Document:

FORM OF THIRD SUPPLEMENTAL INDENTURE

 EXHIBIT 4.2 
 MARKEL CORPORATION 
 Issuer 
  
 TO 
  
 JPMORGAN CHASE BANK 
 (formerly known as The
Chase Manhattan Bank) 
 Trustee 
  

  
 Third Supplemental Indenture 

 
 Dated as of August 13, 2004 
  

  
 $200,000,000 
  
 7.35% Senior Notes 
  
 Due 2034 

  
 TABLE OF CONTENTS*

  

					
	 ARTICLE I
	  	 7.35% SENIOR NOTES DUE 2034
	  	 
			
	 SECTION 101.
	  	 ESTABLISHMENT
	  	1
	 SECTION 102.
	  	 DEFINITIONS
	  	2
	 SECTION 103.
	  	 PAYMENT OF PRINCIPAL AND INTEREST
	  	3
	 SECTION 104.
	  	 DENOMINATIONS
	  	4
	 SECTION 105.
	  	 GLOBAL SECURITIES
	  	5
	 SECTION 106.
	  	 REDEMPTION
	  	5
	 SECTION 107.
	  	 SINKING FUND
	  	5
	 SECTION 108.
	  	 ADDITIONAL INTEREST
	  	5
	 SECTION 109.
	  	 PAYING AGENT
	  	5
	 SECTION 110.
	  	 LIMITATION ON LIENS
	  	6
	 SECTION 111.
	  	 EVENTS OF DEFAULT.
	  	6
	 SECTION 112.
	  	 DEFEASANCE.
	  	8
			
	 ARTICLE II
	  	 MISCELLANEOUS PROVISIONS
	  	 
			
	 SECTION 201.
	  	 RECITALS BY COMPANY
	  	8
	 SECTION 202.
	  	 INCORPORATION OF ORIGINAL INDENTURE
	  	9
	 SECTION 203.
	  	 EXECUTED IN COUNTERPARTS
	  	9
	 SECTION 204.
	  	 ASSIGNMENT
	  	9

	*	This Table of Contents does not constitute part of the Indenture or have any bearing upon the interpretation of any of its terms and provisions. 

  

 i 

 THIS THIRD SUPPLEMENTAL INDENTURE is made as of August 13, 2004, by and between MARKEL CORPORATION, a
Virginia corporation, having its principal office at 4521 Highwoods Parkway, Glen Allen, Virginia 23060 (the “Company”), and JPMORGAN CHASE BANK (formerly known as THE CHASE MANHATTAN BANK), a New York banking corporation, as Trustee
(herein called the “Trustee”). 
  
 W I T N E S S E T H:

  
 WHEREAS, the Company has heretofore entered into a Senior
Indenture, dated as of June 5, 2001 (the “Original Indenture”), as heretofore supplemented and amended, with the Trustee; 
  
 WHEREAS, the Original Indenture is incorporated herein by this reference and the Original Indenture, as heretofore supplemented and amended and as further
supplemented by this Third Supplemental Indenture, is herein called the “Indenture”; 
  
 WHEREAS, under the Original Indenture, a new series of Securities may at any time be established in accordance with the provisions of the Original Indenture and the terms of such series may be described by a
supplemental indenture executed by the Company and the Trustee; 
  
 WHEREAS, the Company proposes to create under the Indenture a series of Securities; 
  
 WHEREAS, additional Securities of other series hereafter established, except as may be limited in the Original Indenture as at the time supplemented and modified, may be issued from time to time pursuant to the
Indenture as at the time supplemented and modified; and 
  
 WHEREAS, all conditions necessary to authorize the execution and delivery of this Third Supplemental Indenture and to make it a valid and binding obligation of the Company have been done or performed. 
  
 NOW, THEREFORE, in consideration of the agreements and obligations set forth
herein and for other good and valuable consideration, the sufficiency of which is hereby acknowledged, the parties hereto hereby agree as follows: 
  
 ARTICLE I 
 7.35% SENIOR NOTES DUE
2034 
  
 SECTION 101. Establishment. There is
hereby established a new series of Securities to be issued under the Indenture, to be designated as the Company’s 7.35% Senior Notes due 2034 (the “7.35% Senior Notes”). 
  
 There are to be authenticated and delivered $200,000,000 principal amount of 7.35% Senior Notes, and such principal amount
of the 7.35% Senior Notes may be increased from time to time pursuant to Section 301 of the Indenture. All 7.35% Senior Notes need not be issued at the same time and such series may be reopened at any time, without the consent of any Holder, for
issuances of additional 7.35% Senior Notes. Any such additional 7.35% Senior Notes will have the same interest rate, maturity and other terms as those initially issued. Further 7.35% Senior Notes may also be authenticated and delivered as provided
by Sections 304, 305, 306 or 905 of the Original Indenture. 

 The 7.35% Senior Notes shall be issued in definitive fully registered form without coupons, in
substantially the form set out in Exhibit A hereto. The entire initially issued principal amount of the 7.35% Senior Notes shall initially be evidenced by one or more certificates issued to Cede & Co., as nominee for The Depository Trust
Company. 
  
 The form of the Trustee’s Certificate of
Authentication for the 7.35% Senior Notes shall be in substantially the form set forth in Exhibit B hereto. 
  
 Each 7.35% Senior Note shall be dated the date of authentication thereof and shall bear interest from the Original Issue Date or from the most recent
Interest Payment Date to which interest has been paid or duly provided for. 
  
 SECTION 102. Definitions. The following defined terms used herein shall, unless the context otherwise requires, have the meanings specified below. Capitalized terms used herein for which no definition is
provided herein shall have the meanings set forth in the Original Indenture. 
  
 “Business Day” means a day other than (i) a Saturday or a Sunday, (ii) a day on which banks in New York, New York are authorized or obligated by law or executive order to remain closed or (iii) a day on
which the Corporate Trust Office is closed for business. 
  
 “Corporate Trust Office” means the office of the Trustee at which at any particular time its corporate trust business shall be principally administered, which office at the date of original execution of this Indenture is located
at 4 New York Plaza, 15th Floor, New York, New York 10004. 
  
 “Interest Payment Dates” means February 15 and August 15 of each
year, commencing on February 15, 2005. 
  
 “Lien” means
any mortgage, lien, pledge, security interest or other encumbrance of any kind. 
  
 “Material Subsidiary” means a Subsidiary of the Company whose total assets (as determined in accordance with GAAP) represent at least 20% of the total assets of the Company on a consolidated basis.

  
 “Original Issue Date” means August 13, 2004.

  
 “Outstanding”, when used with respect to the 7.35%
Senior Notes, means, as of the date of determination, all 7.35% Senior Notes, theretofore authenticated and delivered under the Indenture, except: 
  
 (i) 7.35% Senior Notes theretofore canceled by the Trustee or delivered to the Trustee for cancellation; 
  

 2 

 (ii) 7.35% Senior Notes for whose payment at Maturity the necessary amount of money or money’s worth
has been theretofore deposited (other than pursuant to Section 402 of the Original Indenture) with the Trustee or any Paying Agent (other than the Company) in trust or set aside and segregated in trust by the Company (if the Company shall act as its
own Paying Agent) for the Holders of such 7.35% Senior Notes. 
  
 (iii) 7.35% Senior Notes with respect to which the Company has effected defeasance, or covenant defeasance has been effected, pursuant to Section 402 of the Original Indenture; and 
  
 (iv) 7.35% Senior Notes that have been paid pursuant to Section 306 of the
Original Indenture or in exchange for or in lieu of which other 7.35% Senior Notes have been authenticated and delivered pursuant to the Indenture, other than any such 7.35% Senior Notes in respect of which there shall have been presented to the
Trustee proof satisfactory to it that such 7.35% Senior Notes are held by a bona fide purchaser in whose hands such 7.35% Senior Notes are valid obligations of the Company; provided, however, that in determining whether the Holders of the requisite
principal amount of Outstanding 7.35% Senior Notes have given any request, demand, authorization, direction, notice, consent or waiver hereunder or are present at a meeting of Holders of 7.35% Senior Notes for quorum purposes, 7.35% Senior Notes
owned by the Company or any other obligor upon the 7.35% Senior Notes or any Affiliate of the Company or such other obligor shall be disregarded and deemed not to be Outstanding, except that, in determining whether the Trustee shall be protected in
making any such determination or relying upon any such request, demand, authorization, direction, notice, consent or waiver, only 7.35% Senior Notes which a Responsible Officer of the Trustee knows to be so owned shall be so disregarded. 7.35%
Senior Notes so owned which shall have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee (A) the pledgee’s right so to act with respect to such 7.35% Senior Notes and (B)
that the pledgee is not the Company or any other obligor upon the 7.35% Senior Notes or an Affiliate of the Company or such other obligor. 
  
 “Regular Record Date” means, with respect to each Interest Payment Date, the close of business on the Business Day preceding such Interest
Payment Date; provided, that with respect to 7.35% Senior Notes that are not represented by one or more Global Securities, the Regular Record Date shall be the close of business on the 15th calendar day (whether or not a Business Day) preceding such
Interest Payment Date. 
  
 “Stated Maturity” means
August 15, 2034. 
  
 SECTION 103. Payment of Principal and
Interest. The principal of the 7.35% Senior Notes shall be due at the Stated Maturity. The unpaid principal amount of the 7.35% Senior Notes shall bear interest at the rate of 7.35% per annum until paid or duly provided for, such interest
to accrue from the Original Issue Date or from the most recent Interest Payment Date to which interest has been paid or duly provided for. Interest shall be paid semi-annually in arrears on each Interest Payment Date to the Person in whose name the
7.35% Senior Notes are registered on the Regular Record Date for such Interest Payment Date; provided that interest payable at the Stated Maturity of principal as provided herein will be paid to the Person to whom principal is payable. Any such
interest that is not so punctually paid or duly provided for will 
  

 3 

 forthwith cease to be payable to the Holders on such Regular Record Date and may either be paid to the Person or Persons
in whose name the 7.35% Senior Notes are registered at the close of business on a Special Record Date for the payment of such defaulted interest to be fixed by the Trustee (in accordance with Section 307 of the Original Indenture), notice whereof
shall be given to Holders of the 7.35% Senior Notes not less than ten (10) days prior to such Special Record Date, or be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange, if any, on which
the 7.35% Senior Notes may be listed, and upon such notice as may be required by any such exchange, all as more fully provided in the Original Indenture. 
  
 Payments of interest on the 7.35% Senior Notes will include interest accrued to but excluding the respective Interest Payment Dates. Interest payments for
the 7.35% Senior Notes shall be computed and paid on the basis of a 360-day year of twelve 30-day months. In the event that any date on which interest is payable on the 7.35% Senior Notes is not a Business Day, then payment of the interest payable
on such date will be made on the next succeeding day that is a Business Day (and without any interest or payment in respect of any such delay), in each case with the same force and effect as if made on the date the payment was originally payable.

  
 Payment of the principal and interest on the 7.35% Senior
Notes shall be made at the office of the Paying Agent in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts, with any such payment that is due at the Stated
Maturity of any 7.35% Senior Notes being made upon surrender of such 7.35% Senior Notes to the Paying Agent. Payments of interest (including interest on any Interest Payment Date) will be made, subject to such surrender where applicable, at the
option of the Company, (i) by check mailed to the address of the Person entitled thereto as such address shall appear in the Security Register or (ii) by wire transfer at such place and to such account at a banking institution in the United States
as may be designated in writing to the Trustee at least sixteen (16) days prior to the date for payment by the Person entitled thereto. In the event that any date on which principal and interest is payable on the 7.35% Senior Notes is not a Business
Day, then payment of the principal and interest payable on such date will be made on the next succeeding day that is a Business Day (and without any interest or payment in respect of any such delay), in each case with the same force and effect as if
made on the date the payment was originally payable. 
  
 SECTION
104. Denominations. The 7.35% Senior Notes may be issued in denominations of $1,000, or any integral multiple thereof. 
  

 4 

 SECTION 105. Global Securities. The 7.35% Senior Notes will be issued initially in the form
of one or more Global Securities registered in the name of the Depositary (which shall be The Depository Trust Company) or its nominee. Except under the limited circumstances described below, 7.35% Senior Notes represented by such Global Securities
will not be exchangeable for, and will not otherwise be issuable as, 7.35% Senior Notes in definitive form. The Global Securities described above may not be transferred except by the Depositary to a nominee of the Depositary or by a nominee of the
Depositary to the Depositary or another nominee of the Depositary or to a successor Depositary or its nominee. 
  
 Owners of beneficial interests in such a Global Security will not be considered the Holders thereof for any purpose under the Indenture, and no Global
Security representing a 7.35% Senior Note shall be exchangeable, except for another Global Security of like denomination and tenor to be registered in the name of the Depositary or its nominee or to a successor Depositary or its nominee or except as
described below. The rights of Holders of such Global Security shall be exercised only through the Depositary. 
  
 A Global Security shall be exchangeable for 7.35% Senior Notes registered in the names of persons other than the Depositary or its nominee only if (i) the
Depositary notifies the Company that it is unwilling or unable to continue as a Depositary for such Global Security and no successor Depositary shall have been appointed by the Company within 90 days of receipt by the Company of such notification,
or if at any time the Depositary ceases to be a clearing agency registered under the Exchange Act at a time when the Depositary is required to be so registered to act as such Depositary and no successor Depositary shall have been appointed by the
Company within 90 days after it becomes aware of such cessation, or (ii) the Company in its sole discretion determines that such Global Security shall be so exchangeable. Any Global Security that is exchangeable pursuant to the preceding sentence
shall be exchangeable for 7.35% Senior Notes registered in such names as the Depositary shall direct. 
  
 SECTION 106. Redemption. The 7.35% Senior Notes are not redeemable, in whole or in part, at any time. 
  
 SECTION 107. Sinking Fund. The 7.35% Senior Notes shall not
have a sinking fund. 
  
 SECTION 108. Additional
Interest. Any principal of and installment of interest on the 7.35% Senior Notes that is overdue shall bear interest at the rate of 7.35% (to the extent that the payment of such interest shall be legally enforceable), from the dates such
amounts are due until they are paid or made available for payment, and such interest shall be payable on demand. 
  
 SECTION 109. Paying Agent. The Trustee shall initially serve as Paying Agent with respect to the 7.35% Senior Notes, with the Place of
Payment initially being the Corporate Trust Office of the Trustee. 
  

 5 

 SECTION 110. Limitation on Liens. The Company and its Material Subsidiaries may not issue,
assume, incur or guarantee any indebtedness for borrowed money secured by a mortgage, pledge, lien or other encumbrance, directly or indirectly, upon any shares of the Voting Stock of a Material Subsidiary which shares are owned by the Company or
its Material Subsidiaries without effectively providing that the 7.35% Senior Notes (and if the Company so elects, any other indebtedness of the Company ranking on a parity with the 7.35% Senior Notes) shall be secured equally and ratably with, or
prior to, any such secured indebtedness so long as such indebtedness remains outstanding. This Section 110 shall not apply to: 
  
 (i) liens for taxes or assessments or governmental charges or levies not then due and delinquent or the validity of which is being contested in good faith
or which are less than $1,000,000 in amount and liens created by or resulting from any litigation or legal proceeding which is currently being contested in good faith by appropriate proceedings or which involves claims of less than $1,000,000, or

  
 (ii) any mortgage, pledge, lien or other encumbrance upon any
shares of Voting Stock of any corporation existing at the time such corporation becomes a Material Subsidiary and any extensions, renewals or replacements thereof. 
  
 This Section 110 has been included in this Third Supplemental Indenture expressly and solely for the benefit of the 7.35%
Senior Notes and shall be subject to covenant defeasance pursuant to Section 402(3) of the Original Indenture. 
  
 SECTION 111. Events of Default. Article V of the Original Indenture is amended solely with respect to the 7.35% Senior Notes as follows:

  
 (a) Section 501 is amended and restated in its entirety as
follows: 
  
 “Section 501. Events of Default.

  
 ‘Event of Default’, wherever used
herein with respect to the 7.35% Senior Notes, means any one of the following events (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any administrative or governmental body): 
  
 (1) default in the payment of any interest on the 7.35% Senior Notes when such interest becomes due and payable, and continuance of such
default for a period of 30 days; or 
  
 (2)
default in the payment of the principal of the 7.35% Senior Notes when due upon Maturity; or 
  
 (3) default in the performance, or breach, of any covenant or warranty of the Company in this Indenture or the Security representing the
7.35% Senior Notes (other than (i) a covenant or warranty for which the consequences of breach or nonperformance are addressed elsewhere in this Section 501 or (ii) a covenant or warranty which has 
  

 6 

 expressly been included in this Indenture or a Security of a series, whether or not by means of a
supplemental indenture, solely for the benefit of Securities of a series other than the 7.35% Senior Notes), and continuance of such default or breach for a period of 60 days after there has been given, by registered or certified mail, to the
Company by the Trustee or to the Company and the Trustee by the Holders of at least 25% in principal amount of the Outstanding 7.35% Senior Notes a written notice specifying such default or breach and requiring it to be remedied and stating that
such notice is a ‘Notice of Default’ hereunder; or 
  
 (4) (a) the failure of the Company to make any payment by the end of any applicable grace period after maturity of indebtedness, which term as used in this Section 501 means obligations (other than nonrecourse
obligations) of the Company for borrowed money or evidenced by bonds, debentures, notes or similar instruments in an aggregate principal amount in excess of $50,000,000 (‘Indebtedness’) and continuance of such failure, or (b) the
acceleration of Indebtedness because of a default with respect to such Indebtedness without such Indebtedness having been discharged or such acceleration having been cured, waived, rescinded or annulled, in each case, for a period of 10 days after
written notice to the Company by the Trustee or to the Company and the Trustee by the Holders of not less than 25% in aggregate principal amount of the Outstanding 7.35% Senior Notes; however, if any such failure or acceleration referred to in (a)
or (b) above ceases or is cured, waived, rescinded or annulled, then the Event of Default by reason thereof shall be deemed not to have occurred; or 
  
 (5) the Company pursuant to or under or within the meaning of any Bankruptcy Law: 
  
 (a) commences a voluntary case or proceeding; 
  
 (b) consents to the entry of an order for relief against it
in an involuntary case or proceeding or the commencement of any case against it; 
  
 (c) consents to the appointment of a Custodian of it or for any substantial part of its property; 
  
 (d) makes a general assignment for the benefit of its
creditors; 
  
 (e) files a petition in bankruptcy
or answer or consent seeking reorganization or relief; or 
  
 (f) consents to the filing of such petition or the appointment of or taking possession by a Custodian; or 
  
 (6) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: 
  
 (a) is for relief against the Company in an involuntary case
or proceeding, or adjudicates the Company insolvent or bankrupt; 
  

 7 

 (b) appoints a Custodian of the Company or for any substantial part of its property; or

  
 (c) orders the winding up or liquidation of
the Company; 
  
 and the order or decree remains
unstayed and in effect for 90 days. 
  
 ‘Bankruptcy Law’ means Title 11, United States Code, or any similar Federal or state law for the relief of debtors. “Custodian” means any receiver, trustee, assignee, liquidator, custodian or similar official under any
Bankruptcy Law.” 
  
 (b) Section 502 is amended as follows:

  
 (1) The first paragraph shall be amended by
deleting “33%” and replacing it with “25%” and by adding the following sentence at the end of the paragraph: “If an Event of Default specified in clauses (5) or (6) of Section 501 occurs and is continuing, then the principal
of, and accrued interest on, all of the Outstanding 7.35% Senior Notes shall become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Holder.” 
  
 (2) The second paragraph shall be amended by deleting the
period at the end and replacing it with “; and” and by adding the following clause immediately after clause (2): “(3) the rescission would not conflict with any judgment or decree of a court of competent jurisdiction.”

  
 SECTION 112. Defeasance. In addition to the
conditions set forth in Section 402 of the Original Indenture, in order for the Company to effect defeasance or covenant defeasance of the 7.35% Senior Notes, the Company must have delivered to the Trustee an Opinion of Counsel to the effect that
the Holders of the then Outstanding 7.35% Senior Notes will not recognize income, gain or loss for federal income tax purposes as a result of the defeasance or covenant defeasance and will be subject to federal income tax in the same amounts, in the
same manner and at the same time as would have been the case if the defeasance or covenant defeasance had not occurred. In the case of a defeasance (but not of a covenant defeasance), the opinion must refer to and be based upon a ruling of the
Internal Revenue Service or a change in applicable federal income tax laws. 
  
 ARTICLE II 
 MISCELLANEOUS PROVISIONS 
  
 SECTION 201. Recitals by Company. The recitals in this Third
Supplemental Indenture are made by the Company only and not by the Trustee (who makes no representation for or in respect of the validity or sufficiency of this Third Supplemental Indenture or for or in respect of the recitals contained herein), and
all of the provisions contained in the Original Indenture in respect of the rights, privileges, immunities, powers and duties of the Trustee shall be applicable in respect of the 7.35% Senior Notes and of this Third Supplemental Indenture as fully
and with like effect as if set forth herein in full. 
  

 8 

 SECTION 202. Incorporation of Original Indenture. As supplemented hereby, the Original
Indenture is in all respects ratified and confirmed, and the Original Indenture and this Third Supplemental Indenture shall be read, taken and construed as one and the same instrument. 
  
 SECTION 203. Executed in Counterparts. This Third Supplemental Indenture may be executed in several
counterparts, each of which shall be deemed to be an original, and such counterparts shall together constitute but one and the same instrument. 
  
 SECTION 204. Assignment. The Company shall have the right at all times to assign any of its rights or obligations under the Indenture with
respect to the 7.35% Senior Notes to a direct or indirect wholly-owned subsidiary of the Company; provided that, in the event of any such assignment, the Company shall remain primarily liable for the performance of all such obligations. The
Indenture may also be assigned by the Company in connection with a transaction described in Article Eight of the Original Indenture. 
  

 9 

 IN WITNESS WHEREOF, each party hereto has caused this instrument to be signed in its name and behalf by its duly
authorized officer, all as of the day and year first above written. 
  

			
	 MARKEL CORPORATION

		
	 By:
	 	  

	 Name:
	 	  

	 Title:
	 	  

	
	 JPMORGAN CHASE BANK, as Trustee

		
	 By:
	 	  

	 Name:
	 	  

	 Title:
	 	  

  

 10 

 EXHIBIT A 
  
 FORM OF 
 7.35% SENIOR NOTE DUE 2034 

 
 [UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF [CEDE & CO.] OR SUCH OTHER NAME AS REQUESTED
BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY AND ANY PAYMENT IS MADE TO [CEDE & CO.], ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, [CEDE
& CO.], HAS AN INTEREST HEREIN.]** 
  
 [THIS 7.35% SENIOR NOTE
IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A NOMINEE THEREOF. THIS 7.35% SENIOR NOTE MAY NOT BE EXCHANGED IN WHOLE OR IN PART FOR A SECURITY REGISTERED, AND NO
TRANSFER OF THIS 7.35% SENIOR NOTE IN WHOLE OR IN PART MAY BE REGISTERED, IN THE NAME OF ANY PERSON OTHER THAN SUCH DEPOSITARY OR A NOMINEE THEREOF, EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE.]** 
  

  
 MARKEL CORPORATION 
  

  
 $200,000,000 
 7.35% SENIOR NOTES DUE 2034 
  

			
	 No. A-  
	 	CUSIP No.                     

  
 Markel Corporation, a
corporation duly organized and existing under the laws of Virginia (herein called the “Company”, which term includes any successor Person under the Indenture hereinafter referred to), for value received, hereby promises to pay to [Cede
& Co.], or registered assigns (the “Holder”), the principal sum of Two Hundred Million Dollars ($200,000,000) on August 15, 2034 and to pay interest thereon from August 13, 2004 or from the most recent Interest Payment Date to which
interest has been paid or duly provided for, semi-annually in 

	**	Insert in Global Securities 

 arrears on February 15 and August 15 of each year, commencing on February 15, 2005, at the rate of 7.35% per annum, until
the principal hereof is paid or made available for payment, provided that any principal, and any such installment of interest, that is overdue shall bear interest at the rate of 7.35% per annum (to the extent that the payment of such interest shall
be legally enforceable), from the dates such amounts are due until they are paid or made available for payment, and such interest shall be payable on demand. The interest so payable, and punctually paid or duly provided for, on any Interest Payment
Date will, as provided in such Indenture, be paid to the Person in whose name this 7.35% Senior Note (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest, which shall be the
close of business on the Business Day preceding such Interest Payment Date; provided, that with respect to 7.35% Senior Notes that are not represented by one or more Global Securities, the Regular Record Date shall be the close of business on the
15th calendar day (whether or not a Business Day) preceding such Interest Payment Date. Any such interest not so punctually paid or duly provided for will forthwith cease to be payable to the Holder on such Regular Record Date and may either be paid
to the Person in whose name this 7.35% Senior Note (or one or more Predecessor Securities) is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Trustee, notice whereof shall be
given to Holders of 7.35% Senior Notes not less than 10 days prior to such Special Record Date, or be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the 7.35% Senior Notes may
be listed, and upon such notice as may be required by such exchange, all as more fully provided in said Indenture. 
  
 Payments of interest on the 7.35% Senior Notes will include interest accrued to but excluding the respective Interest Payment Dates. Interest payments for
the 7.35% Senior Notes shall be computed and paid on the basis of a 360-day year of twelve 30-day months. In the event that any date on which interest is payable on the 7.35% Senior Notes is not a Business Day, then payment of the interest payable
on such date will be made on the next succeeding day that is a Business Day (and without any interest or payment in respect of any such delay), in each case with the same force and effect as if made on the date the payment was originally payable.

  
 Payment of the principal of and interest on this 7.35% Senior
Note will be made at the office of the Paying Agent, in the Borough of Manhattan, City and State of New York, in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts,
with any such payment that is due at the Stated Maturity of any 7.35% Senior Note being made upon surrender of such 7.35% Senior Note to such office or agency; provided, however, that at the option of the Company payment of interest, subject to such
surrender where applicable, may be made (i) by check mailed to the address of the Person entitled thereto as such address shall appear in the Security Register or (ii) by wire transfer at such place and to such account at a banking institution in
the United States as may be designated in writing to the Trustee at least sixteen (16) days prior to the date for payment by the Person entitled thereto. 
  
 Reference is hereby made to the further provisions of this 7.35% Senior Note set forth on the reverse hereof, which further provisions shall for all
purposes have the same effect as if set forth at this place. 

 Unless the certificate of authentication hereon has been executed by the Trustee referred to on the
reverse hereof by manual signature, this 7.35% Senior Note shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose. 
  

IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed. 
  

					
	 Dated:
	 	 Markel Corporation

			
	 	 	 By:
	 	  

			
	 	 	 Name:
	 	  

			
	 	 	 Title:
	 	  

 CERTIFICATE OF AUTHENTICATION 
  
 This is one of the Securities of the series designated therein referred to in the within-mentioned Indenture. 
  

			
	 JPMORGAN CHASE BANK,
 as Trustee

		
	 By:
	 	  

	 	 	 Authorized Officer

 REVERSE OF 7.35% SENIOR NOTE 
  
 This Security is one of a duly authorized issue of securities of the Company (herein called the “Securities”),
issued and to be issued in one or more series under an Indenture, dated as of June 5, 2001, as heretofore supplemented and amended and as further supplemented by a Third Supplemental Indenture dated as of August 13, 2004 (collectively, as amended or
supplemented from time to time, herein called the “Indenture”, which term shall have the meaning assigned to it in such instrument), between the Company and JPMorgan Chase Bank (formerly known as The Chase Manhattan Bank), as Trustee
(herein called the “Trustee”, which term includes any successor trustee under the Indenture), and reference is hereby made to the Indenture for a statement of the respective rights, limitations of rights, duties and immunities thereunder
of the Company, the Trustee and the Holders of the Securities and of the terms upon which the Securities are, and are to be, authenticated and delivered. This Security is one of the series designated on the face hereof (the “7.35% Senior
Notes”) which is unlimited in aggregate principal amount. 
  
 If an Event of Default with respect to 7.35% Senior Notes shall occur and be continuing, the principal of the 7.35% Senior Notes may be declared due and payable in the manner and with the effect provided in the Indenture. 
  
 The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the Company and the rights of the Holders of the Securities of each series to be affected under the Indenture at any time by the Company and the Trustee with the consent of the
Holders of a majority in principal amount of the Securities at the time Outstanding of each series to be affected. The Indenture also contains provisions permitting the Holders of specified percentages in principal amount of the Securities of each
series at the time Outstanding, on behalf of the Holders of all Securities of such series, to waive certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this 7.35% Senior Note shall be
conclusive and binding upon such Holder and upon all future Holders of this 7.35% Senior Note and of any 7.35% Senior Note issued upon the registration of transfer hereof or in exchange therefor or in lieu hereof, whether or not notation of such
consent or waiver is made upon this 7.35% Senior Note. 
  
 As
provided in and subject to the provisions of the Indenture, the Holder of this 7.35% Senior Note shall not have the right to institute any proceeding with respect to the Indenture or for the appointment of a receiver or trustee or for any other
remedy thereunder, unless such Holder shall have previously given the Trustee written notice of a continuing Event of Default with respect to the 7.35% Senior Notes, the Holders of not less than a majority in principal amount of the 7.35% Senior
Notes at the time Outstanding shall have made written request to the Trustee to institute proceedings in respect of such Event of Default as Trustee and offered the Trustee reasonable indemnity, and the Trustee shall not have received from the
Holders of a majority in principal amount of 7.35% Senior Notes at the time Outstanding a direction inconsistent with such request, and shall have failed to institute any such proceeding for 60 days after receipt of such notice, request and offer of
indemnity. The foregoing shall not apply to any suit instituted by the Holder of this 7.35% Senior Note for the enforcement of any payment of principal hereof or premium, if any, or interest hereon on or after the respective due dates expressed or
provided for herein. 

 No reference herein to the Indenture and no provision of this 7.35% Senior Note or of the Indenture shall
alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of, premium, if any, and interest on this 7.35% Senior Note at the times, place and rate, and in the coin or currency, herein prescribed.

  
 As provided in the Indenture and subject to certain
limitations therein set forth, the transfer of this 7.35% Senior Note is registrable in the Security Register, upon surrender of this 7.35% Senior Note for registration of transfer at the office or agency of the Company in any place where the
principal of, premium, if any, and interest on this 7.35% Senior Note are payable, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed by, the Holder
hereof or his attorney duly authorized in writing, and thereupon one or more new 7.35% Senior Notes and of like tenor, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or
transferees. 
  
 The 7.35% Senior Notes are issuable only in
registered form without coupons in denominations of $1,000 and any integral multiple thereof. As provided in the Indenture and subject to certain limitations therein set forth, 7.35% Senior Notes are exchangeable for a like aggregate principal
amount of 7.35% Senior Notes having the same Stated Maturity and of like tenor of any authorized denominations as requested by the Holder upon surrender of the 7.35% Senior Note or 7.35% Senior Notes to be exchanged at the office or agency of the
Company. 
  
 No service charge shall be made for any such
registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. 
  
 Prior to due presentment of this 7.35% Senior Note for registration of transfer, the Company, the Trustee and any agent of
the Company or the Trustee may treat the Person in whose name this Security is registered as the owner hereof for all purposes, whether or not this 7.35% Senior Note be overdue, and neither the Company, the Trustee nor any such agent shall be
affected by notice to the contrary. 
  
 All terms used in this
7.35% Senior Note that are defined in the Indenture shall have the meanings assigned to them in the Indenture. 

 ABBREVIATIONS 
  
 The following abbreviations, when used in the inscription on the face of this instrument, shall be construed as though they were written out in full according to
applicable laws or regulations: 
  

					
	TEN COM —	 	as tenants in common
		
	TEN ENT —	 	as tenants by the entireties
		
	JT TEN —	 	as joint tenants with rights of survivorship and not as tenants in common
			
	UNIF GIFT MIN ACT —	 	  

	 	Custodian for
	 	 	(Cust)	 	 
			
	 	 	
	 	 
	`	 	(Minor)	 	 
		
	 	 	Under Uniform Gifts to Minors Act of
			
	 	 	
	 	 
	 	 	(State)

  
 Additional
abbreviations may also be used though not on the above list. 
  
 ___________________________________________________________ 

 FOR VALUE RECEIVED, the undersigned hereby sell(s) and transfer(s) unto
                                        
(please insert Social Security or other identifying number of assignee). 
  
 ________________________________________________________________________________________________________ 
  
 ________________________________________________________________________________________________________ 
  
 ________________________________________________________________________________________________________ 
  
 PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING POSTAL ZIP CODE OF ASSIGNEE 
  
 the within 7.35% Senior Note and all rights thereunder, hereby irrevocably constituting and appointing 
  
 ________________________________________________________________________________________________________ 
  
 ________________________________________________________________________________________________________ 
  
 ________________________________________________________________________________________________________ 
  
 ________________________________________________________________________________________________________ 
  
 ________________________________________________________________________________________________________ 
  
 ________________________________________________________________________________________________________ 
  
 agent to transfer said 7.35% Senior Note on the books of the Company, with
full power of substitution in the premises. 
  
 Dated:
                         ,          
  

  
 NOTICE: The signature to this assignment must correspond with the name as written upon the face of the within instrument in every particular without alteration or
enlargement, or any change whatever. 

 EXHIBIT B 
 CERTIFICATE OF AUTHENTICATION 
  
 This is one of the Securities of the series designated therein referred to in the within-mentioned Indenture. 
  

			
	 JPMORGAN CHASE BANK,
 as Trustee

		
	 By:
	 	  

	 	 	 Authorized OfficerPurchase Agreement

 Exhibit 4.1 
  

PURCHASE AGREEMENT 
  
 THIS PURCHASE AGREEMENT (this “Agreement”) is made as of the 9th day of August, 2004, by and between Saba Software, Inc. (the
“Company”), a corporation organized under the laws of the State of Delaware, with its principal offices at 2400 Bridge Parkway, Redwood Shores, CA 94065 and the purchasers whose names and addresses are set forth on Schedule I hereto (each
a “Purchaser” and, collectively, the “Purchasers”). 
  
 IN CONSIDERATION of the mutual covenants contained in this Agreement, the Company and the Purchasers agree as follows: 
  
 SECTION 1. Authorization of Sale of the Shares. Subject to the terms and conditions of this Agreement, the Company has authorized
the issuance and sale of up to 2,674,500 shares (the “Shares”) of common stock, par value $0.001 per share (the “Common Stock”), of the Company. 
  
 SECTION 2. Agreement to Sell and Purchase the Shares. At the Closing (as defined in Section 3), the
Company will issue and sell to each Purchaser, and each Purchaser will buy from the Company, upon the terms and conditions hereinafter set forth, the number of Shares (at the purchase price) set forth opposite such Purchaser’s name on Schedule
I. 
  
 SECTION 3. Delivery of the Shares at
the Closing. The completion of the purchase and sale of the Shares (the “Closing”) shall occur at the offices of Morrison & Foerster LLP, 1290 Avenue of the Americas, New York, New York 10104 on the date hereof, or on such later
date or at such different location as the parties shall agree in writing, but not prior to satisfaction or waiver by the appropriate party of the conditions for Closing set forth below (the “Closing Date”). 
  
 At the Closing, the Company shall deliver to each Purchaser one or more stock
certificates registered in the name of such Purchaser, representing the number of Shares set forth opposite such Purchaser’s name on Schedule I hereto and bearing an appropriate legend referring to the fact that the Shares were sold in reliance
upon the exemption from registration under the Securities Act of 1933, as amended (the “Securities Act”) provided by Section 4(2) thereof. The Company’s obligation to complete the purchase and sale of the Shares and deliver such stock
certificates to the Purchaser at the Closing shall be subject to the following conditions, any one or more of which may be waived by the Company: (a) receipt by the Company of same-day funds in the full amount of the purchase price for the Shares
being purchased hereunder and (b) the accuracy in all material respects of the representations and warranties made by the Purchasers (as if such representations and warranties were made on the Closing Date) and the fulfillment of those undertakings
of the Purchasers to be fulfilled prior to the Closing. The Purchasers’ obligation to accept delivery of such stock certificates and to pay for the Shares evidenced thereby shall be subject to the following conditions, any one or more of which
may be waived by the Purchasers: (a) each of the representations and warranties of the Company made herein shall be accurate as of the Closing Date; (b) the delivery to the Purchasers by counsel to the Company of a legal opinion in a form reasonably
satisfactory to counsel to the Purchasers; and (c) the 

  

 1 

 
fulfillment in all material respects of those undertakings of the Company to be fulfilled prior to Closing. 
  
 SECTION 4. Representations, Warranties and Covenants of
the Company. The Company hereby represents and warrants to, and covenants with, each Purchaser as follows: 
  
 4.1 Organization and Qualification. The Company is a corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware and the Company is qualified to do business as a foreign corporation in each jurisdiction in which qualification is required, except where failure to so qualify would not reasonably be expected to have a Material
Adverse Effect (as defined herein). The material subsidiaries of the Company are listed on Exhibit A (each a “Subsidiary” and collectively, the “Subsidiaries”). Each Subsidiary is a direct or indirect wholly owned subsidiary of
the Company. Each Subsidiary is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization and is qualified to do business as a foreign entity in each jurisdiction in which qualification is required,
except where failure to so qualify would not reasonably be expected to have a Material Adverse Effect. For purposes of this Agreement, the term “Material Adverse Effect” shall mean a material adverse effect upon the business, financial
condition, properties, assets, operations, or results of operations of the Company and its Subsidiaries, taken as a whole or on the transactions contemplated hereby or by the agreements and instruments to be entered into in connection herewith, or
on the authority or ability of the Company to perform its obligations under this Agreement or the Registration Rights Agreement (as defined in Section 7.1). 
  
 4.2 Capitalization. As of July 31, 2004, the Company had authorized and issued and outstanding capital stock and shares reserved
for issuance pursuant to Company equity incentive programs as set forth under the heading “Capitalization” on Schedule 4.2 hereof, and since such date, except as contemplated by this Agreement and except as disclosed in the Company’s
(i) Annual Report on Form 10-K for the year ended May 31, 2003, (ii) Current Report on Form 8-K filed with the Securities and Exchange Commission (the “Commission”) on June 22, 2004, (iii) Current Report on Form 8-K filed with the
Commission on March 19, 2004, (iv) Current Report on Form 8-K filed with the Commission on March 15, 2004; (v) Current Report on Form 8-K filed with the Commission on December 19, 2003; (vi) Current Report on Form 8-K filed with the Commission on
September 22, 2003; (vii) Quarterly Report on Form 10-Q for the Quarter ended February 29, 2004, (viii) Quarterly Report on Form 10-Q for the Quarter ended August 31, 2003, (ix) Quarterly Report on Form 10-Q for the Quarter ended November 30, 2003,
and (x) Proxy Statement for its Annual Meeting of Stockholders on November 6, 2003 (collectively, the “Disclosure Documents”) and Schedule 4.2, there have been no additional issuances of capital stock of the Company except for options
granted and shares issued pursuant to equity incentive plans or other employee compensation plans or pursuant to options, rights or warrants outstanding as of July 31, 2004. The issued and outstanding shares of the Company’s Common Stock have
been duly authorized and validly issued, are fully paid and nonassessable, have been issued in compliance with all federal and state securities laws, were not issued in violation of or subject to any preemptive rights or other rights to subscribe
for or purchase securities, and conform in all material respects to the description thereof contained in the Disclosure Documents and the 

  

 2 

 
Company’s Form 8-A filed with the Commission on April 5, 2000. Except as disclosed in or contemplated by the Disclosure Documents and Schedule 4.2, the
Company does not have outstanding any options to purchase, or any preemptive rights or other rights to subscribe for or to purchase, any securities or obligations convertible into, or any contracts or commitments to issue or sell, shares of its
capital stock, any shares of capital stock of any Subsidiary or any such options, rights, convertible securities or obligations. The description of the Company’s stock, stock bonus and other stock plans or arrangements and the options or other
rights granted and exercised thereunder, set forth in the Disclosure Documents accurately and fairly presents the information required to be shown with respect to such plans, arrangements, options and rights. 
  
 4.3 Issuance, Sale and Delivery of the Shares. The
Shares have been duly authorized and, when issued, delivered and paid for in the manner set forth in this Agreement, will be duly authorized, validly issued, fully paid and nonassessable and free and clear of all pledges, liens, restrictions and
encumbrances (other than restrictions on transfer under state and/or federal securities laws). No preemptive rights or other rights to subscribe for or purchase exist with respect to the issuance and sale of the Shares by the Company pursuant to
this Agreement. No stockholder of the Company has any right (which has not been waived or has not expired) to require the Company to register the sale of any shares owned by such stockholder under the Securities Act of 1933, as amended (the
“Securities Act”) in or in preference to the registration statement to be filed by the Company pursuant to the Registration Rights Agreement. No further approval or authority of the stockholders or the Board of Directors of the Company
will be required for the issuance and sale of the Shares to be sold by the Company as contemplated herein. 
  
 4.4 Due Execution, Delivery and Performance of this Agreement. The Company has full legal right, corporate power and authority to
enter into this Agreement and the Registration Rights Agreement and perform the transactions contemplated hereby and thereby. This Agreement and the Registration Rights Agreement have been duly authorized, executed and delivered by the Company. The
execution, delivery and performance of this Agreement and the Registration Rights Agreement by the Company and the consummation of the transactions herein or therein contemplated will not violate any provision of the certificate of incorporation or
bylaws of the Company or any of its Subsidiaries and will not result in the creation of any lien, charge, security interest or encumbrance upon any assets of the Company or any of its Subsidiaries pursuant to the terms or provisions of, and will not
(i) conflict with, result in the breach or violation of, or constitute, either by itself or upon notice or the passage of time or both, a default under (A) any agreement, lease, franchise, license, permit or other instrument to which the Company or
any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries or any of their respective properties may be bound or affected and in each case which would have a Material Adverse Effect, or (B) any statute or any judgment,
decree, order, rule or regulation of any court or any regulatory body, administrative agency or other governmental body applicable to the Company or any of its Subsidiaries or any of their respective properties where such conflict, breach, violation
or default is likely to result in a Material Adverse Effect. No consent, approval, authorization or other order of any court, regulatory body, administrative agency or other governmental body or of any third party (including the Company’s
stockholders) is required for the execution and delivery of this Agreement and the Registration Rights Agreement or the consummation of the 

  

 3 

 
transactions contemplated by this Agreement and the Registration Rights Agreement, except for compliance with the blue sky laws and federal securities laws
applicable to the offering of the Shares and except for such consents, approvals, authorizations or orders that will be received prior to or as of the Closing Date. Upon the execution and delivery of this Agreement and the Registration Rights
Agreement, and assuming the valid execution thereof by the Purchasers, this Agreement and the Registration Rights Agreement will constitute a valid and binding obligation of the Company, enforceable in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ and contracting parties’ rights generally and except as enforceability may be subject to general principles
of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law) and except as the indemnification agreements of the Company in Section 7.2 hereof may be limited by federal or state securities laws or the
public policy underlying such laws. 
  
 4.5
Election of Directors. (a) The Company shall, at the Closing, (i) appoint Lawrence D. Lenihan, Jr. (“Lenihan”) as a Class III member of the board of directors of the Company to hold such position until his death, resignation or
removal, and (ii) Lenihan to be a member of the nominating and corporate governance committee (or any committee performing the function thereof) and the compensation committee (or any committee performing the function thereof). For so long as the
funds managed or advised by Pequot Capital Management Inc. (collectively, “Pequot”) hold at least 75% of the Shares, the Company shall use its best efforts to cause (i) Lenihan to remain a Class III director, (ii) Lenihan to be nominated
and elected to the board of directors of the Company in any election of directors, and (iii) if Lenihan ceases for any reason to be a member of the board of directors of the Company during his term as a director, then the Company shall use its best
efforts, subject to applicable laws and regulations, to cause such vacancy to be filled by a replacement, reasonably acceptable to the Company, designated by Pequot Capital Management, Inc. 
  
 (b) After the Closing Date, the Company shall use its
commercially reasonable efforts to cause to be appointed to the board of directors an “independent director,” (within the meaning of independent as set forth in the Marketplace Rules of The Nasdaq Stock Market) mutually acceptable to the
Company and the Purchasers as soon as practicable after the Closing Date and shall amend its bylaws to increase the size of the board of directors from six (6) to seven (7) members to accommodate such independent director once he or she is
identified. 
  
 4.6 Accountants. The firm
of Ernst & Young LLP, which has expressed its opinion with respect to the consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended May 31, 2003 (the “Financial Statements”), is an
independent accountant as required by the Securities Act, the Exchange Act of 1934, as amended (the Exchange Act”) and the rules and regulations promulgated thereunder (the “Rules and Regulations”). 
  
 4.7 No Defaults. Neither the Company nor any of its
Subsidiaries is in violation or default of any provision of its certificate of incorporation or bylaws, or in breach of or default with respect to the performance of any obligation, agreement or condition contained in any bond, debenture, note or
any other evidence of indebtedness or any agreement, indenture, judgment, decree, order, lease, franchise, license, permit or other 

  

 4 

 
instrument to which it is a party or by which it or any of its properties are bound which could reasonably be expected to have a Material Adverse Effect.
There does not exist any state of facts which, with notice or lapse of time or both, would constitute an event of default on the part of the Company or any of its Subsidiaries as defined in such documents and which would have a Material Adverse
Effect. The Company is in compliance with all financial covenants contained in its credit facility with Silicon Valley Bank. 
  
 4.8 Contracts. The contracts described in the Disclosure Documents are in full force and effect on the date hereof; and neither the
Company nor any of its Subsidiaries is, nor, to the Company’s knowledge, is any other party in breach of or default under any of such contracts which would have a Material Adverse Effect. 
  
 4.9 No Actions. Except as disclosed in the Disclosure
Documents, (1) there are no legal or governmental actions, suits or proceedings pending and (2) to the Company’s knowledge, there are no inquiries or investigations, nor are there any legal or governmental actions, suits, or proceedings
threatened to which the Company or any of its Subsidiaries is or may be a party or of which property owned or leased by the Company or any of its Subsidiaries is or may be the subject, or related to environmental or discrimination matters, which
actions, suits or proceedings, individually or in the aggregate, might reasonably be expected to have a Material Adverse Effect; and no labor disturbance by the employees of the Company or any Subsidiary exists or, to the Company’s knowledge,
is imminent which might reasonably be expected to have a Material Adverse Effect. Neither the Company nor any of its Subsidiaries is party to or subject to the provisions of any injunction, judgment, decree or order of any court, regulatory body,
administrative agency or other governmental body which might reasonably be expected to have a Material Adverse Effect. 
  
 4.10 Properties. The Company and the Subsidiaries have good and marketable title to all properties and assets reflected as owned in
the Financial Statements, subject to no lien, mortgage, pledge, charge or encumbrance of any kind except (i) those, if any, reflected in the Financial Statements, or (ii) those which are not material in amount and do not adversely affect the use of
such property by the Company and its Subsidiaries. Each of the Company and its Subsidiaries holds its leased properties under valid and binding leases, with such exceptions as are not materially significant in relation to its business taken as a
whole. Each of the Company and its Subsidiaries leases all such properties as are necessary to its operations as now conducted. 
  
 4.11 No Material Change. Since February 29, 2004, and except as described in the Disclosure Documents (i) the Company and its
Subsidiaries have not incurred any material liabilities or obligations, indirect, or contingent, or entered into any material oral or written agreement or other transaction which is not in the ordinary course of business or which could reasonably be
expected to result in a material reduction in the future earnings of the Company and its Subsidiaries; (ii) the Company and its Subsidiaries have not sustained any material loss or interference with their businesses or properties from fire, flood,
windstorm, accident or other calamity not covered by insurance; (iii) the Company and its Subsidiaries have not paid or declared any dividends or other distributions with respect to their capital stock and neither the Company nor any of its
Subsidiaries is in default in the payment of principal or interest on any outstanding debt obligations; (iv) there has not been any change 

  

 5 

 
in the capital stock of the Company or any of its Subsidiaries other than the sale of the Shares hereunder, shares or options issued pursuant to employee
equity incentive plans or purchase plans approved by the Company’s Board of Directors and repurchases of shares or options pursuant to repurchase plans already approved by the Company’s Board of Directors, and (v) there has not been any
other event which has caused a Material Adverse Effect. 
  
 4.12 Compliance. The Company and its Subsidiaries are conducting their business in compliance with all applicable laws, rules and regulations of the jurisdictions in which it is conducting its business,
including, without limitation, all applicable local, state and federal environmental laws and regulations; except where failure to be so in compliance would not have a Material Adverse Effect. 
  
 4.13 Intellectual Property. Except as disclosed in
the Disclosure Documents and other than for actions, suits, proceedings or claims which would not reasonably be expected to have a Material Adverse Effect: (i) the Company and its Subsidiaries own or have obtained valid and enforceable licenses or
options for the copyrights and trade secrets, and to the Company’s knowledge, inventions, patents, trademarks (both registered and unregistered) and trade names, necessary for the conduct of the Company’s and its Subsidiaries’
business as currently conducted (collectively, the “Intellectual Property”); and (ii) to the Company’s knowledge, (a) there are currently no sales of any products that would constitute an infringement by third parties of any
Intellectual Property owned, licensed or optioned by the Company or its Subsidiaries; (b) there is no pending or threatened action, suit, proceeding or claim by others challenging the rights of the Company in or to any Intellectual Property owned,
licensed or optioned by the Company or its Subsidiaries; (c) there is no pending or threatened action, suit, proceeding or claim by others challenging the validity or scope of any Intellectual Property owned, licensed or optioned by the Company or
its Subsidiaries; and (d) there is no pending or threatened action, suit, proceeding or claim by others that the Company infringe or otherwise violate any patent, trademark, copyright, trade secret or other proprietary right of others. 

 
 4.14 Taxes. Each of the Company and its
Subsidiaries has filed all necessary federal, state and foreign income and franchise tax returns and has paid or accrued all taxes shown as due thereon, and neither the Company nor any of its Subsidiaries has knowledge of a tax deficiency which has
been or might be asserted or threatened against it which might reasonably be expected to have a Material Adverse Effect. 
  
 4.15 Transfer Taxes. On the Closing Date, all stock transfer or other taxes (other than income taxes) which are required to be paid
in connection with the sale and transfer of the Shares to be sold to the Purchasers hereunder will be, or will have been, fully paid or provided for by the Company and all laws imposing such taxes will be or will have been complied with. 

 
 4.16 Investment Company. The Company is not an
“investment company” or an “affiliated person” of, or “promoter” or “principal underwriter” for an investment company, within the meaning of the Investment Company Act of 1940, as amended. 
  

 6 

 4.17 Offering Materials. The Company has not distributed and will not distribute
prior to the Closing Date any offering material in connection with the offering and sale of the Shares. Neither the Company nor any person acting on its behalf has in the past or will hereafter take any action to sell, offer for sale or solicit
offers to buy any securities of the Company which would subject the offer, issuance or sale of the Shares, as contemplated by this Agreement, to the registration requirements of Section 5 of the Securities Act. 
  
 4.18 Insurance. The Company and its Subsidiaries
maintain insurance of the types and in the amounts that the Company reasonably believes is adequate for their businesses, including, but not limited to, insurance covering all real and personal property leased by the Company and its Subsidiaries
against theft, damage, destruction, acts of vandalism and all other risks customarily insured against by similarly situated companies, all of which insurance is in full force and effect. The Company and its Subsidiaries maintain or had in effect
insurance policies that the Company reasonably believes are adequate to cover the securities class action litigation claims described in the Disclosure Documents. 
  
 4.19 Price of Common Stock. The Company has not taken, and will not take, directly or indirectly, any
action designed to cause or result in, or which has constituted or which might reasonably be expected to constitute, the stabilization or manipulation of the price of the shares of the Common Stock to facilitate the sale or resale of the Shares.

  
 4.20 Corporate Legal Opinion. As a
condition to the Purchasers’ obligation to purchase the Shares, legal counsel to the Company will deliver one or more legal opinions to the Purchasers in a form reasonably satisfactory to the Purchasers and their counsel. 
  
 4.21 Certificate. At the Closing, the Company will
deliver to Purchasers a certificate executed by the chief executive officer and the chief financial or accounting officer of the Company, dated as of the Closing Date, in form and substance reasonably satisfactory to the Purchasers, to the effect
that the representations and warranties of the Company set forth in this Section 4 are true and correct as of the date of this Agreement and as of the Closing Date and that the Company has complied with all the agreements and satisfied all the
conditions herein on its part to be performed or satisfied on or prior to such Closing Date. 
  
 4.22 Reporting Company; Form S-3. The Company is subject to the reporting requirements of the Exchange Act and has filed all
reports required thereby. The Company is eligible to register the Shares for resale by the Purchaser on a registration statement on Form S-3 under the Securities Act. There exist no facts or circumstances (including without limitation any required
approvals or waivers or any circumstances that may delay or prevent the obtaining of accountant’s consents) that reasonably could be expected to prohibit or delay the preparation and filing of a registration statement on Form S-3 that will be
available for the resale of the Shares by the Purchaser. 
  
 4.23 Use of Purchaser Name. Except as may be required by applicable law or regulation, the Company shall not use any Purchaser’s name or the name of 

  

 7 

 
any of its affiliates in any advertisement, announcement, press release or other similar public communication unless it has received the prior written
consent of such Purchaser for the specific use contemplated or as otherwise required by applicable law or regulation. 
  
 4.24 Related Party Transactions. No transaction has occurred between or among the Company, any of the Subsidiaries and their
affiliates, officers or directors or any affiliate or affiliates of any such officer or director that is required to have been described under applicable securities laws in its Exchange Act filings and is not so described in such filings.

  
 4.25 Off-Balance Sheet Arrangements.
There is no transaction, arrangement or other relationship between the Company and its Subsidiaries and an unconsolidated or other off-balance sheet entity that is required to be disclosed by the Company in its Exchange Act filings and is not so
disclosed. There are no such transactions, arrangements or other relationships with the Company that may create contingencies or liabilities that are not otherwise disclosed by the Company in its Exchange Act filings. 
  
 4.26 Governmental Permits, Etc. Each of the Company
and its Subsidiaries has all franchises, licenses, certificates and other authorizations from such federal, state or local government or governmental agency, department or body that are currently required for the operation of the business of the
Company and its Subsidiaries as currently conducted, except where the failure to posses currently such franchises, licenses, certificates and other authorizations is not reasonably expected to have a Material Adverse Effect. The Company and its
Subsidiaries have not received any notice of proceedings relating to the revocation or modification of any such permit which, if the subject of an unfavorable decision, ruling or finding, could reasonably be expected to have a Material Adverse
Effect. 
  
 4.27 Financial Statements. The
consolidated financial statements of the Company and the related notes contained in its Exchange Act filings present fairly, in accordance with generally accepted accounting principles, the consolidated financial position of the Company and its
Subsidiaries as of the dates indicated, and the results of their operations, cash flows and the changes in stockholders’ equity for the periods therein specified, subject, in the case of unaudited financial statements for interim periods, to
normal year-end audit adjustments. Such consolidated financial statements (including the related notes) have been prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods therein
specified, except that unaudited financial statements may not contain all footnotes required by generally accepted accounting principles. 
  
 4.28 Listing. The Company shall comply with all requirements of the Nasdaq National Market with respect to the issuance of Shares
and shall use its best efforts to have the Shares listed on the Nasdaq National Market on or before the first date that the Registration Statement is declared effective by the Commission. The Company shall use its best efforts to maintain the Common
Stock’s (including the Shares’) authorization for quotation on the Nasdaq National Market. Neither the Company nor any of its Subsidiaries 

  

 8 

 
shall take any action that would be reasonably expected to result in the delisting or suspension of the Common Stock on the Nasdaq National Market.

  
 4.29 SEC Filings. Since May 31, 2003,
the Company has filed all reports, schedules, forms, statements and other documents required to be filed by it with the Commission pursuant to the reporting requirements of the Exchange Act (all of the foregoing filed prior to the date hereof and
all exhibits included therein and financial statements and schedules thereto and documents incorporated by reference therein being hereinafter referred to as the “SEC Documents”). As of their respective dates, the SEC Documents complied in
all material respects with the requirements of the Exchange Act and the rules and regulations of the SEC promulgated thereunder applicable to the SEC Documents, and none of the SEC Documents, at the time they were filed with the SEC, contained any
untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. As of their
respective dates, the financial statements of the Company included in the SEC Documents complied as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto.

  
 4.30 NASDAQ Compliance. Immediately
after the Closing, the Company will be in compliance, in all respects, with the continued listing requirements of the NASDAQ National Market, including, without limitation, the corporate governance requirements set forth therein. 
  
 4.31 Absence of Litigation. Except as disclosed in
the Disclosure Documents, there is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the Company, threatened against or
affecting the Company or any of its Subsidiaries or any of the Company’s or the Company’s Subsidiaries’ officers or directors in their capacities as such, which could reasonably be expected to have a Material Adverse Effect.

  
 4.32 Certain Legal Proceedings. To the
Company’s knowledge, none of the executive officers of the Company have been convicted of (or plead “guilty” or “nolo contendere” to or been found guilty and not convicted of) any felony offense, or convicted of (or plead
“guilty” or “nolo contendere” to or been found guilty and not convicted of) any misdemeanor involving fraud or moral turpitude. 
  
 4.33 No Integrated Offering. Neither the Company, nor any of its affiliates, nor, to the Company’s knowledge, any person
acting on its or their behalf has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would require registration of any of the Shares under the Securities Act or
cause this offering of the Shares to be integrated with prior offerings by the Company for purposes of the Securities Act or any applicable stockholder approval provisions, including, without limitation, under the rules and regulations of the Nasdaq
National Market nor will the Company or any of its Subsidiaries take any action or steps that would require registration of any of the Shares under the Securities Act (except pursuant to the 

  

 9 

 
Registration Rights Agreement) or cause the offering of the Shares to be integrated with other offerings. 
  
 SECTION 5. Representations, Warranties and Covenants of
the Purchasers. (a) Each Purchaser severally but not jointly represents and warrants to, and covenants with, the Company that: (i) such Purchaser is knowledgeable, sophisticated and experienced in making, and is qualified to make, decisions with
respect to investments in shares representing an investment decision like that involved in the purchase of the Shares, including investments in securities issued by the Company and comparable entities, and has had the opportunity to request,
receive, review and consider all information it deems relevant in making an informed decision to purchase the Shares; (ii) such Purchaser is acquiring the number of Shares set forth opposite its name on Schedule I hereto in the ordinary course of
its business and for its own account for investment only and with no present intention of distributing any of such Shares or any arrangement or understanding with any other persons regarding the distribution of such Shares (this representation and
warranty not limiting the Purchaser’s right to sell pursuant to the Registration Rights Agreement or in compliance with the Securities Act and the Rules and Regulations, or, other than with respect to any claims arising out of a breach of this
representation and warranty, the Purchaser’s right to indemnification under Section 7.2); (iii) such Purchaser will not, directly or indirectly, offer, sell, pledge, transfer or otherwise dispose of (or solicit any offers to buy, purchase or
otherwise acquire or take a pledge of) any of the Shares, nor will such Purchaser engage in any short sale that results in a disposition of any of the Shares by such Purchaser, except in compliance with the Securities Act and the Rules and
Regulations and any applicable state securities laws; (iv) such Purchaser has had an opportunity to discuss this investment with representatives of the Company and ask questions of them; (v) such Purchaser is an “accredited investor”
within the meaning of Rule 501(a) of Regulation D promulgated under the Securities Act ; and (vi) such Purchaser agrees to notify the Company immediately of any change in any of the foregoing information until such time as such Purchaser has sold
all of its Shares. 
  
 (b) Such Purchaser further
represents and warrants to the Company that as of the date hereof, none of the Purchaser or its affiliates holds or has the right to receive or acquire any shares of Common Stock or any securities convertible into Common Stock. 
  
 (c) Such Purchaser understands that the Shares are being
offered and sold to it in reliance upon specific exemptions from the registration requirements of the Securities Act, the Rules and Regulations and state securities laws and that the Company is relying, in part, upon the truth and accuracy of, and
such Purchaser’s compliance with, the representations, warranties, agreements, acknowledgments and understandings of such Purchaser set forth herein in order to determine the availability of such exemptions and the eligibility of such Purchaser
to acquire the Shares. 
  
 (d) For the benefit of
the Company, such Purchaser previously agreed with the Company to keep confidential all information concerning this private placement. Such Purchaser hereby acknowledges that it is prohibited from reproducing or distributing this Agreement, or any
other offering materials or other information provided by the Company in connection with the Purchaser’s consideration of its investment in the Company, in whole or in part, or divulging or discussing any of their contents, except to its
financial, investment or legal 

  

 10 

 
advisors in connection with its proposed investment in the Shares. Further, such Purchaser understands that the existence and nature of all conversations and
presentations, if any, regarding the Company and this offering must be kept strictly confidential. Such Purchaser understands that the federal securities laws impose restrictions on trading based on information regarding this offering. In addition,
such Purchaser hereby acknowledges that unauthorized disclosure of information regarding this offering may result in a violation of Regulation FD. This obligation will terminate upon the filing by the Company of a press release or press releases
describing this offering. The foregoing agreements shall not apply to any information that is or becomes publicly available through no fault of such Purchaser, or that such Purchaser is legally required to disclose; provided, however, that if such
Purchaser is requested or ordered to disclose any such information pursuant to any court or other government order or any other applicable legal procedure, it shall provide the Company with prompt notice of any such request or order in time
sufficient to enable the Company to seek an appropriate protective order. 
  
 (e) Such Purchaser understands that its investment in the Shares involves a significant degree of risk, including a risk of total loss of such Purchaser’s investment. Such Purchaser understands that the market
price of the Common Stock has been volatile and that no representation is being made as to the future value of the Common Stock. Such Purchaser has the knowledge and experience in financial and business matters as to be capable of evaluating the
merits and risks of an investment in the Shares and has the ability to bear the economic risks of an investment in the Shares. 
  
 (f) Such Purchaser understands that no United States federal or state agency or any other government or governmental agency has passed
upon or made any recommendation or endorsement of the Shares. 
  
 (g) Such Purchaser understands that, until such time as a registration statement has been declared effective or the Shares may be sold pursuant to Rule 144 under the Securities Act without any restriction as to the
number of securities as of a particular date that can then be immediately sold, the Shares will bear a restrictive legend in substantially the following form: 
  

“The Shares evidenced by this certificate have not been registered under the Securities Act of 1933, as amended (the “Securities Act”),
or the securities laws of any state or other jurisdiction. The Shares may not be offered, sold, pledged or otherwise transferred except (1) pursuant to an exemption from registration under the Securities Act or (2) pursuant to an effective
registration statement under the Securities Act, in each case in accordance with all applicable securities laws of the states and other jurisdictions, and in the case of a transaction exempt from registration, unless the Company has received an
opinion of counsel reasonably satisfactory to it that such transaction does not require registration under the Securities Act and such other applicable laws.” 
  
 (h) Such Purchaser’s principal executive offices are in the jurisdiction set forth immediately below
the Purchaser’s name on Schedule I hereto. 
  

 11 

 (i) Such Purchaser hereby covenants with the Company not to make any sale of the Shares
under the Registration Statement without complying with the provisions of this Agreement and the Registration Rights Agreement. 
  
 (j) Such Purchaser further represents and warrants to, and covenants with, the Company that (i) such Purchaser has full right, power,
authority and capacity to enter into this Agreement and to consummate the transactions contemplated hereby and has taken all necessary action to authorize the execution, delivery and performance of this Agreement, (ii) the making and performance of
this Agreement by such Purchaser and the consummation of the transactions herein contemplated will not violate any provision of the organizational documents of such Purchaser or conflict with, result in the breach or violation of, or constitute,
either by itself or upon notice or the passage of time or both, a default under any material agreement, mortgage, deed of trust, lease, franchise, license, indenture, permit or other instrument to which such Purchaser is a party, or any statute or
any authorization, judgment, decree, order, rule or regulation of any court or any regulatory body, administrative agency or other governmental body applicable to such Purchaser, (iii) no consent, approval, authorization or other order of any court,
regulatory body, administrative agency or other governmental body is required on the part of such Purchaser for the execution and delivery of this Agreement or the consummation of the transactions contemplated by this Agreement, (iv) upon the
execution and delivery of this Agreement, this Agreement shall constitute a legal, valid and binding obligation of such Purchaser, enforceable in accordance with its terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors’ and contracting parties’ rights generally and except as enforceability may be subject to general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law) and except to the extent enforcement of the indemnification provisions, set forth in Section 7.2 of this Agreement, may be limited by federal or state securities laws or the public policy underlying
such laws, and (v) there is not, to Purchaser’s knowledge, in effect any order enjoining or restraining such Purchaser from entering into or engaging in any of the transactions contemplated by this Agreement. 
  
 SECTION 6. Survival of Representations, Warranties and
Agreements. Notwithstanding any investigation made by any party to this Agreement, all covenants, agreements, representations and warranties made by the Company and the Purchasers herein and in the certificates for the Shares delivered pursuant
hereto shall survive the execution of this Agreement, the delivery to the Purchasers of the Shares being purchased and the payment therefore. 
  
 SECTION 7. Registration of the Shares; Compliance with the Securities Act. 
  
 7.1 Closing Covenants The Company shall: 
  
 (a) enter into a registration rights agreement to be dated
as of the date hereof, among the Company and the Purchasers (the “Registration Rights Agreement”) pursuant to which the Company will grant certain registration rights to the Purchasers; 
  

 12 

 (b) take such action as the Company shall reasonably determine is necessary in order to
obtain an exemption for or to qualify the Shares for sale to the Purchasers at the Closing pursuant to this Agreement under applicable securities or “Blue Sky” laws of the states of the United States; provided, however, that
the Company shall not be required to qualify to do business or consent to service of process in any jurisdiction in which it is not now so qualified or has not so consented; 
  
 (c) bear all expenses in connection with the procedures in paragraphs (a) through (e) of this Section 7.1
and the registration of the Shares pursuant to the Registration Statement (as defined in the Registration Rights Agreement); 
  
 (d) file a Form D with respect to the Shares as required under Regulation D and to provide a copy thereof to the Purchaser promptly after
filing; and 
  
 (e) issue a press release,
reasonably acceptable to the Purchasers describing the transactions contemplated by this Agreement on the Closing Date. 
  
 7.2 Indemnification. For the purpose of this Section 7.2, the term “Purchaser/Affiliate” shall mean any affiliate of the
Purchaser, including a transferee who is an affiliate of the Purchaser, and any person who controls the Purchaser or any affiliate of the Purchaser within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act. 

 
 (a) The Company agrees to indemnify and hold harmless
each Purchaser and each Purchaser/Affiliate against any losses, claims, damages, liabilities or expenses, joint or several, to which such Purchaser or Purchaser/Affiliate may become subject, under the Securities Act, the Exchange Act, or any other
federal or state statutory law or regulation, or at common law or otherwise (including in settlement of any litigation, if such settlement is effected with the prior written consent of the Company, which consent shall not be unreasonably withheld or
delayed), insofar as such losses, claims, damages, liabilities or expenses (or actions in respect thereof) arise out of or are based in whole or in part on any inaccuracy in the representations or warranties of the Company contained in this
Agreement or in any writing delivered pursuant to this Agreement or at the Closing, or any failure of the Company to perform or observe fully any covenant, agreement or other provision to be performed or observed by it pursuant to this Agreement or
in any writing delivered pursuant to this Agreement or at the Closing or under law, and will promptly reimburse each such Purchaser and each such Purchaser/Affiliate for any legal and other expenses as such expenses are reasonably incurred by such
Purchaser or such Purchaser/Affiliate in connection with investigating, defending or preparing to defend, settling, compromising or paying any such loss, claim, damage, liability, expense or action; provided, however, that the Company
will not be liable in any such case to the extent, but only to the extent, that any such loss, claim, damage, liability or expense arises out of or is based upon the failure of such Purchaser to comply with the covenants and agreements contained in
Section 5, or the inaccuracy of any representation or warranty made by such Purchaser herein. If and to the extent that such indemnification is unenforceable for any reason, the Company will make the maximum contribution to the payment and
satisfaction of such indemnified liabilities permissible under applicable law. 
  

 13 

 (b) Each Purchaser will severally, but not jointly, indemnify and hold harmless the
Company, each of its directors, each of its executive officers, and each person, if any, who controls the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, against any losses, claims, damages,
liabilities or expenses to which the Company, each of its directors, executive officers or controlling person may become subject, under the Securities Act, the Exchange Act, or any other federal or state statutory law or regulation, or at common law
or otherwise (including in settlement of any litigation, if such settlement is effected with the written consent of such Purchaser which consent shall not be unreasonably withheld or delayed) insofar as such losses, claims, damages, liabilities or
expenses (or actions in respect thereof) arise out of or are based upon (i) the inaccuracy of any representation or warranty made by such Purchaser in this Agreement or in any writing delivered pursuant to this Agreement or at the Closing or (ii)
any failure of the Purchaser to perform or observe fully any covenants and agreements to be performed or observed by it pursuant to Sections 5 hereof. If and to the extent that such indemnification is unenforceable for any reason, such Purchaser
will make the maximum contribution to the payment and satisfaction of such indemnified liabilities permissible under applicable law. 
  
 (c) Promptly after receipt by an indemnified party under this Section 7.2 of notice of the threat or commencement of any action, such
indemnified party will, if a claim in respect thereof is to be made against an indemnifying party under this Section 7.2, promptly notify the indemnifying party in writing thereof; but the omission so to notify the indemnifying party will not
relieve it from any liability which it may have to any indemnified party for contribution or otherwise under the indemnity agreement contained in this Section 7.2 to the extent it is not prejudiced as a result of such failure. In case any such
action is brought against any indemnified party and such indemnified party seeks or intends to seek indemnity from an indemnifying party, the indemnifying party will be entitled to participate in, and, to the extent that it may wish, jointly with
all other indemnifying parties similarly notified, to assume the defense thereof with counsel reasonably satisfactory to such indemnified party; provided, however, if the defendants in any such action include both the indemnified party
and the indemnifying party and the indemnified party shall have reasonably concluded, based on an opinion of counsel reasonably satisfactory to the indemnifying party, that there may be a conflict of interest between the positions of the
indemnifying party and the indemnified party in conducting the defense of any such action or that there may be legal defenses available to it and/or other indemnified parties which are different from or additional to those available to the
indemnifying party, the indemnified party or parties shall have the right to select separate counsel to assume such legal defenses and to otherwise participate in the defense of such action on behalf of such indemnified party or parties. Upon
receipt of notice from the indemnifying party to such indemnified party of its election to assume the defense of such action and approval by the indemnified party of counsel, the indemnifying party will not be liable to such indemnified party under
this Section 7.2 for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof unless (i) the indemnified party shall have employed such counsel in connection with the assumption of legal
defenses in accordance with the proviso to the preceding sentence (it being understood, however, that the indemnifying party shall not be liable for the expenses of more than one separate counsel, reasonably satisfactory to such indemnifying party,
representing all of the indemnified parties who are parties to such action) or (ii) the indemnifying party shall not have employed counsel reasonably satisfactory to the indemnified party to represent the indemnified party within a 

  

 14 

 
reasonable time after notice of commencement of action, in each of which cases the reasonable fees and expenses of counsel shall be at the expense of the
indemnifying party. In no event shall any indemnifying party be liable in respect of any amounts paid in settlement of any action unless the indemnifying party shall have approved in writing the terms of such settlement; provided that such
consent shall not be unreasonably withheld or delayed. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened proceeding in respect of which any indemnified party
is or could have been a party and indemnification could have been sought hereunder by such indemnified party from all liability on claims that are the subject matter of such proceeding. 
  
 SECTION 8. Notices. All notices required or permitted hereunder shall be in writing and shall be
deemed effectively given: (i) upon hand or personal delivery to the party to be notified; (ii) when received by confirmed facsimile or (iii) one (1) business day after deposit with a nationally recognized overnight carrier, specifying next business
day delivery, with written verification of receipt. All communications shall be sent to the Company and any Purchaser as follows or at such other addresses as the Company or such Purchaser may designate upon ten (10) days’ advance written
notice to the other party: 
  
 (a) if to the Company, to:

  
 Saba Software, Inc. 
 2400 Bridge Parkway 
 Redwood Shores, CA 94065

 Attn: Peter E. Williams, III, Chief Financial Officer 
 Facsimile: (650) 581-2581 
  
 with
a copy to: 
  
 Paul L. Lion III, Esq. 
 James R. Tanenbaum 
 Morrison & Foerster
LLP 
 1290 Avenue of the Americas 
 New York, NY 10104 
 Facsimile: (212) 468-7900 
  
 (b) if to a Purchaser, at its address as set forth on Schedule I. 
  
 SECTION 9. Changes. This Agreement may not be
modified or amended except pursuant to an instrument in writing signed by the Company and each of the Purchasers. No provision hereunder may be waived other than in a written instrument executed by the waiving party. 
  
 SECTION 10. Headings. The headings of the various
sections of this Agreement have been inserted for convenience of reference only and shall not be deemed to be part of this Agreement. 
  

 15 

 SECTION 11. Severability. In case any provision contained in this Agreement should
be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby. 
  
 SECTION 12. Governing Law. This Agreement shall be
governed by and construed in accordance with the laws of the State of New York and the federal law of the United States of America. 
  
 SECTION 13. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall constitute an original,
but all of which, when taken together, shall constitute but one instrument, and shall become effective when one or more counterparts have been signed by each party hereto and delivered (including by facsimile) to the other parties. 
  
 SECTION 14. Entire Agreement. This Agreement and the
instruments referenced herein contain the entire understanding of the parties with respect to the matters covered herein and therein and, except as specifically set forth herein or therein, neither the Company nor the Purchaser makes any
representation, warranty, covenant or undertaking with respect to such matters. 
  
 SECTION 15. Assignment. Except as otherwise expressly provided herein, the provisions hereof shall inure to the benefit of, and be
binding upon, the parties hereto and their respective permitted successors, assigns, heirs, executors and administrators. Any Purchase may assign any or all of its rights under this Agreement to any entity or person to whom such Purchaser assigns or
transfers any Shares, provided that such assignee or transferee agrees in writing to be bound, with respect to the transferred Shares, by the provisions hereof that apply to the Purchasers. 
  
 SECTION 16. Further Assurances. Each party agrees to
cooperate fully with the other parties and to execute such further instruments, documents and agreements and to give such further written assurance as may be reasonably requested by any other party to evidence and reflect the transactions described
herein and contemplated hereby and to carry into effect the intents and purposes of this Agreement. 
  
 SECTION 17. No Brokers. Each of the parties to this Agreement hereby represents that such party has not engaged any person to which
or to whom brokerage commissions, finder’s fees, financial advisory fees or similar payments are or will become due in connection with this Agreement or the transactions contemplated hereby. 
  
 SECTION 18. Fees of Counsel. The Company shall
reimburse the Purchasers for all reasonable fees and expenses of counsel to the Purchasers incurred with respect to this Agreement, the documents referred to herein and the transactions contemplated hereby and thereby, provided such fees and
expenses do not exceed $20,000. 
  
 [Remainder of Page Left
Intentionally Blank] 
  

 16 

 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized
representatives as of the day and year first above written. 
  

			
	SABA SOFTWARE, INC.
		
	By:	 	/s/    PETER E. WILLIAMS
III        
	 Name:
	 	Peter E. Williams III
	 Title:
	 	Chief Financial Officer
	
	 PEQUOT PRIVATE EQUITY FUND III, L.P.

		
	By:	 	 Pequot Capital Management, Inc.,

	 	 	 as Investment Manager

		
	By:	 	/s/    ARYEH DAVIS        
	 Name:
	 	Aryeh Davis
	 Title:
	 	General Counsel

  

			
	Notice to:	  	Aryeh Davis
	 	  	Carlos Rodrigues
	 	  	C/o Pequot Capital Management, Inc.
	 	  	500 Nyala Farm Road
	 	  	Westport, CT 06880

  

			
	 PEQUOT OFFSHORE PRIVATE EQUITY PARTNERS III, L.P.

		
	By:	 	 Pequot Capital Management, Inc.,

	 	 	 as Investment Advisor

		
	By:	 	/s/    ARYEH DAVIS         
	 Name:
	 	Aryeh Davis
	 Title:
	 	General Counsel

  

			
	Notice to:	  	Aryeh Davis
	 	  	Carlos Rodrigues
	 	  	C/o Pequot Capital Management, Inc.
	 	  	500 Nyala Farm Road
	 	  	Westport, CT 06880

  

 17 

 SCHEDULE I 
  

									
	 Purchaser

	  	Shares Purchased

	  	Price Per Share

	  	Aggregate Price

	 PEQUOT PRIVATE EQUITY FUND III, L.P.
	  	2,344,063 shares	  	$	3.2841	  	$	7,698,137.30
	 Aryeh Davis
 Carlos Rodrigues
 C/o Pequot Capital
 Management, Inc.
 500 Nyala Farm Road
 Westport, CT 06880
	  	 	  	 	 	  	 	 
				
	 PEQUOT OFFSHORE PRIVATE EQUITY PARTNERS III, L.P.
	  	330,437 shares	  	$	3.2841	  	$	1,085,188.15
	 Aryeh Davis
 Carlos Rodrigues
 C/o Pequot Capital Management, Inc.
 500 Nyala Farm Road
 Westport, CT 06880
	  	 	  	 	 	  	 	 

  

 18 

 Schedule 4.2 
  
 CAPTIALIZATION 
  
 As of July 31, 2004 
  

			
		
	 Shares Authorized:
	  	 
	   Common Stock
	  	200,000,000
	   Preferred Stock
	  	5,000,000
		
	 Shares Issued and Outstanding:
	  	 
	   Common Stock
	  	13,439,763
	   Preferred Stock
	  	None
		
	 Shares Reserved for Issuance:
	  	 
	   2000 Stock Incentive Plan
	  	3,331,371
	   2000 Employee Stock Purchase Plan
	  	1,085,880
	   1997 Stock Incentive Plan
	  	1,122,430

  

 19 

 EXHIBIT A 
  

			
	 Name of Subsidiary

	  	 Jurisdiction of Formation

	 Saba Software Pty. (Australia) Ltd.
	  	Australia
	 Saba Software (Bermuda) Ltd.
	  	Bermuda
	 Ultris Inc.
	  	California
	 Saba Software (Canada) Inc.
	  	Canada
	 Human Performance Technologies, Inc.
	  	Delaware
	 Saba Software International, Inc.
	  	Delaware
	 Saba Software SARL
	  	France
	 Saba Software GmbH
	  	Germany
	 Saba Software India Private Limited
	  	India
	 Saba Software K.K.
	  	Japan
	 Saba Software (UK) Ltd.
	  	Australia

  

 20

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