Exhibit 10.24

 

[*] CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTIONS OF THIS DOCUMENT
HAVE BEEN OMITTED AND HAVE BEEN SEPARATELY FILED WITH THE COMMISSION.
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.

 

EXECUTION COPY

 

 

ASSET PURCHASE AGREEMENT

 

 

 

BY AND AMONG

 

 

INTERWAVE COMMUNICATIONS INTERNATIONAL, LTD,

 

 

INTERWAVE ADVANCED COMMUNICATIONS, INC.

 

 

AND

 

 

GBASE COMMUNICATIONS

 

 

 

Dated as of August 16, 2002

 

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TABLE OF CONTENTS

 

ARTICLE I DEFINITIONS

 

1.1

Certain Definitions

 

 

ARTICLE II PURCHASE AND SALE OF ASSETS

 

2.1

Purchase and Sale of Assets

2.2

Assumption of Liabilities

2.3

Consideration for Purchased Assets

2.4

Sales and Use Taxes

2.5

Bulk Transfer Laws

2.6

Closing

2.7

Nontransferable Assets

2.8

Taking of Necessary Action; Further Action

2.9

Earn-Out

2.10

Consideration Guarantee

 

 

ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER

 

3.1

Organization, Qualification, and Corporate Power

3.2

Authorization

3.3

Capitalization

3.4

Subsidiaries

3.5

No Conflicts

3.6

Consents

3.7

Financial Statements

3.8

Undisclosed Liabilities

3.9

Events Subsequent to Most Recent Fiscal Period End

3.10

Legal Compliance

3.11

Tax Matters

3.12

Title of Properties; Absence of Liens and Encumbrances; Condition of Equipment

3.13

Intellectual Property

3.14

Contracts

3.15

Notes and Accounts Receivable

3.16

Power of Attorney

3.17

Insurance

3.18

Litigation

3.19

Restrictions on Business Activities

3.20

Product Warranty

3.21

Guaranties; Indemnities

3.22

Employees

3.23

Employee Matters and Benefit Plans

3.24

Environment, Health, and Safety

 

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3.25

Sufficiency of Assets

3.26

Certain Business Relationships With Seller

3.27

No Adverse Developments

3.28

Fees

3.29

Complete Copies of Materials

3.30

Board Approval

3.31

Export Control Laws

3.32

Preferences; Solvency

3.33

Full Disclosure

3.34

Information Supplied

 

 

ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND BUYER

 

4.1

Organization, Qualification, and Corporate Power

4.2

Authorization

4.3

Capitalization

4.4

No Conflicts

4.5

Consents

4.6

SEC Filings

4.7

Brokers’ Fees

4.8

Information Supplied

4.9

Parent Engaged in Active Trade or Business

4.10

Fair Market Value of Parent At Least Equal to that of Seller

4.11

Employees

4.12

Employee Matters and Benefit Plans.

 

 

ARTICLE V PRE-CLOSING COVENANTS

 

 

5.1

Operation of Business

5.2

Access to Information

5.3

Notice of Developments

5.4

Shareholder Approval

5.5

No Solicitation

5.6

Affiliate Agreements

5.7

Reasonable Efforts

5.8

Notices and Consents

 

 

ARTICLE VI OTHER AGREEMENTS AND COVENANTS

 

6.1

Confidentiality

6.2

Additional Documents and Further Assurances

6.3

Treatment as Reorganization

6.4

Employee Plans and Benefit Arrangements

6.5

Seller Options and Warrants

 

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6.6

Benefits Liabilities

6.7

Retained Employees

6.8

Listing of Additional Shares

6.9

Registration of Parent Guarantee Shares

6.10

Shareholder Observer Rights

6.11

Shareholder Representative on Parent Board of Directors

6.12

Parent Loans

6.13

Liquidation of Seller

6.14

Reasonable Cooperation of Buyer

6.15

Seller Operations

 

 

ARTICLE VII CONDITIONS TO THE CLOSING

 

 

7.1

Conditions to Parent’s and Buyer’s Obligation to Close

7.2

Conditions to Seller’s Obligations

 

 

ARTICLE VIII INDEMNIFICATION; ESCROW

 

8.1

Survival of Representations and Warranties

8.2

Indemnification by Seller

 

 

ARTICLE IX TERMINATION

 

 

9.1

Termination of the Agreement

9.2

Effect of Termination

 

 

ARTICLE X MISCELLANEOUS

 

10.1

Press Releases and Public Announcements

10.2

No Third-Party Beneficiaries

10.3

Entire Agreement and Modification

10.4

Amendment

10.5

Waivers

10.6

Successors and Assigns

10.7

Counterparts

10.8

Headings

10.9

Notices

10.10

Governing Law

10.11

Forum Selection; Consent to Jurisdiction

10.12

Severability

10.13

Expenses

10.14

Construction

10.15

Seller Disclosure Letter

10.16

Attorneys’ Fees

10.17

Further Assurances

10.18

Time of Essence

 

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EXHIBITS

 

 

 

Exhibit A-1

List of Shareholders signing Voting Agreement (omitted)

Exhibit A-2

Form of Voting Agreement

Exhibit B-1

List of Persons signing Non-Competition Agreements (omitted)

Exhibit B-2

Form of Non-Competition Agreement

Exhibit C-1

List of Persons signing Offer Letters (omitted)

Exhibit C-2

Form of Offer Letter

Exhibit D

Form of Lock-Up Agreement

Exhibit E

Form of Affiliate Agreement

Exhibit F

Form of Registration Rights Agreement

Exhibit G

Form of Employee Proprietary Information Agreement

Exhibit H

Form of Confirmatory Agreement from Milroute Technologies, Inc. ("Milroute") to
GBase Communications ("GBase") (omitted) - This agreement confirms that Milroute
has transferred all technology and intellectual property that is necessary or
useful for the conduct of GBase's business to GBase.

Exhibit I

Form of License Agreement by and between Milroute Technologies, Inc. and
interWAVE Advanced Communications, Inc. ("IWV") (omitted) - This agreement
memorializes the license grant of certain technology and intellectual property
owned by Milroute and necessary or useful for the conduct of GBase's business to
IWV.

Exhibit J

Form of Liquidating Trust Agreement and Declaration of Trust (omitted)

 

 

SCHEDULES

 

 

Schedule 1.1(i)

Hired Employees (omitted)

 

 

Schedule 1.1(cc)

Intellectual Property (omitted)

 

 

Schedule 1.1(dd)

Shareholders (omitted)

 

 

Schedule 2.1(b)(iii)

Accounts, Notes and Other Receivables (omitted)

 

 

Schedule 2.1(b)(vii)

Assigned Contracts (omitted)

 

 

Schedule 2.1(c)(ii)

Excluded Bank Accounts (omitted)

 

 

Schedule 2.2(b)(ii)

Hired Employee Vacation Pay (omitted)

 

 

Schedule 2.2(b)(iii)

Accounts Payable and Other Expenses (omitted)

 

 

Schedule 2.2(b)(iv)

Hired Employee June 15, 2002 Payroll (omitted)

 

 

Schedule 2.2(b)(v)

Seller Expenses (omitted)

 

 

Schedule 2.2(b)(vi)

Agilent and Telogy Liabilities (omitted)

 

 

Schedule 2.2(b)(x)

Additional Assumed Liabilities (omitted)

 

 

Schedule 7.1(f)

Required Consents (omitted)

 

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ASSET PURCHASE AGREEMENT

 

THIS ASSET PURCHASE AGREEMENT (this “Agreement”) is made and entered into as of
August 16, 2002, by and among interWAVE Communications International, Ltd, a
Bermuda corporation (“Parent”), interWAVE Advanced Communications, Inc., a
Delaware corporation and wholly owned subsidiary of Parent (“Buyer”) and GBase
Communications, a California corporation (“Seller”).  Parent, Buyer and Seller
are sometimes referred to herein individually as a “Party” and collectively as
the “Parties.”

 

RECITALS

 

A.            Seller desires to sell to Buyer, and Buyer desires to purchase
from Seller, on the terms and subject to the conditions set forth herein, the
assets of Seller described herein, and Seller desires Buyer to assume certain of
Seller’s liabilities, which Buyer would agree to assume on the terms and subject
to the conditions set forth herein.

 

B.            The Board of Directors of each of Parent, Buyer and Seller
believes it is in the best interests of its respective corporation and
shareholders that the transactions contemplated hereby be consummated and, in
furtherance thereof, has approved this Agreement and the transactions
contemplated hereby.

 

C.            Parent, Buyer and Seller desire to make certain representations,
warranties, covenants and other agreements in connection with the transactions
contemplated hereby.

 

D.            The parties intend, by executing this Agreement, to adopt a plan
of reorganization within the meaning of Section 368 of the Internal Revenue Code
of 1986, as amended (the “Code”), and to cause the transactions contemplated
hereby to qualify as a “reorganization” under the provisions of Section
368(a)(1)(C) of the Code.

 

E.             Concurrent with the execution of this Agreement, as a material
inducement to Parent and Buyer to enter into this Agreement, certain
shareholders with beneficial ownership of a majority of the Seller Preferred
Stock and a majority of the Seller Common Stock as set forth on Exhibit A-1 are
entering into voting agreements in the form of Exhibit A-2 hereto (the “Voting
Agreements”).

 

F.             As a further inducement to Parent and Buyer to enter into this
Agreement, prior to Closing, certain employees of Seller set forth on Exhibit
B-1 hereto will enter into non-competition agreements in the form of Exhibit B-2
hereto (the “Non-Competition Agreements”), certain employees of Seller set forth
on Exhibit C-1 hereto will countersign offer letters in the form of Exhibit C-2
hereto (the “Offer Letters”), all shareholders of Seller will enter into Lock-Up
Agreements in the form of Exhibit D hereto with Parent (“Lock-Up Agreements”),
and all affiliates of Seller will enter into affiliate agreements in the form of
Exhibit E hereto with Parent (the “Affiliate Agreements”).

 

 

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G.            A portion of the Parent Common Stock otherwise issuable by Parent
in connection with the transactions contemplated by this Agreement shall be
placed in escrow by Parent, the release of which amount shall be contingent upon
certain events and conditions.

 

H.            Concurrent with the execution of this Agreement, as a material
inducement to Parent and Buyer to enter into this Agreement, Milroute
Technologies, Inc. (“Milroute”) will enter into and deliver a Confirmatory
Agreement to Seller in the form of Exhibit H hereto (the “Confirmatory
Agreement”), confirming the transfer of certain technology and intellectual
property developed and owned by Milroute that is necessary or useful for the
conduct of Seller’s business to Seller.

 

I.              Concurrent with the execution of this Agreement, as a material
inducement to Parent and Buyer to enter into this Agreement, Milroute
Technologies, Inc. will enter into and deliver a License Agreement to Buyer in
the form of Exhibit I hereto (the “License Agreement”), granting the right to
use certain technology and intellectual property developed and owned by Milroute
that is necessary or useful for the conduct of Seller’s business to Buyer.

 

NOW, THEREFORE, in consideration of the covenants and representations set forth
herein, and for other good and valuable consideration, the parties agree as
follows:

 

ARTICLE I

 

DEFINITIONS

 

1.1           Certain Definitions.  As used in this Agreement, the following
terms have the following meanings (terms defined in the singular to have a
correlative meaning when used in the plural and vice versa).  Certain other
terms are defined in the text of this Agreement.

 

(a)           “Affiliate” of a Person means any other Person that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with such Person.

 

(b)           “Business” means all the business, operations and activities of
Seller (as currently conducted and as contemplated to be conducted by Seller),
including developing, designing, manufacturing, testing, debugging, marketing,
selling, distributing, supporting and repairing the Products.

 

(c)           “Buyer Restriction” means: (i) any agreement between Buyer and any
third party, other than the Assigned Contracts or any other contracts or
agreements assigned by Seller to Buyer pursuant to this Agreement, or (ii) any
other legal obligation to which Buyer is subject as a result of Buyer’s conduct
unrelated to the operation of the Business and other than as a result of this
Agreement, the Ancillary Agreements or the transactions contemplated herein and
therein.

 

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(d)           “Cash Equivalents” means certificates of deposit, time deposits,
bankers’ acceptances, commercial paper and government securities, in each case,
with maturities of less than one (1) year.

 

(e)           “Derivative Work” has the meaning ascribed to it under the United
States Copyright Law, Title 17 U.S.C. Sec. 101 et. seq., as the same may be
amended from time to time.

 

(f)            “Escrow Shares” shall mean 225,000 shares of Parent Common.

 

(g)           “Fourth Calendar Quarter” shall mean the period beginning October
1, 2003 and terminating on December 31, 2003.

 

(h)           “Governmental Body” means any:

 

(i)            nation, province, state, county, city, town, village, district,
or other jurisdiction of any nature;

 

(ii)           federal, provincial, state, local, municipal, foreign, or other
government;

 

(iii)          governmental or quasi-governmental authority of any nature
(including any governmental agency, branch, department, official, or entity and
any court or other tribunal);

 

(iv)          multi-national organization or body; or

 

(v)           body exercising, or entitled to exercise, any administrative,
executive, judicial, legislative, police, regulatory, or taxing authority or
power of any nature.

 

(i)            “Hired Employee” shall mean the employees of Seller set forth on
Schedule 1.1(i).

 

(j)            “Intellectual Property Rights” any or all of the following and
all rights in, arising out of, or associated therewith:  (i) all United States
and foreign patents and utility models and applications therefor and all
reissues, divisions, re-examinations, renewals, extensions, provisionals,
continuations and continuations-in-part thereof, and equivalent or similar
rights anywhere in the world in inventions and discoveries including without
limitation invention disclosures (“Patents”); (ii) all trade secrets and other
rights in know-how and confidential or proprietary information; (iii) all
copyrights, copyright registrations and applications therefor and all other
rights corresponding thereto throughout the world (“Copyrights”); (iv) all mask
works, mask work registrations and applications therefor, and any equivalent or
similar rights in semiconductor masks, layouts, architectures or topology
(“Maskworks”); (v) all industrial designs and any registrations and applications
therefor throughout the world; (vi) all rights in World Wide Web addresses and
domain names and applications and registrations therefor; (vii) all trade names,
logos, common law trademarks and service marks, trademark and service mark
registrations and

 

3

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applications therefor and all goodwill associated therewith throughout the world
(“Trademarks”); (viii) any similar, corresponding or equivalent rights to any of
the foregoing anywhere in the world, including, without limitation, moral
rights; and (ix) any other rights in or to any Technology (as defined in Section
1.1(ff)).

 

(k)           “Issuance Trading Price” shall mean the average closing sale price
of Parent’s Common Stock as reported by the Nasdaq National Market for each of
the ten (10) consecutive trading days ending two days prior to the date Parent
instructs its transfer agent to issue the Parent Consideration Shares, the
Earn-Out Shares or the Parent Guarantee Shares, as the case may be.

 

(l)            “Key Employees” shall mean Kiomars Anvari, Mike Parker, James
Chen, Prasanna Kuma, Narender Enduri, Upendra Chintra.

 

(m)          “Lien” means any mortgage, pledge, lien, charge, claim, security
interest, adverse claims of ownership or use, restrictions on transfer, defect
of title or other encumbrance of any sort, other than (a) mechanic’s,
materialmen’s, and similar liens with respect to any amounts not yet due and
payable, and (b) liens for taxes not yet due and payable.

 

(n)           “Material Adverse Effect” shall mean any adverse change in the
business,  operations, assets (including intangible assets), liabilities
(contingent or otherwise), results of operations or financial performance, or
condition (financial or otherwise) of Parent or any of its subsidiaries or
Seller or any of its subsidiaries, as the case may be, which is material to
Parent and its subsidiaries, taken as a whole, or Seller and its subsidiaries,
taken as a whole, as the case may be.

 

(o)           “Parent Common Stock” means Common Stock of Parent, $0.001 par
value.

 

(p)           “Parent SEC Reports” has the meaning set forth in Section 5.6.

 

(q)           “Permit” shall mean the licenses, permits, authorizations,
registrations, certificates, variances, approvals, consents and franchises and
similar rights obtained from governments and any Governmental Body, and any
pending applications relating to the foregoing.

 

(r)            “Parent Consideration Shares” shall mean (i) 3,700,000 shares of
Parent Common Stock minus (ii) the number of shares equal to (a) 50% of the
aggregate principal amount loaned by Parent to Seller prior to the Closing Date
plus all accrued interest minus $212,000 paid to Qualcomm Incorporated in
connection with the Enterprise Infrastructure Equipment License Agreement, dated
as of November 22, 2000, divided by (b) the Trading Price.

 

(s)           “Person” means any individual, corporation (including any
non-profit corporation), general or limited partnership, limited liability
company, joint venture, estate, trust, association, organization, labor union,
Governmental Body or other entity.

 

(t)            “Products” means any and all products developed or under
development, manufactured, marketed or sold by or for Seller, including (i) all
designs, packaging, displays, and

 

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documentation associated with or related to any of the foregoing; (iii) all
versions of any of the foregoing, including prior versions, alpha and beta test
versions, new versions or portions thereof currently under development or
proposed to be developed; and (iv) all documentation and training materials
related to any of the foregoing.  “Products” shall include without limitation
the following products: indoor pico-BSS, indoor Pico-BTS, outdoor pico-BSS,
Micro-BSS, PC based, PDSN, cPCI based PDSN, and associated management systems.

 

(u)           “Registered Intellectual Property Rights” all United States,
international and foreign: (i) Patents, including applications therefor
(including provisional applications); (ii) registered Trademarks, applications
to register Trademarks, including intent-to-use applications, or other
registrations or applications related to Trademarks; (iii) Copyrights
registrations and applications to register Copyrights; (iv) Mask Work
registrations and applications to register Mask Works; (v) domain name
registrations; and (vi) any other Technology that is the subject of an
application, certificate, filing, registration or other document issued by,
filed with, or recorded by, any state, government or other public or private
legal authority at any time.

 

(v)           “Representatives” means, with respect to a Person, that Person’s
officers, directors, employees, accountants, counsel, investment bankers,
financial advisors, agents and other representatives.

 

(w)          “SEC” means the United States Securities and Exchange Commission.

 

(x)            “Seller Capital Stock” means Seller Common Stock or Seller
Preferred Stock.

 

(y)           “Seller Common Stock” means Common Stock of Seller, $0.001 par
value per share.

 

(z)            “Seller Options” shall have the meaning ascribed to such term in
Section 6.5.

 

(aa)         “Seller Preferred Stock” means Series A Preferred Stock of Seller,
$0.001 par value per share, Series B Preferred Stock of Seller, $0.001 par value
per share and Series C Preferred Stock, $0.001 par value per share.

 

(bb)         “Seller’s Retained Environmental Liabilities” means any liability,
obligation, judgment, penalty, fine, cost or expense, (including reasonable
attorneys’ fees and environmental consultant costs) of any kind or nature, or
the duty to indemnify, defend or reimburse any Person with respect to: (i) the
presence on or before the Closing Date of any Hazardous Material in the soil,
groundwater, surface water, air or building materials of any Business Facility,
or known to be migrating to a Business Facility as of the Closing Date
(“Pre-Existing Contamination”); (ii) the migration at any time prior to or after
the Closing Date of Pre-Existing Contamination to any other real property, or
the soil, groundwater, surface water, air or building materials thereof; (iii)
the exposure of any Person to Pre-Existing Contamination or to Hazardous
Materials in the course of or as a consequence of any activities of the
Business, without regard to whether any health effect of the exposure has been
manifested as of the Closing Date; (iv) the violation of any Environmental Laws

 

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by the Seller or its agents, employees, predecessors in interest, contractors,
invitees or licensees prior to the Closing Date or in connection with the
operation of the Business prior to the Closing Date; (v) any actions or
proceedings brought or threatened by any third party with respect to any of the
foregoing; and (vi) any of the foregoing to the extent they continue after the
Closing Date.

 

(cc)         “Seller Intellectual Property” means any and all Technology and any
and all Intellectual Property Rights, including Seller Registered Intellectual
Property Rights (as defined below), that is or are owned (in whole or in part)
by or exclusively licensed to Seller, including Intellectual Property listed or
described in Schedule 1.1(cc).

 

(dd)         “Shareholders” shall mean the holders of Seller Capital Stock of
record immediately prior to the Closing as set forth on Schedule 1.1(dd).

 

(ee)         “Six Month Lowest Share Price” shall mean $0.63 per share.

 

(ff)           “Technology” shall mean any or all of the following:  (i) works
of authorship including, without limitation, computer programs, source code and
executable code, whether embodied in software, firmware or otherwise,
documentation, designs, files, net lists, records, data and mask works; (ii)
inventions (whether or not patentable), improvements, and technology; (iii)
proprietary and confidential information, including technical data and customer
and supplier lists, trade secrets and know how; (iv) databases, data
compilations and collections and technical data; (v) logos, trade names, trade
dress, trademarks, service marks; (vi) World Wide Web addresses, domain names
and sites; (vii) tools, systems, devices, specifications, manuals, flow charts,
methods, algorithms, formulae and processes; (viii) technology, technical and
business information relating to the Business or Products; methods and
processes; and (viii) all instantiations of the foregoing in any form and
embodied in any media.

 

(gg)         “Trading Price” shall mean the average closing sale price of
Parent’s Common Stock as reported by the Nasdaq National Market for each of the
ten (10) consecutive trading days ending two days prior to the date Parent
instructs its transfer agent to issue the Parent Consideration Shares, the
Earn-Out Shares or the Parent Guarantee Shares, as the case may be.

 

ARTICLE II

 

PURCHASE AND SALE OF ASSETS

 

2.1           Purchase and Sale of Assets.

 

(a)           Purchase and Sale.  Upon the terms and subject to the conditions
set forth herein, at the Closing (as defined in Section 2.6(a) hereof), Buyer
shall purchase from Seller, and Seller shall irrevocably sell, convey, transfer,
assign and deliver to Buyer, the Purchased Assets (as defined in Section 2.1(b)
hereof), free and clear of all Liens.

 

(b)           Definition of Purchased Assets.  For all purposes of and under
this Agreement, the term “Purchased Assets” shall mean, refer to and include all
of Seller’s right, title

 

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and interest in and to all tangible and intangible assets, properties and rights
which are owned, used or held for use by Seller, including, without limitation,
the following to the extent owned, used or held for use by Seller as of the
Closing (but specifically excluding the Excluded Assets (as defined in Section
2.1(c) hereof)):

 

(i)            all real property, and any leaseholds and sub-leaseholds therein,
buildings, structures, improvements, fixtures, furnishings and other fittings
thereon, and easements, rights-of-way, and other appurtenances thereto;

 

(ii)           all tangible personal property (whether or not located on
Seller’s premises), including, without limitation, all machinery, equipment and
tools, furniture and furnishings, computers and computer supplies, office
materials and supplies, inventories of any kind or nature, raw materials and
supplies, manufactured and purchased goods, and all goods in process and
finished goods;

 

(iii)          all accounts, notes and other receivables, including but not
limited to those accounts, notes and other receivables set forth on Schedule
2.1(b)(iii);

 

(iv)          all prepaid assets and expenses;

 

(v)           all books, records (other than records relating to Taxes),
ledgers, files, documents, correspondence, customer, supplier, advertiser,
circulation and other lists (including subscribers), invoices and sales data,
creative, advertising and other promotional materials, studies, reports, and
other printed or written materials or data;

 

(vi)          all Seller Intellectual Property, together with all goodwill of
Seller appurtenant thereto, licenses and sublicenses granted and obtained with
respect thereto, rights thereunder, appurtenant, rights to protection of
interests therein under the applicable laws of all jurisdictions;

 

(vii)         all rights under any contracts, indentures, mortgages,
instruments, Liens, guaranties or other agreements of Seller, including the
agreements set forth on Schedule 2.1(b)(vii), but excluding the Excluded
Agreements (the “Assigned Contracts”);

 

(viii)        all rights under all permits, authorizations, orders,
registrations, certificates, variances, approvals, consents and franchises or
any pending applications of Seller, including without limitation all Permits to
the extent such rights are transferable;

 

(ix)           all claims, actions, deposits, prepayments, refunds, causes of
action, choses in action, rights of recovery, rights of set off, and rights of
recoupment of any kind or character;

 

(x)            all insurance policies, and refunds paid or payable in connection
with the cancellation or discontinuance of any such insurance policies following
the Closing; and

 

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(xi)           the goodwill associated with the business of Seller.

 

(c)           Definition of Excluded Assets.  Notwithstanding anything to the
contrary set forth in this Section 2.1 or elsewhere in this Agreement, the term
“Purchased Assets” shall not mean, refer to or include the following
(collectively, the “Excluded Assets”) to the extent owned, used or held for use
by Seller as of the Closing:

 

(i)            the corporate charter and bylaws, qualifications to transact
business as a foreign corporation, arrangements with registered agents relating
to foreign qualifications, taxpayer and other identification numbers, seals,
minute books, stock transfer books, blank stock certificates, and other
documents relating to the organization, maintenance, and existence of Seller as
a corporation;

 

(ii)           cash on deposit in Seller bank accounts (including approximately
$99,000 in connection with the Lease but not including any cash on deposit as a
result of loans made to Seller by Parent or Buyer) set forth on Schedule
2.1(c)(ii);

 

(iii)          all refunds of Taxes;

 

(iv)          all claims, actions, deposits, prepayments, refunds, causes of
action, choses in action, rights of recovery, rights of set off, and rights of
recoupment of any kind or nature (including any such item relating to Taxes)
relating to the Excluded Agreements, Excluded Assets or the Excluded
Liabilities;

 

(v)           all directors’ and officers’ insurance policies, and refunds paid
or payable in connection with the cancellation or discontinuance of any such
insurance policies following the Closing;

 

(vi)          all rights of Seller under this Agreement, any agreement,
certificate, instrument or other document executed and delivered by Seller or
Buyer in connection with the transactions contemplated hereby, or any side
agreement between Seller and Buyer entered into on or after the date hereof;

 

(vii)         all books and records of Seller which relate to the Taxes,
Excluded Agreements or Excluded Assets; provided, however, Seller agrees that it
shall provide Buyer with copies of, or reasonable access to, such books and
records to the extent that any such books and records relate to any of the
Purchased Assets or Assumed Liabilities; and

 

2.2           Assumption of Liabilities.

 

(a)           Assumption.  Upon the terms and subject to the conditions set
forth herein, at the Closing, Buyer shall assume from Seller, and Seller shall
irrevocably convey, transfer and assign to Buyer, all of the Assumed Liabilities
(as defined in Section 2.2(b) hereof).  Buyer shall not assume any Liabilities
(as defined in Section 2.2(b) hereof) of Seller pursuant hereto, other than the
Assumed Liabilities.

 

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(b)           Definition of Assumed Liabilities.  For all purposes of and under
this Agreement, the term “Assumed Liabilities” shall mean, refer to and include
the following liabilities of Seller (but specifically excluding the Excluded
Liabilities (as defined in Section 2.2(c) hereof)) up to $450,000 in the
aggregate:

 

(i)            up to $212,000 in contractual obligations associated with the
Enterprise Infrastructure Equipment License Agreement, dated November 22, 2000,
by and among Qualcomm Incorporated and Seller, as amended, which has been paid
directly to Qualcomm Incorporated by Buyer;

 

(ii)           up to $45,000 in vacation pay owed to Hired Employees by Seller
as set forth on Schedule 2.2(b)(ii);

 

(iii)          up to $43,000 for accounts payable and other expenses as set
forth on Schedule 2.2(b)(iii);

 

(iv)          up to $48,000 in payroll expenses of Hired Employees due as of
June 15, 2002 as set forth on Schedule 2.2(b)(iv);

 

(v)           up to $50,000 in Seller Expenses (as defined in Section 10.13) as
set forth on Schedule 2.2(b)(v);

 

(vi)          up to $9,000 in liabilities arising after the Closing Date for (1)
the equipment leases dated June 28, 2000 by and among Agilent Technologies and
Seller and the Master Lease Agreement dated November 30, 2000 by and among
Agilent Financial Services and Seller and (2) the Master Equipment Lease
Agreement dated as of May 15, 2001, by and between TestMart and Seller as set
forth on Schedule 2.2(b)(vi);

 

(vii)         all liabilities under Permits arising after the Closing Date;

 

(viii)        all liabilities related to the Purchased Assets to the extent
arising from or related to any facts or circumstances occurring after the
Closing Date;

 

(ix)           all liabilities related to the Hired Employees arising from or
related to any facts or circumstances occurring after the Closing Date, except
as otherwise expressly provided herein; and

 

(x)            up to $44,000 in liabilities of Seller (but specifically
excluding the Excluded Liabilities as defined in Section 2.2(c) hereof) set
forth in Schedule 2.2(b)(x) under an express statement (that the Buyer has
initialed) to the effect that the definition of Assumed Liabilities will include
the liabilities and obligations so disclosed.

 

(c)           Definition of Excluded Liabilities.  Notwithstanding anything to
the contrary set forth in this Section 2.2 or elsewhere in this Agreement, the
term “Assumed Liabilities” shall not mean, refer to or include the following
(collectively, “Excluded Liabilities”):

 

9

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(i)            liabilities in excess of the amounts set forth in Sections
2.2(b)(i), (ii), (iii), (iv), (v), (vi) and (x);

 

(ii)           all liabilities relating to agreements not assumed by the Company
(the “Excluded Agreements”);

 

(iii)          any and all liabilities or obligations of Seller arising from the
breach by Seller of any term, covenant or provisions of any of the Assigned
Contracts;

 

(iv)          all liabilities for Taxes of Seller or Taxes attributable to the
ownership or operation of the Purchased Assets for any taxable period (or
portion of any period) ending on or prior to the Closing Date and, including,
without limitation, all Liabilities for Taxes attributable to the transactions
contemplated by this Agreement including any Taxes resulting from a
determination by any Tax authority that the transactions contemplated hereby do
not qualify as a “reorganization” within the meaning of Section 368(a)(1)(C) of
the Code;

 

(v)           all liabilities relating to options, warrants and other rights to
purchase or otherwise acquire shares of capital stock of Seller;

 

(vi)          all liabilities to shareholders of Seller in their capacity as
such;

 

(vii)         all liabilities of Seller under this Agreement or any other
certificate, instrument or other agreement entered into in connection with the
transactions contemplated hereby;

 

(viii)        except as set forth in Section 2.2(b), all liabilities for any
commitment, obligation, duty or liability (including but not limited to employee
benefits and compensation arrangements) (1) of Seller to any Hired Employee, (2)
to any Hired Employee that arose prior to the Closing Date, (3) to any employee
that is not a Hired Employee;

 

(ix)           Seller’s Retained Environmental Liabilities;

 

(x)            Benefits Liabilities (as defined in Section 3.23), whether
incurred before, on or after the Closing;

 

(xi)           any and all liabilities, commitments and obligations of Seller
resulting from any litigation, claim, arbitration, investigation or other
proceeding, and all other liabilities, commitments and obligations arising in
connection with all actions, suits, claims, arbitrations, investigations or
proceedings pending on the Closing Date or arising after the Closing Date;

 

(xii)          all liabilities of Seller or any successor thereto for any breach
of this Agreement by Seller or any agreement contemplated by this Agreement, or
any representation or warranty of Seller contained herein; and

 

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(xiii)         all contractual obligations of Seller associated with the
Shadelands Business Park Office Lease (the “Lease”) dated June 21, 2001 by and
among JCS Sharelands LLC (the “Landlord”) and Seller;

 

(xiv)        all liabilities other than Assumed Liabilities.

 

2.3           Consideration for Purchased Assets.

 

(a)           Consideration.  On the terms and subject to the conditions set
forth in this Agreement, as full payment for the transfer of the Purchased
Assets by Seller to Buyer, at the Closing,

 

(i)            Buyer shall deliver to Seller the Parent Consideration Shares,
less the Escrow Shares;

 

(ii)           Buyer shall assume all of the Assumed Liabilities pursuant to
Section 2.2 hereof, if any remain, or Buyer shall have paid such liabilities
prior to the Closing and Seller shall have acknowledged such payment in writing
prior to the Closing; and

 

(iii)          Buyer shall grant to Seller the right to receive the Earn-Out
Shares, subject to the fulfillment of the conditions specified in Section 2.9
hereof.

 

The consideration set forth in Section 2.3(a)(i), (ii) and (iii) shall
collectively be referred to as the “Purchase Price”.

 

(b)           Adjustments to Parent Common Stock.  The number of shares of
Parent Common Stock issuable in Section 2.3(a) shall be adjusted to reflect
fully the effect of any stock split, reverse stock split, stock dividend
(including any dividend or distribution of securities convertible into Parent
Common Stock or Seller Capital Stock), reorganization, recapitalization or other
like change with respect to Parent Common Stock occurring after the date hereof
and prior to the Closing.

 

(c)           Escrow Deposit.  Notwithstanding the terms of Section 2.3(a)
hereof, subject to and in accordance with the provisions of Article VIII hereof,
at the Closing, Buyer shall cause to be delivered to the Escrow Agent (as
defined in Section 8.2 hereof) a certificate or certificates representing the
Escrow Shares, which shall be registered in the name of the Escrow Agent as
nominee for Seller.  The Escrow Shares shall be available to compensate Parent,
Buyer or any other Buyer Indemnified Person (as defined in Section 8.2(a)
hereof) for any Losses (as defined in Section 8.2(a) hereof) for which Parent,
Buyer or any other Buyer Indemnified Person is entitled to indemnification from
Seller or any successor thereto pursuant to Article VIII hereof.  To the extent
not used for such purposes, such Escrow Shares shall be released pursuant to and
in accordance with the terms of Article VIII hereof.

 

2.4           Sales and Use Taxes.  Seller shall bear and pay any and all sales,
use and transfer taxes (or other similar taxes) arising out of the transfer of
the Purchased Assets to Buyer pursuant

 

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hereto (the “Transfer Taxes”).  To the extent permitted by applicable law,
Parent and Buyer shall cooperate fully with Seller in minimizing such Transfer
Taxes.  To the extent any tax authority provides notice to Parent or Buyer of an
audit of the Transfer Taxes, Seller shall promptly assume responsibility for
such audit and shall bear and pay when due any additional Transfer Taxes (plus
interest and penalties determined to be due thereon).

 

2.5           Bulk Transfer Laws.  Parent, Buyer and Seller shall waive, to the
fullest extent permitted by applicable law, any and all bulk transfer or similar
laws that may apply to the transactions contemplated by this Agreement.

 

2.6           Closing.

 

(a)           Closing Place, Time and Date.  Unless this Agreement is earlier
terminated pursuant to Section 9.1 hereof, the closing of the transactions
contemplated by this Agreement (the “Closing”) shall be held at the offices of
Wilson Sonsini Goodrich & Rosati, Professional Corporation, One Market Street,
Spear Tower, Suite 3300, San Francisco, CA  94105, at 10:00 a.m. on the date
which is two (2) business days following the satisfaction or, if permitted
pursuant to the terms of Article VII hereof, waiver of the conditions to Closing
set forth in Article VII hereof, or at such other place and such other time
and/or date as the parties hereto shall mutually agree (the actual date on which
the Closing shall occur being referred to herein as the “Closing Date”).

 

(b)           Closing Deliveries.

 

(i)            At the Closing, Buyer shall deliver, or cause to be delivered, to
Seller or the Escrow Agent, as applicable, the following, dated as of the
Closing Date and executed for and on behalf of Parent or Buyer (as applicable)
by a duly authorized officer thereof:

 

(a)           one or more instruments of assignment and assumption, in customary
form and substance reasonably satisfactory to Buyer and Seller and their
respective counsel;

 

(b)           any and all other instruments, certificates and agreements
contemplated by Article VII hereof or as Seller may reasonably request in order
to effectively make Buyer responsible for all Assumed Liabilities pursuant
hereto to the fullest extent permitted by applicable law.

 

(ii)           At the Closing, Seller shall deliver, or cause to be delivered,
to Buyer the following, dated as of the Closing Date and executed for and on
behalf of Seller by a duly authorized officer thereof:

 

(a)           a bill of sale, in customary form and substance reasonably
satisfactory to Buyer and Seller and their respective counsel;

 

(b)           one or more instruments and assumption, in customary form and
substance reasonably satisfactory to Buyer and Seller and their respective
counsel;

 

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(c)           an instrument of assignment of Patents, in customary form and
substance reasonably satisfactory to Buyer and Seller and their respective
counsel;

 

(d)           an instrument of assignment of Copyrights, in customary form and
substance reasonably satisfactory to Buyer and Seller and their respective
counsel, and for each Product containing copyrightable work for which Seller has
not registered the Copyright if any, an application, in customary form and
substance reasonably satisfactory to Buyer and Seller and their respective
counsel, to register such Copyright, along with the required extracts of the
Product to accompany such application;

 

(e)           an instrument of assignment of Trademarks, in customary form and
substance reasonably satisfactory to Buyer and Seller and their respective
counsel; and

 

(f)            any and all other instruments, certificates and agreements
contemplated by Article VII hereof or as Buyer may reasonably request in order
to effectively transfer to Buyer all of the Purchased Assets pursuant hereto to
the fullest extent permitted by applicable law.

 

(c)           Closing.  The effective date of the transfer of the Purchased
Assets from Seller to Buyer pursuant hereto shall be 12:01 a.m. of the Closing
Date (the “Closing”).  From and after the Closing, the business of Seller shall
be conducted and the Purchased Assets shall be held for the account and benefit,
and at the risk, of Buyer.

 

2.7           Nontransferable Assets.  To the extent that any Purchased Asset or
Assumed Liability to be sold, conveyed, assigned, transferred, delivered or
assumed to or by Buyer pursuant hereto, or any claim, right or benefit arising
thereunder or resulting therefrom, is not capable of being sold, conveyed,
assigned, transferred or delivered without the approval, consent or waiver of
the issuer thereof or the other party thereto, or any third person (including a
government or governmental unit), or if such sale, conveyance, assignment,
transfer or delivery or attempted sale, conveyance, assignment, transfer or
delivery would constitute a breach or termination right thereof or a violation
of any law, decree, order, regulation or other governmental edict, except as
expressly otherwise provided herein, this Agreement shall not constitute a sale,
conveyance, assignment, transfer or delivery thereof, or an attempted sale,
conveyance, assignment, transfer or delivery thereof absent such approvals,
consents or waivers.  If any such approval, consent or waiver shall not be
obtained, or if an attempted assignment of any such Purchased Asset or the
assumption of any Assumed Liability by Buyer would be ineffective so that Buyer
would not in fact receive all such Purchased Assets or assume all such Assumed
Liabilities pursuant hereto, Seller, Buyer and Parent shall cooperate in a
mutually agreeable arrangement under which Buyer would obtain the benefits and
assume the obligations of such Purchased Assets and Assumed Liabilities in
accordance with this Agreement, including subcontracting, sub-licensing, or
sub-leasing to Buyer, or under which Seller, at Buyer’s expense, would enforce
for the benefit of Buyer, with Buyer assuming all of Seller’s obligations
thereunder, any and all rights of Seller against a third party thereto.  From
and after the Closing, Seller shall promptly pay to Buyer when received all
monies received by Seller under any Purchased Asset or any claim or right or any
benefit arising thereunder, except to the extent the same represents an Excluded
Asset hereunder, and Buyer shall promptly pay, perform and discharge when

 

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due all Assumed Liabilities.  The failure of Seller to obtain any third party
consent hereunder shall not affect the Purchase Price if the Closing shall
occur.

 

2.8           Taking of Necessary Action; Further Action.  From time to time
after the Closing Date, at the request of either Party hereto and at the expense
of such Party, the Parties hereto shall execute and deliver such other
instruments of sale, transfer, conveyance, assignment and confirmation and take
such action as Buyer may reasonably determine is necessary to transfer, convey
and assign to Buyer, and to confirm Buyer’s title to or interest in the
Purchased Assets, to put Buyer in actual possession and operating control
thereof and to assist Buyer in exercising all rights with respect thereto. 
Seller hereby constitutes and appoints Buyer and its successors and assigns as
its true and lawful attorney in fact in connection with the transactions
contemplated by this instrument, with full power of substitution, in the name
and stead of Seller but on behalf of and for the benefit of Buyer and its
successors and assigns, to demand and receive any and all of the assets,
properties, rights and business hereby conveyed, assigned, and transferred or
intended so to be, and to give receipt and releases for and in respect of the
same and any part thereof, and from time to time to institute and prosecute, in
the name of Seller or otherwise, for the benefit of Buyer or its successors and
assigns, proceedings at law, in equity, or otherwise, which Buyer or its
successors or assigns reasonably deem proper in order to collect or reduce to
possession or endorse any of the Purchased Assets and to do all acts and things
in relation to the Purchased Assets which Buyer or its successors or assigns
reasonably deem desirable.

 

2.9           Earn-Out.

 

(a)           Earn-Out Escrow Fund.  As soon as practicable after the Closing,
the Earn-Out Shares will be deposited with Wells Fargo Corporate Trust Services,
as escrow agent (the “Earn-Out Escrow Agent”), without any act by Seller, such
deposit to constitute an earn-out escrow fund (the “Earn-Out Escrow Fund”) to be
governed by the terms set forth herein.

 

(b)           Escrow Period; Distribution.  The Earn-Out Escrow Fund shall
remain in existence during the period following the Closing until the Earn-Out
Shares have been distributed according to this Section 2.9 (the “Earn-Out Escrow
Period”).

 

(i)            As soon as practicable following receipt of a Final
Determination, the Earn-Out Escrow Agent shall deliver (1) the First Earn-Out
Shares to Seller or any successor thereto (including the Trust) and (2) the
number of shares equal to the Aggregate First Earn-Out Shares minus the First
Earn-Out Shares to Parent.

 

(ii)           As soon as practicable following receipt of a Final
Determination, the Earn-Out Escrow Agent shall deliver (1) the Second Earn-Out
Shares to Seller or any successor thereto (including the Trust) and (2) the
number of shares equal to the Aggregate Second Earn-Out Shares minus the Second
Earn-Out Shares to Parent.

 

(c)           Determination of First Earn-Out Escrow Shares and Second Earn-Out
Escrow Shares.  Parent shall deliver to Seller or any successor thereto
(including the Trust) (i) within 60 days following First Earn-Out Measurement
Date, a statement setting forth the number of First Earn-Out

 

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Shares and (ii) within 60 days following Second Earn-Out Measurement Date, a
statement setting forth the number of Second Earn-Out Shares, each as determined
and calculated by Parent pursuant to this Agreement (the “Calculations”). 
Parent shall, upon request, make available during normal business hours all
books and records supporting the Calculations for review by Seller or any
successor thereto (including the Trust).  In the event that Seller or any
successor thereto (including the Trust) disputes any portion of the
Calculations, Seller or any successor thereto (including the Trust) shall notify
Parent in writing (an “Earn-Out Dispute Notice”) of the amount, nature and basis
of such dispute, within thirty (30) calendar days after delivery of the
Calculations.  If Seller or any successor thereto (including the Trust) does not
provide an Earn-Out Dispute Notice during such period, then the Calculations
delivered by Parent shall be binding and conclusive upon Seller or any successor
thereto (including the Trust), the Shareholders and all parties to this
Agreement.  In the event of a timely Earn-Out Dispute Notice, Seller or any
successor thereto (including the Trust) and Parent shall first endeavor to
resolve such dispute among themselves.  If Seller or any successor thereto
(including the Trust) and Parent are unable to resolve the dispute within
forty-five (45) calendar days, the dispute, including, without limitation, each
party’s proposed final calculation (“Final Calculation”) at the end of such
45-day period (which may differ from the Calculations or any amounts set forth
in the Earn-Out Dispute Notice), shall be submitted to arbitration in San
Francisco County, California, under the rules then in effect of the San
Francisco Judicial Arbitration and Mediation Service (“JAMS”).  Each Party to
any arbitration pursuant to this Section 2.9 shall pay its own expenses; the
fees of the arbitrator and the administrative fee of JAMS shall be borne equally
by Parent and Seller or any successor thereto (including the Trust).  The
determination in the arbitration as to the resolution of any dispute shall be
binding and conclusive upon Seller or any successor thereto (including the
Trust), the Shareholders and all parties to this Agreement, absent fraud.

 

(d)           Definitions.

 

(i)            “Cause” shall mean (i) a material act of dishonesty by a Key
Employee in connection with the Key Employee’s responsibilities as an employee,
(ii) a Key Employee’s conviction of, or plea of nolo contendere to, a felony, or
(iii) a Key Employee’s unsatisfactory performance of his duties hereunder as
reasonably determined by the Key Employee’s supervisor; provided, however, that
such duties do not materially deviate from such Key Employee’s prior duties,
experience or background.

 

(ii)           “Constructive Termination” shall mean (a) a material reduction in
the Key Employee’s cash compensation as of the day following the Closing Date
paid on the Company’s standard salary payment schedule, less applicable
withholding or benefits, (b) a material reduction in authority, status,
obligations or responsibilities as of the day following the Closing Date, or (c)
the requirement that a Key Employee relocates to more than 50 miles from
Seller’s headquarters as of the day following the Closing Date.

(iii)          “Earn-Out Shares” shall mean 800,000 shares of Parent Common
Stock, of which 560,000 shares shall be designated “Aggregate First Earn-Out
Shares” and 240,000 shares shall be designated “Aggregate Second Earn-Out
Shares”.

 

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(iv)          “Final Determination” shall mean a determination of the number of
First Earn-Out Shares or Second Earn-Out Shares, as the case may be, in
accordance with this Section 2.9 as evidenced by the written agreement of Parent
and Seller or any successor thereto (including the Trust), the written statement
of Parent indicating that neither Seller nor any successor thereto (including
the Trust) submitted an Earn-Out Dispute Notice within thirty (30) calendar days
after delivery of the Calculations or the written decision of the arbitrator as
described in Section 2.9(d).

 

(v)           “First Earn-Out Measurement Date” shall mean the date one year
following the Closing Date.

 

(vi)          “First Earn-Out Shares” shall equal the sum of the numbers of
shares set forth below to the right of each Key Employee’s name; provided,
however that a number shall not be included in such calculation in the event
that the corresponding Key Employee (1) voluntarily terminates his employment
with Buyer prior to the First Earn-Out Measurement Date, (2) terminates his
employment with Buyer under circumstances that constitute a Constructive
termination prior to the First Earn-Out Measurement Date or (3) is terminated by
Parent for Cause prior to the First Earn-Out Measurement Date.

 

(a)           [ * * * ]

 

(b)           [ * * * ]

 

(c)           [ * * * ]

 

(d)           [ * * * ]

 

(e)           [ * * * ]

 

(f)            [ * * * ]

 

(vii)         “Second Earn-Out Measurement Date” shall mean the date eighteen
months following the Closing Date.

 

(viii)        “Second Earn-Out Shares” shall equal the sum of the numbers of
shares set forth below to the right of each Key Employee’s name; provided,
however that a number shall not be included in such calculation in the event
that the corresponding Key Employee (1) voluntarily terminates his employment
with Buyer prior to the Second Earn-Out Measurement Date, (2) terminates his
employment with Buyer under circumstances that constitute a Constructive
termination prior to the Second Earn-Out Measurement Date or (3) is terminated
by Parent for Cause prior to the Second Earn-Out Measurement Date.

 

(a)           [ * * * ]

 

(b)           [ * * * ]

 

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(c)           [ * * * ]

 

(d)           [ * * * ]

 

(e)           [ * * * ]

 

(f)            [ * * * ]

 

(e)           Protection of Escrow Fund.  The Earn-Out Escrow Agent shall hold
and safeguard the Earn-Out Escrow Fund during the Earn-Out Escrow Period, shall
treat such fund as a trust fund in accordance with the terms of this Agreement
and not as the property of Buyer or Parent and shall hold and dispose of the
Earn-Out Escrow Fund only in accordance with the terms hereof.

 

(f)            Distributions; Voting.

 

(i)            Any shares of Parent Common Stock or other equity securities
issued or distributed by Parent (including shares issued upon a stock split,
stock dividend, recapitalization or other similar event) (“New Earn-Out Shares”)
in respect of Parent Common Stock in the Earn-Out Escrow Fund which have not
been released from the Earn-Out Escrow Fund shall be added to the Earn-Out
Escrow Fund and become a part thereof.  New Earn-Out Shares issued in respect of
shares of Parent Common Stock which have been released from the Earn-Out Escrow
Fund shall not be added to the Earn-Out Escrow Fund but shall be distributed to
Seller or any successor thereto (including the Trust).  Cash dividends on Parent
Common Stock shall not be added to the Earn-Out Escrow Fund but shall be
distributed to Seller or any successor thereto (including the Trust).

 

(ii)           Seller or any successor thereto (including the Trust) shall be
shown as the record owner of Parent Common Stock on Parent’s books and records
and shall have voting rights with respect to the shares of Parent Common Stock
held in the Escrow Fund on behalf of Seller or any successor thereto  (including
the Trust) (and on any voting securities added to the Escrow Fund in respect of
such shares of Parent Common Stock).

 

(g)           Seller’s Agent.  After the Closing, Seller or any successor
thereto (including the Trust) may appoint an agent to act on its behalf with
respect to this Section 2.9, with the prior written consent of Parent, which
consent shall not be unreasonably withheld.

 

(h)           Earn-Out Escrow Agent’s Duties.

 

(i)            The Earn-Out Escrow Agent’s duties are purely ministerial in
nature, and the Earn-Out Escrow Agent shall be obligated only for the
performance of such duties as are specifically set forth in this Agreement and
as set forth in any additional written escrow instructions which the Earn-Out
Escrow Agent may receive after the date of this Agreement which are signed by an
officer of Parent and the Seller or any successor thereto (including the Trust),
and may rely and shall be protected in relying or refraining from acting on any
instrument reasonably believed to be genuine and to have been signed or
presented by the proper Party or Parties.  The Earn-Out Escrow Agent shall not
be liable for any action taken, suffered or omitted hereunder as Earn-Out Escrow

 

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Agent absent gross negligence or willful misconduct, and the Earn-Out Escrow
Agent shall be fully protected and shall incur no liability for any action
taken, suffered or omitted pursuant to the advice of counsel.

 

(ii)           The Earn-Out Escrow Agent is hereby expressly authorized to
disregard any and all warnings given by any of the Parties hereto or by any
other Person, excepting only orders or process of courts of law, and is hereby
expressly authorized to comply with and obey orders, judgments or decrees of any
court.  In case the Earn-Out Escrow Agent obeys or complies with any such order,
judgment or decree of any court, the Earn-Out Escrow Agent shall not be liable
to any of the Parties hereto or to any other Person by reason of such
compliance, notwithstanding any such order, judgment or decree being
subsequently reversed, modified, annulled, set aside, vacated or found to have
been entered without jurisdiction.

 

(iii)          The Earn-Out Escrow Agent shall not be liable in any respect on
account of the identity, authority or rights of the Parties executing or
delivering or purporting to execute or deliver this Agreement or any documents
or papers deposited or called for hereunder.

 

(iv)          The Earn-Out Escrow Agent shall not be liable for the expiration
of any rights under any statute of limitations with respect to this Agreement or
any documents deposited with the Earn-Out Escrow Agent.

 

(v)           In performing any duties under the Agreement, the Earn-Out Escrow
Agent shall not be liable to any Party for damages, claims, liabilities, losses,
or expenses, except for gross negligence or willful misconduct on the part of
the Earn-Out Escrow Agent (which for all purposes of any section of this
Agreement as it pertains to the Earn-Out Escrow Agent shall be finally
determined by a court of competent jurisdiction).  The Earn-Out Escrow Agent
shall not incur any such liability for (A) any action taken, suffered or omitted
in good faith, or (B) any action taken, suffered or omitted in reliance upon any
instrument, including any written statement or affidavit provided for in this
Agreement that the Earn-Out Escrow Agent shall in good faith believe to be
genuine, nor will the Earn-Out Escrow Agent be liable or responsible for
forgeries, fraud, impersonations, or determining the scope of any representative
authority.  In addition, the Earn-Out Escrow Agent may consult with legal
counsel in connection with Earn-Out Escrow Agent’s duties under this Agreement
and shall be fully protected in any action taken, suffered, or omitted by it in
accordance with the advice of counsel.  The Earn-Out Escrow Agent is not
responsible for determining and verifying the authority of any Person acting or
purporting to act on behalf of any Party to this Agreement.  The Earn-Out Escrow
Agent shall have the right to perform any of its duties hereunder through
agents, custodians or nominees, and the Earn-Out Escrow Agent shall not be
liable or responsible for any misconduct or negligence on the part of any such
agent, custodian or nominee absent gross negligence, willful misconduct or bad
faith on the part of the Earn-Out Escrow Agent in the selection and continued
employment thereof.

 

(vi)          If any controversy arises between the Parties to this Agreement,
or with any other party, concerning the subject matter of this Agreement, its
terms or conditions, the Earn-Out Escrow Agent will not be required to determine
the controversy or to take any action regarding it.  The Earn-Out Escrow Agent
may hold all documents and funds and may wait for

 

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settlement of any such controversy by final appropriate legal proceedings or
other means as, in the Earn-Out Escrow Agent’s discretion, the Earn-Out Escrow
Agent may be required, despite what may be set forth elsewhere in this
Agreement.  In such event, the Earn-Out Escrow Agent will not be liable for
damages.  Furthermore, the Earn-Out Escrow Agent may at its option, file an
action of interpleader requiring the Parties to answer and litigate any claims
and rights among themselves.  The Earn-Out Escrow Agent is authorized to deposit
with the clerk of the court all documents and funds held in escrow, except all
cost, expenses, charges and reasonable attorney fees incurred by the Earn-Out
Escrow Agent through such time and which the Parties jointly and severally agree
to pay.  Upon initiating such action, the Earn-Out Escrow Agent shall be fully
released and discharged of and from all obligations and liability imposed by the
terms of this Agreement.

 

(vii)         The Parties and their respective successors and assigns agree
jointly and severally to indemnify and hold Earn-Out Escrow Agent harmless
against any and all losses, claims, costs, fines, settlement judgments,
penalties, demands, damages, liabilities, and expenses, including reasonable
costs of investigation, counsel fees, including allocated costs of in-house
counsel and disbursements that may be imposed on Earn-Out Escrow Agent or
incurred by Earn-Out Escrow Agent in connection with the execution of this
Agreement or the performance of its duties under this Agreement, including but
not limited to any litigation arising from this Agreement or involving its
subject matter other than arising out of its negligence or willful misconduct.

 

(viii)        The Earn-Out Escrow Agent may resign at any time upon giving at
least thirty (30) days written notice to the Parties; provided, however, that no
such resignation shall become effective until the appointment of a successor
escrow agent which shall be accomplished as follows:  the Parties shall use
their best efforts to mutually agree on a successor escrow agent within thirty
(30) days after receiving such notice.  If the Parties fail to agree upon a
successor escrow agent within such time, the Earn-Out Escrow Agent shall have
the right to appoint a successor escrow agent authorized to do business in the
State of California.  The successor escrow agent shall execute and deliver an
instrument accepting such appointment and it shall, without further acts, be
vested with all the estates, properties, rights, powers, and duties of the
predecessor escrow agent as if originally named as escrow agent.  Upon
appointment of a successor escrow agent, the Earn-Out Escrow Agent shall be
discharged from any further duties and liability under this Agreement. 
Alternatively, if a successor escrow agent is not appointed within the above
time frames, then the Earn-Out Escrow Agent may apply to a court of competent
jurisdiction for appointment of a successor escrow agent.

 

(ix)           In no event shall the Earn-Out Escrow Agent be liable for
special, indirect, incidental, punitive or consequential loss or damage of any
kind whatsoever (including but not limited to lost profits) even if the Earn-Out
Escrow Agent has been advised of the likelihood of such loss or damage and
regardless of the form of action.

 

(x)            Any Person into which the Earn-Out Escrow Agent may be merged or
converted or with which it may be consolidated, or any Person resulting from any
merger, conversion or consolidation to which the Earn-Out Escrow Agent in its
individual capacity shall be a

 

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party, or any Person to which substantially all the business of the Earn-Out
Escrow Agent may be transferred, shall be the Earn-Out Escrow Agent under this
Agreement without further act.

 

(i)            Fees.  All fees of the Earn-Out Escrow Agent for performance of
its duties hereunder shall be paid by Parent in accordance with the schedule of
the Earn-Out Escrow Agent delivered to Parent at or prior to the execution of
this Agreement.  Such fee schedule may be amended or modified upon mutual
consent of Parent and the Earn-Out Escrow Agent.  It is understood that the fees
and usual charges agreed upon for services of the Earn-Out Escrow Agent shall be
considered compensation for ordinary services as contemplated by this
Agreement.  In the event that the conditions of this Agreement are not promptly
fulfilled, or if the Earn-Out Escrow Agent renders any service not provided for
in this Agreement, or if the Parties request a substantial modification of its
terms, or if any controversy arises, or if the Earn-Out Escrow Agent is made a
party to, or intervenes in, any litigation pertaining to the Escrow Fund or its
subject matter, the Earn-Out Escrow Agent shall be reasonably compensated for
such extraordinary services and reimbursed for all costs, attorney’s fees,
including allocated costs of in-house counsel, and expenses occasioned by such
default, delay, controversy or litigation and the Earn-Out Escrow Agent shall
not be obligated to take any such action unless and until it is reasonably
satisfied that it will receive such compensation and reimbursement.

 

(j)            Notwithstanding anything to the contrary in this Agreement, the
Earn-Out Escrow Agent shall perform only those duties and functions as set forth
in Section 2.9 of this Agreement, shall not have any other obligations under any
other section of this Agreement whatsoever, and shall not be responsible for, or
chargeable with, knowledge of any other terms or other provisions contained in
this Agreement or any other separate agreement(s) and understanding(s) between
the parties thereto.  The Earn-Out Escrow Agent shall not be liable for the
accuracy of any calculations or the sufficiency of any funds or shares of stock
for any purpose.

 

2.10         Consideration Guarantee.

 

(a)           In the event the average closing sale price of a share of Parent
Common Stock, as reported on the Nasdaq National Market, in the Fourth Calendar
Quarter (the “Fourth Quarter Average Share Price”) is less than $2 per share,
the Parent shall issue to Seller or any successor thereto (including the Trust)
the Parent Guarantee Amount (as defined in Section 2.10(d)) in accordance with
the provisions of this Section 2.10.

 

(b)           Within ten (10) calendar days of termination of the Fourth
Calendar Quarter, Seller or any successor thereto (including the Trust) shall
provide evidence to Parent in a form satisfactory to Parent of the number of
Seller Guarantee Shares (as defined in Section 2.10(d)) (the “Seller Guarantee
Notice”).  Parent will deliver to Seller or any successor thereto (including the
Trust) (i) within ten (10) calendar days following the actual receipt of the
Seller Guarantee Notice, Parent shall provide a statement setting forth the
Parent Guarantee Amount, as determined and calculated by Parent pursuant to this
Agreement (the “Guarantee Calculations”).  Parent shall, upon request, make
available during normal business hours all books and records supporting the
Guarantee Calculations for review by the Seller or any successor thereto
(including the Trust).  In the event that Seller or any successor thereto
(including the Trust) disputes any portion of the

 

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Guarantee Calculations, Seller or any successor thereto (including the Trust)
shall notify Parent in writing (a “Guarantee Dispute Notice”) of the amount,
nature and basis of such dispute, within ten (10) calendar days after delivery
of the Guarantee Calculations.  If Seller or any successor thereto (including
the Trust) does not provide Guarantee Dispute Notice during such period, then
the Guarantee Calculations delivered by Parent shall be binding and conclusive
upon Seller or any successor thereto (including the Trust), the Shareholders and
all parties to this Agreement and the Parent shall (i) direct its transfer agent
to issue to Seller or any successor thereto (including the Trust) the applicable
number of Parent Guarantee Shares and (ii) issue to Seller or any successor
thereto (including the Trust) the applicable portion of the Parent Guarantee
Cash, if any, both as determined pursuant to this Section 2.10, within ten (10)
calendar days.  In the event of a timely Guarantee Dispute Notice, Seller or any
successor thereto (including the Trust) and Parent shall first endeavor to
resolve such dispute among themselves.  If Seller or any successor thereto
(including the Trust) and Parent are unable to resolve the dispute within thirty
(30) calendar days, the dispute, including, without limitation, each party’s
proposed final calculation (“Final Guarantee Calculation”) of the Parent
Guarantee Amount at the end of such 30-day period (which may differ from the
Guarantee Calculations or any amounts set forth in the Guarantee Dispute
Notice), shall be submitted to an auditing firm selected by mutual agreement of
Parent and Seller or any successor thereto (including the Trust) (the “Auditing
Firm”).  The Auditing Firm shall use its best efforts to resolve the dispute
within thirty (30) calendar days after submission.  The determination of the
Auditing Firm as to the resolution of any dispute shall be binding and
conclusive upon Seller or any successor thereto (including the Trust), the
Shareholders and all parties to this Agreement, absent fraud.  The fees and
expenses of the Auditing Firm in connection with resolving a Guarantee Dispute
Notice shall be borne by the party whose Final Guarantee Calculation of the
aggregate payment to Seller or any successor thereto (including the Trust) in
connection with the Parent Guarantee Amount is further from the amount
determined by the Auditing Firm; provided, however, that if such fees and
expenses are to be borne by Seller or any successor (including the Trust) the
amount of such fees and expenses may, at Parent’s option, be offset on a pro
rata basis against any earn-out payments hereunder.

 

(c)           As soon as practicable after final determination of the Parent
Guarantee Amount, Parent shall (i) direct its transfer agent to issue to Seller
or any successor thereto (including the Trust) the applicable number of Parent
Guarantee Shares and (ii) pay to Seller or any successor thereto (including the
Trust) the applicable portion of the Parent Guarantee Cash, if any, both as
determined pursuant to this Section 2.10.

 

(d)           Definitions:

 

(i)            The “Parent Guarantee Amount” shall equal the sum of the Parent
Guarantee Shares and the Parent Guarantee Cash.

 

(ii)           The “Parent Guarantee Shares” shall equal the lower of (1) 19.9%
of Parent’s outstanding stock on the Closing Date minus 4,500,000 (the “Ceiling
Shares”) or (2) number of shares (the “Formula Shares”) derived by the following
formula:

 

($2 — X)Y divided by X,

 

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where “X” equals the greater of (1) the Fourth Quarter Average Share Price and
(2) the Six Month Lowest Share Price, and

 

where “Y” equals the number of Seller Guarantee Shares.

 

(iii)          The “Parent Guarantee Cash” shall equal the lower of (A) Cash
Ceiling and (B) the product of (1) the number of Formula Shares minus the number
of Ceiling Shares and (2) greater of the Fourth Quarter Average Share Price and
the Six Month Lowest Share Price; provided, however, that if the number of
Ceiling Shares is greater than the number of Formula Shares the Parent Guarantee
Cash shall equal zero.

 

(iv)          The “Seller Guarantee Shares” shall equal the number of Parent
Consideration Shares and Earn-Out Shares held by Seller or any successor thereto
and the Shareholders on the last day of the Fourth Calendar Quarter.

 

(v)           The “Cash Ceiling” shall equal (1) 19% of the sum of (w) the
product of the Issuance Trading Price and the sum of the number of Parent
Consideration Shares and the number of Earn-Out Shares issued to date (including
the Parent Guarantee Shares), (x) the aggregate value of the Assumed Liability,
(y) the aggregate value of the Excluded Assets, and (z) the cash to be issued
pursuant to Cash Ceiling, less (2) the sum of (y) the aggregate value of the
Assumed Liability and (z) the aggregate value of the Excluded Assets.

 

ARTICLE III

 

REPRESENTATIONS AND WARRANTIES OF SELLER

 

Subject to such exceptions as are specifically disclosed in the disclosure
letter (referencing the appropriate section numbers) supplied by Seller to
Parent and Buyer (the “Seller Disclosure Letter”), Seller hereby represents and
warrants to Parent and Buyer that the statements contained in this Article III
are true and correct as of the date of this Agreement and will be true and
correct as of the Closing (as though made at the Closing ); provided, that the
representations and warranties made as of a specified date will be true and
correct as of such date.

 

3.1           Organization, Qualification, and Corporate Power.  Seller is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of California.  Seller is duly authorized to conduct business
and is in good standing under the laws of each other jurisdiction where such
qualification is required and in which the failure to so qualify is reasonably
likely to have a Material Adverse Effect on Seller.  There is no state other
than California in which Seller owns any property or in which it has any
employees, offices or operations.  Seller has full corporate power and authority
to carry on the businesses in which it is engaged and to own and use the
properties owned and used by it.  Section 3.1 of Seller Disclosure Letter lists
the directors and officers of Seller.  The operations now being conducted by
Seller have not been conducted under any other name since its inception.  The
copies of Seller’s Articles of Incorporation, Bylaws, minute books, stock
transfer ledger, stock option ledger and warrant ledger which have been
delivered to Parent are true, correct and complete as of the date hereof and
shall be as of the Closing.

 

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3.2           Authorization.  Seller has full power and authority to execute and
deliver this Agreement and all agreements and instruments delivered pursuant
hereto (the “Ancillary Agreements”) to which it is a party, and, subject to
receipt of the requisite approval of its shareholders, to consummate the
transactions contemplated hereunder and to perform its obligations hereunder and
no other proceedings on the part of Seller are necessary to authorize the
execution, delivery and performance of this Agreement and the Ancillary
Agreements to which Seller is a party.  This Agreement and the Ancillary
Agreements to which Seller is a party and the transactions contemplated hereby
and thereby have been approved by the unanimous vote of Seller’s Board of
Directors.  This Agreement and the Ancillary Agreements to which Seller is a
party constitute the valid and legally binding obligations of Seller,
enforceable against Seller in accordance with their respective terms and
conditions, except as such enforceability may be limited by principles of public
policy and subject to the laws of general application relating to bankruptcy,
insolvency and the relief of debtors and rules of law governing specific
performance, injunctive relief or other equitable remedies.

 

3.3           Capitalization.

 

(a)           Capital Stock.  The entire authorized capital stock of Seller
consists of 37,000,000 shares of Common Stock, 3,515,000 of which are issued and
outstanding, 14,000,000 shares of Series A Preferred Stock, 12,479,956 of which
are issued and outstanding, 1,000,000 shares of Series B Preferred Stock, 10,000
of which are issued and outstanding, and 10,000,000 shares of Series C Preferred
Stock, 8,806,535 of which are issued and outstanding.  All of the issued and
outstanding shares of capital stock have been duly authorized, are validly
issued, fully paid, non-assessable and were not issued in violation of any
preemptive rights, rights of first refusal, or any similar rights and are held
of record by the respective shareholders with the domicile addresses as set
forth in Section 3.3(a) of Seller Disclosure Letter.  None of the issued and
outstanding shares of capital stock are subject to any preemptive rights, rights
of first refusal, or any similar rights.  All of the outstanding shares of
capital stock have been offered, issued and sold by Seller in compliance with
applicable federal and state securities laws.  All shares of Preferred Stock of
Seller are convertible into shares of Seller Common Stock at a one-for-one
conversion ratio.  There are no declared or accrued but unpaid dividends with
respect to any shares of capital stock of Seller.

 

(b)           Options, Rights or Other Agreements. Except for the 2000 Employee
and Consultant Equity Incentive Plan (the “Seller Plan”), Seller has not adopted
or maintained and Seller is not obligated under, any stock option plan or other
plan providing for equity compensation of any person.  Seller has reserved
4,000,000 shares of Seller Common Stock for issuance to employees, contract
workers and directors of, and consultants to, Seller upon the exercise of
options granted under the Seller Plan, of which 516,000 shares are issuable, as
of the date hereof, upon the exercise of outstanding, unexercised options
granted under the Plan.  Section 3.3(b) of Seller Disclosure Letter sets forth
for each outstanding option granted by Seller under the Seller Plan (the “Seller
Options”), the name of the holder of such option, the domicile address of such
holder, the number of shares of Seller Common Stock issuable upon the exercise
of such option, the exercise price of such option, the vesting schedule for such
option, including the extent vested to date and whether the

 

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vesting of such option will be accelerated by the transactions contemplated by
this Agreement, and whether such option is intended to qualify as an incentive
stock option as defined in Section 422 of the Code.  Except for Seller Options,
there are no options, warrants, calls, rights, commitments or agreements of any
character, written or oral, to which Seller is a party or by which it is bound
obligating Seller to issue, deliver, sell, repurchase or redeem, or cause to be
issued, delivered, sold, repurchased or redeemed, any shares of the capital
stock of Seller or obligating Seller to grant, extend, accelerate the vesting
of, change the price of, otherwise amend or enter into any such option, warrant,
call, right, commitment or agreement.  There are no outstanding or authorized
stock appreciation, phantom stock, profit participation, or other similar rights
with respect to Seller.  Except as contemplated hereby, there are no voting
trusts, proxies, or other agreements or understandings with respect to the
voting stock of Seller.

 

3.4           Subsidiaries.  Seller does not have, and never has had, any
subsidiaries and does not otherwise own, and has not otherwise owned, any shares
in the capital of or any interest in, or control, directly or indirectly, any
other corporation, partnership, association, joint venture or other business
entity.  In addition, there are no corporations, partnerships, associations,
joint ventures or other business entities controlled by, directly or indirectly,
any party that may be deemed to control Seller.

 

3.5           No Conflicts.  Neither the execution and the delivery of this
Agreement by Seller nor the consummation of the transactions contemplated hereby
will (A) violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which Seller is subject, (B) violate or
conflict with any provision of its Articles of Incorporation or bylaws, or (C)
conflict with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate, modify,
or cancel, or require any notice or consent under, any agreement, contract,
lease, license, instrument, franchise, permit, mortgage, indenture or other
arrangement to which Seller is a party or by which it is bound or to which any
of its assets are subject (or result in the imposition of any Lien upon any of
their respective assets).

 

3.6           Consents.  No consent, waiver, approval, order or authorization
of, or registration, declaration or filing with, any Governmental Body or any
third party, including a party to any agreement with Seller, is required by or
with respect to Seller in connection with the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby, except
for (i) such consents, waivers, approvals, orders, authorizations,
registrations, declarations and filings as may be required under applicable
federal and state securities laws, and (ii) any applicable filings required
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

 

3.7           Financial Statements.  Section 3.7 of Seller Disclosure Letter
contains the following financial statements (collectively the “Financial
Statements”): (i) unaudited balance sheets (the “Most Recent Balance Sheet”) 
and statements of income and cash flows (the “Most Recent Financial Statements”)
as of and for the fiscal year ended December 31, 2001 for Seller (the “Most
Recent Fiscal Period End”), (ii) audited balance sheets and statements of income
and cash flows as of and for the fiscal year ended December 31, 2000 for Seller;
and (ii) an unaudited balance sheet

 

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and statements of income and cash flows) as of and for the five month period
ended May 31, 2002 for Seller.  The Financial Statements, (including the notes
thereto) have been prepared in accordance with generally accepted accounting
principles (“GAAP”) applied on a consistent basis throughout the periods covered
thereby and present fairly in all material respects the financial condition of
Seller as of such dates and the results of operations of Seller for such
periods; provided, however, that the Most Recent Financial Statements lack
footnotes and certain other presentation items and are subject to normal year
end adjustments which will not be material individually or in the aggregate. 
The books of account of Seller reflect, in all material respects, as of the
dates shown thereon all items of income and expenses, and all assets,
liabilities and accruals of Seller required to be reflected therein.

 

3.8           Undisclosed Liabilities.  Seller has no liability, indebtedness,
obligation, expense, claim, deficiency, guaranty or endorsement of any type
(whether asserted or unasserted, whether absolute or contingent, whether accrued
or unaccrued, whether liquidated or unliquidated, and whether due or to become
due, including any liability for taxes), except for that which individually or
in the aggregate (i) is reflected on the Most Recent Balance Sheet or (ii) has
arisen after the Most Recent Fiscal Period End in the ordinary course of
business.

 

3.9           Events Subsequent to Most Recent Fiscal Period End.  Since the
Most Recent Fiscal Period End, there has not been any material adverse change in
the business, operations, assets (including intangible assets), liabilities
(contingent or otherwise), results of operations or financial performance, or
condition (financial or otherwise) of Seller.  Without limiting the generality
of the foregoing, since that date:

 

(a)           Seller has not sold, leased, transferred, or assigned any assets
or properties, tangible or intangible, outside the ordinary course of business;

 

(b)           Seller has not entered into, assumed or become bound under or
obligated by any agreement, contract, lease or commitment (collectively a
“Contract”) or extended or modified the terms of any Contract which (i) involves
the payment of greater than $10,000 per annum or which extends for more than one
(1) year, (ii) involves any payment or obligation to any Affiliate of Seller
other than in the ordinary course of business, (iii) involves the sale of any
material assets, or (iv) involves any license of any Seller Intellectual
Property;

 

(c)           no party (including Seller) has accelerated, terminated, made
modifications to, or canceled any agreement, contract, lease, or license to
which Seller is a party or by which it is bound and Seller has not modified,
canceled or waived or settled any debts or claims held by it, outside the
ordinary course of business, or waived or settled any rights or claims of a
substantial value, whether or not in the ordinary course of business;

 

(d)           none of the assets of Seller, tangible or intangible, has become
subject to any Lien;

 

(e)           Seller has not made any capital expenditures except in the
ordinary course of business and not exceeding $10,000 in the aggregate of all
such capital expenditures;

 

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(f)            Seller has not made any capital investment in, or any loan to,
any other Person;

 

(g)           Seller has not created, incurred, assumed, prepaid or guaranteed
any indebtedness for borrowed money and capitalized lease obligations, or
extended or modified any existing indebtedness;

 

(h)           Seller has not granted any license or sublicense of any rights
under or with respect to any Seller Intellectual Property;

 

(i)            there has been no change made or authorized in the Articles of
Incorporation or bylaws of Seller, except as contemplated by this Agreement;

 

(j)            other than the issuance of Seller Common Stock pursuant to the
exercise of employee stock options granted under the Seller Plan outstanding as
of the date hereof, there has not been (i) any change in Seller’s authorized or
issued capital stock, (ii) any grant of any stock option or right to purchase
shares of capital stock of Seller, (iii) the issuance of any security
convertible into such capital stock, (iv) the grant of any registration rights,
(v) any purchase, redemption, retirement, or other acquisition by Seller of any
shares of any such capital stock or (vi) any declaration or payment of any
dividend or other distribution or payment in respect of shares of capital stock;

 

(k)           Seller has not experienced any damage, destruction, or loss
(whether or not covered by insurance) to its property in excess of $10,000 in
the aggregate of all such damage, destruction and losses;

 

(l)            Seller has not suffered any repeated, recurring or prolonged
shortage, cessation or interruption of communications, customer access, supplies
or utility services;

 

(m)          Seller has not made any loan to, or entered into any other
transaction with, or paid any bonuses in excess of an aggregate of $10,000 to,
any of its Affiliates, directors, officers, or employees or their Affiliates,
and, in any event, any such transaction was on fair and reasonable terms no less
favorable to Seller than would be obtained in a comparable arm’s length
transaction with a Person which is not such a director, officer or employee or
Affiliate thereof;

 

(n)           Seller has not entered into any employment contract or collective
bargaining agreement, written or oral, or modified the terms of any existing
such contract or agreement;

 

(o)           Seller has not granted any increase in the base compensation of
any of its directors or officers, or, except in the ordinary course of business,
any of its employees;

 

(p)           Seller has not adopted, amended, modified, or terminated any
bonus, profit-sharing, incentive, severance, or other plan, contract, or
commitment for the benefit of any of its directors, officers, or employees (or
taken any such action with respect to any other Seller Employee Plans);

 

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(q)           Seller has not made any other change in employment terms for any
of its directors or officers, and Seller has not made any other change in
employment terms for any other employees outside the ordinary course of
business;

 

(r)            Seller has not suffered any significant adverse change or any
threat of any significant adverse change in its relations with, or any loss or
threat of loss of, any of its major customers, distributors or partners;

 

(s)           Seller has not suffered any adverse change or any threat of any
adverse change in its relations with, or any loss or threat of loss of, any of
its major suppliers;

 

(t)            Seller has not received notice and does not have knowledge of any
actual or threatened labor trouble or strike, or any other occurrence, event or
condition of a similar character;

 

(u)           Seller has not changed any of the accounting principles followed
by it or the method of applying such principles;

 

(v)           Seller has not made a change in any of its banking or safe deposit
arrangements;

 

(w)          Seller has not entered into any agreement, contract or commitment
materially limiting the freedom of Seller to engage in any line of business or
to compete with any person;

 

(x)            Seller has not entered into any transaction other than in the
ordinary course of business; and

 

(y)           Seller has not become obligated to do any of the foregoing.

 

3.10         Legal Compliance.  Seller is in compliance in all material respects
with all applicable laws (including rules, regulations, codes, plans,
injunctions, judgments, orders, decrees, rulings, and charges thereunder) of
federal, state, local, and foreign governments (and all agencies thereof).  No
action, suit, proceeding, hearing, investigation, charge, complaint, claim,
demand, notice or inquiry is pending, or to the knowledge of Seller, is
threatened against Seller by any governmental body alleging any failure to so
comply.  Seller has all licenses, permits, approvals, registrations,
qualifications, certificates and other governmental authorizations that are
necessary for the operations of Seller as they are presently conducted.

 

3.11         Tax Matters.

 

(a)           For purposes of this Agreement, (i) “Tax” or, collectively,
“Taxes”, means (i) any and all federal, state, local and foreign taxes,
assessments and other governmental charges, duties, impositions and liabilities,
including taxes based upon or measured by gross receipts, income, profits,
sales, use and occupation, and value added, ad valorem, transfer, franchise,
withholding, payroll, recapture, employment, excise and property taxes, together
with all interest, penalties and additions imposed with respect to such amounts;
(ii) any liability for the payment of any amounts of

 

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the type described in clause (i) as a result of being or ceasing to be a member
of an affiliated, consolidated, combined or unitary group for any period
(including, without limitation, any liability under Treas. Reg. Section 1.1502-6
or any comparable provision of foreign, state or local law); and (iii) any
liability for the payment of any amounts of the type described in clause (i) or
(ii) as a result of any express or implied obligation to indemnify any other
person or as a result of any obligations under any agreements or arrangements
with any other person with respect to such amounts and including any liability
for taxes of a predecessor entity.

 

(b)           Seller has timely filed all reports and returns with respect to
any Taxes (“Tax Returns”) that it was required to file.  All such Tax Returns
were correct and complete in all respects so as to avoid any additional
assessments and have been completed in accordance with applicable law and were
prepared in accordance with the applicable statutes, rules and regulations. All
Taxes owed by Seller (whether or not shown on any Tax Return) were paid in full
when due or are being contested in good faith and are supported by adequate
reserves on the Most Recent Financial Statements.

 

(c)           Seller has withheld with respect to its employees all federal and
state income Taxes, Taxes pursuant to the Federal Insurance Contribution Act
(“FICA”), Taxes pursuant to the Federal Unemployment Tax Act (“FUTA”), and other
Taxes required to be withheld.

 

(d)           Except as set forth in Section 3.11(d) of Seller Disclosure
Letter, Seller is not currently the beneficiary of any extension of time within
which to file any Tax Return, and Seller has not waived any statute of
limitations in respect of Taxes or agreed to any extension of time with respect
to any Tax assessment or deficiency.

 

(e)           There is no dispute, claim or proposed adjustment concerning any
Tax liability of Seller either (A) claimed or raised by any authority in writing
or (B) based upon personal contact with any agent of such authority.  Seller is
not a party to nor has it been notified that it is the subject of any pending,
proposed or threatened action, investigation, proceeding, audit, claim or
assessment by or before the Internal Revenue Service or any other governmental
authority and no claim for assessment, deficiency or collection of Taxes, or
proposed assessment, deficiency or collection from the Internal Revenue Service
or any other governmental authority which has not been satisfied, nor does
Seller have any reason to believe that any such notice will be received in the
future.

 

(f)            No Tax Returns are currently the subject of audit or examination
nor has Seller been notified of any request for an audit or examination.

 

(g)           No power of attorney has been granted by Seller or any of its
Affiliates with respect to any matter relating to Taxes of Seller.

 

(h)           There are no Liens upon any property or assets of Seller relating
to or attributable to Taxes, except for Liens for taxes not yet due and payable.

 

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(i)            Seller has no knowledge of any basis for the assertion of any
claim relating or attributable to Taxes which, if adversely determined, would
result in any Lien upon any property or assets of Seller.

 

(j)            Seller has not made any payments, is not obligated to make any
payments, and is not a party to any agreement that under any circumstances could
obligate it to make any payments as a result of the consummation of the
transactions contemplated by this Agreement that will not be deductible under
Section 280G or 162 of the Code.

 

(k)           Seller is not a party to any tax allocation or sharing agreement
nor does Seller owe any amount under any such agreement.

 

(l)            Seller has not requested or received a ruling from any taxing
authority or signed a closing agreement with any taxing authority.  No claim has
ever been made by a taxing authority in a jurisdiction where Seller does not
file Tax Returns that Seller is or may be subject to taxation by such
jurisdiction.

 

(m)          The unpaid Taxes of Seller (A) did not, as of the Most Recent
Fiscal Period End, exceed by any amount the reserve for Tax liability (other
than any reserve for deferred taxes established to reflect timing differences
between book and tax income) set forth on the face of the Most Recent Balance
Sheet (rather than in any notes thereto) and (B) will not exceed that reserve as
adjusted for operations and transactions through the Closing Date in accordance
with the past custom and practice of Seller in filing its Tax Returns.

 

(n)           Seller has provided to Parent copies of all federal and state
income and all state sales and use Tax Returns for all periods since the
Seller’s incorporation.

 

3.12         Title of Properties; Absence of Liens and Encumbrances; Condition
of Equipment.

 

(a)           Seller owns no real property, nor has it ever owned any real
property.  All current leases are in full force and effect, are valid and
effective in accordance with their respective terms, and there is not, under any
of such leases, any existing default or event of default (or event which with
notice or lapse of time, or both, would constitute a default) on the part of
Seller and, to the knowledge of Seller, on the part of any other party thereto.

 

(b)           Seller has good and valid title to, or, in the case of leased
properties and assets, valid leasehold interests in, all of its tangible
properties and assets, real, personal and mixed, used or held for use in its
business, free and clear of any Liens, except (i) as reflected in the Most
Recent Balance Sheet, and (ii) such imperfections of title and encumbrances, if
any, which do not detract from the value in any material respect or interfere
with the present use of the property subject thereto or affected thereby.

 

(c)           Section 3.12(c) of Seller Disclosure Letter lists each material
item of equipment with a value of $5,000 or more (the “Equipment”) owned or
leased by Seller, and such

 

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Equipment is (i) adequate for the conduct of the business of Seller as currently
conducted, and (ii) in good operating condition, regularly and properly
maintained, subject to normal wear and tear.

 

(d)           Seller owns, free and clear of any Liens, all customer lists,
customer contact information, customer correspondence and customer licensing and
purchasing histories relating to its current and former customers (the “Customer
Information”).  Other than Seller and the customers to which such Customer
Information relates, no person possesses any claims or rights with respect to
use of the Customer Information.

 

3.13         Intellectual Property.

 

(a)           Section 3.13(a) of Seller Disclosure Letter lists all Registered
Intellectual Property Rights owned by, filed in the name of, or applied for, by
Seller (the “Seller Registered Intellectual Property Rights”) and lists any
proceedings or actions before any court, tribunal (including the United States
Patent and Trademark Office (the “PTO”) or equivalent authority anywhere in the
world) related to any of Seller Registered Intellectual Property Rights or
Seller Intellectual Property.

 

(b)           Each item of Seller Registered Intellectual Property Rights is
valid and subsisting, and all necessary registration, maintenance and renewal
fees in connection with such Seller Registered Intellectual Property Rights have
been paid and all necessary documents and certificates in connection with such
Seller Registered Intellectual Property Rights have been filed with the relevant
patent, copyright, trademark or other authorities in the United States or
foreign jurisdictions, as the case may be, for the purposes of maintaining such
Registered Intellectual Property Rights.  Except as set forth on Section 3.13(b)
of Seller Disclosure Letter, there are no actions that must be taken by Seller
within one hundred twenty (120) days of the Closing Date, including the payment
of any registration, maintenance or renewal fees or the filing of any responses
to PTO office actions, documents, applications or certificates for the purposes
of obtaining, maintaining, perfecting or preserving or renewing any Registered
Intellectual Property Rights.  In each case in which Seller has acquired any
Technology or Intellectual Property Right from any person, Seller or such
Subsidiary has obtained a valid and enforceable assignment sufficient to
irrevocably transfer all rights in such Technology and the associated
Intellectual Property Rights (including the right to seek past and future
damages with respect thereto) to Seller.  To the maximum extent provided for by,
and in accordance with, applicable laws and regulations, Seller has recorded
each such assignment of a Registered Intellectual Property Right assigned to
Seller with the relevant Governmental Body, including the PTO, the U.S.
Copyright Office, or their respective equivalents in any relevant foreign
jurisdiction, as the case may be.  Except as set forth on Section 3.13(b) of
Seller Disclosure Letter, Seller has not claimed a particular status, including
“Small Business Status,” in the application for any Registered Intellectual
Property Rights, which claim of status was not at the time made, or which has
since become, inaccurate or false or that will not be true and accurate with
respect to Buyer after the Closing.

 

(c)           Seller has no knowledge of any facts or circumstances that would
render any Seller Intellectual Property invalid or unenforceable. Without
limiting the foregoing, Seller knows of no information, materials, facts, or
circumstances, including any information or fact that would

 

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constitute prior art, that would render any of Seller Registered Intellectual
Property Rights invalid or unenforceable, or would adversely effect any pending
application for any Seller Registered Intellectual Property Right and Seller has
not misrepresented, or failed to disclose, and has no knowledge of any
misrepresentation or failure to disclose, any fact or circumstances in any
application for any Seller Registered Intellectual Property Right that would
constitute fraud or a misrepresentation with respect to such application or that
would otherwise affect the validity or enforceability of any Seller Registered
Intellectual Property Right.

 

(d)           Each item of Seller Intellectual Property is free and clear of any
Liens (i) except as set forth in Section 3.13(d) of Seller Disclosure Letter and
(2) except for non-exclusive licenses granted to end-user customers in the
ordinary course of business.  Except as set forth in Section 3.13(d) of Seller
Disclosure Letter, Seller is the exclusive owner or exclusive licensee of all
Seller Intellectual Property.  Without limiting the foregoing: (i) Seller is the
exclusive owner of all Trademarks used in connection with the operation or
conduct of the Business of Seller, including the sale, licensing, distribution
or provision of any Products or services by Seller; (ii) Seller owns
exclusively, and has good title to, all Copyrighted Works that are Products or
which Seller otherwise purports to own; and (iii) to the extent that any Patents
would otherwise be infringed by any Product, or by any services of Seller, such
Patents constitute Seller Intellectual Property.

 

(e)           Except as set forth in Section 3.13(e) of Seller Disclosure
Letter, all Seller Intellectual Property will be fully transferable, alienable
and licensable by Buyer and/or Parent without restriction and without payment of
any kind to any third party.

 

(f)            Except as set forth on Section 3.13(f) of Seller Disclosure
Letter and with exception of “shrink-wrap” or similar widely-available
commercial end-user licenses, all Technology embodied or incorporated in any
Product or otherwise used in or necessary to the conduct of Seller’s Business as
presently conducted or currently contemplated to be conducted by Seller was
written, developed or and created solely by either (i) employees of Seller
acting within the scope of their employment or (ii) by third parties who have
validly and irrevocably assigned all of their rights in or to such Technology,
including Intellectual Property Rights therein, to Seller, and no third party
owns or has any rights to any of such Technology.

 

(g)           Except as set forth in Section 3.13(g) of Seller Disclosure
Letter, all employees and consultants of Seller have entered into a valid and
binding written agreement with Seller sufficient to vest title in Seller of all
Technology, including all accompanying Intellectual Property Rights, created by
such employee or consultant in the scope of his or her services or employment
for Seller.

 

(h)           Seller has taken all steps that are reasonably required to protect
Seller’s rights in confidential information and trade secrets of Seller or
provided by any other person to Seller.  Without limiting the foregoing, Seller
has, and enforces, a policy requiring each employee, consultant and contractor
to execute a proprietary information, confidentiality and assignment agreement,
substantially in the form attached hereto as Section 3.13(h) of Seller
Disclosure Letter, and all current and former employees, consultants and
contractors of Seller have executed such an agreement.

 

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(i)            Except as set forth on Section 3.13(i) of Seller Disclosure
Letter, no person who has licensed Technology or Intellectual Property Rights to
Seller has ownership rights or license rights to improvements, modifications or
Derivative Works made by Seller in such Technology or Intellectual Property
Rights.

 

(j)            Except as set forth in Section 3.13(j) of Seller Disclosure
Letter, Seller has not transferred ownership of, or granted any exclusive
license of or right to use, or authorized the retention of any exclusive rights
to use or joint ownership of, any Technology or Intellectual Property Right that
is or was Seller Intellectual Property, to any other person.

 

(k)           Other than inbound “shrink-wrap” and similar publicly available
commercial binary code end-user licenses and outbound “shrink-wrap” licenses in
the form set forth on Section 3.13(k)(A) of Seller Disclosure Letter, the
contracts, licenses and agreements listed in Section 3.13(k)(A) of Seller
Disclosure Letter are all contracts, licenses and agreements to which Seller is
a party with respect to any Technology or Intellectual Property Rights.  Except
as set forth in Section 3.13(k)(B) of Seller Disclosure Letter, Seller is not in
breach of nor has Seller failed to perform under, any of the foregoing
contracts, licenses or agreements and, to Seller’s knowledge, no other party to
any such contract, license or agreement is in breach thereof or has failed to
perform thereunder.

 

(l)            Section 3.13(l) of Seller Disclosure Letter lists all material
contracts, licenses and agreements between Seller and any other person wherein
or whereby Seller has agreed to, or assumed, any obligation or duty to warrant,
indemnify, reimburse, hold harmless, guaranty or otherwise assume or incur any
obligation or liability or provide a right of rescission with respect to the
infringement or misappropriation by Seller or such other person of the
Intellectual Property Rights of any person other than Seller.

 

(m)          Except as set forth in Section 3.13(m) of Seller Disclosure Letter,
to the knowledge of Seller, there are no contracts, licenses or agreements
between Seller and any other person with respect to any Intellectual Property
Rights or Technology under which there is any dispute regarding the scope of
such agreement, or performance under such agreement, including with respect to
any payments to be made or received by Seller thereunder.

 

(n)           The operation of the Business of Seller as it currently is
conducted or is contemplated to be conducted by Seller, including but not
limited to the design, development, use, import, branding, advertising,
promotion, marketing, manufacture and sale of the Products; or Seller’s
Technology, or the performance of services performed or offered by Seller
(including Products, Technology or services currently under development) does
not and will not and will not when conducted by Parent and/or Buyer in
substantially the same manner following the Closing, infringe or misappropriate
any Intellectual Property Right of any person, violate any right of any person
(including any right to privacy or publicity) or constitute unfair competition
or trade practices under the laws of any jurisdiction, and Seller has not
received notice from any person claiming that such operation or any act,
Product, Technology or service (including Products, Technology or services
currently under development) of Seller infringes or misappropriates any
Intellectual

 

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Property Right of any person or constitutes unfair competition or trade
practices under the laws of any jurisdiction (nor does Seller have knowledge of
any basis therefor).

 

(o)           To Seller’s knowledge, no person is infringing or misappropriating
any Seller Intellectual Property Right.

 

(p)           No Seller Intellectual Property or service of Seller is subject to
any proceeding or outstanding decree, order, judgment or settlement agreement or
stipulation that restricts in any manner the use, transfer or licensing thereof
by Seller or may affect the validity, use or enforceability of such Seller
Intellectual Property.

 

(q)           No (i) Product, Technology, service or publication of Seller, (ii)
material published or distributed by Seller, or (iii) conduct or statement of
Seller constitutes obscene material, a defamatory statement or material, false
advertising or otherwise violates in any material respect any law or regulation.

 

(r)            Except as set forth on Section 3.13(r) of Seller Disclosure
Letter, Seller Intellectual Property constitutes all the Technology and
Intellectual Property Rights used in and/or necessary to the conduct of the
Business of Seller as currently conducted; and contemplated to be conducted by
Seller, including, without limitation, the design, development, manufacture,
use, import and sale of the Products, and Seller’s Technology and the
performance of services performed or offered by Seller (including Products,
Technology or services currently under development).

 

(s)           Other than as a result of a Buyer Restriction, neither this
Agreement nor the transactions contemplated by this Agreement, including the
assignment to Buyer, by operation of law or otherwise, of any contracts or
agreements to which Seller is a party, will result in (i) either Parent’s or the
Buyer’s granting to any third party any right to or with respect to any
Technology or Intellectual Property Right owned by, or licensed to, either of
them, (ii) either the Parent’s or the Buyer’s being bound by, or subject to, any
non-compete or other restriction on the operation or scope of their respective
businesses, or (iii) either the Parent’s or the Buyer’s being obligated to pay
any royalties or other amounts to any third party in excess of those payable by
Parent or Buyer, respectively, prior to the Closing.

 

(t)            Except as set forth in Section 3.13(t) of Seller Disclosure
Letter, there are no royalties, fees, honoraria or other payments payable by
Seller to any person or entity by reason of the ownership, development, use,
license, sale or disposition of Seller Intellectual Property, other than
salaries and sales commissions paid to employees and sales agents in the
ordinary course of business.

 

3.14         Contracts.  Section 3.14 of Seller Disclosure Letter lists the
following written or oral contracts, agreements, commitments and other
arrangements under which Seller is obligated or by which Seller or any of its
assets is bound:

 

(a)           any agreement (or group of related agreements) for the lease of
personal property to or from any Person that involves aggregate annual payments
of more than $20,000;

 

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(b)           any agreement under which the consequences of a default or
termination could have a Material Adverse Effect on Seller;

 

(c)           any agreement (or group of related agreements) for the purchase or
sale of commodities, supplies, products, or other personal property, or for the
furnishing or receipt of services, the performance of which will extend over a
period of more than one year or involve consideration in excess of $20,000;

 

(d)           any agreement for the purchase of supplies, components, products
or services from single source suppliers, custom manufacturers or subcontractors
that involves aggregate annual payments of more than $10,000;

 

(e)           any agreement concerning a partnership or joint venture;

 

(f)            any agreement (or group of related agreements) under which Seller
has created, incurred, assumed, or guaranteed any indebtedness for borrowed
money or any capitalized lease obligation in excess of $20,000 or under which a
Lien has been imposed on any of Seller’s assets, tangible or intangible;

 

(g)           any agreement to which Seller is a party and which contains
covenants of Seller not to compete or engage in any line of business, in any
geographic area or with any person or covenants of any other person not to
compete with Seller or engage in any line of business of Seller;

 

(h)           any agreement with any Seller Shareholder or any of such
shareholder’s Affiliates (other than Seller) or with any Affiliate of Seller;

 

(i)            any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance, or other plan or arrangement for
the benefit of its current or former directors, officers or employees;

 

(j)            any collective bargaining agreement;

 

(k)           any agreement for the employment (other than Offer Letters that
are terminable at will by Seller without payment of any penalty or severance
benefit) of any individual on a full-time, part-time, consulting, or other
basis;

 

(l)            any executory agreement under which Seller has advanced or loaned
any amount to any of its directors, officers, and employees;

 

(m)          any advertising services, e-commerce or other agreement involving
the promotion of products and services of third parties by Seller;

 

(n)           any executory agreement pursuant to which Seller is obligated to
provide maintenance, support or training for its services or products;

 

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(o)           any revenue or profit participation agreement which involves
aggregate annual payments of more than $20,000;

 

(p)           any license, agreement or other permission which Seller or any
Affiliate of Seller has granted to any third party with respect to any of the
Intellectual Property used in Seller’s business;

 

(q)           any agreement for the purchase or sale of materials, supplies,
equipment, merchandise or services that contains an escalation clause or that
obligates Seller to purchase all or substantially all of its requirements of a
particular product or service from a supplier or to make periodic minimum
purchases of a particular product or service from a supplier, which is not
terminable on not more than 30 days notice (without penalty or premium);

 

(r)            any agreement of surety, guarantee or indemnification, other than
agreements in the ordinary course of business with respect to obligations in an
aggregate amount not in excess of $20,000;

 

(s)           any agreement with customers or suppliers for the sharing of fees,
the rebating of charges or other similar arrangements;

 

(t)            any agreement obligating Seller to deliver maintenance services
or future product enhancements or containing a “most favored nation” pricing
clause;

 

(u)           any agreement obligating Seller to provide source code to any
third party for any Seller Intellectual Property;

 

(v)           any agreement granting an exclusive license to any Seller
Intellectual Property or granting any exclusive sales, marketing or distribution
rights;

 

(w)          any agreement relating to the acquisition by Seller of any
operating business or the capital stock of any other person;

 

(x)            any agreement requiring the payment to any person of a brokerage
or sales commission or a finder’s or referral fee (other than arrangements to
pay commissions or fees to employees in the ordinary course of business); and

 

(y)           any other agreement (or group of related agreements) the
performance of which involves consideration in excess of $20,000 or which is
expected to continue for more than one (1) year from the date hereof.

 

Seller has delivered to Parent a correct and complete copy of each written
agreement (as amended to date) listed in Section 3.14 of Seller Disclosure
Letter and a written summary setting forth the terms and conditions of each oral
agreement referred to in Section 3.14 of Seller Disclosure Letter.  With respect
to each such agreement: (A) the agreement, with respect to Seller and, to
Seller’s knowledge, all other parties thereto, is legal, valid, binding,
enforceable, and in full force

 

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and effect in all respects; (B) neither Seller nor, to Seller’s knowledge, any
other party is in breach or default, and no event has occurred, which with
notice or lapse of time would constitute a breach or default, or permit
termination, modification, or acceleration, under the agreement; and (C) Seller
has not received notice that any party has repudiated any provision of the
agreement.  Except as set forth on Section 3.5 of the Seller Disclosure Letter,
Seller has obtained or will obtain prior to the Closing Date, all necessary
consents, waivers and approvals of parties to any such agreement as are required
thereunder in connection with the transactions contemplated by this Agreement or
to remain in effect without modification after the Closing. Except as set forth
on Section 3.5 of the Seller Disclosure Letter, following the Closing, Buyer
will be permitted to exercise all of Seller’s rights under such agreements to
the same extent Seller would have been able to had the transactions contemplated
by this Agreement not occurred and without the payment of any additional amounts
or consideration other than ongoing fees, royalties or payments which Seller
would otherwise be required to pay.

 

3.15         Notes and Accounts Receivable.  All notes and accounts receivable
of Seller, all of which are reflected properly on the books and records of
Seller, are valid receivables subject to no setoffs, defenses or counterclaims
known to Seller, are current and, to Seller’s knowledge, collectible subject in
each case only to the reserve for bad debts set forth on the face of the Most
Recent Balance Sheet as adjusted for operations and transactions through the
Closing Date in accordance with the past custom and practice of Seller.

 

3.16         Power of Attorney.  There are no outstanding powers of attorney
executed on behalf of Seller.

 

3.17         Insurance.  Seller has delivered to Parent copies of each insurance
policy (including policies providing property, casualty, liability, and workers’
compensation coverage and bond and surety arrangements) with respect to which
Seller is a party.  With respect to each such insurance policy: (A) the policy
is legal, valid, binding, enforceable, and in full force and effect (and there
has been no notice of cancellation or nonrenewal of the policy received); (B)
Seller is not in breach or default (including with respect to the payment of
premiums or the giving of notices), and no event has occurred which, with notice
or the lapse of time, would constitute such a breach or default by Seller, or
permit termination, modification, or acceleration, under the policy; (C) Seller
has not received notice that any party to the policy has repudiated any
provision thereof; and (D) there has been no failure by Seller to give any
notice or present any claim under the policy in due and timely fashion. Section
3.17 of Seller Disclosure Letter describes any self-insurance arrangements
presently maintained by Seller.

 

3.18         Litigation.  Section 3.18 of Seller Disclosure Letter sets forth
each instance in which Seller (or any of its assets) (i) is subject to any
outstanding injunction, judgment, order, decree, ruling, or charge or (ii) is or
has been, or, to the knowledge of Seller, is threatened to be made a party, to
any action, suit, proceeding, hearing, arbitration, or investigation of, in, or
before any court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction or before any arbitrator.  To the
knowledge of Seller, there are no facts or circumstances that would form the
reasonable basis of any claim against Seller.

 

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3.19         Restrictions on Business Activities.  Except as set forth in
Section 3.19 of the Disclosure Letter, there is no agreement (not to compete or
otherwise), commitment, judgment, injunction, order or decree to which Seller is
a party or which is otherwise binding upon Seller which has the effect of
prohibiting or restricting any business or any acquisition of property (tangible
or intangible) by Seller.  Without limiting the foregoing, Seller has not
entered into any agreement under which Seller is restricted from selling,
licensing or otherwise distributing any of its technology (including any Seller
Intellectual Property) or products to or providing services to, customers or
potential customers or any class of customers, in any geographic area, or in any
segment of the market.

 

3.20         Product Warranty.  The technologies or products licensed, sold,
leased, and delivered and all services provided by Seller have conformed in all
material respects with all applicable contractual commitments and all express
and implied warranties, and Seller has no liability (whether known or unknown,
whether asserted or unasserted, whether absolute or contingent, whether accrued
or unaccrued, whether liquidated or unliquidated, and whether due or to become
due) for replacement or modification thereof or other damages in connection
therewith, other than in the ordinary course of business in an aggregate amount
not exceeding $20,000.

 

3.21         Guaranties; Indemnities.  Seller is not a guarantor or indemnitor
or is not otherwise responsible for any liability or obligation (including
indebtedness) of any other Person.

 

3.22         Employees.  No executive, key employee, or significant group of
employees has advised any executive officer of Seller that he, she or they plan
to terminate employment with Seller during the next 12 months.  Seller is not a
party to or bound by any collective bargaining agreement, nor has it experienced
any strike or grievance, claim of unfair labor practices, or other collective
bargaining dispute.  To Seller’s knowledge, there is no organizational effort
presently being made or threatened by or on behalf of any labor union with
respect to employees of Seller.

 

3.23         Employee Matters and Benefit Plans.

 

(a)           Definitions.  With the exception of the definition of “Affiliate”
set forth in Section 3.23(a)(i) below (which definition shall apply only to this
Section 3.23), for purposes of this Agreement, the following terms shall have
the meanings set forth below:

 

(i)            “Affiliate” shall mean any other person or entity under common
control with Seller within the meaning of Section 414(b), (c), (m) or (o) of the
Code and the regulations issued thereunder;

 

(ii)           “Benefits Liabilities” shall mean, with respect to any Seller
Employee Plan, any and all claims, debts, liabilities, commitment and
obligations, whether fixed, contingent or absolute, matured or unmatured,
liquidated or unliquidated, accrued or unaccrued, known or unknown, whenever or
however arising, including all costs and expenses relating thereto, and
including those debts, liabilities and obligations arising under law, rule,
regulation, permits, action or proceeding before any court or regulatory agency
or administrative agency, order or consent decree

 

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or any award of any arbitrator of any kind, and those arising under contract,
commitment or undertaking.

 

(iii)          “COBRA” shall mean the Consolidated Omnibus Budget Reconciliation
Act of 1985, as amended;

 

(iv)          “DOL” shall mean the Department of Labor;

 

(v)           “Employee” shall mean any current or former or retired employee,
consultant or director of Seller or any Affiliate;

 

(vi)          “Employment Agreement” shall mean each management, employment,
severance, consulting, relocation, repatriation, expatriation, visas, work
permit or other agreement, contract or understanding between Seller or any
Affiliate and any Employee;

(vii)         “ERISA” shall mean the Employee Retirement Income Security Act of
1974, as amended;

 

(viii)        “FMLA” shall mean the Family Medical Leave Act of 1993, as
amended;

 

(ix)           “International Employee Plan”  shall mean each Seller Employee
Plan that has been adopted or maintained by Seller or any Affiliate, whether
informally or formally, or with respect to which Seller or any Affiliate will or
may have any liability, for the benefit of Employees who perform services
outside the United States;

 

(x)            “IRS” shall mean the Internal Revenue Service;

 

(xi)           “Multiemployer Plan” shall mean any “Pension Plan” (as defined
below) which is a “multiemployer plan,” as defined in Section 3(37) of ERISA;

 

(xii)          “Pension Plan” shall mean each Seller Employee Plan which is an
“employee pension benefit plan,” within the meaning of Section 3(2) of ERISA;

 

(xiii)         “Seller Employee Plan” shall mean any plan, program, policy,
practice, contract, agreement or other arrangement providing for compensation,
severance, termination pay, deferred compensation, performance awards, stock or
stock-related awards, fringe benefits or other employee benefits or remuneration
of any kind, whether written or unwritten or otherwise, funded or unfunded,
including without limitation, each “employee benefit plan,” within the meaning
of Section 3(3) of ERISA which is or has been maintained, contributed to, or
required to be contributed to, by Seller or any Affiliate for the benefit of any
Employee, or with respect to which Seller or any Affiliate has or may have any
liability or obligation;

 

(b)           Schedule.  Schedule 3.23(b) contains an accurate and complete list
of each Seller Employee Plan, International Employee Plan, and each Employment
Agreement.  Seller does

 

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not have any plan or commitment to establish, adopt or enter into any Seller
Employee Plan, International Employee Plan, or Employment Agreement, to modify
any Seller Employee Plan or Employment Agreement (except to the extent required
by law or to conform any such Seller Employee Plan or Employment Agreement to
the requirements of any applicable law, in each case as previously disclosed to
Parent in writing, or as required by this Agreement).

 

(c)           Documents.  Seller has provided to Parent correct and complete
copies of: (i) all documents embodying each Seller Employee Plan and each
Employment Agreement including (without limitation) all amendments thereto and
all related trust documents, administrative service agreements, group annuity
contracts, group insurance contracts, and policies pertaining to fiduciary
liability insurance covering the fiduciaries for each Plan; (ii) the most recent
annual actuarial valuations, if any, prepared for each Seller Employee Plan;
(iii) the three (3) most recent annual reports (Form Series 5500 and all
schedules and financial statements attached thereto), if any, required under
ERISA or the Code in connection with each Seller Employee Plan; (iv) if Seller
Employee Plan is funded, the most recent annual and periodic accounting of
Seller Employee Plan assets; (v) the most recent summary plan description
together with the summary(ies) of material modifications thereto, if any,
required under ERISA with respect to each Seller Employee Plan; (vi) all IRS
determination, opinion, notification and advisory letters, and all applications
and correspondence to or from the IRS or the DOL with respect to any such
application or letter; (vii) all written communications material to any Employee
or Employees relating to any Seller Employee Plan and any proposed Seller
Employee Plans, in each case, relating to any amendments, terminations,
establishments, increases or decreases in benefits, acceleration of payments or
vesting schedules or other events which would result in any material liability
to Seller; (viii) all correspondence to or from any governmental agency relating
to any Seller Employee Plan; (ix) all COBRA forms and related notices (or such
forms and notices as required under comparable law); (x) the three (3) most
recent plan years discrimination tests for each Seller Employee Plan; and (xi)
all registration statements, annual reports (Form 11-K and all attachments
thereto) and prospectuses prepared in connection with each Seller Employee Plan.

 

(d)           Employee Plan Compliance.  Except as set forth on Schedule
3.23(d), (i) Seller has performed in all material respects all obligations
required to be performed by it under, is not in default or violation of, and has
no knowledge of any default or violation by any other party to each Seller
Employee Plan, and each Seller Employee Plan has been established and maintained
in all material respects in accordance with its terms and in compliance with all
applicable laws, statutes, orders, rules and regulations, including but not
limited to ERISA or the Code; (ii) each Seller Employee Plan intended to qualify
under Section 401(a) of the Code and each trust intended to qualify under
Section 501(a) of the Code has either received a favorable determination,
opinion, notification or advisory letter from the IRS with respect to each such
Seller Employee Plan as to its qualified status under the Code, including all
amendments to the Code effected by the Tax Reform Act of 1986 and subsequent
legislation, or has remaining a period of time under applicable Treasury
regulations or IRS pronouncements in which to apply for such a letter and make
any amendments necessary to obtain a favorable determination as to the qualified
status of each such Seller Employee Plan; (iii) no “prohibited transaction,”
within the meaning of Section 4975 of the Code or Sections 406 and 407 of ERISA,
and not otherwise exempt under Section 4975 of the Code or

 

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Section 408 of ERISA (or any administrative class exemption issued thereunder),
has occurred with respect to any Seller Employee Plan; (iv) there are no
actions, suits or claims pending, or, to the knowledge of Seller, threatened or
reasonably anticipated (other than routine claims for benefits) against any
Seller Employee Plan or against the assets of any Seller Employee Plan; (v) each
Seller Employee Plan (other than any stock option plan) can be amended,
terminated or otherwise discontinued after the Closing, without material
liability to Parent, Buyer or any of their Affiliates (other than ordinary
administration expenses); (vi) there are no audits, inquiries or proceedings
pending or, to the knowledge of Seller or any Affiliates, threatened by the IRS
or DOL with respect to any Seller Employee Plan; and (vii) neither Seller nor
any Affiliate is subject to any penalty or tax with respect to any Seller
Employee Plan under Section 502(i) of ERISA or Sections 4975 through 4980 of the
Code.

 

(e)           Pension Plan.  Neither Seller nor any Affiliate has ever
maintained, established, sponsored, participated in, or contributed to, any
Pension Plan which is subject to Title IV of ERISA or Section 412 of the Code.

 

(f)            Collectively Bargained, Multiemployer and Multiple Employer
Plans.  At no time has Seller or any Affiliate contributed to or been obligated
to contribute to any Multiemployer Plan.  Neither Seller, nor any Affiliate has
at any time ever maintained, established, sponsored, participated in, or
contributed to any multiple employer plan, or to any plan described in Section
413 of the Code.

 

(g)           No Post-Employment Obligations.  No Seller Employee Plan provides,
or has any liability to provide, life insurance, medical or other employee
benefits to any current or former Employee upon his or her retirement or
termination of employment for any reason, except as may be required by statute,
and neither Seller nor any of its Affiliates has ever represented, promised or
contracted (whether in oral or written form) to any Employee (either
individually or to Employees as a group) that such Employee(s) would be provided
with life insurance, medical or other employee welfare benefits upon their
retirement or termination of employment, except to the extent required by
statute.

 

(h)           Welfare Plan Compliance.  Seller and, as applicable, its
Affiliates, have, prior to the Closing, complied with the health care
continuation requirements of COBRA, the requirement of FMLA, the requirements of
the Health Insurance Portability and Accountability Act of 1996, the
requirements of the Women’s Health and Cancer Rights Act of 1998, the
requirements of the Newborns’ and Mothers’ Health Protection Act of 1996, or any
similar provisions of state law applicable to its Employees.

 

(i)            Effect of Transaction.

 

(i)            Except as set forth on Schedule 3.23(i), the execution of this
Agreement and the consummation of the transactions contemplated hereby will not
(either alone or upon the occurrence of any additional or subsequent events)
constitute an event under any Seller Employee Plan, Employment Agreement, trust
or loan that will or may result in any payment

 

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(whether of severance pay or otherwise), acceleration, forgiveness of
indebtedness, vesting, distribution, increase in benefits or obligation to fund
benefits with respect to any Employee.

 

(ii)           Except as set forth on Schedule 3.23(i) and other than the
Retention Options, no payment or benefit which will or may be made by Seller or
its Affiliates with respect to any Employee will be characterized as a
“parachute payment,” within the meaning of Section 280G(b)(2) of the Code.

 

(j)            Employment Matters.  Seller: (i) is in compliance in all respects
with all applicable foreign, federal, state and local laws, rules and
regulations respecting employment, employment practices, terms and conditions of
employment and wages and hours, in each case, with respect to Employees; (ii)
has withheld and reported all amounts required by law or by agreement to be
withheld and reported with respect to wages, salaries and other payments to
Employees; (iii) is not liable for any arrears of wages or any taxes or any
penalty for failure to comply with any of the foregoing; and (iv) is not liable
for any payment to any trust or other fund governed by or maintained by or on
behalf of any governmental authority, with respect to unemployment compensation
benefits, social security or other benefits or obligations for Employees (other
than routine payments to be made in the normal course of business and consistent
with past practice).  There are no pending, threatened or reasonably anticipated
claims or actions against Seller under any worker’s compensation policy or
long-term disability policy.

 

(k)           Labor.  No work stoppage or labor strike against Seller is
pending,  threatened or reasonably anticipated.  Seller does not know of any
activities or proceedings of any labor union to organize any Employees.  Except
as set forth in Schedule 3.23(k), there are no actions, suits, claims, labor
disputes or grievances pending, or, to the knowledge of Seller, threatened or
reasonably anticipated relating to any labor, safety or discrimination matters
involving any Employee, including, without limitation, charges of unfair labor
practices or discrimination complaints, which, if adversely determined, would,
individually or in the aggregate, result in any material liability to Seller. 
Neither Seller nor any of its subsidiaries has engaged in any unfair labor
practices within the meaning of the National Labor Relations Act.  Except as set
forth in Schedule 3.23(k), Seller is not presently, nor has it been in the past,
a party to, or bound by, any collective bargaining agreement or union contract
with respect to Employees and no collective bargaining agreement is being
negotiated by Seller.

 

(l)            International Employee Plan.  Seller does not now, nor has it
ever had the obligation to, maintain, establish, sponsor, participate in, or
contribute to any International Employee Plan.

 

3.24         Environment, Health, and Safety.  For purposes of this Agreement,
the following terms shall have the meanings ascribed to them below:

 

(a)           Definitions:

 

(i)            “Hazardous Material” is any material, chemical or substance that
is prohibited or regulated by any Environmental Law or that has been designated
by any Governmental

 

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Authority to be radioactive, toxic, hazardous or otherwise a danger to health,
reproduction or the environment.

 

(ii)           “Governmental Authority” is any local, state, provincial,
federal, or international governmental authority or agency which has had or now
has jurisdiction over any portion of the subject matter of this Agreement, any
Business Facility or the Seller.

 

(iii)          “Business Facility” is any property including the land, the
improvements thereon, the groundwater thereunder and the surface water thereon,
that is or at any time has been owned, operated, occupied, controlled or leased
by the Seller in connection with the operation of its business.

 

(iv)          “Environmental Laws” are all applicable laws, rules, regulations,
orders, treaties, statutes, and codes promulgated by any Governmental Authority
which prohibit, regulate or control any Hazardous Material or any Hazardous
Material Activity, including, without limitation, the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, the Resource
Recovery and Conservation Act of 1976, the Federal Water Pollution Control Act,
the Clean Air Act, the Hazardous Materials Transportation Act, the Occupational
Safety and Health Act, the Clean Water Act, comparable laws, rules, regulations,
ordinances, orders, treaties, statutes, and codes of other Governmental
Authorities, the regulations promulgated pursuant to any of the foregoing, and
all amendments and modifications of any of the foregoing.

 

(v)           “Hazardous Materials Activity” is the transportation, transfer,
recycling, storage, use, treatment, manufacture, removal, remediation, release,
exposure of others to, sale, or distribution of any Hazardous Material or any
product containing a Hazardous Material.

 

(vi)          “Environmental Permit” is any approval, permit, license, clearance
or consent required to be obtained from any private person or any Governmental
Authority with respect to a Hazardous Materials Activity which is or was
conducted by the Seller.

 

(b)           Condition of Property:  As of the Closing, except in compliance
with Environmental Laws and in a manner that could not reasonably be expected to
subject the Seller to liability, no Hazardous Materials are present on any
Business Facility currently owned, operated, occupied, controlled or leased by
the Seller or were present on any other Business Facility at the time it ceased
to be owned, operated, occupied, controlled or leased by the Seller.  There are
no underground storage tanks, asbestos which is friable or likely to become
friable or PCBs present on any Business Facility currently owned, operated,
occupied, controlled or leased by the Seller or as a consequence of the acts of
the Seller or its agents.

 

(c)           Hazardous Materials Activities:  The Seller has conducted all
Hazardous Material Activities relating to the Business in compliance in all
material respects with all applicable Environmental Laws.  The Hazardous
Materials Activities of the Seller prior to the Closing have not resulted in the
exposure of any person to a Hazardous Material in a manner which has caused or
could reasonably be expected to cause an adverse health effect to any such
person.

 

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(d)           Permits:  Seller holds all Environmental Permits necessary for the
conduct of the Seller’s Business as currently being conducted by Seller and as
currently contemplated to be conducted.

 

(e)           Environmental Litigation:  No action, proceeding, revocation
proceeding, amendment procedure, writ, injunction or claim is pending, or to the
best of the Seller’s knowledge,  threatened, concerning or relating to any
Environmental Permit or any Hazardous Materials Activity of the Seller relating
to its Business, or any Business Facility.

 

(f)            Environmental Liabilities:  The Seller is not aware of any fact
or circumstance, which could result in any environmental liability which could
reasonably be expected to result in a material adverse effect on the business or
financial status of the Seller.

 

(g)           Reports and Records:  The Seller has not used any Hazardous
Materials in any Business Facilities other than those contained in office and
janitorial supplies used by Seller.  The Seller has delivered to Buyer or made
available for inspection by Buyer and its agents, representatives and employees
all records in the Seller’s possession concerning the Hazardous Materials
Activities of the Seller relating to its Business and all environmental audits
and environmental assessments of any Business Facility conducted at the request
of, or otherwise in the possession of the Seller.  The Seller has complied with
all environmental disclosure obligations imposed by applicable law with respect
to this transaction.

 

3.25         Sufficiency of Assets.  The Purchased Assets, the personnel set
forth in Schedule 6.7 and the rights acquired by Buyer under this Agreement,
including the Ancillary Agreements and the third party contracts assigned by
Seller to Buyer pursuant to this Agreement, excluding the Excluded Assets and
any nontransferable assets pursuant to Section 2.7, include all assets,
personnel and rights of Seller, that: (i) are used or held for use by Seller for
Seller’s operation or conduct of the Business, or (ii) are necessary for, or
would otherwise be infringed by, the operation or conduct the Business by Buyer
immediately following the Closing in substantially the same manner as currently
conducted or contemplated to be conducted by Seller, and such assets, personnel
and rights are sufficient for the conduct of the Business by Buyer immediately
following the Closing in substantially the same manner as currently conducted or
contemplated to be conducted by Seller.

 

3.26         Certain Business Relationships With Seller.  To Seller’s knowledge,
neither any shareholders of Seller nor any director or officer of Seller, nor
any member of their immediate families, nor any Affiliate of any of the
foregoing, owns, directly or indirectly, or has an ownership interest (excluding
any direct or indirect ownership by a shareholders of Seller of up to 1% of the
outstanding capital stock of a publicly traded entity) in (a) any business
(corporate or otherwise) which is a party to, or in any property which is the
subject of, any business arrangement or relationship of any kind with Seller, or
(b) any business (corporate or otherwise) which conducts the same business as,
or a business similar to, that conducted by Seller.

 

3.27         No Adverse Developments.  There is no development (exclusive of
general economic factors affecting business or Seller’s industry in general) or,
to Seller’s knowledge, threatened development affecting Seller (or affecting
customers, suppliers, employees, and other Persons which

 

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have relationships with Seller) that (i) is having or is reasonably likely to
have a Material Adverse Effect on Seller, or (ii) would prevent Buyer from
conducting the business of Seller following the Closing in the manner in which
it was conducted by Seller prior to the Closing.

 

3.28         Fees.  Seller has no liability or obligation to pay any fees or
commissions to any broker, finder, agent or attorney, with respect to the
transactions contemplated by this Agreement.

 

3.29         Complete Copies of Materials.  Seller has delivered or made
available true and complete copies of each document (or summaries of same) that
has been requested by Parent or its counsel.

 

3.30         Board Approval.  The Board of Directors of Seller has unanimously
(i) approved this Agreement and the transactions contemplated hereby, (ii)
determined that the transactions contemplated hereby are in the best interests
of the shareholders of Seller and is on terms that are fair to such
shareholders, (iii) recommended that the shareholders of Seller approve this
Agreement and the transactions contemplated hereby, and (iv) adopted a plan of
liquidation for purposes of California Corporations Code and other applicable
laws.

 

3.31         Export Control Laws.  Except as set forth in Section 3.31 of the
Seller Disclosure Letter, Seller has conducted its export transactions in
accordance, in all material respects, with applicable provisions of United
States export control laws and regulations, including but not limited to the
Export Administration Act and implementing Export Administration Regulations. 
Without limiting the foregoing, except as set forth in Section 3.31 of the
Seller Disclosure Letter, Seller represents and warrants that:

 

(a)           Seller has obtained all material export licenses and other
approvals required for its exports of products, software and technologies from
the United States;

 

(b)           Seller is in compliance with the terms of all applicable export
licenses or other approvals;

 

(c)           there are no pending or, to the knowledge of Seller, threatened
claims against Seller with respect to such export licenses or other approvals;

 

(d)           to the knowledge of Seller, there are no actions, conditions or
circumstances pertaining to Seller’s export transactions that may give rise to
any future claims; and

 

(e)           no consents or approvals for the transfer of export licenses to
Buyer are required, or such consents and approvals can be obtained expeditiously
without material cost.

 

3.32         Preferences; Solvency.  The following statements are, after giving
effect to the transactions contemplated hereby, and will be, upon each
distribution of any assets or property of Seller to the Trust (as defined in
Section 6.13 hereof) or the shareholders of Seller, true and correct:

 

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(a)           The aggregate value of all assets and properties of Seller or the
Trust, at their respective then present fair saleable values, exceeds the amount
of all the debts and Liabilities (including, without limitation, contingent,
subordinated, unmatured and unliquidated liabilities) of Seller or the Trust. 
Seller understands that, in this context, “present fair saleable value” means
the amount which may be realized within a reasonable time through a sale within
such period by a capable and diligent businessperson from an interested buyer
who is willing to purchase under ordinary selling conditions.  In determining
the present fair saleable value of Seller’s contingent liabilities (such as
litigation, guarantees and pension plan liabilities), Seller has considered such
liabilities that could possibly become actual or matured liabilities.

 

(b)           Seller is not insolvent as such term is used in Section 548 of the
Bankruptcy Code and the Uniform Fraudulent Transfers Act as adopted in the State
of California, and all other applicable fraudulent transfer or fraudulent
conveyance laws, statutes, rules or regulations applicable to Seller.

 

(c)           The Purchase Price received by Seller in connection with the
transactions contemplated hereby constitutes reasonably equivalent consideration
for the Purchased Assets.

 

3.33         Full Disclosure.  No representation or warranty in this Article III
or in any document delivered by Seller or its Representatives pursuant to the
transactions contemplated by this Agreement, and no statement, list, certificate
or instrument furnished to Parent pursuant hereto or in connection with this
Agreement, when taken as a whole, contains any untrue statement of a material
fact, or omits to state a material fact necessary to make the statement herein
or therein, in light of the circumstances in which they were made, not
misleading. Seller has delivered to Parent true, correct and complete copies of
all documents, including all amendments, supplements and modifications thereof
or waivers currently in effect thereunder, described in Seller Disclosure
Letter.

 

3.34         Information Supplied.  The information supplied by Seller
specifically for inclusion in the Shareholder Materials (as defined in Section
5.4) to be sent to the shareholders of Seller shall not, on the date the
Shareholder Materials is first mailed to the shareholders of Seller and at the
time of the meeting of the shareholders of Seller held to vote on the approval
the transactions contemplated by this Agreement, contain any untrue statement of
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein not misleading or omit to
state any material fact necessary to correct any statement in any earlier
communication with respect to the solicitation of proxies or consents for the
approval of the transactions contemplated by this Agreement which has become
false or misleading.  Notwithstanding the foregoing, Seller makes no
representation or warranty with respect to any information supplied by Parent or
Buyer which is contained in any of the foregoing documents.

 

ARTICLE IV

 

REPRESENTATIONS AND WARRANTIES OF PARENT AND BUYER

 

Subject to such exceptions as are specifically disclosed in the disclosure
letter (referencing the appropriate section and paragraph numbers) supplied by
the Parent to Seller (the “Parent

 

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Disclosure Letter”), each of Parent and Buyer, jointly and severally, hereby
represents and warrants to Seller that the statements contained in this Article
IV are true and correct as of the date of this Agreement and will be true and
correct as of the Closing (as though made at the Closing); provided, that the
representations and warranties made as of a specified date will be true and
correct as of such date.

 

4.1           Organization, Qualification, and Corporate Power.  Parent is a
corporation duly organized, validly existing, and in good standing under the
laws of Bermuda.  Buyer is a corporation duly organized, validly existing, and
in good standing under the laws of the Sate of Delaware.  Parent and Buyer are
duly authorized to conduct business and are in good standing under the laws of
each other jurisdiction where such qualification is required and in which the
failure to so qualify is reasonably likely to have a Material Adverse Effect on
Parent.  Parent and Buyer have full corporate power and authority, and have all
necessary licenses and permits (other than licenses or permits the failure of
which to possess would not result in a Material Adverse Effect on Parent), to
carry on the businesses in which they are engaged and to own and use the
properties owned and used by them.

 

4.2           Authorization.  Parent and Buyer have full power and authority to
execute and deliver this Agreement and the Ancillary Agreements to which they
are parties, and to consummate the transactions contemplated hereunder and to
perform their obligations hereunder, and no other proceedings on the part of
Parent or Buyer are necessary to authorize the execution, delivery and
performance of this Agreement and the Ancillary Agreements to which they are
parties.  This Agreement and the Ancillary Agreements to which they are parties
and the transactions contemplated hereby and thereby have been approved by
Parent’s Board of Directors.  The consummation of the transactions contemplated
hereby does not require the approval or consent of the shareholders of Parent. 
This Agreement and the Ancillary Agreements to which they are parties constitute
the valid and legally binding obligations of Parent and/or Buyer, enforceable
against Parent and/or Buyer in accordance with their respective terms and
conditions, except as such enforceability may be limited by principles of public
policy and subject to the laws of general application relating to bankruptcy,
insolvency and the relief of debtors and rules of law governing specific
performance, injunctive relief or other equitable remedies.

 

4.3           Capitalization.

 

(a)           As of June 30, 2002, the authorized capital stock of Parent
consisted of (i) 10,000,000 shares of Preferred Stock, $0.001 par value, none of
which was issued or outstanding, and (ii) 100,000,000 shares of Common Stock,
$0.001 par value, of which 58,357,982 shares were issued and outstanding. All of
the outstanding shares of Parent’s capital stock have been duly authorized and
validly issued and are fully paid and nonassessable. As of the date hereof, the
authorized capital stock of Buyer consists of 1,000 shares of Common Stock,
$0.001 par value per share, of which 1,000 shares have been duly authorized and
validly issued, are fully paid and nonassessable, all of which are owned by
Parent.

 

(b)           The shares of Parent Common Stock to be issued pursuant to Section
2.3 of this Agreement will be duly authorized, validly issued, fully paid,
non-assessable.

 

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4.4           No Conflicts.  Neither the execution and the delivery of this
Agreement nor the consummation of the transactions contemplated hereby, will (A)
violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which Parent or Buyer is subject, (B) violate
or conflict with any provision of the charters or bylaws of Parent or Buyer, or
(C) conflict with, result in a breach of, constitute a default under, result in
the acceleration of, create in any party the right to accelerate, terminate,
modify, or cancel, or require any notice under, any agreement, contract, lease,
license, instrument, or other arrangement to which Parent or Buyer is a party or
by which either is bound or to which any of their assets is subject which has
been filed as an exhibit to the Parent SEC Reports, other than any of the
foregoing which would not in the aggregate have a Material Adverse Effect on
Parent or adversely affect the ability of Parent to consummate the transactions
contemplated hereby.

 

4.5           Consents.  No consent, waiver, approval, order or authorization
of, or registration, declaration or filing with, any Governmental Body or any
third party, including a party to any agreement with Parent, is required by or
with respect to Parent in connection with the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby, except
for (i) such consents, waivers, approvals, orders, authorizations,
registrations, declarations and filings as may be required under applicable
federal and state securities laws, (ii) any applicable filings required under
the HSR Act and (iii) such consents, waivers, approvals, orders, authorizations,
registrations, declarations and filings in which the failure of which to obtain
would not in the aggregate have a Material Adverse Effect on Parent or adversely
affect the ability of Parent to consummate the transactions contemplated hereby.

 

4.6           SEC Filings.  Parent has filed all forms, reports and documents
required to be filed with the SEC since September 27, 2001 (collectively, the
“Parent SEC Reports”).  The Parent SEC Reports (i) were prepared in accordance
with the requirements of the Securities Exchange Act of 1934, as amended, and
(ii) did not at the time they were filed (or if amended or superseded by a
filing prior to the date of this Agreement, then on the date of such filing)
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.

 

4.7           Brokers’ Fees.  Parent does not have any liability or obligation
to pay any fees or commissions to any broker, finder, or agent with respect to
the transactions contemplated by this Agreement.

 

4.8           Information Supplied.  The information supplied by Parent or Buyer
specifically for inclusion in the Shareholder Materials (as defined in Section
5.4) to be sent to the shareholders of Seller shall not, on the date the
Shareholder Materials is first mailed to the shareholders of Seller and at the
time of the Seller’s shareholder meeting held to vote on the approval of the
transactions contemplated by this Agreement, contain any untrue statement of
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein not misleading or omit to
state any material fact necessary to correct any statement in any earlier

 

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communication with respect to the solicitation of proxies or consents for the
approval of the transactions contemplated by this Agreement which has become
false or misleading.  Notwithstanding the foregoing, Parent and Buyer make no
representations or warranties with respect to any information supplied by Seller
which is contained in any of the foregoing documents.

 

4.9           Parent Engaged in Active Trade or Business.  For the entire
thirty-six month period ending on the Closing Date, Parent will have been
engaged in an active trade or business (as defined in section 1.367(a)-2T(b) of
the Treasury Regulations) outside the United States.  Parent has no intention,
and as of the Closing Date shall have no intention, to substantially dispose of
or discontinue such trade or business.

 

4.10         Fair Market Value of Parent At Least Equal to that of Seller.  As
of the Closing Date, the fair market value of Parent will be at least equal to
the fair market value of the Seller.  For purposes of this Section 4.10, the
fair market value of Parent shall include assets acquired outside Parent’s
ordinary course of business within the thirty-six month period ending on the
Closing Date only if either (i) both (a) as of the Closing Date such assets do
not produce, and are not held for the production of, passive income as herein
defined in Section 1296(b) of the Code, and (b) such assets were not acquired
for the principal purpose of satisfying this requirement that Parent’s fair
market value at least equal that of Seller or (ii) such assets consist of (a)
the stock of a foreign corporation whose stock is at least 80% owned (by total
voting power and total value), directly or indirectly, by Parent or (b) an
interest in a partnership in which Parent has active and substantial management
functions as a partner with regard to the partnership business or has an
interest representing a 25% or greater interest in the partnership’s capital and
profits.

 

4.11         Employees.  Buyer is not a party to or bound by any collective
bargaining agreement, nor has it experienced any strike or grievance, claim of
unfair labor practices, or other collective bargaining dispute.  To Buyer’s
knowledge, there is no organizational effort presently being made or threatened
by or on behalf of any labor union with respect to employees of Seller.

 

4.12         Employee Matters and Benefit Plans.

 

(a)           Definitions.

 

(i)            “Buyer Affiliate” shall mean any other person or entity under
common control with Buyer within the meaning of Section 414(b), (c), (m) or (o)
of the Code and the regulations issued thereunder;

 

(ii)           “Buyer Benefits Plan” shall mean any plan, program, policy,
practice, contract, agreement or other arrangement providing for compensation,
severance, termination pay, deferred compensation, performance awards, stock or
stock-related awards, fringe benefits or other employee benefits or remuneration
of any kind, whether written or unwritten or otherwise, funded or unfunded,
including without limitation, each “employee benefit plan,” within the meaning
of Section 3(3) of ERISA which is or has been maintained, contributed to, or
required to be contributed to, by

 

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Buyer or any Buyer Affiliate for the benefit of any Buyer Employee, or with
respect to which Buyer or any Buyer Affiliate has or may have any liability or
obligation that may affect Seller;

 

(iii)          “Buyer Benefits Liabilities” shall mean, with respect to any
Buyer Employee Plan, any and all claims, debts, liabilities, commitment and
obligations, whether fixed, contingent or absolute, matured or unmatured,
liquidated or unliquidated, accrued or unaccrued, known or unknown, whenever or
however arising, including all costs and expenses relating thereto, and
including those debts, liabilities and obligations arising under law, rule,
regulation, permits, action or proceeding before any court or regulatory agency
or administrative agency, order or consent decree or any award of any arbitrator
of any kind, and those arising under contract, commitment or undertaking;

 

(iv)          “Buyer Employee” shall mean any current or former or retired
employee, consultant or director of Buyer or any Buyer Affiliate;

 

(v)           “Buyer International Employee Plan” shall mean each Buyer Employee
Plan that has been adopted or maintained by Buyer or any Buyer Affiliate,
whether informally or formally, or with respect to which Buyer or any Buyer
Affiliate will or may have any liability, for the benefit of Buyer Employees who
perform services outside the United States that may affect Seller.

 

(b)           Schedule.  Schedule 4.12(b) contains an accurate and complete list
of each Buyer Employee Plan and Buyer International Employee Plan.

 

(c)           Employee Plan Compliance.  Except as set forth on Schedule
4.12(c), (i) Buyer has performed in all material respects all obligations
required to be performed by it under, is not in default or violation of, and has
no knowledge of any default or violation by any other party to each Buyer
Employee Plan, and each Buyer Employee Plan has been established and maintained
in all material respects in accordance with its terms and in compliance with all
applicable laws, statutes, orders, rules and regulations, including but not
limited to ERISA or the Code; (ii) each Buyer Employee Plan intended to qualify
under Section 401(a) of the Code and each trust intended to qualify under
Section 501(a) of the Code has either received a favorable determination,
opinion, notification or advisory letter from the IRS with respect to each such
Buyer Employee Plan as to its qualified status under the Code, including all
amendments to the Code effected by the Tax Reform Act of 1986 and subsequent
legislation, or has remaining a period of time under applicable Treasury
regulations or IRS pronouncements in which to apply for such a letter and make
any amendments necessary to obtain a favorable determination as to the qualified
status of each such Buyer Employee Plan; (iii) no “prohibited transaction,”
within the meaning of Section 4975 of the Code or Sections 406 and 407 of ERISA,
and not otherwise exempt under Section 4975 of the Code or Section 408 of ERISA
(or any administrative class exemption issued thereunder), has occurred with
respect to any Buyer Employee Plan; (iv) there are no actions, suits or claims
pending, or, to the knowledge of Buyer, threatened or reasonably anticipated
(other than routine claims for benefits) against any Buyer Employee Plan or
against the assets of any Buyer Employee Plan; (v) each Buyer Employee Plan can
be amended, terminated or otherwise discontinued after the Closing, without
material liability to Seller or any of their Affiliates; (vi) there are no
audits, inquiries or proceedings pending

 

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or, to the knowledge of Buyer or any Buyer Affiliates, threatened by the IRS or
DOL with respect to any Buyer Employee Plan; and (vii) neither Buyer nor any
Buyer Affiliate is subject to any penalty or tax with respect to any Buyer
Employee Plan under Section 502(i) of ERISA or Sections 4975 through 4980 of the
Code.

 

(d)           Pension Plan.  Neither Buyer nor any Buyer Affiliate has ever
maintained, established, sponsored, participated in, or contributed to, any
Pension Plan which is subject to Title IV of ERISA or Section 412 of the Code.

 

(e)           Collectively Bargained, Multiemployer and Multiple Employer
Plans.  At no time has Buyer or any Buyer Affiliate contributed to or been
obligated to contribute to any Multiemployer Plan.  Neither Buyer, nor any Buyer
Affiliate has at any time ever maintained, established, sponsored, participated
in, or contributed to any multiple employer plan, or to any plan described in
Section 413 of the Code.

 

(f)            No Post-Employment Obligations.  No Buyer Employee Plan provides,
or has any liability to provide, life insurance, medical or other employee
benefits to any current or former Buyer Employee upon his or her retirement or
termination of employment for any reason, except as may be required by statute,
and neither Buyer nor any Buyer Affiliate has ever represented, promised or
contracted (whether in oral or written form) to any Buyer Employee (either
individually or to Buyer Employees as a group) that such Buyer Employee(s) would
be provided with life insurance, medical or other employee welfare benefits upon
their retirement or termination of employment, except to the extent required by
statute.

 

(g)           Effect of Transaction.  Except as set forth on Schedule 4.12(g),
the execution of this Agreement and the consummation of the transactions
contemplated hereby will not (either alone or upon the occurrence of any
additional or subsequent events) constitute an event under any Buyer Employee
Plan, Employment Agreement, trust or loan that will or may result in any payment
(whether of severance pay or otherwise), acceleration, forgiveness of
indebtedness, vesting, distribution, increase in benefits or obligation to fund
benefits with respect to any Buyer Employee.

 

(h)           Employment Matters.  Buyer: (i) is in material compliance in all
respects with all applicable foreign, federal, state and local laws, rules and
regulations respecting employment, employment practices, terms and conditions of
employment and wages and hours, in each case, with respect to Buyer Employees;
(ii) has withheld and reported all amounts required by law or by agreement to be
withheld and reported with respect to wages, salaries and other payments to
Buyer Employees; (iii) is not liable for any arrears of wages or any taxes or
any penalty for failure to comply with any of the foregoing; and (iv) is not
liable for any payment to any trust or other fund governed by or maintained by
or on behalf of any governmental authority, with respect to unemployment
compensation benefits, social security or other benefits or obligations for
Buyer Employees (other than routine payments to be made in the normal course of
business and consistent with past practice).  There are no pending, threatened
or reasonably anticipated claims or actions against Buyer under any worker’s
compensation policy or long-term disability policy.

 

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(i)            Labor.  No work stoppage or labor strike against Buyer is
pending, threatened or reasonably anticipated.  Buyer does not know of any
activities or proceedings of any labor union to organize any Buyer Employees. 
Except as set forth in Schedule 4.12(i), there are no actions, suits, claims,
labor disputes or grievances pending, or, to the knowledge of Buyer, threatened
or reasonably anticipated relating to any labor, safety or discrimination
matters involving any Buyer Employee, including, without limitation, charges of
unfair labor practices or discrimination complaints, which, if adversely
determined, would, individually or in the aggregate, result in any material
liability to Seller.  Neither Buyer nor any of its subsidiaries has engaged in
any unfair labor practices within the meaning of the National Labor Relations
Act.  Except as set forth in Schedule 4.12(i), Buyer is not presently, nor has
it been in the past, a party to, or bound by, any collective bargaining
agreement or union contract with respect to Buyer Employees and no collective
bargaining agreement is being negotiated by Buyer.

 

(j)            International Employee Plan.  Buyer does not now, nor has it ever
had the obligation to, maintain, establish, sponsor, participate in, or
contribute to any Buyer International Employee Plan.

 

ARTICLE V

 

PRE-CLOSING COVENANTS

 

With respect to the period between the execution of this Agreement and the
earlier of the termination of this Agreement and the Closing:

 

5.1           Operation of Business.  During the period from the date of this
Agreement and continuing until the earlier of the termination of this Agreement
and the Closing, Seller agrees (except to the extent that the other parties
shall otherwise consent in writing or this Agreement shall otherwise require) to
carry on the business of Seller in the usual, regular and ordinary course in
substantially the same manner as heretofore conducted, to pay debts and Taxes
when due, to pay or perform other obligations when due, and, to the extent
consistent with such business, use all reasonable efforts consistent with past
practice and policies to preserve intact the present business organization, keep
available the services of the present officers and key employees and, except as
or this Agreement shall otherwise require, preserve their relationships with
customers, suppliers, distributors, licensors, licensees, and others having
business dealings with it, all with the goal of preserving unimpaired its
goodwill and ongoing businesses at the Closing. Seller shall promptly notify
Parent of any event or occurrence or emergency not in the ordinary course of its
business, and any material event involving it.  Except as expressly contemplated
by this Agreement, Seller shall not, without the prior written consent of
Parent:

 

(a)           Enter into any commitment or transaction not in the ordinary
course of business.

 

(b)           (i) Sell or enter into any license agreement with respect to
Seller Intellectual Property with any person or entity or (ii) buy or enter into
any license agreement with respect to the Intellectual Property of any person or
entity;

 

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(c)           Transfer to any person or entity any rights to Seller Intellectual
Property (other than pursuant to end user licenses in the ordinary course of
business);

 

(d)           Enter into or amend any agreements pursuant to which any other
party is granted marketing, distribution or similar rights of any type or scope
with respect to any products or technology of Seller;

 

(e)           Enter into or amend any Contract pursuant to which any other party
is granted marketing, distribution or similar rights of any type or scope with
respect to any products or technology of Seller;

 

(f)            Amend or otherwise modify (or agree to do so), except in the
ordinary course of business, or violate the terms of, any of the Contracts set
forth or described in the Seller Disclosure Letter;

 

(g)           Commence any litigation;

 

(h)           Declare, set aside or pay any dividends on or make any other
distributions (whether in cash, stock or property) in respect of any of its
capital stock, or split, combine or reclassify any of its capital stock or issue
or authorize the issuance of any other securities in respect of, in lieu of or
in substitution for shares of capital stock of Seller, or repurchase, redeem or
otherwise acquire, directly or indirectly, any shares of its capital stock (or
options, warrants or other rights exercisable therefore);

 

(i)            Except for the issuance of shares of Seller Capital Stock upon
exercise or conversion of presently outstanding Seller Options or warrants,
issue, grant, deliver or sell or authorize or propose the issuance, grant,
delivery or sale of, or purchase or propose the purchase of, any shares of its
capital stock or securities convertible into, or subscriptions, rights, warrants
or options to acquire, or other agreements or commitments of any character
obligating it to issue any such shares or other convertible securities;

 

(j)            Cause or permit any amendments to its articles of incorporation
or bylaws or other organizational documents;

 

(k)           Acquire or agree to acquire by merging or consolidating with, or
by purchasing any assets or equity securities of, or by any other manner, any
business or any corporation, partnership, association or other business
organization or division thereof, or otherwise acquire or agree to acquire any
assets which are material, individually or in the aggregate, to the business of
Seller;

 

(l)            Sell, lease, license or otherwise dispose of any of its
properties or assets, except in the ordinary course of business;

 

(m)          Incur any indebtedness for borrowed money or guarantee any such
indebtedness or issue or sell any debt securities of Seller or guarantee any
debt securities of others;

 

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(n)           Grant any loans to others or purchase debt securities of others or
amend the terms of any outstanding loan agreement except for advances to
employees for travel and business expenses in the ordinary course of business,
consistent with past practices;

 

(o)           Grant any severance or termination pay in cash or otherwise to any
director, officer or employee except pursuant to written agreements outstanding
and disclosed and provided to Parent, or policies existing, on the date hereof
and as previously disclosed in writing or made available to Parent, or adopt any
new severance plan, amend or modify or alter in any manner any severance plan,
agreement or arrangement existing on the date hereof or grant any bonus, payment
or equity-based compensation (except as expressly permitted by this Agreement),
whether payable in cash, stock or other securities;

 

(p)           Adopt or amend any employee benefit plan, or enter into any
employment contract, pay or agree to pay any special bonus or special
remuneration to any director or employee, or increase the salaries or wage rates
of its employees;

 

(q)           Revalue any of its assets, including without limitation writing
down the value of inventory or writing off notes or accounts receivable other
than in the ordinary course of business;

 

(r)            Take any action to accelerate or modify the vesting of any
options, warrants, restricted stock or other rights to acquire shares of the
capital stock of Seller or take any action that could jeopardize the tax-free
reorganization hereunder;

 

(s)           Pay, discharge or satisfy, in an amount in excess of $10,000, 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 of liabilities reflected or reserved against in
the Financial Statements (or the notes thereto);

 

(t)            Make or change any material election in respect of Taxes, adopt
or change any accounting method in respect of Taxes, enter into any closing
agreement, settle any claim or assessment in respect of Taxes, or consent to any
extension or waiver of the limitation period applicable to any claim or
assessment in respect of Taxes;

 

(u)           Enter into any strategic alliance or joint marketing arrangement
or agreement;

 

(v)           Hire or terminate employees or encourage employees to resign other
than in the ordinary course of business;

 

(w)          Take, or agree in writing or otherwise to take, any of the actions
described in Sections 5.1(a) through (v) above, or any other action that would
prevent Seller from performing or cause Seller not to perform its covenants
hereunder.

 

5.2           Access to Information.  Each of Seller and Parent will permit the
other Party and its representatives to have access at all reasonable times, and
in a manner so as not to interfere with its normal business operations, to its
business and operations (subject, in the case of Parent, to

 

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compliance with applicable securities laws).  Neither such access, inspection
and furnishing of information to any Party and its representatives, nor any
investigation by any Party and its representatives, shall in any way diminish or
otherwise affect such Party’s right to rely on any representation or warranty
made by the other Parties hereunder.

 

5.3           Notice of Developments.  Seller shall give prompt notice to Parent
of (i) the occurrence or non-occurrence of any event, the occurrence or
non-occurrence of which is likely to cause any representation or warranty of
Seller contained in this Agreement to be untrue or inaccurate at or prior to the
Closing and (ii) any failure of Seller to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it hereunder;
provided, however, that the delivery of any notice pursuant to this Section 5.3
shall not limit or otherwise affect any remedies available to the Party
receiving such notice.  No disclosure by Seller pursuant to this Section 5.3,
however, shall be deemed to amend or supplement Seller Disclosure Letter or
prevent or cure any misrepresentations, breach of warranty or breach of covenant
without the written consent of Parent.

 

5.4           Shareholder Approval.  As promptly as practicable after the
execution of this Agreement, Seller shall submit this Agreement and the
transactions contemplated hereby to the Seller’s shareholders for approval and
adoption as provided by California Law and its Articles of Incorporation and
Bylaws.  Seller shall use its best efforts to solicit and obtain the consent of
its shareholders sufficient to approve the transactions contemplated by this
Agreement and to enable the Closing to occur as promptly as practicable.  All
material to be submitted to Seller’s shareholders (the “Shareholder Materials”)
shall be subject to review and approval by Parent and include information
regarding Seller, the terms of the transactions contemplated by this Agreement
and the unanimous recommendation of the Board of Directors of Seller regarding
the transactions contemplated by this Agreement.  At Buyer’s request, Seller
shall include in the Shareholder Materials for approval by the requisite vote of
its shareholders a proposal regarding any payments contemplated under this
Agreement or the transactions contemplated hereby that may be deemed to
constitute “parachute payments” pursuant to Section 280G of the Code such that
all such payments shall not be deemed to be “parachute payments” under Section
280G of the Code or shall be exempt from such treatment under Section 280G of
the Code.  Seller shall deliver to Parent, concurrently with the execution of
this Agreement, executed Voting Agreements from holders with beneficial
ownership of (i) a majority of the outstanding shares of Seller Preferred Stock
and (ii) a majority of the outstanding shares of Seller Common Stock.

 

5.5           No Solicitation.

 

(a)           From and after the date hereof and until the earlier of the
Closing or the termination of this Agreement, Seller shall not (nor shall it
permit its Representatives to) directly or indirectly take any of the following
actions with any Person other than Parent and its designees: (a) solicit,
initiate or encourage any proposals or offers from, or conduct discussions with
or engage in negotiations with, any Person relating to any possible Acquisition
Proposal with Seller or any of its subsidiaries (whether such subsidiaries are
in existence on the date hereof or are hereafter organized), (b) provide
information with respect to Seller to any Person, other than Parent, relating
to, or otherwise cooperate with, facilitate or encourage any effort or attempt
by any such Person with

 

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regard to, any possible Acquisition Proposal with Seller or any subsidiary of
Seller (whether such subsidiaries are in existence on the date hereof or are
hereafter organized), (c) enter into a contract or agreement (whether oral or
written) with any Person, other than Parent, providing for an Acquisition
Proposal with Seller or any subsidiary (whether such subsidiaries are in
existence on the date hereof or are hereafter organized), or (d) make or
authorize any statement, recommendation or solicitation in support of any
possible Acquisition Proposal with Seller or any subsidiary (whether such
subsidiary is in existence on the date hereof or are hereafter organized) other
than by Parent.  Seller shall, and shall cause its Representatives to,
immediately cease and cause to be terminated any such contacts or negotiations
with any Person relating to any Acquisition Proposal.  In addition to the
foregoing, if Seller or any of its Representatives receives, prior to the
Closing or the termination of this Agreement, any offer or proposal (formal or
informal) relating to any of the above, Seller shall immediately notify Parent
thereof and provide Parent with the details thereof including the identity of
the Person or Persons making such offer or proposal, and will keep Parent fully
informed of the status and details of any such offer of proposal.  Each of
Seller and Parent acknowledge that this Section 5.5 was a significant inducement
for Buyer and Parent to enter into this Agreement and the absence of such
provision would have resulted in either (i) a material reduction in the Purchase
Price to be paid to Seller or (ii) a failure to induce Buyer and Parent to enter
into this Agreement.

 

(b)           As used in this Section 5.5, “Acquisition Proposal” shall mean:

 

(i)            a proposal or offer for a merger, consolidation or other business
combination involving an acquisition of Seller or any material assets of Seller;
or

 

(ii)           any proposal to acquire in any manner any Seller Capital Stock
(other than upon the exercise of options outstanding on the date hereof as
listed in Section 3.3(b) of Seller Disclosure Letter.

 

5.6           Affiliate Agreements.  Section 5.6 of Seller Disclosure Letter
sets forth those Persons who, in Seller’s reasonable judgment, are or may be
Affiliates of Seller.  Seller shall provide Parent such information and
documents as Parent shall reasonably request for purposes of reviewing such
list.  Seller shall deliver or cause to be delivered to Parent, concurrently
with the execution of this Agreement (and in any case prior to the Closing Date)
from each of the Affiliates of Seller, an executed Affiliate Agreement.  Parent
and Buyer shall be entitled to place appropriate legends on the certificates
evidencing any Parent Common Stock to be received by such Affiliates pursuant to
the terms of this Agreement, and to issue appropriate stop transfer instructions
to the transfer agent for Parent Common Stock, consistent with the terms of such
Affiliate Agreements.

 

5.7           Reasonable Efforts.  Each of the Parties will use their reasonable
efforts to take all action and to do all things necessary, proper, or advisable
in order to consummate and make effective the transactions contemplated by this
Agreement (including satisfaction, but not waiver, of the closing conditions set
forth in Section 8 below).

 

5.8           Notices and Consents.  Seller will give any notices to third
parties and obtain any third party consents that are required in connection with
the matters identified in Sections 3.5 and 3.6 of Seller Disclosure Letter or
otherwise required in connection with the transactions contemplated by

 

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this Agreement so as to preserve all material rights of or benefits to Seller.
Each of the Parties will give any notices to, make any filings with, and use its
reasonable best efforts to obtain any authorizations, consents, and approvals of
governments and governmental agencies in connection with the matters identified
in Sections 3.5 and 3.6 of Seller Disclosure Letter or as otherwise required in
connection with the transactions contemplated by this Agreement.

 

ARTICLE VI

 

OTHER AGREEMENTS AND COVENANTS

 

6.1           Confidentiality.  Each of the Parties hereto hereby agrees to keep
such information or knowledge obtained in any due diligence or other
investigation pursuant to the negotiation and execution of this Agreement or the
effectuation of the transactions contemplated hereby, confidential; provided,
however, that the foregoing shall not apply to information or knowledge which
(a) a party can demonstrate was already lawfully in its possession prior to the
disclosure thereof by the other party, (b) is generally known to the public and
did not become so known through any violation of law, (c) became known to the
public through no fault of such party, (d) is later lawfully acquired by such
party from other sources, (e) is required to be disclosed by order of court or
government agency with subpoena powers or (f) which is disclosed in the course
of any litigation between any of the parties hereto. In this regard, Seller and
its employees and agents acknowledge that Parent’s Common Stock is publicly
traded and that any information obtained during the course of its due diligence
could be considered to be material non-public information within the meaning of
federal and state securities laws.  Accordingly, Seller and its employees and
agents, acknowledge and agree not to engage in any transactions in Parent’s
Common Stock in violation of applicable insider trading laws.

 

6.2           Additional Documents and Further Assurances.  Each Party hereto,
at the request of another Party hereto, shall execute and deliver such other
instruments and do and perform such other acts and things as may be necessary or
desirable for effecting completely the consummation of the transactions
contemplated hereby.

 

6.3           Treatment as Reorganization.  It is intended by the parties hereto
that the transactions contemplated hereby shall qualify as a “reorganization”
within the meaning of Section 368(a)(1)(C) of the Code.  Notwithstanding the
foregoing, no party to this Agreement makes any representations as to the tax
consequences of the transactions contemplated by this Agreement.

 

6.4           Employee Plans and Benefit Arrangements.  Effective as of the day
immediately preceding the Closing Date, the Seller and any of its Affiliates
shall terminate any and all group severance, separation or salary continuation
plans, programs or arrangements and any and all plans intended to include an
Internal Revenue Code Section 401(k) arrangement (unless Parent provides written
notice to the Seller that such 401(k) plans shall not be terminated)
(collectively, “Seller Employee Plans”).  Unless Parent provides such written
notice to the Seller, no later than five business days prior to the Closing
Date, the Seller shall provide Parent with evidence that such Seller Employee
Plan(s) have been terminated (effective as of the day immediately preceding the
Closing Date) pursuant to resolutions of the Seller’s Board of Directors.  The
form and substance of such

 

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resolutions shall be subject to review and approval of Parent.  The Seller also
shall take such other actions in furtherance of terminating such Seller Employee
Plan(s) as Parent may reasonably require.

 

6.5           Seller Options and Warrants.  Buyer will not assume any
outstanding options or warrants.

 

6.6           Benefits Liabilities.  From and after the Closing Date, Seller and
any of its Affiliates shall (i) sponsor and (ii) assume or retain, as the case
may be, and be solely responsible for all Benefits Liabilities arising under,
resulting from or relating to the Seller Employee Plans whether incurred before,
on or after the Closing.

 

6.7           Retained Employees.  Prior to the Closing, Buyer shall make an
offer of employment to each employee of Seller set forth on Schedule 6.7, which
such employment shall commence upon Closing.

 

6.8           Listing of Additional Shares.  Prior to the Closing, Parent shall
file with the Nasdaq Stock Market a Notification Form for Listing of Additional
Shares, if required, with respect to the shares of Parent Common Stock issuable
pursuant hereto.

 

6.9           Registration of Parent Guarantee Shares.  In accordance with a
Registration Rights Agreement substantially in the form attached hereto as
Exhibit F (the “Registration Rights Agreement”), Parent shall prepare and file
within 30 days after the final determination of the Parent Guarantee Amount
pursuant to Section 2.10 a registration statement on Form F-3 under the
Securities Act covering the Parent Guarantee Shares issued pursuant to this
Agreement; provided, however, that Parent shall have no obligation to file a
registration statement on Form F-3 if Parent is not eligible to use Form F-3 at
the time such registration statement is to be filed pursuant to this Section
6.9.  Parent shall use commercially reasonable efforts to cause the F-3 to
become effective within 30 days of the filing of such registration statement.

 

6.10         Shareholder Observer Rights.

 

(a)           Parent will allow one individual nominated by the Seller or any
successor thereto (including the Trust) (the “Observer”) to act as an authorized
representative of Seller or any successor (including the Trust) and the
Shareholders to participate in and attend all meetings of the Board of Directors
of Parent in a non-voting observer capacity.

 

(b)           Parent shall provide notice of and other information with respect
to such Board of Director meetings as are delivered to the directors of Parent. 
The Observer, Seller or any successor thereto (including the Trust) shall
maintain the confidentiality of all financial, confidential and proprietary
information of Parent obtained by them as a result of these rights, and
represent and agree that the information provided by Parent pursuant to these
rights shall not be made available to any competitor or customer of, or vendor
to, Parent or any affiliate or associate of any such entity.  Upon Parent’s
request, an agreement providing for nondisclosure of Parent’s proprietary
information will be executed and signed by the Observer.  Parent may exclude the
Observer from any meetings or portions thereof if, in the good faith
determination of a majority of the Board of Directors of

 

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Parent, (i) the subject matter to be discussed relates to disputes or
negotiations relating to Seller or any successor thereto (including the Trust)
or the Shareholders, or (ii) if attendance by the Observer could result in
waiver or loss of the attorney-client privilege or other competitive advantage
as reasonably determined by the Parent, or (iii) fulfill Parent’s obligations
with respect to confidential or proprietary information of third parties. 
Parent will use its reasonable best efforts to ensure that any withholding of
information or any restriction on attendance is strictly limited only to the
extent necessary set forth in the preceding sentence.

 

(c)           The observer rights granted under this Section 6.10 shall
terminate on the date two years following the Closing Date (the “Observer Rights
Termination Date”).  If Seller or any successor thereto (including the Trust) or
the Shareholders provide the Parent evidence satisfactory to Parent within 30
days prior to the Observer Rights Termination Date that Seller or any successor
thereto (including the Trust) and the Shareholders hold at least 2 million
shares of Parent Common Stock, the observer rights granted under this Section
6.10 shall be extended until the earlier of (x) such time that Seller or any
successor thereto (including the Trust) and the Shareholders no longer own at
least 2 million shares of Parent Common Stock or (y) the date two years
following the Observer Rights Termination Date.  The foregoing notwithstanding,
the observer rights granted under this Section 6.10 shall terminate immediately
upon the election of a Shareholder Director (as defined in Section 6.11).

 

(d)           The rights granted hereunder may not be assigned or otherwise
conveyed by the Shareholders without the prior written consent of Parent.

 

6.11         Shareholder Representative on Parent Board of Directors.  In the
event an incumbent member of Parent’s Board of Directors voluntarily decides not
to seek re-election to Parent’s Board of Directors at the 2002 annual meeting of
shareholders, Dr. Priscilla Lu shall nominate an individual designated by Seller
or any successor thereto (including the Trust) (a “Shareholder Director”) for
consideration by the Board of Directors for nomination to Parent’s shareholders
for election as a member of Parent’s Board of Directors at Parent’s 2002 annual
meeting of shareholders.

 

6.12         Parent Loans.  Following the execution of this Agreement but prior
to the earlier of the Closing or the termination of the Agreement in accordance
with Section 9, Parent may loan the Seller funds for operating expenses incurred
following the date of this Agreement in accordance with a secured promissory
note in a form satisfactory to Parent.  Any cash loaned by Parent or Buyer to
Seller retained by Seller on the Closing Date shall be repaid to Parent or Buyer
on the Closing Date.

 

6.13         Liquidation of Seller.

 

(a)           Within five (5) business days following the Closing, Seller shall
(i) file a Certificate of Election pursuant to Section 1901 of the California
Corporations Code (the “Certificate of Election”) with the Secretary of State of
California pursuant to the California Corporations Code and other applicable
law, and (ii) enter into the Agreement and Declaration of Trust, in
substantially the form attached hereto as Exhibit J (the “Trust Agreement”), for
the benefit of the shareholders of Seller, designating one or more of Seller’s
directors as initial trustees

 

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thereunder, and designating the other directors of Seller as initial members of
the advisory committee thereunder, and (iii) transfer to the trust established
under the Trust Agreement (the “Trust”) all of the assets and liabilities of
Seller (including, without limitation, the shares of Parent Common Stock issued
to Seller pursuant hereto and all of Seller’s rights under this Agreement and
the Escrow Agreement).  Seller shall, as soon as practicable after the Closing,
but in no event more than twelve (12) months following the Closing, file a
Certificate of Dissolution

.

(b)           Following the Closing Date, Seller shall not carry on the business
for which it was established or any other business (including, without
limitation, the Business), except as may be necessary or incidental to the
winding up of its affairs.

 

(c)           After filing the Certificate of Election, Seller or the Trust, as
the case may be, shall (i) provide notice to claimants, and (ii) make payments
and distributions, pursuant to the California Corporations Code and other
applicable law.

 

(d)           Seller or the Trust shall, pursuant to the Trust Agreement and the
California Corporations Code and other applicable law, (i) provide notice to
claimants, (ii) pay or make reasonable provision to pay all claims and
obligations, including all contingent, conditional or unmatured contractual
claims known to Seller or the Trust, and (iii) make such provision as will be
sufficient to provide compensation for claims that have not been made or known
to Seller or the Trust or that have not arisen but that, based upon facts known
to Seller or the Trust, are likely to arise or to become known to Seller or the
Trust prior to the expiration of applicable statutes of limitation.  Such claims
shall be paid in full or adequately provided for, pursuant to the California
Corporations Code and other applicable law.  After paying Seller’s or the
Trust’s debts and satisfying all of Seller’s or the Trust’s liabilities, or
making provision therefor in accordance with the foregoing (the “Debt Payment”),
Seller or the Trust shall distribute all of the remaining assets and properties
of Seller or the Trust (including the Parent Consideration Shares, the Earn-Out
Shares and the Parent Guarantee Shares) to its shareholders in complete
cancellation of all of the issued and outstanding Seller Capital Stock.  Seller
or the Trust shall not distribute the Parent Consideration Shares, the Earn-Out
Shares or the Parent Guarantee Shares prior to the Debt Payment.

 

6.14         Reasonable Cooperation of Buyer.  Parent and Buyer shall cooperate
with Seller to the extent reasonable with Seller’s efforts to obtain any third
party consents set forth on Schedule 7.1(f) hereof; provided, however, that this
Section 6.14(a) shall not obligate Parent and Buyer (in the aggregate) to incur
any additional expense or liability.

 

6.15         Seller Operations.  Buyer shall maintain the principal office of
the Business at the Shadelands Business Park office or an alternative office
located within 10 miles of the Shadelands Business Park office until at least
December 31, 2003.

 

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ARTICLE VII

 

CONDITIONS TO THE CLOSING

 

7.1           Conditions to Parent’s and Buyer’s Obligation to Close.   The
obligations of Parent and Buyer hereunder are subject to the fulfillment or
satisfaction on, and as of the Closing, of each of the following conditions (any
one or more of which may be waived by Parent, but only in a writing signed by
Parent):

 

(a)           Representations and Warranties. The representations and warranties
of Seller set forth in Article III that are qualified as to materiality or
Material Adverse Effect, or in Sections 3.1, 3.2 or 3.3 shall be true and
correct, and those that are not so qualified shall be true and correct in all
material respects, in each case as of the date of this Agreement, and as of the
Closing with the same force and effect as if made on and as of the Closing
(except to the extent expressly made as of a particular date, in which case as
of such date).

 

(b)           Covenants.  Seller shall have performed or complied in all
material respects with all agreements and covenants required by this Agreement
to be performed or complied with by Seller on or prior to the Closing.

 

(c)           No Actions.  No action, suit, or proceeding shall be threatened or
pending before any court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction or before any arbitrator wherein
an unfavorable injunction, judgment, order, decree, ruling, or charge would, if
successful, (A) prevent consummation of any of the transactions contemplated by
this Agreement, or (B) result in a Material Adverse Effect to Seller or the
Purchased Assets.

 

(d)           No Material Adverse Effect.  From the date of the Most Recent
Balance Sheet, there shall not have been any event or development which has
resulted in a Material Adverse Effect on Seller nor shall there have occurred
any event or development which could reasonably be likely to result in the
future in a Material Adverse Effect on Seller or the Purchased Assets.

 

(e)           Certificates.  The President of Seller shall have delivered to
Parent a certificate to the effect that each of the conditions specified above
in Section 7.1(a) to 7.1(d) (inclusive) is satisfied in all respects.

 

(f)            Required Consents. Buyer and Parent shall have been furnished
with evidence satisfactory to it that Seller has obtained the consents,
approvals and waivers set forth in Schedule 7.1(f) attached hereto.

 

(g)           Governmental Authorizations.  The Parties shall have received all
authorizations, consents and approvals of Governmental Bodies set forth in
Section 3.6 of the Seller Disclosure Letter.

 

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(h)           Non-Competition Agreements. The Persons listed on Exhibit B-1
shall each have executed and delivered to Buyer a Non-Competition Agreement in
substantially the form attached hereto as Exhibit B-2, and such Non-Competition
Agreements shall be in full force and effect.

 

(i)            Offer Letters.  The Persons listed on Exhibit C-1 shall each have
executed and delivered to Buyer an Offer Letter in substantially the form
attached hereto as Exhibit C-2, and such Offer Letters shall be in full force
and effect.

 

(j)            Employee Proprietary Information Agreements.  Each Hired Employee
shall have executed and delivered to Buyer the standard form of Employee
Proprietary Information, Agreement of Buyer or Parent in substantially the form
attached hereto as Exhibit F, and such agreements shall be in full force and
effect.

 

(k)           Legal Opinion.  Parent and Buyer shall have received from Crosby
Heafy Roach & May, counsel to Seller, an opinion in form and substance
reasonably acceptable to Parent and Buyer and its counsel, addressed to Parent
and Buyer, and dated as of the Closing Date.

 

(l)            Voting Agreements.  The Voting Agreements executed and delivered
to Parent on the date hereof shall remain in full force and effect.

 

(m)          Securities Exemptions.  Parent shall be reasonably satisfied that
the issuance of its shares of Parent Common Stock and other securities pursuant
to Section 2.3(a) of this Agreement shall:  (a) be exempt from the registration
requirements of the Securities Act of 1933, as amended (the “Securities Act”);
and (b) be exempt from the registration and/or qualification requirements of all
applicable state “blue sky” securities laws.

 

(n)           Releases.  Each officer and director of Seller, and each holder of
more than five percent (5%) of Seller’s capital stock, shall have executed and
delivered, in form and substance mutually agreed by the parties, a release of
claims against the Purchased Assets, Buyer and Parent which would be, or could
be construed as, Assumed Liabilities.

 

(o)           Amendment of the Qualcomm Agreement.  The Qualcomm Agreement shall
have been amended to the satisfaction of Parent and Buyer and an assignment
agreement in a form satisfactory to Parent and Buyer executed by Seller and
Qualcomm shall have been delivered to Parent.

 

(p)           280G Agreements.   The shareholders of Seller shall have approved,
by the requisite vote under applicable law, any payments of cash or stock
contemplated by this Agreement that may be deemed to constitute “parachute
payments” within the meaning of Section 280G of the Code, such that all such
payments resulting from the transactions contemplated hereby shall not qualify
as “excess parachute payments” within the meaning of Section 280G of the Code or
shall be exempt from such treatment under Section 280G of the Code.

 

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(q)           Hired Employees.  All of the Hired Employees set forth on Schedule
1.1(i) shall have accepted employment with Buyer, effective as of the Closing.

 

(r)            Shareholder Representation and Lock-up Agreement.  Parent and
Buyer shall have received a copy of the Shareholder Representation and Lock-up
Agreement executed for and on behalf of each Shareholder.

 

(s)           Nasdaq Listing.  The shares of Parent Common Stock issuable in
connection with the transactions contemplated by this Agreement shall have been
authorized for listing, if required, on the Nasdaq National Market upon official
notice of issuance.

(t)            Termination of Company Options.  Seller shall have provided a
Cancellation Notice to the holders of options under Seller’s 2000 Employee and
Consultant Equity Incentive Plan and such options shall have been terminated to
the reasonable satisfaction of Parent and Buyer.

 

(u)           Termination of 401(k) Plan.  Parent and Buyer shall have received
from Seller evidence that Seller’s 401(k) plan has been terminated pursuant to
resolution of Seller’s Board of Directors (the form and substance of which shall
have been subject to review and approval of Buyer), effective as of the date
immediately preceding the Closing Date.

 

(v)           Amendment of the Equipment Rental Agreement.  The Equipment Rental
Agreement, dated as of March 1, 2001, by and between Milroute Technologies, Inc.
and Seller shall have been amended to the satisfaction of Parent and Buyer and
an assignment agreement in a form satisfactory to Parent and Buyer executed by
Seller and Milroute shall have been delivered to Parent.

 

7.2           Conditions to Seller’s Obligations.  The obligations of Seller
hereunder are subject to the fulfillment or satisfaction on, and as of the
Closing, of each of the following conditions (any one or more of which may be
waived by Seller, but only in a writing signed by Seller):

 

(a)           Representations and Warranties. The representations and warranties
of Parent and Buyer set forth in Article IV that are qualified as to materiality
or Material Adverse Effect, or in Sections 4.1, 4.2 or 4.3 shall be true and
correct, and those that are not so qualified shall be true and correct in all
material respects, in each case as of the date of this Agreement, and as of the
Closing with the same force and effect as if made on and as of the Closing
(except to the extent expressly made as of a particular date, in which case as
of such date).

 

(b)           Covenants. Parent and Buyer shall have performed or complied in
all material respects with all agreements and covenants required by this
Agreement to be performed or complied with by them on or prior to the Closing.

 

(c)           No Material Adverse Effect.  Since March 31, 2002, there shall not
have been any event or development which has resulted in a Material Adverse
Effect on Parent nor shall there have occurred any event or development which
could reasonably be likely to result in the future in a Material Adverse Effect
on Parent; provided, however, that for the purposes of this Section 7.2 (c), the
following shall not be considered a Material Adverse Effect:  (i) a change in
the market price or

 

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trading volume of Parent Common Stock between the date hereof and the Closing,
in and of itself, and not otherwise attributable to or resulting from any other
effects, changes, events, circumstances or conditions which by itself would
constitute a Material Adverse Effect  or (ii) effects, changes, events,
circumstances and conditions generally affecting the industry in which Parent
and its subsidiaries operate or from changes in general business or economic
conditions in the region, nation or world.

 

(d)           Certificate.  An officer of Parent shall have delivered to Seller
a certificate to the effect that each of the conditions specified above in
Section 7.2(a), 7.2(b) and 7.3(c) is satisfied in all respects.

 

(e)           Nasdaq Listing.  The shares of Parent Common Stock issuable in
connection with the transactions contemplated by this Agreement shall have been
authorized for listing, if required, on the Nasdaq National Market upon official
notice of issuance.

 

ARTICLE VIII

 

INDEMNIFICATION; ESCROW

 

8.1           Survival of Representations and Warranties.  All representations
and warranties set forth in this Agreement, the Seller Disclosure Letter, the
Buyer Disclosure Letter or in any certificate or instrument delivered pursuant
to this Agreement, shall survive the Closing for a period ending on the one (1)
year anniversary of the Closing. The covenants and other agreements set forth in
this Agreement shall terminate at the Closing, except for covenants and other
agreements which by their terms contemplate or require performance following the
Closing, each of which shall survive without limitation until complete
performance of the terms thereof.  Except with respect to Losses related to
Excluded Liabilities and Taxes, the Escrow Fund shall be the sole recourse of
recovery for any and all indemnification claims of Buyer, Parent or the other
Buyer Indemnified Persons.

 

8.2           Indemnification by Seller.

 

(a)           Indemnity; Escrow Fund.

 

(i)            Seller agrees to indemnify and hold harmless Buyer, Parent and
its Representatives and Affiliates (collectively, the “Buyer Indemnified
Persons”) from against all claims, losses, liabilities, Benefits Liabilities,
damages, deficiencies, costs, expenses (including attorneys’ fees and expenses
of investigation) (hereinafter individually a “Loss” and collectively “Losses”)
arising out of, or resulting from, or incurred with respect to, (A) any breach
or inaccuracy of a representation or warranty of Seller contained in this
Agreement, the Seller Disclosure Letter or any certificate or instrument
delivered pursuant to this Agreement (for the purposes of this Section 8.2, the
determination of any breach or inaccuracy of any representation or warranty
shall be made without regard to any qualifications as to knowledge, materiality
or Material Adverse Effect), (B) any failure by Seller to perform or comply with
any covenant contained in this Agreement, or (C) any Excluded Liabilities. 
Except with respect to Losses related to Excluded Liabilities and Taxes, the
Escrow Fund shall be the sole source available to compensate the Buyer
Indemnified

 

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Persons for such Losses.  Buyer, Parent and Seller each acknowledge that such
Losses, if any, would relate to unresolved contingencies existing at the
Closing, which if resolved at the Closing would have led to a reduction in the
aggregate Purchase Price.

 

(ii)           As soon as practicable after the Closing, the Escrow Shares will
be deposited with Wells Fargo Corporate Trust Services, as escrow agent (the
“Escrow Agent”), without any act by Seller, such deposit to constitute an escrow
fund (the “Escrow Fund”) to be governed by the terms set forth herein.

 

(iii)          At such time as Officer’s Certificates with respect to Losses
have been delivered, Parent and Buyer shall be entitled to indemnification for
all Losses.

 

(iv)          The Escrow Fund shall be available to compensate the Buyer
Indemnified Persons for Losses.  Except with respect to Losses related to
Excluded Liabilities, the remedies provided in this Article VIII shall be the
exclusive remedies available to Buyer, Parent or the other Buyer Indemnified
Persons.  Notwithstanding the foregoing, any Losses related to Excluded
Liabilities during the Escrow Period (as defined below) shall be first satisfied
through the Escrow Fund.  To the extent the Escrow Fund is insufficient or no
longer available to satisfy Losses related to Excluded Liabilities, Buyer,
Parent or the other Buyer Indemnified Parties shall be entitled to offset any
such unsatisfied Losses or portion thereof against the Earn-Out Shares or the
Parent Guarantee Shares or to seek and obtain recourse against Seller or any
successor thereto (including the Trust) through any other legal remedies for any
such unsatisfied Losses.  Notwithstanding the foregoing or anything to the
contrary set forth herein, nothing in this Agreement shall limit the liability
(i) of Seller for any breach of any representation, warranty or covenant
contained herein if the Closing shall not occur, (ii) of Seller for any Losses
arising out of fraud or intentional misrepresentation by Seller, or (iii) of any
shareholder of Seller in connection with any breach by such shareholder of the
Voting Agreement between such shareholder and Buyer.

 

(b)           Escrow Period; Distribution upon Termination of Escrow Period.
Subject to the following requirements, the Escrow Fund shall remain in existence
during the period following the Closing until the one year anniversary of the
Closing (the “Escrow Period”).  At the expiration of the Escrow Period a portion
of the Escrow Fund shall be released from Escrow to Seller or any successor
thereto (including the Trust) in an amount equal to the Escrow Shares less an
amount equal to the sum of (i) all amounts theretofore distributed out of the
Escrow Fund to Buyer, Parent and the other Buyer Indemnified Persons pursuant to
this Article VIII and (ii) an amount equal to such portion of the Escrow Fund
which, in the reasonable judgment of Parent, subject to the reasonable objection
of Seller or any successor thereto (including the Trust) and the subsequent
arbitration of the matter in the manner provided in Section 8.2(f) hereof, is
necessary to satisfy any unsatisfied claims specified in any Officer’s
Certificate theretofore delivered to the Escrow Agent prior to the end of the
Escrow Period, which amount shall remain in the Escrow Fund (and the Escrow Fund
shall remain in existence) until such claims have been resolved.  As soon as all
such claims have been resolved (such resolution to be evidenced by the written
agreement of Parent and the Seller (or any successor thereto (including the
Trust)) or the written decision of the arbitrators as

 

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described in Section 8.2(f)), the Escrow Agent shall deliver to Seller or any
successor thereto (including the Trust) the remaining portion of the Escrow Fund
not required to satisfy such claims.

 

(c)           Protection of Escrow Fund.  The Escrow Agent shall hold and
safeguard the Escrow Fund during the Escrow Period, shall treat such fund as a
trust fund in accordance with the terms of this Agreement and not as the
property of Buyer or Parent and shall hold and dispose of the Escrow Fund only
in accordance with the terms hereof.

 

(d)           Distributions; Voting.

 

(i)            Any shares of Parent Common Stock or other equity securities
issued or distributed by Parent (including shares issued upon a stock split,
stock dividend, recapitalization or other similar event) (“New Shares”) in
respect of Parent Common Stock in the Escrow Fund which have not been released
from the Escrow Fund shall be added to the Escrow Fund and become a part
thereof.  New Shares issued in respect of shares of Parent Common Stock which
have been released from the Escrow Fund shall not be added to the Escrow Fund
but shall be distributed to Seller or any successor thereto (including the
Trust).  Cash dividends on Parent Common Stock shall not be added to the Escrow
Fund but shall be distributed to Seller or any successor thereto (including the
Trust).

(ii)           Seller or its successor shall be shown as the record owner of
Parent Common Stock on Parent’s books and records and shall have voting rights
with respect to the shares of Parent Common Stock held in the Escrow Fund on
behalf of Seller or any successor thereto (including the Trust) (and on any
voting securities added to the Escrow Fund in respect of such shares of Parent
Common Stock).

 

(e)           Claims Upon Escrow Fund.

 

(i)            Upon receipt by the Escrow Agent at any time on or before the
last day of the Escrow Period of a certificate signed by any officer of Parent
(an “Officer’s Certificate”):  (A) stating that Buyer, Parent or their
Affiliates has incurred and paid or properly accrued Losses, or reasonably
anticipates that it may have to pay or accrue Losses, (B) specifying in
reasonable detail the individual items of Losses included in the amount so
stated, the date on which each such item was incurred and paid or properly
accrued, or the basis for such anticipated liability, and the nature of the
misrepresentation, breach of warranty or claim to which such item is related,
and (C) indicating the number of shares of Parent Common Stock to be disbursed
to Parent out of the Escrow Fund, the Escrow Agent shall, subject to the
provisions of Section 8.2(f) hereof, deliver to Parent out of the Escrow Fund,
as promptly as practicable, such amounts held in the Escrow Fund equal to such
Losses.

 

(ii)           For the purposes of determining the number of shares of Parent
Common Stock to be disbursed to Parent out of the Escrow Fund, the shares of
Parent Common Stock shall be valued at the Trading Price.

 

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(f)            Objections to Claims. At the time of delivery of any Officer’s
Certificate to the Escrow Agent, a duplicate copy of such certificate promptly
shall be delivered to the Seller or any successor thereto (including the Trust),
and for a period of thirty (30) days after such delivery the Escrow Agent shall
make no delivery to Parent of any Escrow Shares specified in such Officer’s
Certificate unless the Escrow Agent shall have received written authorization
from Seller or any successor thereto (including the Trust) to make such
delivery.  After the expiration of such thirty (30) day period, the Escrow Agent
shall make delivery of an amount from the Escrow Fund in accordance with such
Officer’s Certificate and Section 8.2(e) hereof, provided that no such payment
or delivery may be made if Seller or any successor thereto (including the Trust)
shall object in a written statement to the claim made in the Officer’s
Certificate, and such statement shall have been delivered to the Escrow Agent
prior to the expiration of such thirty (30) day period.

 

(g)           Resolution of Conflicts; Arbitration.

 

(i)            In case Seller or any successor thereto (including the Trust)
shall so object in writing to any claim or claims made in any Officer’s
Certificate within 30 days after delivery of such Officer’s Certificate, Seller
or any successor thereto (including the Trust) and Parent shall attempt in good
faith to agree upon the rights of the respective Parties with respect to each of
such claims.  If Seller or any successor thereto (including the Trust) and
Parent should so agree, a memorandum setting forth such agreement shall be
prepared and signed by both Parties and shall be furnished to the Escrow Agent. 
The Escrow Agent shall be entitled to rely on any such memorandum and distribute
amounts from the Escrow Fund in accordance with the terms thereof.

 

(ii)           If no such agreement can be reached after good faith negotiation,
either Parent or Seller or any successor thereto (including the Trust) may
demand arbitration of the matter unless the amount of the damage or loss is at
issue in pending litigation with a third party, in which event arbitration shall
not be commenced until such amount is ascertained or both Parties agree to
arbitration; and in either such event the matter shall be settled by arbitration
conducted by one arbitrator  who shall be a retired judge at JAMS (as defined
below) mutually agreeable to Parent and the Seller or any successor thereto
(including the Trust).  In the event that within forty-five (45) days after
submission of any dispute to arbitration, Parent and Seller or any successor
thereto (including the Trust) cannot mutually agree on an arbitrator, then JAMS
shall select a retired judge with ten (10) days.  The arbitrator or arbitrators,
as the case may be, shall set a limited time period not to exceed forty-five
(45) and establish procedures designed to limit the cost and time for discovery
while allowing the Parties an opportunity, adequate in the sole judgment of the
arbitrator or majority of the three arbitrators, as the case may be, to discover
relevant information from the opposing Parties about the subject matter of the
dispute.  The arbitrator or a majority of the three arbitrators, as the case may
be, shall rule upon motions to compel or limit discovery and shall have the
authority to impose sanctions, including attorneys’ fees and costs, to the same
extent as a competent court of law or equity, should the arbitrators or a
majority of the three arbitrators, as the case may be, determine that discovery
was sought without substantial justification or that discovery was refused or
objected to without substantial justification.  The decision of the arbitrator
or a majority of the three arbitrators, as the case may be, as to the validity
and amount of any claim in such Officer’s Certificate shall be binding and
conclusive upon the Parties to this Agreement, and

 

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notwithstanding anything in Section 8.2(f) to the hereof, the Escrow Agent shall
be entitled to act in accordance with such decision and make or withhold
payments out of the Escrow Funds in accordance therewith.  Such decision shall
be written and shall be supported by written findings of fact and conclusions
which shall set forth the award, judgment, decree or order awarded by the
arbitrator(s).  In the event that the Escrow Agent has not received evidence of
resolution under Section 8.2(g)(i) or this Section 8.2(g)(ii), the Escrow Agent
shall continue to hold the Escrow Funds in accordance herewith.

 

(iii)          Judgment upon any award rendered by the arbitrators may be
entered in any court having jurisdiction.  Any such arbitration shall be held in
San Francisco County, California, under the rules then in effect of the San
Francisco Judicial Arbitration and Mediation Service (“JAMS”).  Each Party to
any arbitration pursuant to this Section 8.2(g) shall pay its own expenses; the
fees of the arbitrator and the administrative fee of JAMS shall be borne equally
by Parent, on the one hand and Seller, on the other.  Neither the expenses that
Seller or any successor thereto (including the Trust) incurs in the course of
any arbitration pursuant to this Section 8.2(g) nor the Seller’s or any
successor’s portion of the fees of the arbitrator or the administrative fees for
JAMS shall be deducted from any amounts held in the Escrow Fund.

 

(h)           Seller’s Agent.  After the Closing, Seller (or any successor
thereto) may appoint an agent to act on its behalf with respect to this Section
8.2, with the prior written consent of Parent, which consent shall not be
unreasonably withheld.

 

(i)            [INTENTIONALLY OMITTED]

 

(j)            Third-Party Claims. In the event that Buyer or Parent becomes
aware of any claim or legal proceeding by a person who is not a party to this
Agreement (the “Third Party Claim”) which Buyer or Parent believes may result in
a demand against the Escrow Fund, Parent shall notify Seller or any successor
thereto (including the Trust) of such claim, and Seller or any successor thereto
(including the Trust) shall be entitled, at their expense, to participate in any
defense of such claim.  Parent shall have the right in its sole discretion to
settle any such claim which is (i) limited to payment of money damages only, or
(ii) affects only the Purchased Assets or Assumed Liabilities; provided,
however, that except with the consent of the Seller (or any successor thereto),
no settlement of any such claim with third-party claimants shall alone be
determinative of the amount of any claim against the Escrow Fund.  In the event
that Seller or any successor thereto (including the Trust) has consented to any
such settlement, Seller or any successor thereto (including the Trust) shall
have no power or authority to object under any provision of this Article VIII to
the amount of any claim by Buyer or Parent against the Escrow Fund with respect
to such settlement to the extent that such amount is consistent with the terms
of such settlement.

(k)           In connection with any Third Party Claim, Seller or any successor
thereto (including the Trust) may, upon written notice to Parent, assume the
defense of any such claim or legal proceeding, the costs and expenses of which
defense shall be paid from the Escrow Fund, if Seller’s or any successor thereto
(including the Trust) acknowledges to Parent in writing Seller or any successor
thereto’s (including the Trust) obligation to indemnify Parent with respect to
all elements of such claim (subject to any limitations on such liability
contained in this Agreement). If,

 

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however, Seller or any successor thereto (including the Trust) fails or refuses
to undertake the defense of such Third Party Claim within fifteen (15) days
after written notice of such claim has been delivered to Seller or any successor
thereto (including the Trust) by Parent, Parent shall have the right to
undertake the defense, compromise and settlement of such Third Party Claim with
counsel of its own choosing. Failure of Parent to furnish written notice to
Seller or any successor thereto (including the Trust) or the Escrow Agent of a
Third Party Claim shall not release Seller or any successor thereto (including
the Trust) from its obligations hereunder, except to the extent it is prejudiced
by such failure. If Seller or any successor thereto (including the Trust)
assumes the defense of any such claim or legal proceeding, it may use counsel of
its choice to prosecute such defense, subject to the approval of such counsel by
Parent, which approval shall not be unreasonably withheld or delayed. Parent
shall be entitled to participate in the defense of any such action, with its
counsel and its own expense; provided, however, that if there exists a conflict
of interest between Seller or any successor thereto (including the Trust) and
Parent, then Parent shall have the right to engage separate counsel, the
reasonable costs and expenses of which shall be paid from the Escrow Fund, but
in no event shall Seller or any successor thereto (including the Trust) be
liable for the costs and expenses of more than one such separate counsel. If
Seller or any successor thereto (including the Trust) assumes the defense of any
such claim or legal proceeding, Seller or any successor thereto (including the
Trust) shall take all steps necessary to pursue the resolution thereof in a
prompt and diligent manner.  Seller or any successor thereto (including the
Trust) shall be entitled to consent to a settlement of, or the stipulation of
any judgment arising from, any such claim or legal proceeding, with the consent
of Parent, which consent shall not be unreasonably withheld or delayed. 
Notwithstanding the foregoing, however, Parent shall be entitled to the control
of the defense of any such action if it (a) is reasonably likely to result in
liabilities which, taken with other then existing claims by Parent, Buyer or any
Buyer Indemnified Parties under this Article VIII, would not be fully
indemnified hereunder, or (b) is reasonably likely to result in a Material
Adverse Effect even if Seller or any successor thereto (including the Trust)
pays all indemnification amounts in full. If Parent is entitled to control the
defense of an action, Parent shall be entitled to consent to a settlement of, or
the stipulation of any judgment arising from, any such claim or legal
proceeding.

 

(l)            Escrow Agent’s Duties.

 

(i)            The Escrow Agent’s duties are purely ministerial in nature, and
the Escrow Agent shall be obligated only for the performance of such duties as
are specifically set forth in this Agreement and as set forth in any additional
written escrow instructions which the Escrow Agent may receive after the date of
this Agreement which are signed by an officer of Parent and the Seller or any
successor thereto (including the Trust), and may rely and shall be protected in
relying or refraining from acting on any instrument reasonably believed to be
genuine and to have been signed or presented by the proper Party or Parties. 
The Escrow Agent shall not be liable for any action taken, suffered or omitted
hereunder as Escrow Agent absent gross negligence or willful misconduct, and the
Escrow Agent shall be fully protected and shall incur no liability for any
action taken, suffered or omitted pursuant to the advice of counsel.

 

(ii)           The Escrow Agent is hereby expressly authorized to disregard any
and all warnings given by any of the Parties hereto or by any other Person,
excepting only orders or

 

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process of courts of law, and is hereby expressly authorized to comply with and
obey orders, judgments or decrees of any court.  In case the Escrow Agent obeys
or complies with any such order, judgment or decree of any court, the Escrow
Agent shall not be liable to any of the Parties hereto or to any other Person by
reason of such compliance, notwithstanding any such order, judgment or decree
being subsequently reversed, modified, annulled, set aside, vacated or found to
have been entered without jurisdiction.

 

(iii)          The Escrow Agent shall not be liable in any respect on account of
the identity, authority or rights of the Parties executing or delivering or
purporting to execute or deliver this Agreement or any documents or papers
deposited or called for hereunder.

 

(iv)          The Escrow Agent shall not be liable for the expiration of any
rights under any statute of limitations with respect to this Agreement or any
documents deposited with the Escrow Agent.

 

(v)           In performing any duties under the Agreement, the Escrow Agent
shall not be liable to any Party for damages, claims, liabilities, losses, or
expenses, except for gross negligence or willful misconduct on the part of the
Escrow Agent (which for all purposes of any section of this Agreement as it
pertains to the Escrow Agent shall be finally determined by a court of competent
jurisdiction).  The Escrow Agent shall not incur any such liability for (A) any
action taken, suffered or omitted in good faith, or (B) any action taken,
suffered  or omitted in reliance upon any instrument, including any written
statement or affidavit provided for in this Agreement that the Escrow Agent
shall in good faith believe to be genuine, nor will the Escrow Agent be liable
or responsible for forgeries, fraud, impersonations, or determining the scope of
any representative authority.  In addition, the Escrow Agent may consult with
legal counsel in connection with Escrow Agent’s duties under this Agreement and
shall be fully protected in any action taken, suffered, or omitted by it in
accordance with the advice of counsel.  The Escrow Agent is not responsible for
determining and verifying the authority of any Person acting or purporting to
act on behalf of any Party to this Agreement.  The Escrow Agent shall have the
right to perform any of its duties hereunder through agents, custodians or
nominees, and the Escrow Agent shall not be liable or responsible for any
misconduct or negligence on the part of any such agent, custodian or nominee
absent gross negligence, willful misconduct or bad faith on the part of the
Escrow Agent in the selection and continued employment thereof.

 

(vi)          If any controversy arises between the Parties to this Agreement,
or with any other party, concerning the subject matter of this Agreement, its
terms or conditions, the Escrow Agent will not be required to determine the
controversy or to take any action regarding it.  The Escrow Agent may hold all
documents and funds and may wait for settlement of any such controversy by final
appropriate legal proceedings or other means as, in the Escrow Agent’s
discretion, the Escrow Agent may be required, despite what may be set forth
elsewhere in this Agreement.  In such event, the Escrow Agent will not be liable
for damages.  Furthermore, the Escrow Agent may at its option, file an action of
interpleader requiring the Parties to answer and litigate any claims and rights
among themselves.  The Escrow Agent is authorized to deposit with the clerk of
the court all documents and funds held in escrow, except all cost, expenses,
charges and

 

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reasonable attorney fees incurred by the Escrow Agent through such time and
which the Parties jointly and severally agree to pay.  Upon initiating such
action, the Escrow Agent shall be fully released and discharged of and from all
obligations and liability imposed by the terms of this Agreement.

 

(vii)         The Parties and their respective successors and assigns agree
jointly and severally to indemnify and hold Escrow Agent harmless against any
and all losses, claims, costs, fines, settlement judgments, penalties, demands,
damages, liabilities, and expenses, including reasonable costs of investigation,
counsel fees, including allocated costs of in-house counsel and disbursements
that may be imposed on Escrow Agent or incurred by Escrow Agent in connection
with the execution of this Agreement or the performance of its duties under this
Agreement, including but not limited to any litigation arising from this
Agreement or involving its subject matter other than arising out of its
negligence or willful misconduct.

 

(viii)        The Escrow Agent may resign at any time upon giving at least
thirty (30) days written notice to the Parties; provided, however, that no such
resignation shall become effective until the appointment of a successor escrow
agent which shall be accomplished as follows:  the Parties shall use their best
efforts to mutually agree on a successor escrow agent within thirty (30) days
after receiving such notice.  If the Parties fail to agree upon a successor
escrow agent within such time, the Escrow Agent shall have the right to appoint
a successor escrow agent authorized to do business in the State of California. 
The successor escrow agent shall execute and deliver an instrument accepting
such appointment and it shall, without further acts, be vested with all the
estates, properties, rights, powers, and duties of the predecessor escrow agent
as if originally named as escrow agent.  Upon appointment of a successor escrow
agent, the Escrow Agent shall be discharged from any further duties and
liability under this Agreement.  Alternatively, if a successor escrow agent is
not appointed within the above time frames, then the Escrow Agent may apply to a
court of competent jurisdiction for appointment of a successor escrow agent.

 

(ix)           In no event shall the Escrow Agent be liable for special,
indirect, incidental, punitive or consequential loss or damage of any kind
whatsoever (including but not limited to lost profits) even if the Escrow Agent
has been advised of the likelihood of such loss or damage and regardless of the
form of action.

 

(x)            Any Person into which the Escrow Agent may be merged or converted
or with which it may be consolidated, or any Person resulting from any merger,
conversion or consolidation to which the Escrow Agent in its individual capacity
shall be a party, or any Person to which substantially all the business of the
Escrow Agent may be transferred, shall be the Escrow Agent under this Agreement
without further act.

 

(m)          Fees.  All fees of the Escrow Agent for performance of its duties
hereunder shall be paid by Parent in accordance with the schedule of the Escrow
Agent delivered to Parent at or prior to the execution of this Agreement.  Such
fee schedule may be amended or modified upon mutual consent of Parent and the
Escrow Agent.  It is understood that the fees and usual charges agreed upon for
services of the Escrow Agent shall be considered compensation for ordinary
services as contemplated by this Agreement.  In the event that the conditions of
this Agreement are

 

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not promptly fulfilled, or if the Escrow Agent renders any service not provided
for in this Agreement, or if the Parties request a substantial modification of
its terms, or if any controversy arises, or if the Escrow Agent is made a party
to, or intervenes in, any litigation pertaining to the Escrow Fund or its
subject matter, the Escrow Agent shall be reasonably compensated for such
extraordinary services and reimbursed for all costs, attorney’s fees, including
allocated costs of in-house counsel, and expenses occasioned by such default,
delay, controversy or litigation and the Escrow Agent shall not be obligated to
take any such action unless and until it is reasonably satisfied that it will
receive such compensation and reimbursement.

 

(n)           Survival.  The obligations of the Parties under Section 8.2(k) and
Section 8.2(j) hereof shall survive termination of this Agreement and
resignation or substitution of the Escrow Agent.

 

(o)           Notwithstanding anything to the contrary in this Agreement, the
Escrow Agent shall perform only those duties and functions as set forth in
Section 2.3, Article VIII and Section 10.9 of this Agreement, shall not have any
other obligations under any other section of this Agreement whatsoever, and
shall not be responsible for, or chargeable with, knowledge of any other terms
or other provisions contained in this Agreement or any other separate
agreement(s) and understanding(s) between the parties thereto.  The Escrow Agent
shall not be liable for the accuracy of any calculations or the sufficiency of
any funds or shares of stock for any purpose.

 

ARTICLE IX

 

TERMINATION

 

9.1           Termination of the Agreement.  The Parties may terminate this
Agreement as provided below:

 

(a)           Parent and Seller may terminate this Agreement as to all Parties
by mutual written consent at any time prior to the Closing;

 

(b)           Parent or Seller may terminate this Agreement by written notice
if:  (i) the Closing has not occurred by September 30, 2002; provided, however,
that the right to terminate this Agreement under this Section 9.1(b)(i) shall
not be available to any Party whose action or failure to act has been a
principal cause of or resulted in the failure of the Closing to occur on or
before such date and such action or failure to act constitutes a breach of this
Agreement; (ii) there shall be a final nonappealable order of a court  of
competent jurisdiction in effect preventing consummation of the transactions
contemplated by this Agreement or (iii) there shall be any statute, rule,
regulation or order enacted, promulgated or issued or deemed applicable to the
transactions contemplated by this Agreement by any Governmental Body that would
make consummation of the transactions contemplated by this Agreement illegal;

 

(c)           Parent may terminate this Agreement by written notice if there
shall be any action taken, or any statute, rule, regulation or order enacted,
promulgated or issued or deemed applicable to the transactions contemplated by
this Agreement by any Governmental Body, which

 

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would (i) prohibit Parent’s or Buyer’s ownership or operation of all or a
portion of the business of Seller or (ii) compel Parent or Buyer to dispose of
or hold separate all or a portion of the business or assets of Parent or Seller
as a result of the transactions contemplated by this Agreement;

 

(d)           Parent may terminate this Agreement by written notice if it is not
in material breach of its obligations under this Agreement and there has been a
material breach of any representation, warranty, covenant or agreement contained
in this Agreement on the part of Seller and such breach has not been cured
within thirty (30) calendar days after written notice to Seller; provided,
however, that, no cure period shall be required for a breach which by its nature
cannot be cured;

 

(e)           Seller may terminate this Agreement by written notice if it is not
in material breach of its obligations under this Agreement and there has been a
material breach of any representation, warranty, covenant or agreement contained
in this Agreement on the part of Parent and such breach has not been cured
within thirty (30) calendar days after written notice to Parent; provided,
however, that no cure period shall be required for a breach which by its nature
cannot be cured;

 

(f)            Parent or Seller may terminate this Agreement by written notice
if Seller’s shareholders shall have taken a final vote on the transactions
contemplated hereby, and such matters shall not have been approved by Seller’s
shareholders; and

 

(g)           Parent may terminate this Agreement by written notice if an event
having a Material Adverse Effect on Seller or on the Purchased Assets shall have
occurred after the date of this Agreement.

 

(h)           Seller may terminate this Agreement by written notice if an event
having a Material Adverse Effect on Parent shall have occurred after the date of
this Agreement.

 

9.2           Effect of Termination.  If any Party terminates this Agreement
pursuant to Section 9.1 above, all rights and obligations of the Parties
hereunder shall terminate without any liability of any Party to any other Party
(except for any liability of any Party then in breach); provided that each Party
shall remain liable for any willful breaches of this Agreement prior to its
termination and provided, further, that the provisions contained in Section 6.1
(Confidentiality) and Section 10 (Miscellaneous) shall survive termination.

 

ARTICLE X

 

MISCELLANEOUS

 

10.1         Press Releases and Public Announcements.  No Party shall issue any
press release or make any public announcement relating to the subject matter of
this Agreement prior to the Closing without the prior written approval of the
other Party; provided, however, that (a) Parent may make any public disclosure
it believes in good faith is required by applicable law or any listing or
trading

 

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agreement concerning its publicly-traded securities (in which case Parent will
use its reasonable efforts to advise Seller prior to making the disclosure) and
(b) Seller may correspond with third parties in writings in form and substance
reasonably satisfactory to Parent with respect to obtaining consents from such
parties pursuant to Sections 5.8 and 7.1(f).  In furtherance of the foregoing
sentence, the Parties agree and acknowledge that Parent will issue a press
release following the execution and delivery of this Agreement by the Parties.

 

10.2         No Third-Party Beneficiaries.  This Agreement shall not confer any
rights or remedies upon any Person other than the Parties, and their respective
successors and permitted assigns, other than as specifically set forth herein.

 

10.3         Entire Agreement and Modification.  This Agreement (including the
exhibits hereto) constitutes the entire agreement among the Parties with respect
to the subject matter hereof and supersedes any prior understandings,
agreements, or representations by or among the Parties, written or oral, to the
extent they related in any way to the subject matter hereof.  This Agreement may
not be amended except by a written agreement executed by all Parties.

 

10.4         Amendment.  At any time prior to the Closing, this Agreement may be
amended by the parties hereto at any time by execution of an instrument in
writing signed on behalf of each of the parties hereto. At any time after the
Closing, this Agreement may be amended by Parent, Buyer and Seller or any
successor thereto (including the Trust) by execution of an instrument in
writing.

 

10.5         Waivers.  The rights and remedies of the Parties to this Agreement
are cumulative and not alternative.  Neither the failure nor any delay by any
Party in exercising any right, power or privilege under this Agreement or the
documents referred to in this Agreement will operate as a waiver of such right,
power or privilege, and no single or partial exercise of such right, power, or
privilege will preclude any other or further exercise of such right, power, or
privilege or the exercise of any other right, power, or privilege.  To the
maximum extent permitted by applicable law, (i) no claim or right arising out of
this Agreement or the documents referred to in this Agreement can be discharged
by one Party, in whole or in part, by a waiver or renunciation of the claim or
right unless in writing signed by the other Party; (ii) no waiver that may be
given by a Party will be applicable except in the specific instance for which it
is given; and (iii) no notice to or demand on one Party will be deemed to be a
waiver of any obligation of such Party or of the right of the Party giving such
notice or demand to take further action without notice or demand as provided in
this Agreement or the documents referred to in this Agreement.

 

10.6         Successors and Assigns.  This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns.  No Party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the other Parties other than the Escrow Agent; provided, however, that so
long as Parent remains liable for all obligations under this Agreement, Parent
may (i) assign any or all of its rights and interests hereunder to one or more
of its Affiliates and (ii) designate one or more of its Affiliates to perform
its obligations hereunder.

 

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10.7         Counterparts.  This Agreement may be executed in counterparts, each
of which shall be deemed an original but all of which together will constitute
one and the same instrument.

 

10.8         Headings.  The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.

 

10.9         Notices.  All notices and other communications required or
permitted hereunder shall be in writing, shall be effective when given, and
shall in any event be deemed to be given upon receipt or, if earlier, (a) five
(5) days after deposit with the U.S. Postal Service or other applicable postal
service, if delivered by certified or registered first class mail, postage
prepaid, return receipt requested, (b) upon delivery, if delivered by hand, (c)
one business day after the business day of deposit with Federal Express or
similar overnight courier, freight prepaid or (d) one business day after the
business day of facsimile transmission, if delivered by facsimile transmission
with copy by certified or registered first class mail, postage prepaid, return
receipt requested and shall be addressed to the intended recipient as set forth
below:

 

If to Parent:

 

interWAVE Communications International Ltd.

312 Constitution Drive

Menlo Park, California  94025

Attention:              Robin Foor, Vice President and General Counsel

Facsimile:               (650) 321-6381

 

Copy to:

 

Wilson Sonsini Goodrich & Rosati, Professional Corporation

650 Page Mill Road

Palo Alto, California  94304

Attention:              Christopher D. Mitchell, Esq.

Facsimile:               (650) 493-6811

 

If to Seller:

 

GBase Communications

420 Wiget Lane

Walnut Creek, California 94598

Attention:              Kiomars Anvari, President

Facsimile:               (925) 935-8592

 

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Copy to:

 

Crosby Heafy Roach & May

1999 Harrison Street

Oakland, California 94612

Attention:              Dan Leer, Esq.

Facsimile:               (510) 273-8832

 

If to the Escrow Agent:

 

Wells Fargo Bank Minnesota N.A.

Corporate Trust Services

MAC N9303-110

Sixth and Marquette

Minneapolis, Minnesota 55479

Attention:              Marco Morales

Telephone:            (612) 667-8687

Facsimile:               (612) 667-9825

 

Any Party may change the address to which notices, requests, demands, claims,
and other communications hereunder are to be delivered by giving the other
Parties ten (10) days’ advance written notice to the other Parties pursuant to
the provisions above.

 

10.10       Governing Law.  This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of California without giving
effect to any choice or conflict of law provision or rule (whether of the State
of California or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of California.

 

10.11       Forum Selection; Consent to Jurisdiction.  All disputes arising out
of or in connection with this Agreement (other than matters subject to
arbitration pursuant to the terms of this Agreement or the other agreements
delivered by the Parties pursuant hereto) shall be solely and exclusively
resolved by a court of competent jurisdiction in the State of California.  The
Parties hereby consent to the jurisdiction of the courts of the State of
California and the United States District Courts of the Northern District of
California and waive any objections or rights as to forum nonconvenience, lack
of personal jurisdiction or similar grounds with respect to any dispute relating
to this Agreement.

 

10.12       Severability.  Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.

 

10.13       Expenses.  Each Party will bear its own costs and expenses
(including legal and accounting fees and expenses) incurred in connection with
this Agreement and the transactions contemplated hereby.  In the event the
transactions contemplated by this Agreement are

 

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consummated, Parent will assume the reasonable costs and expenses (including
accounting and legal fees and expenses) of Seller up to a maximum of $50,000,
incurred in connection with this Agreement and the transactions contemplated
thereby (“Seller Expenses”) within 10 days of the receipt of an invoice
(supported by reasonable documentation), up to a maximum of $50,000; any costs
or expenses in excess of such amount shall be Excluded Liabilities.  Buyer shall
not assume and Seller shall pay any such Excluded Liabilities.

 

10.14       Construction.  The Parties have participated jointly in the
negotiation and drafting of this Agreement.  In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement.  Any reference to any federal, state, local,
or foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise.  The
word “including” shall mean including without limitation.

 

10.15       Seller Disclosure Letter.

 

(a)           The disclosures in Seller Disclosure Letter, and those in any
Supplement thereto, must relate only to the representations and warranties in
the section of the Agreement to which they expressly relate and not to any other
representation or warranty in this Agreement.  Notwithstanding the foregoing,
any contract, agreement, commitment or arrangement set forth in any of
paragraphs (a) - (y) of Section 3.14 herein shall be deemed to be disclosed for
any other paragraph of paragraphs (a) - (y) of Section 3.14.

 

(b)           In the event of any inconsistency between the statements in the
body of this Agreement and those in Seller Disclosure Letter (other than an
exception expressly set forth as such in Seller Disclosure Letter with respect
to a specifically identified representation or warranty), the statements in the
body of this Agreement will control.

 

(c)           Statements contained within the Seller Disclosure Letter shall be
deemed to be representations and warranties under this Agreement, including,
without limitation, Article VIII.

 

10.16       Attorneys’ Fees.  If any legal proceeding or other action relating
to this Agreement is brought or otherwise initiated, the prevailing Party shall
be entitled to recover reasonable attorneys fees, costs and disbursements (in
addition to any other relief to which the prevailing Party may be entitled).

 

10.17       Further Assurances.  The Parties agree (a) to furnish upon request
to each other such further information, (b) to execute and deliver to each other
such other documents, and (c) to do such other acts and things, all as the other
Party may reasonably request for the purpose of carrying out the intent of this
Agreement and the documents referred to in this Agreement.

 

10.18       Time of Essence.  With regard to all dates and time periods set
forth or referred to in this Agreement, time is of the essence.

 

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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on of the
date first above written.

 

Parent:

INTERWAVE COMMUNICATIONS

 

INTERNATIONAL LTD

 

 

 

By:

 

 

 

Name:

 Priscilla Lu

 

 

Title: 

Chief Executive Officer

 

 

Buyer:

INTERWAVE ADVANCED

 

COMMUNICATIONS, INC.

 

 

 

By:

 

 

 

Name:

 Priscilla Lu

 

 

Title: 

Chief Executive Officer

 

 

Seller:

GBASE COMMUNICATIONS

 

 

 

 

 

By:

 

 

 

Name:

 Kiomars Anvari

 

 

Title: 

President

 

 

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EXHIBIT A-2

EXECUTION COPY

VOTING AGREEMENT

This Voting Agreement (the “Agreement”) is made and entered into as of August
16, 2002, by and among interWAVE Communications International Ltd., a
corporation organized under the laws of Bermuda (“Parent”), interWAVE Advanced
Communications, Inc., a Delaware corporation and a wholly owned subsidiary of
Parent (“Buyer”), and the undersigned shareholder and/or optionholder (the
“Shareholder”) of Gbase Communications, a California corporation (“Seller”).

RECITALS

A.            Seller, Buyer and Parent have entered into an Asset Purchase
Agreement of even date herewith (the “Purchase Agreement”), which contemplates
the acquisition (the “Acquisition”) of the Purchased Assets (as defined in the
Purchase Agreement) in exchange for shares of Common Stock of Parent, as set
forth in the Purchase Agreement;

B.            Shareholder is the beneficial owner (as defined in Rule 13d-3
under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) of
such number of shares of the outstanding capital stock of Seller and shares
subject to outstanding options and warrants as is indicated on the signature
page of this Agreement; and

C.            In order to induce Parent to execute the Purchase Agreement,
Shareholder agrees to vote the Shares (as defined below) and other such shares
of capital stock of Seller over which Shareholder has voting power so as to
facilitate consummation of the Acquisition.  The execution and delivery of this
Agreement and of the attached form of proxy is a material condition to Parent’s
willingness to enter into the Purchase Agreement.

NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound, hereby agree as
follows:

1.             CERTAIN DEFINITIONS.  CAPITALIZED TERMS NOT DEFINED HEREIN SHALL
HAVE THE MEANINGS ASCRIBED TO THEM IN THE PURCHASE AGREEMENT.  FOR PURPOSES OF
THIS AGREEMENT:

1.1           “CLOSING DATE” SHALL MEAN THE EARLIER TO OCCUR OF (I) SUCH DATE
AND TIME AS THE PURCHASE AGREEMENT SHALL HAVE BEEN VALIDLY TERMINATED PURSUANT
TO ARTICLE IX THEREOF, OR (II) SUCH DATE AND TIME AS THE ACQUISITION SHALL BE
CONSUMMATED IN ACCORDANCE WITH THE TERMS AND PROVISIONS OF THE PURCHASE
AGREEMENT.

1.2           “PERSON” MEANS ANY INDIVIDUAL, CORPORATION, PARTNERSHIP, LIMITED
LIABILITY COMPANY, JOINT VENTURE, ASSOCIATION, JOINT STOCK COMPANY, TRUST
(INCLUDING ANY BENEFICIARY

 

2

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THEREOF), UNINCORPORATED ORGANIZATION OR GOVERNMENT OR ANY AGENCY OR POLITICAL
SUBDIVISION THEREOF.

1.3           “SHARES” SHALL MEAN: (I) ALL EQUITY SECURITIES OF SELLER
(INCLUDING ALL SHARES OF SELLER COMMON STOCK OR PREFERRED STOCK AND ALL OPTIONS,
WARRANTS AND OTHER RIGHTS TO ACQUIRE SHARES OF SELLER COMMON STOCK OR PREFERRED
STOCK) BENEFICIALLY OWNED BY SHAREHOLDER AS OF THE DATE OF THIS AGREEMENT; AND
(II) ALL ADDITIONAL EQUITY SECURITIES OF SELLER (INCLUDING ALL ADDITIONAL SHARES
OF SELLER COMMON STOCK OR PREFERRED STOCK AND ALL ADDITIONAL OPTIONS, WARRANTS
AND OTHER RIGHTS TO ACQUIRE SHARES OF SELLER COMMON STOCK OR PREFERRED STOCK) OF
WHICH SHAREHOLDER ACQUIRES BENEFICIAL OWNERSHIP DURING THE PERIOD FROM THE DATE
OF THIS AGREEMENT THROUGH THE CLOSING DATE.

1.4           A PERSON SHALL BE DEEMED TO HAVE EFFECTED A “TRANSFER” OF A
SECURITY IF SUCH PERSON DIRECTLY OR INDIRECTLY: (I) SELLS, PLEDGES, ENCUMBERS,
GRANTS AN OPTION WITH RESPECT TO, TRANSFERS OR DISPOSES OF SUCH SECURITY OR ANY
INTEREST IN SUCH SECURITY; OR (II) ENTERS INTO AN AGREEMENT OR COMMITMENT
PROVIDING FOR THE SALE OF, PLEDGE OF, ENCUMBRANCE OF, GRANT OF AN OPTION WITH
RESPECT TO, TRANSFER OF OR DISPOSITION OF SUCH SECURITY OR ANY INTEREST THEREIN.

2.             TRANSFER OF SHARES.

2.1   TRANSFEREE OF SHARES TO BE BOUND BY THIS AGREEMENT.  SHAREHOLDER AGREES
THAT, DURING THE PERIOD FROM THE DATE OF THIS AGREEMENT THROUGH THE CLOSING
DATE, SHAREHOLDER SHALL NOT CAUSE OR PERMIT ANY TRANSFER (OTHER THAN A TRANSFER
TO SUCH SHAREHOLDER’S ESTATE UPON DEATH; PROVIDED HOWEVER, THAT SUCH TRANSFEREE
AGREES IN WRITING TO BE BOUND BY THE TERMS OF THIS VOTING AGREEMENT) OF ANY OF
THE SHARES TO BE EFFECTED.

2.2   TRANSFER OF VOTING RIGHTS.  SHAREHOLDER AGREES THAT, DURING THE PERIOD
FROM THE DATE OF THIS AGREEMENT THROUGH THE CLOSING DATE, SHAREHOLDER SHALL NOT
DEPOSIT (OR PERMIT THE DEPOSIT OF) ANY SHARES IN A VOTING TRUST OR GRANT ANY
PROXY OR ENTER INTO ANY VOTING AGREEMENT OR SIMILAR AGREEMENT IN CONTRAVENTION
OF THE OBLIGATIONS OF SHAREHOLDER UNDER THIS AGREEMENT WITH RESPECT TO ANY OF
THE SHARES.

3.             AGREEMENT TO VOTE SHARES. DURING THE PERIOD FROM THE DATE OF THIS
AGREEMENT THROUGH THE CLOSING DATE, AT EVERY MEETING OF SHAREHOLDERS OF SELLER
CALLED WITH RESPECT TO ANY OF THE FOLLOWING, AND AT EVERY ADJOURNMENT THEREOF,
AND ON EVERY ACTION OR APPROVAL BY WRITTEN CONSENT OF SHAREHOLDERS OF SELLER
WITH RESPECT TO ANY OF THE FOLLOWING, SHAREHOLDER SHALL VOTE THE SHARES:

3.1           IN FAVOR OF APPROVAL OF THE ACQUISITION, THE EXECUTION AND
DELIVERY BY SELLER OF THE PURCHASE AGREEMENT AND THE ADOPTION AND APPROVAL OF
THE TERMS THEREOF AND IN FAVOR OF EACH OF THE OTHER ACTIONS CONTEMPLATED BY THE
PURCHASE AGREEMENT AND ANY ACTION REQUIRED IN FURTHERANCE HEREOF AND THEREOF;

3.2       AGAINST APPROVAL OF ANY PROPOSAL MADE IN OPPOSITION TO OR IN
COMPETITION WITH CONSUMMATION OF THE ACQUISITION AND THE PURCHASE AGREEMENT; AND

 

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3.3           AGAINST ANY OF THE FOLLOWING ACTIONS (OTHER THAN THOSE ACTIONS
THAT RELATE TO THE ACQUISITION AND THE TRANSACTIONS CONTEMPLATED BY THE PURCHASE
AGREEMENT):  (A) ANY MERGER, CONSOLIDATION, BUSINESS COMBINATION, SALE OF
ASSETS, REORGA­NI­ZA­TION OR RECAPITALIZATION WITH ANY PARTY, (B) ANY SALE,
LEASE OR TRANSFER OF MORE THAN ANY SIGNIFICANT PART OF THE ASSETS OF SELLER, (C)
ANY REORGANIZATION, RECAPITALIZATION, DISSOLUTION, LIQUIDATION OR WINDING UP OF
SELLER, (D) ANY MATERIAL CHANGE IN THE CAPITALIZATION OF SELLER OR SELLER’S
CORPORATE STRUCTURE, OR (E) ANY OTHER ACTION THAT IS INTENDED, OR COULD
REASONABLY BE EXPECTED TO, IMPEDE, INTERFERE WITH, DELAY, POSTPONE, DISCOURAGE
OR ADVERSELY AFFECT THE ACQUISITION OR ANY OF THE OTHER TRANSACTIONS
CONTEMPLATED BY THE PURCHASE AGREEMENT.

 

PRIOR TO THE CLOSING DATE, SHAREHOLDER SHALL NOT ENTER INTO ANY AGREEMENT OR
UNDERSTANDING WITH ANY PERSON TO VOTE OR GIVE INSTRUCTIONS IN ANY MANNER
INCONSISTENT WITH THIS SECTION 3.

4.     NON-SOLICITATION AGREEMENT.  SHAREHOLDER COVENANTS AND AGREES, PRIOR TO
THE CLOSING DATE, NOT TO, DIRECTLY OR INDIRECTLY, (I) SOLICIT, INITIATE OR
ENCOURAGE SUBMISSION OF PROPOSALS OR OFFERS OR ENGAGE IN NEGOTIATIONS WITH ANY
PERSONS OTHER THAN PARENT OR BUYER OR TAKE ANY ACTION INTENDED, DESIGNED OR
REASONABLY LIKELY TO FACILITATE THE EFFORTS OF ANY PERSONS, OTHER THAN PARENT
AND BUYER, RELATING TO (A) THE POSSIBLE ACQUISITION OF SELLER (WHETHER BY WAY OF
MERGER, PURCHASE OF ITS CAPITAL STOCK, PURCHASE OF ASSETS OR OTHERWISE) OR ANY
MATERIAL PORTION OF ITS CAPITAL STOCK OR ASSETS OR (B) ANY OTHER MATERIAL
TRANSACTION (INCLUDING WITHOUT LIMITATION, A JOINT VENTURE OR OTHER SIMILAR
TRANSACTION) (AN “OPPOSING PROPOSAL”); (II) FURNISH ANY NON-PUBLIC INFORMATION
REGARDING SELLER TO ANY PERSON IN CONNECTION WITH OR IN RESPONSE TO AN OPPOSING
PROPOSAL OR POTENTIAL OPPOSING PROPOSAL; (III) ENGAGE IN DISCUSSIONS WITH ANY
PERSONS WITH RESPECT TO ANY OPPOSING PROPOSAL; (IV) APPROVE, ENDORSE OR
RECOMMEND ANY OPPOSING PROPOSAL; OR (V) ENTER INTO ANY LETTER OF INTENT OR OTHER
SIMILAR DOCUMENT OR ANY CONTRACT CONTEMPLATING OR OTHERWISE RELATING TO ANY
OPPOSING PROPOSAL.  SHAREHOLDER SHALL IMMEDIATELY CEASE ANY EXISTING DISCUSSIONS
WITH ANY PERSONS OTHER THAN PARENT AND BUYER THAT RELATE TO ANY OPPOSING
PROPOSAL.  IN THE EVENT THAT SHAREHOLDER RECEIVES FROM ANY THIRD PARTY ANY OFFER
OR INDICATION OF INTEREST (WHETHER MADE IN WRITING OR OTHERWISE) REGARDING ANY
OF THE TRANSACTIONS REFERRED TO IN THE FOREGOING, THEN SHAREHOLDER SHALL
PROMPTLY COMMUNICATE TO PARENT AND BUYER THE MATERIAL TERMS OF EACH SUCH OFFER,
INDICATION OF INTEREST, OR REQUEST, INCLUDING THE IDENTITY OF THE THIRD PARTY.

5.     IRREVOCABLE PROXY.  CONCURRENTLY WITH THE EXECUTION OF THIS AGREEMENT,
SHAREHOLDER SHALL DELIVER TO PARENT A PROXY IN THE FORM ATTACHED HERETO AS
EXHIBIT A (THE “PROXY”), WHICH SHALL BE IRREVOCABLE TO THE FULLEST EXTENT
PERMISSIBLE BY LAW, WITH RESPECT TO THE SHARES.

6.     REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER.  SHAREHOLDER (I)
EXCEPT FOR THE RIGHT OF FIRST REFUSAL SET FORTH IN ARTICLE 10, SECTION 1 OF THE
SELLER’S BYLAWS, IS THE SOLE RECORD AND BENEFICIAL OWNER OF THE SHARES OF COMMON
STOCK OF SELLER, PREFERRED STOCK OF SELLER AND THE OPTIONS AND WARRANTS TO
PURCHASE SHARES OF COMMON STOCK OF SELLER INDICATED ON THE SIGNATURE PAGE
HEREOF, FREE AND CLEAR OF ANY LIENS, CLAIMS, OPTIONS, RIGHTS OF FIRST REFUSAL,
CO-SALE RIGHTS, CHARGES OR OTHER ENCUMBRANCES; (II) DOES NOT BENEFICIALLY OWN
ANY SECURITIES OF SELLER OTHER THAN THE SHARES OF COMMON STOCK OF SELLER,
PREFERRED STOCK OF SELLER AND OPTIONS AND WARRANTS TO PURCHASE SHARES OF COMMON
STOCK OF SELLER INDICATED ON THE SIGNATURE PAGE OF THIS AGREEMENT; (III) HAS
FULL POWER AND AUTHORITY TO MAKE, ENTER INTO AND, ASSUMING DUE EXECUTION AND
DELIVERY

 

4

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THEREOF BY EACH OTHER PARTY THERETO, CARRY OUT THE TERMS OF THIS AGREEMENT AND
THE PROXY; AND (IV) HAS SOLE VOTING POWER AND SOLE POWER TO ISSUE INSTRUCTIONS
WITH RESPECT TO THE MATTERS SET FORTH IN SECTION 3 HEREOF, SOLE POWER OF
DISPOSITION, SOLE POWER OF CONVERSION, SOLE POWER TO DEMAND APPRAISAL RIGHTS AND
SOLE POWER TO AGREE TO ALL OF THE MATTERS SET FORTH IN THIS VOTING AGREEMENT, IN
EACH CASE WITH RESPECT TO ALL OF THE SHARES SET FORTH ON THE SIGNATURE PAGE
HEREOF, WITH NO LIMITATIONS, QUALIFICATIONS OR RESTRICTIONS ON SUCH RIGHTS,
SUBJECT TO APPLICABLE SECURITIES LAWS, AND THE TERMS OF THIS VOTING AGREEMENT. 
THE SHAREHOLDER SHALL NOT, DIRECTLY OR INDIRECTLY, TAKE ANY ACTION THAT WOULD
MAKE ANY REPRESENTATION OR WARRANTY CONTAINED HEREIN UNTRUE OR INCORRECT OR HAVE
THE EFFECT OF PREVENTING OR DISABLING THE SHAREHOLDER FROM PERFORMING THE
SHAREHOLDER’S OBLIGATIONS UNDER THIS AGREEMENT.

7.     ADDITIONAL DOCUMENTS.  FROM TIME TO TIME, AT THE PARENT’S OR BUYER’S
REASONABLE REQUEST AND WITHOUT FURTHER CONSIDERATION, THE SHAREHOLDER SHALL
EXECUTE AND DELIVER SUCH ADDITIONAL DOCUMENTS AND TAKE ALL SUCH FURTHER LAWFUL
ACTIONS AS MAY BE NECESSARY OR DESIRABLE TO CONSUMMATE AND MAKE EFFECTIVE, IN
THE MOST EXPEDITIOUS MANNER PRACTICABLE, THE TRANSACTIONS CONTEMPLATED BY THIS
VOTING AGREEMENT.

8.     CONSENT AND WAIVER.  SHAREHOLDER (NOT IN HIS CAPACITY AS A DIRECTOR OR
OFFICER OF SELLER) HEREBY GIVES ANY CONSENTS OR WAIVERS (INCLUDING WAIVERS OF
PREEMPTIVE RIGHTS, RIGHTS OF FIRST REFUSAL AND CO-SALE RIGHTS) THAT ARE
REASONABLY REQUIRED FOR THE CONSUMMATION OF THE ACQUISITION UNDER THE TERMS OF
ANY AGREEMENTS TO WHICH SHAREHOLDER IS A PARTY OR PURSUANT TO ANY RIGHTS
SHAREHOLDER MAY HAVE.

9.     LEGENDING OF SHARES.  IF SO REQUESTED BY PARENT OR BUYER, SHAREHOLDER
AGREES THAT THE SHARES SHALL BEAR A LEGEND STATING THAT THEY ARE SUBJECT TO THIS
AGREEMENT AND TO AN IRREVOCABLE PROXY.

10.   TERMINATION.  THIS AGREEMENT SHALL TERMINATE AND SHALL HAVE NO FURTHER
FORCE OR EFFECT AS OF THE CLOSING DATE.

11.   MISCELLANEOUS.

11.1         SEVERABILITY.  IF ANY TERM, PROVISION, COVENANT OR RESTRICTION OF
THIS AGREEMENT IS HELD BY A COURT OF COMPETENT JURISDICTION TO BE INVALID, VOID
OR UNENFORCEABLE, THEN THE REMAINDER OF THE TERMS, PROVISIONS, COVENANTS AND
RESTRICTIONS OF THIS AGREEMENT SHALL REMAIN IN FULL FORCE AND EFFECT AND SHALL
IN NO WAY BE AFFECTED, IMPAIRED OR INVALIDATED.

11.2         BINDING EFFECT AND ASSIGNMENT.  THIS AGREEMENT AND ALL OF THE
PROVISIONS HEREOF SHALL BE BINDING UPON AND INURE TO THE BENEFIT OF THE PARTIES
HERETO AND THEIR RESPECTIVE SUCCESSORS AND PERMITTED ASSIGNS, BUT, EXCEPT AS
OTHERWISE SPECIFICALLY PROVIDED HEREIN, NEITHER THIS AGREEMENT NOR ANY OF THE
RIGHTS, INTERESTS OR OBLIGATIONS OF THE PARTIES HERETO MAY BE ASSIGNED BY EITHER
OF THE PARTIES WITHOUT PRIOR WRITTEN CONSENT OF THE OTHER, PROVIDED THAT THE
PARENT AND/OR BUYER MAY ASSIGN, IN ITS SOLE DISCRETION, ITS RIGHTS AND
OBLIGATIONS HEREUNDER TO ANY DIRECT OR INDIRECT WHOLLY OWNED SUBSIDIARY OF THE
PARENT AND/OR BUYER, BUT NO SUCH ASSIGNMENT SHALL RELIEVE THE PARENT OR BUYER OF
ITS OBLIGATIONS HEREUNDER IF SUCH ASSIGNEE DOES NOT PERFORM SUCH OBLIGATIONS.

 

5

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11.3         AMENDMENTS AND MODIFICATION.  THIS AGREEMENT MAY NOT BE MODIFIED,
AMENDED, ALTERED OR SUPPLEMENTED EXCEPT UPON THE EXECUTION AND DELIVERY OF A
WRITTEN AGREEMENT EXECUTED BY THE PARTIES HERETO.

11.4         WAIVER.  NO FAILURE ON THE PART OF PARENT AND/OR BUYER TO EXERCISE
ANY POWER, RIGHT, PRIVILEGE OR REMEDY UNDER THIS AGREEMENT, AND NO DELAY ON THE
PART OF PARENT OR BUYER IN EXERCISING ANY POWER, RIGHT, PRIVILEGE OR REMEDY
UNDER THIS AGREEMENT, SHALL OPERATE AS A WAIVER OF SUCH POWER, RIGHT, PRIVILEGE
OR REMEDY; AND NO SINGLE OR PARTIAL EXERCISE OF ANY SUCH POWER, RIGHT, PRIVILEGE
OR REMEDY SHALL PRECLUDE ANY OTHER OR FURTHER EXERCISE THEREOF OR OF ANY OTHER
POWER, RIGHT, PRIVILEGE OR REMEDY.  PARENT AND/OR BUYER SHALL NOT BE DEEMED TO
HAVE WAIVED ANY CLAIM ARISING OUT OF THIS AGREEMENT, OR ANY POWER, RIGHT,
PRIVILEGE OR REMEDY UNDER THIS AGREEMENT, UNLESS THE WAIVER OF SUCH CLAIM,
POWER, RIGHT, PRIVILEGE OR REMEDY IS EXPRESSLY SET FORTH IN A WRITTEN INSTRUMENT
DULY EXECUTED AND DELIVERED ON BEHALF OF PARENT AND/OR BUYER; AND ANY SUCH
WAIVER SHALL NOT BE APPLICABLE OR HAVE ANY EFFECT EXCEPT IN THE SPECIFIC
INSTANCE IN WHICH IT IS GIVEN.

11.5         SPECIFIC PERFORMANCE; INJUNCTIVE RELIEF.  THE PARTIES HERETO
ACKNOWLEDGE THAT PARENT AND BUYER WILL BE IRREPARABLY HARMED AND THAT THERE WILL
BE NO ADEQUATE REMEDY AT LAW FOR A VIOLATION OF ANY OF THE COVENANTS OR
AGREEMENTS OF SHAREHOLDER SET FORTH HEREIN.  THEREFORE, IT IS AGREED THAT, IN
ADDITION TO ANY OTHER REMEDIES THAT MAY BE AVAILABLE TO PARENT AND BUYER UPON
ANY SUCH VIOLATION, PARENT AND BUYER SHALL HAVE THE RIGHT TO ENFORCE SUCH
COVENANTS AND AGREEMENTS BY SPECIFIC PERFORMANCE, INJUNCTIVE RELIEF OR BY ANY
OTHER MEANS AVAILABLE TO PARENT AND/OR BUYER AT LAW OR IN EQUITY.

11.6         NOTICES.  ALL NOTICES AND OTHER COMMUNICATIONS REQUIRED OR
PERMITTED HEREUNDER SHALL BE IN WRITING, SHALL BE EFFECTIVE WHEN GIVEN, AND
SHALL IN ANY EVENT BE DEEMED TO BE GIVEN UPON RECEIPT OR, IF EARLIER, (A) FIVE
(5) DAYS AFTER DEPOSIT WITH THE U.S. POSTAL SERVICE OR OTHER APPLICABLE POSTAL
SERVICE, IF DELIVERED BY CERTIFIED OR REGISTERED FIRST CLASS MAIL, POSTAGE
PREPAID, (B) UPON DELIVERY, IF DELIVERED BY HAND, (C) ONE BUSINESS DAY AFTER THE
BUSINESS DAY OF DEPOSIT WITH FEDERAL EXPRESS OR SIMILAR OVERNIGHT COURIER,
FREIGHT PREPAID OR (D) ONE BUSINESS DAY AFTER THE BUSINESS DAY OF FACSIMILE
TRANSMISSION, IF DELIVERED BY FACSIMILE TRANSMISSION WITH COPY BY CERTIFIED OR
REGISTERED FIRST CLASS MAIL, POSTAGE PREPAID, AND SHALL BE ADDRESSED TO THE
INTENDED RECIPIENT AS SET FORTH BELOW:

 

If to Parent or Buyer:           InterWAVE Communications International Ltd.

                312 Constitution Drive

                Menlo Park, California 94025

                Attention:  Robin Foor, General Counsel

                Facsimile:  (650) 261-6220

 

6

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             With a copy to:        Wilson Sonsini Goodrich & Rosati

                Professional Corporation

                650 Page Mill Road

                Palo Alto, California 94304

                Attention:              Christopher D. Mitchell, Esq.

                Telephone:            (650) 493-9300

                Facsimile:               (650) 493-6811

 

             If to Shareholder:     To the address for notice set forth on the
signature page hereof.

11.7         GOVERNING LAW.  THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE DOMESTIC LAWS OF THE STATE OF CALIFORNIA WITHOUT GIVING
EFFECT TO ANY CHOICE OR CONFLICT OF LAW PROVISION OR RULE (WHETHER OF THE STATE
OF CALIFORNIA OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE
LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF DELAWARE.  SHAREHOLDER HEREBY
CONSENTS TO THE PERSONAL JURISDICTION OF THE STATE AND FEDERAL COURTS LOCATED IN
CALIFORNIA FOR ANY ACTION OR PROCEEDING ARISING FROM OR RELATING TO THIS
AGREEMENT OR RELATING TO ANY ARBITRATION IN WHICH THE PARTIES ARE PARTICIPANTS.

11.8         ATTORNEYS’ FEES AND EXPENSES.  IF ANY LEGAL ACTION OR OTHER LEGAL
PROCEEDING RELATING TO THE ENFORCEMENT OF ANY PROVISION OF THIS AGREEMENT IS
BROUGHT AGAINST SHAREHOLDER, THE PREVAILING PARTY SHALL BE ENTITLED TO RECOVER
REASONABLE ATTORNEYS’ FEES, COSTS AND DISBURSEMENTS (IN ADDITION TO ANY OTHER
RELIEF TO WHICH THE PREVAILING PARTY MAY BE ENTITLED).

11.9         ENTIRE AGREEMENT.  THIS AGREEMENT AND THE PROXY CONTAIN THE ENTIRE
UNDERSTANDING OF THE PARTIES IN RESPECT OF THE SUBJECT MATTER HEREOF AND
SUPERSEDE ALL PRIOR NEGOTIATIONS AND UNDERSTANDINGS BETWEEN THE PARTIES WITH
RESPECT TO SUCH SUBJECT MATTER.

11.10       EFFECT OF HEADINGS.  THE SECTION HEADINGS ARE FOR CONVENIENCE ONLY
AND SHALL NOT AFFECT THE CONSTRUCTION OR INTERPRETATION OF THIS AGREEMENT.

11.11       COUNTERPARTS.  THIS AGREEMENT MAY BE EXECUTED IN SEVERAL
COUNTERPARTS, EACH OF WHICH SHALL BE AN ORIGINAL, BUT ALL OF WHICH TOGETHER
SHALL CONSTITUTE ONE AND THE SAME AGREEMENT.

*     *     *

 

7

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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed
on the day and year first above written.

 

INTERWAVE COMMUNICATIONS INTERNATIONAL LTD.

 

SHAREHOLDER

 

 

 

 

 

 

By:

 

 

Signature

 

Signature of Authorized Signatory

 

 

 

 

 

 

 

 

 

 

 

 

 

Print Name and Title

 

 

 

 

 

 

 

Print Name

 

 

 

INTERWAVE ADVANCED COMMUNICATIONS, INC.

 

 

 

 

 

 

 

Print Address

 

 

 

By:

 

 

 

 

Signature of Authorized Signatory

 

Telephone

 

 

 

 

 

 

 

 

 

Facsimile No.

 

Print Name and Title

 

 

 

 

Shares beneficially owned:

 

 

 

________ shares of Seller Common Stock

________ shares of Seller Preferred Stock

________ shares of Seller Common Stock issuable upon exercise of outstanding
options or warrants

________ shares of Seller Preferred Stock issuable upon exercise of outstanding
options or warrants

 [SIGNATURE PAGE TO VOTING AGREEMENT]

 

8

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Exhibit A

IRREVOCABLE PROXY

The undersigned shareholder of GBase Communications, a California corporation 
(“Seller”), hereby irrevocably (to the fullest extent permitted by law) appoints
Priscilla Lu, Chief Executive Officer and Robin Foor, General Counsel of
interWAVE Communications International Ltd., a corporation organized under the
laws of Bermuda (“Parent”), and each of them, as the sole and exclusive
attorneys and proxies of the undersigned, with full power of substitution and
resubstitution, to vote and exercise all voting and related rights (to the full
extent that the undersigned is entitled to do so) with respect to all of the
shares of capital stock of Seller that now are or hereafter may be beneficially
owned by the undersigned, and any and all other shares or equity securities of
Seller issued or issuable in respect thereof on or after the date hereof
(collectively, the “Shares”) in accordance with the terms of this Proxy.  The
Shares beneficially owned by the undersigned shareholder of Seller as of the
date of this Proxy are listed on the final page of this Proxy.  Upon the
undersigned’s execution of this Proxy, any and all prior proxies given by the
undersigned with respect to any Shares are hereby revoked and the undersigned
agrees not to grant any subsequent proxies with respect to the Shares until
after the Closing Date (as defined below).

This Proxy is irrevocable (to the fullest extent permitted by law), is coupled
with an interest and is granted pursuant to that certain Voting Agreement of
even date herewith by and among Parent and the undersigned shareholder (the
“Voting Agreement”), and is granted in consideration of Parent entering into
that certain Asset Purchase Agreement (the “Purchase Agreement”), among Parent,
Buyer, Seller and certain other parties.  The Purchase Agreement provides for
the acquisition (the “Acquisition”) of the Purchased Assets (as defined in the
Purchase Agreement).  As used herein, the term “Closing Date” shall mean the
earlier to occur of (i) such date and time as the Purchase Agreement shall have
been validly terminated pursuant to Article IX thereof or (ii) such date and
time as the Acquisition shall be consummated in accordance with the terms and
provisions of the Purchase Agreement.

The attorneys and proxies named above, and each of them, are hereby authorized
and empowered by the undersigned, at any time prior to the Closing Date, to act
as the undersigned’s attorney and proxy to vote the Shares, and to exercise all
voting, consent and similar rights of the undersigned with respect to the Shares
(including, without limitation, the power to execute and deliver written
consents) at every annual, special or adjourned meeting of shareholders of
Seller and in every written consent in lieu of such meeting:

                                (I)            IN FAVOR OF APPROVAL OF THE
ACQUISITION, THE EXECUTION AND DELIVERY BY SELLER OF THE PURCHASE AGREEMENT AND
THE ADOPTION AND APPROVAL OF THE TERMS THEREOF AND IN FAVOR OF EACH OF THE OTHER
ACTIONS CONTEMPLATED BY THE PURCHASE AGREEMENT AND ANY ACTION REQUIRED IN
FURTHERANCE HEREOF AND THEREOF;

 

                                (ii)           against approval of any proposal
made in opposition to or in competition with consummation of the Acquisition and
the Purchase Agreement; and

 

9

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                (iii)          against any of the following actions (other than
those actions that relate to the Acquisition and the transactions contemplated
by the Purchase Agreement):  (A) any merger, consolidation, business
combination, sale of assets, reorga­ni­za­tion or recapitalization with any
party, (B) any sale, lease or transfer of more than any significant part of the
assets of Seller, (C) any reorganization, recapitalization, dissolution,
liquidation or winding up of Seller, (D) any material change in the
capitalization of Seller or Seller’s corporate structure, or (E) any other
action that is intended, or could reasonably be expected to, impede, interfere
with, delay, postpone, discourage or adversely affect the Acquisition or any of
the other transactions contemplated by the Purchase Agreement.

 

                The attorneys and proxies named above may not exercise this
Proxy on any other matter except as provided in clauses (i), (ii) and (iii)
above.  The undersigned Shareholder may vote the Shares on all other matters.

 

                Any obligation of the undersigned hereunder shall be binding
upon the successors and assigns of the undersigned.

 

                This Proxy is irrevocable (to the fullest extent permitted by
law).  This Proxy shall terminate, and be of no further force and effect,
automatically upon the Closing Date.

 

Dated:

 

 

Signature of Shareholder:

 

 

 

 

 

 

 

 

 

Print Name of Shareholder:

 

 

 

 

 

 

 

 

 

Shares beneficially owned:

 

 

 

 

 

 

 

 

 

 

 

shares of Seller Common Stock

 

 

 

 

 

 

 

 

 

 

 

shares of Seller Preferred Stock

 

 

 

 

 

 

 

 

 

 

 

shares of Seller Common Stock issuable upon exercise of outstanding options or
warrants

 

 

 

 

 

 

 

 

 

 

 

shares of Seller Preferred Stock issuable upon exercise of outstanding options
or warrants

 

 

 

 

 

[SIGNATURE PAGE TO IRREVOCABLE PROXY]

 

10

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EXHIIT B-2

 

NON-COMPETITION AGREEMENT

 

                THIS NON-COMPETITION AGREEMENT (this “Agreement”) is made and
entered into as of                , 2002 by and among interWAVE Communications
International, Ltd, a Bermuda corporation (“Acquiror”), interWAVE Advanced
Communications, Inc. (the “Buyer”), and the undersigned shareholder
(“Shareholder”) of GBase Communications, a California corporation (the
“Company”).  The Closing Date (as defined in the Purchase Agreement (as defined
below)) shall be the “Effective Date” of this Agreement.

RECITALS

 

                A.            Acquiror, the Company, and the Buyer have entered
into an Asset Purchase Agreement dated as of August 16, 2002 (the “Purchase
Agreement”) pursuant to which the Buyer shall purchase substantially all of the
Company’s assets, and assume certain of its liabilities, (the “Purchase”) in
exchange for shares of common stock of Acquiror ultimately held by the
shareholders of the Company (“Shares”), including Shareholder.

 

                B.            Shareholder acknowledges that he or she is a
substantial and/or significant shareholder of the Company.

 

                C.            As a result of the Purchase, Shareholder shall
receive from Acquiror significant consideration in the form of (i) shares of
common stock of Acquiror pursuant to the terms of the Purchase Agreement and
(ii) the substitution by Acquiror of all options to purchase common stock of the
Company held by Shareholder.

 

                D.            As a condition and mutual inducement to the
Purchase, and to preserve the value of the business being acquired by Acquiror
after the Purchase, the Purchase Agreement contemplates, among other things,
that Shareholder shall enter into this Agreement and that this Agreement shall
become effective on the Effective Date.

 

                NOW, THEREFORE, in consideration of the mutual promises made
herein, Acquiror, the Buyer and the Shareholder hereby agree as follows:

 

                1.             Covenant Not to Compete or Solicit.

 

                                (a)           Beginning on the Effective Date
and ending on the first (1st) anniversary of the Effective Date of this
Agreement (the “Non-Competition Period”), Shareholder shall not, directly or
indirectly, without the prior written consent of Acquiror: (i) engage in,
anywhere in the jurisdictions in which Acquiror and its subsidiaries (including
but not limited to the Buyer) and affiliates conduct business (the “Restricted
Area”), whether as an employee, agent, consultant, advisor, independent
contractor, proprietor, partner, officer, director or otherwise, or have any
ownership interest in (except for ownership of one percent (1%) or less of any
publicly-held entity), or participate in or facilitate the financing, operation,
management or control of, any

 

11

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firm, partnership, corporation, entity or business that engages or participates
in a Competing Business Purpose (as defined below); or (ii) interfere with the
business of Acquiror and its subsidiaries (including but not limited to the
Buyer) and affiliates or approach, contact or solicit customers of Acquiror, or
any subsidiaries (including but not limited to the Buyer) or affiliates of
Acquiror, in connection with a Competing Business Purpose.  For purposes of this
Agreement, “Competing Business Purpose” shall mean any business which engages in
the same line of business as Acquiror or the Buyer, including but not limited to
any business which engages in the design, development, manufacture or sale of
any (i) base station transceiver (“BTS”) and BTS components and software for
global system for mobile communication (“GSM”), general packet radio service
(“GPRS”), code-division multiple access (“CDMA”) and/or single carrier radio
transmission technology (“1xRTT”) and/or CDMA2000, and wideband code-division
multiple access (“WCDMA”) technologies; (ii) base station controller (“BSC”) and
BSC components and software for GSM, GPRS, CDMA and/or 1xRTT and/or CDMA2000,
and WCDMA technologies; (iii) mobile switching center (“MSC”) and MSC components
and software for GSM, GPRS, CDMA and/or 1xRTT and/or CDMA2000, and WCDMA
technologies; (iv) packet data service node (“PDSN”) and PDSN components and
software for CDMA and/or 1xRTT and/or CDMA2000; (v) radio access network (“RAN”)
and RAN components and software for WCDMA; and (vi) node “B” and node “B”
components and software for WCDMA.

 

                                (b)           Beginning on the Effective Date
and ending on the first (1st) anniversary of the Effective Date of this
Agreement (the “Non-Solicitation Period”), Shareholder shall not, directly or
indirectly, without the prior written consent of Acquiror, solicit, encourage or
take any other action which is intended to induce or encourage, or has the
effect of inducing or encouraging, any employee of Acquiror or any subsidiary of
Acquiror (including but not limited to the Buyer) or any affiliate of Acquiror
to (i) terminate his or her employment with Acquiror or such subsidiary of
Acquiror or such affiliate of Acquiror, or (ii) engage in any action in which
Shareholder would, under the provisions of Section 1(a) hereof, be prohibited
from engaging.

 

                                (c)           The covenants contained in Section
1(a) hereof shall be construed as a series of separate covenants, one for each
country, province, state, city or other political subdivision of the Restricted
Area.  Except for geographic coverage, each such separate covenant shall be
deemed identical in terms to the covenant contained in Section 1(a) hereof.  If,
in any judicial proceeding, a court refuses to enforce any of such separate
covenants (or any part thereof), then such unenforceable covenant (or such part)
shall be eliminated from this Agreement to the extent necessary to permit the
remaining separate covenants (or portions thereof) to be enforced.  In the event
that the provisions of this Section 1 are deemed to exceed the time, geographic
or scope limitations permitted by applicable law, then such provisions shall be
reformed to the maximum time, geographic or scope limitations, as the case may
be, permitted by applicable laws.

 

                                (d)           Shareholder expressly agrees and
acknowledges that the restrictions contained in this Section 1 do not preclude
Shareholder from earning a livelihood, nor do they unreasonably impose
limitations on Shareholder’s ability to earn a living.  Shareholder further
acknowledges that (i) the goodwill associated with the existing business,
customers and assets of the Company prior to the Purchase is an integral
component of the value of the Company to Acquiror and is reflected in the
portion of the Purchase Shares (as that term is defined in the Purchase
Agreement) issuable to Shareholder, and (ii) Shareholder’s agreement as set
forth herein is necessary

 

12

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to preserve the value of the business and operation of the Company for Acquiror
following the Purchase.  Shareholder also acknowledges that the limitations of
time, geography and scope of activity agreed to in this Agreement are reasonable
because, among other things: (A) the Company and Acquiror are engaged in a
highly competitive industry, (B) Shareholder has unique access to, and will
continue to have access to, the trade secrets and know-how of the Company and
Acquiror, including, without limitation, the plans and strategy (and, in
particular, the competitive strategy) of the Company and Acquiror, and (C)
Shareholder is receiving significant consideration in connection with the
Purchase.

 

                                (e)           Shareholder’s obligations under
this Agreement shall remain in effect regardless of Shareholder’s employment
with Acquiror or the Buyer.

 

                                (f)            REMEDIES. SHAREHOLDER HEREBY
RECOGNIZES AND ACKNOWLEDGES THAT A MATERIAL VIOLATION OF THE TERMS AND
PROVISIONS OF THIS SECTION 1 WOULD CAUSE IRREPARABLE INJURY TO ACQUIROR  OR ANY
OF ITS SUBSIDIARIES OR AFFILIATES, AS THE CASE MAY BE, FOR WHICH ACQUIROR OR ANY
OF ITS RESPECTIVE SUBSIDIARIES OR AFFILIATES WOULD HAVE NO ADEQUATE REMEDY AT
LAW.  ACCORDINGLY, IN THE EVENT THAT SHAREHOLDER SHALL FAIL TO MATERIALLY COMPLY
WITH THE TERMS AND PROVISIONS OF THIS SECTION 1 IN ANY RESPECT, AND
NOTWITHSTANDING ANY ARBITRATION AGREEMENT BETWEEN ACQUIROR  AND SHAREHOLDER,
ACQUIROR AND THE BUYER SHALL BE ENTITLED TO PRELIMINARY AND OTHER INJUNCTIVE
RELIEF AND TO SPECIFIC PERFORMANCE OF THE TERMS AND PROVISIONS HEREOF.  IN
FURTHERANCE AND NOT IN LIMITATION OF THE FOREGOING, SHAREHOLDER HEREBY WAIVES
ANY CLAIM OR DEFENSE RELATING TO ANY VIOLATION OR BREACH BY SHAREHOLDER OF THE
TERMS AND PROVISIONS OF THIS SECTION 1 THAT ACQUIROR OR ANY OF ITS RESPECTIVE
SUBSIDIARIES OR AFFILIATES HAVE AN ADEQUATE REMEDY AT LAW OR THAT MONEY DAMAGES
WOULD PROVIDE AN ADEQUATE REMEDY FOR SUCH VIOLATION OR BREACH.

 

                2.             Miscellaneous.

 

                                (a)           Governing Law; Consent to Personal
Jurisdiction.  This Agreement shall be governed by the laws of the State of
California without reference to rules of conflicts of law.  Shareholder hereby
consents to the personal jurisdiction of the state and federal courts located in
California for any action or proceeding arising from or relating to this
Agreement or relating to any arbitration in which the parties are participants.

 

                                (b)           Severability.  If any portion of
this Agreement is held by a court of competent jurisdiction to conflict with any
federal, state or local law, or to be otherwise invalid or unenforceable, such
portion of this Agreement shall be of no force or effect and this Agreement
shall otherwise remain in full force and effect and be construed as if such
portion had not been included in this Agreement.

 

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                                (c)           No Assignment.  Because the nature
of the Agreement is specific to the actions of Shareholder, Shareholder may not
assign this Agreement.  This Agreement shall inure to the benefit of Acquiror,
the Buyer and their respective successors and assigns.

 

                                (d)           Notices.  All notices and other
communications hereunder shall be in writing and shall be deemed given if
delivered personally or by commercial messenger or courier service, or mailed by
registered or certified mail (return receipt requested) or sent via facsimile
(with acknowledgment of complete transmission) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice); provided, however, that notices sent by mail will not be deemed given
until received:

 

If to Acquiror

 

interWAVE Advanced Communications Inc.

or Buyer:

 

c/o interWAVE Communications, Inc.

 

 

312 Constitution Drive

 

 

Menlo Park, CA 94025

 

 

Attn: Robin Foor

 

 

Telephone No.: (650) 838-2101

 

 

Facsimile No.:  (650) 321-6381

 

 

 

With a copy to:

 

Wilson Sonsini Goodrich & Rosati

 

 

Professional Corporation

 

 

650 Page Mill Road

 

 

Palo Alto, California 94304

 

 

Attn: Christopher Mitchell, Esq.

 

 

Telephone No.: (650) 493-9300

 

 

Facsimile No.: (650) 493-6811

 

 

 

If to Shareholder:

 

To the address set forth on the signature page hereof

 

 

 

With a copy to:

 

Crosby, Heafey, Roach & May Professional Corporation

 

 

1999 Harrison Street, Suite 2200

 

 

Oakland, CA 94612-3572

 

 

Attn:  Daniel Leer, Esq.

 

 

Telephone No.: (510) 763-2000

 

 

Facsimile No.: (510) 273-8832

 

 

                                (f)            Entire Agreement.  This Agreement
contains the entire agreement and understanding of the parties and supersedes
all prior discussions, agreements and understandings relating to the subject
matter hereof.  This Agreement may not be changed or modified, except by an
agreement in writing executed by each of Acquiror, the Buyer and Shareholder.

 

                                (g)           Waiver of Breach.  The waiver of a
breach of any term or provision of this Agreement, which must be in writing,
shall not operate as or be construed to be a waiver of any other previous or
subsequent breach of this Agreement.

 

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                                (h)           Headings.  All captions and
section headings used in this Agreement are for convenience only and do not form
a part of this Agreement.

 

                                (i)            Counterparts.  This Agreement may
be executed in counterparts, and each counterpart shall have the same force and
effect as an original and shall constitute an effective, binding agreement on
the part of each of the undersigned.

 

                                (j)            Termination.  This Agreement
shall terminate and be of no force and effect upon the earlier of (i) the
termination of the Purchase Agreement pursuant to Article IX of the Purchase
Agreement, or (ii) one (1) year from the effective Date of this Agreement.

*  *  *

 

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IN WITNESS WHEREOF, the Parties have executed this Agreement as of the Effective
Date.

 

INTERWAVE COMMUNICATIONS
INTERNATIONAL, LTD.

 

 

 

 

By:

 

Name:

 

Title:

 

 

 

 

 

INTERWAVE ADVANCED COMMUNICATIONS, INC.

 

 

 

 

By:

 

Name:

 

Title:

 

 

 

 

 

SHAREHOLDER

 

 

 

 

 

Signature

 

Print Name

 

 

 

 

Address:

 

 

 

 

 

 

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EXHIBIT C-2

 

 

[j5484ex10d24image002.gif]

DATE                , 2002

 

 

To:          Employee

 

 

 

Welcome to interWAVE Communications!  We are happy to offer you employment with
interWAVE contingent upon the closing of the acquisition of substantially all of
the assets of Gbase Communications.  We are excited about the future and believe
that you will make a contribution to our strategic product initiatives.

 

Subject to the approval of the Board of Directors of interWAVE and final closing
of the acquisition, we will be proposing the following to you:

 

Position Title:

 

Salary:

 

 

Stock Options:

 

If you accept this offer of employment, your employment will be “at-will” and
you or the Company can terminate your employment at any time for any reason or
for no reason.  In addition, any disputes arising out of your employment will be
subject to mandatory arbitration governed by California law.  As a condition to
your employment, you will be required to sign and observe the Company’s
Proprietary and Confidential Information Agreements.  Employment is governed by
current policies and procedures of interWAVE.  In the next weeks, interWAVE will
be communicating more details as to you regarding HR issues such as benefits. 
Please refer questions regarding these terms to your HR representative.

 

Your signature signifies acknowledgement of your receipt of this information
and/ or acceptance. Keep the original for your records and submit a copy to HR. 
Please return acknowledgement of this proposal by      , 2002 and
acceptance/decline of this offer by

     , 2002.

 

Again, we look forward to you joining us and to your contributions to the
interWAVE family.

 

Regards,

 

 

 

Priscilla Lu

Chairman and CEO

 

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I acknowledge receipt of this proposed offer:

 

 

 

 

 

Signature

 

Date

 

 

_______       I accept this offer of employment

 

_______        I do not accept this offer of employment

 

 

 

 

 

 

 

Signature

 

Date

 

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EXHIBIT D

 

EXECUTION COPY

 

 

September      , 2002

 

 

interWAVE Communications International Ltd.

312 Constitution Drive

Menlo Park, CA 94025

Attn:       Priscilla Lu,

                Chief Executive Officer

 

                Re:          Shareholder Representation and Lock-up Agreement

 

Reference is made to the provisions of the Asset Purchase Agreement, dated
August 16, 2002 (the “Purchase Agreement”), by and among interWAVE
Communications International Ltd., a corporation organized under the laws of
Bermuda (“ Parent”), interWAVE Advanced Communications, Inc., a Delaware
corporation and a wholly owned subsidiary of Parent (“Buyer”) and GBase
Communications, a California corporation (“Seller”), which provides for the
acquisition (the “Acquisition”) of certain assets of Seller in exchange for
shares of common stock of Parent, as set forth in the Purchase Agreement. This
letter constitutes the undertakings of the undersigned contemplated by the
Purchase Agreement. Capitalized terms without definition shall have the meanings
assigned to them in the Purchase Agreement.

AS CONSIDERATION OF PARENT’S WILLINGNESS TO ENTER INTO (AND IN ORDER TO INDUCE
PARENT TO ENTER INTO) THE PURCHASE AGREEMENT, AND FOR OTHER GOOD AND VALUABLE
CONSIDERATION, THE RECEIPT AND SUFFICIENCY OF WHICH IS HEREBY ACKNOWLEDGED, THE
UNDERSIGNED AGREES TO THE FOLLOWING:

FOR THE PERIOD BEGINNING ON THE DATE OF CLOSING OF THE ACQUISITION (THE “CLOSING
DATE”) AND ENDING ONE YEAR AFTER THE CLOSING DATE, THE UNDERSIGNED WILL NOT
OFFER, SELL, CONTRACT TO SELL, PLEDGE, GRANT ANY OPTION TO PURCHASE, MAKE ANY
SHORT SALE WITH RESPECT TO OR OTHERWISE DISPOSE OF (COLLECTIVELY, “TRANSFER”)
ANY PARENT CONSIDERATION SHARES OR EARN-OUT SHARES (AS DEFINED IN THE PURCHASE
AGREEMENT) OR ANY OPTIONS OR WARRANTS TO PURCHASE ANY PARENT CONSIDERATION
SHARES OR EARN-OUT SHARES AND WILL NOT TRANSFER ANY SECURITIES CONVERTIBLE INTO,
EXCHANGEABLE FOR OR THAT REPRESENT THE RIGHT TO RECEIVE PARENT CONSIDERATION
SHARES OR EARN-OUT SHARES THAT THE UNDERSIGNED RECEIVES IN CONNECTION WITH THE
ACQUISITION DESCRIBED ABOVE OR THAT ARE OTHERWISE HEREAFTER ACQUIRED
(COLLECTIVELY, THE “SHARES”) WHETHER (I) HELD OF RECORD BY THE UNDERSIGNED
(INCLUDING HOLDING AS A CUSTODIAN) OR (II) OWNED BENEFICIALLY AS DEFINED UNDER
THE RULES AND REGULATIONS OF THE SECURITIES AND EXCHANGE COMMISSION.

NOTWITHSTANDING THE FOREGOING RESTRICTIONS, THE UNDERSIGNED MAY TRANSFER THE
SHARES: (I) AS A BONA FIDE GIFT OR GIFTS, PROVIDED THAT THE DONEE OR DONEES
THEREOF AGREE TO BE BOUND IN WRITING BY THE

 

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RESTRICTIONS SET FORTH HEREIN; (II) TO ANY TRUST FOR THE DIRECT OR INDIRECT
BENEFIT OF THE UNDERSIGNED OR THE IMMEDIATE FAMILY OF THE UNDERSIGNED, PROVIDED
THAT THE TRUSTEE OF THE TRUST AGREES TO BE BOUND IN WRITING BY THE RESTRICTIONS
SET FORTH HEREIN; OR (III) WITH THE PRIOR WRITTEN CONSENT OF PARENT.  FOR
PURPOSES OF THIS LOCK-UP AGREEMENT, “IMMEDIATE FAMILY” SHALL MEAN THE
UNDERSIGNED’S SPOUSE, SIBLINGS AND LINEAL ANCESTORS OR DESCENDANTS (INCLUDING BY
WAY OF ADOPTION).  THE UNDERSIGNED ALSO AGREES AND CONSENTS TO (I) THE PLACEMENT
OF A LEGEND ON ALL CERTIFICATES REPRESENTING THE SHARES REFLECTING THE TERMS OF
THIS AGREEMENT AND (II) THE ENTRY OF STOP TRANSFER INSTRUCTIONS WITH PARENT’S
TRANSFER AGENT AND REGISTRAR AGAINST THE TRANSFER OF THE SHARES EXCEPT IN
COMPLIANCE WITH THE FOREGOING RESTRICTIONS.

THE UNDERSIGNED UNDERSTANDS THAT PARENT IS RELYING UPON THIS LOCK-UP AGREEMENT
IN EXECUTING THE PURCHASE AGREEMENT.  THE UNDERSIGNED FURTHER UNDERSTANDS THAT
THIS LOCK-UP AGREEMENT IS IRREVOCABLE TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW AND SHALL BE BINDING UPON THE UNDERSIGNED’S HEIRS, LEGAL
REPRESENTATIVES, SUCCESSORS, AND ASSIGNS.

IN ADDITION, IN CONNECTION WITH THE ISSUANCE OF THE SHARES AND THE PARENT
GUARANTEE SHARES, AS DEFINED IN THE PURCHASE AGREEMENT (COLLECTIVELY, THE “TOTAL
CONSIDERATION SHARES”), THE UNDERSIGNED REPRESENTS TO PARENT AS FOLLOWS:

 

1.     Purchasing for Investment.  The undersigned is purchasing the Total
Consideration Shares solely for investment purposes, and not for further
distribution.  The entire legal and beneficial ownership interest in the Total
Consideration Shares is being purchased and shall be held solely for the
undersigned’s account. The undersigned is not a party to, and does not presently
intend to enter into, any contract or other arrangement with any other person or
entity involving the resale, transfer, grant of participation with respect to or
other distribution of any of the Total Consideration Shares.  The undersigned’s
investment intent is not limited to a present intention to hold the Total
Consideration Shares for the minimum capital gains period specified under any
applicable tax law, for a deferred sale, for a specified increase or decrease in
the market price of the Total Consideration Shares, or for any other fixed
period in the future.

 

2.     Protection of Interests.  The undersigned can properly evaluate the
merits and risks of an investment in the Total Consideration Shares and can
protect his or its own interests in this regard, whether by reason of business
and financial expertise, the business and financial expertise of certain
professional advisors unaffiliated with Parent with whom the undersigned has
consulted, or the undersigned’s preexisting business or personal relationship
with Parent or any of its officers, directors or controlling persons.

 

3.     Informed.  The undersigned is sufficiently aware of the Parent’s business
affairs and financial condition to reach an informed and knowledgeable decision
to acquire the Total Consideration Shares.  The undersigned has had opportunity
to discuss the plans, operations and financial condition of Parent with its
officers, directors or controlling persons, and has received all information he
deems appropriate for assessing the risk of an investment in the Total
Consideration Shares.

 

4.     Economic Risk.  The undersigned realizes that the purchase of the Total
Consideration Shares involves a high degree of risk, and that Parent’s future
prospects are uncertain.  The undersigned is able to hold the Total
Consideration Shares indefinitely if required, and is able to bear the loss of
his entire investment in the Total Consideration Shares.

 

2

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5.     The Total Consideration Shares are Restricted Securities.  The
undersigned understands that the Total Consideration Shares are “restricted
securities” in that Parent’s issuance of the Total Consideration Shares to the
undersigned has not been registered under the Securities Act of 1933, as amended
(the “Securities Act”) in reliance upon an exemption for non-public offerings. 
In this regard, the undersigned also understands and agrees that:

 

a.     He must hold the Total Consideration Shares indefinitely, unless any
subsequent proposed resale by the undersigned is registered under the Securities
Act, or unless an exemption from registration is otherwise available (such as
Rule 144);

 

b.     Except as set forth in the Purchase Agreement, Parent is under no
obligation to register any subsequent proposed resale of the Total Consideration
Shares by the undersigned; and

 

c.     the certificate evidencing the Total Consideration Shares will be
imprinted with a legend which prohibits the transfer of the Total Consideration
Shares unless such transfer is registered or such registration is not required
in the opinion of counsel for Parent.

 

6.     Rule 144.  The undersigned is familiar with Rule 144 adopted under the
Securities Act, which in some circumstances permits limited public resales of
“restricted securities” like the Total Consideration Shares acquired from an
issuer in a non-public offering.  The undersigned understands that his ability
to sell the Total Consideration Shares under Rule 144 in the future is
uncertain, and will depend upon, among other things: (i) the availability of
certain current public information about Parent; (ii) the resale occurring more
than one year following receipt of the Total Consideration Shares and full
payment (within the meaning of Rule 144) for the Total Consideration Shares; and
(iii) if the undersigned is an affiliate of Parent, or a non-affiliate who has
held the Total Consideration Shares less than two years after the purchase and
full payment: (A) the sale being made through a broker in an unsolicited
“broker’s transaction” or in transactions directly with a market maker, as said
term is defined under the Securities Exchange Act of 1934, as amended, (B) the
amount of Shares being sold during any three month period not exceeding the
specified limitations stated in Rule 144, and (C) timely filing of a notice of
proposed sale on Form 144, if applicable.

 

7.     Rule 144 May Never be Available.  The undersigned understands that the
requirements of Rule 144 may never be met, and that the Total Consideration
Shares may never be saleable.  The undersigned further understands that at the
time he wishes to sell the Total Consideration Shares, there may be no public
market for Parent’s stock upon which to make such a sale, or the current public
information requirements of Rule 144 may not be satisfied, either of which would
preclude the undersigned from selling the Total Consideration Shares under
Rule 144 even if the one-year minimum holding period had been satisfied.

 

8.     Further Restrictions on Resale.  The undersigned understands that in the
event Rule 144 is not available, any future proposed sale of any of the Total
Consideration Shares will not be possible without prior registration under the
Securities Act, compliance with some other registration exemption (which may or
may not be available), or each of the following: (i) written notice to Parent
containing detailed information regarding the proposed sale, (ii) providing an
opinion of counsel to the effect that such sale will not require registration,
and (iii) Parent notifying the undersigned in writing that its counsel concurs
in such opinion.  The undersigned understands

 

3

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that neither Parent nor its counsel is obligated to provide any such opinion. 
The undersigned understands that although Rule 144 is not exclusive, the Staff
of the SEC has stated that persons proposing to sell private placement
securities other than in a registered offering or pursuant to Rule 144 will have
a substantial burden of proof in establishing that an exemption from
registration is available for such offers or sales, and that such persons and
their respective brokers who participate in such transactions do so at their own
risk.

 

9.     Accredited Investor.  The undersigned hereby represents to the Company
and, by signing below, now certifies that he is an “accredited investor” as that
term is defined in Rule 501 of the Securities Act.

THIS LETTER AGREEMENT SHALL BE GOVERNED BY THE INTERNAL SUBSTANTIVE LAWS, BUT
NOT THE CHOICE OF LAW RULES, OF THE STATE OF CALIFORNIA.

 

[Remainder of Page Intentionally Left Blank]

 

4

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THIS LETTER AGREEMENT IS HEREBY EXECUTED AS OF THE DATE SET FORTH ABOVE.

 

 

 

[Name]

 

 

 

Acknowledged and Agreed to:

 

INTERWAVE COMMUNICATIONS INTERNATIONAL LTD.

 

 

By:

 

 

 

 

Name:

 

 

 

 

Title:

 

 

 

 

[Signature Page to Shareholder Representation and Lock-Up Agreement]

 

5

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EXHIBIT E

 

EXECUTION COPY

September      , 2002

 

 

interWAVE Communications International Ltd.

312 Constitution Drive

MenloPark, CA 94025

Attn:       Priscilla Lu,

                Chief Executive Officer

 

Re:          Affiliate Agreement

 

Ladies and Gentlemen:

 

Reference is made to the provisions of the Asset Purchase Agreement, dated
August 16, 2002 (the “Purchase Agreement”), by and among interWAVE
Communications International Ltd., a corporation organized under the laws of
Bermuda (“ Parent”), interWAVE Advanced Communications, Inc., a Delaware
corporation and a wholly owned subsidiary of Parent (“Buyer”) and GBase
Communications, a California corporation (“Seller”), which provides for the
acquisition (the “Acquisition”) of certain assets of Seller in exchange for
shares of common stock of Parent, as set forth in the Purchase Agreement. This
letter constitutes the undertakings of the undersigned contemplated by the
Purchase Agreement. Capitalized terms without definition shall have the meanings
assigned to them in the Purchase Agreement.

 

A.            I understand that I may be deemed to be an “affiliate” of Seller,
as such term is defined for purposes of Rule 145 (“ Rule 145”) promulgated under
the Securities Act of 1933 (the “Securities Act”), and that the transferability
of the shares of common stock, par value of $0.001 per share, of Parent (the
“Parent Shares”) which I will receive in connection with the Acquisition in
exchange for my shares of capital stock of Seller (the “Seller Shares”), is
therefore restricted.

 

B.            I hereby represent, warrant and covenant to Parent and Buyer that
I will not transfer, sell or otherwise dispose of any of the Parent Shares
except (a) pursuant to an effective registration statement under the Securities
Act, (b) as permitted by, and in accordance with, Rule 145 or another applicable
exemption under the Securities Act; or (c) pursuant to an opinion of counsel
furnished to and satisfactory to Parent, to the effect that no registration
under the Securities Act would be required in connection with the proposed
offer, sale, pledge, transfer or other disposition.

 

C.            I understand that Parent will issue stop transfer instructions to
its transfer agent with respect to the Parent Shares and that a restrictive
legend will be placed on certificates delivered to me evidencing the Parent
Shares in substantially the following form:

 

1

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“THIS CERTIFICATE AND THE SHARES REPRESENTED HEREBY HAVE BEEN ISSUED PURSUANT TO
A TRANSACTION GOVERNED BY RULE “RULE 145 (“RULE 145”) PROMULGATED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND MAY NOT BE SOLD
OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT PURSUANT TO
A REGISTRATION STATEMENT IN EFFECT AT THE TIME OR UNLESS THE PROPOSED SALE OR
DISPOSITION CAN BE MADE IN COMPLIANCE WITH RULE 145 OR OTHER CONDITIONS IN THE
LETTER REFERRED TO BELOW WITHOUT REGISTRATION IN RELIANCE ON ANOTHER EXEMPTION
THEREFROM. REFERENCE IS MADE TO THAT CERTAIN LETTER AGREEMENT, DATED AUGUST     
, 2002, BETWEEN THE HOLDER AND THE ISSUER, A COPY OF WHICH IS ON FILE IN THE
PRINCIPAL OFFICE OF THE ISSUER WHICH CONTAINS FURTHER RESTRICTIONS ON THE
TRANSFERABILITV OF THIS CERTIFICATE AND THE SHARES REPRESENTED HEREBY.”

 

D.            The term, “Parent Shares,” as used in this letter shall mean and
include not only the common stock of Parent as presently constituted, but also
any other stock, which may be issued in exchange for, in lieu of, or in addition
to, all or any part of such Parent Shares.

 

E.             This agreement shall be binding on my successors and assigns,
including my heirs, executors and administrators.

 

F.             I hereby acknowledge that the receipt of this letter by Parent
and Buyer is an inducement to their entering into the Purchase Agreement and a
condition to Parent’s and Buyer’s respective obligation to consummate the
Acquisition under the Purchase Agreement and that I understand the requirements
of this letter and the limitations imposed upon the transfer, sale or other
disposition of the Parent Shares and Seller Shares.

 

 

Very truly yours,

 

 

 

 

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EXHIBIT F

 

EXECUTION COPY

 

REGISTRATION RIGHTS AGREEMENT

THIS REGISTRATION RIGHTS AGREEMENT (THIS “AGREEMENT”) IS MADE AS OF
SEPTEMBER      , 2002 BY AND AMONG INTERWAVE COMMUNICATIONS INTERNATIONAL LTD.,
A CORPORATION ORGANIZED UNDER THE LAWS OF BERMUDA (THE “COMPANY”) AND THE
PERSONS IDENTIFIED ON EXHIBIT A ATTACHED HERETO (EACH INDIVIDUALLY, A “HOLDER,”
AND COLLECTIVELY, THE “HOLDERS”).

RECITALS

WHEREAS, THE COMPANY, INTERWAVE ADVANCED COMMUNICATIONS, INC., A WHOLLY OWNED
SUBSIDIARY OF THE COMPANY (THE “BUYER”), AND GBASE COMMUNICATIONS, A CALIFORNIA
CORPORATION (THE “SELLER”) HAVE ENTERED INTO AN ASSET PURCHASE AGREEMENT OF EVEN
DATE HEREWITH (THE “PURCHASE AGREEMENT”), WHEREBY THE SELLER’S OBLIGATIONS ARE
CONDITIONED UPON THE EXECUTION AND DELIVERY OF THE HOLDERS AND THE COMPANY OF
THIS AGREEMENT.

NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound, hereby agree as
follows:

AGREEMENT

1.             Certain Definitions.  As used in this Agreement, the following
terms shall have the following respective meanings:

“COMMISSION” SHALL MEAN THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION OR
ANY OTHER FEDERAL AGENCY AT THE TIME ADMINISTERING THE SECURITIES ACT OF 1933,
AS AMENDED.

“EXCHANGE ACT” SHALL MEAN THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, OR
ANY SIMILAR FEDERAL STATUTE AND THE RULES AND REGULATIONS OF THE COMMISSION
THEREUNDER, ALL AS THE SAME SHALL BE IN EFFECT FROM TIME TO TIME.

“REGISTRABLE SECURITIES” MEANS THE SHARES OF COMMON STOCK ISSUED TO THE HOLDERS
AS PARENT GUARANTEE SHARES (AS DEFINED IN THE PURCHASE AGREEMENT) (AND ANY
SECURITIES ISSUED AS A STOCK DIVIDEND WITH RESPECT TO OR AS A RESULT OF A STOCK
SPLIT OR RECAPITALIZATION OF THE COMMON STOCK ISSUED TO THE HOLDERS AS PARENT
GUARANTEE SHARES) OF THE COMPANY IN CONNECTION WITH THE PURCHASE AGREEMENT AND
OWNED BY THE HOLDERS.

THE TERMS “REGISTER,” “REGISTERED” AND “REGISTRATION” REFER TO A REGISTRATION
EFFECTED BY PREPARING AND FILING A REGISTRATION STATEMENT IN COMPLIANCE WITH THE
SECURITIES ACT, AND THE DECLARATION OR ORDERING OF THE EFFECTIVENESS OF SUCH
REGISTRATION STATEMENT.

 

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“REGISTRATION EXPENSES” SHALL MEAN ALL EXPENSES, EXCEPT AS OTHERWISE STATED
BELOW, INCURRED BY THE COMPANY IN COMPLYING WITH SECTION 1 HEROF, INCLUDING,
WITHOUT LIMITATION, ALL REGISTRATION, QUALIFICATION AND FILING FEES, PRINTING
EXPENSES, ESCROW FEES, FEES AND DISBURSEMENTS OF COUNSEL FOR THE COMPANY, BLUE
SKY FEES AND EXPENSES, THE EXPENSE OF ANY SPECIAL AUDITS INCIDENT TO OR REQUIRED
BY ANY SUCH REGISTRATION, INCLUDING LEGAL FEES AND EXPENSES OF ONE COUNSEL TO
HOLDERS (BUT EXCLUDING THE COMPENSATION OF REGULAR EMPLOYEES OF THE COMPANY
WHICH SHALL BE PAID IN ANY EVENT BY THE COMPANY).

“SECURITIES ACT” SHALL MEAN THE UNITED STATES SECURITIES ACT OF 1933, AS
AMENDED, OR ANY SIMILAR FEDERAL STATUTE, AND THE RULES AND REGULATIONS OF THE
COMMISSION THEREUNDER, ALL AS THE SAME SHALL BE IN EFFECT AT THE TIME.

“SELLING EXPENSES” SHALL MEAN SELLING COMMISSIONS AND STOCK TRANSFER TAXES
APPLICABLE TO THE SECURITIES REGISTERED BY THE HOLDERS.

 

1.1.        Registration on Form S-3.  In the event Registrable Securities are
to be issued in accordance to the Purchase Agreement, the Company shall prepare
and file within thirty (30) days after the issuance of such Registrable
Securities, a registration statement on Form S-3 under the Securities Act
covering the Registrable Securities issued pursuant to the Purchase Agreement
and held by signatory(ies) to the Registration Rights Agreement as of the filing
date.

 

1.2.        Expenses of Registration.  The Company shall bear all Registration
Expenses in connection with the registration exclusive of any Selling Expenses. 
All Selling Expenses relating to securities registered on behalf of the Holders
shall be borne by the Holders on a pro rata basis.

 

1.3.        Registration Procedures.  In the case of each registration,
qualification or compliance effected by the Company pursuant to this Section 1,
the Company will keep the Holders advised in writing as to the initiation of the
registration, qualification and compliance and as to the completion thereof.  At
its expense the Company will:

(a)   Prepare and file with the Commission a registration statement with respect
to such securities and use its best efforts to cause such registration statement
to become and remain effective until that date one year following the Effective
Time or less if the distribution described in the Registration Statement has
been completed.

(b)   Prepare and file with the Commission such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
registration statement.

(c)   Furnish to the Holders such reasonable number of copies of the
registration statement, preliminary prospectus, final prospectus and such other
documents as Holders may reasonably request in order to facilitate the public
offering of such securities.

 

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(d)   Use its best efforts to register and qualify the securities covered by
such registration statement under such other securities or Blue Sky laws of such
jurisdictions as shall be reasonably requested by the Holders, provided that the
Company shall not be required in connection therewith or as a condition thereto
to qualify to do business or to file a general consent to service of process in
any such states or jurisdictions.

(e)   Notify the Holders of Registrable Securities covered by such registration
statement at any time when a prospectus relating thereto is required to be
delivered under the Securities Act of the happening of any event as a result of
which the prospectus included in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading in light of the circumstances then existing.

(f)    Furnish, at the request of the Holders on the date that the registration
statement with respect to such securities becomes effective, (i) an opinion,
dated as of such date, of the counsel representing the Company for the purposes
of such registration, in form and substance as is customarily given to
underwriters in an underwritten public offering and reasonably satisfactory to
the Holders, addressed to the Holders and (ii) a letter dated as of such date,
from the independent certified public accountants of the Company, in form and
substance as is customarily given by independent certified public accountants to
underwriters in connection with an underwritten public offering and reasonably
satisfactory to the Holders, addressed to the Holders.

1.4          TEMPORARY CESSATION OF OFFERS AND SALES.  THE HOLDERS ACKNOWLEDGE
THAT THERE MAY OCCASIONALLY BE TIMES WHEN THE COMPANY MAY BE REQUIRED TO SUSPEND
THE USE OF THE PROSPECTUS FORMING PART OF THE REGISTRATION STATEMENT UNTIL SUCH
TIME AS AN AMENDMENT TO THE REGISTRATION STATEMENT HAS BEEN FILED BY THE COMPANY
AND DECLARED EFFECTIVE BY THE COMMISSION, UNTIL THE PROSPECTUS IS SUPPLEMENTED
OR AMENDED TO COMPLY WITH THE SECURITIES ACT, OR UNTIL SUCH TIME AS THE COMPANY
HAS FILED AN APPROPRIATE REPORT WITH THE COMMISSION PURSUANT TO THE EXCHANGE
ACT.  THE HOLDERS HEREBY COVENANT THAT THEY WILL NOT SELL ANY REGISTRABLE
SECURITIES PURSUANT TO SAID PROSPECTUS DURING THE PERIOD COMMENCING AT THE TIME
AT WHICH THE COMPANY GIVES THE HOLDERS NOTICE OF THE SUSPENSION OF THE USE OF
SAID PROSPECTUS AND ENDING AT THE TIME THE COMPANY GIVES THE HOLDERS NOTICE THAT
THE HOLDERS MAY THEREAFTER EFFECT SALES PURSUANT TO SAID PROSPECTUS, AS THE SAME
MAY HAVE BEEN SUPPLEMENTED OR AMENDED, PROVIDED, HOWEVER, THAT IF THE USE OF THE
PROSPECTUS IS SUSPENDED, THE COMPANY SHALL USE ITS BEST EFFORTS TO TAKE ALL
ACTIONS REASONABLY NECESSARY TO SUPPLEMENT OR TO AMEND THE PROSPECTUS SUCH THAT
THE PROSPECTUS SHALL AGAIN BE EFFECTIVE.  IN THE EVENT OF ANY SUSPENSION OF USE
OF A REGISTRATION STATEMENT PURSUANT TO THIS PARAGRAPH, THE TIME PERIOD DURING
WHICH THE COMPANY IS OBLIGATED TO MAINTAIN THE EFFECTIVENESS OF SUCH
REGISTRATION STATEMENT PURSUANT TO THIS AGREEMENT SHALL BE TOLLED FOR THE
DURATION OF THE PERIOD DURING WHICH USE OF THE REGISTRATION STATEMENT WAS
SUSPENDED.

 

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1.5.         INDEMNIFICATION.

(A)           THE COMPANY WILL INDEMNIFY EACH HOLDER WITHIN THE MEANING OF
SECTION 15 OF THE SECURITIES ACT, WITH RESPECT TO WHICH REGISTRATION,
QUALIFICATION OR COMPLIANCE HAS BEEN EFFECTED PURSUANT TO THIS SECTION 1.5,
AGAINST ALL EXPENSES, CLAIMS, LOSSES, DAMAGES OR LIABILITIES (OR ACTIONS IN
RESPECT THEREOF), INCLUDING ANY OF THE FOREGOING INCURRED IN SETTLEMENT OF ANY
LITIGATION, COMMENCED OR THREATENED, ARISING OUT OF OR BASED ON ANY UNTRUE
STATEMENT (OR ALLEGED UNTRUE STATEMENT) OF A MATERIAL FACT CONTAINED IN ANY
REGISTRATION STATEMENT, PROSPECTUS, OFFERING CIRCULAR OR OTHER DOCUMENT, OR ANY
AMENDMENT OR SUPPLEMENT THERETO, INCIDENT TO ANY SUCH REGISTRATION,
QUALIFICATION OR COMPLIANCE, OR BASED ON ANY OMISSION (OR ALLEGED OMISSION) TO
STATE THEREIN A MATERIAL FACT REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE
THE STATEMENTS THEREIN, IN LIGHT OF THE CIRCUMSTANCES IN WHICH THEY WERE MADE,
NOT MISLEADING, OR ANY VIOLATION BY THE COMPANY OF THE SECURITIES ACT OR ANY
RULE OR REGULATION PROMULGATED UNDER THE SECURITIES ACT APPLICABLE TO THE
COMPANY IN CONNECTION WITH ANY SUCH REGISTRATION, QUALIFICATION OR COMPLIANCE,
AND THE COMPANY WILL REIMBURSE EACH HOLDER, FOR ANY LEGAL AND ANY OTHER EXPENSES
REASONABLY INCURRED IN CONNECTION WITH INVESTIGATING, PREPARING OR DEFENDING ANY
SUCH CLAIM, LOSS, DAMAGE, LIABILITY OR ACTION, PROVIDED THAT THE COMPANY WILL
NOT BE LIABLE IN ANY SUCH CASE TO THE EXTENT THAT ANY SUCH CLAIM, LOSS, DAMAGE,
LIABILITY OR EXPENSE ARISES OUT OF OR IS BASED ON ANY UNTRUE STATEMENT OR
OMISSION OR ALLEGED UNTRUE STATEMENT OR OMISSION, MADE IN RELIANCE UPON AND IN
CONFORMITY WITH WRITTEN INFORMATION FURNISHED TO THE COMPANY BY AN INSTRUMENT
DULY EXECUTED BY THE HOLDERS SPECIFICALLY FOR USE THEREIN, OR THE FAILURE OF THE
HOLDERS TO DELIVER A PROSPECTUS THAT WAS DELIVERED TO THE HOLDERS PRIOR TO A
SALE OR SALES BY SUCH HOLDERS.

(B)           THE HOLDERS WILL, IF REGISTRABLE SECURITIES HELD BY THE HOLDERS
ARE INCLUDED IN THE SECURITIES AS TO WHICH SUCH REGISTRATION, QUALIFICATION OR
COMPLIANCE IS BEING EFFECTED, INDEMNIFY THE COMPANY, EACH OF ITS DIRECTORS AND
OFFICERS, EACH PERSON WHO CONTROLS THE COMPANY WITHIN THE MEANING OF SECTION 15
OF THE SECURITIES ACT, AGAINST ALL CLAIMS, LOSSES, DAMAGES AND LIABILITIES (OR
ACTIONS IN RESPECT THEREOF) ARISING OUT OF OR BASED ON ANY UNTRUE STATEMENT (OR
ALLEGED UNTRUE STATEMENT) OF A MATERIAL FACT CONTAINED IN ANY SUCH REGISTRATION
STATEMENT, PROSPECTUS, OFFERING CIRCULAR OR OTHER DOCUMENT, OR ANY OMISSION (OR
ALLEGED OMISSION) TO STATE THEREIN A MATERIAL FACT REQUIRED TO BE STATED THEREIN
OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING, AND WILL REIMBURSE
THE COMPANY, SUCH DIRECTORS, OFFICERS, PERSONS, OR CONTROL PERSONS FOR ANY LEGAL
OR ANY OTHER EXPENSES REASONABLY INCURRED IN CONNECTION WITH INVESTIGATING OR
DEFENDING ANY SUCH CLAIM, LOSS, DAMAGE, LIABILITY OR ACTION, IN EACH CASE TO THE
EXTENT, BUT ONLY TO THE EXTENT, THAT SUCH UNTRUE STATEMENT (OR ALLEGED UNTRUE
STATEMENT) OR OMISSION (OR ALLEGED OMISSION) IS MADE IN SUCH REGISTRATION
STATEMENT, PROSPECTUS, OFFERING CIRCULAR OR OTHER DOCUMENT IN RELIANCE UPON AND
IN CONFORMITY WITH WRITTEN INFORMATION FURNISHED TO THE COMPANY BY AN INSTRUMENT
DULY EXECUTED BY SUCH HOLDERS SPECIFICALLY FOR USE THEREIN.  NOTWITHSTANDING THE
FOREGOING, THE LIABILITY OF THE HOLDERS UNDER THIS SUBSECTION (B) SHALL BE
LIMITED TO THE PROPORTION OF ANY SUCH LOSS, CLAIM, DAMAGE, LIABILITY OR EXPENSE
WHICH IS EQUAL TO THE PROPORTION THAT THE PUBLIC OFFERING PRICE OF THE SHARES
SOLD BY SUCH HOLDERS UNDER SUCH REGISTRATION STATEMENT BEARS TO THE TOTAL PUBLIC
OFFERING PRICE OF ALL SECURITIES SOLD THEREUNDER, BUT NOT TO EXCEED THE PROCEEDS
RECEIVED BY SUCH HOLDERS FROM THE SALE OF REGISTRABLE SECURITIES COVERED BY SUCH
REGISTRATION STATEMENT.  THE HOLDERS WILL NOT BE REQUIRED TO ENTER INTO ANY
AGREEMENT OR UNDERTAKING IN CONNECTION WITH ANY REGISTRATION UNDER THIS
SECTION 1 PROVIDING FOR ANY

 

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INDEMNIFICATION OR CONTRIBUTION ON THE PART OF SUCH HOLDERS GREATER THAN THE
HOLDERS’ OBLIGATIONS UNDER THIS SECTION 1.5(B).

(C)           EACH PARTY ENTITLED TO INDEMNIFICATION UNDER THIS SECTION 1.5 (THE
“INDEMNIFIED PARTY”) SHALL GIVE NOTICE TO THE PARTY REQUIRED TO PROVIDE
INDEMNIFICATION (THE “INDEMNIFYING PARTY”) PROMPTLY AFTER SUCH INDEMNIFIED PARTY
HAS ACTUAL KNOWLEDGE OF ANY CLAIM AS TO WHICH INDEMNITY MAY BE SOUGHT, AND SHALL
PERMIT THE INDEMNIFYING PARTY TO ASSUME THE DEFENSE OF ANY SUCH CLAIM OR ANY
LITIGATION RESULTING THEREFROM, PROVIDED THAT COUNSEL FOR THE INDEMNIFYING
PARTY, WHO SHALL CONDUCT THE DEFENSE OF SUCH CLAIM OR LITIGATION, SHALL BE
APPROVED BY THE INDEMNIFIED PARTY (WHOSE APPROVAL SHALL NOT UNREASONABLY BE
WITHHELD), AND THE INDEMNIFIED PARTY MAY PARTICIPATE IN SUCH DEFENSE AT SUCH
PARTY’S EXPENSE, AND PROVIDED FURTHER THAT THE FAILURE OF ANY INDEMNIFIED PARTY
TO GIVE NOTICE AS PROVIDED HEREIN SHALL NOT RELIEVE THE INDEMNIFYING PARTY OF
ITS OBLIGATIONS UNDER THIS SECTION 1 UNLESS THE FAILURE TO GIVE SUCH NOTICE IS
MATERIALLY PREJUDICIAL TO AN INDEMNIFYING PARTY’S ABILITY TO DEFEND SUCH ACTION
AND PROVIDED FURTHER, THAT THE INDEMNIFYING PARTY SHALL NOT ASSUME THE DEFENSE
FOR MATTERS AS TO WHICH THE INDEMNIFIED PARTY IN GOOD FAITH CONCLUDES THERE IS
AN ACTUAL OR POTENTIAL CONFLICT OF INTEREST OR SEPARATE AND DIFFERENT DEFENSES
BUT SHALL BEAR THE EXPENSE OF SUCH DEFENSE NEVERTHELESS.  NO INDEMNIFYING PARTY,
IN THE DEFENSE OF ANY SUCH CLAIM OR LITIGATION, SHALL, EXCEPT WITH THE CONSENT
OF EACH INDEMNIFIED PARTY, CONSENT TO ENTRY OF ANY JUDGMENT OR ENTER INTO ANY
SETTLEMENT WHICH DOES NOT INCLUDE AS AN UNCONDITIONAL TERM THEREOF THE GIVING BY
THE CLAIMANT OR PLAINTIFF TO SUCH INDEMNIFIED PARTY OF A RELEASE FROM ALL
LIABILITY IN RESPECT TO SUCH CLAIM OR LITIGATION.

(D)             IF THE INDEMNIFICATION PROVIDED FOR PARAGRAPHS (A) THROUGH (C)
OF THIS SECTION 1.5 IS UNAVAILABLE OR INSUFFICIENT TO HOLD HARMLESS AN
INDEMNIFIED PARTY UNDER SUCH PARAGRAPHS IN RESPECT OF ANY LOSSES, CLAIMS,
DAMAGES OR LIABILITIES OR ACTIONS IN RESPECT THEREOF REFERRED TO THEREIN, THEN
EACH INDEMNIFYING PARTY SHALL IN LIEU OF INDEMNIFYING SUCH INDEMNIFIED PARTY
CONTRIBUTE TO THE AMOUNT PAID OR PAYABLE BY SUCH INDEMNIFIED PARTY AS A RESULT
OF SUCH LOSSES, CLAIMS, DAMAGES, LIABILITIES OR ACTIONS IN SUCH PROPORTION AS
APPROPRIATE TO REFLECT THE RELATIVE FAULT OF THE COMPANY, ON THE ONE HAND, AND
THE HOLDERS OF SUCH REGISTRABLE SECURITIES, ON THE OTHER, IN CONNECTION WITH THE
STATEMENTS OR OMISSIONS WHICH RESULTED IN SUCH LOSSES, CLAIMS, DAMAGES,
LIABILITIES OR ACTIONS AS WELL AS ANY OTHER RELEVANT EQUITABLE CONSIDERATIONS,
INCLUDING THE FAILURE TO GIVE ANY NOTICE UNDER PARAGRAPH (C).  THE RELATIVE
FAULT SHALL BE DETERMINED BY REFERENCE TO, AMONG OTHER THINGS, WHETHER THE
UNTRUE OR ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATES TO INFORMATION
SUPPLIED BY THE COMPANY, ON THE ONE HAND, OR THE HOLDERS, ON THE OTHER, AND TO
THE PARTIES’ RELATIVE INTENT, KNOWLEDGE, ACCESS TO INFORMATION AND OPPORTUNITY
TO CORRECT OR PREVENT SUCH STATEMENT OR OMISSION.  THE COMPANY AND THE HOLDERS
AGREE THAT IT WOULD NOT BE JUST AND EQUITABLE IF CONTRIBUTIONS PURSUANT TO THIS
PARAGRAPH WERE DETERMINED BY PRO RATA ALLOCATION OR BY ANY OTHER METHOD OF
ALLOCATION WHICH DID NOT TAKE ACCOUNT OF THE EQUITABLE CONSIDERATIONS REFERRED
TO ABOVE IN THIS PARAGRAPH.  THE AMOUNT PAID OR PAYABLE BY AN INDEMNIFIED PARTY
AS A RESULT OF THE LOSSES, CLAIMS, DAMAGES, LIABILITIES OR ACTION IN RESPECT
THEREOF, REFERRED TO ABOVE IN THIS PARAGRAPH, SHALL BE DEEMED TO INCLUDE ANY
LEGAL OR OTHER EXPENSES REASONABLY INCURRED BY SUCH INDEMNIFIED PARTY IN
CONNECTION WITH INVESTIGATING OR DEFENDING ANY SUCH ACTION OR CLAIM. 
NOTWITHSTANDING THE PROVISIONS OF THIS PARAGRAPH, THE HOLDERS SHALL NOT BE
REQUIRED TO CONTRIBUTE ANY AMOUNT IN EXCESS OF THE LESSER OF (I) THE

 

5

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PROPORTION THAT THE PUBLIC OFFERING PRICE OF SHARES SOLD BY SUCH HOLDERS UNDER
SUCH REGISTRATION STATEMENT BEARS TO THE TOTAL PUBLIC OFFERING PRICE OF ALL
SECURITIES SOLD THEREUNDER, BUT NOT TO EXCEED THE PROCEEDS RECEIVED BY SUCH
HOLDERS FOR THE SALE OF REGISTRABLE SECURITIES COVERED BY SUCH REGISTRATION
STATEMENT AND (II) THE AMOUNT OF ANY DAMAGES WHICH THEY WOULD HAVE OTHERWISE
BEEN REQUIRED TO PAY BY REASON OF SUCH UNTRUE OR ALLEGED UNTRUE STATEMENT OR
OMISSION.  NO PERSON GUILTY OF FRAUDULENT MISREPRESENTATIONS (WITHIN THE MEANING
OF SECTION 11(F) OF THE SECURITIES ACT), SHALL BE ENTITLED TO CONTRIBUTION FROM
ANY PERSON WHO IS NOT GUILTY OF SUCH FRAUDULENT MISREPRESENTATION.

1.6          INFORMATION BY HOLDERS.  THE HOLDERS OF REGISTRABLE SECURITIES
INCLUDED IN ANY REGISTRATION SHALL FURNISH TO THE COMPANY SUCH INFORMATION
REGARDING THE HOLDERS, THE REGISTRABLE SECURITIES HELD BY HIM AND THE
DISTRIBUTION PROPOSED BY THE HOLDERS AS THE COMPANY MAY REASONABLY REQUEST IN
WRITING AND AS SHALL BE REQUIRED IN CONNECTION WITH ANY REGISTRATION,
QUALIFICATION OR COMPLIANCE REFERRED TO IN THIS SECTION 1.

1.7          ASSIGNMENT OF REGISTRATION RIGHTS.  THE RIGHTS TO CAUSE THE COMPANY
TO REGISTER REGISTRABLE SECURITIES PURSUANT TO THIS AGREEMENT MAY BE ASSIGNED BY
HOLDERS TO A TRANSFEREE OR ASSIGNEE OF REGISTRABLE SECURITIES WHICH IS A FAMILY
MEMBER OF HOLDERS OR TRUST FOR THE BENEFIT OF HOLDERS; PROVIDED, HOWEVER,
(A) THE TRANSFEROR SHALL, WITHIN TEN (10) DAYS AFTER SUCH TRANSFER, FURNISH TO
THE COMPANY WRITTEN NOTICE OF THE NAME AND ADDRESS OF SUCH TRANSFEREE OR
ASSIGNEE AND THE SECURITIES WITH RESPECT TO WHICH SUCH REGISTRATION RIGHTS ARE
BEING ASSIGNED AND (B) SUCH TRANSFEREE SHALL AGREE TO BE SUBJECT TO ALL
RESTRICTIONS SET FORTH IN THIS AGREEMENT.

1.8          SEC REPORTING.  WITH A VIEW TO MAKING AVAILABLE TO THE HOLDERS THE
BENEFITS OF CERTAIN RULES AND REGULATIONS OF THE SEC WHICH MAY PERMIT THE SALE
OF THE REGISTRABLE SECURITIES TO THE PUBLIC WITHOUT REGISTRATION, THE COMPANY
AGREES TO USE ITS BEST EFFORTS TO:

(a)           Make and keep public information available, as those terms are
understood and defined in SEC Rule 144 or any similar or analogous rule
promulgated under the Securities Act;

(b)           File with the SEC, in a timely manner, all reports and other
documents required of the Company under the Exchange Act;

(c)           So long as the Holders own any Registrable securities, furnish to
Holders forthwith upon request:  a written statement by the Company as to its
compliance with the reporting requirements of said Rule 144 of the Securities
Act, and of the Exchange Act (at any time after it has become subject to such
reporting requirements); a copy of the most recent annual or quarterly report of
the Company; and such other reports and documents as a Holder may reasonably
request in availing itself of any rule or regulation of the SEC allowing it to
sell any such securities without registration.

1.10        EFFECTIVE TIME.  THIS AGREEMENT SHALL BECOME EFFECTIVE UPON THE
CLOSING OF THE ASSET SALE AS DESCRIBED IN THE PURCHASE AGREEMENT BY AND AMONG
THE COMPANY, THE BUYER AND THE SELLER.

 

6

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IN THE EVENT THE PURCHASE AGREEMENT IS TERMINATED PRIOR TO THE CONSUMMATION OF
THE ASSET SALE, THIS AGREEMENT SHALL TERMINATE AND BE OF NO FURTHER FORCE OR
EFFECT CONCURRENT WITH SUCH TERMINATION.

2.     Miscellaneous.

2.1          GOVERNING LAW.  THIS AGREEMENT SHALL BE GOVERNED IN ALL RESPECTS BY
THE LAWS OF THE STATE OF CALIFORNIA AS SUCH LAWS ARE APPLIED TO AGREEMENTS
BETWEEN CALIFORNIA RESIDENTS ENTERED INTO AND TO BE PERFORMED ENTIRELY WITHIN
CALIFORNIA.

2.2          SUCCESSORS AND ASSIGNS.  EXCEPT AS OTHERWISE EXPRESSLY PROVIDED
HEREIN, THE PROVISIONS HEREOF SHALL INURE TO THE BENEFIT OF, AND BE BINDING
UPON, THE SUCCESSORS, ASSIGNS, HEIRS, EXECUTORS AND ADMINISTRATORS OF THE
PARTIES HERETO.

2.3          ENTIRE AGREEMENT.  THIS AGREEMENT AND THE PURCHASE AGREEMENT
CONSTITUTE THE FULL AND ENTIRE UNDERSTANDING AND AGREEMENT BETWEEN THE PARTIES
WITH REGARD TO THE SUBJECTS HEREOF AND THEREOF.

2.4          NOTICES.  ALL NOTICES AND OTHER COMMUNICATIONS REQUIRED OR
PERMITTED HEREUNDER SHALL BE EFFECTIVE UPON RECEIPT AND SHALL BE IN WRITING AND
MAY BE DELIVERED IN PERSON, BY TELECOPY, ELECTRONIC MAIL, OVERNIGHT DELIVERY
SERVICE OR U.S. MAIL, IN WHICH EVENT IT MAY BE MAILED BY FIRST-CLASS, CERTIFIED
OR REGISTERED, POSTAGE PREPAID, ADDRESSED (A) IF TO HOLDERS, AT SUCH ADDRESS AS
HOLDERS SHALL HAVE FURNISHED THE COMPANY IN WRITING, OR, UNTIL ANY SUCH HOLDERS
SO FURNISHES AN ADDRESS TO THE COMPANY, THEN TO AND AT THE ADDRESS OF THE LAST
HOLDERS OF SUCH SECURITIES WHO HAS SO FURNISHED AN ADDRESS TO THE COMPANY, OR
(B) IF TO THE COMPANY, AT ITS ADDRESS SET FORTH ON THE SIGNATURE PAGE OF THIS
AGREEMENT, OR AT SUCH OTHER ADDRESS AS THE COMPANY SHALL HAVE FURNISHED TO
HOLDERS.  NOTWITHSTANDING THE FOREGOING, ALL NOTICES AND COMMUNICATIONS TO
ADDRESSES OUTSIDE THE UNITED STATES SHALL BE GIVEN BY TELECOPIER AND CONFIRMED
IN WRITING SENT BY OVERNIGHT OR TWO-DAY COURIER SERVICE.

2.5          TITLES AND SUBTITLES.  THE TITLES OF THE PARAGRAPHS AND
SUBPARAGRAPHS OF THIS AGREEMENT ARE FOR CONVENIENCE OF REFERENCE ONLY AND ARE
NOT TO BE CONSIDERED IN CONSTRUING THIS AGREEMENT.

2.6          COUNTERPARTS.  THIS AGREEMENT MAY BE EXECUTED IN ANY NUMBER OF
COUNTERPARTS, EACH OF WHICH SHALL BE AN ORIGINAL, BUT ALL OF WHICH TOGETHER
SHALL CONSTITUTE ONE INSTRUMENT.

2.7          FACSIMILE.  FACSIMILE SIGNATURES SHALL CONSTITUTE ORIGINAL
SIGNATURES FOR PURPOSES OF THIS AGREEMENT.

 

*  *  *

 

7

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The foregoing Registration Rights Agreement is hereby executed as of the date
first above written.

 

“COMPANY”

 

 

INTERWAVE COMMUNICATIONS INTERNATIONAL, LTD.

a corporation organized under the laws of Bermuda

 

 

 

By:

 

 

 

 

 

Name:

 

 

 

 

 

Title:

 

 

 

 

 

 

 

 

 

“HOLDERS”

 

 

 

 

 

Name:

 

 

 

 

 

By:

 

 

 

 

 

Title:

 

 

 

 

 

[Signature Page to Registration Rights Agreement]

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EXHIBIT G

 

interWAVE Communications Inc.

a subsidiary of interWAVE Communications International Ltd.

312 Constitution Drive, Menlo Park, California 94025

 ...........providing microcellular network solutions

 

 

 

EMPLOYMENT AND PROPRIETARY INFORMATION AGREEMENT

 

 

As a condition of my employment with interWAVE Communications Inc., its parent
corporation (interWAVE Communications International, Ltd.) subsidiaries,
affiliates, successors or assigns (together the “Company”), and in consideration
of my employment with the Company and my receipt of the compensation now and
hereafter paid to me by Company, I agree to the following:

 

1.     At-Will Employment.  I understand and acknowledge that my employment with
the Company is for an unspecified duration and constitutes “at-will”
employment.  I acknowledge that this employment relationship may be terminated
or I may be demoted, promoted, transferred or have my compensation, benefits,
duties or location of work changed at any time, with or without good cause or
for any or no cause, at the option either of the Company or myself, with or
without notice.  My status as an at will employee cannot be changed at any time,
with or without good cause or for any or no cause, at the option either of the
Company or myself, with or without notice.  My status as an at will employee
cannot be changed except through a written agreement signed by the designated
officer of the Company.

 

2.     Confidential Information.

 

(a)   Company Information.  I agree at all times during the term of my
employment and thereafter, to hold in strictest con­fidence, and not to use,
except for the benefit of the Company, or to disclose to any person, firm or
corporation without written authorization of the Board of Directors of the
Company, any Con­fidential Information of the Company.  I understand that
“Confiden­tial Information” means any Company proprietary information, technical
data, trade secrets or know-how, including, but not limited to, research,
product plans, products, services, customer lists and customers (including, but
not limited to, customers of the Company on whom I called or with whom I became
acquainted during the term of my employment), markets, software, developments,
inventions, processes, formulas, technology, designs, drawings, engineering,
hardware configuration information, marketing, finan­ces or other business
information disclosed to me by the Company either directly or indirectly in
writing, orally or by drawings or observation of parts or equipment.  I further
understand that Confidential Information does not include any of the foregoing
items which has become publicly known and made generally available through no
wrongful act of mine or of others who were under con­fidentiality obligations as
to the item or items involved.

 

1

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(b)   Former Employer Information.  I agree that I will not, during my
employment with the Company, improperly use or disclose any proprietary
information or trade secrets of any former or concurrent employer or other
person or entity and that I will not bring onto the premises of the Company any
unpublished document or proprietary information belonging to any such employer,
person or entity unless consented to in writing by such employer, person or
entity.

 

(c)   Third Party Information.  I recognize that the Company has received and in
the future will receive from third parties their confidential or proprietary
information subject to a duty on the Company’s part to maintain the
confidentiality of such information and to use it only for certain limited
purposes.  I agree to hold all such confidential or proprietary information in
the strictest confidence and not to disclose it to any person, firm or
corporation or to use it except as necessary in carrying out my work for the
Company consistent with the Company’s agreement with such third party.

 

2

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3.     Inventions.

 

(a)   Inventions Retained and Licensed.  I have attached hereto, as Exhibit A, a
list describing all inventions, original works of authorship, developments,
improvements, and trade secrets which were made by me prior to my employment
with the Company (collectively referred to as “Prior Inventions”), which belong
to me, which relate to the Company’s proposed business, products or research and
development, and which are not assigned to the Company hereunder; or, if no such
list is attached, I represent that there are no such Prior Inventions.  If in
the course of my employment with the Company, I incorporate into a Company
product, process or machine a Prior Invention owned by me or in which I have an
inter­est, the Company is hereby granted and shall have a nonexclusive,
royalty-free, irrevocable, perpetual, worldwide license to make, have made,
modify, use and sell such Prior Invention as part of or in connection with such
product, process or machine.

 

(b)   Assignment of Inventions. I agree that I will promptly make full written
disclosure to the Company, will hold in trust for the sole right and benefit of
the Company, and hereby assign to the Company, or its designee, all my right,
title, and interest in and to any and all inventions, original works of
authorship, developments, concepts, improvements or trade secrets, whether or
not patentable or registrable under copyright or similar laws, which I may
solely or jointly conceive or develop or reduce to practice, or cause to be
conceived or developed or reduced to practice, during the period of time I am in
the employ of the Company (collectively referred to as “Inventions”), except as
provided in Section 3(f) below.  I further acknowledge that all original works
of authorship which are made by me (solely or jointly with others) within the
scope of and during the period of my employment with the Company and which are
protectible by copy­right are “works made for hire,” as that term is defined in
the United States Copyright Act.

 

 (c)  Inventions Assigned to the United States.  I agree to assign to the United
States government all my right, title, and interest in and to any and all
Inventions whenever such full title is required to be in the United States by a
contract between the Company and the United States or any of its agencies.

 

(d)   Maintenance of Records.  I agree to keep and main­tain adequate and
current written records of all Inventions made by me (solely or jointly with
others) during the term of my employment with the Company.  The records will be
in the form of notes, sketches, drawings, and any other format that may be
specified by the Company.  The records will be available to and remain the sole
property of the Company at all times.

 

(e)   Patent and copyright Registrations.  I agree to assist the Company, or its
designee, at the Company’s expense, in every proper way to secure the Company’s
rights in the Inventions and any copyrights, patents, mask work rights or other
intellectual property rights relating thereto in any and all countries,
includ­ing the disclosure to the Company of all pertinent information and data
with respect thereto, the execution of all applications, specifications, oaths,
assignments and all other instruments which the Company shall deem necessary in
order to apply for and obtain such rights and in order to assign and convey to
the Company, its successors, assigns and nominees the sole and

 

3

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exclusive rights, title and interest in and to such Inventions, and any
copyrights, patents, mask work rights or other intellectual property rights
relating thereto.  I further agree that my obligation to execute or cause to be
executed, when it is in my power to do so, any such instrument or papers shall
continue after the termination of this Agreement.  If the Company is unable
because of my mental or physical incapacity or for any other reason to secure my
signature to apply for or to pursue any application for any United States or
foreign patents or copyright registrations covering Inventions or original works
of authorship assigned to the Company as above, then I hereby irrevocably
designate and appoint the Company and its duly authorized officers and agents as
my agent and attorney in fact, to act for and in my behalf and stead to execute
and file any such applications and to do all other lawfully permitted acts to
further the prosecution and issuance of letters patent or copyright
registrations thereon with the same legal force and effect as if executed by me.

 

 

(f)    Exception to Assignments.  I understand that the provisions of this
Agreement requiring assignment of Inventions to the Company do not apply to any
invention which qualifies fully under the provisions of California Labor Code
Section 2870 (attached hereto as Exhibit B).  I will advise the Company promptly
in writing of any inventions that I believe meet the criteria in California
Labor Code Section 2870 and not otherwise disclosed on Exhibit A.

 

4.     Conflicting Employment.  I agree that, during the term of my employment
with the Company, I will not engage in any other employment, occupation,
consulting or other business activity directly related to the business in which
the Company is now involved or becomes involved during the term of my
employment, nor will I engage in any other activities that conflict with my
obliga­tions to the Company.

 

5.     Returning Company Documents.  I agree that, at the time of leaving the
employ of the Company, I will deliver to the Company (and will not keep in my
possession, recreate or deliver to anyone else) any and all devices, records,
data, notes, reports, pro­posals, lists, correspondence, specifications,
drawings, blue­prints, sketches, materials, equipment, other documents or
pro­perty, or reproductions of any aforementioned items developed by me pursuant
to my employment with the Company or otherwise belonging to the Company, its
successors or assigns.  In the event of the termination of my employment, I
agree to sign and deliver the “Termination Certification” attached hereto as
Exhibit C.

 

6.     Notification to New Employer.  In the event that I leave the employ of
the Company, I hereby grant consent to notification by the Company to my new
employer about my rights and obligations under this Agreement.

 

7.     Solicitation of Employees.  I agree that for a period of twelve (12)
months immediately following the termination of my relationship with the Company
for any reason, whether with or without cause, I shall not either directly or
indirectly solicit, induce, recruit or encourage any of the Company’s employees
to leave their employment, or take away such employees, or attempt to solicit,
induce, recruit, encourage or take away employees of the Company, either for
myself or for any other person or entity.

 

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8.     Conflict of Interest Guidelines.  I agree to diligently adhere to the
Conflict of Interest Guidelines attached as Exhibit D hereto.

 

9.     Representations.  I agree to execute any proper oath or verify any proper
document required to carry out the terms of this Agreement.  I represent that my
performance of all the terms of this Agreement will not breach any agreement to
keep in confidence proprietary information acquired by me in confidence or in
trust prior to my employment by the Company.  I have not entered into, and I
agree I will not enter into, any oral or written agreement in conflict herewith.

 

10.  Arbitration and Equitable Relief.

 

(a)   Arbitration.  Except as provided in Section 10(b) below, I agree that any
dispute or controversy arising out of or relating to my employment with the
Company, or this Agreement including Section 1 hereof, or any matter relating to
Section 1 of this Agreement or the amount of salary compensation, severance or
other similar amount allegedly owing to me shall be settled by arbitration to be
held in San Francisco, California before Judicial Arbitration and Mediation
Service (“JAMS”) before a retired judge under the JAMS Rules. The arbitrator may
grant injunctions or other relief in such dispute or controversy.  The decision
of the arbitrator shall be in writing, final, conclusive and binding on the
parties to the arbitration.  Judgment may be entered on the arbitrator’s
decision in any court having jurisdiction.  The Company and I shall each pay
one-half of the costs and expenses of such arbitration, and each of us shall
separately pay our counsel fees and expenses.

 

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(b)   Equitable Remedies.  I agree that it would be impossible or inadequate to
measure and calculate the Company’s damages from any breach set forth in
Sections 2, 3, 4, 7 and 8 herein.  Accordingly, I agree that the Company will
have available, in addition to any right or remedy available, the right to
obtain an injunction from a court of competent jurisdiction restraining any
breach or threatened breach by me and to specific performance of such provision
of this Agreement.  I hereby consent to the issuance of any such injunction and
to the ordering of specific performance.

 

11.  General Provisions

 

(a)   Governing Law: Consent to Personal Jurisdiction. This Agreement will be
governed by the laws of the State of California. I hereby expressly consent to
the personal juris­diction of the state and federal courts located in California
for any lawsuit filed there against me by the Company arising from or relating
to this Agreement.

 

(b)   Entire Agreement.  This Agreement sets forth the entire agreement and
understanding between the Company and me relating to the subject matter herein
and merges all prior discus­sions between us.  No modification of or amendment
to this Agree­ment, nor any waiver of any rights under this agreement, will be
effective unless in writing signed by the party to be charged.  Any subsequent
change or changes in my duties, salary or compensation will not affect the
validity or scope of this Agreement.

 

(c)   Severability.  If one or more of the provisions in this Agreement are
deemed void by law, then the remaining provi­sions will continue in full force
and effect.

 

(d)   Successors and Assigns.  This Agreement will be binding upon my heirs,
executors, administrators and other legal representatives and will be for the
benefit of the Company, its successors, and its assigns.

 

 

 

Date:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Signature

 

 

 

 

 

 

 

 

 

 

 

 

 

Name of Employee

 

 

 

 

(typed or printed)

 

 

 

 

 

 

 

 

 

Witness

 

 

 

 

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EXHIBIT A

 

 

LIST OF PRIOR INVENTIONS

AND ORIGINAL WORKS OF AUTHORSHIP

 

 

 

 

 

 

 

Identifying Number

Title

 

Date

 

or Brief Description

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

__ No inventions or improvements

 

__ Additional Sheets Attached

 

 

Signature of Employee:  ________________________

 

 

Print Name of Employee: ________________________

 

 

Date: ________________

 

 

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EXHIBIT B

 

 

CALIFORNIA LABOR CODE SECTION 2870

 

EMPLOYMENT AGREEMENTS; ASSIGNMENT OF RIGHTS

 

 

(a)  Any provision in an employment agreement which provides that an employee
shall assign, or offer to assign, any of his or her rights in an invention to
his or her employer shall not apply to an invention that the employee developed
entirely on his or her own time without using the employer’s equipment,
supplies, facili­ties, or trade secret information except for those inventions
that either:

 

        (1)   Relate at the time of conception or reduction to practice of the
invention to the employer’s business, or actual or demonstrably anticipated
research or development of the employer.

 

        (2)   Result from any work performed by the employee for the employer.

 

(b)  To the extent a provision in an employment agreement purports to require an
employee to assign an invention otherwise excluded from being required to be
assigned under subdivision (a), the provision is against the public policy of
this state and is unenforceable.”

 

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EXHIBIT C

 

 

interWAVE Communications Inc.

TERMINATION CERTIFICATION

 

 

 

This is to certify that I do not have in my possession, nor have I failed to
return, any devices, records, data, notes, reports, proposals, lists,
correspondence, specifications, draw­ings, blueprints, sketches, materials,
equipment, other documents or property, or reproductions of any aforementioned
items belonging to interWAVE Communications International, its parent
corporation (interWAVE Communications International Ltd.) subsidiaries,
affiliates, successors or assigns.

 

I further certify that I have complied with all the terms of the Company’s
Proprietary Information Agreement signed by me, including the reporting of any
inventions and original works of authorship (as defined therein), conceived or
made by me (solely or jointly with others) covered by that agreement.

 

I further agree that, in compliance with the Proprietary Information Agreement,
I will preserve as confidential all trade secrets, confidential knowledge, data
or other proprietary information relating to products, processes, know-how,
designs, formulas, developmental or experimental work, computer programs, data
bases, other original works of authorship, customer lists, business plans,
financial information or other subject matter pertaining to any business of the
Company or any of its employees, clients, consultants or licensees.

 

I further agree that for twelve (12) months from this date, I will not directly
or indirectly, for myself or for any other person, firm, or corporation or other
legal entity, solicit any employee or consultant/contractor of the Company to
leave their present employment for the other.

 

 

 

Date:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Employee’s Signature)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Type/Print Employee’s Name)

 

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EXHIBIT D

 

                                                            interWAVE
Communications, Inc.

 

                                                            CONFLICT OF INTEREST
GUIDELINES

 

It is the policy of interWAVE Communications, Inc., its parent corporation
(interWAVE Communications International, Ltd.) and subsidiaries, affiliates,
successors or assigns (together the “Company”) to conduct its affairs in strict
compliance with the letter and spirit of the law and to adhere to the highest
principles of business ethics.  Accordingly, all officers, employees and
independent contractors must avoid activities which are in conflict, or give the
appearance of being in conflict, with these principles and with the interests of
the Company.  The following are potentially compromising situations which must
be avoided.  Any exceptions must be reported to the Chief Executive Officer and
written approval for continuation must be obtained.

 

1.   Revealing confidential information to outsiders or misusing confidential
information.  Unauthorized divulging of information is a violation of this
policy whether or not for personal gain and whether or not harm to the Company
is intended. (The Employment, Confidential Information and Invention Assignment
Agreement elaborates on this principle and is a binding agreement.)

 

2.   Accepting or offering substantial gifts, excessive entertainment, favors or
payments which may be deemed to constitute undue influence or otherwise be
improper or embarrassing to the Company.

 

3.     Participating in civic or professional organizations that might involve
divulging confidential information of the Company.

 

4.   Initiating or approving personnel actions affecting reward or punishment of
employees or applicants where there is a family relationship or is or appears to
be a personal or social involvement.

 

5.     Initiating or approving any form of personal or social harassment of
employees.

 

6.   Investing or holding outside directorships in suppliers, customers or
competing companies, including financial speculation, where such investment or
directorship might influence in any manner a decision or course of action of the
Company.

 

7.     Borrowing from or lending to employees, customers or suppliers.

 

8.     Acquiring real estate of interest to the Company.

 

9.     Improperly using or disclosing to the Company any pro­prietary
information or trade secrets of any former or concurrent employer or other
person or entity with whom obligations of con­fidentiality exist.

 

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10.   Unlawfully discussing prices, costs, customers, sales or markets with
competing companies or their employees.

 

11.   Making any unlawful agreements with distributors with respect to prices.

 

12.   Improperly using or authorizing the use of any inventions which are the
subject of patent claims of any other person or entity.

 

13.   Engaging in any conduct which is not in the best interest of the Company.

 

Each officer, employee and independent contractor must take every necessary
action to ensure compliance with these guidelines and to bring problem areas to
the attention of higher management for review.  Violations of this conflict of
interest policy may result in discharge without warning.

 

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