Document:

ex10_19.htm

    
      

      
        

      

      

      

       

      NEITHER
THIS SECURITY NOR THE SECURITIES FOR WHICH THIS SECURITY IS EXERCISABLE HAVE
BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY,
MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM,
OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS
EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE
SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY.  THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF
THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR
OTHER LOAN SECURED BY SUCH SECURITIES.

      

      SERIES
C COMMON STOCK PURCHASE WARRANT

      

       T3
MOTION, INC.

       

       

      Warrant
Shares:
1,298,701                                                                                                                                        Initial
Exercise Date: March ___, 2008

      

       

      THIS
SERIES C COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies
that, for value received, Vision Opportunity Master Fund, Ltd. (the “Holder”) is entitled,
upon the terms and subject to the limitations on exercise and the conditions
hereinafter set forth, at any time on or after the date hereof (the “Initial Exercise
Date”) and on or prior to the close of business on the five year
anniversary of the Initial Exercise Date (the “Termination Date”)
but not thereafter, to subscribe for and purchase from T3 Motion, Inc., a
Delaware corporation (the “Company”), up to
1,298,701 shares (the “Warrant Shares”) of
Common Stock.  The purchase price of one share of Common Stock under
this Warrant shall be equal to the Exercise Price, as defined in Section
2(b).

       

      Section
1.                                Definitions.  Capitalized
terms used and not otherwise defined herein shall have the meanings set forth in
that certain Securities Purchase Agreement (the “Purchase Agreement”),
dated March ___, 2008, among the Company and the purchasers signatory
thereto.

       

      Section
2.                                Exercise.

       

      a)           Exercise of
Warrant.  Exercise of the purchase rights represented by this
Warrant may be made, in whole or in part, at any time or times on or after the
Initial Exercise Date and on or before the Termination Date by delivery to the
Company (or such other office or agency of the Company as it may designate by
notice in writing to the registered Holder at the address of the Holder
appearing on the books of the Company) of a duly executed facsimile copy of the
Notice of Exercise Form annexed hereto; and, within 3 Business Days of the date
said Notice of Exercise is delivered to the Company, the Company shall have
received  payment of the aggregate Exercise Price of the shares
thereby purchased by wire transfer or cashier’s check drawn on a United States
bank.  Notwithstanding anything herein to the contrary, the Holder
shall not be required to physically surrender this Warrant to the Company until
the Holder has purchased all of the Warrant Shares available hereunder and the
Warrant has been exercised in full, in which case, the Holder shall surrender
this Warrant to the Company for cancellation within 3 Business Days of the date
the final Notice of Exercise is delivered to the Company.  Partial
exercises of this Warrant resulting in purchases of a portion of the total
number of Warrant Shares available hereunder shall have the effect of lowering
the outstanding number of Warrant Shares purchasable hereunder in an amount
equal to the applicable number of Warrant Shares purchased.  The
Holder and the Company shall maintain records showing the number of Warrant
Shares purchased and the date of such purchases.  The Company shall
deliver any objection to any Notice of Exercise Form within 1 Business Day of
receipt of such notice.  In the event of any dispute or discrepancy,
the records of the Holder shall be controlling and determinative in the absence
of manifest error. The Holder
and any assignee, by acceptance of this Warrant, acknowledge and agree that, by
reason of the provisions of this paragraph, following the purchase of a portion
of the Warrant Shares hereunder, the number of Warrant Shares available for
purchase hereunder at any given time may be less than the amount stated on the
face hereof.

       

      

      
        
          
             

          

          
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      b)           Exercise
Price.  The exercise price per share of the Common Stock under
this Warrant shall be $2.00 subject to adjustment hereunder (the “Exercise
Price”).

       

      c)           Cashless
Exercise.  If at any time after the earlier of (i) the one year
anniversary of the date of the Purchase Agreement and (ii) the one year from the
Reporting Date (if, and only if, the Company actually becomes an Exchange Act
reporting company), there is no effective Registration Statement registering, or
no current prospectus available for, the resale of the Warrant Shares by the
Holder, then this Warrant may also be exercised at such time by means of a
“cashless exercise” in which the Holder shall be entitled to receive a
certificate for the number of Warrant Shares equal to the quotient obtained by
dividing [(A-B) (X)] by (A), where:

       

      
        
          
          

          
            	 (A)=	 the VWAP on
      the Business Day immediately preceding the date of the delivery of the
      Notice of Exercise;
	 	 
	 (B)=	 the Exercise
      Price of this Warrant, as adjusted: and
	 	 
	 (X)=	 the number of
      Warrant Shares issuable upon exercise of this Warrant in accordance with
      the terms of this Warrant by means of a cash exercise rather than a
      cashless exercise.
	 	 

          

        

      

       

       

      

      
        
          
             

          

          
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      d)           Exercise Limitations.
The Company shall not effect any exercise of this Warrant, and a Holder shall
not have the right to exercise any portion of this Warrant, pursuant
to Section 2 or otherwise, to the extent that after giving effect to such
issuance after exercise as set forth on the applicable Notice of Exercise, the
Holder (together with the Holder’s Affiliates, and any other person or entity
acting as a group together with the Holder or any of the Holder’s Affiliates),
would beneficially own in excess of the Beneficial Ownership Limitation (as
defined below).  For purposes of the foregoing sentence, the number of
shares of Common Stock beneficially owned by the Holder and its Affiliates shall
include the number of shares of Common Stock issuable upon exercise of this
Warrant with respect to which such determination is being made, but shall
exclude the number of shares of Common Stock which would be issuable upon (A)
exercise of the remaining, nonexercised portion of this Warrant beneficially
owned by the Holder or any of its Affiliates and (B) exercise or conversion of
the unexercised or nonconverted portion of any other securities of the Company
(including, without limitation, any other  Common Stock Equivalents)
subject to a limitation on conversion or exercise analogous to the limitation
contained herein beneficially owned by the Holder or any of its
affiliates.  Except as set forth in the preceding sentence, for purposes of
this Section 2(d), beneficial ownership shall be calculated in accordance with
Section 13(d) of the Exchange Act and the rules and regulations promulgated
thereunder, it being acknowledged by the Holder that the Company is not
representing to the Holder that such calculation is in compliance with Section
13(d) of the Exchange Act and the Holder is solely responsible for any schedules
required to be filed in accordance therewith.   To the extent
that the limitation contained in this Section 2(d) applies, the determination of
whether this Warrant is exercisable (in relation to other securities owned by
the Holder together with any Affiliates) and of which portion of this Warrant is
exercisable shall be in the sole discretion of the Holder, and the submission of
a Notice of Exercise shall be deemed to be the Holder’s determination of whether
this Warrant is exercisable (in relation to other securities owned by the Holder
together with any Affiliates) and of which portion of this Warrant is
exercisable, in each case subject to the Beneficial Ownership Limitation, and
the Company shall have no obligation to verify or confirm the accuracy of such
determination.   In addition, a determination as to any group
status as contemplated above shall be determined in accordance with Section
13(d) of the Exchange Act and the rules and regulations promulgated
thereunder.  For purposes of this Section 2(d), in determining the
number of outstanding shares of Common Stock, a Holder may rely on the number of
outstanding shares of Common Stock as reflected in (A) the Company’s most recent
periodic or annual report, as the case may be, (B) a more recent public
announcement by the Company or (C) any other notice by the Company or the
Transfer Agent setting forth the number of shares of Common Stock
outstanding.  Upon the written or oral request of a Holder, the Company
shall within two Business Days confirm orally and in writing to the Holder the
number of shares of Common Stock then outstanding.  In any case, the number
of outstanding shares of Common Stock shall be determined after giving effect to
the conversion or exercise of securities of the Company, including this Warrant,
by the Holder or its Affiliates since the date as of which such number of
outstanding shares of Common Stock was reported.  The “Beneficial Ownership
Limitation” shall be 4.99% of the number of shares of the Common Stock
outstanding immediately after giving effect to the issuance of shares of Common
Stock issuable upon exercise of this Warrant.  The Holder, upon not
less than 61 days’ prior notice to the Company (unless there are less than 61
days remaining until the Termination Date, in which case such notice period
shall be one day less than the number of days remaining until the Termination
Date), may waive the Beneficial Ownership Limitation provisions of this Section
2(d).  Any such waiver will not be effective until the 61st day after
such notice is delivered to the Company (or such shorter period described in the
previous sentence if there are less than 61 days remaining until the Termination
Date).  The provisions of this paragraph shall be construed and
implemented in a manner otherwise than in strict conformity with the terms of
this Section 2(d) to correct this paragraph (or any portion hereof) which may be
defective or inconsistent with the intended Beneficial Ownership Limitation
herein contained or to make changes or supplements necessary or desirable to
properly give effect to such limitation. The limitations contained in this
paragraph shall apply to a successor holder of this Warrant.

       

      

      
        
          
             

          

          
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      e)           Mechanics of
Exercise.

       

      i.      Delivery of Certificates
Upon Exercise.  Certificates for shares purchased hereunder
shall be transmitted by the Transfer Agent to the Holder by crediting the
account of the Holder’s prime broker with the Depository Trust Company through
its Deposit Withdrawal Agent Commission (“DWAC”) system if the
Company is then a participant in such system and either (A) there is an
effective Registration Statement permitting the resale of the Warrant Shares by
the Holder or (B) the shares are eligible for resale without volume or
manner-of-sale limitations pursuant to Rule 144, and otherwise by physical
delivery to the address specified by the Holder in the Notice of Exercise within
7 Business Days from the delivery to the Company of the Notice of Exercise Form,
surrender of this Warrant (if required) and payment of the aggregate Exercise
Price as set forth above (the “Warrant Share Delivery
Date”).  This Warrant shall be deemed to have been exercised on
the date the Exercise Price is received by the Company.  The Warrant
Shares shall be deemed to have been issued, and Holder or any other person so
designated to be named therein shall be deemed to have become a holder of record
of such shares for all purposes, as of the date the Warrant has been exercised
by payment to the Company of the Exercise Price (or by cashless exercise, if
permitted) and all taxes required to be paid by the Holder, if any, pursuant to
Section 2(e)(vi) prior to the issuance of such shares, have been
paid.

       

      ii.           Delivery of New Warrants
Upon Exercise.  If this Warrant shall have been exercised in
part, the Company shall, at the request of a Holder and upon surrender of this
Warrant certificate, at the time of delivery of the certificate or certificates
representing Warrant Shares, deliver to Holder a new Warrant evidencing the
rights of Holder to purchase the unpurchased Warrant Shares called for by this
Warrant, which new Warrant shall in all other respects be identical with this
Warrant.

       

      

      
        
          
             

          

          
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      iii.           Rescission
Rights.  If the Company fails to cause the Transfer Agent to
transmit to the Holder a certificate or the certificates representing the
Warrant Shares pursuant to Section 2(e)(i) by the Warrant Share Delivery Date,
then, the Holder will have the right to rescind such exercise.

       

      iv.           Compensation for Buy-In on
Failure to Timely Deliver Certificates Upon Exercise.  In
addition to any other rights available to the Holder, if the Company fails to
cause the Transfer Agent to transmit to the Holder a certificate or the
certificates representing the Warrant Shares pursuant to an exercise on or
before the Warrant Share Delivery Date, and if after such date the Holder is
required by its broker to purchase (in an open market transaction or otherwise)
or the Holder’s brokerage firm otherwise purchases, shares of Common Stock to
deliver in satisfaction of a sale by the Holder of the Warrant Shares which the
Holder anticipated receiving upon such exercise (a “Buy-In”), then the
Company shall (A) pay in cash to the Holder the amount by which (x) the Holder’s
total purchase price (including brokerage commissions, if any) for the shares of
Common Stock so purchased exceeds (y) the amount obtained by multiplying (1) the
number of Warrant Shares that the Company was required to deliver to the Holder
in connection with the exercise at issue times (2) the price at which the sell
order giving rise to such purchase obligation was executed, and (B) at the
option of the Holder, either reinstate the portion of the Warrant and equivalent
number of Warrant Shares for which such exercise was not honored or deliver to
the Holder the number of shares of Common Stock that would have been issued had
the Company timely complied with its exercise and delivery obligations
hereunder.  For example, if the Holder purchases Common Stock having a
total purchase price of $11,000 to cover a Buy-In with respect to an attempted
exercise of shares of Common Stock with an aggregate sale price giving rise to
such purchase obligation of $10,000, under clause (A) of the immediately
preceding sentence the Company shall be required to pay the Holder $1,000. The
Holder shall provide the Company written notice indicating the amounts payable
to the Holder in respect of the Buy-In and, upon request of the Company,
evidence of the amount of such loss.  Nothing herein shall limit a
Holder’s right to pursue any other remedies available to it hereunder, at law or
in equity including, without limitation, a decree of specific performance and/or
injunctive relief with respect to the Company’s failure to timely deliver
certificates representing shares of Common Stock upon exercise of the Warrant as
required pursuant to the terms hereof.

       

      v.      No Fractional Shares or
Scrip.  No fractional shares or scrip representing fractional
shares shall be issued upon the exercise of this Warrant.  As to any
fraction of a share which Holder would otherwise be entitled to purchase upon
such exercise, the Company shall, at its election, either pay a cash adjustment
in respect of such final fraction in an amount equal to
such fraction multiplied by the Exercise Price or round up to the next whole
share.

       

      

      
        
          
             

          

          
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      vi.           Charges, Taxes and
Expenses.  Issuance of certificates for Warrant Shares shall be
made without charge to the Holder for any issue or transfer tax or other
incidental expense in respect of the issuance of such certificate, all of which
taxes and expenses shall be paid by the Company, and such certificates shall be
issued in the name of the Holder or in such name or names as may be directed by
the Holder; provided, however, that in the
event certificates for Warrant Shares are to be issued in a name other than the
name of the Holder, this Warrant when surrendered for exercise shall be
accompanied by the Assignment Form attached hereto duly executed by the Holder
and the Company may require, as a condition thereto, the payment of a sum
sufficient to reimburse it for any transfer tax incidental thereto.

       

      vii.           Closing of
Books.  The Company will not close its stockholder books or
records in any manner which prevents the timely exercise of this Warrant,
pursuant to the terms hereof.

       

      Section
3.             Certain
Adjustments.

       

      a)           Stock Dividends and
Splits. If the Company, at any time while this Warrant is outstanding:
(i) pays a stock dividend or otherwise make a distribution or distributions on
shares of its Common Stock or any other equity or equity equivalent securities
payable in shares of Common Stock (which, for avoidance of doubt, shall not
include any shares of Common Stock issued by the Company upon exercise of this
Warrant), (ii) subdivides outstanding shares of Common Stock into a larger
number of shares, (iii) combines (including by way of reverse stock split)
outstanding shares of Common Stock into a smaller number of shares or (iv)
issues by reclassification of shares of the Common Stock any shares of capital
stock of the Company, then in each case the Exercise Price shall be multiplied
by a fraction of which the numerator shall be the number of shares of Common
Stock (excluding treasury shares, if any) outstanding immediately before such
event and of which the denominator shall be the number of shares of Common Stock
outstanding immediately after such event and the number of shares issuable upon
exercise of this Warrant shall be proportionately adjusted such that the
aggregate Exercise Price of this Warrant shall remain unchanged.  Any
adjustment made pursuant to this Section 3(a) shall become effective immediately
after the record date for the determination of stockholders entitled to receive
such dividend or distribution and shall become effective immediately after the
effective date in the case of a subdivision, combination or
re-classification.

       

       

      

      
        
          
             

          

          
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        b)           Subsequent Equity
Sales. If the Company or any Subsidiary thereof, as applicable, at any
time while this Warrant is outstanding, shall sell or grant any option to
purchase, or sell or grant any right to reprice, or otherwise dispose of or
issue (or announce any offer, sale, grant or any option to purchase or other
disposition) any Common Stock or Common Stock Equivalents entitling any Person
to acquire shares of Common
Stock, at an effective price per share less than the then Exercise Price (such
lower price, the “Base
Share Price” and such issuances collectively, a “Dilutive Issuance”)
(if the holder of the Common Stock or Common Stock Equivalents so issued shall
at any time, whether by operation of purchase price adjustments, reset
provisions, floating conversion, exercise or exchange prices or otherwise, or
due to warrants, options or rights per share which are issued in connection with
such issuance, be entitled to receive shares of Common Stock at an effective
price per share which is less than the Exercise Price, such issuance shall be
deemed to have occurred for less than the Exercise Price on such date of the
Dilutive Issuance), then, the Exercise Price shall be reduced by multiplying the
Exercise Price by a fraction, the numerator of which is the number of shares of
Common Stock issued and outstanding immediately prior to the Dilutive Issuance
plus the number of shares of Common Stock which the offering price for such
Dilutive Issuance would purchase at the then Exercise Price, and the denominator
of which shall be the sum of the number of shares of Common Stock issued and
outstanding immediately prior to the Dilutive Issuance plus the number of shares
of Common Stock so issued or issuable in connection with the Dilutive Issuance.
Additionally, the number of Warrant Shares issuable hereunder shall be increased
such that the aggregate Exercise Price payable hereunder, after taking into
account the decrease in the Exercise Price, shall be equal to the aggregate
Exercise Price prior to such adjustment.  Such adjustment shall be
made whenever such Common Stock or Common Stock Equivalents are
issued.  Notwithstanding the foregoing, no adjustments shall be made,
paid or issued under this Section 3(b) in respect of an Exempt
Issuance.  The Company shall notify the Holder, in writing, no later
than the Business Day following the issuance of any Common Stock or Common Stock
Equivalents subject to this Section 3(b), indicating therein the applicable
issuance price, or applicable reset price, exchange price, conversion price and
other pricing terms (such notice, the “Dilutive Issuance
Notice”).  For purposes of clarification, whether or not the
Company provides a Dilutive Issuance Notice pursuant to this Section 3(b), upon
the occurrence of any Dilutive Issuance, after the date of such Dilutive
Issuance the Holder is entitled to receive a number of Warrant Shares based upon
the Base Share Price regardless of whether the Holder accurately refers to the
Base Share Price in the Notice of Exercise.

      

       

      c)           Subsequent Rights
Offerings.  If the Company, at any time while the Warrant is
outstanding, shall issue rights, options or warrants to all holders of Common
Stock (and not to Holders) entitling them to subscribe for or purchase shares of
Common Stock at a price per share less than the VWAP at the record date
mentioned below, then, the Exercise Price shall be multiplied by a fraction, of
which the denominator shall be the number of shares of the Common Stock
outstanding on the date of issuance of such rights or warrants plus the number
of additional shares of Common Stock offered for subscription or purchase, and
of which the numerator shall be the number of shares of the Common Stock
outstanding on the date of issuance of such rights or warrants plus the number
of shares which the aggregate offering price of the total number of shares so
offered (assuming receipt by the Company in full of all consideration payable
upon exercise of such rights, options or warrants) would purchase at such
VWAP.  Such adjustment shall be made whenever such rights or warrants
are issued, and shall become effective immediately after the record date for the
determination of stockholders entitled to receive such rights, options or
warrants.

       

      

      
        
          
             

          

          
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      d)           Pro Rata
Distributions.  If the Company, at any time while this Warrant
is outstanding, shall distribute to all holders of Common Stock (and not to
Holders of the Warrants) evidences of its indebtedness or assets (including cash
and cash dividends) or rights or warrants to subscribe for or purchase any
security other than the Common Stock (which shall be subject to Section 3(b)),
then in each such case the Exercise Price shall be adjusted by multiplying the
Exercise Price in effect immediately prior to the record date fixed for
determination of stockholders entitled to receive such distribution by a
fraction of which the denominator shall be the VWAP determined as of the record
date mentioned above, and of which the numerator shall be such VWAP on such
record date less the then per share fair market value at such record date of the
portion of such assets or evidence of indebtedness so distributed applicable to
one outstanding share of the Common Stock as determined by the Board of
Directors in good faith.  In either case the adjustments shall be
described in a statement provided to the Holder of the portion of assets or
evidences of indebtedness so distributed or such subscription rights applicable
to one share of Common Stock.  Such adjustment shall be made whenever
any such distribution is made and shall become effective immediately after the
record date mentioned above.

       

      e)           Fundamental
Transaction. If, at any time while this Warrant is outstanding, (i) the
Company effects any merger or consolidation of the Company with or into another
Person, (ii) the Company effects any sale of all or substantially all of its
assets in one or a series of related transactions, (iii) any tender offer or
exchange offer (whether by the Company or another Person) is completed pursuant
to which holders of Common Stock are permitted to tender or exchange their
shares for other securities, cash or property or (iv) the Company effects any
reclassification of the Common Stock or any compulsory share exchange pursuant
to which the Common Stock is effectively converted into or exchanged for other
securities, cash or property (each “Fundamental
Transaction”), then, upon any subsequent exercise of this Warrant, the
Holder shall have the right to receive, for each Warrant Share that would have
been issuable upon such exercise immediately prior to the occurrence of such
Fundamental Transaction, the number of shares of Common Stock of the successor
or acquiring corporation or of the Company, if it is the surviving corporation,
and any additional consideration (the “Alternate
Consideration”) receivable as a result of such merger, consolidation or
disposition of assets by a holder of the number of shares of Common Stock for
which this Warrant is exercisable immediately prior to such event. For purposes
of any such exercise, the determination of the Exercise Price shall be
appropriately adjusted to apply to such Alternate Consideration based on the
amount of Alternate Consideration issuable in respect of one share of Common
Stock in such Fundamental Transaction, and the Company shall apportion the
Exercise Price among the Alternate Consideration in a reasonable manner
reflecting the relative value of any different components of the Alternate
Consideration.  If holders of Common Stock are given any choice as to
the securities, cash or property to be received in a Fundamental Transaction,
then the Holder shall be given the same choice as to the Alternate Consideration
it receives upon any exercise of this Warrant following such Fundamental
Transaction.

       

      f)           Calculations. All
calculations under this Section 3 shall be made to the nearest cent or the
nearest 1/100th of a share, as the case may be. For purposes of this Section 3,
the number of shares of Common Stock deemed to be issued and outstanding as of a
given date shall be the sum of the number of shares of Common Stock (excluding
treasury shares, if any) issued and outstanding.

       

      

      
        
          
             

          

          
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      g)           Notice to
Holder.

       

      i.      Adjustment to Exercise
Price. Whenever the Exercise Price is adjusted pursuant to any provision
of this Section 3, the Company shall promptly mail to the Holder a notice
setting forth the Exercise Price after such adjustment and setting forth a brief
statement of the facts requiring such adjustment. If the Company enters into a
Variable Rate Transaction, despite the prohibition thereon in the Purchase
Agreement, the Company shall be deemed to have issued Common Stock or Common
Stock Equivalents at the lowest possible conversion or exercise price at which
such securities may be converted or exercised.

       

      ii.           Notice to Allow Exercise by
Holder. If (A) the Company shall declare a dividend (or any other
distribution in whatever form) on the Common Stock, (B) the Company shall
declare a special nonrecurring cash dividend on or a redemption of the Common
Stock, (C) the Company shall authorize the granting to all holders of the Common
Stock rights or warrants to subscribe for or purchase any shares of capital
stock of any class or of any rights, (D) the approval of any stockholders of the
Company shall be required in connection with any reclassification of the Common
Stock, any consolidation or merger to which the Company is a party, any sale or
transfer of all or substantially all of the assets of the Company, of any
compulsory share exchange whereby the Common Stock is converted into other
securities, cash or property, or (E) the Company shall authorize the voluntary
or involuntary dissolution, liquidation or winding up of the affairs of the
Company, then, in each case, the Company shall cause to be mailed to the Holder
at its last address as it shall appear upon the Warrant Register of the Company,
at least 20 calendar days prior to the applicable record or effective date
hereinafter specified, a notice stating (x) the date on which a record is to be
taken for the purpose of such dividend, distribution, redemption, rights or
warrants, or if a record is not to be taken, the date as of which the holders of
the Common Stock of record to be entitled to such dividend, distributions,
redemption, rights or warrants are to be determined or (y) the date on which
such reclassification, consolidation, merger, sale, transfer or share exchange
is expected to become effective or close, and the date as of which it is
expected that holders of the Common Stock of record shall be entitled to
exchange their shares of the Common Stock for securities, cash or other property
deliverable upon such reclassification, consolidation, merger, sale, transfer or
share exchange; provided that the failure to mail such notice or any defect
therein or in the mailing thereof shall not affect the validity of the corporate
action required to be specified in such notice.  The Holder is
entitled to exercise this Warrant during the period commencing
on the date of such notice to the effective date of the event triggering such
notice.

       

      

      
        
          
             

          

          
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      Section
4.             Transfer of
Warrant.

       

      a)           Transferability.  Subject
to compliance with any applicable securities laws and the conditions set forth
in Section 4(d) hereof and to the provisions of Section 4.1 of the Purchase
Agreement, this Warrant and all rights hereunder (including, without limitation,
any registration rights unless inclusion of such transferee would require filing
a post-effective amendment) are transferable, in whole or in part, upon
surrender of this Warrant at the principal office of the Company or its
designated agent, together with a written assignment of this Warrant
substantially in the form attached hereto duly executed by the Holder or its
agent or attorney and funds sufficient to pay any transfer taxes payable upon
the making of such transfer.  The assignee shall also agree to all
terms of the Transaction Documents as applicable.  Upon such surrender
and, if required, such payment, the Company shall execute and deliver a new
Warrant or Warrants in the name of the assignee or assignees, as applicable, and
in the denomination or denominations specified in such instrument of assignment,
and shall issue to the assignor a new Warrant evidencing the portion of this
Warrant not so assigned, and this Warrant shall promptly be
cancelled.  The Warrant, if properly assigned, may be exercised by a
new holder for the purchase of Warrant Shares without having a new Warrant
issued.

       

      b)           New Warrants. This
Warrant may be divided or combined with other Warrants upon presentation hereof
at the aforesaid office of the Company, together with a written notice
specifying the names and denominations in which new Warrants are to be issued,
signed by the Holder or its agent or attorney.  Subject to compliance
with Section 4(a), as to any transfer which may be involved in such division or
combination, the Company shall execute and deliver a new Warrant or Warrants in
exchange for the Warrant or Warrants to be divided or combined in accordance
with such notice. All Warrants issued on transfers or exchanges shall be dated
the original Issue Date and shall be identical with this Warrant except as to
the number of Warrant Shares issuable pursuant thereto.

       

      c)           Warrant Register. The
Company shall register this Warrant, upon records to be maintained by the
Company for that purpose (the “Warrant Register”),
in the name of the record Holder hereof from time to time.  The
Company may deem and treat the registered Holder of this Warrant as the absolute
owner hereof for the purpose of any exercise hereof or any distribution to the
Holder, and for all other purposes, absent actual notice to the
contrary.

       

      d)           Transfer
Restrictions. If, at the time of the surrender of this Warrant in connection with
any transfer of this Warrant, the transfer of this Warrant shall not be
either (i) registered pursuant to an effective
registration statement under the Securities
Act and under applicable state securities
or blue sky laws or (ii) eligible for
resale without volume or manner-of-sale restrictions pursuant to Rule
144, the Company may require, as a
condition of allowing such transfer, that
the Holder or transferee of this Warrant, as the case may be, comply with the provisions of Section 5.7 of the
Purchase Agreement.

       

      

      
        
          
             

          

          
            -10-

            
              

            

          

          
             

          

        

      

      

       

      Section
5.             Miscellaneous.

       

      a)           No Rights as Stockholder
Until Exercise.  This Warrant does not entitle the Holder to
any voting rights or other rights as a stockholder of the Company prior to the
exercise hereof as set forth in Section 2(e)(i).

       

      b)           Loss, Theft, Destruction or
Mutilation of Warrant. The Company covenants that upon receipt by the
Company of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant or any stock certificate relating to
the Warrant Shares, and in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to it (which, in the case of the Warrant, shall
not include the posting of any bond), and upon surrender and cancellation of
such Warrant or stock certificate, if mutilated, the Company will make and
deliver a new Warrant or stock certificate of like tenor and dated as of such
cancellation, in lieu of such Warrant or stock certificate.

       

      c)           Saturdays, Sundays,
Holidays, etc.  If the last or appointed day for the taking of
any action or the expiration of any right required or granted herein shall not
be a Business Day, then, such action may be taken or such right may be exercised
on the next succeeding Business Day.

       

      d)           Authorized
Shares.

       

      The
Company covenants that, during the period the Warrant is outstanding, it will
reserve from its authorized and unissued Common Stock a sufficient number of
shares to provide for the issuance of the Warrant Shares upon the exercise of
any purchase rights under this Warrant.  The Company further covenants
that its issuance of this Warrant shall constitute full authority to its
officers who are charged with the duty of executing stock certificates to
execute and issue the necessary certificates for the Warrant Shares upon the
exercise of the purchase rights under this Warrant.  The Company will
take all such reasonable action as may be necessary to assure that such Warrant
Shares may be issued as provided herein without violation of any applicable law
or regulation, or of any requirements of the Trading Market upon which the
Common Stock may be listed.  The Company covenants that all Warrant
Shares which may be issued upon the exercise of the purchase rights represented
by this Warrant will, upon exercise of the purchase rights represented by this
Warrant, be duly authorized, validly issued, fully paid and nonassessable and
free from all taxes, liens and charges created by the Company in respect of the
issue thereof (other than taxes in respect of any transfer occurring
contemporaneously with such issue).

       

       

      

      
        
          
             

          

          
            -11-

            
              

            

          

          
             

          

        

      

       

      
        Except
and to the extent as waived or consented to by the Holder, the Company shall not
by any action, including, without limitation, amending its certificate
of incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms of this Warrant, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such actions as may be
necessary or appropriate to protect the rights of Holder as set forth in this
Warrant against impairment.  Without limiting the generality of the
foregoing, the Company will (i) not increase the par value of any Warrant Shares
above the amount payable therefor upon such exercise immediately prior to such
increase in par value, (ii) take all such action as may be necessary or
appropriate in order that the Company may validly and legally issue fully paid
and nonassessable Warrant Shares upon the exercise of this Warrant and (iii) use
commercially reasonable efforts to obtain all such authorizations, exemptions or
consents from any public regulatory body having jurisdiction thereof, as may be,
necessary to enable the Company to perform its obligations under this
Warrant.

         

      

      Before
taking any action which would result in an adjustment in the number of Warrant
Shares for which this Warrant is exercisable or in the Exercise Price, the
Company shall obtain all such authorizations or exemptions thereof, or consents
thereto, as may be necessary from any public regulatory body or bodies having
jurisdiction thereof.

       

      e)           Jurisdiction. All
questions concerning the construction, validity, enforcement and interpretation
of this Warrant shall be determined in accordance with the provisions of the
Purchase Agreement.

       

      f)           Restrictions.  The
Holder acknowledges that the Warrant Shares acquired upon the exercise of this
Warrant, if not registered, will have restrictions upon resale imposed by state
and federal securities laws.

       

      g)           Nonwaiver and
Expenses.  No course of dealing or any delay or failure to
exercise any right hereunder on the part of Holder shall operate as a waiver of
such right or otherwise prejudice Holder’s rights, powers or remedies,
notwithstanding the fact that all rights hereunder terminate on the Termination
Date.  If the Company willfully and knowingly fails to comply with any
provision of this Warrant, which results in any material damages to the Holder,
the Company shall pay to Holder such amounts as shall be sufficient to cover any
costs and expenses including, but not limited to, reasonable attorneys’ fees,
including those of appellate proceedings, incurred by Holder in collecting any
amounts due pursuant hereto or in otherwise enforcing any of its rights, powers
or remedies hereunder.

       

      h)           Notices.  Any
notice, request or other document required or permitted to be given or delivered
to the Holder by the Company shall be delivered in accordance with the notice
provisions of the Purchase Agreement.

       

      i)           Limitation of
Liability.  No provision hereof, in the absence of any
affirmative action by Holder to exercise this Warrant to purchase Warrant
Shares, and no enumeration
herein of the rights or privileges of Holder, shall give rise to any liability
of Holder for the purchase price of any Common Stock or as a stockholder of the
Company, whether such liability is asserted by the Company or by creditors of
the Company.

       

      

      
        
          
             

          

          
            -12-

            
              

            

          

          
             

          

        

      

      

       

      j)           Remedies.  The
Holder, in addition to being entitled to exercise all rights granted by law,
including recovery of damages, will be entitled to specific performance of its
rights under this Warrant.  The Company agrees that monetary damages
would not be adequate compensation for any loss incurred by reason of a breach
by it of the provisions of this Warrant and hereby agrees to waive and not to
assert the defense in any action for specific performance that a remedy at law
would be adequate.

       

      k)           Successors and
Assigns.  Subject to applicable securities laws, this Warrant
and the rights and obligations evidenced hereby shall inure to the benefit of
and be binding upon the successors of the Company and the successors and
permitted assigns of Holder.  The provisions of this Warrant are
intended to be for the benefit of all Holders from time to time of this Warrant
and shall be enforceable by the Holder or holder of Warrant Shares.

       

      l)           Amendment.  This
Warrant may be modified or amended or the provisions hereof waived with the
written consent of the Company and Holders holding Warrants at least equal to
67% of the Warrant Shares issuable upon exercise of all then outstanding
Warrants.

       

      m)           Severability.  Wherever
possible, each provision of this Warrant shall be interpreted in such manner as
to be effective and valid under applicable law, but if any provision of this
Warrant shall be prohibited by or invalid under applicable law, such provision
shall be ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provisions or the remaining provisions of
this Warrant.

       

      n)           Headings.  The
headings used in this Warrant are for the convenience of reference only and
shall not, for any purpose, be deemed a part of this Warrant.

       

      

      ********************

      

      

      (Signature
Pages Follow)

       

      

      
        
          
             

          

          
            -13-

            
              

            

          

          
             

          

        

      

      

      

      

      IN
WITNESS WHEREOF, the Company has caused this Warrant to be executed by its
officer thereunto duly authorized as of the date first above
indicated.

       

      

      
 

      
        	
                T3
      MOTION, INC.

                 

                 

              
	
                By:__________________________________________

                     Name:

                     Title:

                 

              

      

      

      

      

      
        
          
             

          

          
            -14-

            
              

            

          

          
             

          

        

      

      

      

      NOTICE
OF EXERCISE

      

      TO:           T3
MOTION, INC.

      

      (1)           The
undersigned hereby elects to purchase ________ Warrant Shares of the Company
pursuant to the terms of the attached Warrant (only if exercised in full), and
tenders herewith payment of the exercise price in full, together with all
applicable transfer taxes, if any.

       

      (2)           Payment
shall take the form of (check applicable box):

       

      [  ]
in lawful money of the United States; or

       

      [ ] [if
permitted] the cancellation of such number of Warrant Shares as is necessary, in
accordance with the formula set forth in subsection 2(c), to exercise this
Warrant with respect to the maximum number of Warrant Shares purchasable
pursuant to the cashless exercise procedure set forth in subsection
2(c).

       

      (3)           Please
issue a certificate or certificates representing said Warrant Shares in the name
of the undersigned or in such other name as is specified below:

       

      _______________________________

      

      

      The
Warrant Shares shall be delivered to the following DWAC Account Number or by
physical delivery of a certificate to:

      

      _______________________________

      

      _______________________________

      

      _______________________________

      

      (4)  Accredited
Investor.  The undersigned is an “accredited investor” as
defined in Regulation D promulgated under the Securities Act of 1933, as
amended.

      

      [SIGNATURE
OF HOLDER]

      

      Name of
Investing Entity:
________________________________________________________________________

      Signature of Authorized Signatory of
Investing Entity:
_________________________________________________

      Name of
Authorized Signatory:
___________________________________________________________________

      Title of
Authorized Signatory:
____________________________________________________________________

      Date:
________________________________________________________________________________________

      

      

      

      

      
        
          
             

          

          
            -15-

            
              

            

          

          
             

          

        

      

      

      

       

      ASSIGNMENT
FORM

      

      (To
assign the foregoing warrant, execute

      this form
and supply required information.

      Do not
use this form to exercise the warrant.)

      

      

      

      FOR VALUE
RECEIVED, [____] all of or [_______] shares of the foregoing Warrant and all
rights evidenced thereby are hereby assigned to

       

      

      _______________________________________________
whose address is

      

      _______________________________________________________________.

      

      

      

      _______________________________________________________________

      

      Dated:  ______________,
_______

      

      

      Holder’s
Signature:                                         _____________________________

      

      Holder’s
Address:                                           _____________________________

      

                                
 _____________________________

      

      

      

      Signature
Guaranteed:  ___________________________________________

      

      

      NOTE:  The
signature to this Assignment Form must correspond with the name as it appears on
the face of the Warrant, without alteration or enlargement or any change
whatsoever, and must be guaranteed by a bank or trust
company.  Officers of corporations and those acting in a fiduciary or
other representative capacity should file proper evidence of authority to assign
the foregoing Warrant.

      

       

      

      
        
          
             

          

          
            -16-ex10-1.htm

     

    Exhibit 10.1

    FIRST
AMENDMENT

     

    TO

     

    THIRD AMENDED AND RESTATED
LOAN AGREEMENT

     

    
      

      This
First Amendment to Third Amended and Restated Loan Agreement (this “Amendment”) is made
as of the 12th day of May, 2008, by and among

       

      Brown
Brothers Harriman & Co. (hereinafter, the “Administrative Agent”), a
general partnership organized under the laws of the State of New York with
offices at 40 Water Street, Boston, Massachusetts 02109; and

       

      TD
Banknorth, N.A. (hereinafter, the “Documentation Agent”) a
national banking association with offices at 7 New England Executive Park,
Burlington, Massachusetts 01803; and

       

      Bank of
America, N.A. (hereinafter, the “Syndication Agent”), and,
together with the Administrative Agent and the Documentation Agent, the “Agents”), a national
banking  association with offices at 100 Federal Street, Boston,
Massachusetts 02110,

       

      as Agents
on behalf of Brown Brothers Harriman & Co., TD Banknorth, N.A., Bank of
America, N.A., and the other financial institutions which may hereafter become
parties to the Loan Agreement (as defined below) (each such party a “Lender” and collectively the
“Lenders”),

       

      and

       

      Dynamics
Research Corporation (hereinafter, the “Lead Borrower”), a
Massachusetts corporation, with its principal executive offices at 60 Frontage
Road, Andover, Massachusetts, as agent for itself and each of

       

      DRC
International Corporation (“International”), a
Massachusetts corporation with its principal executive offices at 60 Frontage
Road, Andover, Massachusetts; and

       

      H.J. Ford
Associates, Inc. (“H.J.
Ford”), a Delaware corporation with its principal executive offices at 60
Frontage Road, Andover, Massachusetts,

       

      (each of
the Lead Borrower, International, and H.J. Ford, being sometimes hereinafter
referred to individually as a “Borrower” and collectively as
the “Borrowers”).

       

      WHEREAS,
the Borrowers, the Lenders and the Agents are parties to a certain Third Amended
and Restated Loan Agreement dated September 29, 2006 (as may be amended and in
effect from time to time, the “Loan
Agreement”);

       

      WHEREAS,
the Borrowers have requested that the parties hereto amend the Loan Agreement to
modify certain covenants contained therein and certain other provisions of the
Loan Agreement; and

       

      WHEREAS,
the Agents and the Lenders each agree to modify and amend certain provisions of
the Loan Agreement, subject to the terms and conditions set forth
herein;

       

      NOW
THEREFORE, as an additional inducement for the Lenders to maintain the revolving
credit facilities on the terms and conditions set forth in the Loan Agreement as
amended hereby, and for

      

      
        
          
             

          

          
            - 1
-

            
              

            

          

          
             

          

        

      

       

      
        
          

            other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, each of the Borrowers and the other parties to the Loan Agreement
covenants and agrees as follows:

             

            1.           Definitions.  Capitalized
terms used herein and not other­wise defined herein shall have the meanings
assigned to such terms in the Loan Agreement.

             

            2.           Amendments to Loan
Agreement.

             

            
              	
                       
      

                    	
                      (a)

                    	
                      Section
      7.10 of the Loan Agreement is hereby amended by deleting the following
      text appearing therein in its
entirety:

                    

            

             

            “7-10.
Net
Profit.

             

            The
Borrowers shall earn a minimum Consolidated Net Income, as determined in
accordance with GAAP, of at least $1.00, measured quarterly as of the end of
each fiscal quarter of each fiscal year on a cumulative basis as and for each
such fiscal year.”

            

             

            and
substituting the following text therefor:

             

            “7-10.
Net
Profit.

             

            The
Borrowers shall earn a minimum Consolidated Net Income, as determined in
accordance with GAAP, of at least $1.00, measured quarterly as of the end of
each fiscal quarter of each fiscal year on a cumulative basis as and for each
such fiscal year; provided, however, the
calculation of Consolidated Net Income for the periods ending June 30, 2008,
September 30, 2008 and December 31, 2008 shall not include a reserve for a
one-time pre-tax charge in an amount up to $8,900,000 (the “2008 Reserve”) in
connection with the resolution of certain litigation involving the Lead
Borrower, as more particularly described in paragraph 2 of Exhibit
5-17.”

             

            
              	
                       
      

                    	
                      (b)

                    	
                      Exhibit
      5-17 to the Loan Agreement is hereby deleted and replaced with the text
      attached hereto as Exhibit
      A.

                    

            

             

            
              	
                       
      

                    	
                      (c)

                    	
                      Section
      5-27(a) of the Loan Agreement is hereby amended by deleting the “.” at the
      end of the Section and substituting
therefor:

                    

            

             

            “, and other than the 2008
Reserve.”

             

            3.           Waiver.                        The
Agents and the Lenders hereby waive (i) the Borrowers’ failure to comply with
Section 7.10 of the Loan Agreement (Consolidated Net Income requirement) for the
period ending March 31, 2008 and (ii) any Event of Default pursuant to Section
8-10 and 8-17 of the Loan Agreement arising solely and directly from the 2008
Reserve.  The waiver
contained in clause (i) above is a one-time waiver and relates solely to the
period ending March 31, 2008.  Except to the limited extent expressly
provided herein, nothing contained in this waiver shall be construed to modify
the Loan Agreement or to modify, waive, impair, or affect any of the covenants,
agreements, terms and conditions thereof, or to waive the due keeping,
observance and/or performance thereof.

             

            4.           Amendment
Fee.  In consideration of the Agents and the Lenders entering
into this Amendment, the Borrowers shall pay to the Administrative Agent, for
the benefit of the Lenders, a fee (the “Amendment Fee”) in
the amount of Fifteen Thousand Dollars ($15,000.00) upon the execution of this
Amendment, which Amendment Fee shall be deemed fully earned as of the date
hereof and shall be distributed by the Administrative Agent to the Lenders (with
each Lender to receive Five Thousand Dollars ($5,000.00)).

              
                
                   

                

                
                  - 2
-

                  
                    

                  

                

                
                   

                

              

              5.           Conditions to
Effectiveness.  This Amendment shall not be effective until
each of the following conditions precedent have been fulfilled to the
satisfaction of the Administrative Agent:

               

              
                	
                         
      

                      	
                        (a)

                      	
                        This
      Amendment shall have been duly executed and delivered by the Borrowers,
      the Administrative Agent and the Lenders and the Administrative Agent
      shall have received a fully executed copy
  hereof.

                      

              

               

              
                	
                         
      

                      	
                        (b)

                      	
                        The
      Administrative Agent shall have received such other documents,
      instruments, and certificates relating to the transactions contemplated by
      this Amendment as may be reasonably requested by the Administrative
      Agent.

                      

              

               

              
                	
                         
      

                      	
                        (c)

                      	
                        The
      Administrative Agent shall have received the Amendment Fee from the
      Borrowers.

                      

              

               

              
                	
                         
      

                      	
                        (d)

                      	
                        No
      default or Event of Default shall be continuing immediately after giving
      effect to the execution of this
Amendment.

                      

              

               

              6.           Ratification of Loan
Documents.  Except as specifically amended or modified in this
Amendment, all of the terms and conditions of the Loan Agreement and each of the
other Loan Documents shall remain in full force and effect.  Each of
the Borrowers hereby ratifies, confirms, and reaffirms all representations,
warranties, and covenants contained therein.  Each of the Borrowers
hereby represents and warrants that, on the date hereof, no default or Event of
Default exists.  Each of the Borrowers further acknowledges, confirms
and agrees that the Borrowers do not have any offsets, defenses, or
counterclaims against the Agents or the Lenders arising out of the Loan
Agreement or the other Loan Documents, and to the extent that any such offsets,
defenses, or counterclaims may exist, each of the Borrowers hereby WAIVES and
RELEASES the Agents and the Lenders therefrom.

               

              7.           Miscellaneous.

               

              
                	
                         
      

                      	
                        (a)

                      	
                        This
      Amendment may be executed in several counterparts and by each party on a
      separate counterpart, each of which when so executed and delivered shall
      be an original, and all of which together shall constitute one
      instrument.

                      

              

               

              
                	
                         
      

                      	
                        (b)

                      	
                        This
      Amendment expresses the entire understanding of the parties with respect
      to the transactions contemplated hereby.  No prior negotiations
      or discussions shall limit, modify, or otherwise affect the provisions
      hereof.

                      

              

               

              
                	
                         
      

                      	
                        (c)

                      	
                        Any
      determination that any provision of this Amendment or any application
      hereof is invalid, illegal or unenforceable in any respect and in any
      instance shall not affect the validity, legality, or enforceability of
      such provision in any other instance, or the validity, legality or
      enforceability of any other provisions of this
  Amendment.

                      

              

               

              
                	
                         
      

                      	
                        (d)

                      	
                        The
      Borrowers each warrant and represent that each such Borrower has consulted
      with independent legal counsel of such Borrower’s selection in connection
      with this Amendment and is not relying on any representations or
      warranties of the Agents or the Lenders, or their respective counsels, in
      entering into this Amendment.

                      

              

               

              (e)           Except
as expressly provided herein, the amendments set forth herein shall be effective
as of the date of this Amendment.

              
                
                   

                

                
                  - 3
-

                  
                    

                  

                

                
                   

                

              

          

        

      

    

    
      IN
WITNESS WHEREOF, the parties have duly executed this Amendment as a sealed
instrument as of the date first set forth above.

       

      

      
        	 
      	
                DYNAMICS
      RESEARCH CORPORATION

              
	 
      	
                (“Lead Borrower and
      Borrower”)

              
	 
      	 
      	 
      	 
	 
      	
                By:

              	
                /s/
      David Keleher

              	 
	 
      	
                Name:

              	
                David
      Keleher

              	 
	 
      	
                Title:

              	
                Senior
      Vice President - Finance,

                CFO
      and Treasurer

              	 

      

      

       

      
        	 
      	
                DRC
      INTERNATIONAL CORPORATION

              
	 
      	
                (“Borrower”)

              
	 
      	 
      	 
      	 
	 
      	
                By:

              	
                /s/
      David Keleher

              	 
	 
      	
                Name:

              	
                David
      Keleher

              	 
	 
      	
                Title:

              	
                Vice
      President - Finance and CFO

              	 

      

      

       

      
        	 
      	
                H.J.
      FORD ASSOCIATES, INC.

              
	 
      	
                (“Borrower”)

              
	 
      	 
      	 
      	 
	 
      	
                By:

              	
                /s/
      David Keleher

              	 
	 
      	
                Name:

              	
                David
      Keleher

              	 
	 
      	
                Title:

              	
                Treasurer,
      CFO and Assistant

                Secretary

              	 

      

      
        
          
            [Signature
Page to First Amendment to

            Third Amended
and Restated Loan Agreement]

          

        

        
           

          
            

          

        

        
           

        

      

    
      

      
        	 
      	
                BROWN
      BROTHERS HARRIMAN & CO.

              
	 
      	
                (“Administrative
      Agent and Lender”)

              
	 
      	 
      	 
      	 
	 
      	
                By:

              	
                /s/
      Daniel G. Head Jr.

              	 
	 
      	
                Name:

              	
                Daniel
      G. Head Jr.

              	 
	 
      	
                Title:

              	
                S.V.P.

              	 

      

      

       

      
        	 
      	
                TD
      BANKNORTH, N.A.

              
	 
      	
                (“Documentation
      Agent and Lender”)

              
	 
      	 
      	 
      	 
	 
      	
                By:

              	
                /s/
      Jeffrey R. Westling

              	 
	 
      	
                Name:

              	
                Jeffery
      R. Westling

              	 
	 
      	
                Title:

              	
                Senior
      Vice President

              	 

      

      

       

      
        	 
      	
                BANK
      OF AMERICA, N.A.

              
	 
      	
                (“Syndication
      Agent and Lender”)

              
	 
      	 
      	 
      	 
	 
      	
                By:

              	
                /s/
      Jean S. Manthorne

              	 
	 
      	
                Name:

              	
                Jean
      S. Manthorne

              	 
	 
      	
                Title:

              	
                Senior
      Vice President

              	 

      

      
        
          
            [Signature
Page to First Amendment to

            Third Amended
and Restated Loan Agreement]

          

        

        
           

          
            

          

        

        
           

        

      

    EXHIBIT
A

     

    Exhibit
5-17

    

    DYNAMICS
RESEARCH CORPORATION

    

    Litigation

     

    
      1.           As
a defense contractor, the Company is subject to many levels of audit and review
from various government agencies, including the Defense Contract Audit Agency,
various inspectors general, the Defense Criminal Investigation Service, the
Government Accountability Office, the Department of Justice and Congressional
Committees. Both related to and unrelated to its defense industry involvement,
the Company is, from time to time, involved in audits, lawsuits, claims,
administrative proceedings and investigations. The Company accrues for
liabilities associated with these activities when it becomes probable that
future expenditures will be made and such expenditures can be reasonably
estimated. Except as noted below, the Company does not presently believe it is
reasonably likely that any of these matters would have a material adverse effect
on the Company’s business, financial position, results of operations or cash
flows. The Company’s evaluation of the likelihood of expenditures related to
these matters is subject to change in future periods, depending on then current
events and circumstances, which could have material adverse effects on the
Company’s business, financial position, results of operations and cash
flows.

       

      2.           On
October 26, 2000, two former Company employees were indicted and charged with
conspiracy to defraud the United States Air Force, and wire fraud, among other
charges, arising out of a scheme to defraud the United States out of
approximately $10 million. Both men subsequently pled guilty to the principal
charges against them. On October 9, 2003, the United States Attorney filed a
civil complaint in the United States District Court for the District of
Massachusetts against the Company based in substantial part upon the actions and
omissions of the former employees that gave rise to the criminal cases against
them. In the civil action, the United States is asserting claims against the
Company. These claims, which cannot lead to multiple awards, are based on the
False Claims Act, the Anti-Kickback Act, and breach of contract for which the
government estimates damages at approximately $24 million, $20 million and $10
million, respectively. The United States Attorney also seeks recovery on certain
common law claims and equitable claims as for recovery of costs, and interest on
breach of contract damages. The Company estimates the maximum awardable amount
of damages to be $26 million. On February 14, 2007, the U.S. Attorney filed a
motion for summary judgment as to liability and as to damages in this matter. On
March 31, 2008, the Court issued a Memorandum on Summary Judgment Motion
granting summary judgment in favor of the Government on the breach of contract,
False Claims Act and Anti-Kickback Act claims but, due to substantial disputed
facts, denied summary judgment on damages.  The Court has scheduled a
status conference on June 10, 2008. Upon completion of the proceedings in
District Court to determine the amount of damages, if any, for which the Company
is liable, the Company would consider appealing the District Court’s decision
granting summary judgment to the Government depending on the outcome.
Nevertheless, the Company believes the Court Memorandum of March 31, 2008
substantially narrows the range of likely outcomes.

       

      Accordingly,
at March 31, 2008, the Company has recognized an estimated liability for all
claims related to this matter in the amount of $9 million, reduced by $2.2
million for estimated tax benefits, for an aftertax effect of $6.8
million.  Of this amount, $181 was provided for in previous
periods.  This amount represents the Company’s best estimate of
liability.  However, as the matter is on-going, the ultimate outcome
remains uncertain. Due to these uncertainties, actual results may eventually
differ materially from the $9 million the Company has provided, and the range of
reasonably possible loss

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

      cannot be
estimated. As a result, there can be no assurance that that there will be
additional provisions required, which could have a material adverse effect on
the Company’s business, financial position, results of operations and cash
flows.

       

      3.           The
Company has provided documents in response to a previously disclosed grand jury
subpoena issued on October 15, 2002 by the United States District Court for the
District of Massachusetts, directing the Company to produce specified documents
dating back to 1996. The subpoena relates to an investigation, currently focused
on the period from 1996 to 1999, by the Antitrust Division of the Department of
Justice into the bidding and procurement activities involving the Company and
several other defense contractors who have received similar subpoenas and may
also be subjects of the investigation. On February 7, 2007, the Company was
informed that the Antitrust Division has communicated to the Department of
Justice in Washington, D.C. the results of its investigation which have not been
made available to the Company. The Company has cooperated in the investigation,
however, it does not have a sufficient basis to predict the outcome of the
investigation. Should the Company be found to have violated the antitrust laws,
the matter could have a material adverse effect on the Company’s business,
financial position, results of operations and cash flows.

       

      4.           On
June 28, 2005, a suit, characterized as a class action employee suit, was filed
in the U.S. Federal Court for the District of Massachusetts alleging violations
of the Fair Labor Standards Act and certain provisions of Massachusetts General
Laws. The Company believes that its practices comply with the Fair Labor
Standards Act and Massachusetts General Laws. The Company intends to vigorously
defend itself and has sought to have the complaint dismissed from Federal Court
and addressed in accordance with the Company’s mandatory Dispute Resolution
Program for the arbitration of workplace complaints. On April 10, 2006, the U.S.
Federal Court for the District of Massachusetts entered an order granting in
part the Company’s motion to dismiss the civil action filed in that court
against the Company, and to compel compliance with its mandatory Dispute
Resolution Program, directing that the parties arbitrate the aforementioned
claims, and striking the class action waiver which was part of the Dispute
Resolution Program. Following the District Court’s decision, the plaintiffs
commenced arbitration before the American Arbitration Association, asserting the
same claims as they asserted in the District Court. On January 26, 2007 the
Company filed an appeal with the United States Court of Appeals for the Second
Circuit appealing the portion of the District Court’s decision that the class
action waiver is not enforceable. The U.S. Court of Appeals on November 19, 2007
concurred with the District Court’s opinion that the matter should proceed in
arbitration and remanded the matter to the District Court. The parties have
informed the District Court that they will proceed in arbitration as a class
action. In the arbitration, the Company has filed a Motion to Dismiss and/or for
Summary Disposition, asserting that the Company is entitled to use the “window
of correction” provided by the Fair Labor Standards Act’s regulations and that
the arbitration should be dismissed without further action in the arbitration.
The motion is pending before the arbitrator. The outcome of this litigation, if
unfavorable, could have a material adverse effect on the Company’s business,
financial position, results of operations and cash flows.

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