Document:

Note and Warrant Purchase Agreement

  
 Exhibit 10.1

  
 NOTE AND
WARRANT PURCHASE AGREEMENT 
  
 among 
  
 CRITICAL PATH, INC., 
  
 GENERAL ATLANTIC PARTNERS 74, L.P., 
  
 GAPSTAR, LLC, 
  
 GAP COINVESTMENT PARTNERS II, L.P., 
  

GAPCO GMBH & CO. KG, 
  
 CAMPINA ENTERPRISES LIMITED, 
  
 AND 
  
 RICHMOND III, LLC 
  

  
 Dated: December 29, 2004 

  

  
 Table of Contents

  
 Page 
  

					
	 ARTICLE I DEFINITIONS
	  	1
	 1.1
	  	 Definitions
	  	1
		
	ARTICLE II PURCHASE AND SALE OF NOTES AND WARRANTS	  	9
	 2.1
	  	 Purchase and Sale of Notes and Warrants
	  	9
	 2.2
	  	 Filings
	  	9
	 2.3
	  	 Certificate of Determination
	  	9
	 2.4
	  	 Closings; Deliveries
	  	9
		
	ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY	  	11
	 3.1
	  	 Corporate Existence and Power
	  	11
	 3.2
	  	 Authorization; No Contravention
	  	12
	 3.3
	  	 Governmental Authorization; Third Party Consents
	  	12
	 3.4
	  	 Binding Effect
	  	12
	 3.5
	  	 Litigation
	  	12
	 3.6
	  	 Compliance with Laws
	  	13
	 3.7
	  	 Capitalization
	  	13
	 3.8
	  	 No Default or Breach; Contractual Obligations
	  	14
	 3.9
	  	 Title to Properties
	  	15
	 3.10
	  	 Reports; Financial Statements
	  	15
	 3.11
	  	 Taxes
	  	15
	 3.12
	  	 No Material Adverse Change; Ordinary Course of Business
	  	16
	 3.13
	  	 Private Offering
	  	16
	 3.14
	  	 Labor Relations
	  	16
	 3.15
	  	 Employee Benefit Plans
	  	17
	 3.16
	  	 Liabilities
	  	18
	 3.17
	  	 Affiliate Transactions
	  	18
	 3.18
	  	 Intellectual Property
	  	18
	 3.19
	  	 Privacy of Customer Information
	  	20
	 3.20
	  	 Potential Conflicts of Interest
	  	20
	 3.21
	  	 Trade Relations
	  	20
	 3.22
	  	 Outstanding Borrowing
	  	20
	 3.23
	  	 Broker’s, Finder’s or Similar Fees
	  	21
	 3.24
	  	 CCC Section
	  	21
	 3.25
	  	 Disclosure
	  	21
	 3.26
	  	 Investments
	  	21
	 3.27
	  	 Sarbanes-Oxley Compliance
	  	21
		
	ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE INVESTORS	  	22
	 4.1
	  	 Existence and Power
	  	22
	 4.2
	  	 Authorization; No Contravention
	  	23

  

 i 

					
	 4.3
	  	 Governmental Authorization; Third Party Consents
	  	23
	 4.4
	  	 Binding Effect
	  	23
	 4.5
	  	 Purchase for Own Account
	  	23
	 4.6
	  	 Restricted Securities
	  	24
	 4.7
	  	 Accredited Investor
	  	24
	 4.8
	  	 Experience
	  	24
	 4.9
	  	 Access to Information
	  	24
	 4.10
	  	 General Solicitation
	  	25
	 4.11
	  	 Reliance
	  	25
		
	ARTICLE V CONDITIONS TO INITIAL CLOSING	  	25
	 5.1
	  	 Conditions to Investors’ Obligations
	  	25
	 5.2
	  	 Conditions to Company’s Obligations
	  	26
		
	ARTICLE VI CONDITIONS TO SECOND CLOSING	  	27
	 6.1
	  	 Conditions to Investors’ Obligations
	  	27
	 6.2
	  	 Conditions to Company’s Obligations
	  	28
		
	ARTICLE VII INDEMNIFICATION	  	29
	 7.1
	  	 Indemnification
	  	29
	 7.2
	  	 Notification
	  	29
	 7.3
	  	 Contribution
	  	30
		
	ARTICLE VIII COVENANTS	  	31
	 8.1
	  	 Financial Statements and Other Information
	  	31
	 8.2
	  	 FIRPTA Certificate
	  	31
	 8.3
	  	 Reservation of Series F Preferred Stock and Common Stock
	  	32
		
	ARTICLE IX TERMINATION	  	32
	 9.1
	  	 Termination
	  	32
		
	ARTICLE X MISCELLANEOUS	  	33
	 10.1
	  	 Survival of Representations and Warranties
	  	33
	 10.2
	  	 Notices
	  	33
	 10.3
	  	 Successors and Assigns; Third Party Beneficiaries
	  	35
	 10.4
	  	 Amendment and Waiver
	  	35
	 10.5
	  	 Counterparts
	  	35
	 10.6
	  	 Richmond III Registration Rights
	  	35
	 10.7
	  	 Coinvestor Sub-Group Board Seat
	  	36
	 10.8
	  	 Observer Rights
	  	36
	 10.9
	  	 Certain Series F Preferred Stock Terms
	  	36
	 10.10
	  	 Headings
	  	37
	 10.11
	  	 Governing Law
	  	37
	 10.12
	  	 Severability
	  	37
	 10.13
	  	 Rules of Construction
	  	37
	 10.14
	  	 Entire Agreement
	  	37
	 10.15
	  	 Fees
	  	37
	 10.16
	  	 Publicity; Confidentiality
	  	37
	 10.17
	  	 Further Assurances
	  	38

  

 ii 

 EXHIBITS 
  

			
	 A
	  	 Form of Note

	 B
	  	 Form of Warrant

	 C
	  	 Articles of Incorporation

	 D
	  	 By-laws

	 E
	  	 Form of Series F Certificate of Determination

	 F
	  	 Form of Paul, Hastings, Janofsky & Walker, LLP Opinion

  
 SCHEDULES 
  

			
	 2.1(a)
	  	 Purchased Notes and Warrants at Initial Closing

	 2.1(b)
	  	 Purchased Notes and Warrants at Second Closing

	 3.3
	  	 Governmental Authorization and Third Party Consents

	 3.5
	  	 Claims

	 3.7(a)
	  	 Capitalization

	 3.10(a)
	  	 SEC Reports

	 3.12
	  	 Material Adverse Changes

	 3.17
	  	 Affiliate Transactions

	 3.20
	  	 Conflicts of Interest

	 3.22
	  	 Indebtedness

	 3.26
	  	 Investments

  

 iii 

 NOTE AND WARRANT PURCHASE AGREEMENT 
  
 NOTE AND WARRANT PURCHASE AGREEMENT, dated December 29, 2004 (this “Agreement”), among General Atlantic
Partners 74, L.P., a Delaware limited partnership, GapStar, LLC, a Delaware limited liability company, GAP Coinvestment Partners II, L.P., a Delaware limited partnership, GAPCO GmbH & Co. KG, a German limited partnership, Campina Enterprises
Limited (“Campina”), and Richmond III, LLC (collectively, the “Investors”) and Critical Path, Inc., a California corporation (the “Company”), 
  
 WHEREAS, upon the terms and conditions set forth in this Agreement, the Company proposes to issue and sell to the Investors,
at the Initial Closing (as hereinafter defined), (i) senior notes, substantially in the form attached hereto as Exhibit A (each a “Note” and, collectively, the “Notes”) having an aggregate principal amount of
eleven million dollars ($11,000,000), allocated among each Investor in the principal amount set forth opposite such Investor’s name on Schedule 2.1(a) hereto and (ii) warrants, substantially in the form attached hereto as Exhibit
B (each a “Warrant” and, collectively, the “Warrants”) to purchase, subject to the terms and conditions thereof, the aggregate number of shares of the Company’s Series F Redeemable Convertible Preferred
Stock, $0.001 par value per share (the “Series F Preferred Stock”) set forth opposite each Investor’s name on Schedule 2.1(a) hereto, at an exercise price per share equal to $14.00 (the “Warrant Exercise
Price”); and 
  
 WHEREAS, upon the terms and conditions
set forth in this Agreement, the Company proposes to issue and sell to the Investors, at the Second Closing, (i) Notes having an aggregate principal amount of seven million dollars ($7,000,000), allocated among each Investor in the principal amount
set forth opposite such Investor’s name on Schedule 2.1(b) hereto and (ii) Warrants to purchase, subject to the terms and conditions thereof, the aggregate number of shares of Series F Preferred Stock set forth opposite each
Investor’s name on Schedule 2.1(b) hereto, at the Warrant Exercise Price. 
  
 NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein and for good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as
follows: 
  
 ARTICLE I 
  
 DEFINITIONS 
  
 1.1 Definitions. As used in this Agreement, and unless the context
requires a different meaning, the following terms have the meanings indicated: 
  
 “Affiliate” shall mean any Person who is an “affiliate” as defined in Rule 12b-2 of the General Rules and Regulations under the Exchange Act. 
  

 “Agreement” means this Agreement as the same may be amended, supplemented or modified in
accordance with the terms hereof. 
  
 “Registration Rights
Agreement” means the Company’s Third Amended and Restated Registration Rights Agreement, dated as of March 9, 2004. 
  
 “Amendment to Preferred Stock Rights Agreement” means an amendment to the Company’s Preferred Stock Rights Agreement to permit the
Investors to purchase the Warrants hereunder without causing such Investors to become Acquiring Persons (as defined in the Preferred Stock Rights Agreement). 
  
 “Articles of Incorporation” means the Amended and Restated Articles of Incorporation of the Company in effect on the Initial Closing Date
and attached hereto as Exhibit C. 
  
 “Board of
Directors” means the Board of Directors of the Company. 
  
 “Business Day” means any day other than a Saturday, Sunday or other day on which commercial banks in the State of New York or the State of California are authorized or required by law or executive order to close.

  
 “By-laws” means the by-laws of the Company in
effect on the Initial Closing Date and attached hereto as Exhibit D. 
  
 “CK Purchasers” means Campina Enterprises Limited, Cenwell Limited, Great Affluent Limited, Dragonfield Limited and Lion Cosmos Limited and their transferees. 
  
 “Claims” has the meaning set forth in Section 3.5 of
this Agreement. 
  
 “Code” means the Internal
Revenue Code of 1986, as amended, or any successor statute thereto. 
  
 “Commission” means the United States Securities and Exchange Commission or any similar agency then having jurisdiction to enforce the Securities Act and Exchange Act. 
  
 “Common Stock” means the common stock of the Company, par
value $0.001 per share. 
  
 “Common Stock
Warrant” or “Common Stock Warrants,” as the case may be, means those certain warrants to purchase Common issued to General Atlantic Entities pursuant to that certain Stock and Warrant Purchase and Exchange Agreement, dated
as of November 8, 2001. 
  
 “Commonly Controlled
Entity” means any entity which is under common control with the Company within the meaning of Code Section 414(b), (c), (m), (o) or (t). 
  

 2 

 “Common Shares” means the shares of Common Stock issuable on conversion of the shares of
Series F Preferred Stock. 
  
 “Company” has the
meaning set forth in the preamble to this Agreement. 
  
 “Company Plans” has the meaning set forth in Section 3.15 of this Agreement. 
  
 “Condition of the Company” means the assets, business, properties, operations or condition (financial or otherwise) of the Company and
its Subsidiaries, taken as a whole. 
  
 “Contingent
Obligation” means, as applied to any Person, any direct or indirect liability of that Person with respect to any Indebtedness, lease, dividend, guaranty, letter of credit or other obligation, contractual or otherwise (the “primary
obligation”) of another Person (the “primary obligor”), whether or not contingent, (a) to purchase, repurchase or otherwise acquire such primary obligations or any property constituting direct or indirect security therefor,
(b) to advance or provide funds (i) for the payment or discharge of any such primary obligation, or (ii) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency or any balance sheet
item, level of income or financial condition of the primary obligor, (c) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make
payment of such primary obligation, or (d) otherwise to assure or hold harmless the owner of any such primary obligation against loss or failure or inability to perform in respect thereof. The amount of any Contingent Obligation shall be deemed to
be an amount equal to the stated or determinable amount of the primary obligation in respect of which such Contingent Obligation is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof. 

 
 “Contractual Obligations” means, as to any Person, any
provision of any security issued by such Person or of any agreement, undertaking, contract, indenture, mortgage, deed of trust or other instrument to which such Person is a party or by which it or any of its property is bound. 
  
 “Conversion” has the meaning set forth in Section
2.1(a). 
  
 “Conversion Notice” has the
meaning set forth in Section 2.5 of this Agreement. 
  
 “Copyrights” means any foreign or United States copyright registrations and applications for registration thereof, and any non-registered copyrights. 
  
 “Environmental Laws” means federal, state, local and foreign laws, principles of common laws, civil laws,
regulations, and codes, as well as orders, decrees, judgments or injunctions, issued, promulgated, approved or entered thereunder relating to pollution, protection of the environment or public health and safety. 
  

 3 

 “ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

  
 “Exchange Act” means the Securities Exchange
Act of 1934, as amended, and the rules and regulations of the Commission thereunder. 
  
 “Financial Statements” has the meaning set forth in Section 3.10 of this Agreement. 
  
 “GAAP” means United States generally accepted accounting principles in effect from time to time. 
  
 “General Atlantic Entities” means General Atlantic Partners
74, L.P., a Delaware limited partnership, GAP Coinvestment Partners II, L.P., a Delaware limited partnership, GapStar, LLC, a Delaware limited liability company, and GAPCO GmbH & Co. KG, a German limited partnership. 
  
 “Governmental Authority” means the government of any nation,
state, city, locality or other political subdivision thereof, any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, and any corporation or other entity owned or controlled,
through stock or capital ownership or otherwise, by any of the foregoing. 
  
 “Indebtedness” means, as to any Person, (a) all obligations of such Person for borrowed money (including, without limitation, reimbursement and all other obligations with respect to surety bonds,
letters of credit and bankers’ acceptances, whether or not matured), (b) all obligations of such Person to pay the deferred purchase price of property or services, except trade accounts payable and accrued commercial or trade liabilities
arising in the ordinary course of business, (c) all interest rate and currency swaps, caps, collars and similar agreements or hedging devices under which payments are obligated to be made by such Person, whether periodically or upon the happening of
a contingency, (d) all indebtedness created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or Investor under such agreement
in the event of default are limited to repossession or sale of such property), (e) all obligations of such Person under leases which have been or should be, in accordance with GAAP, recorded as capital leases, (f) all indebtedness secured by any
Lien (other than Permitted Liens) on any property or asset owned or held by that Person regardless of whether the indebtedness secured thereby shall have been assumed by that Person or is non-recourse to the credit of that Person, and (g) any
Contingent Obligation of such Person. 
  
 “Indemnified
Party” has the meaning set forth in Section 7.1 of this Agreement. 
  
 “Indemnifying Party” has the meaning set forth in Section 7.1 of this Agreement. 
  

 4 

 “Initial Closing” has the meaning set forth in Section 2.4(a) of this Agreement.

  
 “Initial Closing Date” has the meaning set
forth in Section 2.4(a) of this Agreement. 
  
 “Intellectual Property” has the meaning set forth in Section 3.18 of this Agreement. 
  
 “Internet Assets” means any Internet domain names and other computer user identifiers and any rights in and to sites on the worldwide
web, including rights in and to any text, graphics, audio and video files and html or other code incorporated in such sites. 
  
 “Investment” means (i) the acquisition (whether for cash, property, services, assumption of Indebtedness, securities or otherwise) of
assets (other than equipment, inventory, supplies or other assets acquired in the ordinary course of business of the Company), capital stock, bonds, notes, debentures, partnership, joint venture or other ownership interests or other securities of
any Person, (ii) any deposit with, or advance, loan or other extension of credit to, or on behalf of, any Person (other than deposits made in connection with the purchase of equipment, inventory, services, leases, supplies or other assets in the
ordinary course of business of the Company), (iii) any other capital contribution to or investment in such Person, including, without limitation, any guaranty obligation incurred for the benefit of such Person. For the sake of clarity, Investments
shall include any transfer of property or assets by the Company to any of its Subsidiaries or by any Subsidiary of the Company to any other Subsidiary. 
  
 “IP Agreements” has the meaning set forth in Section 3.18(a)(iii) of this Agreement. 
  
 “Knowledge” means the knowledge of the Company and Chief
Executive Officer, Chief Financial Officer, and Senior Vice President, General Counsel of the Company (who are Mark J. Ferrer, James Clark and Michael J. Zukerman) after due inquiry. 
  
 “Liabilities” has the meaning set forth in Section 3.16 of this Agreement. 
  
 “Lien” means any mortgage, deed of trust, pledge,
hypothecation, assignment, encumbrance, lien (statutory or other) or preference, priority, right or other security interest or preferential arrangement of any kind or nature whatsoever (excluding preferred stock and equity related preferences).

  
 “Losses” has the meaning set forth in
Section 7.1 of this Agreement. 
  
 “Material
Contractual Obligations” has the meaning set forth in Section 3.8 of this Agreement. 
  

 5 

 “NASD Rules” has the meaning set forth in Section 3.27(b). 
  
 “Nasdaq” means The Nasdaq Stock Market, Inc. 
  
 “Notes” has the meaning set forth in the recitals to this
Agreement. 
  
 “Orders” has the meaning set forth
in Section 3.2 of this Agreement. 
  
 “Patents” means any foreign or United States patents and patent applications, including any divisions, continuations, continuations-in-part, substitutions or reissues thereof, whether or not patents are issued on such
applications and whether or not such applications are modified, withdrawn or resubmitted. 
  
 “Permitted Investments” means (i) Investments in cash or cash equivalents, (ii) accounts receivable created, acquired or made in the ordinary course of business and payable or dischargeable in
accordance with customary trade terms; (iii) Investments existing on the Initial Closing Date, and listed on Schedule 3.26 hereto, (iv) loans to employees, directors or officers of the Company in connection with the award of convertible bonds
or capital stock under a stock incentive plan, stock option plan or other equity-based compensation plan or arrangement, (v) other advances or loans to employees, directors, officers or agents of the Company in the ordinary course of business not to
exceed $500,000 in the aggregate at any time outstanding; (vi) loans, advances and Investments in or by foreign Subsidiaries; (vii) any acquisition for which the prior written consent of the holders of a majority of the outstanding principal amount
of Notes issued by the Company pursuant to this Agreement has been obtained, or (viii) other loans, advances and investments of a nature not contemplated by the foregoing sections in an amount not to exceed $500,000 in the aggregate at any time
outstanding. 
  
 “Permitted Liens” has the
meaning set forth in the Note. 
  
 “Person” means
any individual, firm, corporation, partnership, trust, incorporated or unincorporated association, joint venture, joint stock company, limited liability company, Governmental Authority or other entity of any kind, and shall include any successor (by
merger or otherwise) of such entity. 
  
 “Plan”
means any employee benefit plan, arrangement, policy, program, agreement or commitment (whether or not an employee plan within the meaning of Section 3(3) of ERISA), including, without limitation, any employment, consulting or deferred
compensation agreement, executive compensation, bonus, incentive, pension, profit-sharing, savings, retirement, stock option, stock purchase or severance pay plan, any life, health, disability or accident insurance plan, whether oral or written,
whether or not subject to ERISA, as to which the Company or any Commonly Controlled Entity has or in the future could have any direct or indirect, actual or contingent liability. 
  
 “Requirements of Law” means, as to any Person, any law (including Environmental Laws), statute, treaty,
rule, regulation, right, privilege, qualification, 

  

 6 

 
license or franchise or determination of an arbitrator or a court or other Governmental Authority or stock exchange, in each case applicable or binding upon
such Person or any of its property or to which such Person or any of its property is subject or pertaining to any or all of the transactions contemplated or referred to herein. 
  
 “Retiree Welfare Plan” means any welfare plan (as defined in Section 3(1) of ERISA) that provides
benefits to current or former employees beyond their retirement or other termination of service (other than coverage mandated by Section 4980A of the Code, commonly referred to as “COBRA,” the cost of which is fully paid by
the current or former employee or his or her dependents). 
  
 “Richmond III” means Richmonds III, LLC. 
  
 “Sarbanes-Oxley Act” has the meaning set forth in Section 3.27(a) of this Agreement. 
  
 “SEC Reports” has the meaning set forth in Section 3.10 of this Agreement. 
  
 “Securities” has the meaning set forth in Section 4.8
of this Agreement. 
  
 “Securities Act” means the
Securities Act of 1933, as amended, and the rules and regulations of the Commission thereunder. 
  
 “Second Closing” has the meaning set forth in Section 2.4(b) of this Agreement. 
  
 “Second Closing Date” has the meaning set forth in
Section 2.4(b) of this Agreement. 
  
 “Series D
Preferred Stock” means the Series D Cumulative Redeemable Convertible Preferred Stock of the Company, par value $0.001 per share. 
  
 “Series F Certificate of Determination” means the Certificate of Determination of Preferences of Series F Redeemable Convertible
Preferred Stock, substantially in the form attached hereto as Exhibit E. 
  
 “Series E Preferred Stock” means the Series E Redeemable Convertible Preferred Stock of the Company, par value $0.001 per share. 
  
 “Series F Preferred Stock” has the meaning set forth in the recitals to this Agreement. 
  
 “Software” means any computer software programs, source
code, object code, data and documentation, including, without limitation, any computer software programs that incorporate and run the Company’s pricing models, formulae and algorithms. 
  

 7 

 “Stock Equivalents” means any security or obligation which is by its terms convertible
into or exchangeable or exercisable for shares of common stock or other capital stock of the Company, and any option, warrant or other subscription or purchase right with respect to common stock or such other capital stock. 
  
 “Stock Option Plans” means the Company’s stock option
plans and employee purchase plans pursuant to which shares of restricted stock and options to purchase shares of Common Stock are reserved and available for grant to officers, directors, employees and consultants of the Company. 
  
 “Stockholders Agreement” means the Amended and Restated
Stockholders Agreement, dated as of November 26, 2003, by and among the Company and the parties named therein. 
  
 “Subsidiaries” means, as of the relevant date of determination, with respect to any Person, a corporation or other Person of which 50% or
more of the voting power of the outstanding voting equity securities or 50% or more of the outstanding economic equity interest is held, directly or indirectly, by such Person. Unless otherwise qualified, or the context otherwise requires, all
references to a “Subsidiary” or to “Subsidiaries” in this Agreement shall refer to a Subsidiary or Subsidiaries of the Company. 
  
 “Taxes” means any federal, state, provincial, county, local, foreign and other taxes (including, without
limitation, income, profits, windfall profits, alternative, minimum, accumulated earnings, personal holding company, capital stock, premium, estimated, excise, sales, use, occupancy, gross receipts, franchise, ad valorem, severance, capital levy,
production, transfer, withholding, employment, unemployment compensation, payroll and property taxes, import duties and other governmental charges and assessments), whether or not measured in whole or in part by net income, and including
deficiencies, interest, additions to tax or interest, and penalties with respect thereto, and including expenses associated with contesting any proposed adjustments related to any of the foregoing. 
  
 “Trade Secrets” means any trade secrets, research records,
processes, procedures, manufacturing formulae, technical know-how, technology, blue prints, designs, plans, inventions (whether patentable and whether reduced to practice), invention disclosures and improvements thereto. 
  
 “Trademarks” means any foreign or United States trademarks,
service marks, trade dress, trade names, brand names, designs and logos, corporate names, product or service identifiers, whether registered or unregistered, and all registrations and applications for registration thereof. 
  
 “Transaction Documents” means, collectively, this Agreement,
the Notes, the Warrants, the Amendment to the Preferred Stock Rights Agreement and the Waivers. 
  

 8 

 “Waivers” means the waivers and consents, dated the date hereof, executed by (i) the
requisite holders of the Company’s Series D Preferred Stock and (ii) the requisite General Atlantic Entities, CK Purchasers and Vectis CP Holdings, LLC, in each case to consent to and approve, to the extent necessary, the transactions and
agreements contemplated by the Transaction Documents and to waive any rights they may have under that certain Amended and Restated Stockholders Agreement, dated November 26, 2003. 
  
 “Warrant” or “Warrants,” as the case may be, has the meaning set forth in the recitals to
this Agreement. 
  
 “Warrant Exercise Price” has
the meaning set forth in the recitals to this Agreement. 
  
 “Warrant Shares” means the shares of Series F Preferred Stock issuable upon exercise of the Warrants. 
  
 ARTICLE II 
  
 PURCHASE AND SALE OF NOTES AND WARRANTS 
  
 2.1 Purchase and Sale of Notes and Warrants. Subject to the terms and conditions of this Agreement, (a) on the Initial Closing Date, each of the
Investors, severally and not jointly, agrees to purchase, and the Company agrees to sell and issue to each Investor, (i) a Note, in the aggregate principal amount set forth opposite such Investor’s name on Schedule 2.1(a) hereto and (ii)
a Warrant to purchase the aggregate number of shares of Series F Preferred Stock set forth opposite such Investor’s name on Schedule 2.1(a) hereto and (b) on the Second Closing Date, each of the Investors, severally and not jointly,
agrees to purchase, and the Company agrees to sell and issue to each Investor, (i) a Note, in the aggregate principal amount set forth opposite such Investor’s name on Schedule 2.1(b) hereto and (ii) a Warrant to purchase the aggregate
number of shares of Series F Preferred Stock set forth opposite such Investor’s name on Schedule 2.1(b) hereto. Each of the Notes shall be due and payable upon the terms and conditions set forth in the Notes and herein. All payments by
the Company under the Notes of principal and interest shall be as set forth in the Notes. 
  
 2.2 Filings. Upon the terms and conditions of this Agreement, on the Initial Closing Date, the Company shall file with the Secretary of State of the State of California the Series F Certificate of
Determination. 
  
 2.3 Certificate of Determination. The
Series F Preferred Stock shall have the preferences and rights set forth in the Series F Certificate of Determination. 
  
 2.4 Closings; Deliveries. 
  
 (a) Initial Closing. Subject to the terms and conditions of this Agreement, the initial purchase and sale of the Notes and Warrants contemplated by

  

 9 

 
Section 2.1(a) of this Agreement (the “Initial Closing”) shall be held on December 30, 2004 (the “Initial Closing Date”),
at the offices of Paul, Hastings, Janofsky & Walker, LLP, 55 Second Street, San Francisco, California, or at such other time and place as the Company and the Investors may mutually agree. At the Initial Closing, signature pages transmitted by
facsimile will be acceptable, with originals to immediately follow. 
  
 (b) Second Closing. Subject to the terms and conditions of this Agreement, the second purchase and sale of the Notes and Warrants contemplated by Section 2.1(b) of this Agreement (the “Second Closing”) shall be held
on the third Business Day after the last to occur of the satisfaction or waiver by the Investors of the conditions set forth in Section 6.1 and the satisfaction or waiver by the Company of the conditions set forth in Section 6.2 (the “Second
Closing Date”), at the offices of Paul, Hastings, Janofsky & Walker, LLP, 55 Second Street, San Francisco, California, or at such other time and place as the Company and the Investors may mutually agree. At the Second Closing, signature
pages transmitted by facsimile will be acceptable, with originals to immediately follow. 
  
 (c) Deliveries by the Company at the Initial Closing. At the Initial Closing, subject to the terms and conditions hereof, the Company shall execute and deliver to each Investor: 
  
 (i) a duly executed Note representing the aggregate
principal amount set forth opposite such Investor’s name on Schedule 2.1(a), a duly executed Warrant to purchase the aggregate number of shares of Series F Preferred Stock set forth opposite such Investor’s name on Schedule
2.1(a) and each of the other Transaction Documents to which the Company is a party; and 
  
 (ii) such other documentation required to be provided by the Company pursuant to Section 5.1. 
  
 (d) Deliveries by each Investor at the Initial Closing. At the Initial
Closing, subject to the terms and conditions hereof, each Investor shall: 
  
 (i) execute and deliver to the Company each of the other Transaction Documents to which it is a party; and 
  
 (ii) pay the aggregate purchase price for the Notes and the Warrants to be purchased at the Initial Closing, by wire transfer, in the
aggregate amount set forth opposite such Investor’s name on Schedule 2.1(a) to the following account (the “Account”): 
  
 Silicon Valley Bank 
 3003 Tasman Dr

 Santa Clara, CA 95054 
 Tel:
415-512-4224 
  

 10 

			
	 Account Name:
	  	Critical Path, Inc.
	 	  	 350 The Embarcadero 6th Floor
 San Francisco, CA 95648

  
 Bank Acct: 3300229151

  
 ABA: 121140399 
  
 SWIFT CODE: SVBKUS6S 
  
 (e) Deliveries by the Company at the Second Closing. At the Second
Closing, subject to the terms and conditions hereof, the Company shall execute and deliver to each Investor a duly executed Note representing the aggregate principal amount set forth opposite such Investor’s name on Schedule 2.1(b), a
duly executed Warrant to purchase the aggregate number of shares of Series F Preferred Stock set forth opposite such Investor’s name on Schedule 2.1(b) and such documentation required to be provided by the Company pursuant to Section
6.1. 
  
 (f) Deliveries by each Investor at the Second
Closing. At the Second Closing, subject to the terms and conditions hereof, each Investor shall pay the aggregate purchase price for the Notes and the Warrants to be purchased at the Second Closing by wire transfer to the Account, in the
aggregate amount set forth opposite such Investor’s name on Schedule 2.1(b). 
  
 ARTICLE III 
  
 REPRESENTATIONS
AND WARRANTIES OF THE COMPANY 
  
 The Company represents and
warrants to each of the Investors that, except as disclosed or incorporated by reference in the SEC Reports or the Disclosure Schedules: 
  
 3.1 Corporate Existence and Power. The Company and each of its Subsidiaries (a) is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation; (b) has all requisite corporate power and authority to own and operate its property, to lease the property it operates as lessee and to conduct the business in which it is currently
engaged; (c) is duly qualified as a foreign corporation, licensed and in good standing under the laws of each jurisdiction in which its ownership, lease or operation of property or the conduct of its business requires such qualification, except
where the failure to be so qualified could not reasonably be expected to have a material adverse effect on the Condition of the Company and (d) has the corporate power and authority to execute, deliver and perform its obligations under this
Agreement and each of the other Transaction Documents. No jurisdiction, other than those referred to in clause (c) above, has claimed, in writing or otherwise, that the Company or any of its Subsidiaries is required to qualify as a foreign
corporation or other entity therein, and the Company or any of its Subsidiaries does not file any franchise, 

  

 11 

 
income or other tax returns in any other jurisdiction based upon the ownership or use of property therein or the derivation of income therefrom. 

 
 3.2 Authorization; No Contravention. The execution, delivery and
performance by the Company of this Agreement and each of the other Transaction Documents and the transactions contemplated hereby and thereby (a) have been duly authorized by all necessary corporate action of the Company; (b) do not contravene the
terms of the Articles of Incorporation or the By-laws; (c) do not violate, conflict with or result in any breach, default or contravention of (or with due notice or lapse of time or both would result in any breach, default or contravention of), or
the creation of any Lien under, any Contractual Obligation of the Company or any of its Subsidiaries or any Requirement of Law applicable to the Company or any of its Subsidiaries except such violations or conflicts that would not reasonably be
expected to have a material adverse effect on the Condition of the Company; and (d) do not violate any judgment, injunction, writ, award, decree or order of any nature (collectively, “Orders”) of any Governmental Authority against,
or binding upon, the Company or any of its Subsidiaries. 
  
 3.3
Governmental Authorization; Third Party Consents. Except as set forth in Schedule 3.3, no approval, consent, compliance, exemption, authorization or other action by, or notice to, or filing with, any Governmental Authority or any other
Person, and no lapse of a waiting period under a Requirement of Law, is necessary or required in connection with the execution, delivery or performance (including, without limitation, the sale, issuance and delivery of the Warrants, the Warrant
Shares or the Common Shares) by, or enforcement against, the Company of this Agreement and the other Transaction Documents or the transactions contemplated hereby and thereby, other than (a) the notification to The NASDAQ National Market for the
listing of the shares of Common Shares and applicable blue-sky filings, (b) such as have already been obtained or such exemptive filings as may be required under applicable securities laws, and (c) such other filings as may be required following the
Initial Closing Date or the Second Closing Date under the Exchange Act. 
  
 3.4 Binding Effect. This Agreement and each of the other Transaction Documents to which the Company is a party have been duly executed and delivered by the Company, and this Agreement and each of the other Transaction Documents to
which the Company is a party constitute the legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their terms, except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance or transfer, moratorium or similar laws affecting the enforcement of creditors’ rights generally and by general principles of equity relating to enforceability (regardless of whether considered in a
proceeding at law or in equity). 
  
 3.5 Litigation. Except
as set forth on Schedule 3.5, there are no actions, suits, proceedings, claims, complaints, disputes, arbitrations or investigations 

  

 12 

 
(collectively, “Claims”) pending or, to the Knowledge of the Company, threatened, at law, in equity, in arbitration or before any
Governmental Authority against the Company or any of its Subsidiaries that seeks in excess of $50,000 in damages nor is the Company aware that there is any basis for any of the foregoing. The foregoing includes, without limitation, Claims pending
or, to the Knowledge of the Company, threatened or any basis therefor known by the Company involving the prior employment of any employee of the Company or any of its Subsidiaries, their use in connection with the business of the Company or any of
its Subsidiaries of any information or techniques allegedly proprietary to any of their former employers or their obligations under any agreements with prior employers. No Order has been issued by any court or other Governmental Authority against
the Company or any of its Subsidiaries purporting to enjoin or restrain the execution, delivery or performance of this Agreement or any of the other Transaction Documents. 
  
 3.6 Compliance with Laws. The Company and each of its Subsidiaries is in compliance in all material respects with all
Requirements of Law and all Orders issued by any court or Governmental Authority against the Company in all respects. To the Company’s Knowledge, there are no Requirements of Law which could reasonably be expected to prohibit or restrict the
Company or any of its Subsidiaries from, or otherwise materially adversely effect the Company or any of its Subsidiaries in, conducting its business in any jurisdiction in which it now conducts its business. 
  
 3.7 Capitalization. 
  
 (a) (i) As of the Initial Closing Date, the authorized
capital stock of the Company shall consist of (A) 200,000,000 shares of Common Stock, of which 23,025,902 shares are outstanding, (B) one share of Special Voting Stock, par value $0.001 per share, of the Company (C) 4,188,587 shares of Series D
Preferred Stock, of which 4,102,355 shares are outstanding, (E) 68,000,000 shares of Series E Preferred Stock, of which 55,894,801 shares are outstanding, (F) 450,000 shares of Series F Preferred Stock, 385,710 of which shall be reserved for
issuance upon exercise of the Warrants, and (G) 2,286,412 shares of undesignated “blank check” preferred stock. As of the date of this Agreement, the aggregate number of shares of restricted stock and options to purchase shares of Common
Stock which may be issued under the Stock Option Plans are 18,745,440, of which 17,427,864 have been granted. The Company has reserved an adequate number of shares of Common Stock for issuance upon conversion of the Series F Preferred Stock.

  
 (ii) As of the Second Closing Date, the
authorized capital stock of the Company shall consist of (A) 200,000,000 shares of Common Stock, (B) one share of Special Voting Stock, par value $0.001 per share, of the Company, (C) 4,188,587 shares of Series D Preferred Stock, of which 4,102,355
shares shall be outstanding, except that the number of shares of Series D Preferred Stock outstanding may decrease due to the conversion of such shares to Common Stock, (E) 68,000,000 shares of Series E Preferred Stock, of which 55,894,801 shares
shall be outstanding, (F) 450,000 of shares of Series F Preferred Stock, 

  

 13 

 
385,710 of which shall be reserved for issuance upon exercise of the Warrants, except that the number of shares of Series E Preferred Stock outstanding may
decrease due to the conversion of such shares to Common Stock, and (G) 2,286,412 shares of undesignated blank check” preferred stock. 
  
 (iii) Except as set forth on Schedule 3.7(a) and except for the Warrants and the Common Stock Warrants, there are no options,
warrants, conversion privileges, subscription or purchase rights or other rights presently outstanding to purchase or otherwise acquire (A) any authorized but unissued, unauthorized or treasury shares of the Company’s capital stock, (B) any
Stock Equivalents or (C) any other securities of the Company and there are no commitments, contracts, agreements, arrangements or understandings to which the Company is a party to issue any shares of the Company’s capital stock or any Stock
Equivalents or other securities of the Company. 
  
 (b) Effective as of not later than the Initial Closing Date and the Second Closing Date, the Notes and Warrants to be issued at the First Closing and the Second Closing, respectively, shall be duly authorized, and assuming the accuracy of
the representations and warranties of the Investors set forth in Article IV of this Agreement, will be issued in compliance with the registration and qualification requirements of all applicable federal, state and foreign securities laws and
will be free and clear of all other Liens. 
  
 (c) Effective as of not later than the Initial Closing Date and the Second Closing Date, the Series F Preferred Stock issuable upon exercise of the Warrants issued at the First Closing and the Warrants issued at the Second Closing,
respectively, and the shares of Common Stock issuable upon conversion of such Series F Preferred Stock, respectively, shall in each case be duly authorized and duly reserved for issuance, and when issued and delivered to the Investors, will be
validly issued, fully paid and non-assessable, not be subject to any preemptive right or similar rights that have not been satisfied and assuming the accuracy of the representations and warranties of the Investors set forth in Article IV of
this Agreement, will be issued in compliance with the registration and qualification requirements of all applicable federal, state and foreign securities laws and will be free and clear of all other Liens. None of the issued and outstanding shares
of Common Stock were issued in violation of any preemptive rights. 
  
 3.8 No Default or Breach; Contractual Obligations. All of the Contractual Obligations to which the Company or any of its Subsidiaries is a party, whether written or oral, which are required by the Exchange Act to be disclosed in the
SEC Reports (collectively, “Material Contractual Obligations”) are valid, subsisting, in full force and effect and binding upon the Company or its Subsidiary, as the case may be, and the other parties thereto, and the Company or its
Subsidiary, as the case may be, has paid in full or accrued all amounts due thereunder and has satisfied in full or provided for all of its liabilities and obligations thereunder, except for such amounts as are being contested by the Company in good
faith. Neither the Company nor any of its Subsidiaries has received notice of a default and is not in default under, or with respect to, any Material Contractual Obligation nor, to the Knowledge of the Company, does any 

  

 14 

 
condition exist that with notice or lapse of time or both would constitute a default thereunder. To the Knowledge of the Company, no other party to any such
Contractual Obligation is in default thereunder, nor does any condition exist that with notice or lapse of time or both would constitute a default by such other party thereunder. 
  
 3.9 Title to Properties. The Company and each of its Subsidiaries has good, record and marketable title in fee simple
to, or holds interests as lessee under leases in full force and effect in, all real property used in connection with its business or otherwise owned or leased by it. The Company and each of its Subsidiaries owns and has good, valid and marketable
title to all of its properties and assets used in its business or reflected as owned on the Financial Statements, in each case free and clear of all Liens, except for Permitted Liens, or that would required to be described in the notes to the
Financial Statements. 
  
 3.10 Reports; Financial
Statements. As of the respective dates of their filing with the Commission, all reports, registration statements and other filings, together with any amendments thereto, filed by the Company with the Commission since June 30, 2000 (the
“SEC Reports”), complied in all material respects with the applicable requirements of the Securities Act, the Exchange Act, and the rules and regulations of the Commission promulgated thereunder, except as disclosed in the SEC
Reports. The SEC Reports did not at the time they were filed with the Commission, or will not at the time they are filed with the Commission, contain any untrue statement of a material fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements therein, in the light of the circumstances under which they are made, not misleading. The Company has delivered or made available to the Investors true and complete copies of, or will make
available at each Investor’s request the SEC Reports and any exhibits thereto. Except as set forth in Schedule 3.10(a), the Company is not aware of any issues raised by the Commission with respect to any of the SEC Reports, other than
those disclosed in the SEC Reports. 
  
 (a) The consolidated
financial statements (including, in each case, any related schedules or notes thereto) contained in or incorporated by reference in the SEC Reports and any such reports, registration statements and other filings to be filed by the Company with the
Commission prior to the Initial Closing Date or the Second Closing Date, as the case may be (the “Financial Statements”), (i) have been or will be prepared in accordance with the published rules and regulations of the Commission and
GAAP consistently applied during the periods involved (except as may be indicated in the notes thereto) and (ii) fairly present or will fairly present in all material respects the consolidated financial position of the Company and its Subsidiaries
as of the respective dates thereof and the consolidated results of operations, statements of stockholders’ equity and cash flows for the periods indicated, except that any unaudited interim financial statements were or will be subject to normal
and recurring year-end adjustments and may omit footnote disclosure as permitted by regulations of the Commission. 
  
 3.11 Taxes. (a) The Company and each of its Subsidiaries has paid all Taxes which have come due and are required to be paid by it through the date
hereof, and all deficiencies or other additions to Tax, interest and penalties owed by it in connection 

  

 15 

 
with any such Taxes, other than Taxes being disputed by the Company in good faith for which adequate reserves have been made in accordance with GAAP; (b) the
Company and each of its Subsidiaries has timely filed or caused to be filed all returns for Taxes that it is required to file on and through the date hereof (including all applicable extensions), and all such Tax returns are accurate and complete in
all material respects; (c) with respect to all Tax returns of the Company and each of its Subsidiaries, (i) there is no unassessed Tax deficiency proposed or, to the Knowledge of the Company, threatened against the Company or any of its Subsidiaries
and (ii) no audit is in progress with respect to any return for Taxes, no extension of time is in force with respect to any date on which any return for Taxes was or is to be filed and no waiver or agreement is in force for the extension of time for
the assessment or payment of any Tax; (d) all provisions for Tax liabilities of the Company and each of its Subsidiaries have been disclosed in the Financial Statements and made in accordance with GAAP consistently applied, and all liabilities for
Taxes of the Company and each of its Subsidiaries attributable to periods prior to or ending on the Initial Closing Date or the Second Closing Date, as the case may be, have been adequately disclosed in the Financial Statements; and (e) there are no
Liens for Taxes on the assets of the Company or any of its Subsidiaries, other than Permitted Liens. 
  
 3.12 No Material Adverse Change; Ordinary Course of Business. Except as set forth on Schedule 3.12, since December 31, 2003, (a) there has
not been any material adverse change in the Condition of the Company, (b) neither the Company nor any of its Subsidiaries has participated in any transaction material to the Condition of the Company, including, without limitation, declaring or
paying any dividend or declaring or making any distribution to its stockholders except out of the earnings of the Company or its Subsidiary, as the case may be, (c) neither the Company nor any of its Subsidiaries has entered into any Material
Contractual Obligation, other than in the ordinary course of business and (d) there has not occurred a material change in the accounting principles or practice of the Company or any of its Subsidiaries except as required by reason of a change in
GAAP. 
  
 3.13 Private Offering. Neither the Company nor
any authorized Person acting on its behalf has, in connection with the offer, sale, exchange or issuance of the Notes, the Warrants, the Warrant Shares or the Common Shares, engaged in (a) any form of general solicitation or general advertising (as
those terms are used within the meaning of Rule 502(c) under the Securities Act), (b) any action involving a public offering within the meaning of Section 4(2) of the Securities Act, or (c) any action that would require the
registration under the Securities Act of the offering, sale, exchange or issuance of the Notes, the Warrants, the Series F Preferred Shares and the Common Shares pursuant to this Agreement or that would violate applicable state securities or
“blue sky” laws. As used herein, the terms “offer” and “sale” have the meanings specified in Section 2(3) of the Securities Act. 
  
 3.14 Labor Relations . Except as could not reasonably be expected to have a material adverse effect on the Condition
of the Company: (a) neither the Company nor any of its Subsidiaries is engaged in any unfair labor practice; (b) there is no strike, labor dispute, slowdown or stoppage pending or, to the Knowledge of the 

  

 16 

 
Company, threatened against the Company or any of its Subsidiaries; (c) neither the Company nor any of its Subsidiaries is a party to any collective
bargaining agreement or contract; and (d) no union organizing activities are taking place. To the Knowledge of the Company, no officer or key employee, or any group of key employees, intends to terminate their employment with the Company or any of
its Subsidiaries. To the Knowledge of the Company, each of the officers and key employees of the Company and each of its Subsidiaries spends all, or substantially all, of his business time on the business of the Company or its Subsidiary, as the
case may be. To the Knowledge of the Company, none of the employees of the Company or any of its Subsidiaries is resident in the United States in violation of any Requirement of Law. 
  
 3.15 Employee Benefit Plans. 
  

(a) The SEC Reports list or describe each Plan that the Company or any of its Subsidiaries maintains or to which the Company or any of its Subsidiaries
contributes (the “Company Plans”). Neither the Company nor any of its Subsidiaries has any liability under any Plans other than the Company Plans. Except as described in or incorporated by reference in the SEC Reports, neither the
Company nor any Commonly Controlled Entity maintains or contributes to, or has within the preceding six years maintained or contributed to, or may have any liability with respect to any Plan subject to Title IV of ERISA or Section 412 of the
Code or any “multiple employer plan” within the meaning of the Code or ERISA. Each Company Plan (and related trust, insurance contract or fund) has been established and administered in accordance with its terms, and complies in form
and in operation with the applicable requirements of ERISA and the Code and other applicable Requirements of Law. All contributions (including all employer contributions and employee salary reduction contributions) which are due have been paid to
each Company Plan. 
  
 (b) No Claim with respect to the
administration or the investment of the assets of any Company Plan (other than routine claims for benefits) is pending. 
  
 (c) Except as could not reasonably be expected to have a material adverse effect on the Condition of the Company, each Company Plan that is intended to be
qualified under Section 401(a) of the Code is so qualified and has been so qualified during the period since its adoption; each trust created under any such Plan is exempt from tax under Section 501(a) of the Code and has been so
exempt since its creation. 
  
 (d) No Company Plan is a Retiree
Welfare Plan. 
  
 (e) Neither the consummation of the transactions
contemplated by this Agreement nor any termination of employment following such transactions will accelerate the time of the payment or vesting of, or increase the amount of, compensation due to any employee or former employee whether or not such
payment would constitute an “excess parachute payment” under Section 280G of the Code. 
  
 (f) There are no unfunded obligations under any Company Plan which are not fully reflected in the Financial Statements. 
  

 17 

 (g) Except as could not reasonably be expected to have a material adverse effect on the Condition of the
Company, the Company has no liability, whether absolute or contingent, including any obligations under any Company Plan, with respect to any misclassification of any person as an independent contractor rather than as an employee. 
  
 3.16 Liabilities. Neither the Company nor any of its Subsidiaries has
any direct or indirect obligation or liability (the “Liabilities”) which are not fully reflected or reserved against in the Financial Statements, other than Liabilities not exceeding $1,000,000 in the aggregate incurred since
December 31, 2003 in the ordinary course of business. The Company has no Knowledge of any circumstance, condition, event or arrangement that could reasonably be expected to give rise hereafter to any Liabilities of the Company or any of its
Subsidiaries that, individually or in the aggregate, could have a material adverse effect on the Condition of the Company. 
  
 3.17 Affiliate Transactions. Except as set forth on Schedule 3.17, in the twelve (12) months preceding the date hereof, neither the Company
nor any of its Subsidiaries has sold, leased or otherwise transferred any property or assets to, or purchased, leased or otherwise acquired any property or assets from, or otherwise engaged in any other transactions with, any of its Affiliates,
except in (a) transactions that are at prices and on terms and conditions not less favorable to the Company or such Subsidiary than could be obtained on an arm’s length basis from unrelated third parties, (b) transactions exclusively between
the Company and one or more of its Subsidiaries, or between two or more Subsidiaries of the Company, and which do not involve any other Affiliate and (c) transactions under the agreements listed on Schedule 3.17 hereto. 
  
 3.18 Intellectual Property. 
  
 (a) (i) The Company and each of its Subsidiaries is the owner of all, or has
the license or right to use, sell and license all of, the Copyrights, Patents, Trade Secrets, Trademarks, Internet Assets, Software and other proprietary rights (collectively, “Intellectual Property”) that are used in connection
with its business as presently conducted, free and clear of all Liens, other than Permitted Liens. 
  
 (ii) None of the Intellectual Property is subject to any outstanding Order, and no action, suit, proceeding, hearing, investigation,
charge, complaint, claim or demand is pending or, to the Knowledge of the Company, threatened, which challenges the validity, enforceability, use or ownership of the item. 
  
 (iii) The Company and each of its Subsidiaries has substantially performed all obligations imposed upon it
under all Intellectual Property licenses, sublicenses, distributor agreements and other agreements under which the Company or any of its Subsidiaries is either a licensor, licensee or distributor, except such licenses, sublicenses and other
agreements relating to off-the-shelf 

  

 18 

 
software which is commercially available on a retail basis and used solely on the computers of the Company or its Subsidiaries (collectively, the “IP
Agreements”). The Company and each of its Subsidiaries is not, nor to the Knowledge of the Company is any other party thereto, in breach of or default thereunder in any respect, nor is there any event which with notice or lapse of time or
both would constitute a default thereunder. All of the IP Agreements are valid, enforceable and in full force and effect, and will continue to be so on identical terms immediately following the Initial Closing and the Second Closing, as the case may
be, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, fraudulent conveyance or transfer, moratorium or similar laws affecting the enforcement of creditors’ rights generally and by general principles
of equity relating to enforceability (regardless of whether considered in a proceeding at law or in equity). 
  
 (iv) None of the Intellectual Property currently sold or licensed by the Company or any of its Subsidiaries to any Person or used by or
licensed to the Company or any of its Subsidiaries by any Person infringes upon or otherwise violates any Intellectual Property rights of others, except as could not reasonably be expected to have a material adverse effect on the Condition of the
Company. 
  
 (b) No litigation is pending and no Claim has been
made against the Company or any of its Subsidiaries or, to the Knowledge of the Company, is threatened, contesting the right of the Company or any of its Subsidiaries to sell or license to any Person or use the Intellectual Property presently sold
or licensed to such Person or used by the Company or any of its Subsidiaries. To the Knowledge of the Company, no Person is infringing upon or otherwise violating the Intellectual Property rights of the Company or any of its Subsidiaries.

  
 (c) No former employer of any employee of the Company or any
of its Subsidiaries has made a claim against the Company or any of its Subsidiaries or, to the Knowledge of the Company, against any other Person, that such employee or such consultant is utilizing Intellectual Property of such former employer.

  
 (d) To the Knowledge of the Company, none of the Trade
Secrets, wherever located, the value of which is contingent upon maintenance of confidentiality thereof, has been disclosed to any Person other than employees, representatives and agents of the Company or any of its Subsidiaries, except as required
pursuant to the filing of a patent application by the Company or any of its Subsidiaries. 
  
 (e) It is not necessary for the business of the Company or any of its Subsidiaries to use any Intellectual Property owned by any director, officer, employee or consultant of the Company or any of its Subsidiaries (or
persons the Company or any of its Subsidiaries presently intends to hire). To the Company’s Knowledge, at no time during the conception or reduction to practice of any of the Intellectual Property of the Company or any of its Subsidiaries was
any developer, inventor or other contributor to such Intellectual Property operating under any grants from any Governmental Authority or subject to any employment agreement, invention assignment, nondisclosure agreement 

  

 19 

 
or other Contractual Obligation with any Person that could materially adversely affect the rights of the Company or any of its Subsidiaries to its
Intellectual Property. 
  
 3.19 Privacy of Customer
Information. Neither the Company nor any of its Subsidiaries use any of the customer information it receives through its website or otherwise in an unlawful manner, or in a manner violative of the privacy policy of the Company or its Subsidiary,
as the case may be, or the privacy rights of its customers. Neither the Company nor any of its Subsidiaries has collected any customer information through its website in an unlawful manner or in violation of its privacy policy. The Company and each
of its Subsidiaries has adequate security measures in place to protect the customer information it receives through its website and which it stores in its computer systems from illegal use by third parties or use by third parties in a manner
violative of the rights of privacy of its customers. The Company and each of its Subsidiaries represents to its customers that it assures complete security as to the customer information it receives through its website. 
  
 3.20 Potential Conflicts of Interest. Except as set forth on
Schedule 3.20, no officer, director or stockholder beneficially owning more than five percent (5%) of the outstanding shares of Common Stock, to the Knowledge of the Company, no spouse of any such officer, director or stockholder, and, to the
Knowledge of the Company, no Affiliate of any of the foregoing (a) owns, directly or indirectly, any interest in (excepting less than one percent (1%) stock holdings for investment purposes in securities of publicly held and traded companies), or is
an officer, director, employee or consultant of, any Person which is, or is engaged in business as, a competitor, lessor, lessee, supplier, distributor, or customer of, or Investor to or borrower from, the Company or any of its Subsidiaries; (b)
owns, directly or indirectly, in whole or in part, any tangible or intangible property that the Company or any of its Subsidiaries use, in the conduct of business; or (c) has any cause of action or other claim whatsoever against, or owes or has
advanced any amount to, the Company or any of its Subsidiaries, except for claims in the ordinary course of business such as for accrued vacation pay, accrued benefits under employee benefit plans, and similar matters and agreements existing on the
date hereof. 
  
 3.21 Trade Relations. There exists no
actual or, to the Knowledge of the Company, threatened termination, cancellation or limitation of, or any material adverse modification or change in, the business relationship of the Company or any of its Subsidiaries, or the business of the Company
or any of its Subsidiaries, with any customer or supplier or any group of customers or suppliers whose purchases or inventories provided to the business of the Company or any of its Subsidiaries are individually or in the aggregate material to the
Condition of the Company. 
  
 3.22 Outstanding Borrowing.
Schedule 3.22 sets forth the amount of all Indebtedness of the Company and each of its Subsidiaries as of the date hereof, the Liens 

  

 20 

 
that relate to such Indebtedness and that encumber the Assets and the name of each Investor thereof. No Indebtedness is entitled to any voting rights in any
matters voted upon by the holders of the Common Stock. 
  
 3.23
Broker’s, Finder’s or Similar Fees. There are no brokerage commissions, finder’s fees or similar fees or commissions payable by the Company or any of its Subsidiaries in connection with the transactions contemplated hereby
based on any agreement, arrangement or understanding with the Company or any of its Subsidiaries or any action taken by any such Person. 
  
 3.24 CCC Section. The provisions of Section 1203 of the California Corporations Code are not applicable to the transactions contemplated by this
Agreement or any of the Transaction Documents. 
  
 3.25
Disclosure. This Agreement and the documents and certificates furnished to the Investors by the Company do not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements
contained herein or therein, in the light of the circumstances under which they were made, not misleading. 
  
 3.26 Investments. As of the date hereof, except as set forth on Schedule 3.26 hereto, neither the Company nor any of its Subsidiaries has
made an Investment in any Person, other than a Permitted Investment. 
  
 3.27 Sarbanes-Oxley Compliance. 
  
 (a) The
financial statements of the Company, together with the related schedules and notes, that are incorporated by reference in the Registration Statement and the Prospectus filed with the Commission on December 24, 2003, as amended: (i) present fairly,
in all material respects, the financial position of the Company as of the dates indicated and the results of operations and cash flows of the Company for the periods specified; (ii) have been prepared in compliance with requirements of the Exchange
Act and in conformity with generally accepted accounting principles in the United States applied on a consistent basis during the periods presented and the schedules included in the Registration Statement present fairly, in all material respects,
the information required to be stated therein; and (iii) comply with the antifraud provisions of the Federal securities laws. There are no financial statements (historical or pro forma) that are required to be included in the Registration Statement
and the Prospectus that are not included as required by the Securities Act. All non-GAAP financial measures included or incorporated by reference in the Registration Statement or the Prospectus comply in all material respects with the applicable
requirements of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”) and the rules and regulations promulgated by the Commission thereunder. 
  
 (b) The Company’s Board of Directors has validly appointed an Audit Committee whose composition satisfies the
requirements of Rule 4350A(d)(2) of the Rules of the National Association of Securities Dealers, Inc. (the “NASD Rules”) and the 

  

 21 

 
Board of Directors and/or the Audit Committee has adopted a charter that satisfies the requirements of Rule 4350A(d)(1) of the NASD Rules. 
  
 (c) The Company has established and maintains disclosure controls and
procedures (as such term is defined in Rule 13a-15 and 15d-15 under the Exchange Act). Such disclosure controls and procedures are designed to ensure that material information relating to the Company is made known to the Company’s principal
executive officer and principal financial officer by others within the Company. As of the end of the Company’s last completed fiscal quarter, such disclosure controls and procedures were effective to perform the functions for which they were
established, and the Company will use commercially reasonable efforts to ensure that the Company’s disclosure controls and procedures remain effective to perform the functions for which they were established. The Company’s auditors and the
Audit Committee of the Board of Directors have been advised of: (i) any significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the
Company’s ability to record, process, summarize, and report financial information; and (ii) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal controls over
financial reporting. Since the date of the most recent evaluation of such disclosure controls and procedures, there have been no changes in internal controls over financial reporting that have materially affected, or are reasonably likely to
materially affect, the Company’s internal control over financial reporting. The principal executive officer and the principal financial officers of the Company have made all certifications required by the Sarbanes-Oxley Act and any related
rules and regulations promulgated by the Commission thereunder, and the statements contained in any such certification are complete and correct. The Company is in compliance in all material respects with all provisions of the Sarbanes-Oxley Act that
are effective and applicable to the Company, except for the requirements of the Sarbanes-Oxley Act which are not yet required to be complied with by the Company. The Company has established procedures to implement timely additional rules and
regulations applicable to the Company that may be promulgated by the Commission pursuant to the Sarbanes-Oxley Act. 
  
 ARTICLE IV 
  
 REPRESENTATIONS AND WARRANTIES OF THE 
 INVESTORS 
  
 Each of the Investors hereby represents and warrants, severally and not jointly, to the Company as follows: 
  
 4.1 Existence and Power. Such Investor (a) is a limited partnership,
corporation, partnership or limited liability company duly organized and validly existing under the laws of the jurisdiction of its formation and (b) has the requisite partnership, corporate or limited liability company, as the case may be, power
and authority to 

  

 22 

 
execute, deliver and perform its obligations under this Agreement and each of the other Transaction Documents to which it is a party. 
  
 4.2 Authorization; No Contravention. The execution, delivery and
performance by such Investor of this Agreement and each of the other Transaction Documents to which it is a party and the transactions contemplated hereby and thereby, (a) have been duly authorized by all necessary partnership, corporate or limited
liability company, as the case may be, action, (b) do not contravene the terms of such Investor’s organizational documents, or any amendment thereof, (c) do not violate, conflict with or result in any breach or contravention of, or the creation
of any Lien under, any Contractual Obligation of such Investor or any Requirement of Law applicable to such Investor, and (d) do not violate any Orders of any Governmental Authority against, or binding upon, such Investor. 
  
 4.3 Governmental Authorization; Third Party Consents. Except for the
Stockholder Approval, no approval, consent, compliance, exemption, authorization or other action by, or notice to, or filing with, any Governmental Authority or any other Person, and no lapse of a waiting period under any Requirement of Law, is
necessary or required in connection with the execution, delivery or performance by, or enforcement against, such Investor of this Agreement and each of the other Transaction Documents to which it is a party or the transactions contemplated hereby
and thereby. 
  
 4.4 Binding Effect. This Agreement and
each of the other Transaction Documents to which such Investor is a party, have been duly executed and delivered by such Investor, and this Agreement and each of the other Transaction Documents to which such Investor is a party, constitute the
legal, valid and binding obligations of such Investor, enforceable against it in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, fraudulent conveyance or transfer, moratorium
or similar laws affecting the enforcement of creditors’ rights generally or by equitable principles relating to enforceability (regardless of whether considered in a proceeding at law or in equity). 
  
 4.5 Purchase for Own Account. The Notes, the Warrants and the Warrant
Shares or Common Shares to be acquired by such Investor, respectively, are being or will be acquired for its own account and with no intention of distributing or reselling such Notes, Warrants, Warrant Shares or Common Shares or any part thereof in
any transaction that would be in violation of the securities laws of the United States of America, any state of the United States or any foreign jurisdiction, without prejudice, however, to the rights of such Investor at all times to sell or
otherwise dispose of all or any part of such Notes, Warrants, Warrant Shares and Common Shares under an effective registration statement under the Securities Act, or under an exemption from such registration available under the Securities Act, and
subject, nevertheless, to the disposition of such Investor’s property being at all times within its control. If such Investor should in the future decide to dispose of any of such Notes, Warrants, Warrant Shares or Common Shares, such Investor
understands and agrees that it may do so only in compliance with the Securities Act and applicable state and foreign securities laws, as then in effect. Such Investor agrees to the imprinting for so long as required by law, of a 

  

 23 

 
legend on certificates representing all of its Notes, Warrants, Warrant Shares and Common Shares to the following effect: 
  
 THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY FOREIGN JURISDICTION. THE SECURITIES MAY NOT BE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH ACT AND APPLICABLE STATE AND FOREIGN SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS. 
  
 4.6 Restricted Securities. Such Investor understands that the Notes, the Warrants, the Warrant Shares and Common
Shares issuable upon exercise of the Warrants and conversion of the Series F Preferred Stock (the “Securities”) will not be registered at the time of their issuance under the Securities Act for the reason that the sale provided for
in this Agreement is exempt pursuant to Section 4(2) of the Securities Act and that the reliance of the Company on such exemption is predicated in part on such Investor’s representations set forth herein. 
  
 4.7 Accredited Investor. Such Investor is an “Accredited
Investor” within the meaning of Rule 501 of Regulation D under the Securities Act, as presently in effect. 
  
 4.8 Experience. Such Investor, either alone or together with its representatives, has such knowledge, sophistication and experience in business and
financial matters so as to be capable of evaluating the merits and risks of the prospective investment in the Securities, and has so evaluated the merits and risks of such investment. Such Investor is able to bear the economic risk of an investment
in the Securities and, at the present time, is able to afford a complete loss of such investment. 
  
 4.9 Access to Information. Such Investor has reviewed the SEC Reports and has been afforded: (a) the opportunity to ask such questions as it has
deemed necessary of, and to receive answers from, representatives of the Company concerning the terms and conditions of the offering of the Securities and the merits and risks of investing in the Securities; (b) access to publicly available
information about the Company and the Subsidiaries and the Condition of the Company sufficient to enable it to evaluate its investment; and (c) the opportunity to obtain such additional publicly 

  

 24 

 
available information that the Company possesses or can acquire without unreasonable effort or expense that is necessary to make an informed investment
decision with respect to the investment. Neither such inquiries nor any other investigation conducted by or on behalf of such Investor or its representatives or counsel shall modify, amend or affect such Investor’s right to rely on the truth,
accuracy and completeness of the SEC Reports and the Company’s representations and warranties contained in the Transaction Documents. 
  
 4.10 General Solicitation. Such Investor is not purchasing the Securities as a result of any advertisement, article, notice or other communication
regarding the Securities published in any newspaper, magazine or similar media or broadcast over television or radio or presented at any seminar or any other general solicitation or general advertisement. 
  
 4.11 Reliance. Such Investor understands and acknowledges that: (a)
the Securities are being offered and sold to it without registration under the Securities Act in a private placement that is exempt from the registration provisions of the Securities Act and (b) the availability of such exemption depends in part on,
and the Company will rely upon the accuracy and truthfulness of, the foregoing representations and such Investor hereby consents to such reliance. 
  
 ARTICLE V 
  
 CONDITIONS TO INITIAL CLOSING 
  
 5.1 Conditions to Investors’ Obligations. Each of the Investors’ obligation to consummate the transactions contemplated by the Initial Closing pursuant to this Agreement is subject to the fulfillment
at or prior to the Initial Closing of the following conditions, any of which may be waived in whole or in part by such Investor: 
  
 (a) Representations and Warranties. The representations and warranties made by the Company in Article III hereof shall be true and correct
on the Initial Closing Date. 
  
 (b) Performance. All
covenants, agreements and conditions contained in this Agreement to be performed by the Company on or prior to the Initial Closing Date shall have been performed or complied with. 
  
 (c) Compliance Certificate. The Company shall have delivered to the Investors a certificate of the Company, executed
by the Chief Executive Officer of the Company and dated as of the Initial Closing Date, certifying to the fulfillment of the conditions specified in Section 5.1(a) and Section 5.1(b) hereof. 
  

 25 

 (d) Secretary’s Certificate. The Company shall have delivered to the Investors a certificate
from the Company, in form and substance satisfactory to the Investors, dated as of the Initial Closing Date and signed by the Secretary or an Assistant Secretary of the Company, certifying (i) that the Company is in good standing with the Secretary
of State of the State of California and (ii) that the attached copies of the Articles of Incorporation, the By-laws, and resolutions of the Board of Directors of the Company approving this Agreement and each of the Transaction Documents to which the
Company is a party and the transactions contemplated hereby and thereby, are all true, complete and correct and remain unamended and in full force and effect. 
  

(e) Opinion of Counsel. The Company shall have caused the opinion of Paul, Hastings, Janofsky & Walker, LLP, dated the Initial Closing Date,
relating to the transactions contemplated by the Initial Closing, substantially in the form attached hereto as Exhibit F to be delivered to the Investors. 
  
 (f) Transaction Documents. The Company shall have executed and delivered to the Investors each Transaction Document
(other than this Agreement) to which it is a party. 
  
 (g)
Compliance with Laws. The issuance of Notes and the Warrants at the Initial Closing pursuant to this Agreement and the Warrant Shares and Common Shares upon exercise of such Warrants and conversion of the Warrant Shares, respectively,
pursuant to the terms of such Warrants, the Series F Certificate of Determination and this Agreement shall be legally permitted by all Requirements of Law to which the Company is subject. 
  
 (h) Qualifications. All authorizations, approvals, consents or permits, if any, of any Person that are required in
connection with the lawful issuance and sale of the Notes and the Warrants at the Initial Closing pursuant to this Agreement and the Warrant Shares and Common Shares upon exercise of such Warrants and conversion of the Warrant Shares, respectively,
pursuant to the terms of such Warrants, the Series F Certificate of Determination and this Agreement shall be duly obtained and effective as of the Initial Closing Date. 
  
 (i) Certificate of Determination. The Company shall have duly filed with the Secretary of State of the State of
California the Series F Certificate of Determination. 
  
 (j)
Deliveries. Simultaneously with the Initial Closing, the Company shall make the deliveries set forth in Section 2.4(c). 
  
 5.2 Conditions to Company’s Obligations. The Company’s obligation to consummate the transactions contemplated by the Initial Closing
pursuant to this Agreement is subject to the fulfillment at or prior to the Initial Closing of the following conditions, any of which may be waived in whole or in part by the Company: 
  
 (a) Representations and Warranties. The representations and warranties made by the Investors in Article IV
hereof shall be true and correct on the Initial Closing Date. 
  

 26 

 (b) Performance. All covenants, agreements and conditions contained in this Agreement to be
performed by the Investors on or prior to the Initial Closing Date shall have been performed or complied with. 
  
 (c) Deliveries. Simultaneously with the Initial Closing, the Investors shall make the deliveries set forth in Section 2.4(d). 
  
 ARTICLE VI 
  
 CONDITIONS TO SECOND CLOSING 
  

6.1 Conditions to Investors’ Obligations. Each of the Investors’ obligation to consummate the transactions contemplated by the Second
Closing pursuant to this Agreement is subject to the fulfillment at or prior to the Second Closing of the following conditions, any of which may be waived in whole or in part by such Investor: 
  
 (a) Representations and Warranties. The representations and warranties
made by the Company in Article III hereof shall be true and correct on the Second Closing Date. 
  
 (b) Performance. All covenants, agreements and conditions contained in this Agreement to be performed by the Company on or prior to the Second
Closing Date shall have been performed or complied with. 
  
 (c)
Compliance Certificate. The Company shall have delivered to the Investors a certificate of the Company, executed by the Chief Executive Officer of the Company and dated as of the Second Closing Date, certifying to the fulfillment of the
conditions specified in Section 6.1(a) and Section 6.1(b) hereof. 
  
 (d) Secretary’s Certificate. The Company shall have delivered to the Investors a certificate from the Company, in form and substance satisfactory to the Investors, dated as of the Second Closing Date and
signed by the Secretary or an Assistant Secretary of the Company, certifying (i) that the Company is in good standing with the Secretary of State of the State of California and (ii) that the attached copies of the Articles of Incorporation, the
By-laws, and resolutions of the Board of Directors of the Company approving this Agreement and each of the Transaction Documents to which the Company is a party and the transactions contemplated hereby and thereby, are all true, complete and correct
and remain unamended and in full force and effect. 
  
 (e)
Opinion of Counsel. The Company shall have caused the opinion of Paul, Hastings, Janofsky & Walker, LLP, dated the Second Closing Date, relating to the transactions contemplated by the Second Closing, substantially in the form attached
hereto as Exhibit F to be delivered to the Investors. 
  

 27 

 (f) Compliance with Laws. The issuance of Notes and the Warrants at the Second Closing pursuant to
this Agreement and the Warrant Shares and Common Shares upon exercise of such Warrants and conversion of the Warrant Shares, respectively, pursuant to the terms of such Warrants, the Series F Certificate of Determination and this Agreement shall be
legally permitted by all Requirements of Law to which the Company is subject. 
  
 (g) Qualifications. All authorizations, approvals, consents or permits, if any, of any Person that are required in connection with the lawful issuance and sale of the Notes and the Warrants at the Second
Closing pursuant to this Agreement and the Warrant Shares and Common Shares upon exercise of such Warrants and conversion of the Warrant Shares, respectively, pursuant to the terms of such Warrants, the Series F Certificate of Determination and this
Agreement shall be duly obtained and effective as of the Second Closing Date. 
  
 (h) Board Confirmation. The Company shall have sent written notice to the Investors after March 1, 2005, but on or prior to March 31, 2005, attaching a resolution or written consent approved by the
non-interested members of the Board of Directors that states that it is in the best interests of the stockholders and creditors of the Company for the Company to borrow the aggregate principal amounts set forth opposite the Investors’ names on
Schedule 2.1(b). 
  
 (i) Event of Default. There
shall not be, or have been at any time since the First Closing, an Event of Default (as defined in the Notes) under the Notes issued to the Investors at the First Closing. 
  
 (j) Deliveries. Simultaneously with the Second Closing, the Company shall make the deliveries set forth in Section
2.4(e). 
  
 6.2 Conditions to Company’s Obligations.
The Company’s obligation to consummate the transactions contemplated by the Second Closing pursuant to this Agreement is subject to the fulfillment at or prior to the Second Closing of the following conditions, any of which may be waived in
whole or in part by the Company: 
  
 (a) Representations and
Warranties. The representations and warranties made by the Investors in Article IV hereof shall be true and correct on the Second Closing Date. 
  
 (b) Performance. All covenants, agreements and conditions contained in this Agreement to be performed by the Investors on or prior to the Second
Closing Date shall have been performed or complied with. 
  
 (c)
Deliveries. Simultaneously with the Second Closing, the Investors shall make the deliveries set forth in Section 2.4(f). 
  

 28 

 ARTICLE VII 
  
 INDEMNIFICATION 
  
 7.1 Indemnification. Except as otherwise provided in this Article VII, the Company (the “Indemnifying Party”) agrees to
indemnify, defend and hold harmless each of the Investors and their Affiliates and their respective officers, directors, agents, employees, subsidiaries, partners, members and controlling persons (each, an “Indemnified Party”) to
the fullest extent permitted by law from and against any and all losses, Claims, or written threats thereof (including, without limitation, any Claim by a third party), damages, expenses (including reasonable fees, disbursements and other charges of
counsel incurred by the Indemnified Party in any action between the Indemnifying Party and the Indemnified Party or between the Indemnified Party and any third party or otherwise) or other liabilities (collectively, “Losses”)
resulting from or arising out of any breach of any representation or warranty, covenant or agreement by the Company in the Transaction Documents. The amount of any payment to any Indemnified Party herewith in respect of any Loss shall be of
sufficient amount to make such Indemnified Party whole for any diminution in value of the Warrants, the Series F Preferred Stock, the Warrant Shares and/or Common Shares, as applicable, directly caused by such breach. In connection with the
obligation of the Indemnifying Party to indemnify for expenses as set forth above, the Indemnifying Party shall, upon presentation of appropriate invoices containing reasonable detail, reimburse each Indemnified Party for all such expenses
(including reasonable fees, disbursements and other charges of counsel incurred by the Indemnified Party in any action between the Indemnifying Party and the Indemnified Party or between the Indemnified Party and any third party) as they are
incurred by such Indemnified Party; provided, however, that if an Indemnified Party is reimbursed under this Article VII for any expenses, such reimbursement of expenses shall be refunded to the extent it is finally judicially
determined that the Losses in question resulted primarily from the willful misconduct or gross negligence of such Indemnified Party. 
  
 7.2 Notification. Each Indemnified Party under this Article VII shall, promptly after the receipt of notice of the commencement of any Claim
against such Indemnified Party in respect of which indemnity may be sought from the Indemnifying Party under this Article VII, notify the Indemnifying Party in writing of the commencement thereof. The omission of any Indemnified Party to so
notify the Indemnifying Party of any such action shall not relieve the Indemnifying Party from any liability which it may have to such Indemnified Party (a) other than pursuant to this Article VII or (b) under this Article VII unless,
and only to the extent that, such omission results in the Indemnifying Party’s forfeiture of substantive rights or defenses. In case any such Claim shall be brought against any Indemnified Party, and it shall notify the Indemnifying Party of
the commencement thereof, the Indemnifying Party shall be entitled to assume the defense thereof at its own expense, with counsel satisfactory to such Indemnified Party in its reasonable judgment; provided, however, that any
Indemnified Party may, at its own expense, retain separate counsel to participate in such defense at its own expense. Notwithstanding the foregoing, in any Claim in which both the Indemnifying Party, on the one hand, and an Indemnified Party, on the
other hand, 

  

 29 

 
are, or are reasonably likely to become, a party, such Indemnified Party shall have the right to employ separate counsel and to control its own defense of
such Claim if, in the reasonable opinion of counsel to such Indemnified Party, either (x) one or more defenses are available to the Indemnified Party that are not available to the Indemnifying Party or (y) a conflict or potential conflict exists
between the Indemnifying Party, on the one hand, and such Indemnified Party, on the other hand, that would make such separate representation advisable; provided, however, that the Indemnifying Party (i) shall not be liable for the fees
and expenses of more than one counsel to all Indemnified Parties and (ii) shall reimburse the Indemnified Parties for all of such fees and expenses of such counsel incurred in any action between the Indemnifying Party and the Indemnified Parties or
between the Indemnified Parties and any third party, as such expenses are incurred; provided, however, that if an Indemnified Party is reimbursed under this Article VII for any expenses, such reimbursement of expenses shall be refunded to the
extent it is finally judicially determined that the Losses in question resulted primarily from the willful misconduct or gross negligence of such Indemnified Party. The Indemnifying Party agrees that it will not, without the prior written consent of
the Indemnified Party, settle, compromise or consent to the entry of any judgment in any pending or threatened Claim relating to the matters contemplated hereby (if any Indemnified Party is a party thereto or has been actually threatened to be made
a party thereto) unless such settlement, compromise or consent includes an unconditional release of each Indemnified Party from all liability arising or that may arise out of such Claim. The Indemnifying Party shall not be liable for any settlement
of any Claim effected against an Indemnified Party without the Indemnifying Party’s written consent, which consent shall not be unreasonably withheld. The rights accorded to an Indemnified Party hereunder shall be in addition to any rights that
any Indemnified Party may have at common law, by separate agreement or otherwise; provided, however, that notwithstanding the foregoing or anything to the contrary contained in this Agreement, nothing in this Article VII shall
restrict or limit any rights that any Indemnified Party may have to seek equitable relief. 
  
 7.3 Contribution. If the indemnification provided for in this Article VII from the Indemnifying Party is unavailable to an Indemnified Party hereunder in respect of any Losses referred to herein, then
the Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount paid or payable by such Indemnified Party as a result of such Losses in such proportion as is appropriate to reflect the relative fault of the
Indemnifying Party and Indemnified Party in connection with the actions which resulted in such Losses, as well as any other relevant equitable considerations. The relative faults of such Indemnifying Party and Indemnified Party shall be determined
by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact, has been made by, or relates to information supplied
by, such Indemnifying Party or Indemnified Party, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such action. The amount paid or payable by a party as a result of the Losses referred to
above shall be deemed to include, subject to the limitations set forth in Section 7.1 and Section 7.2, any reasonable legal or other fees, charges or expenses reasonably incurred by such party in connection with any investigation or
proceeding. 
  

 30 

 ARTICLE VIII 
  
 COVENANTS 
  
 The Company hereby covenants and agrees with the Investors as follows: 
  
 8.1 Financial Statements and Other Information. If any time the Company is not subject to the periodic disclosure
obligations of the Exchange Act, the Company shall deliver to each Investor, in form and substance satisfactory to such Investor: 
  
 (a) as soon as available, but not later than ninety (90) days after the end of each fiscal year of the Company, a copy of the audited consolidated balance
sheet of the Company and its Subsidiaries as of the end of such fiscal year and the related statements of operations and cash flows for such fiscal year, setting forth in each case in comparative form the figures for the previous year, all in
reasonable detail and accompanied by a management summary and analysis of the operations of the Company for such fiscal year and by the opinion of a nationally recognized independent certified public accounting firm which report shall state without
qualification that such financial statements present fairly the financial condition as of such date and results of operations and cash flows for the periods indicated in conformity with GAAP applied on a consistent basis; 
  
 (b) as soon as available, but in any event not later than forty-five (45)
days after the end of each of the first three fiscal quarters of each fiscal year, the unaudited consolidated balance sheet of the Company and its Subsidiaries, and the related statements of operations and cash flows for such quarter and for the
period commencing on the first day of the fiscal year and ending on the last day of such quarter, all certified by an appropriate officer of the Company as presenting fairly the consolidated financial condition as of such date and results of
operations and cash flows for the periods indicated in conformity with GAAP applied on a consistent basis, subject to normal year-end adjustments and the absence of footnotes required by GAAP; and 
  
 (c) as soon as available, but in any event not later than ten (10) days after
the end of each month of each fiscal year, the unaudited consolidated balance sheet of the Company and its Subsidiaries, and the related statements of operations and cash flows for such month and for the period commencing on the first day of the
fiscal year and ending on the last day of such month, all certified by an appropriate officer of the Company as presenting fairly the consolidated financial condition as of such date and results of operations and cash flows for the periods indicated
in conformity with GAAP applied on a consistent basis, subject to normal year-end adjustments and the absence of footnotes required by GAAP. 
  
 8.2 FIRPTA Certificate. If requested by any of the Investors, as promptly as practicable, but not later than five (5) days after the end of each
fiscal year of the Company, the Company shall deliver to such Investor, in form and substance satisfactory to such Investor, a certificate signed by the Chief Executive Officer of the 

  

 31 

 
Company in customary form certifying that the Company is not a “foreign person” within the meaning of Section 1445 of the Code. 

 
 8.3 Reservation of Series F Preferred Stock and Common Stock. The
Company shall at all times reserve and keep available out of its authorized shares of Series F Preferred Stock, solely for the purpose of issue or delivery upon exercise of the Warrants, as provided therein, the maximum number of shares of Series F
Preferred Stock that may be issuable or deliverable upon such exercise. The Company shall at all times reserve and keep available out of its authorized shares of Common Stock, solely for the purpose of issue or delivery upon conversion of the Series
F Preferred Stock, as provided in the Series F Certificate of Determination, the maximum number of shares of Common Stock that may be issuable or deliverable upon such conversion. The Company shall issue such shares of Series F Preferred Stock and
Common Stock, in accordance with the terms of the Warrants and Series F Certificate of Determination, as the case may be, and otherwise comply with the terms hereof and thereof. 
  
 ARTICLE IX 
  
 TERMINATION 
  
 9.1 Termination. Sections 2.4(b), 2.4(e) and 2.4(f) of this Agreement and the obligation of the Investors to consummate the Second Closing shall
automatically terminate and be of no further force or effect: 
  
 (a) at any time on or prior to the Second Closing Date, by mutual written consent of the Company and the Investors; 
  
 (b) at the election of the Company or the Investors by written notice to the other parties hereto after 5:00 p.m., New York time, on March 31, 2005, if
the Second Closing shall not have occurred through no fault of the terminating party on or prior to such date, unless such date is extended by the mutual written consent of the Company and the Investors; 
  
 (c) at the election of the Company or any of the non-defaulting Investors, if
there has been a material breach of any representation, warranty, covenant or agreement on the part of either of the General Atlantic Entities or Campina contained in this Agreement or the other Transaction Documents, which breach has not been cured
within ten (10) Business Days of notice to the Investors of such breach; or 
  
 (d) at the election of any of the Investors, if there has been a material breach of any representation, warranty, covenant or agreement on the part of the Company contained in this Agreement or the other Transaction
Documents, which breach has not been cured within ten (10) Business Days notice to the Company of such breach. 
  
 None of the parties hereto shall have any liability arising out of a termination pursuant to this Section 9.1. 
  

 32 

 ARTICLE X 
  
 MISCELLANEOUS 
  
 10.1 Survival of Representations and Warranties. All of the representations and warranties made herein shall survive the execution and delivery of
this Agreement until the date that is ninety (90) days after the receipt by the Investors of audited financial statements of the Company for the fiscal year ending December 31, 2004 (or, if such fiscal year changes and no such audited consolidated
financial statements are available, then the successor fiscal year), except for (a) Sections 3.1, 3.2, 3.4, 3.7, 3.13 and 3.23, which representations and warranties shall survive until the third anniversary
of the Initial Closing Date, and (b) Section 3.11, which shall survive until the later to occur of (i) the lapse of the statute of limitations with respect to the assessment of any Tax to which such representation and warranty relates
(including any extensions or waivers thereof) and (ii) sixty (60) days after the final administrative or judicial determination of the Taxes to which such representation and warranty relates, and no claim with respect to Section 3.11 may be
asserted thereafter with the exception of claims arising out of any fact, circumstance, action or proceeding to which the party asserting such claim shall have given notice to the other parties to this Agreement prior to the termination of such
period of reasonable belief that a tax liability will subsequently arise therefrom. 
  
 10.2 Notices. All notices, demands and other communications provided for or permitted hereunder shall be made in writing and shall be by registered or certified first-class mail, return receipt requested,
telecopier, courier service or personal delivery: 
  
 if to the
Company: 
  
 Critical Path, Inc. 
 350 The Embarcadero 
 San Francisco, CA 94105

 Telecopy: (415) 541-2300 
 Attention: Chief Financial Officer 
  
 with a copy to,
which shall not constitute notice to the Company: 
  
 Paul,
Hastings, Janofsky & Walker LLP 
 55 Second Street, 24th Floor 
 San Francisco, California 94105-3441 
 Telecopy: (415) 856-7100 
 Attention: Gregg Vignos, Esq. 
  

 33 

 if to the Investors: 
  
 if to any of the General Atlantic Entities: 
  
 c/o General Atlantic Service Corporation 
 3 Pickwick Plaza 
 Greenwich, CT 06830 
 Telecopy: (203) 622-8818 
 Attention: Matthew
Nimetz 
 Thomas J. Murphy 
  
 with a copy to, which shall not constitute notice: 
  
 Paul, Weiss, Rifkind, Wharton & Garrison LLP 
 1285 Avenue of the Americas 
 New York, NY 10019-6064 
 Telecopy: (212) 757-3990 
 Attention: Douglas A. Cifu, Esq. 
  
 if to Campina Enterprises Limited: 
  
 c/o 7th Floor 
 Cheung Kong Center 
 2 Queen’s Road
Central 
 Hong Kong 
 Telecopy:
(852) 2845-2057 
 Attention: Mr. Edmond Ip 
  
 (iv) if to Richmond III, LLC: 
  
 Richmond III, LLC 
 10563 Brunswick Road,
Suite 7 
 Grass Valley, CA 95945 
 Telecopy: 530-272-0556 
 Attention: Peter Kellner 
  
 All such notices, demands and other communications shall be deemed to have been duly given when delivered by hand, if
personally delivered; when delivered by courier, if delivered by commercial courier service; five (5) Business Days after being deposited in the mail, postage prepaid, if mailed; and when receipt is mechanically acknowledged, if telecopied. Any
party may by notice given in accordance with this Section 10.2 designate another address or Person for receipt of notices hereunder. 
  

 34 

 10.3 Successors and Assigns; Third Party Beneficiaries. This Agreement shall inure to the benefit
of and be binding upon the successors and permitted assigns of the parties hereto. Subject to applicable securities laws and the terms and conditions thereof, the Investors may assign any of their rights under this Agreement to any of their
respective Affiliates. The Company may not assign any of its rights under this Agreement without the written consent of the Investors. Except as provided in Article VII, no Person other than the parties hereto and their successors and
permitted assigns is intended to be a beneficiary of this Agreement. 
  
 10.4 Amendment and Waiver. 
  
 (a) No failure or
delay on the part of the Company or the Investors in exercising any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or remedy preclude any other or further
exercise thereof or the exercise of any other right, power or remedy. The remedies provided for herein are cumulative and are not exclusive of any remedies that may be available to the Company or the Investors at law, in equity or otherwise.

  
 (b) Any amendment, supplement or modification of or to any
provision of this Agreement, any waiver of any provision of this Agreement, and any consent to any departure by the Company or the Investors from the terms of any provision of this Agreement, shall be effective (i) only if it is made or given in
writing and signed by the Company and the Investors, and (ii) only in the specific instance and for the specific purpose for which made or given. Except where notice is specifically required by this Agreement, no notice to or demand on the Company
in any case shall entitle the Company to any other or further notice or demand in similar or other circumstances. 
  
 (c) The Investors acknowledge and agree that notwithstanding the terms and provisions of this Agreement and the Notes, no Investor shall be entitled to
take any action permitted to be taken by such Investor under this Agreement or the Notes unless such Investor holds, together with its Affiliates, Notes having an aggregate principal amount equal to at least 40% of the aggregate principal amount of
all of the Notes issued at the Initial Closing and such Investor gives prompt written notice to the other Investors after such exercise or exercises. 
  
 10.5 Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. 
  
 10.6 Richmond III Registration Rights. If a request for Incidental Registration (as defined in the Registration Rights Agreement) is made under the
Registration Rights Agreement, and to the extent permitted by the Registration Rights Agreement, the Company agrees, upon the written request of Richmond III, to include shares of common stock issuable upon conversion of shares of Series F Preferred
Stock 

  

 35 

 
held by Richmond III in such Incidental Registration, as if Richmond III were a Designated Holder. The rights and obligations (including provision relating
to registration expenses and indemnification and contribution) of a Designated Holder under the Registration Rights Agreement shall apply equally to the registration right granted to Richmond III under this Section to the extent applicable to effect
the registration rights hereunder. 
  
 10.7 Coinvestor
Sub-Group Board Seat. The Company covenants and agrees to cause the nomination of Mr. Edmond Ip Tak Chuen, as the nominee of the Coinvestor Sub-group (as defined in the Stockholders Agreement), to the Company’s Board of Directors at its
next board meeting pursuant to its obligation under Section 3.1(b) of the Stockholders Agreement. The Company agrees to provide Mr. Edmond Ip Tak Chuen, so long as he is a member of the Company’s Board of Directors, copies of all materials
which the Company provides to its Board of Directors. Such materials shall be sent to Mr. Edmond Ip Tak Chuen at the same time that they are sent to the Company’s Board of Directors. 
  
 10.8 Observer Rights. The Company covenants and agrees to allow one individual designated by the Coinvestor Sub-group
(who shall initially be Mr. Ma Lai Chee) and one individual designated by General Atlantic Partners 74, L.P., (on behalf of General Atlantic Stockholders) (each, an “Observer”) to attend all meetings of the Company’s Board of
Directors in a nonvoting capacity, and in connection therewith, the Company shall give each Observer copies of all materials which the Company provides to its Board of Directors, and such materials shall be sent to the Observers at the same time
that they are sent to the Company’s Board of Directors; provided, however, that the Company reserves the right to exclude the Observers from access to any material or meeting or portion thereof if the Company believes upon advice of counsel
that such exclusion is reasonably necessary to preserve the attorney-client privilege, to protect highly confidential information or for other similar reasons. The decision of the Board of Directors with respect to the privileged or confidential
nature of such information shall be final and binding. Notice of meetings of the Company’s Board of Directors to the director nominated by the Coinvestor Sub-group and to the director nominated by the General Atlantic Stockholders (as defined
in the Stockholders Agreement) shall constitute notice of such meetings to the Observers. 
  
 10.9 Certain Series F Preferred Stock Terms. The Company and the Investors agree as follows: 
  
 (a) The initial “Series F Conversion Price” (as defined in the Series F Certificate of Determination) is $1.40, as adjusted pursuant to Section
7(c) of the Series F Certificate of Determination; 
  
 (b) The
initial “Series F Price Per Share” (as defined in the Series F Certificate of Determination) is $14.00 (subject to anti-dilution adjustment for stock splits 

  

 36 

 
of, combinations of and capital reorganizations with respect to the Series F Preferred Stock); and 
  
 (c) The “Series F Closing Date” (as defined in the Series F
Certificate of Determination) is December 30, 2004. 
  
 10.10
Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. 
  
 10.11 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without regard to the
principles of conflicts of law thereof. 
  
 10.12
Severability. If any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable in any respect for any reason, the validity, legality and enforceability of any
such provision in every other respect and of the remaining provisions hereof shall not be in any way impaired, unless the provisions held invalid, illegal or unenforceable shall substantially impair the benefits of the remaining provisions hereof.

  
 10.13 Rules of Construction. Unless the context
otherwise requires, references to sections or subsections refer to sections or subsections of this Agreement. 
  
 10.14 Entire Agreement. This Agreement, together with the exhibits and schedules hereto, and the other Transaction Documents are intended by the
parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein and therein. There are no restrictions,
promises, representations, warranties or undertakings, other than those set forth or referred to herein or therein. This Agreement, together with the exhibits and schedules hereto, and the other Transaction Documents supersede all prior agreements
and understandings between the parties with respect to such subject matter. 
  
 10.15 Fees. In the event that the Investors fail to consummate the purchase of the Notes and the Warrants for any reason, the Company will not be responsible for any out-of-pocket fees and expenses incurred by
the Investors. However, if the First Closing is consummated, the Company will reimburse the Investors for all of their reasonable out-of-pocket fees and expenses incurred in connection with the purchase of the Notes and Warrants, including fees and
reasonable disbursements of counsel. 
  
 10.16 Publicity;
Confidentiality. Except as may be required by applicable Requirements of Law, none of the parties hereto shall issue a publicity release or public announcement or otherwise make any disclosure concerning this Agreement, the transactions
contemplated hereby, the Investors or the business, technology and financial affairs of the Company, without prior approval by the other parties hereto; provided, however, that nothing in this Agreement shall restrict any of the
Investors from disclosing information (a) that is already publicly available, (b) that was known to such 

  

 37 

 
Investor on a non-confidential basis prior to its disclosure by the Company, (c) that may be required or appropriate in response to any summons or subpoena
or in connection with any litigation, provided that such Investor will use reasonable efforts to notify the Company in advance of such disclosure so as to permit the Company to seek a protective order or otherwise contest such disclosure, and such
Investor will use reasonable efforts to cooperate, at the expense of the Company, with the Company in pursuing any such protective order, (d) to the extent that such Investor reasonably believes it appropriate in order to comply with any Requirement
of Law, (e) to such Investor’s or the Company’s officers, directors, shareholders, advisors, employees, members, partners, controlling persons, auditors or counsel or (f) to Persons from whom releases, consents or approvals are required,
or to whom notice is required to be provided, pursuant to the transactions contemplated by the Transaction Documents. If any announcement is required by any Requirement of Law to be made by any party hereto, prior to making such announcement such
party will deliver a draft of such announcement to the other parties and shall give the other parties reasonable opportunity to comment thereon; provided, however, that the Investors may file an amendment to their Schedule 13D and
Forms 4 with the Commission without either soliciting any comments from any of the other parties hereto or delivering a copy of such filings to any of the other parties hereto, except as required by law or regulation. Each of the Investors
acknowledge that if such Investor becomes aware of material non-public information, such Investor’s ability to trade in the Company’s securities may be restricted. 
  
 10.17 Further Assurances. Each of the parties shall execute such documents and perform such further acts (including,
without limitation, obtaining any consents, exemptions, authorizations or other actions by, or giving any notices to, or making any filings with, any Governmental Authority or any other Person) as may be reasonably required or desirable to carry out
or to perform the provisions of this Agreement. 
  
 [the remainder
of this page intentionally left blank] 
  

 38 

 IN WITNESS WHEREOF, the undersigned have executed, or have caused to be executed, this Note and Warrant Purchase
Agreement on the date first written above. 
  

			
	 	 	 CRITICAL PATH, INC., a California corporation

		
	By: 	 	/s/ Michael Zukerman
	 Name:
	 	Michael Zukerman
	 Title:
	 	Executive Vice President,
General Counsel and Secretary

  
 Dated: December 29, 2004

  
 SIGNATURE PAGE TO NOTE AND WARRANT PURCHASE AGREEMENT

  

					
	 	 	GENERAL ATLANTIC PARTNERS 74, L.P.
	 	 	By:	 	 GENERAL ATLANTIC PARTNERS, LLC,
 its General
Partner

		
	By: 	 	/s/ Matthew Nimetz
	 	 	 Name:
	 	Matthew Nimetz
	 	 	 Title:
	 	A Managing Member
		
	 	 	 GAP COINVESTMENT PARTNERS II, L.P.

		
	By: 	 	/s/ Matthew Nimetz
	 	 	 Name:
	 	Matthew Nimetz
	 	 	 Title:
	 	A General Partner
		
	 	 	 GAPSTAR, LLC

	 	 	 By:
	 	 GENERAL ATLANTIC PARTNERS, LLC,
 its Sole
Member

		
	By: 	 	/s/ Matthew Nimetz
	 	 	 Name:
	 	Matthew Nimetz
	 	 	 Title:
	 	A Managing Member
		
	 	 	 GAPCO GMBH & CO. KG

	 	 	 By:
	 	 GAPCO MANAGEMENT GMBH,
 its General
Partner

		
	By: 	 	/s/ Matthew Nimetz
	 	 	 Name:
	 	Matthew Nimetz
	 	 	 Title:
	 	Managing Director

  
 SIGNATURE PAGE TO
NOTE AND WARRANT PURCHASE AGREEMENT 
  

			
	CAMPINA ENTERPRISES LIMITED
		
	By:	 	 /s/ Ma Lai Chee

	 	 	 Name: Ma Lai Chee

	 	 	 Title: Authorised Person

  
 SIGNATURE PAGE TO
NOTE AND WARRANT PURCHASE AGREEMENT 
  

			
	RICHMOND III, LLC
		
	By:	 	 /s/ Peter Kellner

	 	 	 Name: Peter Kellner

	 	 	 Title: Managing Member

  
 SIGNATURE PAGE TO
NOTE AND WARRANT PURCHASE AGREEMENT 
  

 SCHEDULE 2.1(a) 
  
 Initial Closing 
  

									
	 Investors

	  	Purchase Price

	  	Principal
Amount of Note

	  	 Shares of Series F
 Preferred Stock subject
 to Warrant

	 General Atlantic Partners 74, L.P.
	  	$	4,146,663.81	  	$	4,146,663.81	  	88,857
				
	 GapStar, LLC
	  	$	321,256.48	  	$	321,256.48	  	6,884
				
	 GAP Coinvestment Partners II, L.P.
	  	$	523,982.98	  	$	523,982.98	  	11,228
				
	 GAPCO GmbH & Co. KG
	  	$	8,096.73	  	$	8,096.73	  	173
				
	 Campina Enterprises Limited
	  	$	5,000,000	  	$	5,000,000	  	107,142
				
	 Richmond III, LLC
	  	$	1,000,000	  	$	1,000,000	  	21,428
				
	 Total:
	  	$	11,000,000	  	$	11,000,000	  	235,712

  

 SCHEDULE 2.1(b) 
  
 Second Closing 
  

									
	 Investors

	  	Purchase Price

	  	Principal
Amount of Note

	  	 Shares of Series F
 Preferred Stock subject
 to Warrant

	 General Atlantic Partners 74, L.P.
	  	$	2,695,331.48	  	$	2,695,331.48	  	57,758
				
	 GapStar, LLC
	  	$	208,816.71	  	$	208,816.71	  	4,474
				
	 GAP Coinvestment Partners II, L.P.
	  	$	340,588.94	  	$	340,588.94	  	7,298
				
	 GAPCO GmbH & Co. KG
	  	$	5,262.87	  	$	5,262.87	  	112
				
	 Campina Enterprises Limited
	  	$	3,250,000	  	$	3,250,000	  	69,642
				
	 Richmond III, LLC
	  	$	500,000	  	$	500,000	  	10,714
				
	 Total:
	  	$	7,000,000	  	$	7,000,000	  	149,998Third Amendment to Credit Agreement, dated as of December 28, 2004

  
 Exhibit 10.1

  
 THIRD AMENDMENT TO 
 CREDIT AGREEMENT 
  
 THIS THIRD AMENDMENT TO CREDIT AGREEMENT (this “Amendment”) is made as of the 28th day of December, 2004 by and among MTC TECHNOLOGIES,
INC., a Delaware corporation (“MTCT”), MTC TECHNOLOGIES, INC, (formerly known as MODERN TECHNOLOGIES CORP.), an Ohio corporation (together with MTCT, collectively, “Borrowers” and, individually, each a
“Borrower”); (the financial institutions listed on Schedule 1 to the Credit Agreement (collectively, the “Banks” and, individually, each a “Bank”); and NATIONAL, CITY BANK, as lead arranger
and administrative agent for the Banks (“Agent”) under the following circumstances: 
  
 A. The Borrowers, the Agent and the Banks are parties to a Credit Agreement dated as of January 31, 2003, as amended by the First Amendment to Credit
Agreement dated as of December 31, 2003 and a Second Amendment to Credit Agreement dated July 12, 2004 (as the same may be amended, supplemented, modified and/or restated from time to time, the “Credit Agreement”). Unless otherwise
defined herein, all capitalized terms used herein shall have the respective meanings ascribed to those terms by the Credit Agreement. 
  
 B. Pursuant to the Credit Agreement, the Banks have provided the Revolving Loans to the Borrowers which are evidenced by Revolving Credit Notes dated as
of December 31, 2003 (collectively, as the same may be amended, supplemented, modified and/or restated from time to time, the “Original Revolving Credit Notes”). 
  
 C. The Borrowers, the Agent and the Banks now desire to amend the Credit Agreement and the Original Revolving Credit Notes
for the reasons and upon the terms and conditions hereinafter set forth 
  
 NOW, THEREFORE, the Borrowers, the Agent and the Banks agree as follows: 
  
 Section 1. Amendment to Credit Agreement. 
  
 (a) Amendments to Section 1.1. Section 1.1 of the Credit Agreement is hereby amended by deleting the definition of “Maximum Commitment Amount”. The following definitions are hereby either added to
Section 1.1 or modified in their entirety to read as follows: 
  
 “Consolidated Pro-Forma EBIT” shall mean, for any period, the sum of (a) Consolidated EBIT, and (b)(i) without duplication, the EBIT of Companies acquired in Acquisitions permitted by Section 5.13 hereof
during such period to the extent that such EBIT of Companies acquired is confirmed by audited financial information or other information satisfactory to Agent, minus (ii) 

  

 
the EBIT of Companies disposed of in accordance with Section 5.12 hereof during such period (but only to the extent that such EBIT is included in the
calculation of Consolidated EBIT). 
  
 “Consolidated Pro-Forma EBITDA” shall mean, for any period, the sum of (a) Consolidated EBITDA, and (b)(i) without duplication, the EBITDA of Companies acquired in Acquisitions permitted by Section 5.13 hereof during such period
to the extent that such EBITDA of Companies acquired is confirmed by audited financial information or other information satisfactory to Agent, minus (ii) the EBITDA of Companies disposed of in accordance with Section 5.12 hereof during such period
(but only to the extent that such EBITDA is included in Consolidated EBITDA). 
  
 “Depreciation and Amortization Charges” shall mean, for any period, in accordance with GAAP, the aggregate of all depreciation and amortization charges for fixed assets, leasehold improvements and general
intangibles (specifically including goodwill) of a Person for such period. 
  
 “EBIT” shall mean, for any period, in accordance with GAAP, Net Earnings for such period, plus the aggregate amounts deducted in determining such Net Earnings in respect of (a) Income Tax Expense, and (b)
Interest Expense. 
  
 “EBITDA” shall
mean, for any period, in accordance with GAAP, (a) EBIT, plus (b) the amount deducted in determining EBIT in respect of Depreciation and Amortization Charges and Stock Option Expense. 
  
 “Fixed Charge Coverage Ratio” shall mean, for the most recently completed four fiscal quarters of
MTCT, the ratio of (a) Consolidated Pro-Forma EBITDA for such period plus lease payments on Consolidated Rental Obligations for such period less Consolidated Income Tax Expense for such period, to (b) Consolidated Fixed Charges for such period.

  
 “Income Tax Expense” shall mean,
for any period, in accordance with GAAP, all provisions for taxes based on the gross or net income of any Person (including, without limitation, any additions to such taxes, and any penalties and interest with respect thereto), and all franchise
taxes of such Person. 
  
 “Interest Coverage
Ratio” shall mean, for the most recently completed four fiscal quarters of MTCT, the ratio of (a) Consolidated Pro-Forma EBIT to (b) Consolidated Interest Expense. 
  
 “Interest Expense” shall mean, for any period, the interest expense of any Person for such period,
as determined in accordance with GAAP. 
  
 “Leverage Ratio” shall mean, at any time, on a Consolidated basis and in accordance with GAAP, the ratio of (a) Consolidated Funded Indebtedness (for the most recently completed 

  

 
fiscal quarter of MTCT) to (b) Consolidated Pro-Forma EBITDA (for the most recently completed four fiscal quarters of MTCT). 
  
 “Net Earnings” shall mean, for any period, the net
income (loss) for such period (excluding from the calculation any nonrecurring gains or losses) of any Person, determined in accordance with GAAP. 
  
 “Stock Option Expense” shall mean, for any period, in accordance with GAAP, all non-cash compensation expense arising from the
issuance by any Person of stock options during such period. 
  
 “Total Commitment Amount” shall mean Eighty-Five Million Dollars ($85,000,000), as such amount may be decreased pursuant to Section 2.1l(a) hereof. 
  
 (b) Amendment to Section 2.1l(b). Section 2.11(b) of the Credit
Agreement is hereby deleted in its entirety 
  
 (c) Amendment
to Section 5.7(d). Section 5.7(d) of the Credit Agreement (captioned Net Worth) is hereby is hereby amended in its entirety to read as follows: 
  
 Borrowers shall not suffer or permit at any time the Consolidated Net Worth, for the most recently completed fiscal quarter of MTCT, to be
less than the current minimum amount required, which current minimum amount required shall be $119,896,000 on the Closing Date through December 30, 2004, with such current minimum amount required to be positively increased by the Increase Amount on
December 31, 2004 and by an additional Increase Amount on the last day of each succeeding fiscal quarter of MTCT thereafter. As used herein, the term “Increase Amount” shall mean an amount equal to fifty percent (50%) of positive
Consolidated Net Earnings for the fiscal quarter then ended plus an amount equal to one hundred percent (100%) of the proceeds of any equity offering by the Companies, or any debt offering of the Companies, to the extent converted into equity. 
  
 (d) Amendment to Section 5.7(e) of the Credit Agreement. Section 5.7(e) of the Credit Agreement (captioned
Tangible Net Worth) is hereby deleted in its entirety. 
  
 (e) Amendment to Section 5.8. The following subsection (f) is hereby added to Section 5.8 of the Credit Agreement: 
  
 (f) Indebtedness (other than the Loans or any other Indebtedness under this Agreement) in an amount not to exceed $60,000,000 on terms and
conditions satisfactory to Agent and the Lenders in its sole discretion. 
  
 (f) Amendment to Schedule 1 to the Credit Agreement. Schedule 1 to the Credit Agreement shall be deleted and replaced with the new Schedule 1 attached to this Amendment. 
  

 Section 2. Amendment to Current Revolving Credit Notes. The “Revolving Credit Note” or
“Revolving Credit Notes” referred to in the Loan Documents shall mean the Amended and Restated Revolving Credit Notes in the form attached hereto as Exhibits A-1, A-2, A-3, and A-4 respectively. 
  
 Section 3. Effective Date. This Amendment shall take effect
immediately upon the satisfaction, in the Agent’s sole discretion, of the following conditions precedent: 
  
 (a) Agent’s receipt of an original counterpart of this Amendment executed by all parties hereto; 
  
 (b) Agent’s receipt of the original Confirmation of Guarantees executed
by Amcomp Corporation, International Consultants, Inc. and Vitronics Inc. (collectively, the “Guarantors”); 
  
 (c) Agent’s receipt of the Amended and Restated Revolving Credit Notes executed by Borrowers; 
  
 (d) Agent’s receipt of the following, certified as true and correct and
in full force and effect by a duly authorized officer of each Borrower and each Guarantor: 
  
 (i) resolutions of the Board of Directors of each Borrower and each Guarantor authorizing execution, delivery and performance of this
Amendment or Confirmation of Guarantee, as applicable, and all other documents executed and delivered in connection herewith to which each is a party; 
  
 (ii) the articles of incorporation of each Borrower and each Guarantor, as certified by the Secretary of State of the state of
incorporation of such entity; and 
  
 (iii) the
bylaws or code of regulations of each Borrower and each Guarantor. 
  
 (e) Receipt by Agent of an opinion of counsel to Borrowers and Guarantors, in form and substance satisfactory to Agent; 
  
 (f) Receipt by each Bank of an amendment fee in the amount equal to the sum of (i) 7.5 basis points multiplied by such Bank’s Maximum Amount as set
forth on Schedule 1 to the First Amendment to Credit Agreement dated as of December 31, 2003, and (ii) 12.5 basis points multiplied by the increase of such Bank’s Maximum Amount as set forth on Schedule 1 to this Amendment over such Bank’s
Maximum Amount as set forth on Schedule 1 to the First to Amendment to Credit Agreement dated as of December 31, 2003; and 
  
 (g) Receipt by Agent of all out-of-pocket costs and expenses incurred in making the Loans and entering into this Agreement (including, without limitation,
all reasonable attorney fees, audit fees and filing fees incurred by Agent). 
  

 Section 4. Special Acknowledgment. Section 2.13(c) of the Credit Agreement provides that, if, at
any time, a Prepayment Event occurs, which includes the issuance of equity by any Company, Borrowers shall, as promptly as practicable, but in no event later than the next Business Day, apply the Prepayment Proceeds to the Revolving Loans and the
Revolving Commitments and the Maximum Commitment Amount shall be permanently reduced by the amount of Prepayment Proceeds allocated thereto, respectively, whether or not there shall be any Revolving Credit Exposure thereunder. The Agent and the
Banks acknowledge that MTCT issued additional equity in February, 2004 and that the Agent and the Banks did not require Borrowers to apply the Prepayment Proceeds thereof to the Revolving Loans and Revolving Commitments in accordance with Section
2.14 of the Credit Agreement and agree that there has been no corresponding reduction in the Maximum Commitment Amount. 
  
 Section 5. Costs and Expenses. The Borrowers hereby agree to reimburse the Agent and Banks for all costs and expenses incurred by Agent and Banks,
in connection with this Amendment and the transactions contemplated hereby, including its respective legal fees and expenses. 
  
 Section 6. Miscellaneous. Agent, the Banks and each Borrower hereby agree that: 
  
 (a) The Credit Agreement, the Revolving Credit Notes and the other Loan Documents, as amended hereby, remain otherwise
unmodified and in full force and effect 
  
 (b) Each Borrower
hereby represents and warrants to Agent and the Banks that as of the date hereof (i) no Default or Event of Default has occurred and is continuing (ii) the representations and warranties of such Borrower in the Credit Agreement and the other Loan
Documents are true and correct in all material respects as if made on the date hereof (except to the extent that any expressly relates to an earlier date), and (iii) such Borrower has no cause of action, at law or in equity, against Agent or the
Banks, including, without limitation, any offset, counterclaim or defense with respect to the Notes (including the Swing Line Note) or the Loans evidenced thereby or any Loan Document. 
  
 (c) This Amendment is limited precisely as written and shall not (i) constitute a consent under or waiver or modification of
any other term or condition of the Credit Agreement, the other Loan Documents or any other agreements, instruments or documents referred to therein, or (ii) prejudice or otherwise affect any right or privilege which Agent or the Banks now have or
may have in the future under the Credit Agreement, the other Loan Documents or under any of the other agreements, documents or instruments therein. 
  
 (d) This Amendment may be executed in any one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute
one and the same instrument 
  
 (e) This Amendment shall be
governed by, and construed and enforced in accordance with, the laws of the State of Ohio. 
  
 (Balance of Page Intentionally Omitted) 
  

 IN WITNESS WHEREOF, the parties hereto have caused a counterpart of this Amendment to be duly executed
and delivered as of the date first above written. 
  

									
	 Address:
	 	 4032 Linden Avenue
 Dayton, OH 45432
 Attention: Michael Gearhardt
 Fax: (937) 252-8240
	 	 	 	MTC TECHNOLOGIES, INC., a Delaware corporation
					
	 	 	 	 	 	 	By:	 	 /s/ Michael Gearhardt

	 	 	 	 	 	 	 Name:
	 	 Michael Gearhardt

	 	 	 	 	 	 	 Title:
	 	 Sr. VP & CFO

				
	 Address:
	 	 4032 Linden Avenue
 Dayton, OH 45432
 Attention: Michael Gearhardt
 Fax: (937) 252-8240
	 	 	 	MTC TECHNOLOGIES, INC., formerly known as MODERN TECHNOLOGIES CORP., an Ohio corporation
	 	 	 	 	 	 	 	 
					
	 	 	 	 	 	 	By:	 	 /s/ Michael Gearhardt

	 	 	 	 	 	 	 Name:
	 	 Michael Gearhardt

	 	 	 	 	 	 	 Title:
	 	 Sr. VP & CFO

				
	 Address:
	 	 629 Euclid Avenue
 LOC, 01 -3034
 Cleveland, Ohio 44114
 Attention: Capital Markets Division
 - Loan Syndications
 Fax: (216) 222-7079
	 	 	 	 NATIONAL CITY BANK
as Agent and as a Bank

	 	 	 	 	 	By:	 	 
	 	 	 	 	 	 	 Name:
	 	 
	 	 	 	 	 	 	 Title:
	 	 

  
 [SIGNATURES OF BANKS
CONTINUE ON NEXT PAGE] 
  

 IN WITNESS WHEREOF, the parties hereto have caused a counterpart of this Amendment to be duly executed
and delivered as of the date first above written. 
  

									
	 Address:
	 	 4032 Linden Avenue
 Dayton, OH 45432
 Attention: Michael Gearhardt
 Fax: (937) 252-8240
	 	 	 	MTC TECHNOLOGIES, INC., a Delaware corporation
	 	 	 	 	 	 	By:	 	 
	 	 	 	 	 	 	 Name:
	 	 
	 	 	 	 	 	 	 Title:
	 	 
				
	 Address:
	 	 4032 Linden Avenue
 Dayton, OH 45432
 Attention: Michael Gearhardt
 Fax: (937) 252-8240
	 	 	 	MTC TECHNOLOGIES, INC., formerly known as MODERN TECHNOLOGIES CORP., an Ohio corporation
	 	 	 	 	 	 	By:	 	 
	 	 	 	 	 	 	 Name:
	 	 
	 	 	 	 	 	 	 Title:
	 	 
				
	 Address:
	 	 629 Euclid Avenue
 LOC, 01-3034
 Cleveland, Ohio 44114
 Attention: Capital Markets Division
 - Loan Syndications
 Fax: (216) 222-7079
	 	 	 	 NATIONAL CITY BANK
as Agent and as a Bank

	 	 	 	 	 	 	By:	 	 /s/ Neal J. Hinker

	 	 	 	 	 	 	 Name:
	 	 Neal J. Hinker

	 	 	 	 	 	 	 Title:
	 	 Senior Vice President

  
 [SIGNATURES OF BANKS
CONTINUE ON NEXT PAGE] 
  

									
	 Address:
	 	 34 North Main Street
 Dayton Ohio 45402
 Attention: Michael Dunlavey
 Fax: (937) 586-7695
	 	 	 	KEYBANK NATIONAL ASSOCIATION
	 	 	 	 	 	 	By:	 	 
	 	 	 	 	 	 	 Name:
	 	 
	 	 	 	 	 	 	 Title:
	 	 
				
	 Address:
	 	 110 North Main Street
 Dayton OH 45402
 Attention: Michael Lopez
 Fax: (937) 227-3027
	 	 	 	FIFTH THIRD BANK
	 	 	 	 	 	 	By:	 	 /s/ Roger S. Furrer

	 	 	 	 	 	 	 Name:
	 	 Roger S. Furrer

	 	 	 	 	 	 	 Title:
	 	 Sr. Vice President

				
	 Address:
	 	 200 West Second Street
 I6th Floor
 Winston-Salem, NC 27101
 Attention: Roberts Bass
 Fax: (336) 733-2740
	 	 	 	BRANCH BANKING AND TRUST COMPANY
	 	 	 	 	 	 	By:	 	 
	 	 	 	 	 	 	 Name:
	 	 
	 	 	 	 	 	 	 Title:
	 	 

  

									
	 Address:
	 	 34 North Main Street
 Dayton Ohio 45402
 Attention: Michael Dunlavey
 Fax: (937) 586-7695
	 	 	 	KEYBANK NATIONAL ASSOCIATION
	 	 	 	 	 	 	By:	 	 /s/ R. Michael Dunlavey

	 	 	 	 	 	 	 Name:
	 	 R. Michael Dunlavey

	 	 	 	 	 	 	 Title:
	 	 Vice President

				
	 Address:
	 	 110 North Main Street
 Dayton OH 45402
 Attention: Neal Ratliff
 Fax: (937) 227-3027
	 	 	 	FIFTH THIRD BANK
	 	 	 	 	 	 	By:	 	 
	 	 	 	 	 	 	 Name:
	 	 
	 	 	 	 	 	 	 Title:
	 	 
				
	 Address:
	 	 200 West Second Street
 16th Floor
 Winston-Salem, NC 27101
 Attention: Roberts Bass
 Fax: (336) 733-2740
	 	 	 	BRANCH BANKING AND TRUST COMPANY
	 	 	 	 	 	 	By:	 	 
	 	 	 	 	 	 	 Name:
	 	 
	 	 	 	 	 	 	 Title:
	 	 

  

									
	 Address:
	 	 34 North Main Street
 Dayton Ohio 45402
 Attention: Michael Dunlavey
 Fax: (937) 586-7695
	 	 	 	KEYBANK NATIONAL ASSOCIATION
	 	 	 	 	 	 	By:	 	 
	 	 	 	 	 	 	 Name:
	 	 
	 	 	 	 	 	 	 Title:
	 	 
				
	 Address:
	 	 110 North Main Street
 Dayton OH 45402
 Attention: Neal Ratliff
 Fax: (937) 227-3027
	 	 	 	FIFTH THIRD BANK
	 	 	 	 	 	 	By:	 	 
	 	 	 	 	 	 	 Name:
	 	 
	 	 	 	 	 	 	 Title:
	 	 
				
	 Address:
	 	 200 West Second Street
 16th Floor
 Winston-Salem, NC 27101
 Attention: Roberts Bass
 Fax: (336) 733-2740
	 	 	 	BRANCH BANKING AND TRUST COMPANY
	 	 	 	 	 	 	By:	 	 /s/ Roberts A. Bass

	 	 	 	 	 	 	 Name:
	 	 Roberts A. Bass

	 	 	 	 	 	 	 Title:
	 	 Senior Vice President

  

  
 SCHEDULE 1

  

										
	 BANKING INSTITUTIONS

	  	COMMITMENT
PERCENTAGE

	 	 	REVOLVING
CREDIT
COMMITMENT
AMOUNT

	  	 MAXIMUM
 AMOUNT

	 National City Bank
	  	29.41117	%	 	$	25,000,000	  	$	25,000,000
	 KeyBank National Association
	  	23.52941	%	 	$	20,000,000	  	$	20,000,000
	 Fifth Third Bank
	  	23.52941	%	 	$	20,000,000	  	$	20,000,000
	 Branch Banking and Trust Company
	  	23.52941	%	 	$	20,000,000	  	$	20,000,000
	 Total Commitment
	  	100% (approximately	)	 	$	85,000,000	  	$	85,000,000
	 	  	 	 	 	
	
	  	
	

  

  
 CONFIRMATION OF GUARANTY

  
 The undersigned, AMCOMP CORPORATION, a California corporation
(“Amcomp”), INTERNATIONAL CONSULTANTS, INC., an Ohio corporation (“ICI”), and VITRONICS INC., a New Jersey corporation (“Vitronics” and collectively with Amcomp and ICI, the
“Guarantors”), jointly and severally hereby: 
  
 (A) Acknowledge that MTC TECHNOLOGIES, INC., a Delaware corporation (“MTCT”) MTC TECHNOLOGIES, INC. (formerly known as MODERN TECHNOLOGIES CORP.), an Ohio corporation (together with MTCT, collectively,
“Borrowers” and, individually, each a “Borrower”), the financial institutions listed on Schedule 1 to the Credit Agreement (defined herein) (collectively, the “Banks” and, individually, each
a “Bank”); and NATIONAL CITY BANK, as lead arranger and administrative agent for the Banks (“Agent”) have entered into that certain Credit and Security Agreement dated as of January 31, 2003, as amended by a First
Amendment to Credit Agreement dated as of December 31, 2003, a Second Amendment to Credit Agreement dated July 12,2004 and a Third Amendment to Credit Agreement dated as of the date hereof (as so amended and as may be further amended from time
to time, the “Credit Agreement”), whereby the Banks have extended financial accommodations to the Borrowers, and the Borrowers have executed Notes (as defined in the Credit Agreement) in favor of the Banks, in evidence thereof.
Terms used but not defined herein shall have the meaning ascribed thereto in the Credit Agreement. 
  
 (B) Acknowledge that the Amended and Restated Revolving Credit Notes evidencing the Revolving Loans are each a “Note” under the Credit
Agreement, along with the Swing Line Note, and other notes delivered pursuant to the Credit Agreement. 
  
 (C) Acknowledge that the Guarantors have guaranteed payment of the principal and interest of all Notes pursuant to a Guaranty of Payment of Debt dated as
of January 31,2003 in the case of Amcomp, and a Guaranty of Payment of Debt dated as of October 6, 2003 in the case of ICI, and a Guaranty of Payment of Debt dated as of the date hereof in the case of Vitronics (collectively, the
“Guarantees”). 
  
 (D) Acknowledge that the
Guarantors have each received and had an opportunity to review the Third Amendment to Credit Agreement referred to in the first paragraph of this Confirmation of Guaranty and consent to the amendments to the Credit Agreement, including without
limitation the increase in the Total Commitment Amount from $55,000,000 to $85,000,000, as such amount may be further increased from time to time. 
  
 (E) Represent and warrant to the Agent and the Banks that the undersigned have no defenses, offsets or counterclaims, either individually or jointly, with
respect to their obligations under the Guarantees and the Guarantees remain unmodified and in full force and effect. 
  
 [REMAINDER OF PAGE IS INTENTIONALLY BLANK.] 
  

 This Confirmation of Guaranty is executed as of the 28th day of December, 2004. 
  

			
	AMCOMP CORPORATION, a California corporation
		
	By:	 	 /s/ Michael Gearhardt

	 Name:
	 	 Michael Gearhardt

	 Title:
	 	 CFO

	
	 INTERNATIONAL CONSULTANTS, INC,
 an Ohio
corporation

		
	By:	 	 /s/ Michael Gearhardt

	 Name:
	 	 Michael Gearhardt

	 Title:
	 	 CFO

	
	VITRONICS INC., a New Jersey corporation
		
	By:	 	 /s/ Michael Gearhardt

	 Name:
	 	 Michael Gearhardt

	 Title:
	 	 Executive Vice President

  

  
 EXHIBIT A-1

  
 AMENDED AND RESTATED  
 REVOLVING CREDIT NOTE 
  

			
	 $25,000,000.00
	  	Dayton, Ohio
	 	  	December 28, 2004

  
 FOR VALUE RECEIVED,
the undersigned, MTC TECHNOLOGIES, INC., a Delaware corporation, and MTC TECHNOLOGIES, INC., (formerly known as MODERN TECHNOLOGIES CORP.), an Ohio corporation (collectively, “Borrowers” and, individually, each a “Borrower”),
jointly and severally, promise to pay, on the last day of the Commitment Period, as defined in the Credit Agreement (as hereinafter defined), to the order of NATIONAL CITY BANK (“Bank”) at the main office of NATIONAL CITY BANK, as Agent,
as hereinafter defined, 1900 East 9th Street, Cleveland, Ohio 44114-3484, the principal sum of TWENTY-FIVE MILLION
DOLLARS ($25,000,000.00) or the aggregate unpaid principal amount of all Revolving Loans made by Bank to Borrowers pursuant to Section 2.2 of the Credit Agreement, whichever is less, in lawful money of the United States of America. 
  
 As used herein, “Credit Agreement” means the Credit and Security
Agreement dated as of January 31, 2003, among Borrowers, the Banks, as defined therein, and National City Bank, as lead arranger and administrative agent for the Banks (“Agent”), as amended by the First Amendment to Credit Agreement dated
as of December 31, 2003, the Second Amendment to Credit Agreement dated July 12, 2004 and the Third Amendment to Credit Agreement dated as of the date hereof, and as the same may be further amended, restated or otherwise modified from time to time.
Each capitalized term used herein that is defined in the Credit Agreement and not otherwise defined herein shall have the meaning ascribed to it in the Credit Agreement. This Note amends, restates and replaces that certain Revolving Note dated as of
December 31, 2003 by Borrowers in favor of the Bank in its entirety. 
  
 Borrowers also promise to pay interest on the unpaid principal amount of each Revolving Loan from time to time outstanding, from the date of such Revolving Loan until the payment in full thereof, at the rates per annum that shall be
determined in accordance with the provisions of Section 2.5 of the Credit Agreement. Such interest shall be payable on each date provided for in such Section 2.5; provided, however, that interest on any principal portion that is not paid when due
shall be payable on demand. 
  
 The portions of the principal sum
hereof from time to time representing Base Rate Loans and LIBOR Loans, and payments of principal of any thereof, shall be shown on the records of Bank by such method as Bank may generally employ; provided, however, that failure to make any such
entry shall in no way detract from the obligations of Borrowers under this Note. 
  
 If this Note shall not be paid at maturity, whether such maturity occurs by reason of lapse of time or by operation of any provision for acceleration of maturity contained in the Credit Agreement, the 

  

 A-1-1 

 
principal hereof and the unpaid interest thereon shall bear interest, until paid, at a rate per annum equal to the Default Rate. All payments of principal of
and interest on this Note shall be made in immediately available funds. In the event of a failure to pay interest or principal, when the same becomes due, Bank may collect and Borrowers agree to pay a late charge of an amount equal to the greater of
(a) ten percent (10%) of the amount of such late payment, or (b) Twenty-Five Dollars ($25). 
  
 This Note is one of the Revolving Credit Notes referred to in the Credit Agreement. Reference is made to the Credit Agreement for a description of the right of the undersigned to anticipate payments hereof, the right
of the holder hereof to declare this Note due prior to its stated maturity, and other terms and conditions upon which this Note is issued. 
  
 Except as expressly provided in the Credit Agreement, Borrowers expressly waive presentment, demand, protest and notice of any kind. 
  
 Each of the undersigned, to the extent permitted by law, hereby waives any
right to have a jury participate in resolving any dispute, whether sounding in contract, tort or otherwise, between the undersigned (or any of them) and the holder of this Note arising out of, in connection with, related to, or incidental to the
relationship established between them in connection with this Note and the Credit Agreement or the transactions related thereto. 
  

			
	 MTC TECHNOLOGIES, INC., a Delaware
 corporation

		
	 By:
	 	 

			
	 Name:
	 	 

			
	 Title:
	 	 

  

			
	MTC TECHNOLOGIES, INC., formerly known as MODERN TECHNOLOGIES CORP., an Ohio corporation
		
	 By:
	 	 

			
	 Name:
	 	 

			
	 Title:
	 	 

  

 A-1-2 

  
 EXHIBIT A-2

  
 AMENDED AND RESTATED 
 REVOLVING CREDIT NOTE 
  

			
	 $20,000,000.00
	  	Dayton, Ohio
	 	  	December 28, 2004

  
 FOR VALUE RECEIVED,
the undersigned, MTC TECHNOLOGIES, INC., a Delaware corporation, and MTC TECHNOLOGIES, INC., (formerly known as MODERN TECHNOLOGIES CORP.), an Ohio corporation (collectively, “Borrowers” and, individually, each a “Borrower”),
jointly and severally, promise to pay, on the last day of the Commitment Period, as defined in the Credit Agreement (as hereinafter defined), to the order of KEYBANK NATIONAL ASSOCIATION (“Bank”) at the main office of NATIONAL CITY BANK,
as Agent, as hereinafter defined, 1900 East 9th Street, Cleveland, Ohio 44114-3484, the principal sum of TWENTY
MILLION DOLLARS ($20,000,000.00) or the aggregate unpaid principal amount of all Revolving Loans made by Bank to Borrowers pursuant to Section 2.2 of the Credit Agreement, whichever is less, in lawful money of the United States of America.

  
 As used herein, “Credit Agreement” means the Credit
and Security Agreement dated as of January 31, 2003, among Borrowers, the Banks, as defined therein, and National City Bank, as lead arranger and administrative agent for the Banks (“Agent”), as amended by the First Amendment to Credit
Agreement dated as of December 31, 2003, the Second Amendment to Credit Agreement dated July 12, 2004 and the Third Amendment to Credit Agreement dated as of the date hereof, and as the same may be further amended, restated or otherwise modified
from time to time. Each capitalized term used herein that is defined in the Credit Agreement and not otherwise defined herein shall have the meaning ascribed to it in the Credit Agreement. This Note amends, restates and replaces that certain
Revolving Note dated as of December 31, 2003 by Borrowers in favor of the Bank in its entirety. 
  
 Borrowers also promise to pay interest on the unpaid principal amount of each Revolving Loan from time to time outstanding, from the date of such
Revolving Loan until the payment in full thereof, at the rates per annum that shall be determined in accordance with the provisions of Section 2.5 of the Credit Agreement. Such interest shall be payable on each date provided for in such Section 2.5;
provided, however, that interest on any principal portion that is not paid when due shall be payable on demand. 
  
 The portions of the principal sum hereof from time to time representing Base Rate Loans and LIBOR Loans, and payments of principal of any thereof, shall
be shown on the records of Bank by such method as Bank may generally employ; provided, however, that failure to make any such entry shall in no way detract from the obligations of Borrowers under this Note. 
  

 A-2-1 

 If this Note shall not be paid at maturity, whether such maturity occurs by reason of lapse of time or by
operation of any provision for acceleration of maturity contained in the Credit Agreement, the principal hereof and the unpaid interest thereon shall bear interest, until paid, at a rate per annum equal to the Default Rate. All payments of principal
of and interest on this Note shall be made in immediately available funds. In the event of a failure to pay interest or principal, when the same becomes due, Bank may collect and Borrowers agree to pay a late charge of an amount equal to the greater
of (a) ten percent (10%) of the amount of such late payment, or (b) Twenty-Five Dollars ($25). 
  
 This Note is one of the Revolving Credit Notes referred to in the Credit Agreement. Reference is made to the Credit Agreement for a description of the right of the undersigned to anticipate payments hereof, the right
of the holder hereof to declare this Note due prior to its stated maturity, and other terms and conditions upon which this Note is issued. 
  
 Except as expressly provided in the Credit Agreement, Borrowers expressly waive presentment, demand, protest and notice of any kind. 
  
 Each of the undersigned, to the extent permitted by law, hereby waives any
right to have a jury participate in resolving any dispute, whether sounding in contract, tort or otherwise, between the undersigned (or any of them) and the holder of this Note arising out of, in connection with, related to, or incidental to the
relationship established between them in connection with this Note and the Credit Agreement or the transactions related thereto. 
  

			
	MTC TECHNOLOGIES, INC., a Delaware corporation
		
	By:	 	 
	 Name:
	 	 
	 Title:
	 	 
	
	MTC TECHNOLOGIES, INC., formerly known as MODERN TECHNOLOGIES CORP., an Ohio corporation
		
	By:	 	 
	 Name:
	 	 
	 Title:
	 	 

  

 A-2-2 

  
 EXHIBIT A-3

  
 AMENDED AND RESTATED  
 REVOLVING CREDIT NOTE 
  

			
	 $20,000,000.00
	  	Dayton, Ohio
	 	  	December 28, 2004

  
 FOR VALUE RECEIVED,
the undersigned, MTC TECHNOLOGIES, INC., a Delaware corporation, and MTC TECHNOLOGIES, INC., (formerly known as MODERN TECHNOLOGIES CORP.), an Ohio corporation (collectively, “Borrowers” and, individually, each a “Borrower”),
jointly and severally, promise to pay, on the last day of the Commitment Period, as defined in the Credit Agreement (as hereinafter defined), to the order of FIFTH THIRD BANK (“Bank”) at the main office of NATIONAL CITY BANK, as Agent, as
hereinafter defined, 1900 East 9th Street, Cleveland, Ohio 44114-3484, the principal sum of TWENTY MILLION DOLLARS
($20,000,000.00) or the aggregate unpaid principal amount of all Revolving Loans made by Bank to Borrowers pursuant to Section 2.2 of the Credit Agreement, whichever is less, in lawful money of the United States of America. 
  
 As used herein, “Credit Agreement” means the Credit and Security
Agreement dated as of January 31, 2003, among Borrowers, the Banks, as defined therein, and National City Bank, as lead arranger and administrative agent for the Banks (“Agent”), as amended by the First Amendment to Credit Agreement dated
as of December 31, 2003, the Second Amendment to Credit Agreement dated July 12, 2004 and the Third Amendment to Credit Agreement dated as of the date hereof, and as the same may be further amended, restated or otherwise modified from time to time.
Each capitalized term used herein that is defined in the Credit Agreement and not otherwise defined herein shall have the meaning ascribed to it in the Credit Agreement. This Note amends, restates and replaces that certain Revolving Note dated as of
December 31, 2003 by Borrowers in favor of the Bank in its entirety. 
  
 Borrowers also promise to pay interest on the unpaid principal amount of each Revolving Loan from time to time outstanding, from the date of such Revolving Loan until the payment in full thereof, at the rates per annum that shall be
determined in accordance with the provisions of Section 2.5 of the Credit Agreement. Such interest shall be payable on each date provided for in such Section 2.5; provided, however, that interest on any principal portion that is not paid when due
shall be payable on demand. 
  
 The portions of the principal sum
hereof from time to time representing Base Rate Loans and LIBOR Loans, and payments of principal of any thereof, shall be shown on the records of Bank by such method as Bank may generally employ; provided, however, that failure to make any such
entry shall in no way detract from the obligations of Borrowers under this Note. 
  

 A-3-1 

 If this Note shall not be paid at maturity, whether such maturity occurs by reason of lapse of time or by
operation of any provision for acceleration of maturity contained in the Credit Agreement, the principal hereof and the unpaid interest thereon shall bear interest, until paid, at a rate per annum equal to the Default Rate. All payments of principal
of and interest on this Note shall be made in immediately available funds. In the event of a failure to pay interest or principal, when the same becomes due, Bank may collect and Borrowers agree to pay a late charge of an amount equal to the greater
of (a) ten percent (10%) of the amount of such late payment, or (b) Twenty- Five Dollars ($25). 
  
 This Note is one of the Revolving Credit Notes referred to in the Credit Agreement. Reference is made to the Credit Agreement for a description of the
right of the undersigned to anticipate payments hereof, the right of the holder hereof to declare this Note due prior to its stated maturity, and other terms and conditions upon which this Note is issued. 
  
 Except as expressly provided in the Credit Agreement, Borrowers expressly
waive presentment, demand, protest and notice of any kind. 
  
 Each of the undersigned, to the extent permitted by law, hereby waives any right to have a jury participate in resolving any dispute, whether sounding in contract, tort or otherwise, between the undersigned (or any of them) and the holder
of this Note arising out of, in connection with, related to, or incidental to the relationship established between them in connection with this Note and the Credit Agreement or the transactions related thereto. 
  

			
	MTC TECHNOLOGIES, INC., a Delaware corporation
		
	By:	 	 
	 Name:
	 	 
	 Title:
	 	 
	
	 MTC TECHNOLOGIES, INC., formerly known as MODERN TECHNOLOGIES CORP., an
 Ohio corporation

		
	By:	 	 
	 Name:
	 	 
	 Title:
	 	 

  

 A-3-2 

  
 EXHIBIT A-4

  
 AMENDED AND RESTATED 
 REVOLVING CREDIT NOTE 
  

			
	 $20,000,000.00
	 	Dayton, Ohio
	 	 	December 28, 2004

  
 FOR VALUE RECEIVED,
the undersigned, MTC TECHNOLOGIES, INC., a Delaware corporation, and MTC TECHNOLOGIES, INC., (formerly known as MODERN TECHNOLOGIES CORP.), an Ohio corporation (collectively, “Borrowers” and, individually, each a “Borrower”),
jointly and severally, promise to pay, on the last day of the Commitment Period, as defined in the Credit Agreement (as hereinafter defined), to the order of BRANCH BANKING AND TRUST COMPANY (“Bank”) at the main office of NATIONAL CITY
BANK, as Agent, as hereinafter defined, 1900 East 9th Street, Cleveland, Ohio 44114-3484, the principal sum of
TWENTY MILLION DOLLARS ($20,000,000.00) or the aggregate unpaid principal amount of all Revolving Loans made by Bank to Borrowers pursuant to Section 2.2 of the Credit Agreement, whichever is less, in lawful money of the United States of America.

  
 As used herein, “Credit Agreement” means the Credit
and Security Agreement dated as of January 31, 2003, among Borrowers, the Banks, as defined therein, and National City Bank, as lead arranger and administrative agent for the Banks (“Agent”), as amended by the First Amendment to Credit
Agreement dated as of December 31, 2003, the Second Amendment to Credit Agreement dated July 12, 2004 and the Third Amendment to Credit Agreement dated as of the date hereof, and as the same may be further amended, restated or otherwise modified
from time to time. Each capitalized term used herein that is defined in the Credit Agreement and not otherwise defined herein shall have the meaning ascribed to it in the Credit Agreement. This Note amends, restates and replaces that certain
Revolving Note dated as of December 31, 2003 by Borrowers in favor of the Bank in its entirety. 
  
 Borrowers also promise to pay interest on the unpaid principal amount of each Revolving Loan from time to time outstanding, from the date of such
Revolving Loan until the payment in full thereof, at the rates per annum that shall be determined in accordance with the provisions of Section 2.5 of the Credit Agreement. Such interest shall be payable on each date provided for in such Section 2.5;
provided, however, that interest on any principal portion that is not paid when due shall be payable on demand. 
  
 The portions of the principal sum hereof from time to time representing Base Rate Loans and LIBOR Loans, and payments of principal of any thereof, shall
be shown on the records of Bank by such method as Bank may generally employ; provided, however, that failure to make any such entry shall in no way detract from the obligations of Borrowers under this Note. 
  

 A-4-1 

 If this Note shall not be paid at maturity, whether such maturity occurs by reason of lapse of time or by
operation of any provision for acceleration of maturity contained in the Credit Agreement, the principal hereof and the unpaid interest thereon shall bear interest, until paid, at a rate per annum equal to the Default Rate. All payments of principal
of and interest on this Note shall be made in immediately available funds. In the event of a failure to pay interest or principal, when the same becomes due, Bank may collect and Borrowers agree to pay a late charge of an amount equal to the greater
of (a) ten percent (10%) of the amount of such late payment, or (b) Twenty-Five Dollars ($25). 
  
 This Note is one of the Revolving Credit Notes referred to in the Credit Agreement. Reference is made to the Credit Agreement for a description of the right of the undersigned to anticipate payments hereof, the right
of the holder hereof to declare this Note due prior to its stated maturity, and other terms and conditions upon which this Note is issued. 
  
 Except as expressly provided in the Credit Agreement, Borrowers expressly waive presentment, demand, protest and notice of any kind. 
  
 Each of the undersigned, to the extent permitted by law, hereby waives any
right to have a jury participate in resolving any dispute, whether sounding in contract, tort or otherwise, between the undersigned (or any of them) and the holder of this Note arising out of, in connection with, related to, or incidental to the
relationship established between them in connection with this Note and the Credit Agreement or the transactions related thereto. 
  

			
	MTC TECHNOLOGIES, INC., a Delaware corporation
		
	By:	 	 
	 Name:
	 	 
	 Title:
	 	 
	
	MTC TECHNOLOGIES, INC., formerly known as MODERN TECHNOLOGIES CORP., an Ohio corporation
		
	By:	 	 
	 Name:
	 	 
	 Title:
	 	 

  

 A-4-2 

  
 GUARANTY OF PAYMENT OF DEBT

  
 This GUARANTY OF PAYMENT OF DEBT (as the same may from time to
time be amended, restated or otherwise modified, this “Agreement”) is made as of the 28th day of, December, 2004, by COMMAND TECHNOLOGIES, INC., a Virginia corporation (“Guarantor”), in favor of NATIONAL CITY BANK, as the
administrative agent under the Credit Agreement, as hereinafter defined (“Agent”), for the benefit of the Banks, as hereinafter defined. 
  
 1. Recitals. 
  
 MTC TECHNOLOGIES, INC., a Delaware corporation, and MTC TECHNOLOGIES, INC. (formerly known as MODERN TECHNOLOGIES CORP.), an Ohio corporation (together
with their respective successors and assigns, collectively, “Borrowers” and, individually, each a “Borrower”), entered into the Credit and Security Agreement dated as of January 31, 2003, as amended by a First Amendment to Credit
Agreement dated as of December 31, 2003, a Second Amendment to Credit Agreement dated July 12, 2004 and a Third Amendment to Credit Agreement dated as of the date hereof, with the financial institutions listed on Schedule 1 thereto (together with
their respective successors and assigns, collectively, the “Banks” and, individually, each a “Bank”) and Agent (as the same may from time to time be amended, restated or otherwise modified, the “Credit Agreement”).
Guarantor desires that the Banks continue to grant the financial accommodations to Borrowers as described in the Credit Agreement. 
  
 Guarantor, a subsidiary of MTC Technologies, INC., an Ohio corporation, whose financing is provided by the Loans, as hereinafter defined, deems it to be
in the direct pecuniary and business interests of Guarantor that Borrowers continue to obtain from the Banks the Commitment, as defined in the Credit Agreement, and the Loans provided for in the Credit Agreement. 
  
 Guarantor understands that the Banks are willing to continue to maintain the
Loans under the Credit Agreement only upon certain terms and conditions, one of which is that Guarantor guarantee the payment of the Debt, as hereinafter defined, and this Agreement is being executed and delivered in consideration of the Banks
continuing to maintain the Loans under the Credit Agreement and for other valuable considerations. 
  
 2. Definitions. Except as specifically defined herein, capitalized terms used herein that are defined in the Credit Agreement shall have their
respective meanings ascribed to them in the Credit Agreement. As used herein, the following terms shall have the following meanings: 
  
 “Collateral” shall mean, collectively, all property, if any, securing the Debt or any part thereof at the time in question. 
  

 “Debt” shall mean, collectively, (a) all Loans; (b) all other Indebtedness or other obligations
now owing or hereafter incurred by any Borrower to Agent and the Banks pursuant to the Credit Agreement and the Notes executed in connection therewith; (c) each renewal, extension, consolidation or refinancing of any of the foregoing, in whole or in
part; (d) all interest from time to time accruing on any of the foregoing, and all fees and other amounts payable to Agent or any Bank pursuant to the Credit Agreement or any other Loan Document; (e) every other liability, now or hereafter owing to
Agent or any Bank by any Borrower or Guarantor pursuant to the Credit Agreement or any Loan Document; and (f) all Related Expenses. 
  
 “Loan” shall mean any Loan, as defined in the Credit Agreement, granted pursuant to the Credit Agreement. 
  
 “Obligor” shall mean any Person that, or any of whose property, is
or shall be obligated on the Debt or any part thereof in any manner and includes, without limiting the generality of the foregoing, any Borrower or Guarantor, and any other co-maker, endorser, guarantor of payment, subordinating creditor, assignor,
grantor of a security interest, pledgor, mortgagor or any hypothecator of property, if any. 
  
 “Person” shall mean any individual, sole proprietorship, partnership, joint venture, unincorporated organization, corporation, limited liability company, institution, trust, estate, government or other
agency or political subdivision thereof or any other entity. 
  
 “Related Expenses” shall mean any and all reasonable costs, liabilities and expenses (including, without limitation, losses, damages, penalties, claims, actions, reasonable attorneys’ fees, legal expenses, judgments, suits
and disbursements) (a) incurred by Agent, or imposed upon or asserted against Agent or any Bank, in any attempt by
Agent and the Banks to (i) enforce this Agreement, the Credit Agreement or any Related Writing, as defined in the Credit Agreement, or to obtain, preserve or perfect any security interest granted by any Credit Party to Agent and the Banks in
connection with this Agreement, the Credit Agreement or any Related Writing; (ii) obtain payment, performance or observance of any and all of the Debt; or (iii) maintain, insure, audit, collect, preserve, repossess or dispose of any of the
Collateral or any other collateral securing the Debt, including, without limitation, costs and expenses for appraisals, assessments and audits of Borrower or any such collateral; or (b) incidental or related to (a) above, including, without
limitation, interest thereupon from the date inclined, imposed or asserted until paid at the Default Rate, as defined in the Credit Agreement. 
  
 3. Guaranty of Debt. Guarantor hereby absolutely and unconditionally guarantees (as a guaranty of payment and not merely a guaranty of collection)
the prompt payment in full of all of the Debt as and when the respective parts thereof become due and payable. If the Debt, or any part thereof, shall not be paid in full when due and payable, Agent, on behalf of the Banks, in each case, shall have
the right to proceed directly against Guarantor under this Agreement to collect the payment in full of the Debt, regardless of whether or not Agent, on behalf of the Banks, shall have theretofore proceeded or shall then be proceeding against any
Borrower or any other Obligor or Collateral, if any, or any of the foregoing, it being understood that Agent and the Banks, in their sole discretion may proceed against any Obligor and any Collateral, and may 

  

 
exercise each right, power or privilege that Agent or the Banks may then have, either simultaneously or separately, and, in any event, at such time or times and as often and in such order as Agent and the Required Banks, in their sole discretion, may from time
to time deem expedient to collect the payment in full of the Debt. Guarantor agrees that all payments made by Guarantor under this Agreement shall be made free and clear of, and without deduction or withholding for or on account of any Taxes or
Other Taxes, in accordance with Section 3.2 of the Credit Agreement. 
  
 4. Payments Conditional. Whenever Agent or any Bank shall credit any payment to the Debt or any part thereof, whatever the source or form of payment, the credit shall be conditional as to Guarantor unless and until the payment shall
be final and valid as to all the world. Without limiting the generality of the foregoing, Guarantor agrees that if any check or other instrument so applied shall be dishonored by the drawer or any party thereto, or if any proceeds of Collateral or
payment so applied shall thereafter be recovered by any trustee in bankruptcy or any other Person, each Bank, in each case, may reverse any entry relating thereto on its books and Guarantor shall remain liable therefor, even if such Bank may no
longer have in its possession any instrument evidencing the Debt to which the payment in question was applied. 
  
 5. Guarantor’s Obligations Absolute and Unconditional. Regardless of the duration of time, regardless of whether any Borrower may from time to
time cease to be indebted to the Banks and irrespective of any act, omission or course of dealing whatever on the part of Agent or any of the Banks, Guarantor’s liabilities and other obligations under this Agreement shall remain in full effect
until the payment in full of the Debt. Without limiting the generality of the foregoing: 
  
 5.1. Banks Have No Duty to Make Advances. No Bank shall at any time be under any duty to Guarantor to grant any financial accommodation to any Borrower, irrespective of any duty or commitment of any of the
Banks to such Borrower, or to follow or direct the application of the proceeds of any such financial accommodation; 
  
 5.2. Guarantor’s Waiver of Notice, Presentment. Guarantor waives (a) notice of the granting of any Loan to any Borrower or the incurring of
any other Indebtedness by any Borrower or the terms and conditions thereof, (b) presentment, demand for payment and notice of dishonor of the Debt or any part thereof, or any other Indebtedness incurred by any Borrower to any Bank, (c) notice of any
indulgence granted to any Obligor, and (d) any other notice to which Guarantor might, but for this waiver, be entitled; 
  
 5.3. Banks’ Rights Not Prejudiced by Action or Omission. Agent and the Banks, in their sole discretion, may, without any prejudice to their
rights under this Agreement, at any time or times, without notice to or the consent of Guarantor, (a) grant any Borrower whatever financial accommodations that Agent and the Banks may from time to time deem advisable, even if such Borrower might be
in default in any respect and even if those financial accommodations might not constitute Indebtedness the payment of which is guaranteed hereunder, (b) assent to any renewal, extension, consolidation or refinancing of the Debt, or any part thereof,
(c) forbear from demanding security, if Agent and the Banks shall have the right to do so, (d) release any Obligor or Collateral or assent to any exchange of Collateral, if any, irrespective of the 

  

 
consideration, if any, received therefor, (e) grant any waiver or consent or forbear from exercising any right, power or privilege that Agent and the Banks
may have or acquire, (f) assent to any amendment, deletion, addition, supplement or other modification in, to or of any writing evidencing or securing any Debt or pursuant to which any Debt is created, (g) grant any other indulgence to any Obligor,
(h) accept any Collateral for, or any otter Obligor upon, the Debt or any part thereof, and (i) fail, neglect or omit in any way to realize upon any Collateral, to perfect any security interest with respect to Collateral, or to protect the Debt or any part thereof or any Collateral therefor; 
  
 5.4. Liabilities Survive Guarantor’s Dissolution.
Guarantor’s liabilities and other obligations under this Agreement shall survive any dissolution of Guarantor; and 
  
 5.5. Liabilities Absolute and Unconditional. Guarantor’s liabilities and other obligations under this Agreement shall be absolute and
unconditional irrespective of any lack of validity or enforceability of the Credit Agreement, the Notes, any Loan Document or any other agreement, instrument or document evidencing the Loans or related thereto, or any other defense available to
Guarantor in respect of this Agreement. 
  
 6. Representations
and Warranties. Guarantor represents and warrants to Agent and each of the Banks that (a) Guarantor is a duly organized and validly existing corporation, in good standing under the laws of the state of its incorporation (as referenced in the
first paragraph of this Agreement), and is qualified to do business in each state where a failure to so qualify would have a material adverse effect on Guarantor; (b) Guarantor has legal power and right to execute and deliver this Agreement and to
perform and observe the provisions hereof; (c) the officers executing and delivering this Agreement on behalf of Guarantor have been duly authorized to do so, and this Agreement, when executed, is legal and binding upon Guarantor in every respect;
(d) except for matters described or referenced in the Credit Agreement or any Schedule thereto, no litigation or proceeding is pending or threatened against Guarantor before any court or any administrative agency that, in Guarantor’s opinion,
after consultation with Guarantor’s counsel, is reasonably expected to have a material adverse effect on Guarantor; (e) Guarantor has received consideration that is the reasonable equivalent value of the obligations and liabilities that
Guarantor has incurred to Agent, for the benefit of the Banks; (f) Guarantor is not insolvent, as defined in any applicable state or federal statute, nor will Guarantor be rendered insolvent by the execution and delivery of this Agreement to Agent
and the Banks; (g) Guarantor is not engaged or about to engage in any business or transaction for which the assets retained by Guarantor are or will be an unreasonably small amount of capital, taking into consideration the obligations to the Banks
incurred hereunder; and (h) Guarantor does not intend to, nor does Guarantor believe that Guarantor will, incur debts beyond Guarantor’s ability to pay such debts as they mature. 
  
 7. Disability of Obligor. Without limiting the generality of any of the other provisions hereof, Guarantor
specifically agrees that upon the dissolution of any Obligor and/or the filing or other commencement of any
bankruptcy or insolvency proceedings by, for or against any Obligor, including without limitation, any assignment for the benefit of creditors or other proceedings intended to liquidate or rehabilitate any Obligor, Agent and the Required Banks, in
their sole discretion, may declare the unpaid principal balance of and accrued interest on the Debt to be forthwith due and payable in full without notice. Upon the occurrence of any of the 

  

 
events enumerated in the immediately preceding sentence, Guarantor shall, upon demand of Agent, on behalf of the Banks, whenever made, pay to Agent, for the
benefit of the Banks, an amount equal to the then unpaid principal balance of and accrued interest on the Debt. 
  
 8. Waiver of Guarantor’s Rights Against Borrowers and Collateral. To the extent permitted by law, Guarantor hereby waives and subordinates to
payment in full of the Debt any claim or other right that Guarantor might now have or hereafter acquire against any Borrower or any other Obligor that arises from the existence or performance of Guarantor’s liabilities or other obligations
under this Agreement, including, without limitation, any right of subrogation, reimbursement, exoneration, contribution, indemnification, and any right to participate in any claim or remedy of Agent or any Bank against any Borrower or any Collateral
that Agent or any Bank now has or hereafter acquires, whether or not such claim, remedy or right arises in equity, or under contract, statute or common law. 
  
 9. Maximum Liability of Guarantor. Anything in this Agreement to the contrary notwithstanding, in no event shall the amount of Guarantor’s
liability hereunder exceed the maximum amount that (after giving effect to the incurring of the obligations hereunder and to any rights to contribution of Guarantor from other affiliates of Borrowers) would not render the rights to payment of Agent
and the Banks hereunder void, voidable or avoidable under any applicable fraudulent transfer law. 
  
 10. Stay of Acceleration. In the event that acceleration of the time for payment of any of the Debt is stayed, upon the insolvency, bankruptcy or
reorganization of any Borrower or any other Person, or otherwise, all such amounts shall nonetheless be payable by Guarantor immediately upon demand by Agent. 
  

11. Warrant of Attorney. Guarantor authorizes any attorney at law at any time or times to appear in any state or federal court of record in the
State of Ohio after the Debt or any part thereof shall have become due and payable (whether the payments become due by lapse of time or by acceleration of maturity or otherwise) and in each case to waive the issuance and service of process, to admit
the maturity of the Debt in question and the nonpayment thereof when due, to present each evidence of the Debt in question, or any part thereof, to the court and to certify the amount of the Debt then owing thereon, to confess judgment against
Guarantor in favor of Agent and the Banks for the amount of the Debt then appearing due, together with interest and costs of suit, and thereupon to release all errors and waive all rights of appeal and stay of execution. The foregoing warrant of
attorney shall survive any judgment, and, should any judgment be vacated for any reason, Agent and the Banks may nevertheless utilize the foregoing warrant of attorney in thereafter obtaining an additional judgment or judgments against Guarantor.
Guarantor agrees that the attorney for Agent and the Banks may confess judgment pursuant to the foregoing warrant of attorney. Guarantor further agrees that the attorney confessing judgment pursuant to the foregoing warrant of attorney may receive a
legal fee or other compensation from Agent and the Banks. 
  
 12.
Notice. All notices, requests, demands and other communications provided for hereunder shall be in writing and, if to Guarantor, mailed or delivered to it, addressed to it at the address specified on the signature page of this Agreement, if
to a Bank, mailed or delivered to it, 

  

 
addressed to the address of such Bank specified on the signature pages of the Credit Agreement or, as to each party, at such other address as shall be
designated by such party in a written notice to each of the other parties. All notices, statements, requests, demands and other communications provided for hereunder shall be deemed to be given or made when delivered or two Business Days after being
deposited in the mails with postage prepaid by registered or certified mail, addressed as aforesaid, or sent by facsimile with telephonic confirmation of receipt, except that notices from Guarantor to Agent or the Banks pursuant to any of the
provisions hereof shall not be effective until received by Agent or the Banks. 
  
 13. Successors and Assigns. This Agreement shall bind Guarantor and Guarantor’s successors and assigns and shall inure to the benefit of Agent and each Bank and their respective successors and assigns,
including (without limitation) each holder of any Note evidencing any Debt. 
  
 14. Invalidity. If, at any time, one or more provisions of this Agreement is or becomes invalid, illegal or unenforceable in whole or in part, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby. 
  
 15. Entire Agreement. This Agreement constitutes a final written expression of all of the terms of this Agreement, is a complete and exclusive statement of those terms and supersedes all oral representations, negotiations and prior
writings, if any, with respect to the subject matter hereof. 
  
 16. Relationship of Parties; Setoff. The relationship between (a) Guarantor and (b) Agent and the Banks with respect to this Agreement is and shall be solely that of debtor and creditors, respectively, and Agent and the Banks shall
have no fiduciary obligation toward Guarantor with respect to this Agreement or the transactions contemplated hereby. If and to the extent any payment is not made when due hereunder, Agent and each Bank may setoff and charge from time to time any
amount so due against any or all of Guarantor’s accounts or deposits with Agent and each Bank. 
  
 17. Headings. The headings and subheadings herein are for convenience of reference only and shall be ignored in interpreting the provisions of this
Agreement. 
  
 18. Governing Law; Submission to
Jurisdiction. The provisions of this Agreement and the respective rights and duties of Guarantor, Agent and the Banks hereunder shall be governed by and construed in accordance with Ohio law, without regard to principles of conflict of laws.
Guarantor hereby irrevocably submits to the non-exclusive jurisdiction of any Ohio state or federal court sitting in Dayton, Ohio, over any action or proceeding arising out of or relating to this Agreement, any Loan Document or any Related Writing,
and Guarantor hereby irrevocably agrees that all claims in respect of such action or proceeding may be heard and determined in such Ohio state or federal court. Guarantor, on behalf of itself and its Subsidiaries, hereby irrevocably waives, to the
fullest extent permitted by law, any objection it may now or hereafter have to the laying of venue in any such action or proceeding in any such court as well as any right it may now or hereafter have to remove such action or proceeding, once
commenced, to another court on the grounds of FORUM NON CONVENIENS or 

  

 
otherwise. Guarantor agrees that a final, nonappealable judgment in any such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law. 
  
 19. JURY TRIAL WAIVER. GUARANTOR, AGENT AND THE BANKS, TO THE EXTENT PERMITTED BY LAW, HEREBY WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT OR
OTHERWISE, AMONG AGENT, THE BANKS, BORROWERS AND GUARANTOR, OR ANY THEREOF, ARISING OUT OF, IN CONNECTION WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION THEREWITH OR THE TRANSACTIONS RELATED THERETO. THIS
WAIVER SHALL NOT IN ANY WAY AFFECT, WAIVE, LIMIT, AMEND OR MODIFY AGENT’S OR EACH BANK’S ABILITY TO PURSUE REMEDIES PURSUANT TO ANY CONFESSION OF JUDGEMENT OR COGNOVIT PROVISION CONTAINED IN THE AGREEMENT, ANY NOTE OR ANY OTHER GUARANTY OF
PAYMENT, AGREEMENT, INSTRUMENT OR DOCUMENT RELATED THERETO. 
  
 Executed as of the date set forth above at Dayton, Ohio. 
  

									
	 Address:
	 	 4032 Linden Avenue
	 	 	 	 COMMAND TECHNOLOGIES, INC.

	 	 	 Dayton, OH 45432
	 	 	 	 
	 	 	 Attention: Michael Gearhardt
	 	 	 	 
	 	 	 Fax: (937) 252-8240
	 	 	 	 By:
	 	 
	 	 	 	 	 	 	 Name:
	 	 
	 	 	 	 	 	 	 Title:

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