Part It Part I should be completed before beginning Part II. Background: In the inidal contract negotiation stage, the contract price with SM was $10.1 million in cash. However, as part of the final contract negotiations, SM agreed to give EYE SPY its old surveillance equipment in exchange for a credit of $100 000. It is expected that this old surveillance equipment will not be decommissioned until the new equipment is operational. Based on its extensive coupononce, EVE SPY'S management believes it s probable that the estimated fair value of the old equipment $ $115 0CC. There was also a provision in the contract that SM would receive a discount (based on a typical credit raine for a customer with Ski's characteristics in this industry) from the contract price of $10 million if they paid within three days of when the contract was signed. EYE SPY determined a discount of $500,000 for this financing based on applying the typical credit rate for the equipment and integration services to be delivered at the end of year one and the monthly delivery of maintenance services in year two through 5 x of the contract. SM wired $9.5 million to EYE SPY two days after the contract was signed. In the interest of tull and expanded disclosure, EYE SPY has decided not to apply the practical expodion: in ASC CCG. 10 32 18. Due to deep security concerns and recent losses of proprietary information, SM also offered a bonus to EYE SPY If the integration was completed early and BYE SPY agreed to pay a penalty if the integration was completed late. BYE SPY has a large number of contracts with bonus characteristics similar to the contract with SM. The following is the schedule of the potential bonus or penalty. While no spacing Outcome s probable, BYE SPY's management assessment of the fil hood of completing the integration in the speckled time frame is based on significant historical experience with similar integra: on jobs