Document:

Amendment and Forbearance Agreement, dated December 29, 2004

 Exhibit 4.7 
  
 AMENDMENT AND FORBEARANCE AGREEMENT 
  
 THIS AMENDMENT AND FORBEARANCE AGREEMENT (this “Agreement”), dated as of December 29, 2004, is entered into
among Wells Fargo Bank, National Association (“Wells Fargo”), Union Bank of California, N.A. and Comerica Bank-California (collectively, the “Lenders”), Modtech Holdings, Inc. (the “Borrower”) and
Wells Fargo as administrative agent for the Lenders (in such capacity, the “Administrative Agent”). 
  
 RECITALS 
  
 A. The Borrower, the Lenders and the Administrative Agent have previously entered into that certain Credit Agreement dated as of December 26, 2001 (as amended, modified or supplemented as of the date hereof, the “Credit
Agreement”), pursuant to which the Lenders have made certain loans and financial accommodations available to the Borrower. Terms used herein without definition shall have the meanings ascribed to them in the Credit Agreement. 
  
 B. The following Events of Default occurred as of September 30, 2004, and
are continuing under the Credit Agreement: (a) the Borrower was not in compliance with Section 6.14 (Current Ratio); (b) the Borrower was in violation of Section 6.15 (Tangible Net Worth); and (c) as of September 30, 2004, the Borrower
was in violation of Section 6.27 (Minimum EBITDA) and the Borrower has advised the Lenders that as of December 31, 2004 it will not be in compliance with the foregoing three sections of the Credit Agreement as well as Section 6.12 (Funded Debt
Ratio) and Section 6.13 (Fixed Charge Coverage Ratio) and will not be in compliance with Section 6.26 (Asset Coverage Ratio) until the Maximum Revolving Credit Amount is reduced to $24,000,000 (all of the foregoing, collectively, the “Known
Defaults”). 
  
 C. The Borrower has asked the Lenders to
forbear from exercising their rights and remedies under the Credit Agreement in order to give the Borrower time to either bring its financial performance back in compliance with the terms of the Credit Agreement or to refinance the amounts
outstanding under the Credit Agreement in their entities. 
  
 D.
The Lenders are willing, for a limited period of time and on the terms and conditions set forth herein, to forbear from exercising their rights and remedies under the Credit Agreement with respect to the Known Defaults. 
  
 E. The Lenders and the Borrower also wish to amend the terms of the Credit
Agreement, all as more fully set forth herein. 
  
 F. The Borrower
is entering into this Agreement with the understanding and agreement that, except as specifically provided herein, none of the Lenders’ rights or remedies as set forth in the Credit Agreement is being waived or modified by the terms of this
Agreement. 
  
 AGREEMENT 
  
 NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows: 
  
 1. Incorporation of Recitals. Each of the above recitals is expressly incorporated herein and is represented by the
Borrower to be true and correct. 

 2. Reaffirmation of Obligations. The Borrower hereby acknowledges that the Loan Documents and the
Obligations constitute the valid and binding obligations of the Borrower enforceable against the Borrower in accordance with their respective terms, and the Borrower hereby reaffirms its obligations under the Loan Documents. The Lenders’ entry
into this Agreement or any of the documents referenced herein, the Lenders’ negotiations with any party with respect to any Loan Document, the Lenders’ conduct of any analysis or investigation of any collateral for the Obligations or any
Loan Document, the Lenders’ acceptance of any payment from the Borrower or any other party made to the Lenders prior to the date hereof, or any other action or failure to act on the part of the Lenders shall not constitute (a) except to the
extent of the specific amendments contained in Section 6 hereof, a modification of any Loan Document, or (b) a waiver of any Default or Event of Default under the Loan Documents, including, without limitation, the Known Defaults, or a waiver of any
term or provision of any Loan Document. 
  
 3. Agreement to
Forbear: Termination of Agreement to Forbear. 
  
 (a) For the
Forbearance Term (as defined below), the Lenders shall not take any action or commence any proceedings with respect to the enforcement of any of their rights or remedies under the Loan Documents as a result of the Known Defaults. The parties agree
that neither the foregoing agreement by the Lenders nor the acceptance by the Lenders of any of the payments provided for in the Loan Documents, nor any payment prior to the date hereof shall, however, (a) excuse any party from any of its
obligations under the Loan Documents, or (b) toll the running of any time periods applicable to any such rights and remedies, including, without limitation, any time periods within which the Borrower may cure defaults under the Loan Documents or
otherwise. The Borrower agrees that it will not assert laches, waiver or any other defense to the enforcement of any of the Loan Documents based upon the foregoing agreement by the Lenders to forbear or the acceptance by the Lenders of any of the
payments provided for in the Loan Documents or any payment prior to the date hereof. As used herein, “Forbearance Term” shall mean the period commencing upon the effectiveness of this Agreement and continuing until the earliest to
occur of: (x) any Default or Event of Default under any of the Loan Documents (other than the Known Defaults or any Event of Default arising from a failure to comply with the provisions of Sections 6.14, 6.15 or 6.27 of the Credit Agreement which
occurs during the Forbearance Term) or (y) March 31, 2005. 
  
 (b)
The Borrower acknowledges and agrees that upon the termination of the Lenders’ agreement to forbear as provided in Section 3(a) hereof, the Lenders and the Administrative Agent shall be entitled to exercise any or all of its remedies under the
Loan Documents, including, without limitation, the appointment of a receiver, the acceleration of the Obligations and the enforcement under the UCC of any liens in favor of the Lenders and the Administrative Agent, as a result of the Known Defaults,
and at any time the Lenders and the Administrative Agent shall be entitled to exercise any or all of their respective remedies under the Loan Documents as a result of any other Default or Event of Default under the Loan Documents. 
  

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 4. Termination of Commitments. Each of the parties hereto agrees that as of the Amendment and
Forbearance Effective Date, the aggregate outstanding principal amount of all Swing Line Advances is $1,700,000, the aggregate outstanding principal amount of all Revolving Advances is $21,200,000 and the Aggregate Effective Amount under all
outstanding Letters of Credit is $6,898,125. From and after the Amendment and Forbearance Effective Date, the entire $201,875 of unused Revolving Commitments shall be cancelled without further action by any party and the Commitments of the Lenders
to make Swing Line Loans or Revolving Advances and to issue any Letters of Credit under the Credit Agreement shall be terminated. Accordingly, any prepayment or repayment of Swing Line Loans or Revolving Advances shall permanently reduce the
Revolving Commitment by the amount of such prepayment or repayment. If any Letter of Credit shall expire or be cancelled prior to its expiry date, the Revolving Commitment shall be permanently reduced by the amount of such Letter of Credit.

  
 5. Prepayment of Swing Line Loans and Revolving Advances;
Default Rate. 
  
 (a) The Borrower shall on or prior to the
Amendment and Forbearance Effective Date, prepay in full all outstanding Swing Line Loans in the amount of $1,700,000 and $4,300,000 of Revolving Advances. Upon such prepayment, the Maximum Revolving Credit Amount shall be reduced to $23,798,125
without further action by any party. 
  
 (b) All Obligations under
the Credit Agreement shall continue to bear interest at the Default Rate until further notice. 
  
 6. Amendments to Credit Agreement. 
  
 (a) The following defined terms are hereby added to Section 1.1 of the Credit Agreement in appropriate alphabetical sequence: 
  
 “Amendment and Forbearance Agreement” means that certain Amendment and Forbearance
Agreement dated as of December 29, 2004 among the Borrower, the Lenders and the Administrative Agent. 
  
 “Amendment and Forbearance Effective Date” means the date upon which all conditions precedent set forth in Section 7 of
the Amendment and Forbearance Agreement shall have been satisfied. 
  
 (b) The following defined terms in Section 1.1 of the Credit Agreement are hereby amended in full to read as follows: 
  
 “Maximum Revolving Credit Amount” means the lesser of (a) $23,798,125 and (b) the Asset Borrowing Amount. 
  
 “Revolving Commitment” means, with respect
to each relevant Lender, the commitment, if any, of such Lender to make Revolving Advances (expressed as the maximum aggregate amount of the Revolving Advances to be made by such Lender hereunder), as such commitment may be (a) reduced from time to
time pursuant to Section 2.6 and (b) reduced or increased from time to time pursuant to assignments by or to such Lender pursuant to Section 11.8. The amount of each relevant Lender’s 
  

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 Revolving Commitment as of the Amendment and Forbearance Effective Date is set forth on Schedule
1.1. The aggregate amount of the Lenders’ Revolving Commitments as of the Amendment and Forbearance Effective Date is $23,798,125. 
  
 (c) Each of the parties hereto hereby agrees that, as of the Amendment and Forbearance Effective Date, the Revolving Commitment of each Lender is being
reduced to the amount set forth on Annex I hereto. Each of the parties hereto agrees that new Revolving Notes are not being issued in connection with this Agreement and that the stated amount of each Revolving Note shall, as of the Amendment
and Forbearance Effective Date, be due and payable to each Lender in the amount (or such lesser amount as shall be outstanding from time to time) of such Lender’s Revolving Commitment. 
  
 (d) Schedule 1.1 of the Credit Agreement is hereby amended to read in its
entirety as set forth on Annex I hereto. 
  
 (e) The second
paragraph of Section 2.1(a) of the Credit Agreement is hereby amended to read in its entirety as follows: 
  
 Upon the Amendment and Forbearance Effective Date, all unutilized Revolving Commitments under the Credit Agreement will be terminated and
from and after such date the Borrower shall have no further right to reborrow amounts repaid under the Revolving Commitment. 
  
 (f) There shall be added to Section 2.5 of the Credit Agreement a new subsection (k) reading in its entirety as follows: 
  
 (k) Notwithstanding anything to the contrary herein, from
and after the Amendment and Forbearance Effective Date, no Letters of Credit shall be issued under this Section 2.5. 
  
 (g) There shall be added to Section 2.8 of the Credit Agreement a new subsection (f) reading in its entirety as follows: 
  
 (f) Notwithstanding anything to the contrary herein, from
and after the Amendment and Forbearance Effective Date, no Swing Line Loans shall be made under this Section 2.8. 
  
 (h) Section 3.2 of the Credit Agreement is hereby amended to read in its entirety as follows: 
  
 3.2 [Intentionally Omitted.] 
  

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 (i) Section 11.23 of the Credit Agreement is hereby amended to read in its entirety as follows:

  
 11.23 Arbitration. 
  
 (a) Arbitration. The parties hereto agree, upon
demand by any party, to submit to binding arbitration all claims, disputes and controversies between or among them (and their respective employees, officers, directors, attorneys, and other agents), whether in tort, contract or otherwise arising out
of or relating to in any way the credit Agreement or any Loan Document and the negotiation, execution, collateralization, administration, repayment, modification, extension, substitution, formation, inducement, enforcement, default or termination of
any such agreements. 
  
 (b) Governing
Rules. Any arbitration proceeding will (i) proceed in a location in California selected by the American Arbitration Association (“AAA”); (ii) be governed by the Federal Arbitration Act (Title 9 of the United States Code),
notwithstanding any conflicting choice of law provision in any of the documents between the parties; and (iii) be conducted by the AAA, or such other administrator as the parties shall mutually agree upon, in accordance with the AAA’s
commercial dispute resolution procedures, unless the claim or counterclaim is at least $1,000,000.00 exclusive of claimed interest, arbitration fees and costs in which case the arbitration shall be conducted in accordance with the AAA’s
optional procedures for large, complex commercial disputes (the commercial dispute resolution procedures or the optional procedures for large, complex commercial disputes to be referred to, as applicable, as the “Rules”). If there is any
inconsistency between the terms hereof and the Rules, the terms and procedures set forth herein shall control. Any party who fails or refuses to submit to arbitration following a demand by any other party shall bear all costs and expenses incurred
by such other party in compelling arbitration of any dispute. Nothing contained herein shall be deemed to be a waiver by any party that is a bank of the protections afforded to it under 12 U.S.C. §91 or any similar applicable state law.

  
 (c) No Waiver of Provisional Remedies,
Self-Help and Foreclosure. The arbitration requirement does not limit the right of any party to (i) foreclose against real or personal property collateral; (ii) exercise self-help remedies relating to collateral or proceeds of collateral such as
setoff or repossession; or (iii) obtain provisional or ancillary remedies such as replevin, injunctive relief, attachment or the appointment of a receiver, before during or after the pendency of any arbitration proceeding. This exclusion does not
constitute a waiver of the right or obligation of any party to submit any dispute to arbitration or reference hereunder, including those arising from the exercise of the actions detailed in sections (i), (ii) and (iii) of this paragraph. 

 
 (d) Arbitrator Qualifications and Powers. Any
arbitration proceeding in which the amount in controversy is $5,000,000.00 or less will be decided by a single arbitrator selected according to the Rules, and who shall not render an award of greater than $5,000,000.00. Any dispute in which the
amount in controversy exceeds $5,000,000.00 shall be decided by majority vote of a panel of three arbitrators; provided however, that all three arbitrators must actively participate in all hearings and deliberations. The arbitrator will be a neutral
attorney licensed in the State of California or a neutral retired judge of the state or federal judiciary of California, in either case with a minimum of ten years experience in the substantive law applicable to the subject matter 
  

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 of the dispute to be arbitrated. The arbitrator will determine whether or not an issue is arbitratable
and will give effect to the statutes of limitation in determining any claim. In any arbitration proceeding the arbitrator will decide (by documents only or with a hearing at the arbitrator’s discretion) any pre-hearing motions which are similar
to motions to dismiss for failure to state a claim or motions for summary adjudication. The arbitrator shall resolve all disputes in accordance with the substantive law of California and may grant any remedy or relief that a court of such state
could order or grant within the scope hereof and such ancillary relief as is necessary to make effective any award. The arbitrator shall also have the power to award recovery of all costs and fees, to impose sanctions and to take such other action
as the arbitrator deems necessary to the same extent a judge could pursuant to the Federal Rules of Civil Procedure, the California Rules of Civil Procedure or other applicable law. Judgment upon the award rendered by the arbitrator may be entered
in any court having jurisdiction. The institution and maintenance of an action for judicial relief or pursuit of a provisional or ancillary remedy shall not constitute a waiver of the right of any party, including the plaintiff, to submit the
controversy or claim to arbitration if any other party contests such action for judicial relief. 
  
 (e) Discovery. In any arbitration proceeding discovery will be permitted in accordance with the Rules. All discovery shall be
expressly limited to matters directly relevant to the dispute being arbitrated and must be completed no later than 20 days before the hearing date and within 180 days of the filing of the dispute with the AAA. Any requests for an extension of the
discovery periods, or any discovery disputes, will be subject to final determination by the arbitrator upon a showing that the request for discovery is essential for the party’s presentation and that no alternative means for obtaining
information is available. 
  
 (f) Class
Proceedings and Consolidations. The resolution of any dispute arising pursuant to the terms of this Note shall be determined by a separate arbitration proceeding and such dispute shall not be consolidated with other disputes or included in any
class proceeding. 
  
 (g) Payment Of
Arbitration Costs And Fees. The arbitrator shall award all costs and expenses of the arbitration proceeding. 
  
 (h) Real Property Collateral; Judicial Reference. Notwithstanding anything herein to the contrary, no dispute shall be submitted to
arbitration if the dispute concerns indebtedness secured directly or indirectly, in whole or in part, by any real property unless (i) the holder of the mortgage, lien or security interest specifically elects in writing to proceed with the
arbitration, or (ii) all parties to the arbitration waive any rights or benefits that might accrue to them by virtue of the single action rule statute of California, thereby agreeing that all indebtedness and obligations of the parties, and all
mortgages, liens and security interests securing such indebtedness and obligations, shall remain fully valid and enforceable. If any such dispute is not submitted to arbitration, the dispute shall be referred to a referee in accordance with
California Code of Civil Procedure Section 638 et seq., and this general reference agreement is intended to be specifically enforceable in accordance with said Section 638. A referee with the qualifications 
  

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 required herein for arbitrators shall be selected pursuant to the AAA’s selection procedures.
Judgment upon the decision rendered by a referee shall be entered in the court in which such proceeding was commenced in accordance with California Code of Civil Procedure Sections 644 and 645. 
  
 (i) Miscellaneous. To the maximum extent practicable,
the AAA, the arbitrators and the parties shall take all action required to conclude any arbitration proceeding within 180 days of the filing of the dispute with the AAA. No arbitrator or other party to an arbitration proceeding may disclose the
existence, content or results thereof, except for disclosures of information by a party required in the ordinary course of its business or by applicable law or regulation. If more than one agreement for arbitration by or between the parties
potentially applies to a dispute, the arbitration provision most directly related to the documents between the parties or the subject matter of the dispute shall control. This arbitration provision shall survive termination, amendment or expiration
of any of the documents or any relationship between the parties. 
  
 (j) Section 6.9 of the Credit Agreement is hereby amended by replacing the period at the end thereof with a semicolon and adding a new subsection (f) reading in its entirety as follows: 
  
 “(f) Liens on cash or Cash Equivalents in an aggregate
principal amount not to exceed $10,000,000 to secure the Borrower’s reimbursement obligation to the issuer of the letter of credit described in Section 6.10(e) and Liens on substantially all of the assets of the Borrower and its Subsidiaries to
secure the Senior Subordinated Secured Convertible Note described in Section 6.10(f).” 
  
 (k) Section 6.10(e) of the Credit Agreement is hereby amended to read in its entirety as follows: 
  
 (e) reimbursement obligations under a letter of credit in the face amount of $10,000,000 issued by U.S. Bank National Association for the
benefit of Amaranth LLC (“Amaranth”) or an Affiliate thereof; 
  
 (1) Section 6.10(f) of the Credit Agreement is hereby amended to read in its entirety as follows: 
  
 “(f) Subordinated Obligations in such amount as may be approved in writing by the Requisite Lenders, including, without limitation,
Indebtedness evidenced by that certain Senior Subordinated Secured Convertible Note dated on or about December 29, 2004 in the principal amount of $25,000,000 in favor of Amphora Limited that has been so approved by the Requisite Lenders;

  
 7. Effectiveness of this Agreement. This Agreement
shall not be effective unless on or before the date hereof, the Lenders have received the following, in form and content acceptable to the Administrative Agent and the Lenders. 
  

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 (a) Agreement: Acknowledgement. This Agreement, including the attached Acknowledgement by
Guarantors, each fully executed in a sufficient number of counterparts for distribution to all parties. 
  
 (b) Convertible Senior Notes. Evidence satisfactory to the Administrative Agent and the Lenders that the Borrower and Amaranth or an Affiliate
thereof shall have executed all documentation in connection with the issuance of $25,000,000 of convertible senior notes on the terms contemplated by the Summary of Terms and Conditions dated November 30, 2004 and the initial funding thereunder
shall have occurred. 
  
 (c) Senior Secured Credit
Facility. Evidence satisfactory to the Administrative Agent and the Lenders that the Borrower and Fortress Credit Corp. (“Fortress”) shall have executed that certain proposal letter dated December 2, 2004 for senior debt financing in
an aggregate principal amount of $38,000,000. 
  
 (d)
Intercreditor Agreement. A duly executed subordination and intercreditor agreement among the Borrower, Amaranth or an Affiliate thereof, and the Administrative Agent, in form and content satisfactory to the Administrative Agent and the
Lenders. 
  
 (e) Corporate Documentation. With respect to
Borrower and the Subsidiaries, such documentation as the Administrative Agent may reasonably require to establish the due organization, valid existence and good standing of each such Person, their qualification to engage in business in each material
jurisdiction in which they are engaged in business or required to be so qualified, their authority to execute, deliver and perform this Agreement and each of the Loan Documents executed in connection herewith to which it is a Party (if any), the
identity, authority and capacity of each Responsible Official thereof authorized to act on its behalf, including certified copies of articles of incorporation and amendments thereto, articles of organization and amendments thereto, operating
agreements and amendments thereto, bylaws and amendments thereto, certificates of good standing and/or qualification to engage in business, tax clearance certificates, certificates of corporate resolutions or limited liability company resolutions or
other applicable authorization document, incumbency certificates, Certificates of Responsible Officials, and the like. 
  
 (f) Prepayment. Payment of all amounts required to be paid pursuant to Section 5(a) of this Agreement. 
  
 (g) Fees and Expenses. Reimbursement of all fees and expenses of
Mayer, Brown, Rowe & Maw LLP, special counsel to the Administrative Agent, and of Nigro, Karlin & Segal, certified public accountants retained by such counsel. 
  
 (h) Representations and Warranties. Evidence satisfactory to the Administrative Agent and the Lenders that except for
the existence of the Known Defaults, the representations and warranties set forth herein and in the Credit Agreement must be true and correct. 
  
 (i) Other Required Documentation. All other documents and legal matters in connection with the transactions contemplated by this Agreement shall
have been delivered or executed or recorded and shall be in form and substance satisfactory to the Administrative Agent and the Lenders. 
  

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 8. Representations and Warranties. The Borrower represents and warrants as follows: 
  
 (a) Authority. The Borrower has the requisite corporate power and
authority to execute and deliver this Agreement, and to perform its obligations hereunder and under the Loan Documents (as amended and supplemented hereby) to which it is a party. The execution, delivery and performance by the Borrower of this
Agreement have been duly approved by all necessary corporate action and no other corporate proceedings are necessary to consummate such transactions. 
  
 (b) Enforceability. This Agreement has been duly executed and delivered by the Borrower. Each of this Agreement and each Loan Document (as amended
and supplemented hereby) is the legal, valid and binding obligation of the Borrower, enforceable against the Borrower in accordance with its terms, and is in full force and effect. 
  
 (c) Representations and Warranties. The representations and warranties contained in each Loan Document (other than
any such representations or warranties that, by their terms, are specifically made as of a date other than the date hereof) are correct on and as of the date hereof as though made on and as of the date hereof. 
  
 (d) Due Execution. The execution, delivery and performance of this
Agreement are within the power of the Borrower, have been duly authorized by all necessary corporate action, have received all necessary governmental approval, if any, and do not contravene any law or any contractual restrictions binding on the
Borrower. 
  
 (e) No Default. Other than the Known
Defaults, no event has occurred and is continuing that constitutes an Event of Default. 
  
 (f) Counsel. The Borrower has read and understands this Agreement, has consulted with and been represented by legal counsel in connection herewith, and has been advised by its counsel of its rights and
obligations hereunder and thereunder. 
  
 9. Release; Covenant
Not to Sue. 
  
 (a) The Borrower hereby absolutely and
unconditionally releases and forever discharges the Lenders and the Administrative Agent, and any and all participants, parent corporations, subsidiary corporations, affiliated corporations, insurers, indemnitors, successors and assigns thereof,
together with all of the present and former directors, officers, agents and employees of any of the foregoing (each a “Released Party”), from any and all claims, demands or causes of action of any kind, nature or description,
whether arising in law or equity or upon contract or tort or under any state or federal law or otherwise, which the Borrower has had, now has or has made claim to have against any such person for or by reason of any act, omission, matter, cause or
thing whatsoever arising from the beginning of time to and including the date of this Agreement, whether such claims, demands and causes of action are matured or unmatured or known or unknown. It is the intention of the Borrower in providing this
release that the same 
  

 9 

 shall be effective as a bar to each and every claim, demand and cause of action specified, and in furtherance of this
intention it waives and relinquishes all rights and benefits under Section 1542 of the Civil Code of the State of California, which provides: 
  
 “A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release,
which if known by him might have materially affected his settlement with the debtor.” 
  
 The Borrower acknowledges that it may hereafter discover facts different from or in addition to those now known or believed to be true with respect to such claims, demands, or causes of action and agree that this
instrument shall be and remain effective in all respects notwithstanding any such differences or additional facts. The Borrower understands, acknowledges and agrees that the release set forth above may be pleaded as a full and complete defense and
may be used as a basis for an injunction against any action, suit or other proceeding which may be instituted, prosecuted or attempted in breach of the provisions of such release. 
  
 (b) The Borrower, on behalf of itself and its successors, assigns, and other legal representatives, hereby absolutely,
unconditionally and irrevocably, covenants and agrees with and in favor of each Released Party above that it will not sue (at law, in equity, in any regulatory proceeding or otherwise) any Released Party on the basis of any claim released, remised
and discharged by the Borrower pursuant to the above release. If the Borrower or any of its successors, assigns or other legal representations violates the foregoing covenant, the Borrower, for itself and its successors, assigns and legal
representatives, agrees to pay, in addition to such other damages as any Released Party may sustain as a result of such violation, all attorneys’ fees and costs incurred by such Released Party as a result of such violation. 
  
 10. Counterparts. This Agreement may be executed in any number of
counterparts and by different parties and separate counterparts, each of which when so executed and delivered, shall be deemed an original, and all of which, when taken together, shall constitute one and the same instrument. Delivery of an executed
counterpart of a signature page to this Agreement by telefacsimile shall be effective as delivery of a manually executed counterpart of this Agreement. 
  
 11. Reference to and Effect on the Loan Documents. 
  
 (a) Upon and after the effectiveness of this Agreement, each reference in the Credit Agreement to “this Agreement”, “hereunder”,
“hereof” or words of like import referring to the Credit Agreement, and each reference in the other Loan Documents to “the Credit Agreement”, “thereof” or words of like import referring to the Credit Agreement, shall
mean and be a reference to the Credit Agreement as amended and supplemented hereby. 
  
 (b) The Credit Agreement, as amended and supplemented hereby, and all other Loan Documents, are and shall continue to be in full force and effect and are hereby in all respects ratified and confirmed and shall
constitute the legal, valid, binding and enforceable obligations of the Borrower to the Lenders. 
  

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 (c) The execution, delivery and effectiveness of this Agreement shall not operate as a waiver of any
right, power or remedy of the Lenders under any of the Loan Documents, nor constitute a waiver of any provision of any of the Loan Documents. 
  
 (d) To the extent that any terms and conditions in any of the Loan Documents shall contradict or be in conflict with any terms or conditions of the Credit
Agreement, as modified and amended hereby, such terms and conditions are hereby deemed modified or amended accordingly to reflect the terms and conditions of the Credit Agreement as modified or amended hereby. 
  
 12. Estoppel. To induce the Lenders to enter into this Agreement, the
Borrower hereby acknowledges and agrees that as of the date hereof, other than the Known Defaults there exists no Event of Default and no right of offset, defense, counterclaim or objection in favor of the Borrower as against the Lenders with
respect to the Obligations. 
  
 13. Integration. This
Agreement, together with the other Loan Documents, incorporates all negotiations of the parties hereto with respect to the subject matter hereof and is the final expression and agreement of the parties hereto with respect to the subject matter
hereof. 
  
 14. Severability. In case any provision in this
Agreement shall be invalid, illegal or unenforceable, such provision shall be severable from the remainder of this Agreement and the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired
thereby. 
  
 15. Modification. This Agreement may not be
amended, waived or modified in any manner without the written consent of the party against whom the amendment, waiver or modification is sought to be enforced. 
  

16. Submission of Agreement. The submission of this Agreement to the parties or their agents or attorneys for review or signature does not
constitute a commitment by the Lenders to forbear from the exercise of its rights and remedies under the Loan Documents, and this Agreement shall have no binding force or effect until all of the conditions to the effectiveness of this Agreement have
been satisfied as set forth herein. 
  
 17. Costs and
Expenses. In addition to the obligations of the Borrower under the Loan Documents, the Borrower agrees to pay all costs and expenses (including without limitation reasonable attorneys’ fees) expended or incurred by the Lenders and the
Administrative Agent in connection with the negotiation, documentation and preparation of this Agreement and any other documents executed in connection herewith, and in carrying out the terms of this Agreement, whether incurred before or after the
effective date hereof. 
  
 18. Choice of Law. The validity
of this Agreement, its construction, interpretation and enforcement, the rights of the parties hereunder, shall be determined under, governed by, and construed in accordance with the internal laws of the State of California governing contracts only
to be performed in that State. 
  
 [Signatures follow on next
page.] 
  

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 IN WITNESS WHEREOF, the parties have entered into this Agreement as of the date first above written.

  

			
	 MODTECH HOLDINGS, INC., a Delaware
 corporation

		
	 By:
	 	 /s/ Dennis L. Shogren

	 Name:
	 	 DENNIS L. SHOGREN

	 Title:
	 	 Sec. & CFO

	
	 WELLS FARGO BANK, NATIONAL
 ASSOCIATION, as Administrative Agent and as a
 Lender

		
	 By:
	 	 /s/ E. J. D. Pinder

	 Name:
	 	 E. J. D. PINDER

	 Title:
	 	 R.M.

	
	 UNION BANK OF CALIFORNIA, N.A., as a
 Lender

		
	 By:
	 	 /s/ Joel Steiner

	 Name:
	 	 JOEL STEINER

	 Title:
	 	 Vice President

	
	 COMERICA BANK-CALIFORNIA, as a Lender

		
	 By:
	 	 /s/ Clark Foster

	 Name:
	 	 CLARK FOSTER

	 Title:
	 	 Vice President

  

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 ACKNOWLEDGEMENT BY GUARANTORS 
  
 Dated as of December 29, 2004 
  
 Each of the undersigned, being a Guarantor (each a “Guarantor” and collectively, the “Guarantors”) under their
respective Guaranties, each dated December 26, 2001 and made in favor of the Lenders (as amended, modified or supplemented, each a “Guaranty” and collectively, the “Guaranties”), hereby acknowledges and agrees to
the foregoing Amendment and Forbearance Agreement (the “Agreement”) and confirms and agrees that its Guaranty is and shall continue to be, in full force and effect and is hereby ratified and confirmed in all respects except that,
upon the effectiveness of, and on and after the date of the Agreement, each reference in such Guaranty to the Credit Agreement (as defined in the Agreement), “thereunder”, “thereof” or words of like import referring to the
“Credit Agreement”, shall mean and be a reference to the Credit Agreement as amended and supplemented by the Agreement. Although the Lenders have informed Guarantors of the matters set forth above, and Guarantors have acknowledged the
same, each Guarantor understands and agrees that the Lenders have no duty under the Credit Agreement, the Guaranties or any other agreement with either Guarantor to so notify any Guarantor or to seek such an acknowledgement, and nothing contained
herein is intended to or shall create such a duty as to any advances or transaction hereafter. 
  
 Each Guarantor hereby agrees to submit to binding arbitration all claims, disputes and controversies between or among such Guarantor and the Lenders and
the Administrative Agent (and their respective employees, officers, directors, attorneys, and other agents), whether in tort, contract or otherwise arising out of or relating to in any way (i) the Credit Agreement and any Loan Document and the
negotiation, execution, collateralization, administration, repayment, modification, extension, substitution, formation, inducement, enforcement, default or termination of any such agreements or (ii) any Guaranty. In furtherance thereof, the
Guarantors agree that the procedures set forth in Section 11.23 of the Credit Agreement shall be followed, which procedures are incorporated herein by this reference. 
  

							
	 COASTAL MODULAR BUILDINGS, INC. a Delaware
 corporation
	  	 INNOVATIVE MODULAR STRUCTURES, INC., a Florida
 corporation

				
	 By:
	 	 /s/ Dennis L. Shogren

	  	 By:
	 	 /s/ Dennis L. Shogren

	 Name:
	 	 DENNIS L. SHOGREN
	  	 Name:
	 	 DENNIS L. SHOGREN

	 Title:
	 	 Sec. & CFO
	  	 Title:
	 	 Sec. / Treasurer

			
	 TRAC MODULAR MANUFACTURING, INC., an Arizona
 corporation
	  	 	 	 
				
	 By:
	 	 /s/ Dennis L. Shogren

	  	 	 	 
	 Name:
	 	 DENNIS L. SHOGREN
	  	 	 	 
	 Title:
	 	 Sec. / CFO Modtech Holding, Inc.
	  	 	 	 

  

 13 

 Annex I  
  
 Schedule 1.1 
  
 Lender Commitments and Pro Rata Shares 
  

							
	 Lender

	  	Amount of Revolving Commitment

	  	Pro Rata Share

	 
	 Wells Fargo Bank, N.A.
	  	$	8,924,297	  	37.5000	%
	 Comerica Bank-California
	  	$	7,436,914	  	31.2500	%
	 Union Bank of California, N.A.
	  	$	7,436,914	  	31.2500	%
	 TOTAL
	  	$	23,798,125	  	100	%

  

 14Form of Note dated as of December 30, 2004

  
 Exhibit 4.1 

 
 THIS NOTE HAS BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR FOR
SALE IN CONNECTION WITH, THE DISTRIBUTION THEREOF. THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS, AND MAY NOT BE PLEDGED, SOLD, OFFERED FOR SALE, TRANSFERRED, OR OTHERWISE DISPOSED OF IN
THE ABSENCE OF REGISTRATION UNDER OR EXEMPTION FROM SUCH ACT AND ALL APPLICABLE STATE SECURITIES LAWS. 
  
 CRITICAL PATH, INC. 
  
 PROMISSORY NOTE 
  

			
	 $________________
	  	San Francisco, California
	 	  	December 30, 2004         

  
 Critical Path, Inc., a
California corporation (the “Company”), the principal office of which is located in San Francisco, California, for value received hereby promises to pay to the order of
                                    , or its registered
assigns (“Holder”), the sum of
                                        
         dollars ($                    ), or such lesser amount as shall then equal the outstanding
principal amount hereof on the terms and conditions set forth hereinafter. The outstanding principal amount hereof and all accrued and unpaid interest hereon, as set forth below, shall be due and payable on the earlier to occur of (i) December 30,
2007, (ii) when declared due and payable by Holder upon the occurrence of an Event of Default or (iii) a Change of Control (the earliest of the events set forth in items (i)-(iii) immediately above, the “Maturity Date”). In
addition, if the Company or any of its Subsidiaries consummates a Business Unit Sale resulting in proceeds to the Company and/or any of its Subsidiaries of less than forty million dollars ($40,000,000) but at least twenty million dollars
($20,000,000), then the Company shall pay (x) thirty-three percent (33%) of the Accreted Principal Amount, together with accrued and unpaid interest thereon since the most recent Interest Compounding Date, to the Holder from the first twenty million
dollars ($20,000,000) of such proceeds and (y) from each incremental five million dollars ($5,000,000) of proceeds in excess of twenty million dollars ($20,000,000), sixteen and seventy-five one-hundredths percent (16.75%) of the unpaid Accreted
Principal Amount, together with accrued and unpaid interest thereon since the most recent Interest Compounding Date, to the Holder from such proceeds immediately after the receipt of such proceed by the Company. 
  
 The Company may prepay this Note in cash in full at any time commencing on
June 30, 2005 for an amount equal to the sum of (i) the Accreted Principal Amount of the Notes plus (ii) all accrued and unpaid interest thereon since the most recent Interest Compounding Date; provided, however, that if the
Company wishes to prepay any of the Notes (including this Note) issued pursuant to the Note Purchase Agreement, then such prepayment(s) must be made pro rata with respect to all such Notes. 

 The following is a statement of the rights of the Holder of this Note and the conditions to which this
Note is subject, and to which the Holder hereof, by the acceptance of this Note, agrees: 
  
 1. Definitions. Except as otherwise defined herein, each capitalized term used herein shall have the meaning assigned to it in the Note Purchase Agreement, as in effect on the date hereof, and without regard to
any subsequent termination of the Note Purchase Agreement. All other references to the Note Purchase Agreement in this Note refer to the Note Purchase Agreement as in effect on the date hereof, and without regard to any subsequent termination of the
Note Purchase Agreement. As used in this Note, the following terms, unless the context otherwise requires, have the following meanings: 
  
 1.1 “Accreted Principal Amount” shall have the meaning set forth in Section 2 hereof. 
  
 1.2 “Affiliate” means any Person who is an
“affiliate” as defined in Rule 12b-2 of the General Rules and Regulations of the Securities Exchange Act of 1934, as amended. 
  
 1.3 “Business Unit Sale” means a sale by the Company or any of its Subsidiaries of any business unit. 
  
 1.4 “Capitalized Lease Obligations” means,
with respect to any Person, all rental obligations of such Person which, under GAAP, are or will be required to be capitalized on the books of such Person, in each case taken at the amount thereof accounted for as indebtedness in accordance with
such principles. 
  
 1.5 “Change of
Control” shall mean (i) any merger, consolidation or other business combination transaction (or series of related transactions) in which the stockholders owning a majority of the voting securities of the Company prior to such transaction do
not own a majority of the voting securities of the Company or the surviving entity, as the case may be, (ii) any tender offer, exchange offer or other transaction whereby any Person or “group” (as defined in Rule 13d-3 of the
General Rules and Regulations of the Securities Exchange Act of 1934, as amended) other than the Investors obtains a majority of the outstanding shares of capital stock entitled to vote in the election of directors, (iii) a sale of all or
substantially all of the Company’s assets or properties in one or a series of related transactions, (iv) a Business Unit Sale resulting in proceeds to the Company and/or any of its subsidiaries of at least forty million dollars ($40,000,000) or
(v) any other transaction described in any stockholder rights agreement or “poison pill”, if any, to which the Company is party, which permits the holders of any rights or similar certificates to exercise the rights evidenced thereby and
would require the Board of Directors to waive the application of such stockholder rights agreement or “poison pill” unless the Board of Directors has determined in good faith that such Person has inadvertently triggered such right.

  

 2 

 1.6 “Company” shall have the meaning set forth in the recitals hereto,
and includes any corporation that shall succeed to or assume the obligations of the Company under this Note. 
  
 1.7 “Domestic Subsidiary” shall have the meaning set forth in Section 3.8 hereof. 
  
 1.8 “Event of Default” shall have the
meaning set forth in Section 4 hereof. 
  
 1.9
“GAP Entities” shall mean General Atlantic Partners 74, L.P., GAP Coinvestment Partners II, L.P., GapStar, LLC and GAPCO GmhH & Co. KG. 
  
 1.10 “Holder” shall mean the registered holder of this Note from time to time, and in the plural, shall mean all
registered holders of Notes from time to time issued by the Company pursuant to the Note Purchase Agreement. 
  
 1.11 “Interest Compounding Date” shall have the meaning set forth in Section 2 hereof. 
  
 1.12 “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), and (iii) any other capital contribution to or investment in any Person, including, without
limitation, any guaranty obligation incurred for the benefit of any 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. 
  
 1.13
“Note” shall mean this note, and in the plural, shall mean all notes issued to the Investors pursuant to the terms of the Note Purchase Agreement, including this Note, and all amendments, modifications and extensions thereto.

  
 1.14 “Note Purchase
Agreement” means that certain Note and Warrant Purchase Agreement, dated December 29, 2004, among the Company, the Holder and the other parties thereto from time to time, and all amendments, modifications and extensions thereto. 

 
 1.15 “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 closing date, and
listed on Schedule 3.26 to the Note Purchase Agreement, (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 

  

 3 

 
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 foreign Subsidiaries made after the date hereof (that are not incorporated or otherwise organized
under the laws of the United States of America or any state thereof) in an amount not to exceed $1,000,000 in the aggregate at any time outstanding provided, however, that the foregoing shall not apply to loans, advances and investments in the
Company’s Canadian Subsidiaries; (vii) any acquisition for which the prior written consent of the Holders of a majority of the outstanding principal amount of all of the Notes issued by the Company pursuant to the Note Purchase 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. 
  
 1.16 “Permitted Liens” shall have the
meaning set forth in Section 3.3. 
  
 1.17
“Person” means any individual, firm, corporation, partnership, trust, 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. 
  
 1.18
“Restricted Payment” means (a) any dividend or other distribution (whether in cash, securities or other property) with respect to any shares of any class of capital stock of the Company or any of its Subsidiaries or (b) any payment
(whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancellation or termination of any shares of any class of capital stock of the Company
or any Subsidiary or any option, warrant or other right to acquire any such shares of capital stock of the Company or any Subsidiary. 
  
 1.19 “UCC” shall have the meaning set forth in Section 3.3. 
  
 2. Interest. Interest shall accrue at the rate of thirteen and nine-tenths percent (13.9%) per annum (or such lesser
amount as shall equal the highest rate of interest allowable under applicable law) (the “Interest Rate”), on the outstanding Accreted Principal Amount (as hereinafter defined), from the date of this Note until the Maturity Date or
the date this Note is otherwise repaid. The Company shall not be obligated to make any payments of interest which shall have accrued under this Note prior to the Maturity Date. Interest shall be calculated on the basis of a 365-day year for the
actual number of days elapsed. Accrued interest shall compound to the Accreted Principal Amount on the last day of each calendar quarter from the date of this Note until the Maturity Date or the date this Note is otherwise repaid (each such
quarterly date, the “Interest Compounding Date”). “Accreted Principal Amount” means the principal amount of the Notes plus the amount of interest that has accrued and compounded thereon on each Interest Compounding
Date. In the event that the principal amount of this Note, any interest, or any amount payable hereunder is not paid in full when such 

  

 4 

 
amount becomes due and payable, or upon the occurrence of an Event of Default, interest shall accrue at the lesser of (a) the initial Interest Rate plus five
percent (5%) per annum or (b) the highest rate of interest allowable under applicable law, on the balance of all amounts outstanding until such overdue amounts are paid or the Event of Default is cured, and such interest shall be payable on demand.

  
 3. Covenants. The Company covenants and agrees until
the date on which all present and future obligations and liabilities of the Company to the Holder for the payment of money under this Note (extending to all principal amounts, interest, late charges, fees and all other charges and sums, as well as
all costs and expenses payable by the Company under this Note, including interest accruing at the then applicable rate provided in this Note after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or
like proceedings, relating to the Company, whether or not a claim for post-filing post-petition interest is allowed in such proceeding) have been paid in full: 
  

3.1 Financial Statements and Other Information. 
  
 (a) The Company shall deliver to the Holder of this Note the financial statements and other information
required to be delivered under Section 8.1 of the Note Purchase Agreement. 
  
 (b) Not later than 15 days after the end of each month, the Company will provide a statement of the Company’s results of operations (on an adjusted EBITDA basis) and capital expenditures for such preceding month,
each compared to the Company’s annual operating budget. 
  
 3.2 Indebtedness. The Company shall not, and shall not permit any Subsidiary to, issue, incur, assume, create or have outstanding any Indebtedness; provided, however, that the foregoing shall not
restrict nor operate to prevent: 
  
 (a)
Indebtedness in favor of the Holders under this Note and the Note Purchase Agreement; 
  
 (b) Indebtedness existing on the date hereof, as set forth on Schedule 3.22 to the Note Purchase Agreement; 
  
 (c) Indebtedness for accounts payable incurred in the
ordinary course of business by the Company; 
  
 (d) Indebtedness incurred solely for the purpose of financing the acquisition of any equipment, machinery, software, improvements or any other similar property, or extensions, renewals or replacements of any of the foregoing for the same or
a lesser amount; provided, that the aggregate outstanding principal amount of all Indebtedness permitted pursuant to this clause (d) outstanding for more than sixty (60) days after the incurrence of such Indebtedness shall not at any time
exceed $500,000; 
  

 5 

 (e) Indebtedness of the Company evidenced by Capitalized Lease Obligations,
provided, that in no event shall the aggregate principal amount of Capitalized Lease Obligations permitted by this clause (e) exceed $500,000 at any time outstanding; and 
  
 (f) Any extension, renewal, refinancing, refunding, or replacement (each, a “refinancing”)
of Indebtedness permitted by clauses (b) through (e) above, on such terms and conditions as are, on the whole, not materially more onerous to the Company than the terms and conditions of such original Indebtedness on the date of such refinancing
(including that the principal amount of such refinancing Indebtedness does not exceed the principal amount of, plus the amount of accrued and unpaid interest on, the Indebtedness so refinanced (plus the amount of reasonable premium and fees and
expenses incurred in connection therewith)). 
  
 3.3 Liens. The Company shall not, and shall not permit any of its Subsidiaries to, create, incur, assume or suffer to exist any Lien upon or with respect to any property or assets (real or personal, tangible or intangible) of the
Company or any of its Subsidiaries, whether now owned or hereafter acquired, or sell any such property or assets subject to an understanding or agreement, contingent or otherwise, to repurchase such property or assets (including sales of accounts
receivable), or assign any right to receive income or permit the filing of any financing statement under the Uniform Commercial Code, as from time to time in effect in the relevant jurisdiction (the “UCC”), or any other similar
notice of Lien under any similar recording or notice statute; provided, that the provisions of this Section 3.3 shall not prevent the creation, incurrence, assumption or existence of the following: 
  
 (a) Liens arising in the ordinary course of business by
statute in connection with worker’s compensation, unemployment insurance, old age benefits, social security obligations, statutory obligations or other similar charges (other then Liens arising under ERISA), good faith cash deposits in
connection with tenders, contracts or leases to which the Company or any Subsidiary is a party or other cash deposits required to be made in the ordinary course of business, provided, that such Liens do not have a material adverse effect on
the ability of the Company to repay amounts due under the Notes; 
  
 (b) inchoate Liens for taxes, assessments or governmental charges or levies not yet due or Liens for taxes, assessments or governmental charges or levies being contested in good faith and by appropriate proceedings
for which adequate reserves have been established in accordance with GAAP; 
  
 (c) Liens in respect of property or assets of the Company or its Subsidiaries imposed by law, which were incurred in the ordinary course of business and do not secure Indebtedness for borrowed money, such as
carriers’, warehousemen’s, materialmen’s and mechanics’ liens and other similar Liens arising in the ordinary course of business, and (i) which do not in the aggregate materially detract from the value of the Company’s and
its Subsidiaries’ property or assets taken as a whole 

  

 6 

 
or result in a material adverse effect on the Condition of the Company or (ii) which are being contested in good faith by appropriate proceedings, which
proceedings have the effect of preventing the forfeiture or sale of the property or assets subject to any such Lien; 
  
 (d) the pledge of assets for the purpose of securing an appeal, stay or discharge in the course of any legal proceeding, provided that the
aggregate amount of liabilities of the Company and its Subsidiaries secured by a pledge of assets permitted under this subsection, including interest and penalties thereon, if any, shall not be in excess of $500,000 at any one time outstanding;

  
 (e) any interest or title of a lessor under
any operating lease; 
  
 (f) easements,
rights-of-way, restrictions and other similar encumbrances against real property incurred in the ordinary course of business; 
  
 (g) the Liens existing on the date hereof identified on Schedule 3.22 to the Note Purchase Agreement; 
  
 (h) Liens on cash deposited with account debtors to secure
performance by the Company or any Subsidiary in the ordinary course of business subject to customary and reasonable terms; 
  
 (i) Liens upon assets of the Company or its Subsidiaries subject to Capitalized Lease Obligations, provided, that (A) such Liens
only serve to secure the payment of Indebtedness permitted by Section 3.2(e) arising under such Capitalized Lease Obligation and (B) the Lien encumbering the asset giving rise to the Capitalized Lease Obligation does not encumber any other asset of
the Company or its Subsidiaries; 
  
 (j) Liens
placed upon equipment, machinery, software, improvements or any other similar property, used in the ordinary course of business of the Company or any of its Subsidiaries at the time of the acquisition thereof by the Company or any of its
Subsidiaries or within ninety (90) days thereafter to secure Indebtedness permitted by Section 3.2(d) above; provided, that the Liens encumbering the equipment, machinery software, improvements or any other similar property so acquired do not
encumber any other asset of the Company or its Subsidiaries; and 
  
 (k) set-off rights of depository institutions (collectively with clauses (a) through (k) hereof, the “Permitted Liens”). 
  
 3.4 Fundamental Changes. The Company will not (i) consummate any Change of Control, (ii) sell,
transfer, lease or otherwise dispose of (in one transaction or a series of transactions) assets for a purchase price in excess of five million dollars ($5,000,000) or outside of the ordinary course of business (other than (A) sales or disposals of
obsolete assets that the Company has determined, in good faith, not 

  

 7 

 
to be useful in the conduct of its business or (B) a Business Unit Sale resulting in proceeds to the Company and/or any of its Subsidiaries of less than
forty million dollars ($40,000,000), but at least twenty million dollars ($20,000,000)) or all or substantially all of the stock of any of its Subsidiaries (in each case, whether now owned or hereafter acquired), or (iii) liquidate or dissolve,
except that, if at the time and immediately after giving effect thereto no Event of Default shall have occurred and be continuing, provided that (A) the Company or any of its Subsidiaries may, with the prior written consent of the Holders, merge
with or into any other wholly-owned Subsidiary of the Company and, except as otherwise prohibited by this Note, may sell, transfer, lease or otherwise dispose of its assets to the Company or to another wholly-owned Subsidiary of the Company; and (B)
any Subsidiary may liquidate or dissolve if the Board of Directors of the Company determines in good faith that such liquidation or dissolution is in its best interests and is not disadvantageous to the Holders. 
  
 3.5 Restricted Payments. The Company will not, and
the Company will not permit any Subsidiary to, declare or make, or agree to pay or make, directly or indirectly, any Restricted Payment, except that (i) any Subsidiary may make a Restricted Payment to the Company or any of its wholly-owned
Subsidiaries, and (ii) the Company or any of its Subsidiaries may make any Restricted Payment required by the terms of the Note Purchase Agreement and the other documents executed in connection therewith. 
  
 3.6 Transactions with Affiliates. The Company will
not, and the Company will not permit any Subsidiary to, sell, lease or otherwise transfer any property or assets to, or purchase lease or otherwise acquire any property or assets from, or otherwise engage in any other transactions with, any of its
Affiliates, except (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, and (b) transactions under the
agreements listed on Schedule 3.17 to the Note Purchase Agreement. 
  
 3.7 Investments. The Company will not, and the Company will not permit any Domestic Subsidiary (as hereinafter defined) to, make an Investment in any Person, except for Permitted Investments. 
  
 3.8 Property of Existing Domestic Subsidiaries. The
Company will not permit, or suffer to allow, any Subsidiary that is incorporated or otherwise organized under the laws of the United States of America or any state thereof (a “Domestic Subsidiary”), to (i) own, hold, lease, license,
purchase or otherwise acquire any personal or real property (excluding any material intellectual property) in excess of $50,000 for all property held by such Subsidiary, or $250,000 in the aggregate for all property held by all Domestic Subsidiaries
(ii) maintain any deposit account in its name, (iii) own or otherwise hold any rights to any material intellectual property or (iv) otherwise conduct any business or maintain operations. 
  
 3.9 Books and Records. The Company shall not make any material changes in accounting policies and
shall keep proper books of record and 

  

 8 

 
account, in which full and correct entries shall be made of all financial transactions and the assets, liabilities and business of the Company and its
Subsidiaries in accordance with GAAP consistently applied. 
  
 3.10 Inspection. The Company shall, and shall cause each of its Subsidiaries to, permit representatives of the Holders to visit and inspect any of its properties, to examine its corporate, financial and
operating records and make copies thereof or abstracts therefrom, and to discuss its affairs, finances and accounts with their respective directors, officers and independent public accountants, all at such reasonable times during normal business
hours and as often as may be reasonably requested upon notice to the Company. 
  
 3.11 Maintenance of Business. The Company shall, and shall cause each Subsidiary to, preserve and maintain its existence. The Company shall, and shall cause each Subsidiary to, preserve and keep in force and
effect all licenses, permits, franchises, approvals, patents, trademarks, trade names, trade styles, copyrights, and other property rights necessary to the proper conduct of its business, except where the failure to do so could not reasonably be
expected to have a material adverse effect on the Condition of the Company or on the prospects of repayment of the Notes. 
  
 3.12 Maintenance of Properties. The Company shall, and shall cause each Subsidiary to, maintain, preserve and keep its property and
equipment in good repair, working order and condition (ordinary wear and tear excepted) and shall from time to time make all needful and proper repairs, renewals, replacements, additions and betterments thereto so that at all times the efficiency
thereof shall by fully preserved and maintained, except in each case to the extent that, in the reasonable business judgment of such Person, any such property or equipment is no longer necessary for the proper conduct of the business of such Person.

  
 4. Events of Default. The occurrence of any one or more
of the following events shall constitute an “Event of Default”: 
  
 4.1 Failure To Pay. (i) The failure of the Company to pay any principal due under any of the Notes when due and payable (whether by
acceleration, declaration, extension or otherwise), or (ii) the failure of the Company to pay any other amounts due under any of the Notes when due and payable if such failure is not cured within five (5) days of Company’s receipt of notice
thereof from any of the Holders. 
  
 4.2 Other
Covenants and Agreements. The failure of Company or any of its Subsidiaries to perform, observe or comply with any of the covenants of this Note and the Note Purchase Agreement, if such failure is not cured within sixty (60) days from its
respective due date. 
  
 4.3 Representations
and Warranties. If any representation or warranty made by the Company or any of its Subsidiaries in the Note Purchase Agreement is not true and correct in all material respects on the Initial Closing Date or the Second Closing Date, as the case
may be. 
  

 9 

 4.4 Default on Other Obligations. The occurrence of any condition resulting in the
acceleration of or default under any other Indebtedness for borrowed money of the Company or any of its Subsidiaries. 
  
 4.5 Involuntary Bankruptcy. There shall be filed against the Company or any of its Subsidiaries an involuntary petition or other
pleading seeking the entry of a decree or order for relief under the United States Bankruptcy Code or any similar federal or state insolvency or similar laws ordering: (a) the liquidation of the Company or any of its Subsidiaries or (b) a
reorganization of the Company or any of its Subsidiaries or the business and affairs of the Company or any of its Subsidiaries or (c) the appointment of a receiver, liquidator, assignee, custodian, trustee or similar official for the Company or any
of its Subsidiaries of the property of the Company or any of its Subsidiaries. 
  
 4.6 Voluntary Bankruptcy. The commencement by the Company or any of its Subsidiaries of a voluntary case under the federal
bankruptcy laws or any federal or state insolvency or similar laws or the consent by the Company or any of its Subsidiaries to the appointment of or taking possession by a receiver, liquidator, assignee, trustee, custodian or similar official for
the Company or any of its Subsidiaries of any of the property of the Company or any of its Subsidiaries or the making by the Company or any of its Subsidiaries of an assignment for the benefit of creditors, or the failure by Company or any of its
Subsidiaries generally to pay its debts as the debts become due. 
  
 4.7 Judgments, Awards. Any judgment or order for the payment of money is rendered against the Company or any of its Subsidiaries in an amount in excess of two hundred fifty thousand dollars ($250,000)
individually or in the aggregate and either (i) enforcement proceedings are commenced by any creditor upon such judgment or order and not stayed, or (ii) there is any period of thirty (30) consecutive days during which such judgment has not been
paid in full or a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, is not in effect. 
  
 4.8 Attachment by Lenders. Any assets of the Company or any of its Subsidiaries shall be attached, levied upon, seized or
repossessed, or come into the possession of a trustee, receiver or other custodian and a determination by any Holder, in good faith but in its sole discretion, that the same could have a material adverse effect on the prospect for the Holders to
fully and punctually realize the full benefits conferred on the Holders by the Notes and/or the Note Purchase Agreement. 
  
 5. Remedies. Upon and after the occurrence of an Event of Default, the Holder shall be entitled to the exercise the rights and remedies set forth
in the Note Purchase Agreement, this Note and under applicable law, all such rights and remedies being cumulative and enforceable alternatively, successively or concurrently. The Holder acknowledges and agrees that notwithstanding the terms and
provisions of this Note, the Holder shall not be entitled to take any action permitted to be taken by the Holder under this Note unless the Holder holds, together with its Affiliates, Notes having an aggregate 

  

 10 

 
principal amount equal to at least 40% of the aggregate principal amount of all of the Notes issued at the Initial Closing and the Holder gives prompt
written notice to the other Holders after such exercise or exercises. 
  
 6. Assignment. Subject to the restrictions on transfer described in Section 9 below, the rights and obligations of the Company and Holder shall be binding upon and benefit the successors, assigns, heirs, administrators and
transferees of the parties. The Company shall not be permitted to assign this Note without the prior written consent of the Holders. 
  
 7. Waiver of Notice. The Company hereby waives notice, presentment, demand, protest and notice of dishonor. 
  
 8. Transfer of This Note. With respect to any offer, sale or other
disposition of this Note, the Holder will give written notice to the Company prior thereto, describing briefly the manner thereof, together with a written opinion of such Holder’s counsel, to the effect that such offer, sale or other
distribution may be effected without registration or qualification (under any federal or state law then in effect); provided, that no opinion shall be required for any transfer to an Affiliate or if the transfer is made in compliance with the
Securities Act, so long as the transferee can make the same representations and warranties at the time of transfer as set forth in Sections 4.5, 4.6, 4.7, 4.8, 4.9, 4.10 and 4.11 of the Note Purchase Agreement. Promptly upon delivering such written
notice and opinion, if so required, the Holder may sell or otherwise dispose of this Note, all in accordance with the terms of the notice delivered to the Company. Each Note thus transferred shall bear a legend as to the applicable restrictions on
transferability in order to ensure compliance with the Securities Act, unless in the opinion of counsel for the Company such legend is not required in order to ensure compliance with the Securities Act. The Company may issue stop transfer
instructions to its transfer agent in connection with such restrictions. This Note is registered as to both principal and stated interest with the Company (or its agent) within the meaning of section 1.871-14(c)(1)(i) of the Income Tax Regulations.
Accordingly, notwithstanding anything to the contrary in this paragraph, this Note, together with any interest thereon, may be transferred only (i) upon surrender of the Note by the transferor to the Company (or its agent) and the reissuance of the
Note (or the issuance of a new Note) to the transferee, or (ii) by transfer of the right to principal and interest through a book-entry system meeting the requirements of section 1.871-14(c)(1)(i)(B) of the Income Tax Regulations that is maintained
by the Company (or its agent). In the case of a Holder that is not a “United States person” within the meaning of section 7701(a)(30) of the Internal Revenue Code of 1986, as amended (the “Code”), so long as an exception under
section 871(h) or section 881(c) of the Code does not apply, the Company (or its agent) shall not withhold any U.S. federal income tax with respect to such Holder provided that the Holder timely provides the Company (or its agent) with a statement
that meets the requirements of section 871(h)(5) of the Code. 
  
 9. Treatment of Note. To the extent permitted by generally accepted accounting principles, the Company will treat, account and report the Note as debt and not equity for accounting purposes and with respect to any returns filed with
federal, state or local tax authorities. 
  

 11 

 10. Notices. Any notice, request or other communication required or permitted hereunder shall be
in writing and shall be deemed to have been duly given if personally delivered or if sent by nationally recognized courier service or mailed by registered or certified mail, postage prepaid, to the respective addresses of the parties as set forth on
the signature pages hereto or if sent by facsimile to the respective facsimile numbers of the parties set forth on the signature pages hereto. Any party hereto may by notice so given change its address for future notice hereunder. Notice shall
conclusively be deemed to have been given and received when personally delivered or three (3) business days after deposited in the mail or one business day after sent by courier or upon confirmation of facsimile delivery in the manner set forth
above. 
  
 11. No Stockholder Rights. Nothing contained in
this Note shall be construed as conferring upon Holder or any other Person the right to vote or to consent or to receive notice as a stockholder in respect of meetings of stockholders for the election of directors of the Company or any other matters
or any rights whatsoever as a stockholder of the Company. 
  
 12.
Governing Law. This Note shall be governed by and construed in accordance with the laws of the State of New York, excluding that body of law relating to conflict of laws. 
  
 13. Amendments and Waivers. No amendments or waivers of any provision of this Note, and no consent by the Holder to
any departure by the Company, shall in any event be effective unless the same shall be in writing, and signed by the Holders of 66 2/3% of the outstanding principal amount of all of the Notes issued by the Company pursuant to the Note Purchase
Agreement, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. Any such amendment or waiver shall be binding upon all Notes and all holders thereof. 
  
 14. Severability. Any provision of this Note that is prohibited or
unenforceable in a jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 
  
 15. WAIVER OF JURY TRIAL. EACH OF THE COMPANY AND THE HOLDER HEREBY (A) COVENANTS AND AGREES NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE
TRIABLE OF RIGHT BY A JURY, AND (B) WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO WHICH THE COMPANY AND THE HOLDER MAY BE PARTIES, ARISING OUT OF, IN CONNECTION WITH OR IN ANY WAY PERTAINING TO THIS NOTE AND THE NOTE PURCHASE AGREEMENT AND/OR
ANY TRANSACTIONS, OCCURRENCES, COMMUNICATIONS, OR UNDERSTANDINGS (OR THE LACK OF ANY OF THE FOREGOING) RELATING IN ANY WAY TO DEBTOR-CREDITOR RELATIONSHIP 

  

 12 

 
BETWEEN THE PARTIES. IT IS UNDERSTOOD AND AGREED THAT THIS WAIVER CONSTITUTES A WAIVER OF TRIAL BY JURY OF ALL CLAIMS AGAINST ALL PARTIES TO SUCH ACTIONS
OR PROCEEDINGS, INCLUDING CLAIMS AGAINST PARTIES WHO ARE NOT PARTIES TO THIS NOTE. THIS WAIVER OF JURY TRIAL IS SEPARATELY GIVEN, KNOWINGLY, WILLINGLY AND VOLUNTARILY MADE BY THE COMPANY AND THE HOLDER, AND THE COMPANY AND THE HOLDER HEREBY AGREE
THAT NO REPRESENTATIONS OF FACT OR OPINION HAVE BEEN MADE BY ANY INDIVIDUAL TO INDUCE THIS WAIVER OF TRIAL BY JURY OR TO IN ANY WAY MODIFY OR NULLIFY ITS EFFECT. THE COMPANY AND THE HOLDER ARE HEREBY AUTHORIZED TO SUBMIT THIS NOTE TO ANY COURT
HAVING JURISDICTION OVER THE SUBJECT MATTER AND THE COMPANY AND THE HOLDER, SO AS TO SERVE AS CONCLUSIVE EVIDENCE OF SUCH WAIVER OF RIGHT TO TRIAL BY JURY. EACH OF THE COMPANY AND THE HOLDER REPRESENTS AND WARRANTS THAT IT HAS BEEN REPRESENTED IN
THE SIGNING OF THIS NOTE AND IN THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL, SELECTED OF ITS OWN FREE WILL, AND/OR THAT IT HAS HAD THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH COUNSEL. 
  
 16. Heading; References. All headings used herein are used for
convenience only and shall not be used to construe or interpret this Note. Except as otherwise indicated, all references herein to Sections refer to Sections hereof. 
  
 [the remainder of this page intentionally left blank] 
  

 13 

 IN WITNESS WHEREOF, the Company has caused this Note to be issued this     
day of December, 2004. 
  

							
	COMPANY:
		
	 	 	 CRITICAL PATH, INC.,
 a California
corporation

			
	 	 	By:	 	 
	 	 	 	 	 Name:
	 	 
	 	 	 	 	 Title:
	 	 
		
	 	 	 Critical Path, Inc.
 350 The Embarcadero
 San Francisco, CA 94105-1204
 Telecopy: (415) 541-2300
 Attention: Chief Financial Officer

		
	 	 	 With a copy to:

		
	 	 	 Paul, Hastings, Janofsky & Walker, LLP
 55 Second Street, 24th Floor
 San
Francisco, California 94105-3441
 Telecopy: (415) 856-7100
 Attention: Gregg Vignos, Esq.

  
 Name of Holder: 
  
 Address: 
  
 Telephone: 
  
 Facsimile:

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