8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

Date of Report: March 9, 2004
(Date of earliest event reported)

CRITICAL PATH, INC.

(Exact name of registrant as specified in its charter)

California	000-25331	91-1788300
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(I.R.S. Employer Identification Number)

350 The Embarcadero, San Francisco, CA	94105
(Address of principal executive offices)	(Zip Code)

(415) 541-2500

(Registrant’s telephone number,
including area code)

TABLE OF CONTENTS

	Item 5. Other Events and Regulation FD Disclosure.
	Item 7. Financial Statements and Exhibits.
SIGNATURES
EXHIBIT INDEX
Exhibit 4.1
Exhibit 4.2
Exhibit 4.3
Exhibit 4.4
Exhibit 10.1
Exhibit 99.1

Item 5. Other Events and Regulation FD Disclosure.

     On March 9, 2004, Critical Path, Inc. (the “Company”) issued a press release announcing that it had issued and sold to new investors and a set of recent investors, $18.5 million in 10% senior secured notes convertible into shares of the Company’s Series E preferred stock upon shareholder approval. The press release is filed herewith as Exhibit 99.1.

     In connection with the transactions described above, the Company signed a Convertible Note Purchase Agreement, which is filed herewith as Exhibit 10.1, which provides for forms of related documents, filed herewith as Exhibits 4.1 through 4.4.

Item 7. Financial Statements and Exhibits.

(c)	Exhibits
4.1	Form of Convertible Subordinated Promissory Note of the Company
4.2	Form of Third Amended and Restated Registration Rights Agreement, among the Company, General Atlantic Partners 74, L.P., GAP Coinvestment Partners II, L.P., GapStar, LLC, GAPCO GmbH & Co. KG, Cenwell Limited, Campina Enterprises Limited, Great Affluent Limited, Dragonfield Limited, Lion Cosmos Limited, Vectis CP Holdings, LLC, Permal U.S. Opportunities Limited, Zaxis Equity Neutral, L.P., Zaxis Institutional Partners, L.P., Zaxis Offshore Limited, Zaxis Partners, L.P., Guggenheim Portfolio Company XIII, Passport Master Fund, L.P., Crosslink Crossover Fund IV, L.P., Sagamore Hill Hub Fund, Ltd., Criterion Capital Partners, Ltd., Criterion Capital Partners, Institutional, Criterion Capital Partners, L.P. and Capital Ventures International
4.3	Form of Amended and Restated Certificate of Determination of Preferences of Series D Redeemable Convertible Preferred Stock of the Company
4.4	Form of Certificate of Determination of Preferences of Series E Redeemable Convertible Preferred Stock of the Company
10.1	Convertible Note Purchase Agreement dated March 9, 2004, among the Company, Permal U.S. Opportunities Limited, Zaxis Equity Neutral, L.P., Zaxis Institutional Partners, L.P., Zaxis Offshore Limited, Zaxis Partners, L.P., Guggenheim Portfolio Company XIII, Crosslink Crossover Fund IV, L.P., Sagamore Hill Hub Fund, Ltd., Criterion Capital Partners, Ltd., Criterion Capital Partners, Institutional, Criterion Capital Partners, L.P. and Capital Ventures International
99.1	Press Release dated March 9, 2004, relating to the purchase of notes convertible into shares of the Company’s Series E preferred stock

2

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	CRITICAL PATH, INC.
Date: March 10, 2004	By	/s/ Michael J. Zukerman
		Name: Michael J. Zukerman Title: Senior Vice President and General Counsel

3

EXHIBIT INDEX

4.1	Form of Convertible Subordinated Promissory Note of the Company
4.2	Form of Third Amended and Restated Registration Rights Agreement, among the Company, General Atlantic Partners 74, L.P., GAP Coinvestment Partners II, L.P., GapStar, LLC, GAPCO GmbH & Co. KG, Cenwell Limited, Campina Enterprises Limited, Great Affluent Limited, Dragonfield Limited, Lion Cosmos Limited, Vectis CP Holdings, LLC, Permal U.S. Opportunities Limited, Zaxis Equity Neutral, L.P., Zaxis Institutional Partners, L.P., Zaxis Offshore Limited, Zaxis Partners, L.P., Guggenheim Portfolio Company XIII, Passport Master Fund, L.P., Crosslink Crossover Fund IV, L.P., Sagamore Hill Hub Fund, Ltd., Criterion Capital Partners, Ltd., Criterion Capital Partners, Institutional, Criterion Capital Partners, L.P. and Capital Ventures International
4.3	Form of Amended and Restated Certificate of Determination of Preferences of Series D Redeemable Convertible Preferred Stock of the Company
4.4	Form of Certificate of Determination of Preferences of Series E Redeemable Convertible Preferred Stock of the Company
10.1	Convertible Note Purchase Agreement dated March 9, 2004 among the Company, Permal U.S. Opportunities Limited, Zaxis Equity Neutral, L.P., Zaxis Institutional Partners, L.P., Zaxis Offshore Limited, Zaxis Partners, L.P., Guggenheim Portfolio Company XIII, Crosslink Crossover Fund IV, L.P., Sagamore Hill Hub Fund, Ltd., Criterion Capital Partners, Ltd., Criterion Capital Partners, Institutional, Criterion Capital Partners, L.P. and Capital Ventures International
99.1	Press Release dated March 9, 2004, relating to the purchase of notes convertible into shares of the Company’s Series E preferred stock

4 EX-4.1 3 f97241exv4w1.txt EXHIBIT 4.1 EXHIBIT 4.1 FORM OF NOTE 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. CONVERTIBLE SUBORDINATED PROMISSORY NOTE $ San Francisco, California --------------------- March 9, 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) March 9, 2008, (ii) when declared due and payable by Holder upon the occurrence of an Event of Default (as defined below), (iii) consummation of a Qualified Asset Sale, (iv) a Change of Control, or (v) any sale of capital stock or Stock Equivalents by the Company, any cash capital contribution from any third person or any other debt or equity financing consummated by the Company after the date of issuance of this Note which, in the case of (v), individually or in the aggregate raises proceeds of at least forty million dollars ($40,000,000) in cash or cash equivalents (the earliest of the events set forth in items (i)-(v) immediately above, the "Maturity Date"). 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 "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. 1.2 "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. 1.3 "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 surviving entity, (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 General Atlantic Partners 74, L.P., GAP Coinvestment Partners II, L.P., GapStar, LLC, GAP-W, LLC, GAPCO GmbH & Co. KG, Campina Enterprises Limited, Cenwell Limited, Great Affluent Limited, Dragonfield Limited and Lion Cosmos Limited and the Affiliates of the foregoing, provided that Affiliates shall be deemed not to include any portfolio companies of any of the foregoing) obtains a majority of the outstanding shares of capital stock entitled to vote in the election of directors, (iii) any proxy contest in which a majority of the Board of Directors of the Company (or persons appointed by such Board of Directors) prior to such contest do not constitute a majority of the Company's Board of Directors after such contest or (iv) any other transaction described in any stockholder rights agreement or "poison pill," if any, to which the Company is party, which may permit the holders of any rights or similar certificates to exercise the rights evidenced thereby. 1.4 "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. 1.5 "Common Conversion Date" shall have the meaning set forth in Section 3.1(b) hereof. 1.6 "Common Stock" means the common stock, par value $0.001 per share, of the Company. 1.7 "Conversion Date" shall mean the Subsequent Closing Date. 1.8 "Domestic Subsidiary" shall have the meaning set forth in Section 5.10 hereof. 2 1.9 "Event of Default" shall have the meaning set forth in Section 6 hereof. 1.10 "GA Notes" shall mean the Convertible Subordinated Promissory Notes, each dated November 26, 2003, issued by the Company to the GAP Entities pursuant to the Purchase and Exchange Agreement. 1.11 "GAP Entities" shall mean General Atlantic Partners 74, L.P., GAP Coinvestment Partners II, L.P., GapStar, LLC and GAPCO GmhH & Co. KG. 1.12 "Guarantor" shall have the meaning set forth in the Security Agreement. 1.13 "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. 1.14 "Intercreditor Agreement" shall mean the Intercreditor Agreement, dated the date hereof, among the GAP Entities, the January Lenders, Guggenheim Portfolio Company XIII, Crosslink Crossover Fund IV, L.P., Sagamore Hill Hub Fund, Ltd., Criterion Capital Partners, Ltd., Criterion Capital Partners, Institutional, Criterion Capital Partners, L.P. and Capital Ventures International. 1.15 "Interest Amount" shall have the meaning set forth in Section 3.1 hereof. 1.16 "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. 1.17 "January Lenders" shall mean Permal U.S. Opportunities Limited, Zaxis Equity Neutral, L.P., Zaxis Institutional Partners, L.P., Zaxis Offshore Limited, Zaxis Partners, L.P. and Passport Master Fund, L.P. 1.18 "January Note Agreement" shall mean the Convertible Note Purchase Agreement, dated January 16, 2004, among the January Lenders and the Company. 3 1.19 "January 2004 Notes" shall mean the Convertible Subordinated Promissory Notes, each dated January 16, 2003, issued by the Company to the January Lenders pursuant to the January Note Agreement. 1.20 "Loan Documents" shall have the meaning set forth in the Security Agreement. 1.21 "Note" shall mean this note, and in the plural, shall mean all notes issued to the Lenders pursuant to the terms of the Note Purchase Agreement, including this Note, and all amendments, modifications and extensions thereto. 1.22 "Note Purchase Agreement" means that certain Convertible Note Purchase Agreement, dated March 9, 2004, among the Company, the Holder and the other parties thereto from time to time, and all amendments, modifications and extensions thereto. 1.23 "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 3.27 to the Note Purchase Agreement, (iv) guaranty obligations permitted by Section 5.3 of this Agreement, (v) loans to employees, directors or officers of the Company in connection with the award of convertible bonds or capital stock under a stock incentive plan, stock option plan or other equity-based compensation plan or arrangement, (vi) 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; (vii) loans, advances and investments in foreign Subsidiaries (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; (viii) 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, (ix) 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 or (x) Investments by the Company in the Guarantor. 1.24 "Permitted Liens" shall have the meaning set forth in Section 5.4. 1.25 "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. 1.26 "Price Per Share" shall have the meaning attributed to such term in the Series E Certificate of Determination, as filed with the Secretary of State of the State of California. 4 1.27 "Purchase and Exchange Agreement" shall mean the Convertible Note Purchase and Exchange Agreement, dated November 18, 2003, among the Company, the GAP Entities, GAP-W, LLC and the other parties thereto, as amended. 1.28 "Qualified Asset Sale" means the sale, transfer or other disposition of any of the assets of the Company or any of its Subsidiaries, other than (a) sales of assets in the ordinary course of business, (b) sales of assets where the proceeds are used to repay Indebtedness owing to SVB, (c) the sale, transfer or other disposition of assets of the Company where the proceeds are applied to the purchase price or traded in for credit against the purchase price of other assets, provided that any such purchase is made, or credit issued, within 90 days of the sale, transfer or other disposition, and (d) one or more sales of the Company's assets (other than sales otherwise included in clauses (a), (b), and (c) immediately above) which collectively yield up to an aggregate of one million dollars ($1,000,000) in gross proceeds to the Company while this Note is outstanding. 1.29 "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. 1.30 "Security Agreement" means that certain Guaranty and Security Agreement, of even date herewith between the Company, Compass Holding Corp., the Lenders and the other parties thereto from time to time, and all amendments, modifications and extensions thereto. 1.31 "Series E Conversion Price" shall have the meaning set forth in the Series E Certificate of Determination. 1.32 "Series E Preferred Stock" means the Series E Preferred Stock, par value $0.001, of the Company. 1.33 "Subordination Agreement" shall have the meaning set forth in Section 5.3. 1.34 "Subsequent Closing Date" shall have the meaning set forth in Section 2.4(e) of the Note Purchase Agreement. 1.35 "SVB" means Silicon Valley Bank, a California chartered bank, or any Affiliates thereof. 1.36 "Ten Percent Holder" means, with respect to a class of equity securities of the Company, a Person (together with such Person's Affiliates) who, directly or indirectly, beneficially owns 9.9% or more of such class of equity securities of 5 the Company, as defined by Section 13(d) of the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder. 1.37 "UCC" shall have the meaning set forth in Section 5.4. 2. Interest. Simple interest shall accrue at the rate of ten percent (10%) per annum (or such lesser amount as shall equal the highest rate of interest allowable under applicable law) (the "Interest Rate"), on the outstanding principal of this Note 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 360-day year for the actual number of days elapsed. In the event that the principal amount of this Note, any interest, or any amount payable hereunder is not paid in full when such 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. Conversion. 3.1 Conversion. (a) On the Conversion Date, the principal amount of this Note plus the accrued and unpaid interest thereon (the "Interest Amount"), shall be automatically converted into the number of fully paid and nonassessable shares of Series E Preferred Stock equal to the quotient obtained by dividing (a) the entire principal amount of this Note plus the Interest Amount by (b) the Price Per Share. (b) In the event that the Conversion Date has not occurred on or prior to August 15, 2004 (the "Common Conversion Date"), then, following the Common Conversion Date, the principal amount of this Note plus the Interest Amount shall be convertible, at the option of Holder and from time to time, only into Common Stock at a conversion price per share equal to $2.18, as adjusted for any stock dividends, stock splits or similar consolidations or subdivisions, following the date hereof; provided, however, that Holder shall not be permitted to convert any portion of the principal of this Note or the Interest Amount into Common Stock pursuant to this Section 3.1(b) if, at the time of such conversion, the conversion would cause Holder to be a Ten Percent Holder. 3.2 Notice of Conversion. Upon conversion of this Note as provided in Section 3.1, Holder shall surrender this Note to the Company and shall state the name or names in which the certificate or certificates for such shares of Series E Preferred Stock or Common Stock, as the case may be, are to be issued. The Person or Persons entitled to receive the shares of Series E Preferred Stock or Common Stock, as the case may be, issuable upon such conversion shall be treated for all purposes as the record holder or holders (a) of such shares of Series E Preferred Stock as of the 6 Conversion Date and (b) of such shares of Common Stock as of the date of any conversion pursuant to Section 3.1(b). 3.3 Delivery of Stock Certificates. Upon conversion of this Note as provided in Section 3.1, the Company at its expense will issue and deliver to Holder of this Note a certificate or certificates (bearing such legends as are required by applicable state and federal securities laws in the opinion of counsel to the Company) for the number of full shares of Series E Preferred Stock or Common Stock, as the case may be, issuable upon such conversion. 3.4 Mechanics and Effect of Conversion. No fractional shares of Series E Preferred Stock or Common Stock, as the case may be, shall be issued upon conversion of this Note. In lieu of the Company issuing any fractional shares to Holder upon the conversion of this Note, the Company shall pay to Holder the amount of outstanding principal and interest that is not so converted. Upon conversion of all amounts due under this Note, the Company shall be released from all of its obligations under this Note. 4. Adjustments. The number of shares of Series E Preferred Stock or Common Stock convertible hereunder are subject to adjustment from time to time as follows: 4.1 Merger, Sale of Assets, Etc. Subject to Section 4.2, if at any time while this Note remains outstanding and unexpired there shall be (a) a reorganization (other than a combination, reclassification, exchange or subdivision of shares otherwise provided for herein), (b) a merger or consolidation of the Company with or into another corporation in which the Company is not the surviving entity, or a merger in which the Company is the surviving entity but the shares of the Company's capital stock outstanding immediately prior to the merger are converted by virtue of the merger into other property, whether in the form of securities, cash or otherwise or (c) a sale or transfer of the Company's stock, properties or assets as, or substantially as, an entirety to any other Person, then, as a part of such reorganization, merger, consolidation, sale or transfer, lawful provision shall be made so that Holder shall thereafter be entitled to receive by converting this Note the number of shares of stock or other securities or property of the successor corporation resulting from such reorganization, merger, consolidation, sale or transfer that a holder of the shares deliverable upon conversion of this Note would have been entitled to receive in such reorganization, consolidation, merger, sale or transfer if this Note had been converted immediately before such reorganization, merger, consolidation, sale or transfer (notwithstanding that the Stockholder Approval may not yet have been obtained), all subject to further adjustment as provided in this Section 4. The foregoing provisions of this Section 4.1 shall similarly apply to successive reorganizations, consolidations, mergers, sales and transfers and to the stock or securities of any other corporation. If the per share consideration payable to Holder hereof for shares in connection with any such transaction is in a form other than cash or marketable securities, then the value of such consideration shall be determined in good faith by the Company's Board of Directors based on the amount the Holder would have otherwise been entitled to receive had the transaction or transactions not occurred. 7 In all events, appropriate adjustment (as determined in good faith by the Company's Board of Directors) shall be made in the application of the provisions of this Note with respect to the rights and interests of Holder after the transaction, to the end that the provisions of this Note shall be applicable after that event, as near as reasonably may be, in relation to any shares or other property deliverable after that event upon conversion of this Note. The Company shall be obligated to retain and set aside, or otherwise make fair provision for exercise of the right of the Holder to receive, the shares of stock and/or other securities, cash or other property provided for in this Section 4.1. 4.2 Election of Holder upon Merger or Sale of Assets. Notwithstanding anything to the contrary contained herein, if an event shall occur as provided in Section 4.1 hereof that would otherwise result in the occurrence of the Maturity Date pursuant to clause (iii) or (iv) of the first paragraph of this Note, then the Holder may, in its sole discretion, by written notice to the Company elect to convert the principal amount of this Note plus the Interest Amount into the number of shares of stock or other securities or property described in Section 4.1, in lieu of receiving payment in full of all amounts outstanding under this Note. The number of shares of stock or other securities or property to be issued upon such conversion shall be determined in accordance with Section 4.1 hereof, taking into account the occurrence of such event. 4.3 Reclassification, Etc. If the Company shall, at any time while this Note, or any portion thereof, remains outstanding and unexpired, by reclassification of securities or otherwise, change any of the securities as to which conversion rights under this Note exist into the same or a different number of securities of any other class or classes, this Note shall thereafter represent the right to acquire such number and kind of securities as would have been issuable with respect to the securities that were subject to the conversion rights under this Note immediately prior to such reclassification or other change, and the Price Per Share shall be appropriately adjusted, all subject to further adjustment as provided in this Section 4. 4.4 Split, Subdivision or Combination of Shares. If the Company at any time while this Note, or any portion thereof, remains outstanding and unexpired shall split, subdivide or combine the shares of Series E Preferred Stock or Common Stock into a different number of securities of the same class, the Price Per Share or conversion price, as the case may be, shall be proportionately adjusted. 4.5 Series E Adjustments. The initial Series E Conversion Price of the shares of Series E Preferred Stock issued upon conversion of this Note pursuant to Section 3.1 shall equal the Series E Conversion Price in effect on the Conversion Date, subject to the adjustment of such Series E Conversion Price from time to time thereafter as provided in the Series E Certificate of Determination. 4.6 Certificate as to Adjustments. Upon the occurrence of each adjustment or readjustment pursuant to this Section 4, the Company at its expense shall promptly compute such adjustment or readjustment in accordance with the terms hereof and furnish to Holder a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. 8 4.7 No Impairment. The Company will not, by any voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Company, but will at all times in good faith assist in the carrying out of all the provisions of this Section 4 and in the taking of all such action as may be necessary or appropriate in order to protect the rights of Holder against impairment. 5. Covenants. The Company covenants and agrees that until the earlier of (i) the date on which all Obligations (as defined in the Security Agreement) have been paid in full or (ii) the date on which all amounts outstanding under the Notes have converted pursuant to Section 3.1(a) or Section 3.1(b): 5.1 Financial Statements and Other Information. 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. 5.2 Financial Covenants. The Company shall at all times comply with the financial and other covenants set forth in Schedule 8.5 to the Note Purchase Agreement as if such covenants were set forth herein. 5.3 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 the Loan Documents; (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; (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 9 (f) Any extension, renewal, refinancing, refunding, or replacement (each, a "refinancing") of Indebtedness permitted by clauses (b) and (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)), provided that, in the case of a refinancing of Indebtedness owed by the Company or any Subsidiary to SVB, this clause (f) shall only apply to the extent consistent with the Subordination Agreement, dated as of the date hereof, by and among SVB, the Holders and the Company (the "Subordination Agreement"). 5.4 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 5.4 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 or result in a material adverse effect on the Condition of the Company or (ii) which are 10 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 5.3(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 5.3(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; (k) set-off rights of depository institutions; and (l) Liens created by the Security Agreement (collectively with clauses (a) through (k) hereof, the "Permitted Liens"). 5.5 Fundamental Changes. The Company will not, and will not permit any Subsidiary to, merge into or consolidate with any other Person, or permit any other Person to merge into or consolidate with it, or sell, transfer, lease or otherwise dispose of (in one transaction or a series of transactions) all or substantially all of its 11 assets, or all or substantially all of the stock of any of its Subsidiaries (in each case, whether now owned or hereafter acquired), or 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 (i) the Company or any of its Subsidiaries may, with the prior written consent of the Holders, merge with or into any other Person; (ii) any wholly-owned Subsidiary of the Company (other than the Guarantor) may merge with or into the Company or any other wholly-owned Subsidiary of the Company; (iii) any Subsidiary (other than the Guarantor, 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 (iv) any Subsidiary may liquidate or dissolve if the board of directors of the Company determine in good faith that such liquidation or dissolution is in its best interests and is not disadvantageous to the Holders. 5.6 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. 5.7 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, (b) transactions exclusively between the Company and the Guarantor and (c) transactions under the agreements listed on Schedule 3.17 to the Note Purchase Agreement. 5.8 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. 5.9 Nature of Business. The Company will not, and the Company will not permit any Subsidiary to, engage in any business other than that conducted on the date hereof and any businesses reasonably related thereto. 5.10 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"), excluding the Guarantor, 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 12 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. 5.11 Formation of Subsidiaries. The Company will not, and will not cause or permit any of its Subsidiaries to, form, acquire or permit the existence of any new domestic Subsidiary, without causing such domestic Subsidiary to execute and deliver to the Holders a secured guaranty of the Notes and related security document, in form and substance satisfactory to the Holders. 5.12 Books and Records. The Company shall keep proper books of record and account, in which full and correct entries shall be made of all financial transactions and the assets and business of the Company and its Subsidiaries in accordance with GAAP consistently applied. 5.13 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. 5.14 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. 5.15 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. 6. The occurrence of any one or more of the following events shall constitute an "Event of Default": 6.1 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. 13 6.2 Financial Covenants. The failure of Company or any of its Subsidiaries to perform, observe or comply with any of the Financial Covenants set forth on Schedule 8.5 to the Note Purchase Agreement, and incorporated by reference in this Note in Section 5.2. 6.3 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, the Security Agreement or any of the other Loan Documents (other than the Financial Covenants set forth on Schedule 8.5 to the Note Purchase Agreement, and incorporated by reference in this Note in Section 5.2), if such failure is not cured within sixty (60) days. 6.4 Representations and Warranties. If any representation or warranty made by the Company or any of its Subsidiaries in the Loan Documents is not true and correct in all material respects on the Initial Closing Date. 6.5 Default on Other Obligations. The occurrence of any condition or default under any other indebtedness for borrowed money of the Company or any of its Subsidiaries with a principal amount of at least five hundred thousand dollars ($500,000) that results in the acceleration of such indebtedness which is not cured within sixty (60) days. 6.6 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. 6.7 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. 6.8 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 five hundred thousand dollars ($500,000) 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 sixty (60) consecutive 14 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. 6.9 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 Loan Documents. 6.10 Adverse Change in Financial Condition. Any event having a material adverse effect on the business, operations, assets, properties or condition of the Company and its Subsidiaries taken as a whole shall have occurred and be continuing or a material adverse effect on the validity or enforceability of this or any of the other Loan Documents or the rights or remedies of the Holders hereunder or thereunder. 7. 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 Security Agreement, the other Loan Documents and under applicable law, all such rights and remedies being cumulative and enforceable alternatively, successively or concurrently. 8. Prepayment. The Company may not prepay this Note prior to the Maturity Date without the prior written consent of the Holders. 9. Seniority. (a) Except as set forth in the Subordination Agreement, the Notes will rank senior in right of payment to all other indebtedness of the Company, other than the GA Notes and the January 2004 Notes, with respect to which the Notes will be pari passu in right of payment in accordance with the Intercreditor Agreement. (b) Notwithstanding anything to the contrary contained in the Notes, this Note and the other Notes, and the terms and the conditions hereof and thereof, are subject to the Intercreditor Agreement. 10. Assignment. Subject to the restrictions on transfer described in Section 12 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. 11. Waiver of Notice. The Company hereby waives notice, presentment, demand, protest and notice of dishonor. 12. Transfer of This Note. With respect to any offer, sale or other disposition of this Note, Holder will give written notice to the Company prior thereto, describing briefly the manner thereof, together with a written opinion of such Holder's 15 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, 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. Notwithstanding the foregoing, the Holder shall not be permitted to transfer this Note to any Person who is not an Affiliate until the earlier of (i) the obtaining of Stockholder Approval, (ii) the receipt of written notice from the Company that Stockholder Approval cannot be obtained, or the occurrence of an actual vote of the Company's shareholders entitled to vote (whether by written consent or at a meeting specially called for such purpose), the result of which is a decision by a majority of the Company's shareholders entitled to vote to decline to grant Stockholder Approval, (iii) six (6) months from the date hereof and (iv) the occurrence of an Event of Default. 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. 13. 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. 14. 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 16 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. 15. 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. 16. Governing Law. This Note shall be governed by and construed in accordance with the laws of the State of California, excluding that body of law relating to conflict of laws. 17. 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 a majority 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. 18. 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. 19. 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, ANY OF THE LOAN DOCUMENTS AND/OR ANY TRANSACTIONS, OCCURRENCES, COMMUNICATIONS, OR UNDERSTANDINGS (OR THE LACK OF ANY OF THE FOREGOING) RELATING IN ANY WAY TO DEBTOR-CREDITOR RELATIONSHIP 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 17 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. 20. 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] 18 IN WITNESS WHEREOF, the Company has caused this Note to be issued this 9th day of March, 2004. COMPANY: CRITICAL PATH, INC., a California corporation By: ----------------------------------------- Name: William E. McGlashan, Jr. Title: Chairman, Chief Executive Officer Critical Path, Inc. 350 The Embarcadero San Francisco, CA 94105-1204 Telecopy: (415) 541-2300 Attention: Chief Financial Officer With a copy to: Pillsbury Winthrop LLP 50 Fremont Street San Francisco, CA 94105 Telecopy: (415) 983-1200 Attention: Gregg Vignos, Esq. Name of Holder: -------------------------------- Address: -------------------------------------- -------------------------------------- Telephone: ------------------------------------- Facsimile: ------------------------------------- EX-4.2 4 f97241exv4w2.txt EXHIBIT 4.2 EXHIBIT 4.2 THIRD AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT THIRD AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT, dated March 9, 2004 (this "Agreement"), among Critical Path, Inc., a California corporation (the "Company"), General Atlantic Partners 74, L.P., a Delaware limited partnership ("GAP LP"), GAP Coinvestment Partners II, L.P., a Delaware limited partnership ("GAP Coinvestment"), GapStar, LLC, a Delaware limited liability company ("GapStar"), GAPCO GmbH & Co. KG, a German limited partnership ("GmbH Coinvestment"), Cenwell Limited ("Cenwell"), Campina Enterprises Limited ("Campina"), Great Affluent Limited ("Great Affluent"), Dragonfield Limited ("Dragonfield"), Lion Cosmos Limited ("Lion Cosmos"), Vectis CP Holdings, LLC, a Delaware limited liability company ("Vectis"), Permal U.S. Opportunities Limited ("Permal"), Zaxis Equity Neutral, L.P. ("Zaxis Equity"), Zaxis Institutional Partners, L.P. ("Zaxis Institutional"), Zaxis Offshore Limited ("Zaxis Offshore"), Zaxis Partners, L.P. ("Zaxis Partners"), Guggenheim Portfolio Company XIII ("Guggenheim" and collectively with Permal, Zaxis Equity, Zaxis Institutional, Zaxis Offshore and Zaxis Partners, "Apex Capital"), Passport Master Fund, L.P. ("Passport Capital"), Crosslink Crossover Fund IV, L.P. ("Crosslink"), Sagamore Hill Hub Fund, Ltd. ("Sagamore"), Criterion Capital Partners, Ltd. ("Criterion Limited"), Criterion Capital Partners, Institutional ("Criterion Institutional"), Criterion Capital Partners, L.P. ("Criterion LP" and together with Criterion Limited and Criterion Institutional, "Criterion") and Capital Ventures International ("Heights Capital"); WHEREAS, pursuant to the Stock and Warrant Purchase Agreement, dated November 8, 2001, as amended from time to time (the "Stock Purchase Agreement"), among the Company, GAP LP, GAP Coinvestment, GapStar, Cenwell, Campina and Vectis, the Company has (i) issued and sold to GAP LP, GAP Coinvestment, GapStar, Cenwell, Campina and Vectis, an aggregate of 2,162,582 shares of Series D Cumulative Redeemable Convertible Participating Series D Preferred Stock, par value $0.001 per share, of the Company, as amended from time to time (the "Series D Preferred Stock"), (ii) issued and delivered to GAP LP, GAP Coinvestment and GapStar an aggregate of 1,837,418 shares of Series D Preferred Stock in exchange for a certain amount of convertible subordinated notes of the Company and (iii) issued and sold to GAP LP, GAP Coinvestment and GapStar warrants to purchase shares of Common Stock (as hereinafter defined) (the "Warrants"); WHEREAS, pursuant to the Convertible Note Purchase and Exchange Agreement, dated November 18, 2003 (the "Convertible Note Purchase and Exchange Agreement"), among the Company, GAP LP, GAP Coinvestment, GapStar, GAP-W, LLC, a Delaware limited liability company, GmbH Coinvestment, Campina, Cenwell, Great Affluent, Dragonfield and Lion Cosmos, as amended, (i) the Company has issued and sold to GAP LP, GAP Coinvestment, GapStar and GmbH Coinvestment convertible promissory notes (the "GA Notes") which are convertible into shares, par value $0.001 per share, of Series E Redeemable Convertible Preferred Stock of the Company (the "Series E Preferred Stock") and (ii) Campina, Cenwell, Great Affluent, Dragonfield and Lion Cosmos agreed upon the satisfaction of certain conditions to exchange their CK Sub Notes (as hereinafter defined) for shares of Series E Preferred Stock; WHEREAS, pursuant to the Convertible Note Purchase Agreement, dated January 16, 2004, among the Company, Permal, Zaxis Equity, Zaxis Institutional, Zaxis Offshore, Zaxis Partners and Passport Capital (the "January Convertible Note Agreement"), the Company has issued and sold to Permal, Zaxis Equity, Zaxis Institutional, Zaxis Offshore, Zaxis Partners and Passport Capital convertible promissory notes (the "January 2004 Notes") which are convertible into shares of Series E Preferred Stock; WHEREAS, pursuant to the Convertible Note Purchase Agreement, dated March 9, 2004, among the Company, Apex Capital, Crosslink, Sagamore, Criterion and Heights Capital (the "March Convertible Note Agreement" and, together with the January Convertible Note Agreement, the "Convertible Note Agreements"), the Company has issued and sold to Apex Capital, Crosslink, Sagamore, Criterion and Heights Capital convertible promissory notes in the principal amount of up to $18,500,000 (the "March 2004 Notes" and, collectively with the GA Notes and the January 2004 Notes, the "Notes") which are convertible into shares of Series E Preferred Stock; and WHEREAS, in order to induce (i) each of GAP LP, GAP Coinvestment, GapStar, GmbH Coinvestment, Apex Capital, Passport Capital, Crosslink, Sagamore, Criterion and Heights Capital to purchase the Notes and (ii) Campina, Cenwell, Great Affluent, Dragonfield and Lion Cosmos to exchange the CK Sub Notes for shares of Series E Preferred Stock, the Company has agreed to grant registration rights with respect to the Registrable Securities (as hereinafter defined) as set forth in this Agreement: NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein and for good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows: 1. Definitions. As used in this Agreement, and unless the context requires a different meaning, the following terms have the meanings indicated: "Affiliate" shall mean any Person who is an "affiliate" as defined in Rule 12b-2 of the General Rules and Regulations under the Exchange Act. "Agreement" means this Agreement as the same may be amended, supplemented or modified in accordance with the terms hereof. "Amended and Restated Stockholders Agreement" shall mean the Amended and Restated Stockholders Agreement, dated the date hereof, among the Company, GAP LP, GAP Coinvestment, GapStar, GmbH Coinvestment and the Persons listed therein as "Coinvestors." "Apex Capital" has the meaning set forth in the preamble to this Agreement. "Apex Stockholders" means Apex Capital, Passport Capital, Crosslink, Sagamore, Criterion and Heights Capital and any Affiliate thereof that, after the date hereof, acquires Registrable Securities. 2 "Approved Underwriter" has the meaning set forth in Section 3(f) of this Agreement. "Board of Directors" means the Board of Directors of the Company. "Business Day" means any day other than a Saturday, Sunday or other day on which commercial banks in the State of New York are authorized or required by law or executive order to close. "Campina" has the meaning set forth in the preamble to this Agreement. "Cenwell" has the meaning set forth in the preamble to this Agreement. "Coinvestor Stockholders" means Cenwell, Campina, Great Affluent, Dragonfield, Lion Cosmos and any Affiliate thereof that, after the date hereof, acquires Registrable Securities. "CK Sub Notes" means the 53/4% Convertible Subordinated Notes due April 1, 2005 issued by the Company in the principal face amount of thirty-two million seven hundred ninety-five thousand dollars ($32,795,000), pursuant to the Company's Indenture, dated March 31, 2000. "Commission" means the Securities and Exchange Commission or any similar agency then having jurisdiction to enforce the Securities Act. "Common Stock" means the Common Stock, par value $0.001 per share, of the Company or any other capital stock of the Company into which such stock is reclassified or reconstituted and any other common stock of the Company. "Company" has the meaning set forth in the preamble to this Agreement. "Company Underwriter" has the meaning set forth in Section 4(a) of this Agreement. "Conversion" has the meaning set forth in the Convertible Note Agreements. "Conversion and Exchange" has the meaning set forth in the Convertible Note Purchase and Exchange Agreement. "Convertible Note Purchase and Exchange Agreement" has the meaning set forth in the recitals to this Agreement. "Convertible Note Agreements" has the meaning set forth in the recitals to this Agreement. "Criterion" has the meaning set forth in the preamble to this Agreement. "Crosslink" has the meaning set forth in the preamble to this Agreement. 3 "Daily Trade Amount" means, (a) as to each of the General Atlantic Stockholders, the Coinvestor Stockholders, the Vectis Stockholders and the Apex Stockholders (other than Passport Capital, Crosslink, Sagamore, Criterion and Heights Capital), the greater of (i) with respect to any date a proposed sale pursuant to a Registration Statement is to be executed, 20% of the daily trading volume of the Common Stock on the Nasdaq National Market System on the date a proposed trade is to take place and (ii) 20% of the average daily trading volume of the Common Stock on the Nasdaq National Market for the five trading days immediately preceding such date, (b) as to Passport Capital, the greater of (i) 6.7% of the daily trading volume of the Common Stock on the Nasdaq National Market System on the date a proposed trade is to take place and (ii) 6.7% of the average daily trading volume of the Common Stock on the Nasdaq National Market for the five trading days immediately preceding such date, (c) as to Crosslink, the greater of (i) 8.9% of the daily trading volume of the Common Stock on the Nasdaq National Market System on the date a proposed trade is to take place and (ii) 8.9% of the average daily trading volume of the Common Stock on the Nasdaq National Market for the five trading days immediately preceding such date, (d) as to Sagamore, the greater of (i) 5.3% of the daily trading volume of the Common Stock on the Nasdaq National Market System on the date a proposed trade is to take place and (ii) 5.3% of the average daily trading volume of the Common Stock on the Nasdaq National Market for the five trading days immediately preceding such date, (e) as to Criterion, the greater of (i) 6.2% of the daily trading volume of the Common Stock on the Nasdaq National Market System on the date a proposed trade is to take place and (ii) 6.2% of the average daily trading volume of the Common Stock on the Nasdaq National Market for the five trading days immediately preceding such date and (f) as to Heights Capital, the greater of (i) 3.6% of the daily trading volume of the Common Stock on the Nasdaq National Market System on the date a proposed trade is to take place and (ii) 3.6% of the average daily trading volume of the Common Stock on the Nasdaq National Market for the five trading days immediately preceding such date; provided, however, that for the purpose of calculating the Daily Trade Amount, a block trade effected by a party outside the Nasdaq National Market System shall be disregarded for purposes of calculating the amount disposed of by the party and the daily trading volume. The Daily Trade Amount shall apply to each such stockholder severally and not jointly, shall not be aggregated among or between such stockholders, and such stockholders shall not be required hereby to coordinate their sales or dispositions of Common Stock. "Demand Registration" has the meaning set forth in Section 3(a) of this Agreement. "Designated Holder" means each of the General Atlantic Stockholders, the Coinvestor Stockholders, the Vectis Stockholders and the Apex Stockholders and any transferee of any of them to whom Registrable Securities have been transferred in accordance with Section 9(f) of this Agreement, other than a transferee to whom Registrable Securities have been transferred pursuant to a Registration Statement under the Securities Act or Rule 144 (or any successor rule thereto). "Dragonfield" has the meaning set forth in the recitals to this Agreement. 4 "Exchange" has the meaning set forth in the Convertible Note Purchase and Exchange Agreement. "Exchange Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission thereunder. "GA Notes" has the meaning set forth in the recitals to this Agreement. "GAP Coinvestment" has the meaning set forth in the preamble to this Agreement. "GAP LLC" means General Atlantic Partners, LLC, a Delaware limited liability company and the general partner of GAP LP and the managing member of GapStar, and any successor to such entity. "GAP LP" has the meaning set forth in the preamble to this Agreement. "GapStar" has the meaning set forth in the preamble to this Agreement. "General Atlantic Stockholders" means GAP LP, GAP Coinvestment, GapStar, GmbH Coinvestment and any Affiliate of GAP LLC that, after the date hereof, acquires Registrable Securities. "GmbH Coinvestment" means GAPCO GmbH & Co. KG, a German limited partnership. "Great Affluent" has the meaning set forth in the recitals to this Agreement. "Heights Capital" has the meaning set forth in the preamble to this Agreement. "Holders' Counsel" has the meaning set forth in Section 6(a)(i) of this Agreement. "Incidental Registration" has the meaning set forth in Section 4(a) of this Agreement. "Indemnified Party" has the meaning set forth in Section 7(c) of this Agreement. "Indemnifying Party" has the meaning set forth in Section 7(c) of this Agreement. "Initiating Holders" has the meaning set forth in Section 3(a) of this Agreement. "Inspector" has the meaning set forth in Section 6(a)(vii) of this Agreement. "January Convertible Note Agreement" has the meaning set forth in the recitals to this Agreement. "January 2004 Notes" has the meaning set forth in the recitals to this Agreement. 5 "Liability" has the meaning set forth in Section 7(a) of this Agreement. "Lion Cosmos" has the meaning set forth in the recitals to this Agreement. "March Convertible Note Agreement" has the meaning set forth in the recitals to this Agreement. "March 2004 Notes" has the meaning set forth in the recitals to this Agreement. "NASD" means the National Association of Securities Dealers, Inc. "Passport Capital" has the meaning set forth in the preamble to this Agreement. "Person" means any individual, firm, corporation, partnership, limited liability company, trust, incorporated or unincorporated association, joint venture, joint stock company, limited liability company, government (or an agency or political subdivision thereof) or other entity of any kind, and shall include any successor (by merger or otherwise) of such entity. "Public Offering" means any public offering of the shares of Common Stock of the Company pursuant to an effective Registration Statement filed under the Securities Act. "Records" has the meaning set forth in Section 6(a)(vii) of this Agreement. "Registrable Securities" means each of the following: (a) any and all shares of Common Stock issued or issuable upon conversion of shares of Series D Preferred Stock or exercise of the Warrants, and, subject to Stockholder Approval, any and all shares of Common Stock issued or issuable upon conversion of shares of Series E Preferred Stock, (b) if the Subsequent Closing does not occur by August 15, 2004, the shares of Common Stock issued upon conversion of the January 2004 Notes and the March 2004 Notes, (c) any other shares of Common Stock acquired or owned by any of the Designated Holders after the date hereof if such Designated Holder is an Affiliate of the Company and (d) any shares of Common Stock issued or issuable to any of the Designated Holders with respect to the Registrable Securities by way of stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization or otherwise and any shares of Common Stock or voting common stock issuable upon conversion, exercise or exchange thereof. "Registration Expenses" has the meaning set forth in Section 6(d) of this Agreement. "Registration Statement" means a Registration Statement filed pursuant to the Securities Act. "Rights Offering" has the meaning set forth in the Convertible Note Purchase and Exchange Agreement. "Sagamore" has the meaning set forth in the preamble to this Agreement. 6 "Securities Act" means the Securities Act of 1933, as amended, and the rules and regulations of the Commission promulgated thereunder. "Series D Preferred Stock" has the meaning set forth in the recitals to this Agreement. "Series E Preferred Stock" has the meaning set forth in the recitals to this Agreement. "Stock Purchase Agreement" has the meaning set forth in the recitals to this Agreement. "Stockholder Approval" has the meaning set forth in the Convertible Note Purchase and Exchange Agreement. "Valid Business Reason" has the meaning set forth in Section 3(a) of this Agreement. "Vectis" has the meaning set forth in the preamble of this Agreement. "Vectis Stockholders" means Vectis and any Affiliate thereof that, after the date hereof, acquires Registrable Securities. "Warrants" has the meaning set forth in the recitals to this Agreement. 2. General; Securities Subject to this Agreement. (a) Grant of Rights. The Company hereby grants registration rights to the Designated Holders upon the terms and conditions set forth in this Agreement. (b) Registrable Securities. For the purposes of this Agreement, Registrable Securities will cease to be Registrable Securities, when (i) a Registration Statement covering such Registrable Securities has been declared effective under the Securities Act by the Commission and such Registrable Securities have been disposed of pursuant to such effective Registration Statement, (ii) (x) the entire amount of the Registrable Securities owned by a Designated Holder may be sold in a single sale, in the opinion of counsel satisfactory to the Company and such Designated Holder, each in their reasonable judgment, without any limitation as to volume pursuant to Rule 144 (or any successor provision then in effect) under the Securities Act and (y) such Designated Holder owning such Registrable Securities owns less than one percent (1%) of the outstanding shares of Common Stock on a fully diluted basis, or (iii) the Registrable Securities are proposed to be sold or distributed by a Person not entitled to the registration rights granted by this Agreement. (c) Holders of Registrable Securities. A Person is deemed to be a holder of Registrable Securities whenever such Person owns of record Registrable Securities, or holds an option to purchase, or a security convertible into or exercisable or exchangeable for, Registrable Securities whether or not such acquisition or conversion has actually been effected. If the Company receives conflicting instructions, notices or elections from two or more Persons with 7 respect to the same Registrable Securities, the Company may act upon the basis of the instructions, notice or election received from the registered owner of such Registrable Securities. Registrable Securities issuable upon exercise of an option or upon conversion of another security shall be deemed outstanding for the purposes of this Agreement. 3. Demand Registration. (a) Request for Demand Registration. At any time after the earliest of (i) the expiration or consummation of the exercise of the right of the General Atlantic Stockholders and the Coinvestor Stockholders (or their respective permitted transferees) to purchase those shares of Series E Preferred Stock offered in the Rights Offering but not acquired by holders of shares of the Company's Common Stock, (ii) the termination of the Rights Offering and the occurrence of the special meeting to seek Stockholder Approval and (iii) August 15, 2004, if the Conversion and Exchange and the Conversion have not occurred on or prior to such date, each of (A) the General Atlantic Stockholders, (B) the Coinvestor Stockholders, (C) Apex Capital, (D) Passport Capital, (E) Crosslink, (F) Sagamore, (G) Criterion and (H) Heights Capital (the "Initiating Holders"), may each make a written request to the Company to register, and the Company shall register, under the Securities Act and on an appropriate registration statement form as reasonably determined by the Company and approved by the Initiating Holders (a "Demand Registration"), the number of Registrable Securities stated in such request; provided, however, that the Company shall not be obligated to effect more than one such Demand Registration for the General Atlantic Stockholders (subject to Section 3(e)(ii) below), more than one such Demand Registration for the Coinvestor Stockholders (subject to Section 3(e)(ii) below), more than one such Demand Registration for Apex Capital (subject to Section 3(e)(ii) below), more than one such Demand Registration for Passport Capital (subject to Section 3(e)(ii) below), more than one such Demand Registration for Crosslink (subject to Section 3(e)(ii) below), more than one such Demand Registration for Sagamore (subject to Section 3(e)(ii) below), more than one such Demand Registration for Criterion (subject to Section 3(e)(ii) below) and more than one such Demand Registration for Heights Capital (subject to Section 3(e)(ii) below). If following receipt of a written request for a Demand Registration the Board of Directors, in its good faith judgment, determines that any registration of Registrable Securities should not be made or continued because it would materially interfere with any material financing, acquisition, corporate reorganization or merger or other material transaction involving the Company (a "Valid Business Reason"), the Company may (x) postpone filing a Registration Statement relating to a Demand Registration until such Valid Business Reason no longer exists, but in no event for more than ninety (90) days, and (y) in case a Registration Statement has been filed relating to a Demand Registration, if the Valid Business Reason has not resulted from actions taken by the Company, the Company, upon the approval of a majority of the Board of Directors, such majority to include at least one Director appointed by the General Atlantic Stockholders, may cause such Registration Statement to be withdrawn and its effectiveness terminated or may postpone amending or supplementing such Registration Statement. The Company shall give written notice of its determination to postpone or withdraw a Registration Statement and of the fact that the Valid Business Reason for such postponement or withdrawal no longer exists, in each case, promptly after the occurrence thereof. Notwithstanding anything to the contrary contained herein, the Company may not postpone or withdraw a filing under this Section 3(a) more than once in any twelve (12) month period. Each request for a Demand Registration by the Initiating 8 Holders shall state the amount of the Registrable Securities proposed to be sold and the intended method of disposition thereof. (b) Incidental or "Piggy-Back" Rights with Respect to a Demand Registration. Each of the Designated Holders (other than Initiating Holders which have requested a registration under Section 3(a)) may offer its or his Registrable Securities under any Demand Registration pursuant to this Section 3(b). Within five (5) days after the receipt of a request for a Demand Registration from an Initiating Holder, the Company shall (i) give written notice thereof to all of the Designated Holders (other than Initiating Holders which have requested a registration under Section 3(a)) and (ii) subject to Section 3(e), include in such registration all of the Registrable Securities held by such Designated Holders from whom the Company has received a written request for inclusion therein within ten (10) days of the receipt by such Designated Holders of such written notice referred to in clause (i) above. Each such request by such Designated Holders shall specify the number of Registrable Securities proposed to be registered. The failure of any Designated Holder to respond within such 10 day period referred to in clause (ii) above shall be deemed to be a waiver of such Designated Holder's rights under this Section 3 with respect to such Demand Registration. Any Designated Holder may waive its rights under this Section 3 prior to the expiration of such 10-day period by giving written notice to the Company, with a copy to the Initiating Holders. If a Designated Holder sends the Company a written request for inclusion of part or all of such Designated Holder's Registrable Securities in a registration, such Designated Holder shall not be entitled to withdraw or revoke such request without the prior written consent of the Company in its sole discretion unless, as a result of facts or circumstances arising after the date on which such request was made relating to the Company or to market conditions, such Designated Holder reasonably determines that participation in such registration would have a material adverse effect on such Designated Holder. (c) Effective Demand Registration. The Company shall use all commercially reasonable efforts to cause any such Demand Registration to be filed not later than thirty (30) days after it receives a request under Section 3(a) hereof and to become and remain effective as soon as practicable thereafter but, in any event, not later than ninety (90) days (or, if the Company is eligible to effect such registration on Form S-3, sixty (60) days) after such filing. A registration shall not constitute a Demand Registration unless it has become effective and remains continuously effective until the earlier of the date (i) on which all Registrable Securities registered in the Demand Registration are sold and (ii) that is the second anniversary of the effectiveness of the Registration Statement relating to such Demand Registration; provided, however, that a registration shall not constitute a Demand Registration if (x) after such Demand Registration has become effective, such registration or the related offer, sale or distribution of Registrable Securities thereunder is interfered with by any stop order, injunction or other order or requirement of the Commission or other governmental agency or court for any reason not attributable to the Initiating Holders and such interference is not thereafter eliminated or (y) the conditions specified in the underwriting agreement, if any, entered into in connection with such Demand Registration are not satisfied or waived, other than by reason of a failure by the Initiating Holder. (d) Expenses. The Company shall pay all Registration Expenses in connection with a Demand Registration, whether or not such Demand Registration becomes 9 effective, except for an underwritten Demand Registration pursuant to Section 3(e)(i)(y) below, as to which each participating Designated Holder shall bear its pro rata portion of expenses based on the number of shares of Common Stock registered pursuant thereto. (e) Underwriting Procedures. (i) If (x) any of the Initiating Holders so elects for itself or (y) with respect to any given trading day, a Designated Holder proposes to sell or dispose of more than the Daily Trade Amount and the Company's board of directors determines in good faith that it is necessary for an orderly distribution to be made pursuant to a firm commitment underwritten offering, then the Company shall use all commercially reasonable efforts to cause such Demand Registration to be in the form of, and such Designated Holder or Designated Holders shall be obligated to sell or dispose of its or their Registrable Securities pursuant to, a firm commitment underwritten offering and the managing underwriter or underwriters selected for such offering shall be the Approved Underwriter selected in accordance with Section 3(f). In connection with any Demand Registration under this Section 3 involving an underwritten offering, none of the Registrable Securities held by any Designated Holder making a request for inclusion of such Registrable Securities pursuant to Section 3(b) hereof shall be included in such underwritten offering unless such Designated Holder accepts the terms of the offering as agreed upon by the Company, the Initiating Holders and the Approved Underwriter, and then only in such quantity as will not, in the opinion of the Approved Underwriter, jeopardize the success of such offering by the Initiating Holders. If the Approved Underwriter advises the Company in its reasonable opinion that the aggregate amount of such Registrable Securities requested to be included in such offering is sufficiently large to have a material adverse effect on the success of such offering, then the Company shall include in such registration only the aggregate amount of Registrable Securities that the Approved Underwriter believes may be sold without any such material adverse effect and shall reduce the amount of Registrable Securities to be included in such registration by removing from such registration securities owned, first by the Company and second by the Designated Holders (including the Initiating Holders) pro rata based on the number of Registrable Securities owned by each such Designated Holder. (ii) If an Initiating Holder makes a request for a Demand Registration and, pursuant to Section 3(e)(i) above, the Approved Underwriter advises the Company to reduce the aggregate amount of Registrable Securities requested to be included in such offering such that less than seventy-five percent (75%) of the Registrable Securities requested to be included by any Initiating Holder are ultimately included in and sold pursuant to such Demand Registration, the Initiating Holder shall have the right to require the Company to effect an additional Demand Registration; provided, however, that in no event shall the aggregate number of Demand Registrations to be effected by the Company for any one Initiating Holder exceed two (2). (f) Selection of Underwriters. If any Demand Registration of Registrable Securities is in the form of an underwritten offering, the Company shall select and obtain an investment banking firm of national reputation to act as the managing underwriter of the offering (the "Approved Underwriter"); provided, however, that the Approved Underwriter shall, in any case, also be approved by the Initiating Holders. 10 4. Incidental or "Piggy-Back" Registration. (a) Request for Incidental Registration. If at any time the Company proposes to file a Registration Statement under the Securities Act with respect to an offering by the Company for its own account (other than a Registration Statement on Form S-4 or S-8 or any successor thereto) or for the account of any stockholder of the Company other than the Designated Holders, then the Company shall give written notice of such proposed filing to each of the Designated Holders at least twenty (20) days before the anticipated filing date, and such notice shall describe the proposed registration and distribution and offer such Designated Holders the opportunity to register the number of Registrable Securities as each such Designated Holder may request (an "Incidental Registration"). The Company shall use all commercially reasonable efforts (within twenty (20) days of the notice provided for in the preceding sentence) to cause the managing underwriter or underwriters in the case of a proposed underwritten offering (the "Company Underwriter") to permit each of the Designated Holders who have requested in writing to participate in the Incidental Registration to include its or his Registrable Securities in such offering on the same terms and conditions as the securities of the Company or the account of such other stockholder, as the case may be, included therein. In connection with any Incidental Registration under this Section 4(a) involving an underwritten offering, the Company shall not be required to include any Registrable Securities in such underwritten offering unless the Designated Holders thereof accept the terms of the underwritten offering as agreed upon between the Company, such other stockholders, if any, and the Company Underwriter, and then only in such quantity as the Company Underwriter believes will not jeopardize the success of the offering by the Company. If the Company Underwriter determines that the registration of all or part of the Registrable Securities which the Designated Holders have requested to be included would materially adversely affect the success of such offering, then the Company shall be required to include in such Incidental Registration, to the extent of the amount that the Company Underwriter believes may be sold without causing such adverse effect, first, all of the securities to be offered for the account of the Company or on the account of the selling stockholder that caused the registration statement that has triggered the Incidental Registration to be filed, as the case may be; second, the Registrable Securities to be offered for the account of the Designated Holders pursuant to this Section 4, pro rata based on the number of Registrable Securities owned by each such Designated Holder; and third, any other securities requested to be included in such offering. (b) Expenses. The Company shall bear all Registration Expenses in connection with any Incidental Registration pursuant to this Section 4, whether or not such Incidental Registration becomes effective. 5. Holdback Agreements. (a) Restrictions on Public Sale by Designated Holders. To the extent (i) requested (A) by the Company or the Initiating Holders, as the case may be, in the case of a non-underwritten public offering and (B) by the Approved Underwriter or the Company Underwriter, as the case may be, in the case of an underwritten public offering and (ii) all of the Company's officers, directors and holders in excess of one percent (1%) of its outstanding capital stock execute agreements identical to those referred to in this Section 5(a), each Designated Holder agrees (x) not to effect any public sale or distribution of any Registrable 11 Securities or of any securities convertible into or exchangeable or exercisable for such Registrable Securities, including a sale pursuant to Rule 144 under the Securities Act, or offer to sell, contract to sell (including without limitation any short sale), grant any option to purchase or enter into any hedging or similar transaction with the same economic effect as a public sale any Registrable Securities and (y) not to make any request for a Demand Registration under this Agreement, during the ninety (90) day period or such shorter period, if any, mutually agreed upon by such Designated Holder and the requesting party beginning on the effective date of the Registration Statement (except as part of such registration) for such public offering. No Designated Holder of Registrable Securities subject to this Section 5(a) shall be released from any obligation under any agreement, arrangement or understanding entered into pursuant to this Section 5(a) unless all other Designated Holders of Registrable Securities subject to the same obligation are also released. All Designated Holders of Registrable Securities shall be automatically released from any obligations under any agreement, arrangement or understanding entered into pursuant to this Section 5(a) immediately upon the expiration of the 90 day period, and in any case, on the date that is two years from the date of this Agreement. (b) Restrictions on Public Sale by the Company. The Company agrees not to effect any public sale or distribution of any of its securities, or any securities convertible into or exchangeable or exercisable for such securities (except pursuant to registrations on Form S-4 or S-8 or any successor thereto), during the period beginning on the effective date of any Registration Statement in which the Designated Holders of Registrable Securities are participating and ending on the earlier of (i) the date on which all Registrable Securities registered on such Registration Statement are sold and (ii) 120 days after the effective date of such Registration Statement (except as part of such registration). 6. Registration Procedures. (a) Obligations of the Company. Whenever registration of Registrable Securities has been requested pursuant to Section 3 or Section 4 of this Agreement, the Company shall use all commercially reasonable efforts to effect the registration and sale of such Registrable Securities in accordance with the intended method of distribution thereof as quickly as practicable, and in connection with any such request, the Company shall, as expeditiously as possible: (i) prepare and file with the Commission a Registration Statement on any form for which the Company then qualifies or which counsel for the Company shall deem appropriate and which form shall be available for the sale of such Registrable Securities in accordance with the intended method of distribution thereof, and cause such Registration Statement to become effective; provided, however, that (x) before filing a Registration Statement or prospectus or any amendments or supplements thereto, the Company shall provide counsel selected by the Designated Holders holding a majority of the Registrable Securities being registered in such registration ("Holders' Counsel") with an adequate opportunity to review and comment on such Registration Statement and each prospectus included therein (and each amendment or supplement thereto) to be filed with the Commission, subject to such documents being under the Company's control, and (y) the Company shall notify the Holders' Counsel and each seller of Registrable Securities of any stop order issued or threatened by the Commission and take all action required to prevent the entry of such stop order or to remove it if entered; 12 (ii) prepare and file with the Commission such amendments and supplements to such Registration Statement and the prospectus used in connection therewith as may be necessary to keep such Registration Statement effective for the lesser of (x) 120 days and (y) such shorter period which will terminate when all Registrable Securities covered by such Registration Statement have been sold, and comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such Registration Statement during such period in accordance with the intended methods of disposition by the sellers thereof set forth in such Registration Statement; (iii) furnish to each seller of Registrable Securities, prior to filing a Registration Statement, at least one copy of such Registration Statement as is proposed to be filed, and thereafter such number of copies of such Registration Statement, each amendment and supplement thereto (in each case including all exhibits thereto), and the prospectus included in such Registration Statement (including each preliminary prospectus) and any prospectus filed under Rule 424 under the Securities Act as each such seller may reasonably request in order to facilitate the disposition of the Registrable Securities owned by such seller; (iv) register or qualify such Registrable Securities under such other securities or "blue sky" laws of such jurisdictions as any seller of Registrable Securities may request, and to continue such qualification in effect in such jurisdiction for as long as permissible pursuant to the laws of such jurisdiction, or for as long as any such seller requests or until all of such Registrable Securities are sold, whichever is shortest, and do any and all other acts and things which may be reasonably necessary or advisable to enable any such seller to consummate the disposition in such jurisdictions of the Registrable Securities owned by such seller; provided, however, that the Company shall not be required to (x) qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this Section 6(a)(iv), (y) subject itself to taxation in any such jurisdiction or (z) consent to general service of process in any such jurisdiction; (v) notify each seller of Registrable Securities at any time when a prospectus relating thereto is required to be delivered under the Securities Act, upon discovery that, or upon the happening of any event as a result of which, the prospectus included in such Registration Statement contains an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading and the Company shall promptly prepare a supplement or amendment to such prospectus and furnish to each seller of Registrable Securities a reasonable number of copies of such supplement to or an amendment of such prospectus as may be necessary so that, after delivery to the purchasers of such Registrable Securities, such prospectus shall not contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; (vi) enter into and perform customary agreements (including an underwriting agreement containing representations, warranties, covenants and indemnities for securities law matters and otherwise in customary form with the Approved Underwriter or Company Underwriter, if any, selected as provided in Section 3 or Section 4, as the case may be) and take such other actions as are prudent and reasonably required in order to expedite or 13 facilitate the disposition of such Registrable Securities, including causing its officers to participate in "road shows" and other information meetings organized by the Approved Underwriter or Company Underwriter; (vii) make available at reasonable times for inspection by any seller of Registrable Securities, any managing underwriter participating in any disposition of such Registrable Securities pursuant to a Registration Statement, Holders' Counsel and any attorney, accountant or other agent retained by any such seller or any managing underwriter (each, an "Inspector" and collectively, the "Inspectors"), all financial and other records, pertinent corporate documents and properties of the Company and its subsidiaries (collectively, the "Records") as shall be reasonably necessary to enable them to exercise their due diligence responsibility, and cause the Company's and its subsidiaries' officers, directors and employees, and the independent public accountants of the Company, to supply all information reasonably requested by any such Inspector in connection with such Registration Statement. Records that the Company determines, in good faith, to be confidential and which it notifies the Inspectors are confidential shall not be disclosed by the Inspectors (and the Inspectors shall confirm their agreement in writing in advance to the Company if the Company shall so request) unless (x) the disclosure of such Records is necessary, in the Company's judgment, to avoid or correct a misstatement or omission in the Registration Statement, (y) the release of such Records is ordered pursuant to a subpoena or other order from a court of competent jurisdiction after exhaustion of all appeals therefrom or (z) the information in such Records was known to the Inspectors on a non-confidential basis prior to its disclosure by the Company or has been made generally available to the public. Each seller of Registrable Securities agrees that it shall, upon learning that disclosure of such Records is sought in a court of competent jurisdiction, give notice to the Company and allow the Company, at the Company's expense, to undertake appropriate action to prevent disclosure of the Records deemed confidential; (viii) if such sale is pursuant to an underwritten offering, obtain a "cold comfort" letter dated the effective date of the Registration Statement and the date of the closing under the underwriting agreement from the Company's independent public accountants in customary form and covering such matters of the type customarily covered by "cold comfort" letters as the managing underwriter reasonably requests; (ix) furnish, at the request of any seller of Registrable Securities on the date such securities are delivered to the underwriters for sale pursuant to such registration or, if such securities are not being sold through underwriters, on the date the Registration Statement with respect to such securities becomes effective, an opinion, if reasonably available, dated such date, of counsel representing the Company for the purposes of such registration, addressed to the underwriters, if any, and to the seller making such request, covering such legal matters with respect to the registration in respect of which such opinion is being given as the underwriters, if any, and such seller may reasonably request and are customarily included in such opinions; (x) comply with all applicable rules and regulations of the Commission, and make available to its security holders, as soon as reasonably practicable but no later than fifteen (15) months after the effective date of the Registration Statement, an earnings statement covering a period of twelve (12) months beginning after the effective date of the 14 Registration Statement, in a manner which satisfies the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder; (xi) cause all such Registrable Securities to be listed on each securities exchange on which similar securities issued by the Company are then listed, provided that the applicable listing requirements are satisfied; (xii) cooperate with each seller of Registrable Securities and each underwriter participating in the disposition of such Registrable Securities and their respective counsel in connection with any filings required to be made with the NASD; and (xiii) take all other steps reasonably necessary to effect the registration of the Registrable Securities contemplated hereby. (b) Seller Information. The Company may require each seller of Registrable Securities as to which any registration is being effected to furnish, and such seller shall furnish, to the Company such information regarding the distribution of such securities as the Company may from time to time reasonably request in writing. (c) Notice to Discontinue. Each Designated Holder agrees that, not more than two times in any 12-month period, upon receipt of any notice from the Company of the happening of any event of the kind described in Section 6(a)(v), such Designated Holder shall, for a total period not longer than 90 days during each such 12-month period (inclusive of any delay pursuant to a Valid Business Reason under Section 3(a) or period during which the Designated Holder is unable to dispose of Registrable Securities under the Registration Statement pursuant to a notice by the Company under Section 6(a)(v) hereof), forthwith discontinue disposition of Registrable Securities pursuant to the Registration Statement covering such Registrable Securities until such Designated Holder's receipt of the copies of the supplemented or amended prospectus contemplated by Section 6(a)(v) and, if so directed by the Company, such Designated Holder shall deliver to the Company (at the Company's expense) all copies, other than permanent file copies then in such Designated Holder's possession, of the prospectus covering such Registrable Securities which is current at the time of receipt of such notice. If the Company shall give any such notice, the Company shall extend the period during which such Registration Statement shall be maintained effective pursuant to this Agreement (including, without limitation, the period referred to in Section 6(a)(ii)) by the number of days during the period from and including the date of the giving of such notice pursuant to Section 6(a)(v) to and including the date when sellers of such Registrable Securities under such Registration Statement shall have received the copies of the supplemented or amended prospectus contemplated by and meeting the requirements of Section 6(a)(v). (d) Registration Expenses. The Company shall pay all expenses arising from or incident to its performance of, or compliance with, this Agreement, including, without limitation, (i) Commission, stock exchange and NASD registration and filing fees, (ii) all fees and expenses incurred in complying with securities or "blue sky" laws (including reasonable fees, charges and disbursements of counsel to any underwriter incurred in connection with "blue sky" qualifications of the Registrable Securities as may be set forth in any underwriting agreement), (iii) all printing, messenger and delivery expenses and (iv) the fees, charges and 15 expenses of counsel to the Company and of its independent public accountants and any other accounting fees, charges and expenses incurred by the Company (including, without limitation, any expenses arising from any "cold comfort" letters or any special audits incident to or required by any registration or qualification) and any reasonable legal fees, charges and expenses incurred by one counsel for the General Atlantic Stockholders. All of the expenses described in the preceding sentence of this Section 6(d) are referred to herein as "Registration Expenses." The Designated Holders of Registrable Securities sold pursuant to a Registration Statement shall bear the expense of any underwriter's discount or commission relating to registration and sale of such Designated Holders' Registrable Securities. 7. Indemnification; Contribution. (a) Indemnification by the Company. The Company agrees to indemnify and hold harmless each Designated Holder, its partners, directors, officers, affiliates and each Person who controls (within the meaning of Section 15 of the Securities Act) such Designated Holder from and against any and all losses, claims, damages, liabilities and expenses (including reasonable costs of investigation) (each, a "Liability" and collectively, "Liabilities"), arising out of or based upon any untrue, or allegedly untrue, statement of a material fact contained in any Registration Statement, prospectus or preliminary prospectus (as amended or supplemented if the Company shall have furnished any amendments or supplements thereto) or arising out of or based upon any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances under which such statements were made, except insofar as such Liability arises out of or is based upon any untrue statement or alleged untrue statement or omission or alleged omission contained in such Registration Statement, preliminary prospectus or final prospectus in reliance and in conformity with information concerning such Designated Holder furnished in writing to the Company by such Designated Holder expressly for use therein, including, without limitation, the information furnished to the Company pursuant to Section 7(b). The Company shall also provide customary indemnities to any underwriters of the Registrable Securities, their officers, directors and employees and each Person who controls such underwriters (within the meaning of Section 15 of the Securities Act) to the same extent as provided above with respect to the indemnification of the Designated Holders of Registrable Securities. (b) Indemnification by Designated Holders. In connection with any Registration Statement in which a Designated Holder is participating pursuant to Section 3 or Section 4 hereof, each such Designated Holder shall promptly furnish to the Company in writing such information with respect to such Designated Holder as the Company may reasonably request or as may be required by law for use in connection with any such Registration Statement or prospectus and all information required to be disclosed in order to make the information previously furnished to the Company by such Designated Holder not materially misleading or necessary to cause such Registration Statement not to omit a material fact with respect to such Designated Holder necessary in order to make the statements therein not misleading. Each Designated Holder agrees to indemnify and hold harmless the Company, each of its directors, each of its officers who has signed the Registration Statement, any underwriter retained by the Company and each Person who controls the Company or such underwriter (within the meaning of Section 15 of the Securities Act) to the same extent as the foregoing indemnity from the Company to the Designated Holders, but only if such statement or alleged statement or omission 16 or alleged omission was made in reliance upon and in conformity with information with respect to such Designated Holder furnished in writing to the Company by such Designated Holder expressly for use in such Registration Statement or prospectus, including, without limitation, the information furnished to the Company pursuant to this Section 7(b); provided, however, that the total amount to be indemnified by such Designated Holder pursuant to this Section 7(b) shall be limited to the net proceeds (after deducting the underwriters' discounts and commissions) received by such Designated Holder in the offering to which the Registration Statement or prospectus relates. (c) Conduct of Indemnification Proceedings. Any Person entitled to indemnification hereunder (the "Indemnified Party") agrees to give prompt written notice to the indemnifying party (the "Indemnifying Party") after the receipt by the Indemnified Party of any written notice of the commencement of any action, suit, proceeding or investigation or threat thereof made in writing for which the Indemnified Party intends to claim indemnification or contribution pursuant to this Agreement; provided, however, that the failure so to notify the Indemnifying Party shall not relieve the Indemnifying Party of any Liability that it may have to the Indemnified Party hereunder (except to the extent that the Indemnifying Party is materially prejudiced or otherwise forfeits substantive rights or defenses by reason of such failure). If notice of commencement of any such action is given to the Indemnifying Party as above provided, the Indemnifying Party shall be entitled to participate in and, to the extent it may wish, jointly with any other Indemnifying Party similarly notified, to assume the defense of such action at its own expense, with counsel chosen by it and reasonably satisfactory to such Indemnified Party. The Indemnified Party shall have the right to employ separate counsel in any such action and participate in the defense thereof, but the fees and expenses of such counsel shall be paid by the Indemnified Party unless (i) the Indemnifying Party agrees to pay the same, (ii) the Indemnifying Party fails to assume the defense of such action with counsel reasonably satisfactory to the Indemnified Party or (iii) the named parties to any such action (including any impleaded parties) include both the Indemnifying Party and the Indemnified Party and such parties have been advised by such counsel that either (x) representation of such Indemnified Party and the Indemnifying Party by the same counsel would be inappropriate under applicable standards of professional conduct or (y) there may be one or more legal defenses available to the Indemnified Party which are different from or additional to those available to the Indemnifying Party. In any of such cases, the Indemnifying Party shall not have the right to assume the defense of such action on behalf of such Indemnified Party, it being understood, however, that the Indemnifying Party shall not be liable for the fees and expenses of more than one separate firm of attorneys (in addition to any local counsel) for all Indemnified Parties. No Indemnifying Party shall be liable for any settlement entered into without its written consent, which consent shall not be unreasonably withheld. No Indemnifying Party shall, without the consent of such Indemnified Party, effect any settlement of any pending or threatened proceeding in respect of which such Indemnified Party is a party and indemnity has been sought hereunder by such Indemnified Party, unless such settlement includes an unconditional release of such Indemnified Party from all liability for claims that are the subject matter of such proceeding. (d) Contribution. If the indemnification provided for in this Section 7 from the Indemnifying Party is unavailable to an Indemnified Party hereunder in respect of any Liabilities referred to herein, then the Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount paid or payable by such Indemnified Party as a 17 result of such Liabilities in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party and Indemnified Party in connection with the actions which resulted in such Liabilities, as well as any other relevant equitable considerations. The relative faults of such Indemnifying Party and Indemnified Party shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact, has been made by, or relates to information supplied by, such Indemnifying Party or Indemnified Party, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such action. The amount paid or payable by a party as a result of the Liabilities referred to above shall be deemed to include, subject to the limitations set forth in Sections 7(a), 7(b) and 7(c), any legal or other fees, charges or expenses reasonably incurred by such party in connection with any investigation or proceeding; provided that the total amount to be contributed by such Designated Holder shall be limited to the net proceeds (after deducting the underwriters' discounts and commissions) received by such Designated Holder in the offering. The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 7(d) were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraph. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. 8. Rule 144. The Company covenants that it shall (a) file any reports required to be filed by it under the Exchange Act and (b) take such further action as each Designated Holder may reasonably request (including providing any information necessary to comply with Rule 144 under the Securities Act), all to the extent required from time to time to enable such Designated Holder to sell Registrable Securities without registration under the Securities Act within the limitation of the exemptions provided by (i) Rule 144 under the Securities Act, as such rule may be amended from time to time or (ii) any similar rules or regulations hereafter adopted by the Commission. The Company shall, upon the request of any Designated Holder, deliver to such Designated Holder a written statement as to whether it has complied with such requirements. 9. Miscellaneous. (a) Recapitalizations, Exchanges, etc. The provisions of this Agreement shall apply to the full extent set forth herein with respect to (i) the shares of Common Stock, (ii) any and all shares of voting common stock of the Company into which the shares of Common Stock are converted, exchanged or substituted in any recapitalization or other capital reorganization by the Company and (iii) any and all equity securities of the Company or any successor or assign of the Company (whether by merger, consolidation, sale of assets or otherwise) which may be issued in respect of, in conversion of, in exchange for or in substitution of, the shares of Common Stock and shall be appropriately adjusted for any stock dividends, splits, reverse splits, combinations, recapitalizations and the like occurring after the date hereof. The Company shall use all commercially reasonable efforts to cause any successor or assign (whether by merger, consolidation, sale of assets or otherwise) to enter into a new registration rights agreement with the Designated Holders on terms substantially the same as this Agreement as a condition of any such transaction. 18 (b) No Inconsistent Agreements. The Company shall not enter into any agreement with respect to its securities that is inconsistent with the rights granted to the Designated Holders in this Agreement or grant any additional registration rights to any Person or with respect to any securities which are not Registrable Securities which are prior in right to or inconsistent with the rights granted in this Agreement. (c) Remedies. The Designated Holders, in addition to being entitled to exercise all rights granted by law, including recovery of damages, shall be entitled to specific performance of their rights under this Agreement. 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 Agreement and hereby agrees to waive in any action for specific performance the defense that a remedy at law would be adequate. (d) Amendments and Waivers. Except as otherwise provided herein, the provisions of this Agreement may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given unless consented to in writing by (i) the Company and (ii) the General Atlantic Stockholders, Coinvestor Stockholders, Vectis Stockholders and Apex Stockholders holding Registrable Securities representing (after giving effect to any adjustments) at least a majority of the aggregate number of Registrable Securities owned by all of the General Atlantic Stockholders, Coinvestor Stockholders, Vectis Stockholders and Apex Stockholders; provided, however, that to the extent any amendment or waiver shall adversely affect any of such stockholders, such amendment or waiver shall require the prior written consent of each stockholder so adversely affected. Any such written consent shall be binding upon the Company and all of the Designated Holders. (e) Notices. All notices, demands and other communications provided for or permitted hereunder shall be made in writing and shall be made by registered or certified first-class mail, return receipt requested, telecopier, courier service or personal delivery: (i) if to the Company: Critical Path, Inc. 350 The Embarcadero San Francisco, CA 94105-1204 Telecopy: (415) 541-2300 Attention: Chief Financial Officer with a copy to: Pillsbury Winthrop LLP 50 Fremont Street San Francisco, CA 94105 Telecopy: (415) 983-1200 Attention: Gregg F. Vignos, Esq. 19 (ii) if to the General Atlantic Stockholders: c/o General Atlantic Service Company 3 Pickwick Plaza Greenwich, CT 06830 Telecopy: (203) 622-8818 Attention: Matthew Nimetz Thomas J. Murphy with a copy to: Paul, Weiss, Rifkind, Wharton & Garrison LLP 1285 Avenue of the Americas New York, NY 10019-6064 Telecopy: (212) 757-3990 Attention: Douglas A. Cifu, Esq. (iii) if to Campina, Great Affluent, Dragonfield or Lion Cosmos: c/o 7th Floor Cheung Kong Center 2 Queen's Road Central Hong Kong Telecopy: (852) 2845-2057 Attention: Mr. Edmond Ip (iv) if to Cenwell: c/o 22nd Floor Hutchison House 10 Harcourt Road Hong Kong Telecopy: (852) 2128-1778 Attention: Company Secretary (v) if to Vectis: c/o Vectis Group, LLC 117 Greenwich Street San Francisco, CA 94111 Telecopy: 415-352-5310 Attention: Matthew Hobart 20 with a copy to: Kirkland & Ellis 153 East 53rd Street New York, NY 10022-4675 Telecopy: 212-446-4900 Attention: Michael Movsovich, Esq. (vi) if to Apex Capital: Apex Capital, LLC 25 Orinda Way, Suite 300 Orinda, CA 94563 Telecopy: (925) 253-1809 Attention: Adam Fiore, General Counsel (vii) if to Passport Capital: Passport Capital, LLC One Sansome Street, 39th Floor San Francisco, CA 94104 Telecopy: (415) 399-7608 Attention: John Burbank, Managing Partner (viii) if to Crosslink: Crosslink Capital Two Embarcadero Center, Suite 2200 San Francisco, CA 94111 Telecopy: (415) 617-1801 Attention: Jason Sanders (ix) if to Sagamore: Sagamore Hill Hub Fund, Ltd. c/o Sagamore Hill Capital Management 10 Glenville Street, 3rd Floor Greenwich, CT 06831 Telecopy: (203) 422-7214 Attention: Legal Department (x) if to Criterion: Criterion Capital Management One Maritime Plaza, Suite 1460 San Francisco, CA 94111 Telecopy:___________________ 21 Attention: R. Daniel Beckham (xi) if to Heights Capital: Capital Ventures International c/o Heights Capital Management, Inc. 425 California Street, Suite 1100 San Francisco, CA 94104 Telecopy: (415) 403-6525 Attention: Martin Kobinger (xii) if to any other Designated Holder, at its address as it appears on the record books of the Company. All such notices, demands and other communications shall be deemed to have been duly given when delivered by hand, if personally delivered; when delivered by courier, if delivered by commercial courier service; five (5) Business Days after being deposited in the mail, postage prepaid, if mailed; and when receipt is mechanically acknowledged, if telecopied. Any party may by notice given in accordance with this Section 9(e) designate another address or Person for receipt of notices hereunder. (f) Successors and Assigns; Third Party Beneficiaries. This Agreement shall inure to the benefit of and be binding upon the successors and permitted assigns of the parties hereto as hereinafter provided. The Demand Registration rights and related rights of the General Atlantic Stockholders, the Coinvestor Stockholders or the Apex Stockholders contained in Section 3 hereof shall be (i) with respect to any Registrable Security that is transferred to an Affiliate of a General Atlantic Stockholder, a Coinvestor Stockholder or an Apex Stockholder, automatically transferred to such Affiliate and (ii) with respect to any Registrable Security that is transferred in all cases to a non-Affiliate, transferred only with the consent of the Company which consent shall not be unreasonably withheld, conditioned or delayed. The incidental or "piggy-back" registration rights of the Designated Holders contained in Sections 3(b) and 4 hereof and the other rights of each of the Designated Holders with respect thereto shall be, with respect to any Registrable Security, automatically transferred to any Person who is the transferee of such Registrable Security so long as such transferee agrees to be bound by this Agreement. All of the obligations of the Company hereunder shall survive any such transfer. Except as provided in Section 7, no Person other than the parties hereto and their successors and permitted assigns is intended to be a beneficiary of this Agreement. (g) Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. (h) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. 22 (i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAW THEREOF. (j) Severability. If any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable in any respect for any reason, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions hereof shall not be in any way impaired, unless the provisions held invalid, illegal or unenforceable shall substantially impair the benefits of the remaining provisions hereof. (k) Rules of Construction. Unless the context otherwise requires, references to sections or subsections refer to sections or subsections of this Agreement. (l) Entire Agreement. This Agreement is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto with respect to the subject matter contained herein. There are no restrictions, promises, representations, warranties or undertakings with respect to the subject matter contained herein, other than those set forth or referred to herein. Subject to Section 9(o), upon the Subsequent Closing (as defined in the Convertible Note Purchase and Exchange Agreement and the Convertible Note Agreements), this Agreement shall supersede all prior agreements and understandings among the parties with respect to such subject matter. (m) Further Assurances. Each of the parties shall execute such documents and perform such further acts as may be reasonably required or desirable to carry out or to perform the provisions of this Agreement. (n) Other Agreements. Nothing contained in this Agreement shall be deemed to be a waiver of, or release from, any obligations any party hereto may have under, or any restrictions on the transfer of Registrable Securities or other securities of the Company imposed by, any other agreement including, but not limited to, the Stock Purchase Agreement, the Convertible Note Purchase and Exchange Agreement, the Convertible Note Agreements or the Amended and Restated Stockholders Agreement. (o) Effective Date and Termination. Subject to the provisions of this Section 9(o), this Agreement shall become effective immediately following the Subsequent Closing. If the Subsequent Closing does not occur and the obligation to consummate the Conversion and the Exchange and the Conversion has been terminated pursuant to Article IX of the Convertible Note Purchase and Exchange Agreement or Article IX of the Convertible Note Agreements, then this Agreement shall become effective as of the date of such termination; provided, however, that Registrable Securities shall not include any shares of Common Stock issued or issuable upon conversion of the Series E Preferred Stock. [the remainder of this page intentionally left blank] 23 IN WITNESS WHEREOF, the undersigned have executed, or have caused to be executed, this Amended and Restated Registration Rights Agreement on the date first written above. CRITICAL PATH, INC. By: -------------------------------------------- Name: Title: SIGNATURE PAGE TO THIRD AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT GENERAL ATLANTIC PARTNERS 74, L.P. By: GENERAL ATLANTIC PARTNERS, LLC, its General Partner By: ------------------------------------ Name: Title: GAP COINVESTMENT PARTNERS II, L.P. By: -------------------------------------------- Name: Title: GAPSTAR, LLC By: GENERAL ATLANTIC PARTNERS, LLC, its Managing Member By: ------------------------------------ Name: Title: GAPCO GMBH & CO. KG By: GAPCO MANAGEMENT GMBH, its General Partner By: ------------------------------------ Name: Title: SIGNATURE PAGE TO THIRD AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT VECTIS CP HOLDINGS, LLC, a Delaware limited liability company By: VECTIS GROUP, LLC its Managing Member By: -------------------------------------------- Name: Title: SIGNATURE PAGE TO THIRD AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT CENWELL LIMITED By: -------------------------------------------- Name: Title: CAMPINA ENTERPRISES LIMITED By: -------------------------------------------- Name: Title: GREAT AFFLUENT LIMITED By: -------------------------------------------- Name: Title: DRAGONFIELD LIMITED By: -------------------------------------------- Name: Title: LION COSMOS LIMITED By: -------------------------------------------- Name: Title: SIGNATURE PAGE TO THIRD AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT PERMAL U.S. OPPORTUNITIES LIMITED By: Apex Capital, LLC, its Authorized Investment Advisor By: ----------------------------------------- Name: Sanford J. Colen Title: Manager and Principal ZAXIS PARTNERS, L.P. By: Apex Capital, LLC, its General Partner By: ----------------------------------------- Name: Sanford J. Colen Title: Manager and Principal ZAXIS EQUITY NEUTRAL, L.P. By: Apex Capital, LLC, its General Partner By: ----------------------------------------- Name: Sanford J. Colen Title: Manager and Principal ZAXIS OFFSHORE LIMITED By: Apex Capital, LLC, its Authorized Investment Advisor By: ----------------------------------------- Name: Sanford J. Colen Title: Manager and Principal SIGNATURE PAGE TO THIRD AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT ZAXIS INSTITUTIONAL PARTNERS, L.P. By: Apex Capital, LLC, its General Partner By: ----------------------------------------- Name: Sanford J. Colen Title: Manager and Principal GUGGENHEIM PORTFOLIO COMPANY XIII By: Apex Capital, LLC, its Authorized Investment Advisor By: ----------------------------------------- Name: Sanford J. Colen Title: Manager and Principal SIGNATURE PAGE TO THIRD AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT PASSPORT MASTER FUND, LP By: -------------------------------------------- Name: John Burbank Title: Managing Partner SIGNATURE PAGE TO THIRD AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT CROSSLINK CROSSOVER FUND IV, L.P. By: Crossover Fund IV Management, L.L.C., its General Partner By: ----------------------------------------- Name: Michael J. Stark Title: Managing Member SIGNATURE PAGE TO THIRD AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT SAGAMORE HILL HUB FUND, LTD. By: Sagamore Hill Capital Management L.P., Investment Manager By: ----------------------------------------- Name: Steven H. Bloom Title: President SIGNATURE PAGE TO THIRD AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT CAPITAL VENTURES INTERNATIONAL By: Heights Capital Management, Inc., an authorized signatory By: ----------------------------------------- Name: Martin Kobinger Title: Investment Manager SIGNATURE PAGE TO THIRD AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT CRITERION CAPITAL PARTNERS, LTD. By: Derivatives Portfolio Management, an authorized signatory By: ----------------------------------------- Name: Guy J. Castranova Title: Chief Operating Officer CRITERION CAPITAL PARTNERS, INSTITUTIONAL By: Criterion Capital Partners, LLC, an authorized signatory By: ----------------------------------------- Name: R. Daniel Beckham Title: Chief Operating Officer CRITERION CAPITAL PARTNERS, L.P. By: Criterion Capital Partners, LLC, an authorized signatory By: ----------------------------------------- Name: R. Daniel Beckham Title: Chief Operating Officer SIGNATURE PAGE TO THIRD AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT ================================================================================ THIRD AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT among CRITICAL PATH, INC. GENERAL ATLANTIC PARTNERS 74, L.P., GAP COINVESTMENT PARTNERS II, L.P., GAPSTAR, LLC, GAPCO GMBH & CO. KG and THE OTHER PARTIES LISTED HEREIN ---------------------------- Dated: March 9, 2004 ---------------------------- ================================================================================ TABLE OF CONTENTS

Page ---- 1. Definitions...................................................................2 2. General; Securities Subject to this Agreement.................................7 (a) Grant of Rights........................................................7 (b) Registrable Securities.................................................7 (c) Holders of Registrable Securities......................................7 3. Demand Registration...........................................................8 (a) Request for Demand Registration........................................8 (b) Incidental or "Piggy-Back" Rights with Respect to a Demand Registration9 (c) Effective Demand Registration..........................................9 (d) Expenses...............................................................9 (e) Underwriting Procedures...............................................10 (f) Selection of Underwriters.............................................10 4. Incidental or "Piggy-Back" Registration......................................11 (a) Request for Incidental Registration...................................11 (b) Expenses..............................................................11 5. Holdback Agreements..........................................................11 (a) Restrictions on Public Sale by Designated Holders.....................11 (b) Restrictions on Public Sale by the Company............................12 6. Registration Procedures......................................................12 (a) Obligations of the Company............................................12 (b) Seller Information....................................................15 (c) Notice to Discontinue.................................................15 (d) Registration Expenses.................................................15 7. Indemnification; Contribution................................................16 (a) Indemnification by the Company........................................16 (b) Indemnification by Designated Holders.................................16 (c) Conduct of Indemnification Proceedings................................17 (d) Contribution..........................................................17 8. Rule 144.....................................................................18 9. Miscellaneous................................................................18 (a) Recapitalizations, Exchanges, etc.....................................18 (b) No Inconsistent Agreements............................................19 (c) Remedies..............................................................19 (d) Amendments and Waivers................................................19 (e) Notices...............................................................19 (f) Successors and Assigns; Third Party Beneficiaries.....................22

i

Page ---- (g) Counterparts..........................................................22 (h) Headings..............................................................22 (i) Governing Law.........................................................23 (j) Severability..........................................................23 (k) Rules of Construction.................................................23 (l) Entire Agreement......................................................23 (m) Further Assurances....................................................23 (n) Other Agreements......................................................23 (o) Effective Date and Termination........................................23

ii EX-4.3 5 f97241exv4w3.txt EXHIBIT 4.3 EXHIBIT 4.3 AMENDED AND RESTATED CERTIFICATE OF DETERMINATION OF PREFERENCES OF SERIES D CUMULATIVE REDEEMABLE CONVERTIBLE PREFERRED STOCK, PAR VALUE $0.001 PER SHARE, OF CRITICAL PATH, INC., a California corporation Pursuant to Section 401 of the California Corporations Code, The undersigned, William E. McGlashan, Jr. and Michael J. Zukerman, do hereby certify that: 1. They are the duly elected and acting Chief Executive Officer and Chairman of the Board of Directors and Senior Vice President, General Counsel and Secretary, respectively, of Critical Path, Inc., a California corporation (the "Corporation"). 2. Pursuant to the authority given in the Corporation's Amended and Restated Articles of Incorporation, the Corporation filed a Certificate of Determination of Preferences of Series D Cumulative Redeemable Convertible Participating Preferred Stock on November 9, 2001. 3. Pursuant to Section 907 of the California Corporations Code, the Certificate of Determination of Preferences of Series D Cumulative Redeemable Convertible Participating Preferred Stock is amended and restated to read in full as follows: WITNESSETH WHEREAS, it is the desire of the Board of Directors, upon requisite approval of the stockholders of the Corporation, to alter the terms of the Series D Cumulative Redeemable Convertible Participating Preferred Stock and amend and restate the Certificate of Determination of Preferences for such series: NOW, THEREFORE, BE IT RESOLVED: 1. Designation and Number of Shares. There shall be hereby created and established a series of preferred stock designated as "Series D Cumulative Redeemable Convertible Preferred Stock" (the "Series D Preferred Stock"). The authorized number of shares of Series D Preferred Stock shall be four million one hundred eighty-eight thousand five hundred eighty-seven (4,188,587). Capitalized terms used herein and not otherwise defined shall have the meanings set forth in Section 10 below. 2. Rank. (a) Notwithstanding anything to the contrary in this Certificate of Determination, the Series D Preferred Stock shall not be entitled to the payment of dividends, the Series D Liquidation Payment, the Series D Optional Redemption Price or the Series D Redemption Price until the issued and outstanding shares of Series E Preferred Stock shall have received all dividends, the Series E Liquidation Payment, the Series E Optional Redemption Price and the Series E Redemption Price due and owing under the terms thereof; provided, however, that notwithstanding the foregoing and for the avoidance of doubt, dividends shall accrue on the Series D Preferred Stock as provided in Section 3 below. Subject to the foregoing sentence, the Series D Preferred Stock shall with respect to the payment of the Series D Liquidation Payment in the event of Liquidation or Change of Control and with respect to dividend and redemption rights rank senior to (i) all series of common stock of the Corporation (including, without limitation, the Common Stock, par value $0.001 per share, of the Corporation (the "Common Stock")), (ii) all series of preferred stock of the Corporation (excluding any shares of Series E Preferred Stock but including, without limitation, the Series C Participating Preferred Stock, par value $0.001 per share) and (iii) each other class or series of Capital Stock of the Corporation hereafter created which does not expressly rank pari passu with or senior to the Series D Preferred Stock (clauses (i), (ii) and (iii), together, the "Junior Stock"). (b) Notwithstanding anything to the contrary contained in the Amended and Restated Articles of Incorporation of the Corporation, the vote of the holders of a majority of the Series D Preferred Stock shall be a prerequisite to the designation or issuance of any shares of Capital Stock of the Corporation ranking pari passu with or senior to the Series D Preferred Stock in the event of a Liquidation or with respect to the payment of the Series D Liquidation Payment. 3. Dividends. (a) Dividend Rate. During the period beginning on the date of issuance of such shares of Series D Preferred Stock and ending on the Series E Closing Date, the holders of shares of Series D Preferred Stock shall accrue dividends at an annual rate equal to eight percent (8%) of the Series D Accreted Value, calculated on the basis of a 360-day year, consisting of twelve 30-day months, and shall accrue on a daily basis from the date of issuance of such shares of Series D Preferred Stock until the Series E Closing Date, whether or not the Corporation has earnings or profits, whether or not there are funds legally available for the payment of dividends and whether or not declared by the Board of Directors. During the period beginning on the date of issuance thereof and ending on the Series E Closing Date, such accrued and unpaid dividends shall compound to the Series D Accreted Value on a semi-annual basis on December 31st and June 30th of each year (each such date, the "Series D Accrual Date") whether or not declared by the Board of Directors. Following the Series E Closing Date, the holders of shares of Series D Preferred Stock shall accrue, out of funds legally available therefor, dividends at an annual rate equal to five and three-fourths percent (5 3/4%) of the Price Per Share with respect to each share of Series D Preferred Stock, calculated on the basis of a 360-day year, consisting of twelve 30-day months, and shall accrue on a daily basis from the Series E Closing Date, whether or not the Corporation has earnings or profits, whether or not there are funds legally available for the payment of dividends and whether or not declared by the Board of Directors. Such dividends 2 shall not be paid in cash and shall instead be added to the Series D Accreted Value on the Series D Accrual Date. In addition, if the Corporation declares and pays any dividends on the Common Stock, then, in that event, the holders of shares of Series D Preferred Stock shall be entitled to share in such dividends on a pro rata basis, as if their shares had been converted into shares of Common Stock pursuant to Section 7(a) below immediately prior to the record date for determining the stockholders of the Corporation eligible to receive such dividends. (b) Change of Control; Optional Redemption. In the event of the occurrence of a Change of Control or an optional redemption of the shares of Series D Preferred Stock pursuant to Section 5(a) below, the sum of (i) any dividends accrued at the rate and in the manner specified in Section 3(a) since the previous Series D Accrual Date and prior to the date of the occurrence of a Change of Control or the Series D Optional Redemption Date plus (ii) any and all dividends that would have accrued at the rate and in the manner specified in Section 3(a) from the closing date of such Change of Control or the Series D Optional Redemption Date through and until the Series D Automatic Redemption Date shall be added to the Series D Accreted Value on the closing date of such Change of Control or the Series D Optional Redemption Date, as the case may be. (c) Other Dividends. The Corporation shall not declare or pay any dividends on, or make any other distributions with respect to or redeem, purchase or otherwise acquire for consideration, any other shares of Capital Stock unless and until all accrued and unpaid dividends on the Series D Preferred Stock have been paid in full. 4. Liquidation and Change of Control. (a) Series D Liquidation Payment. Upon the occurrence of a Liquidation, after the payment of the full Series E Liquidation Payment of the issued and outstanding shares of Series E Preferred Stock, the holders of shares of Series D Preferred Stock shall be paid in cash for each share of Series D Preferred Stock held thereby, out of, but only to the extent of, the assets of the Corporation legally available for distribution to its stockholders, an amount equal to the greater of (i) the sum of (A) the Series D Accreted Value of such share of Series D Preferred Stock on the date of such Liquidation plus (B) all dividends accrued since the previous Series D Accrual Date, (ii) the product of (x) 1.6 multiplied by (y) the Price Per Share or (iii) the aggregate consideration that would be paid to the holder of the number of shares of Common Stock into which such share of Series D Preferred Stock is convertible immediately prior to such Liquidation. If, after the payment of the full Series E Liquidation Payment of the issued and outstanding shares of Series E Preferred Stock, the assets of the Corporation available for distribution to the holders of shares of Series D Preferred Stock shall be insufficient to permit payment in full to such holders of the sums which such holders are entitled to receive in such case, then all of the assets available for distribution to holders of shares of Series D Preferred Stock shall be distributed among and paid to such holders ratably in proportion to the amounts that would be payable to such holders if such assets were sufficient to permit payment in full. (b) Change of Control. In the event of a Change of Control, after the payment of the full Series E Liquidation Payment of the issued and outstanding shares of Series E Preferred Stock, the holders of shares of Series D Preferred Stock shall be paid for each share of Series D Preferred Stock held thereby, an amount equal to the greater of (i) the sum of (A) the 3 Series D Accreted Value of such share of Series D Preferred Stock on the date of such Change of Control plus (B) all dividends that accrue and are payable pursuant to Section 3(b), (ii) the product of (x) 1.6 multiplied by (y) the Price Per Share or (iii) the aggregate consideration that would be paid to the holder of the number of shares of Common Stock into which such share of Series D Preferred Stock is convertible immediately prior to the closing of such Change of Control. Such amount shall be paid in the form of consideration paid in such Change of Control on the closing date of such Change of Control. (c) Notice. Written notice of a Liquidation or Change of Control stating a payment or payments and the place where such payment or payments shall be payable, shall be delivered in person, mailed by certified mail, return receipt requested, mailed by overnight mail or sent by telecopier, not less than ten (10) days prior to the earliest payment date stated therein, to the holders of record of shares of Series D Preferred Stock, such notice to be addressed to each such holder at its address as shown by the records of the Corporation. 5. Redemption. (a) Optional Redemption. (i) Series D Optional Redemption Period. The Corporation shall not have any right to redeem any shares of the Series D Preferred Stock on or prior to the third anniversary of the Series E Closing Date. If on any date after the third anniversary of the Series E Closing Date, but prior to the Series D Automatic Redemption Date, the average closing price per share of the Common Stock, as reported on NASDAQ or other nationally recognized securities exchange on which the shares of Common Stock trade, for any sixty (60) consecutive trading days after such third anniversary date, equals or exceeds four hundred percent (400%) of the Series D Accreted Value (the "Series D Optional Redemption Measurement Window"), the Corporation shall have the right, at its sole option and election, to redeem (unless otherwise prevented by law) within thirty (30) days following such Series D Optional Redemption Measurement Window (the "Series D Optional Redemption Period"), all, but not less than all, of the outstanding shares of Series D Preferred Stock in cash, at a price per share (the "Series D Optional Redemption Price") equal to the sum of the Series D Accreted Value plus all dividends that accrue and are payable pursuant to Section 3(b). (ii) Optional Redemption Payment. Written notice of any election by the Corporation to redeem the shares of Series D Preferred Stock pursuant to Section 5(a) (with a closing date prior to the expiration of the Series D Optional Redemption Period selected for such redemption (the "Series D Optional Redemption Date")), shall be delivered in person, mailed by certified mail, return receipt requested, mailed by overnight mail or sent by telecopier not less than ten (10), nor more than thirty (30), days prior to such Series D Optional Redemption Date to the holders of record of the shares of Series D Preferred Stock, such notice to be addressed to each such holder at its address as shown in the records of the Corporation. The Series D Optional Redemption Price shall be made with respect to each share of Series D Preferred Stock by wire transfer of immediately available funds as promptly as practicable and, in any event, within seven (7) days after receipt by the Corporation of the Series D Preferred Stock certificates to accounts designated in writing by the holders of such shares of Series D Preferred Stock after surrender of the Series D Preferred Stock certificates pursuant to the following sentence. Upon 4 notice from the Corporation, each holder of shares of Series D Preferred Stock so redeemed shall promptly surrender to the Corporation, at any place where the Corporation shall maintain a transfer agent for its shares of Series D Preferred Stock, certificates representing the shares so redeemed, duly endorsed in blank or accompanied by proper instruments of transfer. Notwithstanding anything to the contrary set forth in this Certificate of Determination, any holder of Series D Preferred Stock may convert its shares of Series D Preferred Stock pursuant to Section 7(a) until the Series D Optional Redemption Price has been paid in full by the Corporation to such holder. (iii) Termination of Rights. If shares of Series D Preferred Stock are redeemed in full on the Series D Optional Redemption Date, then after the Series D Optional Redemption Date, all rights of any holder of shares of Series D Preferred Stock shall cease and terminate, and such shares of Series D Preferred Stock shall no longer be deemed to be outstanding; provided, however, that, if the Corporation defaults in the payment in full of the Series D Optional Redemption Price, then, subject to Section 5(b), the Corporation may not redeem the shares of Series D Preferred Stock until the next Series D Optional Redemption Measurement Window. (b) Automatic Redemption. (i) Automatic Redemption Date and Payment. On the fourth anniversary of the Series E Closing Date (the "Series D Automatic Redemption Date"), all of the shares of Series D Preferred Stock shall automatically, with no further action required to be taken by the Corporation or the holder thereof, be redeemed (unless otherwise prevented by law) in cash, at a redemption price per share (the "Series D Redemption Price") equal to the sum of the Series D Accreted Value plus all dividends accrued since the previous Series D Accrual Date. Written notice of the Series D Automatic Redemption Date shall be delivered in person, mailed by certified mail, return receipt requested, mailed by overnight mail or sent by telecopier not less than thirty (30), nor more than sixty (60), days prior to the Series D Automatic Redemption Date to the holders of record of the shares of Series D Preferred Stock, such notice to be addressed to each such holder at its address as shown in the records of the Corporation. The Series D Redemption Price shall be made with respect to each share of Series D Preferred Stock by wire transfer of immediately available funds as promptly as practicable and, in any event, within seven (7) days after receipt by the Corporation of the Series D Preferred Stock certificates to accounts designated in writing by the holders of such shares of Series D Preferred Stock after surrender of the Series D Preferred Stock certificates pursuant to the following sentence. Upon notice from the Corporation, each holder of such shares of Series D Preferred Stock so redeemed shall promptly surrender to the Corporation, at any place where the Corporation shall maintain a transfer agent for its shares of Series D Preferred Stock, certificates representing the shares so redeemed, duly endorsed in blank or accompanied by proper instruments of transfer. Notwithstanding anything to the contrary set forth in this Certificate of Determination, any holder of Series D Preferred Stock may convert its shares of Series D Preferred Stock pursuant to Section 7(a) hereof until the Series D Redemption Price has been paid in full by the Corporation to any such holder. 5 (ii) Termination of Rights. If the shares of Series D Preferred Stock are redeemed in full on the Series D Automatic Redemption Date, then after the Series D Automatic Redemption Date, all rights of any holder of such shares of Series D Preferred Stock shall cease and terminate, and such shares of Series D Preferred Stock shall no longer be deemed to be outstanding, whether or not the certificates representing such shares have been received by the Corporation; provided, however, that, if the Corporation defaults in the payment in full of the Series D Redemption Price, the rights of the holders of shares of Series D Preferred Stock shall continue until the Corporation cures such default. (iii) Insufficient Funds for Redemption. If the funds of the Corporation available for redemption of the shares of Series D Preferred Stock on the Series D Automatic Redemption Date are insufficient to redeem in full the shares of Series D Preferred Stock, the holders of shares of Series D Preferred Stock shall share ratably in any funds available by law for redemption of such shares according to the respective amounts which would be payable with respect to the number of shares owned by them if the shares to be so redeemed on such Series D Automatic Redemption Date were redeemed in full. Any shares of Series D Preferred Stock that the Corporation does not redeem on the Series D Automatic Redemption Date due to insufficient funds shall continue to be outstanding until redeemed and dividends on such shares shall continue to accrue and cumulate until redeemed. The Corporation shall in good faith use all commercially reasonable efforts as expeditiously as possible to eliminate, or obtain an exception, waiver or exemption from, any and all restrictions that prevented the Corporation from paying the Series D Redemption Price and redeeming all of the shares of Series D Preferred Stock. At any time thereafter when additional funds of the Corporation are available by law for the redemption of the shares of Series D Preferred Stock, such funds shall be used as promptly as practicable to redeem the balance of such shares, or such portion thereof for which funds are available, on the basis set forth above. (c) Rank. Notwithstanding anything to the contrary in this Section 5, no redemption of shares Series D Preferred Stock pursuant to this Section 5 shall occur (i) if there are any shares of Series E Preferred Stock issued and outstanding or (ii) unless and until the issued and outstanding shares of Series E Preferred Stock shall have received all payments due and owing under the terms thereof. 6. Voting Rights; Election of Directors. (a) General. In addition to the voting rights to which the holders of Series D Preferred Stock are entitled under or granted by California law, the holders of Series D Preferred Stock shall be entitled to vote, in person or by proxy, at a special or annual meeting of stockholders on all matters entitled to be voted on by holders of shares of Common Stock voting together as a single class with the Common Stock (and with other shares entitled to vote thereon, if any). With respect to any such vote, each share of Series D Preferred Stock shall entitle the holder thereof to cast that number of votes as is equal to the quotient of (i) the sum of the Series D Accreted Value plus all dividends accrued since the previous Series D Accrual Date divided by (ii) $4.20, subject to the same adjustments that are made to the Series D Conversion Price as provided in Section 7(c) below. 6 (b) Directors. As long as at least 500,000 shares of Series D Preferred Stock are outstanding, if General Atlantic Partners 74, L.P., GAP Coinvestment Partners II, L.P., GapStar, LLC, GAPCO GmbH & Co. KG and/or any Affiliate thereof in the aggregate own at least a majority of the outstanding shares of Series D Preferred Stock, then the holders of shares of Series D Preferred Stock, voting as a separate class, shall be entitled to elect one (1) director of the Corporation. (c) Elections. As long as at least 500,000 shares of Series D Preferred Stock are outstanding, the Series D Preferred Stock shall vote together as a single class with the Common Stock (and all other classes and series of stock of the Corporation entitled to vote thereon, if any) with respect to the election of all of the other directors of the Corporation other than the director elected solely by the holders of shares of Series E Preferred Stock pursuant to Section 6(b) of the Series E Certificate of Determination of Preferences. If the conditions set forth in Section 6(b) necessary for the holders of shares of Series D Preferred Stock to vote as a separate class for the election of one director are not satisfied, then the Series D Preferred Stock shall vote together as a single class with the Common Stock (and all other classes and series of stock of the Corporation entitled to vote thereon, if any) with respect to the election of all of the directors of the Corporation other than the director elected solely by the holders of shares of Series E Preferred Stock pursuant to Section 6(b) of the Series E Certificate of Determination of Preferences. At any meeting held for the purpose of electing directors pursuant to Section 6(b) at a time when the holders of shares of Series D Preferred Stock are entitled to vote as a separate class for the election of one director, the presence in person or by proxy of the holders of a majority of the shares of Series D Preferred Stock then outstanding shall constitute a quorum of the Series D Preferred Stock for the election of the director to be elected solely by the holders of shares of Series D Preferred Stock; the holders of shares of Series D Preferred Stock shall be entitled to cast one vote per share of Series D Preferred Stock in any such election; and the director to be elected exclusively by the holders of shares of Series D Preferred Stock shall be elected by the affirmative vote of the holders of a majority of the outstanding shares of Series D Preferred Stock. A vacancy in a directorship filled by the holders of the Series D Preferred Stock voting as a separate class pursuant to Section 6(b) shall be filled only by vote or written consent of the holders of shares of Series D Preferred Stock. The director elected pursuant to Section 6(b) may not be removed without the consent of a majority of the holders of shares of Series D Preferred Stock, except as otherwise provided by law. (d) Major Actions. Notwithstanding anything to the contrary set forth in the Amended and Restated Articles of Incorporation or the By-laws of the Corporation, the affirmative vote of the holders of a majority of the outstanding shares of Series D Preferred Stock, voting as a separate class, shall be a prerequisite to: (i) any amendment, modification or restatement of the Articles of Incorporation or the By-Laws of the Corporation, including, without limitation, by merger, consolidation, business combination or otherwise that is not a Change of Control; (ii) the issuance, reservation for issuance or authorization of any Capital Stock of the Corporation or any right or option to acquire shares of Capital Stock ranking senior to the shares of Series D Preferred Stock or any increase or decrease in the authorized number of shares of Series D Preferred Stock; provided, that the Corporation may issue 7 (w) options or shares pursuant to the Stock Option Plans, (x) shares of Series E Preferred Stock (A) upon conversion of those certain convertible promissory notes, with an aggregate principal amount of ten million dollars ($10,000,000), issued by the Corporation on November 26, 2003, (B) in exchange for those certain 5 3/4% Convertible Subordinated Notes, due April 1, 2005, in the principal face amount of thirty-two million seven hundred ninety-five thousand dollars ($32,795,000), issued by the Corporation pursuant to the Corporation's Indenture, dated March 31, 2000, (C) upon conversion of the Apex Notes and (D) issuable pursuant to agreements entered into prior to the Series E Closing Date, and (y) the Series E Purchase Rights and the Rights Shares; (iii) the redemption of any Junior Stock other than the repurchase of unvested stock options or restricted stock from employees, officers, directors or consultants of the Corporation upon termination of service or in accordance with the Stock Option Plans; (iv) any declaration, distribution or payment of any dividend or other distribution to any Junior Stock; (v) the issuance, incurrence, assumption or guarantee by the Corporation or any Subsidiary of the Corporation of any funded Indebtedness (excluding capital leases incurred in the ordinary course of business but including the incurrence of any debt in connection with any borrowing arrangements with Silicon Valley Bank, provided that, with respect to the incurrence of any debt in connection with any borrowing arrangements with Silicon Valley Bank, if the holders of Series D Preferred Stock do not respond to a written request for consent by the Company within two Business Days of receiving such request, such holder shall be deemed to have consented); and (vi) any amendment to this Section 6(d). 7. Conversion. (a) Optional Conversion. Any holder of shares of Series D Preferred Stock shall have the right, at its option, at any time and from time to time, to convert, subject to the terms and provisions of this Section 7, any or all of such holder's shares of Series D Preferred Stock into such number of fully paid and non-assessable shares of Common Stock as is equal to the product of (i) the number of shares of Series D Preferred Stock being so converted multiplied by (ii) the quotient of (x) the sum of the Series D Accreted Value plus all dividends accrued since the previous Series D Accrual Date divided by (y) the Series D Conversion Price, subject to adjustment as provided in Section 7(c) below. Such conversion right shall be exercised by the surrender of certificate(s) representing the shares of Series D Preferred Stock to be converted to the Corporation at any time during usual business hours at its principal place of business maintained by it (or such other office or agency of the Corporation as the Corporation may designate by notice in writing to the holders of shares of Series D Preferred Stock), accompanied by written notice that the holder elects to convert such shares of Series D Preferred Stock and specifying the name or names (with address) in which a certificate or certificates for shares of Common Stock are to be issued and (if so required by the Corporation) by a written instrument or instruments of transfer in form reasonably satisfactory to the Corporation duly executed by the holder or its duly authorized legal representative and transfer tax stamps or funds therefor, if 8 required pursuant to Section 7(i) below. All certificates representing shares of Series D Preferred Stock surrendered for conversion shall be delivered to the Corporation for cancellation and canceled by it. As promptly as practicable after the surrender of any shares of Series D Preferred Stock, in any event within seven (7) days of the receipt of such certificates, the Corporation shall (subject to compliance with the applicable provisions of federal and state securities laws) deliver to the holder of such shares so surrendered certificate(s) representing the number of fully paid and nonassessable shares of Common Stock into which such shares are entitled to be converted. At the time of the surrender of such certificate(s), the Person in whose name any certificate(s) for shares of Common Stock shall be issuable upon such conversion shall be deemed to be the holder of record of such shares of Common Stock on such date, notwithstanding that the share register of the Corporation shall then be closed or that the certificates representing such Common Stock shall not then be actually delivered to such Person. (b) Termination of Rights. On the date of such optional conversion pursuant to Section 7(a) above all rights with respect to the shares of Series D Preferred Stock so converted, including the rights, if any, to receive notices and vote, shall terminate, except only the rights of holders thereof to (i) receive certificates for the number of shares of Common Stock into which such shares of Series D Preferred Stock have been converted and (ii) exercise the rights to which they are entitled as holders of Common Stock. (c) (i) Dividend, Subdivision, Combination or Reclassification of Common Stock. In the event that the Corporation shall at any time or from time to time, prior to conversion of shares of Series D Preferred Stock (w) pay a dividend or make a distribution on the outstanding shares of Common Stock payable in Capital Stock of the Corporation, (x) subdivide the outstanding shares of Common Stock into a larger number of shares, (y) combine the outstanding shares of Common Stock into a smaller number of shares or (z) issue any shares of its Capital Stock in a reclassification of the Common Stock (other than any such event for which an adjustment is made pursuant to another clause of this Section 7(c)), then, and in each such case, the Series D Conversion Price in effect immediately prior to such event shall be adjusted (and any other appropriate actions shall be taken by the Corporation) so that the holder of any share of Series D Preferred Stock thereafter surrendered for conversion shall be entitled to receive the number of shares of Common Stock or other securities of the Corporation that such holder would have owned or would have been entitled to receive upon or by reason of any of the events described above, had such share of Series D Preferred Stock been converted immediately prior to the occurrence of such event. An adjustment made pursuant to this Section 7(c)(i) shall become effective retroactively (x) in the case of any such dividend or distribution, to a date immediately following the close of business on the record date for the determination of holders of Common Stock entitled to receive such dividend or distribution or (y) in the case of any such subdivision, combination or reclassification, to the close of business on the day upon which such corporate action becomes effective. (i) Certain Distributions. In case the Corporation shall at any time or from time to time, prior to conversion of shares of Series D Preferred Stock, distribute to all holders of shares of the Common Stock (including any such distribution made in connection with a merger or consolidation in which the Corporation is the resulting or surviving Person and the Common Stock is not changed or exchanged) cash, evidences of indebtedness of the Corporation or another issuer, securities of the Corporation or another issuer or other assets (excluding cash 9 dividends in which holders of shares of Series D Preferred Stock participate, in the manner provided in Section 3(c); dividends payable in shares of Common Stock for which adjustment is made under another paragraph of this Section 7(c); and any distribution in connection with an Excluded Transaction) or rights or warrants to subscribe for or purchase of any of the foregoing, then, and in each such case, the Series D Conversion Price then in effect shall be adjusted (and any other appropriate actions shall be taken by the Corporation) by multiplying the Series D Conversion Price in effect immediately prior to the date of such distribution by a fraction (x) the numerator of which shall be the Current Market Price of the Common Stock immediately prior to the date of distribution less the then fair market value (as determined by the Board of Directors in the exercise of their fiduciary duties) of the portion of the cash, evidences of indebtedness, securities or other assets so distributed or of such rights or warrants applicable to one share of Common Stock and (y) the denominator of which shall be the Current Market Price of the Common Stock immediately prior to the date of distribution (but such fraction shall not be greater than one); provided, however, that no adjustment shall be made with respect to any distribution of rights or warrants to subscribe for or purchase securities of the Corporation if the holder of shares of Series D Preferred Stock would otherwise be entitled to receive such rights or warrants upon conversion at any time of shares of Series D Preferred Stock into Common Stock. Such adjustment shall be made whenever any such distribution is made and shall become effective retroactively to a date immediately following the close of business on the record date for the determination of stockholders entitled to receive such distribution. (ii) Other Changes. In case the Corporation at any time or from time to time, prior to the conversion of shares of Series D Preferred Stock, shall take any action affecting its Common Stock similar to or having an effect similar to any of the actions described in Sections 7(c)(i) or (ii) above or Section 7(f) below (but not including any action described in any such Section) and the Board of Directors shall consider whether an adjustment should thereupon be made in the Series D Conversion Price. If the Board of Directors in good faith determines that it would be equitable in the circumstances to adjust the Series D Conversion Price as a result of such action, then, and in each such case, the Series D Conversion Price shall be adjusted in such manner and at such time as the Board of Directors in good faith determines would be equitable in the circumstances (such determination to be evidenced in a resolution, a certified copy of which shall be mailed to the holders of shares of Series D Preferred Stock). (iii) No Adjustment. Notwithstanding anything herein to the contrary, no adjustment under this Section 7(c) need be made to the Series D Conversion Price if the Corporation receives written notice from holders of a majority of the outstanding shares of Series D Preferred Stock that no such adjustment is required. (d) Abandonment. If the Corporation shall take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend or other distribution, and shall thereafter and before the distribution to stockholders thereof legally abandon its plan to pay or deliver such dividend or distribution, then no adjustment in the Series D Conversion Price shall be required by reason of the taking of such record. (e) Certificate as to Adjustments. Upon any adjustment in the Series D Conversion Price, the Corporation shall within a reasonable period (not to exceed ten (10) Business Days) following any of the foregoing transactions deliver to each registered holder of 10 shares of Series D Preferred Stock a certificate, signed by (i) the Chief Executive Officer of the Corporation and (ii) the Chief Financial Officer of the Corporation, setting forth in reasonable detail the event requiring the adjustment and the method by which such adjustment was calculated and specifying the increased or decreased Series D Conversion Price then in effect following such adjustment. (f) Reorganization, Reclassification. In case of any merger or consolidation of the Corporation (other than a Change of Control) or any capital reorganization, reclassification or other change of outstanding shares of Common Stock (other than a change in par value, or from par value to no par value, or from no par value to par value) (each, a "Transaction"), the Corporation shall execute and deliver to each holder of shares of Series D Preferred Stock at least ten (10) Business Days prior to effecting such Transaction a certificate, signed by (i) the Chief Executive Officer of the Corporation and (ii) the Chief Financial Officer of the Corporation, stating that the holder of each share of Series D Preferred Stock shall have the right to receive in such Transaction, in exchange for each share of Series D Preferred Stock, a security identical to (and not less favorable than) the Series D Preferred Stock, and provision shall be made therefor in the agreement, if any, relating to such Transaction. Any certificate delivered pursuant to this Section 7(f) shall provide for adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Section 7. The provisions of this Section 7(f) and any equivalent thereof in any such certificate similarly shall apply to successive transactions. (g) Notices. In case at any time or from time to time: (w) the Corporation shall declare a dividend (or any other distribution) on its shares of Common Stock; (x) the Corporation shall authorize the granting to the holders of its Common Stock rights or warrants to subscribe for or purchase any shares of Capital Stock of any class or of any other rights or warrants; or (y) there shall be any Transaction; then the Corporation shall mail to each holder of shares of Series D Preferred Stock at such holder's address as it appears on the transfer books of the Corporation, as promptly as possible but in any event at least ten (10) days prior to the applicable date hereinafter specified, a notice stating (A) the date on which a record is to be taken for the purpose of such dividend, distribution or granting of rights or warrants or, if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such dividend, distribution or granting of rights or warrants are to be determined, or (B) the date on which such Transaction is expected to become effective and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their Common Stock for shares of stock or other securities or property or cash deliverable upon such Transaction. Notwithstanding the foregoing, in the case of any event to which Section 7(f) above is applicable, the Corporation shall also deliver the certificate described in Section 7(f) above to each holder of shares of Series D Preferred Stock at least ten (10) Business Days' prior to effecting such reorganization or reclassification as aforesaid. 11 (h) Reservation of Common Stock. The Corporation shall at all times reserve and keep available for issuance upon the conversion of shares of Series D Preferred Stock, such number of its authorized but unissued shares of Common Stock as will from time to time be sufficient to permit the conversion of all outstanding shares of Series D Preferred Stock, and shall take all action to increase the authorized number of shares of Common Stock if at any time there shall be insufficient authorized but unissued shares of Common Stock to permit such reservation or to permit the conversion of all outstanding shares of Series D Preferred Stock; provided, that (x) the holders of shares of Series D Preferred Stock shall vote such shares in favor of any such action that requires a vote of stockholders and (y) such holders shall cause any directors elected by them pursuant to Section 6(b) above to vote in favor of any such action that requires a vote of the Board of Directors. (i) No Conversion Tax or Charge. The issuance or delivery of certificates for Common Stock upon the conversion of shares of Series D Preferred Stock shall be made without charge to the converting holder of shares of Series D Preferred Stock for such certificates or for any tax in respect of the issuance or delivery of such certificates or the securities represented thereby, and such certificates shall be issued or delivered in the respective names of, or (subject to compliance with the applicable provisions of federal and state securities laws) in such names as may be directed by, the holders of the shares of Series D Preferred Stock converted; provided, however, that the Corporation shall not be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of any such certificate in a name other than that of the holder of the shares of Series D Preferred Stock converted, and the Corporation shall not be required to issue or deliver such certificate unless or until the Person or Persons requesting the issuance or delivery thereof shall have paid to the Corporation the amount of such tax or shall have established to the reasonable satisfaction of the Corporation that such tax has been paid. (j) Limitations on Conversions. Each holder of the Series D Preferred Stock's right to convert its shares of Series D Preferred Stock into shares of Common Stock shall not be limited by any notice delivered by the Corporation of any proposed redemption, Change of Control or any other event that notwithstanding this subsection (j) shall purport to limit such conversion right. 8. Certain Remedies. Any registered holder of shares of Series D Preferred Stock shall be entitled to an injunction or injunctions to prevent breaches of the provisions of this Certificate of Determination and to enforce specifically the terms and provisions of this Certificate of Determination in any court of the United States or any state thereof having jurisdiction, this being in addition to any other remedy to which such holder may be entitled at law or in equity. 9. Business Day. If any payment shall be required by the terms hereof to be made on a day that is not a Business Day, such payment shall be made on the immediately succeeding Business Day. 10. Definitions. As used in this Certificate of Determination, the following terms shall have the following meanings (with terms defined in the singular having comparable meanings when used in the plural and vice versa), unless the context otherwise requires: 12 "Affiliate" shall mean any Person who is an "affiliate" as defined in Rule 12b-2 of the General Rules and Regulations under the Exchange Act. "Apex Notes" means the convertible promissory notes with an aggregate principal amount of fifteen million dollars ($15,000,000) issued by the Corporation on January 16, 2004, to Permal U.S. Opportunities Limited, Zaxis Equity Neutral, L.P., Zaxis Institutional Partners, L.P., Zaxis Offshore Limited, Zaxis Partners, L.P. and Passport Master Fund, L.P., pursuant to the Convertible Note Purchase Agreement. "Board of Directors" means the Board of Directors of the Corporation. "Business Day" means any day except a Saturday, a Sunday, or other day on which commercial banks in the State of New York or the State of California are authorized or required by law or executive order to close. "Capital Stock" means, with respect to any Person, any and all shares, interests, participations, rights in, or other equivalents (however designated and whether voting or non-voting) of, such Person's capital stock (including, without limitation, common stock and preferred stock) and any and all rights, warrants or options exchangeable for or convertible into such capital stock. "Certificate of Determination" means this Amended and Restated Certificate of Determination of Preferences of Series D Cumulative Redeemable Convertible Preferred Stock, as amended from time to time. "Change of Control" means (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 Corporation prior to such transaction do not own a majority of the voting securities of the surviving entity, (ii) any tender offer, exchange offer or other transaction whereby any person or "group" other than the Investors obtains a majority of the outstanding shares of capital stock entitled to vote in the election of the Board of Directors, (iii) any proxy contest in which a majority of the Board of Directors (or persons appointed by such Board of Directors) prior to such contest do not constitute a majority of the Board of Directors after such contest, (iv) a sale of all or substantially all of the assets of the Corporation or (v) any other transaction described in any stockholder rights agreement or "poison pill", if any, to which the Corporation is a party, which permits the holders of any rights or similar certificates to exercise the rights evidenced thereby and pursuant to which the Board of Directors does not waive the application of such stockholder rights agreement or "poison pill." "Commission" means the United States Securities and Exchange Commission. "Common Stock" shall have the meaning ascribed to it in Section 2(a) hereof. "Common Stock Equivalent" shall mean any security or obligation which is by its terms convertible, exchangeable or exercisable into or for shares of Common Stock, including, without limitation, shares of Series D Preferred Stock, shares of Series E Preferred Stock, and 13 any option, warrant or other subscription or purchase right with respect to Common Stock or any Common Stock Equivalent. "Contingent Obligation" means, as applied to any Person, any direct or indirect liability of that Person with respect to any Indebtedness, lease, dividend, guaranty, letter of credit or other obligation, contractual or otherwise (the "primary obligation") of another Person (the "primary obligor"), whether or not contingent, (a) to purchase, repurchase or otherwise acquire such primary obligations or any property constituting direct or indirect security therefor, (b) to advance or provide funds (i) for the payment or discharge or any such primary obligor or otherwise to maintain the net worth or solvency or any balance sheet item, level of income or financial condition of the primary obligor, (c) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation, or (d) otherwise to assure or hold harmless the owner of any such primary obligation against loss or failure or inability to perform in respect thereof. The amount of any Contingent Obligation shall be deemed to be an amount equal to the stated or determinable amount of the primary obligation in respect of which such Contingent Obligation is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof. "Convertible Note Purchase Agreement" means the Convertible Note Purchase Agreement, dated January 16, 2004, among the Corporation and Permal U.S. Opportunities Limited, Zaxis Equity Neutral, L.P., Zaxis Institutional Partners, L.P., Zaxis Offshore Limited, Zaxis Partners, L.P. and Passport Master Fund, L.P. "Corporation" shall have the meaning ascribed to it in the first paragraph of this Certificate of Determination. "Current Market Price" per share of Capital Stock of any Person shall mean, as of the date of determination, (a) the average of the daily Market Price under clause (a), (b) or (c), as applicable, of the definition thereof of such Capital Stock during the immediately preceding thirty (30) trading days ending on such date, and (b) if such Capital Stock is not then listed or admitted to trading on any national securities exchange or quoted in the over-the-counter market, then the Market Price under clause (d) of the definition thereof on such date. "Exchange Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission promulgated thereunder. "Excluded Transaction" means (a) any issuance of shares of stock or options to purchase shares of Series E Preferred Stock or Common Stock pursuant to the Stock Option Plans and (b) any issuance of Common Stock (i) upon the conversion of shares of Series D Preferred Stock or shares of Series E Preferred Stock, (ii) as a dividend on shares of Series D Preferred Stock or shares of Series E Preferred Stock or (iii) upon conversion or exercise of any Common Stock Equivalents, (c) any issuance of Common Stock in connection with any Series D Liquidation Payment or Series E Liquidation Payment, (d) Capital Stock issued in consideration of an acquisition, approved by the Board of Directors, by the Company of another Person, (e) shares of Common Stock and Common Stock Equivalents issued in strategic transactions (which may not be private equity or venture capital financing transactions) approved by the 14 Board of Directors to Persons that are not principally engaged in financial investing, (f) the issuance of the Series E Purchase Rights and the Rights Shares, (g) shares of Series E Preferred Stock issuable pursuant to agreements entered into prior to the Series E Closing Date and (h) shares of Common Stock issuable upon conversion of the Apex Notes in accordance with the terms of the Convertible Note Purchase Agreement. "GAAP" means United States generally accepted accounting principles in effect from time to time. "Indebtedness" means, as to any Person, (a) all obligations of such Person for borrowed money (including, without limitation, reimbursement and all other obligations with respect to surety bonds, letters of credit and bankers' acceptances, whether or not matured), (b) all obligations of such Person to pay the deferred purchase price of property or services, except trade accounts payable and accrued commercial or trade liabilities arising in the ordinary course of business, (c) all interest rate and currency swaps, caps, collars and similar agreements or hedging devices under which payments are obligated to be made by such Person, whether periodically or upon the happening of a contingency, (d) all indebtedness created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), (e) all obligations of such Person under leases which have been or should be, in accordance with GAAP, recorded as capital leases, (f) all indebtedness secured by any Lien (other than Liens in favor of lessors under leases other than leases included in clause (e)) on any property or asset owned or held by that Person regardless of whether the indebtedness secured thereby shall have been assumed by that Person or is non-recourse to the credit of that Person and (g) any Contingent Obligation of such Person. "Investors" means General Atlantic Partners 74, L.P., GAP Coinvestment Partners II, L.P., GapStar, LLC, GAPCO GmbH & Co. KG, Campina Enterprises Limited, Cenwell Limited, Great Affluent Limited, Dragonfield Limited and Lion Cosmos Limited and the Affiliates of the foregoing, provided that Affiliates shall be deemed not to include any portfolio companies of any of the foregoing. "Junior Stock" shall have the meaning ascribed to it in Section 2(a) hereof. "Lien" means any mortgage, deed of trust, pledge, hypothecation, assignment, encumbrance, lien (statutory or other) or preference, priority, right or other security interest or preferential arrangement of any kind or nature whatsoever (excluding preferred stock and equity related preferences). "Liquidation" shall mean the voluntary or involuntary liquidation under applicable bankruptcy or reorganization legislation, or the dissolution or winding up of the Corporation. "Market Price" shall mean, with respect to the Capital Stock of any Person, as of the date of determination, (a) if such Capital Stock is listed on a national securities exchange, the closing price per share of such Capital Stock on such date published in The Wall Street Journal (National Edition) or, if no such closing price on such date is published in The Wall Street Journal 15 (National Edition), the average of the closing bid and asked prices on such date, as officially reported on the principal national securities exchange on which such Capital Stock is then listed or admitted to trading; or (b) if such Capital Stock is not then listed or admitted to trading on any national securities exchange but is designated as a national market system security by the National Association of Securities Dealers, Inc., the last trading price of such Capital Stock on such date; or (c) if there shall have been no trading on such date or if such Capital Stock is not designated as a national market system security by the National Association of Securities Dealers, Inc., the average of the reported closing bid and asked prices of such Capital Stock on such date as shown by the National Market System of the National Association of Securities Dealers, Inc. Automated Quotations System and reported by any member firm of the New York Stock Exchange selected by the Corporation; or (d) if none of (a), (b) or (c) is applicable, the fair market value thereof as reasonably per share determined by the Board of Directors. "NASDAQ" shall mean The Nasdaq Stock Market, Inc. "Person" means any individual, firm, corporation, partnership, limited liability company, trust, incorporated or unincorporated association, joint venture, joint stock company, governmental body or other entity of any kind. "Price Per Share" means $13.75 (subject to anti-dilution adjustment for stock splits of, combinations of and capital reorganizations with respect to the Series D Preferred Stock). "Rights Offering" shall mean a rights offering for an aggregate amount of up to $21,000,000 of shares of Series E Preferred Stock pursuant to which the Corporation will distribute transferable rights to the Corporation's holders of Common Stock as contemplated by the Convertible Note Purchase and Exchange Agreement, dated November 18, 2003, among the Corporation and certain other parties thereto. "Rights Shares" means the shares of Series E Preferred Stock issuable upon exercise of the Series E Purchase Rights and the shares of the Common Stock issuable upon conversion of such shares of Series E Preferred Stock. "Securities Act" means the Securities Act of 1933, as amended, and the rules and regulations of the Commission promulgated thereunder. "Series D Accreted Value" shall mean as of any date, with respect to each share of Series D Preferred Stock, the Price Per Share plus the amount of dividends that have accrued and compounded thereto during the period beginning on the date of issuance of such share of Series D Preferred Stock and ending on the Series E Closing Date plus, during the period beginning on the first day after the Series E Closing Date and from and after such date, the amount of dividends that have accrued from the Series E Closing Date to the then most recent Series D Accrual Date pursuant to Section 3(a) of this Certificate of Determination. 16 "Series D Automatic Redemption Date" shall have the meaning ascribed to it in Section 5(b) hereof. "Series D Conversion Price" shall mean $1.50, as adjusted pursuant to Section 7(c). "Series D Liquidation Payment" shall mean, with respect to each share of Series D Preferred Stock, those amounts payable pursuant to Section 4(a)(i), Section 4(a)(ii), Section 4(b)(i), or Section 4(b)(ii) as the case may be. "Series D Optional Redemption Date" shall have the meaning ascribed to it in Section 5(a)(ii) hereof. "Series D Optional Redemption Measurement Window" shall have the meaning ascribed to it in Section 5(a)(i) hereof. "Series D Optional Redemption Period" shall have the meaning ascribed to it in Section 5(a)(i) hereof. "Series D Optional Redemption Price" shall have the meaning ascribed to it in Section 5(a)(i) hereof. "Series D Preferred Stock" shall have the meaning ascribed to it in Section 1 hereof. "Series D Redemption Price" shall have the meaning ascribed to it in Section 5(b) hereof. "Series E Certificate of Determination" means the Corporation's Certificate of Determination of Preferences of Series E Preferred Stock, as amended from time to time. "Series E Closing Date" means [__________], 2004. "Series E Liquidation Payment" shall have the meaning ascribed to it in the Certificate of Determination of Preferences of Series E Preferred Stock if and when approved by the requisite stockholders of the Corporation and duly filed with the Secretary of State of the State of California. "Series E Optional Redemption Price" shall have the meaning ascribed to it in the Certificate of Determination of Preferences of Series E Preferred Stock if and when approved by the requisite stockholders of the Corporation and duly filed with the Secretary of State of California. "Series E Preferred Stock" shall have the meaning ascribed to it in the Certificate of Determination of Preferences of Series E Redeemable Convertible Preferred Stock if and when approved by the requisite stockholders of the Corporation and duly filed with the Secretary of State of the State of California. 17 "Series E Purchase Rights" means those rights to purchase Series E Preferred Stock issued in the Rights Offering. "Series E Redemption Price" shall have the meaning ascribed to it in the Certificate of Determination of Preferences of Series E Preferred Stock if and when approved by the requisite stockholders of the Corporation and duly filed with the Secretary of State of California. "Stock Option Plans" means the Company's stock option plans and employee purchase plans approved by the Board of Directors, pursuant to which shares of restricted stock and options to purchase shares of Series E Preferred Stock and/or Common Stock are reserved and available for grant to officers, directors, employees and consultants of the Corporation. "Transaction" shall have the meaning ascribed to it in Section 7(f) hereof. * * * * * * 4. This Certificate of Determination has been duly approved by the Board of Directors. This Certificate of Determination has been duly approved by the required vote of stockholders in accordance with Section 903 of the California Corporations Code. As of the record date for the meeting of the stockholders in which the Certificate of Designation was approved, the total number of shares of outstanding shares of the Corporation was [__________] shares of Common Stock,[___________] million (__________) shares of Series D Preferred Stock, and one (1) share of Special Voting Stock. The number of shares voting in favor of the amendment equaled or exceeded the vote required. The percentage vote required under the law and the Amended and Restated Articles of Incorporation in effect at the time of this amendment is more than fifty percent (50%) of the outstanding shares of Common Stock, the votes represented by the Special Voting Share and the outstanding shares of preferred stock, voting together as a class, and more than fifty percent (50%) of the outstanding shares of Series D Preferred Stock, voting separately as a class. [the remainder of this page intentionally left blank] 18 The undersigned, William E. McGlashan, Jr. and Michael J. Zukerman, the Chief Executive Officer and Chairman of the Board and Senior Vice President, General Counsel and Secretary of Critical Path, Inc., respectively, declare under penalty of perjury that the matters set out in the foregoing Certificate are true of their own knowledge. Executed at San Francisco, California on this [__] day of [__________], [____]. ----------------------------------- William E. McGlashan, Jr., Chief Executive Officer and Chairman of the Board ----------------------------------- Michael J. Zukerman, Senior Vice President, General Counsel and Secretary EX-4.4 6 f97241exv4w4.txt EXHIBIT 4.4 EXHIBIT 4.4 CERTIFICATE OF DETERMINATION OF PREFERENCES OF SERIES E REDEEMABLE CONVERTIBLE PREFERRED STOCK, PAR VALUE $0.001 PER SHARE, OF CRITICAL PATH, INC., a California corporation Pursuant to Section 401 of the California Corporations Code, The undersigned, William E. McGlashan, Jr. and Michael J. Zukerman, do hereby certify that: 1. They are the duly elected and acting Chief Executive Officer and Chairman of the Board of Directors and Senior Vice President, General Counsel and Secretary, respectively, of Critical Path, Inc., a California corporation (the "Corporation"). 2. Pursuant to authority given in the Corporation's Amended and Restated Articles of Incorporation, the following recitals and resolutions, creating a series of [___________] ([__________]) shares of Series E Redeemable Convertible Preferred Stock were duly adopted by the Corporation's Board of Directors on [__________]. WITNESSETH WHEREAS, the Board of Directors is authorized, within the limitations and restrictions stated in the Amended and Restated Articles of Incorporation of the Corporation, to provide by resolution or resolutions for the issuance of shares of Preferred Stock, par value $0.001 per share, of the Corporation, in one or more classes or series with such voting powers, full or limited, or no voting powers, and such designations, preferences and relative, participating, optional or other special rights, and qualifications, limitations or restrictions as shall be stated and expressed in the resolution or resolutions providing for the issuance thereof adopted by the Board of Directors, and as are not stated and expressed in the Amended and Restated Articles of Incorporation, or any amendment thereto, including (but without limiting the generality of the foregoing) such provisions as may be desired concerning voting, redemption, dividends, dissolution or the distribution of assets and such other subjects or matters as may be fixed by resolution or resolutions of the Board of Directors under the California Corporations Code; and WHEREAS, it is the desire of the Board of Directors, pursuant to its authority as aforesaid, to authorize and fix the terms of a series of Preferred Stock and the number of shares constituting such series: NOW, THEREFORE, BE IT RESOLVED: 1. Designation and Number of Shares. There shall be hereby created and established a series of Preferred Stock designated as "Series E Redeemable Convertible Preferred Stock" (the "Series E Preferred Stock"). The authorized number of shares of Series E Preferred Stock shall be [___________] ([__________]). Capitalized terms used herein and not otherwise defined shall have the meanings set forth in Section 10 below. 2. Rank. The Series E Preferred Stock shall with respect to the payment of the Series E Liquidation Payment in the event of Liquidation or Change of Control and with respect to dividend and redemption rights rank senior to (i) all series of common stock of the Corporation (including, without limitation, the Common Stock, par value $0.001 per share, of the Corporation (the "Common Stock")), (ii) all series of preferred stock of the Corporation (including, without limitation, the Series C Participating Preferred Stock, par value $0.001 per share, and the Series D Preferred Stock) and (iii) each other class or series of Capital Stock of the Corporation hereafter created which does not expressly rank pari passu with or senior to the Series E Preferred Stock (clauses (i), (ii) and (iii), together, the "Junior Stock"). 3. Dividends. (a) Dividend Rate. The holders of shares of Series E Preferred Stock shall accrue dividends at an annual rate equal to five and three-fourths percent (5 3/4%) of the Price Per Share, calculated on the basis of a 360-day year, consisting of twelve 30-day months, and shall accrue on a daily basis from the date of issuance thereof, whether or not the Corporation has earnings or profits, whether or not there are funds legally available for the payment of dividends and whether or not declared by the Board of Directors. Such dividends shall not be paid in cash and shall instead be added to the Series E Accreted Value on a semi-annual basis on December 31st and June 30th of each year (each such date, a "Series E Accrual Date"). In addition, if the Corporation declares and pays any dividends on the Common Stock, then, in that event, the holders of shares of Series E Preferred Stock shall be entitled to share in such dividends on a pro rata basis, as if their shares had been converted into shares of Common Stock pursuant to Section 7(a) below immediately prior to the record date for determining the stockholders of the Corporation eligible to receive such dividends. (b) Other Dividends. The Corporation shall not declare or pay any dividends on, or make any other distributions with respect to or redeem, purchase or otherwise acquire for consideration, any other shares of Capital Stock unless and until all accrued and unpaid dividends on the Series E Preferred Stock have been paid in full. Notwithstanding Section 2 or this Section 3(b), dividends shall accrue on the Series D Preferred Stock as provided in Section 3 of the Amended and Restated Series D Certificate of Determination. 4. Liquidation and Change of Control. (a) Series E Liquidation Payment. Upon the occurrence of a Liquidation, the holders of shares of Series E Preferred Stock shall be paid in cash for each share of Series E Preferred Stock held thereby, out of, but only to the extent of, the assets of the Corporation legally available for distribution to its stockholders, an amount equal to the greater of (i) the sum 2 of (A) the Series E Accreted Value of such share of Series E Preferred Stock on the date of such Liquidation plus (B) all dividends accrued since the previous Series E Accrual Date or (ii) the aggregate consideration that would be paid to the holder of the number of shares of Common Stock into which such share of Series E Preferred Stock is convertible immediately prior to such Liquidation. If the assets of the Corporation available for distribution to the holders of shares of Series E Preferred Stock shall be insufficient to permit payment in full to such holders of the sums which such holders are entitled to receive in such case, then all of the assets available for distribution to holders of shares of Series E Preferred Stock shall be distributed among and paid to such holders ratably in proportion to the amounts that would be payable to such holders if such assets were sufficient to permit payment in full. (b) Change of Control. In the event of a Change of Control, the holders of shares of Series E Preferred Stock shall be paid for each share of Series E Preferred Stock held thereby, an amount equal to the greater of (i) the sum of (A) the Series E Accreted Value of such share of Series E Preferred Stock on the date of such Change of Control plus (B) all dividends accrued since the previous Series E Accrual Date or (ii) the aggregate consideration that would be paid to the holder of the number of shares of Common Stock into which such share of Series E Preferred Stock is convertible immediately prior to the closing of such Change of Control. Such amount shall be paid in the form of consideration paid in such Change of Control on the closing date of such Change of Control. 5. Redemption. (a) Optional Redemption. (i) Series E Optional Redemption Period. The Corporation shall not have any right to redeem any shares of the Series E Preferred Stock on or prior to the third anniversary of the Series E Closing Date. If on any date after the third anniversary of the Series E Closing Date, but prior to the Series E Automatic Redemption Date, the average closing price per share of the Common Stock, as reported on NASDAQ or other nationally recognized securities exchange on which the shares of Common Stock trade, for any sixty (60) consecutive trading days after such third anniversary date, equals or exceeds four hundred percent (400%) of the Series E Accreted Value (the "Series E Optional Redemption Measurement Window"), the Corporation shall have the right, at its sole option and election, to redeem (unless otherwise prevented by law) within thirty (30) days following such Series E Optional Redemption Measurement Window (the "Series E Optional Redemption Period"), all, but not less than all, of the outstanding shares of Series E Preferred Stock in cash, at a price per share (the "Series E Optional Redemption Price") equal to the sum of the Series E Accreted Value plus all dividends accrued since the previous Series E Accrual Date. (ii) Optional Redemption Payment. Written notice of any election by the Corporation to redeem the shares of Series E Preferred Stock pursuant to Section 5(a) (with a closing date prior to the expiration of the Series E Optional Redemption Period selected for such redemption (the "Series E Optional Redemption Date")), shall be delivered in person, mailed by certified mail, return receipt requested, mailed by overnight mail or sent by telecopier not less than ten (10), nor more than thirty (30), days prior to such Series E Optional Redemption Date to the holders of record of the shares of Series E Preferred Stock, such notice to be addressed to 3 each such holder at its address as shown in the records of the Corporation. The Series E Optional Redemption Price shall be made with respect to each share of Series E Preferred Stock by wire transfer of immediately available funds or check as promptly as practicable and, in any event, within seven (7) days after receipt by the Corporation of the Series E Preferred Stock certificates to accounts designated in writing by the holders of such shares of Series E Preferred Stock (in the case of wire transfer) after surrender of the Series E Preferred Stock certificates pursuant to the following sentence. Upon notice from the Corporation, each holder of shares of Series E Preferred Stock so redeemed shall promptly surrender to the Corporation, at any place where the Corporation shall maintain a transfer agent for its shares of Series E Preferred Stock, certificates representing the shares so redeemed, duly endorsed in blank or accompanied by proper instruments of transfer. Notwithstanding anything to the contrary set forth in this Certificate of Determination, any holder of Series E Preferred Stock may convert its shares of Series E Preferred Stock pursuant to Section 7(a) until the Series E Optional Redemption Price has been paid in full by the Corporation to such holder. (iii) Termination of Rights. If shares of Series E Preferred Stock are redeemed in full on the Series E Optional Redemption Date, then after the Series E Optional Redemption Date, all rights of any holder of shares of Series E Preferred Stock shall cease and terminate, and such shares of Series E Preferred Stock shall no longer be deemed to be outstanding; provided, however, that, if the Corporation defaults in the payment in full of the Series E Optional Redemption Price, then, subject to Section 5(b), the Corporation may not redeem the shares of Series E Preferred Stock until the next Series E Optional Redemption Measurement Window. (b) Automatic Redemption. (i) Automatic Redemption Date and Payment. On the fourth anniversary of the Series E Closing Date (the "Series E Automatic Redemption Date"), all of the shares of Series E Preferred Stock shall automatically, with no further action required to be taken by the Corporation or the holder thereof, be redeemed (unless otherwise prevented by law) in cash, at a redemption price per share (the "Series E Redemption Price") equal to the sum of the Series E Accreted Value plus all dividends accrued since the previous Series E Accrual Date. Written notice of the Series E Automatic Redemption Date shall be delivered in person, mailed by certified mail, return receipt requested, mailed by overnight mail or sent by telecopier not less than thirty (30), nor more than sixty (60), days prior to the Series E Automatic Redemption Date to the holders of record of the shares of Series E Preferred Stock, such notice to be addressed to each such holder at its address as shown in the records of the Corporation. The Series E Redemption Price shall be made with respect to each share of Series E Preferred Stock by wire transfer of immediately available funds or check as promptly as practicable and, in any event, within seven (7) days after receipt by the Corporation of the Series E Preferred Stock certificates to accounts designated (in the case of wire transfer) in writing by the holders of such shares of Series E Preferred Stock after surrender of the Series E Preferred Stock certificates pursuant to the following sentence. Upon notice from the Corporation, each holder of such shares of Series E Preferred Stock so redeemed shall promptly surrender to the Corporation, at any place where the Corporation shall maintain a transfer agent for its shares of Series E Preferred Stock, certificates representing the shares so redeemed, duly endorsed in blank or accompanied by proper instruments of transfer. Notwithstanding anything to the contrary set forth in this 4 Certificate of Determination, any holder of Series E Preferred Stock may convert its shares of Series E Preferred Stock pursuant to Section 7(a) hereof until the Series E Redemption Price has been paid in full by the Corporation to any such holder. (ii) Termination of Rights. If the shares of Series E Preferred Stock are redeemed in full on the Series E Automatic Redemption Date, then after the Series E Automatic Redemption Date, all rights of any holder of such shares of Series E Preferred Stock shall cease and terminate, and such shares of Series E Preferred Stock shall no longer be deemed to be outstanding, whether or not the certificates representing such shares have been received by the Corporation; provided, however, that, if the Corporation defaults in the payment in full of the Series E Redemption Price, the rights of the holders of shares of Series E Preferred Stock shall continue until the Corporation cures such default. (iii) Insufficient Funds for Redemption. If the funds of the Corporation available for redemption of the shares of Series E Preferred Stock on the Series E Automatic Redemption Date are insufficient to redeem in full the shares of Series E Preferred Stock, the holders of shares of Series E Preferred Stock shall share ratably in any funds available by law for redemption of such shares according to the respective amounts which would be payable with respect to the number of shares owned by them if the shares to be so redeemed on such Series E Automatic Redemption Date were redeemed in full. Any shares of Series E Preferred Stock that the Corporation does not redeem on the Series E Automatic Redemption Date due to insufficient funds shall continue to be outstanding until redeemed and dividends on such shares shall continue to accrue and cumulate until redeemed. The Corporation shall in good faith use all commercially reasonable efforts as expeditiously as possible to eliminate, or obtain an exception, waiver or exemption from, any and all restrictions that prevented the Corporation from paying the Series E Redemption Price and redeeming all of the shares of Series E Preferred Stock. At any time thereafter when additional funds of the Corporation are available by law for the redemption of the shares of Series E Preferred Stock, such funds shall be used as promptly as practicable to redeem the balance of such shares, or such portion thereof for which funds are available, on the basis set forth above. 6. Voting Rights. (a) General. In addition to the voting rights to which the holders of Series E Preferred Stock are entitled under or granted by California law, the holders of Series E Preferred Stock shall be entitled to vote, in person or by proxy, at a special or annual meeting of stockholders on all matters entitled to be voted on by holders of shares of Common Stock voting together as a single class with the Common Stock (and with other shares entitled to vote thereon, if any), including, without limitation, the election of all of the directors of the Corporation other than the director elected solely by the holders of the shares of Series D Preferred Stock pursuant to Section 6(b) of the Amended and Restated Series D Certificate of Determination. With respect to any such vote, each share of Series E Preferred Stock shall entitle the holder thereof to cast that number of votes as is equal to the quotient of (i) the sum of the Series E Accreted Value plus all dividends accrued since the previous Series E Accrual Date divided by (ii) [____], subject to the same adjustments that are made to the Series E Conversion Price as provided in Section 7(c) below. 5 (b) Series E Actions. At any meeting of the holders of shares of Series E Preferred Stock held for the purpose of voting upon any resolutions requiring the approval of the holders of shares of Series E Preferred Stock, voting as a separate class or series, the presence in person or by proxy of the holders of a majority of the shares of Series E Preferred Stock then outstanding shall constitute a quorum of the Series E Preferred Stock; the holders of shares of Series E Preferred Stock shall be entitled to cast one vote per share of Series E Preferred Stock; and such resolution shall be deemed approved upon the affirmative vote of the holders of a majority of the outstanding shares of Series E Preferred Stock present in person or represented by proxy at such meeting. (c) Action Without a Meeting. Any action required by the California Corporations Code to be taken at any annual or special meeting of holders of Series E Preferred Stock, voting as a separate class or series, may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holders of outstanding shares of Series E Preferred Stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting of the holders of Series E Preferred Stock pursuant to Section 6(b) and shall be delivered (by hand or certified or registered mail, return receipt requested) to the Corporation by delivery to its registered office in the State of California, its principal place of business, or any officer or agent of the Corporation having custody of the book in which proceedings of meetings of the holders of Series E Preferred Stock are recorded. Every written consent shall bear the date of signature of each holder of Series E Preferred Stock who signs the consent. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall, to the extent, required by applicable law, be given to those holders of Series E Preferred Stock who have not consented in writing, and who, if the action had been taken at a meeting, would have been entitled to notice of the meeting if the record date for such meeting had been the date that written consents signed by a sufficient number of holders to take the action were delivered to the Corporation. (d) Major Actions. Notwithstanding anything to the contrary set forth in the Amended and Restated Articles of Incorporation or the By-laws of the Corporation, the affirmative vote of the holders of the outstanding shares of Series E Preferred Stock acting in accordance with Section 6(b) or 6(c), voting as a separate class, shall be a prerequisite to: (i) any amendment to, restatement of or waiver of the terms of the Series E Preferred Stock, including, without limitation, by merger, consolidation, business combination or otherwise that is not a Change of Control; (ii) the issuance, reservation for issuance or authorization of any Capital Stock of the Corporation or any right or option to acquire shares of Capital Stock ranking senior to the shares of Series E Preferred Stock or any increase or decrease in the authorized number of shares of Series E Preferred Stock; provided, that the Corporation may issue (w) options or shares pursuant to the Stock Option Plans, (x) shares of Series E Preferred Stock (A) upon conversion of those certain convertible promissory notes, with an aggregate principal amount of ten million dollars ($10,000,000), issued by the Corporation on November 26, 2003, (B) in exchange for those certain 5 3/4% Convertible Subordinated Notes, due April 1, 2005, in the principal face amount of thirty-two million seven hundred ninety-five thousand dollars 6 ($32,795,000), issued by the Corporation pursuant to the Corporation's Indenture, dated March 31, 2000, (C) upon conversion of the Apex Notes and (D) issuable pursuant to agreements entered into prior to the Series E Closing Date, and (y) the Series E Purchase Rights and the Rights Shares; (iii) the redemption of any Junior Stock other than the repurchase of unvested stock options or restricted stock from employees, officers, directors or consultants of the Corporation upon termination of service or in accordance with the Stock Option Plans; (iv) prior to the payment in full of the Series E Liquidation Payment, any distribution or payment of any dividend or other distribution to any Junior Stock, provided that, no consent of the holders of Series E Preferred Stock shall be required for the accrual of dividends on the Series D Preferred Stock as provided in Section 3 of the Amended and Restated Certificate of Determination of Preferences of Series D Preferred Stock; and (v) any amendment to this Section 6(d). 7. Conversion. (a) Optional Conversion. Any holder of shares of Series E Preferred Stock shall have the right, at its option, at any time and from time to time, to convert, subject to the terms and provisions of this Section 7, any or all of such holder's shares of Series E Preferred Stock into such number of fully paid and non-assessable shares of Common Stock as is equal to the product of (i) the number of shares of Series E Preferred Stock being so converted multiplied by (ii) the quotient of (x) the Series E Accreted Value divided by (y) the Series E Conversion Price, subject to adjustment as provided in Section 7(c) below. Such conversion right shall be exercised by the surrender of certificate(s) representing the shares of Series E Preferred Stock to be converted to the Corporation at any time during usual business hours at its principal place of business maintained by it (or such other office or agency of the Corporation as the Corporation may designate by notice in writing to the holders of shares of Series E Preferred Stock), accompanied by written notice that the holder elects to convert such shares of Series E Preferred Stock and specifying the name or names (with address) in which a certificate or certificates for shares of Common Stock are to be issued and (if so required by the Corporation) by a written instrument or instruments of transfer in form reasonably satisfactory to the Corporation duly executed by the holder or its duly authorized legal representative and transfer tax stamps or funds therefor, if required pursuant to Section 7(i) below. All certificates representing shares of Series E Preferred Stock surrendered for conversion shall be delivered to the Corporation for cancellation and canceled by it. As promptly as practicable after the surrender of any shares of Series E Preferred Stock, in any event within seven (7) days of the receipt of such certificates, the Corporation shall (subject to compliance with the applicable provisions of federal and state securities laws) deliver to the holder of such shares so surrendered certificate(s) representing the number of fully paid and nonassessable shares of Common Stock into which such shares are entitled to be converted. At the time of the surrender of such certificate(s), the Person in whose name any certificate(s) for shares of Common Stock shall be issuable upon such conversion shall be deemed to be the holder of record of such shares of Common Stock on such date, notwithstanding that the share register of the Corporation shall then be closed or that the certificates representing such Common Stock shall not then be actually delivered to such Person. 7 (b) Termination of Rights. On the date of such optional conversion pursuant to Section 7(a) above all rights with respect to the shares of Series E Preferred Stock so converted, including the rights, if any, to receive notices and vote, shall terminate, except only the rights of holders thereof to (i) receive certificates for the number of shares of Common Stock into which such shares of Series E Preferred Stock have been converted and (ii) exercise the rights to which they are entitled as holders of Common Stock. (c) (i) Dividend, Subdivision, Combination or Reclassification of Common Stock. In the event that the Corporation shall at any time or from time to time, prior to conversion of shares of Series E Preferred Stock (w) pay a dividend or make a distribution on the outstanding shares of Common Stock payable in Capital Stock of the Corporation, (x) subdivide the outstanding shares of Common Stock into a larger number of shares, (y) combine the outstanding shares of Common Stock into a smaller number of shares or (z) issue any shares of its Capital Stock in a reclassification of the Common Stock (other than any such event for which an adjustment is made pursuant to another clause of this Section 7(c)), then, and in each such case, the Series E Conversion Price in effect immediately prior to such event shall be adjusted (and any other appropriate actions shall be taken by the Corporation) so that the holder of any share of Series E Preferred Stock thereafter surrendered for conversion shall be entitled to receive the number of shares of Common Stock or other securities of the Corporation that such holder would have owned or would have been entitled to receive upon or by reason of any of the events described above, had such share of Series E Preferred Stock been converted immediately prior to the occurrence of such event. An adjustment made pursuant to this Section 7(c)(i) shall become effective retroactively (x) in the case of any such dividend or distribution, to a date immediately following the close of business on the record date for the determination of holders of Common Stock entitled to receive such dividend or distribution or (y) in the case of any such subdivision, combination or reclassification, to the close of business on the day upon which such corporate action becomes effective. (ii) Certain Distributions. In case the Corporation shall at any time or from time to time, prior to conversion of shares of Series E Preferred Stock, distribute to all holders of shares of the Common Stock (including any such distribution made in connection with a merger or consolidation in which the Corporation is the resulting or surviving Person and the Common Stock is not changed or exchanged) cash, evidences of indebtedness of the Corporation or another issuer, securities of the Corporation or another issuer or other assets (excluding cash dividends in which holders of shares of Series E Preferred Stock participate, in the manner provided in Section 3(b); dividends payable in shares of Common Stock for which adjustment is made under another paragraph of this Section 7(c); and any distribution in connection with an Excluded Transaction) or rights or warrants to subscribe for or purchase of any of the foregoing, then, and in each such case, the Series E Conversion Price then in effect shall be adjusted (and any other appropriate actions shall be taken by the Corporation) by multiplying the Series E Conversion Price in effect immediately prior to the date of such distribution by a fraction (x) the numerator of which shall be the Current Market Price of the Common Stock immediately prior to the date of distribution less the then fair market value (as determined by the Board of Directors in the exercise of their fiduciary duties) of the portion of the cash, evidences of indebtedness, securities or other assets so distributed or of such rights or warrants applicable to one share of Common Stock and (y) the denominator of which shall be the Current Market Price of the Common Stock immediately prior to the date of distribution (but such fraction shall not be 8 greater than one); provided, however, that no adjustment shall be made with respect to any distribution of rights or warrants to subscribe for or purchase securities of the Corporation if the holder of shares of Series E Preferred Stock would otherwise be entitled to receive such rights or warrants upon conversion at any time of shares of Series E Preferred Stock into Common Stock. Such adjustment shall be made whenever any such distribution is made and shall become effective retroactively to a date immediately following the close of business on the record date for the determination of stockholders entitled to receive such distribution. (iii) Other Changes. In case the Corporation at any time or from time to time, prior to the conversion of shares of Series E Preferred Stock, shall take any action affecting its Common Stock similar to or having an effect similar to any of the actions described in Sections 7(c)(i) or (ii) above or Section 7(f) below (but not including any action described in any such Section) and the Board of Directors shall consider whether an adjustment should thereupon be made in the Series E Conversion Price. If the Board of Directors in good faith determines that it would be equitable in the circumstances to adjust the Series E Conversion Price as a result of such action, then, and in each such case, the Series E Conversion Price shall be adjusted in such manner and at such time as the Board of Directors in good faith determines would be equitable in the circumstances (such determination to be evidenced in a resolution, a certified copy of which shall be mailed to the holders of shares of Series E Preferred Stock). (iv) No Adjustment. Notwithstanding anything herein to the contrary, no adjustment under this Section 7(c) need be made to the Series E Conversion Price if the Corporation receives written notice from holders of a majority of the outstanding shares of Series E Preferred Stock that no such adjustment is required. (d) Abandonment. If the Corporation shall take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend or other distribution, and shall thereafter and before the distribution to stockholders thereof legally abandon its plan to pay or deliver such dividend or distribution, then no adjustment in the Series E Conversion Price shall be required by reason of the taking of such record. (e) Certificate as to Adjustments. Upon any adjustment in the Series E Conversion Price, the Corporation shall within a reasonable period (not to exceed ten (10) Business Days) following any of the foregoing transactions deliver to each registered holder of shares of Series E Preferred Stock a certificate, signed by (i) the Chief Executive Officer of the Corporation and (ii) the Chief Financial Officer of the Corporation, setting forth in reasonable detail the event requiring the adjustment and the method by which such adjustment was calculated and specifying the increased or decreased Series E Conversion Price then in effect following such adjustment. (f) Reorganization, Reclassification. In case of any merger or consolidation of the Corporation (other than a Change of Control) or any capital reorganization, reclassification or other change of outstanding shares of Common Stock (other than a change in par value, or from par value to no par value, or from no par value to par value) (each, a "Transaction"), the holder of each share of Series E Preferred Stock shall have the right to receive in such Transaction, in exchange for each share of Series E Preferred Stock, a security identical to (and 9 not less favorable than) the Series E Preferred Stock, and provision shall be made therefor in the agreement, if any, relating to such Transaction. (g) Reservation of Common Stock. The Corporation shall at all times reserve and keep available for issuance upon the conversion of shares of Series E Preferred Stock, such number of its authorized but unissued shares of Common Stock as will from time to time be sufficient to permit the conversion of all outstanding shares of Series E Preferred Stock, and shall take all action to increase the authorized number of shares of Common Stock if at any time there shall be insufficient authorized but unissued shares of Common Stock to permit such reservation or to permit the conversion of all outstanding shares of Series E Preferred Stock; provided, that the holders of shares of Series E Preferred Stock shall vote such shares in favor of any such action that requires a vote of stockholders. (h) No Conversion Tax or Charge. The issuance or delivery of certificates for Common Stock upon the conversion of shares of Series E Preferred Stock shall be made without charge to the converting holder of shares of Series E Preferred Stock for such certificates or for any tax in respect of the issuance or delivery of such certificates or the securities represented thereby, and such certificates shall be issued or delivered in the respective names of, or (subject to compliance with the applicable provisions of federal and state securities laws) in such names as may be directed by, the holders of the shares of Series E Preferred Stock converted; provided, however, that the Corporation shall not be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of any such certificate in a name other than that of the holder of the shares of Series E Preferred Stock converted, and the Corporation shall not be required to issue or deliver such certificate unless or until the Person or Persons requesting the issuance or delivery thereof shall have paid to the Corporation the amount of such tax or shall have established to the reasonable satisfaction of the Corporation that such tax has been paid. (i) Limitations on Conversions. Each holder of the Series E Preferred Stock's right to convert its shares of Series E Preferred Stock into shares of Common Stock shall not be limited by any notice delivered by the Corporation of any proposed redemption, Change of Control or any other event that notwithstanding this subsection (i) shall purport to limit such conversion right. 8. Certain Remedies. Any registered holder of shares of Series E Preferred Stock shall be entitled to an injunction or injunctions to prevent breaches of the provisions of this Certificate of Determination and to enforce specifically the terms and provisions of this Certificate of Determination in any court of the United States or any state thereof having jurisdiction, this being in addition to any other remedy to which such holder may be entitled at law or in equity. 9. Business Day. If any payment shall be required by the terms hereof to be made on a day that is not a Business Day, such payment shall be made on the immediately succeeding Business Day. 10 10. Definitions. As used in this Certificate of Determination, the following terms shall have the following meanings (with terms defined in the singular having comparable meanings when used in the plural and vice versa), unless the context otherwise requires: "Affiliate" shall mean any Person who is an "affiliate" as defined in Rule 12b-2 of the General Rules and Regulations under the Exchange Act. "Amended and Restated Series D Certificate of Determination" means the Corporation's Certificate of Determination of Preference of Series D Cumulative Redeemable Convertible Preferred Stock, as amended from time to time. "Apex Notes" means the convertible promissory notes with an aggregate principal amount of fifteen million dollars ($15,000,000) issued by the Corporation on January 16, 2004, to Permal U.S. Opportunities Limited, Zaxis Equity Neutral, L.P., Zaxis Institutional Partners, L.P., Zaxis Offshore Limited, Zaxis Partners, L.P. and Passport Master Fund, L.P., pursuant to the Convertible Note Purchase Agreement. "Board of Directors" means the Board of Directors of the Corporation. "Business Day" means any day except a Saturday, a Sunday, or other day on which commercial banks in the State of New York or the State of California are authorized or required by law or executive order to close. "Capital Stock" means, with respect to any Person, any and all shares, interests, participations, rights in, or other equivalents (however designated and whether voting or non-voting) of, such Person's capital stock (including, without limitation, common stock and preferred stock) and any and all rights, warrants or options exchangeable for or convertible into such capital stock. "Certificate of Determination" means this Certificate of Determination of Preferences of Series E Redeemable Convertible Preferred Stock, as amended from time to time. "Change of Control" means (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 Corporation prior to such transaction do not own a majority of the voting securities of the surviving entity, (ii) any tender offer, exchange offer or other transaction whereby any person or "group" other than the Investors obtains a majority of the outstanding shares of capital stock entitled to vote in the election of the Board of Directors, (iii) any proxy contest in which a majority of the Board of Directors (or persons appointed by such Board of Directors) prior to such contest do not constitute a majority of the Board of Directors after such contest, (iv) a sale of all or substantially all of the assets of the Corporation or (v) any other transaction described in any stockholder rights agreement or "poison pill", if any, to which the Corporation is a party, which permits the holders of any rights or similar certificates to exercise the rights evidenced thereby and pursuant to which the Board of Directors does not waive the application of such stockholder rights agreement or "poison pill." "Commission" means the United States Securities and Exchange Commission. 11 "Common Stock" shall have the meaning ascribed to it in Section 2(a) hereof. "Common Stock Equivalent" shall mean any security or obligation which is by its terms convertible, exchangeable or exercisable into or for shares of Common Stock, including, without limitation, shares of Series D Preferred Stock, shares of Series E Preferred Stock and any option, warrant or other subscription or purchase right with respect to Common Stock or any Common Stock Equivalent. "Convertible Note Purchase Agreement" means the Convertible Note Purchase Agreement, dated January 16, 2004, among the Corporation and Permal U.S. Opportunities Limited, Zaxis Equity Neutral, L.P., Zaxis Institutional Partners, L.P., Zaxis Offshore Limited, Zaxis Partners, L.P. and Passport Master Fund, L.P. "Corporation" shall have the meaning ascribed to it in the first paragraph of this Certificate of Determination. "Current Market Price" per share of Capital Stock of any Person shall mean, as of the date of determination, (a) the average of the daily Market Price under clause (a), (b) or (c), as applicable, of the definition thereof of such Capital Stock during the immediately preceding thirty (30) trading days ending on such date, and (b) if such Capital Stock is not then listed or admitted to trading on any national securities exchange or quoted in the over-the-counter market, then the Market Price under clause (d) of the definition thereof on such date. "Exchange Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission promulgated thereunder. "Excluded Transaction" means (a) any issuance of shares of stock or options to purchase shares of Series E Preferred Stock or Common Stock pursuant to the Stock Option Plans, (b) any issuance of Common Stock (i) upon the conversion of shares of Series E Preferred Stock or shares of Series D Preferred Stock, (ii) as a dividend on shares of Series E Preferred Stock or shares of Series D Preferred Stock or (iii) upon conversion or exercise of any Common Stock Equivalents, (c) any issuance of Common Stock in connection with any Series E Liquidation Payment or Series D Liquidation Payment, (d) Capital Stock issued in consideration of an acquisition, approved by the Board of Directors, of another Person, (e) shares of Common Stock and Common Stock Equivalents issued in strategic transactions (which may not be private equity or venture capital financing transactions), approved by the Board of Directors, to Persons that are not principally engaged in financial investing, (f) the issuance of the Series E Purchase Rights and the Rights Shares, (g) shares of Series E Preferred Stock issuable pursuant to agreements entered into prior to the Series E Closing Date and (h) shares of Common Stock issuable upon conversion of the Apex Notes in accordance with the terms of the Convertible Note Purchase Agreement. "GAAP" means United States generally accepted accounting principles in effect from time to time. "Investors" means General Atlantic Partners 74, L.P., GAP Coinvestment Partners II, L.P., GapStar, LLC, GAPCO GmbH & Co. KG, Campina Enterprises Limited, 12 Cenwell Limited, Great Affluent Limited, Dragonfield Limited and Lion Cosmos Limited and the Affiliates of the foregoing, provided that Affiliates shall be deemed not to include any portfolio companies of any of the foregoing. "Junior Stock" shall have the meaning ascribed to it in Section 2(a) hereof. "Liquidation" shall mean the voluntary or involuntary liquidation under applicable bankruptcy or reorganization legislation, or the dissolution or winding up of the Corporation. "Market Price" shall mean, with respect to the Capital Stock of any Person, as of the date of determination, (a) if such Capital Stock is listed on a national securities exchange, the closing price per share of such Capital Stock on such date published in The Wall Street Journal (National Edition) or, if no such closing price on such date is published in The Wall Street Journal (National Edition), the average of the closing bid and asked prices on such date, as officially reported on the principal national securities exchange on which such Capital Stock is then listed or admitted to trading; or (b) if such Capital Stock is not then listed or admitted to trading on any national securities exchange but is designated as a national market system security by the National Association of Securities Dealers, Inc., the last trading price of such Capital Stock on such date; or (c) if there shall have been no trading on such date or if such Capital Stock is not designated as a national market system security by the National Association of Securities Dealers, Inc., the average of the reported closing bid and asked prices of such Capital Stock on such date as shown by the National Market System of the National Association of Securities Dealers, Inc. Automated Quotations System and reported by any member firm of the New York Stock Exchange selected by the Corporation; or (d) if none of (a), (b) or (c) is applicable, the fair market value thereof as reasonably determined by the Board of Directors. "NASDAQ" shall mean The Nasdaq Stock Market, Inc. "Person" means any individual, firm, corporation, partnership, limited liability company, trust, incorporated or unincorporated association, joint venture, joint stock company, governmental body or other entity of any kind. "Price Per Share" means $1.50 (subject to anti-dilution adjustment for stock splits of, combinations of and capital reorganizations with respect to the Series E Preferred Stock). "Rights Offering" shall mean a rights offering for an aggregate amount of up to $21,000,000 of shares of Series E Preferred Stock pursuant to which the Corporation will distribute transferable rights to the Corporation's holders of Common Stock as contemplated by the Convertible Note Purchase and Exchange Agreement, dated November 18, 2003, among the Corporation and certain other parties thereto. "Rights Shares" means the shares of Series E Preferred Stock issuable upon exercise of the Series E Purchase Rights and the shares of the Common Stock issuable upon conversion of such shares of Series E Preferred Stock. 13 "Securities Act" means the Securities Act of 1933, as amended, and the rules and regulations of the Commission promulgated thereunder. "Series D Liquidation Payment" shall have the meaning ascribed to it in the Amended and Restated Certificate of Determination of Preferences of Series D Preferred Stock if and when approved by the requisite stockholders of the Corporation and duly filed with the Secretary of State of the State of California. "Series D Preferred Stock" shall have the meaning ascribed to it in the Amended and Restated Certificate of Determination of Preferences of Series D Preferred Stock if and when approved by the requisite stockholders of the Corporation and duly filed with the Secretary of State of the State of California. "Series E Accreted Value" shall mean as of any date, with respect to each share of Series E Preferred Stock, the Price Per Share plus the amount of dividends that have accrued from the Series E Closing Date to the then most recent Series E Accrual Date pursuant to Section 3(a) of this Certificate of Determination. "Series E Automatic Redemption Date" shall have the meaning ascribed to it in Section 5(b) hereof. "Series E Closing Date" means _____________, 2004. "Series E Conversion Price" shall mean $1.50, as adjusted pursuant to Section 7(c). "Series E Liquidation Payment" shall mean, with respect to each share of Series E Preferred Stock, those amounts payable pursuant to Section 4(a)(i) or Section 4(b)(i), as the case may be. "Series E Optional Redemption Date" shall have the meaning ascribed to it in Section 5(a)(ii) hereof. "Series E Optional Redemption Measurement Window" shall have the meaning ascribed to it in Section 5(a)(i) hereof. "Series E Optional Redemption Period" shall have the meaning ascribed to it in Section 5(a)(i) hereof. "Series E Optional Redemption Price" shall have the meaning ascribed to it in Section 5(a)(i) hereof. "Series E Preferred Stock" shall have the meaning ascribed to it in Section 1 hereof. "Series E Purchase Rights" means those rights to purchase Series E Preferred Stock issued in the Rights Offering. 14 "Series E Redemption Price" shall have the meaning ascribed to it in Section 5(b) hereof. "Stock Option Plans" means the Corporation's stock option plans and employee purchase plans approved by the Board of Directors, pursuant to which shares of restricted stock and options to purchase shares of Series E Preferred Stock and/or Common Stock are reserved and available for grant to officers, directors, employees and consultants of the Corporation. * * * * * * 3. This Certificate of Determination has been duly approved by the Board of Directors. The authorized number of shares of Preferred Stock of the Corporation is [__________], of which one share constitutes the Special Voting Share, which share has been issued, 75,000 shares constitute Series C Participating Preferred Stock, none of which has been issued, [___________] shares of Series D Preferred Stock, [all] of which have been issued, and [__________] shares of Series E Preferred Stock, none of which has been issued. The number of shares voting in favor of this Certificate of Determination equaled or exceeded the vote required. The percentage vote required under the Amended and Restated Articles of Incorporation in effect at the time of this Certificate of Determination was more than 50% of the outstanding shares of Series D Preferred Stock, voting separately as a class. [the remainder of this page intentionally left blank] 15 The undersigned, William E. McGlashan, Jr. and Michael J. Zukerman, the Chief Executive Officer and Chairman of the Board of Directors and Vice President and Secretary, respectively, of Critical Path, Inc., declare under penalty of perjury that the matters set out in the foregoing Certificate are true of their own knowledge. Executed at San Francisco, California on this [__] day of [__________], [____]. ---------------------------------- William E. McGlashan, Jr., Chief Executive Officer and Chairman of the Board of Directors ---------------------------------- Michael J. Zukerman, Senior Vice President, General Counsel and Secretary EX-10.1 7 f97241exv10w1.txt EXHIBIT 10.1 EXHIBIT 10.1 ================================================================================ CONVERTIBLE NOTE PURCHASE AGREEMENT among CRITICAL PATH, INC., PERMAL U.S. OPPORTUNITIES LIMITED, ZAXIS EQUITY NEUTRAL, L.P., ZAXIS INSTITUTIONAL PARTNERS, L.P., ZAXIS OFFSHORE LIMITED, ZAXIS PARTNERS, L.P., GUGGENHEIM PORTFOLIO COMPANY XIII, CROSSLINK CROSSOVER FUND IV, L.P., SAGAMORE HILL HUB FUND, LTD., CRITERION CAPITAL PARTNERS, LTD., CRITERION CAPITAL PARTNERS, INSTITUTIONAL, CRITERION CAPITAL PARTNERS, L.P. AND CAPITAL VENTURES INTERNATIONAL -------------------- Dated: March 9, 2004 -------------------- ================================================================================ Table of Contents

Page ---- ARTICLE I DEFINITIONS.................................................................2 1.1 Definitions..........................................................2 ARTICLE II PURCHASE AND SALE OF NOTES; CONVERSION; EXCHANGE..........................11 2.1 Purchase and Sale of Notes..........................................11 2.2 Filings.............................................................11 2.3 Certificate of Determination........................................11 2.4 Closings; Deliveries................................................11 2.5 Issuances of Common Shares..........................................13 ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY............................13 3.1 Corporate Existence and Power.......................................13 3.2 Authorization; No Contravention.....................................14 3.3 Governmental Authorization; Third Party Consents....................14 3.4 Binding Effect......................................................14 3.5 Litigation..........................................................15 3.6 Compliance with Laws................................................15 3.7 Capitalization......................................................15 3.8 No Default or Breach; Contractual Obligations.......................17 3.9 Title to Properties.................................................17 3.10 Reports; Financial Statements.......................................17 3.11 Taxes...............................................................18 3.12 No Material Adverse Change; Ordinary Course of Business.............18 3.13 Private Offering....................................................18 3.14 Labor Relations.....................................................19 3.15 Employee Benefit Plans..............................................19 3.16 Liabilities.........................................................20 3.17 Affiliate Transactions..............................................20 3.18 Intellectual Property...............................................21 3.19 Privacy of Customer Information.....................................22 3.20 Potential Conflicts of Interest.....................................22 3.21 Trade Relations.....................................................23 3.22 Outstanding Borrowing...............................................23 3.23 Broker's, Finder's or Similar Fees..................................23 3.24 Stockholder Approval................................................23 3.25 CCC Section.........................................................23 3.26 Disclosure..........................................................24 3.27 Investments.........................................................24 3.28 Sarbanes-Oxley Compliance...........................................24

i ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE LENDERS.............................25 4.1 Existence and Power.................................................25 4.2 Authorization; No Contravention.....................................25 4.3 Governmental Authorization; Third Party Consents....................25 4.4 Binding Effect......................................................26 4.5 Purchase for Own Account............................................26 4.6 Restricted Securities...............................................27 4.7 Accredited Investor.................................................27 4.8 Experience..........................................................27 4.9 Access to Information...............................................27 4.10 General Solicitation................................................27 4.11 Reliance............................................................27 4.12 Qualified Institutional Buyer.......................................28 4.13 Affiliate Status....................................................28 4.14 Capital Stock Ownership.............................................28 ARTICLE V CONDITIONS TO INITIAL CLOSING..............................................29 5.1 Conditions to Lenders' Obligations..................................29 5.2 Conditions to Company's Obligations.................................29 ARTICLE VI CONDITIONS TO SUBSEQUENT CLOSING..........................................30 6.1 Conditions to Lenders' Obligations..................................30 6.2 Conditions to the Company's Obligations.............................30 ARTICLE VII INDEMNIFICATION..........................................................31 7.1 Indemnification.....................................................31 7.2 Notification........................................................31 7.3 Contribution........................................................32 ARTICLE VIII COVENANTS...............................................................33 8.1 Financial Statements and Other Information..........................33 8.2 FIRPTA Certificate..................................................33 8.3 Reservation of Common Stock.........................................34 8.4 Stockholder Approval................................................34 8.5 Financial Covenants.................................................34 8.6 Purchases and Sales.................................................34 8.7 Proxy Matters.......................................................35 ARTICLE IX TERMINATION...............................................................35 9.1 Termination.........................................................35 ARTICLE X MISCELLANEOUS..............................................................35 10.1 Survival of Representations and Warranties..........................35 10.2 Notices.............................................................36 10.3 Successors and Assigns; Third Party Beneficiaries...................38 10.4 Amendment and Waiver................................................38 10.5 Counterparts........................................................38 ii 10.6 Headings............................................................38 10.7 Governing Law.......................................................38 10.8 Severability........................................................38 10.9 Rules of Construction...............................................39 10.10 Entire Agreement....................................................39 10.11 Fees................................................................39 10.12 Publicity; Confidentiality..........................................39 10.13 Further Assurances..................................................40 10.14 Waiver..............................................................40 EXHIBITS A Form of Note B Form of Third Amended and Restated Registration Rights Agreement C Form of Amended and Restated Series D Certificate of Determination D Articles of Incorporation E By-laws F Form of Series E Certificate of Determination G Form of Pillsbury Winthrop LLP Opinion SCHEDULES 2.1 Purchased Notes 3.3 Government Authorizations; Consents 3.5 Litigation 3.7(a) Capitalization 3.10(a) Reports; Financial Statements 3.12 Material Adverse Change 3.17 Affiliate Transactions 3.20 Potential Conflicts of Interest 3.22 Outstanding Borrowing 3.27 Investments 4.14 Capital Stock Ownership 8.5 Financial Covenants iii CONVERTIBLE NOTE PURCHASE AGREEMENT CONVERTIBLE NOTE PURCHASE AGREEMENT, dated March 9, 2004 (this "Agreement"), among Permal U.S. Opportunities Limited, Zaxis Equity Neutral, L.P., Zaxis Institutional Partners, L.P., Zaxis Offshore Limited, Zaxis Partners, L.P., Guggenheim Portfolio Company XIII, Crosslink Crossover Fund IV, L.P., Sagamore Hill Hub Fund, Ltd., Criterion Capital Partners, Ltd., Criterion Capital Partners, Institutional, Criterion Capital Partners, L.P. and Capital Ventures International (collectively, the "Lenders") and Critical Path, Inc., a California corporation (the "Company"), WHEREAS, on November 18, 2003, the Company entered into the Convertible Note Purchase and Exchange Agreement, as amended from time to time (the "November Convertible Note Agreement") with the General Atlantic Entities, GAP-W, LLC and the CK Purchasers pursuant to which (a) the Company issued $10 million in principal amount of 10% convertible secured notes to the General Atlantic Entities, and agreed to convert the notes into approximately 7.3 million shares, par value $0.001 per share, of Series E Redeemable Convertible Preferred Stock (the "Series E Preferred Stock"), and (b) the CK Purchasers agreed to exchange approximately $32.8 million in face value of CK Sub Notes for approximately 21.9 million shares of Series E Preferred Stock subject to Stockholder Approval (as hereinafter defined); and WHEREAS, on January 16, 2004, the Company entered into the Convertible Note Purchase Agreement, as amended from time to time (the "January Convertible Note Agreement") with Permal U.S. Opportunities Limited, Zaxis Equity Neutral, L.P., Zaxis Institutional Partners, L.P., Zaxis Offshore Limited, Zaxis Partners, L.P. and Passport Master Fund, L.P. (collectively, the "January 2004 Investors"), pursuant to which the Company issued $15 million in principal amount of 10% convertible secured notes to the January 2004 Investors, and agreed to convert such notes into approximately 10 million shares of Series E Preferred Stock subject to Stockholder Approval (as hereinafter defined); and WHEREAS, upon the terms and conditions set forth in this Agreement, the Company proposes to issue and sell, at the Initial Closing, convertible notes, substantially in the form attached hereto as Exhibit A (each a "Note" and, collectively, the "Notes") having an aggregate principal amount of eighteen million five hundred thousand dollars ($18,500,000), in the face amount set forth opposite such Lender's (as hereinafter defined) name on Schedule 2.1 hereto, that subject to the terms and conditions set forth in this Agreement and the Notes, are convertible either into Series E Preferred Stock or Common Stock, as more fully set forth in the Agreement and the Notes: NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein and for good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows: ARTICLE I DEFINITIONS 1.1 Definitions. As used in this Agreement, and unless the context requires a different meaning, the following terms have the meanings indicated: "Affiliate" shall mean any Person who is an "affiliate" as defined in Rule 12b-2 of the General Rules and Regulations under the Exchange Act. "Agreement" means this Agreement as the same may be amended, supplemented or modified in accordance with the terms hereof. "Amended and Restated Registration Rights Agreement" means the Third Amended and Restated Registration Rights Agreement, substantially in the form attached hereto as Exhibit B. "Amended and Restated Series D Certificate of Determination" means the Amended and Restated Certificate of Determination of Preferences of Series D Cumulative Redeemable Convertible Preferred Stock, substantially in the form attached hereto as Exhibit C, with such changes or limitations to the voting provisions thereof as may be necessary to comply with NASD Rule 4351 regarding the voting power of the Series D Preferred Stock, which shall be duly filed with the Secretary of State of the State of California as soon as practicable following Stockholder Approval. "Amendment to Preferred Stock Rights Agreement" means an amendment to the Company's Preferred Stock Rights Agreement to permit the Lenders to purchase securities being offered by the Company hereunder without causing such Lenders to become Acquiring Persons (as defined in the Preferred Stock Rights Agreement). "Articles of Incorporation" means the Amended and Restated Articles of Incorporation of the Company in effect on the Initial Closing Date and attached hereto as Exhibit D. "Board of Directors" means the Board of Directors of the Company. "Business Day" means any day other than a Saturday, Sunday or other day on which commercial banks in the State of New York or the State of California are authorized or required by law or executive order to close. "By-laws" means the by-laws of the Company in effect on the Initial Closing Date and attached hereto as Exhibit E. "CK Purchasers" means Campina Enterprises Limited, Cenwell Limited, Great Affluent Limited, Dragonfield Limited and Lion Cosmos Limited and their transferees. 2 "CK Sub Notes" means the 5 _% Convertible Subordinated Notes, due April 1, 2005, issued by the Company pursuant to the Company's Indenture, dated March 31, 2000, and purchased by the CK Purchasers. "Claims" has the meaning set forth in Section 3.5 of this Agreement. "Code" means the Internal Revenue Code of 1986, as amended, or any successor statute thereto. "Commission" means the United States Securities and Exchange Commission or any similar agency then having jurisdiction to enforce the Securities Act and Exchange Act. "Common Stock" means the common stock of the Company, par value $0.001 per share. "Commonly Controlled Entity" means any entity which is under common control with the Company within the meaning of Code Section 414(b), (c), (m), (o) or (t). "Common Shares" has the meaning set forth in Section 2.1(a). "Common Shares Issuance Date" has the meaning set forth in Section 2.5. "Company" has the meaning set forth in the preamble to this Agreement. "Company Plans" has the meaning set forth in Section 3.15 of this Agreement. "Condition of the Company" means the assets, business, properties, operations or condition (financial or otherwise) of the Company and its Subsidiaries, taken as a whole. "Contingent Obligation" means, as applied to any Person, any direct or indirect liability of that Person with respect to any Indebtedness, lease, dividend, guaranty, letter of credit or other obligation, contractual or otherwise (the "primary obligation") of another Person (the "primary obligor"), whether or not contingent, (a) to purchase, repurchase or otherwise acquire such primary obligations or any property constituting direct or indirect security therefor, (b) to advance or provide funds (i) for the payment or discharge of any such primary obligation, or (ii) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency or any balance sheet item, level of income or financial condition of the primary obligor, (c) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation, or (d) otherwise to assure or hold harmless the owner of any such primary obligation against loss or failure or inability to perform in respect thereof. The amount of any Contingent Obligation shall be deemed to be an amount equal to the stated or determinable amount of the primary obligation in respect of 3 which such Contingent Obligation is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof. "Contractual Obligations" means, as to any Person, any provision of any security issued by such Person or of any agreement, undertaking, contract, indenture, mortgage, deed of trust or other instrument to which such Person is a party or by which it or any of its property is bound. "Conversion" has the meaning set forth in Section 2.1(a). "Conversion Notice" has the meaning set forth in Section 2.5 of this Agreement. "Copyrights" means any foreign or United States copyright registrations and applications for registration thereof, and any non-registered copyrights. "Environmental Laws" means federal, state, local and foreign laws, principles of common laws, civil laws, regulations, and codes, as well as orders, decrees, judgments or injunctions, issued, promulgated, approved or entered thereunder relating to pollution, protection of the environment or public health and safety. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. "Exchangeable Shares" shall mean the Class A Non-Voting Preference Shares of Critical Path Messaging Co., an unlimited liability company existing under the laws of Nova Scotia, and a subsidiary of the Company. "Exchange Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission thereunder. "Existing Convertible Note Agreements" means the November Convertible Note Agreement and the January Convertible Note Agreement. "Financial Statements" has the meaning set forth in Section 3.10 of this Agreement. "GAAP" means United States generally accepted accounting principles in effect from time to time. "General Atlantic Entities" means General Atlantic Partners 74, L.P., a Delaware limited partnership, GAP Coinvestment Partners II, L.P., a Delaware limited partnership, GapStar, LLC, a Delaware limited liability company, and GAPCO GmbH & Co. KG, a German limited partnership. "General Atlantic Notes" means the 10% convertible secured notes issued to the General Atlantic Entities pursuant to the November Convertible Note Agreement and held by the General Atlantic Entities or their permitted transferees. 4 "Governmental Authority" means the government of any nation, state, city, locality or other political subdivision thereof, any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, and any corporation or other entity owned or controlled, through stock or capital ownership or otherwise, by any of the foregoing. "Indebtedness" means, as to any Person, (a) all obligations of such Person for borrowed money (including, without limitation, reimbursement and all other obligations with respect to surety bonds, letters of credit and bankers' acceptances, whether or not matured), (b) all obligations of such Person to pay the deferred purchase price of property or services, except trade accounts payable and accrued commercial or trade liabilities arising in the ordinary course of business, (c) all interest rate and currency swaps, caps, collars and similar agreements or hedging devices under which payments are obligated to be made by such Person, whether periodically or upon the happening of a contingency, (d) all indebtedness created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), (e) all obligations of such Person under leases which have been or should be, in accordance with GAAP, recorded as capital leases, (f) all indebtedness secured by any Lien (other than Permitted Liens) on any property or asset owned or held by that Person regardless of whether the indebtedness secured thereby shall have been assumed by that Person or is non-recourse to the credit of that Person, and (g) any Contingent Obligation of such Person. "Indemnified Party" has the meaning set forth in Section 7.1 of this Agreement. "Indemnifying Party" has the meaning set forth in Section 7.1 of this Agreement. "Initial Closing" has the meaning set forth in Section 2.4(a) of this Agreement. "Initial Closing Date" has the meaning set forth in Section 2.4(a) of this Agreement. "Intellectual Property" has the meaning set forth in Section 3.18 of this Agreement. "Intercreditor Agreement" shall mean the Intercreditor Agreement, dated the date hereof, among the General Atlantic Entities, the January 2004 Investors and the Lenders. "Internet Assets" means any Internet domain names and other computer user identifiers and any rights in and to sites on the worldwide web, including rights in and to any text, graphics, audio and video files and html or other code incorporated in such sites. 5 "Investment" means (i) the acquisition (whether for cash, property, services, assumption of Indebtedness, securities or otherwise) of assets (other than equipment, inventory, supplies or other assets acquired in the ordinary course of business of the Company), capital stock, bonds, notes, debentures, partnership, joint venture or other ownership interests or other securities of any Person, (ii) any deposit with, or advance, loan or other extension of credit to, or on behalf of, any Person (other than deposits made in connection with the purchase of equipment, inventory, services, leases, supplies or other assets in the ordinary course of business of the Company), (iii) any other capital contribution to or investment in such Person, including, without limitation, any guaranty obligation incurred for the benefit of such Person. For the sake of clarity, Investments shall include any transfer of property or assets by the Company to any of its Subsidiaries or by any Subsidiary of the Company to any other Subsidiary. "IP Agreements" has the meaning set forth in Section 3.18(a)(iii) of this Agreement. "Issuable Shares" has the meaning set forth in Section 2.1(a) of this Agreement. "January Convertible Note Agreement" has the meaning set forth in the recitals of this Agreement. "January 2004 Investors" has the meaning set forth in the recitals of this Agreement. "January 2004 Notes" means the 10% convertible secured notes issued to the January 2004 Investors pursuant to the January Convertible Note Agreement and held by the January 2004 Investors or their permitted transferees. "Knowledge" means the knowledge of the Company and Paul Bartlett, James Clark, Tracy Currie, Matthew Hobart, William E. McGlashan, Jr. and Michael J. Zukerman after due inquiry. "Lenders" means Permal U.S. Opportunities Limited, Zaxis Equity Neutral, L.P., Zaxis Institutional Partners, L.P., Zaxis Offshore Limited, Zaxis Partners, L.P., Guggenheim Portfolio Company XIII, Crosslink Crossover Fund IV, L.P., Sagamore Hill Hub Fund, Ltd., Criterion Capital Partners, Ltd., Criterion Capital Partners, Institutional, Criterion Capital Partners, L.P. and Capital Ventures International and any transferees to whom the Notes purchased by any of the foregoing are transferred after the date hereof and in accordance with the terms of such Notes. "Liabilities" has the meaning set forth in Section 3.16 of this Agreement. "Lien" means any mortgage, deed of trust, pledge, hypothecation, assignment, encumbrance, lien (statutory or other) or preference, priority, right or other security interest or preferential arrangement of any kind or nature whatsoever (excluding preferred stock and equity related preferences). 6 "Losses" has the meaning set forth in Section 7.1 of this Agreement. "Material Contractual Obligations" has the meaning set forth in Section 3.8 of this Agreement. "Material Non-Public Information" has the meaning set forth in Section 8.6 of this Agreement. "NASD Rules" has the meaning set forth in Section 3.28(b). "Nasdaq" means The Nasdaq Stock Market, Inc. "Notes" has the meaning set forth in the recitals to this Agreement. "November Convertible Note Agreement" has the meaning set forth in the recitals of this Agreement. "Orders" has the meaning set forth in Section 3.2 of this Agreement. "Patents" means any foreign or United States patents and patent applications, including any divisions, continuations, continuations-in-part, substitutions or reissues thereof, whether or not patents are issued on such applications and whether or not such applications are modified, withdrawn or resubmitted. "Permitted Investments" means (i) Investments in cash or cash equivalents, (ii) accounts receivable created, acquired or made in the ordinary course of business and payable or dischargeable in accordance with customary trade terms; (iii) Investments existing on the Initial Closing Date, and listed on Schedule 3.27 hereto, (iv) guaranty obligations permitted by Section 5.3 of the Security Agreement, (v) loans to employees, directors or officers of the Company in connection with the award of convertible bonds or capital stock under a stock incentive plan, stock option plan or other equity-based compensation plan or arrangement, (vi) 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; (vii) loans, advances and Investments in or by foreign Subsidiaries; (viii) any acquisition for which the prior written consent of the holders of a majority of the outstanding principal amount of (a) the General Atlantic Notes and (b) the January 2004 Notes has been obtained, (ix) 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 or (x) Investments by the Company in the Guarantor (as defined in the Security Agreement). "Permitted Liens" has the meaning set forth in the Note. "Person" means any individual, firm, corporation, partnership, trust, incorporated or unincorporated association, joint venture, joint stock company, limited liability company, Governmental Authority or other entity of any kind, and shall include any successor (by merger or otherwise) of such entity. 7 "Plan" means any employee benefit plan, arrangement, policy, program, agreement or commitment (whether or not an employee plan within the meaning of Section 3(3) of ERISA), including, without limitation, any employment, consulting or deferred compensation agreement, executive compensation, bonus, incentive, pension, profit-sharing, savings, retirement, stock option, stock purchase or severance pay plan, any life, health, disability or accident insurance plan, whether oral or written, whether or not subject to ERISA, as to which the Company or any Commonly Controlled Entity has or in the future could have any direct or indirect, actual or contingent liability. "Proxy Statement" has the meaning set forth in Section 8.4 of this Agreement. "Record Date" shall mean a date determined by the Board of Directors as the record date for determining the shareholders of the Company entitled to receive Series E Purchase Rights. "Requirements of Law" means, as to any Person, any law (including Environmental Laws), statute, treaty, rule, regulation, right, privilege, qualification, license or franchise or determination of an arbitrator or a court or other Governmental Authority or stock exchange, in each case applicable or binding upon such Person or any of its property or to which such Person or any of its property is subject or pertaining to any or all of the transactions contemplated or referred to herein. "Retiree Welfare Plan" means any welfare plan (as defined in Section 3(1) of ERISA) that provides benefits to current or former employees beyond their retirement or other termination of service (other than coverage mandated by Section 4980A of the Code, commonly referred to as "COBRA," the cost of which is fully paid by the current or former employee or his or her dependents). "Rights Offering" shall mean a rights offering for an aggregate amount of up to $21,000,000 of shares of Series E Preferred Stock pursuant to which the Company will distribute transferable rights to the Company's holders of Common Stock as of the Record Date. "Sarbanes-Oxley Act" has the meaning set forth in Section 3.28(a) of this Agreement. "SEC Reports" has the meaning set forth in Section 3.10 of this Agreement. "Securities" has the meaning set forth in Section 4.8 of this Agreement. "Securities Act" means the Securities Act of 1933, as amended, and the rules and regulations of the Commission thereunder. "Security Agreement" has the meaning set forth in the Notes. 8 "Series D Preferred Stock" means the Series D Redeemable Convertible Participating Preferred Stock of the Company, par value $0.001 per share. "Series E Certificate of Determination" means the Certificate of Determination of Preferences of Series E Redeemable Convertible Preferred Stock, substantially in the form attached hereto as Exhibit F, with such changes or limitations to the voting provisions thereof as may be necessary to comply with NASD Rule 4351 regarding the voting power of the Series E Preferred Stock, which certificate shall be duly filed with the Secretary of State of the State of California as soon as practicable following Stockholder Approval. "Series E Preferred Stock" has the meaning set forth in the recitals to this Agreement. "Series E Purchase Rights" means those rights to purchase Series E Preferred Stock issued in the Rights Offering. "Software" means any computer software programs, source code, object code, data and documentation, including, without limitation, any computer software programs that incorporate and run the Company's pricing models, formulae and algorithms. "Stock Equivalents" means any security or obligation which is by its terms convertible into or exchangeable or execrable for shares of common stock or other capital stock of the Company, and any option, warrant or other subscription or purchase right with respect to common stock or such other capital stock. "Stock Option Plans" means the Company's stock option plans and employee purchase plans pursuant to which shares of restricted stock and options to purchase shares of Common Stock are reserved and available for grant to officers, directors, employees and consultants of the Company. "Stockholder Approval" has the meaning set forth in Section 3.24 of this Agreement. "Subordination Agreement" has the meaning set forth in the Notes. "Subsequent Closing" has the meaning set forth in Section 2.4(e) of this Agreement. "Subsequent Closing Date" has the meaning set forth in Section 2.4(e) of this Agreement. "Subsidiaries" means, as of the relevant date of determination, with respect to any Person, a corporation or other Person of which 50% or more of the voting power of the outstanding voting equity securities or 50% or more of the outstanding economic equity interest is held, directly or indirectly, by such Person. Unless otherwise 9 qualified, or the context otherwise requires, all references to a "Subsidiary" or to "Subsidiaries" in this Agreement shall refer to a Subsidiary or Subsidiaries of the Company. "Taxes" means any federal, state, provincial, county, local, foreign and other taxes (including, without limitation, income, profits, windfall profits, alternative, minimum, accumulated earnings, personal holding company, capital stock, premium, estimated, excise, sales, use, occupancy, gross receipts, franchise, ad valorem, severance, capital levy, production, transfer, withholding, employment, unemployment compensation, payroll and property taxes, import duties and other governmental charges and assessments), whether or not measured in whole or in part by net income, and including deficiencies, interest, additions to tax or interest, and penalties with respect thereto, and including expenses associated with contesting any proposed adjustments related to any of the foregoing. "Trade Secrets" means any trade secrets, research records, processes, procedures, manufacturing formulae, technical know-how, technology, blue prints, designs, plans, inventions (whether patentable and whether reduced to practice), invention disclosures and improvements thereto. "Trademarks" means any foreign or United States trademarks, service marks, trade dress, trade names, brand names, designs and logos, corporate names, product or service identifiers, whether registered or unregistered, and all registrations and applications for registration thereof. "Transaction Documents" means, collectively, this Agreement, the Amended and Restated Registration Rights Agreement, the Notes, the Security Agreement, the Subordination Agreement, the Intercreditor Agreement, the Amendment to the Preferred Stock Rights Agreement and the Waivers. "Waivers" means the waivers and consents, dated the date hereof, executed by (i) the requisite holders of our Series D Preferred Stock, (ii) the requisite General Atlantic Entities, CK Purchasers and Vectis CP Holdings, LLC, and (iii) a majority of the outstanding principal amount of all of the January 2004 Notes, in each case to consent to and approve, to the extent necessary, the transactions and agreements contemplated by the Transaction Documents and to waive any rights they may have under that certain Stockholders Agreement dated as of November 8, 2001. "Warrant" or "Warrants," as the case may be, means those certain warrants to purchase Common issued to General Atlantic Entities pursuant to that certain Stock and Warrant Purchase and Exchange Agreement, dated as of November 8, 2001. 10 ARTICLE II PURCHASE AND SALE OF NOTES; CONVERSION; EXCHANGE 2.1 Purchase and Sale of Notes. (a) Subject to the terms and conditions of this Agreement, on the Initial Closing Date, each of the Lenders, severally and not jointly, agrees to purchase, and the Company agrees to sell and issue to each Lender, a Note, in the principal amount set opposite such Lender's name on Schedule 2.1 hereto. Each of the Notes shall be due and payable upon the terms and conditions set forth in the Notes and herein. Subject to Stockholder Approval and the terms and conditions of this Agreement, on the Subsequent Closing Date, the Notes shall convert into shares of Series E Preferred Stock in accordance with the terms thereof, and the Company shall issue to each Lender that number of shares of Series E Preferred Stock issuable upon such conversion, in exchange for the surrender to the Company by each Lender of its Notes (the "Conversion") (all of the shares of Series E Preferred Stock issuable upon conversion of the Notes referred to herein as the "Issuable Shares"). If the Conversion has not occurred on or before August 15, 2004, the Notes shall thereafter be convertible at the option of each Lender only into shares of Common Stock in accordance with the terms thereof (all the shares of Common Stock issuable directly upon conversion of the Notes referred to herein as the "Common Shares"). (b) All payments by the Company under the Notes of principal and interest shall be as set forth in the Notes. 2.2 Filings. As promptly as practicable following the Stockholder Approval and upon the terms and conditions of this Agreement, on or before the Subsequent Closing Date, the Company shall file with the Secretary of State of the State of California: (a) an amendment to the Amended and Restated Articles of Incorporation to increase the authorized common stock and preferred stock of the Company; and (b) the Series E Certificate of Determination. 2.3 Certificate of Determination. The Issuable Shares shall have the preferences and rights set forth in the Series E Certificate of Determination, with such changes or limitations to the voting provisions thereof as may be necessary to comply with NASD Rule 4351. The Common Shares shall have the preferences and rights set forth in the Articles of Incorporation. 2.4 Closings; Deliveries. (a) Initial Closing. The purchase and sale of the Notes under this Agreement (the "Initial Closing") shall be held as soon as practicable following the date of this Agreement (the "Initial Closing Date"), at the offices of Pillsbury Winthrop LLP, 50 Fremont Street, San Francisco, California, or at such other time and place as the Company and the Lenders may mutually agree. At the Initial Closing, signature pages transmitted by facsimile will be acceptable, with originals to immediately follow. 11 (b) Deliveries by the Company and the Lenders on the Date Hereof. On the date hereof, (i) the Company shall execute and deliver to each Lender and each Lender shall execute and deliver to the Company this Agreement. (c) Deliveries by the Company at the Initial Closing. At the Initial Closing, subject to the terms and conditions hereof, the Company shall execute (except for the Waivers) and deliver to each Lender: (i) the Amended and Restated Registration Rights Agreement; (ii) such other documentation required to be provided by the Company pursuant to Section 5.1; (iii) a Note, in the form attached hereto as Exhibit A, in the principal amount set forth opposite such Lender's name on Schedule 2.1; (iv) the Waivers; (v) a copy of the Amendment to Preferred Stock Rights Agreement; and (vi) the Security Agreement and the related security documents required or contemplated by the Security Agreement. (d) Deliveries by each Lender at the Initial Closing. At the Initial Closing, subject to the terms and conditions hereof, each Lender shall: (i) execute and deliver to the Company the Amended and Restated Registration Rights Agreement; and (ii) loan to the Company, in the form of a check or wire transfer, that amount set forth opposite such Lender's name on Schedule 2.1. (e) Subsequent Closing. The consummation of the Conversion (the "Subsequent Closing") shall take place concurrently with the Subsequent Closings under the Existing Convertible Note Agreements as soon as practicable following the satisfaction of the closing conditions set forth in Article VI of this Agreement and Article VI of the Existing Convertible Note Agreements (the "Subsequent Closing Date"), at the offices of Pillsbury Winthrop LLP, 50 Fremont Street, San Francisco, California, or at such other time and place as the Company, the Lenders, the General Atlantic Entities, the CK Purchasers and the January 2004 Investors may mutually agree. At the Subsequent Closing, signature pages transmitted by facsimile will be acceptable, with originals to immediately follow. (f) Deliveries by the Company at the Subsequent Closing. At the Subsequent Closing, subject to the terms and conditions hereof, the Company shall execute and deliver to: 12 (i) each Lender, a certificate or certificates in definitive form and registered in the name of each Lender, representing such Lender's Issuable Shares; and (ii) each Lender, such other documentation evidencing the satisfaction of the conditions set forth in Section 6.1. (g) Deliveries by each Lender at the Subsequent Closing. At the Subsequent Closing, subject to the terms and conditions hereof, each Lender shall execute and deliver to the Company its Notes together with duly executed note powers for such Notes. 2.5 Issuances of Common Shares. If the Conversion has not occurred on or before August 15, 2004, subject to and in accordance with the provisions of the Notes, thereafter upon surrender by a Lender of a Note to the Company, together with a notice with duly executed note powers (the "Conversion Notice"), also specifying the portion of the Note to be converted, the Company shall, or shall cause its transfer agent to issue and deliver to the address as specified in the Conversion Notice (the date of each such delivery, a "Common Shares Issuance Date"), a certificate or certificates in definitive form and in such denominations as may be requested by such Lender in the Conversion Notice, registered in the name of such Lender, for the number of Common Shares to which such Lender shall be entitled upon such conversion. If a Note has been surrendered only in part, the Company shall, at the time of delivery of the stock certificate or certificates, deliver to such Lender a new Note evidencing the remaining balance, which new Note shall in all other respects be identical to the Note surrendered. ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY The Company represents and warrants to each of the Lenders that, except as disclosed or incorporated by reference in the SEC Reports or the Disclosure Schedules: 3.1 Corporate Existence and Power. The Company and each of its Subsidiaries (a) is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation; (b) has all requisite corporate power and authority to own and operate its property, to lease the property it operates as lessee and to conduct the business in which it is currently engaged; (c) is duly qualified as a foreign corporation, licensed and in good standing under the laws of each jurisdiction in which its ownership, lease or operation of property or the conduct of its business requires such qualification, except where the failure to be so qualified could not reasonably be expected to have a material adverse effect on the Condition of the Company and (d) has the corporate power and authority to execute, deliver and perform its obligations under this Agreement and each of the other Transaction Documents. No jurisdiction, other than those referred to in clause (c) above, has claimed, in writing or otherwise, that the Company or any of its Subsidiaries is required to qualify as a foreign corporation or other 13 entity therein, and the Company or any of its Subsidiaries does not file any franchise, income or other tax returns in any other jurisdiction based upon the ownership or use of property therein or the derivation of income therefrom. 3.2 Authorization; No Contravention. The execution, delivery and performance by the Company of this Agreement and each of the other Transaction Documents and the transactions contemplated hereby and thereby (a) subject to Stockholder Approval with respect to the matters set forth in Section 3.24, have been duly authorized by all necessary corporate action of the Company; (b) subject to Stockholder Approval with respect to the matters set forth in Section 3.24, do not contravene the terms of the Articles of Incorporation or the By-laws; (c) do not violate, conflict with or result in any breach, default or contravention of (or with due notice or lapse of time or both would result in any breach, default or contravention of), or the creation of any Lien under, any Contractual Obligation of the Company or any of its Subsidiaries or any Requirement of Law applicable to the Company or any of its Subsidiaries except such violations or conflicts that would not reasonably be expected to have a material adverse effect on the Condition of the Company; and (d) do not violate any judgment, injunction, writ, award, decree or order of any nature (collectively, "Orders") of any Governmental Authority against, or binding upon, the Company or any of its Subsidiaries. 3.3 Governmental Authorization; Third Party Consents. Except for the Stockholder Approval and as set forth in Schedule 3.3, no approval, consent, compliance, exemption, authorization or other action by, or notice to, or filing with, any Governmental Authority or any other Person, and no lapse of a waiting period under a Requirement of Law, is necessary or required in connection with the execution, delivery or performance (including, without limitation, the sale, issuance and delivery of the Issuable Shares or the Common Shares) by, or enforcement against, the Company of this Agreement and the other Transaction Documents or the transactions contemplated hereby and thereby, other than (a) the notification to The NASDAQ National Market for the listing of the shares of Common Stock issuable upon conversion of the Series E Preferred Stock or the Notes, as the case may be, and applicable blue-sky filings, (b) such as have already been obtained or such exemptive filings as may be required under applicable securities laws, and (c) such other filings as may be required following the Initial Closing Date or the Subsequent Closing Date under the Securities Act, the Exchange Act and corporate law. 3.4 Binding Effect. This Agreement and each of the other Transaction Documents to which the Company is a party have been duly executed and delivered by the Company, and this Agreement and each of the other Transaction Documents to which the Company is a party constitute the legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, fraudulent conveyance or transfer, moratorium or similar laws affecting the enforcement of creditors' rights generally and by general principles of equity relating to enforceability (regardless of whether considered in a proceeding at law or in equity). 14 3.5 Litigation. Except as set forth on Schedule 3.5, there are no actions, suits, proceedings, claims, complaints, disputes, arbitrations or investigations (collectively, "Claims") pending or, to the Knowledge of the Company, threatened, at law, in equity, in arbitration or before any Governmental Authority against the Company or any of its Subsidiaries that seeks in excess of $50,000 in damages nor is the Company aware that there is any basis for any of the foregoing. The foregoing includes, without limitation, Claims pending or, to the Knowledge of the Company, threatened or any basis therefor known by the Company involving the prior employment of any employee of the Company or any of its Subsidiaries, their use in connection with the business of the Company or any of its Subsidiaries of any information or techniques allegedly proprietary to any of their former employers or their obligations under any agreements with prior employers. No Order has been issued by any court or other Governmental Authority against the Company or any of its Subsidiaries purporting to enjoin or restrain the execution, delivery or performance of this Agreement or any of the other Transaction Documents. 3.6 Compliance with Laws. The Company and each of its Subsidiaries is in compliance in all material respects with all Requirements of Law and all Orders issued by any court or Governmental Authority against the Company in all respects. To the Company's Knowledge, there are no Requirements of Law which could reasonably be expected to prohibit or restrict the Company or any of its Subsidiaries from, or otherwise materially adversely effect the Company or any of its Subsidiaries in, conducting its business in any jurisdiction in which it now conducts its business. 3.7 Capitalization. (a) (i) As of the Initial Closing, the authorized capital stock of the Company consists of (A) 125,000,000 shares of Common Stock, of which 21,171,399 shares are issued and outstanding, (B) one share of Special Voting Stock, par value $0.001 per share, of the Company, which is issued and outstanding, (C) 75,000 shares of Series C Preferred Stock, par value $0.001 per share, of the Company, of which no shares are issued and outstanding, (D) 4,188,587 shares of Series D Preferred Stock, all of which are issued and outstanding, and (E) 736,412 shares of undesignated "blank check" preferred stock. As of the date of this Agreement, the aggregate number of shares of restricted stock and options to purchase shares of Common Stock which may be issued under the Stock Option Plans are 19,079,109, of which 12,449,551 have been granted. The Company has reserved an adequate number of shares of Common Stock for issuance upon conversion of the Issuable Shares. In addition, as of the Initial Closing, there were 110,209 Exchangeable Shares issued and outstanding, each of which is convertible into one share of Common Stock. (ii) As of the Subsequent Closing Date, the authorized capital stock of the Company shall consist of (A) 200,000,000 shares of Common Stock, (B) one share of Special Voting Stock, par value $0.001 per share, of the Company (C) 75,000 shares of Series C Preferred Stock, par value $0.001 per share, of the Company, (D) 4,188,587 shares of Series D Preferred Stock, (E) a 15 sufficient number of shares of Series E Preferred Stock to issue the Issuable Shares, convert 69,149 shares of Series D Preferred Stock into 733,333 shares of Series E Preferred Stock held by MBCP Peerlogic LLC and its affiliates issued in connection with the settlement of certain claims and to consummate the transactions contemplated by the Existing Convertible Note Agreements and the Rights Offering, and (F) a number of shares of undesignated "blank check" preferred stock agreed upon by the Company, the Lenders, the General Atlantic Entities and the CK Purchasers. (iii) Except as set forth on Schedule 3.7(a) and except for the Warrants, there are no options, warrants, conversion privileges, subscription or purchase rights or other rights presently outstanding to purchase or otherwise acquire (A) any authorized but unissued, unauthorized or treasury shares of the Company's capital stock, (B) any Stock Equivalents or (C) any other securities of the Company and there are no commitments, contracts, agreements, arrangements or understandings to which the Company is a party to issue any shares of the Company's capital stock or any Stock Equivalents or other securities of the Company. (b) Upon the Initial Closing Date, the Notes shall be duly authorized, and assuming the accuracy of the representations and warranties of the Lenders set forth in Article IV of this Agreement, will be issued in compliance with the registration and qualification requirements of all applicable federal, state and foreign securities laws and will be free and clear of all other Liens. (c) Upon the Subsequent Closing Date, the Issuable Shares shall be duly authorized, and when issued and delivered to the Lenders and upon the consummation of the Conversion on the Subsequent Closing Date, will be validly issued, fully paid and non-assessable, and assuming the accuracy of the representations and warranties of the Lenders set forth in Article IV of this Agreement, will be issued in compliance with the registration and qualification requirements of all applicable federal, state and foreign securities laws and will be free and clear of all other Liens. Upon the Subsequent Closing Date, the shares of Common Stock issuable upon conversion of the Issuable Shares shall have been duly reserved for issuance and will be validly issued, fully paid and non-assessable and not subject to any preemptive rights or similar rights that have not been satisfied, will be issued in compliance with the registration and qualification requirements of all applicable federal and state securities laws and will be free and clear of all other Liens. None of the issued and outstanding shares of Common Stock were issued in violation of any preemptive rights. (d) Upon each Common Shares Issuance Date, the Common Shares then issuable shall be duly authorized, and when issued and delivered to the Lenders in accordance with the terms and conditions of the Notes, will be validly issued, fully paid and non-assessable, and assuming the accuracy of the representations and warranties of the Lenders set forth in Article IV of this Agreement, will be issued in compliance with the registration and qualification requirements of all applicable federal, state and foreign securities laws and will be free and clear of all other Liens. 16 3.8 No Default or Breach; Contractual Obligations. All of the Contractual Obligations to which the Company or any of its Subsidiaries is a party, whether written or oral, which are required by the Exchange Act to be disclosed in the SEC Reports (collectively, "Material Contractual Obligations") are valid, subsisting, in full force and effect and binding upon the Company or its Subsidiary, as the case may be, and the other parties thereto, and the Company or its Subsidiary, as the case may be, has paid in full or accrued all amounts due thereunder and has satisfied in full or provided for all of its liabilities and obligations thereunder, except for such amounts as are being contested by the Company in good faith. Neither the Company nor any of its Subsidiaries has received notice of a default and is not in default under, or with respect to, any Material Contractual Obligation nor, to the Knowledge of the Company, does any condition exist that with notice or lapse of time or both would constitute a default thereunder. To the Knowledge of the Company, no other party to any such Contractual Obligation is in default thereunder, nor does any condition exist that with notice or lapse of time or both would constitute a default by such other party thereunder. 3.9 Title to Properties. The Company and each of its Subsidiaries has good, record and marketable title in fee simple to, or holds interests as lessee under leases in full force and effect in, all real property used in connection with its business or otherwise owned or leased by it. The Company and each of its Subsidiaries owns and has good, valid and marketable title to all of its properties and assets used in its business or reflected as owned on the Financial Statements, in each case free and clear of all Liens, except for Permitted Liens, or that would required to be described in the notes to the Financial Statements. 3.10 Reports; Financial Statements. (a) As of the respective dates of their filing with the Commission, all reports, registration statements and other filings, together with any amendments thereto, filed by the Company with the Commission since June 30, 2000 (the "SEC Reports"), complied in all material respects with the applicable requirements of the Securities Act, the Exchange Act, and the rules and regulations of the Commission promulgated thereunder, except as disclosed in the SEC Reports. The SEC Reports did not at the time they were filed with the Commission, or will not at the time they are filed with the Commission, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they are made, not misleading. The Company has delivered or made available to the Lenders true and complete copies of, or will make available at each Lender's request the SEC Reports and any exhibits thereto. Except as set forth in Schedule 3.10(a), the Company is not aware of any issues raised by the Commission with respect to any of the SEC Reports, other than those disclosed in the SEC Reports. (b) The consolidated financial statements (including, in each case, any related schedules or notes thereto) contained in or incorporated by reference in the SEC Reports and any such reports, registration statements and other filings to be filed by the Company with the Commission prior to the Initial Closing Date or the Subsequent 17 Closing Date, as the case may be (the "Financial Statements"), (i) have been or will be prepared in accordance with the published rules and regulations of the Commission and GAAP consistently applied during the periods involved (except as may be indicated in the notes thereto) and (ii) fairly present or will fairly present in all material respects the consolidated financial position of the Company and its Subsidiaries as of the respective dates thereof and the consolidated results of operations, statements of stockholders' equity and cash flows for the periods indicated, except that any unaudited interim financial statements were or will be subject to normal and recurring year-end adjustments and may omit footnote disclosure as permitted by regulations of the Commission. 3.11 Taxes. (a) The Company and each of its Subsidiaries has paid all Taxes which have come due and are required to be paid by it through the date hereof, and all deficiencies or other additions to Tax, interest and penalties owed by it in connection with any such Taxes, other than Taxes being disputed by the Company in good faith for which adequate reserves have been made in accordance with GAAP; (b) the Company and each of its Subsidiaries has timely filed or caused to be filed all returns for Taxes that it is required to file on and through the date hereof (including all applicable extensions), and all such Tax returns are accurate and complete in all material respects; (c) with respect to all Tax returns of the Company and each of its Subsidiaries, (i) there is no unassessed Tax deficiency proposed or, to the Knowledge of the Company, threatened against the Company or any of its Subsidiaries and (ii) no audit is in progress with respect to any return for Taxes, no extension of time is in force with respect to any date on which any return for Taxes was or is to be filed and no waiver or agreement is in force for the extension of time for the assessment or payment of any Tax; (d) all provisions for Tax liabilities of the Company and each of its Subsidiaries have been disclosed in the Financial Statements and made in accordance with GAAP consistently applied, and all liabilities for Taxes of the Company and each of its Subsidiaries attributable to periods prior to or ending on the Initial Closing Date or the Subsequent Closing Date, as the case may be, have been adequately disclosed in the Financial Statements; and (e) there are no Liens for Taxes on the assets of the Company or any of its Subsidiaries, other than Permitted Liens. 3.12 No Material Adverse Change; Ordinary Course of Business. Except as set forth on Schedule 3.12, since December 31, 2002, (a) there has not been any material adverse change in the Condition of the Company, (b) neither the Company nor any of its Subsidiaries has participated in any transaction material to the Condition of the Company, including, without limitation, declaring or paying any dividend or declaring or making any distribution to its stockholders except out of the earnings of the Company or its Subsidiary, as the case may be, (c) neither the Company nor any of its subsidiaries has entered into any Material Contractual Obligation, other than in the ordinary course of business and (d) there has not occurred a material change in the accounting principles or practice of the Company or any of its Subsidiaries except as required by reason of a change in GAAP. 3.13 Private Offering. Neither the Company nor any authorized Person acting on its behalf has, in connection with the offer, sale, exchange or issuance of the Notes, the Issuable Shares or the Common Shares, engaged in (a) any form of general 18 solicitation or general advertising (as those terms are used within the meaning of Rule 502(c) under the Securities Act), (b) any action involving a public offering within the meaning of Section 4(2) of the Securities Act, or (c) any action that would require the registration under the Securities Act of the offering, sale, exchange or issuance of the Notes and the Issuable Shares pursuant to this Agreement or that would violate applicable state securities or "blue sky" laws. As used herein, the terms "offer" and "sale" have the meanings specified in Section 2(3) of the Securities Act. 3.14 Labor Relations. Except as could not reasonably be expected to have a material adverse effect on the Condition of the Company: (a) neither the Company nor any of its Subsidiaries is engaged in any unfair labor practice; (b) there is no strike, labor dispute, slowdown or stoppage pending or, to the Knowledge of the Company, threatened against the Company or any of its Subsidiaries; (c) neither the Company nor any of its Subsidiaries is a party to any collective bargaining agreement or contract; and (d) no union organizing activities are taking place. To the Knowledge of the Company, no officer or key employee, or any group of key employees, intends to terminate their employment with the Company or any of its Subsidiaries. To the Knowledge of the Company, each of the officers and key employees of the Company and each of its Subsidiaries spends all, or substantially all, of his business time on the business of the Company or its Subsidiary, as the case may be. To the Knowledge of the Company, none of the employees of the Company or any of its Subsidiaries is resident in the United States in violation of any Requirement of Law. 3.15 Employee Benefit Plans. (a) The SEC Reports list or describe each Plan that the Company or any of its Subsidiaries maintains or to which the Company or any of its Subsidiaries contributes (the "Company Plans"). Neither the Company nor any of its Subsidiaries has any liability under any Plans other than the Company Plans. Except as described in or incorporated by reference in the SEC Reports, neither the Company nor any Commonly Controlled Entity maintains or contributes to, or has within the preceding six years maintained or contributed to, or may have any liability with respect to any Plan subject to Title IV of ERISA or Section 412 of the Code or any "multiple employer plan" within the meaning of the Code or ERISA. Each Company Plan (and related trust, insurance contract or fund) has been established and administered in accordance with its terms, and complies in form and in operation with the applicable requirements of ERISA and the Code and other applicable Requirements of Law. All contributions (including all employer contributions and employee salary reduction contributions) which are due have been paid to each Company Plan. (b) No Claim with respect to the administration or the investment of the assets of any Company Plan (other than routine claims for benefits) is pending. (c) Except as could not reasonably be expected to have a material adverse effect on the Condition of the Company, each Company Plan that is intended to be qualified under Section 401(a) of the Code is so qualified and has been so qualified 19 during the period since its adoption; each trust created under any such Plan is exempt from tax under Section 501(a) of the Code and has been so exempt since its creation. (d) No Company Plan is a Retiree Welfare Plan. (e) Neither the consummation of the transactions contemplated by this Agreement nor any termination of employment following such transactions will accelerate the time of the payment or vesting of, or increase the amount of, compensation due to any employee or former employee whether or not such payment would constitute an "excess parachute payment" under Section 280G of the Code. (f) There are no unfunded obligations under any Company Plan which are not fully reflected in the Financial Statements. (g) Except as could not reasonably be expected to have a material adverse effect on the Condition of the Company, the Company has no liability, whether absolute or contingent, including any obligations under any Company Plan, with respect to any misclassification of any person as an independent contractor rather than as an employee. 3.16 Liabilities. Neither the Company nor any of its Subsidiaries has any direct or indirect obligation or liability (the "Liabilities") which are not fully reflected or reserved against in the Financial Statements, other than Liabilities not exceeding $1,000,000 in the aggregate incurred since December 31, 2003 in the ordinary course of business. The Company has no Knowledge of any circumstance, condition, event or arrangement that could reasonably be expected to give rise hereafter to any Liabilities of the Company or any of its Subsidiaries that, individually or in the aggregate, could have a material adverse effect on the Condition of the Company. 3.17 Affiliate Transactions. Except as set forth on Schedule 3.17, in the twelve (12) months preceding the date hereof, neither the Company nor any of its Subsidiaries has sold, leased or otherwise transferred any property or assets to, or purchased, leased or otherwise acquired any property or assets from, or otherwise engaged in any other transactions with, any of its Affiliates, except in (a) transactions that are at prices and on terms and conditions not less favorable to the Company or such Subsidiary than could be obtained on an arm's length basis from unrelated third parties, (b) transactions exclusively between the Company and one or more if its Subsidiaries, or between two or more Subsidiaries of the Company, and which do not involve any other Affiliate and (c) transactions under the agreements listed on Schedule 3.17 hereto. 20 3.18 Intellectual Property. (a) (i) The Company and each of its Subsidiaries is the owner of all, or has the license or right to use, sell and license all of, the Copyrights, Patents, Trade Secrets, Trademarks, Internet Assets, Software and other proprietary rights (collectively, "Intellectual Property") that are used in connection with its business as presently conducted, free and clear of all Liens, other than Permitted Liens. (ii) None of the Intellectual Property is subject to any outstanding Order, and no action, suit, proceeding, hearing, investigation, charge, complaint, claim or demand is pending or, to the Knowledge of the Company, threatened, which challenges the validity, enforceability, use or ownership of the item. (iii) The Company and each of its Subsidiaries has substantially performed all obligations imposed upon it under all Intellectual Property licenses, sublicenses, distributor agreements and other agreements under which the Company or any of its Subsidiaries is either a licensor, licensee or distributor, except such licenses, sublicenses and other agreements relating to off-the-shelf software which is commercially available on a retail basis and used solely on the computers of the Company or its Subsidiaries (collectively, the "IP Agreements"). The Company and each of its Subsidiaries is not, nor to the Knowledge of the Company is any other party thereto, in breach of or default thereunder in any respect, nor is there any event which with notice or lapse of time or both would constitute a default thereunder. All of the IP Agreements are valid, enforceable and in full force and effect, and will continue to be so on identical terms immediately following the Initial Closing and the Subsequent Closing, as the case may be, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, fraudulent conveyance or transfer, moratorium or similar laws affecting the enforcement of creditors' rights generally and by general principles of equity relating to enforceability (regardless of whether considered in a proceeding at law or in equity). (iv) None of the Intellectual Property currently sold or licensed by the Company or any of its Subsidiaries to any Person or used by or licensed to the Company or any of its Subsidiaries by any Person infringes upon or otherwise violates any Intellectual Property rights of others, except as could not reasonably be expected to have a material adverse effect on the Condition of the Company. (b) No litigation is pending and no Claim has been made against the Company or any of its Subsidiaries or, to the Knowledge of the Company, is threatened, contesting the right of the Company or any of its Subsidiaries to sell or license to any Person or use the Intellectual Property presently sold or licensed to such Person or used by the Company or any of its Subsidiaries. To the Knowledge of the Company, no Person is infringing upon or otherwise violating the Intellectual Property rights of the Company or any of its Subsidiaries. 21 (c) No former employer of any employee of the Company or any of its Subsidiaries has made a claim against the Company or any of its Subsidiaries or, to the Knowledge of the Company, against any other Person, that such employee or such consultant is utilizing Intellectual Property of such former employer. (d) To the Knowledge of the Company, none of the Trade Secrets, wherever located, the value of which is contingent upon maintenance of confidentiality thereof, has been disclosed to any Person other than employees, representatives and agents of the Company or any of its Subsidiaries, except as required pursuant to the filing of a patent application by the Company or any of its Subsidiaries. (e) It is not necessary for the business of the Company or any of its Subsidiaries to use any Intellectual Property owned by any director, officer, employee or consultant of the Company or any of its Subsidiaries (or persons the Company or any of its Subsidiaries presently intends to hire). To the Company's Knowledge, at no time during the conception or reduction to practice of any of the Intellectual Property of the Company or any of its Subsidiaries was any developer, inventor or other contributor to such Intellectual Property operating under any grants from any Governmental Authority or subject to any employment agreement, invention assignment, nondisclosure agreement or other Contractual Obligation with any Person that could materially adversely affect the rights of the Company or any of its Subsidiaries to its Intellectual Property. 3.19 Privacy of Customer Information. Neither the Company nor any of its Subsidiaries use any of the customer information it receives through its website or otherwise in an unlawful manner, or in a manner violative of the privacy policy of the Company or its Subsidiary, as the case may be, or the privacy rights of its customers. Neither the Company nor any of its Subsidiaries has collected any customer information through its website in an unlawful manner or in violation of its privacy policy. The Company and each of its Subsidiaries has adequate security measures in place to protect the customer information it receives through its website and which it stores in its computer systems from illegal use by third parties or use by third parties in a manner violative of the rights of privacy of its customers. The Company and each of its Subsidiaries represents to its customers that it assures complete security as to the customer information it receives through its website. 3.20 Potential Conflicts of Interest. Except as set forth on Schedule 3.20, no officer, director or stockholder beneficially owning more than five percent (5%) of the outstanding shares of Common Stock, to the Knowledge of the Company, no spouse of any such officer, director or stockholder, and, to the Knowledge of the Company, no Affiliate of any of the foregoing (a) owns, directly or indirectly, any interest in (excepting less than one percent (1%) stock holdings for investment purposes in securities of publicly held and traded companies), or is an officer, director, employee or consultant of, any Person which is, or is engaged in business as, a competitor, lessor, lessee, supplier, distributor, or customer of, or lender to or borrower from, the Company or any of its Subsidiaries; (b) owns, directly or indirectly, in whole or in part, any tangible or intangible property that the Company or any of its Subsidiaries use, in the conduct of business; or (c) has any cause of action or other claim whatsoever against, or 22 owes or has advanced any amount to, the Company or any of its Subsidiaries, except for claims in the ordinary course of business such as for accrued vacation pay, accrued benefits under employee benefit plans, and similar matters and agreements existing on the date hereof. 3.21 Trade Relations. There exists no actual or, to the Knowledge of the Company, threatened termination, cancellation or limitation of, or any material adverse modification or change in, the business relationship of the Company or any of its Subsidiaries, or the business of the Company or any of its Subsidiaries, with any customer or supplier or any group of customers or suppliers whose purchases or inventories provided to the business of the Company or any of its Subsidiaries are individually or in the aggregate material to the Condition of the Company. 3.22 Outstanding Borrowing. Schedule 3.22 sets forth the amount of all Indebtedness of the Company and each of its Subsidiaries as of the date hereof, the Liens that relate to such Indebtedness and that encumber the Assets and the name of each lender thereof. No Indebtedness is entitled to any voting rights in any matters voted upon by the holders of the Common Stock. 3.23 Broker's, Finder's or Similar Fees. There are no brokerage commissions, finder's fees or similar fees or commissions payable by the Company or any of its Subsidiaries in connection with the transactions contemplated hereby based on any agreement, arrangement or understanding with the Company or any of its Subsidiaries or any action taken by any such Person. 3.24 Stockholder Approval. The approval on the first attempt of (a) more than fifty percent (50%) of the outstanding shares of Common Stock and the votes represented by the Special Voting Stock, voting together as a class, and (b) more than fifty percent (50%) of the outstanding shares of Series D Preferred Stock, voting separately as a class, such stockholders present in person or proxy at a properly convened meeting of the Company's stockholders ("Stockholder Approval") are the stockholders' consents required for the (i) filing of (A) the Amended and Restated Series D Certification of Determination and (B) the Series E Certificate of Determination; (ii) the authorization and the issuance of shares of Series E Preferred Stock authorized for issuance in the Series E Certificate of Determination; (iii) the reservation and issuance of shares of Common Stock upon conversion of the shares of Series D Preferred Stock and the shares of Series E Preferred Stock and upon exercise of the Warrants; (iv) an amendment to the Amended and Restated Articles of Incorporation to increase the authorized shares of common stock and preferred stock, and (v) the Warrant Amendment (as defined in the November Convertible Note Agreement). 3.25 CCC Section. The Board of Directors has taken all action necessary to exempt from the provisions of Section 1203 of the California Corporations Code, to the extent applicable, this Agreement, any acquisition by the Lenders of Notes and the Issuable Shares or Common Shares pursuant to this Agreement and the Series E Certificate of Determination, each as applicable, and any conversion by the Lenders of Issuable Shares into shares of Common Stock. 23 3.26 Disclosure. This Agreement and the documents and certificates furnished to the Lenders by the Company do not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements contained herein or therein, in the light of the circumstances under which they were made, not misleading. 3.27 Investments. As of the date hereof, except as set forth on Schedule 3.27 hereto, neither the Company nor any of its Subsidiaries has made an Investment in any Person, other than a Permitted Investment. 3.28 Sarbanes-Oxley Compliance. (a) The financial statements of the Company, together with the related schedules and notes, that are incorporated by reference in the Registration Statement and the Prospectus filed with the Commission on December 24, 2003, as amended: (i) present fairly, in all material respects, the financial position of the Company as of the dates indicated and the results of operations and cash flows of the Company for the periods specified; (ii) have been prepared in compliance with requirements of the Exchange Act and in conformity with generally accepted accounting principles in the United States applied on a consistent basis during the periods presented and the schedules included in the Registration Statement present fairly, in all material respects, the information required to be stated therein; and (iii) comply with the antifraud provisions of the Federal securities laws. There are no financial statements (historical or pro forma) that are required to be included in the Registration Statement and the Prospectus that are not included as required by the Securities Act. All non-GAAP financial measures included or incorporated by reference in the Registration Statement or the Prospectus comply in all material respects with the applicable requirements of the Sarbanes-Oxley Act of 2002 (the "Sarbanes-Oxley Act") and the rules and regulations promulgated by the Commission thereunder. (b) The Company's Board of Directors has validly appointed an Audit Committee whose composition satisfies the requirements of Rule 4350A(d)(2) of the Rules of the National Association of Securities Dealers, Inc. (the "NASD Rules") and the Board of Directors and/or the Audit Committee has adopted a charter that satisfies the requirements of Rule 4350A(d)(1) of the NASD Rules. (c) The Company has established and maintains disclosure controls and procedures (as such term is defined in Rule 13a-15 and 15d-15 under the Exchange Act). Such disclosure controls and procedures are designed to ensure that material information relating to the Company is made known to the Company's principal executive officer and principal financial officer by others within the Company. As of the end of the Company's last completed fiscal quarter, such disclosure controls and procedures were effective to perform the functions for which they were established, and the Company will use commercially reasonable efforts to ensure that the Company's disclosure controls and procedures remain effective to perform the functions for which they were established. The Company's auditors and the Audit Committee of the Board of Directors have been advised of: (i) any significant deficiencies and material weaknesses 24 in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the Company's ability to record, process, summarize, and report financial information; and (ii) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company's internal controls over financial reporting. Since the date of the most recent evaluation of such disclosure controls and procedures, there have been no changes in internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting. The principal executive officer and the principal financial officers of the Company have made all certifications required by the Sarbanes-Oxley Act and any related rules and regulations promulgated by the Commission thereunder, and the statements contained in any such certification are complete and correct. The Company is in compliance in all material respects with all provisions of the Sarbanes-Oxley Act that are effective and applicable to the Company, except for the requirements of the Sarbanes-Oxley Act which are not yet required to be complied with by the Company. The Company has established procedures to implement timely additional rules and regulations applicable to the Company that may be promulgated by the Commission pursuant to the Sarbanes-Oxley Act. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE LENDERS Each of the Lenders hereby represents and warrants, severally and not jointly, to the Company as follows: 4.1 Existence and Power. Such Lender (a) is a limited partnership, corporation, partnership or limited liability company duly organized and validly existing under the laws of the jurisdiction of its formation and (b) has the requisite partnership, corporate or limited liability company, as the case may be, power and authority to execute, deliver and perform its obligations under this Agreement and each of the other Transaction Documents to which it is a party. 4.2 Authorization; No Contravention. The execution, delivery and performance by such Lender of this Agreement and each of the other Transaction Documents to which it is a party and the transactions contemplated hereby and thereby, (a) have been duly authorized by all necessary partnership, corporate or limited liability company, as the case may be, action, (b) do not contravene the terms of such Lender's organizational documents, or any amendment thereof, (c) do not violate, conflict with or result in any breach or contravention of, or the creation of any Lien under, any Contractual Obligation of such Lender or any Requirement of Law applicable to such Lender, and (d) do not violate any Orders of any Governmental Authority against, or binding upon, such Lender. 4.3 Governmental Authorization; Third Party Consents. Except for the Stockholder Approval, no approval, consent, compliance, exemption, authorization or other action by, or notice to, or filing with, any Governmental Authority or any other Person, and no lapse of a waiting period under any Requirement of Law, is necessary or 25 required in connection with the execution, delivery or performance by, or enforcement against, such Lender of this Agreement and each of the other Transaction Documents to which it is a party or the transactions contemplated hereby and thereby. 4.4 Binding Effect. This Agreement and each of the other Transaction Documents to which such Lender is a party, have been duly executed and delivered by such Lender, and this Agreement and each of the other Transaction Documents to which such Lender is a party, constitute the legal, valid and binding obligations of such Lender, enforceable against it in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, fraudulent conveyance or transfer, moratorium or similar laws affecting the enforcement of creditors' rights generally or by equitable principles relating to enforceability (regardless of whether considered in a proceeding at law or in equity). 4.5 Purchase for Own Account. The Notes and the Issuable Shares or Common Shares to be acquired by such Lender, respectively, are being or will be acquired for its own account and with no intention of distributing or reselling such Notes, Issuable Shares or Common Shares or any part thereof in any transaction that would be in violation of the securities laws of the United States of America, any state of the United States or any foreign jurisdiction, without prejudice, however, to the rights of such Lender at all times to sell or otherwise dispose of all or any part of such Notes, Issuable Shares or Common Shares under an effective registration statement under the Securities Act, or under an exemption from such registration available under the Securities Act, and subject, nevertheless, to the disposition of such Lender's property being at all times within its control. If such Lender should in the future decide to dispose of any of such Notes, Issuable Shares or Common Shares, such Lender understands and agrees that it may do so only in compliance with the Securities Act and applicable state and foreign securities laws, as then in effect. Such Lender agrees to the imprinting for so long as required by law, of a legend on certificates representing all of its Notes, Issuable Shares or Common Shares and shares of Common Stock issuable upon conversion of its Issuable Shares to the following effect: THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY FOREIGN JURISDICTION. THE SECURITIES MAY NOT BE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE AND FOREIGN SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS. 26 4.6 Restricted Securities. Such Lender understands that the Notes, the Issuable Shares and the Common Shares will not be registered at the time of their issuance under the Securities Act for the reason that the sale provided for in this Agreement is exempt pursuant to Section 4(2) of the Securities Act and that the reliance of the Company on such exemption is predicated in part on such Lender's representations set forth herein. 4.7 Accredited Investor. Such Lender is an "Accredited Investor" within the meaning of Rule 501 of Regulation D under the Securities Act, as presently in effect. 4.8 Experience. Such Lender, either alone or together with its representatives, has such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment in its Notes, Issuable Shares or Common Shares (the "Securities"), and has so evaluated the merits and risks of such investment. Such Lender is able to bear the economic risk of an investment in the Securities and, at the present time, is able to afford a complete loss of such investment. 4.9 Access to Information. Such Lender has reviewed the SEC Reports and has been afforded: (a) the opportunity to ask such questions as it has deemed necessary of, and to receive answers from, representatives of the Company concerning the terms and conditions of the offering of the Securities and the merits and risks of investing in the Securities; (b) access to publicly available information about the Company and the Subsidiaries and the Condition of the Company sufficient to enable it to evaluate its investment; and (c) the opportunity to obtain such additional publicly available information that the Company possesses or can acquire without unreasonable effort or expense that is necessary to make an informed investment decision with respect to the investment. Neither such inquiries nor any other investigation conducted by or on behalf of such Lender or its representatives or counsel shall modify, amend or affect such Lender's right to rely on the truth, accuracy and completeness of the SEC Reports and the Company's representations and warranties contained in the Transaction Documents. 4.10 General Solicitation. Such Lender is not purchasing the Securities as a result of any advertisement, article, notice or other communication regarding the Securities published in any newspaper, magazine or similar media or broadcast over television or radio or presented at any seminar or any other general solicitation or general advertisement. 4.11 Reliance. Such Lender understands and acknowledges that: (a) the Securities are being offered and sold to it without registration under the Securities Act in a private placement that is exempt from the registration provisions of the Securities Act and (b) the availability of such exemption depends in part on, and the Company will rely upon the accuracy and truthfulness of, the foregoing representations and such Lender hereby consents to such reliance. 27 4.12 Qualified Institutional Buyer. Such Lender is a "qualified institutional buyer" as defined in Rule 144A(a)(1) of the Securities Act, as presently in effect. 4.13 Affiliate Status. Such Lender is not an Affiliate of any director, officer or substantial shareholder of the Company for purposes of Rule 4350(i)(1)(A) of the NASD, Inc. Marketplace Rules. In addition, except as disclosed on Schedule 4.14, each Lender represents that it is not an Affiliate of the other Lenders or the January 2004 Investors and that Lenders have not entered into an agreement, arrangement or understanding with each other or any other holder of the Company's securities for the purpose of holding, acquiring, voting or disposing of any securities of the Company. Except as disclosed on Schedule 4.14, the obligations of each Lender under any Transaction Document are several and not joint with the obligations of any other Lender, and no Lender shall be responsible in any way for the performance of the obligations of any other Lender under any Transaction Document. Except as disclosed on Schedule 4.14, the decision of each Lender to purchase Securities pursuant to this Agreement has been made by such Lender independently of any other Lender and independently of any information, materials, statements or opinions as to the business, affairs, operations, assets, properties, liabilities, results of operations, condition (financial or otherwise) or prospects of the Company or of any Subsidiary which may have been made or given by any other Lender or by any agent or employee of any other Lender, and no Lender or any of its agents or employees shall have any liability to any other Lender (or any other person) relating to or arising from any such information, materials, statements or opinions. Except as disclosed on Schedule 4.14, nothing contained herein or in any Transaction Document, and no action taken by any Lender pursuant thereto, shall be deemed to constitute the Lenders as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Lenders are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by the Transaction Document. Except as disclosed on Schedule 4.14, each Lender acknowledges that no other Lender has acted as agent for such Lender in connection with making its investment hereunder and that no other Lender will be acting as agent of such Lender in connection with monitoring its investment hereunder. Except as disclosed on Schedule 4.14, each Lender shall be entitled to independently protect and enforce its rights, including without limitation the rights arising out of this Agreement or out of the other Transaction Documents, and it shall not be necessary for any other Lender to be joined as an additional party in any proceeding for such purpose. The Lenders acknowledge that the Company has elected to provide all Lenders with the same terms and Transaction Documents for the convenience of the Company and not because it was required or requested to do so by the Lenders. 4.14 Capital Stock Ownership. Schedule 4.14 sets forth a complete list of the capital stock, Common Stock Equivalents or other securities of the Company (and any options, warrants, conversion privileges, subscription purchase rights or other rights presently outstanding to purchase or otherwise acquire any of the foregoing) beneficially owned (as defined in Rule 13d-3 under the Exchange Act) by each Lender and its respective Affiliates as of the date hereof. 28 ARTICLE V CONDITIONS TO INITIAL CLOSING 5.1 Conditions to Lenders' Obligations. Each of the Lenders' obligation to consummate the transactions contemplated by the Initial Closing pursuant to this Agreement is subject to the fulfillment at or prior to the Initial Closing of the following conditions, any of which may be waived in whole or in part by such Lender: (a) Representations and Warranties. The representations and warranties made by the Company in Article III hereof shall be true and correct on the Initial Closing Date. (b) Performance. All covenants, agreements and conditions contained in this Agreement to be performed by the Company on or prior to the Initial Closing Date shall have been performed or complied with. (c) Compliance Certificate. The Company shall have delivered to the Lenders a certificate of the Company, executed by the Chief Executive Officer of the Company and dated as of the Initial Closing Date, certifying to the fulfillment of the conditions specified in Section 5.1(a) and Section 5.1(b) hereof. (d) Secretary's Certificate. The Company shall have delivered to the Lenders a certificate from the Company, in form and substance satisfactory to the Lenders, dated as of the Initial Closing Date and signed by the Secretary or an Assistant Secretary of the Company, certifying (i) that the Company is in good standing with the Secretary of State of the State of California and (ii) that the attached copies of the Articles of Incorporation, the By-laws, and resolutions of the Board of Directors of the Company approving this Agreement and each of the applicable Transaction Documents and the transactions contemplated hereby and thereby, are all true, complete and correct and remain unamended and in full force and effect. (e) Satisfactory Release of Liens. The Company shall have delivered to the Lenders satisfactory evidence of the release of all Liens, except for Permitted Liens, on the assets of the Company and its Subsidiaries in order to ensure the Lender's first priority security interests upon the filing of applicable UCC-1's. (f) Opinion of Counsel. The Company shall have caused the opinion of Pillsbury Winthrop LLP, dated the Initial Closing Date, relating to the transactions contemplated by the Initial Closing, substantially in the form attached hereto as Exhibit G to be delivered to the Lenders. (g) SVB Consent. The Company shall have delivered to the Lenders the written consent of Silicon Valley Bank to the execution, delivery and performance of the Transaction Documents and all of the transactions contemplated therein. 5.2 Conditions to Company's Obligations. The Company's obligation to consummate the transactions contemplated by the Initial Closing pursuant to this 29 Agreement is subject to the fulfillment at or prior to the Initial Closing of the following conditions, any of which may be waived in whole or in part by the Company: (a) Representations and Warranties. The representations and warranties made by the Lenders in Article IV hereof shall be true and correct on the Initial Closing Date. (b) Performance. All covenants, agreements and conditions contained in this Agreement to be performed by the Lenders on or prior to the Initial Closing Date shall have been performed or complied with. ARTICLE VI CONDITIONS TO SUBSEQUENT CLOSING 6.1 Conditions to Lenders' Obligations. Each of the Lenders' obligation to consummate the Conversion at the Subsequent Closing pursuant to this Agreement is subject to the fulfillment at or prior to the Subsequent Closing of the following conditions: (a) Compliance with Laws. The issuance of the Issuable Shares by the Company hereunder shall be legally permitted by all laws and regulations to which the Company is subject. (b) Stockholder Approval. The Company shall have delivered to the Lenders satisfactory evidence of the Stockholder Approval. (c) Amendment to the Amended and Restated Articles of Incorporation. The Company shall have duly filed with the Secretary of State of the State of California and caused to become effective an amendment to the Amended and Restated Articles of Incorporation to increase the authorized common stock and preferred stock of the Company. (d) Certificate of Determination. The Company shall have duly filed with the Secretary of State of the State of California the Series E Certificate of Determination. 6.2 Conditions to the Company's Obligations. The Company's obligation to consummate the Conversion at the Subsequent Closing pursuant to this Agreement is subject to the fulfillment at or prior to the Subsequent Closing of the following condition: (a) Stockholder Approval. The Company shall have received satisfactory evidence of the Stockholder Approval. 30 ARTICLE VII INDEMNIFICATION 7.1 Indemnification. Except as otherwise provided in this Article VII, the Company (the "Indemnifying Party") agrees to indemnify, defend and hold harmless each of the Lenders and their Affiliates and their respective officers, directors, agents, employees, subsidiaries, partners, members and controlling persons (each, an "Indemnified Party") to the fullest extent permitted by law from and against any and all losses, Claims, or written threats thereof (including, without limitation, any Claim by a third party), damages, expenses (including reasonable fees, disbursements and other charges of counsel incurred by the Indemnified Party in any action between the Indemnifying Party and the Indemnified Party or between the Indemnified Party and any third party or otherwise) or other liabilities (collectively, "Losses") resulting from or arising out of any breach of any representation or warranty, covenant or agreement by the Company in this Agreement, the Amended and Restated Registration Rights Agreement, the Notes or the Security Agreement. The amount of any payment to any Indemnified Party herewith in respect of any Loss shall be of sufficient amount to make such Indemnified Party whole for any diminution in value of the Issuable Shares or Common Shares, as applicable, directly caused by such breach. In connection with the obligation of the Indemnifying Party to indemnify for expenses as set forth above, the Indemnifying Party shall, upon presentation of appropriate invoices containing reasonable detail, reimburse each Indemnified Party for all such expenses (including reasonable fees, disbursements and other charges of counsel incurred by the Indemnified Party in any action between the Indemnifying Party and the Indemnified Party or between the Indemnified Party and any third party) as they are incurred by such Indemnified Party; provided, however, that if an Indemnified Party is reimbursed under this Article VII for any expenses, such reimbursement of expenses shall be refunded to the extent it is finally judicially determined that the Losses in question resulted primarily from the willful misconduct or gross negligence of such Indemnified Party. 7.2 Notification. Each Indemnified Party under this Article VII shall, promptly after the receipt of notice of the commencement of any Claim against such Indemnified Party in respect of which indemnity may be sought from the Indemnifying Party under this Article VII, notify the Indemnifying Party in writing of the commencement thereof. The omission of any Indemnified Party to so notify the Indemnifying Party of any such action shall not relieve the Indemnifying Party from any liability which it may have to such Indemnified Party (a) other than pursuant to this Article VII or (b) under this Article VII unless, and only to the extent that, such omission results in the Indemnifying Party's forfeiture of substantive rights or defenses. In case any such Claim shall be brought against any Indemnified Party, and it shall notify the Indemnifying Party of the commencement thereof, the Indemnifying Party shall be entitled to assume the defense thereof at its own expense, with counsel satisfactory to such Indemnified Party in its reasonable judgment; provided, however, that any Indemnified Party may, at its own expense, retain separate counsel to participate in such defense at its own expense. Notwithstanding the foregoing, in any Claim in which both the Indemnifying Party, on the one hand, and an Indemnified Party, on the other hand, 31 are, or are reasonably likely to become, a party, such Indemnified Party shall have the right to employ separate counsel and to control its own defense of such Claim if, in the reasonable opinion of counsel to such Indemnified Party, either (x) one or more defenses are available to the Indemnified Party that are not available to the Indemnifying Party or (y) a conflict or potential conflict exists between the Indemnifying Party, on the one hand, and such Indemnified Party, on the other hand, that would make such separate representation advisable; provided, however, that the Indemnifying Party (i) shall not be liable for the fees and expenses of more than one counsel to all Indemnified Parties and (ii) shall reimburse the Indemnified Parties for all of such fees and expenses of such counsel incurred in any action between the Indemnifying Party and the Indemnified Parties or between the Indemnified Parties and any third party, as such expenses are incurred; provided, however, that if an Indemnified Party is reimbursed under this Article VII for any expenses, such reimbursement of expenses shall be refunded to the extent it is finally judicially determined that the Losses in question resulted primarily from the willful misconduct or gross negligence of such Indemnified Party. The Indemnifying Party agrees that it will not, without the prior written consent of the Indemnified Party, settle, compromise or consent to the entry of any judgment in any pending or threatened Claim relating to the matters contemplated hereby (if any Indemnified Party is a party thereto or has been actually threatened to be made a party thereto) unless such settlement, compromise or consent includes an unconditional release of each Indemnified Party from all liability arising or that may arise out of such Claim. The Indemnifying Party shall not be liable for any settlement of any Claim effected against an Indemnified Party without the Indemnifying Party's written consent, which consent shall not be unreasonably withheld. The rights accorded to an Indemnified Party hereunder shall be in addition to any rights that any Indemnified Party may have at common law, by separate agreement or otherwise; provided, however, that notwithstanding the foregoing or anything to the contrary contained in this Agreement, nothing in this Article VII shall restrict or limit any rights that any Indemnified Party may have to seek equitable relief. 7.3 Contribution. If the indemnification provided for in this Article VII from the Indemnifying Party is unavailable to an Indemnified Party hereunder in respect of any Losses referred to herein, then the Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount paid or payable by such Indemnified Party as a result of such Losses in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party and Indemnified Party in connection with the actions which resulted in such Losses, as well as any other relevant equitable considerations. The relative faults of such Indemnifying Party and Indemnified Party shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact, has been made by, or relates to information supplied by, such Indemnifying Party or Indemnified Party, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such action. The amount paid or payable by a party as a result of the Losses referred to above shall be deemed to include, subject to the limitations set forth in Section 7.1 and Section 7.2, any reasonable legal or other fees, charges or expenses reasonably incurred by such party in connection with any investigation or proceeding. 32 ARTICLE VIII COVENANTS The Company hereby covenants and agrees with the Lenders as follows: 8.1 Financial Statements and Other Information. If any time the Company is not subject to the periodic disclosure obligations of the Exchange Act, the Company shall deliver to each Lender, in form and substance satisfactory to such Lender: (a) as soon as available, but not later than ninety (90) days after the end of each fiscal year of the Company, a copy of the audited consolidated balance sheet of the Company and its Subsidiaries as of the end of such fiscal year and the related statements of operations and cash flows for such fiscal year, setting forth in each case in comparative form the figures for the previous year, all in reasonable detail and accompanied by a management summary and analysis of the operations of the Company for such fiscal year and by the opinion of a nationally recognized independent certified public accounting firm which report shall state without qualification that such financial statements present fairly the financial condition as of such date and results of operations and cash flows for the periods indicated in conformity with GAAP applied on a consistent basis; (b) as soon as available, but in any event not later than forty-five (45) days after the end of each of the first three fiscal quarters of each fiscal year, the unaudited consolidated balance sheet of the Company and its Subsidiaries, and the related statements of operations and cash flows for such quarter and for the period commencing on the first day of the fiscal year and ending on the last day of such quarter, all certified by an appropriate officer of the Company as presenting fairly the consolidated financial condition as of such date and results of operations and cash flows for the periods indicated in conformity with GAAP applied on a consistent basis, subject to normal year-end adjustments and the absence of footnotes required by GAAP; and (c) as soon as available, but in any event not later than ten (10) days after the end of each month of each fiscal year, the unaudited consolidated balance sheet of the Company and its Subsidiaries, and the related statements of operations and cash flows for such month and for the period commencing on the first day of the fiscal year and ending on the last day of such month, all certified by an appropriate officer of the Company as presenting fairly the consolidated financial condition as of such date and results of operations and cash flows for the periods indicated in conformity with GAAP applied on a consistent basis, subject to normal year-end adjustments and the absence of footnotes required by GAAP. 8.2 FIRPTA Certificate. If requested by any of the Lenders, as promptly as practicable, but not later than five (5) days after the end of each fiscal year of the Company, the Company shall deliver to such Lender, in form and substance satisfactory to such Lender, a certificate signed by the Chief Executive Officer of the 33 Company in customary form certifying that the Company is not a "foreign person" within the meaning of Section 1445 of the Code. 8.3 Reservation of Common Stock. The Company shall at all times reserve and keep available out of its authorized shares of Common Stock, solely for the purpose of issue or delivery upon conversion of the Issuable Shares, as provided in the Series E Certificate of Determination, or upon conversion of the Notes, as provided for in the Notes, the maximum number of shares of Common Stock that may be issuable or deliverable upon such conversion or exercise. Such shares of Common Stock are duly authorized and, when issued or delivered in accordance with the Series E Certificate of Determination, or in accordance with the Notes, as the case may be, shall be validly issued, fully paid and non-assessable. The Company shall issue such shares of Common Stock, in accordance with the terms of the Series E Certificate of Determination or the terms of the Notes, as the case may be, and otherwise comply with the terms hereof and thereof. 8.4 Stockholder Approval. The Company will use all reasonable commercial efforts to cause the proxy statement filed with the Commission on December 24, 2003 to be distributed to the Company's stockholders in connection with the solicitation of votes in favor of the matters set forth in Section 3.24 that require Stockholder Approval, including any amendments or supplements thereto (the "Proxy Statement") to be cleared by the Commission as promptly as practicable. The Company agrees to provide the Lenders and their respective counsel with any written comments the Company or its counsel may receive from the Commission with respect to the Proxy Statement promptly after the receipt of such comments. The Company will use all reasonable commercial efforts to cause the Proxy Statement (a) not to contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading and (b) to comply as to form in all material respects with the applicable provisions of the Exchange Act and the rules and regulations thereunder. Following clearance by the Commission of the Proxy Statement, the Company shall promptly distribute the Proxy Statement to its stockholders and call and arrange for a special meeting of stockholders and take such other actions as are required or necessary in order to obtain the Stockholder Approval as promptly as practicable. The Company will use all reasonable commercial efforts to hold the special meeting and obtain a vote of the stockholders on or prior to August 15, 2004. The Board of Directors shall recommend that the Company's stockholders vote in favor of the Stockholder Approval. 8.5 Financial Covenants. The Company hereby covenants and agrees that on and after the Initial Closing and until all of the obligations under the Notes, including, without limitation, the repayment or conversion of the principal amount and all accrued interest outstanding thereunder, have been satisfied in full, the Company shall at all times comply with the financial and other covenants set forth on Schedule 8.5. 8.6 Purchases and Sales. In the event any Lender has become aware of or becomes aware of any material non-public information about the Company (which the 34 parties hereby agree will include (but not be limited to) any information labeled by the Company to be material non-public information) ("Material Non-Public Information"), such Lender shall not purchase or sell any shares of the Company's capital stock (or securities exercisable or convertible for shares of the Company's capital stock) until the earlier of (a) such time as the information is no longer material as a matter of law (which the parties agree shall be a period of at least three months after becoming aware of such material non-public information), and (b) the time at which such information has been disseminated publicly by the Company, and in any event not in violation of the federal securities laws. Except as set forth in this Agreement, the Company covenants and agrees that neither it nor any other Person acting on its behalf will provide any Lender or its agents or counsel with any information that the Company believes constitutes Material Non-Public Information, unless prior thereto such Lender shall have executed a written agreement regarding the confidentiality and use of such information. The Company understands and confirms that each Lender shall be relying on the foregoing representations in effecting transactions in securities of the Company. 8.7 Proxy Matters. Notwithstanding anything herein to the contrary, but subject to the provisions of Section 9.1 of this Agreement, if the Registration Statement (as defined in the November Convertible Note Agreement) has not been declared effective by the Commission on or prior to May 15, 2004, subject to approval by the Board of Directors, the Company will promptly take all such actions as may be necessary to withdraw the Registration Statement, and the Company shall continue to have an obligation under Section 8.4 of this Agreement to seek Stockholder Approval. If the Company withdraws the Registration Statement pursuant to this Section 8.7 and receives Stockholder Approval, the Company may, subject to approval by the Board of Directors, file a subsequent registration statement with the Commission and provide the Company's shareholders the opportunity to participate in a subsequent rights offering. ARTICLE IX TERMINATION 9.1 Termination. The Lenders' obligation to consummate the Conversion under this Agreement including, but not limited to, Sections 2.4(e), 2.4(f) and 2.4(g) and Article VI of this Agreement, shall terminate in the event that the Company is unable to obtain Stockholder Approval pursuant to Section 8.4 on the first attempt, but in any event on August 15, 2004, if Stockholder Approval is not obtained by such date. None of the Company or the Lenders shall have any liability arising out of such termination. ARTICLE X MISCELLANEOUS 10.1 Survival of Representations and Warranties. All of the representations and warranties made herein shall survive the execution and delivery of this Agreement until the date that is ninety (90) days after the receipt by the Lenders of 35 audited financial statements of the Company for the fiscal year ending December 31, 2004 (or, if such fiscal year changes and no such audited consolidated financial statements are available, then the successor fiscal year), except for (a) Sections 3.1, 3.2, 3.4, 3.7, 3.13 and 3.23, which representations and warranties shall survive until the third anniversary of the Initial Closing Date, and (b) Section 3.11, which shall survive until the later to occur of (i) the lapse of the statute of limitations with respect to the assessment of any Tax to which such representation and warranty relates (including any extensions or waivers thereof) and (ii) sixty (60) days after the final administrative or judicial determination of the Taxes to which such representation and warranty relates, and no claim with respect to Section 3.11 may be asserted thereafter with the exception of claims arising out of any fact, circumstance, action or proceeding to which the party asserting such claim shall have given notice to the other parties to this Agreement prior to the termination of such period of reasonable belief that a tax liability will subsequently arise therefrom. 10.2 Notices. All notices, demands and other communications provided for or permitted hereunder shall be made in writing and shall be by registered or certified first-class mail, return receipt requested, telecopier, courier service or personal delivery: if to the Company: Critical Path, Inc. 350 The Embarcadero San Francisco, CA 94105 Telecopy: (415) 541-2300 Attention: Chief Financial Officer with a copy to, which shall not constitute notice to the Company: Pillsbury Winthrop LLP 50 Fremont Street San Francisco, CA 94105 Telecopy: (415) 983-1200 Attention: Gregg Vignos, Esq. if to the Lenders: Apex Capital, LLC 25 Orinda Way, Suite 300 Orinda, CA 94563 Attention: Adam Fiore, General Counsel Telephone: (925) 253-6125 Telecopy: (925) 253-1809 with a copy to, which shall not constitute notice: 36 Howard, Rice, Nemerovski, Canady, Falk & Rabkin Three Embarcadero Center, Seventh Floor San Francisco, CA 94111-4024 Telephone: (415) 434-1600 Telecopy: (415) 217-5910 Attention: Joseph Hershenson and to: Crosslink Capital Two Embarcadero Center, Suite 2200 San Francisco, CA 94111 Attention: Jason Sanders Telephone: (415) 617-1845 Telecopy: (415) 617-1801 and to: Sagamore Hill Hub Fund, Ltd. c/o Sagamore Hill Capital Management 10 Glenville Street, 3rd Floor Greenwich, CT 06831 Attention: Legal Department Telecopy: (203) 422-7214 and to: Criterion Capital Management One Maritime Plaza, Suite 1460 San Francisco, CA 64111 Attention: R. Daniel Beckham Telephone: Telecopy: and to: Capital Ventures International c/o Heights Capital Management, Inc. 425 California Street, Suite 1100 San Francisco, CA 94104 Attention: Martin Kobinger Telephone: (415) 403-6500 Telecopy: (415) 403-6525 All such notices, demands and other communications shall be deemed to have been duly given when delivered by hand, if personally delivered; when delivered by courier, if delivered by commercial courier service; five (5) Business Days after being 37 deposited in the mail, postage prepaid, if mailed; and when receipt is mechanically acknowledged, if telecopied. Any party may by notice given in accordance with this Section 10.2 designate another address or Person for receipt of notices hereunder. 10.3 Successors and Assigns; Third Party Beneficiaries. This Agreement shall inure to the benefit of and be binding upon the successors and permitted assigns of the parties hereto. Subject to applicable securities laws and the terms and conditions thereof, the Lenders may assign any of their rights under this Agreement or the other Transaction Documents to any of their respective Affiliates. The Company may not assign any of its rights under this Agreement without the written consent of the Lenders. Except as provided in Article VII, no Person other than the parties hereto and their successors and permitted assigns is intended to be a beneficiary of this Agreement. 10.4 Amendment and Waiver. (a) No failure or delay on the part of the Company or the Lenders in exercising any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy. The remedies provided for herein are cumulative and are not exclusive of any remedies that may be available to the Company or the Lenders at law, in equity or otherwise. (b) Any amendment, supplement or modification of or to any provision of this Agreement, any waiver of any provision of this Agreement, and any consent to any departure by the Company or the Lenders from the terms of any provision of this Agreement, shall be effective (i) only if it is made or given in writing and signed by the Company and the Lenders, and (ii) only in the specific instance and for the specific purpose for which made or given. Except where notice is specifically required by this Agreement, no notice to or demand on the Company in any case shall entitle the Company to any other or further notice or demand in similar or other circumstances. 10.5 Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. 10.6 Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. 10.7 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of California, without regard to the principles of conflicts of law thereof. 10.8 Severability. If any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable in any respect for any reason, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions hereof shall not 38 be in any way impaired, unless the provisions held invalid, illegal or unenforceable shall substantially impair the benefits of the remaining provisions hereof. 10.9 Rules of Construction. Unless the context otherwise requires, references to sections or subsections refer to sections or subsections of this Agreement. 10.10 Entire Agreement. This Agreement, together with the exhibits and schedules hereto, and the other Transaction Documents are intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein and therein. There are no restrictions, promises, representations, warranties or undertakings, other than those set forth or referred to herein or therein. This Agreement, together with the exhibits and schedules hereto, and the other Transaction Documents supersede all prior agreements and understandings between the parties with respect to such subject matter. 10.11 Fees. The Company shall reimburse the Lenders for their fees, disbursements and other charges of counsel incurred in connection with the transactions contemplated by this Agreement (including, but without limitation, to advise on reporting obligations of the Lenders and filings with Commission); provided, that the aggregate amount of all such reimbursements in respect of the Lenders shall not exceed $20,000. 10.12 Publicity; Confidentiality. Except as may be required by applicable Requirements of Law, none of the parties hereto shall issue a publicity release or public announcement or otherwise make any disclosure concerning this Agreement, the transactions contemplated hereby, the Lenders or the business, technology and financial affairs of the Company, without prior approval by the other parties hereto; provided, however, that nothing in this Agreement shall restrict any of the Lenders from disclosing information (a) that is already publicly available, (b) that was known to such Lender on a non-confidential basis prior to its disclosure by the Company, (c) that may be required or appropriate in response to any summons or subpoena or in connection with any litigation, provided that such Lender will use reasonable efforts to notify the Company in advance of such disclosure so as to permit the Company to seek a protective order or otherwise contest such disclosure, and such Lender will use reasonable efforts to cooperate, at the expense of the Company, with the Company in pursuing any such protective order, (d) to the extent that such Lender reasonably believes it appropriate in order to comply with any Requirement of Law, (e) to such Lender's or the Company's officers, directors, shareholders, advisors, employees, members, partners, controlling persons, auditors or counsel or (f) to Persons from whom releases, consents or approvals are required, or to whom notice is required to be provided, pursuant to the transactions contemplated by the Transaction Documents. If any announcement is required by any Requirement of Law to be made by any party hereto, prior to making such announcement such party will deliver a draft of such announcement to the other parties and shall give the other parties reasonable opportunity to comment thereon. Each of the Lenders acknowledge that if such Lender becomes aware of Material Non-Public Information, such Lender's ability to trade in the Company's securities and to participate, to the extent otherwise eligible, in the Rights Offering would be restricted. 39 10.13 Further Assurances. Each of the parties shall execute such documents and perform such further acts (including, without limitation, obtaining any consents, exemptions, authorizations or other actions by, or giving any notices to, or making any filings with, any Governmental Authority or any other Person) as may be reasonably required or desirable to carry out or to perform the provisions of this Agreement. 10.14 Waiver. The Company hereby waives the provisions set forth in Section 8.6 of the January Convertible Note Agreement with respect to the purchase by certain of the January 2004 Investors of Notes (and any shares of capital stock of the Company issuable upon their conversion) pursuant to this Agreement. [the remainder of this page intentionally left blank] 40 IN WITNESS WHEREOF, the undersigned have executed, or have caused to be executed, this Convertible Note Purchase Agreement on the date first written above. CRITICAL PATH, INC., a California corporation By: /s/ William E. McGlashan, Jr. ----------------------------------- Name: William E. McGlashan, Jr. Title: Chairman, Chief Executive Officer SIGNATURE PAGE TO CONVERTIBLE NOTE PURCHASE AGREEMENT PERMAL U.S. OPPORTUNITIES LIMITED By: Apex Capital, LLC, its Authorized Investment Advisor By: /s/ Sanford J. Colen ------------------------------------------- Name: Sanford J. Colen Title: Manager and Principal ZAXIS PARTNERS, L.P. By: Apex Capital, LLC, its General Partner By: /s/ Sanford J. Colen ------------------------------------------- Name: Sanford J. Colen Title: Manager and Principal ZAXIS EQUITY NEUTRAL, L.P. By: Apex Capital, LLC, its General Partner By: /s/ Sanford J. Colen ------------------------------------------- Name: Sanford J. Colen Title: Manager and Principal ZAXIS OFFSHORE LIMITED By: Apex Capital, LLC, its Authorized Investment Advisor By: /s/ Sanford J. Colen ------------------------------------------- Name: Sanford J. Colen Title: Manager and Principal SIGNATURE PAGE TO CONVERTIBLE NOTE PURCHASE AGREEMENT ZAXIS INSTITUTIONAL PARTNERS, L.P. By: Apex Capital, LLC, its General Partner By: /s/ Sanford J. Colen ------------------------------------------- Name: Sanford J. Colen Title: Manager and Principal GUGGENHEIM PORTFOLIO COMPANY XIII By: Apex Capital, LLC, its Authorized Investment Advisor By: /s/ Sanford J. Colen -------------------------------------------- Name: Sanford J. Colen Title: Manager and Principal SIGNATURE PAGE TO CONVERTIBLE NOTE PURCHASE AGREEMENT CROSSLINK CROSSOVER FUND IV, L.P. By: Crossover Fund IV Management, L.L.C., its General Partner By: /s/ Michael J. Stark ------------------------------------------- Name: Michael J. Stark Title: Managing Member SIGNATURE PAGE TO CONVERTIBLE NOTE PURCHASE AGREEMENT SAGAMORE HILL HUB FUND, LTD. By: Sagamore Hill Capital Management, L.P., Investment Manager By: /s/ Steven H. Bloom ---------------------------------------------- Name: Steven H. Bloom Title: President SIGNATURE PAGE TO CONVERTIBLE NOTE PURCHASE AGREEMENT CAPITAL VENTURES INTERNATIONAL By: Heights Capital Management, Inc., an authorized signatory By: /s/ Martin Kobinger ----------------------------------------------- Name: Martin Kobinger Title: Investment Manager CRITERION CAPITAL PARTNERS, LTD. By: Derivatives Portfolio Management, an authorized signatory By: /s/ Guy J. Castranova ------------------------------------------------ Name: Guy J. Castranova Title: Chief Operating Officer CRITERION CAPITAL PARTNERS, INSTITUTIONAL By: Criterion Capital Partners, LLC, an authorized signatory By: /s/ R. Daniel Beckham ------------------------------------------- Name: R. Daniel Beckham Title: Chief Operating Officer CRITERION CAPITAL PARTNERS, L.P. By: Criterion Capital Partners, LLC, an authorized signatory By: /s/ R. Daniel Beckham ------------------------------------------------ Name: R. Daniel Beckham Title: Chief Operating Officer EX-99.1 8 f97241exv99w1.txt EXHIBIT 99.1 EXHIBIT 99.1 FOR IMMEDIATE RELEASE Tuesday, March 9, 2004 Critical Path Raises Additional $18.5 Million in Private Financing From New and Recent Investors SAN FRANCISCO (MARCH 9, 2004) -- Critical Path, Inc. (Nasdaq: CPTH), a global provider of digital communications software and services, today announced that it has signed definitive agreements for the purchase of a total of $18.5 million in convertible notes. Investment entities affiliated with Crosslink Capital, Criterion Capital Management and Heights Capital Management have made new investments in the Company and entities affiliated with Apex Capital, which had invested in the Company in January 2004, have invested again. The investments consist of 10% senior secured notes, which will convert into approximately 12.3 million shares of Series E preferred stock, at $1.50 per share, upon shareholder approval. As previously announced by the Company, the Series E preferred shares will rank senior in preference to all existing equity shares of the Company. The preferred shares will accrue dividends at an annual rate of 5 3/4% of the purchase price. The Company plans to submit the issuance of these shares to shareholders for approval in the first half of 2004, in accordance with the rules of the Nasdaq Stock Market. These investments are made on substantially the same terms as and are separate from -- and in addition to -- the $15 million in capital raised by the Company in January 2004 and the $10 million raised in November 2003, bringing the total raised in the past four months to $43.5 million. The securities have not been registered under the Securities Act of 1933, or the securities laws of any other jurisdiction, and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements. ABOUT CRITICAL PATH, INC. Critical Path, Inc. (Nasdaq: CPTH) is a global provider of digital communications software and services, headquartered in San Francisco. More information is available at www.criticalpath.net. 1 Forward-Looking Statements: This press release contains forward-looking statements by the Company and its executives regarding the performance, security, scalability and interoperability of our product and service offerings, the ability of our customers to achieve cost savings in the provision of services, industry trends, market and customer requirements, the ability of our products and services to meet the business needs of our customers, the market for products and services like ours and the performance of our senior management in achieving strategic goals. The words and expressions "look forward to," "will," "expect," "plan," "believe," "seek," "strive for," "anticipate," hope," "estimate" and similar expressions are intended to identify the Company's forward-looking statements. These forward-looking statements involve a number of risks and uncertainties that could cause actual results to differ materially from those anticipated. These risks include, but are not limited to, our evolving business strategy and the emerging and changing nature of the market for our products and services, our ability to deliver on our sales objectives, the ability of our technology and our competitors' technologies to address customer demands, changes in economic and market conditions, unplanned system interruptions and capacity constraints, software and service design defects. These and other risks and uncertainties are described in more detail in the Company's filings with the U.S Securities and Exchange Commission (www.sec.gov) made from time to time, including Critical Path's Annual Report on Form 10-K for the fiscal year ended December 31, 2002, and Quarterly Reports on Form 10-Q for the fiscal quarters ended March 31, June 30 and September 30, 2003, as may be amended from time to time, and all subsequent filings with the Securities and Exchange Commission (www.sec.gov). The company makes no commitment to revise or update any forward-looking statements in order to reflect events or circumstances after the date any such statement is made. Note to Editors: Critical Path and the Critical Path logo are the trademarks of Critical Path, Inc. All other trademarks are the property of their holders # # # CONTACT INFORMATION FOR REPORTERS AND EDITORS: FOR INVESTORS: Critical Path, Inc. Critical Path, Inc. Jim Fulton Investor Relations 415.541.2524 415.541.2619 jim.fulton@criticalpath.net ir@criticalpath.net www.criticalpath.net www.criticalpath.net 2 -----END PRIVACY-ENHANCED MESSAGE-----

EX-4.1

                                                                     EXHIBIT 4.1



                                  FORM OF NOTE


        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.

                    CONVERTIBLE SUBORDINATED PROMISSORY NOTE


$                                                     San Francisco, California
 ---------------------                                March 9, 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)
March 9, 2008, (ii) when declared due and payable by Holder upon the occurrence
of an Event of Default (as defined below), (iii) consummation of a Qualified
Asset Sale, (iv) a Change of Control, or (v) any sale of capital stock or Stock
Equivalents by the Company, any cash capital contribution from any third person
or any other debt or equity financing consummated by the Company after the date
of issuance of this Note which, in the case of (v), individually or in the
aggregate raises proceeds of at least forty million dollars ($40,000,000) in
cash or cash equivalents (the earliest of the events set forth in items (i)-(v)
immediately above, the "Maturity Date").

               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 "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.

                      1.2 "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.

                      1.3 "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 surviving entity, (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 General Atlantic Partners 74, L.P., GAP Coinvestment
Partners II, L.P., GapStar, LLC, GAP-W, LLC, GAPCO GmbH & Co. KG, Campina
Enterprises Limited, Cenwell Limited, Great Affluent Limited, Dragonfield
Limited and Lion Cosmos Limited and the Affiliates of the foregoing, provided
that Affiliates shall be deemed not to include any portfolio companies of any of
the foregoing) obtains a majority of the outstanding shares of capital stock
entitled to vote in the election of directors, (iii) any proxy contest in which
a majority of the Board of Directors of the Company (or persons appointed by
such Board of Directors) prior to such contest do not constitute a majority of
the Company's Board of Directors after such contest or (iv) any other
transaction described in any stockholder rights agreement or "poison pill," if
any, to which the Company is party, which may permit the holders of any rights
or similar certificates to exercise the rights evidenced thereby.

                      1.4 "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.

                      1.5 "Common Conversion Date" shall have the meaning set
forth in Section 3.1(b) hereof.

                      1.6 "Common Stock" means the common stock, par value
$0.001 per share, of the Company.

                      1.7 "Conversion Date" shall mean the Subsequent Closing
Date.

                      1.8 "Domestic Subsidiary" shall have the meaning set forth
in Section 5.10 hereof.



                                       2

                      1.9 "Event of Default" shall have the meaning set forth in
Section 6 hereof.

                      1.10 "GA Notes" shall mean the Convertible Subordinated
Promissory Notes, each dated November 26, 2003, issued by the Company to the GAP
Entities pursuant to the Purchase and Exchange Agreement.

                      1.11 "GAP Entities" shall mean General Atlantic Partners
74, L.P., GAP Coinvestment Partners II, L.P., GapStar, LLC and GAPCO GmhH & Co.
KG.

                      1.12 "Guarantor" shall have the meaning set forth in the
Security Agreement.

                      1.13 "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.

                      1.14 "Intercreditor Agreement" shall mean the
Intercreditor Agreement, dated the date hereof, among the GAP Entities, the
January Lenders, Guggenheim Portfolio Company XIII, Crosslink Crossover Fund IV,
L.P., Sagamore Hill Hub Fund, Ltd., Criterion Capital Partners, Ltd., Criterion
Capital Partners, Institutional, Criterion Capital Partners, L.P. and Capital
Ventures International.

                      1.15 "Interest Amount" shall have the meaning set forth in
Section 3.1 hereof.

                      1.16 "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.

                      1.17 "January Lenders" shall mean Permal U.S.
Opportunities Limited, Zaxis Equity Neutral, L.P., Zaxis Institutional Partners,
L.P., Zaxis Offshore Limited, Zaxis Partners, L.P. and Passport Master Fund,
L.P.

                      1.18 "January Note Agreement" shall mean the Convertible
Note Purchase Agreement, dated January 16, 2004, among the January Lenders and
the Company.



                                       3

                      1.19 "January 2004 Notes" shall mean the Convertible
Subordinated Promissory Notes, each dated January 16, 2003, issued by the
Company to the January Lenders pursuant to the January Note Agreement.

                      1.20 "Loan Documents" shall have the meaning set forth in
the Security Agreement.

                      1.21 "Note" shall mean this note, and in the plural, shall
mean all notes issued to the Lenders pursuant to the terms of the Note Purchase
Agreement, including this Note, and all amendments, modifications and extensions
thereto.

                      1.22 "Note Purchase Agreement" means that certain
Convertible Note Purchase Agreement, dated March 9, 2004, among the Company, the
Holder and the other parties thereto from time to time, and all amendments,
modifications and extensions thereto.

                      1.23 "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 3.27 to the Note Purchase Agreement, (iv) guaranty
obligations permitted by Section 5.3 of this Agreement, (v) loans to employees,
directors or officers of the Company in connection with the award of convertible
bonds or capital stock under a stock incentive plan, stock option plan or other
equity-based compensation plan or arrangement, (vi) 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;
(vii) loans, advances and investments in foreign Subsidiaries (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; (viii) 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, (ix) 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 or (x) Investments by the
Company in the Guarantor.

                      1.24 "Permitted Liens" shall have the meaning set forth in
Section 5.4.

                      1.25 "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.

                      1.26 "Price Per Share" shall have the meaning attributed
to such term in the Series E Certificate of Determination, as filed with the
Secretary of State of the State of California.




                                       4

                      1.27 "Purchase and Exchange Agreement" shall mean the
Convertible Note Purchase and Exchange Agreement, dated November 18, 2003, among
the Company, the GAP Entities, GAP-W, LLC and the other parties thereto, as
amended.

                      1.28 "Qualified Asset Sale" means the sale, transfer or
other disposition of any of the assets of the Company or any of its
Subsidiaries, other than (a) sales of assets in the ordinary course of business,
(b) sales of assets where the proceeds are used to repay Indebtedness owing to
SVB, (c) the sale, transfer or other disposition of assets of the Company where
the proceeds are applied to the purchase price or traded in for credit against
the purchase price of other assets, provided that any such purchase is made, or
credit issued, within 90 days of the sale, transfer or other disposition, and
(d) one or more sales of the Company's assets (other than sales otherwise
included in clauses (a), (b), and (c) immediately above) which collectively
yield up to an aggregate of one million dollars ($1,000,000) in gross proceeds
to the Company while this Note is outstanding.

                      1.29 "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.

                      1.30 "Security Agreement" means that certain Guaranty and
Security Agreement, of even date herewith between the Company, Compass Holding
Corp., the Lenders and the other parties thereto from time to time, and all
amendments, modifications and extensions thereto.

                      1.31 "Series E Conversion Price" shall have the meaning
set forth in the Series E Certificate of Determination.

                      1.32 "Series E Preferred Stock" means the Series E
Preferred Stock, par value $0.001, of the Company.

                      1.33 "Subordination Agreement" shall have the meaning set
forth in Section 5.3.

                      1.34 "Subsequent Closing Date" shall have the meaning set
forth in Section 2.4(e) of the Note Purchase Agreement.

                      1.35 "SVB" means Silicon Valley Bank, a California
chartered bank, or any Affiliates thereof.

                      1.36 "Ten Percent Holder" means, with respect to a class
of equity securities of the Company, a Person (together with such Person's
Affiliates) who, directly or indirectly, beneficially owns 9.9% or more of such
class of equity securities of



                                       5

the Company, as defined by Section 13(d) of the Securities Exchange Act of 1934,
as amended, and the rules and regulations promulgated thereunder.

                      1.37 "UCC" shall have the meaning set forth in Section
5.4.

               2. Interest. Simple interest shall accrue at the rate of ten
percent (10%) per annum (or such lesser amount as shall equal the highest rate
of interest allowable under applicable law) (the "Interest Rate"), on the
outstanding principal of this Note 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
360-day year for the actual number of days elapsed. In the event that the
principal amount of this Note, any interest, or any amount payable hereunder is
not paid in full when such 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. Conversion.

                      3.1 Conversion.

                             (a) On the Conversion Date, the principal amount of
this Note plus the accrued and unpaid interest thereon (the "Interest Amount"),
shall be automatically converted into the number of fully paid and nonassessable
shares of Series E Preferred Stock equal to the quotient obtained by dividing
(a) the entire principal amount of this Note plus the Interest Amount by (b) the
Price Per Share.

                             (b) In the event that the Conversion Date has not
occurred on or prior to August 15, 2004 (the "Common Conversion Date"), then,
following the Common Conversion Date, the principal amount of this Note plus the
Interest Amount shall be convertible, at the option of Holder and from time to
time, only into Common Stock at a conversion price per share equal to $2.18, as
adjusted for any stock dividends, stock splits or similar consolidations or
subdivisions, following the date hereof; provided, however, that Holder shall
not be permitted to convert any portion of the principal of this Note or the
Interest Amount into Common Stock pursuant to this Section 3.1(b) if, at the
time of such conversion, the conversion would cause Holder to be a Ten Percent
Holder.

                      3.2 Notice of Conversion. Upon conversion of this Note as
provided in Section 3.1, Holder shall surrender this Note to the Company and
shall state the name or names in which the certificate or certificates for such
shares of Series E Preferred Stock or Common Stock, as the case may be, are to
be issued. The Person or Persons entitled to receive the shares of Series E
Preferred Stock or Common Stock, as the case may be, issuable upon such
conversion shall be treated for all purposes as the record holder or holders (a)
of such shares of Series E Preferred Stock as of the



                                       6

Conversion Date and (b) of such shares of Common Stock as of the date of any
conversion pursuant to Section 3.1(b).

                      3.3 Delivery of Stock Certificates. Upon conversion of
this Note as provided in Section 3.1, the Company at its expense will issue and
deliver to Holder of this Note a certificate or certificates (bearing such
legends as are required by applicable state and federal securities laws in the
opinion of counsel to the Company) for the number of full shares of Series E
Preferred Stock or Common Stock, as the case may be, issuable upon such
conversion.

                      3.4 Mechanics and Effect of Conversion. No fractional
shares of Series E Preferred Stock or Common Stock, as the case may be, shall be
issued upon conversion of this Note. In lieu of the Company issuing any
fractional shares to Holder upon the conversion of this Note, the Company shall
pay to Holder the amount of outstanding principal and interest that is not so
converted. Upon conversion of all amounts due under this Note, the Company shall
be released from all of its obligations under this Note.

               4. Adjustments. The number of shares of Series E Preferred Stock
or Common Stock convertible hereunder are subject to adjustment from time to
time as follows:

                      4.1 Merger, Sale of Assets, Etc. Subject to Section 4.2,
if at any time while this Note remains outstanding and unexpired there shall be
(a) a reorganization (other than a combination, reclassification, exchange or
subdivision of shares otherwise provided for herein), (b) a merger or
consolidation of the Company with or into another corporation in which the
Company is not the surviving entity, or a merger in which the Company is the
surviving entity but the shares of the Company's capital stock outstanding
immediately prior to the merger are converted by virtue of the merger into other
property, whether in the form of securities, cash or otherwise or (c) a sale or
transfer of the Company's stock, properties or assets as, or substantially as,
an entirety to any other Person, then, as a part of such reorganization, merger,
consolidation, sale or transfer, lawful provision shall be made so that Holder
shall thereafter be entitled to receive by converting this Note the number of
shares of stock or other securities or property of the successor corporation
resulting from such reorganization, merger, consolidation, sale or transfer that
a holder of the shares deliverable upon conversion of this Note would have been
entitled to receive in such reorganization, consolidation, merger, sale or
transfer if this Note had been converted immediately before such reorganization,
merger, consolidation, sale or transfer (notwithstanding that the Stockholder
Approval may not yet have been obtained), all subject to further adjustment as
provided in this Section 4. The foregoing provisions of this Section 4.1 shall
similarly apply to successive reorganizations, consolidations, mergers, sales
and transfers and to the stock or securities of any other corporation. If the
per share consideration payable to Holder hereof for shares in connection with
any such transaction is in a form other than cash or marketable securities, then
the value of such consideration shall be determined in good faith by the
Company's Board of Directors based on the amount the Holder would have otherwise
been entitled to receive had the transaction or transactions not occurred.



                                       7

In all events, appropriate adjustment (as determined in good faith by the
Company's Board of Directors) shall be made in the application of the provisions
of this Note with respect to the rights and interests of Holder after the
transaction, to the end that the provisions of this Note shall be applicable
after that event, as near as reasonably may be, in relation to any shares or
other property deliverable after that event upon conversion of this Note. The
Company shall be obligated to retain and set aside, or otherwise make fair
provision for exercise of the right of the Holder to receive, the shares of
stock and/or other securities, cash or other property provided for in this
Section 4.1.

                      4.2 Election of Holder upon Merger or Sale of Assets.
Notwithstanding anything to the contrary contained herein, if an event shall
occur as provided in Section 4.1 hereof that would otherwise result in the
occurrence of the Maturity Date pursuant to clause (iii) or (iv) of the first
paragraph of this Note, then the Holder may, in its sole discretion, by written
notice to the Company elect to convert the principal amount of this Note plus
the Interest Amount into the number of shares of stock or other securities or
property described in Section 4.1, in lieu of receiving payment in full of all
amounts outstanding under this Note. The number of shares of stock or other
securities or property to be issued upon such conversion shall be determined in
accordance with Section 4.1 hereof, taking into account the occurrence of such
event.

                      4.3 Reclassification, Etc. If the Company shall, at any
time while this Note, or any portion thereof, remains outstanding and unexpired,
by reclassification of securities or otherwise, change any of the securities as
to which conversion rights under this Note exist into the same or a different
number of securities of any other class or classes, this Note shall thereafter
represent the right to acquire such number and kind of securities as would have
been issuable with respect to the securities that were subject to the conversion
rights under this Note immediately prior to such reclassification or other
change, and the Price Per Share shall be appropriately adjusted, all subject to
further adjustment as provided in this Section 4.

                      4.4 Split, Subdivision or Combination of Shares. If the
Company at any time while this Note, or any portion thereof, remains outstanding
and unexpired shall split, subdivide or combine the shares of Series E Preferred
Stock or Common Stock into a different number of securities of the same class,
the Price Per Share or conversion price, as the case may be, shall be
proportionately adjusted.

                      4.5 Series E Adjustments. The initial Series E Conversion
Price of the shares of Series E Preferred Stock issued upon conversion of this
Note pursuant to Section 3.1 shall equal the Series E Conversion Price in effect
on the Conversion Date, subject to the adjustment of such Series E Conversion
Price from time to time thereafter as provided in the Series E Certificate of
Determination.

                      4.6 Certificate as to Adjustments. Upon the occurrence of
each adjustment or readjustment pursuant to this Section 4, the Company at its
expense shall promptly compute such adjustment or readjustment in accordance
with the terms hereof and furnish to Holder a certificate setting forth such
adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based.



                                       8

                      4.7 No Impairment. The Company will not, by any voluntary
action, avoid or seek to avoid the observance or performance of any of the terms
to be observed or performed hereunder by the Company, but will at all times in
good faith assist in the carrying out of all the provisions of this Section 4
and in the taking of all such action as may be necessary or appropriate in order
to protect the rights of Holder against impairment.

               5. Covenants. The Company covenants and agrees that until the
earlier of (i) the date on which all Obligations (as defined in the Security
Agreement) have been paid in full or (ii) the date on which all amounts
outstanding under the Notes have converted pursuant to Section 3.1(a) or Section
3.1(b):

                      5.1 Financial Statements and Other Information. 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.

                      5.2 Financial Covenants. The Company shall at all times
comply with the financial and other covenants set forth in Schedule 8.5 to the
Note Purchase Agreement as if such covenants were set forth herein.

                      5.3 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 the
Loan Documents;

                             (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;

                             (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



                                       9

                             (f) Any extension, renewal, refinancing, refunding,
or replacement (each, a "refinancing") of Indebtedness permitted by clauses (b)
and (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)), provided that, in the case of a refinancing of
Indebtedness owed by the Company or any Subsidiary to SVB, this clause (f) shall
only apply to the extent consistent with the Subordination Agreement, dated as
of the date hereof, by and among SVB, the Holders and the Company (the
"Subordination Agreement").

                      5.4 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 5.4 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 or result in a material
adverse effect on the Condition of the Company or (ii) which are



                                       10

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
5.3(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 5.3(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;

                             (k) set-off rights of depository institutions; and

                             (l) Liens created by the Security Agreement
(collectively with clauses (a) through (k) hereof, the "Permitted Liens").

                      5.5 Fundamental Changes. The Company will not, and will
not permit any Subsidiary to, merge into or consolidate with any other Person,
or permit any other Person to merge into or consolidate with it, or sell,
transfer, lease or otherwise dispose of (in one transaction or a series of
transactions) all or substantially all of its



                                       11

assets, or all or substantially all of the stock of any of its Subsidiaries (in
each case, whether now owned or hereafter acquired), or 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 (i) the Company or any of its
Subsidiaries may, with the prior written consent of the Holders, merge with or
into any other Person; (ii) any wholly-owned Subsidiary of the Company (other
than the Guarantor) may merge with or into the Company or any other wholly-owned
Subsidiary of the Company; (iii) any Subsidiary (other than the Guarantor, 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 (iv) any Subsidiary may liquidate or dissolve if
the board of directors of the Company determine in good faith that such
liquidation or dissolution is in its best interests and is not disadvantageous
to the Holders.

                      5.6 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.

                      5.7 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, (b) transactions
exclusively between the Company and the Guarantor and (c) transactions under the
agreements listed on Schedule 3.17 to the Note Purchase Agreement.

                      5.8 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.

                      5.9 Nature of Business. The Company will not, and the
Company will not permit any Subsidiary to, engage in any business other than
that conducted on the date hereof and any businesses reasonably related thereto.

                      5.10 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"), excluding the Guarantor, 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



                                       12

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.

                      5.11 Formation of Subsidiaries. The Company will not, and
will not cause or permit any of its Subsidiaries to, form, acquire or permit the
existence of any new domestic Subsidiary, without causing such domestic
Subsidiary to execute and deliver to the Holders a secured guaranty of the Notes
and related security document, in form and substance satisfactory to the
Holders.

                      5.12 Books and Records. The Company shall keep proper
books of record and account, in which full and correct entries shall be made of
all financial transactions and the assets and business of the Company and its
Subsidiaries in accordance with GAAP consistently applied.

                      5.13 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.

                      5.14 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.

                      5.15 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.

               6. The occurrence of any one or more of the following events
shall constitute an "Event of Default":

                      6.1 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.



                                       13

                      6.2 Financial Covenants. The failure of Company or any of
its Subsidiaries to perform, observe or comply with any of the Financial
Covenants set forth on Schedule 8.5 to the Note Purchase Agreement, and
incorporated by reference in this Note in Section 5.2.

                      6.3 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, the Security Agreement or any of the other Loan
Documents (other than the Financial Covenants set forth on Schedule 8.5 to the
Note Purchase Agreement, and incorporated by reference in this Note in Section
5.2), if such failure is not cured within sixty (60) days.

                      6.4 Representations and Warranties. If any representation
or warranty made by the Company or any of its Subsidiaries in the Loan Documents
is not true and correct in all material respects on the Initial Closing Date.

                      6.5 Default on Other Obligations. The occurrence of any
condition or default under any other indebtedness for borrowed money of the
Company or any of its Subsidiaries with a principal amount of at least five
hundred thousand dollars ($500,000) that results in the acceleration of such
indebtedness which is not cured within sixty (60) days.

                      6.6 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.

                      6.7 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.

                      6.8 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 five hundred thousand dollars ($500,000) 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 sixty (60) consecutive



                                       14

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.

                      6.9 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
Loan Documents.

                      6.10 Adverse Change in Financial Condition. Any event
having a material adverse effect on the business, operations, assets, properties
or condition of the Company and its Subsidiaries taken as a whole shall have
occurred and be continuing or a material adverse effect on the validity or
enforceability of this or any of the other Loan Documents or the rights or
remedies of the Holders hereunder or thereunder.

               7. 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 Security Agreement, the other Loan Documents and under
applicable law, all such rights and remedies being cumulative and enforceable
alternatively, successively or concurrently.

               8. Prepayment. The Company may not prepay this Note prior to the
Maturity Date without the prior written consent of the Holders.

               9. Seniority.

                             (a) Except as set forth in the Subordination
Agreement, the Notes will rank senior in right of payment to all other
indebtedness of the Company, other than the GA Notes and the January 2004 Notes,
with respect to which the Notes will be pari passu in right of payment in
accordance with the Intercreditor Agreement.

                             (b) Notwithstanding anything to the contrary
contained in the Notes, this Note and the other Notes, and the terms and the
conditions hereof and thereof, are subject to the Intercreditor Agreement.

               10. Assignment. Subject to the restrictions on transfer described
in Section 12 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.

               11. Waiver of Notice. The Company hereby waives notice,
presentment, demand, protest and notice of dishonor.

               12. Transfer of This Note. With respect to any offer, sale or
other disposition of this Note, Holder will give written notice to the Company
prior thereto, describing briefly the manner thereof, together with a written
opinion of such Holder's



                                       15

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, 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. Notwithstanding the foregoing, the Holder shall not be permitted
to transfer this Note to any Person who is not an Affiliate until the earlier of
(i) the obtaining of Stockholder Approval, (ii) the receipt of written notice
from the Company that Stockholder Approval cannot be obtained, or the occurrence
of an actual vote of the Company's shareholders entitled to vote (whether by
written consent or at a meeting specially called for such purpose), the result
of which is a decision by a majority of the Company's shareholders entitled to
vote to decline to grant Stockholder Approval, (iii) six (6) months from the
date hereof and (iv) the occurrence of an Event of Default. 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.

               13. 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.

               14. 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



                                       16

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.

               15. 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.

               16. Governing Law. This Note shall be governed by and construed
in accordance with the laws of the State of California, excluding that body of
law relating to conflict of laws.

               17. 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 a majority 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.

               18. 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.

               19. 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, ANY OF THE LOAN
DOCUMENTS AND/OR ANY TRANSACTIONS, OCCURRENCES, COMMUNICATIONS, OR
UNDERSTANDINGS (OR THE LACK OF ANY OF THE FOREGOING) RELATING IN ANY WAY TO
DEBTOR-CREDITOR RELATIONSHIP 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



                                       17

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.

               20. 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.


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                                       18


               IN WITNESS WHEREOF, the Company has caused this Note to be issued
this 9th day of March, 2004.



                                    COMPANY:

                                    CRITICAL PATH, INC.,
                                    a California corporation


                                    By:
                                       -----------------------------------------
                                       Name:  William E. McGlashan, Jr.
                                       Title:  Chairman, Chief Executive Officer

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

                                       With a copy to:

                                       Pillsbury Winthrop LLP
                                       50 Fremont Street
                                       San Francisco, CA 94105
                                       Telecopy:  (415) 983-1200
                                       Attention:  Gregg Vignos, Esq.



Name of Holder:
               --------------------------------
Address:
         --------------------------------------

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

Telephone:
          -------------------------------------
Facsimile:
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EX-4.2

                                                                     EXHIBIT 4.2

                           THIRD AMENDED AND RESTATED

                          REGISTRATION RIGHTS AGREEMENT

        THIRD AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT, dated March 9,
2004 (this "Agreement"), among Critical Path, Inc., a California corporation
(the "Company"), General Atlantic Partners 74, L.P., a Delaware limited
partnership ("GAP LP"), GAP Coinvestment Partners II, L.P., a Delaware limited
partnership ("GAP Coinvestment"), GapStar, LLC, a Delaware limited liability
company ("GapStar"), GAPCO GmbH & Co. KG, a German limited partnership ("GmbH
Coinvestment"), Cenwell Limited ("Cenwell"), Campina Enterprises Limited
("Campina"), Great Affluent Limited ("Great Affluent"), Dragonfield Limited
("Dragonfield"), Lion Cosmos Limited ("Lion Cosmos"), Vectis CP Holdings, LLC, a
Delaware limited liability company ("Vectis"), Permal U.S. Opportunities Limited
("Permal"), Zaxis Equity Neutral, L.P. ("Zaxis Equity"), Zaxis Institutional
Partners, L.P. ("Zaxis Institutional"), Zaxis Offshore Limited ("Zaxis
Offshore"), Zaxis Partners, L.P. ("Zaxis Partners"), Guggenheim Portfolio
Company XIII ("Guggenheim" and collectively with Permal, Zaxis Equity, Zaxis
Institutional, Zaxis Offshore and Zaxis Partners, "Apex Capital"), Passport
Master Fund, L.P. ("Passport Capital"), Crosslink Crossover Fund IV, L.P.
("Crosslink"), Sagamore Hill Hub Fund, Ltd. ("Sagamore"), Criterion Capital
Partners, Ltd. ("Criterion Limited"), Criterion Capital Partners, Institutional
("Criterion Institutional"), Criterion Capital Partners, L.P. ("Criterion LP"
and together with Criterion Limited and Criterion Institutional, "Criterion")
and Capital Ventures International ("Heights Capital");

        WHEREAS, pursuant to the Stock and Warrant Purchase Agreement, dated
November 8, 2001, as amended from time to time (the "Stock Purchase Agreement"),
among the Company, GAP LP, GAP Coinvestment, GapStar, Cenwell, Campina and
Vectis, the Company has (i) issued and sold to GAP LP, GAP Coinvestment,
GapStar, Cenwell, Campina and Vectis, an aggregate of 2,162,582 shares of Series
D Cumulative Redeemable Convertible Participating Series D Preferred Stock, par
value $0.001 per share, of the Company, as amended from time to time (the
"Series D Preferred Stock"), (ii) issued and delivered to GAP LP, GAP
Coinvestment and GapStar an aggregate of 1,837,418 shares of Series D Preferred
Stock in exchange for a certain amount of convertible subordinated notes of the
Company and (iii) issued and sold to GAP LP, GAP Coinvestment and GapStar
warrants to purchase shares of Common Stock (as hereinafter defined) (the
"Warrants");

        WHEREAS, pursuant to the Convertible Note Purchase and Exchange
Agreement, dated November 18, 2003 (the "Convertible Note Purchase and Exchange
Agreement"), among the Company, GAP LP, GAP Coinvestment, GapStar, GAP-W, LLC, a
Delaware limited liability company, GmbH Coinvestment, Campina, Cenwell, Great
Affluent, Dragonfield and Lion Cosmos, as amended, (i) the Company has issued
and sold to GAP LP, GAP Coinvestment, GapStar and GmbH Coinvestment convertible
promissory notes (the "GA Notes") which are convertible into shares, par value
$0.001 per share, of Series E Redeemable Convertible Preferred Stock of the
Company (the "Series E Preferred Stock") and (ii) Campina, Cenwell, Great
Affluent, Dragonfield and Lion Cosmos agreed upon the satisfaction of certain
conditions to exchange their CK Sub Notes (as hereinafter defined) for shares of
Series E Preferred Stock;




        WHEREAS, pursuant to the Convertible Note Purchase Agreement, dated
January 16, 2004, among the Company, Permal, Zaxis Equity, Zaxis Institutional,
Zaxis Offshore, Zaxis Partners and Passport Capital (the "January Convertible
Note Agreement"), the Company has issued and sold to Permal, Zaxis Equity, Zaxis
Institutional, Zaxis Offshore, Zaxis Partners and Passport Capital convertible
promissory notes (the "January 2004 Notes") which are convertible into shares of
Series E Preferred Stock;

        WHEREAS, pursuant to the Convertible Note Purchase Agreement, dated
March 9, 2004, among the Company, Apex Capital, Crosslink, Sagamore, Criterion
and Heights Capital (the "March Convertible Note Agreement" and, together with
the January Convertible Note Agreement, the "Convertible Note Agreements"), the
Company has issued and sold to Apex Capital, Crosslink, Sagamore, Criterion and
Heights Capital convertible promissory notes in the principal amount of up to
$18,500,000 (the "March 2004 Notes" and, collectively with the GA Notes and the
January 2004 Notes, the "Notes") which are convertible into shares of Series E
Preferred Stock; and

        WHEREAS, in order to induce (i) each of GAP LP, GAP Coinvestment,
GapStar, GmbH Coinvestment, Apex Capital, Passport Capital, Crosslink, Sagamore,
Criterion and Heights Capital to purchase the Notes and (ii) Campina, Cenwell,
Great Affluent, Dragonfield and Lion Cosmos to exchange the CK Sub Notes for
shares of Series E Preferred Stock, the Company has agreed to grant registration
rights with respect to the Registrable Securities (as hereinafter defined) as
set forth in this Agreement:

        NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth herein and for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follows:

        1. Definitions. As used in this Agreement, and unless the context
requires a different meaning, the following terms have the meanings indicated:

               "Affiliate" shall mean any Person who is an "affiliate" as
defined in Rule 12b-2 of the General Rules and Regulations under the Exchange
Act.

               "Agreement" means this Agreement as the same may be amended,
supplemented or modified in accordance with the terms hereof.

               "Amended and Restated Stockholders Agreement" shall mean the
Amended and Restated Stockholders Agreement, dated the date hereof, among the
Company, GAP LP, GAP Coinvestment, GapStar, GmbH Coinvestment and the Persons
listed therein as "Coinvestors."

               "Apex Capital" has the meaning set forth in the preamble to this
Agreement.

               "Apex Stockholders" means Apex Capital, Passport Capital,
Crosslink, Sagamore, Criterion and Heights Capital and any Affiliate thereof
that, after the date hereof, acquires Registrable Securities.


                                       2


               "Approved Underwriter" has the meaning set forth in Section 3(f)
of this Agreement.

               "Board of Directors" means the Board of Directors of the Company.

               "Business Day" means any day other than a Saturday, Sunday or
other day on which commercial banks in the State of New York are authorized or
required by law or executive order to close.

               "Campina" has the meaning set forth in the preamble to this
Agreement.

               "Cenwell" has the meaning set forth in the preamble to this
Agreement.

               "Coinvestor Stockholders" means Cenwell, Campina, Great Affluent,
Dragonfield, Lion Cosmos and any Affiliate thereof that, after the date hereof,
acquires Registrable Securities.

               "CK Sub Notes" means the 53/4% Convertible Subordinated Notes due
April 1, 2005 issued by the Company in the principal face amount of thirty-two
million seven hundred ninety-five thousand dollars ($32,795,000), pursuant to
the Company's Indenture, dated March 31, 2000.

               "Commission" means the Securities and Exchange Commission or any
similar agency then having jurisdiction to enforce the Securities Act.

               "Common Stock" means the Common Stock, par value $0.001 per
share, of the Company or any other capital stock of the Company into which such
stock is reclassified or reconstituted and any other common stock of the
Company.

               "Company" has the meaning set forth in the preamble to this
Agreement.

               "Company Underwriter" has the meaning set forth in Section 4(a)
of this Agreement.

               "Conversion" has the meaning set forth in the Convertible Note
Agreements.

               "Conversion and Exchange" has the meaning set forth in the
Convertible Note Purchase and Exchange Agreement.

               "Convertible Note Purchase and Exchange Agreement" has the
meaning set forth in the recitals to this Agreement.

               "Convertible Note Agreements" has the meaning set forth in the
recitals to this Agreement.

               "Criterion" has the meaning set forth in the preamble to this
Agreement.

               "Crosslink" has the meaning set forth in the preamble to this
Agreement.


                                       3


               "Daily Trade Amount" means, (a) as to each of the General
Atlantic Stockholders, the Coinvestor Stockholders, the Vectis Stockholders and
the Apex Stockholders (other than Passport Capital, Crosslink, Sagamore,
Criterion and Heights Capital), the greater of (i) with respect to any date a
proposed sale pursuant to a Registration Statement is to be executed, 20% of the
daily trading volume of the Common Stock on the Nasdaq National Market System on
the date a proposed trade is to take place and (ii) 20% of the average daily
trading volume of the Common Stock on the Nasdaq National Market for the five
trading days immediately preceding such date, (b) as to Passport Capital, the
greater of (i) 6.7% of the daily trading volume of the Common Stock on the
Nasdaq National Market System on the date a proposed trade is to take place and
(ii) 6.7% of the average daily trading volume of the Common Stock on the Nasdaq
National Market for the five trading days immediately preceding such date, (c)
as to Crosslink, the greater of (i) 8.9% of the daily trading volume of the
Common Stock on the Nasdaq National Market System on the date a proposed trade
is to take place and (ii) 8.9% of the average daily trading volume of the Common
Stock on the Nasdaq National Market for the five trading days immediately
preceding such date, (d) as to Sagamore, the greater of (i) 5.3% of the daily
trading volume of the Common Stock on the Nasdaq National Market System on the
date a proposed trade is to take place and (ii) 5.3% of the average daily
trading volume of the Common Stock on the Nasdaq National Market for the five
trading days immediately preceding such date, (e) as to Criterion, the greater
of (i) 6.2% of the daily trading volume of the Common Stock on the Nasdaq
National Market System on the date a proposed trade is to take place and (ii)
6.2% of the average daily trading volume of the Common Stock on the Nasdaq
National Market for the five trading days immediately preceding such date and
(f) as to Heights Capital, the greater of (i) 3.6% of the daily trading volume
of the Common Stock on the Nasdaq National Market System on the date a proposed
trade is to take place and (ii) 3.6% of the average daily trading volume of the
Common Stock on the Nasdaq National Market for the five trading days immediately
preceding such date; provided, however, that for the purpose of calculating the
Daily Trade Amount, a block trade effected by a party outside the Nasdaq
National Market System shall be disregarded for purposes of calculating the
amount disposed of by the party and the daily trading volume. The Daily Trade
Amount shall apply to each such stockholder severally and not jointly, shall not
be aggregated among or between such stockholders, and such stockholders shall
not be required hereby to coordinate their sales or dispositions of Common
Stock.

               "Demand Registration" has the meaning set forth in Section 3(a)
of this Agreement.

               "Designated Holder" means each of the General Atlantic
Stockholders, the Coinvestor Stockholders, the Vectis Stockholders and the Apex
Stockholders and any transferee of any of them to whom Registrable Securities
have been transferred in accordance with Section 9(f) of this Agreement, other
than a transferee to whom Registrable Securities have been transferred pursuant
to a Registration Statement under the Securities Act or Rule 144 (or any
successor rule thereto).

               "Dragonfield" has the meaning set forth in the recitals to this
Agreement.


                                       4


               "Exchange" has the meaning set forth in the Convertible Note
Purchase and Exchange Agreement.

               "Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission thereunder.

               "GA Notes" has the meaning set forth in the recitals to this
Agreement.

               "GAP Coinvestment" has the meaning set forth in the preamble to
this Agreement.

               "GAP LLC" means General Atlantic Partners, LLC, a Delaware
limited liability company and the general partner of GAP LP and the managing
member of GapStar, and any successor to such entity.

               "GAP LP" has the meaning set forth in the preamble to this
Agreement.

               "GapStar" has the meaning set forth in the preamble to this
Agreement.

               "General Atlantic Stockholders" means GAP LP, GAP Coinvestment,
GapStar, GmbH Coinvestment and any Affiliate of GAP LLC that, after the date
hereof, acquires Registrable Securities.

               "GmbH Coinvestment" means GAPCO GmbH & Co. KG, a German limited
partnership.

               "Great Affluent" has the meaning set forth in the recitals to
this Agreement.

               "Heights Capital" has the meaning set forth in the preamble to
this Agreement.

               "Holders' Counsel" has the meaning set forth in Section 6(a)(i)
of this Agreement.

               "Incidental Registration" has the meaning set forth in Section
4(a) of this Agreement.

               "Indemnified Party" has the meaning set forth in Section 7(c) of
this Agreement.

               "Indemnifying Party" has the meaning set forth in Section 7(c) of
this Agreement.

               "Initiating Holders" has the meaning set forth in Section 3(a) of
this Agreement.

               "Inspector" has the meaning set forth in Section 6(a)(vii) of
this Agreement.

               "January Convertible Note Agreement" has the meaning set forth in
the recitals to this Agreement.

               "January 2004 Notes" has the meaning set forth in the recitals to
this Agreement.


                                       5


               "Liability" has the meaning set forth in Section 7(a) of this
Agreement.

               "Lion Cosmos" has the meaning set forth in the recitals to this
Agreement.

               "March Convertible Note Agreement" has the meaning set forth in
the recitals to this Agreement.

               "March 2004 Notes" has the meaning set forth in the recitals to
this Agreement.

               "NASD" means the National Association of Securities Dealers, Inc.

               "Passport Capital" has the meaning set forth in the preamble to
this Agreement.

               "Person" means any individual, firm, corporation, partnership,
limited liability company, trust, incorporated or unincorporated association,
joint venture, joint stock company, limited liability company, government (or an
agency or political subdivision thereof) or other entity of any kind, and shall
include any successor (by merger or otherwise) of such entity.

               "Public Offering" means any public offering of the shares of
Common Stock of the Company pursuant to an effective Registration Statement
filed under the Securities Act.

               "Records" has the meaning set forth in Section 6(a)(vii) of this
Agreement.

               "Registrable Securities" means each of the following: (a) any and
all shares of Common Stock issued or issuable upon conversion of shares of
Series D Preferred Stock or exercise of the Warrants, and, subject to
Stockholder Approval, any and all shares of Common Stock issued or issuable upon
conversion of shares of Series E Preferred Stock, (b) if the Subsequent Closing
does not occur by August 15, 2004, the shares of Common Stock issued upon
conversion of the January 2004 Notes and the March 2004 Notes, (c) any other
shares of Common Stock acquired or owned by any of the Designated Holders after
the date hereof if such Designated Holder is an Affiliate of the Company and (d)
any shares of Common Stock issued or issuable to any of the Designated Holders
with respect to the Registrable Securities by way of stock dividend or stock
split or in connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization or otherwise and any shares of Common
Stock or voting common stock issuable upon conversion, exercise or exchange
thereof.

               "Registration Expenses" has the meaning set forth in Section 6(d)
of this Agreement.

               "Registration Statement" means a Registration Statement filed
pursuant to the Securities Act.

               "Rights Offering" has the meaning set forth in the Convertible
Note Purchase and Exchange Agreement.

               "Sagamore" has the meaning set forth in the preamble to this
Agreement.


                                       6


               "Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations of the Commission promulgated thereunder.

               "Series D Preferred Stock" has the meaning set forth in the
recitals to this Agreement.

               "Series E Preferred Stock" has the meaning set forth in the
recitals to this Agreement.

               "Stock Purchase Agreement" has the meaning set forth in the
recitals to this Agreement.

               "Stockholder Approval" has the meaning set forth in the
Convertible Note Purchase and Exchange Agreement.

               "Valid Business Reason" has the meaning set forth in Section 3(a)
of this Agreement.

               "Vectis" has the meaning set forth in the preamble of this
Agreement.

               "Vectis Stockholders" means Vectis and any Affiliate thereof
that, after the date hereof, acquires Registrable Securities.

               "Warrants" has the meaning set forth in the recitals to this
Agreement.

        2. General; Securities Subject to this Agreement.

               (a) Grant of Rights. The Company hereby grants registration
rights to the Designated Holders upon the terms and conditions set forth in this
Agreement.

               (b) Registrable Securities. For the purposes of this Agreement,
Registrable Securities will cease to be Registrable Securities, when (i) a
Registration Statement covering such Registrable Securities has been declared
effective under the Securities Act by the Commission and such Registrable
Securities have been disposed of pursuant to such effective Registration
Statement, (ii) (x) the entire amount of the Registrable Securities owned by a
Designated Holder may be sold in a single sale, in the opinion of counsel
satisfactory to the Company and such Designated Holder, each in their reasonable
judgment, without any limitation as to volume pursuant to Rule 144 (or any
successor provision then in effect) under the Securities Act and (y) such
Designated Holder owning such Registrable Securities owns less than one percent
(1%) of the outstanding shares of Common Stock on a fully diluted basis, or
(iii) the Registrable Securities are proposed to be sold or distributed by a
Person not entitled to the registration rights granted by this Agreement.

               (c) Holders of Registrable Securities. A Person is deemed to be a
holder of Registrable Securities whenever such Person owns of record Registrable
Securities, or holds an option to purchase, or a security convertible into or
exercisable or exchangeable for, Registrable Securities whether or not such
acquisition or conversion has actually been effected. If the Company receives
conflicting instructions, notices or elections from two or more Persons with


                                       7


respect to the same Registrable Securities, the Company may act upon the basis
of the instructions, notice or election received from the registered owner of
such Registrable Securities. Registrable Securities issuable upon exercise of an
option or upon conversion of another security shall be deemed outstanding for
the purposes of this Agreement.

        3. Demand Registration.

               (a) Request for Demand Registration. At any time after the
earliest of (i) the expiration or consummation of the exercise of the right of
the General Atlantic Stockholders and the Coinvestor Stockholders (or their
respective permitted transferees) to purchase those shares of Series E Preferred
Stock offered in the Rights Offering but not acquired by holders of shares of
the Company's Common Stock, (ii) the termination of the Rights Offering and the
occurrence of the special meeting to seek Stockholder Approval and (iii) August
15, 2004, if the Conversion and Exchange and the Conversion have not occurred on
or prior to such date, each of (A) the General Atlantic Stockholders, (B) the
Coinvestor Stockholders, (C) Apex Capital, (D) Passport Capital, (E) Crosslink,
(F) Sagamore, (G) Criterion and (H) Heights Capital (the "Initiating Holders"),
may each make a written request to the Company to register, and the Company
shall register, under the Securities Act and on an appropriate registration
statement form as reasonably determined by the Company and approved by the
Initiating Holders (a "Demand Registration"), the number of Registrable
Securities stated in such request; provided, however, that the Company shall not
be obligated to effect more than one such Demand Registration for the General
Atlantic Stockholders (subject to Section 3(e)(ii) below), more than one such
Demand Registration for the Coinvestor Stockholders (subject to Section 3(e)(ii)
below), more than one such Demand Registration for Apex Capital (subject to
Section 3(e)(ii) below), more than one such Demand Registration for Passport
Capital (subject to Section 3(e)(ii) below), more than one such Demand
Registration for Crosslink (subject to Section 3(e)(ii) below), more than one
such Demand Registration for Sagamore (subject to Section 3(e)(ii) below), more
than one such Demand Registration for Criterion (subject to Section 3(e)(ii)
below) and more than one such Demand Registration for Heights Capital (subject
to Section 3(e)(ii) below). If following receipt of a written request for a
Demand Registration the Board of Directors, in its good faith judgment,
determines that any registration of Registrable Securities should not be made or
continued because it would materially interfere with any material financing,
acquisition, corporate reorganization or merger or other material transaction
involving the Company (a "Valid Business Reason"), the Company may (x) postpone
filing a Registration Statement relating to a Demand Registration until such
Valid Business Reason no longer exists, but in no event for more than ninety
(90) days, and (y) in case a Registration Statement has been filed relating to a
Demand Registration, if the Valid Business Reason has not resulted from actions
taken by the Company, the Company, upon the approval of a majority of the Board
of Directors, such majority to include at least one Director appointed by the
General Atlantic Stockholders, may cause such Registration Statement to be
withdrawn and its effectiveness terminated or may postpone amending or
supplementing such Registration Statement. The Company shall give written notice
of its determination to postpone or withdraw a Registration Statement and of the
fact that the Valid Business Reason for such postponement or withdrawal no
longer exists, in each case, promptly after the occurrence thereof.
Notwithstanding anything to the contrary contained herein, the Company may not
postpone or withdraw a filing under this Section 3(a) more than once in any
twelve (12) month period. Each request for a Demand Registration by the
Initiating


                                       8


Holders shall state the amount of the Registrable Securities proposed to be sold
and the intended method of disposition thereof.

               (b) Incidental or "Piggy-Back" Rights with Respect to a Demand
Registration. Each of the Designated Holders (other than Initiating Holders
which have requested a registration under Section 3(a)) may offer its or his
Registrable Securities under any Demand Registration pursuant to this Section
3(b). Within five (5) days after the receipt of a request for a Demand
Registration from an Initiating Holder, the Company shall (i) give written
notice thereof to all of the Designated Holders (other than Initiating Holders
which have requested a registration under Section 3(a)) and (ii) subject to
Section 3(e), include in such registration all of the Registrable Securities
held by such Designated Holders from whom the Company has received a written
request for inclusion therein within ten (10) days of the receipt by such
Designated Holders of such written notice referred to in clause (i) above. Each
such request by such Designated Holders shall specify the number of Registrable
Securities proposed to be registered. The failure of any Designated Holder to
respond within such 10 day period referred to in clause (ii) above shall be
deemed to be a waiver of such Designated Holder's rights under this Section 3
with respect to such Demand Registration. Any Designated Holder may waive its
rights under this Section 3 prior to the expiration of such 10-day period by
giving written notice to the Company, with a copy to the Initiating Holders. If
a Designated Holder sends the Company a written request for inclusion of part or
all of such Designated Holder's Registrable Securities in a registration, such
Designated Holder shall not be entitled to withdraw or revoke such request
without the prior written consent of the Company in its sole discretion unless,
as a result of facts or circumstances arising after the date on which such
request was made relating to the Company or to market conditions, such
Designated Holder reasonably determines that participation in such registration
would have a material adverse effect on such Designated Holder.

               (c) Effective Demand Registration. The Company shall use all
commercially reasonable efforts to cause any such Demand Registration to be
filed not later than thirty (30) days after it receives a request under Section
3(a) hereof and to become and remain effective as soon as practicable thereafter
but, in any event, not later than ninety (90) days (or, if the Company is
eligible to effect such registration on Form S-3, sixty (60) days) after such
filing. A registration shall not constitute a Demand Registration unless it has
become effective and remains continuously effective until the earlier of the
date (i) on which all Registrable Securities registered in the Demand
Registration are sold and (ii) that is the second anniversary of the
effectiveness of the Registration Statement relating to such Demand
Registration; provided, however, that a registration shall not constitute a
Demand Registration if (x) after such Demand Registration has become effective,
such registration or the related offer, sale or distribution of Registrable
Securities thereunder is interfered with by any stop order, injunction or other
order or requirement of the Commission or other governmental agency or court for
any reason not attributable to the Initiating Holders and such interference is
not thereafter eliminated or (y) the conditions specified in the underwriting
agreement, if any, entered into in connection with such Demand Registration are
not satisfied or waived, other than by reason of a failure by the Initiating
Holder.

               (d) Expenses. The Company shall pay all Registration Expenses in
connection with a Demand Registration, whether or not such Demand Registration
becomes



                                       9


effective, except for an underwritten Demand Registration pursuant to Section
3(e)(i)(y) below, as to which each participating Designated Holder shall bear
its pro rata portion of expenses based on the number of shares of Common Stock
registered pursuant thereto.

               (e) Underwriting Procedures.

                        (i) If (x) any of the Initiating Holders so elects for
itself or (y) with respect to any given trading day, a Designated Holder
proposes to sell or dispose of more than the Daily Trade Amount and the
Company's board of directors determines in good faith that it is necessary for
an orderly distribution to be made pursuant to a firm commitment underwritten
offering, then the Company shall use all commercially reasonable efforts to
cause such Demand Registration to be in the form of, and such Designated Holder
or Designated Holders shall be obligated to sell or dispose of its or their
Registrable Securities pursuant to, a firm commitment underwritten offering and
the managing underwriter or underwriters selected for such offering shall be the
Approved Underwriter selected in accordance with Section 3(f). In connection
with any Demand Registration under this Section 3 involving an underwritten
offering, none of the Registrable Securities held by any Designated Holder
making a request for inclusion of such Registrable Securities pursuant to
Section 3(b) hereof shall be included in such underwritten offering unless such
Designated Holder accepts the terms of the offering as agreed upon by the
Company, the Initiating Holders and the Approved Underwriter, and then only in
such quantity as will not, in the opinion of the Approved Underwriter,
jeopardize the success of such offering by the Initiating Holders. If the
Approved Underwriter advises the Company in its reasonable opinion that the
aggregate amount of such Registrable Securities requested to be included in such
offering is sufficiently large to have a material adverse effect on the success
of such offering, then the Company shall include in such registration only the
aggregate amount of Registrable Securities that the Approved Underwriter
believes may be sold without any such material adverse effect and shall reduce
the amount of Registrable Securities to be included in such registration by
removing from such registration securities owned, first by the Company and
second by the Designated Holders (including the Initiating Holders) pro rata
based on the number of Registrable Securities owned by each such Designated
Holder.

                        (ii) If an Initiating Holder makes a request for a
Demand Registration and, pursuant to Section 3(e)(i) above, the Approved
Underwriter advises the Company to reduce the aggregate amount of Registrable
Securities requested to be included in such offering such that less than
seventy-five percent (75%) of the Registrable Securities requested to be
included by any Initiating Holder are ultimately included in and sold pursuant
to such Demand Registration, the Initiating Holder shall have the right to
require the Company to effect an additional Demand Registration; provided,
however, that in no event shall the aggregate number of Demand Registrations to
be effected by the Company for any one Initiating Holder exceed two (2).

               (f) Selection of Underwriters. If any Demand Registration of
Registrable Securities is in the form of an underwritten offering, the Company
shall select and obtain an investment banking firm of national reputation to act
as the managing underwriter of the offering (the "Approved Underwriter");
provided, however, that the Approved Underwriter shall, in any case, also be
approved by the Initiating Holders.


                                       10


        4. Incidental or "Piggy-Back" Registration.

               (a) Request for Incidental Registration. If at any time the
Company proposes to file a Registration Statement under the Securities Act with
respect to an offering by the Company for its own account (other than a
Registration Statement on Form S-4 or S-8 or any successor thereto) or for the
account of any stockholder of the Company other than the Designated Holders,
then the Company shall give written notice of such proposed filing to each of
the Designated Holders at least twenty (20) days before the anticipated filing
date, and such notice shall describe the proposed registration and distribution
and offer such Designated Holders the opportunity to register the number of
Registrable Securities as each such Designated Holder may request (an
"Incidental Registration"). The Company shall use all commercially reasonable
efforts (within twenty (20) days of the notice provided for in the preceding
sentence) to cause the managing underwriter or underwriters in the case of a
proposed underwritten offering (the "Company Underwriter") to permit each of the
Designated Holders who have requested in writing to participate in the
Incidental Registration to include its or his Registrable Securities in such
offering on the same terms and conditions as the securities of the Company or
the account of such other stockholder, as the case may be, included therein. In
connection with any Incidental Registration under this Section 4(a) involving an
underwritten offering, the Company shall not be required to include any
Registrable Securities in such underwritten offering unless the Designated
Holders thereof accept the terms of the underwritten offering as agreed upon
between the Company, such other stockholders, if any, and the Company
Underwriter, and then only in such quantity as the Company Underwriter believes
will not jeopardize the success of the offering by the Company. If the Company
Underwriter determines that the registration of all or part of the Registrable
Securities which the Designated Holders have requested to be included would
materially adversely affect the success of such offering, then the Company shall
be required to include in such Incidental Registration, to the extent of the
amount that the Company Underwriter believes may be sold without causing such
adverse effect, first, all of the securities to be offered for the account of
the Company or on the account of the selling stockholder that caused the
registration statement that has triggered the Incidental Registration to be
filed, as the case may be; second, the Registrable Securities to be offered for
the account of the Designated Holders pursuant to this Section 4, pro rata based
on the number of Registrable Securities owned by each such Designated Holder;
and third, any other securities requested to be included in such offering.

               (b) Expenses. The Company shall bear all Registration Expenses in
connection with any Incidental Registration pursuant to this Section 4, whether
or not such Incidental Registration becomes effective.

        5. Holdback Agreements.

               (a) Restrictions on Public Sale by Designated Holders. To the
extent (i) requested (A) by the Company or the Initiating Holders, as the case
may be, in the case of a non-underwritten public offering and (B) by the
Approved Underwriter or the Company Underwriter, as the case may be, in the case
of an underwritten public offering and (ii) all of the Company's officers,
directors and holders in excess of one percent (1%) of its outstanding capital
stock execute agreements identical to those referred to in this Section 5(a),
each Designated Holder agrees (x) not to effect any public sale or distribution
of any Registrable


                                       11


Securities or of any securities convertible into or exchangeable or exercisable
for such Registrable Securities, including a sale pursuant to Rule 144 under the
Securities Act, or offer to sell, contract to sell (including without limitation
any short sale), grant any option to purchase or enter into any hedging or
similar transaction with the same economic effect as a public sale any
Registrable Securities and (y) not to make any request for a Demand Registration
under this Agreement, during the ninety (90) day period or such shorter period,
if any, mutually agreed upon by such Designated Holder and the requesting party
beginning on the effective date of the Registration Statement (except as part of
such registration) for such public offering. No Designated Holder of Registrable
Securities subject to this Section 5(a) shall be released from any obligation
under any agreement, arrangement or understanding entered into pursuant to this
Section 5(a) unless all other Designated Holders of Registrable Securities
subject to the same obligation are also released. All Designated Holders of
Registrable Securities shall be automatically released from any obligations
under any agreement, arrangement or understanding entered into pursuant to this
Section 5(a) immediately upon the expiration of the 90 day period, and in any
case, on the date that is two years from the date of this Agreement.

               (b) Restrictions on Public Sale by the Company. The Company
agrees not to effect any public sale or distribution of any of its securities,
or any securities convertible into or exchangeable or exercisable for such
securities (except pursuant to registrations on Form S-4 or S-8 or any successor
thereto), during the period beginning on the effective date of any Registration
Statement in which the Designated Holders of Registrable Securities are
participating and ending on the earlier of (i) the date on which all Registrable
Securities registered on such Registration Statement are sold and (ii) 120 days
after the effective date of such Registration Statement (except as part of such
registration).

        6. Registration Procedures.

               (a) Obligations of the Company. Whenever registration of
Registrable Securities has been requested pursuant to Section 3 or Section 4 of
this Agreement, the Company shall use all commercially reasonable efforts to
effect the registration and sale of such Registrable Securities in accordance
with the intended method of distribution thereof as quickly as practicable, and
in connection with any such request, the Company shall, as expeditiously as
possible:

                        (i) prepare and file with the Commission a Registration
Statement on any form for which the Company then qualifies or which counsel for
the Company shall deem appropriate and which form shall be available for the
sale of such Registrable Securities in accordance with the intended method of
distribution thereof, and cause such Registration Statement to become effective;
provided, however, that (x) before filing a Registration Statement or prospectus
or any amendments or supplements thereto, the Company shall provide counsel
selected by the Designated Holders holding a majority of the Registrable
Securities being registered in such registration ("Holders' Counsel") with an
adequate opportunity to review and comment on such Registration Statement and
each prospectus included therein (and each amendment or supplement thereto) to
be filed with the Commission, subject to such documents being under the
Company's control, and (y) the Company shall notify the Holders' Counsel and
each seller of Registrable Securities of any stop order issued or threatened by
the Commission and take all action required to prevent the entry of such stop
order or to remove it if entered;


                                       12


                        (ii) prepare and file with the Commission such
amendments and supplements to such Registration Statement and the prospectus
used in connection therewith as may be necessary to keep such Registration
Statement effective for the lesser of (x) 120 days and (y) such shorter period
which will terminate when all Registrable Securities covered by such
Registration Statement have been sold, and comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
Registration Statement during such period in accordance with the intended
methods of disposition by the sellers thereof set forth in such Registration
Statement;

                        (iii) furnish to each seller of Registrable Securities,
prior to filing a Registration Statement, at least one copy of such Registration
Statement as is proposed to be filed, and thereafter such number of copies of
such Registration Statement, each amendment and supplement thereto (in each case
including all exhibits thereto), and the prospectus included in such
Registration Statement (including each preliminary prospectus) and any
prospectus filed under Rule 424 under the Securities Act as each such seller may
reasonably request in order to facilitate the disposition of the Registrable
Securities owned by such seller;

                        (iv) register or qualify such Registrable Securities
under such other securities or "blue sky" laws of such jurisdictions as any
seller of Registrable Securities may request, and to continue such qualification
in effect in such jurisdiction for as long as permissible pursuant to the laws
of such jurisdiction, or for as long as any such seller requests or until all of
such Registrable Securities are sold, whichever is shortest, and do any and all
other acts and things which may be reasonably necessary or advisable to enable
any such seller to consummate the disposition in such jurisdictions of the
Registrable Securities owned by such seller; provided, however, that the Company
shall not be required to (x) qualify generally to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
Section 6(a)(iv), (y) subject itself to taxation in any such jurisdiction or (z)
consent to general service of process in any such jurisdiction;

                        (v) notify each seller of Registrable Securities at any
time when a prospectus relating thereto is required to be delivered under the
Securities Act, upon discovery that, or upon the happening of any event as a
result of which, the prospectus included in such Registration Statement contains
an untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading and the
Company shall promptly prepare a supplement or amendment to such prospectus and
furnish to each seller of Registrable Securities a reasonable number of copies
of such supplement to or an amendment of such prospectus as may be necessary so
that, after delivery to the purchasers of such Registrable Securities, such
prospectus shall not contain an untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading;

                        (vi) enter into and perform customary agreements
(including an underwriting agreement containing representations, warranties,
covenants and indemnities for securities law matters and otherwise in customary
form with the Approved Underwriter or Company Underwriter, if any, selected as
provided in Section 3 or Section 4, as the case may be) and take such other
actions as are prudent and reasonably required in order to expedite or


                                       13


facilitate the disposition of such Registrable Securities, including causing its
officers to participate in "road shows" and other information meetings organized
by the Approved Underwriter or Company Underwriter;

                        (vii) make available at reasonable times for inspection
by any seller of Registrable Securities, any managing underwriter participating
in any disposition of such Registrable Securities pursuant to a Registration
Statement, Holders' Counsel and any attorney, accountant or other agent retained
by any such seller or any managing underwriter (each, an "Inspector" and
collectively, the "Inspectors"), all financial and other records, pertinent
corporate documents and properties of the Company and its subsidiaries
(collectively, the "Records") as shall be reasonably necessary to enable them to
exercise their due diligence responsibility, and cause the Company's and its
subsidiaries' officers, directors and employees, and the independent public
accountants of the Company, to supply all information reasonably requested by
any such Inspector in connection with such Registration Statement. Records that
the Company determines, in good faith, to be confidential and which it notifies
the Inspectors are confidential shall not be disclosed by the Inspectors (and
the Inspectors shall confirm their agreement in writing in advance to the
Company if the Company shall so request) unless (x) the disclosure of such
Records is necessary, in the Company's judgment, to avoid or correct a
misstatement or omission in the Registration Statement, (y) the release of such
Records is ordered pursuant to a subpoena or other order from a court of
competent jurisdiction after exhaustion of all appeals therefrom or (z) the
information in such Records was known to the Inspectors on a non-confidential
basis prior to its disclosure by the Company or has been made generally
available to the public. Each seller of Registrable Securities agrees that it
shall, upon learning that disclosure of such Records is sought in a court of
competent jurisdiction, give notice to the Company and allow the Company, at the
Company's expense, to undertake appropriate action to prevent disclosure of the
Records deemed confidential;

                        (viii) if such sale is pursuant to an underwritten
offering, obtain a "cold comfort" letter dated the effective date of the
Registration Statement and the date of the closing under the underwriting
agreement from the Company's independent public accountants in customary form
and covering such matters of the type customarily covered by "cold comfort"
letters as the managing underwriter reasonably requests;

                        (ix) furnish, at the request of any seller of
Registrable Securities on the date such securities are delivered to the
underwriters for sale pursuant to such registration or, if such securities are
not being sold through underwriters, on the date the Registration Statement with
respect to such securities becomes effective, an opinion, if reasonably
available, dated such date, of counsel representing the Company for the purposes
of such registration, addressed to the underwriters, if any, and to the seller
making such request, covering such legal matters with respect to the
registration in respect of which such opinion is being given as the
underwriters, if any, and such seller may reasonably request and are customarily
included in such opinions;

                        (x) comply with all applicable rules and regulations of
the Commission, and make available to its security holders, as soon as
reasonably practicable but no later than fifteen (15) months after the effective
date of the Registration Statement, an earnings statement covering a period of
twelve (12) months beginning after the effective date of the


                                       14


Registration Statement, in a manner which satisfies the provisions of Section
11(a) of the Securities Act and Rule 158 thereunder;

                        (xi) cause all such Registrable Securities to be listed
on each securities exchange on which similar securities issued by the Company
are then listed, provided that the applicable listing requirements are
satisfied;

                        (xii) cooperate with each seller of Registrable
Securities and each underwriter participating in the disposition of such
Registrable Securities and their respective counsel in connection with any
filings required to be made with the NASD; and

                        (xiii) take all other steps reasonably necessary to
effect the registration of the Registrable Securities contemplated hereby.

               (b) Seller Information. The Company may require each seller of
Registrable Securities as to which any registration is being effected to
furnish, and such seller shall furnish, to the Company such information
regarding the distribution of such securities as the Company may from time to
time reasonably request in writing.

               (c) Notice to Discontinue. Each Designated Holder agrees that,
not more than two times in any 12-month period, upon receipt of any notice from
the Company of the happening of any event of the kind described in Section
6(a)(v), such Designated Holder shall, for a total period not longer than 90
days during each such 12-month period (inclusive of any delay pursuant to a
Valid Business Reason under Section 3(a) or period during which the Designated
Holder is unable to dispose of Registrable Securities under the Registration
Statement pursuant to a notice by the Company under Section 6(a)(v) hereof),
forthwith discontinue disposition of Registrable Securities pursuant to the
Registration Statement covering such Registrable Securities until such
Designated Holder's receipt of the copies of the supplemented or amended
prospectus contemplated by Section 6(a)(v) and, if so directed by the Company,
such Designated Holder shall deliver to the Company (at the Company's expense)
all copies, other than permanent file copies then in such Designated Holder's
possession, of the prospectus covering such Registrable Securities which is
current at the time of receipt of such notice. If the Company shall give any
such notice, the Company shall extend the period during which such Registration
Statement shall be maintained effective pursuant to this Agreement (including,
without limitation, the period referred to in Section 6(a)(ii)) by the number of
days during the period from and including the date of the giving of such notice
pursuant to Section 6(a)(v) to and including the date when sellers of such
Registrable Securities under such Registration Statement shall have received the
copies of the supplemented or amended prospectus contemplated by and meeting the
requirements of Section 6(a)(v).

               (d) Registration Expenses. The Company shall pay all expenses
arising from or incident to its performance of, or compliance with, this
Agreement, including, without limitation, (i) Commission, stock exchange and
NASD registration and filing fees, (ii) all fees and expenses incurred in
complying with securities or "blue sky" laws (including reasonable fees, charges
and disbursements of counsel to any underwriter incurred in connection with
"blue sky" qualifications of the Registrable Securities as may be set forth in
any underwriting agreement), (iii) all printing, messenger and delivery expenses
and (iv) the fees, charges and


                                       15


expenses of counsel to the Company and of its independent public accountants and
any other accounting fees, charges and expenses incurred by the Company
(including, without limitation, any expenses arising from any "cold comfort"
letters or any special audits incident to or required by any registration or
qualification) and any reasonable legal fees, charges and expenses incurred by
one counsel for the General Atlantic Stockholders. All of the expenses described
in the preceding sentence of this Section 6(d) are referred to herein as
"Registration Expenses." The Designated Holders of Registrable Securities sold
pursuant to a Registration Statement shall bear the expense of any underwriter's
discount or commission relating to registration and sale of such Designated
Holders' Registrable Securities.

        7. Indemnification; Contribution.

               (a) Indemnification by the Company. The Company agrees to
indemnify and hold harmless each Designated Holder, its partners, directors,
officers, affiliates and each Person who controls (within the meaning of Section
15 of the Securities Act) such Designated Holder from and against any and all
losses, claims, damages, liabilities and expenses (including reasonable costs of
investigation) (each, a "Liability" and collectively, "Liabilities"), arising
out of or based upon any untrue, or allegedly untrue, statement of a material
fact contained in any Registration Statement, prospectus or preliminary
prospectus (as amended or supplemented if the Company shall have furnished any
amendments or supplements thereto) or arising out of or based upon any omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading in the light
of the circumstances under which such statements were made, except insofar as
such Liability arises out of or is based upon any untrue statement or alleged
untrue statement or omission or alleged omission contained in such Registration
Statement, preliminary prospectus or final prospectus in reliance and in
conformity with information concerning such Designated Holder furnished in
writing to the Company by such Designated Holder expressly for use therein,
including, without limitation, the information furnished to the Company pursuant
to Section 7(b). The Company shall also provide customary indemnities to any
underwriters of the Registrable Securities, their officers, directors and
employees and each Person who controls such underwriters (within the meaning of
Section 15 of the Securities Act) to the same extent as provided above with
respect to the indemnification of the Designated Holders of Registrable
Securities.

               (b) Indemnification by Designated Holders. In connection with any
Registration Statement in which a Designated Holder is participating pursuant to
Section 3 or Section 4 hereof, each such Designated Holder shall promptly
furnish to the Company in writing such information with respect to such
Designated Holder as the Company may reasonably request or as may be required by
law for use in connection with any such Registration Statement or prospectus and
all information required to be disclosed in order to make the information
previously furnished to the Company by such Designated Holder not materially
misleading or necessary to cause such Registration Statement not to omit a
material fact with respect to such Designated Holder necessary in order to make
the statements therein not misleading. Each Designated Holder agrees to
indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the Registration Statement, any underwriter retained by
the Company and each Person who controls the Company or such underwriter (within
the meaning of Section 15 of the Securities Act) to the same extent as the
foregoing indemnity from the Company to the Designated Holders, but only if such
statement or alleged statement or omission


                                       16


or alleged omission was made in reliance upon and in conformity with information
with respect to such Designated Holder furnished in writing to the Company by
such Designated Holder expressly for use in such Registration Statement or
prospectus, including, without limitation, the information furnished to the
Company pursuant to this Section 7(b); provided, however, that the total amount
to be indemnified by such Designated Holder pursuant to this Section 7(b) shall
be limited to the net proceeds (after deducting the underwriters' discounts and
commissions) received by such Designated Holder in the offering to which the
Registration Statement or prospectus relates.

               (c) Conduct of Indemnification Proceedings. Any Person entitled
to indemnification hereunder (the "Indemnified Party") agrees to give prompt
written notice to the indemnifying party (the "Indemnifying Party") after the
receipt by the Indemnified Party of any written notice of the commencement of
any action, suit, proceeding or investigation or threat thereof made in writing
for which the Indemnified Party intends to claim indemnification or contribution
pursuant to this Agreement; provided, however, that the failure so to notify the
Indemnifying Party shall not relieve the Indemnifying Party of any Liability
that it may have to the Indemnified Party hereunder (except to the extent that
the Indemnifying Party is materially prejudiced or otherwise forfeits
substantive rights or defenses by reason of such failure). If notice of
commencement of any such action is given to the Indemnifying Party as above
provided, the Indemnifying Party shall be entitled to participate in and, to the
extent it may wish, jointly with any other Indemnifying Party similarly
notified, to assume the defense of such action at its own expense, with counsel
chosen by it and reasonably satisfactory to such Indemnified Party. The
Indemnified Party shall have the right to employ separate counsel in any such
action and participate in the defense thereof, but the fees and expenses of such
counsel shall be paid by the Indemnified Party unless (i) the Indemnifying Party
agrees to pay the same, (ii) the Indemnifying Party fails to assume the defense
of such action with counsel reasonably satisfactory to the Indemnified Party or
(iii) the named parties to any such action (including any impleaded parties)
include both the Indemnifying Party and the Indemnified Party and such parties
have been advised by such counsel that either (x) representation of such
Indemnified Party and the Indemnifying Party by the same counsel would be
inappropriate under applicable standards of professional conduct or (y) there
may be one or more legal defenses available to the Indemnified Party which are
different from or additional to those available to the Indemnifying Party. In
any of such cases, the Indemnifying Party shall not have the right to assume the
defense of such action on behalf of such Indemnified Party, it being understood,
however, that the Indemnifying Party shall not be liable for the fees and
expenses of more than one separate firm of attorneys (in addition to any local
counsel) for all Indemnified Parties. No Indemnifying Party shall be liable for
any settlement entered into without its written consent, which consent shall not
be unreasonably withheld. No Indemnifying Party shall, without the consent of
such Indemnified Party, effect any settlement of any pending or threatened
proceeding in respect of which such Indemnified Party is a party and indemnity
has been sought hereunder by such Indemnified Party, unless such settlement
includes an unconditional release of such Indemnified Party from all liability
for claims that are the subject matter of such proceeding.

               (d) Contribution. If the indemnification provided for in this
Section 7 from the Indemnifying Party is unavailable to an Indemnified Party
hereunder in respect of any Liabilities referred to herein, then the
Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall
contribute to the amount paid or payable by such Indemnified Party as a


                                       17


result of such Liabilities in such proportion as is appropriate to reflect the
relative fault of the Indemnifying Party and Indemnified Party in connection
with the actions which resulted in such Liabilities, as well as any other
relevant equitable considerations. The relative faults of such Indemnifying
Party and Indemnified Party shall be determined by reference to, among other
things, whether any action in question, including any untrue or alleged untrue
statement of a material fact or omission or alleged omission to state a material
fact, has been made by, or relates to information supplied by, such Indemnifying
Party or Indemnified Party, and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such action. The amount
paid or payable by a party as a result of the Liabilities referred to above
shall be deemed to include, subject to the limitations set forth in Sections
7(a), 7(b) and 7(c), any legal or other fees, charges or expenses reasonably
incurred by such party in connection with any investigation or proceeding;
provided that the total amount to be contributed by such Designated Holder shall
be limited to the net proceeds (after deducting the underwriters' discounts and
commissions) received by such Designated Holder in the offering.

               The parties hereto agree that it would not be just and equitable
if contribution pursuant to this Section 7(d) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
No Person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation.

        8. Rule 144. The Company covenants that it shall (a) file any reports
required to be filed by it under the Exchange Act and (b) take such further
action as each Designated Holder may reasonably request (including providing any
information necessary to comply with Rule 144 under the Securities Act), all to
the extent required from time to time to enable such Designated Holder to sell
Registrable Securities without registration under the Securities Act within the
limitation of the exemptions provided by (i) Rule 144 under the Securities Act,
as such rule may be amended from time to time or (ii) any similar rules or
regulations hereafter adopted by the Commission. The Company shall, upon the
request of any Designated Holder, deliver to such Designated Holder a written
statement as to whether it has complied with such requirements.

        9. Miscellaneous.

               (a) Recapitalizations, Exchanges, etc. The provisions of this
Agreement shall apply to the full extent set forth herein with respect to (i)
the shares of Common Stock, (ii) any and all shares of voting common stock of
the Company into which the shares of Common Stock are converted, exchanged or
substituted in any recapitalization or other capital reorganization by the
Company and (iii) any and all equity securities of the Company or any successor
or assign of the Company (whether by merger, consolidation, sale of assets or
otherwise) which may be issued in respect of, in conversion of, in exchange for
or in substitution of, the shares of Common Stock and shall be appropriately
adjusted for any stock dividends, splits, reverse splits, combinations,
recapitalizations and the like occurring after the date hereof. The Company
shall use all commercially reasonable efforts to cause any successor or assign
(whether by merger, consolidation, sale of assets or otherwise) to enter into a
new registration rights agreement with the Designated Holders on terms
substantially the same as this Agreement as a condition of any such transaction.


                                       18


               (b) No Inconsistent Agreements. The Company shall not enter into
any agreement with respect to its securities that is inconsistent with the
rights granted to the Designated Holders in this Agreement or grant any
additional registration rights to any Person or with respect to any securities
which are not Registrable Securities which are prior in right to or inconsistent
with the rights granted in this Agreement.

               (c) Remedies. The Designated Holders, in addition to being
entitled to exercise all rights granted by law, including recovery of damages,
shall be entitled to specific performance of their rights under this Agreement.
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
Agreement and hereby agrees to waive in any action for specific performance the
defense that a remedy at law would be adequate.

               (d) Amendments and Waivers. Except as otherwise provided herein,
the provisions of this Agreement may not be amended, modified or supplemented,
and waivers or consents to departures from the provisions hereof may not be
given unless consented to in writing by (i) the Company and (ii) the General
Atlantic Stockholders, Coinvestor Stockholders, Vectis Stockholders and Apex
Stockholders holding Registrable Securities representing (after giving effect to
any adjustments) at least a majority of the aggregate number of Registrable
Securities owned by all of the General Atlantic Stockholders, Coinvestor
Stockholders, Vectis Stockholders and Apex Stockholders; provided, however, that
to the extent any amendment or waiver shall adversely affect any of such
stockholders, such amendment or waiver shall require the prior written consent
of each stockholder so adversely affected. Any such written consent shall be
binding upon the Company and all of the Designated Holders.

               (e) Notices. All notices, demands and other communications
provided for or permitted hereunder shall be made in writing and shall be made
by registered or certified first-class mail, return receipt requested,
telecopier, courier service or personal delivery:

                      (i)    if to the Company:

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

                             with a copy to:

                             Pillsbury Winthrop LLP
                             50 Fremont Street
                             San Francisco, CA  94105
                             Telecopy:  (415) 983-1200
                             Attention: Gregg F. Vignos, Esq.


                                       19


                      (ii)   if to the General Atlantic Stockholders:

                             c/o General Atlantic Service Company
                             3 Pickwick Plaza
                             Greenwich, CT  06830
                             Telecopy:  (203) 622-8818
                             Attention: Matthew Nimetz
                                        Thomas J. Murphy

                             with a copy to:

                             Paul, Weiss, Rifkind, Wharton & Garrison LLP
                             1285 Avenue of the Americas
                             New York, NY 10019-6064
                             Telecopy:  (212) 757-3990
                             Attention:  Douglas A. Cifu, Esq.

                      (iii)  if to Campina, Great Affluent, Dragonfield or Lion
                      Cosmos:

                             c/o 7th Floor
                             Cheung Kong Center
                             2 Queen's Road Central
                             Hong Kong
                             Telecopy:  (852) 2845-2057
                             Attention:  Mr. Edmond Ip

                      (iv)   if to Cenwell:

                             c/o 22nd Floor
                             Hutchison House
                             10 Harcourt Road
                             Hong Kong
                             Telecopy:  (852) 2128-1778
                             Attention: Company Secretary

                      (v)    if to Vectis:

                             c/o Vectis Group, LLC
                             117 Greenwich Street
                             San Francisco, CA 94111
                             Telecopy: 415-352-5310
                             Attention: Matthew Hobart


                                       20


                             with a copy to:

                             Kirkland & Ellis
                             153 East 53rd Street
                             New York, NY 10022-4675
                             Telecopy: 212-446-4900
                             Attention: Michael Movsovich, Esq.

                      (vi)   if to Apex Capital:

                             Apex Capital, LLC
                             25 Orinda Way, Suite 300
                             Orinda, CA 94563
                             Telecopy:  (925) 253-1809
                             Attention: Adam Fiore, General Counsel

                      (vii)  if to Passport Capital:

                             Passport Capital, LLC
                             One Sansome Street, 39th Floor
                             San Francisco, CA 94104
                             Telecopy:  (415) 399-7608
                             Attention: John Burbank, Managing Partner

                      (viii) if to Crosslink:

                             Crosslink Capital
                             Two Embarcadero Center, Suite 2200
                             San Francisco, CA 94111
                             Telecopy:  (415) 617-1801
                             Attention: Jason Sanders

                      (ix)   if to Sagamore:

                             Sagamore Hill Hub Fund, Ltd.
                             c/o Sagamore Hill Capital Management
                             10 Glenville Street, 3rd Floor
                             Greenwich, CT 06831
                             Telecopy:  (203) 422-7214
                             Attention: Legal Department

                      (x)    if to Criterion:

                             Criterion Capital Management
                             One Maritime Plaza, Suite 1460
                             San Francisco, CA 94111
                             Telecopy:___________________


                                       21


                             Attention: R. Daniel Beckham

                      (xi)   if to Heights Capital:

                             Capital Ventures International
                             c/o Heights Capital Management, Inc.
                             425 California Street, Suite 1100
                             San Francisco, CA 94104
                             Telecopy:  (415) 403-6525
                             Attention: Martin Kobinger

                      (xii)  if to any other Designated Holder, at its address
                             as it appears on the record books of the Company.

        All such notices, demands and other communications shall be deemed to
have been duly given when delivered by hand, if personally delivered; when
delivered by courier, if delivered by commercial courier service; five (5)
Business Days after being deposited in the mail, postage prepaid, if mailed; and
when receipt is mechanically acknowledged, if telecopied. Any party may by
notice given in accordance with this Section 9(e) designate another address or
Person for receipt of notices hereunder.

               (f) Successors and Assigns; Third Party Beneficiaries. This
Agreement shall inure to the benefit of and be binding upon the successors and
permitted assigns of the parties hereto as hereinafter provided. The Demand
Registration rights and related rights of the General Atlantic Stockholders, the
Coinvestor Stockholders or the Apex Stockholders contained in Section 3 hereof
shall be (i) with respect to any Registrable Security that is transferred to an
Affiliate of a General Atlantic Stockholder, a Coinvestor Stockholder or an Apex
Stockholder, automatically transferred to such Affiliate and (ii) with respect
to any Registrable Security that is transferred in all cases to a non-Affiliate,
transferred only with the consent of the Company which consent shall not be
unreasonably withheld, conditioned or delayed. The incidental or "piggy-back"
registration rights of the Designated Holders contained in Sections 3(b) and 4
hereof and the other rights of each of the Designated Holders with respect
thereto shall be, with respect to any Registrable Security, automatically
transferred to any Person who is the transferee of such Registrable Security so
long as such transferee agrees to be bound by this Agreement. All of the
obligations of the Company hereunder shall survive any such transfer. Except as
provided in Section 7, no Person other than the parties hereto and their
successors and permitted assigns is intended to be a beneficiary of this
Agreement.

               (g) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.

               (h) Headings. The headings in this Agreement are for convenience
of reference only and shall not limit or otherwise affect the meaning hereof.


                                       22


               (i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD
TO THE PRINCIPLES OF CONFLICTS OF LAW THEREOF.

               (j) Severability. If any one or more of the provisions contained
herein, or the application thereof in any circumstance, is held invalid, illegal
or unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions hereof shall not be in any way impaired, unless the provisions held
invalid, illegal or unenforceable shall substantially impair the benefits of the
remaining provisions hereof.

               (k) Rules of Construction. Unless the context otherwise requires,
references to sections or subsections refer to sections or subsections of this
Agreement.

               (l) Entire Agreement. This Agreement is intended by the parties
as a final expression of their agreement and intended to be a complete and
exclusive statement of the agreement and understanding of the parties hereto
with respect to the subject matter contained herein. There are no restrictions,
promises, representations, warranties or undertakings with respect to the
subject matter contained herein, other than those set forth or referred to
herein. Subject to Section 9(o), upon the Subsequent Closing (as defined in the
Convertible Note Purchase and Exchange Agreement and the Convertible Note
Agreements), this Agreement shall supersede all prior agreements and
understandings among the parties with respect to such subject matter.

               (m) Further Assurances. Each of the parties shall execute such
documents and perform such further acts as may be reasonably required or
desirable to carry out or to perform the provisions of this Agreement.

               (n) Other Agreements. Nothing contained in this Agreement shall
be deemed to be a waiver of, or release from, any obligations any party hereto
may have under, or any restrictions on the transfer of Registrable Securities or
other securities of the Company imposed by, any other agreement including, but
not limited to, the Stock Purchase Agreement, the Convertible Note Purchase and
Exchange Agreement, the Convertible Note Agreements or the Amended and Restated
Stockholders Agreement.

               (o) Effective Date and Termination. Subject to the provisions of
this Section 9(o), this Agreement shall become effective immediately following
the Subsequent Closing. If the Subsequent Closing does not occur and the
obligation to consummate the Conversion and the Exchange and the Conversion has
been terminated pursuant to Article IX of the Convertible Note Purchase and
Exchange Agreement or Article IX of the Convertible Note Agreements, then this
Agreement shall become effective as of the date of such termination; provided,
however, that Registrable Securities shall not include any shares of Common
Stock issued or issuable upon conversion of the Series E Preferred Stock.

              [the remainder of this page intentionally left blank]


                                       23


        IN WITNESS WHEREOF, the undersigned have executed, or have caused to be
executed, this Amended and Restated Registration Rights Agreement on the date
first written above.

                             CRITICAL PATH, INC.



                             By:
                                    --------------------------------------------
                                    Name:
                                    Title:



   SIGNATURE PAGE TO THIRD AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT




                             GENERAL ATLANTIC PARTNERS 74, L.P.

                                    By:     GENERAL ATLANTIC PARTNERS, LLC,
                                            its General Partner

                                    By:
                                            ------------------------------------
                                            Name:
                                            Title:

                             GAP COINVESTMENT PARTNERS II, L.P.

                             By:
                                    --------------------------------------------
                                    Name:
                                    Title:

                             GAPSTAR, LLC

                                    By:     GENERAL ATLANTIC PARTNERS, LLC,
                                            its Managing Member

                                    By:
                                            ------------------------------------
                                            Name:
                                            Title:

                             GAPCO GMBH & CO. KG

                                    By:     GAPCO MANAGEMENT GMBH,
                                            its General Partner

                                    By:
                                            ------------------------------------
                                            Name:
                                            Title:


   SIGNATURE PAGE TO THIRD AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT



                             VECTIS CP HOLDINGS, LLC,
                             a Delaware limited liability company

                             By:    VECTIS GROUP, LLC
                                    its Managing Member

                             By:
                                    --------------------------------------------
                                    Name:
                                    Title:


   SIGNATURE PAGE TO THIRD AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT



                             CENWELL LIMITED

                             By:
                                    --------------------------------------------
                                    Name:
                                    Title:

                             CAMPINA ENTERPRISES LIMITED

                             By:
                                    --------------------------------------------
                                    Name:
                                    Title:

                             GREAT AFFLUENT LIMITED

                             By:
                                    --------------------------------------------
                                    Name:
                                    Title:

                             DRAGONFIELD LIMITED

                             By:
                                    --------------------------------------------
                                    Name:
                                    Title:

                             LION COSMOS LIMITED

                             By:
                                    --------------------------------------------
                                    Name:
                                    Title:


   SIGNATURE PAGE TO THIRD AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT



                             PERMAL U.S. OPPORTUNITIES LIMITED

                             By:    Apex Capital, LLC, its Authorized Investment
                                    Advisor

                                    By:
                                       -----------------------------------------
                                    Name: Sanford J. Colen
                                    Title: Manager and Principal

                             ZAXIS PARTNERS, L.P.

                             By:    Apex Capital, LLC, its General Partner

                                    By:
                                       -----------------------------------------
                                       Name: Sanford J. Colen
                                       Title: Manager and Principal

                             ZAXIS EQUITY NEUTRAL, L.P.

                             By:    Apex Capital, LLC, its General Partner

                                    By:
                                       -----------------------------------------
                                       Name: Sanford J. Colen
                                       Title: Manager and Principal

                             ZAXIS OFFSHORE LIMITED

                             By:    Apex Capital, LLC, its Authorized Investment
                                    Advisor

                                    By:
                                       -----------------------------------------
                                       Name: Sanford J. Colen
                                       Title: Manager and Principal


   SIGNATURE PAGE TO THIRD AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT



                             ZAXIS INSTITUTIONAL PARTNERS, L.P.

                             By:  Apex Capital, LLC, its General Partner

                                    By:
                                       -----------------------------------------
                                       Name: Sanford J. Colen
                                       Title: Manager and Principal

                             GUGGENHEIM PORTFOLIO COMPANY XIII

                             By:  Apex Capital, LLC, its Authorized Investment
                                  Advisor


                                    By:
                                       -----------------------------------------
                                       Name: Sanford J. Colen
                                       Title: Manager and Principal


   SIGNATURE PAGE TO THIRD AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT



                             PASSPORT MASTER FUND, LP



                             By:
                                    --------------------------------------------
                                    Name: John Burbank
                                    Title: Managing Partner


   SIGNATURE PAGE TO THIRD AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT






                             CROSSLINK CROSSOVER FUND IV, L.P.

                             By:    Crossover Fund IV Management, L.L.C.,
                                    its General Partner

                                    By:
                                       -----------------------------------------
                                       Name: Michael J. Stark
                                       Title: Managing Member


   SIGNATURE PAGE TO THIRD AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT



                             SAGAMORE HILL HUB FUND, LTD.

                             By:    Sagamore Hill Capital Management L.P.,
                                    Investment Manager


                                    By:
                                       -----------------------------------------
                                       Name: Steven H. Bloom
                                       Title:  President


   SIGNATURE PAGE TO THIRD AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT



                             CAPITAL VENTURES INTERNATIONAL

                             By:    Heights Capital Management, Inc., an
                                    authorized signatory

                                    By:
                                       -----------------------------------------
                                       Name: Martin Kobinger
                                       Title: Investment Manager


   SIGNATURE PAGE TO THIRD AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT



                             CRITERION CAPITAL PARTNERS, LTD.

                             By:    Derivatives Portfolio Management, an
                                    authorized signatory

                                    By:
                                       -----------------------------------------
                                       Name: Guy J. Castranova
                                       Title:  Chief Operating Officer

                             CRITERION CAPITAL PARTNERS, INSTITUTIONAL

                             By:    Criterion Capital Partners, LLC, an
                                    authorized signatory

                                    By:
                                       -----------------------------------------
                                       Name: R. Daniel Beckham
                                       Title:  Chief Operating Officer

                             CRITERION CAPITAL PARTNERS, L.P.

                             By:    Criterion Capital Partners, LLC, an
                                    authorized signatory

                                    By:
                                       -----------------------------------------
                                       Name: R. Daniel Beckham
                                       Title:  Chief Operating Officer


   SIGNATURE PAGE TO THIRD AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT



================================================================================




                           THIRD AMENDED AND RESTATED
                          REGISTRATION RIGHTS AGREEMENT

                                      among



                               CRITICAL PATH, INC.

                       GENERAL ATLANTIC PARTNERS 74, L.P.,

                       GAP COINVESTMENT PARTNERS II, L.P.,

                                  GAPSTAR, LLC,

                               GAPCO GMBH & CO. KG

                                       and

                         THE OTHER PARTIES LISTED HEREIN



                          ----------------------------
                              Dated: March 9, 2004
                          ----------------------------




================================================================================



                                TABLE OF CONTENTS



                                                                                     Page
                                                                                     ----
                                                                               

1.      Definitions...................................................................2

2.      General; Securities Subject to this Agreement.................................7
        (a)    Grant of Rights........................................................7
        (b)    Registrable Securities.................................................7
        (c)    Holders of Registrable Securities......................................7

3.      Demand Registration...........................................................8
        (a)    Request for Demand Registration........................................8
        (b)    Incidental or "Piggy-Back" Rights with Respect to a Demand Registration9
        (c)    Effective Demand Registration..........................................9
        (d)    Expenses...............................................................9
        (e)    Underwriting Procedures...............................................10
        (f)    Selection of Underwriters.............................................10

4.      Incidental or "Piggy-Back" Registration......................................11
        (a)    Request for Incidental Registration...................................11
        (b)    Expenses..............................................................11

5.      Holdback Agreements..........................................................11
        (a)    Restrictions on Public Sale by Designated Holders.....................11
        (b)    Restrictions on Public Sale by the Company............................12

6.      Registration Procedures......................................................12
        (a)    Obligations of the Company............................................12
        (b)    Seller Information....................................................15
        (c)    Notice to Discontinue.................................................15
        (d)    Registration Expenses.................................................15

7.      Indemnification; Contribution................................................16
        (a)    Indemnification by the Company........................................16
        (b)    Indemnification by Designated Holders.................................16
        (c)    Conduct of Indemnification Proceedings................................17
        (d)    Contribution..........................................................17

8.      Rule 144.....................................................................18

9.      Miscellaneous................................................................18
        (a)    Recapitalizations, Exchanges, etc.....................................18
        (b)    No Inconsistent Agreements............................................19
        (c)    Remedies..............................................................19
        (d)    Amendments and Waivers................................................19
        (e)    Notices...............................................................19
        (f)    Successors and Assigns; Third Party Beneficiaries.....................22



                                       i




                                                                                     Page
                                                                                     ----
                                                                               
        (g)    Counterparts..........................................................22
        (h)    Headings..............................................................22
        (i)    Governing Law.........................................................23
        (j)    Severability..........................................................23
        (k)    Rules of Construction.................................................23
        (l)    Entire Agreement......................................................23
        (m)    Further Assurances....................................................23
        (n)    Other Agreements......................................................23
        (o)    Effective Date and Termination........................................23




                                       ii

EX-4.3

                                                                     EXHIBIT 4.3

                              AMENDED AND RESTATED

                 CERTIFICATE OF DETERMINATION OF PREFERENCES OF

           SERIES D CUMULATIVE REDEEMABLE CONVERTIBLE PREFERRED STOCK,

                         PAR VALUE $0.001 PER SHARE, OF

                              CRITICAL PATH, INC.,
                            a California corporation

          Pursuant to Section 401 of the California Corporations Code,

         The undersigned, William E. McGlashan, Jr. and Michael J. Zukerman, do
hereby certify that:

         1. They are the duly elected and acting Chief Executive Officer and
Chairman of the Board of Directors and Senior Vice President, General Counsel
and Secretary, respectively, of Critical Path, Inc., a California corporation
(the "Corporation").

         2. Pursuant to the authority given in the Corporation's Amended and
Restated Articles of Incorporation, the Corporation filed a Certificate of
Determination of Preferences of Series D Cumulative Redeemable Convertible
Participating Preferred Stock on November 9, 2001.

         3. Pursuant to Section 907 of the California Corporations Code, the
Certificate of Determination of Preferences of Series D Cumulative Redeemable
Convertible Participating Preferred Stock is amended and restated to read in
full as follows:

                                   WITNESSETH

         WHEREAS, it is the desire of the Board of Directors, upon requisite
approval of the stockholders of the Corporation, to alter the terms of the
Series D Cumulative Redeemable Convertible Participating Preferred Stock and
amend and restate the Certificate of Determination of Preferences for such
series:

         NOW, THEREFORE, BE IT RESOLVED:

         1. Designation and Number of Shares. There shall be hereby created and
established a series of preferred stock designated as "Series D Cumulative
Redeemable Convertible Preferred Stock" (the "Series D Preferred Stock"). The
authorized number of shares of Series D Preferred Stock shall be four million
one hundred eighty-eight thousand five hundred eighty-seven (4,188,587).
Capitalized terms used herein and not otherwise defined shall have the meanings
set forth in Section 10 below.




         2. Rank.

                  (a) Notwithstanding anything to the contrary in this
Certificate of Determination, the Series D Preferred Stock shall not be entitled
to the payment of dividends, the Series D Liquidation Payment, the Series D
Optional Redemption Price or the Series D Redemption Price until the issued and
outstanding shares of Series E Preferred Stock shall have received all
dividends, the Series E Liquidation Payment, the Series E Optional Redemption
Price and the Series E Redemption Price due and owing under the terms thereof;
provided, however, that notwithstanding the foregoing and for the avoidance of
doubt, dividends shall accrue on the Series D Preferred Stock as provided in
Section 3 below. Subject to the foregoing sentence, the Series D Preferred Stock
shall with respect to the payment of the Series D Liquidation Payment in the
event of Liquidation or Change of Control and with respect to dividend and
redemption rights rank senior to (i) all series of common stock of the
Corporation (including, without limitation, the Common Stock, par value $0.001
per share, of the Corporation (the "Common Stock")), (ii) all series of
preferred stock of the Corporation (excluding any shares of Series E Preferred
Stock but including, without limitation, the Series C Participating Preferred
Stock, par value $0.001 per share) and (iii) each other class or series of
Capital Stock of the Corporation hereafter created which does not expressly rank
pari passu with or senior to the Series D Preferred Stock (clauses (i), (ii) and
(iii), together, the "Junior Stock").

                  (b) Notwithstanding anything to the contrary contained in the
Amended and Restated Articles of Incorporation of the Corporation, the vote of
the holders of a majority of the Series D Preferred Stock shall be a
prerequisite to the designation or issuance of any shares of Capital Stock of
the Corporation ranking pari passu with or senior to the Series D Preferred
Stock in the event of a Liquidation or with respect to the payment of the Series
D Liquidation Payment.

         3. Dividends.

                  (a) Dividend Rate. During the period beginning on the date of
issuance of such shares of Series D Preferred Stock and ending on the Series E
Closing Date, the holders of shares of Series D Preferred Stock shall accrue
dividends at an annual rate equal to eight percent (8%) of the Series D Accreted
Value, calculated on the basis of a 360-day year, consisting of twelve 30-day
months, and shall accrue on a daily basis from the date of issuance of such
shares of Series D Preferred Stock until the Series E Closing Date, whether or
not the Corporation has earnings or profits, whether or not there are funds
legally available for the payment of dividends and whether or not declared by
the Board of Directors. During the period beginning on the date of issuance
thereof and ending on the Series E Closing Date, such accrued and unpaid
dividends shall compound to the Series D Accreted Value on a semi-annual basis
on December 31st and June 30th of each year (each such date, the "Series D
Accrual Date") whether or not declared by the Board of Directors. Following the
Series E Closing Date, the holders of shares of Series D Preferred Stock shall
accrue, out of funds legally available therefor, dividends at an annual rate
equal to five and three-fourths percent (5 3/4%) of the Price Per Share with
respect to each share of Series D Preferred Stock, calculated on the basis of a
360-day year, consisting of twelve 30-day months, and shall accrue on a daily
basis from the Series E Closing Date, whether or not the Corporation has
earnings or profits, whether or not there are funds legally available for the
payment of dividends and whether or not declared by the Board of Directors. Such
dividends


                                       2


shall not be paid in cash and shall instead be added to the Series D Accreted
Value on the Series D Accrual Date. In addition, if the Corporation declares and
pays any dividends on the Common Stock, then, in that event, the holders of
shares of Series D Preferred Stock shall be entitled to share in such dividends
on a pro rata basis, as if their shares had been converted into shares of Common
Stock pursuant to Section 7(a) below immediately prior to the record date for
determining the stockholders of the Corporation eligible to receive such
dividends.

                  (b) Change of Control; Optional Redemption. In the event of
the occurrence of a Change of Control or an optional redemption of the shares of
Series D Preferred Stock pursuant to Section 5(a) below, the sum of (i) any
dividends accrued at the rate and in the manner specified in Section 3(a) since
the previous Series D Accrual Date and prior to the date of the occurrence of a
Change of Control or the Series D Optional Redemption Date plus (ii) any and all
dividends that would have accrued at the rate and in the manner specified in
Section 3(a) from the closing date of such Change of Control or the Series D
Optional Redemption Date through and until the Series D Automatic Redemption
Date shall be added to the Series D Accreted Value on the closing date of such
Change of Control or the Series D Optional Redemption Date, as the case may be.

                  (c) Other Dividends. The Corporation shall not declare or pay
any dividends on, or make any other distributions with respect to or redeem,
purchase or otherwise acquire for consideration, any other shares of Capital
Stock unless and until all accrued and unpaid dividends on the Series D
Preferred Stock have been paid in full.

         4. Liquidation and Change of Control.

                  (a) Series D Liquidation Payment. Upon the occurrence of a
Liquidation, after the payment of the full Series E Liquidation Payment of the
issued and outstanding shares of Series E Preferred Stock, the holders of shares
of Series D Preferred Stock shall be paid in cash for each share of Series D
Preferred Stock held thereby, out of, but only to the extent of, the assets of
the Corporation legally available for distribution to its stockholders, an
amount equal to the greater of (i) the sum of (A) the Series D Accreted Value of
such share of Series D Preferred Stock on the date of such Liquidation plus (B)
all dividends accrued since the previous Series D Accrual Date, (ii) the product
of (x) 1.6 multiplied by (y) the Price Per Share or (iii) the aggregate
consideration that would be paid to the holder of the number of shares of Common
Stock into which such share of Series D Preferred Stock is convertible
immediately prior to such Liquidation. If, after the payment of the full Series
E Liquidation Payment of the issued and outstanding shares of Series E Preferred
Stock, the assets of the Corporation available for distribution to the holders
of shares of Series D Preferred Stock shall be insufficient to permit payment in
full to such holders of the sums which such holders are entitled to receive in
such case, then all of the assets available for distribution to holders of
shares of Series D Preferred Stock shall be distributed among and paid to such
holders ratably in proportion to the amounts that would be payable to such
holders if such assets were sufficient to permit payment in full.

                  (b) Change of Control. In the event of a Change of Control,
after the payment of the full Series E Liquidation Payment of the issued and
outstanding shares of Series E Preferred Stock, the holders of shares of Series
D Preferred Stock shall be paid for each share of Series D Preferred Stock held
thereby, an amount equal to the greater of (i) the sum of (A) the


                                       3


Series D Accreted Value of such share of Series D Preferred Stock on the date of
such Change of Control plus (B) all dividends that accrue and are payable
pursuant to Section 3(b), (ii) the product of (x) 1.6 multiplied by (y) the
Price Per Share or (iii) the aggregate consideration that would be paid to the
holder of the number of shares of Common Stock into which such share of Series D
Preferred Stock is convertible immediately prior to the closing of such Change
of Control. Such amount shall be paid in the form of consideration paid in such
Change of Control on the closing date of such Change of Control.

                  (c) Notice. Written notice of a Liquidation or Change of
Control stating a payment or payments and the place where such payment or
payments shall be payable, shall be delivered in person, mailed by certified
mail, return receipt requested, mailed by overnight mail or sent by telecopier,
not less than ten (10) days prior to the earliest payment date stated therein,
to the holders of record of shares of Series D Preferred Stock, such notice to
be addressed to each such holder at its address as shown by the records of the
Corporation.

         5. Redemption.

                  (a) Optional Redemption.

                           (i) Series D Optional Redemption Period. The
Corporation shall not have any right to redeem any shares of the Series D
Preferred Stock on or prior to the third anniversary of the Series E Closing
Date. If on any date after the third anniversary of the Series E Closing Date,
but prior to the Series D Automatic Redemption Date, the average closing price
per share of the Common Stock, as reported on NASDAQ or other nationally
recognized securities exchange on which the shares of Common Stock trade, for
any sixty (60) consecutive trading days after such third anniversary date,
equals or exceeds four hundred percent (400%) of the Series D Accreted Value
(the "Series D Optional Redemption Measurement Window"), the Corporation shall
have the right, at its sole option and election, to redeem (unless otherwise
prevented by law) within thirty (30) days following such Series D Optional
Redemption Measurement Window (the "Series D Optional Redemption Period"), all,
but not less than all, of the outstanding shares of Series D Preferred Stock in
cash, at a price per share (the "Series D Optional Redemption Price") equal to
the sum of the Series D Accreted Value plus all dividends that accrue and are
payable pursuant to Section 3(b).

                           (ii) Optional Redemption Payment. Written notice of
any election by the Corporation to redeem the shares of Series D Preferred Stock
pursuant to Section 5(a) (with a closing date prior to the expiration of the
Series D Optional Redemption Period selected for such redemption (the "Series D
Optional Redemption Date")), shall be delivered in person, mailed by certified
mail, return receipt requested, mailed by overnight mail or sent by telecopier
not less than ten (10), nor more than thirty (30), days prior to such Series D
Optional Redemption Date to the holders of record of the shares of Series D
Preferred Stock, such notice to be addressed to each such holder at its address
as shown in the records of the Corporation. The Series D Optional Redemption
Price shall be made with respect to each share of Series D Preferred Stock by
wire transfer of immediately available funds as promptly as practicable and, in
any event, within seven (7) days after receipt by the Corporation of the Series
D Preferred Stock certificates to accounts designated in writing by the holders
of such shares of Series D Preferred Stock after surrender of the Series D
Preferred Stock certificates pursuant to the following sentence. Upon


                                       4


notice from the Corporation, each holder of shares of Series D Preferred Stock
so redeemed shall promptly surrender to the Corporation, at any place where the
Corporation shall maintain a transfer agent for its shares of Series D Preferred
Stock, certificates representing the shares so redeemed, duly endorsed in blank
or accompanied by proper instruments of transfer. Notwithstanding anything to
the contrary set forth in this Certificate of Determination, any holder of
Series D Preferred Stock may convert its shares of Series D Preferred Stock
pursuant to Section 7(a) until the Series D Optional Redemption Price has been
paid in full by the Corporation to such holder.

                           (iii) Termination of Rights. If shares of Series D
Preferred Stock are redeemed in full on the Series D Optional Redemption Date,
then after the Series D Optional Redemption Date, all rights of any holder of
shares of Series D Preferred Stock shall cease and terminate, and such shares of
Series D Preferred Stock shall no longer be deemed to be outstanding; provided,
however, that, if the Corporation defaults in the payment in full of the Series
D Optional Redemption Price, then, subject to Section 5(b), the Corporation may
not redeem the shares of Series D Preferred Stock until the next Series D
Optional Redemption Measurement Window.

                  (b) Automatic Redemption.

                           (i) Automatic Redemption Date and Payment. On the
fourth anniversary of the Series E Closing Date (the "Series D Automatic
Redemption Date"), all of the shares of Series D Preferred Stock shall
automatically, with no further action required to be taken by the Corporation or
the holder thereof, be redeemed (unless otherwise prevented by law) in cash, at
a redemption price per share (the "Series D Redemption Price") equal to the sum
of the Series D Accreted Value plus all dividends accrued since the previous
Series D Accrual Date. Written notice of the Series D Automatic Redemption Date
shall be delivered in person, mailed by certified mail, return receipt
requested, mailed by overnight mail or sent by telecopier not less than thirty
(30), nor more than sixty (60), days prior to the Series D Automatic Redemption
Date to the holders of record of the shares of Series D Preferred Stock, such
notice to be addressed to each such holder at its address as shown in the
records of the Corporation. The Series D Redemption Price shall be made with
respect to each share of Series D Preferred Stock by wire transfer of
immediately available funds as promptly as practicable and, in any event, within
seven (7) days after receipt by the Corporation of the Series D Preferred Stock
certificates to accounts designated in writing by the holders of such shares of
Series D Preferred Stock after surrender of the Series D Preferred Stock
certificates pursuant to the following sentence. Upon notice from the
Corporation, each holder of such shares of Series D Preferred Stock so redeemed
shall promptly surrender to the Corporation, at any place where the Corporation
shall maintain a transfer agent for its shares of Series D Preferred Stock,
certificates representing the shares so redeemed, duly endorsed in blank or
accompanied by proper instruments of transfer. Notwithstanding anything to the
contrary set forth in this Certificate of Determination, any holder of Series D
Preferred Stock may convert its shares of Series D Preferred Stock pursuant to
Section 7(a) hereof until the Series D Redemption Price has been paid in full by
the Corporation to any such holder.


                                       5


                           (ii) Termination of Rights. If the shares of Series D
Preferred Stock are redeemed in full on the Series D Automatic Redemption Date,
then after the Series D Automatic Redemption Date, all rights of any holder of
such shares of Series D Preferred Stock shall cease and terminate, and such
shares of Series D Preferred Stock shall no longer be deemed to be outstanding,
whether or not the certificates representing such shares have been received by
the Corporation; provided, however, that, if the Corporation defaults in the
payment in full of the Series D Redemption Price, the rights of the holders of
shares of Series D Preferred Stock shall continue until the Corporation cures
such default.

                           (iii) Insufficient Funds for Redemption. If the funds
of the Corporation available for redemption of the shares of Series D Preferred
Stock on the Series D Automatic Redemption Date are insufficient to redeem in
full the shares of Series D Preferred Stock, the holders of shares of Series D
Preferred Stock shall share ratably in any funds available by law for redemption
of such shares according to the respective amounts which would be payable with
respect to the number of shares owned by them if the shares to be so redeemed on
such Series D Automatic Redemption Date were redeemed in full. Any shares of
Series D Preferred Stock that the Corporation does not redeem on the Series D
Automatic Redemption Date due to insufficient funds shall continue to be
outstanding until redeemed and dividends on such shares shall continue to accrue
and cumulate until redeemed. The Corporation shall in good faith use all
commercially reasonable efforts as expeditiously as possible to eliminate, or
obtain an exception, waiver or exemption from, any and all restrictions that
prevented the Corporation from paying the Series D Redemption Price and
redeeming all of the shares of Series D Preferred Stock. At any time thereafter
when additional funds of the Corporation are available by law for the redemption
of the shares of Series D Preferred Stock, such funds shall be used as promptly
as practicable to redeem the balance of such shares, or such portion thereof for
which funds are available, on the basis set forth above.

                  (c) Rank. Notwithstanding anything to the contrary in this
Section 5, no redemption of shares Series D Preferred Stock pursuant to this
Section 5 shall occur (i) if there are any shares of Series E Preferred Stock
issued and outstanding or (ii) unless and until the issued and outstanding
shares of Series E Preferred Stock shall have received all payments due and
owing under the terms thereof.

         6. Voting Rights; Election of Directors.

                  (a) General. In addition to the voting rights to which the
holders of Series D Preferred Stock are entitled under or granted by California
law, the holders of Series D Preferred Stock shall be entitled to vote, in
person or by proxy, at a special or annual meeting of stockholders on all
matters entitled to be voted on by holders of shares of Common Stock voting
together as a single class with the Common Stock (and with other shares entitled
to vote thereon, if any). With respect to any such vote, each share of Series D
Preferred Stock shall entitle the holder thereof to cast that number of votes as
is equal to the quotient of (i) the sum of the Series D Accreted Value plus all
dividends accrued since the previous Series D Accrual Date divided by (ii)
$4.20, subject to the same adjustments that are made to the Series D Conversion
Price as provided in Section 7(c) below.


                                       6


                  (b) Directors. As long as at least 500,000 shares of Series D
Preferred Stock are outstanding, if General Atlantic Partners 74, L.P., GAP
Coinvestment Partners II, L.P., GapStar, LLC, GAPCO GmbH & Co. KG and/or any
Affiliate thereof in the aggregate own at least a majority of the outstanding
shares of Series D Preferred Stock, then the holders of shares of Series D
Preferred Stock, voting as a separate class, shall be entitled to elect one (1)
director of the Corporation.

                  (c) Elections. As long as at least 500,000 shares of Series D
Preferred Stock are outstanding, the Series D Preferred Stock shall vote
together as a single class with the Common Stock (and all other classes and
series of stock of the Corporation entitled to vote thereon, if any) with
respect to the election of all of the other directors of the Corporation other
than the director elected solely by the holders of shares of Series E Preferred
Stock pursuant to Section 6(b) of the Series E Certificate of Determination of
Preferences. If the conditions set forth in Section 6(b) necessary for the
holders of shares of Series D Preferred Stock to vote as a separate class for
the election of one director are not satisfied, then the Series D Preferred
Stock shall vote together as a single class with the Common Stock (and all other
classes and series of stock of the Corporation entitled to vote thereon, if any)
with respect to the election of all of the directors of the Corporation other
than the director elected solely by the holders of shares of Series E Preferred
Stock pursuant to Section 6(b) of the Series E Certificate of Determination of
Preferences. At any meeting held for the purpose of electing directors pursuant
to Section 6(b) at a time when the holders of shares of Series D Preferred Stock
are entitled to vote as a separate class for the election of one director, the
presence in person or by proxy of the holders of a majority of the shares of
Series D Preferred Stock then outstanding shall constitute a quorum of the
Series D Preferred Stock for the election of the director to be elected solely
by the holders of shares of Series D Preferred Stock; the holders of shares of
Series D Preferred Stock shall be entitled to cast one vote per share of Series
D Preferred Stock in any such election; and the director to be elected
exclusively by the holders of shares of Series D Preferred Stock shall be
elected by the affirmative vote of the holders of a majority of the outstanding
shares of Series D Preferred Stock. A vacancy in a directorship filled by the
holders of the Series D Preferred Stock voting as a separate class pursuant to
Section 6(b) shall be filled only by vote or written consent of the holders of
shares of Series D Preferred Stock. The director elected pursuant to Section
6(b) may not be removed without the consent of a majority of the holders of
shares of Series D Preferred Stock, except as otherwise provided by law.

                  (d) Major Actions. Notwithstanding anything to the contrary
set forth in the Amended and Restated Articles of Incorporation or the By-laws
of the Corporation, the affirmative vote of the holders of a majority of the
outstanding shares of Series D Preferred Stock, voting as a separate class,
shall be a prerequisite to:

                           (i) any amendment, modification or restatement of the
Articles of Incorporation or the By-Laws of the Corporation, including, without
limitation, by merger, consolidation, business combination or otherwise that is
not a Change of Control;

                           (ii) the issuance, reservation for issuance or
authorization of any Capital Stock of the Corporation or any right or option to
acquire shares of Capital Stock ranking senior to the shares of Series D
Preferred Stock or any increase or decrease in the authorized number of shares
of Series D Preferred Stock; provided, that the Corporation may issue


                                       7


(w) options or shares pursuant to the Stock Option Plans, (x) shares of Series E
Preferred Stock (A) upon conversion of those certain convertible promissory
notes, with an aggregate principal amount of ten million dollars ($10,000,000),
issued by the Corporation on November 26, 2003, (B) in exchange for those
certain 5 3/4% Convertible Subordinated Notes, due April 1, 2005, in the
principal face amount of thirty-two million seven hundred ninety-five thousand
dollars ($32,795,000), issued by the Corporation pursuant to the Corporation's
Indenture, dated March 31, 2000, (C) upon conversion of the Apex Notes and (D)
issuable pursuant to agreements entered into prior to the Series E Closing Date,
and (y) the Series E Purchase Rights and the Rights Shares;

                           (iii) the redemption of any Junior Stock other than
the repurchase of unvested stock options or restricted stock from employees,
officers, directors or consultants of the Corporation upon termination of
service or in accordance with the Stock Option Plans;

                           (iv) any declaration, distribution or payment of any
dividend or other distribution to any Junior Stock;

                           (v) the issuance, incurrence, assumption or guarantee
by the Corporation or any Subsidiary of the Corporation of any funded
Indebtedness (excluding capital leases incurred in the ordinary course of
business but including the incurrence of any debt in connection with any
borrowing arrangements with Silicon Valley Bank, provided that, with respect to
the incurrence of any debt in connection with any borrowing arrangements with
Silicon Valley Bank, if the holders of Series D Preferred Stock do not respond
to a written request for consent by the Company within two Business Days of
receiving such request, such holder shall be deemed to have consented); and

                           (vi) any amendment to this Section 6(d).

         7. Conversion.

                  (a) Optional Conversion. Any holder of shares of Series D
Preferred Stock shall have the right, at its option, at any time and from time
to time, to convert, subject to the terms and provisions of this Section 7, any
or all of such holder's shares of Series D Preferred Stock into such number of
fully paid and non-assessable shares of Common Stock as is equal to the product
of (i) the number of shares of Series D Preferred Stock being so converted
multiplied by (ii) the quotient of (x) the sum of the Series D Accreted Value
plus all dividends accrued since the previous Series D Accrual Date divided by
(y) the Series D Conversion Price, subject to adjustment as provided in Section
7(c) below. Such conversion right shall be exercised by the surrender of
certificate(s) representing the shares of Series D Preferred Stock to be
converted to the Corporation at any time during usual business hours at its
principal place of business maintained by it (or such other office or agency of
the Corporation as the Corporation may designate by notice in writing to the
holders of shares of Series D Preferred Stock), accompanied by written notice
that the holder elects to convert such shares of Series D Preferred Stock and
specifying the name or names (with address) in which a certificate or
certificates for shares of Common Stock are to be issued and (if so required by
the Corporation) by a written instrument or instruments of transfer in form
reasonably satisfactory to the Corporation duly executed by the holder or its
duly authorized legal representative and transfer tax stamps or funds therefor,
if


                                       8


required pursuant to Section 7(i) below. All certificates representing shares of
Series D Preferred Stock surrendered for conversion shall be delivered to the
Corporation for cancellation and canceled by it. As promptly as practicable
after the surrender of any shares of Series D Preferred Stock, in any event
within seven (7) days of the receipt of such certificates, the Corporation shall
(subject to compliance with the applicable provisions of federal and state
securities laws) deliver to the holder of such shares so surrendered
certificate(s) representing the number of fully paid and nonassessable shares of
Common Stock into which such shares are entitled to be converted. At the time of
the surrender of such certificate(s), the Person in whose name any
certificate(s) for shares of Common Stock shall be issuable upon such conversion
shall be deemed to be the holder of record of such shares of Common Stock on
such date, notwithstanding that the share register of the Corporation shall then
be closed or that the certificates representing such Common Stock shall not then
be actually delivered to such Person.

                  (b) Termination of Rights. On the date of such optional
conversion pursuant to Section 7(a) above all rights with respect to the shares
of Series D Preferred Stock so converted, including the rights, if any, to
receive notices and vote, shall terminate, except only the rights of holders
thereof to (i) receive certificates for the number of shares of Common Stock
into which such shares of Series D Preferred Stock have been converted and (ii)
exercise the rights to which they are entitled as holders of Common Stock.

                  (c) (i) Dividend, Subdivision, Combination or Reclassification
of Common Stock. In the event that the Corporation shall at any time or from
time to time, prior to conversion of shares of Series D Preferred Stock (w) pay
a dividend or make a distribution on the outstanding shares of Common Stock
payable in Capital Stock of the Corporation, (x) subdivide the outstanding
shares of Common Stock into a larger number of shares, (y) combine the
outstanding shares of Common Stock into a smaller number of shares or (z) issue
any shares of its Capital Stock in a reclassification of the Common Stock (other
than any such event for which an adjustment is made pursuant to another clause
of this Section 7(c)), then, and in each such case, the Series D Conversion
Price in effect immediately prior to such event shall be adjusted (and any other
appropriate actions shall be taken by the Corporation) so that the holder of any
share of Series D Preferred Stock thereafter surrendered for conversion shall be
entitled to receive the number of shares of Common Stock or other securities of
the Corporation that such holder would have owned or would have been entitled to
receive upon or by reason of any of the events described above, had such share
of Series D Preferred Stock been converted immediately prior to the occurrence
of such event. An adjustment made pursuant to this Section 7(c)(i) shall become
effective retroactively (x) in the case of any such dividend or distribution, to
a date immediately following the close of business on the record date for the
determination of holders of Common Stock entitled to receive such dividend or
distribution or (y) in the case of any such subdivision, combination or
reclassification, to the close of business on the day upon which such corporate
action becomes effective.

                           (i) Certain Distributions. In case the Corporation
shall at any time or from time to time, prior to conversion of shares of Series
D Preferred Stock, distribute to all holders of shares of the Common Stock
(including any such distribution made in connection with a merger or
consolidation in which the Corporation is the resulting or surviving Person and
the Common Stock is not changed or exchanged) cash, evidences of indebtedness of
the Corporation or another issuer, securities of the Corporation or another
issuer or other assets (excluding cash


                                       9


dividends in which holders of shares of Series D Preferred Stock participate, in
the manner provided in Section 3(c); dividends payable in shares of Common Stock
for which adjustment is made under another paragraph of this Section 7(c); and
any distribution in connection with an Excluded Transaction) or rights or
warrants to subscribe for or purchase of any of the foregoing, then, and in each
such case, the Series D Conversion Price then in effect shall be adjusted (and
any other appropriate actions shall be taken by the Corporation) by multiplying
the Series D Conversion Price in effect immediately prior to the date of such
distribution by a fraction (x) the numerator of which shall be the Current
Market Price of the Common Stock immediately prior to the date of distribution
less the then fair market value (as determined by the Board of Directors in the
exercise of their fiduciary duties) of the portion of the cash, evidences of
indebtedness, securities or other assets so distributed or of such rights or
warrants applicable to one share of Common Stock and (y) the denominator of
which shall be the Current Market Price of the Common Stock immediately prior to
the date of distribution (but such fraction shall not be greater than one);
provided, however, that no adjustment shall be made with respect to any
distribution of rights or warrants to subscribe for or purchase securities of
the Corporation if the holder of shares of Series D Preferred Stock would
otherwise be entitled to receive such rights or warrants upon conversion at any
time of shares of Series D Preferred Stock into Common Stock. Such adjustment
shall be made whenever any such distribution is made and shall become effective
retroactively to a date immediately following the close of business on the
record date for the determination of stockholders entitled to receive such
distribution.

                           (ii) Other Changes. In case the Corporation at any
time or from time to time, prior to the conversion of shares of Series D
Preferred Stock, shall take any action affecting its Common Stock similar to or
having an effect similar to any of the actions described in Sections 7(c)(i) or
(ii) above or Section 7(f) below (but not including any action described in any
such Section) and the Board of Directors shall consider whether an adjustment
should thereupon be made in the Series D Conversion Price. If the Board of
Directors in good faith determines that it would be equitable in the
circumstances to adjust the Series D Conversion Price as a result of such
action, then, and in each such case, the Series D Conversion Price shall be
adjusted in such manner and at such time as the Board of Directors in good faith
determines would be equitable in the circumstances (such determination to be
evidenced in a resolution, a certified copy of which shall be mailed to the
holders of shares of Series D Preferred Stock).

                           (iii) No Adjustment. Notwithstanding anything herein
to the contrary, no adjustment under this Section 7(c) need be made to the
Series D Conversion Price if the Corporation receives written notice from
holders of a majority of the outstanding shares of Series D Preferred Stock that
no such adjustment is required.

                  (d) Abandonment. If the Corporation shall take a record of the
holders of its Common Stock for the purpose of entitling them to receive a
dividend or other distribution, and shall thereafter and before the distribution
to stockholders thereof legally abandon its plan to pay or deliver such dividend
or distribution, then no adjustment in the Series D Conversion Price shall be
required by reason of the taking of such record.

                  (e) Certificate as to Adjustments. Upon any adjustment in the
Series D Conversion Price, the Corporation shall within a reasonable period (not
to exceed ten (10) Business Days) following any of the foregoing transactions
deliver to each registered holder of


                                       10


shares of Series D Preferred Stock a certificate, signed by (i) the Chief
Executive Officer of the Corporation and (ii) the Chief Financial Officer of the
Corporation, setting forth in reasonable detail the event requiring the
adjustment and the method by which such adjustment was calculated and specifying
the increased or decreased Series D Conversion Price then in effect following
such adjustment.

                  (f) Reorganization, Reclassification. In case of any merger or
consolidation of the Corporation (other than a Change of Control) or any capital
reorganization, reclassification or other change of outstanding shares of Common
Stock (other than a change in par value, or from par value to no par value, or
from no par value to par value) (each, a "Transaction"), the Corporation shall
execute and deliver to each holder of shares of Series D Preferred Stock at
least ten (10) Business Days prior to effecting such Transaction a certificate,
signed by (i) the Chief Executive Officer of the Corporation and (ii) the Chief
Financial Officer of the Corporation, stating that the holder of each share of
Series D Preferred Stock shall have the right to receive in such Transaction, in
exchange for each share of Series D Preferred Stock, a security identical to
(and not less favorable than) the Series D Preferred Stock, and provision shall
be made therefor in the agreement, if any, relating to such Transaction. Any
certificate delivered pursuant to this Section 7(f) shall provide for
adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section 7. The provisions of this Section 7(f)
and any equivalent thereof in any such certificate similarly shall apply to
successive transactions.

                  (g) Notices. In case at any time or from time to time:

                           (w) the Corporation shall declare a dividend (or any
other distribution) on its shares of Common Stock;

                           (x) the Corporation shall authorize the granting to
the holders of its Common Stock rights or warrants to subscribe for or purchase
any shares of Capital Stock of any class or of any other rights or warrants; or

                           (y) there shall be any Transaction;

then the Corporation shall mail to each holder of shares of Series D Preferred
Stock at such holder's address as it appears on the transfer books of the
Corporation, as promptly as possible but in any event at least ten (10) days
prior to the applicable date hereinafter specified, a notice stating (A) the
date on which a record is to be taken for the purpose of such dividend,
distribution or granting of rights or warrants or, if a record is not to be
taken, the date as of which the holders of Common Stock of record to be entitled
to such dividend, distribution or granting of rights or warrants are to be
determined, or (B) the date on which such Transaction is expected to become
effective and the date as of which it is expected that holders of Common Stock
of record shall be entitled to exchange their Common Stock for shares of stock
or other securities or property or cash deliverable upon such Transaction.
Notwithstanding the foregoing, in the case of any event to which Section 7(f)
above is applicable, the Corporation shall also deliver the certificate
described in Section 7(f) above to each holder of shares of Series D Preferred
Stock at least ten (10) Business Days' prior to effecting such reorganization or
reclassification as aforesaid.


                                       11


                  (h) Reservation of Common Stock. The Corporation shall at all
times reserve and keep available for issuance upon the conversion of shares of
Series D Preferred Stock, such number of its authorized but unissued shares of
Common Stock as will from time to time be sufficient to permit the conversion of
all outstanding shares of Series D Preferred Stock, and shall take all action to
increase the authorized number of shares of Common Stock if at any time there
shall be insufficient authorized but unissued shares of Common Stock to permit
such reservation or to permit the conversion of all outstanding shares of Series
D Preferred Stock; provided, that (x) the holders of shares of Series D
Preferred Stock shall vote such shares in favor of any such action that requires
a vote of stockholders and (y) such holders shall cause any directors elected by
them pursuant to Section 6(b) above to vote in favor of any such action that
requires a vote of the Board of Directors.

                  (i) No Conversion Tax or Charge. The issuance or delivery of
certificates for Common Stock upon the conversion of shares of Series D
Preferred Stock shall be made without charge to the converting holder of shares
of Series D Preferred Stock for such certificates or for any tax in respect of
the issuance or delivery of such certificates or the securities represented
thereby, and such certificates shall be issued or delivered in the respective
names of, or (subject to compliance with the applicable provisions of federal
and state securities laws) in such names as may be directed by, the holders of
the shares of Series D Preferred Stock converted; provided, however, that the
Corporation shall not be required to pay any tax which may be payable in respect
of any transfer involved in the issuance and delivery of any such certificate in
a name other than that of the holder of the shares of Series D Preferred Stock
converted, and the Corporation shall not be required to issue or deliver such
certificate unless or until the Person or Persons requesting the issuance or
delivery thereof shall have paid to the Corporation the amount of such tax or
shall have established to the reasonable satisfaction of the Corporation that
such tax has been paid.

                  (j) Limitations on Conversions. Each holder of the Series D
Preferred Stock's right to convert its shares of Series D Preferred Stock into
shares of Common Stock shall not be limited by any notice delivered by the
Corporation of any proposed redemption, Change of Control or any other event
that notwithstanding this subsection (j) shall purport to limit such conversion
right.

         8. Certain Remedies. Any registered holder of shares of Series D
Preferred Stock shall be entitled to an injunction or injunctions to prevent
breaches of the provisions of this Certificate of Determination and to enforce
specifically the terms and provisions of this Certificate of Determination in
any court of the United States or any state thereof having jurisdiction, this
being in addition to any other remedy to which such holder may be entitled at
law or in equity.

         9. Business Day. If any payment shall be required by the terms hereof
to be made on a day that is not a Business Day, such payment shall be made on
the immediately succeeding Business Day.

         10. Definitions. As used in this Certificate of Determination, the
following terms shall have the following meanings (with terms defined in the
singular having comparable meanings when used in the plural and vice versa),
unless the context otherwise requires:


                                       12


                  "Affiliate" shall mean any Person who is an "affiliate" as
defined in Rule 12b-2 of the General Rules and Regulations under the Exchange
Act.

                  "Apex Notes" means the convertible promissory notes with an
aggregate principal amount of fifteen million dollars ($15,000,000) issued by
the Corporation on January 16, 2004, to Permal U.S. Opportunities Limited, Zaxis
Equity Neutral, L.P., Zaxis Institutional Partners, L.P., Zaxis Offshore
Limited, Zaxis Partners, L.P. and Passport Master Fund, L.P., pursuant to the
Convertible Note Purchase Agreement.

                  "Board of Directors" means the Board of Directors of the
Corporation.

                  "Business Day" means any day except a Saturday, a Sunday, or
other day on which commercial banks in the State of New York or the State of
California are authorized or required by law or executive order to close.

                  "Capital Stock" means, with respect to any Person, any and all
shares, interests, participations, rights in, or other equivalents (however
designated and whether voting or non-voting) of, such Person's capital stock
(including, without limitation, common stock and preferred stock) and any and
all rights, warrants or options exchangeable for or convertible into such
capital stock.

                  "Certificate of Determination" means this Amended and Restated
Certificate of Determination of Preferences of Series D Cumulative Redeemable
Convertible Preferred Stock, as amended from time to time.

                  "Change of Control" means (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
Corporation prior to such transaction do not own a majority of the voting
securities of the surviving entity, (ii) any tender offer, exchange offer or
other transaction whereby any person or "group" other than the Investors obtains
a majority of the outstanding shares of capital stock entitled to vote in the
election of the Board of Directors, (iii) any proxy contest in which a majority
of the Board of Directors (or persons appointed by such Board of Directors)
prior to such contest do not constitute a majority of the Board of Directors
after such contest, (iv) a sale of all or substantially all of the assets of the
Corporation or (v) any other transaction described in any stockholder rights
agreement or "poison pill", if any, to which the Corporation is a party, which
permits the holders of any rights or similar certificates to exercise the rights
evidenced thereby and pursuant to which the Board of Directors does not waive
the application of such stockholder rights agreement or "poison pill."

                  "Commission" means the United States Securities and Exchange
Commission.

                  "Common Stock" shall have the meaning ascribed to it in
Section 2(a) hereof.

                  "Common Stock Equivalent" shall mean any security or
obligation which is by its terms convertible, exchangeable or exercisable into
or for shares of Common Stock, including, without limitation, shares of Series D
Preferred Stock, shares of Series E Preferred Stock, and


                                       13


any option, warrant or other subscription or purchase right with respect to
Common Stock or any Common Stock Equivalent.

                  "Contingent Obligation" means, as applied to any Person, any
direct or indirect liability of that Person with respect to any Indebtedness,
lease, dividend, guaranty, letter of credit or other obligation, contractual or
otherwise (the "primary obligation") of another Person (the "primary obligor"),
whether or not contingent, (a) to purchase, repurchase or otherwise acquire such
primary obligations or any property constituting direct or indirect security
therefor, (b) to advance or provide funds (i) for the payment or discharge or
any such primary obligor or otherwise to maintain the net worth or solvency or
any balance sheet item, level of income or financial condition of the primary
obligor, (c) to purchase property, securities or services primarily for the
purpose of assuring the owner of any such primary obligation of the ability of
the primary obligor to make payment of such primary obligation, or (d) otherwise
to assure or hold harmless the owner of any such primary obligation against loss
or failure or inability to perform in respect thereof. The amount of any
Contingent Obligation shall be deemed to be an amount equal to the stated or
determinable amount of the primary obligation in respect of which such
Contingent Obligation is made or, if not stated or determinable, the maximum
reasonably anticipated liability in respect thereof.

                  "Convertible Note Purchase Agreement" means the Convertible
Note Purchase Agreement, dated January 16, 2004, among the Corporation and
Permal U.S. Opportunities Limited, Zaxis Equity Neutral, L.P., Zaxis
Institutional Partners, L.P., Zaxis Offshore Limited, Zaxis Partners, L.P. and
Passport Master Fund, L.P.

                  "Corporation" shall have the meaning ascribed to it in the
first paragraph of this Certificate of Determination.

                  "Current Market Price" per share of Capital Stock of any
Person shall mean, as of the date of determination, (a) the average of the daily
Market Price under clause (a), (b) or (c), as applicable, of the definition
thereof of such Capital Stock during the immediately preceding thirty (30)
trading days ending on such date, and (b) if such Capital Stock is not then
listed or admitted to trading on any national securities exchange or quoted in
the over-the-counter market, then the Market Price under clause (d) of the
definition thereof on such date.

                  "Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission promulgated thereunder.

                  "Excluded Transaction" means (a) any issuance of shares of
stock or options to purchase shares of Series E Preferred Stock or Common Stock
pursuant to the Stock Option Plans and (b) any issuance of Common Stock (i) upon
the conversion of shares of Series D Preferred Stock or shares of Series E
Preferred Stock, (ii) as a dividend on shares of Series D Preferred Stock or
shares of Series E Preferred Stock or (iii) upon conversion or exercise of any
Common Stock Equivalents, (c) any issuance of Common Stock in connection with
any Series D Liquidation Payment or Series E Liquidation Payment, (d) Capital
Stock issued in consideration of an acquisition, approved by the Board of
Directors, by the Company of another Person, (e) shares of Common Stock and
Common Stock Equivalents issued in strategic transactions (which may not be
private equity or venture capital financing transactions) approved by the


                                       14


Board of Directors to Persons that are not principally engaged in financial
investing, (f) the issuance of the Series E Purchase Rights and the Rights
Shares, (g) shares of Series E Preferred Stock issuable pursuant to agreements
entered into prior to the Series E Closing Date and (h) shares of Common Stock
issuable upon conversion of the Apex Notes in accordance with the terms of the
Convertible Note Purchase Agreement.

                  "GAAP" means United States generally accepted accounting
principles in effect from time to time.

                  "Indebtedness" means, as to any Person, (a) all obligations of
such Person for borrowed money (including, without limitation, reimbursement and
all other obligations with respect to surety bonds, letters of credit and
bankers' acceptances, whether or not matured), (b) all obligations of such
Person to pay the deferred purchase price of property or services, except trade
accounts payable and accrued commercial or trade liabilities arising in the
ordinary course of business, (c) all interest rate and currency swaps, caps,
collars and similar agreements or hedging devices under which payments are
obligated to be made by such Person, whether periodically or upon the happening
of a contingency, (d) all indebtedness created or arising under any conditional
sale or other title retention agreement with respect to property acquired by
such Person (even though the rights and remedies of the seller or lender under
such agreement in the event of default are limited to repossession or sale of
such property), (e) all obligations of such Person under leases which have been
or should be, in accordance with GAAP, recorded as capital leases, (f) all
indebtedness secured by any Lien (other than Liens in favor of lessors under
leases other than leases included in clause (e)) on any property or asset owned
or held by that Person regardless of whether the indebtedness secured thereby
shall have been assumed by that Person or is non-recourse to the credit of that
Person and (g) any Contingent Obligation of such Person.

                  "Investors" means General Atlantic Partners 74, L.P., GAP
Coinvestment Partners II, L.P., GapStar, LLC, GAPCO GmbH & Co. KG, Campina
Enterprises Limited, Cenwell Limited, Great Affluent Limited, Dragonfield
Limited and Lion Cosmos Limited and the Affiliates of the foregoing, provided
that Affiliates shall be deemed not to include any portfolio companies of any of
the foregoing.

                  "Junior Stock" shall have the meaning ascribed to it in
Section 2(a) hereof.

                  "Lien" means any mortgage, deed of trust, pledge,
hypothecation, assignment, encumbrance, lien (statutory or other) or preference,
priority, right or other security interest or preferential arrangement of any
kind or nature whatsoever (excluding preferred stock and equity related
preferences).

                  "Liquidation" shall mean the voluntary or involuntary
liquidation under applicable bankruptcy or reorganization legislation, or the
dissolution or winding up of the Corporation.

                  "Market Price" shall mean, with respect to the Capital Stock
of any Person, as of the date of determination, (a) if such Capital Stock is
listed on a national securities exchange, the closing price per share of such
Capital Stock on such date published in The Wall Street Journal (National
Edition) or, if no such closing price on such date is published in The Wall
Street Journal


                                       15


(National Edition), the average of the closing bid and asked prices on such
date, as officially reported on the principal national securities exchange on
which such Capital Stock is then listed or admitted to trading; or (b) if such
Capital Stock is not then listed or admitted to trading on any national
securities exchange but is designated as a national market system security by
the National Association of Securities Dealers, Inc., the last trading price of
such Capital Stock on such date; or (c) if there shall have been no trading on
such date or if such Capital Stock is not designated as a national market system
security by the National Association of Securities Dealers, Inc., the average of
the reported closing bid and asked prices of such Capital Stock on such date as
shown by the National Market System of the National Association of Securities
Dealers, Inc. Automated Quotations System and reported by any member firm of the
New York Stock Exchange selected by the Corporation; or (d) if none of (a), (b)
or (c) is applicable, the fair market value thereof as reasonably per share
determined by the Board of Directors.

                  "NASDAQ" shall mean The Nasdaq Stock Market, Inc.

                  "Person" means any individual, firm, corporation, partnership,
limited liability company, trust, incorporated or unincorporated association,
joint venture, joint stock company, governmental body or other entity of any
kind.

                  "Price Per Share" means $13.75 (subject to anti-dilution
adjustment for stock splits of, combinations of and capital reorganizations with
respect to the Series D Preferred Stock).

                  "Rights Offering" shall mean a rights offering for an
aggregate amount of up to $21,000,000 of shares of Series E Preferred Stock
pursuant to which the Corporation will distribute transferable rights to the
Corporation's holders of Common Stock as contemplated by the Convertible Note
Purchase and Exchange Agreement, dated November 18, 2003, among the Corporation
and certain other parties thereto.

                  "Rights Shares" means the shares of Series E Preferred Stock
issuable upon exercise of the Series E Purchase Rights and the shares of the
Common Stock issuable upon conversion of such shares of Series E Preferred
Stock.

                  "Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations of the Commission promulgated thereunder.

                   "Series D Accreted Value" shall mean as of any date, with
respect to each share of Series D Preferred Stock, the Price Per Share plus the
amount of dividends that have accrued and compounded thereto during the period
beginning on the date of issuance of such share of Series D Preferred Stock and
ending on the Series E Closing Date plus, during the period beginning on the
first day after the Series E Closing Date and from and after such date, the
amount of dividends that have accrued from the Series E Closing Date to the then
most recent Series D Accrual Date pursuant to Section 3(a) of this Certificate
of Determination.


                                       16


                  "Series D Automatic Redemption Date" shall have the meaning
ascribed to it in Section 5(b) hereof.

                  "Series D Conversion Price" shall mean $1.50, as adjusted
pursuant to Section 7(c).

                  "Series D Liquidation Payment" shall mean, with respect to
each share of Series D Preferred Stock, those amounts payable pursuant to
Section 4(a)(i), Section 4(a)(ii), Section 4(b)(i), or Section 4(b)(ii) as the
case may be.

                  "Series D Optional Redemption Date" shall have the meaning
ascribed to it in Section 5(a)(ii) hereof.

                  "Series D Optional Redemption Measurement Window" shall have
the meaning ascribed to it in Section 5(a)(i) hereof.

                  "Series D Optional Redemption Period" shall have the meaning
ascribed to it in Section 5(a)(i) hereof.

                  "Series D Optional Redemption Price" shall have the meaning
ascribed to it in Section 5(a)(i) hereof.

                  "Series D Preferred Stock" shall have the meaning ascribed to
it in Section 1 hereof.

                  "Series D Redemption Price" shall have the meaning ascribed to
it in Section 5(b) hereof.

                  "Series E Certificate of Determination" means the
Corporation's Certificate of Determination of Preferences of Series E Preferred
Stock, as amended from time to time.

                  "Series E Closing Date" means [__________], 2004.

                  "Series E Liquidation Payment" shall have the meaning ascribed
to it in the Certificate of Determination of Preferences of Series E Preferred
Stock if and when approved by the requisite stockholders of the Corporation and
duly filed with the Secretary of State of the State of California.

                  "Series E Optional Redemption Price" shall have the meaning
ascribed to it in the Certificate of Determination of Preferences of Series E
Preferred Stock if and when approved by the requisite stockholders of the
Corporation and duly filed with the Secretary of State of California.

                   "Series E Preferred Stock" shall have the meaning ascribed to
it in the Certificate of Determination of Preferences of Series E Redeemable
Convertible Preferred Stock if and when approved by the requisite stockholders
of the Corporation and duly filed with the Secretary of State of the State of
California.


                                       17


                   "Series E Purchase Rights" means those rights to purchase
Series E Preferred Stock issued in the Rights Offering.

                  "Series E Redemption Price" shall have the meaning ascribed to
it in the Certificate of Determination of Preferences of Series E Preferred
Stock if and when approved by the requisite stockholders of the Corporation and
duly filed with the Secretary of State of California.

                   "Stock Option Plans" means the Company's stock option plans
and employee purchase plans approved by the Board of Directors, pursuant to
which shares of restricted stock and options to purchase shares of Series E
Preferred Stock and/or Common Stock are reserved and available for grant to
officers, directors, employees and consultants of the Corporation.

                  "Transaction" shall have the meaning ascribed to it in Section
7(f) hereof.

                                   * * * * * *

         4. This Certificate of Determination has been duly approved by the
Board of Directors. This Certificate of Determination has been duly approved by
the required vote of stockholders in accordance with Section 903 of the
California Corporations Code. As of the record date for the meeting of the
stockholders in which the Certificate of Designation was approved, the total
number of shares of outstanding shares of the Corporation was [__________]
shares of Common Stock,[___________] million (__________) shares of Series D
Preferred Stock, and one (1) share of Special Voting Stock. The number of shares
voting in favor of the amendment equaled or exceeded the vote required. The
percentage vote required under the law and the Amended and Restated Articles of
Incorporation in effect at the time of this amendment is more than fifty percent
(50%) of the outstanding shares of Common Stock, the votes represented by the
Special Voting Share and the outstanding shares of preferred stock, voting
together as a class, and more than fifty percent (50%) of the outstanding shares
of Series D Preferred Stock, voting separately as a class.

              [the remainder of this page intentionally left blank]


                                       18


         The undersigned, William E. McGlashan, Jr. and Michael J. Zukerman, the
Chief Executive Officer and Chairman of the Board and Senior Vice President,
General Counsel and Secretary of Critical Path, Inc., respectively, declare
under penalty of perjury that the matters set out in the foregoing Certificate
are true of their own knowledge.

         Executed at San Francisco, California on this [__] day of [__________],
[____].




                                             -----------------------------------
                                             William E. McGlashan, Jr.,
                                             Chief Executive Officer and
                                             Chairman of the Board



                                             -----------------------------------
                                             Michael J. Zukerman,
                                             Senior Vice President, General
                                             Counsel and Secretary

EX-4.4

                                                                     EXHIBIT 4.4

                 CERTIFICATE OF DETERMINATION OF PREFERENCES OF

                SERIES E REDEEMABLE CONVERTIBLE PREFERRED STOCK,

                         PAR VALUE $0.001 PER SHARE, OF

                              CRITICAL PATH, INC.,
                            a California corporation

          Pursuant to Section 401 of the California Corporations Code,


         The undersigned, William E. McGlashan, Jr. and Michael J. Zukerman, do
hereby certify that:

         1. They are the duly elected and acting Chief Executive Officer and
Chairman of the Board of Directors and Senior Vice President, General Counsel
and Secretary, respectively, of Critical Path, Inc., a California corporation
(the "Corporation").

         2. Pursuant to authority given in the Corporation's Amended and
Restated Articles of Incorporation, the following recitals and resolutions,
creating a series of [___________] ([__________]) shares of Series E Redeemable
Convertible Preferred Stock were duly adopted by the Corporation's Board of
Directors on [__________].

                                   WITNESSETH

         WHEREAS, the Board of Directors is authorized, within the limitations
and restrictions stated in the Amended and Restated Articles of Incorporation of
the Corporation, to provide by resolution or resolutions for the issuance of
shares of Preferred Stock, par value $0.001 per share, of the Corporation, in
one or more classes or series with such voting powers, full or limited, or no
voting powers, and such designations, preferences and relative, participating,
optional or other special rights, and qualifications, limitations or
restrictions as shall be stated and expressed in the resolution or resolutions
providing for the issuance thereof adopted by the Board of Directors, and as are
not stated and expressed in the Amended and Restated Articles of Incorporation,
or any amendment thereto, including (but without limiting the generality of the
foregoing) such provisions as may be desired concerning voting, redemption,
dividends, dissolution or the distribution of assets and such other subjects or
matters as may be fixed by resolution or resolutions of the Board of Directors
under the California Corporations Code; and

         WHEREAS, it is the desire of the Board of Directors, pursuant to its
authority as aforesaid, to authorize and fix the terms of a series of Preferred
Stock and the number of shares constituting such series:




         NOW, THEREFORE, BE IT RESOLVED:

         1. Designation and Number of Shares. There shall be hereby created and
established a series of Preferred Stock designated as "Series E Redeemable
Convertible Preferred Stock" (the "Series E Preferred Stock"). The authorized
number of shares of Series E Preferred Stock shall be [___________]
([__________]). Capitalized terms used herein and not otherwise defined shall
have the meanings set forth in Section 10 below.

         2. Rank. The Series E Preferred Stock shall with respect to the payment
of the Series E Liquidation Payment in the event of Liquidation or Change of
Control and with respect to dividend and redemption rights rank senior to (i)
all series of common stock of the Corporation (including, without limitation,
the Common Stock, par value $0.001 per share, of the Corporation (the "Common
Stock")), (ii) all series of preferred stock of the Corporation (including,
without limitation, the Series C Participating Preferred Stock, par value $0.001
per share, and the Series D Preferred Stock) and (iii) each other class or
series of Capital Stock of the Corporation hereafter created which does not
expressly rank pari passu with or senior to the Series E Preferred Stock
(clauses (i), (ii) and (iii), together, the "Junior Stock").

         3. Dividends.

                  (a) Dividend Rate. The holders of shares of Series E Preferred
Stock shall accrue dividends at an annual rate equal to five and three-fourths
percent (5 3/4%) of the Price Per Share, calculated on the basis of a 360-day
year, consisting of twelve 30-day months, and shall accrue on a daily basis from
the date of issuance thereof, whether or not the Corporation has earnings or
profits, whether or not there are funds legally available for the payment of
dividends and whether or not declared by the Board of Directors. Such dividends
shall not be paid in cash and shall instead be added to the Series E Accreted
Value on a semi-annual basis on December 31st and June 30th of each year (each
such date, a "Series E Accrual Date"). In addition, if the Corporation declares
and pays any dividends on the Common Stock, then, in that event, the holders of
shares of Series E Preferred Stock shall be entitled to share in such dividends
on a pro rata basis, as if their shares had been converted into shares of Common
Stock pursuant to Section 7(a) below immediately prior to the record date for
determining the stockholders of the Corporation eligible to receive such
dividends.

                  (b) Other Dividends. The Corporation shall not declare or pay
any dividends on, or make any other distributions with respect to or redeem,
purchase or otherwise acquire for consideration, any other shares of Capital
Stock unless and until all accrued and unpaid dividends on the Series E
Preferred Stock have been paid in full. Notwithstanding Section 2 or this
Section 3(b), dividends shall accrue on the Series D Preferred Stock as provided
in Section 3 of the Amended and Restated Series D Certificate of Determination.

         4. Liquidation and Change of Control.

                  (a) Series E Liquidation Payment. Upon the occurrence of a
Liquidation, the holders of shares of Series E Preferred Stock shall be paid in
cash for each share of Series E Preferred Stock held thereby, out of, but only
to the extent of, the assets of the Corporation legally available for
distribution to its stockholders, an amount equal to the greater of (i) the sum


                                       2


of (A) the Series E Accreted Value of such share of Series E Preferred Stock on
the date of such Liquidation plus (B) all dividends accrued since the previous
Series E Accrual Date or (ii) the aggregate consideration that would be paid to
the holder of the number of shares of Common Stock into which such share of
Series E Preferred Stock is convertible immediately prior to such Liquidation.
If the assets of the Corporation available for distribution to the holders of
shares of Series E Preferred Stock shall be insufficient to permit payment in
full to such holders of the sums which such holders are entitled to receive in
such case, then all of the assets available for distribution to holders of
shares of Series E Preferred Stock shall be distributed among and paid to such
holders ratably in proportion to the amounts that would be payable to such
holders if such assets were sufficient to permit payment in full.

                  (b) Change of Control. In the event of a Change of Control,
the holders of shares of Series E Preferred Stock shall be paid for each share
of Series E Preferred Stock held thereby, an amount equal to the greater of (i)
the sum of (A) the Series E Accreted Value of such share of Series E Preferred
Stock on the date of such Change of Control plus (B) all dividends accrued since
the previous Series E Accrual Date or (ii) the aggregate consideration that
would be paid to the holder of the number of shares of Common Stock into which
such share of Series E Preferred Stock is convertible immediately prior to the
closing of such Change of Control. Such amount shall be paid in the form of
consideration paid in such Change of Control on the closing date of such Change
of Control.

         5. Redemption.

                  (a) Optional Redemption.

                           (i) Series E Optional Redemption Period. The
Corporation shall not have any right to redeem any shares of the Series E
Preferred Stock on or prior to the third anniversary of the Series E Closing
Date. If on any date after the third anniversary of the Series E Closing Date,
but prior to the Series E Automatic Redemption Date, the average closing price
per share of the Common Stock, as reported on NASDAQ or other nationally
recognized securities exchange on which the shares of Common Stock trade, for
any sixty (60) consecutive trading days after such third anniversary date,
equals or exceeds four hundred percent (400%) of the Series E Accreted Value
(the "Series E Optional Redemption Measurement Window"), the Corporation shall
have the right, at its sole option and election, to redeem (unless otherwise
prevented by law) within thirty (30) days following such Series E Optional
Redemption Measurement Window (the "Series E Optional Redemption Period"), all,
but not less than all, of the outstanding shares of Series E Preferred Stock in
cash, at a price per share (the "Series E Optional Redemption Price") equal to
the sum of the Series E Accreted Value plus all dividends accrued since the
previous Series E Accrual Date.

                           (ii) Optional Redemption Payment. Written notice of
any election by the Corporation to redeem the shares of Series E Preferred Stock
pursuant to Section 5(a) (with a closing date prior to the expiration of the
Series E Optional Redemption Period selected for such redemption (the "Series E
Optional Redemption Date")), shall be delivered in person, mailed by certified
mail, return receipt requested, mailed by overnight mail or sent by telecopier
not less than ten (10), nor more than thirty (30), days prior to such Series E
Optional Redemption Date to the holders of record of the shares of Series E
Preferred Stock, such notice to be addressed to


                                       3


each such holder at its address as shown in the records of the Corporation. The
Series E Optional Redemption Price shall be made with respect to each share of
Series E Preferred Stock by wire transfer of immediately available funds or
check as promptly as practicable and, in any event, within seven (7) days after
receipt by the Corporation of the Series E Preferred Stock certificates to
accounts designated in writing by the holders of such shares of Series E
Preferred Stock (in the case of wire transfer) after surrender of the Series E
Preferred Stock certificates pursuant to the following sentence. Upon notice
from the Corporation, each holder of shares of Series E Preferred Stock so
redeemed shall promptly surrender to the Corporation, at any place where the
Corporation shall maintain a transfer agent for its shares of Series E Preferred
Stock, certificates representing the shares so redeemed, duly endorsed in blank
or accompanied by proper instruments of transfer. Notwithstanding anything to
the contrary set forth in this Certificate of Determination, any holder of
Series E Preferred Stock may convert its shares of Series E Preferred Stock
pursuant to Section 7(a) until the Series E Optional Redemption Price has been
paid in full by the Corporation to such holder.

                           (iii) Termination of Rights. If shares of Series E
Preferred Stock are redeemed in full on the Series E Optional Redemption Date,
then after the Series E Optional Redemption Date, all rights of any holder of
shares of Series E Preferred Stock shall cease and terminate, and such shares of
Series E Preferred Stock shall no longer be deemed to be outstanding; provided,
however, that, if the Corporation defaults in the payment in full of the Series
E Optional Redemption Price, then, subject to Section 5(b), the Corporation may
not redeem the shares of Series E Preferred Stock until the next Series E
Optional Redemption Measurement Window.

                  (b) Automatic Redemption.

                           (i) Automatic Redemption Date and Payment. On the
fourth anniversary of the Series E Closing Date (the "Series E Automatic
Redemption Date"), all of the shares of Series E Preferred Stock shall
automatically, with no further action required to be taken by the Corporation or
the holder thereof, be redeemed (unless otherwise prevented by law) in cash, at
a redemption price per share (the "Series E Redemption Price") equal to the sum
of the Series E Accreted Value plus all dividends accrued since the previous
Series E Accrual Date. Written notice of the Series E Automatic Redemption Date
shall be delivered in person, mailed by certified mail, return receipt
requested, mailed by overnight mail or sent by telecopier not less than thirty
(30), nor more than sixty (60), days prior to the Series E Automatic Redemption
Date to the holders of record of the shares of Series E Preferred Stock, such
notice to be addressed to each such holder at its address as shown in the
records of the Corporation. The Series E Redemption Price shall be made with
respect to each share of Series E Preferred Stock by wire transfer of
immediately available funds or check as promptly as practicable and, in any
event, within seven (7) days after receipt by the Corporation of the Series E
Preferred Stock certificates to accounts designated (in the case of wire
transfer) in writing by the holders of such shares of Series E Preferred Stock
after surrender of the Series E Preferred Stock certificates pursuant to the
following sentence. Upon notice from the Corporation, each holder of such shares
of Series E Preferred Stock so redeemed shall promptly surrender to the
Corporation, at any place where the Corporation shall maintain a transfer agent
for its shares of Series E Preferred Stock, certificates representing the shares
so redeemed, duly endorsed in blank or accompanied by proper instruments of
transfer. Notwithstanding anything to the contrary set forth in this


                                       4

Certificate of Determination, any holder of Series E Preferred Stock may convert
its shares of Series E Preferred Stock pursuant to Section 7(a) hereof until the
Series E Redemption Price has been paid in full by the Corporation to any such
holder.

                           (ii) Termination of Rights. If the shares of Series E
Preferred Stock are redeemed in full on the Series E Automatic Redemption Date,
then after the Series E Automatic Redemption Date, all rights of any holder of
such shares of Series E Preferred Stock shall cease and terminate, and such
shares of Series E Preferred Stock shall no longer be deemed to be outstanding,
whether or not the certificates representing such shares have been received by
the Corporation; provided, however, that, if the Corporation defaults in the
payment in full of the Series E Redemption Price, the rights of the holders of
shares of Series E Preferred Stock shall continue until the Corporation cures
such default.

                           (iii) Insufficient Funds for Redemption. If the funds
of the Corporation available for redemption of the shares of Series E Preferred
Stock on the Series E Automatic Redemption Date are insufficient to redeem in
full the shares of Series E Preferred Stock, the holders of shares of Series E
Preferred Stock shall share ratably in any funds available by law for redemption
of such shares according to the respective amounts which would be payable with
respect to the number of shares owned by them if the shares to be so redeemed on
such Series E Automatic Redemption Date were redeemed in full. Any shares of
Series E Preferred Stock that the Corporation does not redeem on the Series E
Automatic Redemption Date due to insufficient funds shall continue to be
outstanding until redeemed and dividends on such shares shall continue to accrue
and cumulate until redeemed. The Corporation shall in good faith use all
commercially reasonable efforts as expeditiously as possible to eliminate, or
obtain an exception, waiver or exemption from, any and all restrictions that
prevented the Corporation from paying the Series E Redemption Price and
redeeming all of the shares of Series E Preferred Stock. At any time thereafter
when additional funds of the Corporation are available by law for the redemption
of the shares of Series E Preferred Stock, such funds shall be used as promptly
as practicable to redeem the balance of such shares, or such portion thereof for
which funds are available, on the basis set forth above.

         6. Voting Rights.

                  (a) General. In addition to the voting rights to which the
holders of Series E Preferred Stock are entitled under or granted by California
law, the holders of Series E Preferred Stock shall be entitled to vote, in
person or by proxy, at a special or annual meeting of stockholders on all
matters entitled to be voted on by holders of shares of Common Stock voting
together as a single class with the Common Stock (and with other shares entitled
to vote thereon, if any), including, without limitation, the election of all of
the directors of the Corporation other than the director elected solely by the
holders of the shares of Series D Preferred Stock pursuant to Section 6(b) of
the Amended and Restated Series D Certificate of Determination. With respect to
any such vote, each share of Series E Preferred Stock shall entitle the holder
thereof to cast that number of votes as is equal to the quotient of (i) the sum
of the Series E Accreted Value plus all dividends accrued since the previous
Series E Accrual Date divided by (ii) [____], subject to the same adjustments
that are made to the Series E Conversion Price as provided in Section 7(c)
below.


                                       5


                  (b) Series E Actions. At any meeting of the holders of shares
of Series E Preferred Stock held for the purpose of voting upon any resolutions
requiring the approval of the holders of shares of Series E Preferred Stock,
voting as a separate class or series, the presence in person or by proxy of the
holders of a majority of the shares of Series E Preferred Stock then outstanding
shall constitute a quorum of the Series E Preferred Stock; the holders of shares
of Series E Preferred Stock shall be entitled to cast one vote per share of
Series E Preferred Stock; and such resolution shall be deemed approved upon the
affirmative vote of the holders of a majority of the outstanding shares of
Series E Preferred Stock present in person or represented by proxy at such
meeting.

                  (c) Action Without a Meeting. Any action required by the
California Corporations Code to be taken at any annual or special meeting of
holders of Series E Preferred Stock, voting as a separate class or series, may
be taken without a meeting, without prior notice and without a vote, if a
consent or consents in writing, setting forth the action so taken, shall be
signed by the holders of outstanding shares of Series E Preferred Stock having
not less than the minimum number of votes that would be necessary to authorize
or take such action at a meeting of the holders of Series E Preferred Stock
pursuant to Section 6(b) and shall be delivered (by hand or certified or
registered mail, return receipt requested) to the Corporation by delivery to its
registered office in the State of California, its principal place of business,
or any officer or agent of the Corporation having custody of the book in which
proceedings of meetings of the holders of Series E Preferred Stock are recorded.
Every written consent shall bear the date of signature of each holder of Series
E Preferred Stock who signs the consent. Prompt notice of the taking of the
corporate action without a meeting by less than unanimous written consent shall,
to the extent, required by applicable law, be given to those holders of Series E
Preferred Stock who have not consented in writing, and who, if the action had
been taken at a meeting, would have been entitled to notice of the meeting if
the record date for such meeting had been the date that written consents signed
by a sufficient number of holders to take the action were delivered to the
Corporation.

                  (d) Major Actions. Notwithstanding anything to the contrary
set forth in the Amended and Restated Articles of Incorporation or the By-laws
of the Corporation, the affirmative vote of the holders of the outstanding
shares of Series E Preferred Stock acting in accordance with Section 6(b) or
6(c), voting as a separate class, shall be a prerequisite to:

                           (i) any amendment to, restatement of or waiver of the
terms of the Series E Preferred Stock, including, without limitation, by merger,
consolidation, business combination or otherwise that is not a Change of
Control;

                           (ii) the issuance, reservation for issuance or
authorization of any Capital Stock of the Corporation or any right or option to
acquire shares of Capital Stock ranking senior to the shares of Series E
Preferred Stock or any increase or decrease in the authorized number of shares
of Series E Preferred Stock; provided, that the Corporation may issue (w)
options or shares pursuant to the Stock Option Plans, (x) shares of Series E
Preferred Stock (A) upon conversion of those certain convertible promissory
notes, with an aggregate principal amount of ten million dollars ($10,000,000),
issued by the Corporation on November 26, 2003, (B) in exchange for those
certain 5 3/4% Convertible Subordinated Notes, due April 1, 2005, in the
principal face amount of thirty-two million seven hundred ninety-five thousand
dollars


                                       6

($32,795,000), issued by the Corporation pursuant to the Corporation's
Indenture, dated March 31, 2000, (C) upon conversion of the Apex Notes and (D)
issuable pursuant to agreements entered into prior to the Series E Closing Date,
and (y) the Series E Purchase Rights and the Rights Shares;

                           (iii) the redemption of any Junior Stock other than
the repurchase of unvested stock options or restricted stock from employees,
officers, directors or consultants of the Corporation upon termination of
service or in accordance with the Stock Option Plans;

                           (iv) prior to the payment in full of the Series E
Liquidation Payment, any distribution or payment of any dividend or other
distribution to any Junior Stock, provided that, no consent of the holders of
Series E Preferred Stock shall be required for the accrual of dividends on the
Series D Preferred Stock as provided in Section 3 of the Amended and Restated
Certificate of Determination of Preferences of Series D Preferred Stock; and

                           (v) any amendment to this Section 6(d).

         7. Conversion.

                  (a) Optional Conversion. Any holder of shares of Series E
Preferred Stock shall have the right, at its option, at any time and from time
to time, to convert, subject to the terms and provisions of this Section 7, any
or all of such holder's shares of Series E Preferred Stock into such number of
fully paid and non-assessable shares of Common Stock as is equal to the product
of (i) the number of shares of Series E Preferred Stock being so converted
multiplied by (ii) the quotient of (x) the Series E Accreted Value divided by
(y) the Series E Conversion Price, subject to adjustment as provided in Section
7(c) below. Such conversion right shall be exercised by the surrender of
certificate(s) representing the shares of Series E Preferred Stock to be
converted to the Corporation at any time during usual business hours at its
principal place of business maintained by it (or such other office or agency of
the Corporation as the Corporation may designate by notice in writing to the
holders of shares of Series E Preferred Stock), accompanied by written notice
that the holder elects to convert such shares of Series E Preferred Stock and
specifying the name or names (with address) in which a certificate or
certificates for shares of Common Stock are to be issued and (if so required by
the Corporation) by a written instrument or instruments of transfer in form
reasonably satisfactory to the Corporation duly executed by the holder or its
duly authorized legal representative and transfer tax stamps or funds therefor,
if required pursuant to Section 7(i) below. All certificates representing shares
of Series E Preferred Stock surrendered for conversion shall be delivered to the
Corporation for cancellation and canceled by it. As promptly as practicable
after the surrender of any shares of Series E Preferred Stock, in any event
within seven (7) days of the receipt of such certificates, the Corporation shall
(subject to compliance with the applicable provisions of federal and state
securities laws) deliver to the holder of such shares so surrendered
certificate(s) representing the number of fully paid and nonassessable shares of
Common Stock into which such shares are entitled to be converted. At the time of
the surrender of such certificate(s), the Person in whose name any
certificate(s) for shares of Common Stock shall be issuable upon such conversion
shall be deemed to be the holder of record of such shares of Common Stock on
such date, notwithstanding that the share register of the Corporation shall then
be closed or that the certificates representing such Common Stock shall not then
be actually delivered to such Person.


                                       7


                  (b) Termination of Rights. On the date of such optional
conversion pursuant to Section 7(a) above all rights with respect to the shares
of Series E Preferred Stock so converted, including the rights, if any, to
receive notices and vote, shall terminate, except only the rights of holders
thereof to (i) receive certificates for the number of shares of Common Stock
into which such shares of Series E Preferred Stock have been converted and (ii)
exercise the rights to which they are entitled as holders of Common Stock.

                  (c) (i) Dividend, Subdivision, Combination or Reclassification
of Common Stock. In the event that the Corporation shall at any time or from
time to time, prior to conversion of shares of Series E Preferred Stock (w) pay
a dividend or make a distribution on the outstanding shares of Common Stock
payable in Capital Stock of the Corporation, (x) subdivide the outstanding
shares of Common Stock into a larger number of shares, (y) combine the
outstanding shares of Common Stock into a smaller number of shares or (z) issue
any shares of its Capital Stock in a reclassification of the Common Stock (other
than any such event for which an adjustment is made pursuant to another clause
of this Section 7(c)), then, and in each such case, the Series E Conversion
Price in effect immediately prior to such event shall be adjusted (and any other
appropriate actions shall be taken by the Corporation) so that the holder of any
share of Series E Preferred Stock thereafter surrendered for conversion shall be
entitled to receive the number of shares of Common Stock or other securities of
the Corporation that such holder would have owned or would have been entitled to
receive upon or by reason of any of the events described above, had such share
of Series E Preferred Stock been converted immediately prior to the occurrence
of such event. An adjustment made pursuant to this Section 7(c)(i) shall become
effective retroactively (x) in the case of any such dividend or distribution, to
a date immediately following the close of business on the record date for the
determination of holders of Common Stock entitled to receive such dividend or
distribution or (y) in the case of any such subdivision, combination or
reclassification, to the close of business on the day upon which such corporate
action becomes effective.

                           (ii) Certain Distributions. In case the Corporation
shall at any time or from time to time, prior to conversion of shares of Series
E Preferred Stock, distribute to all holders of shares of the Common Stock
(including any such distribution made in connection with a merger or
consolidation in which the Corporation is the resulting or surviving Person and
the Common Stock is not changed or exchanged) cash, evidences of indebtedness of
the Corporation or another issuer, securities of the Corporation or another
issuer or other assets (excluding cash dividends in which holders of shares of
Series E Preferred Stock participate, in the manner provided in Section 3(b);
dividends payable in shares of Common Stock for which adjustment is made under
another paragraph of this Section 7(c); and any distribution in connection with
an Excluded Transaction) or rights or warrants to subscribe for or purchase of
any of the foregoing, then, and in each such case, the Series E Conversion Price
then in effect shall be adjusted (and any other appropriate actions shall be
taken by the Corporation) by multiplying the Series E Conversion Price in effect
immediately prior to the date of such distribution by a fraction (x) the
numerator of which shall be the Current Market Price of the Common Stock
immediately prior to the date of distribution less the then fair market value
(as determined by the Board of Directors in the exercise of their fiduciary
duties) of the portion of the cash, evidences of indebtedness, securities or
other assets so distributed or of such rights or warrants applicable to one
share of Common Stock and (y) the denominator of which shall be the Current
Market Price of the Common Stock immediately prior to the date of distribution
(but such fraction shall not be


                                       8

greater than one); provided, however, that no adjustment shall be made with
respect to any distribution of rights or warrants to subscribe for or purchase
securities of the Corporation if the holder of shares of Series E Preferred
Stock would otherwise be entitled to receive such rights or warrants upon
conversion at any time of shares of Series E Preferred Stock into Common Stock.
Such adjustment shall be made whenever any such distribution is made and shall
become effective retroactively to a date immediately following the close of
business on the record date for the determination of stockholders entitled to
receive such distribution.

                           (iii) Other Changes. In case the Corporation at any
time or from time to time, prior to the conversion of shares of Series E
Preferred Stock, shall take any action affecting its Common Stock similar to or
having an effect similar to any of the actions described in Sections 7(c)(i) or
(ii) above or Section 7(f) below (but not including any action described in any
such Section) and the Board of Directors shall consider whether an adjustment
should thereupon be made in the Series E Conversion Price. If the Board of
Directors in good faith determines that it would be equitable in the
circumstances to adjust the Series E Conversion Price as a result of such
action, then, and in each such case, the Series E Conversion Price shall be
adjusted in such manner and at such time as the Board of Directors in good faith
determines would be equitable in the circumstances (such determination to be
evidenced in a resolution, a certified copy of which shall be mailed to the
holders of shares of Series E Preferred Stock).

                           (iv) No Adjustment. Notwithstanding anything herein
to the contrary, no adjustment under this Section 7(c) need be made to the
Series E Conversion Price if the Corporation receives written notice from
holders of a majority of the outstanding shares of Series E Preferred Stock that
no such adjustment is required.

                  (d) Abandonment. If the Corporation shall take a record of the
holders of its Common Stock for the purpose of entitling them to receive a
dividend or other distribution, and shall thereafter and before the distribution
to stockholders thereof legally abandon its plan to pay or deliver such dividend
or distribution, then no adjustment in the Series E Conversion Price shall be
required by reason of the taking of such record.

                  (e) Certificate as to Adjustments. Upon any adjustment in the
Series E Conversion Price, the Corporation shall within a reasonable period (not
to exceed ten (10) Business Days) following any of the foregoing transactions
deliver to each registered holder of shares of Series E Preferred Stock a
certificate, signed by (i) the Chief Executive Officer of the Corporation and
(ii) the Chief Financial Officer of the Corporation, setting forth in reasonable
detail the event requiring the adjustment and the method by which such
adjustment was calculated and specifying the increased or decreased Series E
Conversion Price then in effect following such adjustment.

                  (f) Reorganization, Reclassification. In case of any merger or
consolidation of the Corporation (other than a Change of Control) or any capital
reorganization, reclassification or other change of outstanding shares of Common
Stock (other than a change in par value, or from par value to no par value, or
from no par value to par value) (each, a "Transaction"), the holder of each
share of Series E Preferred Stock shall have the right to receive in such
Transaction, in exchange for each share of Series E Preferred Stock, a security
identical to (and


                                       9

not less favorable than) the Series E Preferred Stock, and provision shall be
made therefor in the agreement, if any, relating to such Transaction.

                  (g) Reservation of Common Stock. The Corporation shall at all
times reserve and keep available for issuance upon the conversion of shares of
Series E Preferred Stock, such number of its authorized but unissued shares of
Common Stock as will from time to time be sufficient to permit the conversion of
all outstanding shares of Series E Preferred Stock, and shall take all action to
increase the authorized number of shares of Common Stock if at any time there
shall be insufficient authorized but unissued shares of Common Stock to permit
such reservation or to permit the conversion of all outstanding shares of Series
E Preferred Stock; provided, that the holders of shares of Series E Preferred
Stock shall vote such shares in favor of any such action that requires a vote of
stockholders.

                  (h) No Conversion Tax or Charge. The issuance or delivery of
certificates for Common Stock upon the conversion of shares of Series E
Preferred Stock shall be made without charge to the converting holder of shares
of Series E Preferred Stock for such certificates or for any tax in respect of
the issuance or delivery of such certificates or the securities represented
thereby, and such certificates shall be issued or delivered in the respective
names of, or (subject to compliance with the applicable provisions of federal
and state securities laws) in such names as may be directed by, the holders of
the shares of Series E Preferred Stock converted; provided, however, that the
Corporation shall not be required to pay any tax which may be payable in respect
of any transfer involved in the issuance and delivery of any such certificate in
a name other than that of the holder of the shares of Series E Preferred Stock
converted, and the Corporation shall not be required to issue or deliver such
certificate unless or until the Person or Persons requesting the issuance or
delivery thereof shall have paid to the Corporation the amount of such tax or
shall have established to the reasonable satisfaction of the Corporation that
such tax has been paid.

                  (i) Limitations on Conversions. Each holder of the Series E
Preferred Stock's right to convert its shares of Series E Preferred Stock into
shares of Common Stock shall not be limited by any notice delivered by the
Corporation of any proposed redemption, Change of Control or any other event
that notwithstanding this subsection (i) shall purport to limit such conversion
right.

         8. Certain Remedies. Any registered holder of shares of Series E
Preferred Stock shall be entitled to an injunction or injunctions to prevent
breaches of the provisions of this Certificate of Determination and to enforce
specifically the terms and provisions of this Certificate of Determination in
any court of the United States or any state thereof having jurisdiction, this
being in addition to any other remedy to which such holder may be entitled at
law or in equity.

         9. Business Day. If any payment shall be required by the terms hereof
to be made on a day that is not a Business Day, such payment shall be made on
the immediately succeeding Business Day.


                                       10


         10. Definitions. As used in this Certificate of Determination, the
following terms shall have the following meanings (with terms defined in the
singular having comparable meanings when used in the plural and vice versa),
unless the context otherwise requires:

                  "Affiliate" shall mean any Person who is an "affiliate" as
defined in Rule 12b-2 of the General Rules and Regulations under the Exchange
Act.

                  "Amended and Restated Series D Certificate of Determination"
means the Corporation's Certificate of Determination of Preference of Series D
Cumulative Redeemable Convertible Preferred Stock, as amended from time to time.

                  "Apex Notes" means the convertible promissory notes with an
aggregate principal amount of fifteen million dollars ($15,000,000) issued by
the Corporation on January 16, 2004, to Permal U.S. Opportunities Limited, Zaxis
Equity Neutral, L.P., Zaxis Institutional Partners, L.P., Zaxis Offshore
Limited, Zaxis Partners, L.P. and Passport Master Fund, L.P., pursuant to the
Convertible Note Purchase Agreement.

                  "Board of Directors" means the Board of Directors of the
Corporation.

                  "Business Day" means any day except a Saturday, a Sunday, or
other day on which commercial banks in the State of New York or the State of
California are authorized or required by law or executive order to close.

                  "Capital Stock" means, with respect to any Person, any and all
shares, interests, participations, rights in, or other equivalents (however
designated and whether voting or non-voting) of, such Person's capital stock
(including, without limitation, common stock and preferred stock) and any and
all rights, warrants or options exchangeable for or convertible into such
capital stock.

                  "Certificate of Determination" means this Certificate of
Determination of Preferences of Series E Redeemable Convertible Preferred Stock,
as amended from time to time.

                  "Change of Control" means (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
Corporation prior to such transaction do not own a majority of the voting
securities of the surviving entity, (ii) any tender offer, exchange offer or
other transaction whereby any person or "group" other than the Investors obtains
a majority of the outstanding shares of capital stock entitled to vote in the
election of the Board of Directors, (iii) any proxy contest in which a majority
of the Board of Directors (or persons appointed by such Board of Directors)
prior to such contest do not constitute a majority of the Board of Directors
after such contest, (iv) a sale of all or substantially all of the assets of the
Corporation or (v) any other transaction described in any stockholder rights
agreement or "poison pill", if any, to which the Corporation is a party, which
permits the holders of any rights or similar certificates to exercise the rights
evidenced thereby and pursuant to which the Board of Directors does not waive
the application of such stockholder rights agreement or "poison pill."

                  "Commission" means the United States Securities and Exchange
Commission.


                                       11


                  "Common Stock" shall have the meaning ascribed to it in
Section 2(a) hereof.

                  "Common Stock Equivalent" shall mean any security or
obligation which is by its terms convertible, exchangeable or exercisable into
or for shares of Common Stock, including, without limitation, shares of Series D
Preferred Stock, shares of Series E Preferred Stock and any option, warrant or
other subscription or purchase right with respect to Common Stock or any Common
Stock Equivalent.

                  "Convertible Note Purchase Agreement" means the Convertible
Note Purchase Agreement, dated January 16, 2004, among the Corporation and
Permal U.S. Opportunities Limited, Zaxis Equity Neutral, L.P., Zaxis
Institutional Partners, L.P., Zaxis Offshore Limited, Zaxis Partners, L.P. and
Passport Master Fund, L.P.

                   "Corporation" shall have the meaning ascribed to it in the
first paragraph of this Certificate of Determination.

                  "Current Market Price" per share of Capital Stock of any
Person shall mean, as of the date of determination, (a) the average of the daily
Market Price under clause (a), (b) or (c), as applicable, of the definition
thereof of such Capital Stock during the immediately preceding thirty (30)
trading days ending on such date, and (b) if such Capital Stock is not then
listed or admitted to trading on any national securities exchange or quoted in
the over-the-counter market, then the Market Price under clause (d) of the
definition thereof on such date.

                  "Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission promulgated thereunder.

                  "Excluded Transaction" means (a) any issuance of shares of
stock or options to purchase shares of Series E Preferred Stock or Common Stock
pursuant to the Stock Option Plans, (b) any issuance of Common Stock (i) upon
the conversion of shares of Series E Preferred Stock or shares of Series D
Preferred Stock, (ii) as a dividend on shares of Series E Preferred Stock or
shares of Series D Preferred Stock or (iii) upon conversion or exercise of any
Common Stock Equivalents, (c) any issuance of Common Stock in connection with
any Series E Liquidation Payment or Series D Liquidation Payment, (d) Capital
Stock issued in consideration of an acquisition, approved by the Board of
Directors, of another Person, (e) shares of Common Stock and Common Stock
Equivalents issued in strategic transactions (which may not be private equity or
venture capital financing transactions), approved by the Board of Directors, to
Persons that are not principally engaged in financial investing, (f) the
issuance of the Series E Purchase Rights and the Rights Shares, (g) shares of
Series E Preferred Stock issuable pursuant to agreements entered into prior to
the Series E Closing Date and (h) shares of Common Stock issuable upon
conversion of the Apex Notes in accordance with the terms of the Convertible
Note Purchase Agreement.

                  "GAAP" means United States generally accepted accounting
principles in effect from time to time.

                  "Investors" means General Atlantic Partners 74, L.P., GAP
Coinvestment Partners II, L.P., GapStar, LLC, GAPCO GmbH & Co. KG, Campina
Enterprises Limited,


                                       12


Cenwell Limited, Great Affluent Limited, Dragonfield Limited and Lion Cosmos
Limited and the Affiliates of the foregoing, provided that Affiliates shall be
deemed not to include any portfolio companies of any of the foregoing.

                  "Junior Stock" shall have the meaning ascribed to it in
Section 2(a) hereof.

                  "Liquidation" shall mean the voluntary or involuntary
liquidation under applicable bankruptcy or reorganization legislation, or the
dissolution or winding up of the Corporation.

                  "Market Price" shall mean, with respect to the Capital Stock
of any Person, as of the date of determination, (a) if such Capital Stock is
listed on a national securities exchange, the closing price per share of such
Capital Stock on such date published in The Wall Street Journal (National
Edition) or, if no such closing price on such date is published in The Wall
Street Journal (National Edition), the average of the closing bid and asked
prices on such date, as officially reported on the principal national securities
exchange on which such Capital Stock is then listed or admitted to trading; or
(b) if such Capital Stock is not then listed or admitted to trading on any
national securities exchange but is designated as a national market system
security by the National Association of Securities Dealers, Inc., the last
trading price of such Capital Stock on such date; or (c) if there shall have
been no trading on such date or if such Capital Stock is not designated as a
national market system security by the National Association of Securities
Dealers, Inc., the average of the reported closing bid and asked prices of such
Capital Stock on such date as shown by the National Market System of the
National Association of Securities Dealers, Inc. Automated Quotations System and
reported by any member firm of the New York Stock Exchange selected by the
Corporation; or (d) if none of (a), (b) or (c) is applicable, the fair market
value thereof as reasonably determined by the Board of Directors.

                  "NASDAQ" shall mean The Nasdaq Stock Market, Inc.

                  "Person" means any individual, firm, corporation, partnership,
limited liability company, trust, incorporated or unincorporated association,
joint venture, joint stock company, governmental body or other entity of any
kind.

                  "Price Per Share" means $1.50 (subject to anti-dilution
adjustment for stock splits of, combinations of and capital reorganizations with
respect to the Series E Preferred Stock).

                  "Rights Offering" shall mean a rights offering for an
aggregate amount of up to $21,000,000 of shares of Series E Preferred Stock
pursuant to which the Corporation will distribute transferable rights to the
Corporation's holders of Common Stock as contemplated by the Convertible Note
Purchase and Exchange Agreement, dated November 18, 2003, among the Corporation
and certain other parties thereto.

                  "Rights Shares" means the shares of Series E Preferred Stock
issuable upon exercise of the Series E Purchase Rights and the shares of the
Common Stock issuable upon conversion of such shares of Series E Preferred
Stock.


                                       13


                  "Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations of the Commission promulgated thereunder.

                  "Series D Liquidation Payment" shall have the meaning ascribed
to it in the Amended and Restated Certificate of Determination of Preferences of
Series D Preferred Stock if and when approved by the requisite stockholders of
the Corporation and duly filed with the Secretary of State of the State of
California.

                  "Series D Preferred Stock" shall have the meaning ascribed to
it in the Amended and Restated Certificate of Determination of Preferences of
Series D Preferred Stock if and when approved by the requisite stockholders of
the Corporation and duly filed with the Secretary of State of the State of
California.

                  "Series E Accreted Value" shall mean as of any date, with
respect to each share of Series E Preferred Stock, the Price Per Share plus the
amount of dividends that have accrued from the Series E Closing Date to the then
most recent Series E Accrual Date pursuant to Section 3(a) of this Certificate
of Determination.

                  "Series E Automatic Redemption Date" shall have the meaning
ascribed to it in Section 5(b) hereof.

                  "Series E Closing Date" means _____________, 2004.

                  "Series E Conversion Price" shall mean $1.50, as adjusted
pursuant to Section 7(c).

                  "Series E Liquidation Payment" shall mean, with respect to
each share of Series E Preferred Stock, those amounts payable pursuant to
Section 4(a)(i) or Section 4(b)(i), as the case may be.

                  "Series E Optional Redemption Date" shall have the meaning
ascribed to it in Section 5(a)(ii) hereof.

                  "Series E Optional Redemption Measurement Window" shall have
the meaning ascribed to it in Section 5(a)(i) hereof.

                  "Series E Optional Redemption Period" shall have the meaning
ascribed to it in Section 5(a)(i) hereof.

                  "Series E Optional Redemption Price" shall have the meaning
ascribed to it in Section 5(a)(i) hereof.

                  "Series E Preferred Stock" shall have the meaning ascribed to
it in Section 1 hereof.

                  "Series E Purchase Rights" means those rights to purchase
Series E Preferred Stock issued in the Rights Offering.


                                       14


                  "Series E Redemption Price" shall have the meaning ascribed to
it in Section 5(b) hereof.

                  "Stock Option Plans" means the Corporation's stock option
plans and employee purchase plans approved by the Board of Directors, pursuant
to which shares of restricted stock and options to purchase shares of Series E
Preferred Stock and/or Common Stock are reserved and available for grant to
officers, directors, employees and consultants of the Corporation.

                                   * * * * * *

         3. This Certificate of Determination has been duly approved by the
Board of Directors. The authorized number of shares of Preferred Stock of the
Corporation is [__________], of which one share constitutes the Special Voting
Share, which share has been issued, 75,000 shares constitute Series C
Participating Preferred Stock, none of which has been issued, [___________]
shares of Series D Preferred Stock, [all] of which have been issued, and
[__________] shares of Series E Preferred Stock, none of which has been issued.
The number of shares voting in favor of this Certificate of Determination
equaled or exceeded the vote required. The percentage vote required under the
Amended and Restated Articles of Incorporation in effect at the time of this
Certificate of Determination was more than 50% of the outstanding shares of
Series D Preferred Stock, voting separately as a class.

              [the remainder of this page intentionally left blank]


                                       15


         The undersigned, William E. McGlashan, Jr. and Michael J. Zukerman, the
Chief Executive Officer and Chairman of the Board of Directors and Vice
President and Secretary, respectively, of Critical Path, Inc., declare under
penalty of perjury that the matters set out in the foregoing Certificate are
true of their own knowledge.

         Executed at San Francisco, California on this [__] day of [__________],
[____].





                                              ----------------------------------
                                              William E. McGlashan, Jr.,
                                              Chief Executive Officer and
                                              Chairman of the Board of Directors



                                              ----------------------------------
                                              Michael J. Zukerman,
                                              Senior Vice President, General
                                              Counsel and Secretary

EX-10.1

                                                                    EXHIBIT 10.1

================================================================================


                       CONVERTIBLE NOTE PURCHASE AGREEMENT


                                      among


                              CRITICAL PATH, INC.,

                       PERMAL U.S. OPPORTUNITIES LIMITED,

                           ZAXIS EQUITY NEUTRAL, L.P.,

                       ZAXIS INSTITUTIONAL PARTNERS, L.P.,

                             ZAXIS OFFSHORE LIMITED,

                              ZAXIS PARTNERS, L.P.,

                       GUGGENHEIM PORTFOLIO COMPANY XIII,

                       CROSSLINK CROSSOVER FUND IV, L.P.,

                          SAGAMORE HILL HUB FUND, LTD.,

                        CRITERION CAPITAL PARTNERS, LTD.,

                   CRITERION CAPITAL PARTNERS, INSTITUTIONAL,

                      CRITERION CAPITAL PARTNERS, L.P. AND

                         CAPITAL VENTURES INTERNATIONAL



                              --------------------
                              Dated: March 9, 2004
                              --------------------


================================================================================


                                Table of Contents



                                                                                   Page
                                                                                   ----
                                                                                
ARTICLE I DEFINITIONS.................................................................2
        1.1      Definitions..........................................................2

ARTICLE II PURCHASE AND SALE OF NOTES; CONVERSION; EXCHANGE..........................11
        2.1      Purchase and Sale of Notes..........................................11
        2.2      Filings.............................................................11
        2.3      Certificate of Determination........................................11
        2.4      Closings; Deliveries................................................11
        2.5      Issuances of Common Shares..........................................13

ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY............................13
        3.1      Corporate Existence and Power.......................................13
        3.2      Authorization; No Contravention.....................................14
        3.3      Governmental Authorization; Third Party Consents....................14
        3.4      Binding Effect......................................................14
        3.5      Litigation..........................................................15
        3.6      Compliance with Laws................................................15
        3.7      Capitalization......................................................15
        3.8      No Default or Breach; Contractual Obligations.......................17
        3.9      Title to Properties.................................................17
        3.10     Reports; Financial Statements.......................................17
        3.11     Taxes...............................................................18
        3.12     No Material Adverse Change; Ordinary Course of Business.............18
        3.13     Private Offering....................................................18
        3.14     Labor Relations.....................................................19
        3.15     Employee Benefit Plans..............................................19
        3.16     Liabilities.........................................................20
        3.17     Affiliate Transactions..............................................20
        3.18     Intellectual Property...............................................21
        3.19     Privacy of Customer Information.....................................22
        3.20     Potential Conflicts of Interest.....................................22
        3.21     Trade Relations.....................................................23
        3.22     Outstanding Borrowing...............................................23
        3.23     Broker's, Finder's or Similar Fees..................................23
        3.24     Stockholder Approval................................................23
        3.25     CCC Section.........................................................23
        3.26     Disclosure..........................................................24
        3.27     Investments.........................................................24
        3.28     Sarbanes-Oxley Compliance...........................................24




                                       i

                                                                                  
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE LENDERS.............................25
        4.1      Existence and Power.................................................25
        4.2      Authorization; No Contravention.....................................25
        4.3      Governmental Authorization; Third Party Consents....................25
        4.4      Binding Effect......................................................26
        4.5      Purchase for Own Account............................................26
        4.6      Restricted Securities...............................................27
        4.7      Accredited Investor.................................................27
        4.8      Experience..........................................................27
        4.9      Access to Information...............................................27
        4.10     General Solicitation................................................27
        4.11     Reliance............................................................27
        4.12     Qualified Institutional Buyer.......................................28
        4.13     Affiliate Status....................................................28
        4.14     Capital Stock Ownership.............................................28

ARTICLE V CONDITIONS TO INITIAL CLOSING..............................................29
        5.1      Conditions to Lenders' Obligations..................................29
        5.2      Conditions to Company's Obligations.................................29

ARTICLE VI CONDITIONS TO SUBSEQUENT CLOSING..........................................30
        6.1      Conditions to Lenders' Obligations..................................30
        6.2      Conditions to the Company's Obligations.............................30

ARTICLE VII INDEMNIFICATION..........................................................31
        7.1      Indemnification.....................................................31
        7.2      Notification........................................................31
        7.3      Contribution........................................................32

ARTICLE VIII COVENANTS...............................................................33
        8.1      Financial Statements and Other Information..........................33
        8.2      FIRPTA Certificate..................................................33
        8.3      Reservation of Common Stock.........................................34
        8.4      Stockholder Approval................................................34
        8.5      Financial Covenants.................................................34
        8.6      Purchases and Sales.................................................34
        8.7      Proxy Matters.......................................................35

ARTICLE IX TERMINATION...............................................................35
        9.1      Termination.........................................................35

ARTICLE X MISCELLANEOUS..............................................................35
        10.1     Survival of Representations and Warranties..........................35
        10.2     Notices.............................................................36
        10.3     Successors and Assigns; Third Party Beneficiaries...................38
        10.4     Amendment and Waiver................................................38
        10.5     Counterparts........................................................38




                                       ii

                                                                                  
        10.6     Headings............................................................38
        10.7     Governing Law.......................................................38
        10.8     Severability........................................................38
        10.9     Rules of Construction...............................................39
        10.10    Entire Agreement....................................................39
        10.11    Fees................................................................39
        10.12    Publicity; Confidentiality..........................................39
        10.13    Further Assurances..................................................40
        10.14    Waiver..............................................................40



EXHIBITS

        A     Form of Note
        B     Form of Third Amended and Restated Registration Rights Agreement
        C     Form of Amended and Restated Series D Certificate of Determination
        D     Articles of Incorporation
        E     By-laws
        F     Form of Series E Certificate of Determination
        G     Form of Pillsbury Winthrop LLP Opinion


SCHEDULES


    2.1     Purchased Notes
    3.3     Government Authorizations; Consents
    3.5     Litigation
    3.7(a)  Capitalization
    3.10(a) Reports; Financial Statements
    3.12    Material Adverse Change
    3.17    Affiliate Transactions
    3.20    Potential Conflicts of Interest
    3.22    Outstanding Borrowing
    3.27    Investments
    4.14    Capital Stock Ownership
    8.5     Financial Covenants



                                      iii

                       CONVERTIBLE NOTE PURCHASE AGREEMENT


        CONVERTIBLE NOTE PURCHASE AGREEMENT, dated March 9, 2004 (this
"Agreement"), among Permal U.S. Opportunities Limited, Zaxis Equity Neutral,
L.P., Zaxis Institutional Partners, L.P., Zaxis Offshore Limited, Zaxis
Partners, L.P., Guggenheim Portfolio Company XIII, Crosslink Crossover Fund IV,
L.P., Sagamore Hill Hub Fund, Ltd., Criterion Capital Partners, Ltd., Criterion
Capital Partners, Institutional, Criterion Capital Partners, L.P. and Capital
Ventures International (collectively, the "Lenders") and Critical Path, Inc., a
California corporation (the "Company"),

               WHEREAS, on November 18, 2003, the Company entered into the
Convertible Note Purchase and Exchange Agreement, as amended from time to time
(the "November Convertible Note Agreement") with the General Atlantic Entities,
GAP-W, LLC and the CK Purchasers pursuant to which (a) the Company issued $10
million in principal amount of 10% convertible secured notes to the General
Atlantic Entities, and agreed to convert the notes into approximately 7.3
million shares, par value $0.001 per share, of Series E Redeemable Convertible
Preferred Stock (the "Series E Preferred Stock"), and (b) the CK Purchasers
agreed to exchange approximately $32.8 million in face value of CK Sub Notes for
approximately 21.9 million shares of Series E Preferred Stock subject to
Stockholder Approval (as hereinafter defined); and

               WHEREAS, on January 16, 2004, the Company entered into the
Convertible Note Purchase Agreement, as amended from time to time (the "January
Convertible Note Agreement") with Permal U.S. Opportunities Limited, Zaxis
Equity Neutral, L.P., Zaxis Institutional Partners, L.P., Zaxis Offshore
Limited, Zaxis Partners, L.P. and Passport Master Fund, L.P. (collectively, the
"January 2004 Investors"), pursuant to which the Company issued $15 million in
principal amount of 10% convertible secured notes to the January 2004 Investors,
and agreed to convert such notes into approximately 10 million shares of Series
E Preferred Stock subject to Stockholder Approval (as hereinafter defined); and

               WHEREAS, upon the terms and conditions set forth in this
Agreement, the Company proposes to issue and sell, at the Initial Closing,
convertible notes, substantially in the form attached hereto as Exhibit A (each
a "Note" and, collectively, the "Notes") having an aggregate principal amount of
eighteen million five hundred thousand dollars ($18,500,000), in the face amount
set forth opposite such Lender's (as hereinafter defined) name on Schedule 2.1
hereto, that subject to the terms and conditions set forth in this Agreement and
the Notes, are convertible either into Series E Preferred Stock or Common Stock,
as more fully set forth in the Agreement and the Notes:

               NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein and for good and valuable consideration, the receipt
and adequacy of which are hereby acknowledged, the parties hereto agree as
follows:




                                    ARTICLE I

                                   DEFINITIONS

               1.1 Definitions. As used in this Agreement, and unless the
context requires a different meaning, the following terms have the meanings
indicated:

               "Affiliate" shall mean any Person who is an "affiliate" as
defined in Rule 12b-2 of the General Rules and Regulations under the Exchange
Act.

               "Agreement" means this Agreement as the same may be amended,
supplemented or modified in accordance with the terms hereof.

               "Amended and Restated Registration Rights Agreement" means the
Third Amended and Restated Registration Rights Agreement, substantially in the
form attached hereto as Exhibit B.

               "Amended and Restated Series D Certificate of Determination"
means the Amended and Restated Certificate of Determination of Preferences of
Series D Cumulative Redeemable Convertible Preferred Stock, substantially in the
form attached hereto as Exhibit C, with such changes or limitations to the
voting provisions thereof as may be necessary to comply with NASD Rule 4351
regarding the voting power of the Series D Preferred Stock, which shall be duly
filed with the Secretary of State of the State of California as soon as
practicable following Stockholder Approval.

               "Amendment to Preferred Stock Rights Agreement" means an
amendment to the Company's Preferred Stock Rights Agreement to permit the
Lenders to purchase securities being offered by the Company hereunder without
causing such Lenders to become Acquiring Persons (as defined in the Preferred
Stock Rights Agreement).

               "Articles of Incorporation" means the Amended and Restated
Articles of Incorporation of the Company in effect on the Initial Closing Date
and attached hereto as Exhibit D.

               "Board of Directors" means the Board of Directors of the Company.

               "Business Day" means any day other than a Saturday, Sunday or
other day on which commercial banks in the State of New York or the State of
California are authorized or required by law or executive order to close.

               "By-laws" means the by-laws of the Company in effect on the
Initial Closing Date and attached hereto as Exhibit E.

               "CK Purchasers" means Campina Enterprises Limited, Cenwell
Limited, Great Affluent Limited, Dragonfield Limited and Lion Cosmos Limited and
their transferees.




                                       2

               "CK Sub Notes" means the 5 _% Convertible Subordinated Notes, due
April 1, 2005, issued by the Company pursuant to the Company's Indenture, dated
March 31, 2000, and purchased by the CK Purchasers.

               "Claims" has the meaning set forth in Section 3.5 of this
Agreement.

               "Code" means the Internal Revenue Code of 1986, as amended, or
any successor statute thereto.

               "Commission" means the United States Securities and Exchange
Commission or any similar agency then having jurisdiction to enforce the
Securities Act and Exchange Act.

               "Common Stock" means the common stock of the Company, par value
$0.001 per share.

               "Commonly Controlled Entity" means any entity which is under
common control with the Company within the meaning of Code Section 414(b), (c),
(m), (o) or (t).

               "Common Shares" has the meaning set forth in Section 2.1(a).

               "Common Shares Issuance Date" has the meaning set forth in
Section 2.5.

               "Company" has the meaning set forth in the preamble to this
Agreement.

               "Company Plans" has the meaning set forth in Section 3.15 of this
Agreement.

               "Condition of the Company" means the assets, business,
properties, operations or condition (financial or otherwise) of the Company and
its Subsidiaries, taken as a whole.

               "Contingent Obligation" means, as applied to any Person, any
direct or indirect liability of that Person with respect to any Indebtedness,
lease, dividend, guaranty, letter of credit or other obligation, contractual or
otherwise (the "primary obligation") of another Person (the "primary obligor"),
whether or not contingent, (a) to purchase, repurchase or otherwise acquire such
primary obligations or any property constituting direct or indirect security
therefor, (b) to advance or provide funds (i) for the payment or discharge of
any such primary obligation, or (ii) to maintain working capital or equity
capital of the primary obligor or otherwise to maintain the net worth or
solvency or any balance sheet item, level of income or financial condition of
the primary obligor, (c) to purchase property, securities or services primarily
for the purpose of assuring the owner of any such primary obligation of the
ability of the primary obligor to make payment of such primary obligation, or
(d) otherwise to assure or hold harmless the owner of any such primary
obligation against loss or failure or inability to perform in respect thereof.
The amount of any Contingent Obligation shall be deemed to be an amount equal to
the stated or determinable amount of the primary obligation in respect of



                                       3

which such Contingent Obligation is made or, if not stated or determinable, the
maximum reasonably anticipated liability in respect thereof.

               "Contractual Obligations" means, as to any Person, any provision
of any security issued by such Person or of any agreement, undertaking,
contract, indenture, mortgage, deed of trust or other instrument to which such
Person is a party or by which it or any of its property is bound.

               "Conversion" has the meaning set forth in Section 2.1(a).

               "Conversion Notice" has the meaning set forth in Section 2.5 of
this Agreement.

               "Copyrights" means any foreign or United States copyright
registrations and applications for registration thereof, and any non-registered
copyrights.

               "Environmental Laws" means federal, state, local and foreign
laws, principles of common laws, civil laws, regulations, and codes, as well as
orders, decrees, judgments or injunctions, issued, promulgated, approved or
entered thereunder relating to pollution, protection of the environment or
public health and safety.

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

               "Exchangeable Shares" shall mean the Class A Non-Voting
Preference Shares of Critical Path Messaging Co., an unlimited liability company
existing under the laws of Nova Scotia, and a subsidiary of the Company.

               "Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission thereunder.

               "Existing Convertible Note Agreements" means the November
Convertible Note Agreement and the January Convertible Note Agreement.

               "Financial Statements" has the meaning set forth in Section 3.10
of this Agreement.

               "GAAP" means United States generally accepted accounting
principles in effect from time to time.

               "General Atlantic Entities" means General Atlantic Partners 74,
L.P., a Delaware limited partnership, GAP Coinvestment Partners II, L.P., a
Delaware limited partnership, GapStar, LLC, a Delaware limited liability
company, and GAPCO GmbH & Co. KG, a German limited partnership.

               "General Atlantic Notes" means the 10% convertible secured notes
issued to the General Atlantic Entities pursuant to the November Convertible
Note Agreement and held by the General Atlantic Entities or their permitted
transferees.



                                       4

                "Governmental Authority" means the government of any nation,
state, city, locality or other political subdivision thereof, any entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government, and any corporation or other entity
owned or controlled, through stock or capital ownership or otherwise, by any of
the foregoing.

               "Indebtedness" means, as to any Person, (a) all obligations of
such Person for borrowed money (including, without limitation, reimbursement and
all other obligations with respect to surety bonds, letters of credit and
bankers' acceptances, whether or not matured), (b) all obligations of such
Person to pay the deferred purchase price of property or services, except trade
accounts payable and accrued commercial or trade liabilities arising in the
ordinary course of business, (c) all interest rate and currency swaps, caps,
collars and similar agreements or hedging devices under which payments are
obligated to be made by such Person, whether periodically or upon the happening
of a contingency, (d) all indebtedness created or arising under any conditional
sale or other title retention agreement with respect to property acquired by
such Person (even though the rights and remedies of the seller or lender under
such agreement in the event of default are limited to repossession or sale of
such property), (e) all obligations of such Person under leases which have been
or should be, in accordance with GAAP, recorded as capital leases, (f) all
indebtedness secured by any Lien (other than Permitted Liens) on any property or
asset owned or held by that Person regardless of whether the indebtedness
secured thereby shall have been assumed by that Person or is non-recourse to the
credit of that Person, and (g) any Contingent Obligation of such Person.

               "Indemnified Party" has the meaning set forth in Section 7.1 of
this Agreement.

               "Indemnifying Party" has the meaning set forth in Section 7.1 of
this Agreement.

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

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

               "Intellectual Property" has the meaning set forth in Section 3.18
of this Agreement.

               "Intercreditor Agreement" shall mean the Intercreditor Agreement,
dated the date hereof, among the General Atlantic Entities, the January 2004
Investors and the Lenders.

               "Internet Assets" means any Internet domain names and other
computer user identifiers and any rights in and to sites on the worldwide web,
including rights in and to any text, graphics, audio and video files and html or
other code incorporated in such sites.



                                       5

               "Investment" means (i) the acquisition (whether for cash,
property, services, assumption of Indebtedness, securities or otherwise) of
assets (other than equipment, inventory, supplies or other assets acquired in
the ordinary course of business of the Company), capital stock, bonds, notes,
debentures, partnership, joint venture or other ownership interests or other
securities of any Person, (ii) any deposit with, or advance, loan or other
extension of credit to, or on behalf of, any Person (other than deposits made in
connection with the purchase of equipment, inventory, services, leases, supplies
or other assets in the ordinary course of business of the Company), (iii) any
other capital contribution to or investment in such Person, including, without
limitation, any guaranty obligation incurred for the benefit of such Person. For
the sake of clarity, Investments shall include any transfer of property or
assets by the Company to any of its Subsidiaries or by any Subsidiary of the
Company to any other Subsidiary.

               "IP Agreements" has the meaning set forth in Section 3.18(a)(iii)
of this Agreement.

               "Issuable Shares" has the meaning set forth in Section 2.1(a) of
this Agreement.

               "January Convertible Note Agreement" has the meaning set forth in
the recitals of this Agreement.

               "January 2004 Investors" has the meaning set forth in the
recitals of this Agreement.

               "January 2004 Notes" means the 10% convertible secured notes
issued to the January 2004 Investors pursuant to the January Convertible Note
Agreement and held by the January 2004 Investors or their permitted transferees.

               "Knowledge" means the knowledge of the Company and Paul Bartlett,
James Clark, Tracy Currie, Matthew Hobart, William E. McGlashan, Jr. and Michael
J. Zukerman after due inquiry.

               "Lenders" means Permal U.S. Opportunities Limited, Zaxis Equity
Neutral, L.P., Zaxis Institutional Partners, L.P., Zaxis Offshore Limited, Zaxis
Partners, L.P., Guggenheim Portfolio Company XIII, Crosslink Crossover Fund IV,
L.P., Sagamore Hill Hub Fund, Ltd., Criterion Capital Partners, Ltd., Criterion
Capital Partners, Institutional, Criterion Capital Partners, L.P. and Capital
Ventures International and any transferees to whom the Notes purchased by any of
the foregoing are transferred after the date hereof and in accordance with the
terms of such Notes.

               "Liabilities" has the meaning set forth in Section 3.16 of this
Agreement.

               "Lien" means any mortgage, deed of trust, pledge, hypothecation,
assignment, encumbrance, lien (statutory or other) or preference, priority,
right or other security interest or preferential arrangement of any kind or
nature whatsoever (excluding preferred stock and equity related preferences).



                                       6

               "Losses" has the meaning set forth in Section 7.1 of this
Agreement.

               "Material Contractual Obligations" has the meaning set forth in
Section 3.8 of this Agreement.

               "Material Non-Public Information" has the meaning set forth in
Section 8.6 of this Agreement.

               "NASD Rules" has the meaning set forth in Section 3.28(b).

               "Nasdaq" means The Nasdaq Stock Market, Inc.

               "Notes" has the meaning set forth in the recitals to this
Agreement.

               "November Convertible Note Agreement" has the meaning set forth
in the recitals of this Agreement.

               "Orders" has the meaning set forth in Section 3.2 of this
Agreement.

               "Patents" means any foreign or United States patents and patent
applications, including any divisions, continuations, continuations-in-part,
substitutions or reissues thereof, whether or not patents are issued on such
applications and whether or not such applications are modified, withdrawn or
resubmitted.

               "Permitted Investments" means (i) Investments in cash or cash
equivalents, (ii) accounts receivable created, acquired or made in the ordinary
course of business and payable or dischargeable in accordance with customary
trade terms; (iii) Investments existing on the Initial Closing Date, and listed
on Schedule 3.27 hereto, (iv) guaranty obligations permitted by Section 5.3 of
the Security Agreement, (v) loans to employees, directors or officers of the
Company in connection with the award of convertible bonds or capital stock under
a stock incentive plan, stock option plan or other equity-based compensation
plan or arrangement, (vi) 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; (vii) loans, advances
and Investments in or by foreign Subsidiaries; (viii) any acquisition for which
the prior written consent of the holders of a majority of the outstanding
principal amount of (a) the General Atlantic Notes and (b) the January 2004
Notes has been obtained, (ix) 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 or (x) Investments by the Company in
the Guarantor (as defined in the Security Agreement).

               "Permitted Liens" has the meaning set forth in the Note.

               "Person" means any individual, firm, corporation, partnership,
trust, incorporated or unincorporated association, joint venture, joint stock
company, limited liability company, Governmental Authority or other entity of
any kind, and shall include any successor (by merger or otherwise) of such
entity.



                                       7

               "Plan" means any employee benefit plan, arrangement, policy,
program, agreement or commitment (whether or not an employee plan within the
meaning of Section 3(3) of ERISA), including, without limitation, any
employment, consulting or deferred compensation agreement, executive
compensation, bonus, incentive, pension, profit-sharing, savings, retirement,
stock option, stock purchase or severance pay plan, any life, health, disability
or accident insurance plan, whether oral or written, whether or not subject to
ERISA, as to which the Company or any Commonly Controlled Entity has or in the
future could have any direct or indirect, actual or contingent liability.

               "Proxy Statement" has the meaning set forth in Section 8.4 of
this Agreement.

               "Record Date" shall mean a date determined by the Board of
Directors as the record date for determining the shareholders of the Company
entitled to receive Series E Purchase Rights.

               "Requirements of Law" means, as to any Person, any law (including
Environmental Laws), statute, treaty, rule, regulation, right, privilege,
qualification, license or franchise or determination of an arbitrator or a court
or other Governmental Authority or stock exchange, in each case applicable or
binding upon such Person or any of its property or to which such Person or any
of its property is subject or pertaining to any or all of the transactions
contemplated or referred to herein.

               "Retiree Welfare Plan" means any welfare plan (as defined in
Section 3(1) of ERISA) that provides benefits to current or former employees
beyond their retirement or other termination of service (other than coverage
mandated by Section 4980A of the Code, commonly referred to as "COBRA," the cost
of which is fully paid by the current or former employee or his or her
dependents).

               "Rights Offering" shall mean a rights offering for an aggregate
amount of up to $21,000,000 of shares of Series E Preferred Stock pursuant to
which the Company will distribute transferable rights to the Company's holders
of Common Stock as of the Record Date.

               "Sarbanes-Oxley Act" has the meaning set forth in Section 3.28(a)
of this Agreement.

               "SEC Reports" has the meaning set forth in Section 3.10 of this
Agreement.

               "Securities" has the meaning set forth in Section 4.8 of this
Agreement.

               "Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations of the Commission thereunder.

               "Security Agreement" has the meaning set forth in the Notes.



                                       8

               "Series D Preferred Stock" means the Series D Redeemable
Convertible Participating Preferred Stock of the Company, par value $0.001 per
share.

               "Series E Certificate of Determination" means the Certificate of
Determination of Preferences of Series E Redeemable Convertible Preferred Stock,
substantially in the form attached hereto as Exhibit F, with such changes or
limitations to the voting provisions thereof as may be necessary to comply with
NASD Rule 4351 regarding the voting power of the Series E Preferred Stock, which
certificate shall be duly filed with the Secretary of State of the State of
California as soon as practicable following Stockholder Approval.

               "Series E Preferred Stock" has the meaning set forth in the
recitals to this Agreement.

               "Series E Purchase Rights" means those rights to purchase Series
E Preferred Stock issued in the Rights Offering.

               "Software" means any computer software programs, source code,
object code, data and documentation, including, without limitation, any computer
software programs that incorporate and run the Company's pricing models,
formulae and algorithms.

               "Stock Equivalents" means any security or obligation which is by
its terms convertible into or exchangeable or execrable for shares of common
stock or other capital stock of the Company, and any option, warrant or other
subscription or purchase right with respect to common stock or such other
capital stock.

               "Stock Option Plans" means the Company's stock option plans and
employee purchase plans pursuant to which shares of restricted stock and options
to purchase shares of Common Stock are reserved and available for grant to
officers, directors, employees and consultants of the Company.

               "Stockholder Approval" has the meaning set forth in Section 3.24
of this Agreement.

               "Subordination Agreement" has the meaning set forth in the Notes.

               "Subsequent Closing" has the meaning set forth in Section 2.4(e)
of this Agreement.

               "Subsequent Closing Date" has the meaning set forth in Section
2.4(e) of this Agreement.

               "Subsidiaries" means, as of the relevant date of determination,
with respect to any Person, a corporation or other Person of which 50% or more
of the voting power of the outstanding voting equity securities or 50% or more
of the outstanding economic equity interest is held, directly or indirectly, by
such Person. Unless otherwise



                                       9

qualified, or the context otherwise requires, all references to a "Subsidiary"
or to "Subsidiaries" in this Agreement shall refer to a Subsidiary or
Subsidiaries of the Company.

               "Taxes" means any federal, state, provincial, county, local,
foreign and other taxes (including, without limitation, income, profits,
windfall profits, alternative, minimum, accumulated earnings, personal holding
company, capital stock, premium, estimated, excise, sales, use, occupancy, gross
receipts, franchise, ad valorem, severance, capital levy, production, transfer,
withholding, employment, unemployment compensation, payroll and property taxes,
import duties and other governmental charges and assessments), whether or not
measured in whole or in part by net income, and including deficiencies,
interest, additions to tax or interest, and penalties with respect thereto, and
including expenses associated with contesting any proposed adjustments related
to any of the foregoing.

               "Trade Secrets" means any trade secrets, research records,
processes, procedures, manufacturing formulae, technical know-how, technology,
blue prints, designs, plans, inventions (whether patentable and whether reduced
to practice), invention disclosures and improvements thereto.

               "Trademarks" means any foreign or United States trademarks,
service marks, trade dress, trade names, brand names, designs and logos,
corporate names, product or service identifiers, whether registered or
unregistered, and all registrations and applications for registration thereof.

               "Transaction Documents" means, collectively, this Agreement, the
Amended and Restated Registration Rights Agreement, the Notes, the Security
Agreement, the Subordination Agreement, the Intercreditor Agreement, the
Amendment to the Preferred Stock Rights Agreement and the Waivers.

               "Waivers" means the waivers and consents, dated the date hereof,
executed by (i) the requisite holders of our Series D Preferred Stock, (ii) the
requisite General Atlantic Entities, CK Purchasers and Vectis CP Holdings, LLC,
and (iii) a majority of the outstanding principal amount of all of the January
2004 Notes, in each case to consent to and approve, to the extent necessary, the
transactions and agreements contemplated by the Transaction Documents and to
waive any rights they may have under that certain Stockholders Agreement dated
as of November 8, 2001.

               "Warrant" or "Warrants," as the case may be, means those certain
warrants to purchase Common issued to General Atlantic Entities pursuant to that
certain Stock and Warrant Purchase and Exchange Agreement, dated as of November
8, 2001.



                                       10

                                   ARTICLE II

                PURCHASE AND SALE OF NOTES; CONVERSION; EXCHANGE

               2.1 Purchase and Sale of Notes.

               (a) Subject to the terms and conditions of this Agreement, on the
Initial Closing Date, each of the Lenders, severally and not jointly, agrees to
purchase, and the Company agrees to sell and issue to each Lender, a Note, in
the principal amount set opposite such Lender's name on Schedule 2.1 hereto.
Each of the Notes shall be due and payable upon the terms and conditions set
forth in the Notes and herein. Subject to Stockholder Approval and the terms and
conditions of this Agreement, on the Subsequent Closing Date, the Notes shall
convert into shares of Series E Preferred Stock in accordance with the terms
thereof, and the Company shall issue to each Lender that number of shares of
Series E Preferred Stock issuable upon such conversion, in exchange for the
surrender to the Company by each Lender of its Notes (the "Conversion") (all of
the shares of Series E Preferred Stock issuable upon conversion of the Notes
referred to herein as the "Issuable Shares"). If the Conversion has not occurred
on or before August 15, 2004, the Notes shall thereafter be convertible at the
option of each Lender only into shares of Common Stock in accordance with the
terms thereof (all the shares of Common Stock issuable directly upon conversion
of the Notes referred to herein as the "Common Shares").

               (b) All payments by the Company under the Notes of principal and
interest shall be as set forth in the Notes.

               2.2 Filings. As promptly as practicable following the Stockholder
Approval and upon the terms and conditions of this Agreement, on or before the
Subsequent Closing Date, the Company shall file with the Secretary of State of
the State of California: (a) an amendment to the Amended and Restated Articles
of Incorporation to increase the authorized common stock and preferred stock of
the Company; and (b) the Series E Certificate of Determination.

               2.3 Certificate of Determination. The Issuable Shares shall have
the preferences and rights set forth in the Series E Certificate of
Determination, with such changes or limitations to the voting provisions thereof
as may be necessary to comply with NASD Rule 4351. The Common Shares shall have
the preferences and rights set forth in the Articles of Incorporation.

               2.4 Closings; Deliveries.

               (a) Initial Closing. The purchase and sale of the Notes under
this Agreement (the "Initial Closing") shall be held as soon as practicable
following the date of this Agreement (the "Initial Closing Date"), at the
offices of Pillsbury Winthrop LLP, 50 Fremont Street, San Francisco, California,
or at such other time and place as the Company and the Lenders may mutually
agree. At the Initial Closing, signature pages transmitted by facsimile will be
acceptable, with originals to immediately follow.



                                       11

               (b) Deliveries by the Company and the Lenders on the Date Hereof.
On the date hereof, (i) the Company shall execute and deliver to each Lender and
each Lender shall execute and deliver to the Company this Agreement.

               (c) Deliveries by the Company at the Initial Closing. At the
Initial Closing, subject to the terms and conditions hereof, the Company shall
execute (except for the Waivers) and deliver to each Lender:

                      (i) the Amended and Restated Registration Rights
        Agreement;

                      (ii) such other documentation required to be provided by
        the Company pursuant to Section 5.1;

                      (iii) a Note, in the form attached hereto as Exhibit A, in
        the principal amount set forth opposite such Lender's name on Schedule
        2.1;

                      (iv) the Waivers;

                      (v) a copy of the Amendment to Preferred Stock Rights
        Agreement; and

                      (vi) the Security Agreement and the related security
        documents required or contemplated by the Security Agreement.

               (d) Deliveries by each Lender at the Initial Closing. At the
Initial Closing, subject to the terms and conditions hereof, each Lender shall:

                      (i) execute and deliver to the Company the Amended and
        Restated Registration Rights Agreement; and

                      (ii) loan to the Company, in the form of a check or wire
        transfer, that amount set forth opposite such Lender's name on Schedule
        2.1.

               (e) Subsequent Closing. The consummation of the Conversion (the
"Subsequent Closing") shall take place concurrently with the Subsequent Closings
under the Existing Convertible Note Agreements as soon as practicable following
the satisfaction of the closing conditions set forth in Article VI of this
Agreement and Article VI of the Existing Convertible Note Agreements (the
"Subsequent Closing Date"), at the offices of Pillsbury Winthrop LLP, 50 Fremont
Street, San Francisco, California, or at such other time and place as the
Company, the Lenders, the General Atlantic Entities, the CK Purchasers and the
January 2004 Investors may mutually agree. At the Subsequent Closing, signature
pages transmitted by facsimile will be acceptable, with originals to immediately
follow.

               (f) Deliveries by the Company at the Subsequent Closing. At the
Subsequent Closing, subject to the terms and conditions hereof, the Company
shall execute and deliver to:



                                       12

                      (i) each Lender, a certificate or certificates in
        definitive form and registered in the name of each Lender, representing
        such Lender's Issuable Shares; and

                      (ii) each Lender, such other documentation evidencing the
        satisfaction of the conditions set forth in Section 6.1.

               (g) Deliveries by each Lender at the Subsequent Closing. At the
Subsequent Closing, subject to the terms and conditions hereof, each Lender
shall execute and deliver to the Company its Notes together with duly executed
note powers for such Notes.

               2.5 Issuances of Common Shares. If the Conversion has not
occurred on or before August 15, 2004, subject to and in accordance with the
provisions of the Notes, thereafter upon surrender by a Lender of a Note to the
Company, together with a notice with duly executed note powers (the "Conversion
Notice"), also specifying the portion of the Note to be converted, the Company
shall, or shall cause its transfer agent to issue and deliver to the address as
specified in the Conversion Notice (the date of each such delivery, a "Common
Shares Issuance Date"), a certificate or certificates in definitive form and in
such denominations as may be requested by such Lender in the Conversion Notice,
registered in the name of such Lender, for the number of Common Shares to which
such Lender shall be entitled upon such conversion. If a Note has been
surrendered only in part, the Company shall, at the time of delivery of the
stock certificate or certificates, deliver to such Lender a new Note evidencing
the remaining balance, which new Note shall in all other respects be identical
to the Note surrendered.

                                   ARTICLE III

                  REPRESENTATIONS AND WARRANTIES OF THE COMPANY

               The Company represents and warrants to each of the Lenders that,
except as disclosed or incorporated by reference in the SEC Reports or the
Disclosure Schedules:

               3.1 Corporate Existence and Power. The Company and each of its
Subsidiaries (a) is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation; (b) has all
requisite corporate power and authority to own and operate its property, to
lease the property it operates as lessee and to conduct the business in which it
is currently engaged; (c) is duly qualified as a foreign corporation, licensed
and in good standing under the laws of each jurisdiction in which its ownership,
lease or operation of property or the conduct of its business requires such
qualification, except where the failure to be so qualified could not reasonably
be expected to have a material adverse effect on the Condition of the Company
and (d) has the corporate power and authority to execute, deliver and perform
its obligations under this Agreement and each of the other Transaction
Documents. No jurisdiction, other than those referred to in clause (c) above,
has claimed, in writing or otherwise, that the Company or any of its
Subsidiaries is required to qualify as a foreign corporation or other



                                       13

entity therein, and the Company or any of its Subsidiaries does not file any
franchise, income or other tax returns in any other jurisdiction based upon the
ownership or use of property therein or the derivation of income therefrom.

               3.2 Authorization; No Contravention. The execution, delivery and
performance by the Company of this Agreement and each of the other Transaction
Documents and the transactions contemplated hereby and thereby (a) subject to
Stockholder Approval with respect to the matters set forth in Section 3.24, have
been duly authorized by all necessary corporate action of the Company; (b)
subject to Stockholder Approval with respect to the matters set forth in Section
3.24, do not contravene the terms of the Articles of Incorporation or the
By-laws; (c) do not violate, conflict with or result in any breach, default or
contravention of (or with due notice or lapse of time or both would result in
any breach, default or contravention of), or the creation of any Lien under, any
Contractual Obligation of the Company or any of its Subsidiaries or any
Requirement of Law applicable to the Company or any of its Subsidiaries except
such violations or conflicts that would not reasonably be expected to have a
material adverse effect on the Condition of the Company; and (d) do not violate
any judgment, injunction, writ, award, decree or order of any nature
(collectively, "Orders") of any Governmental Authority against, or binding upon,
the Company or any of its Subsidiaries.

               3.3 Governmental Authorization; Third Party Consents. Except for
the Stockholder Approval and as set forth in Schedule 3.3, no approval, consent,
compliance, exemption, authorization or other action by, or notice to, or filing
with, any Governmental Authority or any other Person, and no lapse of a waiting
period under a Requirement of Law, is necessary or required in connection with
the execution, delivery or performance (including, without limitation, the sale,
issuance and delivery of the Issuable Shares or the Common Shares) by, or
enforcement against, the Company of this Agreement and the other Transaction
Documents or the transactions contemplated hereby and thereby, other than (a)
the notification to The NASDAQ National Market for the listing of the shares of
Common Stock issuable upon conversion of the Series E Preferred Stock or the
Notes, as the case may be, and applicable blue-sky filings, (b) such as have
already been obtained or such exemptive filings as may be required under
applicable securities laws, and (c) such other filings as may be required
following the Initial Closing Date or the Subsequent Closing Date under the
Securities Act, the Exchange Act and corporate law.

               3.4 Binding Effect. This Agreement and each of the other
Transaction Documents to which the Company is a party have been duly executed
and delivered by the Company, and this Agreement and each of the other
Transaction Documents to which the Company is a party constitute the legal,
valid and binding obligations of the Company, enforceable against the Company in
accordance with their terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, fraudulent conveyance or
transfer, moratorium or similar laws affecting the enforcement of creditors'
rights generally and by general principles of equity relating to enforceability
(regardless of whether considered in a proceeding at law or in equity).



                                       14

               3.5 Litigation. Except as set forth on Schedule 3.5, there are no
actions, suits, proceedings, claims, complaints, disputes, arbitrations or
investigations (collectively, "Claims") pending or, to the Knowledge of the
Company, threatened, at law, in equity, in arbitration or before any
Governmental Authority against the Company or any of its Subsidiaries that seeks
in excess of $50,000 in damages nor is the Company aware that there is any basis
for any of the foregoing. The foregoing includes, without limitation, Claims
pending or, to the Knowledge of the Company, threatened or any basis therefor
known by the Company involving the prior employment of any employee of the
Company or any of its Subsidiaries, their use in connection with the business of
the Company or any of its Subsidiaries of any information or techniques
allegedly proprietary to any of their former employers or their obligations
under any agreements with prior employers. No Order has been issued by any court
or other Governmental Authority against the Company or any of its Subsidiaries
purporting to enjoin or restrain the execution, delivery or performance of this
Agreement or any of the other Transaction Documents.

               3.6 Compliance with Laws. The Company and each of its
Subsidiaries is in compliance in all material respects with all Requirements of
Law and all Orders issued by any court or Governmental Authority against the
Company in all respects. To the Company's Knowledge, there are no Requirements
of Law which could reasonably be expected to prohibit or restrict the Company or
any of its Subsidiaries from, or otherwise materially adversely effect the
Company or any of its Subsidiaries in, conducting its business in any
jurisdiction in which it now conducts its business.

               3.7 Capitalization.

               (a) (i) As of the Initial Closing, the authorized capital stock
        of the Company consists of (A) 125,000,000 shares of Common Stock, of
        which 21,171,399 shares are issued and outstanding, (B) one share of
        Special Voting Stock, par value $0.001 per share, of the Company, which
        is issued and outstanding, (C) 75,000 shares of Series C Preferred
        Stock, par value $0.001 per share, of the Company, of which no shares
        are issued and outstanding, (D) 4,188,587 shares of Series D Preferred
        Stock, all of which are issued and outstanding, and (E) 736,412 shares
        of undesignated "blank check" preferred stock. As of the date of this
        Agreement, the aggregate number of shares of restricted stock and
        options to purchase shares of Common Stock which may be issued under the
        Stock Option Plans are 19,079,109, of which 12,449,551 have been
        granted. The Company has reserved an adequate number of shares of Common
        Stock for issuance upon conversion of the Issuable Shares. In addition,
        as of the Initial Closing, there were 110,209 Exchangeable Shares issued
        and outstanding, each of which is convertible into one share of Common
        Stock.

                      (ii) As of the Subsequent Closing Date, the authorized
        capital stock of the Company shall consist of (A) 200,000,000 shares of
        Common Stock, (B) one share of Special Voting Stock, par value $0.001
        per share, of the Company (C) 75,000 shares of Series C Preferred Stock,
        par value $0.001 per share, of the Company, (D) 4,188,587 shares of
        Series D Preferred Stock, (E) a



                                       15

        sufficient number of shares of Series E Preferred Stock to issue the
        Issuable Shares, convert 69,149 shares of Series D Preferred Stock into
        733,333 shares of Series E Preferred Stock held by MBCP Peerlogic LLC
        and its affiliates issued in connection with the settlement of certain
        claims and to consummate the transactions contemplated by the Existing
        Convertible Note Agreements and the Rights Offering, and (F) a number of
        shares of undesignated "blank check" preferred stock agreed upon by the
        Company, the Lenders, the General Atlantic Entities and the CK
        Purchasers.

                      (iii) Except as set forth on Schedule 3.7(a) and except
        for the Warrants, there are no options, warrants, conversion privileges,
        subscription or purchase rights or other rights presently outstanding to
        purchase or otherwise acquire (A) any authorized but unissued,
        unauthorized or treasury shares of the Company's capital stock, (B) any
        Stock Equivalents or (C) any other securities of the Company and there
        are no commitments, contracts, agreements, arrangements or
        understandings to which the Company is a party to issue any shares of
        the Company's capital stock or any Stock Equivalents or other securities
        of the Company.

               (b) Upon the Initial Closing Date, the Notes shall be duly
authorized, and assuming the accuracy of the representations and warranties of
the Lenders set forth in Article IV of this Agreement, will be issued in
compliance with the registration and qualification requirements of all
applicable federal, state and foreign securities laws and will be free and clear
of all other Liens.

               (c) Upon the Subsequent Closing Date, the Issuable Shares shall
be duly authorized, and when issued and delivered to the Lenders and upon the
consummation of the Conversion on the Subsequent Closing Date, will be validly
issued, fully paid and non-assessable, and assuming the accuracy of the
representations and warranties of the Lenders set forth in Article IV of this
Agreement, will be issued in compliance with the registration and qualification
requirements of all applicable federal, state and foreign securities laws and
will be free and clear of all other Liens. Upon the Subsequent Closing Date, the
shares of Common Stock issuable upon conversion of the Issuable Shares shall
have been duly reserved for issuance and will be validly issued, fully paid and
non-assessable and not subject to any preemptive rights or similar rights that
have not been satisfied, will be issued in compliance with the registration and
qualification requirements of all applicable federal and state securities laws
and will be free and clear of all other Liens. None of the issued and
outstanding shares of Common Stock were issued in violation of any preemptive
rights.

               (d) Upon each Common Shares Issuance Date, the Common Shares then
issuable shall be duly authorized, and when issued and delivered to the Lenders
in accordance with the terms and conditions of the Notes, will be validly
issued, fully paid and non-assessable, and assuming the accuracy of the
representations and warranties of the Lenders set forth in Article IV of this
Agreement, will be issued in compliance with the registration and qualification
requirements of all applicable federal, state and foreign securities laws and
will be free and clear of all other Liens.



                                       16

               3.8 No Default or Breach; Contractual Obligations. All of the
Contractual Obligations to which the Company or any of its Subsidiaries is a
party, whether written or oral, which are required by the Exchange Act to be
disclosed in the SEC Reports (collectively, "Material Contractual Obligations")
are valid, subsisting, in full force and effect and binding upon the Company or
its Subsidiary, as the case may be, and the other parties thereto, and the
Company or its Subsidiary, as the case may be, has paid in full or accrued all
amounts due thereunder and has satisfied in full or provided for all of its
liabilities and obligations thereunder, except for such amounts as are being
contested by the Company in good faith. Neither the Company nor any of its
Subsidiaries has received notice of a default and is not in default under, or
with respect to, any Material Contractual Obligation nor, to the Knowledge of
the Company, does any condition exist that with notice or lapse of time or both
would constitute a default thereunder. To the Knowledge of the Company, no other
party to any such Contractual Obligation is in default thereunder, nor does any
condition exist that with notice or lapse of time or both would constitute a
default by such other party thereunder.

               3.9 Title to Properties. The Company and each of its Subsidiaries
has good, record and marketable title in fee simple to, or holds interests as
lessee under leases in full force and effect in, all real property used in
connection with its business or otherwise owned or leased by it. The Company and
each of its Subsidiaries owns and has good, valid and marketable title to all of
its properties and assets used in its business or reflected as owned on the
Financial Statements, in each case free and clear of all Liens, except for
Permitted Liens, or that would required to be described in the notes to the
Financial Statements.

               3.10 Reports; Financial Statements.

               (a) As of the respective dates of their filing with the
Commission, all reports, registration statements and other filings, together
with any amendments thereto, filed by the Company with the Commission since June
30, 2000 (the "SEC Reports"), complied in all material respects with the
applicable requirements of the Securities Act, the Exchange Act, and the rules
and regulations of the Commission promulgated thereunder, except as disclosed in
the SEC Reports. The SEC Reports did not at the time they were filed with the
Commission, or will not at the time they are filed with the Commission, contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they are made, not
misleading. The Company has delivered or made available to the Lenders true and
complete copies of, or will make available at each Lender's request the SEC
Reports and any exhibits thereto. Except as set forth in Schedule 3.10(a), the
Company is not aware of any issues raised by the Commission with respect to any
of the SEC Reports, other than those disclosed in the SEC Reports.

               (b) The consolidated financial statements (including, in each
case, any related schedules or notes thereto) contained in or incorporated by
reference in the SEC Reports and any such reports, registration statements and
other filings to be filed by the Company with the Commission prior to the
Initial Closing Date or the Subsequent


                                       17

Closing Date, as the case may be (the "Financial Statements"), (i) have been or
will be prepared in accordance with the published rules and regulations of the
Commission and GAAP consistently applied during the periods involved (except as
may be indicated in the notes thereto) and (ii) fairly present or will fairly
present in all material respects the consolidated financial position of the
Company and its Subsidiaries as of the respective dates thereof and the
consolidated results of operations, statements of stockholders' equity and cash
flows for the periods indicated, except that any unaudited interim financial
statements were or will be subject to normal and recurring year-end adjustments
and may omit footnote disclosure as permitted by regulations of the Commission.

               3.11 Taxes. (a) The Company and each of its Subsidiaries has paid
all Taxes which have come due and are required to be paid by it through the date
hereof, and all deficiencies or other additions to Tax, interest and penalties
owed by it in connection with any such Taxes, other than Taxes being disputed by
the Company in good faith for which adequate reserves have been made in
accordance with GAAP; (b) the Company and each of its Subsidiaries has timely
filed or caused to be filed all returns for Taxes that it is required to file on
and through the date hereof (including all applicable extensions), and all such
Tax returns are accurate and complete in all material respects; (c) with respect
to all Tax returns of the Company and each of its Subsidiaries, (i) there is no
unassessed Tax deficiency proposed or, to the Knowledge of the Company,
threatened against the Company or any of its Subsidiaries and (ii) no audit is
in progress with respect to any return for Taxes, no extension of time is in
force with respect to any date on which any return for Taxes was or is to be
filed and no waiver or agreement is in force for the extension of time for the
assessment or payment of any Tax; (d) all provisions for Tax liabilities of the
Company and each of its Subsidiaries have been disclosed in the Financial
Statements and made in accordance with GAAP consistently applied, and all
liabilities for Taxes of the Company and each of its Subsidiaries attributable
to periods prior to or ending on the Initial Closing Date or the Subsequent
Closing Date, as the case may be, have been adequately disclosed in the
Financial Statements; and (e) there are no Liens for Taxes on the assets of the
Company or any of its Subsidiaries, other than Permitted Liens.

               3.12 No Material Adverse Change; Ordinary Course of Business.
Except as set forth on Schedule 3.12, since December 31, 2002, (a) there has not
been any material adverse change in the Condition of the Company, (b) neither
the Company nor any of its Subsidiaries has participated in any transaction
material to the Condition of the Company, including, without limitation,
declaring or paying any dividend or declaring or making any distribution to its
stockholders except out of the earnings of the Company or its Subsidiary, as the
case may be, (c) neither the Company nor any of its subsidiaries has entered
into any Material Contractual Obligation, other than in the ordinary course of
business and (d) there has not occurred a material change in the accounting
principles or practice of the Company or any of its Subsidiaries except as
required by reason of a change in GAAP.

               3.13 Private Offering. Neither the Company nor any authorized
Person acting on its behalf has, in connection with the offer, sale, exchange or
issuance of the Notes, the Issuable Shares or the Common Shares, engaged in (a)
any form of general


                                       18

solicitation or general advertising (as those terms are used within the meaning
of Rule 502(c) under the Securities Act), (b) any action involving a public
offering within the meaning of Section 4(2) of the Securities Act, or (c) any
action that would require the registration under the Securities Act of the
offering, sale, exchange or issuance of the Notes and the Issuable Shares
pursuant to this Agreement or that would violate applicable state securities or
"blue sky" laws. As used herein, the terms "offer" and "sale" have the meanings
specified in Section 2(3) of the Securities Act.

               3.14 Labor Relations. Except as could not reasonably be expected
to have a material adverse effect on the Condition of the Company: (a) neither
the Company nor any of its Subsidiaries is engaged in any unfair labor practice;
(b) there is no strike, labor dispute, slowdown or stoppage pending or, to the
Knowledge of the Company, threatened against the Company or any of its
Subsidiaries; (c) neither the Company nor any of its Subsidiaries is a party to
any collective bargaining agreement or contract; and (d) no union organizing
activities are taking place. To the Knowledge of the Company, no officer or key
employee, or any group of key employees, intends to terminate their employment
with the Company or any of its Subsidiaries. To the Knowledge of the Company,
each of the officers and key employees of the Company and each of its
Subsidiaries spends all, or substantially all, of his business time on the
business of the Company or its Subsidiary, as the case may be. To the Knowledge
of the Company, none of the employees of the Company or any of its Subsidiaries
is resident in the United States in violation of any Requirement of Law.

               3.15 Employee Benefit Plans.

               (a) The SEC Reports list or describe each Plan that the Company
or any of its Subsidiaries maintains or to which the Company or any of its
Subsidiaries contributes (the "Company Plans"). Neither the Company nor any of
its Subsidiaries has any liability under any Plans other than the Company Plans.
Except as described in or incorporated by reference in the SEC Reports, neither
the Company nor any Commonly Controlled Entity maintains or contributes to, or
has within the preceding six years maintained or contributed to, or may have any
liability with respect to any Plan subject to Title IV of ERISA or Section 412
of the Code or any "multiple employer plan" within the meaning of the Code or
ERISA. Each Company Plan (and related trust, insurance contract or fund) has
been established and administered in accordance with its terms, and complies in
form and in operation with the applicable requirements of ERISA and the Code and
other applicable Requirements of Law. All contributions (including all employer
contributions and employee salary reduction contributions) which are due have
been paid to each Company Plan.

               (b) No Claim with respect to the administration or the investment
of the assets of any Company Plan (other than routine claims for benefits) is
pending.

               (c) Except as could not reasonably be expected to have a material
adverse effect on the Condition of the Company, each Company Plan that is
intended to be qualified under Section 401(a) of the Code is so qualified and
has been so qualified



                                       19

during the period since its adoption; each trust created under any such Plan is
exempt from tax under Section 501(a) of the Code and has been so exempt since
its creation.

               (d) No Company Plan is a Retiree Welfare Plan.

               (e) Neither the consummation of the transactions contemplated by
this Agreement nor any termination of employment following such transactions
will accelerate the time of the payment or vesting of, or increase the amount
of, compensation due to any employee or former employee whether or not such
payment would constitute an "excess parachute payment" under Section 280G of the
Code.

               (f) There are no unfunded obligations under any Company Plan
which are not fully reflected in the Financial Statements.

               (g) Except as could not reasonably be expected to have a material
adverse effect on the Condition of the Company, the Company has no liability,
whether absolute or contingent, including any obligations under any Company
Plan, with respect to any misclassification of any person as an independent
contractor rather than as an employee.

               3.16 Liabilities. Neither the Company nor any of its Subsidiaries
has any direct or indirect obligation or liability (the "Liabilities") which are
not fully reflected or reserved against in the Financial Statements, other than
Liabilities not exceeding $1,000,000 in the aggregate incurred since December
31, 2003 in the ordinary course of business. The Company has no Knowledge of any
circumstance, condition, event or arrangement that could reasonably be expected
to give rise hereafter to any Liabilities of the Company or any of its
Subsidiaries that, individually or in the aggregate, could have a material
adverse effect on the Condition of the Company.

               3.17 Affiliate Transactions. Except as set forth on Schedule
3.17, in the twelve (12) months preceding the date hereof, neither the Company
nor any of its Subsidiaries has sold, leased or otherwise transferred any
property or assets to, or purchased, leased or otherwise acquired any property
or assets from, or otherwise engaged in any other transactions with, any of its
Affiliates, except in (a) transactions that are at prices and on terms and
conditions not less favorable to the Company or such Subsidiary than could be
obtained on an arm's length basis from unrelated third parties, (b) transactions
exclusively between the Company and one or more if its Subsidiaries, or between
two or more Subsidiaries of the Company, and which do not involve any other
Affiliate and (c) transactions under the agreements listed on Schedule 3.17
hereto.



                                       20

               3.18 Intellectual Property.

               (a) (i) The Company and each of its Subsidiaries is the owner of
all, or has the license or right to use, sell and license all of, the
Copyrights, Patents, Trade Secrets, Trademarks, Internet Assets, Software and
other proprietary rights (collectively, "Intellectual Property") that are used
in connection with its business as presently conducted, free and clear of all
Liens, other than Permitted Liens.

                      (ii) None of the Intellectual Property is subject to any
        outstanding Order, and no action, suit, proceeding, hearing,
        investigation, charge, complaint, claim or demand is pending or, to the
        Knowledge of the Company, threatened, which challenges the validity,
        enforceability, use or ownership of the item.

                      (iii) The Company and each of its Subsidiaries has
        substantially performed all obligations imposed upon it under all
        Intellectual Property licenses, sublicenses, distributor agreements and
        other agreements under which the Company or any of its Subsidiaries is
        either a licensor, licensee or distributor, except such licenses,
        sublicenses and other agreements relating to off-the-shelf software
        which is commercially available on a retail basis and used solely on the
        computers of the Company or its Subsidiaries (collectively, the "IP
        Agreements"). The Company and each of its Subsidiaries is not, nor to
        the Knowledge of the Company is any other party thereto, in breach of or
        default thereunder in any respect, nor is there any event which with
        notice or lapse of time or both would constitute a default thereunder.
        All of the IP Agreements are valid, enforceable and in full force and
        effect, and will continue to be so on identical terms immediately
        following the Initial Closing and the Subsequent Closing, as the case
        may be, except as enforceability may be limited by applicable
        bankruptcy, insolvency, reorganization, fraudulent conveyance or
        transfer, moratorium or similar laws affecting the enforcement of
        creditors' rights generally and by general principles of equity relating
        to enforceability (regardless of whether considered in a proceeding at
        law or in equity).

                      (iv) None of the Intellectual Property currently sold or
        licensed by the Company or any of its Subsidiaries to any Person or used
        by or licensed to the Company or any of its Subsidiaries by any Person
        infringes upon or otherwise violates any Intellectual Property rights of
        others, except as could not reasonably be expected to have a material
        adverse effect on the Condition of the Company.

               (b) No litigation is pending and no Claim has been made against
the Company or any of its Subsidiaries or, to the Knowledge of the Company, is
threatened, contesting the right of the Company or any of its Subsidiaries to
sell or license to any Person or use the Intellectual Property presently sold or
licensed to such Person or used by the Company or any of its Subsidiaries. To
the Knowledge of the Company, no Person is infringing upon or otherwise
violating the Intellectual Property rights of the Company or any of its
Subsidiaries.



                                       21

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

               (d) To the Knowledge of the Company, none of the Trade Secrets,
wherever located, the value of which is contingent upon maintenance of
confidentiality thereof, has been disclosed to any Person other than employees,
representatives and agents of the Company or any of its Subsidiaries, except as
required pursuant to the filing of a patent application by the Company or any of
its Subsidiaries.

               (e) It is not necessary for the business of the Company or any of
its Subsidiaries to use any Intellectual Property owned by any director,
officer, employee or consultant of the Company or any of its Subsidiaries (or
persons the Company or any of its Subsidiaries presently intends to hire). To
the Company's Knowledge, at no time during the conception or reduction to
practice of any of the Intellectual Property of the Company or any of its
Subsidiaries was any developer, inventor or other contributor to such
Intellectual Property operating under any grants from any Governmental Authority
or subject to any employment agreement, invention assignment, nondisclosure
agreement or other Contractual Obligation with any Person that could materially
adversely affect the rights of the Company or any of its Subsidiaries to its
Intellectual Property.

               3.19 Privacy of Customer Information. Neither the Company nor any
of its Subsidiaries use any of the customer information it receives through its
website or otherwise in an unlawful manner, or in a manner violative of the
privacy policy of the Company or its Subsidiary, as the case may be, or the
privacy rights of its customers. Neither the Company nor any of its Subsidiaries
has collected any customer information through its website in an unlawful manner
or in violation of its privacy policy. The Company and each of its Subsidiaries
has adequate security measures in place to protect the customer information it
receives through its website and which it stores in its computer systems from
illegal use by third parties or use by third parties in a manner violative of
the rights of privacy of its customers. The Company and each of its Subsidiaries
represents to its customers that it assures complete security as to the customer
information it receives through its website.

               3.20 Potential Conflicts of Interest. Except as set forth on
Schedule 3.20, no officer, director or stockholder beneficially owning more than
five percent (5%) of the outstanding shares of Common Stock, to the Knowledge of
the Company, no spouse of any such officer, director or stockholder, and, to the
Knowledge of the Company, no Affiliate of any of the foregoing (a) owns,
directly or indirectly, any interest in (excepting less than one percent (1%)
stock holdings for investment purposes in securities of publicly held and traded
companies), or is an officer, director, employee or consultant of, any Person
which is, or is engaged in business as, a competitor, lessor, lessee, supplier,
distributor, or customer of, or lender to or borrower from, the Company or any
of its Subsidiaries; (b) owns, directly or indirectly, in whole or in part, any
tangible or intangible property that the Company or any of its Subsidiaries use,
in the conduct of business; or (c) has any cause of action or other claim
whatsoever against, or



                                       22

owes or has advanced any amount to, the Company or any of its Subsidiaries,
except for claims in the ordinary course of business such as for accrued
vacation pay, accrued benefits under employee benefit plans, and similar matters
and agreements existing on the date hereof.

               3.21 Trade Relations. There exists no actual or, to the Knowledge
of the Company, threatened termination, cancellation or limitation of, or any
material adverse modification or change in, the business relationship of the
Company or any of its Subsidiaries, or the business of the Company or any of its
Subsidiaries, with any customer or supplier or any group of customers or
suppliers whose purchases or inventories provided to the business of the Company
or any of its Subsidiaries are individually or in the aggregate material to the
Condition of the Company.

               3.22 Outstanding Borrowing. Schedule 3.22 sets forth the amount
of all Indebtedness of the Company and each of its Subsidiaries as of the date
hereof, the Liens that relate to such Indebtedness and that encumber the Assets
and the name of each lender thereof. No Indebtedness is entitled to any voting
rights in any matters voted upon by the holders of the Common Stock.

               3.23 Broker's, Finder's or Similar Fees. There are no brokerage
commissions, finder's fees or similar fees or commissions payable by the Company
or any of its Subsidiaries in connection with the transactions contemplated
hereby based on any agreement, arrangement or understanding with the Company or
any of its Subsidiaries or any action taken by any such Person.

               3.24 Stockholder Approval. The approval on the first attempt of
(a) more than fifty percent (50%) of the outstanding shares of Common Stock and
the votes represented by the Special Voting Stock, voting together as a class,
and (b) more than fifty percent (50%) of the outstanding shares of Series D
Preferred Stock, voting separately as a class, such stockholders present in
person or proxy at a properly convened meeting of the Company's stockholders
("Stockholder Approval") are the stockholders' consents required for the (i)
filing of (A) the Amended and Restated Series D Certification of Determination
and (B) the Series E Certificate of Determination; (ii) the authorization and
the issuance of shares of Series E Preferred Stock authorized for issuance in
the Series E Certificate of Determination; (iii) the reservation and issuance of
shares of Common Stock upon conversion of the shares of Series D Preferred Stock
and the shares of Series E Preferred Stock and upon exercise of the Warrants;
(iv) an amendment to the Amended and Restated Articles of Incorporation to
increase the authorized shares of common stock and preferred stock, and (v) the
Warrant Amendment (as defined in the November Convertible Note Agreement).

               3.25 CCC Section. The Board of Directors has taken all action
necessary to exempt from the provisions of Section 1203 of the California
Corporations Code, to the extent applicable, this Agreement, any acquisition by
the Lenders of Notes and the Issuable Shares or Common Shares pursuant to this
Agreement and the Series E Certificate of Determination, each as applicable, and
any conversion by the Lenders of Issuable Shares into shares of Common Stock.



                                       23

               3.26 Disclosure. This Agreement and the documents and
certificates furnished to the Lenders by the Company do not contain any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements contained herein or therein, in the light of the
circumstances under which they were made, not misleading.

               3.27 Investments. As of the date hereof, except as set forth on
Schedule 3.27 hereto, neither the Company nor any of its Subsidiaries has made
an Investment in any Person, other than a Permitted Investment.

               3.28 Sarbanes-Oxley Compliance.

               (a) The financial statements of the Company, together with the
related schedules and notes, that are incorporated by reference in the
Registration Statement and the Prospectus filed with the Commission on December
24, 2003, as amended: (i) present fairly, in all material respects, the
financial position of the Company as of the dates indicated and the results of
operations and cash flows of the Company for the periods specified; (ii) have
been prepared in compliance with requirements of the Exchange Act and in
conformity with generally accepted accounting principles in the United States
applied on a consistent basis during the periods presented and the schedules
included in the Registration Statement present fairly, in all material respects,
the information required to be stated therein; and (iii) comply with the
antifraud provisions of the Federal securities laws. There are no financial
statements (historical or pro forma) that are required to be included in the
Registration Statement and the Prospectus that are not included as required by
the Securities Act. All non-GAAP financial measures included or incorporated by
reference in the Registration Statement or the Prospectus comply in all material
respects with the applicable requirements of the Sarbanes-Oxley Act of 2002 (the
"Sarbanes-Oxley Act") and the rules and regulations promulgated by the
Commission thereunder.

               (b) The Company's Board of Directors has validly appointed an
Audit Committee whose composition satisfies the requirements of Rule 4350A(d)(2)
of the Rules of the National Association of Securities Dealers, Inc. (the "NASD
Rules") and the Board of Directors and/or the Audit Committee has adopted a
charter that satisfies the requirements of Rule 4350A(d)(1) of the NASD Rules.

               (c) The Company has established and maintains disclosure controls
and procedures (as such term is defined in Rule 13a-15 and 15d-15 under the
Exchange Act). Such disclosure controls and procedures are designed to ensure
that material information relating to the Company is made known to the Company's
principal executive officer and principal financial officer by others within the
Company. As of the end of the Company's last completed fiscal quarter, such
disclosure controls and procedures were effective to perform the functions for
which they were established, and the Company will use commercially reasonable
efforts to ensure that the Company's disclosure controls and procedures remain
effective to perform the functions for which they were established. The
Company's auditors and the Audit Committee of the Board of Directors have been
advised of: (i) any significant deficiencies and material weaknesses



                                       24

in the design or operation of internal controls over financial reporting which
are reasonably likely to adversely affect the Company's ability to record,
process, summarize, and report financial information; and (ii) any fraud,
whether or not material, that involves management or other employees who have a
significant role in the Company's internal controls over financial reporting.
Since the date of the most recent evaluation of such disclosure controls and
procedures, there have been no changes in internal controls over financial
reporting that have materially affected, or are reasonably likely to materially
affect, the Company's internal control over financial reporting. The principal
executive officer and the principal financial officers of the Company have made
all certifications required by the Sarbanes-Oxley Act and any related rules and
regulations promulgated by the Commission thereunder, and the statements
contained in any such certification are complete and correct. The Company is in
compliance in all material respects with all provisions of the Sarbanes-Oxley
Act that are effective and applicable to the Company, except for the
requirements of the Sarbanes-Oxley Act which are not yet required to be complied
with by the Company. The Company has established procedures to implement timely
additional rules and regulations applicable to the Company that may be
promulgated by the Commission pursuant to the Sarbanes-Oxley Act.

                                   ARTICLE IV

                  REPRESENTATIONS AND WARRANTIES OF THE LENDERS

               Each of the Lenders hereby represents and warrants, severally and
not jointly, to the Company as follows:

               4.1 Existence and Power. Such Lender (a) is a limited
partnership, corporation, partnership or limited liability company duly
organized and validly existing under the laws of the jurisdiction of its
formation and (b) has the requisite partnership, corporate or limited liability
company, as the case may be, power and authority to execute, deliver and perform
its obligations under this Agreement and each of the other Transaction Documents
to which it is a party.

               4.2 Authorization; No Contravention. The execution, delivery and
performance by such Lender of this Agreement and each of the other Transaction
Documents to which it is a party and the transactions contemplated hereby and
thereby, (a) have been duly authorized by all necessary partnership, corporate
or limited liability company, as the case may be, action, (b) do not contravene
the terms of such Lender's organizational documents, or any amendment thereof,
(c) do not violate, conflict with or result in any breach or contravention of,
or the creation of any Lien under, any Contractual Obligation of such Lender or
any Requirement of Law applicable to such Lender, and (d) do not violate any
Orders of any Governmental Authority against, or binding upon, such Lender.

               4.3 Governmental Authorization; Third Party Consents. Except for
the Stockholder Approval, no approval, consent, compliance, exemption,
authorization or other action by, or notice to, or filing with, any Governmental
Authority or any other Person, and no lapse of a waiting period under any
Requirement of Law, is necessary or


                                       25

required in connection with the execution, delivery or performance by, or
enforcement against, such Lender of this Agreement and each of the other
Transaction Documents to which it is a party or the transactions contemplated
hereby and thereby.

               4.4 Binding Effect. This Agreement and each of the other
Transaction Documents to which such Lender is a party, have been duly executed
and delivered by such Lender, and this Agreement and each of the other
Transaction Documents to which such Lender is a party, constitute the legal,
valid and binding obligations of such Lender, enforceable against it in
accordance with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, fraudulent conveyance or transfer,
moratorium or similar laws affecting the enforcement of creditors' rights
generally or by equitable principles relating to enforceability (regardless of
whether considered in a proceeding at law or in equity).

               4.5 Purchase for Own Account. The Notes and the Issuable Shares
or Common Shares to be acquired by such Lender, respectively, are being or will
be acquired for its own account and with no intention of distributing or
reselling such Notes, Issuable Shares or Common Shares or any part thereof in
any transaction that would be in violation of the securities laws of the United
States of America, any state of the United States or any foreign jurisdiction,
without prejudice, however, to the rights of such Lender at all times to sell or
otherwise dispose of all or any part of such Notes, Issuable Shares or Common
Shares under an effective registration statement under the Securities Act, or
under an exemption from such registration available under the Securities Act,
and subject, nevertheless, to the disposition of such Lender's property being at
all times within its control. If such Lender should in the future decide to
dispose of any of such Notes, Issuable Shares or Common Shares, such Lender
understands and agrees that it may do so only in compliance with the Securities
Act and applicable state and foreign securities laws, as then in effect. Such
Lender agrees to the imprinting for so long as required by law, of a legend on
certificates representing all of its Notes, Issuable Shares or Common Shares and
shares of Common Stock issuable upon conversion of its Issuable Shares to the
following effect:

               THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
               REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
               "ACT"), OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES
               OR ANY FOREIGN JURISDICTION. THE SECURITIES MAY NOT BE
               TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
               STATEMENT UNDER SUCH ACT AND APPLICABLE STATE AND FOREIGN
               SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION FROM THE
               REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS.



                                       26

               4.6 Restricted Securities. Such Lender understands that the
Notes, the Issuable Shares and the Common Shares will not be registered at the
time of their issuance under the Securities Act for the reason that the sale
provided for in this Agreement is exempt pursuant to Section 4(2) of the
Securities Act and that the reliance of the Company on such exemption is
predicated in part on such Lender's representations set forth herein.

               4.7 Accredited Investor. Such Lender is an "Accredited Investor"
within the meaning of Rule 501 of Regulation D under the Securities Act, as
presently in effect.

               4.8 Experience. Such Lender, either alone or together with its
representatives, has such knowledge, sophistication and experience in business
and financial matters so as to be capable of evaluating the merits and risks of
the prospective investment in its Notes, Issuable Shares or Common Shares (the
"Securities"), and has so evaluated the merits and risks of such investment.
Such Lender is able to bear the economic risk of an investment in the Securities
and, at the present time, is able to afford a complete loss of such investment.

               4.9 Access to Information. Such Lender has reviewed the SEC
Reports and has been afforded: (a) the opportunity to ask such questions as it
has deemed necessary of, and to receive answers from, representatives of the
Company concerning the terms and conditions of the offering of the Securities
and the merits and risks of investing in the Securities; (b) access to publicly
available information about the Company and the Subsidiaries and the Condition
of the Company sufficient to enable it to evaluate its investment; and (c) the
opportunity to obtain such additional publicly available information that the
Company possesses or can acquire without unreasonable effort or expense that is
necessary to make an informed investment decision with respect to the
investment. Neither such inquiries nor any other investigation conducted by or
on behalf of such Lender or its representatives or counsel shall modify, amend
or affect such Lender's right to rely on the truth, accuracy and completeness of
the SEC Reports and the Company's representations and warranties contained in
the Transaction Documents.

               4.10 General Solicitation. Such Lender is not purchasing the
Securities as a result of any advertisement, article, notice or other
communication regarding the Securities published in any newspaper, magazine or
similar media or broadcast over television or radio or presented at any seminar
or any other general solicitation or general advertisement.

               4.11 Reliance. Such Lender understands and acknowledges that: (a)
the Securities are being offered and sold to it without registration under the
Securities Act in a private placement that is exempt from the registration
provisions of the Securities Act and (b) the availability of such exemption
depends in part on, and the Company will rely upon the accuracy and truthfulness
of, the foregoing representations and such Lender hereby consents to such
reliance.



                                       27

               4.12 Qualified Institutional Buyer. Such Lender is a "qualified
institutional buyer" as defined in Rule 144A(a)(1) of the Securities Act, as
presently in effect.

               4.13 Affiliate Status. Such Lender is not an Affiliate of any
director, officer or substantial shareholder of the Company for purposes of Rule
4350(i)(1)(A) of the NASD, Inc. Marketplace Rules. In addition, except as
disclosed on Schedule 4.14, each Lender represents that it is not an Affiliate
of the other Lenders or the January 2004 Investors and that Lenders have not
entered into an agreement, arrangement or understanding with each other or any
other holder of the Company's securities for the purpose of holding, acquiring,
voting or disposing of any securities of the Company. Except as disclosed on
Schedule 4.14, the obligations of each Lender under any Transaction Document are
several and not joint with the obligations of any other Lender, and no Lender
shall be responsible in any way for the performance of the obligations of any
other Lender under any Transaction Document. Except as disclosed on Schedule
4.14, the decision of each Lender to purchase Securities pursuant to this
Agreement has been made by such Lender independently of any other Lender and
independently of any information, materials, statements or opinions as to the
business, affairs, operations, assets, properties, liabilities, results of
operations, condition (financial or otherwise) or prospects of the Company or of
any Subsidiary which may have been made or given by any other Lender or by any
agent or employee of any other Lender, and no Lender or any of its agents or
employees shall have any liability to any other Lender (or any other person)
relating to or arising from any such information, materials, statements or
opinions. Except as disclosed on Schedule 4.14, nothing contained herein or in
any Transaction Document, and no action taken by any Lender pursuant thereto,
shall be deemed to constitute the Lenders as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption that the
Lenders are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated by the Transaction Document. Except
as disclosed on Schedule 4.14, each Lender acknowledges that no other Lender has
acted as agent for such Lender in connection with making its investment
hereunder and that no other Lender will be acting as agent of such Lender in
connection with monitoring its investment hereunder. Except as disclosed on
Schedule 4.14, each Lender shall be entitled to independently protect and
enforce its rights, including without limitation the rights arising out of this
Agreement or out of the other Transaction Documents, and it shall not be
necessary for any other Lender to be joined as an additional party in any
proceeding for such purpose. The Lenders acknowledge that the Company has
elected to provide all Lenders with the same terms and Transaction Documents for
the convenience of the Company and not because it was required or requested to
do so by the Lenders.

               4.14 Capital Stock Ownership. Schedule 4.14 sets forth a complete
list of the capital stock, Common Stock Equivalents or other securities of the
Company (and any options, warrants, conversion privileges, subscription purchase
rights or other rights presently outstanding to purchase or otherwise acquire
any of the foregoing) beneficially owned (as defined in Rule 13d-3 under the
Exchange Act) by each Lender and its respective Affiliates as of the date
hereof.



                                       28

                                    ARTICLE V

                          CONDITIONS TO INITIAL CLOSING

               5.1 Conditions to Lenders' Obligations. Each of the Lenders'
obligation to consummate the transactions contemplated by the Initial Closing
pursuant to this Agreement is subject to the fulfillment at or prior to the
Initial Closing of the following conditions, any of which may be waived in whole
or in part by such Lender:

               (a) Representations and Warranties. The representations and
warranties made by the Company in Article III hereof shall be true and correct
on the Initial Closing Date.

               (b) Performance. All covenants, agreements and conditions
contained in this Agreement to be performed by the Company on or prior to the
Initial Closing Date shall have been performed or complied with.

               (c) Compliance Certificate. The Company shall have delivered to
the Lenders a certificate of the Company, executed by the Chief Executive
Officer of the Company and dated as of the Initial Closing Date, certifying to
the fulfillment of the conditions specified in Section 5.1(a) and Section 5.1(b)
hereof.

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

               (e) Satisfactory Release of Liens. The Company shall have
delivered to the Lenders satisfactory evidence of the release of all Liens,
except for Permitted Liens, on the assets of the Company and its Subsidiaries in
order to ensure the Lender's first priority security interests upon the filing
of applicable UCC-1's.

               (f) Opinion of Counsel. The Company shall have caused the opinion
of Pillsbury Winthrop LLP, dated the Initial Closing Date, relating to the
transactions contemplated by the Initial Closing, substantially in the form
attached hereto as Exhibit G to be delivered to the Lenders.

               (g) SVB Consent. The Company shall have delivered to the Lenders
the written consent of Silicon Valley Bank to the execution, delivery and
performance of the Transaction Documents and all of the transactions
contemplated therein.

               5.2 Conditions to Company's Obligations. The Company's obligation
to consummate the transactions contemplated by the Initial Closing pursuant to
this



                                       29

Agreement is subject to the fulfillment at or prior to the Initial Closing of
the following conditions, any of which may be waived in whole or in part by the
Company:

               (a) Representations and Warranties. The representations and
warranties made by the Lenders in Article IV hereof shall be true and correct on
the Initial Closing Date.

               (b) Performance. All covenants, agreements and conditions
contained in this Agreement to be performed by the Lenders on or prior to the
Initial Closing Date shall have been performed or complied with.

                                   ARTICLE VI

                        CONDITIONS TO SUBSEQUENT CLOSING

               6.1 Conditions to Lenders' Obligations. Each of the Lenders'
obligation to consummate the Conversion at the Subsequent Closing pursuant to
this Agreement is subject to the fulfillment at or prior to the Subsequent
Closing of the following conditions:

               (a) Compliance with Laws. The issuance of the Issuable Shares by
the Company hereunder shall be legally permitted by all laws and regulations to
which the Company is subject.

               (b) Stockholder Approval. The Company shall have delivered to the
Lenders satisfactory evidence of the Stockholder Approval.

               (c) Amendment to the Amended and Restated Articles of
Incorporation. The Company shall have duly filed with the Secretary of State of
the State of California and caused to become effective an amendment to the
Amended and Restated Articles of Incorporation to increase the authorized common
stock and preferred stock of the Company.

               (d) Certificate of Determination. The Company shall have duly
filed with the Secretary of State of the State of California the Series E
Certificate of Determination.

               6.2 Conditions to the Company's Obligations. The Company's
obligation to consummate the Conversion at the Subsequent Closing pursuant to
this Agreement is subject to the fulfillment at or prior to the Subsequent
Closing of the following condition:

               (a) Stockholder Approval. The Company shall have received
satisfactory evidence of the Stockholder Approval.



                                       30

                                   ARTICLE VII

                                 INDEMNIFICATION

               7.1 Indemnification. Except as otherwise provided in this Article
VII, the Company (the "Indemnifying Party") agrees to indemnify, defend and hold
harmless each of the Lenders and their Affiliates and their respective officers,
directors, agents, employees, subsidiaries, partners, members and controlling
persons (each, an "Indemnified Party") to the fullest extent permitted by law
from and against any and all losses, Claims, or written threats thereof
(including, without limitation, any Claim by a third party), damages, expenses
(including reasonable fees, disbursements and other charges of counsel incurred
by the Indemnified Party in any action between the Indemnifying Party and the
Indemnified Party or between the Indemnified Party and any third party or
otherwise) or other liabilities (collectively, "Losses") resulting from or
arising out of any breach of any representation or warranty, covenant or
agreement by the Company in this Agreement, the Amended and Restated
Registration Rights Agreement, the Notes or the Security Agreement. The amount
of any payment to any Indemnified Party herewith in respect of any Loss shall be
of sufficient amount to make such Indemnified Party whole for any diminution in
value of the Issuable Shares or Common Shares, as applicable, directly caused by
such breach. In connection with the obligation of the Indemnifying Party to
indemnify for expenses as set forth above, the Indemnifying Party shall, upon
presentation of appropriate invoices containing reasonable detail, reimburse
each Indemnified Party for all such expenses (including reasonable fees,
disbursements and other charges of counsel incurred by the Indemnified Party in
any action between the Indemnifying Party and the Indemnified Party or between
the Indemnified Party and any third party) as they are incurred by such
Indemnified Party; provided, however, that if an Indemnified Party is reimbursed
under this Article VII for any expenses, such reimbursement of expenses shall be
refunded to the extent it is finally judicially determined that the Losses in
question resulted primarily from the willful misconduct or gross negligence of
such Indemnified Party.

               7.2 Notification. Each Indemnified Party under this Article VII
shall, promptly after the receipt of notice of the commencement of any Claim
against such Indemnified Party in respect of which indemnity may be sought from
the Indemnifying Party under this Article VII, notify the Indemnifying Party in
writing of the commencement thereof. The omission of any Indemnified Party to so
notify the Indemnifying Party of any such action shall not relieve the
Indemnifying Party from any liability which it may have to such Indemnified
Party (a) other than pursuant to this Article VII or (b) under this Article VII
unless, and only to the extent that, such omission results in the Indemnifying
Party's forfeiture of substantive rights or defenses. In case any such Claim
shall be brought against any Indemnified Party, and it shall notify the
Indemnifying Party of the commencement thereof, the Indemnifying Party shall be
entitled to assume the defense thereof at its own expense, with counsel
satisfactory to such Indemnified Party in its reasonable judgment; provided,
however, that any Indemnified Party may, at its own expense, retain separate
counsel to participate in such defense at its own expense. Notwithstanding the
foregoing, in any Claim in which both the Indemnifying Party, on the one hand,
and an Indemnified Party, on the other hand,



                                       31

are, or are reasonably likely to become, a party, such Indemnified Party shall
have the right to employ separate counsel and to control its own defense of such
Claim if, in the reasonable opinion of counsel to such Indemnified Party, either
(x) one or more defenses are available to the Indemnified Party that are not
available to the Indemnifying Party or (y) a conflict or potential conflict
exists between the Indemnifying Party, on the one hand, and such Indemnified
Party, on the other hand, that would make such separate representation
advisable; provided, however, that the Indemnifying Party (i) shall not be
liable for the fees and expenses of more than one counsel to all Indemnified
Parties and (ii) shall reimburse the Indemnified Parties for all of such fees
and expenses of such counsel incurred in any action between the Indemnifying
Party and the Indemnified Parties or between the Indemnified Parties and any
third party, as such expenses are incurred; provided, however, that if an
Indemnified Party is reimbursed under this Article VII for any expenses, such
reimbursement of expenses shall be refunded to the extent it is finally
judicially determined that the Losses in question resulted primarily from the
willful misconduct or gross negligence of such Indemnified Party. The
Indemnifying Party agrees that it will not, without the prior written consent of
the Indemnified Party, settle, compromise or consent to the entry of any
judgment in any pending or threatened Claim relating to the matters contemplated
hereby (if any Indemnified Party is a party thereto or has been actually
threatened to be made a party thereto) unless such settlement, compromise or
consent includes an unconditional release of each Indemnified Party from all
liability arising or that may arise out of such Claim. The Indemnifying Party
shall not be liable for any settlement of any Claim effected against an
Indemnified Party without the Indemnifying Party's written consent, which
consent shall not be unreasonably withheld. The rights accorded to an
Indemnified Party hereunder shall be in addition to any rights that any
Indemnified Party may have at common law, by separate agreement or otherwise;
provided, however, that notwithstanding the foregoing or anything to the
contrary contained in this Agreement, nothing in this Article VII shall restrict
or limit any rights that any Indemnified Party may have to seek equitable
relief.

               7.3 Contribution. If the indemnification provided for in this
Article VII from the Indemnifying Party is unavailable to an Indemnified Party
hereunder in respect of any Losses referred to herein, then the Indemnifying
Party, in lieu of indemnifying such Indemnified Party, shall contribute to the
amount paid or payable by such Indemnified Party as a result of such Losses in
such proportion as is appropriate to reflect the relative fault of the
Indemnifying Party and Indemnified Party in connection with the actions which
resulted in such Losses, as well as any other relevant equitable considerations.
The relative faults of such Indemnifying Party and Indemnified Party shall be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission to state a material fact, has been made by, or relates to
information supplied by, such Indemnifying Party or Indemnified Party, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such action. The amount paid or payable by a party as a
result of the Losses referred to above shall be deemed to include, subject to
the limitations set forth in Section 7.1 and Section 7.2, any reasonable legal
or other fees, charges or expenses reasonably incurred by such party in
connection with any investigation or proceeding.



                                       32

                                  ARTICLE VIII

                                    COVENANTS

               The Company hereby covenants and agrees with the Lenders as
follows:

               8.1 Financial Statements and Other Information. If any time the
Company is not subject to the periodic disclosure obligations of the Exchange
Act, the Company shall deliver to each Lender, in form and substance
satisfactory to such Lender:

               (a) as soon as available, but not later than ninety (90) days
after the end of each fiscal year of the Company, a copy of the audited
consolidated balance sheet of the Company and its Subsidiaries as of the end of
such fiscal year and the related statements of operations and cash flows for
such fiscal year, setting forth in each case in comparative form the figures for
the previous year, all in reasonable detail and accompanied by a management
summary and analysis of the operations of the Company for such fiscal year and
by the opinion of a nationally recognized independent certified public
accounting firm which report shall state without qualification that such
financial statements present fairly the financial condition as of such date and
results of operations and cash flows for the periods indicated in conformity
with GAAP applied on a consistent basis;

               (b) as soon as available, but in any event not later than
forty-five (45) days after the end of each of the first three fiscal quarters of
each fiscal year, the unaudited consolidated balance sheet of the Company and
its Subsidiaries, and the related statements of operations and cash flows for
such quarter and for the period commencing on the first day of the fiscal year
and ending on the last day of such quarter, all certified by an appropriate
officer of the Company as presenting fairly the consolidated financial condition
as of such date and results of operations and cash flows for the periods
indicated in conformity with GAAP applied on a consistent basis, subject to
normal year-end adjustments and the absence of footnotes required by GAAP; and

               (c) as soon as available, but in any event not later than ten
(10) days after the end of each month of each fiscal year, the unaudited
consolidated balance sheet of the Company and its Subsidiaries, and the related
statements of operations and cash flows for such month and for the period
commencing on the first day of the fiscal year and ending on the last day of
such month, all certified by an appropriate officer of the Company as presenting
fairly the consolidated financial condition as of such date and results of
operations and cash flows for the periods indicated in conformity with GAAP
applied on a consistent basis, subject to normal year-end adjustments and the
absence of footnotes required by GAAP.

               8.2 FIRPTA Certificate. If requested by any of the Lenders, as
promptly as practicable, but not later than five (5) days after the end of each
fiscal year of the Company, the Company shall deliver to such Lender, in form
and substance satisfactory to such Lender, a certificate signed by the Chief
Executive Officer of the



                                       33

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

               8.3 Reservation of Common Stock. The Company shall at all times
reserve and keep available out of its authorized shares of Common Stock, solely
for the purpose of issue or delivery upon conversion of the Issuable Shares, as
provided in the Series E Certificate of Determination, or upon conversion of the
Notes, as provided for in the Notes, the maximum number of shares of Common
Stock that may be issuable or deliverable upon such conversion or exercise. Such
shares of Common Stock are duly authorized and, when issued or delivered in
accordance with the Series E Certificate of Determination, or in accordance with
the Notes, as the case may be, shall be validly issued, fully paid and
non-assessable. The Company shall issue such shares of Common Stock, in
accordance with the terms of the Series E Certificate of Determination or the
terms of the Notes, as the case may be, and otherwise comply with the terms
hereof and thereof.

               8.4 Stockholder Approval. The Company will use all reasonable
commercial efforts to cause the proxy statement filed with the Commission on
December 24, 2003 to be distributed to the Company's stockholders in connection
with the solicitation of votes in favor of the matters set forth in Section 3.24
that require Stockholder Approval, including any amendments or supplements
thereto (the "Proxy Statement") to be cleared by the Commission as promptly as
practicable. The Company agrees to provide the Lenders and their respective
counsel with any written comments the Company or its counsel may receive from
the Commission with respect to the Proxy Statement promptly after the receipt of
such comments. The Company will use all reasonable commercial efforts to cause
the Proxy Statement (a) not to contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading and (b) to comply as to form in all material
respects with the applicable provisions of the Exchange Act and the rules and
regulations thereunder. Following clearance by the Commission of the Proxy
Statement, the Company shall promptly distribute the Proxy Statement to its
stockholders and call and arrange for a special meeting of stockholders and take
such other actions as are required or necessary in order to obtain the
Stockholder Approval as promptly as practicable. The Company will use all
reasonable commercial efforts to hold the special meeting and obtain a vote of
the stockholders on or prior to August 15, 2004. The Board of Directors shall
recommend that the Company's stockholders vote in favor of the Stockholder
Approval.

               8.5 Financial Covenants. The Company hereby covenants and agrees
that on and after the Initial Closing and until all of the obligations under the
Notes, including, without limitation, the repayment or conversion of the
principal amount and all accrued interest outstanding thereunder, have been
satisfied in full, the Company shall at all times comply with the financial and
other covenants set forth on Schedule 8.5.

               8.6 Purchases and Sales. In the event any Lender has become aware
of or becomes aware of any material non-public information about the Company
(which the



                                       34

parties hereby agree will include (but not be limited to) any information
labeled by the Company to be material non-public information) ("Material
Non-Public Information"), such Lender shall not purchase or sell any shares of
the Company's capital stock (or securities exercisable or convertible for shares
of the Company's capital stock) until the earlier of (a) such time as the
information is no longer material as a matter of law (which the parties agree
shall be a period of at least three months after becoming aware of such material
non-public information), and (b) the time at which such information has been
disseminated publicly by the Company, and in any event not in violation of the
federal securities laws. Except as set forth in this Agreement, the Company
covenants and agrees that neither it nor any other Person acting on its behalf
will provide any Lender or its agents or counsel with any information that the
Company believes constitutes Material Non-Public Information, unless prior
thereto such Lender shall have executed a written agreement regarding the
confidentiality and use of such information. The Company understands and
confirms that each Lender shall be relying on the foregoing representations in
effecting transactions in securities of the Company.

               8.7 Proxy Matters. Notwithstanding anything herein to the
contrary, but subject to the provisions of Section 9.1 of this Agreement, if the
Registration Statement (as defined in the November Convertible Note Agreement)
has not been declared effective by the Commission on or prior to May 15, 2004,
subject to approval by the Board of Directors, the Company will promptly take
all such actions as may be necessary to withdraw the Registration Statement, and
the Company shall continue to have an obligation under Section 8.4 of this
Agreement to seek Stockholder Approval. If the Company withdraws the
Registration Statement pursuant to this Section 8.7 and receives Stockholder
Approval, the Company may, subject to approval by the Board of Directors, file a
subsequent registration statement with the Commission and provide the Company's
shareholders the opportunity to participate in a subsequent rights offering.

                                   ARTICLE IX

                                   TERMINATION

               9.1 Termination. The Lenders' obligation to consummate the
Conversion under this Agreement including, but not limited to, Sections 2.4(e),
2.4(f) and 2.4(g) and Article VI of this Agreement, shall terminate in the event
that the Company is unable to obtain Stockholder Approval pursuant to Section
8.4 on the first attempt, but in any event on August 15, 2004, if Stockholder
Approval is not obtained by such date. None of the Company or the Lenders shall
have any liability arising out of such termination.

                                    ARTICLE X

                                  MISCELLANEOUS

               10.1 Survival of Representations and Warranties. All of the
representations and warranties made herein shall survive the execution and
delivery of this Agreement until the date that is ninety (90) days after the
receipt by the Lenders of


                                       35

audited financial statements of the Company for the fiscal year ending December
31, 2004 (or, if such fiscal year changes and no such audited consolidated
financial statements are available, then the successor fiscal year), except for
(a) Sections 3.1, 3.2, 3.4, 3.7, 3.13 and 3.23, which representations and
warranties shall survive until the third anniversary of the Initial Closing
Date, and (b) Section 3.11, which shall survive until the later to occur of (i)
the lapse of the statute of limitations with respect to the assessment of any
Tax to which such representation and warranty relates (including any extensions
or waivers thereof) and (ii) sixty (60) days after the final administrative or
judicial determination of the Taxes to which such representation and warranty
relates, and no claim with respect to Section 3.11 may be asserted thereafter
with the exception of claims arising out of any fact, circumstance, action or
proceeding to which the party asserting such claim shall have given notice to
the other parties to this Agreement prior to the termination of such period of
reasonable belief that a tax liability will subsequently arise therefrom.

               10.2 Notices. All notices, demands and other communications
provided for or permitted hereunder shall be made in writing and shall be by
registered or certified first-class mail, return receipt requested, telecopier,
courier service or personal delivery:

               if to the Company:

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

               with a copy to, which shall not constitute notice to the Company:

               Pillsbury Winthrop LLP
               50 Fremont Street
               San Francisco, CA  94105
               Telecopy:  (415) 983-1200
               Attention:  Gregg Vignos, Esq.

               if to the Lenders:

               Apex Capital, LLC
               25 Orinda Way, Suite 300
               Orinda, CA 94563
               Attention:  Adam Fiore, General Counsel
               Telephone:  (925) 253-6125
               Telecopy:  (925) 253-1809

               with a copy to, which shall not constitute notice:



                                       36

               Howard, Rice, Nemerovski, Canady, Falk & Rabkin
               Three Embarcadero Center, Seventh Floor
               San Francisco, CA 94111-4024
               Telephone:  (415) 434-1600
               Telecopy:  (415) 217-5910
               Attention:  Joseph Hershenson

               and to:

               Crosslink Capital
               Two Embarcadero Center, Suite 2200
               San Francisco, CA  94111
               Attention:  Jason Sanders
               Telephone:  (415) 617-1845
               Telecopy:  (415) 617-1801

               and to:

               Sagamore Hill Hub Fund, Ltd.
               c/o Sagamore Hill Capital Management
               10 Glenville Street, 3rd Floor
               Greenwich, CT  06831
               Attention:  Legal Department
               Telecopy:  (203) 422-7214

               and to:

               Criterion Capital Management
               One Maritime Plaza, Suite 1460
               San Francisco, CA  64111
               Attention:  R. Daniel Beckham
               Telephone:
               Telecopy:

               and to:

               Capital Ventures International
               c/o Heights Capital Management, Inc.
               425 California Street, Suite 1100
               San Francisco, CA 94104
               Attention:  Martin Kobinger
               Telephone:  (415) 403-6500
               Telecopy:  (415) 403-6525

               All such notices, demands and other communications shall be
deemed to have been duly given when delivered by hand, if personally delivered;
when delivered by courier, if delivered by commercial courier service; five (5)
Business Days after being



                                       37

deposited in the mail, postage prepaid, if mailed; and when receipt is
mechanically acknowledged, if telecopied. Any party may by notice given in
accordance with this Section 10.2 designate another address or Person for
receipt of notices hereunder.

               10.3 Successors and Assigns; Third Party Beneficiaries. This
Agreement shall inure to the benefit of and be binding upon the successors and
permitted assigns of the parties hereto. Subject to applicable securities laws
and the terms and conditions thereof, the Lenders may assign any of their rights
under this Agreement or the other Transaction Documents to any of their
respective Affiliates. The Company may not assign any of its rights under this
Agreement without the written consent of the Lenders. Except as provided in
Article VII, no Person other than the parties hereto and their successors and
permitted assigns is intended to be a beneficiary of this Agreement.

               10.4 Amendment and Waiver.

               (a) No failure or delay on the part of the Company or the Lenders
in exercising any right, power or remedy hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right, power or
remedy preclude any other or further exercise thereof or the exercise of any
other right, power or remedy. The remedies provided for herein are cumulative
and are not exclusive of any remedies that may be available to the Company or
the Lenders at law, in equity or otherwise.

               (b) Any amendment, supplement or modification of or to any
provision of this Agreement, any waiver of any provision of this Agreement, and
any consent to any departure by the Company or the Lenders from the terms of any
provision of this Agreement, shall be effective (i) only if it is made or given
in writing and signed by the Company and the Lenders, and (ii) only in the
specific instance and for the specific purpose for which made or given. Except
where notice is specifically required by this Agreement, no notice to or demand
on the Company in any case shall entitle the Company to any other or further
notice or demand in similar or other circumstances.

               10.5 Counterparts. This Agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.

               10.6 Headings. The headings in this Agreement are for convenience
of reference only and shall not limit or otherwise affect the meaning hereof.

               10.7 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of California, without regard
to the principles of conflicts of law thereof.

               10.8 Severability. If any one or more of the provisions contained
herein, or the application thereof in any circumstance, is held invalid, illegal
or unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions hereof shall not



                                       38

be in any way impaired, unless the provisions held invalid, illegal or
unenforceable shall substantially impair the benefits of the remaining
provisions hereof.

               10.9 Rules of Construction. Unless the context otherwise
requires, references to sections or subsections refer to sections or subsections
of this Agreement.

               10.10 Entire Agreement. This Agreement, together with the
exhibits and schedules hereto, and the other Transaction Documents are intended
by the parties as a final expression of their agreement and intended to be a
complete and exclusive statement of the agreement and understanding of the
parties hereto in respect of the subject matter contained herein and therein.
There are no restrictions, promises, representations, warranties or
undertakings, other than those set forth or referred to herein or therein. This
Agreement, together with the exhibits and schedules hereto, and the other
Transaction Documents supersede all prior agreements and understandings between
the parties with respect to such subject matter.

               10.11 Fees. The Company shall reimburse the Lenders for their
fees, disbursements and other charges of counsel incurred in connection with the
transactions contemplated by this Agreement (including, but without limitation,
to advise on reporting obligations of the Lenders and filings with Commission);
provided, that the aggregate amount of all such reimbursements in respect of the
Lenders shall not exceed $20,000.

               10.12 Publicity; Confidentiality. Except as may be required by
applicable Requirements of Law, none of the parties hereto shall issue a
publicity release or public announcement or otherwise make any disclosure
concerning this Agreement, the transactions contemplated hereby, the Lenders or
the business, technology and financial affairs of the Company, without prior
approval by the other parties hereto; provided, however, that nothing in this
Agreement shall restrict any of the Lenders from disclosing information (a) that
is already publicly available, (b) that was known to such Lender on a
non-confidential basis prior to its disclosure by the Company, (c) that may be
required or appropriate in response to any summons or subpoena or in connection
with any litigation, provided that such Lender will use reasonable efforts to
notify the Company in advance of such disclosure so as to permit the Company to
seek a protective order or otherwise contest such disclosure, and such Lender
will use reasonable efforts to cooperate, at the expense of the Company, with
the Company in pursuing any such protective order, (d) to the extent that such
Lender reasonably believes it appropriate in order to comply with any
Requirement of Law, (e) to such Lender's or the Company's officers, directors,
shareholders, advisors, employees, members, partners, controlling persons,
auditors or counsel or (f) to Persons from whom releases, consents or approvals
are required, or to whom notice is required to be provided, pursuant to the
transactions contemplated by the Transaction Documents. If any announcement is
required by any Requirement of Law to be made by any party hereto, prior to
making such announcement such party will deliver a draft of such announcement to
the other parties and shall give the other parties reasonable opportunity to
comment thereon. Each of the Lenders acknowledge that if such Lender becomes
aware of Material Non-Public Information, such Lender's ability to trade in the
Company's securities and to participate, to the extent otherwise eligible, in
the Rights Offering would be restricted.



                                       39

               10.13 Further Assurances. Each of the parties shall execute such
documents and perform such further acts (including, without limitation,
obtaining any consents, exemptions, authorizations or other actions by, or
giving any notices to, or making any filings with, any Governmental Authority or
any other Person) as may be reasonably required or desirable to carry out or to
perform the provisions of this Agreement.

               10.14 Waiver. The Company hereby waives the provisions set forth
in Section 8.6 of the January Convertible Note Agreement with respect to the
purchase by certain of the January 2004 Investors of Notes (and any shares of
capital stock of the Company issuable upon their conversion) pursuant to this
Agreement.


              [the remainder of this page intentionally left blank]



                                       40

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

                             CRITICAL PATH, INC.,
                             a California corporation


                             By: /s/   William E. McGlashan, Jr.
                                 -----------------------------------
                                 Name:   William E. McGlashan, Jr.
                                 Title:  Chairman, Chief Executive Officer




              SIGNATURE PAGE TO CONVERTIBLE NOTE PURCHASE AGREEMENT


                             PERMAL U.S. OPPORTUNITIES LIMITED

                             By: Apex Capital, LLC, its Authorized Investment
                                 Advisor


                                 By: /s/ Sanford J. Colen
                                     -------------------------------------------
                                 Name:  Sanford J. Colen
                                 Title: Manager and Principal


                             ZAXIS PARTNERS, L.P.

                             By: Apex Capital, LLC, its General Partner


                                 By: /s/ Sanford J. Colen
                                     -------------------------------------------
                                 Name:  Sanford J. Colen
                                 Title: Manager and Principal


                             ZAXIS EQUITY NEUTRAL, L.P.

                             By: Apex Capital, LLC, its General Partner


                                 By: /s/  Sanford J. Colen
                                     -------------------------------------------
                                 Name:  Sanford J. Colen
                                 Title: Manager and Principal


                             ZAXIS OFFSHORE LIMITED

                             By: Apex Capital, LLC, its Authorized Investment
                                 Advisor


                                 By: /s/   Sanford J. Colen
                                     -------------------------------------------
                                 Name:  Sanford J. Colen
                                 Title: Manager and Principal


              SIGNATURE PAGE TO CONVERTIBLE NOTE PURCHASE AGREEMENT


                             ZAXIS INSTITUTIONAL PARTNERS, L.P.

                             By: Apex Capital, LLC, its General Partner


                                 By: /s/ Sanford J. Colen
                                     -------------------------------------------
                                 Name:  Sanford J. Colen
                                 Title: Manager and Principal


                             GUGGENHEIM PORTFOLIO COMPANY XIII

                             By: Apex Capital, LLC, its Authorized Investment
                                 Advisor


                                 By: /s/ Sanford J. Colen
                                    --------------------------------------------
                                 Name:  Sanford J. Colen
                                 Title: Manager and Principal



              SIGNATURE PAGE TO CONVERTIBLE NOTE PURCHASE AGREEMENT


                             CROSSLINK CROSSOVER FUND IV, L.P.

                             By: Crossover Fund IV Management, L.L.C.,
                                 its General Partner


                                 By: /s/ Michael J. Stark
                                     -------------------------------------------
                                 Name:  Michael J. Stark
                                 Title: Managing Member



              SIGNATURE PAGE TO CONVERTIBLE NOTE PURCHASE AGREEMENT

                          SAGAMORE HILL HUB FUND, LTD.

                          By: Sagamore Hill Capital Management, L.P.,
                              Investment Manager


                              By: /s/ Steven H. Bloom
                                  ----------------------------------------------
                              Name: Steven H. Bloom
                              Title: President



              SIGNATURE PAGE TO CONVERTIBLE NOTE PURCHASE AGREEMENT

                         CAPITAL VENTURES INTERNATIONAL

                         By: Heights Capital Management, Inc., an authorized
                             signatory


                             By: /s/ Martin Kobinger
                                 -----------------------------------------------
                             Name: Martin Kobinger
                             Title:  Investment Manager




                        CRITERION CAPITAL PARTNERS, LTD.

                        By: Derivatives Portfolio Management, an authorized
                            signatory


                            By: /s/ Guy J. Castranova
                                ------------------------------------------------
                            Name: Guy J. Castranova
                            Title: Chief Operating Officer


                        CRITERION CAPITAL PARTNERS, INSTITUTIONAL

                        By: Criterion Capital Partners, LLC, an authorized
                            signatory


                            By: /s/ R. Daniel Beckham
                                -------------------------------------------
                            Name: R. Daniel Beckham
                            Title: Chief Operating Officer


                        CRITERION CAPITAL PARTNERS, L.P.

                        By: Criterion Capital Partners, LLC, an authorized
                            signatory


                            By: /s/ R. Daniel Beckham
                                ------------------------------------------------
                            Name:  R. Daniel Beckham
                            Title: Chief Operating Officer

EX-99.1

                                                                    EXHIBIT 99.1

FOR IMMEDIATE RELEASE
Tuesday, March 9, 2004

     Critical Path Raises Additional $18.5 Million in Private Financing From
                            New and Recent Investors

SAN FRANCISCO (MARCH 9, 2004) -- Critical Path, Inc. (Nasdaq: CPTH), a global
provider of digital communications software and services, today announced that
it has signed definitive agreements for the purchase of a total of $18.5 million
in convertible notes. Investment entities affiliated with Crosslink Capital,
Criterion Capital Management and Heights Capital Management have made new
investments in the Company and entities affiliated with Apex Capital, which had
invested in the Company in January 2004, have invested again.

        The investments consist of 10% senior secured notes, which will convert
into approximately 12.3 million shares of Series E preferred stock, at $1.50 per
share, upon shareholder approval. As previously announced by the Company, the
Series E preferred shares will rank senior in preference to all existing equity
shares of the Company. The preferred shares will accrue dividends at an annual
rate of 5 3/4% of the purchase price. The Company plans to submit the issuance
of these shares to shareholders for approval in the first half of 2004, in
accordance with the rules of the Nasdaq Stock Market.

        These investments are made on substantially the same terms as and are
separate from -- and in addition to -- the $15 million in capital raised by the
Company in January 2004 and the $10 million raised in November 2003, bringing
the total raised in the past four months to $43.5 million. The securities have
not been registered under the Securities Act of 1933, or the securities laws of
any other jurisdiction, and may not be offered or sold in the United States
absent registration or an applicable exemption from registration requirements.

ABOUT CRITICAL PATH, INC.

Critical Path, Inc. (Nasdaq: CPTH) is a global provider of digital
communications software and services, headquartered in San Francisco. More
information is available at www.criticalpath.net.


                                       1






Forward-Looking Statements:

This press release contains forward-looking statements by the Company and its
executives regarding the performance, security, scalability and interoperability
of our product and service offerings, the ability of our customers to achieve
cost savings in the provision of services, industry trends, market and customer
requirements, the ability of our products and services to meet the business
needs of our customers, the market for products and services like ours and the
performance of our senior management in achieving strategic goals. The words and
expressions "look forward to," "will," "expect," "plan," "believe," "seek,"
"strive for," "anticipate," hope," "estimate" and similar expressions are
intended to identify the Company's forward-looking statements. These
forward-looking statements involve a number of risks and uncertainties that
could cause actual results to differ materially from those anticipated. These
risks include, but are not limited to, our evolving business strategy and the
emerging and changing nature of the market for our products and services, our
ability to deliver on our sales objectives, the ability of our technology and
our competitors' technologies to address customer demands, changes in economic
and market conditions, unplanned system interruptions and capacity constraints,
software and service design defects. These and other risks and uncertainties are
described in more detail in the Company's filings with the U.S Securities and
Exchange Commission (www.sec.gov) made from time to time, including Critical
Path's Annual Report on Form 10-K for the fiscal year ended December 31, 2002,
and Quarterly Reports on Form 10-Q for the fiscal quarters ended March 31, June
30 and September 30, 2003, as may be amended from time to time, and all
subsequent filings with the Securities and Exchange Commission (www.sec.gov).
The company makes no commitment to revise or update any forward-looking
statements in order to reflect events or circumstances after the date any such
statement is made.

Note to Editors: Critical Path and the Critical Path logo are the trademarks of
Critical Path, Inc. All other trademarks are the property of their holders

                                      # # #

CONTACT INFORMATION

        FOR REPORTERS AND EDITORS:            FOR INVESTORS:
        Critical Path, Inc.                   Critical Path, Inc.
        Jim Fulton                            Investor Relations
        415.541.2524                          415.541.2619
        jim.fulton@criticalpath.net           ir@criticalpath.net
        www.criticalpath.net                  www.criticalpath.net


                                       2