, LLC
By:	/s/    Walter W. Leach III
	Name: Walter W. Leach III Title: Secretary

SIMIPC ACQUISITION CORP.
By:	/s/    Walter W. Leach III
	Name: Walter W. Leach III Title: Secretary
STAR NUMBER, INC.
By:	/s/    Walter W. Leach III
	Name: Walter W. Leach III Title: Secretary
1010 INTERACTIVE, LLC.
By:	/s/    Walter W. Leach III
	Name: Walter W. Leach III Title: Secretary

CITICORP NORTH AMERICA, INC., as Administrative Agent and as a Lender
By:	/s/    Scot P. French
	Name: Scot P. French Title: Managing Director/Vice President

GOLDMAN SACHS CREDIT PARTNERS, L.P., as a Lender
By:	/s/    Kenneth Eberts
	Name: Kenneth Eberts Title: Managing Director, Goldman, Sachs & Co. – Attorney in fact, Goldman Sachs Credit Partners

AP INPHONIC HOLDINGS, LLC, as a Lender
By:	/s/    Scott G. Bruce
	Name: Scott G. Bruce Title: Managing Director

EX-10.7

EXHIBIT 10.7

EXECUTION COPY

AMENDMENT NO. 5 TO CREDIT AGREEMENT

AMENDMENT, dated as of May 1, 2007 (this “Amendment”), to the Credit Agreement, dated as of November 7, 2006, as amended by Amendment to Credit Agreement, dated as of February 6, 2007, by Amendment No. 2 to Credit Agreement, dated as of March 30, 2007, by Amendment No. 3 to Credit Agreement, dated as of April 9, 2007, and by Amendment No. 4, dated as of April 23, 2007 (the “Agreement”), among InPhonic, Inc., a Delaware corporation (the “Borrower”), the Lenders listed on the signature pages hereof as Lenders, and Citicorp North America, Inc., as Administrative Agent.

WHEREAS, the parties hereto have previously entered into the Agreement; and

WHEREAS, the parties have agreed to amend the Agreement pursuant to the terms and conditions set forth herein.

NOW, THEREFORE, in consideration of the mutual agreements, provisions and covenants contained herein, the parties agree as follows:

Section 1. Definitions. Capitalized terms used but not otherwise defined herein shall have the respective meanings given to them in the Agreement.

Section 2. Effectiveness of the Amendment. This Amendment shall become effective upon receipt by the Administrative Agent of:

(a) counterparts hereof duly executed by:

(i) the Borrower,

(ii) each of the Guarantors,

(iii) the Administrative Agent, and

(iv) each Lender;

(b) confirmation of the due authorization of this Amendment by the Borrower and each Guarantor in form and substance satisfactory to the Administrative Agent and the Lenders; and

(c) the 2006 Amended Financials Delay Fee (as defined below).

Section 3. Amendment to Agreement – Definitions.

The definition of “Availability Period” in Section 1.01 is hereby amended and restated in its entirety as follows:

“Availability Period” means the period from and including the Closing Date to the earliest of (A) the Maturity Date, (B) the date of termination of the Commitments pursuant to Section 8.02 and (C) July 31, 2007.

Section 4. Amendment to Agreement – Delayed Draw.

The penultimate sentence of Section 2.01 is hereby amended and restated in its entirety as follows:

“The Borrower shall, not later than July 31, 2007, have made up to two requests for Loans which, in the aggregate, equal the full amount of the Facility.”

Section 5. Amendment to Agreement – Post-Closing Covenants and Cash Collateral Account.

(a) Section 6.01(a). The phrase: “by April 23, 2007 (or, if the Borrower has timely paid all of the required 2006 Financial Daily Delay Fee, as defined in Section 4 of Amendment No. 4 to Credit Agreement, by May 1, 2007) with respect to the fiscal year ended December 31, 2006 and within 90 days after the end of each other fiscal year” shall be replaced with the phrase, “by May 31, 2007 with respect to the fiscal year ended December 31, 2006 and within 90 days after the end of each other fiscal year.”

(b) Section 6.01(b). The phrase: “within 45 days after the end of each of the first three fiscal quarters of each fiscal year of the Borrower (commencing with the fiscal quarter ended March 31, 2007).” shall be replaced with the phrase, “within 45 days after the end of each of the first three fiscal quarters of each fiscal year of the Borrower (except with respect to the fiscal quarter ended March 31, 2007, by May 31, 2007).”

(c) Section 6.12(d). The phrase “by May 30, 2007 and at all times thereafter” in the first sentence of Section 6.12(d) shall be replaced with the phrase: “by July 31, 2007 and at all times thereafter.”

(d) Section 6.16. Section 6.16 is hereby amended and restated in its entirety as follows: “By July 31, 2007 and at all times thereafter, maintain the Cash Collateral Account.”

(e) Section 7.11(b). The phrase “May 30, 2007.” in Section 7.11(b) shall be replaced with the phrase: “July 31, 2007.”

Section 6. Amendment to Agreement – 2006 Amended Financials Delay Fee.

The Borrower shall (not later than on May 2, 2007) pay a fee of $300,000 (the “2006 Amended Financials Delay Fee”) to the Administrative Agent for the accounts of the Lenders (to be distributed to the Lenders in proportion to each such Lender’s Applicable Percentage in respect of the Facility). Such 2006 Amended Financials Delay Fee is non-refundable. The Borrower’s payment, and the Administrative Agent’s and the Lenders’ receipt, of such 2006 Amended Financials Delay Fee shall not waive any Default or Event of Default nor waive any rights or remedies of the Administrative Agent or the Lenders under the Agreement as hereby amended, the other Loan Documents or applicable law, all of which are cumulative and expressly reserved.

Section 7. Waiver. With respect to the annual financial statements for the year-ended December 31, 2006, the Administrative Agent and the Lenders hereby waive the requirement set forth in Section 6.01(a) of the Agreement that Borrower deliver an opinion (the “Internal Controls Opinion for 2007”) of a Registered Public Accounting Firm independently assessing the Borrower’s internal controls over financial reporting in accordance with Item 308 of SEC Regulation S-K, PCAOB Auditing Standard No. 2, and Section 404 of Sarbanes-Oxley expressing a conclusion that contains no statement that there is a material weakness in such internal controls to the extent that the Internal Controls Opinion for 2007 (x) is delivered later than March 31, 2007 and (y) mentions that there are material weaknesses in such internal controls; provided that the waiver in this Section 7 shall terminate and be of no force or effect unless (i) the Borrower cures the material weakness in internal controls relating to personnel staffing requirements (identified in Schedule A to Amendment No. 2 to Credit Agreement dated as of March 30, 2007) by July 1, 2007, (ii) the Borrower cures all other material weaknesses in internal controls (identified in Schedule A Amendment No. 2 to Credit Agreement dated as of March 30, 2007 or in the Internal Controls Opinion for 2007) by May 31, 2007, and (iii) the Borrower receives the Internal Controls Opinion for 2007 (and delivers a copy to the Administrative Agent and the Lenders) by May 31, 2007.

Section 8. Representations and Warranties. The Borrower hereby repeats and restates those representations and warranties set forth in Article V of the Agreement, as if made on and as of the date hereof (except to the extent such representations and warranties expressly relate to an earlier date), which representations and warranties are hereby incorporated herein by reference, as if specifically set forth herein; provided that references to “the Agreement” in any Loan Documents shall be and are deemed to mean the Agreement as amended hereby. The Borrower represents and warrants that attached to Amendment No. 2 to Credit Agreement dated as of March 30, 2007 as Schedule A is a brief description of the material weaknesses in the Borrower’s internal controls over financial reporting in accordance with Item 308 of SEC Regulation S-K, PCAOB Auditing Standard No. 2, and Section 404 of Sarbanes-Oxley

identified with respect to the annual financial statements for the year-ended December 31, 2006. The Borrower hereby represents and warrants that, after giving effect to this Amendment, no Default or Event of Default exists on the date of this Amendment.

Section 9. Consent of Guarantors. By signing below, each of the Guarantors irrevocably consents and agrees to this Amendment.

Section 10. Miscellaneous. This Amendment may be executed by one or more of the parties to this Amendment on any number of counterparts (including by facsimile), and all of said counterparts taken together shall be deemed to constitute one and the same instrument. This Amendment is a Loan Document. The Borrower shall pay or reimburse each of the Lenders and the Administrative Agent for all of their reasonable out-of-pocket expenses in connection with the negotiation, preparation, execution and delivery of this Amendment, including without limitation, the reasonable fees and expenses of Fried, Frank, Harris, Shriver & Jacobson, LLP. The provisions of Sections 10.14 and 10.15 of the Agreement are incorporated by reference into this Amendment mutatis mutandis. This Amendment shall not constitute an amendment or waiver of any of the terms and provisions of the Agreement and shall not be construed as a waiver or consent to any further or future action on the part of the Borrower or any Guarantor, except to the extent expressly set forth herein. Except as specifically set forth herein, all of the terms and provisions of the Agreement and the other Loan Documents are and shall remain in full force and effect and the Borrower and the Guarantors shall continue to be bound by such terms and provisions.

[Signature Pages Follow]

IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to be duly executed and delivered as of the date first above written.

Borrower:
INPHONIC, INC.
By:	/s/ David A. Steinberg
	Name: David A. Steinberg
	Title: Chief Executive Officer
Guarantors: CAIS ACQUISITION, LLC
By:	/s/ David A. Steinberg
	Name: David A. Steinberg
	Title: President
CAIS ACQUISITION II, LLC
By:	/s/ David A. Steinberg
	Name: David A. Steinberg
	Title: President
FON ACQUISITION, LLC
By:	/s/ David A. Steinberg
	Name: David A. Steinberg
	Title: President
MOBILE TECHNOLOGY SERVICES, LLC
By:	/s/ David A. Steinberg
	Name: David A. Steinberg
	Title: President

[Signature Page to Amendment No. 5 to InPhonic Credit Agreement]

SIMIPC ACQUISITION CORP.
By:	/s/ David A. Steinberg
	Name: David A. Steinberg
	Title: Chief Executive Officer
STAR NUMBER, INC.
By:	/s/ David A. Steinberg
	Name: David A. Steinberg
	Title: Chief Executive Officer
1010 INTERACTIVE, LLC.
By:	/s/ David A. Steinberg
	Name: David A. Steinberg Title: Chief Executive Officer

[Signature Page to Amendment No. 5 to InPhonic Credit Agreement]

CITICORP NORTH AMERICA, INC., as Administrative Agent and as a Lender
By:	/s/ Scot French
	Name: Scot French
	Title: Managing Director

[Signature Page to Amendment No. 5 to InPhonic Credit Agreement]

GOLDMAN SACHS CREDIT PARTNERS, L.P., as a Lender
By:	/s/ Kenneth Eberts
	Name: Kenneth Eberts
	Title: Managing Director, Goldman, Sachs & Co. Attorney-In-Fact, Goldman Sachs Credit Partners

[Signature Page to Amendment No. 5 to InPhonic Credit Agreement]

AP INPHONIC HOLDINGS, LLC, as a Lender
By:	/s/ David Berkman
	Name: David Berkman
	Title: Managing Partner

[Signature Page to Amendment No. 5 to InPhonic Credit Agreement]

EX-10.8

EXHIBIT 10.8

WARRANT AGREEMENT

Dated as of November 7, 2006

by and between

INPHONIC, INC.,

GOLDMAN, SACHS & CO.,

CITICORP NORTH AMERICA, INC.

and

AP INPHONIC HOLDINGS, LLC

WARRANT AGREEMENT

TABLE OF CONTENTS

			Page
SECTION 1.	DEFINITIONS		1
SECTION 2.	WARRANT CERTIFICATES		3
SECTION 3.	ISSUANCE OF WARRANTS		3
SECTION 4.	EXECUTION OF WARRANT CERTIFICATES		3
SECTION 5.	WARRANTS REGISTER		4
SECTION 6.	REGISTRATION OF TRANSFERS AND EXCHANGES		4
SECTION 7.	TERMS OF WARRANTS; EXERCISE OF WARRANTS		6
SECTION 8.	EXCHANGE OF WARRANTS; TERMS OF EXCHANGE		7
SECTION 9.	PAYMENT OF TAXES		8
SECTION 10.	MUTILATED OR MISSING WARRANT CERTIFICATES		8
SECTION 11.	RESERVATION OF WARRANT SHARES		9
SECTION 12.	ADJUSTMENT OF NUMBER OF WARRANT SHARES		9
	(a)	Adjustments for Change in Common Stock	10
	(b)	Adjustment for Rights Issue	10
	(c)	Superseding Adjustment	11
	(d)	Adjustment for Dividends and Other Distributions	12
	(e)	Current Market Price	13
	(f)	No Amendments	13
	(g)	Voluntary Increases	13
	(h)	When De Minimis Adjustment May Be Deferred	14
	(i)	Consolidation, Merger, Reorganization or Recapitalization of the Company	14
	(j)	Consideration Received	14
	(k)	When Issuance or Payment May Be Deferred	15
	(l)	Form of Warrants	15
	(m)	Adjustment in Exercise Price	15
SECTION 13.	OBTAINING STOCK EXCHANGE LISTING		15

- i -

SECTION 14.	REGISTRATION RIGHTS		16
	(a)	S-3 Registration	16
	(b)	Demand Registrations	16
	(c)	Holdback Agreements; Restrictions on Public Sale by Holders of Warrant Shares	19
	(d)	Piggyback rights	19
	(e)	Other Registration	21
	(f)	Registration Procedures	21
	(g)	Registration Expenses	23
	(h)	Indemnification by the Company	24
	(i)	Postponement or Suspension of Registration	24
	(j)	Default Warrant	25
	(k)	Governmental Filings	26
SECTION 15.	LIMITATION ON OWNERSHIP OF COMMON STOCK		26
SECTION 16.	FRACTIONAL INTERESTS		26
SECTION 17.	NOTICES TO WARRANT HOLDERS; RIGHTS OF WARRANT HOLDERS		27
SECTION 18.	NOTICES		28
SECTION 19.	SUPPLEMENTS AND AMENDMENTS		29
SECTION 20.	SUCCESSORS		29
SECTION 21.	EXPIRATION OF WARRANTS; TERMINATION		29
SECTION 22.	GOVERNING LAW		30
SECTION 23.	BENEFITS OF THIS AGREEMENT		30
SECTION 24.	HEADINGS		30
SECTION 25.	SUBMISSION TO JURISDICTION		30
SECTION 26.	WAIVER OF JURY TRIAL		30
SECTION 27.	SERVICE OF PROCESS		31
SECTION 28.	COUNTERPARTS		31
EXHIBIT A.	FORM OF WARRANT CERTIFICATE		A-1
EXHIBIT B.	FORM OF TRANSFER		B-1

- ii -

SCHEDULE A     Issuance of Warrants A-1

- iii -

WARRANT AGREEMENT, dated as of November 7, 2006, by and between InPhonic, Inc., a Delaware corporation (the “Company”), Goldman, Sachs & Co. , Citicorp North America, Inc. and AP InPhonic Holdings, LLC (each a “Purchaser”, and collectively, the “Purchasers”).

RECITALS

WHEREAS, the Company proposes to issue 1,250,000 stock purchase warrants (the “Warrants”), which in the aggregate entitle the holders thereof to purchase up to 1,250,000 shares of common stock of the Company (the “Common Stock”) (the Common Stock issuable upon exercise of the Warrants, the “Warrant Shares”), which constitute approximately 2.72% of the Common Stock outstanding on the date hereof (on a fully-diluted basis), after giving effect to the exercise of such Warrants and all options, warrants, and rights to acquire Common Stock and the conversion of all restricted stock awards for the maximum number of common shares obtainable whether or not such convertible securities are then convertible; and

WHEREAS, the parties hereto desire to enter into this Agreement in order to set forth the terms and conditions of the Warrants.

NOW, THEREFORE, in consideration of the premises and the mutual agreements herein set forth, the parties hereto agree as follows:

SECTION 1. DEFINITIONS

As used in this Agreement, the following capitalized terms will have the respective meanings:

“Act” means the Securities Act of 1933, as amended, and the rules and regulations thereunder.

“Agreement” and all references thereto means this Warrant Agreement as it may from time to time be amended, supplemented or modified.

“Applicable Share” shall have the meaning set forth in Section 12(e).

“Board” means the Board of Directors of the Company.

“Business Day” means any day other than Saturday or Sunday and any day on which the Commission is not open for business.

“Capital Stock” of any Person means any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents of or interests in (however designated) equity of such Person, including any preferred stock, but excluding any debt securities convertible into such equity.

“Closing Date” means November 7, 2006.

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“Code” shall have the meaning set forth in Section 8.

“Commission” means the Securities and Exchange Commission.

“Common Stock” shall have the meaning set forth in the Recitals.

“Company” shall have the meaning set forth in the preamble to this Agreement.

“Company Notice” shall have the meaning set forth in Section 14(b).

“Current Market Price” shall have the meaning set forth in Section 12(e).

“Default Warrants” shall have the meaning set forth in Section 14(j).

“Demand” shall have the meaning set forth in Section 14(b).

“Demand Registration” shall have the meaning set forth in Section 14(b).

“Exchange Right” shall have the meaning set forth in Section 8.

“Exercise Price” shall have the meaning set forth in Section 7.

“Exercise Rate” shall have the meaning set forth in Section 12.

“Expiration Date” means November 7, 2011 or, if such day is not a Business Day, the next succeeding Business Day.

“GS” shall have the meaning set forth in Section 15.

“Person” means any individual, corporation, partnership, limited liability company, association, joint venture, trust, unincorporated organization, government or any agency or political subdivision thereof or other entity.

“Piggy-Back Registration” shall have the meaning set forth in Section 14(d).

“Piggy-Back Registration Rights” shall have the meaning set forth in Section 14(d).

“Prospectus” means the prospectus or prospectuses included in any Registration Statement, as amended or supplemented by any prospectus supplement with respect to the terms of the offering of any portion of the Warrant Shares covered by such Registration Statement and by all other amendments and supplements to the prospectus, including post-effective amendments and all material incorporated by reference in such prospectus or prospectuses.

“Purchaser” or “Purchasers” shall have the meaning set forth in the preamble to this Agreement.

“Register Office” shall have the meaning set forth in Section 6.

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“Registration Statement” means any registration statement of the Company which covers any of the Warrant Shares pursuant to the provisions of this Agreement, including the Prospectus, amendments and supplements to such Registration Statement, including post-effective amendments, all exhibits and all materials incorporated by reference in such Registration Statement.

“S-3 Registration” shall have the meaning set forth in Section 14(a).

“Senior Financial Officer” means the chief financial officer, principal accounting officer, treasurer or controller of the Company.

“Suspension Notice” shall have the meaning set forth in Section 14(i).

“Transaction” shall have the meaning set forth in Section 12(i).

“Transfer Agent” shall have the meaning set forth in Section 11.

“Warrant holder(s)” or “holders of Warrant certificates” means, in each case, registered holders of Warrant certificates.

“Warrants” shall have the meaning set forth in the Recitals.

“Warrant Shares” shall have the meaning set forth in the Recitals.

SECTION 2. WARRANT CERTIFICATES

The Warrant certificates to be issued and delivered pursuant to this Agreement shall be in registered form only and shall be substantially in the form set forth in Exhibit A attached hereto.

SECTION 3. ISSUANCE OF WARRANTS

The Company, simultaneously with the Closing Date, shall deliver to each Purchaser duly executed Warrant certificates registered in the name of each Purchaser for the purchase of the number of Warrant Shares set forth opposite the name of such Purchaser on Schedule A to this Agreement. Warrant certificates shall be dated the date of issuance by the Company.

SECTION 4. EXECUTION OF WARRANT CERTIFICATES

Warrant certificates evidencing Warrants, each Warrant to purchase initially one share of Common Stock, shall be duly executed, on the Closing Date, by the Company and delivered to the registered holders of the Warrants in accordance with the provisions of Section 3. Warrant certificates shall be signed on behalf of the Company by its Chairman of the Board, or its President, a Vice President or by its Secretary or an Assistant Secretary under its corporate seal. Each such signature upon the Warrant certificates may be in the form of a facsimile signature of the present or any future Chairman of the Board, President, Vice President, Secretary

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or Assistant Secretary and may be imprinted or otherwise reproduced on the Warrant certificates and, for that purpose, the Company may adopt and use the facsimile signature of any Person who shall have been Chairman of the Board, President, Vice President, Secretary or Assistant Secretary, notwithstanding the fact that at the time the Warrant certificates shall be delivered or disposed of such Person shall have ceased to hold such office. In case any officer of the Company who shall have signed any of the Warrant certificates shall cease to be such officer before such Warrant certificates shall have been delivered or disposed of by the Company, such Warrant certificates nevertheless may be delivered or disposed of as though such Person had not ceased to be such officer of the Company. Any Warrant certificate may be signed on behalf of the Company by any Person who, at the actual date of the execution of such Warrant certificate, shall be a proper officer of the Company to sign such Warrant certificate, although at the date of the execution of this Agreement any such Person was not such an officer.

SECTION 5. WARRANTS REGISTER

The Company shall number and register the Warrant certificates in a register as they are issued by the Company. The Company may deem and treat the registered holder(s) of the Warrant certificates as the absolute owner(s) thereof (notwithstanding any notation of ownership or other writing thereon made by anyone) for all purposes, and the Company shall not be affected by any notice to the contrary. The Company shall keep copies of this Agreement available for inspection by the registered Warrant holders during normal business hours and upon reasonable notice at the Register Office.

SECTION 6. REGISTRATION OF TRANSFERS AND EXCHANGES

The Company shall cause to be kept at its principal office (the “Register Office”) a register in which the Company shall provide for the registration of Warrant certificates and of transfers or exchanges of Warrant certificates at the Warrant holder’s option. The Company shall promptly register the transfer of any outstanding Warrant certificates, in the records to be maintained by it for that purpose, upon surrender thereof. Upon any such registration of transfer, a new Warrant certificate shall be issued to the transferee(s) and the surrendered Warrant certificate shall be canceled by the Company. Canceled Warrant certificates shall thereafter be disposed of in a manner satisfactory to the Company in accordance with any applicable laws. Whenever any Warrant certificates are surrendered for exchange, the Company shall execute and deliver the Warrant certificates that the Warrant holder making the exchange is entitled to receive. All Warrant certificates issued upon any registration of transfer or exchange of Warrant certificates in accordance with the provisions of this Section 6 shall be the valid obligations of the Company, evidencing the same obligations and entitled to the same benefits under this Agreement, as the Warrant certificates surrendered for such registration of transfer or exchange. Every Warrant certificate surrendered for registration of transfer or exchange shall (if so required by the Company) be duly endorsed, or be accompanied by a written instrument of transfer in the form of Exhibit B attached hereto, duly executed by the Warrant holder or its attorney duly authorized in writing. No service charge will be made for any registration of transfer or exchange upon surrender of Warrant certificates or any issuance of Warrant certificates pursuant to Section 3 or this Section 6, but the Company may require payment of a sum sufficient to cover any stamp or other governmental charge or tax which may be imposed in connection with any

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such transfer or exchange before registering any such transfer or exchange or issuing or delivering any Warrant certificates. Any Warrant certificate when duly endorsed in blank (with signature guaranteed) shall be deemed negotiable. The holder of any Warrant certificate duly endorsed in blank may be treated by the Company and all other Persons dealing therewith as the absolute owner thereof for any purpose and as the Person entitled to exercise the rights represented thereby, or to the transfer thereof on the register of Warrants maintained by the Company, any notice to the contrary notwithstanding; but until such transfer on such register, the Company may treat the registered Warrant holder as the owner for all purposes.

The Warrant holders agree that they shall give five (5) Business Days prior written notice to the Company of any proposed transfer of the Warrants or of the Warrant Shares, if such transfer is not made pursuant to an effective registration statement under the Securities Act prior to (X) the date which is two years (or such shorter period as may be prescribed by Rule 144(k) (or any successor provision thereto)) after the later of the date of original issuance of the Warrants and the last date on which the Company or any affiliate of the Company was the owner of such Warrants, or any predecessor thereto, and (Y) such later date, if any, as may be required by any subsequent change in applicable law, the Warrant holders shall deliver to the Company:

(1) (a) an opinion of counsel reasonably acceptable to the Company that the Warrant or Warrant Shares may be transferred without registration under the Securities Act or (b) in the case of a transfer (x) to a “qualified institutional buyer” (as defined in Rule 144A under the Act) in a transaction complying with Rule 144A, (y) to an institutional “accredited investor” (as defined in Rule 501(a)(1), (2), (3) or (7) under the Act) or (z) outside the United States in compliance with Rule 904 under the Act, such certificates or letters, containing such representations and agreements, as are customary for such transactions and reasonably requested by the Company to demonstrate compliance with such exemption from the Act;

(2) an agreement by such transferee to the impression of the restrictive investment legend set forth below on the Warrant or the Warrant Shares to the extent required; and

(3) an agreement by such transferee to be bound by the provisions of this Agreement.

In addition to any other legend which may be required by applicable law, each Warrant certificate representing Warrants and each certificate representing Warrant Shares issued upon exercise or exchange of the Warrant shall have endorsed, to the extent appropriate, upon its face the following words:

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR THE SECURITIES LAWS OF ANY JURISDICTION. SUCH SECURITIES MAY NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED, ASSIGNED, ENCUMBERED, HYPOTHECATED OR OTHERWISE DISPOSED OF EXCEPT

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PURSUANT TO (I) A REGISTRATION STATEMENT WITH RESPECT TO SUCH SECURITIES THAT IS EFFECTIVE UNDER SUCH ACT OR APPLICABLE STATE SECURITIES LAW, OR (II) ANY EXEMPTION FROM REGISTRATION UNDER SUCH ACT, OR APPLICABLE STATE SECURITIES LAW, RELATING TO THE DISPOSITION OF SECURITIES, INCLUDING RULE 144.

SECTION 7. TERMS OF WARRANTS; EXERCISE OF WARRANTS

Subject to the terms of this Agreement, the Warrants may be exercised at any time after the date hereof and prior to the close of business on the Expiration Date. Each Warrant, when exercised in accordance with the terms hereof and upon payment in cash of the exercise price of $.01 (as adjusted pursuant to Section 12(m)) per share for the Common Stock (the “Exercise Price”) will entitle the holder thereof to acquire from the Company (and the Company shall issue to such holder of a Warrant) one fully paid and non-assessable share of the Company’s authorized but unissued Common Stock (subject to adjustment as provided in Section 12).

No cash dividend shall be paid to a holder of Warrant Shares issuable upon the exercise of Warrants unless such holder was, as of the record date for the declaration of such dividend, the record holder of such Warrant Shares.

A Warrant may be exercised upon surrender to the Company at the Register Office of the certificate or certificates evidencing the Warrants to be exercised with the form of election to purchase on the reverse thereof duly filled in and signed, together with payment to the Company of the Exercise Price for each Warrant Share issuable upon the exercise of such Warrants.

Subject to the provisions of this Section 7, upon surrender of the Warrant certificate or certificates, the Company shall issue and deliver with all reasonable dispatch, to or upon the written order of the Warrant holder and in such name or names as the Warrant holder may designate, a certificate or certificates for the number of Warrant Shares issuable or other securities or property to which such holder is entitled hereunder upon the exercise of such Warrants, including, at the Company’s option, any cash payable in lieu of fractional interests as provided in Section 16. Such certificate or certificates shall be deemed to have been issued and any Person so designated to be named therein shall be deemed to have become a holder of record of such Warrant Shares as of the date of the surrender of such Warrants and payment of the Exercise Price. The Company may issue fractional shares of Common Stock upon exercise of any Warrants in accordance with Section 16.

The Warrants shall be exercisable, at the election of the holders thereof, either in full or from time to time in part (provided that Warrants shall be exercisable in multiples of 5,000 Warrants unless all of the Warrants evidenced by a particular certificate are being exercised) and, in the event that a certificate evidencing Warrants is exercised in respect of fewer than all of the Warrant Shares issuable on such exercise at any time on or prior to the Expiration Date, a new certificate evidencing the remaining Warrant or Warrants will be issued, and the Company will duly execute and deliver the required new Warrant certificate or certificates pursuant to the provisions of Section 4 and this Section 7.

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All Warrant certificates surrendered upon exercise of Warrants shall be canceled by the Company. Such canceled Warrant certificates shall then be disposed of in a manner satisfactory to the Company and in accordance with any applicable law. The Company shall account promptly in writing with respect to Warrants exercised and all monies received for the purchase of the Warrant Shares through the exercise of such Warrants. In the event that the Company shall purchase or otherwise acquire Warrants, the Company may elect to have the Warrants canceled and retired.

SECTION 8. EXCHANGE OF WARRANTS; TERMS OF EXCHANGE

Subject to the terms of this Agreement, the Warrants may be exchanged in whole or in part (provided that Warrants shall be exchangeable in multiples of 5,000 Warrants unless all of the Warrants evidenced by a particular certificate are being exchanged) at any time or from time to time after the date hereof and prior to the close of business on the Expiration Date.

The Warrant holder shall have the right to require the Company to exchange the Warrants, in whole or in part and at any time or times (the “Exchange Right”), for Warrant Shares by surrendering to the Company the certificate or certificates evidencing the number of Warrants to be exchanged, together with the form of notice of exchange on the reverse thereof duly filled in and signed. Upon exercise of the Exchange Right, the Company shall deliver to the Warrant holder (without payment of any Exercise Price by the holder of the Warrants to be exchanged) that number of Warrant Shares which is equal to the quotient obtained by dividing (x) the value of the number of Warrants being exchanged at the time the Warrants are exchanged (determined by subtracting the aggregate Exercise Price for all such Warrants immediately prior to the exchange of the Warrants from the aggregate Current Market Price (determined pursuant to Section 12(e)) of that number of Warrant Shares purchasable upon exercise of such Warrants immediately prior to the exchange of the Warrants (taking into account all applicable adjustments pursuant to Section 12) by (y) the Current Market Price of one share of Common Stock immediately prior to the exchange of the Warrants.

No cash dividend shall be paid to a holder of Warrant Shares issuable upon the exchange of Warrants unless such holder was, as of the record date for the declaration of such dividend, the record holder of such Warrant Shares.

Subject to the provisions of this Section 8, upon surrender of the Warrant certificate or certificates, the Company shall issue and deliver with all reasonable dispatch, to or upon the written order of the Warrant holder and in such name or names as the Warrant holder may designate, a certificate or certificates for the number of Warrant Shares issuable or other securities or property to which such holder is entitled hereunder upon the exchange of such Warrants, including, at the Company’s option, any cash payable in lieu of fractional interests as provided in Section 16. Such certificate or certificates shall be deemed to have been issued and any Person so designated to be named therein shall be deemed to have become a holder of record of such Warrant Shares as of the date of the surrender of such Warrants pursuant to the Exchange Right. The Company may issue fractional shares of Common Stock upon exchange of any Warrants in accordance with Section 16.

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The Warrants shall be exchangeable, at the election of the holders thereof, either in full or from time to time in part (provided that Warrants shall be exchangeable in multiples of 5,000 Warrants unless all of the Warrants evidenced by a particular certificate are being exchanged) and, in the event that a certificate evidencing Warrants is exchanged in respect of fewer than all of the Warrant Shares issuable on such exchange at any time on or prior to the Expiration Date, a new certificate evidencing the remaining Warrant or Warrants will be issued, and the Company will duly execute and deliver the required new Warrant certificate or certificates pursuant to the provisions of Section 4 and this Section 8.

All Warrant certificates surrendered upon exchange of Warrants shall be canceled by the Company. Such canceled Warrant certificates shall then be disposed of in a manner satisfactory to the Company and in accordance with any applicable law. The Company shall account promptly in writing with respect to Warrants exchanged and all monies received for the acquisition of the Warrant Shares through the exchange of such Warrants.

The Company and the Warrant holder each agree to treat any exchange made pursuant to the provisions of this Section 8 as a tax-free recapitalization within the meaning of Section 368(a)(1)(E) of the Internal Revenue Code of 1986, as amended (the “Code”) pursuant to a plan of reorganization within the meaning of Section 354 of the Code including by making all required tax filings in a manner that is consistent with such treatment.

SECTION 9. PAYMENT OF TAXES

The Company will pay all taxes and other governmental charges attributable to the initial issuance of Warrant Shares upon the exercise or exchange of Warrants; provided, however, that the Company shall not be required to pay any such taxes or charges which may be payable in respect of any transfer involved in the issue of any Warrant certificates or any certificates for Warrant Shares in a name other than that of the registered holder of a Warrant certificate surrendered upon the exercise or exchange of a Warrant, and the Company shall not be required to issue or deliver such Warrant certificates unless or until the Person or Persons requesting the issuance thereof shall have paid to the Company the amount of such taxes or charges or shall have established to the satisfaction of the Company that such taxes or charges have been paid.

SECTION 10. MUTILATED OR MISSING WARRANT CERTIFICATES

In case any of the Warrant certificates shall be mutilated, lost, stolen or destroyed, the Company may in its discretion issue in exchange and substitution for and upon cancellation of the mutilated Warrant certificate, or in lieu of and substitution for the Warrant certificate lost, stolen or destroyed, a new Warrant certificate of like tenor and representing an equivalent number of Warrants, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction of such Warrant certificate and indemnity and security therefor, if requested, also satisfactory (provided that if the Warrant holder is a Purchaser, such Person’s

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own unsecured agreement of indemnity shall be deemed to be satisfactory) to the Company. Applicants for such substitute Warrant certificates shall also comply with such other reasonable regulations and pay such other reasonable charges as the Company may prescribe.

SECTION 11. RESERVATION OF WARRANT SHARES

The Company will at all times reserve and keep available, free from preemptive rights, out of the aggregate of its authorized but unissued Common Stock or its authorized Common Stock held in its treasury, that number of shares of Common Stock sufficient for the purpose of enabling it to satisfy any obligation to issue Warrant Shares upon the exercise or exchange of all outstanding Warrants.

The Company covenants that the transfer agent for the Common Stock (which may be the Company if it is acting as transfer agent) (the “Transfer Agent”) and every subsequent transfer agent for any shares of the Company’s equity issuable upon the exercise or exchange of any Warrants will be irrevocably authorized and directed by the Company at all times to reserve such number of authorized shares as shall be required for such purpose. The Company will keep a copy of this Agreement on file with the Transfer Agent for any shares of the Company’s equity issuable upon the exercise or exchange of the Warrants. The Company will supply such Transfer Agent with duly executed stock certificates for purposes of honoring all outstanding Warrants upon exercise or exchange thereof in accordance with the terms of this Agreement and the Company will provide or otherwise make available any cash which may be payable as provided in Section 12 or 16. The Company will furnish such Transfer Agent a copy of all notices of adjustments and certificates related thereto which are transmitted to each Warrant holder pursuant to Section 17.

The Company represents, warrants and covenants that all Warrant Shares which may be issued upon exercise or exchange of Warrants have been duly authorized and will, upon payment of the Exercise Price or upon the exercise of the Exchange Right and issuance, be duly and validly issued, fully paid and nonassessable, free of preemptive rights and free from all taxes, liens, charges and security interests with respect to the issue thereof, other than restrictions on transfer pursuant to this Agreement and applicable federal and state securities laws. The Company represents, warrants and covenants that the Board has duly, validly and irrevocably approved of Goldman, Sachs & Co. and its affiliates becoming an “interested stockholder” (within the meaning) and for purposes of Section 203 of the Delaware General Corporation Law.

SECTION 12. ADJUSTMENT OF NUMBER OF WARRANT SHARES

Each Warrant will initially be exercisable by the holder thereof into one share of Common Stock. The number of Warrant Shares that may be purchased upon the exercise of each Warrant (the “Exercise Rate”) will be subject to adjustment from time to time upon the occurrence of the events enumerated in this Section 12. For purposes of this Section 12, the Common Stock shall mean shares now or hereafter authorized of any class of common stock of the Company, however designated, that has the right (subject to any prior rights of any class or series of preferred stock) to participate in any distribution of the assets or earnings of the Company without limit as to per share amount.

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(a) Adjustments for Change in Common Stock. If at any time after the date of this Agreement the Company:

(1) pays a dividend or makes a distribution on its Common Stock exclusively in shares of its Common Stock;

(2) subdivides its outstanding shares of Common Stock into a greater number of shares;

(3) combines its outstanding shares of Common Stock into a smaller number of shares;

(4) issues by reclassification of its Common Stock any Capital Stock of the Company; or

(5) pays a dividend or makes a distribution on its Common Stock in shares of its Capital Stock other than Common Stock;

then the Exercise Rate in effect immediately prior to such action shall be proportionately adjusted upon occurrence of such event so that the holder of any Warrant thereafter exercised may receive the aggregate number and kind of shares of equity of the Company which such holder would have owned immediately following such action if such Warrant had been exercised immediately prior to such action (or, in the case of a dividend or distribution of Common Stock, immediately prior to the record date therefor). An adjustment made pursuant to this Section 12(a) shall become effective immediately after the distribution date, retroactive to the record date therefor in the case of a dividend or distribution in shares of Common Stock or other shares of its equity, and shall become effective immediately after the effective date in the case of a subdivision, combination or reclassification. If upon exercise of a Warrant after an adjustment to the Exercise Rate pursuant to clauses (4) or (5) of this Section 12(a), the holder of such Warrant may receive shares of two or more classes or series of equity of the Company, the exercise rights and the Exercise Rate of each class of equity shall thereafter be subject to further adjustment on terms comparable to those applicable to the Common Stock in this Section 12. The adjustment pursuant to this Section 12(a) shall be made successively each time that any event listed in this Section 12(a) above shall occur.

(b) Adjustment for Rights Issue. In case the Company shall issue to all (or substantially all) holders of Common Stock (other than a distribution covered by paragraph (a) of this Section 12), or shall make a dividend or other distribution to all (or substantially all) holders of Common Stock, consisting exclusively of (i) rights, options or warrants entitling the holders thereof to subscribe for or purchase Common Stock (provided, however, that no adjustment shall be made under this Section 12(b) upon the exercise of such rights, options or warrants) or (ii) securities convertible into or exchangeable for Common Stock (including, without limitation, any rights issuance concurrent with the issuance of Warrants) (provided, however, that no adjustment shall be made under this Section 12(b) upon the conversion or exchange of such securities (other than issuances specified in (i) or (ii) which are made as the result of anti-dilution adjustments set forth in such securities)) at a price per share (determined in the case of such rights, options,

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warrants or convertible or exchangeable securities, by dividing (x) the total consideration payable to the Company upon exercise, conversion or exchange of such rights, options, warrants or convertible or exchangeable securities, by (y) the total number of shares of such class or series of Common Stock covered by such rights, options, warrants or convertible or exchangeable securities) less than the Current Market Price (as determined in accordance with paragraph (e) of this Section 12) on the date fixed for the determination of shareholders entitled to receive such rights, options, or warrants or convertible or exchangeable securities, the number of Warrant Shares for which each Warrant may be exercised shall be determined (and the Exercise Rate shall be appropriately adjusted) by multiplying the number of Warrant Shares issuable upon exercise of such Warrant immediately prior to the close of business on the date fixed for the determination of shareholders entitled to receive such rights, options or warrants, or convertible or exchangeable securities, by a fraction (not less than one) the numerator of which shall be the number of fully diluted shares of Common Stock outstanding immediately after giving effect to such dividend or other distribution (and assuming that such rights, options, warrants or convertible or exchangeable securities had been fully exercised or converted, as the case may be) and the denominator of which shall be the number of fully diluted shares of Common Stock outstanding at the close of business on the date fixed for the determination of shareholders entitled to receive such rights, options, or warrants or convertible or exchangeable securities plus the number of shares of Common Stock which the aggregate consideration (as determined in good faith by the Board) that would be received by the Company for the additional shares of Common Stock to be issued, purchased or subscribed for upon exercise of such rights, options or warrants or upon conversion or exchange of such convertible or exchangeable securities would purchase at the Current Market Price (as determined in accordance with paragraph (e) of this Section 12) on the date fixed for the determination of shareholders entitled to receive such rights, options or warrants, or convertible or exchangeable securities. For the purposes of this paragraph (b), the number of shares of Common Stock at any time outstanding shall include shares issuable in respect of scrip certificates issued in lieu of fractions of Common Stock. This paragraph (b) does not apply to the issuance of Common Stock upon the exercise of any such rights, options or warrants or the conversion or exchange of any such convertible or exchangeable securities for consideration per share of Common Stock less than the Current Market Price, so long as the Warrant holders participate in such offering on the same basis as other stockholders of the Company (as if such Warrant holders had exercised their Warrants immediately prior to the record date relating to such offering, but without requiring any such exercise). The adjustment pursuant to this Section 12(b) shall be made successively each time that any event listed in this Section 12(b) above shall occur and shall be effective immediately after the record date for the determination of stockholders entitled to receive such rights, options, warrants or convertible or exchangeable securities.

(c) Superseding Adjustment. If, at any time (x) after any adjustment in the number of shares issuable upon exercise of the Warrants shall have been made pursuant to Section 12(b) on the basis of the issuance of rights, options or warrants entitling the holders thereof to subscribe for or purchase Common Stock or securities convertible into or exchangeable for Common Stock, or (y) after new adjustments in the number of shares issuable upon exercise of the Warrants shall have been made pursuant to this Section 12(c),

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(1) the right of conversion, exercise or exchange in such rights, options or warrants, or convertible or exchangeable securities shall expire, and the right of conversion, exercise or exchange in respect of any or all of such rights, options or warrants, or convertible or exchangeable securities shall not have been exercised, and/or

(2) the consideration per share for which shares of Common Stock are issuable pursuant to the terms of such rights, options or warrants, or convertible or exchangeable securities shall be increased or decreased by virtue of provisions therein or by virtue of the conversion rate or exchange rate of such security being changed upon the arrival of a specified date or the happening of a specified event or by agreement between the Company and the holders of such securities,

such previous adjustment shall be rescinded and annulled. Thereupon, a recomputation shall be made of the effect of such rights, options or warrants, or convertible or exchangeable securities on the basis of

(3) treating the number of shares of Common Stock, if any, theretofore actually issued or issuable pursuant to the previous exercise of such right of conversion, exercise or exchange as having been issued on the date or dates of such exercise and for the consideration actually received or receivable therefor, and treating the rights, options or warrants, or convertible or exchangeable securities which have expired and shall not have been exercised as if such securities had not been issued, and

(4) with respect to securities as to which the consideration per share of Common Stock has been changed, treating any such rights, options or warrants or convertible or exchangeable securities which then remain outstanding as having been granted or issued immediately after the time of such increase or decrease for the consideration per share for which shares of Common Stock are issuable under such rights, options or warrants or convertible or exchangeable securities, and

in each such case, a new adjustment in the number of shares issuable upon exercise of the Warrants shall be made, which new adjustment shall supersede the previous adjustment so rescinded and annulled. No adjustment in the number of shares issuable upon exercise of the Warrants pursuant to this Section 12(c) shall change the number of or otherwise affect any shares of Common Stock issued prior to such adjustment upon exercise of the Warrants.

(d) Adjustment for Dividends and Other Distributions. In case the Company shall make a dividend or other distribution on the Common Stock (other than a distribution covered by any of paragraphs (a), or (b) of this Section 12), each Warrant holder shall be entitled to receive (and the Company shall pay and/or distribute) the cash, stock or other securities or property to which the Warrant holder would have been entitled by way of dividends and distributions if the Warrant holder had exercised its Warrant(s) immediately prior to the

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declaration of such dividend or the making of such distribution (or, if earlier, the record date therefor) so as to be entitled thereto. Except as provided in this Section 12, no adjustment as to dividends will be made upon the exercise of the Warrants pursuant to Section 7 or exchange of the Warrants pursuant to Section 8.

(e) Current Market Price. For the purpose of any computation under Section 8 or this Section 12, the current market price (the “Current Market Price”) per share of Common Stock of the Company or any other security (the “Applicable Share”) on any date shall be deemed to be the average of the daily closing prices of such Applicable Share on the principal national securities exchange on which the Applicable Shares are listed or admitted to trading or, if the Applicable Shares are not so listed, the average daily closing bid prices of such Applicable Shares on the Nasdaq National Market System if the Applicable Shares are quoted thereon or, if not quoted on the Nasdaq National Market System, the average of the closing bid and asked prices in the over-the-counter market as furnished by any New York Stock Exchange member firm selected from time to time by the Company for that purpose, in any such case, for the twenty (20) consecutive trading days ending on the day before the date in question. If, on any date on which computation of the Current Market Price is to be made hereunder, the Applicable Shares are not so listed or quoted on a national securities exchange or the Nasdaq National Market System or the over-the-counter market (or if the market price is not determinable for at least ten (10) Business Days in such period), the Current Market Price (except as otherwise provided herein) shall be determined by the Board in good faith.

(f) No Amendments. The Company will not, by amendment of its certificate of incorporation or through any consolidation, merger, reorganization, transfer of assets, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Agreement, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the Warrant holders thereof against dilution or other impairment. Without limiting the generality of the foregoing, the Company (i) will take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and non assessable Common Stock on the exercise of the Warrants from time to time outstanding and (ii) will not take any action which results in any adjustment of the number of Warrant Shares if the total number of shares of Common Stock issuable after the action upon the exercise of all of the Warrants would exceed the total number of shares of Common Stock then authorized by the Company’s certificate of incorporation and available for the purposes of issuance upon such exercise.

(g) Voluntary Increases. The Company may, but shall not be obligated to, make such increases in the number of Warrant Shares, in addition to those required by paragraphs (a) through (c) of this Section 12, as it considers to be advisable in order that any event treated for United States federal income tax purposes as a dividend of stock or stock rights shall not be taxable to the recipients, or if that is not possible, to diminish any income taxes that are otherwise payable because of such event; provided that no such adjustment shall be made without the consent of the holders of the Warrants if such adjustment would result in the increase of income tax liabilities of such holders.

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(h) When De Minimis Adjustment May Be Deferred. No adjustment in the number of Warrant Shares shall be required unless such adjustment (plus any other adjustments not previously made by reason of this paragraph (h)) would require an increase or decrease of at least 1.0% in the number of Warrant Shares; provided, however, that any adjustments which by reason of this paragraph (h) are not required to be made shall be carried forward and taken into account in any subsequent adjustment.

(i) Consolidation, Merger, Reorganization or Recapitalization of the Company. In case at any time the Company shall be a party to any transaction (including, without limitation, a merger, consolidation, sale of all or substantially all of the Company’s assets, liquidation or recapitalization of the Common Stock, not subject to adjustment under any of the paragraphs (a) through (g) of this Section 12) in which the previously outstanding Common Stock shall be converted or changed into or exchanged for different securities of the Company or Common Stock or other securities of another corporation or interests in a non-corporate entity or other property (including cash) or any combination of the foregoing (each such transaction being herein called a “Transaction”), then, as a condition of the consummation of the Transaction, lawful and adequate provision shall be made so that each holder of a Warrant, upon the exercise thereof at any time on or after the consummation of the Transaction, shall be entitled to receive, and such Warrant shall thereafter represent the right to receive, in lieu of the Common Stock issuable upon such conversion prior to such consummation, the securities, cash or other property to which such holder would have been entitled upon consummation of the Transaction if such holder had exercised such Warrant immediately prior thereto (subject to adjustments from and after the consummation date as nearly equivalent as possible to the adjustments provided for in this Section 12). The Company will not effect any Transaction unless prior to the consummation thereof each corporation or entity (other than the Company) which may be required to deliver any securities or other property upon the exercise of the Warrants as provided herein shall assume in a written agreement the obligation to deliver to such holder such securities or other property as in accordance with the foregoing provisions such holder may be entitled to receive and agreeing and confirming that all of the outstanding Warrants and this Agreement shall continue in full force and effect, enforceable against the Company and such corporation or entity in accordance with the terms thereof and hereof. The foregoing provisions of this Section 12(i) shall similarly apply to successive mergers, consolidations, sales of assets, liquidations and recapitalizations.

(j) Consideration Received. For purposes of any computation respecting consideration received pursuant to this Section 12, the following shall apply:

(1) in the case of the issuance of shares of Common Stock for cash, the consideration shall be the amount of such cash, provided that in no case shall any deduction be made for any commissions, discounts or other expenses incurred by the Company for any underwriting of the issue or otherwise in connection therewith;

(2) in the case of the issuance of shares of Common Stock for a consideration in whole or in part other than cash, the consideration other than cash shall be deemed to be the fair market value thereof (as determined in good faith by the Board); and

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(3) in the case of the issuance of securities convertible into or exchangeable for shares, the aggregate consideration received therefor shall be deemed to be the consideration received by the Company for the issuance of such securities plus the additional minimum consideration, if any, to be received by the Company upon the conversion or exchange thereof (the consideration in each case to be determined in the same manner as provided in clauses (1) and (2) of this paragraph (j)).

(k) When Issuance or Payment May Be Deferred. In any case in which this Section 12 shall require that an adjustment in the Exercise Rate be made effective as of a record date for a specified event, the Company may elect to defer until the occurrence of such event (i) issuing to the holder of any Warrant exercised after such record date the Warrant Shares and other equity of the Company, if any, issuable upon such exercise over and above the Warrant Shares and other equity of the Company, if any, issuable upon such exercise on the basis of the Exercise Rate and (ii) paying to such holder any amount in cash in lieu of a fractional share pursuant to Section 16; provided, however, that the Company shall deliver to such holder a due bill or other appropriate instrument evidencing such holder’s right to receive such additional Warrant Shares, other equity and cash upon the occurrence of the event requiring such adjustment.

(l) Form of Warrants. Irrespective of any adjustments in the Exercise Price or the Exercise Rate or kind of shares or other assets purchasable upon the exercise of the Warrants, Warrants theretofore or thereafter issued may continue to express the same price and number and kind of shares or other assets as are stated in the Warrants initially issuable pursuant to this Agreement. The Company, however, may at any time in its sole discretion make any change in the form of Warrant certificate that it may deem appropriate to give effect to such adjustments and that does not affect the substance of the Warrant certificate, and any Warrant certificate thereafter issued or countersigned, whether in exchange or substitution for an outstanding Warrant certificate or otherwise, may be in the form as so changed.

(m) Adjustment in Exercise Price. Upon each adjustment in the number of Warrant Shares for which a Warrant is exercisable pursuant to this Section 12, the Exercise Price for such Warrant shall be adjusted to equal an amount per share of Common Stock equal to the Exercise Price before such adjustment multiplied by a fraction, of which the numerator is the number of Warrant Shares for which a Warrant is exercisable immediately before giving effect to such adjustment and the denominator of which is the number of Warrant Shares for which a Warrant is exercisable immediately after giving effect to such adjustment; provided, however, that in no event shall the Exercise Price be reduced below the par value of the Common Stock for which the Warrant is exercisable; provided, further, that if this paragraph (m) shall have any adverse impact on the intended benefit of the Warrants, the Company shall cooperate to maintain the value of such intended benefit of the Warrants, including but not limited to, establishing no par value Common Stock.

SECTION 13. OBTAINING STOCK EXCHANGE LISTING

The Company will use its commercially reasonable best efforts to cause the Warrant Shares, immediately upon their issuance upon the exercise of Warrants, to be listed on

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any domestic national securities exchange or quotation system upon which shares of Common Stock or other securities constituting Warrant Shares are listed or quoted at the time of such exercise.

SECTION 14. REGISTRATION RIGHTS

(a) S-3 Registration. If at any time that the Company is eligible to use Form S-3 or any successor thereto, the holders of Warrants or Warrant Shares holding not less than 25% of the Warrant Shares (including Warrants exercisable therefor) request that the Company file a Registration Statement on Form S-3 or any successor thereto for a public offering of all or any portion of the Warrant Shares held by such holders, then the Company shall use its commercially reasonable best efforts to register, as soon as reasonably practicable but in any event within forty-five (45) calendar days of such request, under the Act on Form S-3 or any successor thereto (an “S-3 Registration”), for public sale in accordance with the method of disposition specified in such notice, the number of Warrant Shares specified in such notice (or otherwise proposed to be offered in such registration) ; provided, however, that (i) no more than two such S-3 Registrations shall be required in any 12-month period, (ii) the Company shall have no obligation to register such Warrant Shares pursuant to this Section 14(a) if (based on the Current Market Price) the number of Warrant Shares specified in such notice would not yield gross proceeds to the selling holders of at least $2,000,000 (based on the Current Market Price), and (iii) the Company shall not be required to cause an S-3 Registration to become effective prior to April 30, 2007. Whenever the Company is required by this Section 14 to use its commercially reasonable best efforts to effect the registration of Warrant Shares, each of the procedures and requirements of Sections 14(b), 14(c), 14(f) and 14(i) (including but not limited to the requirement that the Company notify all holders from whom notice has not been received and provide them with the opportunity to participate in the offering) shall apply to such registration. There is no limitation on the number of registrations pursuant to this Section 14(a) that the Company is obligated to effect.

(b) Demand Registrations.

(1) At any time the Company is not eligible to use Form S-3 or any successor thereto, the holders of Warrants or Warrant Shares holding not less than 25% of the Warrant Shares (including Warrants exercisable therefor) not (i) theretofore effectively registered under the Act and disposed of in accordance with the Registration Statement covering any such Warrants and Warrant Shares or (ii) then saleable by the holder thereof pursuant to Rule 144(k) under the Act shall be entitled to make up to four (4) written requests (each, a “Demand”) of the Company to register all or part of their Warrant Shares (including Warrant Shares issuable upon exercise of their Warrants), under the Act (a “Demand Registration”) on a Registration Statement on Form S-1 or any successor thereof for a public offering of all or any portion of the Warrant Shares held by such holder(s) for sale in accordance with the method of disposition specified in such notice, provided, however, that (i) no Demand may be made until at least one hundred eighty (180) calendar days after the effective date of a

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previous S-3 Registration or a previous registration under which the initiating holders had Piggy-Back Registration Rights and (ii) the Company shall have no obligation to register such Warrant Shares pursuant to this Section 14(b) if (based on the Current Market Price) the number of Warrant Shares specified in such notice (or otherwise proposed to be offered in such registration) would not yield gross proceeds to the selling holders of at least $2,000,000 (based on the Current Market Price).

Within ten (10) calendar days after receipt of such Demand, the Company will serve written notice thereof (the “Company Notice”) to all other holders of Warrants and Warrant Shares. Subject to the provisions of the next succeeding paragraph, the Company shall include in such Demand Registration all Warrant Shares with respect to which the Company receives written requests for inclusion within fifteen (15) calendar days after the delivery of the Company Notice.

If any of the Warrant Shares registered pursuant to a Demand Registration are to be sold in one or more firm commitment underwritten offerings, the Company will also provide written notice to holders of securities of the Company other than the holders of the Warrants and the Warrant Shares, if any, who have piggyback registration rights with respect thereto and will permit all such holders who request to be included in the Demand Registration to include any or all securities of the Company held by such holders in such Demand Registration on the same terms and conditions as the Warrant Shares. Notwithstanding the foregoing, if the managing underwriter or underwriters of the offering to which such Demand Registration relates advises the Company that the total amount of Warrant Shares and securities that such holders of securities of the Company (other than holders of the Warrant Shares) intend to include in such Demand Registration is in the aggregate such as to materially and adversely affect the success of such offering and/or exceeds the number of securities which can be sold in such offering, then (i) first, the amount of securities to be offered for the account of the holders of such other securities of the Company will be reduced, to zero if necessary (pro rata among such holders on the basis of the amount of such other securities to be included therein by each such holder), and (ii) second, the number of Warrant Shares included in such Demand Registration will, if necessary, be reduced and there will be included in such firm commitment underwritten offering only the number of Warrant Shares that, in the opinion of such managing underwriter or underwriters, can be sold without materially and adversely affecting the success of such offering and/or exceeding the number of securities which can be sold in such offering, allocated pro rata among the holders of the Warrants and Warrant Shares on the basis of the number of Warrants or Warrant Shares held by each such holder.

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(2) Selection of Underwriter. Any Demand Registration hereunder shall be on any appropriate form under the Act permitting registration of such Warrant Shares for resale by the holders thereof in the manner or manners designated by them (including, without limitation, pursuant to one or more underwritten offerings). The determination of whether the offering will involve an underwritten offering, and the selection of investment bankers and managers, if any, and counsel for the holders, shall be made by a majority of the holders making such Demand; provided, however, that the selection of investment bankers and managers, if any, and such counsel so selected shall be reasonably satisfactory to the Company. If requested by such holders, the Company shall enter into an underwriting or purchase agreement with an investment banking firm in connection with a Demand Registration containing representations, warranties, indemnities and agreements then customarily included in underwriting or purchase agreements with respect to secondary distributions of securities.

(3) The Company shall file a Registration Statement with respect to each Demand Registration as promptly as practicable following receipt of each Demand and use its commercially reasonable best efforts to cause the same to be declared effective as promptly as practicable following such Demand, but not later than seventy five (75) calendar days after such Demand. Unless all of the Warrant Shares covered by the registration statement have earlier been sold or withdrawn from sale, the Company shall keep any such Registration Statement effective for a period of at lease one hundred and eighty (180) calendar days after such registration statement is first declared effective plus a period equal to (y) any period during which the holders are prohibited from making sales because of any stop order, injunction or other order or requirement of the Commission or any other governmental agency or court plus (z) any period during which the right of holders to make sales pursuant to a Demand Registration is suspended pursuant to paragraph (i) of this Section 14 (the “Demand Period “).

(4) For purposes of determining whether the holders have made a Demand pursuant to Section 14(a), a registration will not count as a Demand Registration unless it is declared effective by the Commission and remains effective until the earlier of such time as all of the Warrant Shares included in such registration have been sold or disposed of or withdrawn from sale by the holders or the expiration of the Demand Period. In addition, a request for registration shall not be deemed to constitute a Demand Registration if: (i) the conditions to closing specified in the purchase agreement or underwriting agreement entered into in connection with such Demand Registration are not satisfied other than by reason of some act or omission by the holders; (ii) the Company voluntarily takes any action (other than as permitted under paragraph (f) of

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this Section 14) that would result in the holders not being able to sell such Warrant Shares covered thereby during the Demand Period; (iii) after it has become effective, such Demand Registration becomes subject to any stop order, injunction or other order or requirement of the Commission or other governmental agency or court and such order, injunction or requirement is not withdrawn or lifted within thirty (30) days, and such Demand Registration has not otherwise remained effective for the Demand Period (including effective periods both before and after the order, injunction or requirement is made or imposed); or (iv) such Demand Registration does not involve an underwritten offering and the holders shall have notified the Company in writing within ten (10) days following any delay or suspension of a Demand Registration imposed under paragraph (f) of this Section 14 by the Company that such holders have determined not to proceed; provided, however, that prior to such a delay under this clause (iv), the holders have not sold all of the Warrant Shares included in such Demand Registration.

(5) The Company further agrees to supplement or amend the registration statement with respect to such Demand Registration, as required by the registration form utilized by the Company or by the Act or as reasonably requested (which request shall result in the filing of a supplement or amendment subject to approval thereof by the Company, which approval shall not be unreasonably withheld) by the holders or any managing underwriter of Warrant Shares to which such Demand Registration relates, and the Company agrees to furnish to the holders (and any managing underwriter) copies, in substantially the form proposed to be used and/or filed, of any such supplement or amendment prior to its being used and/or filed with the Commission.

(c) Holdback Agreements; Restrictions on Public Sale by Holders of Warrant Shares. Each holder of Warrant Shares participating in a registered offering of such Warrant Shares pursuant to this Agreement and the Company agrees, if timely requested in writing by the managing underwriter or underwriters in an underwritten offering, not to effect any public sale or distribution of any Warrant Shares, including a sale pursuant to Rule 144 (except as part of such underwritten offering), during the period beginning ten (10) calendar days prior to, and ending one hundred and eighty (180) calendar days after, the closing date of the underwritten offering made pursuant to such Registration Statement or such shorter period as the managing underwriter shall agree to with respect to any other stockholder of the Company. Such agreement shall be in writing in form reasonably satisfactory to the Company and the managing underwriter.

(d) Piggyback rights. If at any time the Company proposes to file a Registration Statement with the Commission respecting an underwritten offering of any shares of any class of its equity securities for its own account or for the account of a holder of securities of the Company, the Company shall give written notice to all the holders of Warrants or Warrant Shares at least ten (10) calendar days prior to the initial filing of the Registration Statement

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relating to such offering (the “Piggy-Back Registration”). Each holder shall have the right, within five (5) Business Days after delivery of such notice, to request in writing that the Company include all or a portion of the Warrant Shares issued or issuable upon exercise of such holder’s Warrants in such Registration Statement (“Piggy-Back Registration Rights”). The Company may postpone or withdraw the filing or the effectiveness of a Piggyback Registration at any time in its sole discretion. The Company shall include in such Underwritten Offering all of the Warrant Shares that a holder has requested be included. The underwriting agreement for such Underwritten Offering shall provide that each requesting holder shall have the right to sell its Warrant Shares to the underwriters and that the underwriters shall purchase the Warrant Shares at the price paid by the underwriters for the Common Shares sold by the Company and/or selling stockholders, as the case may be.

Notwithstanding the foregoing, if the managing underwriter or underwriters of such offering advises the Company to the effect that the total amount of securities which such holders, the Company and any other Persons having rights to participate in such registration propose to include in such offering is such as to materially and adversely affect the success of such offering and/or exceed the number of securities which can be sold in such offering, then:

(1) if such registration is a primary registration on behalf of the Company, the Company will include therein: (x) first, up to the full amount of securities to be included therein for the account of the Company that, in the opinion of such managing underwriter or underwriters, can be sold, (y) second, up to the full amount of shares held by the Holders (as such term is defined in the Seventh Amended and Restated Investor Rights Agreement dated as of June 12, 2003 by and among InPhonic, Inc. and the investors thereto) that, in the opinion of such managing underwriter or underwriters, can be sold without adversely affecting the success of the offering (allocated pro rata in proportion to the number of shares held by such holders to the extent necessary to reduce the total amount of securities to be included in such offering to the amount recommended by such managing underwriter or underwriters) and (z) third, up to the full amount of the Warrant Shares which such holders propose to include in such registration that, in the opinion of such managing underwriter or underwriters, can be sold without adversely affecting the success of the offering (allocated pro rata in proportion to the number of Warrant Shares held by such holders to the extent necessary to reduce the total amount of securities to be included in such offering to the amount recommended by such managing underwriter or underwriters); and

(2) if such registration is an underwritten secondary registration on behalf of holders of securities of the Company other than the Warrant Shares, the Company will include therein: (w) first, up to the full number of securities of such Persons exercising “demand” registration rights that, in the opinion of such managing underwriter or underwriters, can be sold, (x) second, up to the full amount of shares held by the Holders (as such term is defined in the Seventh Amended and Restated Investor Rights

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agreement dated as of June 12, 2003 by and between InPhonic, Inc. and the investors thereto) that, in the opinion of such managing underwriter or underwriters, can be sold without adversely affecting the success of the offering (allocated pro rata in proportion to the number of shares held by such holders to the extent necessary to reduce the total amount of securities to be included in such offering to the amount recommended by such managing underwriter or underwriters), (y) third, up to the full amount of the Warrant Shares which such holders propose to include in such registration that, in the opinion of such managing underwriter or underwriters, can be sold (allocated pro rata in proportion to the number of Warrant Shares held by such holders to the extent necessary to reduce the total amount of securities to be included in such offering to the amount recommended by such managing underwriter or underwriters) and (z) fourth, all other securities proposed to be sold by any other Persons that, in the opinion of such managing underwriter or underwriters can be sold without adversely affecting the success of the offering (allocated pro rata among such persons in proportion to the number of securities held by such persons, or as the Company may otherwise determine).

(3) If any holder advises the book-runner(s) of any underwritten offering that the Warrant Shares covered by the Registration Statement cannot be sold in such offering within a price range acceptable to such holder, then such holder shall have the right to exclude its Warrant Shares from registration.

If any Piggy-Back Registration is an underwritten primary offering, the Company shall have the right to select the managing underwriter or underwriters to administer any such offering. The Company hereby represents and warrants that the Company is not a party to any agreement or arrangement on the date hereof providing “piggyback” registration rights with respect to shares of the Company that are required by such agreement to be included in any registered offering.

(e) Other Registration. If the Company has previously filed a Registration Statement with respect to the Warrant Shares pursuant to Section 14(a), Section 14(b) or Section 14(d), and if such registration has not been withdrawn or abandoned, the Company shall not be obligated to cause to become effective any other registration of any holder or holders of such securities, until a period of at least one hundred and eighty (180) calendar days from the effective date of such previous registration.

(f) Registration Procedures.

(1) No holder of Warrant Shares may participate in any registration which is underwritten unless such holder (i) agrees to sell such person’s securities on the basis provided in any customary underwriting arrangements approved by the Company to the extent the Company is entitled hereunder to approve such arrangements and (ii) completes and executes all questionnaires, powers of attorney, indemnities, underwriting

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agreements and other documents required under the terms of such customary underwriting arrangements; provided, that no such holder shall be required to make any representations or warranties to or agreements with the Company or the underwriters other than representations, warranties or agreements regarding such holder and its ownership of the securities being registered on its behalf and its intended method of distribution and any other representation required by law; provided, further that, the liability of each such holder shall not be greater in amount than the dollar amount of the proceeds (net of any selling expenses) received by such holder from the sale of the Warrant Shares giving rise to such indemnification.

(2) The Company shall not be obligated to cause any special audit to be undertaken in connection with any registration pursuant to this Agreement unless such audit is required by the Commission or requested by the underwriters in connection with an underwritten offering with respect to such registration.

(3) The Company shall (i) furnish without charge to each selling holder of Warrant Shares named in any Registration Statement, before filing with the Commission, such numbers of copies of any Registration Statement or any prospectus included therein or any amendments or supplements to any such Registration Statement or prospectus (including all documents incorporated by reference after the initial filing of such Registration Statement) as such selling holders of Warrant Shares may reasonably request in order to facilitate the public sale or other disposition of the Warrant Shares covered by such Registration Statement, and (ii) provide each such selling holder of Warrant Shares the opportunity to object to any information pertaining to such selling holder of Warrant Shares and its plan of distribution that is contained therein and make the corrections reasonably requested by such selling holder of Warrant Shares with respect to such information prior to filing such Registration Statement or any prospectus included therein or any amendments or supplements thereto.

(4) The Company shall (i) obtain an opinion of counsel to the Company and updates thereof, addressed to each selling holder of the Warrant Shares covered by any Registration Statements and the underwriters, if any, participating in the underwritten offering of such Warrant Shares, covering the matters (including, without limitation, 10b-5 matters) customarily covered in opinions of counsel to the Company requested in underwritten offerings of equity securities similar to the Warrant Shares, as may be appropriate in the circumstances; and (ii) obtain “cold comfort” letters and updates thereof from the registered independent public accounting firm of the Company, addressed to such selling holder of the Warrant Shares covered by any Registration

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Statement and the underwriters, if any, participating in the underwritten offering of such Warrant Shares, such letters to be in customary form and covering matters of the type customarily covered in “cold comfort” letters in connection with underwritten offerings of equity securities similar to the Warrant Shares, as may be appropriate in the circumstances.

(5) The Company shall make available for inspection by any selling holder of the Warrant Shares covered by any Registration Statement, or any underwriter, if any, participating in the underwritten offering of the Warrant Shares, and any attorney, accountant or other agent retained by any such holder or underwriter (collectively, the “Inspectors”), upon written request, at the offices where normally kept, during reasonable business hours, all pertinent financial and other records and pertinent corporate documents of the Company and its subsidiaries (collectively, the “Records”) as shall be reasonably necessary to enable them to exercise any applicable due diligence responsibilities, and cause the officers, directors and employees of the Company and its subsidiaries to supply all information reasonably requested in writing by any such Inspector in connection with such due diligence responsibilities. Each Inspector shall agree that it will keep the Records confidential and not disclose any of the Records unless (i) the release of such Records is ordered pursuant to a subpoena or other order from a court of competent jurisdiction, (ii) the information in such Records is public or has been made generally available to the public other than as a result of a disclosure or failure to safeguard by such Inspector or (iii) disclosure of such information is, in the reasonable written opinion of counsel for any Inspector, necessary in connection with any action, claim, suit or proceeding, directly or indirectly, involving or potentially involving such Inspector and arising out of, based upon, related to, or involving this Agreement, or any transaction contemplated hereby or arising hereunder.

(6) Notwithstanding anything to the contrary elsewhere in this Agreement or the Warrants, holders of Warrants shall be entitled to specify that their exercise of Warrants pursuant to Section 7 or their exchange of Warrants pursuant to Section 8 may be conditioned upon the closing of the offering that is the subject of a Registration Statement pursuant to this Section 14.

(g) Registration Expenses. The costs and expenses (other than underwriting discount or commission, fees and disbursements of holders’ counsel and such fees for printing, registration and other fees as state securities officials may require any holder pay) of all registrations and qualifications under the Act, and of all other actions that the Company is required to take or effect, shall be paid by the Company (including, without limitation, all registration and filing fees, printing expenses, costs of special audits incident to or required by any such registration (subject to paragraph (g) of this Section 14), and fees and disbursements of counsel for the Company).

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(h) Indemnification by the Company. In the event of any registration (whether or not declared effective by the Commission) under the Act of any Warrant Shares, the Company hereby agrees to indemnify and hold harmless all past or present holders of Warrants or Warrant Shares and their affiliates and its and their respective directors, officers, employees, representatives and agents (collectively, the “Indemnitees”) against any losses, claims, damages or liabilities, joint or several, to which any Indemnitee may become subject under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or proceedings in respect thereof) arise out of or are based upon (i) any untrue statement or alleged untrue statement of any material fact contained, on the effective date thereof, in any Registration Statement under which Warrant Shares were registered under the Act, or in any preliminary prospectus or final prospectus contained therein or any amendment or supplement thereto, (ii) the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading or (iii) any failure or alleged failure of the Company to comply with any applicable statute, rule or regulation in connection with the Registration Statement or the offering, and will reimburse any Indemnitee for any legal or other expenses reasonably incurred by any such Indemnitee in connection with investigating or defending any such loss, claim, damage, liability or proceeding; provided that the Company will not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in such Registration Statement, or in said preliminary or final prospectus or said amendment or supplement, in reliance upon and in conformity with written information furnished by such Person for use in the preparation thereof.

(i) Postponement or Suspension of Registration. Subject to the provisions of this paragraph, the Company shall be entitled to postpone, for a reasonable period of time, the filing or effectiveness of, or suspend the rights of any holders to make sales pursuant to, any Registration Statement otherwise required to be prepared, filed and made and kept effective by it pursuant to Section 14(a), Section 14(b) or Section 14(d) hereunder, in the event that, and for a period of time not to exceed an aggregate of ninety (90) days in any twelve-month period, (i) the Board determines in good faith that the premature disclosure of a material event at such time would be detrimental to the business, operations or prospects of the Company or any Subsidiary and the stockholders of the Company, or (ii) the disclosure otherwise relates to a material business transaction which has not been publicly disclosed and the Board determines in good faith that any such disclosure would jeopardize the success of such transaction, (iii) a holder is holding Warrant Shares covered by a Registration Statement at any time when a prospectus relating thereto is required to be delivered under the Act, upon delivery of a notice to the holders (a “Suspension Notice”) of the occurrence of any event as a result of which the prospectus included in such Registration Statement, as then in effect, could reasonably be expected to include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing; provided, that the Company shall promptly make corrections with respect to such untrue statement or to include such material fact required to be stated therein or necessary to make such statements not misleading in light of the circumstances then existing, or (iv) during

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the period starting with the date thirty (30) days prior to the Company’s estimated date of filing of a registration statement pertaining to Common Stock of the Company and ending ninety (90) days following such estimated date if (A) the Company received such holder’s request for registration after the Company had given written notice, made in good faith, to the holders entitled to registration pursuant to this Section 14 that the Company was commencing to prepare a Company-initiated registration statement, (B) the Company is using its commercially reasonable best efforts to achieve such effectiveness promptly following such period and (C) the holders are entitled to participate in such registration with respect to all of the Warrant Shares held by such holder. If the Company shall postpone the filing of a Registration Statement as set forth above, it shall, as promptly as possible, deliver a certificate signed by an executive officer of the Company to the selling holders as to such determination, and the selling holders shall have the right, in the case of a postponement of the filing or effectiveness of a Registration Statement, upon the affirmative vote of the holders of not less than a majority of the Warrant Shares (or Warrants exercisable for such Warrant Shares) to be included in such Registration Statement, to withdraw the request for registration by giving written notice to the Company within 10 days after receipt of such notice. If the Company shall deliver a Suspension Notice as set forth above, the selling holders shall have the right, in the case of a suspension of the right to make sales, to receive an extension of the registration period equal to the number of days of the suspension.

(j) Default Warrant. If (i) the Registration Statement covering the Warrant Shares required to be filed by the Company pursuant to Section 14(a) or Section 14(b) is not filed on or prior to the required date or not declared effective by the Commission on or prior to the required date, or (ii) after the Registration Statement has been declared effective by the Commission, the Registration Statement ceases for any reason to remain continuously effective as to all securities for which it is required to be effective, or the holders are not permitted to resell their Warrant Shares for more than fifteen (15) consecutive calendar days, and for more than an aggregate of thirty (30) calendar days during any 12-month period (which need not be consecutive calendar days, provided that such number of days shall not include the fifteen (15) calendar days following the filing of any Form 8-K, Form 10-Q, or Form 10-K, or other comparable form, for purposes of filing a post-effective amendment to the Registration Statement), in each case, other than (x) in connection with a delay or suspension pursuant to paragraph (i) of this Section 14 or (y) after such time as all Warrants or Warrant Shares, as the case may be, have been disposed of thereunder or all Warrants and Warrant Shares are eligible to be sold pursuant to Rule 144(k), then, in addition to any rights that a holder may have as a holder of a Warrant, the Company will issue additional Warrants to the holders in such amounts and at such time as shall be determined pursuant to the immediately following paragraph.

Upon and after any failure by the Company described in the immediately preceding paragraph (a “Default”), the Company shall issue to the holders of Warrants and Warrant Shares additional Warrants (“Default Warrants”), at a rate of 11,500 Default Warrants per month (based on twelve 30-day months), for each day during which one or more Defaults continues, provided, that the Company shall not be required to issue in the aggregate more than 137,500 Default Warrants. The Default Warrants shall be in the form of Exhibit A hereto and shall be governed by this Warrant Agreement. Within five (5) Business Days after the end of each month during which a Default occurred or was continuing, each holder of Warrants and Warrant Shares shall be issued Default Warrants equal to the total number of Default Warrants to

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be issued for such month, multiplied by a fraction, the numerator of which is the number of Warrants or Warrant Shares owned by such holder and the denominator of which is the total number of Warrants and Warrant Shares then outstanding, which shall be rounded up to the next whole share.

(k) Governmental Filings. The Company shall assist and cooperate with any reasonable request by any holder of any Warrant which is required to make any governmental filings or obtain any governmental approvals prior to or in connection with any exercise or exchange of any Warrant.

SECTION 15. LIMITATION ON OWNERSHIP OF COMMON STOCK.

The Company shall not repurchase shares of its Common Stock or engage in other transactions if, after giving effect to such proposed stock repurchase or other transaction, The Goldman Sachs Group, Inc. and/or Goldman, Sachs & Co. (together with their affiliates, collectively “GS”) would beneficially own more than nineteen and one-half percent (19.50%) of the shares of Common Stock then outstanding (i.e., not on a fully diluted basis) (the “Cap”). In determining compliance with this Section 15, the Company shall rely on the Schedule 13-D, Schedule 13-G or similar filings made by GS with the Commission for purposes of determining the number of shares of Common Stock beneficially owned by GS at any time; provided, however, that the Company shall be entitled to determine compliance with this Section 15 assuming that GS beneficially owns no more than the same number of shares beneficially owned by GS immediately after giving effect to the issuance of the Warrants on the Closing Date, increased by any shares owned by GS as a result of actions taken by the Company (including in each case securities which are convertible into such shares). Nothwithstanding the foregoing, if the Company notifies GS of its desire to enter into a transaction that would cause GS’s beneficial ownership to exceed the Cap, GS agrees to negotiate with the Company in good faith to find a mutually acceptable means for the Company to proceed with such transaction while maintaining GS’s beneficial ownership at an amount that does not exceed the Cap.

SECTION 16. FRACTIONAL INTERESTS

The Company shall not be required to issue fractional Warrant Shares on the exercise or exchange of Warrants, although it may do so in its sole discretion. If more than one Warrant shall be presented for exercise or exchange in full at the same time by the same holder, the number of full Warrant Shares which shall be issuable upon the exercise or exchange thereof shall be computed on the basis of the aggregate number of Warrant Shares purchasable on exercise or exchange of the Warrants so presented. If any fraction of a Warrant Share would, except for the provisions of this Section 16, be issuable upon the exercise or exchange of any such Warrants (or specified portion thereof), the Company shall notify the Warrant holder exercising or exchanging the Warrants in writing of the amount to be paid in lieu of the fraction of a Warrant Share and concurrently shall pay to the Warrant holder an amount in cash equal to the Current Market Value per Warrant Share, as determined on the day immediately preceding the date the Warrant is presented for exercise or exchange, multiplied by such fraction, computed to the nearest whole cent.

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SECTION 17. NOTICES TO WARRANT HOLDERS; RIGHTS OF WARRANT HOLDERS.

Upon any adjustment of the number of Warrant Shares pursuant to Section 12, the Company shall promptly thereafter (i) file with the Register Office a certificate of the Senior Financial Officer of the Company (unless the Purchasers request a certificate of a firm of independent public accountants of recognized standing selected by the Board (who may be the regular auditors of the Company), in which case, the Company shall instead file with the Register Office a certificate of such independent public accountants) setting forth the number of Warrant Shares (or portion thereof) issuable after such adjustment, upon exercise of a Warrant, and setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based, and (ii) give to each of the registered holders of the Warrant certificates at his or her address appearing on the Warrant register written notice of such adjustments by first-class mail, postage prepaid. Where appropriate, such notice may be given in advance and included as a part of the notice required to be mailed under the other provisions of this Section 17.

In case:

(a) the Company shall authorize the issuance of any dividend or other distribution on the Common Stock, whether in cash, equity, or other securities, evidences of indebtedness or other property;

(b) the Company shall authorize any action which would require an adjustment of the number of Warrant Shares pursuant to Section 12;

(c) the Company shall authorize any tender offer or exchange offer by the Company for Common Stock, or Common Stock open market repurchase program, in either case, involving more than 3% of the outstanding Common Stock; or

(d) of the voluntary or involuntary dissolution, liquidation or winding up of the Company;

then the Company shall cause to be filed with the Register Office and shall give to each of the registered holders of the Warrant certificates at the address appearing on the Warrant register, a written notice delivered by any method provided in Section 18, at least fifteen (15) Business Days (or ten (10) Business Days in any case specified in clause (b) above) prior to the applicable record date hereinafter specified, or, in the case of events for which there is no record date, at least fifteen (15) Business Days before the effective date of such event or the commencement of such tender offer, exchange offer, or repurchase program. Any written notice provided pursuant to this Section 17 shall state (i) the date as of which the holders of record of the Common Stock are entitled to receive any such rights, options, warrants or distribution is to be determined, or (ii) the commencement date of any tender offer, exchange offer or repurchase program for the Common Stock, or (iii) the date on which any such consolidation, merger, conveyance, transfer, reclassification, dissolution, liquidation or winding up is expected to become effective or consummated, and the date as of which it is expected that holders of record of Common Stock shall be entitled to exchange such shares for securities or other property, if any, deliverable upon such consolidation, merger, conveyance, transfer, reclassification, dissolution, liquidation or

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winding up. The failure to give the notice required by this Section 17 or any defect therein shall not affect the legality or validity of any issuance, right, option, warrant, distribution, tender offer, exchange offer, repurchase program, consolidation, merger, conveyance, transfer, reclassification, dissolution, liquidation or winding up, or the vote upon any action.

Nothing contained in this Agreement or in any of the Warrant certificates shall be construed as conferring upon the holders thereof the right to vote or to consent or to receive notice of meetings of shareholders or the election of directors of the Company or any other matter, or any other rights of shareholders of the Company, including any right to receive dividends. In addition, the holders of Warrant certificates shall have no preemptive rights and shall not be entitled to share in the assets of the Company in the event of the liquidation, dissolution or winding up of the Company’s affairs.

SECTION 18. NOTICES

Any notice or demand authorized by this Agreement to be given or made by the Company or by the registered holder of any Warrant certificate to the Company shall be sufficiently given or made when deposited in the mail, first class or registered, postage prepaid, addressed, or when sent via facsimile, as follows:

InPhonic, Inc.

1010 Wisconsin Avenue, Suite 600

Washington D.C., 20007

Facsimile no.:

Attention: Chief Financial Officer

with copies to:

Skadden, Arps, Slate, Meagher & Flom LLP

Four Times Square

New York, NY 10036-6522

Facsimile no.:

Attention: Howard Ellin.

Any notice pursuant to this Agreement to be given by the Company to the Purchasers shall be sufficiently given when deposited in the mail, first-class or registered, postage prepaid, addressed (until another address is provided in writing by the Purchasers to the Company) to the Purchasers, or when sent via facsimile, as follows:

Goldman, Sachs & Co. L.P.

One New York Plaza

New York, New York 10004

Facsimile no.:

Attention: Nick Advani and Connie Shoemaker

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with copies to:

Fried, Frank, Harris, Shriver & Jacobson LLP

One New York Plaza

New York, New York 10004

Facsimile no.:

Attention: F. William Reindel and Craig F. Miller

Citicorp. North America, Inc.

2 Penns Way, Suite 100

New Castle, DE 19720

AP InPhonic Holdings, LLC

c/o Liberty Associated Partners, LP

3 Bala Plaza East, Suite 502

Bala Cynwyd, PA 19004

Attn: Scott G. Bruce, Managing Director

                     tel

                     fax

with copies to:

Dechert LLP

30 Rockefeller Plaza

New York, NY 10112

Attn: Henry N. Nassau and Jeffrey M. Katz

Tel:

Fax:

SECTION 19. SUPPLEMENTS AND AMENDMENTS

Any amendment or supplement to this Agreement shall require the written consent of the Company and registered holders of fifty percent in interest of the then outstanding Warrants (excluding any Warrants that may be held by the Company, any parent holding company of the Company, or any subsidiary or controlled affiliate thereof); provided, however, the consent of each holder of a Warrant affected shall be required for any amendment of this Section 19 or pursuant to which the Exercise Price would be increased or the number of Warrant Shares for or into which a Warrant may be exercised or exchanged would be decreased (other than in connection with a waiver of any provisions of Section 12).

SECTION 20. SUCCESSORS

All the covenants and provisions of this Agreement by or for the benefit of the Company, Warrant holders or holders of Warrant Shares shall bind and inure to the benefit of their respective successors and assigns hereunder.

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SECTION 21. EXPIRATION OF WARRANTS; TERMINATION

This Agreement shall terminate on the date on which all Warrants have been exercised, exchanged or lapsed, except that the provisions of Sections 13, 14, 15, and 18 through 28 shall survive such termination. Each Warrant not (x) exercised pursuant to Section 7 or (y) exchanged pursuant to Section 8, in each case, prior to the close of business on the Expiration Date shall become void and all rights thereunder and all rights in respect thereof under this Agreement shall cease as of such time.

SECTION 22. GOVERNING LAW

THIS AGREEMENT AND EACH WARRANT CERTIFICATE ISSUED HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION 5-1401 AND SECTION 5-1402 OF THE NY GENERAL OBLIGATION LAW).

SECTION 23. BENEFITS OF THIS AGREEMENT

Nothing in this Agreement shall be construed to give to any Person other than the Company, the registered holders of Warrant certificates and the holders of Warrant Shares any legal or equitable right, remedy or claim under this Agreement; but this Agreement shall be for the sole and exclusive benefit of the Company and the registered holders of the Warrant certificates. Whether or not expressly stated, references to Warrant holders or holders of Warrants shall mean and include the holders of Warrant Shares for purposes of Sections 13, 14, 15 and 17 through 28 as appropriate for the context.

SECTION 24. HEADINGS

The descriptive headings of the several Sections and paragraphs of this Agreement are inserted for convenience only, do not constitute a part of this Agreement and shall not affect in any way the meanings or interpretation of this Agreement.

SECTION 25. SUBMISSION TO JURISDICTION

If any action, proceeding or litigation shall be brought by the Purchasers, any holder of Warrants, any holder of Warrant Shares or the Company in order to enforce any right or remedy under this Agreement, the parties hereto hereby consent and will submit, and will cause each of its subsidiaries to submit, to the jurisdiction of any state or federal court of competent jurisdiction sitting within the area comprising the Southern District of New York on the date of this Agreement. The parties hereto hereby irrevocably waive any objection, including, but not limited to, any objection to the laying of venue or based on the grounds of forum non conveniens, which they may now or hereafter have to the bringing of any such action, proceeding or litigation in such jurisdiction.

SECTION 26. WAIVER OF JURY TRIAL

THE PARTIES HERETO HEREBY WAIVE ANY RIGHT ANY OF THEM MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY ACTION, PROCEEDING OR LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OF THE WARRANTS.

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SECTION 27. SERVICE OF PROCESS

Nothing herein shall affect the right of any holder of a Warrant to serve process in any other manner permitted by law or to commence legal proceedings or otherwise proceed against the Company in any other jurisdiction.

SECTION 28. COUNTERPARTS

This Agreement may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument.

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed, as of the day and year first above written.

INPHONIC, INC.
By:	/s/ David A. Steinberg
Name:	David A. Steinberg
Title:	CEO
GOLDMAN, SACHS & CO.
By:	/s/ Kenneth M. Eberts
Name:	Kenneth M. Eberts
Title:	Managing Director, Attorney-in-Fact
CITICORP NORTH AMERICA, INC.
By:	/s/ Scot P. French
Name:	Scot P. French
Title:	Managing Director/Vice President
AP INPHONIC HOLDINGS, LLC
By:	/s/ David J. Berkman
Name:	David J. Berkman
Title:	Managing Partner

Signature page to Warrant Agreement

EXHIBIT A

Form of Warrant Certificate

[Face]

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR THE SECURITIES LAWS OF ANY JURISDICTION. SUCH SECURITIES MAY NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED, ASSIGNED, ENCUMBERED, HYPOTHECATED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO (I) A REGISTRATION STATEMENT WITH RESPECT TO SUCH SECURITIES THAT IS EFFECTIVE UNDER SUCH ACT OR APPLICABLE STATE SECURITIES LAW, OR (II) ANY EXEMPTION FROM REGISTRATION UNDER SUCH ACT, OR APPLICABLE STATE SECURITIES LAW, RELATING TO THE DISPOSITION OF SECURITIES, INCLUDING RULE 144.

[Date]
No.	Warrants

Warrant Certificate

INPHONIC, INC.

This Warrant Certificate certifies that                         , or registered assigns, is the registered holder of                          Warrants (the “Warrants”) to purchase an aggregate of                          shares of Common Stock, par value $.01 per share (the “Common Stock”), of InPhonic, Inc., a Delaware corporation (the “Company”). Each Common Stock Warrant entitles the holder upon exercise to purchase from the Company at any time after the date hereof and prior to the close of business on November 7, 2011 (or, if such day is not a Business Day, the next succeeding Business Day) (the “Expiration Date”) one (1) fully paid and non-assessable shares of Common Stock (a “Warrant Share”) upon surrender of this Warrant Certificate and payment in full for such Warrant Share at the Register Office of the Company, subject to the conditions set forth herein and in the Warrant Agreement referred to on the reverse hereof. The number of Warrant Shares purchasable upon exercise thereof is subject to adjustment upon the occurrence of certain events set forth in the Warrant Agreement.

Reference is hereby made to the further provisions of this Warrant Certificate set forth on the reverse hereof, which provisions shall for all purposes have the same effect as though fully set forth at this place.

THIS WARRANT CERTIFICATE SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION 5-1401 AND SECTION 5-1402 OF THE NY GENERAL OBLIGATION LAW).

- A-1 -

IN WITNESS WHEREOF, InPhonic, Inc., has caused this Warrant Certificate to be signed by its duly authorized officer as of the date first above written.

INPHONIC, INC., a Delaware corporation

By:

Name:

Title:

- A-2 -

Form of Warrant Certificate

[Reverse]

The Warrants evidenced by this Warrant are part of a duly authorized issue of Warrants entitling the holder on exercise or exchange to receive shares of Common Stock of the Company, and are issued or to be issued pursuant to a Warrant Agreement, dated as of November 7, 2006 (the “Warrant Agreement”), between the Company and the other parties thereto, which Warrant Agreement is hereby incorporated by reference in and made a part of this instrument and is hereby referred to for a description of the rights, limitation of rights, obligations, duties and immunities thereunder of the Company and the holders (the words “holders” or “holder” meaning the registered holders or registered holder) of the Warrants. All terms not otherwise defined herein shall have the meanings set forth in the Warrant Agreement. A copy of the Warrant Agreement may be obtained by the holder hereof upon written request to the Company.

Warrants may be exercised or exchanged at any time after the date hereof and prior to the close of business on the Expiration Date. The holder of Warrants evidenced by this Warrant Certificate may exercise such Warrants by surrendering this Warrant Certificate, with the form of election to purchase set forth hereon properly completed and executed, together with payment to the Company of the Exercise Price for each Warrant then exercised. In addition, the holder of the Warrants may exchange the Warrants, in whole or in part and at any time or times, into Common Stock by surrendering to the Company this Warrant Certificate with the form of notice of exchange set forth hereon properly completed and executed. In the event that upon any exercise or exchange of Warrants evidenced hereby the number of Warrants exercised or exchanged shall be less than the total number of Warrants evidenced hereby, there shall be issued prior to the close of business on the Exercise Date to the holder hereof or his assignee a new Warrant Certificate evidencing the number of Warrants not exercised or exchanged. No adjustment shall be made for any dividends on any Common Stock issuable upon exercise or exchange of this Warrant.

The Warrant Agreement provides that upon the occurrence of certain events the number of Warrant Shares may, subject to certain conditions, be adjusted. The Company will not be required to issue fractional Warrant Shares on the exchange of Warrants, although it may do so in its sole discretion. If fractional shares are not issued, the Company will pay the cash value of such fractional shares as determined in accordance with the provisions of the Warrant Agreement.

Warrant certificates, when surrendered at the Register Office of the Company by the registered holder thereof in person or by legal representative or attorney duly authorized in writing, may be exchanged, in the manner and subject to the limitations provided in the Warrant Agreement, but without payment of any service charge, for another Warrant certificate or Warrant certificates of like tenor evidencing in the aggregate a like number of Warrants.

Upon due presentation for registration of transfer of this Warrant certificate at the office of the Company, a new Warrant certificate or Warrant certificates of like tenor and evidencing in the aggregate a like number of Warrants shall be issued to the transferee(s) in

- A-3 -

exchange for this Warrant certificate, subject to the limitations provided in the Warrant Agreement, without charge except for any tax or other governmental charge imposed in connection therewith.

The Company may deem and treat the registered holder(s) thereof as the absolute owner(s) of this Warrant certificate (notwithstanding any notation of ownership or other writing hereon made by anyone), for the purpose of any exercise or exchange hereof, of any distribution to the holder(s) hereof, and for all other purposes, and the Company shall not be affected by any notice to the contrary. Neither the Warrants nor this Warrant certificate entitles any holder hereof to any rights of a stockholder of the Company.

- A-1 -

Form of Election to Purchase

(To Be Executed Upon Exercise of Warrant)

The undersigned hereby irrevocably elects to exercise the right, represented by this Warrant certificate, to receive pursuant to the terms hereof and Section 8 of the Warrant Agreement [insert number] shares of Common Stock and hereby tenders for payment for such shares to the order of InPhonic, Inc. cash in the amount of $                        , in accordance with the terms hereof and the Warrant Agreement.

The undersigned requests that a certificate for such shares be registered in the name of                                                  , whose address is                                                   and that such shares be delivered to                                                   whose address is                                                  .

If said number of Warrant Shares is less than all of the shares of Common Stock purchasable hereunder, the undersigned requests that a new Warrant certificate representing the remaining balance of such shares be registered in the name of                                                  , whose address is                                                  , and that such Warrant certificate be delivered to                                                  , whose address is                                                  .

	(Signature)
Date:

- A-5 -

Form of Notice of Exchange

(To Be Executed Upon Exchange of Warrant)

The undersigned hereby irrevocably elects to exercise the right, represented by this Warrant certificate, to exchange pursuant to the terms hereof and Section 8 of the Warrant Agreement [insert number] of the Warrants represented hereby into the number of shares of Common Stock determined in accordance with the terms hereof and the Warrant Agreement.

The undersigned requests that a certificate for such shares be registered in the name of                                                  , whose address is                                                   and that such shares be delivered to                                                   whose address is                                                  .

If said number of Warrant Shares is less than all of the shares of Common Stock purchasable hereunder, the undersigned requests that a new Warrant certificate representing the remaining balance of such shares be registered in the name of                                                  , whose address is                                                  , and that such Warrant certificate be delivered to                                                  , whose address is                                                  .

	(Signature)
Date:

- A-6 -

EXHIBIT B

Form of Transfer

(To Be Executed Upon Transfer of Warrant)

FOR VALUE RECEIVED, the undersigned registered holder of this Warrant certificate hereby sells, assigns and transfers unto the Assignee(s) named below (including the undersigned with respect to any Warrants constituting a part of the Warrants evidenced by this Warrant certificate not being assigned hereby) all of the rights of the undersigned under this Warrant certificate, with respect to the number of Warrants set forth below:

Name of Assignee(s) Address Social Security, EIN or other identifying number of assignee(s) Number of Warrants

and does hereby irrevocably constitute and appoint the Company as the undersigned’s attorney to make such transfer on the register maintained by the Company for that purpose, with full power of substitution in the premises.

Date:

(Signature of Registered Holder)

(Street Address)

(City) (State) (Zip Code)

- B-1 -

EX-10.30

EXHIBIT 10.30

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (the “Agreement”) effective May 1, 2004 (the “Effective Date”) is by and between InPhonic, Inc., a Delaware corporation with an address at 1010 Wisconsin Avenue N.W., Suite 600, Washington, DC 20007 (the “Company”) and Michael Walden, an individual with an address at 65 Hull Avenue, Annapolis, Maryland 21403 (the “Executive”).

WHEREAS, the parties desire to set forth the terms and conditions upon which the Company will employ the Executive.

NOW, THEREFORE, in consideration of the promotion of the Executive and related additional benefits of such promotion, as detailed herein, the mutual covenants and promises contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties, intending to be legally bound, agree as follows:

1. Position. The Executive shall assume the title of “Senior Vice President of Corporate Development” for the Company and Executive hereby accepts such employment with the Company. The Executive shall report directly to the Chief Executive Officer (the “CEO”) of the Company or such other individual as determined by the CEO.

2. Employment. The Executive shall continue in his position of Chief Information Officer until otherwise determined by the CEO or his employment terminates pursuant to this Agreement (the “Employment Period”).

3. Duties.

3.1. Executive agrees to undertake the duties and responsibilities inherent in the position of Senior Vice President of Corporate Development, which may encompass different or additional duties as may, from time to time, be assigned, altered or modified by the CEO. The

Executive agrees to abide by the written rules, personnel practices and policies of the Company and any reasonable change thereof that may be adopted at any time by the CEO and communicated in writing to the Executive or otherwise generally publicized by the Company.

3.2. Executive shall devote Executive’s full business time and attention to performing his duties hereunder and shall use his commercially reasonable efforts to further the business and affairs of the Company and to work with other employees of the Company in a competent and professional manner and generally to promote the interests of the Company. The Executive shall not engage in consulting work or any trade or business for his own account or for or on behalf of any other person, firm or corporation that competes, conflicts or interferes with the performance of his duties hereunder in any way.

4. Compensation. As remuneration for all services to be rendered by the Executive hereunder, and as consideration for complying with the covenants contained herein, the Company shall pay and provide to the Executive the following compensation:

4.1 Base Salary. The Company shall pay to the Executive a base salary of One hundred fifty thousand dollars ($150,000) per annum (the “Salary”). The Salary shall be payable in accordance with the Company’s normal payroll schedule and practices. Such Salary shall be reviewed annually to ascertain whether, in the judgment of the CEO, such Salary should be increased based on the performance of and contributions made by the Executive during the preceding year, inflation, and other factors deemed appropriate by the CEO.

4.2. Bonus. Executive shall have the opportunity to earn an annual bonus in such amount as determined in the discretion of the CEO (the “Bonus”). Payment of the Bonus shall be determined in the good faith discretion of the CEO based on the achievement of the Executive’s overall performance and the financial performance of the Company. The Bonus

2

shall be payable within thirty (30) days after the end of each calendar year or as otherwise reasonably determined by the CEO based on the results of such immediately preceding calendar year.

4.3. Incentive Plans; Stock Options. The Executive shall be eligible to participate in such profit-sharing, stock option, bonus, incentive and performance based award programs as are made available to any other executive employees of the Company; provided, further, nothing in this Agreement shall affect, amend or otherwise modify any incentive stock options granted to the Executive pursuant to the terms and conditions of the InPhonic.com, Inc. 1999 Stock Incentive Plan (the “Common Stock Options”) and related incentive stock option agreements.

4.4. All amounts of salary, bonus or other compensation hereunder shall be subject to such withholding as is required by law or otherwise agreed to by the Company and Executive.

5. Benefits; Expenses.

5.1. The Executive shall be entitled to the benefits available to any other executive employees of the Company pursuant to Company programs, including, by way of illustration, but not limitation, paid holidays, sick leave, dental, accident or health insurance programs of the Company, as and to the extent that any such programs are or may from time to time be in effect. Notwithstanding anything to the contrary contained herein, Executive shall be entitled to three (3) weeks of paid vacation per year which is commensurate with the Company’s vacation policy, which shall be taken at times as the CEO reasonably approves.

5.2. The Company shall pay or reimburse Executive for all reasonable, ordinary, client-related business or entertainment expenses incurred in the performance of his services hereunder in accordance with Company policy in effect from time to time; provided, however, that any expenditure in excess of five hundred dollars ($500) available to the Executive for such travel,

3

entertainment and other expenses shall require advance approval by the CEO. The Executive shall submit vouchers and receipts for all expenses for which reimbursement is sought in accordance with the Company’s standard policies.

6. Employment Period; Disability; Termination.

6.1. Termination For Cause. Nothing in this Agreement shall be construed to prevent the CEO from terminating the Executive’s employment under this Agreement for Cause. The Company and the Executive shall have no further obligations under this Agreement after the effective date of such termination, except as set forth in Sections 7, 8, and 9 of this Agreement. Such provisions shall remain in full force and effect for the periods referenced in such Sections subsequent to the effective date of the termination of the Executive.

In the event that the Executive’s employment is terminated for Cause, the Executive shall be entitled to (i) the Salary at the rate in effect at such time through the effective date of such termination (including any accrued but unused vacation time); (ii) any rights or benefits available under applicable employee benefit programs then in effect and in which the Executive was a participant at the time of such termination, to the extent that such rights or benefits have vested in accordance with the terms of such programs; and (iii) reimbursement of any expenses in accordance with Section 5.2.

For purposes of this Agreement, the term “Cause” shall mean (i) the conviction of, or the plea of non contendere by, the Executive for any misdemeanor or felony or other crime involving fraud or moral turpitude; (ii) any act or omission constituting a material dereliction of the obligations of the Executive including, but not limited to, willful and continued failure to perform the duties of Executive under this Agreement, except in cases involving the mental or physical incapacity or disability of the Executive; in which case the Executive may be terminated

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in the event that the incapacity or disability is a “Permanent Disability”, as defined in Section 6.3., (iii) negligence or intentional misconduct by Executive materially injurious to the Company, (iii) any breach by Executive of the provisions of Sections 7, 8 or 9 of this Agreement; (iv) use of alcohol or abuse of controlled substances interfering with performance of Executive’s duties hereunder, or (v) a material violation of Company policy or any action which constitutes a violation of any law, rule or regulation applicable to the Company’s business operations.

6.2. Termination Without Cause. The Company shall retain the right to terminate the Executive without Cause, at any time. In the event that the Executive’s employment is terminated without Cause pursuant to this Section 6.2 , the Executive shall be entitled to: (i) a payment equal to three (3) months of Salary, at the rate then in effect (the “Severance”), paid at the discretion of the Company, in either one lump sum amount or three (3) equal monthly payments, commencing as of the effective date of termination; provided, further, should the Executive obtain full or part time employment or provide any consulting services anytime during the three (3) month period, the Company’s obligation to provide any Severance shall immediately cease; (ii) any rights or benefits available under applicable employee benefit programs then in effect and in which the Executive was a participant at the time of such termination, to the extent such rights or benefits have vested in accordance with the terms of such programs; (iii) on the effective date of termination, the Salary at the rate in effect at such time through the effective date of such termination (including any accrued but unused vacation time); and (iii) reimbursement of any expenses in accordance with Section 5.2.

6.3. Termination Due to Permanent Disability. In the event that the Executive suffers a Permanent Disability, as hereinafter defined, during his employment with the Company, the Company may terminate this Agreement by providing at least thirty (30) days written notice to

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the Executive. The effective date of such termination shall be the last day of such thirty (30) day notice period.

In the event that the Executive’s employment is terminated due to his Permanent Disability, the Executive or his legal representative or court appointed guardian shall be entitled to: (i) any rights or benefits available under applicable employee benefit programs then in effect and in which the Executive was a participant at the time of such termination, to the extent that such rights or benefits have vested in accordance with the terms of such programs; (ii) the Salary at the rate in effect at such time through the effective date of such termination (including any accrued but unused vacation time); and (ii) reimbursement of any expenses in accordance with Section 5.2.

The term “Permanent Disability” for purposes of this Agreement, shall mean the inability of the Executive to render full and effective services hereunder by reason of permanent physical or mental infirmity, resulting from illness, accident or otherwise, despite any reasonable accommodation by the Company, as such term is defined by the ADA in the event Executive is unable to perform due to a disability, as such term is defined by the ADA, for more than thirty (30) consecutive calendar days during any twelve (12) month period.

6.4. This Agreement shall terminate immediately upon the Executive’s death or the effective date of the Executive’s resignation or Retirement (as defined under the then established rules of the Company’s retirement plans); provided, however, that in the event that the Executive’s employment terminates upon his Retirement, the provisions of Sections 7 and 8 will remain in full force and effect for the periods referenced in such Sections subsequent to such termination. In the event that the Executive’s employment is terminated by reason of death, resignation or Retirement, the Executive (or his estate as the case may be) shall be entitled to (i)

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the Salary at the rate in effect at such time through the effective date of such termination (including any accrued but unused vacation time); (ii) any rights or benefits available under applicable employee benefit programs then in effect and in which the Executive was a participant at the time of such termination, to the extent that such rights or benefits have vested in accordance with the terms of such programs; and (iii) reimbursement of any expenses in accordance with Section 5.2.

7. Confidential Information. The Executive shall not (for his own benefit or the benefit of any person or entity other than the Company) use or disclose any of the Company’s trade secrets or other confidential information. For purposes of this Agreement, the term “trade secrets or other confidential information” includes, by way of example, matters of a technical nature, “know-how”, computer programs (including documentation of such programs), research projects, and matters of a business nature, such as proprietary information about costs, profits, markets, sales, lists of customers, and other information of a similar nature discovered during performance of this Agreement that is generally understood in the industry as being trade secret, confidential and/or proprietary, that is designated as being, or reasonably should be understood to be, confidential or proprietary information of the Company, either verbally or in writing, or that is designated as representing trade secrets of the Company, either verbally or in writing except to the extent such information (1) is generally known to the public; or (2) is known by the Executive prior to the disclosures under this Agreement; or (3) has been acquired by the Executive from a third party having no confidentiality agreement with the Company; or (4) is required to be disclosed by law or judicial or administrative process. In order for material disclosed to be subject to the protections provided, such disclosure does not have to be in writing

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or other tangible form and/or clearly marked as proprietary. The parties agree that the terms of this Section shall survive termination, with or without Cause, of this Agreement.

7.1. Except as otherwise provided in Section 6.2 above, the Executive agrees that for twelve (12) months following termination of his employment, with or without Cause, Executive will not contact any Customer or Employee of the Company to request, induce or attempt to induce such Customer or Employee to terminate any business relationship, agreement or employment with the Company. The term “Customer” is defined as any entity that the Company is conducting business with or has entered into a contractual relation with as of the date of termination of this Agreement and the term “Employee” is defined as any individual employed by the Company as a partner, contractor, sub-contractor, employee, consultant or other business associate of the Company as of the date of termination of this Agreement and during the six (6) month period immediately preceding termination of this Agreement.

7.2. The Executive acknowledges that the markets served by the Company are global in scope and are not dependent on the geographic location of the executive personnel or the businesses by which they are employed.

7.3. All files, memoranda, notes, and other work product in tangible form in connection with the employment of Executive, including any marketing plans, deliverables and reports prepared by Executive for the Company under this Agreement, and which may or may not be either confidential or proprietary, and all other materials prepared for and delivered to the Company, shall be the property of the Company. Upon termination of the Executive’s employment, either with or without Cause, or at any other time upon request of the Company, the Executive agrees to deliver to the Company the following original documents and any copies thereto without retaining any copies of (i) all documents, files, notes, manuals, memoranda,

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databases, and/or computer programs, reflecting any confidential and/or proprietary information of the Company whatsoever or otherwise relating to the business of the Company and its affiliates or parent company, (ii) lists of customers, vendors, suppliers, and leads or referrals thereto, and (iii) any computer equipment, home office equipment, automobile or any other business equipment, if any, that the Executive may then possess or have under his control; provided, however, that in each of the categories (i) through (iii) above, the Executive’s personal rolodex, shall be excluded.

7.4. The Company shall retain its entire right, title and interest in and to (including the right to reproduce, modify, display, produce derivative works of, translate, publish, sell, use, dispose of, and to authorize others to do so, and the right to patent as the sole inventor, copyright and to register such copyright in the Company’s or its nominee’s name), all deliverables, and copyrightable materials conceived or first produced under this Agreement by the Executive, and Executive agrees that such copyrightable materials are works made for hire under the copyright laws of the United States. The Executive further agrees during the term of this Agreement and at all times thereafter, at the Company’s sole cost and expense, to execute all documents and perform all lawful acts which the Company reasonably considers necessary or advisable to secure its rights hereunder and to carry out the intent of this Agreement.

8. Restrictions; Employees, Remedies. The parties hereto recognize that Executive’s services are special and unique and that his compensation is partly in consideration of and conditioned upon Executive agreeing to the provisions of Section 7 hereto and the provisions of this Section 8, and that such covenants are essential to protect the business and goodwill of the Company. Accordingly, Executive agrees that, during the Employment Period and until one (1) year after the last date on which Executive is employed by the Company,

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Executive will not (i) render any service (as an employee, officer, director, consultant or otherwise) to any unit or division of any entity involved directly in the Business, or (ii) make or hold any investment in any entity in the Business other than that the ownership of not more than five percent (5%) of the listed stock of any publicly traded entity. The uppercased term “Business” shall mean, for purposes of this Agreement, the provision of loyalty, affinity, branding, and marketing services of the sort performed by Company during the course of Executive’s employment with the Company, as well as any other services provided by the Company at any time during Executive’s employment with the Company.

8.1. The parties acknowledge and agree that the restrictions set forth in Section 7 and in this Section 8 are reasonable and necessary to protect the Company’s legitimate business interests. Executive acknowledges that a breach by Executive of such provisions will cause the Company irreparable harm; therefore, the Company shall be entitled, in addition to any other right and remedy it may have, at law or in equity, to an injunction, without posting of any bond or other security, enjoining or restraining Executive from any violation of such provisions.

8.2. The parties agree that the restrictions set forth and incorporated herein are reasonable in order to protect the Company. If any of such restrictions shall be deemed to be unenforceable by reason of the extent, duration, geographical scope, or other provisions, then the parties contemplate that the court shall reduce such extent, duration, geographical scope, or other provisions and enforce this Agreement to the fullest extent in its reduced form for all purposes.

9. Intellectual Property. During the Employment Period, the Executive shall disclose to the Company all ideas, concepts, inventions, product ideas, new products, discoveries, methods, software, business plans and business opportunities, which may or may not be patentable or copyrightable, or otherwise protected by then-applicable laws governing intellectual

10

property and intellectual property rights, that are developed by the Executive through the use of Company resources that relate directly to the Company’s business. The Executive agrees that such property and rights will be the property of the Company and that, at the Company’s request and cost, he will do whatever is reasonably necessary to secure for the Company the rights thereto by patent, copyright or otherwise. Executive acknowledges and agrees that his obligations with respect to Company property discussed in this paragraph shall survive the termination of this Agreement.

10. Representation and Warranty. Executive represents and warrants to the Company that Executive is not subject to any non-compete, non-solicitation, or other restriction which may prevent Executive from performing the services contemplated by this Agreement.

11. Waivers. No delay or waiver by either party of any breach or non-performance of any provisions or obligations of this Agreement shall be deemed to be a waiver of any preceding or succeeding breach of the same or any other provision of this Agreement.

12. Notices. All notices or other communications required or permitted under this Agreement shall be in writing addressed to the parties at the addresses set forth in the first paragraph of this Agreement and shall be deemed to be given upon the earlier of (i) actual delivery by hand, or (ii) three days after being mailed by registered or certified mail, return receipt requested.

13. Headings. The headings appearing in this Agreement are for convenience of reference only and in no way define, limit or affect the scope or substance of any section of this Agreement.

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14. Governing Law. This Agreement shall be governed by, construed and enforced in accordance with the laws of the State of Maryland, without giving effect to the principles of conflicts of law thereof.

15. Heirs, Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon both parties and their respective heirs, personal representatives, successors and assigns. The parties understand that the obligations of the Executive are personal and may not be assigned by him.

16. Publicity. Neither party may issue, without the prior written consent of the other party, any press release or make any public announcement with respect to this Agreement or the employment relationship between the Company and the Executive. Following the Effective Date of this Agreement and regardless of any dispute that may arise in the future, the Executive and the Company jointly and mutually agree that neither shall disparage, criticize or make statements which are negative, detrimental or injurious to the other party.

17. Continuing Obligations. The provisions of Sections 7, 8, 9, 16, and 17 shall survive the termination or expiration of this Agreement.

18. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which taken together shall constitute one and the same instrument.

19. Severability. In case any one or more of the provisions of this Agreement shall be held by any court of competent jurisdiction to be illegal, invalid or unenforceable in any respect, such provision shall be of no force and effect, but the illegality, invalidity or

12

unenforceability of any other provision of this Agreement shall be construed as if such illegal, invalid or unenforceable provision had never been contained in this Agreement.

20. Entire Agreement. This Agreement contains the entire understanding of the Executive and the Company with respect to the employment of the Executive by the Company and supercedes any and all prior understandings of the parties hereto, whether written or oral; provided, however, the parties agree that the terms and conditions of the Agreement of Invention, NonDisclosure and NonCompetition Agreement, dated June 7, 2000, signed by the parties (the “NonCompetition Agreement”) shall remain in full force and effect and to the extent such NonCompetition Agreement conflicts with Sections 7, 8 or 9 of this Agreement, the terms of the NonCompetition Agreement shall govern and control with respect to Section 7, 8 and 9 of this Agreement. This Agreement may not be amended, modified, altered or rescinded in any manner, except by written instrument signed by both of the parties to this Agreement.

IN WITNESS WHEREOF, the parties having read, understood and agreed to the foregoing terms and conditions, have signed below:

INPHONIC, INC.	EXECUTIVE
/s/ David A. Steinberg	/s/ Michael Walden
Name  David A. Steinberg Title: CEO	Michael Walden

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EX-21.1

Exhibit 21.1

Subsidiaries of InPhonic:

CAIS Acquisition II, LLC

Mobile Technology Services, LLC

EX-23.1

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

We have issued our reports dated May 31, 2007, accompanying the consolidated financial statements and schedule (which report expressed an unqualified opinion and contains an explanatory paragraph relating to the adoption of SFAS No. 123R, “Share Based Payment,” effective January 1, 2006) and management’s assessment of the effectiveness of internal control over financial reporting included in the Annual Report of Inphonic, Inc., and subsidiaries on Form 10-K for the year ended December 31, 2006. We hereby consent to the incorporation by reference of said reports in the Registration Statement of Inphonic, Inc., and subsidiaries on Form S-8 (File No 333-123601).

/s/Grant Thornton LLP

McLean, Virginia

May 30, 2007

EX-31.1

EXHIBIT 31.1

CERTIFICATION PURSUANT TO

SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

I, David A. Steinberg, certify that:

1. I have reviewed this Annual Report on Form 10-K for the period ended December 31, 2006 of InPhonic, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

Date: May 31, 2007

/s/ DAVID A. STEINBERG

David A. Steinberg

Chairman of the Board and Chief Executive Officer

(Principal Executive Officer)

EX-31.2

EXHIBIT 31.2

CERTIFICATION PURSUANT TO

SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

I, George Z. Moratis, certify that:

1. I have reviewed this Annual Report on Form 10-K for the period ended December 31, 2006 of InPhonic, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

Date: May 31, 2007

/s/ GEORGE Z. MORATIS

George Z. Moratis

Executive Vice President

and Chief Accounting Officer

(Principal Financial and Accounting Officer)

EX-32.1

EXHIBIT 32.1

Certification of Principal Executive Officer

Pursuant to 18 U.S.C. 1350

(Section 906 of the Sarbanes-Oxley Act of 2002)

I, David A. Steinberg, Chairman and Chief Executive Officer (principal executive officer) of InPhonic, Inc. (the “Registrant”), certify that to the best of my knowledge, based upon a review of the Annual Report on Form 10-K for the period ended December 31, 2006 of the Registrant (the “Report”):

(1) The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

	/s/ DAVID A. STEINBERG
Name:	David A. Steinberg
Date:	May 31, 2007

EX-32.2

EXHIBIT 32.2

Certification of Principal Financial Officer

Pursuant to 18 U.S.C. 1350

(Section 906 of the Sarbanes-Oxley Act of 2002)

I, George Z. Moratis, Executive Vice President and Chief Accounting Officer (principal financial and accounting officer) of InPhonic, Inc. (the “Registrant”), certify that to the best of my knowledge, based upon a review of the Annual Report on Form 10-K, as amended for the period ended December 31, 2006 of the Registrant (the “Report”):

(1) The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

	/s/ GEORGE Z. MORATIS
Name:	George Z. Moratis
Date:	May 31, 2007