EXECUTION COPY

 

EX – 10.4

 

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SECURED LENDER WARRANT AGREEMENT

 

Dated as of

 

December 12, 2003

 

among

 

DDI CORP.

 

and

 

Mellon Investor Services LLC

 

as the Warrant Agent

 

and

 

JPMorgan Chase Bank

 

as the Administrative Agent

 

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TABLE OF CONTENTS

 

     Page

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ARTICLE 1. Defined Terms

   1

SECTION 1.1.    Definitions

   1

SECTION 1.2.    Other Definitions

   6

SECTION 1.3.    Rules of Construction

   6

ARTICLE 2. Warrant Certificates

   6

SECTION 2.1.    Issuance and Dating; Terms of Warrants

   6

SECTION 2.2.    Execution and Countersignature

   7

SECTION 2.3.    Certificate Register

   8

SECTION 2.4.    Transfer and Exchange

   8

SECTION 2.5.    Legends

   9

SECTION 2.6.    Replacement Certificates

   9

SECTION 2.7.    Temporary Certificates

   10

SECTION 2.8.    Cancellation

   10

ARTICLE 3. Exercise Terms

   10

SECTION 3.1.    Exercise Price

   10

SECTION 3.2.    Exercise Periods

   10

SECTION 3.3.    Expiration

   10

SECTION 3.4.    Manner of Exercise

   11

SECTION 3.5.    Issuance of Warrant Shares

   11

SECTION 3.6.    Fractional Warrant Shares

   12

SECTION 3.7.    Reservation of Warrant Shares

   12

SECTION 3.8.    Compliance with Law

   12

ARTICLE 4. Release of Warrants from Escrow

   13

SECTION 4.1.    Terms of Release

   13

SECTION 4.2.    Earn-In Release (an “Earn-In Release”)

   13

SECTION 4.3.    Retirement Release (a “Retirement Release”)

   14

SECTION 4.4.    Deadlock

   14

SECTION 4.5.    Release Procedures

   15

ARTICLE 5. Antidilution Provisions

   15

SECTION 5.1.    Changes in Common Stock

   15

SECTION 5.2.    Cash Dividends and Other Distributions.

   15

SECTION 5.3.    Rights Issue

   16

SECTION 5.4.    Issuance of Additional Shares of Common Stock.

   17

SECTION 5.5.    Combination; Liquidation.

   18

SECTION 5.6.    Tender Offers; Exchange Offers

   19

 

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SECTION 5.7.    Other Events

   19

SECTION 5.8.    Current Market Value

   19

SECTION 5.9.    Superseding Adjustment

   20

SECTION 5.10.  Minimum Adjustment

   21

SECTION 5.11.  Notice of Adjustment

   21

SECTION 5.12.  No Adjustment Under Certain Circumstances

   21

SECTION 5.13.  Notice of Certain Transactions

   22

SECTION 5.14.  Adjustment to Warrant Certificate

   22

SECTION 5.15.  Adjustment of Per Share Warrant Price

   22

ARTICLE 6. Rights of Holders

   23

SECTION 6.1.    Registration Rights

   23

SECTION 6.2.    No Voting Rights; Limitations of Liability

   23

SECTION 6.3.    Convertible Securities

   23

ARTICLE 7. Warrant Agent

   23

SECTION 7.1.    Appointment of Warrant Agent

   23

SECTION 7.2.    Rights and Duties of Warrant Agent

   24

SECTION 7.3.    Individual Rights of Warrant Agent

   26

SECTION 7.4.    Warrant Agent’s Disclaimer

   26

SECTION 7.5.    Compensation and Indemnity

   26

SECTION 7.6.    Successor Warrant Agent

   26

ARTICLE 8. Miscellaneous

   28

SECTION 8.1.    Reports

   28

SECTION 8.2.    Persons Benefiting

   28

SECTION 8.3.    Amendment

   28

SECTION 8.4.    Notices

   29

SECTION 8.5.    Business Days.

   30

SECTION 8.6.  GOVERNING LAW

   30

SECTION 8.7.    Successors

   30

SECTION 8.8.    Counterparts

   30

SECTION 8.9.    Table of Contents

   30

SECTION 8.10.  Severability

   30

SECTION 8.11.  Entire Agreement

   30

 

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EXHIBIT A

  

-

  

Form of Warrant Certificate

EXHIBIT B

  

-

  

Form of Election to Purchase Warrant Certificates

EXHIBIT C

  

-

  

Form of Assignment

EXHIBIT D

  

-

  

Schedule of Fees

ANNEX A

  

-

  

List of Initial Lenders and Warrant Shares Distribution

ANNEX B

  

-

  

Release Certificate

 

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SECURED LENDER WARRANT AGREEMENT, dated as of December 12, 2003 (this
“Agreement”), among DDi Corp., a Delaware corporation (the “Company”), Mellon
Investor Services LLC, a New Jersey limited liability company, as Warrant Agent
(in such capacity, the “Warrant Agent”), and JPMorgan Chase Bank, as
Administrative Agent on behalf of the Lenders listed on Annex A hereto (in such
capacity, the “Administrative Agent”).

 

W I T N E S S E T H :

 

WHEREAS, it is a condition to the obligations of the Lenders under the Second
Amended and Restated Credit Agreement, dated as of December 12, 2003 (the
“Credit Agreement”), among Dynamic Details, Incorporated, DDi Capital Corp., the
Lenders from time to time parties thereto and the Administrative Agent and the
Restructuring Support Agreement, dated as of August 1, 2003, as amended on
August 7, 2003 and August 19, 2003 (the “Restructuring Support Agreement”),
among the Company, DDi Intermediate Holdings Corp., DDi Capital Corp., Dynamic
Details, Incorporated, Dynamic Details, Incorporated, Silicon Valley and their
respective subsidiaries and affiliates, the Administrative Agent and the
Consenting Lenders, and it is a condition to the effectiveness of the Debtors’
Modified First Amended Joint Plan of Reorganization, dated as of August 30, 2003
(as may be further amended, the “Plan”), as confirmed by Order of the United
States Bankruptcy Court for the Southern District of New York entered December
2, 2003 (the “Confirmation Order”) that the Company execute and deliver (i) this
Agreement, (ii) the Warrant Escrow Agreement, dated the date hereof (the
“Warrant Escrow Agreement”), between the Company and Mellon Investor Services
LLC, as Warrant Escrow Agent (in such capacity, the “Warrant Escrow Agent”), and
to deposit with the Warrant Escrow Agent thereunder Warrants (the “Warrants”) to
purchase from the Company 3,051,507 shares of Common Stock of the Company
representing ten percent (10%) of the Common Stock of the Company on a Diluted
Basis (as defined herein) on the Closing Date and (iii) the Registration Rights
Agreement, dated the date hereof (the “Registration Rights Agreement”), between
the Company and the Administrative Agent on behalf of the Holders;

 

NOW, THEREFORE, in consideration of the premises and mutual covenants contained
herein, the parties hereto hereby agree as follows:

 

ARTICLE 1.

 

Defined Terms

 

SECTION 1.1. Definitions. All terms defined in the Credit Agreement shall have
such defined meanings when used herein or in any Exhibit hereto unless otherwise
defined herein or therein. As used in this Agreement, the following terms shall
have the following meanings:

 

“Affiliate” means, as to any Person, any other Person which, directly or
indirectly, is in control of, is controlled by, or is under common control with,
such Person. For purposes of this definition, “control” of a Person means the
power, directly or indirectly, either to (a) vote 10% or more of the securities
having ordinary voting power for the election of directors of such Person or (b)
direct or cause the direction of the management and policies of such Person,
whether by contract or otherwise.

 

1

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“Board” means the Board of Directors of the Company or any committee thereof
duly authorized to act on behalf of such Board of Directors.

 

“Business Day” means a day other than a Saturday, Sunday or other day on which
commercial banks in New York City are authorized or required by law to close.

 

“Cashless Exercise Ratio” means a fraction, the numerator of which is the excess
of the Current Market Value per share of Common Stock on the date of exercise
over the Exercise Price per share as of the date of exercise and the denominator
of which is the Current Market Value per share of the Common Stock on the date
of exercise.

 

“Change of Control”, with respect to the Company, shall be considered to occur
if:

 

(a) any Person or group (within the meaning of Rules 13d-3 and 13d-5 under the
Securities Exchange Act of 1934, as amended, as in effect on the Restatement
Effective Date) is or becomes the beneficial owner, directly or indirectly, of
more than fifty percent (50%) of the total voting power of the voting stock of
the Company (provided that for the purposes of this clause, such Person shall be
deemed to beneficially own any voting stock of a Person held by any other Person
(the “parent entity”) if such person is the beneficial owner, directly or
indirectly, of more than fifty percent (50%) of the voting power of the voting
stock of such parent entity) or such Person or group has the power, directly or
indirectly, to elect a majority of the members of the board of directors of the
Company;

 

(b) there is a sale of all or substantially all of the assets of the Company to
another Person or the merger or consolidation of the Company with or into
another Person or the merger of another person with or into the Company, or if
the securities of the Company that are outstanding immediately prior to such
transaction and which represent 100% of the aggregate voting power of the voting
stock of the Company are changed into or exchanged for cash, securities, or
property, unless pursuant to such transaction such securities are changed into
or exchanged for, in addition to any other consideration, securities of the
surviving person or transferee that represent, immediately after such
transaction, a majority of the aggregate voting power of the voting stock of the
surviving person or transferee; or

 

(c) the Company is dissolved or liquidated.

 

“Closing Date” means the “Restatement Effective Date” as such term is defined in
the Credit Agreement.

 

“Combination” means an event in which the Company consolidates with, merges with
or into, or sells, transfers or otherwise disposes of all or substantially all
its property, assets or business to another Person, and shall include, without
duplication, a Change of Control with respect to the Company.

 

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“Commitments” has the meaning assigned to this term in the Credit Agreement.

 

“Common Stock” means the new common stock, $0.001 par value, of the Company
together with any other equity securities that may be issued by the Company in
substitution therefor.

 

“Convertible Securities” means (i) options to purchase or rights to subscribe
for Common Stock, (ii) securities by their terms convertible into or
exchangeable for Common Stock or (iii) options to purchase or rights to
subscribe for such convertible or exchangeable securities.

 

“Convertible Subordinated Notes” means, collectively, the 5¼% Convertible
Subordinated Notes due 2008 and the 6¼% Convertible Subordinated Notes due 2007
of the Company.

 

“Convertible Subordinated Note Holders” means, collectively, the holders as of
the Closing Date of the 5¼% Convertible Subordinated Notes due 2008 and the 6¼%
Convertible Subordinated Notes due 2007 of the Company.

 

“Current Market Value” has the meaning set forth in Section 5.8 of this
Agreement.

 

“Deadlock Period” has the meaning set forth in Section 4.4 of this Agreement.

 

“Earn-In Date” means December 12, 2005, the date which is two years after the
Closing Date.

 

“Exercise Date” has the meaning set forth in Section 3.5 of this Agreement.

 

“Exercise Price” has the meaning set forth in Section 3.1 of this Agreement.

 

“Expiration Date” means December 31, 2008.

 

“Fair Value” has the meaning set forth in Section 5.2 of this Agreement.

 

“Holder” means the duly registered holder of a Warrant under the terms of this
Agreement and the Warrant Escrow Agreement.

 

“Houlihan” means Houlihan Lokey Howard & Zukin Capital, financial advisors to
the Company.

 

“Houlihan Note” means the promissory note issued on the Closing Date by the
Company to Houlihan in the amount of $500,000, which, if not paid in full by
March 31, 2004, shall be convertible into 200,945 shares of Common Stock, as
adjusted in accordance with the terms thereof.

 

3

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“Independent Valuation Firm” means an investment banking firm of nationally
recognized standing that is, in the reasonable judgment of the Person engaging
such firm, qualified to perform the task for which it has been engaged. Such
Independent Valuation Firm shall be selected by the Company and approved by the
Required Lenders.

 

“Initial Lenders” means the Lenders listed in Annex A.

 

“Lenders” means the lenders party to the Credit Agreement and restructuring and
exchanging Commitments pursuant to the Credit Agreement on the Closing Date and
the permitted assignees and transferees of their rights hereunder and under the
Credit Agreement.

 

“Management Incentive Plan” means the 2003 Management Equity Incentive Plan of
the Company and its Subsidiaries.

 

“Management Options” means the Tranche A and Tranche B management options issued
or issuable to the Company’s management employees under the Management Incentive
Plan of the Company and its Subsidiaries.

 

“Management Securities” means 50% of the Tranche A1 Management Options, 50% of
the Tranche A2 Management Options, 50% of the Tranche A3 Management Options and
1,250,000 shares of Common Stock reserved for issuance under the Management
Incentive Plan.

 

“New Common Shareholders” means the former Convertible Subordinated Note Holders
receiving new Common Stock of the Company on the Closing Date.

 

“New Senior Accreting Notes” means the new 16% Senior Accreting Notes due 2009
of the Company to be issued on the Closing Date.

 

“New Senior Accreting Note Holders” means the holders of the New Senior
Accreting Notes.

 

“Officer” means the Chairman of the Board, the President, any Vice President,
the Chief Financial Officer or the Treasurer of the Company.

 

“Per Share Warrant Price” has the meaning set forth in Section 5.15 of this
Agreement.

 

“Person” means any individual, corporation, partnership, joint venture, limited
liability company, association, joint-stock company, trust, unincorporated
organization, government or any agency or political subdivision thereof or any
other entity.

 

“Purchased Shares” has the meaning set forth in Section 5.6 of this Agreement.

 

“Registrar” has the meaning set forth in Section 3.7 of this Agreement.

 

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“Registration Rights Agreement” means the New Common Stock Registration Rights
Agreement, dated as of the date hereof, among the Company, the Lenders, the New
Senior Accreting Note Holders and the New Common Shareholders.

 

“Release Certificate” means a certificate, substantially in the form attached
hereto as Annex B, jointly executed and delivered by the Administrative Agent
and the Company to the Warrant Agent in order to obtain release from escrow of
some or all of the Warrants under the procedure described herein in Section 4.2
or Section 4.3, as applicable.

 

“Release Date” means the first Business Day following the Earn-In Date.

 

“Release Ratio” means, for the purposes of any determination thereof on any
date, the ratio of (i) the aggregate principal amount of Commitments of a Lender
or its predecessor(s) in interest under the Credit Agreement on the Closing Date
to (ii) the aggregate principal amount of all outstanding Commitments under the
Credit Agreement on the Closing Date; provided, however, that in no event shall
the aggregate of all such ratios exceed 1.0 to 1.0.

 

“Required Lenders” has the meaning assigned to this term in the Credit
Agreement.

 

“SEC” means the Securities and Exchange Commission (or any successor thereto).

 

“Securities Act” means the Securities Act of 1933, as amended.

 

“Senior Discount Warrants” means the warrants of the Company issued on the
Closing Date to the New Senior Accreting Note Holders.

 

“Success Fees” has the meaning assigned to this term in the Credit Agreement.

 

“Successor Company” has the meaning set forth in Section 5.5 of this Agreement.

 

“Time of Determination” has the meaning set forth in Section 5.8 of this
Agreement.

 

“Transfer Agent” has the meaning set forth in Section 3.5 of this Agreement.

 

“Voting Stock” of a corporation means all classes of capital stock of such
corporation then outstanding and normally entitled to vote in the election of
directors.

 

“Warrant Certificates” means the certificates evidencing the Warrants to be
delivered pursuant to this Agreement, substantially in the form of Exhibit A
hereto.

 

“Warrant Shares” means the shares of Common Stock of the Company to be issued
and received, or issued and received, as the case may be, upon exercise of the
Warrants.

 

5

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SECTION 1.2. Other Definitions.

 

Term

--------------------------------------------------------------------------------

   Defined in
Section

--------------------------------------------------------------------------------

   

“Agreement”

   Preamble    

“Cashless Exercise”

   3.4    

“Certificate Register”

   2.3    

“Company”

   Preamble    

“Confirmation Order”

   Recitals    

“Credit Agreement”

   Preamble    

“Diluted Basis”

   2.1(b)    

“Earn-In Release”

   4.2    

“Plan”

   Recitals    

“Registration Rights Agreement”

   Recitals    

“Retirement Release”

   4.3    

“Successor Company”

   5.4(a)    

“Warrant Agent”

   Preamble    

“Warrant Escrow Agent”

   Recitals    

“Warrant Escrow Agreement”

   Recitals    

“Warrants”

   Recitals    

 

SECTION 1.3. Rules of Construction. Unless the text otherwise requires:

 

(a) a term has the meaning assigned to it;

 

(b) an accounting term not otherwise defined has the meaning assigned to it in
accordance with generally accepted accounting principles as in effect from time
to time;

 

(c) “or” is not exclusive;

 

(d) “including” means including, without limitation; and

 

(e) words in the singular include the plural and words in the plural include the
singular.

 

ARTICLE 2.

 

Warrant Certificates

 

SECTION 2.1. Issuance and Dating; Terms of Warrants. (a) The Warrants shall be
initially issued on the Closing Date (the Company shall promptly notify the
Warrant Agent of such date and until then, the Warrant Agent shall not be deemed
to have knowledge of such date) and shall be deposited with the Warrant Escrow
Agent pursuant to the terms of the Warrant Escrow Agreement. The Warrant
Certificates will be issued in registered form as definitive

 

6

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Warrant Certificates, substantially in the form of Exhibit A, which is hereby
incorporated in and expressly made a part of this Agreement. The Warrant
Certificates may have notations, legends or endorsements required by law, stock
exchange rule, agreements to which the Company is subject, if any, or usage
(provided that any such notation, legend or endorsement is in a form acceptable
to the Company and does not affect the rights, immunities, duties or liabilities
of the Warrant Agent) and shall bear the legend required by Section 2.5. Each
Warrant shall be dated the date of its countersignature. The terms of the
Warrants set forth in Exhibit A are part of the terms of this Agreement.

 

(b) Each Warrant shall, when the Warrant Certificate or Certificates therefore
are countersigned by the Warrant Agent, entitle the Holder(s) thereof, subject
to and upon compliance with the provisions of this Agreement, to purchase one
(1) share of Common Stock, which number of shares of Common Stock, in the
aggregate for all Warrants, shall be equal to 3,051,507 which is equal to ten
percent (10.0%) of the sum of (i) the number of shares of Common Stock
outstanding as of the close of business on the Closing Date and (ii) without
duplication, the number of additional shares of Common Stock not then
outstanding, which are issuable upon exercise or conversion of the Warrants, the
Senior Discount Warrants and the Management Securities (“Diluted Basis”). The
number of Warrant Shares issuable upon exercise of a Warrant shall be subject to
adjustment from time to time as set forth in Article 5 hereof.

 

SECTION 2.2. Execution and Countersignature. (a) With respect to the Warrants to
be issued on the Closing Date (the Company shall promptly notify the Warrant
Agent of such date and until then, the Warrant Agent shall not be deemed to have
knowledge of such date), one or more Warrant Certificates as specified by the
Administrative Agent representing the Warrants shall be executed in blank on
behalf of the Company by manual or facsimile signature by one Officer and
attested by its Secretary or an Assistant Secretary under its corporate seal
which may be impressed, affixed, imprinted or reproduced on such Warrant
Certificates or may be in facsimile form. The Warrant Agent is hereby instructed
and authorized to countersign such Warrant Certificate(s) by manual or facsimile
signature, and such Warrant Certificate(s) shall be delivered in accordance with
Section 2.1 hereof.

 

(b) With respect to all other Warrants, the Warrant Certificates therefor shall
be executed on behalf of the Company by one Officer and attested by its
Secretary or an Assistant Secretary under its corporate seal. Such signature may
be manual or facsimile signature. The Company’s seal shall be impressed,
affixed, imprinted or reproduced on the Warrant Certificates and may be in
facsimile form. If an Officer whose signature is on a Warrant Certificate no
longer holds that office at the time the Warrant Agent countersigns the Warrant
Certificate, the Warrant Certificate shall be valid nevertheless. A Warrant
Certificate shall not be valid until an authorized signatory of the Warrant
Agent manually countersigns the Warrant Certificate. The signature shall be
conclusive evidence that the Warrant Certificate has been countersigned under
this Agreement.

 

(c) Upon written order from the Warrant Agent, the Company shall execute and
deliver to the Warrant Agent, and the Warrant Agent is hereby instructed and
authorized to countersign and deliver to the Warrant Escrow Agent, Warrant
Certificates registered in the

 

7

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name or names and for such number of Warrants as shall be specified by the
Warrant Agent in such order in exchange for Warrant Certificate(s) then held by
the Warrant Escrow Agent for a like number of Warrants. To the extent the
Warrant Certificate(s) delivered by the Warrant Escrow Agent to the Warrant
Agent represent a greater number of Warrants than specified in the order from
the Warrant Agent, the Company shall execute and deliver to the Warrant Agent,
and the Warrant Agent is hereby instructed and authorized to countersign and
deliver to the Warrant Escrow Agent, Warrant Certificates in blank for such
excess number of Warrants to be held in escrow by the Warrant Escrow Agent
pursuant to the Warrant Escrow Agreement.

 

(d) The Warrant Agent may appoint an agent reasonably acceptable to the Company
to countersign the Warrant Certificate. Unless limited by the terms of such
appointment, such agent may countersign the Warrant Certificate whenever the
Warrant Agent may do so. Each reference in this Agreement to countersignature by
the Warrant Agent includes countersignature by such agent. Such agent will have
the same rights as the Warrant Agent for service of notices and demands.

 

SECTION 2.3. Certificate Register. The Warrant Agent shall keep at its office
designed for such purpose a register (“Certificate Register”) of the Warrant
Certificates and of their transfer and exchange. The Certificate Register shall
show the names and addresses of the respective Holders and the date and number
of Warrants evidenced on the face of each of the Warrant Certificates. The
Company and the Warrant Agent may deem and treat the Person in whose name a
Warrant Certificate is registered as the absolute owner of such Warrant
Certificate for all purposes whatsoever and neither the Company nor the Warrant
Agent shall be affected by notice to the contrary.

 

SECTION 2.4. Transfer and Exchange. (a) When Warrants are presented to the
Warrant Agent with a written request to register the transfer of such Warrants
or to exchange such Warrants for an equal number of Warrants of other authorized
denominations, the Warrant Agent shall register the transfer or make the
exchange as requested if it is instructed by the Company to do so in writing and
its reasonable requirements for such transaction are met, including for instance
delivery of an Assignment in the form of Exhibit C hereto.

 

(b) (i) To permit registrations of transfers and exchanges, the Company shall
execute and the Warrant Agent is hereby instructed and authorized to countersign
Warrant Certificates as required pursuant to the provisions of this Section 2.4.

 

(ii) All Warrant Certificates issued upon any registration of transfer or
exchange of Warrants shall be the valid obligations of the Company, entitled to
the same benefits under this Agreement, as the Warrant Certificates surrendered
upon such registration of transfer or exchange.

 

(iii) Prior to due presentment for registration of transfer of any Warrant, the
Warrant Agent and the Company may deem and treat the Person in whose name any
Warrant is registered as the absolute owner of such Warrant and neither the
Warrant Agent nor the Company shall be affected by notice to the contrary.

 

8

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(iv) No service charge shall be made to a Holder for any registration of
transfer or exchange upon surrender of any Warrant Certificate at the office of
the Warrant Agent maintained for that purpose. However, the Company may require
payment of a sum sufficient to cover any tax or other governmental charge that
may be imposed in connection with any registration of transfer or exchange of
Warrant Certificates. The Warrant Agent shall have no duty or obligation to take
any action under any Section of this Agreement which requires the payment by a
Holder of applicable taxes and governmental charges which are due and payable
unless and until the Warrant Agent is satisfied that all such taxes and/or
charges have been paid.

 

(c) Prior to the Release Date, no Holder may sell or transfer Warrants except to
a Person who is (i) is an Affiliate of such Holder or (ii) is, or will become
concurrently with such transfer, a Lender under the Credit Agreement. Any such
sale or transfer shall also comply with the restrictions set forth in Section
10.6 of the Credit Agreement.

 

SECTION 2.5. Legends. Each Warrant Certificate evidencing the Warrants (and all
Warrant Certificates issued in exchange therefor or substitution thereof) and
each certificate representing the Warrant Shares shall bear a legend in
substantially the following form:

 

“THIS WARRANT AND THE WARRANT SHARES ISSUABLE UPON EXERCISE HEREOF HAVE BEEN
ISSUED PURSUANT TO THE JOINT PLAN OF REORGANIZATION (THE “PLAN”) OF DDI CAPITAL
CORP. AND DDI CORP. (THE “DEBTORS”) IN THE CASE OF THE DEBTORS FILED IN THE
UNITED STATES BANKRUPTCY COURT FOR THE SOUTHERN DISTRICT OF NEW YORK (THE
“BANKRUPTCY COURT”), CASE NO. 03-15261 (SMB) (JOINTLY ADMINISTERED). THE PLAN
HAS BEEN CONFIRMED BY THE BANKRUPTCY COURT AND THIS WARRANT AND ANY WARRANT
SHARE ISSUABLE UPON EXERCISE HEREOF AND ANY INTEREST THEREIN IS EXEMPT FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), AND ANY STATE AND LOCAL SECURITIES LAWS AND IS FREELY TRANSFERABLE
PURSUANT TO SECTION 1145(A) OF THE BANKRUPTCY REFORM ACT OF 1978, AS AMENDED, AS
SET FORTH IN TITLE 11 OF THE UNITED STATES CODE, 11 U.S.C. §§ 101 ET. SEQ.”

 

“NO WARRANTS AND NO WARRANT SHARES HELD BY AN UNDERWRITER OR AN AFFILIATE OF THE
DEBTORS MAY BE SOLD, EXCHANGED OR OTHERWISE TRANSFERRED IN VIOLATION OF THE
SECURITIES ACT OR STATE SECURITIES LAWS. ACCORDINGLY, THE DEBTORS RECOMMEND THAT
POTENTIAL RECIPIENTS OF WARRANTS AND WARRANT SHARES CONSULT THEIR OWN COUNSEL
CONCERNING WHETHER THEY MAY FREELY TRADE SUCH SECURITIES.”

 

SECTION 2.6. Replacement Certificates. If a mutilated Warrant Certificate is
surrendered to the Warrant Agent or if the Holder of a Warrant Certificate
claims that the Warrant Certificate has been lost, destroyed or wrongfully
taken, the Company shall issue and the Warrant Agent is hereby instructed and
authorized to countersign a replacement Warrant Certificate if the reasonable
requirements of the Warrant Agent and of Section 8-405 of the Uniform Commercial
Code as in effect in the State of New York are met. If required by the Warrant
Agent or the Company, such Holder shall furnish an indemnity bond sufficient in
the

 

9

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judgment of the Company and the Warrant Agent to protect the Company and the
Warrant Agent from any loss that either of them may suffer if a Warrant
Certificate is replaced. The Company and the Warrant Agent may charge the Holder
for their expenses in replacing a Warrant Certificate. Every replacement Warrant
Certificate is an additional obligation of the Company.

 

SECTION 2.7. Temporary Certificates. Until definitive Warrant Certificates are
ready for delivery, the Company may prepare and the Warrant Agent is hereby
instructed and authorized to countersign temporary Warrant Certificates.
Temporary Warrant Certificates shall be substantially in the form of definitive
Warrant Certificates but may have variations that the Company considers
appropriate for temporary Warrant Certificates. Without unreasonable delay, the
Company shall prepare and upon receipt of written instruction from the Company,
the Warrant Agent shall countersign definitive Warrant Certificates and deliver
them in exchange for temporary Warrant Certificates.

 

SECTION 2.8. Cancellation. (a) In the event the Company shall purchase or
otherwise acquire Warrants, the Warrant Certificates in respect thereof shall
thereupon be delivered to the Warrant Agent for cancellation.

 

(b) The Warrant Agent and no one else shall cancel and destroy all Warrant
Certificates surrendered for transfer, exchange, replacement, exercise or
cancellation and deliver a certificate of such destruction to the Company unless
the Company directs the Warrant Agent to deliver canceled Warrant Certificates
to the Company. The Company may not issue new Warrant Certificates to replace
Warrant Certificates to the extent they evidence Warrants, which have been
exercised, or Warrants that the Company has purchased or otherwise acquired.

 

ARTICLE 3.

 

Exercise Terms

 

SECTION 3.1. Exercise Price. Each Warrant shall initially entitle the Holder
thereof, subject to adjustment pursuant to the terms of this Agreement, to
purchase one share of Common Stock for a per share exercise price of $0.001 (as
the same may be adjusted pursuant to Article 5, the “Exercise Price”).

 

SECTION 3.2. Exercise Periods. (a) Subject to the terms and conditions set forth
herein, each Warrant shall be exercisable at any time or from time to time on or
after the Release Date; provided, however, that Warrants that are held in escrow
pursuant to the terms of the Warrant Escrow Agreement are not eligible for
exercise unless and until they are released from escrow pursuant to the terms of
the Warrant Escrow Agreement and this Agreement.

 

(b) No Warrant shall be exercisable after the Expiration Date.

 

SECTION 3.3. Expiration. A Warrant shall terminate and become void as of the
earlier of (a) the close of business on the Expiration Date and (b) the time and
date such Warrant is exercised. The Company shall give notice not less than 90
and not more than 120 days prior to the Expiration Date to the Holders (and
written notice thereof to the Warrant Agent) of all

 

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then outstanding Warrants to the effect that the Warrants will terminate and
become void as of the close of business on the Expiration Date. The Warrants
shall terminate and become void after the Expiration Date, notwithstanding the
Company’s failure to give such notice.

 

SECTION 3.4. Manner of Exercise. Warrants may be exercised upon (a) surrender to
the Warrant Agent at its office designed for such purpose of the Warrant
Certificates, together with the form of election to purchase Common Stock on the
reverse thereof and substantially in the form attached hereto as Exhibit B duly
filled in and signed by the Holder thereof and (b) payment to the Warrant Agent,
for the account of the Company, of the Exercise Price for the number of Warrant
Shares in respect of which such Warrant is then exercised. Such payment shall be
made (i) in cash or by certified or official bank check payable to the order of
the Company or by wire transfer of funds to an account designated by the Company
for such purpose or (ii) by the surrender of a Warrant or Warrants (represented
by one or more relevant Warrant Certificates) without the payment of the
Exercise Price in cash (such surrender shall be evidenced by cancellation of the
number of Warrants represented by any Warrant Certificate presented in
connection with a Cashless Exercise) in exchange for the issuance of such number
of shares of Common Stock equal to the product of (1) the number of shares of
Common Stock for which such Warrant would otherwise then be nominally exercised
if payment of the Exercise Price as of the date of exercise were being made in
cash and (2) the Cashless Exercise Ratio. An exercise of a Warrant in accordance
with the immediately preceding sentence is herein called a “Cashless Exercise”.
All provisions of this Agreement shall be applicable with respect to an exercise
of Warrant Certificates pursuant to a Cashless Exercise for less than the full
number of Warrants represented thereby. Subject to Section 3.2, the rights
represented by the Warrants shall be exercisable at the election of the Holders
thereof either in full at any time or from time to time in part and in the event
that a Warrant Certificate is surrendered for exercise in respect of less than
all the Warrant Shares purchasable on such exercise at any time prior to the
Expiration Date a new Warrant Certificate exercisable for the remaining Warrant
Shares will be issued. The Warrant Agent is hereby instructed and authorized to
countersign and deliver the required new Warrant Certificates, and the Company,
at the Warrant Agent’s request, shall supply the Warrant Agent with Warrant
Certificates duly signed on behalf of the Company for such purpose. The Warrant
Agent shall have no duty (i) to determine or calculate the Exercise Price or
(ii) to confirm or verify the accuracy or correctness of the Exercise Price. The
Warrant Agent’s sole duty under this paragraph is to accept the certificates
evidencing the Warrants and to take possession for the benefit of the Company of
the Exercise Price delivered to it by a Warrant Holder.

 

SECTION 3.5. Issuance of Warrant Shares. Subject to Section 2.5, upon the
surrender of Warrant Certificates and payment of the per share Exercise Price,
as set forth in Section 3.4, the Company promptly (and in no event later than
three Business Days after the Exercise Date (as defined below)) shall issue and
cause the Warrant Agent or, if appointed, a transfer agent for the Common Stock
(“Transfer Agent”) to countersign and deliver to or upon the written order of
the Holder and in such name or names as the Holder may designate, a certificate
or certificates for the number of full Warrant Shares so purchased upon the
exercise of such Warrants or other securities or property to which it is
entitled, registered or otherwise to the Person or Persons entitled to receive
the same, together with cash as provided in Section 3.6 in

 

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respect of any fractional Warrant Shares otherwise issuable upon such exercise.
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 (the “Exercise Date”) of the
surrender of such Warrant Certificates and the payment of the per share Exercise
Price.

 

SECTION 3.6. Fractional Warrant Shares. The Company shall not be required to
issue fractional Warrant Shares on the exercise of Warrants. If more than one
Warrant shall be exercised in full at the same time by the same Holder, the
number of full Warrant Shares which shall be issuable upon such exercise shall
be computed on the basis of the aggregate number of Warrant Shares purchasable
pursuant thereto. If any fraction of a Warrant Share would, except for the
provisions of this Section 3.6, be issuable upon the exercise of any Warrant (or
specified portion thereof), the Company shall, within five (5) Business Days
after the Exercise Date, pay an amount in cash equal to the Current Market Value
for one Warrant Share on the Business Day immediately preceding the date the
Warrant is exercised multiplied by such fraction and computed to the nearest
whole cent.

 

SECTION 3.7. Reservation of Warrant Shares. The Company shall at all times
reserve and keep available for issue upon exercise of the Warrants such number
of authorized but unissued shares of Common Stock as will be sufficient to
provide for the exercise of all outstanding Warrants. The registrar for the
Common Stock (the “Registrar”) shall at all times until the Expiration Date, or
the time at which all Warrants have been exercised or cancelled, 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. All Warrant
Shares which may be issued upon exercise of Warrants shall, upon issue, be fully
paid, nonassessable, free of preemptive rights and free from all taxes, liens,
charges and security interests with respect to the issue thereof. The Company
will supply such Transfer Agent with duly executed stock certificates for such
purpose and will itself provide or otherwise make available any cash which may
be payable as provided in Section 3.6. The Company will furnish to such Transfer
Agent a copy of all notices of adjustments and certificates related thereto
transmitted to each Holder.

 

SECTION 3.8. Compliance with Law. If any shares of Common Stock required to be
reserved for purposes of exercise of Warrants require, under any other Federal
or state law or applicable governing rule or regulation of any national
securities exchange, registration with or approval of any Governmental
Authority, or listing on any such national securities exchange before such
shares may be issued upon exercise, the Company will cause such shares to be
duly registered or approved by such Governmental Authority or listed on the
relevant national securities exchange; provided that the Company shall not have
any obligation to register the Warrant Shares under the Securities Act except
pursuant to the Registration Rights Agreement.

 

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ARTICLE 4.

 

Release of Warrants from Escrow

 

SECTION 4.1. Terms of Release. The Warrants created under the terms of this
Agreement shall be released in whole or in part only through one of the
procedures described below in Section 4.2, 4.3 or 4.5.

 

SECTION 4.2. Earn-In Release (an “Earn-In Release”). In accordance with the
provisions of this Section 4.2, the number of Warrants, if any, that shall be
released from escrow on the Release Date shall be determined based on the
aggregate amount of Commitments outstanding under the Credit Agreement on the
Earn-In Date. The number of Warrants which each Lender holding Commitments under
the Credit Agreement will be entitled to receive under this Section 4.2 on the
Release Date will be equal to a number calculated by taking the product of:

 

(a) the total number of Warrants initially issued under this Agreement (as
adjusted in accordance with Article 5 hereof); and

 

(b) the Release Ratio applicable to such Lender;

 

multiplied by

 

(c) (i) 0.50, if on the Earn-In Date, the Commitments under the Credit Agreement
have been permanently reduced by at least fifty percent (50%) but less than one
hundred percent (100%) of the aggregate amount of such Commitments outstanding
on the Closing Date, and any outstanding loans in excess of such reduced
Commitments plus all accrued and unpaid interest and all accrued and unpaid
Success Fees with respect thereto have been repaid in full, and such reduced
Commitments are not subject to reborrowing;

 

(ii) 0, if on the Earn-In Date all outstanding loans and other extensions of
credit pursuant to the Commitments under the Credit Agreement plus all accrued
and unpaid interest with respect thereto and all accrued and unpaid Success Fees
have been repaid in full, and all such loans and Commitments have been
terminated and are not subject to reborrowing; or

 

(iii) 1.0, if on the Earn-In Date more than 50% of the aggregate amount of the
Commitments under the Credit Agreement outstanding on the Closing Date remain
outstanding.

 

As of the close of business on the Earn-In Date, the Administrative Agent and
the Company shall jointly execute and deliver to the Warrant Agent a Release
Certificate (and simultaneously deliver a copy thereof to each Holder), which
Release Certificate shall be substantially in the form attached as Annex B
hereto and shall indicate whether any Warrants are to be released from escrow
pursuant to the terms of this Section 4.2. If any Warrants are to be released
from escrow, the Release Certificate shall state the percentage of the total
number of

 

13

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Warrants to be released and shall also provide a schedule indicating the
proportionate number of Warrants to be released to each Holder entitled to
receive Warrants from escrow. Following the Earn-In Date, Warrants not entitled
to be released from escrow pursuant to the terms of this Section 4.2, if any,
shall be returned to the Company for cancellation.

 

SECTION 4.3. Retirement Release (a “Retirement Release”). (a) In the event that,
prior to the Earn-In Date, Dynamic Details, Incorporated has permanently reduced
the Commitments under the Credit Agreement by at least fifty percent (50%) but
less than one hundred percent (100%) of the aggregate amount of such Commitments
outstanding on the Closing Date, and any outstanding loans in excess of such
reduced Commitments plus all accrued and unpaid interest and all accrued and
unpaid Success Fees with respect thereto have been repaid in full, and such
Commitments are not subject to reborrowing, the Company may obtain the release
of fifty percent (50%) of the Warrants then held in escrow (as determined
pursuant to Section 4.2) by delivering a Release Certificate jointly executed by
the Administrative Agent and the Company, modified as appropriate, to the
Warrant Agent, substantially in the form attached hereto as Annex B.

 

(b) In the event that, prior to the Earn-In Date, Dynamic Details, Incorporated
repays all the loans under the Credit Agreement, all accrued and unpaid interest
and all accrued and unpaid Success Fees with respect thereto have been repaid in
full, and the Commitments under the Credit Agreement have been terminated and
are not subject to reborrowing, the Company may obtain the release of all
Warrants then held in escrow (as determined pursuant to Section 4.2) by
delivering a Release Certificate jointly executed by the Administrative Agent
and the Company, modified as appropriate, to the Warrant Agent, substantially in
the form attached hereto as Annex B, whereupon the rights of each Holder to
obtain the release of any Warrants pursuant to this Article 4 shall terminate.

 

SECTION 4.4. Deadlock. In the event that the Administrative Agent and the
Company fail to agree on the number of Warrants to be released from escrow
pursuant to the terms of Section 4.2 or Section 4.3, as the case may be, the
Administrative Agent and the Company shall use their best efforts to resolve
such deadlock promptly but in any event no later than 7 days after the Earn-In
Date (the “Deadlock Period”). In the event that the Administrative Agent and the
Company are able to resolve such deadlock during the Deadlock Period, the
Company shall have up to 3 Business Days from the time such deadlock is resolved
to make any additional payments to repay any outstanding loans under the Credit
Agreement plus any accrued and unpaid interest and any accrued and unpaid
Success Fees with respect thereto and to reduce Commitments to an amount that
would reduce the number of Warrants to be released from escrow. However, if the
Company and the Administrative Agent fail to resolve such deadlock during the
Deadlock Period, the Administrative Agent’s good faith calculation of the number
of Warrants to be released from escrow shall be determinative, and both the
Administrative Agent and the Company shall jointly execute and deliver an
appropriate Release Certificate to the Warrant Agent; provided, however, that
(i) the Company shall have the option to repay all or a portion of any
outstanding loans under the Credit Agreement plus any accrued and unpaid
interest and any accrued and unpaid Success Fees with respect thereto and to
reduce the Commitments within 3 Business Days after the Deadlock Period and (ii)
if the Company exercises its option to make any such repayment and it is
subsequently determined that there was

 

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a calculation error on the part of the Administrative Agent relating to the
number of Warrants to be released from escrow which resulted in an overpayment
by the Company of any accrued and unpaid interest and any accrued and unpaid
Success Fees with respect to any loans that have been repaid, the Lenders shall
be obligated to promptly return the amount of such overpayment to the Company.

 

SECTION 4.5. Release Procedures. Upon receipt by the Warrant Agent of a properly
completed Release Certificate described in Section 4.2 or Section 4.3, as the
case may be, the Warrant Agent will present such Certificate to the Warrant
Escrow Agent, promptly but no later than 5 days after receipt of such notice, as
contemplated by Section 2 of the Warrant Escrow Agreement. In the case of a
Release Certificate, Warrants released from escrow will be registered in the
names requested by the Administrative Agent; provided that if any such name
requested by the Administrative Agent is not of an Initial Lender, the Company
may require that, as a condition of release of Warrants that the holder deliver
to the Company and the Warrant Agent an opinion of counsel, which opinion of
counsel shall be reasonably satisfactory to the Company, to the effect that such
transfer is made in compliance with the Securities Act and all applicable state
securities laws or pursuant to an exempt transaction under the Securities Act
and state securities laws.

 

ARTICLE 5.

 

Antidilution Provisions

 

SECTION 5.1. Changes in Common Stock. In the event that at any time or from time
to time after the Closing Date, the Company shall (a) pay a dividend or make a
distribution on its Common Stock in shares of its Common Stock or other shares
of capital stock, (b) subdivide its outstanding shares of Common Stock into a
larger number of shares of Common Stock, (c) combine its outstanding shares of
Common Stock into a smaller number of shares of Common Stock or (d) increase or
decrease the number of shares of Common Stock outstanding by reclassification of
its Common Stock (in each case, other than a transaction to which Section 5.5 is
applicable), then the number of shares of Common Stock purchasable upon exercise
of each Warrant immediately after the happening of such event shall be adjusted
so that, after giving affect to such adjustment, the Holder of each Warrant
shall be entitled to receive the number of shares of Common Stock upon exercise
thereof that such Holder would have owned or have been entitled to receive had
such Warrants been exercised immediately prior to the happening of the events
described above (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 5.1 shall become effective immediately after the effective date,
retroactive to the record date therefor in the case of a dividend or
distribution in shares of Common Stock, and shall become effective immediately
after the effective date in the case of a subdivision, combination or
reclassification. Notwithstanding escrow of the Warrants, the provisions of this
Article 5 shall apply at all times commencing on the Closing Date until and
including the Expiration Date.

 

SECTION 5.2. Cash Dividends and Other Distributions. In the event that at any
time or from time to time after the Closing Date the Company shall distribute to
holders of Common Stock (a) any dividend or other distribution of cash,
evidences of its indebtedness,

 

15

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shares of its capital stock or any other properties or securities or (b) any
options, warrants or other rights to subscribe for or purchase any of the
foregoing (other than, in each case set forth in (a) and (b), (i) any dividend
or distribution described in Section 5.1 or (ii) any rights, options, warrants
or securities described in Section 5.3), then the Company shall make the same
distribution to Holders of Warrants as it makes to holders of Common Stock pro
rata based on the number of shares of Common Stock for which such Warrants are
exercisable (whether or not currently exercisable). If the Company makes such
distribution to the Holders of Warrants at a time such Warrants are not
currently exercisable, such distributions shall be held in escrow until on or
after the Release Date. In the event that the Company makes a good faith
determination that it is impractical to distribute such distribution to Holders
of Warrants, then the number of shares of Common Stock thereafter purchasable
upon the exercise of each Warrant shall be increased to a number determined by
multiplying the number of shares of Common Stock purchasable upon the exercise
of such Warrant immediately prior to the record date for any such dividend or
distribution by a fraction, the numerator of which shall be the Current Market
Value per share of Common Stock on the record date for such distribution, and
the denominator of which shall be such Current Market Value per share of Common
Stock less the sum of (x) any cash distributed per share of Common Stock and (y)
the fair value (the “Fair Value”) (as determined in good faith by the Board,
whose determination shall be evidenced by a board resolution filed with the
Warrant Agent, a certified copy of which will be sent to Holders) of the
portion, if any, of the distribution applicable to one share of Common Stock
consisting of evidences of indebtedness, shares of stock, securities, other
property, warrants, options or subscription of purchase rights. Such adjustments
shall be made whenever any distribution described in the preceding sentence is
made and shall become effective as of the date of distribution, retroactive to
the record date for any such distribution. No adjustment made pursuant to this
Section 5.2 shall have the effect of decreasing the number of shares of Common
Stock purchasable upon exercise of each Warrant or increasing the Exercise
Price; provided, however, that such adjustment may have the effect of decreasing
the Exercise Price.

 

SECTION 5.3. Rights Issue. In the event that at any time or from time to time
after the Closing Date the Company shall issue, sell, distribute or otherwise
grant any rights to subscribe for or to purchase, any options or warrants for
the purchase of, or any securities convertible into or exchangeable for, Common
Stock, entitling such holders to subscribe for or purchase shares of Common
Stock or stock or securities convertible into or exchangeable for Common Stock,
whether or not immediately exercisable, convertible or exchangeable, as the case
may be, and the subscription or purchase price per share of Common Stock or the
price per share of Common Stock issuable upon exercise, conversion or exchange
thereof is lower on the record date for such issuance than the then Current
Market Value per share of Common Stock, then the number of shares of Common
Stock thereafter purchasable upon the exercise of each Warrant shall be
increased to a number determined by multiplying the number of shares of Common
Stock purchasable upon the exercise of such Warrant immediately prior to the
date of issuance of such rights, options, warrants or securities by a fraction,
(a) the numerator of which shall be (i) the number of shares of Common Stock
outstanding on the date of issuance of such rights, options, warrants or
securities plus (ii) the number of additional shares of Common Stock offered for
subscription or purchase or issuable upon exercise of such options or warrants
or for which such securities are convertible into or exchangeable for, and (b)
the denominator of which

 

16

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shall be the number of shares of Common Stock outstanding on the date of
issuance of such rights, options, warrants or securities plus the total number
of shares of Common Stock which could be purchased at the Current Market Value
with the aggregate consideration received through issuance of such rights,
warrants, options, or convertible securities. Such adjustment shall be made
whenever such rights, options or warrants are issued and shall become effective
retroactively immediately after the record date for the determination of
stockholders entitled to receive such rights, options, warrants or securities.
Notwithstanding any other provision of this Section 5.3, the number of shares of
Common Stock purchasable upon exercise of any Warrant shall not be adjusted
pursuant to this Section 5.3 in connection with the issuance or sale of rights,
options, warrants or convertible or exchangeable securities described in clause
(a) of Section 5.4.

 

If the Company at any time shall issue two or more securities as a unit and one
or more of such securities shall be rights, options or warrants for or
securities convertible into or exchangeable for, Common Stock subject to this
Section 5.3, the consideration allocated to each such security shall be
determined in good faith by the Board whose determination shall be evidenced by
a Board resolution filed with the Warrant Agent, a certified copy of which shall
be delivered to each Holder.

 

SECTION 5.4. Issuance of Additional Shares of Common Stock. In the event that at
any time or from time to time after the Closing Date (A) the Company shall issue
or sell (x) any additional shares of Common Stock for consideration (or
Convertible Securities convertible into or exercisable to purchase for aggregate
consideration, including the consideration for issuance of the Convertible
Securities) in an amount per additional share of Common Stock less than the
Current Market Value, (y) any additional shares of Common Stock for
consideration (or Convertible Securities convertible into or exercisable to
purchase for aggregate consideration, including the consideration for issuance
of the Convertible Securities) in an amount per additional share of Common Stock
at or above the Current Market Value in case of issuances of equity permitted by
Section 2.9(g) of the Credit Agreement or (z) without limiting the foregoing as
set forth in clauses (x) and (y), any Management Options not included in the
Management Securities, or (B) without limiting the foregoing as set forth in
clauses (A)(x) and (A)(y), the Houlihan Note shall become convertible into
Common Stock or Convertible Securities, as the case may be, then the number of
shares of Common Stock thereafter purchasable upon the exercise of each Warrant
shall be increased to a number determined by multiplying the number of shares of
Common Stock purchasable upon the exercise of each Warrant immediately prior to
such issue or sale by a fraction (a) the numerator of which shall be the number
of shares of Common Stock outstanding immediately after such issue or sale,
assuming conversion or exercise of any Convertible Securities (as adjusted from
time to time for increases due to accruals of interest or other adjustments
(other than anti-dilution adjustments which separately result in similar
adjustments pursuant to this Article 5) pursuant to the terms of such
Convertible Securities), including, without limitation, the Houlihan Note, and
(b) the denominator of which shall be (I), in the case of an issuance as set
forth in clauses (A)(x), (A)(z) or (B) above the number, of shares of Common
Stock outstanding immediately prior to such issue or sale and (II), in the case
of an issuance as set forth in clause (A)(y) above, the sum of (i) the number of
shares of Common Stock outstanding immediately prior to such issue or sale, and
(ii) the number of shares of Common Stock which could be purchased at the
Current Market

 

17

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Value with the aggregate consideration received from the issuance or sale of the
additional shares of Common Stock. For the purposes of this Section 5.4, the
date as of which the Current Market Value per share of Common Stock shall be
computed shall be the earlier of (x) the date immediately prior to the date on
which the Company shall enter into a firm contract for the issuance of such
additional shares of Common Stock or (y) the date immediately prior to the date
of actual issuance of such additional shares of Common Stock. In the event that
the Company enters into a contract to acquire another Person in which
transaction Common Stock is to be issued in exchange for such Person’s
securities based upon a floating exchange ratio, then the Common Stock to be so
issued shall be deemed to have been issued on the date immediately before the
date such contract is entered into and the consideration to be received therefor
shall be deemed to be the value for such Common Stock derived from such ratio on
such date. Notwithstanding any other provision of this Section 5.4, the number
of shares of Common Stock purchasable upon exercise of any Warrant shall not be
adjusted pursuant to this Section 5.4 as a result of the issuance or series of
issuances or sale of Common Stock in connection with: (a) a transaction to which
Section 5.1, 5.2 or 5.3 is applicable, (b) the exercise of the Warrants or the
Senior Discount Warrants, (c) the exercise of any Management Options and (d) the
conversion of the Houlihan Note.

 

SECTION 5.5. Combination; Liquidation. (a) Except as provided in Section 5.5(b)
and unless the escrowed Warrants have already been released from the escrow and
returned to the Company for cancellation pursuant to Section 4.2(c)(ii) or
4.3(b) at the time of the consummation of any Combination, in the event of any
Combination, upon consummation of any Combination, the escrowed Warrants of the
Holders shall be released from the escrow, and the Holders shall receive new
warrants in exchange for their released Warrants and the new warrants shall be
immediately exercisable for such number of shares of capital stock or other
securities or property which such Holder would have been entitled to receive
upon or as a result of such Combination had such Warrants been exercised
immediately prior to such event. Unless paragraph (b) is applicable to a
Combination, the Company shall provide that the surviving or acquiring Person
(the “Successor Company”) in such Combination will enter into an agreement with
the Warrant Agent confirming the Holders’ rights pursuant to this Section 5.5(a)
and providing for adjustments, which shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Article 5. The provisions of
this Section 5.5(a) shall similarly apply to successive Combinations involving
any Successor Company.

 

(b) In the event of (i) a Combination where consideration to holders of Common
Stock in exchange for their shares is payable partly or solely in cash, or (ii)
the dissolution, liquidation or winding-up of the Company, then the Holders of
the Warrants shall be entitled to receive distributions on an equal basis with
the holders of Common Stock or other securities issuable upon exercise of the
Warrants, as if the Warrants had been exercised immediately prior to such event,
less the Exercise Price; provided that if the consideration to holders of Common
Stock in connection with a Combination is payable only partly in cash, with
respect to the cash portion of the consideration, the Holders of the Warrants
will receive cash distributions on a pro rata basis and, with respect to the
non-cash portion of the consideration, the Holders of the Warrants shall receive
new warrants as provided in Section 5.5(a).

 

18

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In case of any Combination described in this Section 5.5(b), the surviving or
acquiring Person and, in the event of any dissolution, liquidation or winding-up
of the Company, the Company, shall deposit promptly with the Warrant Agent the
funds, if any, necessary to pay to the holders of the Warrants the amounts to
which they are entitled to as described above. After such funds and the
surrendered Warrant Certificates are received, the Warrant Agent shall make
prompt payment to the Holders by delivering a check in such amount as is
appropriate (or, in the case of consideration other than cash, such other
consideration as is appropriate) to such Person or Persons as it may be directed
in writing by the Holders surrendering such Warrants.

 

SECTION 5.6. Tender Offers; Exchange Offers. In the event that the Company or
any subsidiary or Affiliate of the Company (excluding DDi Europe Limited and its
wholly-owned (direct and indirect) subsidiaries) shall purchase shares of Common
Stock pursuant to a tender offer or an exchange offer for a price per share of
Common Stock that is greater than the then Current Market Value per share of
Common Stock in effect at the end of the trading day immediately following the
day on which such tender offer or exchange offer expires, then the number of
shares of Common Stock thereafter purchasable upon the exercise of each Warrant
shall be increased to a number determined by multiplying the number of shares of
Common Stock purchasable upon the exercise of such Warrant immediately prior to
such purchase by a fraction the numerator of which shall be the sum of (x) the
fair market value of the aggregate consideration payable to stockholders based
on the acceptance (up to any maximum specified in the terms of the tender offer
or exchange offer) of all shares of Common Stock validly tendered or exchanged
and not withdrawn as of the expiration time of such tender offer or exchange
offer (the “Purchased Shares”) and (y) the product of the number of shares of
Common Stock outstanding (less the Purchased Shares) at the expiration time of
such tender offer or exchange offer and the first reported sales price of the
Common Stock on the trading day immediately following the day on which such
tender offer or exchange offer expires and the denominator of which shall be the
number of shares of Common Stock outstanding (including any Purchased Shares) at
the expiration time of such tender offer or exchange offer multiplied by the
first reported sales price of the Common Stock on the trading day immediately
following the day on which such tender offer or exchange offer expires, such
increase to become effective immediately prior to the opening of business on the
day immediately following the day on which such tender offer or exchange offer
expires.

 

SECTION 5.7. Other Events. If any event occurs as to which the foregoing
provisions of this Article 5 are not strictly applicable, including but not
limited to any other distribution, offer or similar dilutive event, or, if
strictly applicable, would not, in the good faith judgment of the Board, fairly
and adequately protect the purchase rights of the Warrants in accordance with
the essential intent and principles of such provisions, then the Board shall
make such adjustments in the application of such provisions, in accordance with
such essential intent and principles, as shall be reasonably necessary, in the
good faith opinion of the Board, to protect such purchase rights as aforesaid,
but in no event shall any such adjustment have the effect of decreasing the
number of shares of Common Stock subject to purchase upon exercise of the
Warrants.

 

SECTION 5.8. Current Market Value. For the purpose of any computation of Current
Market Value under this Section 5 and Section 3.6, the “Current Market Value”
per

 

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share of Common Stock at any date shall be (a) for purposes of Section 3.6, the
closing price on the Business Day immediately prior to the date of the exercise
of the applicable Warrant pursuant to Section 3 and (b) in all other cases, the
weighted average of the daily closing prices for the five (5) consecutive
trading days ending on the last full trading day on the exchange or market
specified in the second succeeding sentence prior to the Time of Determination
(as defined below); provided, however, that for purposes of the issuance of any
Management Options, Current Market Value shall mean Fair Market Value as defined
in the Management Incentive Plan. The term “Time of Determination” as used
herein shall be the time and date of the earlier to occur of (A) the date as of
which the Current Market Value is to be computed, (B) the date of the first
public announcement of the issuance, sale, distribution or granting in question
and (C) the last full trading day on such exchange or market before the
commencement of “ex-dividend” trading in the Common Stock relating to the event
giving rise to the adjustment required by this Section 5.8. The closing price
for any day shall be the last reported sale price regular way or, in case no
such reported sale takes place on such day, the average of the closing bid and
asked prices regular way for such day, in each case (1) on the principal
national securities exchange on which the shares of Common Stock are listed or
to which such shares are admitted to trading or (2) if the Common Stock is not
listed or admitted to trading on a national securities exchange, in the
over-the-counter market as reported by the Nasdaq National Market or Nasdaq
Small Cap Market or any comparable system. In the absence of all of the
foregoing, or if for any other reason the Current Market Value per share cannot
be determined pursuant to the foregoing provisions of this Section 5.8, the
Current Market Value per share shall be the fair market value thereof determined
in good faith by the Board; provided that any determination of fair market value
of such shares or other assets under this Agreement shall be subject to the
approval of the Required Lenders, and provided, further that any dispute with
regard to any such determination of fair market value shall be resolved by an
Independent Valuation Firm. The Company shall pay the fees and expenses of any
Independent Valuation Firm involved in the determination of fair market value.

 

SECTION 5.9. Superseding Adjustment. Upon the expiration of any rights, options,
warrants or conversion or exchange privileges which resulted in adjustments
pursuant to this Article 5, if any thereof shall not have been exercised, the
number of Warrant Shares purchasable upon the exercise of each Warrant shall be
readjusted as if (a) the only shares of Common Stock issuable upon exercise of
such rights, options, warrants, conversion or exchange privileges were the
shares of Common Stock, if any, actually issued upon the exercise of such
rights, options, warrants or conversion or exchange privileges and (b) shares of
Common Stock actually issued, if any, were issuable for the consideration
actually received by the Company upon such exercise plus the aggregate
consideration, if any, actually received by the Company for the issuance, sale
or grant of all such rights, options, warrants or conversion or exchange
privileges whether or not exercised; provided, however, that no such
readjustment shall (except by reason of an intervening adjustment under Section
5.1 or 5.5) have the effect of decreasing the number of Warrant Shares
purchasable upon the exercise of each Warrant by an amount in excess of the
amount of the adjustment initially made in respect of the issuance, sale or
grant of such rights, options, warrants or conversion or exchange privileges.

 

20

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SECTION 5.10. Minimum Adjustment. The adjustments required by the preceding
Sections of this Article 5 shall be made whenever and as often as any specified
event requiring an adjustment shall occur, except that no adjustment of the
number of shares of Common Stock purchasable upon exercise of Warrants that
would otherwise be required shall be made (except in the case of a subdivision
or combination of shares of Common Stock, as provided for in Section 5.1) unless
and until such adjustment either by itself or with other adjustments not
previously made increases or decreases by at least 1% the number of shares of
Common Stock purchasable upon exercise of Warrants immediately prior to the
making of such adjustment. Any adjustment representing a change of less than
such minimum amount shall be carried forward and made as soon as such
adjustment, together with other adjustments required by this Article 5 and not
previously made, would result in a minimum adjustment. For the purpose of any
adjustment, any specified event shall be deemed to have occurred at the close of
business on the date of its occurrence. In computing adjustments under this
Article 5, fractional interests in Common Stock shall be taken into account to
the nearest one-hundredth of a share.

 

SECTION 5.11. Notice of Adjustment. Whenever the number of shares of Common
Stock and other property, if any, purchasable upon exercise of Warrants is
adjusted, as herein provided, the Company shall deliver to the Warrant Agent a
certificate of a firm of independent accountants (who may be the regular
accountants employed by the Company) setting forth, in reasonable detail, the
event requiring the adjustment and the method by which such adjustment was
calculated (including a description of the basis on which the Board determined
the fair market value of any evidences of indebtedness, other securities,
property or warrants or other subscription or purchase rights), and specifying
the number of shares of Common Stock purchasable upon exercise of Warrants after
giving effect to such adjustment. The Warrant Agent shall be fully protected in
relying on any such certificate and on any adjustment contained therein, and the
Warrant Agent shall have no duty with respect to and shall not be deemed to have
knowledge of any adjustment unless and until it shall have received such written
certificate. The Company shall promptly mail a copy of such certificate to each
Holder in accordance with Section 8.5. The Warrant Agent shall be entitled to
rely on such certificate and shall be under no duty or responsibility with
respect to any such certificate, except to exhibit the same from time to time,
to any Holder desiring an inspection thereof during reasonable business hours.
The Warrant Agent shall not at any time be under any duty or responsibility to
any Holder to determine whether any facts exist which may require any adjustment
of the Exercise Price or the number of shares of Common Stock or other stock or
property, purchasable on exercise of the Warrants, or with respect to the nature
or extent of any such adjustment when made or the method employed in making such
adjustment or the validity or value of any shares of Common Stock.

 

SECTION 5.12. No Adjustment Under Certain Circumstances. Notwithstanding
anything herein to the contrary, the Exercise Price or the number of shares of
Common Stock thereafter purchasable upon the exercise of each Warrant shall not
be adjusted in connection with (i) any issuance on the Closing Date of any
shares of Common Stock, the Warrants or the Senior Discount Warrants, (ii) any
issuance after the Closing Date of any Management Securities or (iii) any
adjustment to the exercise price of the Senior Discount Warrants or Management
Options or the number of shares of Common Stock thereafter purchasable upon the
exercise of each Senior

 

21

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Discount Warrant or Management Option if such adjustment is the result of the
issuance of any shares of Common Stock, any stock or securities (directly or
indirectly) convertible into or exchangeable for Common Stock or any rights or
options for which an adjustment is provided pursuant to Article V of this
Agreement.

 

SECTION 5.13. Notice of Certain Transactions. In the event that the Company
shall propose (a) to pay any dividend payable in securities of any class to the
holders of its Common Stock or to make any other distribution to the holders of
its Common Stock, (b) to offer the holders of its Common Stock rights to
subscribe for or to purchase any securities convertible into shares of Common
Stock or shares of stock of any class or any other securities, rights or
options, (c) to effect any reclassification of its Common Stock, capital
reorganization or Combination or (d) to effect the voluntary or involuntary
dissolution, liquidation or winding-up of the Company, or in the event of a
tender offer or exchange offer described in Section 5.6, the Company shall
within 5 Business Days of the effectiveness of any such event send to the
Warrant Agent and the Administrative Agent and the Warrant Agent shall within
two Business Days thereafter send the Holders a notice (in such form as shall be
furnished to the Warrant Agent by the Company) of such proposed action or offer,
such notice to be mailed by the Warrant Agent to the Holders at their addresses
as they appear in the Certificate Register, which shall specify the record date
for the purposes of such dividend, distribution or rights, or the date such
issuance or event is to take place and the date of participation therein by the
holders of Common Stock, if any such date is to be fixed, and shall briefly
indicate the effect of such action on the Common Stock and on the number and
kind of any other shares of stock and on other property, if any, and the number
of shares of Common Stock and other property, if any, purchasable upon exercise
of each Warrant after giving effect to any adjustment which will be required as
a result of such action. Such notice shall be given by the Company as promptly
as possible and, in the case of any action covered by clause (a) or (b) above,
at least 10 days prior to the record date for determining holders of the Common
Stock for purposes of such action and, in the case of any other such action
(including any action contemplated by clause (a) of Section 5.4), at least 30
Business Days prior to the date of the taking of such proposed action or the
date of participation therein by the holders of Common Stock, whichever shall be
the earlier.

 

SECTION 5.14. Adjustment to Warrant Certificate. The form of Warrant Certificate
need not be changed because of any adjustment made pursuant to this Article 5,
and Warrant Certificates issued after such adjustment may state the same number
of shares of Common Stock as are stated in any Warrant Certificates issued prior
to the adjustment. 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.

 

SECTION 5.15. Adjustment of Per Share Warrant Price. Upon each adjustment of the
aggregate number of Warrant Shares issuable upon exercise of this Warrant under
the provisions of this Section 5, the warrant price as measured per share (the
“Per Share Warrant Price”) shall be adjusted by multiplying the Per Share
Warrant Price in effect immediately prior to such adjustment by a fraction the
numerator of which is the aggregate number of Warrant

 

22

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Shares for which this Warrant may be exercised immediately prior to such
adjustment and the denominator of which is the aggregate number of Warrant
Shares for which this Warrant may be exercised immediately after such
adjustment. The Company will take all such actions as may be necessary to assure
that the par value or stated value, if any, per share of the Common Stock is at
all times equal to or less than the then Per Share Warrant Price.

 

ARTICLE 6.

 

Rights of Holders

 

SECTION 6.1. Registration Rights. The Holders of the Warrants and Warrant Shares
shall be entitled to the registration rights set forth in the Registration
Rights Agreement.

 

SECTION 6.2. No Voting Rights; Limitations of Liability. The Warrants shall not
entitle any Holder thereof to any voting rights or other rights as a stockholder
of the Company. No provision hereof, in the absence of affirmative action by the
Holder to purchase Common Stock, and no enumeration herein of the rights or
privileges of the Holder shall give rise to any liability of such Holder for the
Exercise Price of Common Stock acquirable by exercise thereof or as a
stockholder of the Company.

 

SECTION 6.3. Convertible Securities. The Company shall not issue any (a)
Convertible Securities or similar securities that contain a provision that
provides for any change or determination of the applicable conversion price,
conversion rate or exercise price (or a similar provision which might have a
similar effect) based on any determination of the Current Market Value or other
value of the Company’s securities or any other market-based or contingent
standard (or such other value so long as the applicable conversion price,
conversion rate or exercise price (or similar provision which might have a
similar effect) is not less than 80% of the Current Market Value at the time of
the issuance of such Convertible Securities) or (b) any preferred stock, debt
instruments or similar securities or investment instruments providing for (i)
preferences or other payments substantially in excess of the original investment
by purchasers thereof or (ii) dividends, interest or similar payments other than
dividends, interest or similar payments (but not including as interest or
dividends the amortization as original issue discount or otherwise of a
Convertible Security or similar security issued concurrently with or together
with such debt or other investment interest if such Convertible Security or
similar security triggers an adjustment pursuant to Article V above), computed
on an annual basis and not in excess, directly or indirectly, of a rate equal to
the greater of (A) twice the interest rate on 10-year U.S. Treasury Notes and
(B) 20% of the initial purchase price of such securities.

 

ARTICLE 7.

 

Warrant Agent

 

SECTION 7.1. Appointment of Warrant Agent. The Company hereby appoints the
Warrant Agent to act as agent for the Company in accordance with the express
provisions of this Agreement and the Warrant Agent hereby accepts such
appointment.

 

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SECTION 7.2. Rights and Duties of Warrant Agent. (a) In acting under this
Agreement and in connection with the Warrant Certificates, the Warrant Agent is
acting solely as agent of the Company and does not assume any obligation or
relationship or agency or trust for or with any of the holders of Warrant
Certificates or beneficial owners of Warrants.

 

(b) The Warrant Agent may consult with counsel (who may be legal counsel for the
Company) satisfactory to it, and the advice or opinion of such counsel shall be
full and complete authorization and protection in respect of any action taken,
suffered or omitted by it in accordance with such advice or opinion of such
counsel.

 

(c) The Warrant Agent shall be protected and shall incur no liability for or in
respect of any action taken, suffered or omitted by it in reliance upon any
Warrant Certificate, notice, direction, consent, certificate, affidavit,
statement or other paper or document reasonably believed by it to be genuine and
to have been presented or signed by the proper parties; and such Warrant
Certificate, notice, direction, consent, certificate, affidavit, statement or
other paper or document shall be full authorization and protection to the
Warrant Agent for any action taken, suffered or omitted by it under the
provisions of this Agreement in reliance upon such Warrant Certificate, notice,
direction, consent, certificate, affidavit, statement or other paper or
document; but in its discretion the Warrant Agent may in lieu thereof accept
other evidence of such matter or may require such further or additional evidence
as it may deem reasonable.

 

(d) The Warrant Agent shall be obligated to perform only such duties as are
specifically set forth herein and in the Warrant Certificates and no implied
duties or obligations shall be read into this Agreement or the Warrant
Certificates against the Warrant Agent. The Warrant Agent shall not be under any
obligation to take any action hereunder which may tend to involve it in any
expense or liability for which it does not receive indemnity if such indemnity
is reasonably requested. The Warrant Agent shall not be liable or under any duty
or responsibility for the use by the Company of any of the Warrant Certificates
countersigned by the Warrant Agent and delivered by it to the Holders or on
behalf of the Holders pursuant to this Agreement or for the application by the
Company of the proceeds of the Warrants. The Warrant Agent shall have no
liability, duty or responsibility in case of any default by the Company in the
performance of its covenants, conditions or agreements contained herein or in
the Warrant Certificates or in the case of the receipt of any written demand
from a Holder with respect to such default, including any duty or responsibility
to initiate or attempt to initiate any proceedings at law or otherwise. The
Warrant Agent shall have no liability, duty or responsibility for the making of
any adjustment in the Exercise Price, or number of shares issuable upon exercise
of the Warrant Certificates or responsible for the manner, method or amount of
any such adjustment or the facts that would require any such adjustment; nor
shall it by any act hereunder be deemed to make any representation or warranty
as to the authorization or reservation of any shares of Common Stock to be
issued pursuant to this Agreement or any Warrant Certificate or as to whether
any shares of Common Stock or other securities are or will be validly authorized
and issued and fully paid and nonassessable.

 

(e) The Warrant Agent shall not at any time be under any duty or responsibility
to any Holder to determine whether any facts exist that may require an
adjustment of the number of shares of Common Stock purchasable upon exercise of
each Warrant or with

 

24

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respect to the nature or extent of any adjustment when made, or with respect to
the method employed, or herein or in any supplemental agreement provided to be
employed, in making the same. The Warrant Agent shall not be accountable with
respect to the validity or value of any shares of Common Stock or of any
securities or property that may at any time be issued or delivered upon the
exercise of any Warrant or upon any adjustment pursuant to Article 5, and it
makes no representation with respect thereto. The Warrant Agent shall not be
responsible for any failure of the Company to make any cash payment or to issue,
transfer or deliver any shares of Common Stock or stock certificates upon the
surrender of any Warrant Certificate for the purpose of exercise or upon any
adjustment pursuant to Article 5, or to comply with any of the covenants of the
Company contained in Article 5.

 

(f) The Warrant Agent is hereby authorized and directed to accept instructions
with respect to the performance of its duties hereunder from any one of the
Officers, and to apply to such Officers for advice or instructions in connection
with its duties, and such instructions shall be full authorization and
protection to the Warrant Agent, and the Warrant Agent shall not be liable for
any action taken, suffered or omitted to be taken by it in accordance with
instructions of any such Officer.

 

(g) The Warrant Agent may execute and exercise any of the rights or powers
hereby vested in it or perform any duty hereunder either itself or by or through
its attorneys or agents, and the Warrant Agent shall not be liable for any act,
default, neglect or misconduct of any such attorneys or agents or for any loss
to the Company resulting from any such act, default, neglect or misconduct (each
as finally determined by a court of competent jurisdiction), except by reason of
acts constituting bad faith, gross negligence or willful misconduct in the
selection and continued employment thereof.

 

(h) No provision of this Agreement shall require the Warrant Agent to expend or
risk its own funds or otherwise incur any financial liability in the performance
of any of its duties hereunder or in the exercise of its rights if it believes
that repayment of such funds or adequate indemnification against such risk or
liability is not reasonably assured to it.

 

(i) The Warrant Agent shall not be liable for or by reason of any of the
statements of fact or recitals contained in this Agreement or in the Warrant
Certificates (except its countersignature thereof) or be required to verify the
same.

 

(j) In the event the Warrant Agent believes any ambiguity or uncertainty exists
hereunder or in any notice, instruction, direction, request or other
communication, paper or document received by the Warrant Agent hereunder, the
Warrant Agent, may, in its sole discretion, refrain from taking any action, and
shall be fully protected and shall not be liable in any way to the Company, the
holder of any Warrant Certificate or any other person or entity for refraining
from taking such action, unless the Warrant Agent receives written instructions
signed by the Company which eliminates such ambiguity or uncertainty to the
satisfaction of Warrant Agent.

 

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(k) The provisions of this Section 7.2 shall survive the termination of this
Agreement, the exercise or expiration of the Warrants and the resignation or
removal of the Warrant Agent.

 

SECTION 7.3. Individual Rights of Warrant Agent. The Warrant Agent and any
stockholder, director, officer or employee of the Warrant Agent may buy, sell or
deal in any of the Warrants or other securities of the Company or its affiliates
or become pecuniarily interested in transactions in which the Company or its
affiliates may be interested, or contract with or lend money to the Company or
its affiliates or otherwise act as fully and freely as though it were not the
Warrant Agent under this Agreement. Nothing herein shall preclude the Warrant
Agent from acting in any other capacity for the Company or for any other legal
entity.

 

SECTION 7.4. Warrant Agent’s Disclaimer. The Warrant Agent shall not be
responsible for and makes no representation as to the validity or adequacy of
this Agreement or the Warrant Certificates and it shall not be responsible for
any statement in this Agreement or the Warrant Certificates other than its
countersignature thereon.

 

SECTION 7.5. Compensation and Indemnity. The Company shall pay to the Warrant
Agent compensation in accordance with the fee schedule attached hereto as
Exhibit D for its engagement and services hereunder and to reimburse the Warrant
Agent upon request for all reasonable out-of-pocket expenses incurred by it,
including the reasonable compensation and expenses of the Warrant Agent’s agents
and counsel incurred in the preparation, administration, delivery, execution and
amendment of this Agreement and the performance of its duties under this
Agreement. The Company shall indemnify the Warrant Agent against any and all
losses, liabilities or expenses (including judgments, damages, fines, penalties,
claims, demands, settlements, costs and agents’ and attorneys’ fees and
expenses) for anything done or omitted by the Warrant Agent arising out or in
connection with this Agreement except as a result of its bad faith, gross
negligence or willful misconduct (each as finally determined by a court of
competent jurisdiction). The Warrant Agent shall notify the Company promptly of
any claim for which it may seek indemnity. The Company’s obligations pursuant to
this Section 7.5 shall survive the termination of this Agreement. The costs and
expenses incurred by the Warrant Agent in enforcing the right to indemnification
shall be paid by the Company unless it is determined by a final order, judgment,
decree or ruling of a court of competent jurisdiction that the Warrant Agent is
not entitled to indemnification due to its own bad faith, gross negligence or
willful misconduct. In no event will the Warrant Agent be liable for special,
indirect, incidental, punitive or consequential loss or damage of any kind
whatsoever, even if the Warrant Agent has been advised of the possibility of
such loss or damage. Any liability of the Warrant Agent under this Agreement to
the Company will be limited to the amount of fees paid by the Company to the
Warrant Agent.

 

SECTION 7.6. Successor Warrant Agent. (a) The Company agrees for the benefit of
the Holders that there shall at all times be a Warrant Agent hereunder until all
the Warrants have been exercised or are no longer exercisable.

 

(b) The Warrant Agent or any successor Warrant Agent may at any time resign by
giving written notice to the Company of such intention on its part, specifying
the date

 

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on which its desired resignation shall become effective; provided, however, that
such date shall not be less than 30 days after the date on which such notice is
given unless the Company otherwise agrees. The Warrant Agent hereunder may be
removed at any time by the filing with it of an instrument in writing signed by
or on behalf of the Company and specifying such removal and the date when it
shall become effective, which date shall not be less than 30 days after such
notice is given unless the Warrant Agent otherwise agrees. Any removal under
this Section 7.6 shall take effect upon the appointment by the Company as
hereinafter provided of a successor Warrant Agent (which shall be a Person
authorized under the laws of the jurisdiction of its organization to exercise
corporate powers) and the acceptance of such appointment by such successor
Warrant Agent.

 

(c) In case at any time the Warrant Agent shall resign, shall be removed, shall
become incapable of acting, shall be adjudged a bankrupt or insolvent, or shall
commence a voluntary case under the Federal bankruptcy laws, as now or hereafter
constituted, or under any other applicable Federal or state bankruptcy,
insolvency or similar law or shall consent to the appointment of or taking
possession by a receiver, custodian, liquidator, assignee, trustee, sequestrator
(or other similar official) of the Warrant Agent or its property or affairs, or
shall make an assignment for the benefit of creditors, or shall admit in writing
its inability to pay its debts generally as they become due, or shall take
corporate action in furtherance of any such action, or a decree or order for
relief by a court having jurisdiction in the premises shall have been entered in
respect of the Warrant Agent in an involuntary case under the Federal bankruptcy
laws, as now or hereafter constituted, or any other applicable Federal or State
bankruptcy, insolvency or similar law; or a decree order by a court having
jurisdiction in the premises shall have been entered for the appointment of a
receiver, custodian, liquidator, assignee, trustee, sequestrator (or similar
official) of the Warrant Agent or of its property or affairs, or any public
officer shall take charge or control of the Warrant Agent or of its property or
affairs for the purpose of rehabilitation, conservation, winding up of or
liquidation, a successor Warrant Agent, qualified as aforesaid, shall be
appointed by the Company by an instrument in writing, filed with the successor
Warrant Agent. Upon the appointment as aforesaid of a successor Warrant Agent
and acceptance by the successor Warrant Agent of such appointment, the Warrant
Agent shall cease to be Warrant Agent hereunder; provided, however, that in the
event of the resignation of the Warrant Agent hereunder, such resignation shall
be effective on the earlier of (i) the date specified in the Warrant Agent’s
notice of resignation and (ii) the appointment and acceptance of a successor
Warrant Agent hereunder.

 

(d) Any successor Warrant Agent appointed hereunder shall execute, acknowledge
and deliver to its predecessor and to the Company an instrument accepting such
appointment hereunder, and thereupon such successor Warrant Agent, without any
further act, deed or conveyance, shall become vested with all the rights and
obligations of such predecessor with like effect as if originally named as
Warrant Agent hereunder, and such predecessor, upon payment of its charges and
disbursements then unpaid, shall thereupon become obligated to transfer, deliver
and pay over, and such successor Warrant Agent shall be entitled to receive, all
monies, securities and other property on deposit with or held by such
predecessor, as Warrant Agent hereunder.

 

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(e) Any Person into which the Warrant Agent hereunder may be merged or
consolidated, or any Person resulting from any merger or consolidation to which
the Warrant Agent shall be a party, or any Person to which the Warrant Agent
shall sell or otherwise transfer all or substantially all the assets and
business of the Warrant Agent, provided that it shall be qualified as aforesaid,
shall be the successor Warrant Agent under this Agreement without the execution
or filing of any paper or any further act on the part of any of the parties
hereto.

 

ARTICLE 8.

 

Miscellaneous

 

SECTION 8.1. Reports. (a) As soon as any Warrant becomes outstanding, the
Company shall provide the Warrant Agent and each Holder with such financial
statements and reports as are distributed to holders of Common Stock generally.

 

SECTION 8.2. Persons Benefiting. Nothing in this Agreement is intended or shall
be construed to confer upon any Person other than the Company, the Warrant Agent
and the Holders any legal or equitable right, remedy or claim under or by reason
of this Agreement or any part hereof, and this Agreement shall be for the sole
and exclusive benefit of the Company, the Warrant Agent and the Holders and
their successors and permitted assigns.

 

SECTION 8.3. Amendment. This Agreement may be amended by the parties hereto
without the consent of any Holder for the purpose of curing any ambiguity, or of
curing, correcting or supplementing any defective provision contained herein or
making any other provisions with respect to matters or questions arising under
this Agreement as the Company and the Warrant Agent may deem necessary or
desirable; provided, however, that such action shall not affect adversely the
rights of the Holders or the rights, immunities, duties or liability of the
Warrant Agent. Any amendment or supplement to this Agreement (including any
Exhibit or Annex hereto) that has or would have an adverse effect on the
interests of the Holders shall require the written consent of the Holders of a
majority of the outstanding Warrants or, if no Warrants are outstanding, the
Initial Lenders. The consent of each Holder affected shall be required for any
amendment pursuant to which (i) the Exercise Price would be increased, (ii) the
number of Warrant Shares purchasable upon exercise of Warrants would be
decreased (other than pursuant to adjustments provided herein) or (iii)
restrictions on transfer of the Warrants or Warrant Shares would be imposed. In
determining whether the Holders of the required number of Warrants have
concurred in any direction, waiver or consent, Warrants owned by the Company or
by any Person directly or indirectly controlling or controlled by or under
direct or indirect common control with the Company shall be disregarded and
deemed not to be outstanding, except that, for the purpose of determining
whether the Warrant Agent shall be protected in relying on any such direction,
waiver or consent, only Warrants which the Warrant Agent knows are so owned
shall be so disregarded. Also, subject to the foregoing, only Warrants
outstanding at the time shall be considered in any such determination.
Notwithstanding the foregoing, the Warrant Agent shall have no obligation to,
and shall incur no liability in failing to, join in and execute any such
supplemental agreement or amendment if the rights, duties, liabilities or
obligations of the Warrant Agent will be materially affected in any manner
thereby.

 

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SECTION 8.4. Notices. Any notice or communication shall be in writing and
delivered in person or mailed by overnight delivery service addressed as
follows:

 

if to the Company:

  

DDi Corp.

    

1220 North Simon Circle

    

Anaheim, CA 92806

    

Attention: Timothy J. Donnelly

with a copy to:

   Kirkland & Ellis LLP     

777 South Figueroa Street, Suite 3400

    

Los Angeles, CA 90017

    

Attention: Eva H. Davis

if to the Warrant Agent:

  

Mellon Investor Services LLC

    

400 S. Hope Street, 4th Floor

    

Los Angeles, CA 90071

    

Attention: Relationship Manager

with a copy to:

   Mellon Investor Services LLC     

85 Challenger Road

    

Ridgefield Park, New Jersey 07660

    

Attention: General Counsel

if to the Administrative Agent:

         

JPMorgan Chase Bank

    

270 Park Avenue

    

New York, New York 10017

    

Attention: Jonathan Katz

with a copy to:

   Simpson Thacher & Bartlett LLP     

425 Lexington Avenue

    

New York, New York 10017

    

Attention: Kathrine McLendon

 

The Company or the Warrant Agent or the Administrative Agent by notice to the
other may designate additional or different addresses for subsequent notices or
communications.

 

Any notice or communication mailed to a Holder shall be mailed to the Holder at
the Holder’s address as it appears on the Certificate Register and shall be
sufficiently given if so mailed within the time prescribed.

 

Failure to mail a notice or communication to a Holder or any defect in it shall
not affect its sufficiency with respect to other Holders. If a notice or
communication is mailed in the manner provided above, it is duly given, whether
or not the addressee receives it.

 

29

--------------------------------------------------------------------------------

SECTION 8.5. Business Days.

 

In any case where the Earn-In Date, the Release Date or any date on which a
Holder has a right to exercise Warrants shall not be a Business Day, then
(notwithstanding any other provision of this Agreement), such action may be made
or taken on the next succeeding Business Day with the same force and effect as
if made or taken on the Earn-In Date, the Release Date or such last day for
exercise, respectively.

 

SECTION 8.6. GOVERNING LAW. THIS AGREEMENT AND THE WARRANT CERTIFICATES SHALL BE
GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK.

 

SECTION 8.7. Successors. All agreements of the Company in this Agreement and the
Warrant Certificates shall bind its successors. All agreements of the Warrant
Agent in this Agreement shall bind its successors.

 

SECTION 8.8. 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.

 

SECTION 8.9. Table of Contents. The table of contents and headings of the
Articles and Sections of this Agreement have been inserted for convenience of
reference only, are not intended to be considered a part hereof and shall not
modify or restrict any of the terms or provisions hereof.

 

SECTION 8.10. Severability. The provisions of this Agreement are severable, and
if any clause or provision shall be held invalid, illegal or unenforceable in
whole or in part in any jurisdiction, then such invalidity or unenforceability
shall affect in that jurisdiction only such clause or provision, or part
thereof, and shall not in any manner affect such clause or provision in any
other jurisdiction or any other clause or provision of this Agreement in any
jurisdiction.

 

SECTION 8.11. Entire Agreement. This Agreement shall constitute the entire
agreement of the parties with respect to the subject matter herein and
supersedes all prior oral or written agreements in regard thereto.

 

30

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed
as of the date first written above.

 

DDI CORP.

By:

 

/s/    Timothy Donnelly        

--------------------------------------------------------------------------------

   

Name: Timothy Donnelly

   

Title: Vice President

MELLON INVESTOR SERVICES LLC

as Warrant Agent

By:

 

/s/    Martha Mijango        

--------------------------------------------------------------------------------

   

Name: Martha Mijango

   

Title: Assistant Vice President

JPMORGAN CHASE BANK

as Administrative Agent

By:

 

/s/    Michael Lancia        

--------------------------------------------------------------------------------

   

Name: Michael Lancia

   

Title: Vice President

 

31

--------------------------------------------------------------------------------

EXHIBIT A

TO

SECURED LENDER WARRANT AGREEMENT

 

[FORM OF FACE OF WARRANT CERTIFICATE]

 

“THIS WARRANT AND THE WARRANT SHARES ISSUABLE UPON EXERCISE HEREOF HAVE BEEN
ISSUED PURSUANT TO THE JOINT PLAN OF REORGANIZATION (THE “PLAN”) OF DDI CAPITAL
CORP. AND DDI CORP. (THE “DEBTORS”) IN THE CASE OF THE DEBTORS FILED IN THE
UNITED STATES BANKRUPTCY COURT FOR THE SOUTHERN DISTRICT OF NEW YORK (THE
“BANKRUPTCY COURT”), CASE NO. 03-15261 (SMB) (JOINTLY ADMINISTERED). THE PLAN
HAS BEEN CONFIRMED BY THE BANKRUPTCY COURT AND THIS WARRANT AND ANY WARRANT
SHARE ISSUABLE UPON EXERCISE HEREOF AND ANY INTEREST THEREIN IS EXEMPT FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), AND ANY STATE AND LOCAL SECURITIES LAWS AND IS FREELY TRANSFERABLE
PURSUANT TO SECTION 1145(A) OF THE BANKRUPTCY REFORM ACT OF 1978, AS AMENDED, AS
SET FORTH IN TITLE 11 OF THE UNITED STATES CODE, 11 U.S.C. §§ 101 ET. SEQ.”

 

“NO WARRANTS AND NO WARRANT SHARES HELD BY AN UNDERWRITER OR AN AFFILIATE OF THE
DEBTORS MAY BE SOLD, EXCHANGED OR OTHERWISE TRANSFERRED IN VIOLATION OF THE
SECURITIES ACT OR STATE SECURITIES LAWS. ACCORDINGLY, THE DEBTORS RECOMMEND THAT
POTENTIAL RECIPIENTS OF WARRANTS AND WARRANT SHARES CONSULT THEIR OWN COUNSEL
CONCERNING WHETHER THEY MAY FREELY TRADE SUCH SECURITIES.”

 

No.     

   Certificate for      Warrants

 

WARRANTS TO PURCHASE COMMON STOCK OF

 

DDI CORP.

 

THIS CERTIFIES THAT,             , or its registered assigns, is the registered
holder of the number of Warrants set forth above (the “Warrants”). Each Warrant
entitles the holder thereof (the “Holder”), at its option and subject to the
provisions contained herein and in the Warrant Agreement referred to below, to
purchase from DDi Corp., a California corporation (“the Company”), one share of
Common Stock, 0.001 par value, of the Company (the “Common Stock”) at the per
share exercise price of $0.001 (the “Exercise Price”), or by Cashless Exercise
referred to below. This Warrant Certificate shall terminate and become void as
of the close of business on December 31, 2008 (the “Expiration Date”) or upon
the exercise hereof as to all the shares of Common Stock subject hereto. The
number of shares purchasable upon exercise of the Warrants and the Exercise
Price per share shall be subject to adjustment from time to time as set forth in
the Warrant Agreement.

 

This Warrant Certificate is issued under and in accordance with a Warrant
Agreement dated as of December     , 2003 (the “Warrant Agreement”), between the
Company and Mellon Investor Services LLC (the “Warrant Agent”), which term
includes any successor

--------------------------------------------------------------------------------

Warrant Agent under the Warrant Agreement), and is subject to the terms and
provisions contained in the Warrant Agreement, to all of which terms and
provisions the Holder of this Warrant Certificate consents by acceptance hereof.
The Warrant Agreement is hereby incorporated herein by reference and made a part
hereof. Reference is hereby made to the Warrant Agreement for a full statement
of the respective rights, limitations of rights, duties and obligations of the
Company, the Warrant Agent and the Holders of the Warrants. Capitalized terms
used but not defined herein shall have the meanings ascribed thereto in the
Warrant Agreement. A copy of the Warrant Agreement may be obtained for
inspection by the Holder hereof upon written request to the Warrant Agent at
Mellon Investor Services LLC, 400 S. Hope Street, 4th Floor, Los Angeles, CA
90071, Attention: Relationship Manager.

 

Subject to the terms of the Warrant Agreement, the Warrants may be exercised in
whole or in part (i) by surrender of this Warrant Certificate with the form of
election to purchase Warrant Shares attached hereto duly executed and with the
simultaneous payment of the Exercise Price in cash (subject to adjustment) to
the Warrant Agent for the account of the Company at the office of the Warrant
Agent or (ii) by Cashless Exercise. Payment of the Exercise Price in cash shall
be made in cash or by certified or official bank check payable to the order of
the Company or by wire transfer of funds to an account designated by the Company
for such purpose. Payment by Cashless Exercise shall be made by the surrender of
a Warrant or Warrants represented by one or more Warrant Certificates and
without payment of the Exercise Price in cash, in exchange for the issuance of
such number of shares of Common Stock equal to the product of (1) the number of
shares of Common Stock for which such Warrant would otherwise then be nominally
exercised if payment of the Exercise Price were being made in cash and (2) the
Cashless Exercise Ratio.

 

As provided in the Warrant Agreement and subject to the terms and conditions
therein set forth, the Warrants shall be exercisable at any time from and after
they have been released from escrow under the terms of the Warrant Agreement;
provided, however, that no Warrant shall be exercisable after the Expiration
Date.

 

Unless the escrowed Warrants have already been released from the escrow and
returned to the Company for cancellation pursuant to Section 4.2(c)(ii) or
4.3(b) of the Warrant Agreement at the time of the consummation of any
Combination, in the event the Company enters into a Combination involving an
exchange of securities and/or property, upon consummation of the Combination,
the escrowed Warrants of the Holder hereof will be released from the escrow, and
such Holder will receive new warrants of the Successor Company in exchange for
its released Warrants with substantially similar terms to the Warrants, and such
new warrants will be immediately exercisable for such number of shares of
capital stock or other securities or property which such Holder would have been
entitled to receive upon or as a result of such Combination had such Warrants
been exercised immediately prior to such event. In the event the Company enters
into a Combination where the consideration to holders of Common Stock in
exchange for their shares is payable partly or solely in cash, upon consummation
of the Combination (a) with respect to the cash portion of the consideration,
the Holder hereof will be entitled to receive cash distributions on an equal
(but pro rata) basis with the holders of Common Stock or other securities
issuable upon exercise of the Warrants, as if the Warrants had been exercised
immediately prior to such event, less the Exercise Price and (b) with respect to
the

--------------------------------------------------------------------------------

non-cash portion of the consideration, the Holder hereof will receive a pro rata
amount of new warrants of the Successor Company in exchange for such pro rata
portion of its Warrants, which will be released from the escrow account as a
result of such Combination, with substantially similar terms to the Warrants,
and such new warrants will be immediately exercisable for a pro rata portion of
such number of shares of capital stock or other securities or property which
such Holder would have been entitled to receive upon or as a result of such
Combination had such Warrants been exercised immediately prior to such event. In
the event of the dissolution, liquidation or winding-up of the Company, the
Holder hereof will be entitled to receive distributions on an equal basis with
the holders of Common Stock or other securities issuable upon exercise of the
Warrants, as if the Warrants had been exercised immediately prior to such
events, less the Exercise Price.

 

The Company may require payment of a sum sufficient to pay all taxes,
assessments or other governmental charges in connection with the transfer or
exchange of the Warrant Certificates pursuant to Section 2.4 of the Warrant
Agreement but not for any exchange or original issuance (not involving a
transfer) with respect to temporary Warrant Certificates, the exercise of the
Warrants or the Warrant Shares.

 

Upon any partial exercise of the Warrants, there shall be countersigned and
issued to the Holder hereof a new Warrant Certificate in respect of the shares
of Common Stock as to which the Warrants shall not have been exercised. This
Warrant Certificate may be exchanged at the office of the Warrant Agent by
presenting this Warrant Certificate properly endorsed with a request to exchange
this Warrant Certificate for other Warrant Certificates evidencing an equal
number of Warrants. No fractional Warrant Shares will be issued upon the
exercise of the Warrants, but the Company shall pay an amount in cash equal to
the Current Market Value for one Warrant Share on the date the Warrant is
exercised, multiplied by such fraction, computed to the nearest whole cent.

 

The Warrants do not entitle any holder hereof to any of the rights of a
stockholder of the Company. All shares of Common Stock issuable by the Company
upon the exercise of the Warrants shall, upon such issue, be duly and validly
issued and fully paid and non-assessable.

 

The holder in whose name the Warrant Certificate is registered may be deemed and
treated by the Company and the Warrant Agent as the absolute owner of the
Warrant Certificate for all purposes whatsoever and neither the Company nor the
Warrant Agent shall be affected by notice to the contrary.

--------------------------------------------------------------------------------

This Warrant Certificate shall not be valid or obligatory for any purpose until
it shall have been countersigned by the Warrant Agent.

 

   

DDI CORP.

   

By

--------------------------------------------------------------------------------

[SEAL]

Attest:

--------------------------------------------------------------------------------

    Secretary

DATED:

Countersigned:

MELLON INVESTOR SERVICES LLC

as Warrant Agent

by

 

 

--------------------------------------------------------------------------------

   

Authorized Signatory

 

--------------------------------------------------------------------------------

EXHIBIT B

TO

SECURED LENDER WARRANT AGREEMENT

 

FORM OF ELECTION TO PURCHASE WARRANT SHARES

(to be executed only upon exercise of Warrants)

 

The undersigned hereby irrevocably elects to exercise              Warrants at
an exercise price per Warrant (subject to adjustment) of $.01 to acquire an
equal number of shares of Common Stock of DDi Corp., on the terms and conditions
specified in the within Warrant Certificate and the Warrant Agreement therein
referred to, surrenders this Warrant Certificate and all right, title and
interest therein to the Warrant Agent, and directs that the shares of Common
Stock deliverable upon the exercise of such Warrants be registered or placed in
the name and at the address specified below and delivered thereto.

 

Date:                     ,     

 

--------------------------------------------------------------------------------

(Signature of Owner)*

--------------------------------------------------------------------------------

(Street Address)

--------------------------------------------------------------------------------

(City)    (State)    (Zip Code)

Signature Guaranteed by:

--------------------------------------------------------------------------------

 

Securities and/or check to be issued to:

 

--------------------------------------------------------------------------------

* The signature must correspond with the name as written upon the face of the
within Warrant Certificate in every particular, without alteration or
enlargement or any change whatsoever, and must be guaranteed by a national bank
or trust company or by a member firm of any national securities exchange.

--------------------------------------------------------------------------------

Please insert social security or identifying number:

 

Name:

Street Address:

City, State and Zip Code:

 

Any unexercised Warrants evidenced by the within Warrant Certificate to be
issued to:

 

Please insert social security or identifying number:

Name:

Street Address:

City, State and Zip Code:

--------------------------------------------------------------------------------

EXHIBIT C

TO

SECURED LENDER WARRANT AGREEMENT

 

FORM OF ASSIGNMENT

 

(To be signed only upon transfer of Warrant)

 

For value received, the undersigned hereby sells, assigns and transfers unto
                     the right represented by the within Warrant to purchase
             of Common Stock of DDi Corp. to which the within Warrant relates,
and appoints                      Attorney to transfer such right on the books
of DDi Corp. with full power of substitution in the premises.

 

Alternative 1: The undersigned is not currently an affiliate of the Company or
an underwriter engaged in the distribution of such Warrant as those terms are
defined in the rules of the Securities and Exchange Commission.

 

Or

 

Alternative 2: If the undersigned is an affiliate or an underwriter, (a) the
undersigned has sold the securities represented by the within Warrant pursuant
to a registration statement filed and made effective in accordance with the
Securities Act and in a manner described under the caption “Plan of
Distribution” in the prospectus included in such registration statement and that
such sale complies with all applicable securities laws applicable to the
undersigned, including without limitation, the prospectus delivery requirements,
or (b), only in the case of an affiliate, has transferred such securities
pursuant to an exemption from registration under the Securities Act and provided
reasonable evidence of such exemption.

 

The Warrant being transferred hereby is one of the Warrants issued by DDi Corp.
as of December     , 2003 to purchase an aggregate of              shares of
Common Stock.

 

Date:                     ,     

 

--------------------------------------------------------------------------------

(Signature of Owner)*

 

--------------------------------------------------------------------------------

* The signature must correspond with the name as written upon the face of the
within Warrant Certificate in every particular, without alteration or
enlargement or any change whatsoever, and must be guaranteed by a national bank
or trust company or by a member firm of any national securities exchange.

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

(Street Address)

--------------------------------------------------------------------------------

(City)    (State)    (Zip Code)

Signature Guaranteed by:

--------------------------------------------------------------------------------

 

Securities to be issued to:

 

Please insert social security or identifying number:

Name:

Street Address:

City, State and Zip Code:

--------------------------------------------------------------------------------

EXHIBIT D

TO

SECURED LENDER WARRANT AGREEMENT

 

MELLON INVESTOR SERVICES LLC

 

Schedule of Fees

As Warrant Agent for

Secured Lender Warrants &

Senior Discount Warrants

 

Set-Up Fee

   Included

Annual Administration Fee for combined warrant issues

   $2,500.00

Examining & Transferring Warrants (per warrant certificate)

   $75.00

Exercise of Warrants, each

   $100.00

Special Services

    

* Programming fees

   $250 per hour

* Internal Attorney Review of Agreement (if there

   $1,000.00

   are any variations on the standard language)

    

*Changes to shareholder file

    

   including transfer journal updates

   $50.00/account

* Additional Special Services

   By Appraisal

* Media & Drafting Services

   $175 per hour

 

  (1) Out of Pocket Expenses

Additional

 

Including Postage, Printing, Stationery,

Overtime, Transportation, Microfilming, Imprinting, etc.

--------------------------------------------------------------------------------

ANNEX A

TO

SECURED LENDER WARRANT AGREEMENT

 

List of Initial Lenders and Warrant Shares Distribution

 

     Total
Outstanding

--------------------------------------------------------------------------------

   % of Total
Outstanding

--------------------------------------------------------------------------------

    Warrant Shares

--------------------------------------------------------------------------------

   % of
Warrant
Shares

--------------------------------------------------------------------------------

 

JPMorgan Chase Bank

   $ 6,392,896.04    8.77 %   267,625.0    8.77 %

Crescent/Mach I Partners, L.P.

     1,492,174.23    2.05 %   62,466.7    2.05 %

KZH Crescent-2 LLC

     1,989,565.64    2.73 %   83,288.9    2.73 %

KZH Crescent-3 LLC

     1,492,174.23    2.05 %   62,466.7    2.05 %

TCW Select Loan Fund, Limited

     3,153,468.21    4.33 %   132,013.2    4.33 %

Castle Hill I-Ingots, Ltd.

     6,631,885.45    9.10 %   277,629.8    9.10 %

Sankaty High Yield Partners II, L.P.

     1,432,289.53    1.96 %   59,959.8    1.96 %

Jana Master Fund, LTD

     6,963,479.80    9.55 %   291,511.3    9.55 %

Morgan Stanley Prime Income Trust

     4,642,319.86    6.37 %   194,340.9    6.37 %

Grayston CLO 2001-01 Ltd.

     3,882,422.21    5.33 %   162,529.4    5.33 %

KZH CypressTree-1 LLC

     3,398,841.33    4.66 %   142,285.3    4.66 %

Spring Street Partners - II, L.P.

     3,380,914.98    4.64 %   141,534.8    4.64 %

Van Kampen Senior Loan Fund

     2,984,348.47    4.09 %   124,933.4    4.09 %

Deutsche Bank Trust Company Americas

     2,535,686.24    3.48 %   106,151.1    3.48 %

CypressTree Investment Partners I

     2,155,362.80    2.96 %   90,229.7    2.96 %

CypressTree Investment Partners II

     331,594.30    0.45 %   13,881.5    0.45 %

IBM Credit LLC

     2,391,990.20    3.28 %   100,135.6    3.28 %

Dresdner Bank AG

     2,253,943.32    3.09 %   94,356.5    3.09 %

Citizens Financial Corporation

     2,253,943.32    3.09 %   94,356.5    3.09 %

Smoky River CDO, L.P.

     2,238,261.36    3.07 %   93,700.1    3.07 %

Bank of Nova Scotia

     1,690,457.49    2.32 %   70,767.4    2.32 %

Pilgrim CLO 1999-1 Ltd.

     1,661,293.93    2.28 %   69,546.5    2.28 %

Pilgrim America High Income Investments Ltd.

     1,492,174.23    2.05 %   62,466.7    2.05 %

JPMorgan Chase Bank

     1,286,292.21    1.76 %   53,847.9    1.76 %

Massachusetts Mutual Life Insurance Company

     746,087.12    1.02 %   31,233.4    1.02 %

Somers CDO Ltd.

     497,391.42    0.68 %   20,822.2    0.68 %

Bank Austria Creditanstalt Corp. Finance

     1,126,971.67    1.55 %   47,178.3    1.55 %

Brant Point II CBO 2000-1 Ltd.

     557,276.09    0.76 %   23,329.2    0.76 %

Harbour Town Funding Trust

     552,657.14    0.76 %   23,135.8    0.76 %

MassMutual High Yield Partners II, LLC

     746,087.12    1.02 %   31,233.4    1.02 %

Indosuez Capital Funding IIA, Ltd.

     407,847.67    0.56 %   17,073.7    0.56 %

SunAmerica Senior Floating Rate Fund Inc.

     82,898.56    0.11 %   3,470.4    0.11 %

GSC Partners Gemini Fund Limited

     47,920.00    0.07 %   2,006.1    0.07 %     

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

  

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

 

--------------------------------------------------------------------------------

  

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

Total

   $ 72,892,916.17    100.00 %   3,051,507.0    100.00 %

--------------------------------------------------------------------------------

ANNEX B

TO

SECURED LENDER WARRANT AGREEMENT

 

Release Certificate

 

[Use the following paragraph in the event of an Earn-In Release]

 

As an authorized representative of the Lenders and the holders of
$                     aggregate principal amount of Commitments under the
Amended and Restated Credit Agreement, dated as of December     , 2003 (the
“Credit Agreement”), among Dynamic Details, Incorporated, DDi Capital Corp., the
Lenders from time to time parties thereto and JPMorgan Chase Bank, as
Administrative Agent thereunder (in such capacity, the “Administrative Agent”),
the undersigned hereby certifies that, as of the Earn-In Date, each Lender
listed on the attached Schedule I was the holder of Commitments under the Credit
Agreement in the principal amount set forth beside such Lender’s name.

 

Upon receipt of this duly completed Release Certificate, the Warrant Escrow
Agent is hereby instructed to release to each Lender the number of Warrants set
forth beside such Lender’s name on the attached Schedule I, as provided under
Section 4.2 of the Warrant Agreement between DDi Corp. and Mellon Investor
Services LLC, dated as of December     , 2003.

 

       

JPMORGAN CHASE BANK,

       

as Administrative Agent

Date:

 

 

--------------------------------------------------------------------------------

 

 

--------------------------------------------------------------------------------

       

CONSENTED TO AND AGREED BY:

       

DDI CORP.

       

By:

--------------------------------------------------------------------------------

 

[Attach Schedule I, which shall include a complete list of Lender names, the
aggregate principal amount of Commitments outstanding under the Credit Agreement
as of the Earn-In Date, the principal amount of Commitments of each Lender as of
the Earn-In Date, the percentage and the corresponding total number of Warrants
to be released from escrow, and the percentage of the total number of Warrants
to be released to each Lender.]

--------------------------------------------------------------------------------

[Use the following paragraph in the event that the Commitments under the Credit
Agreement have been permanently reduced by at least 50% as of the Earn-In Date.]

 

As the authorized representative of DDI Corp., I hereby certify that, as of the
Earn-In Date (as defined in the Warrant Agreement), the borrowers under the
Credit Agreement (referred to below) have permanently reduced the Commitments
under the Credit Agreement by at least fifty percent (50%) of the aggregate
amount of such Commitments outstanding on the Closing Date and any outstanding
loans in excess of such reduced Commitments plus all accrued and unpaid interest
and all accrued and unpaid Success Fees with respect thereto have been repaid in
full, and such Commitments are not subject to reborrowing. The undersigned
therefore requests that Mellon Investor Services LLC, as Warrant Escrow Agent,
release fifty percent (50%) of the unearned Warrants for the Common Stock of DDi
Corp. in escrow as of the date hereof, and deliver such Warrants to Mellon
Investor Services LLC (the “Warrant Agent”) for cancellation.

 

[Use the following paragraph in the event that all outstanding loans have been
repaid and all Commitments under the Credit Agreement have been terminated as of
the Earn-In Date.]

 

As the authorized representative of DDi Corp., I hereby certify that, as of the
Earn-In Date (as defined in the Warrant Agreement), the borrowers under the
Credit Agreement (referred to below) have repaid in full all outstanding loans
and other extensions of credit under the Commitments under the Credit Agreement
plus all accrued and unpaid interest and all accrued and unpaid Success Fees
under the Credit Agreement, and such Commitments have been terminated and are
not subject to reborrowing. The undersigned therefore requests that Mellon
Investor Services LLC, as Warrant Escrow Agent, release all of the unearned
Warrants for the Common Stock of DDi Corp. in escrow as of the date hereof, and
deliver such Warrants to Mellon Investor Services LLC (the “Warrant Agent”) for
cancellation.

 

       

DDI CORP.

Date:

 

 

 

--------------------------------------------------------------------------------

 

By:

 

 

--------------------------------------------------------------------------------

                     

CONSENTED TO AND AGREED BY:

       

JPMORGAN CHASE BANK,

       

as Administrative Agent

       

By:

 

 

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

[Use the following paragraph, modified as appropriate.]

 

As the authorized representative of JPMorgan Chase Bank, which serves as the
Administrative Agent under the terms of the Second Amended and Restated Credit
Agreement, dated as of December     , 2003 (the “Credit Agreement”), among
Dynamic Details, Incorporated, DDi Capital Corp., the Lenders from time to time
parties thereto and JPMorgan Chase Bank, as Administrative Agent thereunder (in
such capacity, the “Administrative Agent”), the undersigned hereby certifies
that, as of the Earn-In Date, [the borrowers under the Credit Agreement] have
[permanently reduced at least fifty percent (50%) of the aggregate amount,
including principal, accrued interest and fees thereon, of the Commitments and
indebtedness incurred under the terms of the Credit Agreement, and DDi Corp. is
therefore entitled to the release of fifty percent (50%)] [repaid the entire
amount, including principal, all accrued interest and fees thereon, of the
Commitments and indebtedness incurred under the terms of the Credit Agreement
and has repaid in full all accrued Success Fees, and DDi Corp. is therefore
entitled to the release of all] of the unearned Warrants for the Common Stock of
DDi Corp. from escrow.

 

       

JPMORGAN CHASE BANK,

       

as Administrative Agent

Date:

 

 

 

--------------------------------------------------------------------------------

 

By:

 

 

 

--------------------------------------------------------------------------------

                                   

CONSENTED TO AND AGREED BY:

       

DDI CORP.

       

By: