Exhibit 10.18

METASTORM INC.

SERIES CC CONVERTIBLE PREFERRED

STOCK PURCHASE AGREEMENT

JULY 31, 2007

EXHIBITS

SCHEDULES

Disclosure Schedule:

METASTORM INC.

SERIES CC CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT

THIS SERIES CC CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT (this “Agreement”), dated as of July 31, 2007, by and among METASTORM INC., a Maryland corporation (the “Company”), and the several purchasers named in Schedule 1 attached hereto (each individually, a “Purchaser” and collectively the “Purchasers”).  All capitalized terms used herein and not otherwise defined shall have the meaning assigned to them in Appendix A attached hereto.

WITNESSETH:

WHEREAS, subject to the terms and conditions set forth herein, the Company desires to issue and sell to the Purchasers shares of the Company’s Series CC Convertible Preferred Stock, par value $0.01 per share (the “Series CC Preferred Stock”) for an aggregate purchase price of up to Thirty Million Dollars ($30,000,000).

NOW, THEREFORE, in consideration of the premises and the covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

1.             Purchase and Sale of Series CC Preferred Stock.

1.1      Sale and Issuance of Series CC Preferred Stock.

(a)           The Company has authorized the issuance and sale of up to 18,844,221 shares of the Series CC Preferred Stock at a purchase price of $1.592 per share (the “Per Share Purchase Price”) to the Purchasers.  The Company shall adopt and file with the State Department of Assessments and Taxation of the State of Maryland (the “SDAT”) on or before the Initial Closing (as defined below) the Sixth Articles of Amendment and Restatement of the Company which shall be in the form attached hereto as Exhibit A (the “Sixth Articles”).  The Series CC Preferred Stock and the Common Stock issuable upon conversion of the Series CC Preferred Stock (the “Conversion Stock”) are hereinafter referred to as the “Securities”.

(b)           Subject to the terms and conditions of this Agreement, each Purchaser, subject to and in reliance upon the representations, warranties and covenants of the Company, and the other terms and conditions of this Agreement, severally, but not jointly, agrees to purchase at the Initial Closing (as defined below), and the Company agrees to sell and issue to such Purchaser at the Initial Closing, such number of shares of the Company’s Series CC Preferred Stock as set forth opposite such Purchaser’s name on Schedule 1 attached hereto for the purchase price indicated with respect to such Purchaser on Schedule 1, with the aggregate purchase price for all of the shares of Series CC Preferred Stock to be sold hereunder (either at the Initial Closing or the Additional Closing (as defined below)) being up to Thirty Million Dollars ($30,000,000).

1.2      Closings; Delivery.

(a)           Initial Closing.    The initial closing of the purchase and sale of the Series CC Preferred Stock (the “Initial Closing”) pursuant to this Agreement shall take place at the offices of ▇▇▇▇▇▇▇ LLP, 1800 Mercantile Bank and Trust Building, ▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, at 10:00 a.m., on July 31, 2007, or at such other time and place as the Company and the Purchasers acquiring in the aggregate more than half of the shares of Series CC Preferred Stock being sold at the Initial Closing mutually agree upon, orally or in writing (the “Initial Closing Date”.  At the Initial Closing, the Company shall deliver to each Purchaser a certificate registered in the name of such Purchaser representing the number of shares of Series CC Preferred Stock set forth opposite such Purchaser’s name on Schedule 1 hereto against payment of the purchase price therefor, such payment to be made in the amount set forth opposite such Purchaser’s name on Schedule 1 hereto by cashiers or certified check or wire transfer of immediately available U.S. funds.  The Company and each Purchaser shall take such additional actions and execute and deliver such additional agreements and other instruments and documents as necessary or appropriate to effect the transactions contemplated by this Agreement in accordance with its terms.

(b)           Additional Closing.  On or before the thirtieth (30^th) day following the Initial Closing Date, the Company may sell and issue at an additional closing (the “Additional Closing” and together with the Initial Closing, a “Closing”) up to the balance of the authorized number of shares of Series CC Preferred Stock not purchased at the Initial Closing at a price per share of not less than the Per Share Purchase Price, to one or more of the Company’s existing stockholders, including existing stockholders that purchase shares of Series CC Preferred Stock at the Initial Closing.  Any such sale and issuance in the Additional Closing shall be on the same terms and conditions as those contained herein, and such persons or entities shall, upon execution and delivery of the relevant signature pages, become parties to, and be bound by, this Agreement.  The Additional Closing shall take place at the offices of ▇▇▇▇▇▇▇ LLP, 1800 Mercantile Bank and Trust Building, ▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, at such date and time as is mutually agreed upon by the Company and the additional purchasers acquiring in the aggregate more than half of the shares of Series CC Preferred Stock being sold at the Additional Closing (the “Additional Closing Date”, and together with the Initial Closing Date, a “Closing Date”). Each purchaser participating in such Additional Closing shall execute a counterpart signature to this Agreement and shall become a party to the Stockholders Agreement and the Registration Rights Agreement, at which time such purchaser shall be treated as a “Purchaser” for purposes of this Agreement and the stock purchased by such purchaser shall be deemed to be sold under this Agreement for purposes of this Agreement, the Stockholders Agreement and the Registration Rights Agreement; provided, that Purchasers that participate in the Initial Closing shall not be required to execute such agreements again.

(c)           Articles Supplementary.  As promptly as practicable after (i) the Post-Closing Audit (as defined in the Agreement and Plan of Merger attached hereto as Exhibit G (the “Proforma Merger Agreement”)) is complete, (ii) the amount (if any) of the revenue-based adjustment of the Merger Consideration (as defined in the Proforma Merger Agreement) has been determined pursuant to the Proforma Merger Agreement, and (iii) all disputes relating to the foregoing have been finally resolved, the Company shall use its reasonable best efforts to

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prepare, execute and file with SDAT one or more Articles Supplementary for the purposes of (x) reclassifying the Unused Series AA Shares (defined below) as shares of  Common Stock and decreasing the number of authorized shares of Series AA Preferred Stock by the number of Unused Series AA Shares; and (y) reclassifying all shares of Series BB Preferred Stock that the Company is authorized to issue as shares of Common Stock and decreasing the number of authorized shares of Series BB Preferred Stock to zero.  As used herein, “Unused Series AA Shares” means the number of shares of Series AA Preferred Stock authorized in the Sixth Articles, less:

(i)            37,056,696 shares of Series AA Preferred Stock issued and outstanding on the date hereof;

(ii)           9,667,605 shares of Series AA Preferred Stock to be issued in the Recapitalization to holders of shares of, and warrants to purchase shares of, Series BB Preferred Stock;

(iii)          the number of shares of Series AA Preferred Stock issuable as Merger Consideration, (taking into account the result of the Post-Closing Audit, the amount of the revenue-based adjustment of the Merger Consideration, and the final resolution of all disputes related thereto);

(iv)          42,331 shares of Series AA Preferred Stock reserved for issuance upon exercise of options granted under the Company’s 1999 Equity Incentive Plan;

(v)           1,443,780 shares of Series AA Preferred Stock in respect of restricted stock units awarded under the Company’s Amended and Restated 2004 Omnibus Stock Plan;

(vi)          788,264.28  shares of Series AA Preferred Stock in respect of dividends projected to accrue over a five (5) year period after the Initial Closing on restricted stock units awarded under the Company’s Amended and Restated 2004 Omnibus Stock Plan; and

(vii)         14,279 shares of Series AA Preferred Stock reserved for issuance upon exercise of outstanding warrants.

(d)           Restriction of Issuance of Series AA Shares.  The Company shall not, at any time on or before the date on which the Articles Supplementary contemplated by Section 1.2(c) are filed, issue any shares of Series AA Preferred Stock for any purpose other than the purposes described in the definition of “Unused Series AA Shares.”

1.3      Use of Proceeds.  The Company will use the proceeds from the sale of the Series CC Preferred Stock to fund the closing of the Proforma Acquisition, with any excess proceeds to be used for general corporate purposes.

2.             Representations, Warranties and Covenants of the Company.  The Company hereby represents, warrants and covenants to each Purchaser as of the date hereof and as of the applicable Closing Date (except to the extent expressly made as of an earlier date, in which case

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as of such date), except as set forth on the schedules of exceptions attached hereto and labeled as the “Disclosure Schedule,” which exceptions shall be deemed to be part of the representations and warranties made hereunder (the “Disclosure Schedule”), as follows:

2.1      Organization, Good Standing and Qualification.  The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Maryland and has full corporate power and authority to carry on its business as now being conducted.  The Company is duly qualified to transact business and is in good standing in each jurisdiction in which the failure to so qualify or become licensed would reasonably be expected to have a Company Material Adverse Effect.  Section 2.1 of the Disclosure Schedule sets forth a true and complete list of all foreign jurisdictions in which the Company is so qualified or licensed and in good standing.

2.2      Capitalization.

(a)           The authorized and outstanding capital stock of the Company consists, or will consist immediately prior to the Initial Closing (giving effect to the Recapitalization but prior to the closing of the Proforma Acquisition) of:

(i)            71,012,991 shares of Series AA Preferred Stock, of which 48,172,486 will be issued and outstanding as of immediately prior to the Initial Closing;

(ii)           6,800,000 shares of Series BB Preferred Stock, none of which will be issued and outstanding as of immediately prior to the Initial Closing

(iii)          18,844,221 shares of Series CC Preferred Stock, none of which will be issued and outstanding as of immediately prior to the Initial Closing; and

(iv)          120,000,000 shares of Common Stock, of which 28,125 will be issued and outstanding as of immediately prior to the Initial Closing.

(b)           The Company has reserved 42,331 shares of Series AA Preferred Stock for issuance to directors, key employees and consultants to the Company pursuant to its 1999 Equity Incentive Plan, which has been duly adopted by the Company’s board of directors and approved by the Company’s stockholders.  The Company’s board of directors and stockholders have approved the Amended and Restated 2004 Omnibus Stock Plan, a copy of which is attached hereto as Exhibit B,  which allows the Company to issue stock options to purchase up to 12,770,232 shares of Common Stock for issuance to directors, key employees and consultants and 1,443,779.71 restricted stock units for shares of Series AA Preferred Stock for issuance to key employees.

(c)           Except as set forth on Section 2.2 of the Disclosure Schedule, (i) no subscription, warrant, option, convertible security or other right (contingent or otherwise) to purchase or acquire any shares of capital stock of the Company or any of its Subsidiaries (as defined below) is authorized or outstanding, (ii) neither the Company nor any of its Subsidiaries has any obligation (contingent or otherwise) to (A) issue any subscription, warrant, option, convertible security, participation right or other such right or (B) issue or distribute to holders of

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any shares of its capital stock any evidences of indebtedness or assets of the Company or any of its Subsidiaries, and (iii) neither the Company nor any of its Subsidiaries has any obligation (contingent or otherwise) to purchase, redeem or otherwise acquire any shares of its capital stock or any interest therein or to pay any dividend or make any other distribution in respect thereof.  Section 2.2 of the Disclosure Schedule shows the equity capitalization of the Company on a fully-diluted basis immediately prior to, and after giving effect to, the transactions contemplated by this Agreement (including the Recapitalization and the Proforma Acquisition (assuming that stockholders of Proforma elect to receive the maximum number of shares of Series AA Preferred Stock issuable pursuant to the Proforma Acquisition)). Section 2.2 of the Disclosure Schedule, as revised in accordance with Section 4.20 hereof, will, when delivered by the Company to the Purchasers, show the equity capitalization of the Company on a fully diluted basis immediately prior to, and after giving effect to, the transactions contemplated by this Agreement (including the Recapitalization and the actual elections made by Proforma stockholders to receive shares of Series AA Preferred Stock in the Proforma Acquisition).

(d)           Attached hereto as Exhibit C is a true and complete list of the Company’s stockholders, showing the number of shares of capital stock of the Company held of record by each stockholder as of the date of this Agreement.  Except as provided in Section 2.2 of the Disclosure Schedule, there are no agreements, written or oral, between the Company and any holder of its capital stock, or among any holders of its capital stock, relating to the issuance, acquisition (including without limitation rights of first refusal or preemptive rights), disposition, registration under the Securities Act of 1933, as amended (the “Securities Act”), or voting of the capital stock of the Company.

(e)           The issuance of the Securities and the consummation of the transactions contemplated under this Agreement (including the Recapitalization and the Proforma Acquisition) will not result in any adjustment to the conversion rate into Common Stock of any series of the Company’s authorized preferred stock.

2.3      Subsidiaries.  Except as set forth on Section 2.3 of the Disclosure Schedule (each entity listed thereon, a “Subsidiary”), the Company does not have any Subsidiaries or own or control, directly or indirectly, any interest in any other corporation, partnership, limited liability company, trust, association, or other business entity.  Except as set forth on Section 2.3 of the Disclosure Schedule, the Company’s Subsidiaries are duly organized, validly existing and in good standing under the laws of their respective jurisdictions and have all requisite corporate power and authority for the ownership and operations of their properties and to carry on their businesses as now conducted and as proposed to be conducted.  The Company’s Subsidiaries are duly qualified to transact business and are in good standing in each jurisdiction in which the failure so to qualify would reasonably be expected to have a Company Material Adverse Effect.  Each of the Subsidiaries listed on Section 2.3 of the Disclosure Schedule is, directly or indirectly, wholly-owned by the Company.

2.4      Authority; Authorization. The Company has all requisite corporate power and authority to execute and deliver the Investment Agreements, to issue and sell the Securities, to carry out the provisions of the Investment Agreements and, when filed with the SDAT, the Sixth Articles, and to carry on its business as currently conducted.  All corporate action on the

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part of the Company, its directors and stockholders necessary for the authorization, execution and delivery of the Investment Agreements, the performance of all obligations of the Company hereunder and thereunder, the consummation of the Recapitalization and the Proforma Acquisition, the authorization, issuance and delivery of the Series CC Preferred Stock, and the authorization and reservation of the Conversion Stock has been taken or will be taken prior to the Initial Closing, and the Investment Agreements, when executed and delivered by the Company, shall (assuming due execution by the other parties thereto) constitute valid and legally binding obligations of the Company, enforceable against the Company in accordance with their terms (i) subject to the effect of bankruptcy, insolvency, moratorium, fraudulent conveyance or other similar laws affecting the enforcement of creditors’ rights generally, (ii) except as the availability of equitable remedies may be limited by general principles of equity, or (iii) except to the extent the indemnification provisions contained in the Registration Rights Agreement may be limited by applicable federal or state securities laws.

2.5      Valid Issuance of Securities.  All authorized and outstanding shares of capital stock of the Company (i) have been duly authorized and validly issued in compliance with applicable laws, including, without limitation, all applicable state and federal securities laws concerning the issuance of securities, and are fully paid and nonassessable and (ii) have been issued in compliance with articles of incorporation, bylaws and other organizational documents of the Company and with all material agreements to which the Company is a party.  The Series CC Preferred Stock that is being issued to the Purchasers hereunder, when issued, sold and delivered in accordance with the terms hereof for the consideration expressed herein, will be duly and validly issued, fully paid and nonassessable and free of restrictions on transfer other than restrictions on transfer under this Agreement, the Stockholders Agreement, the Registration Rights Agreement and applicable federal and state securities laws and will be issued in compliance with all applicable federal and state securities laws.  The Conversion Stock has been duly and validly reserved for issuance, and upon issuance in accordance with the terms of the Sixth Articles, shall be duly and validly issued, fully paid and nonassessable and free of restrictions on transfer other than restrictions on transfer under this Agreement, the Stockholders Agreement and applicable federal and state securities laws and will be issued in compliance with all applicable federal and state securities laws.  Neither the issuance, sale or delivery of the Series CC Preferred Stock nor the issuance or delivery of the Conversion Stock is subject to any preemptive right of the stockholders of the Company with which the Company has not complied or which has not been properly waived or to any right of first refusal or other right in favor of any individual or entity.

2.6      Governmental Consents.  Except as set forth on Section 2.6 of the Disclosure Schedule, no consent, approval, order or authorization of, or registration, qualification, designation, declaration or filing with, any federal, foreign, state or local governmental authority on the part of the Company or any of its Subsidiaries is required in connection with the consummation of the transactions contemplated by the Investment Agreements, or the consummation of the Recapitalization or the Proforma Acquisition, except for filings pursuant to applicable state securities laws and Regulation D of the Securities Act, which will be made by the Company in compliance with such laws.

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2.7      Litigation.  Except as set forth on Section 2.7 of the Disclosure Schedule, there is no action, suit, proceeding or investigation pending or, to the Company’s knowledge, currently threatened against the Company or any of its Subsidiaries nor, to the Company’s knowledge, is there any basis for the foregoing.  Except as set forth on Section 2.7 of the Disclosure Schedule, neither the Company nor any of its Subsidiaries is a party or subject to the provisions of any order, writ, injunction, judgment or decree of any court or government agency or instrumentality.  There is no action, suit, proceeding or investigation by the Company or any of its Subsidiaries currently pending or which the Company or any of its Subsidiaries intends to initiate.  To the Company’s knowledge, no executive officer of the Company (including any of such person’s properties or assets) is pursuing, is a party or is otherwise subject to any pending action, suit, proceeding or investigation and there is no threat thereof which, individually or in the aggregate, would reasonably be expected to prevent such executive officer from devoting substantially all of such person’s business time to the affairs of the Company.

2.8      Intellectual Property.

(a)           Section 2.8(a) of the Disclosure Schedule sets forth a complete and correct list of all Patents, registered Trademarks, applications to register Trademarks, material unregistered Trademarks, registered Copyrights, applications to register Copyrights, and material unregistered Copyrights included in the Owned Intellectual Property, identifying for each, as applicable: (A) the serial number, registration number or application number; and (B) the status of any issuance, renewal, maintenance or other payments required to be made within twelve (12) months after the date hereof.  The Company owns no registered Copyrights nor any applications for registration of any Copyrights.

(b)           Section 2.8(b) of the Disclosure Schedule sets forth a complete and correct list of all Inbound License Agreements other than Mass-Market Licenses, identifying for each: (A) the licensor(s) thereunder; and (B) the Intellectual Property licensed thereunder.

(c)           Section 2.8(c) of the Disclosure Schedule sets forth a complete and correct list of all Outbound License Agreements, identifying for each: (A) the licensee(s) thereunder; (B) the date thereof; and (C) the Owned Intellectual Property licensed thereunder.

(d)           No Intra-Company License Agreements exist.

(e)           Section 2.8(e) of the Disclosure Schedule sets forth a complete and correct list of all Owned Software, identifying for each all Third Party Software (other than software subject to Mass-Market Licenses) that is (A) required to be used in conjunction with such Owned Software in order for such Owned Software to function in accordance with its design specifications; or (B) otherwise used by the Company in conjunction with such Owned Software in the operation of the Company’s business as presently conducted and as conducted since October 5, 2005.

(f)            Section 2.8(f) of the Disclosure Schedule sets forth a complete and correct list of all Owned Internet Identifiers.

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(g)           Except as set forth in Section 2.8(g) of the Disclosure Schedule, the Company owns all right, title and interest in and to the Owned Intellectual Property, free and clear of all liens.  The Owned Intellectual Property has been duly maintained, is valid and subsisting, is in full force and effect and has not been cancelled, expired or abandoned.

(h)           To the Company’s knowledge, the Licensed Intellectual Property has been duly maintained, is valid and subsisting, is in full force and effect and has not been cancelled, expired or abandoned.

(i)            Each Inbound License Agreement is a valid and binding agreement of the Company enforceable in accordance with its terms (except as the same may be limited by bankruptcy, insolvency, reorganization, moratorium or similar Laws now or hereafter in effect relating to creditors’ rights generally and subject to general principles of equity), and, to the Company’s knowledge, there exists no event or condition (including the consummation of the transactions contemplated by this Agreement) that will result in a violation or breach thereof, or constitute any default thereunder.

(j)            All Owned Software and other works protectable by Copyright that are included in the Owned Intellectual Property were created, developed and authored by either (A) employees of the Company within the scope of their employment; or (B) independent contractors who have assigned all of their rights to the Company pursuant to a written agreement.  No Owned Software was jointly developed with any third Person who has not assigned all of his, her or its rights to the Company pursuant to a written agreement.

(k)           To the Company’s knowledge, the operation of the Company’s business as presently conducted, and as conducted for the three (3) years prior to the date of this Agreement, does not infringe any Intellectual Property rights of any third-party.  For the avoidance of doubt, the use by the Company of any Licensed Intellectual Property pursuant to a valid Inbound License Agreement shall not be construed as an infringement of any Intellectual Property rights of the licensor for purposes of this Section 2.8(k).

(l)            There is no pending or, to the Company’s knowledge, threatened claim alleging that the business of the Company, as presently conducted, and as conducted since January 1, 2003, infringes, violates, misappropriates or dilutes, or interferes with, any Intellectual Property rights of any third-party and, to the Company’s knowledge, there are no facts or circumstances that might reasonably provide a basis for any such claim.

(m)          There is no pending or, to the Company’s knowledge, threatened claim challenging the validity or enforceability of any Inbound License Agreement or Outbound License Agreement and, to the Company’s knowledge, there are no facts or circumstances that might reasonably provide a basis for any such claim.

(n)           Except as set forth in Section 2.8(n) of the Disclosure Schedule, the Company has not brought or threatened a claim against any Person (A) alleging infringement, violation, misappropriation, or dilution of, or interference with, any Owned Intellectual Property or any License Agreement; (B) challenging any Person’s ownership or use of, or the validity or enforceability of, any Intellectual Property; or (C) challenging the validity

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or enforceability of any License Agreement and, to the Company’s knowledge, there are no facts or circumstances that might reasonably provide a basis for any claim described in the foregoing clauses (A)-(C) and reasonably relating to the business of the Company.

(o)           All registered Trademarks, applications to register Trademarks and material unregistered Trademarks included in the Owned Intellectual Property of the Company are in use in the form appearing in, and in connection with the goods and services listed in, their respective registration certificates (with respect to registered Trademarks) or applications (with respect to unregistered Trademarks for which an application has been filed).

(p)           The Company takes commercially reasonable measures to protect the confidentiality of (A) the Source Code and (B) Trade Secrets included in the Owned Intellectual Property and the Licensed Intellectual Property, including requiring all employees and third Persons having access thereto to execute written non-disclosure agreements.  No Trade Secrets included in the Owned Intellectual Property or the Licensed Intellectual Property have been disclosed or authorized to be disclosed to any third Person other than pursuant to a written non-disclosure agreement; and no third Person that is a party to any non-disclosure agreement with the Company is in breach or default thereof.  Except as set forth in Section 2.8(p) of the Disclosure Schedule, no Person other than the Company is in possession of any Source Code included in the Owned Intellectual Property.  The Company is not bound by any agreement that will, or would reasonably be expected to, result in or require the disclosure or release of any Source Code included in the Owned Intellectual Property to a third Person by the Company or any escrow agent(s).

(q)           Section 2.8(q) of the Disclosure Schedule lists all Software that is distributed as “free software,” “open source software” or under a similar licensing or distribution model (“Open Source Materials”) used by or for Company in any way, and states for each item of Open Source Material listed thereon (x) the name of the license under which the Open Source Material is licensed and (y) a brief description of the purpose or function of the Open Source Material.  The Company has not (i) incorporated Open Source Materials into, or combined Open Source Materials with, the Company’s software or other intellectual property, except as otherwise specifically described in Section 2.8(q) of the Disclosure Schedule; (ii) distributed Open Source Materials in conjunction with any of the Company’s software or other intellectual property, except as expressly provided in Section 2.8(q) of the Disclosure Schedule; or (iii) used Open Source Materials in a manner that has given rise to any legally enforceable obligation on the Company to (i) disclose or distribute the source code of any Owned Software, (ii) grant any license for the purpose of making derivative works of any Owned Software, or (iii) redistribute at no charge any of the Owned Software.

(r)            Except as set forth in Section 2.8(r) of the Disclosure Schedule, the Company does not have any material obligation to provide any technical support or Software maintenance services to any third Person.

(s)           No current or former stockholder, partner, member, director, officer or employee of the Company has or will have, after giving effect to the transactions contemplated by this Agreement, any legal or equitable right, title or interest in or to, or any right to use, directly or indirectly, in whole or in part, any of the Owned Intellectual Property or

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Licensed Intellectual Property; provided, that for purposes of this Section 2.8(s), “Owned Intellectual Property” shall not include, in the case of each such natural Person, moral rights and rights of publicity and privacy relating to the use of the name, likeness, voice, signature and biographical information of such natural Person.

(t)            Neither this Agreement, nor the consummation of the transactions contemplated by this Agreement, will result in any third Person being granted rights of access to, use of, or the placement in or release from escrow of, any Owned Intellectual Property or, to the Company’s knowledge, any Licensed Intellectual Property.

(u)           To the Company’s knowledge, the Owned Intellectual Property and the Licensed Intellectual Property include all Intellectual Property necessary for the continued conduct of the business of the Company after the Initial Closing in substantially the same manner as currently conducted.

(v)           To the Company’s knowledge, the business of the Company is being conducted in compliance in all material respects with all Laws relating to Intellectual Property, and the Company has not received written notification that has not lapsed, been withdrawn or abandoned by any Governmental Entity asserting a violation by the business of the Company of any such Law, judgment, order, settlement or decree, relating to Intellectual Property.

2.9      Compliance with Other Instruments.

(a)           Neither the Company nor any of its Subsidiaries is in violation or default (i) of any provisions of their respective articles of incorporation, bylaws or other organizational documents, (ii) of any material instrument, judgment, order, writ, decree or contract to which it is a party or by which it is bound, which violations or defaults are material, or (iii) of any provision of federal or state statute, rule or regulation applicable to the Company or any of its Subsidiaries.  The execution, delivery and performance of the Investment Agreements and the consummation of the transactions contemplated hereby or thereby (including the Recapitalization and the Proforma Acquisition) will not, with or without the passage of time and/or the giving of notice, result in any such violation or be in conflict with or constitute either a default under any such provision, instrument, judgment, order, writ, decree or contract or an event which results in the creation of any lien, charge or encumbrance upon any assets of the Company or its Subsidiaries, except where any such violation, conflict, default or creation of any lien, charge or encumbrance would not have a Company Material Adverse Effect.

(b)           Both the Company and its Subsidiaries have used commercially reasonable efforts to avoid every condition, and not to perform any act, the occurrence of which would result in the Company’s or the Subsidiaries’ loss of any material Intellectual Property Right.

2.10    Agreements; Action.

(a)           Section 2.10 of the Disclosure Schedule sets forth the following agreements or commitments (whether written or oral), other than the Investment Agreements, to

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which either the Company or any of its Subsidiaries is a party or by which any of them is bound, and which is, in each case, currently in effect: (i) any agreement which requires future expenditures by the Company or any of its Subsidiaries in excess of $50,000 per annum, (ii) any employment and consulting agreements, employee benefit, bonus, pension, profit-sharing, stock option, stock purchase and similar plans and arrangements, (iii) any agreement pursuant to which the Company is granted any, or has granted to any other Person any rights with respect to, the Intellectual Property Rights (excluding agreements in the ordinary course of business and trade secrets and Intellectual Property Rights to software generally available for commercial purchase or license), (iv) any agreements involving the grant of rights to manufacture, produce, assemble, license, market or sell the Company’s or its Subsidiaries’ products to any other person or that restrict the exclusive right of the Company or any of its Subsidiaries to develop, manufacture, assemble, distribute, market or sell its products, (v) any agreement between the Company and any current or former stockholder, officer or director of either the Company or any of its Subsidiaries, or any “affiliate” or “associate” of such persons (as such terms are defined in the rules and regulations promulgated under the Securities Act), including without limitation any agreement or other arrangement providing for the furnishing of services by, rental of real or personal property from, or otherwise requiring payments to, any such Person, (vi) any agreement under which either the Company or any of its Subsidiaries is restricted from carrying on any business anywhere in the world, (vii) any agreement relating to indebtedness for borrowed money, (viii) any agreement for the disposition of a material portion of either the Company’s or any of its Subsidiaries’ assets (other than for the sale of products to customers in the ordinary course of business), or (ix) other than any agreement relating to the Proforma Acquisition, any agreement for the acquisition of the business or securities or other ownership interests of another party, which acquisition has not been consummated (collectively, the “Material Contracts”).  The Company has made available to the Purchasers copies of the Material Contracts (or an accurate summary of any oral agreement).

(b)           All of the Material Contracts are enforceable against the Company and the other parties thereto in accordance with their terms, except as enforceability may be limited by the effect of bankruptcy, insolvency, moratorium, fraudulent conveyance or other similar laws affecting the enforcement of creditors’ rights generally and except as the availability of equitable remedies may be limited by general principles of equity.  Neither the Company nor any of its Subsidiaries is now in default in any material respect under, nor are there any liabilities arising from any material breach or material default by the Company or any Subsidiary prior to the date of this Agreement of, any provision of any Material Contract.

2.11    Absence of Liabilities.  Neither the Company nor any of its Subsidiaries has any material liability (whether absolute or contingent), except for (i) liabilities shown on the Financial Statements (defined below), (ii) liabilities which have arisen since May 31, 2007 in the ordinary course of business which aggregate less than $100,000, and (iii) contractual liabilities which are not required by GAAP to be reflected on a balance sheet.

2.12    Disclosure.  No representation or warranty of the Company contained in this Agreement and the schedules and exhibits attached hereto, any certificate furnished or to be furnished to the Purchasers at a Closing (when read together) contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements contained herein or therein not misleading in light of the circumstances under which they were made.

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2.13    No Conflict of Interest.  Neither the Company nor any of its Subsidiaries is indebted, directly or indirectly, to any of its officers or directors or to their respective spouses or children, in any amount whatsoever other than in connection with expenses or advances of expenses incurred in the ordinary course of business or relocation expenses of employees.  None of the Company or its Subsidiaries’ officers, or any members of their immediate families, are, directly or indirectly, indebted to the Company or any of its Subsidiaries (other than in connection with purchases of the Company or any of its Subsidiaries’ stock) or, to the knowledge of the Company, have any direct or indirect ownership interest in any firm or corporation with which the Company or any of its Subsidiaries is affiliated or with which the Company or any of its Subsidiaries has a material business relationship, or any firm or corporation which competes with the Company or any of its Subsidiaries, except for ownership by officers of the Company or any of its Subsidiaries of stock in (but not exceeding two percent of the outstanding capital stock of) any publicly traded companies that may compete with the Company or any of its Subsidiaries.  To the knowledge of the Company, none of the Company or any of its Subsidiaries’ officers or directors or any members of their immediate families are, directly or indirectly, interested in any Material Contract with the Company or any of its Subsidiaries.  Other than in the ordinary course of business and consistent with past practices and except as set forth on Section 2.13 of the Disclosure Schedule, neither the Company nor any of its Subsidiaries is a guarantor or indemnitor of any indebtedness of any other person, corporation, partnership or other entity.

2.14    Investment Company Act.  The Company is not, and after the receipt of the proceeds of the financing contemplated by this Agreement, will not be, an “investment company” as defined in the Investment Company Act of 1940, as amended.

2.15    Private Placement.  Subject to the truth and accuracy of the Purchasers’ representations set forth in this Agreement, the offer, sale and issuance of the Series CC Preferred Stock as contemplated by this Agreement is exempt (and the issuance of the Conversion Stock will be exempt) from the registration requirements of the Securities Act, and neither the Company nor any authorized agent acting on its behalf will take any action hereafter that would cause the loss of such exemption.

2.16    Title to Property and Assets.  Each of the Company and its Subsidiaries owns its property and assets free and clear of all mortgages, liens, loans and encumbrances, except such encumbrances and liens which arise in the ordinary course of business and do not materially impair the Company’s ownership or use of such property or assets and except for Permitted Liens.  With respect to the property and assets leased by the Company or its Subsidiaries, the Company and each of its Subsidiaries is in compliance with such leases and holds a valid leasehold interest free of any liens, claims or encumbrances, except for Permitted Liens.

2.17    Employee Benefit Plans.

(a)           Section 2.17(a) of the Disclosure Schedule contains a list of each Company Benefit Plan currently sponsored, maintained or contributed to by the Company.

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(b)           Except as set forth in Section 2.17(b) of the Disclosure Schedule, (A) with respect to each Company Benefit Plan identified in Section 2.17(a) of the Disclosure Schedule, the Company has heretofore made available to the Purchasers true and complete copies of the plan documents, and any amendments thereto, and (B) each Company Benefit Plan has been established, qualified, operated and administered in all material respects in accordance with its terms and in compliance with ERISA, the Code and all Applicable Benefit Laws including without limitation compliance with (1) the continuation coverage requirements of ERISA Sections 601 to 608, (2) Code Section 401(a) in the case of a Company Benefit Plan intended to be qualified thereunder, and (3) all reporting and disclosure requirements.

(c)           No Company Benefit Plan is a “multiemployer plan” as defined in ERISA Section 4001(a)(3) or otherwise subject to Title IV of ERISA.  No Company Benefit Plan is subject to Code Section 412 or ERISA Section 302.

2.18    Tax Returns and Audits.  Except as set forth in Section 2.18 of the Disclosure Schedule:

(a)           The Company has (i) duly and timely filed (or there has been filed on its behalf) with the appropriate Governmental Entities all material Tax Returns required to be filed by the Company; and (ii) timely paid (or provided adequate reserves in accordance with GAAP, consistently applied, on the Company’s most recent books), or there has been paid on its behalf, all material Taxes due from the Company (whether or not set forth on any Tax Return).  All such Tax Returns were complete and accurate in all material respects.

(b)           The Company has complied in all material respects with all applicable tax laws relating to the payment and withholding of material Taxes (including, without limitation, withholding of Taxes pursuant to Sections 1441, 1442, 3402 and 4999 of the Code and employment withholding Taxes) and have, within the time and manner prescribed by law, withheld and paid over to the proper Governmental Entity all amounts required to be withheld and paid over under all applicable tax laws.

(c)           There are no Liens for Taxes upon the assets or properties of the Company except for Permitted Liens.

(d)           The Company has not requested any extension of time within which to file any material Tax Return in respect of any taxable year which has not since been filed, and no outstanding waivers or comparable consents regarding the application of the statute of limitations with respect to any material Taxes or material Tax Returns has been given by or on behalf of the Company.

(e)           All Tax deficiencies which have been claimed, proposed or asserted against the Company by any taxing authority have been fully paid, and there are no other federal, state, local or foreign audits, review, or other actions by any taxing authority in progress relating to the Company or its business, nor has the Company received any notice from any taxing authority that it intends to conduct such an audit or investigation.  The Company is not subject to any private letter ruling of the Internal Revenue Service or any comparable ruling of any other taxing authority.

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(f)            The Company is not required to include in income any adjustment pursuant to Section 481(a) of the Code, by reason of any voluntary or involuntary change in accounting method (nor has any Governmental Entity proposed any such adjustment or change of accounting method).

(g)           No power of attorney has been granted by or with respect to the Company for any matter relating to Taxes.

(h)           The Company is not a party to any agreement, contract or arrangement that would result, separately or in the aggregate, in the payment of any “excess parachute payments” within the meaning of Section 280G of the Code; provided, however, that the Company shall have no liability for breach of this representation to the extent liability arises from actions taken by the Purchasers or any of their Affiliates on or after the date of Initial Closing.

(i)            The Company is not a party to, bound by, or does not have any obligation under, any Tax sharing agreement, Tax indemnification agreement or similar contract or arrangement.

(j)            The Company has no liability for Taxes of another person under Section 1.1502-6 of the treasury regulations promulgated under the Code (or any similar provision under state, local or foreign law), by contract or otherwise.

(k)           The Company is not or has not been a party to any joint venture, partnership, or other arrangement or contract which could be treated as a partnership for U.S. federal income tax purposes.

2.19    Labor Agreements and Actions.  Neither the Company nor its Subsidiaries is bound by or subject to (and none of its assets or properties is bound by or subject to) any written or oral, express or implied, contract, commitment or arrangement with any labor union, and no labor union has requested or, to the knowledge of the Company, has sought to represent any of the employees, representatives or agents of the Company or any of its Subsidiaries.  There is no strike or other labor dispute involving the Company and any of its Subsidiaries pending, or to the knowledge of the Company, threatened, nor is the Company aware of any labor organization activity involving its employees or those of any Subsidiary.  The Company and its Subsidiaries have complied in all material respects with all applicable federal and state equal employment opportunity laws and with all other laws related to employment or the health and safety of its employees.

2.20    Employees; Employment and Consulting Agreements.

(a)           To the Company’s knowledge, no officer, director, member, stockholder, agent, employee, consultant or contractor of the Company is bound by any contract that purports to limit the ability of such officer, director, member, stockholder, agent, employee, consultant or contractor (A) to engage in or continue to perform any conduct, activity, duties or

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practice relating to the business of the Company, or (B) to assign to the Company or to any other Person any rights to any invention, improvement or discovery.  To the Company’s knowledge, no former or current employee is a party to, or is otherwise bound by, any agreement that in any way adversely affected, affects or will affect the ability of the Company to conduct the business of the Company.

(b)           The Company and its Subsidiaries have complied in all material respects with all applicable laws relating to wages, hours, equal opportunity, collective bargaining, workers’ compensation insurance and the payment of social security and other Taxes.

(c)           Except as set forth on Section 2.18(c) of the Disclosure Schedule, neither the Company nor any of its Subsidiaries has a policy, practice, plan, or program of paying severance pay or any form of severance compensation in connection with the termination of employment services.

(d)           To the Company’s knowledge, none of the officers or directors of the Company or any of its Subsidiaries during the previous five (5) years has been (i) subject to voluntary or involuntary petition under the federal bankruptcy laws or any state insolvency law or the appointment of a receiver, fiscal agent or similar officer by a court for his or her business or property; (ii) convicted in a criminal proceeding or named as a subject of a pending criminal proceeding (excluding traffic violations and other minor offenses); (iii) subject to any order, judgment, or decree (not subsequently reversed, suspended, or vacated) of any court of competent jurisdiction permanently or temporarily enjoining him or her from engaging, or otherwise imposing limits or conditions on his or her engagement in any securities, investment advisory, banking, insurance, or other type of business or acting as an officer or director of a public company; or (iv) found by a court of competent jurisdiction in a civil action or by the Securities and Exchange Commission or a state insurance commission to have violated any federal or state securities, insurance, or unfair trade practices law, which such judgment or finding has not been subsequently reversed, suspended, or vacated

2.21    Permits.  The Company and each of its Subsidiaries has all material franchises, permits, licenses and any similar authority necessary for the conduct of its business as now being conducted by it.  Neither the Company nor any of its Subsidiaries is in default in any material respect under any of such franchises, permits, licenses or other similar authority.

2.22    Corporate Documents.  The Sixth Articles and the Bylaws of the Company are in the forms provided to the Purchasers.  A true and complete copy of the minute books of the Company has been made available to the Purchaser and the minute books contain minutes of all meetings of directors and stockholders of the Company and all actions by written consent without a meeting by the directors and stockholders of the Company since May 31, 2002, and reflect all actions by the directors (and any committee of directors) and stockholders of the Company with respect to all transactions referred to in such minutes accurately in all material respects; provided, however, that minutes of meetings of, and actions of, the directors of the Company dated after February 7, 2007 that are included in such minute books (if any) have not been approved by the Company’s board of directors and, accordingly, the foregoing representation and warranty is made subject to any changes that the Company’s board of

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directors makes to such minutes and actions at or before the time they are approved.  As of the date hereof, the stock ledger of the Company is complete and reflects all issuances, transfers, repurchases and cancellations of shares of capital stock of the Company.

2.23    Real Property Holding Corporation.  Neither the Company nor any of its Subsidiaries is a United States real property holding corporation within the meaning of Code Section 897(c)(2) and Section 1.897-2(c) of the Treasury Regulations promulgated thereunder.

2.24    Financial Statements.

(a)           The Company has furnished to the Purchasers a complete and accurate copy of its (i) consolidated audited financial statements as of, and for the fiscal year of the Company ended, December 31, 2006, and (ii) consolidated unaudited financial statements (including balance sheet and income statement) as of, and for the 5-month period ended, May 31, 2007 (such financial statements identified in clauses (i) and (ii), the “Financial Statements”).  The Financial Statements are in accordance with the books and records of the Company, have been prepared in accordance with GAAP consistently applied (except, with respect to the financial statements identified in clause (ii) of the preceding sentence, for the omission of footnotes and period end adjustments), are complete and correct in all material respects and fairly present the consolidated financial condition and operating results of the Company and its Subsidiaries as of the dates thereof and for the periods then ended.

2.25          Changes.  Except as set forth in Section 2.25 of the Disclosure Schedule, since May 31, 2007, there has not been:

(a)           any change in the assets, liabilities, financial condition or operating results of the Company or any of its Subsidiaries from that reflected in the Financial Statements, except changes that have not had a Company Material Adverse Effect

(b)           any material change in any method of accounting or accounting practice by the Company or any of its Subsidiaries;

(c)           any damage, destruction or loss, whether or not covered by insurance, having a Company Material Adverse Effect;

(d)           any waiver or compromise by the Company or any of its Subsidiaries of a valuable right or of a material debt owed to it;

(e)           any satisfaction or discharge of any lien, claim or encumbrance or payment of any obligation by the Company or any of its Subsidiaries, except in the ordinary course of business and that has not had a Company Material Adverse Effect;

(f)            any material change to a Material Contract by which the Company, any of its Subsidiaries or any of their assets is bound or subject;

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(g)           any material change in any compensation arrangement or agreement with any employee, officer, director or stockholder of the Company or any of its Subsidiaries;

(h)           any material sale, assignment or transfer of any Intellectual Property Rights or other intangible assets of the Company or any of its Subsidiaries other than in the ordinary course of business;

(i)            any sale, exchange or other disposition of any material assets or rights (to the extent not covered by paragraph (h) above), other than sales to customers in the ordinary course of business;

(j)            any resignation or termination of employment of any officer or key employee of the Company or any of its Subsidiaries; and the Company, to its knowledge, does not know of any impending resignation or termination of employment of any such officer or key employee;

(k)           any loss of, or order cancellation by, any major customer of the Company or any of its Subsidiaries;

(l)            any incurrence of indebtedness for money borrowed or incurrence of any other liabilities other than in the ordinary course of business and in amounts and on terms consistent with past practices;

(m)          any mortgage, pledge, transfer of a security interest in, or lien, created by the Company or any of its Subsidiaries, with respect to any of its properties or assets, except Permitted Liens;

(n)           any loans or guarantees made by the Company or any of its Subsidiaries to or for the benefit of its employees, officers or directors, or any members of their immediate families, other than travel advances and other advances made in the ordinary course of its business;

(o)           any declaration, setting aside or payment or other distribution in respect to any of the Company’s capital stock, or any direct or indirect redemption, purchase, or other acquisition of any of such stock by the Company;

(p)           any adoption of, amendment to or increase in payments to or benefits under, any Company Benefit Plan (except as necessary to comply with Applicable Benefit Laws); or

(q)           any arrangement or commitment by the Company or any of its Subsidiaries to do anything described in this Section 2.25 (other than negotiating with Purchasers and their representatives regarding the terms contemplated by this Agreement).

2.26    Insurance.  The Company and its Subsidiaries maintain and/or are covered by valid policies of workers’ compensation insurance and of insurance with respect to their

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properties and business of the kinds and in the amounts not less than is customarily obtained by corporations engaged in the same or similar business, including, without limitation, insurance against loss, damage, fire, theft, public liability and other risks.

2.27    Compliance with Law.  The operations of the Company and its Subsidiaries and the conduct of their business as and where such business is presently conducted and or currently contemplated to be conducted, and the property of the Company and its Subsidiaries, and the use thereof, comply, in all material respects, with all applicable statutes, regulations, ordinances, orders and decrees.

2.28    Accounts and Notes Receivable.  Receivables shown on the most recent Financial Statement arose in the ordinary course of business and have been collected or, to the knowledge of the Company, are collectible in the book amounts thereof, less an amount not in excess of the allowance for doubtful accounts provided for in such balance sheet.  Allowances for doubtful accounts are adequate and have been prepared in accordance with GAAP consistently applied and in accordance with past practices of the Company.  No receivable (which, for purposes of this sentence will mean the aggregate of amounts due from any customer or vendor) greater than $100,000 is subject to any claim of offset, recoupment, set off or counterclaim and the Company has no knowledge of any facts or circumstances that could give rise to any such claim.

2.29    Restrictions on Business Activities.  There is no material order binding upon the Company or any of its Subsidiaries or any of their properties which has had or could reasonably be expected to have the effect of prohibiting or materially impairing any business practice of the Company or any of its Subsidiaries or the conduct of business by the Company or any of its Subsidiaries as currently conducted or as proposed to be conducted by the Company.  Without limiting the foregoing, the Company has not entered into any agreement under which the Company is restricted from selling, licensing or otherwise distributing any of its products to any class of customers, in any geographic area, during any period of time or in any segment of the market.

2.30    No Brokers.  The Company has no liability, directly or indirectly, to pay any fees, commissions or other amounts to any broker, finder or agent with respect to this Agreement or the transactions contemplated hereby.

2.31    Environmental and Safety Laws.  Neither the Company nor any of its Subsidiaries is in material violation of any applicable statute, law or regulation relating to the environment or occupational health and safety, and no material expenditures are required in order to comply with any such existing statute, law or regulation.

2.32    Antitakeover Statutes.  To the Company’s knowledge, except for laws relating to antitrust issues, there are no laws (either state or federal) which would in any way restrict, limit or impair any Purchaser from acquiring additional shares of any class of capital stock of the Company or limit its ability to vote or obtain full rights with respect to such stock.

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3.             Representations and Warranties of Purchasers.  Each Purchaser hereby, severally and not jointly represents and warrants to the Company, with respect to itself only, as follows:

3.1      Accredited Investor; Authorization.  Such Purchaser is an “accredited investor” within the meaning of Rule 501 promulgated under the Securities Act and has the corporate, limited liability company or partnership, as the case may be, power and authority to enter into and perform this Agreement and to purchase the Series CC Preferred Stock (and the Conversion Stock).  This Agreement has been duly authorized, executed and delivered by such Purchaser and (assuming due execution by the Company) constitutes the legal, valid and binding obligation of such Purchaser, enforceable in accordance with its terms, subject to the effect of bankruptcy, insolvency, moratorium, fraudulent conveyance or other similar laws affecting the enforcement of creditors’ rights generally and except as the availability of equitable remedies may be limited by general principles of equity.

3.2      No Conflict With Other Agreements.  The execution, delivery and performance of the Investment Agreements and the consummation of the transactions contemplated hereby or thereby will not, with or without the passage of time and/or the giving of notice, result in a violation or default of any provisions of such Purchaser’s charter, bylaws, partnership agreement or other organizational document or of any instrument, judgment, order, writ, decree or contract to which it is a party or by which it is bound.

3.3      Investment Knowledge.  Such Purchaser has sufficient knowledge and experience in financial and business matters so as to be capable of evaluating the risks and merits of its investment in the Company and is capable of bearing the economic risks of such investment, including a complete loss of its investment.

3.4      Distribution.  The Series CC Preferred Stock (and the Conversion Stock) are being acquired for such Purchaser’s own account for the purpose of investment and not with a view to or for resale in connection with any distribution thereof.

4.             Conditions of Purchasers’ Obligations at Closing.  The obligations of the Purchasers to the Company under this Agreement are subject to the fulfillment, concurrently with or prior to the applicable Closing, of each of the following conditions, unless otherwise waived in writing by the Purchasers purchasing a majority of the Series CC Preferred Stock at such Closing:

4.1      Representations and Warranties.  (i) The representations and warranties of the Company contained in Sections 2.1, 2.2, 2.4 and 2.5 shall be true, correct and complete in all respects, in each case both when made and at and as of the applicable Closing Date, as if made at and as of such time (except to the extent expressly made as of an earlier date, in which case as of such date) and (ii) all other representations and warranties of the Company set forth herein shall be true and correct in all material respects both when made and at and as of the applicable Closing Date, as if made at and as of such time (except to the extent expressly made as of an earlier date, in which case as of such date) without giving effect to any qualification or limitation

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as to “materiality”, “Company Material Adverse Effect” or words of similar effect set forth therein.

4.2      Performance.  The Company shall have performed and complied with, in all material respects (except that any materiality qualifiers contained in the covenants, agreements, obligations and conditions shall not be deemed to be further qualified or limited as to materiality), all covenants, agreements, obligations and conditions contained in this Agreement that are required to be performed or complied with by the Company on or before the applicable Closing.

4.3      Legal Investment.  No Governmental Entity shall have enacted, issued, promulgated, enforced or entered any laws, statutes, ordinances, rules (including rules of common law), regulations, codes, orders, judgments, injunctions, awards, decrees, writs, executive orders or legally enforceable requirements (whether temporary, preliminary or permanent) that enjoin or otherwise prohibit consummation of the transactions contemplated by this Agreement.

4.4      Compliance Certificate.  The President of the Company shall deliver to the Purchasers in the Initial Closing a certificate certifying that the conditions specified in Sections 4.1,  4.2, 4.14, 4.16, 4.17  and 4.20 have been fulfilled.

4.5      Good Standing Certificate.  The Purchasers in the Initial Closing shall have received from the Company a certificate dated as of a recent date from the SDAT certifying as to the Company’s due incorporation and good standing in the State of Maryland.

4.6      Qualifications.  All authorizations, approvals or permits, if any, of any governmental authority or regulatory body of the United States or of any state that are required in connection with the lawful issuance and sale of the Series CC Preferred Stock pursuant to this Agreement shall be obtained and effective as of the Closing.

4.7      Opinion of Company Counsel.  The Purchasers in the Initial Closing shall have received from ▇▇▇▇▇▇▇ LLP, Counsel for the Company, an opinion, dated as of the date of the Initial Closing, substantially in the form of Exhibit D.

4.8      Supporting Documents.  The Purchasers in the Initial Closing shall have received the following:

(a)           A copy of resolutions of the Board of Directors of the Company and stockholders of the Company authorizing and approving (i) the Investment Agreements and the transactions contemplated thereby, (ii) the Recapitalization, (iii) the Proforma Acquisition and (iv) the adoption of the Sixth Articles that are contemplated by this Agreement, all such resolutions to be certified by the Secretary of the Company;

(b)           A Certificate of Incumbency executed by the Secretary of the Company certifying the names, titles and signatures of the officers authorized to execute the Investment Agreements and further certifying that the Sixth Articles and Bylaws of the Company

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delivered to the Purchasers at the time of the execution of this Agreement have been validly adopted and have not been amended or modified; and

(c)           Such additional supporting documentation and other information with respect to the transactions contemplated hereby as legal counsel for the Purchasers may reasonably request.

4.9      Director Indemnification Agreements.  The Company shall have executed and delivered to each person designated by the Purchasers to the Company’s Board of Directors the Indemnification Agreement in substantially the form attached as Exhibit E.

4.10    Management Rights Letters.  The Company shall have executed and delivered to ABS Capital Partners V, L.P. and ABS Capital Partners V-A, L.P. Management Rights Letters substantially in the forms attached as Exhibits F-1 and F-2, respectively.

4.11    Registration Rights Agreement.  The Company, each Purchaser and the other parties thereto shall have executed and delivered the Registration Rights Agreement in substantially the form attached as Exhibit G.

4.12    Stockholders Agreement.  The Company, each Purchaser that is a party thereto and the other parties thereto shall have executed and delivered the Stockholders Agreement in substantially the form attached as Exhibit H.

4.13    Sixth Articles.  The Company shall have filed the Sixth Articles with the SDAT on or prior to the date of the Initial Closing, which shall continue to be in full force and effect as of the date of the applicable Closing.

4.14    Recapitalization.  The Company shall have completed the Recapitalization prior to the Initial Closing.

4.15    Proforma Acquisition.  Concurrently with the Initial Closing, the Company shall complete the Proforma Acquisition.

4.16    Amendment of Option Plan.  The Company shall have amended and restated its 2004 Omnibus Stock Plan in the form of the Amended and Restated 2004 Omnibus Stock Plan attached as Exhibit B to increase the total number of shares of Common Stock authorized for issuance under the plan to 12,770,232 shares.

4.17    Board Membership.  The Company shall have fixed the membership of the Board of Directors at seven (7) members and, effective upon the completion of the Initial Closing, the following persons shall constitute the Board of Directors ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇.

4.18    Payment of Expenses.  The Company shall have paid in accordance with Section 7.9 the expenses and disbursements of the Lead Investor.

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4.19    No Material Adverse Effect.  Since May 31, 2007, no event, change, effect, condition, fact or circumstance shall have occurred that, individually or in the aggregate, would reasonably be expected to have a Company Material Adverse Effect.

4.20    Updated Capitalization Table.  The Company shall have delivered to each Purchaser a new version of Section 2.2 of the Disclosure Schedule, revised to reflect the actual elections made by Proforma stockholders to receive shares of Series AA Preferred Stock in the Proforma Acquisition.

5.             Conditions of the Company’s Obligations at the Closing.  The obligations of the Company to each Purchaser under this Agreement are subject to the fulfillment, on or before the applicable Closing, of each of the following conditions, unless otherwise waived by the Company in writing.

5.1      Representations and Warranties.  The representations and warranties of the Purchasers in the applicable Closing contained in Section 3 shall be true, correct and complete in all respects, in each case both when made and at and as of the applicable Closing Date, as if made at and as of such time (except to the extent expressly made as of an earlier date, in which case as of such date).

5.2      Performance.  All covenants, agreements and conditions contained in this Agreement to be performed or complied with by such Purchaser on or prior to the applicable Closing Date shall have been performed or complied with in all material respects (except that any materiality qualifiers contained in the covenants, agreements, obligations and conditions shall not be deemed to be further qualified or limited as to materiality).

5.3      Registration Rights Agreement.  Such Purchaser shall have executed and delivered the Registration Rights Agreement in substantially the form attached as Exhibit G.

5.4      Stockholders Agreement.  Such Purchaser shall have executed and delivered the Stockholders Agreement in substantially the form attached as Exhibit H.

6.             Other Agreements.

6.1      Corporate Existence.  The Company and each of its Subsidiaries will maintain its respective corporate existence in good standing and comply with all applicable laws and regulations of the United States or of any state or political subdivision thereof and of any foreign jurisdiction, and of any government authority of any of the foregoing, where failure to so comply would reasonably be expected to have a Company Material Adverse Effect.

6.2      Books of Account and Reserves.  The Company will keep books of record and account in which full, true and correct entries are made of all of its dealings, business and affairs, in accordance with GAAP.  The Company will employ certified public accountants of established national reputation selected by the Board of Directors of the Company who are “independent” within the meaning of the accounting regulations of the Securities and Exchange Commission (the “Accountants”).  The Company will have annual audits made by such Accountants in the course of which such Accountants shall make such examinations, in

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accordance with generally accepted auditing standards, as will enable them to give such reports or opinions with respect to the financial statements of the Company as will satisfy the requirements of the Securities and Exchange Commission (the “SEC”) in effect at such time with respect to reports or opinions of accountants.

6.3      Conduct of Business Pending Additional Closing.  From the date hereof until the earliest of (i) the Additional Closing, (ii) fifteen (15) days after the Initial Closing Date or (iii) the termination of this Agreement pursuant to Section 7.2, the Company shall:

(a)           maintain its existence in good standing and that of each of its material Subsidiaries;

(b)           conduct its business, and the business of its material Subsidiaries, in the ordinary course of business, except as expressly permitted by this Agreement;

(c)           maintain business and accounting records consistent with past practices, except as required by GAAP or applicable laws; and

(d)           give prompt notice to the Purchasers after becoming aware of the occurrence of any event which would reasonably be likely to cause (i) any representation or warranty of the Company contained in this Agreement to be untrue or inaccurate in any material respect, (ii) any covenant, condition or agreement contained in this Agreement not to be complied with or satisfied, or (iii) any failure of the Company or any of its Subsidiaries to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it hereunder; and

(e)           use commercially reasonable efforts (i) to preserve its, and its Subsidiaries’, businesses intact in all material respects, (ii) to keep available to the Company and its Subsidiaries the services of its current officers and key employees, and (iii) to preserve in all material respects for the Company and its Subsidiaries the goodwill of their suppliers, customers and others having business relations with the Company or its Subsidiaries.

6.4      Prohibited Actions Pending Initial Closing.  Except as contemplated by this Agreements (including, for avoidance of doubt, as necessary to effectuate the adoption and filing of the Sixth Articles, the Recapitalization and the Proforma Acquisition), unless otherwise necessary in order to comply with applicable laws or the Company’s or its Subsidiaries’ obligations hereunder or approved by the Purchasers in writing, including, without limitation, by electronic mail (which approval shall not be unreasonably withheld or delayed), from the date hereof until the Initial Closing or the earlier termination of this Agreement pursuant to Section 7.2, the Company and each of its Subsidiaries shall operate in the ordinary course of business and shall not:

(a)           amend or otherwise change its articles of incorporation or bylaws;

(b)           other than grants of options, restricted stock and/or restricted stock units as set forth on Schedule 6.4(b), issue or sell or authorize for issuance or sale, or grant any options or restricted stock or make other agreements with respect to, any shares of its capital stock or any other of its securities;

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(c)           declare, set aside, make or pay any dividend or other distribution, payable in cash, stock, property or otherwise with respect to any of its capital stock;

(d)           reclassify, combine, split, subdivide or redeem, purchase or otherwise acquire, directly or indirectly, any of its capital stock;

(e)           incur any indebtedness for borrowed money or issue any debt securities or assume, guarantee or endorse, or otherwise as an accommodation become responsible for, the obligations of any person or entity, or make any loans or advances, except in the ordinary course of business, consistent with past practice;

(f)            acquire (including, without limitation, by merger, consolidation or acquisition of stock or assets) any corporation, partnership, other business organization or any division thereof or any material amount of assets;

(g)           enter into any contract or agreement other than in the ordinary course of business that would constitute a Material Contract;

(h)           authorize any capital commitment or capital lease in an amount in excess of $50,000, individually or $100,000, in the aggregate;

(i)            mortgage, pledge or subject to encumbrance any of its assets or properties or agree to do so other than in the ordinary course of business;

(j)            assume, guarantee or otherwise become responsible for the obligations of any other person or entity, or agree to so do;

(k)           hire any executive officer or senior member of management, or enter into or agree to enter into any employment agreement with any such Person;

(l)            increase the compensation payable or to become payable to its officers or key employees, or grant any severance or termination pay to, or enter into any severance agreement with any director, officer or key employee, or establish, adopt, enter into or amend any collective bargaining, bonus, profit sharing, thrift, compensation, stock option, restricted stock, pension, retirement, deferred compensation, employment, termination or other plan, agreement, trust, fund, policy or arrangement for the benefit of any such director, officer or key employee;

(m)          take any material action to change in any respect its accounting policies or procedures (including, without limitation, procedures with respect to the payment of accounts payable and collection of accounts receivables), except as required by GAAP or applicable law;

(n)           make any material change to any tax election or settle or compromise any federal, state, local or foreign income material tax liability;

(o)           settle or compromise, or initiate against any third party, any pending or threatened action, suit, proceeding or investigation;

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(p)           pay, discharge or satisfy any claim, liability or obligation (absolute, accrued, asserted or unasserted, contingent or otherwise), other than the payment, discharge or satisfaction, in the ordinary course of business and consistent with past practice, of liabilities reflected or reserved against in the Financial Statements or subsequently incurred in the ordinary course of business and consistent with past practice in amounts not in excess of $50,000, individually or $100,000, in the aggregate;

(q)           sell, assign, transfer, license or sublicense, pledge or otherwise encumber any of its right in Intellectual Property (other than in the ordinary course of business and consistent with past practice); or

(r)            agree to do any of the foregoing.

7.             Miscellaneous.

7.1      Survival of Warranties.  Except for the representations and warranties set forth in Sections 2.1, 2.2, 2.3, 2.4 and  2.5 of the Agreement, which shall survive the execution and delivery of this Agreement and the applicable Closing without limitation as to duration, and except for the representations and warranties set forth in Section 2.18 of the Agreement, which shall survive for the applicable statute of limitations period associated with the tax matters set forth therein, the representations and warranties of the Company and the Purchasers contained in or made pursuant to this Agreement shall survive the execution and delivery of this Agreement and the applicable Closing for a period of eighteen (18) months after the date hereof.

7.2      Termination.

(a)           This Agreement may be terminated by the Lead Investor or the Company in the event the Initial Closing has not occurred by September 30, 2007 (the “Termination Date”), except that the right to terminate this Agreement under this Section will not be available to any party to this Agreement whose failure to fulfill any of its obligations under this Agreement has been a principal cause of, or resulted in, the failure to consummate the Initial Closing by such date.

(b)           In the event of the termination of this Agreement, this Agreement shall be of no further force or effect; provided, however, that the provisions of Section 7 shall survive the termination of this Agreement and shall remain in full force and effect.

7.3      Transfer; Successors and Assigns.   The terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors and assigns of the parties.  Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement.

7.4      GOVERNING LAW.  THIS AGREEMENT AND ALL ACTS AND TRANSACTIONS PURSUANT HERETO AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO SHALL BE GOVERNED, CONSTRUED AND INTERPRETED IN

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ACCORDANCE WITH THE LAWS OF THE STATE OF MARYLAND, WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAW.

7.5      Counterparts.  This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute one instrument.

7.6      Titles and Subtitles.  The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.

7.7      Notices.  Any notice required or permitted by this Agreement shall be in writing and shall be deemed given upon delivery, when delivered personally or by overnight courier or sent by fax, or forty-eight (48) hours after being deposited in the U.S. mail, as certified or registered mail, with postage prepaid, addressed to the party to be notified at such party’s address as set forth below or on Schedule 1 hereto, or as subsequently modified by written notice, and

if to the Company at:

Metastorm Inc.

▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇

▇▇▇▇▇▇▇▇▇, ▇▇  ▇▇▇▇▇

Attention:  ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇

Facsimile:  (▇▇▇) ▇▇▇-▇▇▇▇

with a copy to:

▇▇▇▇▇▇▇ LLP

▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇

▇▇▇▇▇▇▇▇▇, ▇▇  ▇▇▇▇▇

Attention:  ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇., Esq.

Telecopier:  (▇▇▇) ▇▇▇-▇▇▇▇

7.8      Finder’s Fee.  Each party severally and not jointly represents that it neither is nor will be obligated for any finder’s fee or commission in connection with this transaction.  Each Purchaser agrees to indemnify and to hold harmless the Company from any liability for any commission or compensation in the nature of a finder’s fee (and the costs and expenses of defending against such liability or asserted liability) for which such Purchaser or any of its officers, employees, or representatives is responsible.  The Company agrees to indemnify and hold harmless the Purchasers from any liability for any commission or compensation in the nature of a finder’s fee (and the costs and expenses of defending against such liability or asserted liability) for which the Company or any of its officers, employees or representatives is responsible.

7.9           Expenses.  Each party shall bear its own costs and expenses incident to this Agreement and the transactions contemplated hereunder, provided, however, that the

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Company shall pay and be responsible for all out-of-pocket expenses of the Lead Investor and the reasonable fees of the counsel for the Lead Investor incurred with respect to this Agreement, the documents referred to herein and the transactions contemplated hereby, in an amount not to exceed $75,000 in the aggregate, promptly (a) upon the Initial Closing, (b) upon request by the Lead Investor in the event this Agreement is terminated by the Lead Investor pursuant to Section 7.2, provided that the Company’s failure to satisfy any one or more of the conditions to the Initial Closing set forth in Section 4.1 or 4.15 hereof has been a primary cause of, or has resulted in, the failure of the parties to consummate the Initial Closing prior to the Termination Date.

7.10    Amendments and Waivers.  Any term of this Agreement may be amended or waived with the written consent of the Company and Purchasers purchasing at least 75% of the Series CC Preferred Stock pursuant to this Agreement.  Any amendment or waiver effected in accordance with this Section 7.10 shall be binding upon the Purchasers and each transferee of the Series CC Preferred Stock, each future holder of all such securities, and the Company.

7.11    Severability.  If any provision of this Agreement shall be declared void or unenforceable by any judicial or administrative authority, the validity of any other provision and of the entire Agreement shall not be affected thereby.

7.12    Delays or Omissions.  No delay or omission to exercise any right, power or remedy accruing to any holder of any of the Series CC Preferred Stock (or the Conversion Stock) upon any breach or default of the Company under this Agreement, shall impair any such right, power or remedy of such holder nor shall it be construed to be a waiver of any such breach or default, or an acquiescence therein, or of or in any similar breach or default thereafter occurring; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring.  Any waiver, permit, consent or approval of any kind or character on the part of any holder of any breach or default under this Agreement, or any waiver on the part of any holder of any provisions or conditions of this Agreement, must be in writing and shall be effective only to the extent specifically set forth in such writing.  All remedies, either under this Agreement or by law or otherwise afforded to any holder, shall be cumulative and not alternative.

7.13    Entire Agreement.  This Agreement, and the documents referred to herein constitute the entire agreement between the parties hereto pertaining to the subject matter hereof, and any and all other written or oral agreements existing between the parties hereto are expressly canceled.

7.14    Right to Conduct Business.  The Company hereby acknowledges that the Purchasers invest in numerous companies, some of which may be competitive with the Company’s business.  The Purchasers shall not be liable for any claim arising out of, related to or based upon (i) the investment by the Purchasers in any entity competitive to the Company, or (ii) actions taken by any partner, officer or other representative of the Purchasers to assist any such competitive company, whether or not such action was taken as a board member of such competitive company or otherwise, and whether or not such action has a detrimental effect on the Company.

[signatures on following pages]

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

Appendix A

Definitions

“Affiliate” means with respect to a specified Person, a Person that directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with the Person specified.

“Applicable Benefit Laws” means all laws applicable to, or with respect to, any Company Benefit Plan.

“Code” means the Internal Revenue Code of 1986, as amended.

“Common Stock” means the Company’s common stock, par value $0.01 per share.

“Company Benefit Plan” means each material written plan, fund, program, contract or scheme, in each case, that is sponsored or maintained or required to be sponsored or maintained by the Company or any Company ERISA Affiliate or to which the Company or any Company ERISA Affiliate make, or have an obligation to make, contributions providing for employee benefits or for the remuneration (other than salary), direct or indirect, of the employees, former employees, officers, contingent workers or leased employees of the Company or any Company ERISA Affiliate or the dependents of any of them, including each written deferred compensation, bonus, incentive compensation, pension, retirement, stock purchase, stock option and other equity compensation plan, “welfare” plan (within the meaning of Section 3(1) of ERISA, determined without regard to whether such plan is subject to ERISA); each “pension” plan (within the meaning of Section 3(2) of ERISA, determined without regard to whether such plan is subject to ERISA); each severance plan or agreement; and each health, vacation, supplemental unemployment benefit, hospitalization insurance, medical, dental, legal program, agreement or arrangement.

“Company ERISA Affiliate” means a member of a controlled group of corporations or a trade or business under common control, as defined under Code Section 414(b) or (c), with the Company.

“Company Material Adverse Effect” means any material adverse effect on the business, results of operations, financial condition, properties, assets or liabilities of the Company and its Subsidiaries, taken as a whole.

“Company’s knowledge” or the phrase “knowledge of the Company” or words of similar effect mean the actual knowledge of the officers of the Company and its Subsidiaries.

“Copyrights” means all copyrights, the content contained on or the “look and feel” of any World Wide Web site, all mask works, and registrations and applications for any of the foregoing, and the right to ▇▇▇ for past infringement thereof.

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

“GAAP” means United States generally accepted accounting principles as in effect on any applicable date, consistently applied.

“Governmental Entity” means any federal, state or local or foreign government or any court, administrative, arbitrative or regulatory agency or commission or other governmental authority or agency, domestic or foreign.

“Inbound License Agreement” means any License Agreement pursuant to which the Company or any of its Subsidiaries has been granted any rights in any Intellectual Property.

“Indemnification Agreement” means the Indemnification Agreement in the form attached hereto as Exhibit E.

“Intellectual Property” means, interchangeably and collectively as the context requires, the following, whether completed or in any stage of development: (a) Copyrights; (b) Patents; (c) Trademarks; (d) Trade Secrets; (e) rights of publicity and privacy relating to the use of the names, likenesses, voices, signatures and biographical information of natural Persons; (f) all rights with respect to Software, to the extent not otherwise embodied in the foregoing clauses (a)-(e); (g) all rights with respect to Internet Identifiers, to the extent not otherwise embodied in the foregoing clauses (a)-(e); and (h) all moral rights in any of the foregoing.

“Intellectual Property Rights” means the Company’s rights in the Owned Intellectual Property and the Licensed Intellectual Property.

“Internet Identifiers” means (a) internet domain names; (b) ranges of internet protocol addresses and, to the extent not included in such ranges, individual internet protocol addresses, but not including any such addresses within the three blocks reserved by the Internet Assigned Numbers Authority for private internets (i.e., ▇▇.▇.▇.▇/▇, ▇▇▇.▇▇.▇.▇/▇▇ and ▇▇▇.▇▇▇.▇.▇/▇▇); (c) secure socket layer certificates; and (d) Software code signing certificates.

“Intra-Company License Agreement” means any License Agreement pursuant to which any rights in Intellectual Property are granted (a) by the Company to any Subsidiary or Affiliate of the Company; or (b) to the Company by any Subsidiary or Affiliate of the Company.

“Investment Agreements” means the Agreement, the Stockholders Agreement, the Registration Rights Agreement, the Management Rights Letters, and the Indemnification Agreement.

“Laws” means all applicable laws, codes, statutes, ordinances, orders, judgments, decrees, administrative or judicial promulgations, injunctions, determinations, approvals, rules, regulations, permits, certificates, licenses and authorizations of all Governmental Entities with jurisdiction, that relate to or affect the Business of Buyer or the Business of Sellers, as the case may be.

“Lead Investor” means ABS Capital Partners V, L.P.

“License Agreement” means any agreement (including, without limitation, any outstanding decrees, orders, judgments, settlement agreements or stipulations, and any Mass-Market Licenses) pursuant to which a Person is granted any rights in any Intellectual Property, including any right to distribute, promote, market or sell any Intellectual Property.

“Licensed Intellectual Property” means Intellectual Property in which the Company is granted any rights pursuant to an Inbound License Agreement.

“Liens” means all mortgages, liens, pledges, security interests, charges, claims, restrictions and encumbrances.

“Management Rights Letters” means the management rights letters in the forms attached as Exhibits F-1 and F-2.

“Mass-Market License” means any License Agreement that (a) grants the licensee(s) thereunder any rights in Mass-Market Software; (b) is a “shrink wrap” or “click wrap” license agreement; and (c) requires aggregate annual and/or other fee payments of less than One Thousand Dollars ($1,000) or a one-time royalty of not less than Fifteen Thousand Dollars ($15,000).

“Mass-Market Software” means non-customized, commercial, off-the-shelf Software made generally available to the public.

“Outbound License Agreement” means any License Agreement pursuant to which the Company grants any rights in any Owned Intellectual Property to any other Person.

“Owned Intellectual Property” means Intellectual Property owned by the Company.

“Owned Internet Identifiers” means, with respect to the Company, an Internet Identifier owned by, allocated to (in the case of ranges of internet protocol addresses and individual internet protocol addresses), or issued to (in the case of secure socket layer certificates and Software code signing certificates) the Company.

“Owned Software” means Software included in the Owned Intellectual Property.

“Patents” means all patents and registrations, industrial designs, including any continuations, divisionals, continuations-in-part, renewals, reissues and applications for any of the foregoing, and the right to ▇▇▇ for past infringement thereof.

“Permitted Liens” means: (a) liens imposed by Law for Taxes, assessments or charges or claims by Governmental Entities that are not yet due or are being properly contested; (b) carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s, landlords’ and other like liens imposed by Law or contract, arising in the ordinary course of business and securing obligations that are not overdue; (c) pledges and deposits made in the ordinary course of business in compliance with workers’ compensation, unemployment insurance and other social security Laws or regulations; (d) deposits to secure the performance of bids, trade contracts, leases, statutory obligations, surety, indemnity and appeal bonds, performance and return-of-money and

fiduciary bonds and other obligations of a like nature, in each case in the ordinary course of business; (e) easements, zoning restrictions, rights-of-way, licenses, covenants, conditions, minor defects, encroachments or irregularities in title and similar encumbrances on or affecting real property leased by the Company (“Leased Real Property”) that do not secure any monetary obligations and do not materially interfere with the ordinary conduct of the business of the Company; (f) any (i) interest or title of a lessor or sublessor under any lease, (ii) restriction or encumbrance that the interest or title of such lessor or sublessor may be subject to, or (iii) subordination of the interest of the lessee or sublessee under such lease to any restriction or encumbrance referred to in the preceding clause (ii); and (g) with respect to the Leased Real Property, any defect or encumbrance caused by or arising out of the failure to record the lease or a memorandum thereof in the applicable real property records in the county where such Leased Real Property is located.

“Person” means an individual, a sole proprietorship, a partnership, a corporation, an association, an institution, a joint stock company, a limited liability company, a trust, a joint venture, an unincorporated organization, or a Governmental Entity or any other legal entity.

“Proforma” means Proforma Corporation, a Michigan corporation.

“Proforma Acquisition” means the acquisition of Proforma substantially on the terms of the form of Agreement and Plan of Merger attached hereto as Exhibit G.

“Recapitalization” means (i) the conversion of (A) all of the Company’s outstanding shares of Series BB Preferred Stock into shares of Series AA Preferred Stock in the ration of 1.8339403 shares of Series AA Preferred Stock for each share of Series BB Preferred Stock, rounded, in the case of each holder of Series BB Preferred Stock, to the nearest whole number of shares of Series AA Preferred Stock, and (B) all of the Company’s outstanding warrants to purchase shares of Series BB Preferred Stock into shares of Series AA Preferred Stock in the ratio of one share of Series AA Preferred Stock for each warrant to purchase a share of Series BB Preferred Stock and (ii) the subsequent elimination of the Series BB Preferred Stock as an authorized series of preferred stock of the Company, as a result of which all of the Company’s preferred stock outstanding immediately prior to the Initial Closing (excluding the effect of the Proforma Acquisition) shall have a maximum liquidation preference pursuant to the terms of the Sixth Articles of no greater than $75 million, assuming that a Liquidation (as defined in the Sixth Articles) were to occur immediately prior to the Initial Closing (excluding the effect of the Proforma Acquisition).

“Registration Rights Agreement” means the Fourth Amended and Restated Registration Rights Agreement in the form attached hereto as Exhibit H.

“Software” means all (a) computer programs, including software implementations of algorithms, models and methodologies, whether in source code or object code form; (b) libraries, functions, subroutines, development tools, interfaces, displays and other work product or tools used to design, plan, organize, develop, implement or operate any computer program; (c) databases and compilations, including data and collections of data, in any form or format whatsoever, and (d) documentation, including user manuals, training materials, design documents and flowcharts relating to any of the foregoing.

“Series AA Preferred Stock” means the Company’s Series AA Convertible Preferred Stock, par value $0.01 per share.

“Series BB Preferred Stock” means the Company’s Series BB Convertible Preferred Stock, par value $0.01 per share.

“Source Code” means the source code for (a) Owned Software and/or (b) Software included in the Licensed Intellectual Property.

“Stockholders Agreement” means the Fifth Amended and Restated Stockholders Agreement in the form attached hereto as Exhibit I.

“Taxes” means all taxes, assessments, charges, duties, fees, levies or other governmental charges (including interest, penalties or additions associated therewith), including income, franchise, capital stock, real property, personal property, tangible property, escheat, withholding, employment, payroll, social security, unemployment compensation, disability, transfer, sales, use, excise, gross receipts, value-added and all other charges or assessments of any kind for which Sellers may have any liability imposed by any Governmental Entity, whether disputed or not, and any charges, interest or penalties imposed thereon by any Governmental Entity.

“Tax Return” means any return, declaration, estimate, installment, report, claim for refund, or information return or statement relating to Taxes, including any schedule or attachment thereto, and including any amendment or supplement thereof.

“Third Party Software” means Software not owned by the Company or any of its Subsidiaries.

“Trademarks” means all trademarks, service marks, trade names, trade dress, designs, logos, emblems, signs or insignia, slogans, and other similar designations of source or origin, together with all goodwill symbolized by any of the foregoing, registrations and applications for any of the foregoing, and the right to ▇▇▇ for past infringement thereof.

“Trade Secrets” means any and all forms and types of confidential technology, trade secrets and other confidential information, including know-how, customer lists, prospect lists, business plans, inventions, invention disclosures, proprietary processes, formulae, algorithms, models and methodologies.

As used herein, the terms “delivered,” “provided to,” “furnished,” “made available” and words of similar meaning when used to describe the provision of any information, documents or other materials to the Purchasers in Section 2 hereof, means either (i) the actual delivery of such materials (either in hardcopy or electronic form) to the Purchasers or their legal counsel or (ii) the setting forth by the Company of such materials in any “dataroom” available for access and review by the Purchasers or their legal counsel and the contents of which were reasonably identified to the Purchasers or their legal counsel from a date that is at least ten (10) days prior to the Initial Closing until the last Additional Closing Date.

Schedule 1

Purchasers, Shares Purchased and Purchase Price

Exhibit A

Form of Sixth Articles of Amendment and Restatement

METASTORM INC.

SIXTH ARTICLES OF AMENDMENT AND RESTATEMENT

Metastorm Inc., a Maryland corporation having its principal office in Baltimore City, Maryland (hereinafter called the “Corporation”), hereby certifies to the State Department of Assessments and Taxation of the State of Maryland that:

FIRST:  The Charter of the Corporation currently in effect is hereby amended and restated by striking out in its entirety the existing Charter and inserting in lieu thereof the following:

FIRST: The name of the corporation (which is hereinafter called the “Corporation”) is:

Metastorm Inc.

SECOND: The purpose or purposes of the Corporation are to engage in any or all lawful acts or activities for which corporations may be organized under the Maryland General Corporation Law.

THIRD:  The address of the principal office of the Corporation in Maryland is ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇.  The name of the resident agent is ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, whose address is ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇.  Said resident agent is a citizen of the State of Maryland residing therein.

FOURTH:  (a)  The amount of the total authorized capital stock of this Corporation shall be up to 216,657,212 shares, divided as follows:  (i) 120,000,000 shares of Common Stock, par value $0.01 per share (the “Common Stock”), and (ii) 96,657,212 shares of Preferred Stock, par value $0.01 per share (the “Preferred Stock”), of which:

(i)            71,012,991 shares shall be designated as “Series AA Convertible Preferred Stock” (the “Series AA Preferred Stock”);

(ii)           6,800,000 shares shall be designated as “Series BB Convertible Preferred Stock” (the “Series BB Preferred Stock”); and

(iii)          18,844,221 shares shall be designated as “Series CC Convertible Preferred Stock” (the “Series CC Preferred Stock”).

The aggregate par value of all shares of capital stock having a par value is $2,166,572.12.

(b)           Common Stock.  Each share of the Common Stock authorized for issuance by the Corporation shall be entitled to one vote.

(c)           Preferred Stock.  The Preferred Stock authorized hereby may be divided and issued from time to time in series.  Except as otherwise provided in the Corporation’s Charter, or as may be provided in that certain Fifth Amended and Restated Stockholders Agreement by and among the Corporation and certain of the holders of the Corporation’s Series AA Preferred Stock and the holders of the Corporation’s Series CC Preferred Stock (as such may be amended from time to time, the “Stockholders Agreement”), and subject to limitations and requirements prescribed by law, the Board of Directors of the Corporation (the “Board”) is expressly authorized, by a vote of at least a majority of the Board then in office or by a unanimous written consent of the Board then in office, to provide for the issuance of the Preferred Stock in one or more series, each with such designations, preferences, voting powers (or no voting powers), relative, participating, option or other special rights and privileges and such qualifications, limitations or restrictions thereof as shall be stated in the resolution or resolutions adopted by the Board to create such series.  The authority of the Board with respect to each such series shall include, without limitation of the foregoing, the right to provide that the shares of each such series may be:

(i)            subject to redemption at such time or times and at such price or prices;

(ii)           entitled to receive dividends (which may be cumulative or non-cumulative) at such rates, on such conditions, and at such times, and payable in preference to, or in such relation to, the dividends payable on any other class or classes or any other series;

(iii)          entitled to such rights upon the dissolution of, or upon any distribution of the assets of, the Corporation;

(iv)          convertible into, or exchangeable for, shares of any other class or classes of capital stock, or of any other series of the same or any other class or classes of stock of the Corporation at such price or prices or at such rates of exchange and with such adjustments, if any;

(v)           entitled to the benefit of such limitations, if any, on the issuance of additional shares of such series or shares of any other series of Preferred Stock; or

(vi)          entitled to such other preferences, powers, qualifications, rights and privileges, all as the Board may deem advisable and as are not inconsistent with law and the provisions of the Corporation’s Charter.

The Board is also authorized to decrease the number of shares of any series, subsequent to the issuance of that series, but not below the number of shares of such series then outstanding.  In case the number of shares of any series shall be so decreased, the shares constituting such decrease shall resume the status which they had prior to the adoption of the resolution originally fixing the number of shares of such series.

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(d)           Conversion.

(i)            The Corporation shall, at all times when any series of convertible Preferred Stock shall be outstanding, reserve and keep available out of its authorized but unissued stock, for the purpose of effecting the conversion of such Preferred Stock, such number of its duly authorized shares of Common Stock (and Series AA Preferred Stock, with respect to the conversion of Series BB Preferred Stock contemplated by Article Fifth (together with the Common Stock, the “Conversion Shares”)) as shall from time to time be sufficient to effect the conversion of all outstanding shares of such Preferred Stock.  The Corporation covenants that all Conversion Shares which shall be so issued shall be duly and validly issued and fully paid and nonassessable and free from all taxes, liens and charges with respect to the issue thereof, and, without limiting the generality of the foregoing, the Corporation covenants that it will from time to time take all such action as may be requisite to assure that the par value per share of all Conversion Shares is at all times equal to or less than the lowest of the Series AA Conversion Price and the Series CC Conversion Price in effect at the time.  The Corporation will take all such action as may be necessary to assure that all Conversion Shares may be so issued without violation of any applicable law or regulation, or of any requirement of any national securities exchange upon which any Conversion Shares may be listed.

(ii)           All shares of Preferred Stock which shall have been converted to another class or series of capital stock as herein provided (notwithstanding any failure of the holder or holders thereof to surrender certificates therefor) shall no longer be deemed to be outstanding and all rights with respect to such shares shall immediately cease and terminate upon the applicable conversion date, except only the right of the holders thereof to receive Conversion Shares in exchange therefor.  Any shares of Preferred Stock so converted, and all certificates representing such shares, shall be retired and canceled and shall not be reissued, and the Corporation may from time to time take such appropriate action as may be necessary to reduce accordingly the number of authorized shares of the series of Preferred Series so converted.

(iii)          The issuance of certificates for Conversion Shares upon conversion of Preferred Stock shall be made without charge to the holders thereof for any issuance tax in respect thereof, provided 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 certificate

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in a name other than that of the holder of the Preferred Stock which is being converted.

(iii)          The Corporation will at no time close its transfer books against the transfer of any Preferred Stock or of any Conversion Shares in any manner which interferes with the timely conversion of any Preferred Stock in accordance herewith, except as may otherwise be required to comply with applicable securities laws.

(e)           Voting.  In addition to the voting preferences of the Preferred Stock set forth herein, with respect to all matters on which the holders of Common Stock are entitled to vote, the holders of the Series AA Preferred Stock (voting on an “as-converted” basis, as adjusted from time to time in accordance herewith), the holders of Series CC Preferred Stock (voting on an “as converted” basis, as adjusted from time to time in accordance herewith) and the holders of the Common Stock shall vote together as a single class.

FIFTH:  Upon the effectiveness of this Charter (the “Effective Time”), each outstanding share of Series BB Preferred Stock shall be automatically reclassified and converted into 1.8339403 validly issued, fully paid and nonassessable shares of Series AA Preferred Stock.  Immediately following the Effective Time, each certificate that immediately prior to the Effective Time represented outstanding shares of Series BB Preferred Stock (“Old Certificates”) shall represent the right to receive in exchange therefor, as soon as reasonably practicable following the surrender by the holder of such Old Certificate, a new certificate representing the number of whole shares of Series AA Preferred Stock into which the shares of Series BB Preferred Stock so surrendered have been reclassified and converted as of the Effective Time.  If so required by the Corporation, Old Certificates surrendered for conversion shall be endorsed or accompanied by written instrument or instruments of transfer, in form satisfactory to the Corporation, duly executed by the registered holder or by his or its attorney duly authorized in writing.

SIXTH:  For purposes of Article Seventh below, the following terms shall have the respective meanings indicated:

“Additional Shares of Common Stock” means all shares of Common Stock issued (or, pursuant to Section 4(c)(ii) of Article Seventh, deemed to be issued) by the Corporation after the Series AA Original Issue Date, other than (a) shares of Common Stock issued or issuable upon the conversion of shares of the Series AA Preferred Stock or Series CC Preferred Stock; (b) shares of Common Stock issued or issuable by reason of a dividend, stock split or other distribution that is covered by Section 4(d), 4(e) or 4(f) of Article Seventh below; (c) shares of Common Stock issued as consideration (and not as financing) for any business combination between the Corporation and another corporation or entity approved by the Board of Directors; (d) shares of Common Stock or Series AA Preferred Stock issued or issuable to employees, directors or consultants of the Corporation pursuant to a compensation plan or arrangement approved by the Board (provided that the Board shall also approve the grant of shares of Common Stock or Series AA Preferred Stock or other securities

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exercisable for such shares of Common Stock or Series AA Preferred Stock in connection therewith); (e) shares of Common Stock issued in a Liquidation approved in accordance with Article Twelfth; (f) shares of Common Stock issued or issuable to commercial banking or equipment lease financing entities in connection with banking or lease financing transactions approved by the Board; and (g) shares of Common Stock issued or issuable upon the conversion of shares of Series AA Preferred Stock issued in exchange for shares of Series BB Preferred Stock or warrants to purchase shares of Series BB Preferred Stock.

“Convertible Securities” means any stock, evidences of indebtedness or other securities of the Corporation directly or indirectly convertible into or exchangeable for Additional Shares of Common Stock.

“Liquidation” has the meaning set forth in Article Eleventh.

“Options” means rights, options or warrants to subscribe for, purchase or otherwise acquire Common Stock or Convertible Securities.

“Qualified Initial Public Offering” means the closing of a firm commitment underwritten public offering, pursuant to an effective registration statement under the Securities Act of 1933, as amended (the “Securities Act”), covering the offer and sale of Common Stock to the public that raises gross proceeds for the Corporation of at least $75,000,000 and at an initial price per share to the public at least equal to two and one-half (2½) times the then-applicable Series CC Conversion Price (as defined in Article Eighth).

“Qualified Sale Transaction” has the meaning set forth in Article Eleventh.

“Recapitalization Events” means stock splits, stock dividends, combinations, recapitalizations, reclassifications, mergers, consolidations and other similar events affecting the Corporation’s capital stock.

“Series AA Conversion Date” shall have the meaning set forth in Section 4(b) of Article Seventh.

“Series AA Conversion Price” means $1.38572 per share (subject to adjustment as provided in Section 4 of Article Seventh).

“Series AA Conversion Ratio” shall have the meaning set forth in Section 4(a) of Article Seventh.

“Series AA Conversion Value” means the original Series AA Stated Value.

“Series AA Original Issue Date” means the date on which the Corporation first issued any shares of Series AA Preferred Stock.

“Series AA Stated Value” means $1.38572 per share (subject to appropriate

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adjustment for any Recapitalization Event).

SEVENTH:  The Series AA Preferred Stock shall be subject to all of the provisions of the Corporation’s Charter relating to the capital stock of the Corporation generally and shall have the following preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends, qualifications and terms and conditions of redemption (section references below are to the corresponding sections in this Article Seventh):

Section 1.              Rank.  The Series AA Preferred Stock will, with respect to dividend rights and rights upon Liquidation, rank:  (a) senior to the Common Stock, and (b) junior to the Series CC Preferred Stock.

Section 2.              Dividend Rate; Series AA Dividend Payment Date.

(a)           Subject to the preferential rights of the holders of the Series CC Preferred Stock as to dividends, the holders of shares of the Series AA Preferred Stock shall be entitled to receive, when, as and if authorized by the Board of Directors and declared by the Corporation, out of funds legally available for the payment of dividends, cumulative dividends at the rate of 8.00% per annum.  Unless otherwise waived in writing by holders of at least two-thirds (2/3) of the then outstanding Series AA Preferred Stock, dividends on each share of Series AA Preferred Stock shall accrue monthly and be cumulative from and including the date on which such share of Series AA Preferred Stock was first issued; provided, however, that dividends shall be deemed to accrue beginning January 1, 2006 with respect to all shares of Series AA Preferred Stock that were outstanding as of October 5, 2005 and with respect to all shares of Series AA Preferred Stock issued upon conversion of Series BB Preferred Stock or in lieu of warrants to purchase shares of Series BB Preferred Stock.

(b)           Notwithstanding anything contained herein to the contrary, dividends on the Series AA Preferred Stock shall accrue whether or not the Corporation has earnings, whether or not there are funds legally available for the payment of such dividends, and whether or not such dividends are authorized or declared.

(c)           No dividends shall be declared or paid or set apart for payment and no other distribution of cash or other property may be declared or made, directly or indirectly, on or with respect to any shares of Common Stock (other than a dividend paid in shares of Common Stock) for any period, nor shall any shares of capital stock be redeemed, purchased or otherwise acquired for any consideration (other than the repurchase of shares of capital stock from former employees in connection with the termination of their employment and other than as set forth in Article Tenth) and no other distribution of cash or other property may be made, directly or indirectly, on or with respect thereto by the Corporation, unless full cumulative dividends on:

(i)            first, the Series CC Preferred Stock shall have been or contemporaneously are declared and paid; and

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(iii)          second, the Series AA Preferred Stock shall have been or contemporaneously are declared and paid.

(d)           Any dividend payment made on the Series AA Preferred Stock shall first be credited against the earliest accrued but unpaid dividends due with respect to such shares which remains payable.

(e)           In the event the Corporation shall declare, pay or set aside any dividends with respect to any Common Stock, the holders of the Series AA Preferred Stock then outstanding shall first receive, or contemporaneously receive, a dividend on each outstanding share of Series AA Preferred Stock equal to the product of (i) the dividend payable on each share of Common Stock, multiplied by (ii) the number of shares of Common Stock then issuable upon conversion of a share of Series AA Preferred Stock, in each case calculated on the record date for determination of holders entitled to receive such dividend.

Section 3.              Voting Rights.

(a)           The Corporation shall not take, and shall not permit any subsidiary of the Corporation to take, whether by merger, consolidation or otherwise, any of the following actions without the written consent or affirmative vote of stockholders representing at least two-thirds (2/3) of the then outstanding shares of Series AA Preferred Stock voting as a single class:

(i)            amend, alter, modify or repeal the charter, bylaws or other organic or organizational documents of the Corporation or any of its subsidiaries, whether by merger, consolidation or otherwise, in any manner that would have an adverse effect on the rights, powers, preferences or privileges of the Series AA Preferred Stock;

 (ii)          issue, authorize or sell any preferred stock (or any options, warrants or similar participation rights to purchase such preferred stock) ranking senior to or on parity with the Series AA Preferred Stock as to dividend rights, voting rights and/or rights upon a Liquidation;

 (iii)         increase the size of the Board, except as contemplated by Article 3 of the Stockholder’s Agreement;

(iv)          take any action that would adversely affect, in any material respect, the preferences, special rights, privileges or powers of the Series AA Preferred Stock;

(v)           take any action that would increase or decrease the number of authorized shares of Series AA Preferred Stock;

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(b)           The Corporation shall not permit any of its subsidiaries to take any action which, if taken by the Corporation, would require the consent of the holders of at least two-thirds (2/3) of the then outstanding Series AA Preferred Stock in accordance with the preceding subsection.

Section 4.              Conversion.  The holders of the Series AA Preferred Stock shall have conversion rights as follows (the “Series AA Conversion Rights”):

(a)           Right to Convert. Each share of Series AA Preferred Stock shall be convertible, at the option of the holder thereof, at any time and from time to time, into such number of fully paid and nonassessable shares of Common Stock as determined by dividing the Series AA Conversion Value by the Series AA Conversion Price (subject to appropriate adjustment in accordance with this Section 4) (the “Series AA Conversion Ratio”).  No additional consideration shall be paid by a holder of Series AA Preferred Stock upon exercise of the Series AA Conversion Rights.  Upon any such conversion, no adjustment to the Series AA Conversion Price shall be made for any accrued and unpaid dividends on the Series AA Preferred Stock converted.

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(b)           Mechanics of Conversion.  In order for a holder of Series AA Preferred Stock to convert shares of Series AA Preferred Stock into shares of Common Stock, such holder shall surrender the certificate or certificates for such shares of Series AA Preferred Stock, at the office of the transfer agent for the Series AA Preferred Stock (or at the principal office of the Corporation if the Corporation serves as its own transfer agent), together with written notice that such holder elects to convert all or any number of the shares of Series AA Preferred Stock represented by such certificate or certificates.  If required by the Corporation, certificates surrendered for conversion shall be endorsed or accompanied by a written instrument or instruments of transfer, in form satisfactory to the Corporation, duly executed by the registered holder or his or its attorney duly authorized in writing.  The date of receipt of such certificates and notice by the transfer agent (or by the Corporation if the Corporation serves as its own transfer agent) shall be the conversion date (“Series AA Conversion Date”).  The Corporation shall, as soon as practicable after the Series AA Conversion Date, issue and deliver at such office to such holder of Series AA Preferred Stock a certificate or certificates for the number of whole shares of Common Stock to which such holder shall be entitled.  As of the Series AA Conversion Date, the person entitled to receive certificates of Common Stock shall be regarded for all corporate purposes as the holder of the number of whole shares of Common Stock to which he or it is entitled upon the conversion.

(c)           Adjustments to Conversion Price for Diluting Issues.

(i)            No Adjustment of Conversion Price.  No adjustment in the number of shares of Common Stock into which the Series AA Preferred Stock is convertible shall be made, by adjustment in the applicable Series AA Conversion Price thereof:  (A) unless the consideration per share (determined pursuant to Section 4(c)(iv)) for an Additional Share of Common Stock issued or deemed to be issued by the Corporation is less than the applicable Series AA Conversion Price in effect on the date of, and immediately prior to, the issuance of such Additional Share of Common Stock, (B) upon the issuance of any shares of Series BB Preferred Stock or shares of Series AA Preferrred Stock issuable upon the conversion thereof; (C) upon the issuance of any shares of Series CC Preferred Stock or shares of Common Stock issuable upon the conversion thereof, or (D) if prior to such issuance, the Corporation receives written notice from the holders of at least two-thirds (2/3) of the then outstanding shares of Series AA Preferred Stock agreeing that no such adjustment shall be made as the result of the issuance of such Additional Shares of Common Stock.

(ii)           Issuance of Securities Deemed Issuance of Additional Shares of Common Stock.  If the Corporation at any time or from time to time after the Series AA Original Issue Date shall issue any Convertible Securities or Options (excluding Options or Convertible Securities which, upon exercise, conversion or exchange thereof, would entitle the holder thereof to receive shares of Common Stock which are

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specifically excepted from the definition of Additional Shares of Common Stock) or shall fix a record date for the determination of holders of any class of securities entitled to receive any such Convertible Securities or Options, then the maximum number of shares of Common Stock (as set forth in the instrument relating thereto without regard to any provision contained therein for a subsequent adjustment of such number) issuable upon the exercise of such Options or, in the case of Convertible Securities and Options therefor, the conversion or exchange of such Convertible Securities, shall be deemed to be Additional Shares of Common Stock issued as of the time of such issuance or, in case such a record date shall have been fixed, as of the close of business on such record date, provided that Additional Shares of Common Stock shall not be deemed to have been issued unless the consideration per share (determined pursuant to Section 4(c)(iv)) of such Additional Shares of Common Stock would be less than the Series AA Conversion Price in effect on the date of and immediately prior to such issuance, or such record date, as the case may be, and provided that in any such case in which Additional Shares of Common Stock are deemed to be issued:

(1)           no further adjustment in the Series AA Conversion Price shall be made upon the subsequent issuance of Convertible Securities or shares of Common Stock upon the exercise of such Options or conversion or exchange of such Convertible Securities;

(2)           if such Options or Convertible Securities by their terms provide, with the passage of time or otherwise, for any increase in the consideration payable to the Corporation, or decrease in the number of shares of Common Stock issuable, upon the exercise, conversion or exchange thereof, the Series AA Conversion Price computed upon the original issuance thereof (or upon the occurrence of a record date with respect thereto), and any subsequent adjustments based thereon, shall, upon any such increase or decrease becoming effective, be recomputed to reflect such increase or decrease insofar as it affects such Options or the rights of conversion or exchange under such Convertible Securities;

(3)           no readjustment pursuant to clause (2) above shall have the effect of increasing the Series AA Conversion Price to an amount which exceeds the Series AA Conversion Price on the original adjustment date; and

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(4)           in the event of any change in the number of shares of Common Stock issuable upon the exercise, conversion or exchange of any Option or Convertible Security other than as a result of any exercise thereof, including, but not limited to, a change resulting from the anti-dilution provisions thereof, the Series AA Conversion Price then in effect shall forthwith be readjusted to such Series AA Conversion Price as would have been obtained had the adjustment which was made upon the issuance of such Options or Convertible Security not exercised or converted prior to such change been made upon the basis of such change, but no further adjustment shall be made for the actual issuance of Common Stock upon the exercise or conversion of any such Option or Convertible Security.

Upon the expiration of any such Options or any rights of conversion or exchange under such Convertible Securities which shall not have been exercised, the Series AA Conversion Price computed upon the issuance thereof (or upon the occurrence of a record date with respect thereto), and any subsequent adjustments based thereon, shall, upon such expiration, be recomputed as if:

(x)           in the case of Convertible Securities or Options for Common Stock, the only Additional Shares of Common Stock issued were the shares of Common Stock, if any, actually issued upon the exercise of such Options or the conversion or exchange of such Convertible Securities and the consideration received therefor was the consideration actually received by the Corporation upon such exercise of such Options; or for the issue of all such Convertible Securities which were actually converted or exchanged, plus the additional consideration, if any, actually received by the Corporation upon such conversion or exchange; and

(y)           in the case of Options for Convertible Securities, only the Convertible Securities, if any, actually issued upon the exercise thereof were issued at the time of issue of such Options, and the consideration received by the Corporation for the Additional Shares of Common Stock deemed to have been then issued was the consideration actually received by the Corporation for the issue of all such Options, whether or not exercised, plus the consideration deemed to have been received by the Corporation upon the issue of the Convertible Securities with respect to which such Options were actually exercised.

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(iii)          Adjustment of Conversion Price Upon Issuance of Additional Shares of Common Stock.  In the event the Corporation shall at any time after the Series AA Original Issue Date issue Additional Shares of Common Stock (including Additional Shares of Common Stock deemed to be issued pursuant to Section 4(c)(ii)), without consideration or for a consideration per share (determined pursuant to Section 4(c)(iv) hereof) less than the Series AA Conversion Price in effect on the date of and immediately prior to such issuance, then and in each such case, such Series AA Conversion Price shall be reduced, concurrently with such issuance, to a price (calculated to the nearest hundredth of a cent) determined by multiplying the Series AA Conversion Price by a fraction:

(1)           the numerator of which is the amount of Common Stock outstanding immediately before such issuance plus the amount of Common Stock that the aggregate consideration received by the Corporation for the Additional Shares of Common Stock would purchase at the Series AA Conversion Price in effect immediately before such issuance; and

(2)           the denominator of which is the Common Stock outstanding immediately before such issuance plus the number of such Additional Shares of Common Stock;

provided, that for purposes of this Section 4(c)(iii), all shares of Common Stock issuable upon exercise of options and warrants outstanding immediately prior to such issuance or upon conversion of the Series AA Preferred Stock and Series CC Preferred Stock shall be deemed to be outstanding.

(iv)          Determination of Consideration.  For purposes of this Section 4(c), the consideration received by the Corporation for the issuance of any Additional Shares of Common Stock shall be computed as follows:

(1)           Cash and Property.  Such consideration shall:

(a)           insofar as it consists of cash, be computed at the aggregate amount of cash received by the Corporation, excluding amounts paid or payable for accrued interest or accrued dividends;

(b)           insofar as it consists of property other than cash, be computed at the fair market value thereof at the time

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of such issuance, as determined in good faith by the Board; and

(c)           in the event Additional Shares of Common Stock are issued together with other shares of securities or other assets of the Corporation for consideration which covers both, be the proportion of such consideration so received, computed as provided in clauses (a) and (b) above, as determined in good faith by the Board.

(2)           Options and Convertible Securities.  The consideration per share received by the Corporation for Additional Shares of Common Stock deemed to have been issued pursuant to Section 4(c)(ii), relating to Options and Convertible Securities, shall be determined by dividing:

(a)           the total amount, if any, received or receivable by the Corporation as consideration for the issuance of such Options or Convertible Securities, plus the minimum aggregate amount of additional consideration (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such consideration) payable to the Corporation upon the exercise of such Options or the conversion or exchange of such Convertible Securities, or in the case of Options for Convertible Securities, the exercise of such Options for Convertible Securities and the conversion or exchange of such Convertible Securities, by

(b)           the maximum number of shares of Common Stock (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such number) issuable upon the exercise of such Options or the conversion or exchange of such Convertible Securities.

(d)           Adjustment for Stock Splits and Combinations.  If the Corporation shall at any time or from time to time after the Series AA Original Issue Date effect a subdivision of the outstanding Common Stock, the Series AA Conversion Price then in effect immediately before that subdivision shall be proportionately decreased.  If the Corporation shall at any time or from time to time after the Series AA Original Issue Date combine the outstanding shares of Common Stock, the Series AA Conversion Price then in effect immediately before the combination shall be proportionately increased.  Any adjustment under this paragraph

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shall become effective at the close of business on the date the subdivision or combination becomes effective.

(e)           Adjustment for Certain Dividends and Distributions.  In the event the Corporation at any time or from time to time after the Series AA Original Issue Date, shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in additional shares of Common Stock, then and in each such event the Series AA Conversion Price then in effect shall be decreased as of the time of such issuance or, in the event such a record date shall have been fixed, as of the close of business on such record date, by multiplying the Series AA Conversion Price for the Series AA Preferred Stock then in effect by a fraction:

(i)            the numerator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date, and

(ii)           the denominator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date plus the number of shares of Common Stock issuable in payment of such dividend or distribution; provided, however, if such record date shall have been fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed therefor, the Series AA Conversion Price for the Series AA Preferred Stock shall be recomputed accordingly as of the close of business on such record date and thereafter the Series AA Conversion Price for the Series AA Preferred Stock shall be adjusted pursuant to this paragraph as of the time of actual payment of such dividends or distributions.

(f)            Adjustments for Other Dividends and Distributions.  In the event the Corporation at any time or from time to time after the Series AA Original Issue Date shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in securities of the Corporation other than shares of Common Stock, then and in each such event provision shall be made so that the holders of the Series AA Preferred Stock shall receive upon conversion thereof in addition to the number of shares of Common Stock receivable thereupon, the amount of securities of the Corporation that they would have received had their Series AA Preferred Stock been converted into Common Stock on the date of such event and had they thereafter, during the period from the date of such event to and including the conversion date, retained such securities receivable by them as aforesaid during such period giving application to all adjustments called for during such period, under this paragraph with respect to the rights of the holders of the Series AA Preferred Stock.

(g)           Adjustment for Reclassification, Exchange, or Substitution.  If the Common Stock issuable upon the conversion of the Series AA Preferred Stock shall be changed into

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the same or a different number of shares of any class or classes of stock, whether by capital reorganization, reclassification or otherwise (other than a subdivision or combination of shares or stock dividend provided for above, or a reorganization, merger, consolidation, or sale of assets provided for below), then and in each such event the holder of each such share of Series AA Preferred Stock shall have the right thereafter to convert such share into the kind and amount of shares of stock and other securities and property receivable upon such reorganization, reclassification, or other change, by holders of the number of shares of Common Stock into which such shares of Series AA Preferred Stock might have been converted immediately prior to such reorganization, reclassification, or change, all subject to further adjustment as provided herein.

(h)           Adjustment for Merger or Reorganization.  In case of any consolidation or merger of the Corporation with or into another corporation which does not cause a Liquidation, each share of Series AA Preferred Stock shall thereafter be convertible into the kind and amount of shares of stock or other securities or property to which a holder of the number of shares of Common Stock of the Corporation deliverable upon conversion of such Series AA Preferred Stock would have been entitled upon such consolidation or merger; and, in such case, appropriate adjustment (as determined in good faith by the Board) shall be made in the application of the provisions in this Section 4 set forth with respect to the rights and interest thereafter of the holders of the Series AA Preferred Stock, to the end that the provisions set forth in this Section 4 (including provisions with respect to changes in and other adjustments of the Conversion Price) shall thereafter be applicable, as nearly as reasonably may be, in relation to any shares of stock or other property thereafter deliverable upon the conversion of the Series AA Preferred Stock.

(i)            No Impairment.  The Corporation will not, by amendment of its Charter or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Corporation, 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 Series AA Conversion Rights of the holders of Series AA Preferred Stock against impairment.

(j)            Notice of Record Date.  In the event:

(i)            that the Corporation declares a dividend (or any other distribution) on its Common Stock payable in Common Stock or other securities of the Corporation;

(ii)           that the Corporation subdivides or combines its outstanding shares of Common Stock;

(iii)          of any reclassification of the Common Stock of the Corporation (other than a subdivision or combination of its outstanding shares of

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Common Stock or a stock dividend or stock distribution thereon), or of any consolidation or merger of the Corporation into or with another corporation; or

(iv)          of the Liquidation of the Corporation;

then the Corporation shall cause to be filed at its principal office or at the office of the transfer agent of the Series AA Preferred Stock, and shall cause to be mailed to the holders of the Series AA Preferred Stock at their last addresses as shown on the records of the Corporation or such transfer agent, at least ten (10) days prior to the record date specified in (A) below or twenty (20) days before the date specified in (B) below, a notice stating:

(A)          the record date of such dividend, distribution, subdivision or combination, 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, subdivision or combination are to be determined, or

(B)          the date on which such reclassification, consolidation, merger, or Liquidation 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 shares of Common Stock for securities or other property deliverable upon such reclassification, consolidation, merger, or Liquidation.

(k)           Certificate as to Adjustments.  Upon the occurrence of each adjustment or readjustment pursuant to this Section 4, the Corporation at its expense shall promptly compute such adjustment or readjustment in accordance with the terms hereof and furnish to each holder of Series AA Preferred Stock a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based.  The Corporation shall, upon the written request at any time of any holder of Series AA Preferred Stock, furnish or cause to be furnished to such holder a similar certificate setting forth (i) such adjustments and readjustments; (ii) the Series AA Conversion Price then in effect; and (iii) the number of shares of Common Stock and the amount, if any, of other property which then would be received upon the conversion of Series AA Preferred Stock.

Section 5.              Exclusion of Other Rights.  Except as set forth in the Charter and the Stockholders Agreement, the Series AA Preferred Stock shall not have any preferences or other rights, restrictions, limitations as to dividends or other distributions, qualifications or terms or conditions of redemption.

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Section 6.              Mandatory Conversion of Series AA Preferred Stock.

(a)           (i)  Upon written request of the holders of more than two-thirds (²/₃) of the then outstanding shares of the Series AA Preferred Stock, voting together as a single class, the Corporation shall convert all of the outstanding shares of Series AA Preferred Stock into shares of Common Stock in accordance with Section 4 and (ii) upon the closing of a Qualified Initial Public Offering, all of the Series AA Preferred Stock then outstanding shall automatically be converted into shares of Common Stock at the Series AA Conversion Price (subject to appropriate adjustment in accordance with Section 4) in accordance with Section 4.

(b)           If so required by the Corporation, certificates surrendered for conversion shall be endorsed or accompanied by written instrument or instruments of transfer, in form satisfactory to the Corporation, duly executed by the registered holder or by his or its attorney duly authorized in writing.  As soon as practicable after the date of such conversion and the surrender of the certificate or certificates for Series AA Preferred Stock, the Corporation shall cause to be issued and delivered to such holder, or on his or its written order, a certificate or certificates for the number of shares of Common Stock issuable on such conversion in accordance with the provisions hereof.  Upon any such conversion, no adjustment to the Series AA Conversion Price shall be made for any accrued and unpaid dividends on the Series AA Preferred Stock converted.

EIGHT:  For purposes of Article Ninth below, the following terms shall have the respective meanings indicated:

“Additional Shares of Common Stock” means all shares of Common Stock issued (or, pursuant to Section 4(c)(ii) of Article Ninth, deemed to be issued) by the Corporation after the Series CC Original Issue Date, other than (a) shares of Common Stock issued or issuable upon the conversion of shares of the Series AA Preferred Stock or Series CC Preferred Stock; (b) shares of Common Stock issued or issuable by reason of a dividend, stock split or other distribution that is covered by Section 4(d), 4(e) or 4(f) of Article Ninth below; (c) (c) shares of Common Stock issued as consideration (and not as financing) for any business combination between the Corporation and another corporation or entity approved by the Board of Directors; (d) shares of Common Stock or Series AA Preferred Stock issued or issuable to employees, directors or consultants of the Corporation pursuant to a plan or arrangement approved by the Board (provided that the Board shall also approve the grant of shares of Common Stock or Series AA Preferred Stock or other securities exercisable for such shares of Common Stock or Series AA Preferred Stock in connection therewith); (e) shares of Common Stock issued in connection with a Liquidation approved in accordance with Article Twelfth; (f) shares of Common Stock issued or issuable to commercial banking or equipment lease financing entities in connection with banking or lease financing transactions approved by the Board; and (g) shares of Common Stock issued or issuable upon the conversion of shares of Series AA Preferred Stock issued in exchange for shares of Series BB Preferred Stock or warrants to purchase shares of Series BB Preferred Stock.

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“Convertible Securities” means any stock, evidences of indebtedness or other securities of the Corporation directly or indirectly convertible into or exchangeable for Additional Shares of Common Stock.

“Liquidation” has the meaning set forth in Article Eleventh.

“Options” means rights, options or warrants to subscribe for, purchase or otherwise acquire Common Stock or Convertible Securities.

“Qualified Initial Public Offering” means the closing of a firm commitment underwritten public offering, pursuant to an effective registration statement under the Securities Act of 1933, as amended (the “Securities Act”), covering the offer and sale of Common Stock to the public that raises gross proceeds for the Corporation of at least $75,000,000 and at an initial price per share to the public at least equal to two and one-half (2½) times the then-applicable Series CC Conversion Price.

“Qualified Sale Transaction” has the meaning set forth in Article Eleventh.

“Recapitalization Events” means stock splits, stock dividends, combinations, recapitalizations, reclassifications, mergers, consolidations and other similar events affecting the Corporation’s capital stock.

“Series CC Conversion Price” means  $1.592 per share (subject to adjustment as provided in Section 4 of Article Ninth).

“Series CC Conversion Value” means the original Series CC Stated Value.

“Series CC Conversion Date” shall have the meaning set forth in Section 4(b) of Article Ninth.

“Series CC Conversion Ratio” shall have the meaning set forth in Section 4(a) of Article Ninth.

“Series CC Original Issue Date” means the date on which the Corporation first issued any shares of Series CC Preferred Stock.

“Series CC Stated Value” means $1.592 per share (subject to appropriate adjustment for any Recapitalization Event).

NINTH:  The Series CC Preferred Stock shall be subject to all of the provisions of the Corporation’s Charter relating to the capital stock of the Corporation generally and shall have the following preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends, qualifications and terms and conditions of redemption (section references below are to the corresponding sections in this Article Ninth):

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Section 1.              Rank.  The Series CC Preferred Stock will, with respect to dividend rights and rights upon Liquidation, rank:  (a) senior to (i) the Common Stock and (ii) the Series AA Preferred Stock.

Section 2.              Dividend Rate; Series CC Dividend Payment Date.

(a)           The holders of shares of the Series CC Preferred Stock shall be entitled to receive, when, as and if authorized by the Board of Directors and declared by the Corporation, out of funds legally available for the payment of dividends, cumulative dividends at the rate of 8.00% per annum. Dividends on each share of Series CC Preferred Stock shall accrue monthly and be cumulative from and including the date on which such share of Series CC Preferred Stock was first issued.

(b)           Notwithstanding anything contained herein to the contrary, dividends on the Series CC Preferred Stock shall accrue whether or not the Corporation has earnings, whether or not there are funds legally available for the payment of such dividends, and whether or not such dividends are authorized or declared.

(c)           No dividends shall be declared or paid or set apart for payment and no other distribution of cash or other property may be declared or made, directly or indirectly, on or with respect to any shares of Common Stock or shares of Series AA Preferred Stock (other than a dividend paid in shares of Common Stock) for any period, nor shall any shares of capital stock be redeemed, purchased or otherwise acquired for any consideration (other than the repurchase of shares of capital stock from former employees in connection with the termination of their employment and other than as set forth in Article Tenth) and no other distribution of cash or other property may be made, directly or indirectly, on or with respect thereto by the Corporation, unless full cumulative dividends on the Series CC Preferred Stock shall have been or contemporaneously are declared and paid.

(d)           Any dividend payment made on the Series CC Preferred Stock shall first be credited against the earliest accrued but unpaid dividends due with respect to such shares which remains payable.

(e)           In the event the Corporation shall declare, pay or set aside any dividends with respect to any Common Stock, the holders of the Series CC Preferred Stock then outstanding shall first receive, or contemporaneously receive, a dividend on each outstanding share of Series CC Preferred Stock equal to the product of (i) the dividend payable on each share of Common Stock, multiplied by (ii) the number of shares of Common Stock then issuable upon conversion of a share of Series CC Preferred Stock, in each case calculated on the record date for determination of holders entitled to receive such dividend.

Section 3.              Voting Rights.

(a)           The Corporation shall not take, and shall not permit any subsidiary of the Corporation to take, whether by merger, consolidation or otherwise, any of the following

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actions without the written consent or affirmative vote of stockholders representing a majority of the then outstanding shares of Series CC Preferred Stock voting together as a single class:

(i)            amend, alter, modify or repeal the articles of incorporation, bylaws or other organic or organizational documents of the Corporation or any of its subsidiaries, whether by merger, consolidation or otherwise, in any manner that would have an adverse effect on the rights, powers, preferences or privileges of the Series CC Preferred Stock;

 (ii)          issue, authorize or sell any preferred stock (or any options, warrants or similar participation rights to purchase such preferred stock) ranking senior to or on parity with the Series CC Preferred Stock as to dividend rights, voting rights and/or rights upon a Liquidation;

(iii)          increase the size of the Board, except as contemplated by Article 3 of the Stockholders Agreement;

(iv)          any action, whether by merger, consolidation or otherwise, that would adversely affect, in any material respect, the preferences, special rights, privileges or powers of the Series CC Preferred Stock;

(v)           take any action that would increase or decrease the number of authorized shares of Series CC Preferred Stock;

(vi)          substantially change the business in which the Corporation or any of its subsidiaries engages as of the Series CC Original Issue Date;

(vii)         issue any equity securities of the Corporation within a fiscal year having an aggregate fair market value (as determined in good faith by the Board of Directors of the Corporation) in excess of $10,000,000;

(viii)        redeem, purchase, retire or otherwise acquire for value, any shares of the capital stock of the Corporation or any shares of the capital stock of any subsidiary of the Corporation (other than the payment of dividends or distributions, or other payments in redemption, made by such subsidiary solely to the Corporation and other than the repurchase of shares from former employees in connection with the termination of their employment or other than pursuant to Article Tenth);

(ix)           declare or distribute any dividends with respect to the Common Stock, except for dividends or distributions payable solely in additional shares of Common Stock;

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(x)            incur indebtedness for borrowed money, individually or in the aggregate, in excess of $10,000,000; or

(xi)           issue any shares of Series BB Preferred Stock.

(b)           The Corporation shall not permit any of its subsidiaries to take any action which, if taken by the Corporation, would require the consent of the holders of at least a majority of the then outstanding Series CC Preferred Stock in accordance with the subsection (a) of this Section 3.

(c)           Notwithstanding anything herein to the contrary, the Corporation shall not engage in any Liquidation at any time between the Series CC Original Issue Date and the second anniversary of the Series CC Original Issue Date (inclusive), if

(i)            the amount of proceeds to paid in respect of a share of Series CC Preferred Stock in connection with such Liquidation is less than two (2) times the Series CC Stated Value; and

(ii)           stockholders representing at least seventy-five percent (75%) of the then outstanding shares of Series CC Preferred Stock vote against the approval of such Liquidation or otherwise provide written notice to the Corporation of their opposition to the consummation of such Liquidation.

Section 4.              Conversion.  The holders of the Series CC Preferred Stock shall have conversion rights as follows (the “Series CC Conversion Rights”):

(a)           Right to Convert. Each share of Series CC Preferred Stock shall be convertible, at the option of the holder thereof, at any time and from time to time, into such number of fully paid and nonassessable shares of Common Stock as determined by dividing the Series CC Conversion Value by the Series CC Conversion Price (subject to appropriate adjustment in accordance with this Section 4) (the “Series CC Conversion Ratio”).  No additional consideration shall be paid by a holder of Series CC Preferred Stock upon exercise of the Series CC Conversion Rights.  Upon any such conversion, no adjustment to the Series CC Conversion Price shall be made for any accrued and unpaid dividends on the Series CC Preferred Stock converted.

(b)           Mechanics of Conversion.  In order for a holder of Series CC Preferred Stock to convert shares of Series CC Preferred Stock into shares of Common Stock, such holder shall surrender the certificate or certificates for such shares of Series CC Preferred Stock, at the office of the transfer agent for the Series CC Preferred Stock (or at the principal office of the Corporation if the Corporation serves as its own transfer agent), together with written notice that such holder elects to convert all or any number of the shares of Series CC Preferred Stock represented by such certificate or certificates.  If required by the Corporation, certificates surrendered for conversion shall be endorsed or accompanied by a written

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instrument or instruments of transfer, in form satisfactory to the Corporation, duly executed by the registered holder or his or its attorney duly authorized in writing.  The date of receipt of such certificates and notice by the transfer agent (or by the Corporation if the Corporation serves as its own transfer agent) shall be the conversion date (the “Series CC Conversion Date”).  The Corporation shall, as soon as practicable after the Series CC Conversion Date, issue and deliver at such office to such holder of Series CC Preferred Stock a certificate or certificates for the number of whole shares of Common Stock to which such holder shall be entitled.  As of the Series CC Conversion Date, the person entitled to receive certificates of Common Stock shall be regarded for all corporate purposes as the holder of the number of whole shares of Common Stock to which he or it is entitled upon the conversion.

(c)           Adjustments to Conversion Price for Diluting Issues.

(i)            No Adjustment of Conversion Price.  No adjustment in the number of shares of Common Stock into which the Series CC Preferred Stock is convertible shall be made, by adjustment in the applicable Series CC Conversion Price thereof:  (A) unless the consideration per share (determined pursuant to Section 4(c)(iv)) for an Additional Share of Common Stock issued or deemed to be issued by the Corporation is less than the applicable Series CC Conversion Price in effect on the date of, and immediately prior to, the issuance of such Additional Share of Common Stock, or (B) if prior to such issuance, the Corporation receives written notice from the holders of at least a majority of the then outstanding shares of Series CC Preferred Stock agreeing that no such adjustment shall be made as the result of the issuance of such Additional Shares of Common Stock.

(ii)           Issuance of Securities Deemed Issuance of Additional Shares of Common Stock.  If the Corporation at any time or from time to time after the Series CC Original Issue Date shall issue any Convertible Securities or Options (excluding Options or Convertible Securities which, upon exercise, conversion or exchange thereof, would entitle the holder thereof to receive shares of Common Stock which are specifically excepted from the definition of Additional Shares of Common Stock) or shall fix a record date for the determination of holders of any class of securities entitled to receive any such Convertible Securities or Options, then the maximum number of shares of Common Stock (as set forth in the instrument relating thereto without regard to any provision contained therein for a subsequent adjustment of such number) issuable upon the exercise of such Options or, in the case of Convertible Securities and Options therefor, the conversion or exchange of such Convertible Securities, shall be deemed to be Additional Shares of Common Stock issued as of the time of such issuance or, in case such a record date shall have been fixed, as of the close of business on such record date, provided

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that Additional Shares of Common Stock shall not be deemed to have been issued unless the consideration per share (determined pursuant to Section 4(c)(iv)) of such Additional Shares of Common Stock would be less than the Series CC Conversion Price in effect on the date of and immediately prior to such issuance, or such record date, as the case may be, and provided that in any such case in which Additional Shares of Common Stock are deemed to be issued:

(1)           no further adjustment in the Series CC Conversion Price shall be made upon the subsequent issuance of Convertible Securities or shares of Common Stock upon the exercise of such Options or conversion or exchange of such Convertible Securities;

(2)           if such Options or Convertible Securities by their terms provide, with the passage of time or otherwise, for any increase in the consideration payable to the Corporation, or decrease in the number of shares of Common Stock issuable, upon the exercise, conversion or exchange thereof, the Series CC Conversion Price computed upon the original issuance thereof (or upon the occurrence of a record date with respect thereto), and any subsequent adjustments based thereon, shall, upon any such increase or decrease becoming effective, be recomputed to reflect such increase or decrease insofar as it affects such Options or the rights of conversion or exchange under such Convertible Securities;

(3)           no readjustment pursuant to clause (2) above shall have the effect of increasing the Series CC Conversion Price to an amount which exceeds the Series CC Conversion Price on the original adjustment date; and

(4)           in the event of any change in the number of shares of Common Stock issuable upon the exercise, conversion or exchange of any Option or Convertible Security other than as a result of any exercise thereof, including, but not limited to, a change resulting from the anti-dilution provisions thereof, the Series CC Conversion Price then in effect shall forthwith be readjusted to such Series CC Conversion Price as would have been obtained had the adjustment which was made upon the issuance of such Options or Convertible Security not exercised or converted prior to such change been made upon the basis of such change, but no further adjustment shall be made for the actual issuance of Common Stock upon the

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exercise or conversion of any such Option or Convertible Security.

Upon the expiration of any such Options or any rights of conversion or exchange under such Convertible Securities which shall not have been exercised, the Series CC Conversion Price computed upon the issuance thereof (or upon the occurrence of a record date with respect thereto), and any subsequent adjustments based thereon, shall, upon such expiration, be recomputed as if:

(x)            in the case of Convertible Securities or Options for Common Stock, the only Additional Shares of Common Stock issued were the shares of Common Stock, if any, actually issued upon the exercise of such Options or the conversion or exchange of such Convertible Securities and the consideration received therefor was the consideration actually received by the Corporation upon such exercise of such Options; or for the issue of all such Convertible Securities which were actually converted or exchanged, plus the additional consideration, if any, actually received by the Corporation upon such conversion or exchange; and

(y)           in the case of Options for Convertible Securities, only the Convertible Securities, if any, actually issued upon the exercise thereof were issued at the time of issue of such Options, and the consideration received by the Corporation for the Additional Shares of Common Stock deemed to have been then issued was the consideration actually received by the Corporation for the issue of all such Options, whether or not exercised, plus the consideration deemed to have been received by the Corporation upon the issue of the Convertible Securities with respect to which such Options were actually exercised.

(iii)          Adjustment of Conversion Price Upon Issuance of Additional Shares of Common Stock.  In the event the Corporation shall at any time after the Series CC Original Issue Date issue Additional Shares of Common Stock (including Additional Shares of Common Stock deemed to be issued pursuant to Section 4(c)(ii)), without consideration or for a consideration per share (determined pursuant to Section 4(c)(iv) hereof) less than the Series CC Conversion Price in effect on the date of and immediately prior to such issuance, then and in each such case, such Series CC Conversion Price shall be reduced, concurrently with such issuance, to a price (calculated to the nearest hundredth of a cent) determined by multiplying the Series CC

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Conversion Price by a fraction:

(1)           the numerator of which is the amount of Common Stock outstanding immediately before such issuance plus the amount of Common Stock that the aggregate consideration received by the Corporation for the Additional Shares of Common Stock would purchase at the Series CC Conversion Price in effect immediately before such issuance; and

(2)           the denominator of which is the Common Stock outstanding immediately before such issuance plus the number of such Additional Shares of Common Stock;

provided, that for purposes of this Section 4(c)(iii), all shares of Common Stock issuable upon exercise of options and warrants outstanding immediately prior to such issuance or upon conversion of the Series AA Preferred Stock and Series CC Preferred Stock shall be deemed to be outstanding.

(iv)          Determination of Consideration.  For purposes of this Section 4(c), the consideration received by the Corporation for the issuance of any Additional Shares of Common Stock shall be computed as follows:

(1)           Cash and Property.  Such consideration shall:

(a)           insofar as it consists of cash, be computed at the aggregate amount of cash received by the Corporation, excluding amounts paid or payable for accrued interest or accrued dividends;

(b)           insofar as it consists of property other than cash, be computed at the fair market value thereof at the time of such issuance, as determined in good faith by the Board; and

(c)           in the event Additional Shares of Common Stock are issued together with other shares of securities or other assets of the Corporation for consideration which covers both, be the proportion of such consideration so received, computed as provided in clauses (a) and (b) above, as determined in good faith by the Board.

(2)           Options and Convertible Securities.  The consideration per share received by the Corporation for Additional Shares of Common Stock deemed to have been issued pursuant to

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Section 4(c)(ii), relating to Options and Convertible Securities, shall be determined by dividing:

(a)           the total amount, if any, received or receivable by the Corporation as consideration for the issuance of such Options or Convertible Securities, plus the minimum aggregate amount of additional consideration (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such consideration) payable to the Corporation upon the exercise of such Options or the conversion or exchange of such Convertible Securities, or in the case of Options for Convertible Securities, the exercise of such Options for Convertible Securities and the conversion or exchange of such Convertible Securities, by

(b)           the maximum number of shares of Common Stock (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such number) issuable upon the exercise of such Options or the conversion or exchange of such Convertible Securities.

(d)           Adjustment for Stock Splits and Combinations.  If the Corporation shall at any time or from time to time after the Series CC Original Issue Date effect a subdivision of the outstanding Common Stock, the Series CC Conversion Price then in effect immediately before that subdivision shall be proportionately decreased.  If the Corporation shall at any time or from time to time after the Series CC Original Issue Date combine the outstanding shares of Common Stock, the Series CC Conversion Price then in effect immediately before the combination shall be proportionately increased.  Any adjustment under this paragraph shall become effective at the close of business on the date the subdivision or combination becomes effective.

(e)           Adjustment for Certain Dividends and Distributions.  In the event the Corporation at any time or from time to time after the Series CC Original Issue Date, shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in additional shares of Common Stock, then and in each such event the Series CC Conversion Price then in effect shall be decreased as of the time of such issuance or, in the event such a record date shall have been fixed, as of the close of business on such record date, by multiplying the Series CC Conversion Price for the Series CC Preferred Stock then in effect by a fraction:

(i)            the numerator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time

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of such issuance or the close of business on such record date, and

(ii)           the denominator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date plus the number of shares of Common Stock issuable in payment of such dividend or distribution; provided, however, if such record date shall have been fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed therefor, the Series CC Conversion Price for the Series CC Preferred Stock shall be recomputed accordingly as of the close of business on such record date and thereafter the Series CC Conversion Price for the Series CC Preferred Stock shall be adjusted pursuant to this paragraph as of the time of actual payment of such dividends or distributions.

(f)            Adjustments for Other Dividends and Distributions.  In the event the Corporation at any time or from time to time after the Series CC Original Issue Date shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in securities of the Corporation other than shares of Common Stock, then and in each such event provision shall be made so that the holders of the Series CC Preferred Stock shall receive upon conversion thereof in addition to the number of shares of Common Stock receivable thereupon, the amount of securities of the Corporation that they would have received had their Series CC Preferred Stock been converted into Common Stock on the date of such event and had they thereafter, during the period from the date of such event to and including the conversion date, retained such securities receivable by them as aforesaid during such period giving application to all adjustments called for during such period, under this paragraph with respect to the rights of the holders of the Series CC Preferred Stock.

(g)           Adjustment for Reclassification, Exchange, or Substitution.  If the Common Stock issuable upon the conversion of the Series CC Preferred Stock shall be changed into the same or a different number of shares of any class or classes of stock, whether by capital reorganization, reclassification or otherwise (other than a subdivision or combination of shares or stock dividend provided for above, or a reorganization, merger, consolidation, or sale of assets provided for below), then and in each such event the holder of each such share of Series CC Preferred Stock shall have the right thereafter to convert such share into the kind and amount of shares of stock and other securities and property receivable upon such reorganization, reclassification, or other change, by holders of the number of shares of Common Stock into which such shares of Series CC Preferred Stock might have been converted immediately prior to such reorganization, reclassification, or change, all subject to further adjustment as provided herein.

(h)           Adjustment for Merger or Reorganization.  In case of any consolidation or merger of the Corporation with or into another corporation which does not cause a Liquidation, each share of Series CC Preferred Stock shall thereafter be convertible into the

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kind and amount of shares of stock or other securities or property to which a holder of the number of shares of Common Stock of the Corporation deliverable upon conversion of such Series CC Preferred Stock would have been entitled upon such consolidation or merger; and, in such case, appropriate adjustment (as determined in good faith by the Board) shall be made in the application of the provisions in this Section 4 set forth with respect to the rights and interest thereafter of the holders of the Series CC Preferred Stock, to the end that the provisions set forth in this Section 4 (including provisions with respect to changes in and other adjustments of the Conversion Price) shall thereafter be applicable, as nearly as reasonably may be, in relation to any shares of stock or other property thereafter deliverable upon the conversion of the Series CC Preferred Stock.

(i)            No Impairment.  The Corporation will not, by amendment of its Charter or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Corporation, 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 Series CC Conversion Rights of the holders of Series CC Preferred Stock against impairment.

(j)            Notice of Record Date.  In the event:

(i)            that the Corporation declares a dividend (or any other distribution) on its Common Stock payable in Common Stock or other securities of the Corporation;

(ii)           that the Corporation subdivides or combines its outstanding shares of Common Stock;

(iii)          of any reclassification of the Common Stock of the Corporation (other than a subdivision or combination of its outstanding shares of Common Stock or a stock dividend or stock distribution thereon), or of any consolidation or merger of the Corporation into or with another corporation; or

(iv)          of the Liquidation of the Corporation;

then the Corporation shall cause to be filed at its principal office or at the office of the transfer agent of the Series CC Preferred Stock, and shall cause to be mailed to the holders of the Series CC Preferred Stock at their last addresses as shown on the records of the Corporation or such transfer agent, at least ten (10) days prior to the record date specified in (A) below or twenty (20) days before the date specified in (B) below, a notice stating:

(A)          the record date of such dividend, distribution, subdivision or combination, or, if a record is not to be taken, the date as of which the

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holders of Common Stock of record to be entitled to such dividend, distribution, subdivision or combination are to be determined, or

(B)           the date on which such reclassification, consolidation, merger, or Liquidation 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 shares of Common Stock for securities or other property deliverable upon such reclassification, consolidation, merger, or Liquidation.

(k)           Certificate as to Adjustments.  Upon the occurrence of each adjustment or readjustment pursuant to this Section 4, the Corporation at its expense shall promptly compute such adjustment or readjustment in accordance with the terms hereof and furnish to each holder of Series CC Preferred Stock a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based.  The Corporation shall, upon the written request at any time of any holder of Series CC Preferred Stock, furnish or cause to be furnished to such holder a similar certificate setting forth (i) such adjustments and readjustments; (ii) the Series CC Conversion Price then in effect; and (iii) the number of shares of Common Stock and the amount, if any, of other property which then would be received upon the conversion of Series CC Preferred Stock.

Section 5.              Exclusion of Other Rights.  Except as set forth in the Charter and the Stockholders Agreement, the Series CC Preferred Stock shall not have any preferences or other rights, restrictions, limitations as to dividends or other distributions, qualifications or terms or conditions of redemption.

Section 6.              Mandatory Conversion of Series CC Preferred Stock.

(a)           All of the Series CC Preferred Stock then outstanding shall be converted into shares of Common Stock at the Series CC Conversion Price (as adjusted) in accordance with Section 4:

(i)            automatically upon the closing of a Qualified Initial Public Offering; or

(ii)           by the Corporation upon written request of the holders of a majority of the then outstanding shares of the Series CC Preferred Stock.

(b)           If so required by the Corporation, certificates surrendered for conversion shall be endorsed or accompanied by written instrument or instruments of transfer, in form satisfactory to the Corporation, duly executed by the registered holder or by his or its attorney duly authorized in writing.  As soon as practicable after the date of such conversion and the surrender of the certificate or certificates for Series CC Preferred Stock, the Corporation shall cause to be issued and delivered to such holder, or on his or its written order, a certificate or

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certificates for the number of shares of Common Stock issuable on such conversion in accordance with the provisions hereof.  Upon any such conversion, no adjustment to the Series CC Conversion Price shall be made for any accrued and unpaid dividends on the Series CC Preferred Stock converted.

TENTH. Redemption.

Section 1.              Series CC Preferred Stock.

(a)           Redemption Price.  As used herein, “Series CC Redemption Price” means, for each share of Series CC Preferred Stock, an amount equal to the Series CC Liquidation Preference (as defined in Article Eleventh) as of the Series CC Redemption Date (as defined below).  For purposes of calculating the Series CC Liquidation Preference as of the Series CC Redemption Date, clause (ii) of the definition of Series CC Liquidation Preference shall be determined by multiplying (A) the Series CC Conversion Ratio (as defined in Article Ninth) and (B)  the fair market value of the Common Stock as of the Series CC Redemption Date, assuming all shares of Preferred Stock were converted into shares of Common Stock pursuant to the terms of these Sixth Articles of Amendment and Restatement immediately prior to the Series CC Redemption Date.  The fair market value of the shares of Common Stock shall be determined by an independent appraiser selected by the Corporation and approved by a majority of the holders of the Series CC Preferred Stock.

(b)           Redemption Option.  At any time after the fifth (5th) anniversary of the Series CC Original Issue Date (as defined in Article Eighth), upon the written request (a “Series CC Redemption Request”) of any holder of Series CC Preferred Stock, the Corporation shall redeem from such holders all, but not less than all, of the then issued and outstanding shares of Series CC Preferred Stock held by such holder ( “Series CC Redemption Shares”) at the Series CC Redemption Price.  Upon its receipt of a Series CC Redemption Request, the Corporation shall, within ten (10) days of its receipt of such request, send to (i) each holder of Series CC Preferred Stock, with respect to whose shares no Series CC Redemption Request has been delivered to the Company, and (ii) each holder of Series AA Preferred Stock written notice indicating that a Series CC Redemption Request has been received by the Company and listing the number of shares of Series CC Preferred Stock subject to the Series CC Redemption Request (each such notice, a “Series CC Redemption Request Notice”).  If the Company subsequently receives, within twenty (20) days following delivery of the relevant Series CC Redemption Request Notice (an “Applicable Redemption Request Deadline”), a Series CC Redemption Request from any holder of Series CC Preferred Stock or a Series AA Redemption Request from a requisite number of holders of Series AA Preferred Stock pursuant to Section 2(b) of this Article Tenth, then all such Series CC Redemption Requests and such Series AA Redemption Request shall be treated by the Corporation as if the Corporation had received all such requests simultaneously (the redemption of all shares of Series AA Preferred Stock and Series CC Preferred Stock pursuant to such requests (including the initial Series CC Redemption Request) is hereinafter referred to as an “Applicable Redemption”).  The date of redemption shall be on a date selected by the Corporation that is no later than 180 days after receipt by the Corporation of

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the initial Series CC Redemption Request (an “Applicable Redemption Date”).

(c)           Manner of Redemption.  In the event the Corporation becomes obligated to redeem any Series CC Redemption Shares pursuant to subsection (b) above, or any Series AA Redemption Shares pursuant to Section 2(b) of this Article Tenth, the Corporation shall send written notice of such obligation to each holder of record of such shares following the Applicable Redemption Request Deadline and at least thirty (30) days prior to the Applicable Redemption Date, which notice shall set forth the following: (i) the number of shares to be redeemed by the Corporation from such stockholder; (ii) the aggregate number of Series CC Redemption Shares  and Series AA Redemption Shares, as applicable, to be redeemed from all the holders thereof; (iii) the Applicable Redemption Date; (iv) the Series CC Redemption Price or Series AA Redemption Price, as applicable, per share; and (v) instructions to the holders thereof to surrender all certificates evidencing the Series CC Redemption Shares and Series AA Redemption Shares, as applicable, to the Corporation at its principal office (or such other place as may be designated in the notice by the Corporation); provided, however, that the failure of the Corporation to deliver such notice shall not relieve the Corporation of its obligation to redeem the Series CC Redemption Shares and Series AA Redemption Shares, as applicable, pursuant to the terms of this Article Tenth.

Section 2.              Series AA Preferred Stock.

(a)           Redemption Price.  As used herein, “Series AA Redemption Price” means, for each share of Series AA Preferred Stock, an amount equal to the Series AA Liquidation Preference (as defined in Article Eleventh) as of the Series AA Redemption Date (as defined below).  For purposes of calculating the Series AA Liquidation Preference as of the Series AA Redemption Date, clause (ii) of the definition of Series AA Liquidation Preference shall be determined by multiplying (A) the Series AA Conversion Ratio (as defined in Article Seventh) and (B)  the fair market value of the Common Stock as of the Series AA Redemption Date, assuming all shares of Preferred Stock were converted into shares of Common Stock pursuant to the terms of these Sixth Articles of Amendment and Restatement immediately prior to the Series AA Redemption Date.  The fair market value of the shares of Common Stock shall be determined by an independent appraiser selected by the Corporation and approved by a majority of the holders of the Series AA Preferred Stock; provided, however, that in the event that shares of Series CC Preferred Stock are to be redeemed on the same Applicable Redemption Date, the independent appraiser shall be selected by the Corporation and approved by a majority of the holders of the Series CC Preferred Stock.

(b)           Redemption Option.  At any time after the fifth (5th) anniversary of the Series CC Original Issue Date, upon the written request of the holders of more than sixty-six percent (66%) of the then outstanding shares of the Series AA Preferred Stock (a “Series AA Redemption Request”), the Corporation shall redeem from the holders thereof all, but not less than all, of the then issued and outstanding shares of Series AA Preferred Stock (collectively, the “Series AA Redemption Shares”) at the Series AA Redemption Price.  Upon its receipt of a Series AA Redemption Request from a requisite number of holders of Series AA Preferred Stock pursuant to Section 2(b) of this Article Tenth, the Corporation

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shall, within ten (10) days of its receipt of such request, send to each holder of Series CC Preferred Stock, with respect to whose shares no Series CC Redemption Request has been delivered to the Company, written notice indicating that a Series AA Redemption Request has been received by the Company (each such notice, a “Series AA Redemption Request Notice”).  If the Company subsequently receives, within twenty (20) days following delivery of the Series AA Redemption Request notice (an “Applicable Redemption Request Deadline”), a Series CC Redemption Request from any holder of Series CC Preferred Stock, then the Series AA Redemption Request and all such Series CC Redemption Requests shall be treated by the Corporation as if the Corporation had received all such requests simultaneously (the redemption of all shares of Series AA Preferred Stock and Series CC Preferred Stock pursuant to such requests (including the initial Series AA Redemption Request) is hereinafter referred to as an “Applicable Redemption”). The date of redemption shall be on a date selected by the Corporation that is no later than 180 days after receipt by the Corporation of the Series AA Redemption Request (an “Applicable Redemption Date”).

(c)           Manner of Redemption.  In the event the Corporation becomes obligated to redeem the Series AA Redemption Shares pursuant to subsection (b) above, the Corporation shall send written notice of its intent or obligation to do so to each holder of record of such shares in accordance with Section 1(c) of this Article Tenth.

Section 3.              Rank.  Notwithstanding anything herein to the contrary, the Corporation shall not pay any portion of the redemption price in respect of any Series AA Redemption Shares redeemed in an Applicable Redemption unless all unpaid amounts the Corporation is then obligated to pay in respect of all Series CC Redemption Shares redeemed in such Applicable Redemption or any redemption occurring prior to such Applicable Redemption (including the total amount of principal and interest then outstanding under any Redemption Notes (as defined below) issued in respect of Series CC Redemption Shares) are first paid in full.

Section 4.              Effect of Redemption.  Upon receipt of notice of redemption from the Corporation pursuant to Section 1(c) of this Article Tenth, as applicable (in each case, a “Redemption Notice”), each holder of Series AA Redemption Shares or Series CC Redemption Shares, as applicable (in each case, “Redemption Shares”) shall surrender to the Corporation all certificates evidencing the shares to be redeemed as instructed, and, thereupon, the Corporation shall pay the Series AA Redemption Price or Series CC Redemption Price, as applicable (in each case, the “Redemption Price”) for each such share to the order of the holder of the shares so redeemed and each such certificate and the shares evidenced thereby shall be canceled and retired.  No Redemption Shares redeemed by the Corporation shall be reissued by the Corporation.  From and after the Redemption Date set forth in the Corporation’s Redemption Notice, no further dividends shall accrue upon any of the Redemption Shares covered thereby, subject to the redemption thereof on such date.

Section 5.              Funds Insufficient to Effect Redemptions.  If, at any time, the Corporation shall be required to redeem any Redemption Shares, and the Corporation shall not have assets or funds legally available for the redemption of all of the shares required to

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be redeemed in an Applicable Redemption, then the Corporation shall (after giving effect to Section 3 of this Article Tenth) redeem ratably from the holders of the applicable Redemption Shares such number of shares as it shall have funds legally available therefore and shall issue to the holders of the Redemption Shares for which the full Redemption Price has not been paid one-year notes (“Redemption Notes”) bearing interest at 8.0% per annum with such other terms and conditions as the holders of a majority of the holders of the Redemption Shares and the Corporation shall reasonably agree, each with a principal amount equal to the Redemption Price for the Redemption Shares for which the note is delivered.

ELEVENTH: This Article Eleventh sets forth rights, privileges preferences, terms and conditions applicable to (i) the voluntary or involuntary liquidation, dissolution or winding up of the Corporation; or (ii) any Qualified Sale Transaction (as defined below) (any of the foregoing, a “Liquidation”); provided, however, that a reincorporation or like transaction untaken for the sole purpose of changing the Corporation’s domicile shall not be deemed to be a Liquidation.  When used in this Charter: (x) “Acquisition” means a consolidation or merger of the Corporation with or into any other corporation or other entity or person, or an acquisition of assets or other corporate reorganization, in which stockholders of the Corporation immediately prior to such consolidation, merger, acquisition of assets or reorganization, own less than a majority of the common stock, on an as converted, fully-diluted basis of the surviving entity immediately after such consolidation, merger, acquisition of assets or reorganization; (y) “Asset Transfer” means a sale, lease or other disposition of all or substantially all of the assets of the Corporation, in one or more related transactions; and (z) “Qualified Sale Transaction” means an Acquisition or Asset Transfer.

Section 1.              Series CC Liquidation Preference.

(a)           Upon any Liquidation, before any distribution or payment of any Proceeds (defined below) shall be made to holders of shares of Common Stock or Series AA Preferred Stock, the holders of shares of Series CC Preferred Stock shall be entitled to be paid out of the assets of the Corporation legally available for distribution to its stockholders or any consideration or proceeds payable to the Corporation’s stockholders as a result of such Liquidation (collectively, “Proceeds”), an amount of cash or other property per share of Series CC Preferred Stock (the “Series CC Liquidation Preference”), valued in accordance with Section 5 of this Article Eleventh, equal to the greater of:

(i)            the Series CC Stated Value (as defined in Article Eighth), plus the amount of any accrued and unpaid dividends (whether or not declared) on such share of Series CC Preferred Stock; or

(ii)           the amount per share of Series CC Preferred Stock the holder of such share of Series CC Preferred Stock would be entitled to receive if all shares of Preferred Stock were converted into shares of Common Stock pursuant to the terms of these Sixth Articles of Amendment and Restatement immediately prior to such Liquidation.

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(b)             In the event that, upon such Liquidation, the Proceeds available for distribution or payment to the Corporation’s stockholders are insufficient to pay the holders of Series CC Preferred Stock the full amount to which they shall be entitled, then the holders of the Series CC Preferred Stock shall share ratably in any such distribution or payment of Proceeds in proportion to the full preferential payment rights upon a Liquidation to which they would otherwise be respectively entitled.

Section 2.              Series AA Liquidation Preference.

(a)           Upon any Liquidation, after all payments have been made to the holders of the Series CC Preferred Stock pursuant to Section 2 above, but before any distribution or payment of any Proceeds shall be made to holders of shares of Common Stock, the holders of shares of Series AA Preferred Stock shall be entitled to be paid out of the remaining Proceeds, if any, available for distribution to the Corporation’s stockholders an amount of cash or other property per share of Series AA Preferred Stock (the “Series AA Liquidation Preference”), valued in accordance with Section 5 of this Article Eleventh, equal to the greater of (i) the Series AA Stated Value, plus the amount of any accrued and unpaid dividends (whether or not declared) on such share of Series AA Preferred Stock and (ii) the amount per share of Series AA Preferred Stock that the holder of such share of Series AA Preferred Stock would be entitled to receive if all shares of Preferred Stock were converted to shares of Common Stock pursuant to the terms of these Sixth Articles of Amendment and Restatement immediately prior to such Liquidation.

(b)           In the event that, upon such Liquidation, the remaining Proceeds, if any, available for distribution or payment to the Corporation’s stockholders are insufficient to pay the holders of Series AA Preferred Stock the full amount to which they shall be entitled, then the holders of the Series AA Preferred Stock shall share ratably in any such distribution or payment of Proceeds in proportion to the full preferential payment rights upon a Liquidation to which they would otherwise be respectively entitled.

Section 4.  Common Stock Liquidation Payment.  Upon any Liquidation, after all payments have been made to the holders of the Series CC Preferred Stock pursuant to Section 2 above, to the holders of Series AA Preferred Stock pursuant to Section 3 above, the holders of shares of Common Stock shall be entitled to be paid out of the remaining Proceeds, if any, available for distribution to the Corporation’s stockholders for each share of Common Stock, an amount equal to all remaining Proceeds, if any, ratably.

Section 5.  Valuation of Proceeds.  The amount deemed paid or distributed to the holders of capital stock of the Corporation in respect of such capital stock upon any Liquidation shall be the amount of cash or the fair market value of the property, rights or securities paid or distributed to such holders by the Corporation or by the acquiring person, firm or other entity.  Any securities shall be valued as follows:

(a)           Securities not subject to investment letter or other similar restrictions on free marketability:

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(i)            If traded on a securities exchange or The Nasdaq Stock Market, the value shall be based on a formula approved by the Board of Directors and derived from the closing prices of the securities on such exchange or The Nasdaq Stock Market over the 30-day period ending 3 days prior to the closing of such transaction;

(ii)           If (i) above does not apply but the securities are actively traded over-the-counter, the value shall be based on a formula approved by the Board of Directors and derived from the closing bid or sales prices (whichever is applicable) of such securities over the 30-day period ending 3 days prior to the closing of such transaction; and

(iii)          If there is no active public market, the value shall be the fair market value thereof, as determined in good faith by the Board of Directors;

(b)           The method of valuation of securities subject to investment letter or other restrictions on free marketability (other than restrictions arising solely by virtue of a stockholder’s status as an affiliate or former affiliate) shall be to make an appropriate discount from the market value determined as specified above in Section 5(a) to reflect the approximate fair market value thereof, as determined in good faith by the Board of Directors.

(c)           Notwithstanding Sections 5(a) and (b) of this Article Eleventh, in the event such securities are paid or distributed to the holders of capital stock of the Corporation by an entity that is not an affiliate (as defined in Regulation 12B-2 promulgated under the Securities Exchange Act of 1934, as amended) of the Corporation pursuant to a definitive transaction agreement (such as a merger agreement) in which the aggregate value of such securities is determined pursuant to an express formula set forth in such definitive transaction agreement, then the fair market value of such securities shall instead be determined in accordance with the express formula set forth in such definitive transaction agreement.

Section 5.  Notice of Liquidation.  Written notice of any Liquidation stating the payment date or dates when, and the place or places where, the amounts distributable in such circumstances shall be payable, shall be given by first class mail, postage pre-paid, not less than 10 nor more than 90 days prior to the payment date stated therein, to each record holder of shares of Series AA Preferred Stock and each record holder of shares of shares of Series CC Preferred Stock at the respective addresses of such holders as the same shall appear on the stock transfer records of the Corporation.  After payment of the full amount of the liquidating distributions to which they are entitled, the holders of Series AA Preferred Stock and Series CC Preferred Stock (as the case may be) will have no right or claim to any of the remaining assets of the Corporation.

Section 6.  Treatment of Liquidation Obligations.  In determining whether a distribution (other than upon Liquidation), by dividend, redemption or other acquisition of shares of stock of the Corporation or otherwise, is permitted under the Maryland General Corporation Law, amounts that would be needed, if the Corporation were to be dissolved at the time of the distribution, to satisfy the preferential rights upon dissolution of holders of

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shares of Series AA Preferred Stock and Series CC Preferred Stock shall not be added to the Corporation’s total liabilities.

TWELFTH:  Preferred Protective Provisions

(a)           The Corporation shall not take, and shall not permit any subsidiary of the Corporation to take, whether by merger, consolidation or otherwise, any of the following actions without the written consent or affirmative vote of stockholders representing at least sixty percent (60%) of the then outstanding shares of Series CC Preferred Stock and Series AA Preferred Stock voting together as a single class on an as-converted basis:

(i)            amend, alter, modify, waive or repeal the articles of incorporation, bylaws or other organic or organizational documents of the Corporation or any of its subsidiaries, whether by merger, consolidation or otherwise;

(ii)           effect a Liquidation (as defined in Article Eleventh);

(iii)          sell, transfer, lease or dispose of any assets of the Corporation with a value (individually or in the aggregate) in excess of $10,000,000 in one transaction or a series of related transactions; or

(iv)          make, or cause any of its subsidiaries to make, any loan, advance or payment to, or transfer any assets or property to, enter into any contract or amendment of any agreement with, or engage in any other transaction with, any person or entity in which any stockholder, director or other officer of the Corporation, or any of their respective immediate family members or affiliates, has an any interest in excess of $50,000.

(b)           Notwithstanding anything herein to the contrary, the Corporation may, from time to time, without obtaining any prior consent of any stockholder of the Corporation (i) cause any of its wholly-owned subsidiaries to merge into the Corporation, with the Corporation as the surviving corporation, provided, that any such merger shall only be permitted in accordance with the terms of Section 3-106 of the Maryland General Corporation Law and in no event shall such merger adversely affect the preferences, special rights, privileges or powers of the Series AA Preferred Stock or the Series CC Preferred Stock; or (ii) cause any of its wholly-owned subsidiaries to distribute all of such subsidiary’s assets to the Corporation and thereafter terminate the existence of such subsidiary.

THIRTEENTH:  The Corporation shall have seven (7) directors, which number may be increased by the Board pursuant to the bylaws of the Corporation and the Stockholders Agreement.  ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇ constitute the current directors of the Corporation.

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FOURTEENTH:   Indemnification; Limitation of Liability

Section 1.              Mandatory Indemnification.  The Corporation shall indemnify its directors and officers (including its former directors and officers) against any and all liabilities and expenses incurred in connection with their services in such capacities to the maximum extent permitted by the Maryland General Corporation Law, as from time to time amended.

Section 2.              Discretionary Indemnification.  If approved by the Board, the Corporation may indemnify its employees, agents and persons who serve and have served, at its request as a director, officer, partner, trustee, employee or agent of another corporation, partnership, joint venture or other enterprise to the extent determined to be appropriate by the Board.

Section 3.              Advancing Expenses Prior to a Decision.  The Corporation shall advance expenses to its directors and officers entitled to mandatory indemnification to the maximum extent permitted by the Maryland General Corporation Law and may in the discretion of the Board advance expenses to employees, agents and others who may be granted indemnification.

Section 4.              Other Provisions for Indemnification.  The Board may, by bylaw, resolution or agreement, make further provision for indemnification of directors, officers, employees and agents.

Section 5.              Limitation of Liability of Directors and Officers.  To the maximum extent that limitations on the liability of directors and officers are permitted by the Maryland General Corporation Law, as from time to time amended, no director or officer of the Corporation shall have any liability to the Corporation or its stockholders for money damages.  This limitation on liability applies to events occurring at the time a person serves as a director or officer of the Corporation whether or not such person is a director or officer at the time of any proceeding in which liability is asserted.

Section 6.              Effect of Amendment or Repeal.  No amendment or repeal of any section of this Article, or the adoption of any provision of the Corporation’s Articles of Incorporation inconsistent with this Article, shall apply to or affect in any respect the rights to indemnification or limitation of liability of any director or officer of the Corporation with respect to any alleged act or omission which occurred prior to such amendment, repeal or adoption.

FIFTEENTH:   Notwithstanding any provision of law requiring any action to be taken or authorized by the affirmative vote of the holders of a greater proportion of the votes of all classes or of any class of stock of the Corporation, such action shall be effective and valid if taken or authorized by the affirmative vote of a majority of the total number of votes entitled to be cast thereon, except as otherwise provided in the Corporation’s Charter, or as may otherwise be provided in any contract between the Corporation and any of its stockholders.

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SIXTEENTH:  Subject to the requirements of the Corporation’s Charter and the Maryland General Corporation Law with respect to the approval of amendments to the Corporation’s Charter, the Corporation reserves the right to make, from time to time, any amendments of its Charter which now or hereafter be authorized by law, including any amendments which alter the contract rights of any class of outstanding stock as expressly set forth in the Charter.

SEVENTEENTH:  Any action required or permitted to be taken at any meeting of stockholders may be taken without a meeting (a) if a unanimous consent setting forth the action is given in writing or by electronic transmission by each stockholder entitled to vote on the matter and filed with the minutes of proceedings of the stockholders or (b) if the action is advised, and submitted to the stockholders for approval, by the Board and a consent in writing or by electronic transmission of stockholders entitled to cast not less than the minimum number of votes that would be necessary to authorize or take the action at a meeting of stockholders is delivered to the Corporation in accordance with the Maryland General Corporation Law.  The Corporation shall give notice of any action taken by less than unanimous consent to each stockholder not later than ten days after the effective time of such action.

EIGHTTEENTH:  The duration of the Corporation shall be perpetual.

NINETEENTH:  For the purposes of all applicable legislation and regulation, each of the stockholders, officers and directors of the Corporation authorize Mayflower L.P., 3i Group plc and affiliates of 3i Group plc (both within and outside the United States) to process (but only amongst such entities and their advisors and only within the meaning of European Directive 95/46/EC) any data or information concerning them which is obtained in the course of its and their due diligence and other investment business.  The data and information which may be processed for such purposes shall include any information which may have a bearing on the prudence or commercial merits of investing or disposing of any stock (or other investment or security) in the Corporation.  Nothing in this authority shall entitle Mayflower L.P., 3i Group plc or any affiliate of 3i Group plc to make any unauthorized disclosure of such data or information to third parties.

SECOND:  The Corporation desires to amend and restate its Charter as currently in effect.  The provisions set forth in the above Sixth Articles of Amendment and Restatement are all of the provisions of the Corporation’s Charter currently in effect as hereby amended and restated.

THIRD:  The Board of Directors of the Corporation deemed the amendment and restatement of the Charter of the Corporation as hereinabove set forth advisable and directed the amendment be submitted to the stockholders of the Corporation for consideration at a meeting duly convened and held on July 18, 2007.  The amendment and restatement of the Charter of the Corporation was approved by the stockholders of the Corporation by written consent in lieu of meeting dated July     , 2007 in accordance with Section 2-505 of the Maryland General Corporation Law.

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FOURTH:  The address of the principal office of the Corporation in Maryland is ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇.  The name of the resident agent is ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, whose address is ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇.

FIFTH:  The number of directors of the Corporation and the names of those directors currently in office is as set forth in Article Thirteenth above.

SIXTH: These Sixth Articles of Amendment and Restatement increase the par value of the authorized stock of the Corporation.  Immediately before the amendment, the total number of shares of all classes of stock of the Corporation heretofore authorized and the number and par value of the shares of each class were 101,979,000 shares, of the par value of $0.01 each, of which 55,179,000 shares were designated Common Stock and 46,800,000 shares were designated Preferred Stock.  The aggregate par value of all shares having par value was $1,019,790.  As amended and restated, the total number of shares of all classes of stock of the Corporation as increased, and the par value of such shares, are 216,657,212 shares, of the par value of $0.01 each, of which 120,000,000 shares are designated Common Stock and 96,657,212 shares are designated Preferred Stock.  The aggregate par value of all shares having par value is $2,166,572.12.

[Signatures follow on the next page]

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IN WITNESS WHEREOF, the Corporation has caused these Sixth Articles of Amendment and Restatement to be signed in its name and on its behalf by its President and attested to by its Secretary on this        day of                               , 2007.

THE UNDERSIGNED, President acknowledges these Sixth Articles of Amendment and Restatement to be the corporate act of the Corporation; and as to all matters or facts required to be verified under oath, the undersigned President acknowledges that, to the best of his knowledge, information, and belief, these matters and facts are true in all material respects, and that this statement is made under the penalties for perjury.

Exhibit B

Form of Amended and Restated 2004 Omnibus Stock Plan

METASTORM INC.

Form of Amended and Restated

2004 OMNIBUS STOCK PLAN

Effective:                      

METASTORM INC.

FORM OF AMENDED AND RESTATED
2004 OMNIBUS STOCK PLAN

1.             Establishment, Purpose and Types of Awards

Metastorm Inc. hereby establishes the METASTORM INC. AMENDED AND RESTATED 2004 OMNIBUS STOCK PLAN (the “Plan”).  The purpose of the Plan is to promote the long-term growth and profitability of Metastorm Inc. (the “Corporation”) by (i) providing key people with incentives to improve stockholder value and to contribute to the growth and financial success of the Corporation, and (ii) enabling the Corporation to attract, retain and reward the best available persons for positions of substantial responsibility.

The Plan permits the granting of stock options (including nonqualified stock options and incentive stock options qualifying under Section 422 of the Code), restricted and unrestricted stock and restricted stock units (collectively, “Awards”).

The Plan is a compensatory benefit plan within the meaning of Rule 701 under the Securities Act of 1933 (the “Securities Act”).  Except to the extent any other exemption from the Securities Act is expressly relied upon in connection with any agreement entered into pursuant to the Plan or the securities issuable hereunder are registered under the Securities Act, or the securities issuable hereunder are registered under the Securities Act, the issuance of Common or Preferred Stock pursuant to the Plan is intended to qualify for the exemption from registration under the Securities Act provided by Rule 701.  To the extent that an exemption from registration under the Securities Act provided by Rule 701 is unavailable, all unregistered offers and sales of Awards and shares of Common or Preferred Stock issuable upon exercise of an Award are intended to be exempt from registration under the Securities Act in reliance upon the private offering exemption contained in Section 4(2) of the Securities Act, or other available exemption, and the Plan shall be so administered.

2.             Definitions

Under this Plan, except where the context otherwise indicates, the following definitions apply:

(a)           “Board” shall mean the Board of Directors of the Corporation.

(b)           “Change in Control” shall mean:

(i)            The consummation of a merger or consolidation of the Corporation with or into another entity or any other reorganization of the Corporation, if more than fifty percent (50%) of the combined voting power of the continuing or surviving entity’s securities outstanding immediately after such merger,

consolidation or other reorganization is not owned directly or indirectly (via ownership of another entity) by persons who were holders of the Corporation’s then-outstanding voting securities  immediately prior to such merger, consolidation or other reorganization;

(ii)           The sale, transfer or other disposition of all or substantially all of the Corporation’s assets to an entity that is not a Parent or a Subsidiary of the Corporation; or

(iii)          Any transaction as a result of which any person becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Corporation representing at least fifty percent (50%) of the total voting power represented by the Corporation’s then-outstanding voting securities.  For purposes of this subsection, the term “person” shall have the same meaning as when used in sections 13(d) and 14(d) of the Exchange Act but shall exclude:  (A) any Parent or Subsidiary of the Corporation, (B) any employee benefit plan (or related trust) sponsored or maintained by the Corporation, a Parent, or any Subsidiary, and (C) any underwriter temporarily holding securities pursuant to an offering of such securities.

(c)           “Code” shall mean the Internal Revenue Code of 1986, as amended, and any regulations issued thereunder.

(d)           “Committee” shall mean the Board or committee of Board members appointed pursuant to Section 3 of the Plan to administer the Plan.

(e)           “Common Stock” shall mean shares of the Corporation’s common stock.

(f)            “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

(g)           “Fair Market Value” of a share of the Corporation’s Common or Preferred Stock for any purpose on a particular date shall be determined in a manner such as the Committee shall in good faith determine to be appropriate.

(h)           “Grant Agreement” shall mean a written agreement between the Corporation and a grantee memorializing the terms and conditions of an Award granted pursuant to the Plan.

(i)            “Grant Date” shall mean the date on which the Committee formally acts to grant an Award to a grantee or such other date as the Committee shall so designate at the time of taking such formal action.

(j)            “Parent” shall mean a corporation, whether now or hereafter existing, within the meaning of the definition of “parent corporation” provided in Section 424(e) of

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the Code, or any successor thereto of similar import.

(k)           “Preferred Stock” means shares of the Corporation’s Class AA Preferred Stock.

(l)            “Restricted Stock Units” mean Awards granted under Section 7 providing for the issuance of Preferred Stock to Participants at a specified future date, in such amounts and subject to such vesting requirements and other restrictions and conditions as the Committee determines.

(m)          “Restricted Stock” means Awards granted under Section 7 providing for the issuance of Preferred Stock to Participants, in such amounts and subject to such vesting requirements and other restrictions and conditions as the Committee determines.

(n)           “Rule 16b-3” shall mean Rule 16b-3 as in effect under the Exchange Act on the effective date of the Plan, or any successor provision prescribing conditions necessary to exempt the issuance of securities under the Plan (and further transactions in such securities) from Section 16(b) of the Exchange Act.

(o)           “Stock Options” means Awards granted under Section 6 providing for the right of a Participant to purchase Common Stock in such amounts, at such exercise price, for such term and subject to such vesting requirements and other restrictions and conditions as the Committee determines.

(p)           “Subsidiary” and “subsidiaries” shall mean only a corporation or corporations, whether now or hereafter existing, within the meaning of the definition of “subsidiary corporation” provided in Section 424(f) of the Code, or any successor thereto of similar import.

(q)           “Unrestricted Stock” means Awards granted under Section 7 providing for the issuance of Preferred Stock to Participants, in such amounts and subject to such conditions as the Committee determines.

3.             Administration

(a)           Procedure.  The Plan shall be administered by the Board.  In the alternative, the Board may appoint a Committee consisting of not less than two (2) members of the Board to administer the Plan on behalf of the Board, subject to such terms and conditions as the Board may prescribe.  Once appointed, the Committee shall continue to serve until otherwise directed by the Board.  From time to time, the Board may increase the size of the Committee and appoint additional members thereof, remove members (with or without cause) and appoint new members in substitution therefor, fill vacancies, however caused, and remove all members of the Committee and, thereafter, directly administer the Plan.  In the event that the Board is the administrator of the Plan in lieu of a Committee, the term “Committee” as used herein shall be deemed to mean the

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Board.

Members of the Board or Committee who are either eligible for Awards or have been granted Awards may vote on any matters affecting the administration of the Plan or the grant of Awards pursuant to the Plan, except that no such member shall act upon the granting of an Award to himself or herself, but any such member may be counted in determining the existence of a quorum at any meeting of the Board or the Committee during which action is taken with respect to the granting of an Award to him or her.

The Committee shall meet at such times and places and upon such notice as it may determine.  A majority of the Committee shall constitute a quorum.  Any acts by the Committee may be taken at any meeting at which a quorum is present and shall be by majority vote of those members entitled to vote.  Additionally, any acts reduced to writing or approved in writing by all of the members of the Committee shall be valid acts of the Committee.

(b)           Procedure After Registration of Common or Preferred Stock.  Upon and after the point in time that the Common or Preferred Stock or any other capital stock of the Corporation becomes registered under Section 12 of the Exchange Act, the Board shall take all action necessary to cause the Plan to be administered in accordance with the then effective provisions of Rule 16b-3, provided that any amendment to the Plan required for compliance with such provisions shall be made in accordance with Section 11 of the Plan.

(c)           Powers of the Committee.  The Committee shall have all the powers vested in it by the terms of the Plan, such powers to include authority, in its sole and absolute discretion, to grant Awards under the Plan, prescribe Grant Agreements evidencing such Awards and establish programs for granting Awards.  The Committee shall have full power and authority to take all other actions necessary to carry out the purpose and intent of the Plan, including, but not limited to, the authority to:

(i)            determine the eligible persons to whom, and the time or times at which Awards shall be granted,

(ii)           determine the types of Awards to be granted,

(iii)          determine the number of shares to be covered by or used for reference purposes for each Award,

(iv)          impose such terms, limitations, restrictions and conditions upon any such Award as the Committee shall deem appropriate,

(v)           modify, extend or renew outstanding Awards, accept the surrender of outstanding Awards and substitute new Awards,

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provided that no such action shall be taken with respect to any outstanding Award which would adversely affect the grantee without the grantee’s consent,

(vi)          accelerate or otherwise change the time in which an Award may be exercised or becomes payable and to waive or accelerate the lapse, in whole or in part, of any restriction or condition with respect to such Award, including, but not limited to, any restriction or condition with respect to the vesting or exercisability of an Award following termination of any grantee’s employment, and

(vii)         to establish objectives and conditions, if any, for earning Awards and determining whether Awards will be paid after the end of a performance period.

The Committee shall have full power and authority to administer and interpret the Plan and to adopt such rules, regulations, agreements, guidelines and instruments for the administration of the Plan and for the conduct of its business as the Committee deems necessary or advisable and to interpret same, all within the Committee’s sole and absolute discretion.

(d)           Limited Liability.  To the maximum extent permitted by law, no member of the Board or Committee shall be liable for any action taken or decision made in good faith relating to the Plan or any Award thereunder.

(e)           Indemnification.  To the maximum extent permitted by law, the members of the Board and Committee shall be indemnified by the Corporation in respect of all their activities under the Plan.

(f)            Effect of Committee’s Decision.  All actions taken and decisions and determinations made by the Committee on all matters relating to the Plan pursuant to the powers vested in it hereunder shall be in the Committee’s sole and absolute discretion and shall be conclusive and binding on all parties concerned, including the Corporation, its stockholders, any participants in the Plan and any other employee of the Corporation, and their respective successors in interest.

4.             Shares Available for the Plan

Subject to adjustments as provided in Section 10 of the Plan, the shares of stock that may be delivered or purchased with respect to Stock Options, including incentive stock options intended to qualify under Section 422 of the Code, shall not exceed an aggregate of 12,770,232 shares of Common Stock and the shares of stock that may be delivered or purchased with respect to Restricted and Unrestricted Stock and Restricted Stock Units shall not exceed an aggregate of 1,436,080 shares of Preferred Stock.  The Corporation shall reserve said number of shares for Awards under the Plan, subject to

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adjustments as provided in Section 10 of the Plan.  If any Award, or portion of an Award, under the Plan expires or terminates unexercised, becomes unexercisable or is forfeited or otherwise terminated, surrendered or canceled as to any shares without the delivery of shares or other consideration, the shares subject to such Award shall thereafter be available for further Awards under the Plan.

5.             Participation

Participation in the Plan shall be open to all employees, officers, directors and consultants of the Corporation, or of any Parent or Subsidiary of the Corporation, as may be selected by the Committee from time to time.  Notwithstanding the foregoing, participation in the Plan with respect to Awards of incentive stock options shall be limited to employees of the Corporation or of any Parent or Subsidiary of the Corporation.

Awards may be granted to such eligible persons and for or with respect to such number of shares of Common or Preferred Stock as the Committee shall determine, subject to the limitations in Section 4 of the Plan.  A grant of any type of Award made in any one year to an eligible person shall neither guarantee nor preclude a further grant of that or any other type of Award to such person in that year or subsequent years.

6.             Stock Options

Subject to the other applicable provisions of the Plan, the Committee may from time to time grant to eligible participants Awards of nonqualified stock options or incentive stock options as that term is defined in Section 422 of the Code.  The Stock Option Awards granted shall be subject to the following terms and conditions.

(a)           Grant of Option.  The grant of a Stock Option shall be evidenced by a Grant Agreement, executed by the Corporation and the grantee, stating the number of shares of Common Stock subject to the Stock Option evidenced thereby and the terms and conditions of such Stock Option, in such form as the Committee may from time to time determine.

(b)           Price.  The price per share payable upon the exercise of each Stock Option (“exercise price”) shall be determined by the Committee.

(c)           Payment.  Stock Options may be exercised in whole or in part by payment of the exercise price of the shares to be acquired in accordance with the provisions of the Grant Agreement, and/or such rules and regulations as the Committee may have prescribed, and/or such determinations, orders, or decisions as the Committee may have made.  Payment may be made in cash (or cash equivalents acceptable to the Committee) or, if approved by the Committee, in shares of Common Stock or a combination of cash and shares of Common Stock, or by such other means as the Committee may prescribe.  The Fair Market Value of shares of Common Stock delivered on exercise of Stock

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Options shall be determined as of the date of exercise.  Shares of Common Stock delivered in payment of the exercise price may be previously owned shares or, if approved by the Committee, shares acquired upon exercise of the Stock Option.  Any fractional share will be paid in cash.  If approved by the Board of Directors, the Corporation may make or guarantee loans to grantees to assist grantees in exercising Stock Options and satisfying any related withholding tax obligations.

If the Common Stock is registered under Section 12(b) or 12(g) of the Exchange Act, the Committee, subject to such limitations as it may determine, may authorize payment of the exercise price, in whole or in part, by delivery of a properly executed exercise notice, together with irrevocable instructions, to:  (i) a brokerage firm designated by the Corporation to deliver promptly to the Corporation the aggregate amount of sale or loan proceeds to pay the exercise price and any withholding tax obligations that may arise in connection with the exercise, and (ii) the Corporation to deliver the certificates for such purchased shares directly to such brokerage firm.

(d)           Terms of Options.  The term during which each Stock Option may be exercised shall be determined by the Committee; provided, however, that in no event shall a Stock Option be exercisable more than ten years from the date it is granted.  Prior to the exercise of the Stock Option and delivery of the shares certificates represented thereby, the grantee shall have none of the rights of a stockholder with respect to any shares represented by an outstanding Stock Option.

(e)           Restrictions on Incentive Stock Options.  Incentive stock option Awards granted under the Plan shall comply in all respects with Code Section 422 and, as such, shall meet the following additional requirements:

(i)            Grant Date.  An incentive stock option must be granted within 10 years of the earlier of the Plan’s adoption by the Board of Directors or approval by the Corporation’s shareholders.

(ii)           Exercise Price and Term.  The exercise price of an incentive stock option shall not be less than 100% of the Fair Market Value of the shares on the date the Stock Option is granted and the term of the Stock Option shall not exceed ten years.  Also, the exercise price of any incentive stock option granted to a grantee who owns (within the meaning of Section 422(b)(6) of the Code, after the application of the attribution rules in Section 424(d) of the Code) more than 10% of the total combined voting power of all classes of shares of the Corporation or its Parent or Subsidiary corporations (within the meaning of Sections 422 and 424 of the Code) shall be not less than 110% of the Fair Market Value of the Common Stock on the grant date and the term of such Stock Option shall not exceed five years.

(iii)          Maximum Grant.  The aggregate Fair Market Value (determined as of the Grant Date) of shares of Common Stock with respect to which all incentive

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stock options first become exercisable by any grantee in any calendar year under this or any other plan of the Corporation and its Parent and Subsidiary corporations may not exceed $100,000 or such other amount as may be permitted from time to time under Section 422 of the Code.  To the extent that such aggregate Fair Market Value shall exceed $100,000, or other applicable amount, such Stock Options shall be treated as nonqualified stock options.  In such case, the Corporation may designate the shares of Common Stock that are to be treated as stock acquired pursuant to the exercise of an incentive stock option by issuing a separate certificate for such shares and identifying the certificate as incentive stock option shares in the stock transfer records of the Corporation.

(iv)          Grantee.  Incentive stock options shall only be issued to employees of the Corporation, or of a Parent or Subsidiary of the Corporation.

(v)           Designation.  No Stock Option shall be an incentive stock option unless so designated by the Committee at the time of grant or in the Grant Agreement evidencing such Stock Option.

(vi)          Stockholder Approval.  No Stock Option issued under the Plan shall be an incentive stock option unless the Plan is approved by the shareholders of the Corporation within 12 months of its adoption by the Board in accordance with the Bylaws and Articles of the Corporation and governing law relating to such matters.

(f)            Other Terms and Conditions.  Stock Options may contain such other provisions, not inconsistent with the provisions of the Plan, as the Committee shall determine appropriate from time to time.

7.             Stock Awards (including Restricted and Unrestricted Stock and Restricted Stock Units).

(a)           In General.  Subject to the other applicable provisions of the Plan and applicable law, the Committee may at any time and from time to time grant Restricted or Unrestricted Stock or Restricted Stock Units to Participants, in such amounts and subject to such vesting requirements and other restrictions and conditions as it determines.  Unless determined otherwise by the Committee, Participants receiving Restricted or Unrestricted Stock or Restricted Stock Units are not required to pay the Corporation cash consideration for such units (except as may be required for applicable tax withholding).

(b)           Vesting Conditions and Other Restrictions.  Each Award for Restricted Stock or Restricted Stock Units shall be evidenced by a Grant Agreement that specifies the applicable vesting conditions and other restrictions, if any, on such Award, the duration of such restrictions, and the time or times at which such restrictions shall lapse with respect to all or a specified number of the shares of Preferred Stock that are part of the Award.  Notwithstanding the foregoing, the Committee may reduce or shorten the

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duration of any vesting or other restriction applicable to any Restricted Stock or Restricted Stock Units awarded to any grantee under the Plan.

(c)           Stock Issuance and Stockholder Rights.

(i)            Restricted Stock.  Stock certificates with respect to shares of Preferred Stock granted pursuant to a Restricted Stock Award shall be issued, and/or Preferred Stock shall be registered, at the time of grant of the Restricted Stock Award, subject to forfeiture if the Restricted Stock does not vest or other restrictions do not lapse.  Any Preferred Stock certificates shall bear an appropriate legend with respect to the restrictions applicable to such Restricted Stock Award and the grantee may be required to deposit the certificates with the Corporation during the period of any restriction thereon and to execute a blank stock power or other instrument of transfer therefor.  Except as otherwise provided by the Committee, during the period of restriction following issuance of Restricted Stock certificates, the grantee shall have all of the rights of a holder of Preferred Stock, including but not limited to the rights to receive dividends (or amounts equivalent to dividends) and to vote with respect to the Restricted Stock.  The Committee, in its discretion, may provide that any dividends or distributions paid with respect to Preferred Stock subject to the unvested portion of a Restricted Stock Award will be subject to the same restrictions as the Restricted Stock to which such dividends or distributions relate.

(ii)           Restricted Stock Units.  Stock certificates for the shares of Preferred Stock subject to a Restricted Stock Unit shall be issued, and/or Preferred Stock shall be registered, upon vesting and lapse of any other restrictions or conditions with respect to the issuance of Preferred Stock under such Award.  The grantee will not be entitled to vote such Preferred Stock or to any of the other rights of stockholders during the period prior to issuance of the certificates for such Preferred Stock and/or the registration of the Preferred Stock.  An Award of Restricted Stock Units shall provide the Participant with the right to receive amounts equivalent to dividends and distributions paid with respect to Preferred Stock subject to the Award while the Award is outstanding, which payments may, in the Committee’s discretion, either be made currently or credited to an account for the Participant, and may be settled in cash or Preferred Stock, all as determined by the Committee.  Unless otherwise determined by the Committee with respect to a particular Award, each outstanding Restricted Stock Unit shall accrue such dividend equivalents, deferred as equivalent amounts of additional Restricted Stock Units, which amounts will be paid only when and if the Restricted Stock Unit (on which such dividend equivalents were accrued) vests and becomes payable.  To the extent that a Restricted Stock Unit does not vest or is otherwise forfeited, any accrued and unpaid dividend equivalents shall be forfeited.

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8.             Withholding of Taxes

The Corporation may require, as a condition to the grant of any Award under the Plan or exercise pursuant to such Award or to the delivery of certificates for shares issued or payments of cash to a grantee pursuant to the Plan or a Grant Agreement (hereinafter collectively referred to as a “taxable event”), that the grantee pay to the Corporation, in cash or, if approved by the Corporation, in shares of stock, including shares that would otherwise be issued upon exercise of or payment under the Award, valued at Fair Market Value on the date as of which the withholding tax liability is determined, any federal, state or local taxes of any kind required by law to be withheld with respect to any taxable event under the Plan.  The Corporation, to the extent permitted or required by law, shall have the right to deduct from any payment of any kind (including salary or bonus) otherwise due to a grantee any federal, state or local taxes of any kind required by law to be withheld with respect to any taxable event under the Plan, or to retain or sell without notice a sufficient number of the shares to be issued to such grantee to cover any such taxes.

9.             Transferability

No Award granted under the Plan shall be transferable by a grantee otherwise than by will or the laws of descent and distribution.  Unless otherwise determined by the Committee in accord with the provisions of the immediately preceding sentence, an Award may be exercised during the lifetime of the grantee, only by the grantee or, during the period the grantee is under a legal disability, by the grantee’s guardian or legal representative.

10.          Adjustments; Business Combinations

In the event of a reclassification, recapitalization, stock split, reverse stock split, stock dividend, combination of shares, or other similar event, involving the Common or Preferred Stock, the maximum number and kind of shares reserved for issuance or with respect to which Awards may be granted under the Plan as provided in Section 4 shall be adjusted to reflect such event, and the Committee shall make such adjustments as it deems appropriate and equitable in the number, kind and price of shares covered by outstanding Awards made under the Plan, and in any other matters which relate to Awards and which are affected by the changes in the Common or Preferred Stock referred to above.

In the event of any proposed Change in Control, the Committee shall take such action as it deems appropriate and equitable to effectuate the purposes of this Plan and to protect the grantees of Awards, which action may include, but without limitation, any one or more of the following:  (i) acceleration or change of the exercise and/or expiration dates of any Award to require that exercise be made, if at all, prior to the Change in Control; (ii) cancellation of any Award upon payment to the holder in cash of the Fair Market Value of the Common or Preferred Stock subject to such Award as of the date of (and, to the extent applicable, as established for purposes of) the Change in Control, less

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the aggregate exercise price, if any, of the Award; and (iii) in any case where equity securities of another entity are proposed to be delivered in exchange for or with respect to Common or Preferred Stock of the Corporation, arrangements to have such other entity replace the Awards granted hereunder with awards with respect to such other securities, with appropriate adjustments in the number of shares subject to, and the exercise prices under, the award.

The Committee is authorized to make adjustments in the terms and conditions of, and the criteria included in, Awards in recognition of unusual or nonrecurring events (including, without limitation, the events described in the preceding two paragraphs of this Section 10) affecting the Corporation, or the financial statements of the Corporation or any Subsidiary, or of changes in applicable laws, regulations, or accounting principles, whenever the Committee determines that such adjustments are appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan.

In the event the Corporation dissolves and liquidates (other than pursuant to a plan of merger or reorganization), then notwithstanding any restrictions on exercise set forth in this Plan or any Grant Agreement, or other agreement evidencing a Stock Option or Restricted Stock Unit Award: (i) each grantee shall have the right to exercise his Stock Option or to require delivery of share certificates under any such Restricted Stock Unit Award, at any time up to ten (10) days prior to the effective date of such liquidation and dissolution; and (ii) the Committee may make arrangements with the grantees for the payment of appropriate consideration to them for the cancellation and surrender of any Stock Option or Restricted Stock Unit Award that is so canceled or surrendered at any time up to ten (10) days prior to the effective date of such liquidation and dissolution.  The Committee may establish a different period (and different conditions) for such exercise, delivery, cancellation, or surrender to avoid subjecting the grantee to liability under Section 16(b) of the Exchange Act.  Any Stock Option not so exercised, canceled, or surrendered shall terminate on the last day for exercise prior to such effective date; and any Restricted Stock Unit as to which there has not been such delivery of share certificates or that has not been so canceled or surrendered, shall be forfeited on the last day prior to such effective date.  The Committee shall give to each grantee written notice of the commencement of any proceedings for such liquidation and dissolution of the Corporation and the grantee’s rights with respect to his outstanding Award.

Except as hereinbefore expressly provided, issuance by the Corporation of shares of stock of any class or securities convertible into shares of stock of any class, for cash, property, labor or services, upon direct sale, upon the exercise of rights or warranty to subscribe therefore, or upon conversion of shares or obligations of the Corporation convertible into such shares or other securities, and in any case whether or not for fair value, shall not affect, and no adjustment by reason thereof shall be made with respect to, the number of shares of Common or Preferred Stock subject to Awards theretofore granted or the purchase price per share of Common or Preferred Stock subject to Awards.

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11.          Termination and Modification of the Plan

The Board, without further approval of the stockholders, may modify or terminate the Plan or any portion thereof at any time, except that no modification shall become effective without prior approval of the stockholders of the Corporation to increase the number of shares of Common or Preferred Stock subject to the Plan or if stockholder approval is necessary to comply with any tax or regulatory requirement or rule of any exchange or Nasdaq System upon which the Common or Preferred Stock is listed or quoted (including for this purpose stockholder approval that is required for continued compliance with Rule 16b-3 or stockholder approval that is required to enable the Committee to grant incentive stock options pursuant to the Plan).

The Committee shall be authorized to make minor or administrative modifications to the Plan as well as modifications to the Plan that may be dictated by requirements of federal or state laws applicable to the Corporation or that may be authorized or made desirable by such laws.  The Committee may amend or modify the grant of any outstanding Award in any manner to the extent that the Committee would have had the authority to make such Award as so modified or amended.  No modification may be made that would materially adversely affect any Award previously made under the Plan without the approval of the grantee.

12.          Non-Guarantee of Employment

Nothing in the Plan or in any Grant Agreement thereunder shall confer any right on an employee to continue in the employ of the Corporation or shall interfere in any way with the right of the Corporation to terminate an employee at any time.

13.          Termination of Employment

For purposes of maintaining a grantee’s continuous status as an employee and accrual of rights under any Award, transfer of an employee among the Corporation and the Corporation’s Parent or Subsidiaries shall not be considered a termination of employment.  Nor shall it be considered a termination of employment for such purposes if an employee is placed on military or sick leave or such other leave of absence which is considered as continuing intact the employment relationship; in such a case, the employment relationship shall be continued until the date when an employee’s right to reemployment shall no longer be guaranteed either by law or contract.

14.          Written Agreement

Each Grant Agreement entered into between the Corporation and a grantee with respect to an Award granted under the Plan shall incorporate the terms of this Plan and shall contain such provisions, consistent with the provisions of the Plan, as may be

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established by the Committee.

15.          Non-Uniform Determinations

The Committee’s determinations under the Plan (including without limitation determinations of the persons to receive Awards, the form, amount and time of such Awards, the terms and provisions of such Awards and the agreements evidencing same) need not be uniform and may be made by it selectively among persons who receive, or are eligible to receive, Awards under the Plan, whether or not such persons are similarly situated.

16.          Limitation on Benefits

With respect to persons subject to Section 16 of the Exchange Act, transactions under this Plan are intended to comply with all applicable conditions of Rule 16b-3.  To the extent any provision of the Plan or action by the Committee fails to so comply, it shall be deemed null and void, to the extent permitted by law and deemed advisable by the Committee.

17.          Listing and Registration

If the Corporation determines that the listing, registration or qualification upon any securities exchange or upon any listing or quotation system established by the National Association of Securities Dealers, Inc. (“Nasdaq System”) or under any law, of shares subject to any Award is necessary or desirable as a condition of, or in connection with, the granting of same or the issue or purchase of shares thereunder, no such Award may be exercised in whole or in part and no restrictions on such Award shall lapse, unless such listing, registration or qualification is effected free of any conditions not acceptable to the Corporation.

18.          Compliance with Securities Law

The Corporation may require that a grantee, as a condition to exercise of an Award, and as a condition to the delivery of any share certificate, provide to the Corporation, at the time of each such exercise and each such delivery, a written representation that the shares of Common or Preferred Stock being acquired shall be acquired by the grantee solely for investment and will not be sold or transferred without registration or the availability of an exemption from registration under the Securities Act and applicable state securities laws.  The Corporation may also require that a grantee submit other written representations which will permit the Corporation to comply with federal and applicable state securities laws in connection with the issuance of the Common or Preferred Stock, including representations as to the knowledge and experience in financial and business matters of the grantee and the grantee’s ability to bear the economic risk of the grantee’s investment.  The Corporation may require that the grantee obtain a “purchaser representative” as that term is defined in applicable federal and state securities laws.  The stock certificates for any shares of Common or Preferred

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Stock issued pursuant to this Plan may bear a legend restricting transferability of the shares of Common or Preferred Stock unless such shares are registered or an exemption from registration is available under the Securities Act and applicable state securities laws.  The Corporation may notify its transfer agent to stop any transfer of shares of Common or Preferred Stock not made in compliance with these restrictions.  Common or Preferred Stock shall not be issued with respect to an Award granted under the Plan unless the exercise of such Award and the issuance and delivery of share certificates for such Common or Preferred Stock pursuant thereto shall comply with all relevant provisions of law, including, without limitation, the Securities Act, the Exchange Act, the rules and regulations promulgated thereunder, and the requirements of any national securities exchange or Nasdaq System upon which the Common or Preferred Stock may then be listed or quoted, and shall be further subject to the approval of counsel for the Corporation with respect to such compliance to the extent such approval is sought by the Committee.

19.          No Trust or Fund Created

Neither the Plan nor any Award shall create or be construed to create a trust or separate fund of any kind or a fiduciary relationship between the Corporation and a grantee or any other person.  To the extent that any grantee or other person acquires a right to receive payments from the Corporation pursuant to an Award, such right shall be no greater than the right of any unsecured general creditor of the Corporation.

20.          No Limit on Other Compensation Arrangements

Nothing contained in the Plan shall prevent the Corporation or its Parent or Subsidiary corporations from adopting or continuing in effect other compensation arrangements (whether such arrangements be generally applicable or applicable only in specific cases) as the Committee in its discretion determines desirable, including without limitation the granting of stock options or restricted stock units otherwise than under the Plan.

21.          No Restriction of Corporate Action

Nothing contained in the Plan shall be construed to prevent the Corporation or any Parent or Subsidiary from taking any corporate action which is deemed by the Corporation or such Parent or Subsidiary to be appropriate or in its best interest, whether or not such action would have an adverse effect on the Plan or any Award issued under the Plan.  No employee, beneficiary or other person shall have any claim against the Corporation or any Parent or Subsidiary as a result of such action.

22.          Governing Law

The validity, construction and effect of the Plan, of Grant Agreements entered into pursuant to the Plan, and of any rules, regulations, determinations or decisions made by

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the Board or Committee relating to the Plan or such Grant Agreements, and the rights of any and all persons having or claiming to have any interest therein or thereunder, shall be determined exclusively in accordance with applicable federal laws and the laws of the State of Maryland, without regard to its conflict of laws rules and principles.

23.          Plan Subject to Charter and By-Laws

This Plan is subject to the Articles and By-Laws of the Corporation, as they may be amended from time to time.

24.          Effective Date; Termination Date

The Plan is effective as of the date on which the Plan was adopted by the Board; provided that no Stock Options issued hereunder shall be treated as incentive stock options, regardless of the designation in the Grant Agreement, unless the Plan is approved by the shareholders of the Corporation as provided in Section 6(e)(vi).  No Award shall be granted under the Plan after the close of business on the day immediately preceding the tenth anniversary of the effective date of the Plan.  Subject to other applicable provisions of the Plan, all Awards made under the Plan prior to such termination of the Plan shall remain in effect until such Awards have been satisfied or terminated in accordance with the Plan and the terms of such Awards.

Date Approved by the Board:                                 

Date Approved by the Shareholders:                                    

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Exhibit C

Stockholder List

METASTORM INC.

SERIES AA CONVERTIBLE PREFERRED STOCK