Exhibit
10.27 AGREEMENT AND PLAN OF MERGER Among EBAY INC., VAQUITA ACQUISITION CORP. and PAYPAL, INC. Dated as of July 7, 2002 
   Table
of Contents  PageARTICLE IThe Merger; Closing; Effective Time1.1.
  The Merger
  21.2.
  Closing
  21.3.
  Effective Time
  2ARTICLE IICertificate of Incorporation and By-Laws of the Surviving Corporation2.1.
  The Certificate of
  Incorporation
  22.2.
  The By-Laws
  3ARTICLE IIIOfficers and Directors of the Surviving Corporation3.1.
  Directors
  33.2.
  Officers
  3ARTICLE IVEffect of the Merger on Capital Stock; Exchange of Certificates4.1.
  Effect
  on Capital Stock
  3(a) Merger Consideration
  3(b) Cancellation of Shares
  4(c) Merger
  Sub
  44.2.
  Exchange of
  Certificates for Shares
  4(a)
  Exchange Agent
  4(b) Exchange Procedures
  4(c) Transfers
  5(d)
  Fractional Shares
  5(e) Termination of
  Exchange Fund
  6(f) Lost,
  Stolen or Destroyed Certificates
  6(g)
  Distributions with Respect to Unexchanged Shares
  6(h)
  Affiliates
  74.3.
  Dissenters
  Rights
  74.4.
  Adjustments to Prevent
  Dilution
  7   -i- 
    ARTICLE VRepresentations and Warranties5.1.
  Representations
  and Warranties of the Company
  7(a)
  Organization, Good Standing and Qualification
  7(b)
  Capital Structure
  8(c)
  Corporate Authority; Approval and Fairness
  9(d)
  Governmental Filings; No Violations; Certain Contracts
  10(e) Company
  Reports; Financial Statements
  11(f) Absence of Certain
  Changes
  11(g) Litigation and
  Liabilities
  12(h)
  Employee Benefits
  12(i) Compliance with
  Laws; Permits
  14(j) Certain Regulatory
  Matters
  14(k)
  Takeover Statutes
  15(l) Environmental Matters
  15(m) Tax
  Matters
  15(n) Taxes
  15(o)
  Labor Matters
  16(p) Insurance
  16(q) Intellectual Property
  17(r) Intercompany
  Restrictions
  20(s) Brokers and Finders
  205.2.
  Representations
  and Warranties of Parent and Merger Sub
  21(a) Capitalization of
  Merger Sub
  21(b)
  Organization, Good Standing and Qualification
  21(c)
  Capital Structure
  22(d) Corporate Authority
  23(e) Governmental
  Filings; No Violations
  23(f) Parent
  Reports; Financial Statements
  24(g) Absence of Certain
  Changes
  24(h) Litigation and
  Liabilities
  24(i) Compliance with Laws
  25(j) Certain Regulatory
  Matters
  25(k) Tax
  Matters
  25(l) Taxes
  26(m) Intellectual Property
  26(n) Brokers and Finders
  28   -ii- 
    ARTICLE VICovenants6.1.
  Interim Operations
  286.2.
  Acquisition
  Proposals
  306.3.
  Information
  Supplied
  316.4.
  Stockholders
  Meeting
  326.5.
  Filings; Other
  Actions; Notification
  326.6.
  Taxation
  356.7.
  Access
  356.8.
  Affiliates
  356.9.
  Nasdaq
  National Market Listing and De-listing
  366.10.
  Publicity
  366.11.
  Benefits
  36(a) Stock Options and
  Warrants
  36(b)
  Benefit Plans
  37(c)
  2001 ESPP and Company 401-K
  386.12.
  Expenses
  386.13.
  Indemnification;
  Directors and Officers Insurance
  386.14.
  Takeover
  Statute
  406.15.
  Retention of Certain
  Employees
  406.16.
  Conduct
  of Merger Sub
  406.17.
  Rule 144
  Reporting
  40ARTICLE VIIConditions7.1.
  Conditions
  to Each Partys Obligation to Effect the Merger
  41(a)
  Stockholder Approval
  41(b) H-S-R
  41(c)
  Litigation
  41(d) S-4
  41(e)
  Blue Sky Approvals
  417.2.
  Conditions
  to Obligations of Parent and Merger Sub
  41(a) Representations and
  Warranties
  41(b)
  Performance of Obligations of the Company
  42(c) Absence of Certain
  Changes
  42(d) Regulatory Consents
  42(e) Tax
  Opinion
  42(f)
  Accountant Letter
  427.3.
  Conditions to
  Obligation of the Company
  43(a) Representations and
  Warranties
  43   -iii- 
    (b)
  Performance of Obligations of Parent and Merger Sub
  43(c) Absence of Certain
  Changes
  43(d) Regulatory Consents
  43(e) Tax
  Opinion
  44(f) Nasdaq National
  Market Listing
  44(g) Accountant Letters
  44ARTICLE VIIITermination8.1.
  Termination by Mutual Consent
  448.2.
  Termination
  by Either Parent or the Company
  448.3.
  Termination by the Company
  458.4.
  Termination
  by Parent
  458.5.
  Effect of
  Termination and Abandonment
  45ARTICLE IXMiscellaneous and General9.1.
  Survival
  479.2.
  Modification or Amendment
  479.3.
  Waiver
  of Conditions
  479.4.
  Counterparts
  479.5.
  GOVERNING
  LAW AND VENUE; WAIVER OF JURY TRIAL
  479.6.
  Notices
  489.7.
  Entire
  Agreement; No Other Representations
  499.8.
  No Third Party
  Beneficiaries
  499.9.
  Obligations
  of Parent and of the Company
  499.10.
  Definitions
  499.11.
  Severability
  499.12.
  Interpretation
  509.13.
  Assignment
  50   -iv- 
   AGREEMENT AND PLAN OF MERGER AGREEMENT AND PLAN OF MERGER (hereinafter called this
Agreement), dated as of
July 7, 2002, among PAYPAL, INC., a Delaware corporation (the Company), EBAY INC., a Delaware
corporation (Parent),
and VAQUITA ACQUISITION CORP., a Delaware corporation and a wholly-owned
subsidiary of Parent (Merger Sub,
with the Company and Merger Sub sometimes being hereinafter collectively
referred to as the Constituent
Corporations). RECITALS WHEREAS, the respective boards of directors of each of
Parent, Merger Sub and the Company have approved the merger of Merger Sub with
and into the Company (the Merger)
and approved the Merger upon the terms and subject to the conditions set forth
in this Agreement; WHEREAS, the respective boards of directors of each of
Parent and the Company have determined that the Merger is advisable and in the
best interests of their respective companies and stockholders and accordingly
have agreed to effect the Merger upon the terms and subject to the conditions
set forth in this Agreement; WHEREAS, it is intended that, for federal income tax
purposes, the Merger shall qualify as a reorganization under the provisions of
Section 368(a) of the Internal Revenue Code of 1986, as amended, and the
rules and regulations promulgated thereunder (the Code); WHEREAS, in order to induce Parent and Merger Sub to
enter into this Agreement, certain stockholders of the Company have each
entered into a Stockholders Agreement with Parent with respect to the approval
of the Merger and certain restrictions on the transfer of securities of the
Company and Parent (collectively, the Stockholders
Agreements); WHEREAS, in order to induce Parent and Merger Sub to
enter into this Agreement, certain officers of the Company are simultaneously
entering into employment, non-compete and non-solicitation agreements with
Parent to become effective at the Effective Time (as defined below)
(collectively, the Employment Agreements);
and WHEREAS, the Company, Parent and Merger Sub desire to
make certain representations, warranties, covenants and agreements in
connection with this Agreement. NOW, THEREFORE, in consideration of the premises, and
of the representations, warranties, covenants and agreements contained herein,
the parties hereto agree as follows:  -1- 
   ARTICLE I The Merger; Closing;
Effective Time 1.1.          The Merger. 
Upon the terms and subject to the conditions set forth in this
Agreement, at the Effective Time (as defined in Section 1.3), Merger Sub
shall be merged with and into the Company and the separate corporate existence
of Merger Sub shall thereupon cease. 
The Company shall be the surviving corporation in the Merger (sometimes
hereinafter referred to as the Surviving
Corporation), and the separate corporate existence of the
Company with all its rights, privileges, immunities, powers and franchises
shall continue unaffected by the Merger, except as set forth in Article
II.  The Merger shall have the effects
specified in the Delaware General Corporation Law, as amended (the DGCL). 1.2.          Closing.  The
closing of the Merger (the Closing)
shall take place (i) at the offices of Sullivan & Cromwell, 1870
Embarcadero Road, Palo Alto, as promptly as practicable (but in no event later
than the fifth business day) after the last to be fulfilled or waived of the
conditions set forth in Article VII (other than those conditions that by their
nature are to be satisfied at the Closing, but subject to the fulfillment or
waiver of those conditions) shall be satisfied or waived in accordance with
this Agreement or (ii) at such other place and time and/or on such other
date as the Company and Parent may agree in writing (the Closing Date). 1.3.          Effective Time.  As of the Closing Date, the Company and Parent will cause a
Certificate of Merger (the Delaware
Certificate of Merger) to be executed, acknowledged and filed
with the Secretary of State of Delaware as provided in Section 251 of the
DGCL.  The Merger shall become effective
at the time when the Delaware Certificate of Merger has been duly filed with
and accepted by the Secretary of State of Delaware (the Effective Time). ARTICLE II Certificate of Incorporation and By-Laws
of the Surviving Corporation 2.1.          The Certificate of Incorporation.  The Amended and Restated Certificate of
Incorporation of the Company as in effect immediately prior to the Effective
Time shall be the certificate of incorporation of the Surviving Corporation
(the Charter), until
duly amended as provided therein or by applicable law, except that
Article IV of the Charter shall be amended to read in its entirety as
follows:  The aggregate number of
shares that the Corporation shall have the authority to issue is 1,000 shares
of Common Stock, par value $1.00 per share.  -2- 
    2.2.          The By-Laws. 
The by-laws of the Company in effect at the Effective Time shall be the
by-laws of the Surviving Corporation (the By-Laws),
until thereafter amended as provided therein or by applicable law. ARTICLE III Officers and Directors
of the Surviving Corporation 3.1.          Directors. 
The directors of Merger Sub at the Effective Time shall, from and after
the Effective Time, be the directors of the Surviving Corporation until their
successors have been duly elected or appointed and qualified or until their
earlier death, resignation or removal in accordance with the Charter and the
By-Laws. 3.2.          Officers. 
The officers of the Company at the Effective Time shall, from and after
the Effective Time, be the officers of the Surviving Corporation until their
successors have been duly elected or appointed and qualified or until their
earlier death, resignation or removal in accordance with the Charter and the
By-Laws. ARTICLE IV Effect of the Merger on Capital Stock;
Exchange of Certificates 4.1.          Effect on Capital Stock.  At the Effective Time, as a result of the
Merger and without any action on the part of Parent, Merger Sub or the Company
or their respective stockholders: (a)           Merger Consideration.  Each share of the Common Stock, par value
$0.001 per share, of the Company (a Share
or, collectively, the Shares)
issued and outstanding immediately prior to the Effective Time (other than
Shares owned by Parent, Merger Sub or any other direct or indirect subsidiary
of Parent (collectively, the Parent
Companies) or Shares that are owned by the Company or any
direct or indirect subsidiary of the Company and in each case not held on
behalf of third parties (each, an Excluded
Share and collectively, Excluded
Shares)) shall be converted into, and become exchangeable for
0.39 shares(the Exchange Ratio), of Common Stock, par
value $0.001 per share, of Parent (Parent
Common Stock).  At the
Effective Time, all Shares shall no longer be outstanding and shall be
automatically cancelled and retired and shall cease to exist, and each
certificate (a Certificate)
formerly representing any of such Shares (other than Excluded Shares) shall
thereafter represent only the right to the merger consideration set forth in
this Section 4.1(a) and the right, if any, to receive pursuant to Section
4.2(d) cash in lieu of fractional shares into which such Shares have been
converted pursuant to this Section 4.1(a).   -3- 
    (b)           Cancellation of Shares.  Each Excluded Share shall, by virtue of the
Merger and without any action on the part of the holder thereof, cease to be
outstanding, shall be automatically cancelled and retired without payment of
any consideration therefor and shall cease to exist. (c)           Merger Sub. 
At the Effective Time, each share of Common Stock, par value $0.001 per
share, of Merger Sub issued and outstanding immediately prior to the Effective
Time shall be converted into one share of Common Stock, par value $0.001 per
share, of the Surviving Corporation. 4.2.          Exchange of Certificates for Shares. (a)           Exchange Agent.  As of the Effective Time, Parent shall deposit, or shall cause to
be deposited, with an exchange agent selected by Parent with the Companys
prior approval, which shall not be unreasonably withheld (the Exchange Agent), for the benefit of
the holders of Shares, certificates representing the shares of Parent Common
Stock and, after the Effective Time, if applicable, any cash to be paid
pursuant to the last sentence of Section 4.1(a) in exchange for Shares
outstanding immediately prior to the Effective Time upon due surrender of the
Certificates (or affidavits of loss in lieu thereof) pursuant to the provisions
of this Article IV.  Parent will
promptly make available to the Exchange Agent as needed any dividends or
distributions with respect to the merger consideration set forth in Section
4.1(a).  Such certificates for shares of
Parent Common Stock, together with any cash, dividends or distributions payable
with respect thereto, being hereinafter referred to as the Exchange Fund. (b)           Exchange Procedures.  Promptly after the Effective Time, Parent
shall cause the Exchange Agent to mail to each holder of record of Shares
(other than holders of Excluded Shares) (i) a letter of transmittal
specifying that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates (or affidavits
of loss in lieu thereof) to the Exchange Agent, such letter of transmittal to
be in such form and have such other provisions as Parent and the Company may
reasonably agree, and (ii) instructions for use in effecting the surrender
of the Certificates in exchange for (A) certificates representing shares
of Parent Common Stock, (B) any cash in lieu of fractional shares and
(C) any unpaid dividends and distributions as contemplated by this Article
IV.  Subject to Section 4.2(h), upon
surrender of a Certificate for cancellation to the Exchange Agent together with
such letter of transmittal, duly executed, the holder of such Certificate shall
be entitled to receive in exchange therefor (x) a certificate representing
that number of whole shares of Parent Common Stock that such holder is entitled
to receive pursuant to this Article IV, (y) a check in the amount
(after giving effect to any required tax withholdings) of any cash in lieu of
fractional shares and (z) any unpaid dividends and distributions as
contemplated by this Article IV, and the Certificate so surrendered shall
forthwith be cancelled.  No interest
will be paid or accrued on any amount payable upon due surrender of the
Certificates.  In the event of a
transfer of ownership of Shares that is not registered in the transfer records
of the Company, a certificate representing the proper number of shares of
Parent   -4- 
   Common Stock, together with a check for any cash to be
paid upon due surrender of the Certificate may be issued and/or paid to such a
transferee if the Certificate formerly representing such Shares is presented to
the Exchange Agent, accompanied by all documents required to evidence and
effect such transfer and to evidence that any applicable stock transfer taxes
have been paid.  If any certificate for
shares of Parent Common Stock is to be issued in a name other than that in
which the Certificate surrendered in exchange therefor is registered, it shall
be a condition of such exchange that the Person (as defined below) requesting
such exchange shall pay any transfer or other taxes required by reason of the
issuance of certificates for shares of Parent Common Stock in a name other than
that of the registered holder of the Certificate surrendered, or shall
establish to the satisfaction of Parent or the Exchange Agent that such tax has
been paid or is not applicable. For the purposes of this Agreement, the term Person shall mean any individual,
corporation (including not-for-profit), general or limited partnership, limited
liability company, joint venture, estate, trust, association, organization,
Governmental Entity (as defined in Section 5.1(d)) or other entity of any
kind or nature. (c)           Transfers. 
After the Effective Time, there shall be no transfers on the stock
transfer books of the Company of the Shares that were outstanding immediately
prior to the Effective Time. (d)           Fractional Shares.  Notwithstanding any other provision of this
Agreement, no fractional shares of Parent Common Stock will be issued and any
holder of Shares entitled to receive a fractional share of Parent Common Stock
but for this Section 4.2(d) shall be entitled to receive a cash payment in
lieu thereof in accordance with the terms of this Section 4.2(d).  As promptly as practicable following the
Effective Time, the Exchange Agent shall determine the excess of (i) the number
of full shares of Parent Common Stock delivered to the Exchange Agent pursuant
to Section 4.2(a), over (ii) the aggregate number of full shares of Parent
Common Stock to be distributed to holders of Company Common Stock pursuant to
Section 4.2(b) (such excess, the Excess
Shares).  Following the
Effective Time, the Exchange Agent, as agent for the holders of Company Common
Stock, shall sell the Excess Shares at then prevailing prices on the Nasdaq
National Market.  The Exchange Agent
shall use all commercially reasonable efforts to complete the sale of the
Excess Shares as promptly following the Effective Time as, in the Exchange
Agents reasonable judgment, is practicable consistent with obtaining the best
execution of such sales in light of prevailing market conditions.  The Exchange Agent shall determine the
portion of such net proceeds to which each holder of Company Common Stock shall
be entitled, if any, by multiplying the amount of the aggregate net proceeds by
a fraction the numerator of which is the amount of the fractional share
interest to which such holder of Company Common Stock is entitled (after
aggregating all shares of Parent Common Stock to be issued to such holder) and
the denominator of which is the aggregate amount of fractional share interests
to which all holders of Company Common Stock are entitled.  As soon as practicable after the
determination of the amount of cash, if any, to be paid to holders of Company
Common   -5- 
    Stock with respect to fractional share interests, the
Exchange Agent shall promptly pay such amounts to such holders of Company
Common Stock in accordance with the terms of Section 4.2(b). (e)           Termination of Exchange Fund.  Any portion of the Exchange Fund (including
any Parent Common Stock) that remains unclaimed by the stockholders of the
Company for 180 days after the Effective Time shall be paid to Parent.  Any stockholders of the Company who have not
theretofore complied with this Article IV shall thereafter look only to Parent
for payment of their shares of Parent Common Stock and any cash payable
pursuant to Sections 4.1 or 4.2 upon due surrender of their Certificates (or
affidavits of loss in lieu thereof), in each case, without any interest
thereon.  Notwithstanding the foregoing,
none of Parent, the Surviving Corporation, the Exchange Agent or any other
Person shall be liable to any former holder of Shares for any amount properly
delivered to a public official pursuant to applicable abandoned property,
escheat or similar laws. (f)            Lost, Stolen or Destroyed Certificates.  In the event any Certificate shall have been
lost, stolen or destroyed, upon the making of an affidavit of that fact by the
Person claiming such Certificate to be lost, stolen or destroyed and, if
required by Parent, the posting by such Person of a bond in customary amount as
indemnity against any claim that may be made against it with respect to such
Certificate, the Exchange Agent will issue in exchange for such lost, stolen or
destroyed Certificate the shares of Parent Common Stock and any cash payable
upon due surrender of and deliverable in respect of the Shares represented by
such Certificate pursuant to this Agreement. (g)           Distributions with Respect to
Unexchanged Shares.  Whenever a
dividend or other distribution is declared by Parent in respect of Parent
Common Stock, the record date for which is on or after the date of the
Effective Time, that declaration shall include such dividends or other
distributions in respect of all Parent Common Stock issued or issuable pursuant
to Section 4.1(a). No dividends or other distributions declared on or after the
date of the Effective Time, or made on or after the date of the Effective Time
with a record date on or after the date of the Effective Time, with respect to
Parent Common Stock issued or issuable in connection with this Agreement shall
be paid to the holder of any unsurrendered Certificate, and as well no merger
consideration shall be paid to any such holder, until such Certificate is
surrendered as provided in this Article IV. 
Promptly following the proper surrender of a Certificate, there shall be
paid, without interest, to the Person in whose name Parent Common Stock have
been or will be registered (if and to the extent Parent Common Stock are
payable in respect of such Certificate) any dividends or other distributions
with a record date on or after the date of the Effective Time and which have
then been previously paid, with respect to the number of whole Parent Common
Stock registered in the name of such Person, less the amount of any withholding
taxes that may be required thereon. 
There shall also be paid to the holders of Parent Common Stock issued in
the Merger any dividends or other distributions with (i) a record date on
or after the date of the Effective Time but prior to the issuance of the
respective Parent Common Stock and (ii) a payment date subsequent  -6- 
    to the issuance of the respective Parent Common Stock,
at the appropriate payment date for such dividend or other distribution, less
the amount of any withholding taxes which may be required thereon. (h)           Affiliates. 
Notwithstanding anything herein to the contrary, Certificates
surrendered for exchange by any affiliate (as determined pursuant to
Section 6.8) of the Company shall not be exchanged until Parent has
received a written agreement from such Person as provided in Section 6.8
hereof. 4.3.          Dissenters Rights.  In accordance with Section 262 of the
DGCL, no appraisal rights shall be available to holders of Shares in connection
with the Merger. 4.4.          Adjustments to Prevent Dilution.  In the event that the Company changes the
number of Shares or securities convertible or exchangeable into or exercisable
for Shares, or Parent changes the number of shares of Parent Common Stock or
securities convertible or exchangeable into or exercisable for shares of Parent
Common Stock, issued and outstanding prior to the Effective Time as a result of
a reclassification, stock split (including a reverse split), stock dividend or
distribution, recapitalization, merger, subdivision, issuer tender or exchange
offer, or other similar transaction, the Exchange Ratio shall be equitably
adjusted as Parent and the Company shall mutually agree (such agreement not to
be unreasonably withheld or delayed) so as to preserve the economic benefits
that Parent and the Company reasonably expected on the date of this Agreement
to receive as a result of the consummation of the Merger and the other
transactions contemplated by this Agreement. ARTICLE V Representations and Warranties 5.1.          Representations and Warranties of
the Company.  Except as set
forth in the disclosure letter delivered to Parent by the Company that is
attached to this Agreement (the Company
Disclosure Letter) (any matter disclosed in a section or
subsection of the Company Disclosure Letter shall qualify the correspondingly
numbered representation, warranty and covenant of this Agreement and all other
representations, warranties and covenants of the Company in this Agreement
regardless of whether such matter is specifically cross referenced in such
section or subsection so long as the disclosure of such matter is sufficient as
to make its relevance to such other representation, warranty and covenant
readily apparent), the Company hereby represents and warrants to Parent and
Merger Sub that: (a)           Organization, Good Standing and
Qualification.  Each of the
Company and its Subsidiaries has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the jurisdiction in which
it is chartered or organized with full corporate power and authority to own or
lease, as the case may be, and to operate its properties and conduct its
business as presently conducted, and is duly  -7- 
    qualified to do business as a foreign corporation and
is in good standing under the laws of each jurisdiction which requires such
qualification except where failure to so qualify or to be in good standing is
not reasonably likely to have, individually or in the aggregate, a Company
Material Adverse Effect (as defined below). 
The Company has made available to Parent a complete and correct copy of
the Companys and its Subsidiaries certificates of incorporation and by-laws,
each as amended to date.  The Companys
and its Subsidiaries certificates of incorporation and by-laws so made
available are in full force and effect. 
Section 5.1(a) of the Company Disclosure Letter contains a correct and
complete list of each jurisdiction where the Company and each of its
Subsidiaries is organized and qualified to do business. As used in this Agreement, the term (i) Subsidiary means, with respect to the
Company, Parent or Merger Sub, as the case may be, any entity, whether
incorporated or unincorporated, of which at least a majority of the securities
or ownership interests having by their terms ordinary voting power to elect a
majority of the board of directors or other persons performing similar
functions is directly or indirectly owned or controlled by such party or by one
or more of its respective Subsidiaries or by such party and any one or more of
its respective Subsidiaries and (ii) Company
Material Adverse Effect means (x) a material adverse
effect on the condition (financial or otherwise), prospects, business or
results of operations of the Company and its Subsidiaries taken as a whole or
(y) an effect that could prevent or materially burden or materially impair
the ability of the Company to consummate the transactions contemplated by this
Agreement; provided, however, that the following shall be
excluded from the definition of Company Material Adverse Effect and from the
determination of whether such a Company Material Adverse Effect has occurred:
(a) the effects of conditions or events resulting from general financial,
political, economic or market conditions (including the suspension of trading
in securities on the Nasdaq National Market); (b) any change in the
trading prices or volumes of the capital stock of the Company; (c) the
effects of conditions or events resulting from an outbreak or escalation of
hostilities involving the United States or the declaration by the United States
of a national emergency or war or the occurrence of any other calamity or
crisis, including the occurrence of a terrorist attack; (d) any change
resulting from the entry into this Agreement or the announcement of the
transactions contemplated by this Agreement or the performance of this
Agreement and the covenants set forth herein; and (e) any change resulting
from the actions of Parent. (b)           Capital Structure.  The authorized capital stock of the Company
consists of 150,000,000 Shares, of which 60,646,087 Shares were outstanding as
of the close of business on July 5, 2002, and 10,000,000 shares of
Preferred Stock, par value $0.001 per share (the Preferred Shares), none of which were outstanding as of
the close of business on the date hereof. 
All of the outstanding Shares have been duly authorized and are validly
issued, fully paid and nonassessable. 
The Company has no Shares or Preferred Shares reserved for issuance,
except that, as of the date hereof, there were (i) 9,500,000 Shares
reserved for issuance pursuant to the Companys 2001 Equity Incentive Plan (the
2001 Equity Incentive Plan)
and options with respect to 4,591,338  -8- 
    Shares are currently outstanding under the 2001 Equity
Incentive Plan, (ii) 625,000 Shares reserved for issuance pursuant to the
Amended and Restated Company 2001 Employee Stock Purchase Plan (the 2001 ESPP) and no options with
respect to Shares are currently outstanding under the 2001 ESPP,
(iii) 4,677,733 Shares reserved for issuance pursuant to the X.com
Corporation 1999 Stock Plan (the X.com
1999 Stock Plan) and options with respect to 1,503,567 Shares
are currently outstanding under the X.com 1999 Stock Plan, (iv) 1,207,583
Shares reserved for issuance pursuant to the Confinity, Inc. 1999 Stock Plan
(the Confinity 1999 Plan
and, together with the 2001 Equity Incentive Plan, the 2001 ESPP and the X.com
1999 Stock Plan, the Stock Plans)
and options with respect to 282,633 Shares are currently outstanding under the
Confinity 1999 Plan, and (v) 125,000 Shares were reserved for issuance
pursuant to warrants issued by the Company (the Company Warrants). 
The Company Disclosure Letter contains a correct and complete list of
each outstanding (i) option to purchase Shares under the Stock Plans or
otherwise (each a Company Option),
including the holder, date of grant, exercise price and number of Shares
subject thereto and the Stock Plan under which it is issued, (ii) Share of
restricted stock which is still subject to vesting, repurchase or forfeiture,
including the holder, date of grant, vesting schedule and the Stock Plan under
which it was issued and (iii) Company Warrant, including the holder, date
of grant, exercise price and number of Shares subject thereto.  Each of the outstanding shares of capital
stock or other securities of each of the Companys Subsidiaries is duly
authorized, validly issued, fully paid and nonassessable and owned by the
Company or a direct or indirect wholly-owned subsidiary of the Company, free
and clear of any lien, pledge, security interest, claim or other
encumbrance.  Except as set forth above,
as of the date hereof, there are no preemptive or other outstanding rights,
options, warrants, conversion rights, stock appreciation rights, redemption
rights, repurchase rights, agreements, arrangements, calls, commitments or
rights of any kind that obligate the Company or any of its Subsidiaries to
issue or sell any shares of capital stock or other securities of the Company or
any of its Subsidiaries or any securities or obligations convertible or
exchangeable into or exercisable for, or giving any Person a right to subscribe
for or acquire, any securities of the Company or any of its Subsidiaries, and
no securities or obligations evidencing such rights are authorized, issued or
outstanding.  The Company does not have
outstanding any bonds, debentures, notes or other obligations the holders of
which have the right to vote (or convertible into or exercisable for securities
having the right to vote) with the stockholders of the Company on any matter (Voting Debt). (c)           Corporate Authority; Approval and
Fairness.  (i)  The Company has all requisite corporate
power and authority and has taken all corporate action necessary in order to
execute, deliver and perform its obligations under this Agreement and to
consummate, subject only to approval of this Agreement by the holders of a
majority of the outstanding Shares (the Company
Requisite Vote), the Merger. 
This Agreement is a valid and binding agreement of the Company
enforceable against the Company in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors
rights and to general equity principles (the Bankruptcy and Equity Exception).   -9- 
    (ii)           The
Board of Directors of the Company (A) has approved this Agreement and the
Merger and the other transactions contemplated hereby and (B) has received
the opinion of its financial advisor, Morgan Stanley & Co., to the effect
that the Exchange Ratio pursuant to this Agreement is fair from a financial
point of view to holders of the Shares (other than Parent and its Affiliates
(as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended
(the Exchange Act))), a
copy of which opinion has been delivered to Parent. (d)           Governmental Filings; No Violations;
Certain Contracts. 
(i)  Other than the filings and/or notices (A) pursuant
to Section 1.3, (B) under the Hart-Scott-Rodino Antitrust Improvement
Act of 1976, as amended (the HSR Act),
the Exchange Act and the Securities Act of 1933, as amended (the Securities Act), (C) to comply with
state securities or blue-sky laws, (D) required to be made with the
Nasdaq National Market and (E) to comply with foreign antitrust and unfair competition
laws, no notices, reports or other filings are required to be made by the
Company with, nor are any consents, registrations, approvals, permits or
authorizations required to be obtained by the Company from, any governmental or
regulatory authority, agency, commission, body or other governmental entity,
whether federal, state, local or foreign (Governmental
Entity), in connection with the execution and delivery of this
Agreement by the Company and the consummation by the Company of the Merger and
the other transactions contemplated. 
Neither Parent nor Merger Sub is, or will be, required to make any
filings and/or notices to comply with state bill payer, cash checker, money
transmitter or similar laws in connection with this Agreement and the transactions
contemplated hereby. (ii)           The
execution, delivery and performance of this Agreement by the Company do not,
and the consummation by the Company of the Merger and the other transactions
contemplated hereby will not, conflict with, result in a breach or violation or
imposition of any lien, charge or encumbrance upon any property or assets of
the Company or any of its Subsidiaries pursuant to (A) the certificate of
incorporation or by-laws of the Company or any of its Subsidiaries,
(B) the terms of any indenture, contract, lease, mortgage, deed of trust,
note agreement, loan agreement or other agreement, obligation, condition,
covenant or instrument pursuant to the terms of which there are obligations or
commitments or consideration by any party thereto valued in excess of $250,000
in any year or in excess of $500,000 during the initial term thereof
(collectively, Material Contracts)
to which the Company or any of its Subsidiaries is a party or bound or to which
its or their property is subject, or (C) any material Law applicable to
the Company or any of its Subsidiaries of any court, Governmental Entity,
arbitrator or other authority having jurisdiction over the Company or any of
its Subsidiaries or any of its or their properties.  Laws shall
mean any statute, law, rule, regulation, judgment, order or decree.  Section 5.1(d) of the Company
Disclosure Letter sets forth a correct and complete list of Material Contracts
of the Company and its Subsidiaries pursuant to which consents or waivers are
or may be required prior to consummation of the transactions contemplated by
this Agreement.  Each of the Material  -10- 
    Contracts of the Company and its Subsidiaries is in
full force and effect and enforceable in accordance with its terms, subject to
the Bankruptcy and Equity Exception. (iii)          Neither
the Company nor any of its Subsidiaries is a party to or bound by any
non-competition contract or other indenture, contract, lease, mortgage, deed of
trust, note agreement, loan agreement or other agreement, obligation,
condition, covenant or instrument (collectively, Contracts) that purports to limit in any respect either
the type of business in which the Company or its Subsidiaries (or, after giving
effect to the Merger, the Parent or its Subsidiaries) may engage or the manner
or locations in which any of them may so engage in any business. (e)           Company Reports; Financial
Statements.  The Company has
made available to the Parent each registration statement, report, proxy
statement or information statement prepared by it since February 14, 2002,
including the Companys Annual Report on Form 10-K for the year ended
December 31, 2001 in the form (including exhibits, annexes and any amendments
thereto) filed with the Securities and Exchange Commission (the SEC) (collectively, including any
such reports filed subsequent to the date hereof and as amended, the Company Reports).  As of their respective dates, (or, if
amended, as of the date of such amendment) the Company Reports did not, and any
Company Reports filed with the SEC subsequent to the date hereof will not, as
of their respective dates, contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to
make the statements made therein, in light of the circumstances in which they
were made, not misleading.  Each of the
consolidated balance sheets included in or incorporated by reference into the
Company Reports (including the related notes and schedules) fairly presents in
all material respects, or will fairly present in all material respects, the
consolidated financial position of the Company and its Subsidiaries as of its
date and each of the consolidated statements of operations and statements of cash
flows included in or incorporated by reference into the Company Reports
(including any related notes and schedules) fairly presents in all material
respects, or will fairly present in all material respects, the results of
operations and cash flows, as the case may be, of the Company and its
Subsidiaries for the periods set forth therein (subject, in the case of
unaudited statements, to notes and normal year-end audit adjustments that will
not be material in amount or effect), in each case in accordance with generally
accepted accounting principles (GAAP)
consistently applied during the periods involved, except as may be noted
therein. (f)            Absence of Certain Changes.  Except as disclosed in the Company Reports,
since December 31, 2001 (the Audit Date)
through the date hereof the Company and its Subsidiaries have conducted their
respective businesses only in, and have not engaged in any material transaction
other than according to, the ordinary and usual course of such businesses.  Except as disclosed in the Company Reports,
since the Audit Date there has not been (i) a Company Material Adverse
Effect or any development or combination of developments of which management of
the Company has knowledge that, individually or in the aggregate, has had or is
reasonably likely to have a Company Material Adverse Effect; (ii) any material
damage, destruction or other casualty  -11- 
    loss with respect to any material asset or property
owned, leased or otherwise used by the Company or any of its Subsidiaries,
whether or not covered by insurance; (iii) any declaration, setting aside
or payment of any dividend or other distribution in cash, stock or property in
respect of the capital stock of the Company; or (iv) any change by the
Company in accounting principles, practices or methods.  Since the Audit Date, except as provided for
herein or as disclosed in the Company Reports, there has not been any increase
in the compensation payable or that could become payable by the Company or any
of its Subsidiaries to officers or key employees or any amendment of any of the
Compensation and Benefit Plans (except for increases in salary, wages, bonuses
or other compensation of non-executive employees made in the ordinary course of
business consistent with past practice). (g)           Litigation and Liabilities.  Except as disclosed in the Company Reports
filed prior to the date hereof and except for liabilities or obligations
reflected or reserved against in the most recent consolidated balance sheet of
the Company included in the Company Reports, there are no (i) material
civil, criminal or administrative actions, suits, claims, hearings,
investigations or proceedings pending or, to the knowledge of the officers of
the Company, threatened against the Company or any of its affiliates or
(ii) material obligations or liabilities, whether or not accrued,
contingent or otherwise and whether or not required to be disclosed, including
those relating to matters involving any environmental and occupational safety
and health matters, or any other facts or circumstances of which the officers
of the Company has knowledge that are reasonably likely to result in any
material claims against, or obligations or liabilities of, the Company or any
of its Affiliates, except in the case of (i) and (ii) those arising in the
ordinary course of business consistent with past practice. (h)           Employee Benefits.  (i) All benefit and compensation plans,
contracts, policies or arrangements covering current or former employees of the
Company and its Subsidiaries (the Employees)
and current or former directors of the Company and its Subsidiaries, including,
but not limited to, employee benefit plans within the meaning of Section 3(3)
of the Employee Retirement Income Security Act of 1974, as amended (ERISA), and deferred compensation,
stock option, stock purchase, stock appreciation rights, stock based, incentive
and bonus plans, (the Benefit Plans)
are listed in Section 5.1(h) of the Company Disclosure Letter.  True and complete copies of all Benefit
Plans listed in Section 5.1 of the Company Disclosure Letter, including, but
not limited to, any trust instruments and insurance contracts forming a part of
any Benefit Plans, and all amendments thereto have been provided or made
available to Parent. (ii)           All
Benefit Plans covering Employees which are subject to ERISA (the ERISA Plans) are in compliance in all
material respects with ERISA.  Each
ERISA Plan which is an employee pension benefit plan within the meaning of
Section 3(2) of ERISA (Pension Plan)
and which is intended to be qualified under Section 401(a) of the Code has
received or will timely file for a favorable determination letter from the
Internal Revenue Service (the IRS),
and the Company is not aware of any circumstances likely to result in
revocation of any such favorable determination letter or  -12- 
    the loss
of the qualification of such Plan under Section 401(a) of the Code.  Neither the Company nor any of its
Subsidiaries has engaged in a transaction with respect to any ERISA Plan that,
assuming the taxable period of such transaction expired as of the date hereof,
could subject the Company or any Subsidiary to a tax or penalty imposed by
either Section 4975 of the Code or Section 502(i) of ERISA in an
amount which would be material. (iii)          Neither
the Company, nor any of its Subsidiaries nor any entity which is considered one
employer with the Company under Section 4001 of ERISA or Section 414 of the
Code (an ERISA Affiliate)
(x) maintains or contributes to or has within the past six years maintained or
contributed to a Pension Plan that is subject to Subtitles C or D of Title IV
of ERISA or (y) maintains or has an obligation to contribute to or has within
the past six years maintained or had an obligation to contribute to a
multiemployer plan within the meaning of Section 3(37) of ERISA.  All contributions required to be made under
the terms of any Benefit Plan have been timely made or have been reflected in
the Companys audited financial statements. 
No Pension Plan has an accumulated funding deficiency (whether or not
waived) within the meaning of Section 412 of the Code or Section 302
of ERISA. (iv)          There
is no material pending or, to the knowledge of the Company threatened,
litigation relating to the Benefit Plans. (v)           Since
the Audit Date, there has been no amendment to, announcement by the Company or
any of its Subsidiaries relating to, or change in employee participation or
coverage under, any Benefit Plan which would increase materially the expense of
maintaining such Plan above the level of the expense incurred therefor for the
most recent fiscal year, except for increases directly resulting from an
increase in the number of persons employed by the Company or its Subsidiaries
or promotions of existing employees in the ordinary course of business
consistent with past practice.  Except
as specifically noted in Section 5.1(h) of the Company Disclosure Letter,
neither the execution of this Agreement, stockholder approval of this Agreement
nor the consummation of the transactions contemplated hereby will (v) entitle
any employees of the Company or any of its Subsidiaries to severance pay or any
increase in severance pay upon any termination of employment after the date
hereof, (w) accelerate the time of payment or vesting or result in any payment
or funding (through a grantor trust or otherwise) of compensation or benefits
under, result in the acceleration or lapse of any repurchase right, increase the
amount payable or result in any other material obligation pursuant to, any of
the Benefit Plans, (x) limit or restrict the right of the Company or, after the
consummation of the transactions contemplated hereby, Parent to merge, amend or
terminate any of the Benefit Plans, (y) cause the Company or any of its
Subsidiaries or, after the consummation of the transactions contemplated
hereby, Parent to record additional compensation expense on its income
statement with respect to any outstanding stock option or other equity-based
award or (z) result in payments under any of the Benefit Plans which would not
be deductible under Section 162(m) or Section 280G of the Code.  -13- 
    (vi)          All
Benefit Plans maintained outside of the United States comply in all material
respects with applicable local law. (i)Compliance with Laws; Permits.Neither the
Company nor any of its Subsidiaries is in material violation or default of
(i) any provision of its certificate or by-laws, (ii) the terms of
any Material Contract to which it is a party or bound or to which its property
is subject, (iii) the terms of any Contract to which it is a party or bound or
to which its property is subject which violation or default, when taken together
with all other such violations and defaults, could be considered material to
the Company and its Subsidiaries or (iv) any material Laws of any court,
Governmental Entity, arbitrator or other authority having jurisdiction over the
Company or such Subsidiary or any of its properties, as applicable.  No material action, suit or proceeding by or
before any court, Governmental Entity or any arbitrator involving the Company
or any of its Subsidiaries or its or their property is pending or, to the best
knowledge of the officers of the Company, threatened.  The Company and its Subsidiaries possess or have applied for all
material licenses, certificates, permits and other authorizations from or of
the appropriate Governmental Entity necessary to conduct their respective
businesses, other than any such license, certificate, permit or other
authorization required in connection with the consummation of the transactions
contemplated by this Agreement, and neither the Company nor any such Subsidiary
has received any notice of proceedings relating to the revocation or
modification of any such license, certificate, permit or authorization. (j)            Certain Regulatory Matters.  (i) 
The Company and its Subsidiaries (A) are in compliance in all
material respects with any and all material Laws relating to the banking,
investment adviser, broker-dealer, trust, custody and escrow businesses, the
business of money transmission, or other payment services businesses and the
rights of consumers who use the services of such businesses (Regulatory Laws) and (B) are in
material compliance with all terms and conditions of any such material
licenses, certificates, permits or approvals required of them under applicable
Regulatory Laws to conduct their respective businesses.  Neither the Company nor any of its
Subsidiaries is required to register as a bank holding company under the Bank
Holding Company Act of 1956, as amended, nor is the Company or any of its
Subsidiaries required to obtain deposit insurance from the Federal Deposit
Insurance Corporation for any of their accounts or services. (ii)           None
of the Company and its Subsidiaries is subject to any order or action, and none
has been threatened with any action by any Government Entity concerning its
compliance with applicable Regulatory Laws (including, but not limited to, the
failure to obtain any license, certificate, permit or approval, or to comply
with the terms thereof). (iii)          PayPal
Asset Management, Inc. (the Asset
Management Company) (A) has duly registered with the SEC
as an investment adviser as such term is defined in the Investment Advisers
Act of 1940, as amended (the Advisers
Act), such registration is in effect and no order or other
regulatory action has been threatened by the  -14- 
    SEC that concerns the effectiveness of such
registration or the Asset Management Companys compliance with the Advisers Act
or applicable regulations thereunder and (B) the Asset Management Company
has taken all actions required to maintain the effectiveness of that
registration.  No other Subsidiary of
the Company is required to be registered as an investment adviser under the
Advisers Act.  Neither the Company nor
any of its Subsidiaries, wherever located, is a broker (as defined in Section 3(a)(4)
of the Exchange Act) or a dealer (as defined in Section 3(a)(5) of the Exchange
Act) or is registered or required to be registered as a broker or a dealer
under Section 15(b) the Exchange Act or under the Laws of any State in the
United States of America or the District of Columbia. (k)Takeover Statutes.No fair price, moratorium, control
share acquisition or other similar anti-takeover statute or regulation
(including Section 203 of the DGCL) (each a Takeover Statute) or any anti-takeover provision in the
Companys certificate of incorporation and by-laws is, or at the Effective Time
will be, applicable to the Company, the Shares, the Merger or the other
transactions contemplated by this Agreement. 
The Board of Directors of the Company has taken all action so that
Parent will not be prohibited from entering into a business combination with
the Company as an interested stockholder (in each case as such term is used
in Section 203 of the DGCL) as a result of the execution of this Agreement,
or the consummation of the transactions contemplated hereby. (l)            Environmental Matters.  The Company and its Subsidiaries are
(i) in compliance with any and all applicable foreign, federal, state and
local laws and regulations relating to the protection of human health and
safety, the environment or hazardous or toxic substances or wastes, pollutants
or contaminants (Environmental Laws),
(ii) have received and are in compliance with all permits, licenses or
other approvals required of them under applicable Environmental Laws to conduct
their respective businesses and (iii) have not received notice of any
actual or potential liability for the investigation or remediation of any
disposal or release of hazardous or toxic substances or wastes, pollutants or
contaminants, except as is not reasonably likely to have, individually or in
the aggregate, a Company Material Adverse Effect.  Neither the Company nor any of its Subsidiaries has been named as
a potentially responsible party under the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended. (m)          Tax Matters. 
As of the date hereof, neither the Company nor any of its Affiliates has
taken or agreed to take any action, nor do the officers of the Company have any
knowledge of any fact or circumstance, that would prevent the Merger and the
other transactions contemplated by this Agreement from qualifying as a
reorganization within the meaning of Section 368(a) of the Code. (n)           Taxes.  The Company and each of its Subsidiaries
(i) have prepared in good faith and duly and timely filed (taking into
account any extension of time within which to file) all Tax Returns (as defined
below) required to be filed by any  -15- 
    of them and all such filed Tax Returns are complete
and accurate in all material respects; (ii) have paid all Taxes (as
defined below) that are required to be paid or that the Company or any of its
Subsidiaries are obligated to withhold from amounts owing to any employee,
creditor or third party, except with respect to matters contested in good
faith; and (iii) have not waived any statute of limitations with respect
to Taxes or agreed to any extension of time with respect to a Tax assessment or
deficiency.  As of the date hereof,
there are not pending or, to the knowledge of the officers of the Company,
threatened in writing, any audits, examinations, investigations or other
proceedings in respect of Taxes or Tax matters.  There are not, to the knowledge of the officers of the Company,
any unresolved questions or claims concerning the Companys or any of its
Subsidiaries Tax liability that are reasonably likely to have, individually or
in the aggregate, a Company Material Adverse Effect.  The Company has made available to Parent true and correct copies
of the United States federal income Tax Returns filed by the Company and its
Subsidiaries for each of the fiscal years ended December 31, 2001, 2000 and
1999.  Neither the Company nor any of
its Subsidiaries has any liability with respect to income, franchise or similar
Taxes that accrued on or before December 31, 1999 in excess of the amounts
accrued with respect thereto that are reflected in the financial statements
included in the Company Reports filed on or prior to the date hereof. As used in this Agreement, (i) the term Tax (including, with correlative
meaning, the terms Taxes,
and Taxable) includes
all federal, state, local and foreign income, profits, franchise, gross
receipts, environmental, customs duty, capital stock, severances, stamp,
payroll, sales, employment, unemployment, disability, use, property,
withholding, excise, production, value added, occupancy and other taxes, duties
or assessments of any nature whatsoever, together with all interest, penalties
and additions imposed with respect to such amounts and any interest in respect
of such penalties and additions, and (ii) the term Tax Return includes all returns and
reports (including elections, declarations, disclosures, schedules, estimates
and information returns) required to be supplied to a Tax authority relating to
Taxes. (o)           Labor Matters. 
No material labor problem or dispute with the employees of the Company
or any of its Subsidiaries exists or, to the knowledge of the officers of the
Company, is threatened or imminent. 
Neither the Company nor any of its Subsidiaries is a party to or
otherwise bound by any collective bargaining agreement, contract or other
agreement or understanding with a labor union or labor organization, nor is the
Company or any of its Subsidiaries the subject of any material proceeding
asserting that the Company or any of its Subsidiaries has committed an unfair
labor practice or is seeking to compel it to bargain with any labor union or
labor organization nor is there pending or, to the knowledge of the officers of
the Company, threatened, nor has there been since inception of the Company, any
labor strike, dispute, walk-out, work stoppage, slow-down or lockout involving
the Company or any of its Subsidiaries. (p)           Insurance. 
The Company and each of its Subsidiaries are insured by insurers of
recognized financial responsibility against such losses and risks and in such
amounts as are commercially reasonable in the businesses in which they are  -16- 
    engaged; all policies of insurance insuring the
Company or any of its Subsidiaries or their respective businesses, assets,
employees, officers and directors are in full force and effect; the Company and
its Subsidiaries are in compliance with the terms of such policies and
instruments in all material respects; and there are no claims by the Company or
any of its Subsidiaries under any such policy or instrument as to which any
insurance company is denying liability or defending under a reservation of
rights clause; neither the Company nor any such Subsidiary has been refused any
insurance coverage sought or applied for; and neither the Company nor any such
Subsidiary has any reason to believe that it will not be able to renew its existing
insurance coverage as and when such coverage expires or to obtain similar
coverage from similar insurers as may be necessary to continue its business at
a cost that is not materially higher than its current cost. (q)           Intellectual Property.  The following terms have the following
meanings as used in this Section 5.1(q). Business Intellectual Property means
the Owned Intellectual Property and the Licensed Intellectual Property.  Intellectual Property means all
foreign and domestic rights in and to (i) trademarks, service marks, brand
names, certification marks, collective marks, d/b/as, Internet domain names,
logos, symbols, trade dress, assumed names, fictitious names, trade names, and
other indicia of origin, all applications and registrations for the foregoing,
and all goodwill associated therewith and symbolized thereby, including all
renewals of same (collectively, Trademarks);
(ii) inventions and discoveries, whether patentable or not, and all
patents, registrations, invention disclosures and applications therefor,
including divisions, continuations, continuations-in-part and renewal
applications, and including renewals, extensions and reissues (collectively, Patents); (iii) confidential and
proprietary information, trade secrets and know-how, including processes,
schematics, business methods, formulae, drawings, prototypes, models, designs,
customer lists and supplier lists (collectively, Trade Secrets); (iv) published and unpublished
works of authorship, whether copyrightable or not (including without limitation
databases and other compilations of information), copyrights therein and
thereto, and registrations and applications therefor, and all renewals,
extensions, restorations and reversions thereof (collectively, Copyrights); and (v) all other
intellectual property or proprietary rights.  Intellectual Property Contracts means
all agreements concerning the Business Intellectual Property to which the
Company or its Subsidiaries are a party, including without limitation agreements
granting the Company or its Subsidiaries rights to use the Licensed
Intellectual Property, nonassertion agreements, settlement agreements,
agreements granting rights to use Owned Intellectual Property, confidentiality
agreements, Trademark coexistence agreements and Trademark consent agreements.   -17- 
    IT Assets means the Companys and its
Subsidiaries computers, computer software, firmware, middleware, servers,
workstations, routers, hubs, switches, data communications lines, and all other
information technology equipment, and all associated documentation.  Licensed Intellectual Property means
Intellectual Property that the Company or its Subsidiaries are licensed or
otherwise permitted by other Persons to use.  Owned Intellectual Property means
Intellectual Property owned by the Company or its Subsidiaries.  Registered means issued, registered,
renewed or the subject of a pending application.  (i)            Schedule
5.1(q)(i) sets forth a true and complete list and summary description of all of
the Registered Trademarks, Patents and Copyrights of the Company and its
Subsidiaries. (ii)           All
material Owned Intellectual Property is owned exclusively by the Company and
its Subsidiaries; all material Registered Owned Intellectual Property is
validly filed, subsisting and, to the Companys knowledge, enforceable, and to
the Companys knowledge all other Owned Intellectual Property is enforceable,
and none has been canceled or adjudicated invalid (excepting any expirations in
the ordinary course), or is subject to any outstanding order, judgment or
decree restricting its use or adversely affecting or reflecting the Companys
or its Subsidiaries rights thereto.  To
the Companys knowledge, all material Licensed Intellectual Property is the
subject of a valid license to Company or its Subsidiaries as applicable, is
subsisting and enforceable, and none has been canceled or adjudicated invalid
(excepting any expirations in the ordinary course), or is subject to any
outstanding order, judgment or decree restricting its use or adversely
affecting or reflecting the Companys or its Subsidiaries rights thereto,
except as would not be material to the business of the Company. (iii)          No
material suit, action, reissue, reexamination, public protest, interference,
opposition, cancellation or other proceeding (collectively, Suit) is pending concerning any claim
that the Company or its Subsidiaries have violated any Intellectual Property
rights.  No material claim has been
threatened or asserted to an officer, director or legal representative against
the Company or its Subsidiaries or any of their indemnitees for violation of
any Intellectual Property rights.  To
the Companys knowledge, the Company and its Subsidiaries are not violating and
have not violated any Intellectual Property rights material to their respective
businesses (excluding such Intellectual Property rights that relate generally
to the internet or internet payment systems that, if valid, would also be violated
by Parent or its Subsidiaries in their respective businesses as currently
conducted).  -18- 
    (iv)          No
Suit is pending concerning any material Intellectual Property Contract,
including any Suit concerning any claim that the Company or its Subsidiaries
or, to the Companys knowledge, another Person has breached any such
Intellectual Property Contract.  No
claim has been threatened or asserted to an officer, director or legal
representative that the Company or its Subsidiaries or, to the Companys
knowledge another Person, has breached any material Intellectual Property
Contract.  To the Companys knowledge,
there exists no event, condition or occurrence which, with the giving of notice
or lapse of time, or both, would constitute a material breach or default by the
Company or its Subsidiaries or another Person under any material Intellectual
Property Contract.  No party to any
material Intellectual Property Contract has given the Company or its
Subsidiaries notice of its intention to cancel, terminate, change the scope of
rights under, or fail to renew any such Intellectual Property Contract. (v)           No
Suit is pending concerning any material Owned Intellectual Property, including
any Suit concerning a claim that any material Owned Intellectual Property has
been violated or is invalid, unenforceable, unpatentable, unregisterable,
cancelable, not owned or not owned exclusively by the Company or its
Subsidiaries.  No such claim has been
threatened or asserted to any officer, director or legal representative of the
Company.  To the Companys knowledge, no
valid basis for any such Suits or claims exists. (vi)          To
the Companys knowledge, no Suit is pending concerning any material Licensed
Intellectual Property, including any Suit concerning (i) a claim that such
Licensed Intellectual Property has been violated or is invalid, unenforceable,
unpatentable, unregisterable, cancelable; or (ii) the Companys or its
Subsidiaries use of or rights to such Licensed Intellectual Property.  To the Companys knowledge, no such claim
has been threatened or asserted to any officer, director or legal
representative of the Company. (vii)         To
the Companys knowledge, no Person is violating any of the Companys or its
Subsidiaries rights in the material Business Intellectual Property. (viii)        To
the Companys knowledge, the Company and its Subsidiaries own or otherwise have
the right to use pursuant to a valid license sufficient for the Companys and
its Subsidiaries use, all material Intellectual Property used or contemplated
to be used by the Company and its Subsidiaries, including, without limitation,
all material software currently used by the Company or any of its
Subsidiaries.  Except as indicated on
Schedule 5.1(q)(viii), all such rights that are owned by the Company or its
Subsidiaries are free of all Liens (excluding licenses granted in the ordinary
course) and all such rights shall survive the execution, consummation and
performance of this Agreement unchanged. (ix)           The
Company and its Subsidiaries have taken all reasonable measures to protect the
secrecy, confidentiality and value of all material Trade Secrets which are
Business Intellectual Property (collectively, Business Trade Secrets).  To the  -19- 
    Companys
knowledge, its material Business Trade Secrets have only been disclosed or made
accessible to Persons with a bona fide business purpose and need for receiving
or accessing such information.  Each
such Person has executed a valid and appropriate non-disclosure and non-use
agreement in connection therewith. (x)            The
Companys and its Subsidiaries material IT Assets operate and perform as
described on the Companys web site and in all material respects in accordance
with past performance, subject to reasonable scheduled and unscheduled
downtime.  To the Companys knowledge,
the IT Assets do not contain any time bombs, Trojan horses, back doors,
trap doors, worms, viruses or other similar devices or effects that
(A) enable or assist any Person to access without authorization the IT
Assets, or (B) otherwise hinder operation of material functionality of the
IT Assets except as disclosed in its documentation.  The Company and the Subsidiaries have taken reasonable measures
to protect the confidentiality of its trade secret and confidential information
contained within the IT Assets.  The
Company and the Subsidiaries have taken reasonable security measures to protect
the operation of the material IT Assets consistent with industry practice.  To the Companys and Subsidiaries knowledge
no Person has accessed any material IT Assets without proper authorization. (xi)           All
material computer software that is Owned Intellectual Property has been
exclusively developed either (A) internally by employees of the Company and its
Subsidiaries working within the scope of their employment or (B) by third
Persons pursuant to written work made for hire and assignment agreements
placing ownership of such computer software with the Company and its
Subsidiaries.  True and complete copies
of all such agreements have been provided to the Parent; provided, however, to
the extent necessary to protect the confidentiality of the Companys trade
secrets or confidential information, such copies, may have been redacted. (xii)          As
of the date hereof, no Suit is pending concerning any claim that the Company or
its Subsidiaries have violated the terms of any applicable privacy statement or
similar policy published by the Company or its Subsidiaries.  The Company and its Subsidiaries comply with
such statement or similar policy in effect as of the date hereof and hereafter
in all material respects.  As of the
date hereof, no such claim has been threatened or asserted to any officer,
director or legal representative of the Company in the past 6 months. (r)            Intercompany Restrictions.  No Subsidiary of the Company is currently
prohibited, directly or indirectly, from paying any dividends to the Company,
from making any other distribution on such Subsidiarys capital stock, from
repaying to the Company any loans or advances to such Subsidiary from the
Company or from transferring any of such Subsidiarys property or assets to the
Company or any other Subsidiary of the Company. (s)           Brokers and Finders.  Neither the Company nor any of its officers,
directors or employees has employed any broker or finder or incurred any
liability for any  -20- 
    brokerage fees, commissions or finders, fees in
connection with the Merger or the other transactions contemplated in this
Agreement except that the Company has employed Morgan Stanley & Co. as its
financial advisor, the arrangements with which have been disclosed to Parent
prior to the date hereof. 5.2.          Representations and Warranties of
Parent and Merger Sub.  Except
as set forth in the disclosure letter delivered to the Company by Parent that
is attached to this Agreement (the Parent
Disclosure Letter) (any matter disclosed in a section or
subsection of the Parent Disclosure Letter shall qualify the correspondingly
numbered representation, warranty and covenant of this Agreement and all other
representations, warranties and covenants of Parent in this Agreement
regardless of whether such matter is specifically cross referenced in such
section or subsection so long as the disclosure of such matter is sufficient as
to make its relevance to such other representation, warranty and covenant
readily apparent), Parent and Merger Sub each hereby represent and warrant to
the Company that: (a)           Capitalization of Merger Sub.  The authorized capital stock of Merger Sub
consists of 1,000 shares of Common Stock, par value $0.001 per share, all of
which are validly issued and outstanding. 
All of the issued and outstanding capital stock of Merger Sub is, and at
the Effective Time will be, owned by Parent, and there are (i) no other
shares of capital stock or voting securities of Merger Sub, (ii) no
securities of Merger Sub convertible into or exchangeable for shares of capital
stock or voting securities of Merger Sub and (iii) no options or other
rights to acquire from Merger Sub, and no obligations of Merger Sub to issue,
any capital stock, voting securities or securities convertible into or
exchangeable for capital stock or voting securities of Merger Sub. (b)           Organization, Good Standing and
Qualification.  Each of Parent,
Merger Sub and Parents Significant Subsidiaries has been duly incorporated and
is validly existing as a corporation in good standing under the laws of the
jurisdiction in which it is chartered or organized with full corporate power
and authority to own or lease, as the case may be, and to operate its
properties and conduct its business as presently conducted, and is duly
qualified to do business as a foreign corporation and is in good standing under
the laws of each jurisdiction which requires such qualification except where
failure to so qualify or to be in good standing is not reasonably likely to
have, individually or in the aggregate, a Parent Material Adverse Effect (as
defined below).  Parent has made
available to the Company a complete and correct copy of Parents certificate of
incorporation and by-laws, each as amended to the date hereof.  Parents and its Significant Subsidiaries
certificates of incorporation and by-laws are in full force and effect.  Significant
Subsidiary shall have the meaning ascribed to such term in
Rule 1-02(w) of Regulation S-X promulgated under the Exchange Act. As used in this Agreement, the term Parent Material Adverse Effect means
(x) a material adverse effect on the condition (financial or otherwise),
prospects, business or results of operations of Parent and its Significant
Subsidiaries taken as a  -21- 
   whole or (y) an effect that could prevent or
materially burden or materially impair the ability of Parent or Merger Sub to
consummate the transactions contemplated by this Agreement; provided, however,
that the following shall be excluded from the definition of Parent Material
Adverse Effect and from the determination of whether such a Parent Material
Adverse Effect has occurred: (a) the effects of conditions or events
resulting from general financial, political, economic or market conditions
(including the suspension of trading in securities on the Nasdaq National
Market); (b) any change in the trading prices or volumes of the capital
stock of Parent; (c) the effects of conditions or events resulting from an
outbreak or escalation of hostilities involving the United States or the
declaration by the United States of a national emergency or war or the
occurrence of any other calamity or crisis, including the occurrence of a
terrorist attack; (d) any change resulting from the entry into this
Agreement or the announcement of the transactions contemplated by this
Agreement or the performance of this Agreement and the covenants set forth
herein; and (e) any change resulting from the actions of the Company. (c)           Capital
Structure.  The authorized
capital stock of Parent consists of 900,000,000 shares of Parent Common Stock,
of which 281,627,707 shares were outstanding as of the close of business on
June 30, 2002, and 10,000,000 shares of Preferred Stock par value $0.001
per share (the Parent Preferred Shares),
none of which were outstanding as of the close of business on the date
hereof.  All of the outstanding Parent
Common Stock have been duly authorized and are validly issued, fully paid and
nonassessable.  Parent has no shares of
Parent Common Stock reserved for issuance, except that, as of June 30,
2002, there were 25,158,126 shares of Parent Common Stock reserved for issuance
pursuant to Parents stock option plans (not including Parents 1998 employee
stock purchase plan) and options with respect to 37,431,071 shares of Parent
Common Stock were outstanding under such plans as of such date.  Each of the outstanding shares of capital
stock or other securities of each of Parents Significant Subsidiaries is duly
authorized, validly issued, fully paid and nonassessable and owned by Parent or
a direct or indirect wholly-owned subsidiary of Parent, free and clear of any
lien, pledge, security interest, claim or other encumbrance.  Except as set forth above and except as is
not material to the capitalization of Parent, as of the date hereof, there are
no preemptive or other outstanding rights, options, warrants, conversion
rights, stock appreciation rights, redemption rights, repurchase rights,
agreements, arrangements, calls, commitments or rights of any kind that
obligate Parent to issue or sell any shares of capital stock or other
securities of Parent or any securities or obligations convertible or
exchangeable into or exercisable for, or giving any Person a right to subscribe
for or acquire, any securities of Parent, and no securities or obligations evidencing
such rights are authorized, issued or outstanding.  Parent does not have outstanding any bonds, debentures, notes or
other obligations the holders of which have the right to vote (or convertible
into or exercisable for securities having the right to vote) with the
stockholders of Parent on any matter.  -22-





(d)           Corporate
Authority. (i)            No
vote of holders of capital stock of Parent is necessary to approve this
Agreement and the Merger and the other transactions contemplated hereby.  Parent, as the sole stockholder of the
Merger Sub, has taken all action necessary to approve this Agreement, the
Merger and the other transactions contemplated hereby.Each
of the Parent and Merger Sub has all requisite corporate power and authority
and has taken all corporate action necessary in order to execute, deliver and
perform its obligations under this Agreement and to consummate the Merger.  This Agreement is a valid and binding
agreement of Parent and Merger Sub, enforceable against each of Parent and
Merger Sub in accordance with its terms, subject to the Bankruptcy and Equity
Exception. (ii)           The
Board of Directors of Parent (A) has approved this Agreement and the
Merger and the other transactions contemplated hereby and (B) has received
the opinion of its financial advisor, Goldman, Sachs & Co., to the effect
that the consideration to be paid by Parent in the Merger is fair to Parent
from a financial point of view. (iii)          Prior
to the Effective Time, Parent will have taken all necessary action to permit it
to issue the number of duly authorized shares of Parent Common Stock required
to be issued or issuable pursuant to Article IV and Section 6.11(a).  Such Parent Common Stock, when issued, will
be validly issued, fully paid and nonassessable, and no stockholder of Parent
will have any preemptive right of subscription or purchase in respect
thereof.  Such Parent Common Stock, when
issued, will be registered under the Securities Act and Exchange Act and
registered or exempt from registration under any applicable state securities or
blue sky laws. (e)           Governmental Filings; No Violations.  (i)  Other than the filings and/or
notices (A) pursuant to Section 1.3, (B) under the HSR Act, the
Securities Act and the Exchange Act, (C) to comply with state securities
or blue sky laws, (D) required to be made with the Nasdaq National Market
and (E) to comply with foreign antitrust and unfair competition laws, no
notices, reports or other filings are required to be made by Parent or Merger
Sub with, nor are any consents, registrations, approvals, permits or
authorizations required to be obtained by Parent or Merger Sub from, any
Governmental Entity, in connection with the execution and delivery of this
Agreement by Parent and Merger Sub and the consummation by Parent and Merger
Sub of the Merger and the other transactions contemplated hereby, except those
that the failure to make or obtain is not reasonably likely to have,
individually or in the aggregate, a Parent Material Adverse Effect or prevent,
materially delay or materially impair the ability of Parent or Merger Sub to
consummate the transactions contemplated by this Agreement. (ii)           The
execution, delivery and performance of this Agreement by Parent and Merger Sub
do not, and the consummation by Parent and Merger Sub of the Merger and the
other transactions contemplated hereby will not, conflict with, result in a  -23- 
    breach or violation or imposition of any lien, charge
or encumbrance upon any property or assets of the Parent or any of its
Significant Subsidiaries pursuant to (A) the certificate of incorporation
or by-laws of the Parent or any of its Significant Subsidiaries, or
(B) the terms of any Material Contracts to which Parent or any of its
Significant Subsidiaries is a party or bound or to which it or their property
is subject, or (C) any Laws applicable to Parent or any of its Significant
Subsidiaries of any court, Governmental Entity, arbitrator or other authority
having jurisdiction over Parent or any of its Significant Subsidiaries or any
of its or their properties; except, in the case of clauses (B) and (C), for
such conflict, breach, violation or imposition that is not reasonably likely to
have, individually or in the aggregate, a Parent Material Adverse Effect. (f)            Parent Reports; Financial
Statements.  Parent has made
available to the Company each registration statement, report, proxy statement
or information statement prepared by it since December 31, 1999, including
(i) Parents Annual Report on Form 10-K for the year ended December
31, 2001 (the Parent Audit Date)
in the form (including exhibits, annexes and any amendments thereto) filed with
the SEC (collectively, including any such reports filed subsequent to the date
hereof, the Parent Reports).  As of their respective dates, the Parent
Reports did not, and any Parent Reports filed with the SEC subsequent to the
date hereof will not, contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances in which they were made,
not misleading.  Each of the
consolidated balance sheets included in or incorporated by reference into the
Parent Reports (including the related notes and schedules) fairly presents, or
will fairly present, the consolidated financial position of Parent and its
Subsidiaries as of its date and each of the consolidated statements of income
and consolidated statements of cash flows included in or incorporated by
reference into the Parent Reports (including any related notes and schedules)
fairly presents, or will fairly present, the results of operations and cash
flows, as the case may be, of Parent and its Subsidiaries for the periods set
forth therein (subject, in the case of unaudited statements, to notes and
normal year-end audit adjustments that will not be material in amount or
effect), in each case in accordance with GAAP consistently applied during the
periods involved, except as may be noted therein. (g)           Absence of Certain Changes.  Except as disclosed in the Parent Reports
filed prior to the date hereof, since the Parent Audit Date through the date
hereof Parent and its Subsidiaries have conducted their respective businesses
only in, and have not engaged in any material transaction other than according
to, the ordinary and usual course of such businesses.  Except as disclosed in the Parent Reports filed prior to the date
hereof, since the Parent Audit Date there has not been a Parent Material
Adverse Effect or any development or combination of developments of which management
of Parent has knowledge that is reasonably likely to have, individually or in
the aggregate, a Parent Material Adverse Effect. (h)           Litigation and Liabilities.  Except as disclosed in the Parent Reports
filed prior to the date hereof and except for liabilities or obligations
reflected or  -24- 
    reserved against in the most recent consolidated
balance sheet of Parent included in the Parent Reports, there are no
(i) civil, criminal or administrative actions, suits, claims, hearings,
investigations or proceedings pending or, to the knowledge of the officers of
Parent, threatened against Parent or any of its Affiliates or
(ii) obligations or liabilities, whether or not accrued, contingent or
otherwise and whether or not required to be disclosed, including those relating
to matters involving any environmental and occupational safety and health
matters, or any other facts or circumstances of which the officers of Parent
have knowledge that could result in any claims against, or obligations or
liabilities of, Parent or any of its Affiliates, except for those that are not
reasonably likely to have, individually or in the aggregate, a Parent Material
Adverse Effect or prevent or materially burden or materially impair the ability
of Parent or Merger Sub to consummate the transactions contemplated by this
Agreement. (i)            Compliance with Laws.  Neither Parent nor any of its Significant
Subsidiaries is in violation or default of (i) any provision of its
certificate or by-laws, (ii) the terms of any Material Contract to which
it is a party or bound or to which its property is subject, (iii) the
terms of any Contract to which it is a party or bound or to which its property
is subject which violation or default, when taken together with all other such
violations and defaults, could be considered material to the Company and its
Subsidiaries, or (iv) any Laws of any court, Governmental Entity,
arbitrator or other authority having jurisdiction over Parent or such Significant
Subsidiary or any of its properties, as applicable, which, with respect to
clauses (ii), (iii) and (iv), is reasonably likely to have, individually or in
the aggregate, a Parent Material Adverse Effect. (j)            Certain Regulatory Matters.  Each of Parent and its Significant
Subsidiaries (A) is in compliance with any and all Regulatory Laws
applicable to it, (B) holds all licenses, certificates, permits,
franchises and other authorizations required of it for the lawful conduct of
its business under and pursuant to each and (C) is in compliance with, and
not in default under, all terms and conditions of any such licenses,
certificates, permits, franchises or authorizations, except where the failure
to hold such license, certificate, permit, franchise or authorization or such
noncompliance or default is not reasonably likely to have, individually or in
the aggregate, a Parent Material Adverse Effect.  Neither Parent nor any of its Significant Subsidiaries is
required to register as a bank holding company under the Bank Holding Company
Act of 1956, as amended, nor is Parent or any of its Significant Subsidiaries
required to obtain deposit insurance from the Federal Deposit Insurance
Corporation for any of their respective products or services. (k)           Tax Matters. 
As of the date hereof, neither Parent nor any of its Affiliates has
taken or agreed to take any action, nor do the officers of Parent have any
knowledge of any fact or circumstance, that would prevent the Merger and the
other transactions contemplated by this Agreement from qualifying as a
reorganization within the meaning of Section 368(a) of the Code.   -25- 
    (l)            Taxes.  Parent
and each of its Significant Subsidiaries (i) have prepared in good faith
and duly and timely filed (taking into account any extension of time within
which to file) all Tax Returns required to be filed by any of them and all such
filed Tax Returns are complete and accurate in all material respects; and
(ii) have paid all Taxes that are required to be paid or that Parent or
any of its Significant Subsidiaries are obligated to withhold from amounts
owing to any employee, creditor or third party, except with respect to matters
contested in good faith.  As of the date
hereof, there are not pending or, to the knowledge of the officers of Parent,
threatened in writing, any audits, examinations, investigations or other
proceedings in respect of United States federal, state or local taxes or tax
matters that are reasonably likely to have, individually or in the aggregate, a
Parent Material Adverse Effect. (m)          Intellectual Property.  The following terms have the following
meanings used in this Section 5.2(m): Parent Owned Intellectual Property
means Intellectual Property owned by Parent or its Subsidiaries. Parent Business Intellectual Property
means the Owned Intellectual Property and Intellectual Property that the Parent
or its Subsidiaries are license or otherwise permitted by other Persons to use. Parent Intellectual Property Contracts
means all agreements concerning the Parent Business Intellectual Property to
which the Parent or its Subsidiaries are a party, including without limitation
agreements granting the Parent or its Subsidiaries rights to use the Licensed
Intellectual Property, nonassertion agreements, agreements granting rights to
use Parent Owned Intellectual Property, confidentiality agreements relating to
Intellectual Property, Trademark coexistence agreements and Trademark consent
agreements. (i)            Except
as is not reasonably likely to have, individually or in the aggregate, a Parent
Material Adverse Effect: the Parent Owned Intellectual Property is owned
exclusively by the Parent and its Subsidiaries; all registered Parent Owned
Intellectual Property is validly filed, subsisting and, to Parents knowledge,
enforceable, and to Parents knowledge all other Parent Owned Intellectual
Property is enforceable, and none has been canceled or adjudicated invalid
(excepting any expirations in the ordinary course), or is subject to any outstanding
order, judgment or decree restricting its use or adversely affecting or
reflecting Parents or its Subsidiaries rights thereto; and, to Parents
knowledge, all Parent Licensed Intellectual Property is the subject of a valid
license to Parent or its Subsidiaries as applicable, is subsisting and
enforceable, and none has been canceled or adjudicated invalid (excepting any
expirations in the ordinary course), or is subject to any outstanding order,
judgment or decree restricting its use or adversely affecting or reflecting
Parents or its Subsidiaries rights thereto. (ii)           Except
as is not reasonably likely to have, individually or in the aggregate, a Parent
Material Adverse Effect, no Suit is pending concerning any claim that  -26- 
    Parent
or its Subsidiaries have violated any Intellectual Property rights and no claim
has been threatened or asserted to an officer, director or legal representative
against Parent or its Subsidiaries or any of their indemnitees for violation of
any Intellectual Property rights. 
Except as is not reasonably likely to have, individually or in the
aggregate, a Parent Material Adverse Effect, Parent and its Subsidiaries are
not violating and have not violated any Intellectual Property rights (excluding
such Intellectual Property rights that relate generally to the internet or
internet payment systems that, if valid, would also be violated by the Company
or its Subsidiaries in their respective businesses as currently conducted). (iii)          Except
as is not reasonably likely to have, individually or in the aggregate, a Parent
Material Adverse Effect, no Suit is pending concerning any Parent Intellectual
Property Contract, including any Suit concerning any claim that Parent or its
Subsidiaries or, to Parents knowledge, another Person has breached any Parent
Intellectual Property Contract and no claim has been threatened or asserted to
an officer, director or legal representative of the Parent that Parent or its
Subsidiaries or, to Parents knowledge another Person, has breached any Parent
Intellectual Property Contract.  To
Parents knowledge, there exists no event, condition or occurrence which, with
the giving of notice or lapse of time, or both, would constitute a material
breach or default by the Parent or its Subsidiaries or another Person under any
Parent Intellectual Property Contract, except as is not reasonably likely to
have, individually or in the aggregate, a Parent Material Adverse Effect.  No party to any Parent Intellectual Property
Contract has given the Parent or its Subsidiaries notice of its intention to
cancel, terminate, change the scope of rights under, or fail to renew any
Parent Intellectual Property Contract except as is not reasonably likely to
have, individually or in the aggregate, a Parent Material Adverse Effect. (iv)          Except
as is not reasonably likely to have, individually or in the aggregate, a Parent
Material Adverse Effect, no Suit is pending concerning any Parent Owned
Intellectual Property, including any Suit concerning a claim that any Parent
Owned Intellectual Property has been violated or is invalid, unenforceable,
unpatentable, unregisterable, cancelable, not owned or not owned exclusively by
Parent or its Subsidiaries.  No such
claim has been threatened or asserted to any officer, director or legal
representative of the Parent. (v)           Except
as is not reasonably likely to have, individually or in the aggregate, a Parent
Material Adverse Effect, to Parents knowledge, Parent and its Subsidiaries own
or otherwise have the right to use pursuant to a valid license sufficient for
the Parents and its Subsidiaries use, all Intellectual Property used by the
Company and its Subsidiaries, including, without limitation, all software
currently used by the Company or any of its Subsidiaries.  Except as is not reasonably likely to have,
individually or in the aggregate, a Parent Material Adverse Effect, all such
rights shall survive the execution, consummation and performance of this
Agreement unchanged.  -27- 
    (vi)          Except
as is not reasonably likely to have, individually or in the aggregate, a Parent
Material Adverse Effect, all computer software that is Parent Owned
Intellectual Property has been exclusively developed either (A) internally
by employees of the Parent and its Subsidiaries working within the scope of
their employment or (B) by third Persons pursuant to written work made for
hire and assignment agreements placing ownership of such computer software with
the Parent and its Subsidiaries. (vii)         Parent
and its Subsidiaries have taken all reasonable measures to protect the secrecy,
confidentiality and value of all Trade Secrets which are Parent Business
Intellectual Property, except as is not reasonably likely to have, individually
or in the aggregate, a Parent Material Adverse Effect. (n)           Brokers and Finders.  Neither Parent nor any of its officers,
directors or employees has employed any broker or finder or incurred any
liability for any brokerage fees, commissions or finders, fees in connection
with the Merger or the other transactions contemplated by this Agreement,
except that Parent has employed Goldman, Sachs & Co. as its financial
advisor. ARTICLE VI Covenants 6.1.          Interim Operations.  The Company covenants and agrees as to
itself and its Subsidiaries that, after the date hereof and prior to the
Effective Time (unless Parent shall otherwise approve in writing and except as
otherwise expressly contemplated by this Agreement or set forth in the
corresponding section or subsections of the Company Disclosure Schedule): (a)   the business of it and its Subsidiaries shall
be conducted in all material respects in the ordinary course consistent with
past practice and, to the extent consistent therewith, it and its Subsidiaries
shall use their respective commercially reasonable efforts to preserve its
present business organization intact and maintain its existing relations and
goodwill with customers, suppliers, distributors, creditors, lessors, employees
and business associates consistent with past practice; (b)   it shall not (i) issue, sell, pledge, dispose
of or encumber any capital stock owned by it in any of its Subsidiaries;
(ii) amend its certificate of incorporation or by-laws; (iii) split,
combine or reclassify its outstanding shares of capital stock;
(iv) declare, set aside or pay any dividend payable in cash, stock or
property in respect of any capital stock other than dividends from its direct
or indirect wholly-owned Subsidiaries; or (v) repurchase, redeem or otherwise
acquire, except (x) in connection with the Stock Plans and (y) for the
repurchase of unvested Shares issued as restricted stock or issued upon the
early exercise of options from departing employees at a repurchase price equal
to the lower of the employees purchase or exercise price or the fair market
value of such Shares at the time of repurchase; or (vi) permit any of its  -28- 
   Subsidiaries to purchase
or otherwise acquire, any shares of its capital stock or any securities
convertible into or exchangeable or exercisable for any shares of its capital
stock; (c)   neither it nor any of its Subsidiaries shall
(i) issue, sell, pledge, dispose of or encumber any shares of, or
securities convertible into or exchangeable or exercisable for, or options,
warrants, calls, commitments or rights of any kind to acquire, any shares of
its capital stock of any class or any other property or assets (other than
Shares issuable pursuant to options outstanding on the date hereof under the
Stock Plans, Shares issuable pursuant to the 2001 ESPP, and Shares issuable
pursuant to the Company Warrants and the grant to new employees of the Company
(other than new officers of the Company) hired after the date hereof consistent
with the hiring plan set forth in Section 6.1(c) of the Company Disclosure
Letter of options pursuant to the Stock Plans in the ordinary course of
business consistent with past practice, provided that such grants shall not
exceed in the aggregate 500,000 Shares per quarter without the prior consent of
Parent, which consent shall not be unreasonably withheld or delayed);
(ii) other than in the ordinary and usual course of business, transfer,
lease, license, guarantee, sell, mortgage, pledge, dispose of or encumber any
other property or assets or incur or modify any material indebtedness or other
liability; (iii) make or authorize or commit for any capital expenditures
other than as set forth on Schedule 6.1(c)(iii) hereto; (iv) make any
acquisition of, or investment in, assets or stock of or other interest in, any
other Person or entity; (v) enter into any Contract the terms of which
contemplate material changes in the obligations, rights or responsibilities of
any party thereto or any terms therein after giving effect to the Merger; (vi)
enter into, modify, amend or terminate any Material Contract except in the
ordinary course consistent with past practice or without the prior consent of
Parent, which consent shall not be unreasonably withheld or delayed; (vii) enter
into or amend any Contract for payment processing without the prior consent of
Parent, which consent shall not be unreasonably withheld or delayed;
(viii) enter into any non-competition Contracts or other Contracts that
purport to limit in any respect either the type of business in which it (or,
after giving effect to the Merger, the Parent or its Subsidiaries) may engage
or the manner or locations in which any of them may so engage in any business;
(ix) enter into any partnership, joint venture, strategic alliance, revenue or
profit sharing agreement or similar arrangement with any Person; or (x) change
or modify its line of business from the line of business in which it is engaged
as of the date hereof or enter into any new line of business; (d)   neither it nor any of its Subsidiaries shall
terminate, establish, adopt, enter into, make any new grants or awards under,
amend or otherwise modify, any Benefit Plans, amend or modify the terms of any
Company Option or increase the salary, wage, bonus or other compensation of any
employees (except for (i) increases in salary, wages, bonuses or other
compensation of non-executive employees made in the ordinary course of business
consistent with past practice and (ii) subject to Section 6.1(c)(i), the grant of
options to new employees of the Company pursuant to the Stock Plans);  -29- 
   (e)   neither it nor any of its Subsidiaries shall
(i) commence any litigation or arbitration proceeding or any regulatory or
other governmental action or proceeding with or before any Governmental Entity
other than ordinary contract and commercial litigation that the Company does
not reasonably expect to result in total costs to the Company in excess of
$300,000 and except for litigation to which the Parent consents, which consent
shall not be unreasonably withheld or delayed, (ii) settle or compromise
any material claims or litigation without the prior consent of Parent, which
consent shall not be unreasonably withheld or delayed, or (iii) waive,
release or assign any material rights or claims without the prior consent of
Parent, which consent shall not be unreasonably withheld or delayed; (f)    neither it nor any of its Subsidiaries shall
make any material Tax election or permit any material insurance policy naming
it as a beneficiary or loss-payable payee to be cancelled or terminated except
in the ordinary and usual course of business; and (g)   neither it nor any of its Subsidiaries will
authorize or enter into an agreement to do any of the foregoing. 6.2.          Acquisition Proposals.  The Company agrees that neither it nor any
of its Subsidiaries nor any of the officers and directors of it or its
Subsidiaries shall, and that it shall not authorize or knowingly permit its and
its Subsidiaries employees, agents and representatives (including any
investment banker, attorney or accountant retained by it or any of its
Subsidiaries) to, directly or indirectly, initiate, solicit, knowingly
encourage or facilitate any inquiries or the making of any proposal or offer
with respect to a merger, reorganization, share exchange, consolidation or
similar transaction involving, or any purchase of all or any material portion
of the assets of, or 20% or more of the equity securities in, the Company or
any of its Subsidiaries (any such proposal or offer being hereinafter referred
to as an Acquisition Proposal).  The Company further agrees that neither it
nor any of its Subsidiaries nor any of the officers and directors of it or its
Subsidiaries shall, and that it shall not authorize or knowingly permit its and
its Subsidiaries employees, agents and representatives (including any
investment banker, attorney or accountant retained by it or any of its
Subsidiaries) not to, directly or indirectly, engage in any negotiations
concerning, or provide any confidential information or data to, or have any
discussions with, any Person relating to an Acquisition Proposal, or otherwise
entertain or knowingly facilitate any effort or attempt to make or implement an
Acquisition Proposal; provided, however, that nothing contained
in this Agreement shall prevent the Company or its Board of Directors or its
officers, employees, agents or representatives from (A) complying with
Rule 14e-2 promulgated under the Exchange Act with regard to an
Acquisition Proposal or making any disclosure required by applicable law;
(B) at any time prior, but not after, the Stockholders Meeting (as defined
in Section 6.4) is convened, providing information in response to a request
therefor by a Person who has made an unsolicited bona fide written Acquisition
Proposal if the Board of Directors receives from the Person so requesting such
information an executed confidentiality agreement on terms substantially
similar to  -30- 
    those contained in the Confidentiality Agreement (as
defined in Section 9.7); (C) engaging in any negotiations or
discussions with any Person who has made an unsolicited bona fide written
Acquisition Proposal; or (D) recommending such an Acquisition Proposal to
the stockholders of the Company, if and only to the extent that, in each such
case referred to in clause (B), (C) or (D) above, the Board of Directors of the
Company determines in good faith (after consultation with its outside legal
counsel) that such action is necessary in order for its directors to comply
with their respective fiduciary duties under applicable law and the Board of
Directors determines in good faith (after consultation with its financial
advisor) that such Acquisition Proposal is, or is reasonably likely to result
in, a Superior Proposal.  A Superior Proposal is an Acquisition
Proposal that, if accepted, would be reasonably likely to be consummated
(taking into account the legal, financial and regulatory aspects of the
proposal) and would, if consummated, result in a transaction more favorable to
the Companys stockholders from a financial point of view than the transaction
contemplated by this Agreement.  The
Company agrees that it will immediately cease and cause to be terminated any
existing activities, discussions or negotiations with any parties conducted
heretofore with respect to any Acquisition Proposal.  The Company agrees that it will take the necessary steps to
promptly inform the individuals or entities referred to in the first sentence
hereof of the obligations undertaken in this Section 6.2 and in the
Confidentiality Agreement (as defined in Section 9.7).  The Company agrees that it will notify
Parent immediately if any such inquiries, proposals or offers are received by,
any such information is requested from, or any such discussions or negotiations
are sought to be initiated or continued with, any of its representatives
indicating, in connection with such notice, the name of such Person and the material
terms and conditions of any proposals or offers.  The Company also agrees that it will promptly request each Person
that has heretofore executed a confidentiality agreement in connection with its
consideration of acquiring it or any of its Subsidiaries to return or destroy
all confidential information heretofore furnished to such Person by or on
behalf of it or any of its Subsidiaries. 6.3.          Information Supplied.  The Company and Parent each agrees, as to
itself and its Subsidiaries, that none of the information expressly supplied or
to be supplied by it or its Subsidiaries for inclusion or incorporation by
reference in (i) the Registration Statement on Form S-4 to be filed
with the SEC by Parent in connection with the issuance of shares of Parent Common
Stock in the Merger (including the proxy statement and prospectus (the Prospectus/Proxy Statement)
constituting a part thereof) (the S-4
Registration Statement) will, at the time the S-4 Registration
Statement becomes effective under the Securities Act, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, and (ii) the
Prospectus/Proxy Statement and any amendment or supplement thereto will, at the
date of mailing to stockholders and at the times of the meetings of
stockholders of the Company to be held in connection with the Merger, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.  The Company and Parent will
cause the  -31- 
    Form S-4 to comply as to form in all material
respects with the applicable provisions of the Securities Act and the rules and
regulations thereunder, except that neither the Company nor Parent makes any
covenant other than with respect to statements made or incorporated by
reference based on information supplied by such party specifically for
inclusion or incorporation by reference therein. 6.4.          Stockholders Meeting.  The Company will take, in accordance with
applicable law and its certificate of incorporation and by-laws, all action
necessary to call, hold and convene a meeting of holders of Shares (the Stockholders Meeting) as promptly as
reasonably practicable after the S-4 Registration Statement is declared effective
to consider and vote upon the approval of this Agreement.  Except on the determination of the
occurrence of a Superior Proposal and during such time as there remains a
Superior Proposal or as the Companys Board of Directors may determine in good
faith (after consultation with its outside legal counsel) in order to comply
with its fiduciary duties under applicable law, the Companys Board of
Directors shall recommend such approval, the Companys Board of Directors shall
not amend, modify, withdraw, condition or qualify such recommendation and shall
take all lawful action to solicit such approval.  The Company agrees that it will provide Parent with at least 48
hours prior notice of the Companys Board of Directors intention to make any
such amendment, modification, withdrawal, condition or qualification; provided,
however, that such notice shall not be required to the extent that the
Companys Board of Directors determines (after consultation with its outside
legal counsel) that such notice violates its fiduciary duties or would cause
the Company to violate any applicable law. 
Notwithstanding anything to the contrary in this Agreement, the
obligation of the Company to convene a Stockholders Meeting shall not be limited
or otherwise affected by the commencement, disclosure, announcement or
submission to it of any Acquisition Proposal, or by any change of
recommendation of the Companys Board of Directors.  The Company shall not submit to the vote of its stockholders any
Acquisition Proposal or propose to do so. 6.5.          Filings; Other Actions; Notification.  (a) The Company and Parent shall
promptly prepare and file with the SEC the Prospectus/Proxy Statement, and
Parent shall prepare and file with the SEC the S-4 Registration Statement as
promptly as practicable after the date hereof. 
Parent and the Company each shall use its commercially reasonable
efforts to have the S-4 Registration Statement declared effective under the
Securities Act as promptly as practicable after such filing, and promptly
thereafter mail the Prospectus/Proxy Statement to the stockholders of the
Company.  Parent shall also use its
commercially reasonable efforts to obtain prior to the effective date of the
S-4 Registration Statement all necessary state securities law or blue sky
permits and approvals required in connection with the Merger and to consummate
the other transactions contemplated by this Agreement and will pay all expenses
incident thereto. (b)           No amendment or supplement to the Registration Statement
or the Proxy Statement/Prospectus will be made by the Company or Parent without
the prior  -32- 
   approval
of the other party. Each party will advise the other party, promptly after it
receives notice thereof, of the time when the Registration Statement has become
effective or any supplement or amendment has been filed, the issuance of any
stop order, the suspension of the qualification of the Parent Common Stock
issuable in connection with the Merger for offering or sale in any jurisdiction,
or any request by the SEC for amendment of the Registration Statement or the
Proxy Statement/Prospectus or comments of the SEC thereon and responses thereto
or requests by the SEC for additional information.  If at any time prior to the Effective Time, the Company or Parent
discovers any information relating to itself, or any of its affiliates,
officers or directors, that should be set forth in an amendment or supplement
to the Registration Statement or the Proxy Statement/Prospectus, so that such
document would not include any misstatement of a material fact or omit to state
any material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, such party that
discovers such information shall promptly notify the other parties hereto and
the parties shall jointly prepare an appropriate amendment or supplement
describing such information which shall be promptly filed with the SEC and, to
the extent required by law or regulation, disseminated to the stockholders of
the Company. (c)           The Company and Parent each shall use its commercially
reasonable efforts to cause to be delivered to the other party and its
directors a letter of its independent auditors, dated (i) the date on
which the S-4 Registration Statement shall become effective and (ii) the
Closing Date, and addressed to the other party and its directors, in form and
substance customary for comfort letters delivered by independent public
accountants in connection with registration statements similar to the S-4
Registration Statement. (d)           The Company and Parent shall cooperate with each other and
use (and shall cause their respective Subsidiaries to use) their respective
commercially reasonable efforts to take or cause to be taken all actions, and
do or cause to be done all things, necessary, proper or advisable on its part
under this Agreement and applicable Laws to consummate and make effective the
Merger and the other transactions contemplated by this Agreement as soon as
practicable, including preparing and filing as promptly as practicable all
documentation to effect all required notices, reports and other filings and to
obtain as promptly as practicable all consents, registrations, approvals,
permits and authorizations required to be obtained from any third party and/or
any Governmental Entity in order to consummate the Merger or any of the other
transactions contemplated by this Agreement; provided, however,
that nothing in this Section 6.5 shall require, or be construed to
require, Parent to proffer to, or agree to, sell or hold separate and agree to
sell, before or after the Effective Time, any assets, businesses, or interest
in any assets or businesses of Parent, the Company or any of their respective
Affiliates (or to consent to any sale, or agreement to sell, by the Company of
any of its assets or businesses) or to agree to any material changes or
restriction in the operations of any such assets or businesses.  Nothing in this Section shall require Parent
or the Company to take any action which would be inconsistent with the
fiduciary duties of its Board of Directors as such duties would exist under
applicable law in the absence of this Section. 
Without  -33- 
   limiting
the generality of the foregoing, each of Parent and the Company shall file any
Notification and Report Forms and related materials that it may be required to
file in connection with the transactions contemplated by this Agreement with
the Federal Trade Commission and the Antitrust Division of the United States
Department of Justice under the HSR Act, shall each use its commercially
reasonable efforts to obtain an early termination of the applicable waiting
period, and shall each make any submissions pursuant thereto that may be
necessary, proper or advisable.  Subject
to applicable laws relating to the exchange of information, Parent and the
Company shall (i) have the right to review in advance, and to the extent
practicable each will consult the other on, all the information relating to
Parent or the Company, as the case may be, and any of their respective
Subsidiaries, that appear in any filing made with, or written materials
submitted to, any third party and/or any Governmental Entity in connection with
the Merger and the other transactions contemplated by this Agreement and
(ii) consult with each other before meeting with, or engaging in any
conference calls with, any antitrust agency to discuss the transactions
contemplated hereby.  In exercising the
foregoing right, each of the Company and Parent shall act reasonably and as
promptly as practicable. (e)           The Company and Parent each shall, upon request by the
other and subject to applicable law, furnish the other with all information
concerning itself, its Subsidiaries, directors, officers and stockholders and
such other matters as may be reasonably necessary or advisable in connection
with the Prospectus/Proxy Statement, the S-4 Registration Statement or any
other statement, filing, notice or application made by or on behalf of Parent,
the Company or any of their respective Subsidiaries to any third party and/or
any Governmental Entity in connection with the Merger and the transactions
contemplated by this Agreement. (f)            The Company and Parent each shall keep the other apprised
of the status of matters relating to completion of the transactions
contemplated hereby, including promptly furnishing the other with copies of
notice or other communications received by Parent or the Company, as the case
may be, or any of its Subsidiaries, from any third party and/or any
Governmental Entity with respect to the Merger and the other transactions
contemplated by this Agreement.  The
Company and Parent each shall give prompt notice to the other of any change
that is reasonably likely to result in a Company Material Adverse Effect or
Parent Material Adverse Effect, respectively. (g)           The Company shall promptly furnish Parent with copies of
any notices and other communications received by the Company or any of its
Subsidiaries from any third party and/or any Governmental Entity with respect
to the Companys and its Subsidiaries licenses, certificates, permits or other
authorizations from or of Governmental Entities and any applications relating
thereto, unless the Company reasonably determines that furnishing such copies
would violate the terms of a written confidentiality obligation of the Company
to such third party or applicable law.  -34- 
   6.6.          Taxation. 
Parent and Company intend the Merger to qualify as a reorganization
within the meaning of Section 368(a) of the Code.  Subject to Section 6.2, each party will (and will cause its
Subsidiaries to) both before and after the Effective Time, (i) use
reasonable efforts to cause the Merger to so qualify; (ii) refrain from
taking any action that would reasonably be expected to cause the Agreement to
fail to so qualify; and (iii) take the position for all U.S. federal
income tax purposes that the Merger so qualifies. 6.7.          Access.  Upon
reasonable notice, and except as may otherwise be required by applicable law,
the Company and Parent each shall (and shall cause its Subsidiaries to) afford
the others officers, employees, counsel, accountants and other authorized
representatives (Representatives)
reasonable access, during normal business hours throughout the period prior to
the Effective Time, to its properties, books, contracts and records and, during
such period, each shall (and shall cause its Subsidiaries to) furnish promptly
to the other all information concerning its business, properties and personnel
as may reasonably be requested, provided that no investigation pursuant
to this Section shall affect or be deemed to modify any representation or
warranty made by the Company, Parent or Merger Sub, and provided, further,
that the foregoing shall not require the Company or Parent to permit any
inspection, or to disclose any information, that in the reasonable judgment of
the Company or Parent, as the case may be, would result in the disclosure of
any trade secrets of third parties or violate any of its obligations with
respect to confidentiality if the Company or Parent, as the case may be, shall
have used commercially reasonable efforts to obtain the consent of such third
party to such inspection or disclosure. 
All requests for information made pursuant to this Section shall be
directed to an executive officer of the Company or Parent, as the case may be,
or such Person as may be designated by either of its officers, as the case may
be.  All such information shall be
governed by the terms of the Confidentiality Agreement and applicable antitrust
and trade regulation laws. 
Notwithstanding the generality of the foregoing, access to Highly
Confidential Information (as defined in the Confidentiality Agreement) shall
be restricted in accordance with the terms of such Confidentiality Agreement. 6.8.          Affiliates. 
Prior to the date of the Stockholders Meeting, Parent shall deliver to
the Company a list of names and addresses of those Persons who are, in the
opinion of the Parent, as of the time of the Stockholders Meeting referred to
in Section 6.4, affiliates of the Company within the meaning of
Rule 145 under the Securities Act. 
The Company shall provide to Parent such information and documents as Parent
shall reasonably request for purposes of preparing such list.  The Company shall exercise its best efforts
to deliver or cause to be delivered to Parent, prior to the date of the
Stockholders Meeting, from each affiliate of the Company identified in the
foregoing list (as the same may be supplemented as aforesaid), a letter dated
as of the Closing Date substantially in the form attached as Exhibit A
(the Affiliates Letter).  Parent shall not be required to maintain the
effectiveness of the S-4 Registration Statement or any other registration
statement under the Securities Act for the purposes of resale of Parent Common
Stock by such affiliates received in the Merger and the certificates
representing  -35- 
    Parent Common Stock received by such affiliates shall
bear a customary legend regarding applicable Securities Act restrictions and
the provisions of this Section. 6.9.          Nasdaq National Market Listing and
De-listing.  Parent shall use
its best efforts to cause the shares of Parent Common Stock to be issued in the
Merger to be approved for quotation on the Nasdaq National Market subject to
official notice of issuance, prior to the Closing Date.  The Surviving Corporation shall use its best
efforts to cause the Shares to no longer be quoted on the Nasdaq National
Market and deregistered under the Exchange Act as soon as practicable
following the Effective Time. 6.10.        Publicity. 
The initial press release shall be a joint press release and thereafter
the Company and Parent each shall consult with each other prior to issuing any
press releases or otherwise making public announcements with respect to the
Merger and the other transactions contemplated by this Agreement and prior to
making any filings with any third party and/or any Governmental Entity with
respect thereto, except as may be required by law or by obligations pursuant to
any listing agreement with or rules of the Nasdaq National Market. 6.11.        Benefits. (a)           Stock
Options and Warrants. (i)            At
the Effective Time, each outstanding Company Option, whether vested or
unvested, shall be deemed to constitute an option to acquire, on the same terms
and conditions as were applicable under such Company Option, the number of
shares of Parent Common Stock equal to the product of the number of shares of
Company Common Stock that were issuable upon exercise of such Company Option
immediately prior to the Effective Time multiplied by the Exchange Ratio
(rounded down to the nearest whole number), at a price per share (rounded up to
the nearest whole cent) equal to (y) the exercise price per Share at which
such Company Option was exercisable immediately prior to the Effective Time
divided by (z) the Exchange Ratio; provided, however, that
in the case of any Company Option to which Section 422 of the Code
applies, the option price, the number of shares purchasable pursuant to such
option and the terms and conditions of exercise of such option shall be
determined in accordance with the foregoing, subject to such adjustments as are
necessary in order to satisfy the requirements of Section 424(a) of the
Code.  At or prior to the Effective
Time, each of the Company and Parent shall make all necessary arrangements and
take all necessary actions to cause the assumption of the unexercised Company
Options and Company Warrants by Parent pursuant to this Section.  Except with respect to Company Options that
accelerate in vesting pursuant to the specific terms of their respective option
award agreements or under the applicable Stock Option Plan, the Company shall
not take any actions that would result in the accelerated vesting or cashing
out of any Company Options.  -36- 
    (ii)           Effective
at the Effective Time, Parent shall assume each Company Option in accordance
with the terms of the Stock Plan under which it was issued and the stock option
agreement by which it is evidenced.  At
or prior to the Effective Time, Parent shall take all corporate action
necessary to reserve for issuance a sufficient number of shares of Parent
Common Stock for delivery upon exercise of Company Options assumed by it in
accordance with this Section.  As soon
as practicable after the Effective Time but in no event later than seven days
after the Closing Date, Parent shall file a registration statement on
Form S-3 or Form S-8, as the case may be (or any successor or other
appropriate forms), or another appropriate form with respect to the Parent
Common Stock subject to such Company Options, and shall use its commercially
reasonable efforts to maintain the effectiveness of such registration statement
(and maintain the current status of the prospectus or prospectuses contained
therein) for so long as such Company Options remain outstanding. (iii)          At
the Effective Time, each outstanding Company Warrant shall be deemed to
constitute a warrant to acquire, on the same terms and conditions as were
applicable under such Company Warrant, the number of shares of Parent Common
Stock equal to the product of the number of shares of Company Common Stock that
were issuable upon exercise of such Company Warrant immediately prior to the
Effective Time multiplied by the Exchange Ratio (rounded up to the nearest
whole number), at a price per share (rounded down to the nearest whole cent)
equal to (y) the exercise price per Share at which such Company Warrant
was exercisable immediately prior to the Effective time divided by (z) the
Exchange Ratio.  At or prior to the
Effective Time, Parent shall take all corporate action necessary to reserve for
issuance a sufficient number of shares of Parent Common Stock for delivery upon
exercise of Company Warrants assumed by it in accordance with this Section. (iv)          The
Board of Directors of the Company and Parent shall, prior to the Effective Time,
take all such actions as may be necessary or appropriate pursuant to
Rule 16b-3(d) and Rule 16b-3(e) to exempt (i) the conversion of Shares and
Company Options into Parent Common Stock or options to purchase Parent Common
Stock, as the case may be, and (ii) the acquisition of Parent Common Stock or
options to purchase Parent Common Stock, as the case may be, pursuant to the
terms of this Agreement by officers and directors of the Company subject to the
reporting requirements of Section 16(a) of the Exchange Act or by
employees of the Company who may become an officer or director of Parent
subject to the reporting requirements of Section 16(a) of the Exchange
Act. (b)           Benefit Plans. 
(i) Subject to any necessary transition periods (during which Parent
will cause the Company to maintain its applicable existing welfare plans), from
and after the Effective Time, Parent shall (x) provide employees of the
Company who become employees of Parent or any of its Subsidiaries or remain
employees of the Company with employee welfare and pension benefits no less
favorable in the aggregate than those provided to similarly situated employees
of Parent and its Subsidiaries, and (y) cause each employee welfare and
pension benefit plan, program,  -37- 
    policy or arrangement of Parent in which employees of
the Company become eligible to participate to take into account for purposes of
eligibility and vesting thereunder the service of such employees with the
Company to the same extent as such service was credited for such purpose by the
Company.  Nothing herein shall limit the
ability of Parent to amend or terminate any of its welfare and pension benefit
plans in accordance with their terms at any time. (ii)           When
employees of the Company become eligible to participate in a medical, dental or
health plan of Parent, to the extent permissible under the applicable benefit
plan, Parent shall cause each such plan to (x) waive any preexisting
condition limitations to the extent such conditions were covered under the
applicable medical, health or dental plans of the Company and (y) waive any
waiting period limitation or evidence of insurability requirement which would
otherwise be applicable to such employee on or after the Effective Time to the
extent such employee had satisfied any similar limitation or requirement under
an analogous Company plan prior to the Effective Time. (c)           2001 ESPP and Company 401-K.  The Company shall take all actions necessary
to cause the 2001 ESPP and the Companys 401(k) Plan to terminate prior to the
Effective Time and to (i) cause each Company employees 2001 ESPP account
balance to be distributed in cash to such employee at the time of plan
termination and (ii) cause each Companys employees 401(k) Plan account
balance to be distributed to such employee (or rolled over into another
qualified plan) at the time of plan termination.  Employees of the Company shall become eligible to participate in
Parents 1998 Employee Stock Purchase Plan, as amended, and 401(k) Savings Plan
on the first date new employees are permitted to join such plans pursuant to
the terms of such plans. 6.12.        Expenses. 
The Surviving Corporation shall pay all charges and expenses, including
those of the Exchange Agent, in connection with the transactions contemplated
in Article IV, and Parent shall reimburse the Surviving Corporation for
such charges and expenses.  Except as
otherwise provided in Section 8.5(b), whether or not the Merger is consummated,
all costs and expenses incurred in connection with this Agreement and the
Merger and the other transactions contemplated by this Agreement shall be paid
by the party incurring such expense, except that expenses incurred in
connection with the filing fee for the S-4 Registration Statement and printing
and mailing the Prospectus/Proxy Statement and the S-4 Registration Statement
shall be shared equally by Parent and the Company. 6.13.        Indemnification; Directors and
Officers Insurance. 
(a) From and after the Effective Time, Parent agrees that it shall
indemnify and hold harmless each present and former director and officer of the
Company, (when acting in such capacity) determined as of the Effective Time
(the Indemnified Parties),
against any costs or expenses (including reasonable attorneys fees),
judgments, fines, losses, claims, damages or liabilities (collectively, Costs) incurred in connection with
any claim, action, suit, proceeding or investigation, whether civil, criminal,
administrative or  -38- 
    investigative (collectively, Claims), arising out of matters
existing or occurring at or prior to the Effective Time (including the
transactions contemplated hereby), whether asserted or claimed prior to, at or
after the Effective Time, to the fullest extent that the Company would have
been permitted under Delaware law and any Claims arising from or related to the
transactions contemplated hereby (and Parent shall also advance expenses as
incurred to the fullest extent permitted under applicable law, provided
the Person to whom expenses are advanced provides an undertaking to repay such
advances if it is ultimately determined that such Person is not entitled to
indemnification); and provided, further, that any determination
required to be made with respect to whether an officers or directors conduct
complies with the standards set forth under Delaware law shall be made by
independent counsel mutually selected by the Surviving Corporation and the
Indemnified Party. (b)           Any
Indemnified Party wishing to claim indemnification under paragraph (a) of
this Section 6.13, upon learning of any such Claim, shall promptly notify
Parent thereof; provided, however, that no delay on the part of the Indemnified
Party in notifying the Parent shall lessen the Indemnified Partys right to
indemnification under this Section unless Parent is prejudiced thereby.  In the event of any such Claim (whether
arising before or after the Effective Time), (i) Parent or the Surviving
Corporation shall have the right to assume the defense thereof and Parent shall
not be liable to such Indemnified Parties for any legal expenses of other
counsel or any other expenses subsequently incurred by such Indemnified Parties
in connection with the defense thereof, so long as (x) such party notifies
in writing the Indemnified Party (and acknowledges in writing) within 10
business days after the Indemnified Party has given the requisite notice to
Parent that such Indemnified Party will be indemnified from and against any
Costs the Indemnified Party may suffer resulting from, arising out of, or
caused by any such Claim without giving effect to the scope of or limitations
on indemnification set forth in Section 6.13(a) (y) such Claim involves
only money damages and does not seek an injunction or other equitable relief
and (z) the settlement of, or an adverse judgment with respect to, such
Claim will not, in the good faith judgment of the Indemnified Party, likely be
detrimental to the reputation, professional stature or business(es) of the Indemnified
Party; provided, further, that such party may not consent to the entry of any
judgment or settlement with respect to such Claim without the prior written
consent of the Indemnified Party, with such consent not to be unreasonably
withheld; (ii) the Indemnified Parties will cooperate in the defense of
any such matter and (iii) Parent shall not be liable for any settlement
effected without its prior written consent, with such consent not to be
unreasonably withheld; and provided, further, that Parent shall
not have any obligation hereunder to any Indemnified Party if and when a court
of competent jurisdiction shall ultimately determine, and such determination
shall have become final, that the indemnification of such Indemnified Party in
the manner contemplated hereby is prohibited by applicable law.  If an Indemnified Party is successful, in
whole or in part, in any proceeding challenging such Indemnified Partys right
to indemnification hereunder, Parent shall pay any and all costs or expenses
(including reasonable attorneys fees) incurred by such Indemnified Party in
connection with such proceeding.  -39- 
    (c)           Parent shall cause the Surviving Corporation to maintain
the Companys existing officers and directors liability insurance (D&O Insurance) for a period of
six years after the Effective Time so long as the annual premium therefor is
not in excess of 150% of the last annual premium paid prior to the date hereof
(the Current Premium); provided,
however, that if the existing D&O Insurance expires, is terminated
or cancelled during such six-year period, the Surviving Corporation will use
its best efforts to obtain as much D&O Insurance as can be obtained for the
remainder of such period for a premium not in excess (on an annualized basis)
of the Current Premium. (d)           If the Surviving Corporation or any of its successors or
assigns (i) shall consolidate with or merge into any other corporation or
entity and shall not be the continuing or surviving corporation or entity of
such consolidation or merger or (ii) shall transfer all or substantially
all of its properties and assets to any individual, corporation or other
entity, then, and in each such case, proper provisions shall be made so that
the successors and assigns of the Surviving Corporation shall assume all of the
obligations set forth in this Section. (e)           The provisions of this Section are intended to be for
the benefit of, and shall be enforceable by, each of the Indemnified Parties,
their heirs and their representatives. 6.14.        Takeover Statute.  If any Takeover Statute is or may become applicable to the Merger
or the other transactions contemplated by this Agreement, each of Parent and
the Company and its Board of Directors shall grant such approvals and take such
actions as are necessary so that such transactions may be consummated as
promptly as practicable on the terms contemplated by this Agreement or by the
Merger and otherwise act to eliminate or minimize the effects of such statute
or regulation on such transactions. 
Nothing in this Section shall require Parent or the Company to take any
action which would be inconsistent with the fiduciary duties of its Board of
Directors as such duties would exist under applicable law in the absence of this
Section. 6.15.        Retention of Certain Employees.  The Company and Parent shall work together
in good faith using reasonable efforts to retain selected key employees of the
Company and its Subsidiaries, including new employment terms as appropriate. 6.16.        Conduct of Merger Sub.  Parent will take all action necessary to
cause Merger Sub to perform its obligations under this Agreement and to
consummate the Merger on the terms and conditions set forth in this Agreement. 6.17.        Rule 144 Reporting.  From and after the Effective Time, unless
and until the earlier of the time that (i) each affiliate of the Company has
disposed of all Parent Common Stock received as merger consideration in the
Merger and (ii) such shares are permitted to be resold pursuant to Rule 145(d)(3)
under the Securities Act, Parent shall make and keep available adequate
current public information (as those terms are understood and defined in Rule
144 under the Securities Act) with respect to Parent.   -40- 
   ARTICLE VII Conditions 7.1.          Conditions to Each Partys
Obligation to Effect the Merger. 
The respective obligation of each party to effect the Merger is subject
to the satisfaction or waiver at or prior to the Effective Time of each of the following
conditions: (a)           Stockholder Approval.  This Agreement shall have been duly approved
by holders of Shares constituting the Company Requisite Vote in accordance with
applicable law and the certificate of incorporation and by-laws of the Company. (b)           H-S-R.  The
waiting period applicable to the consummation of the Merger under the HSR Act
shall have expired or been terminated. (c)           Litigation. 
No court or Governmental Entity of competent jurisdiction shall have
enacted, issued, promulgated, enforced or entered any statute, law, ordinance,
rule, regulation, judgment, decree, injunction or other order (whether
temporary, preliminary or permanent) that is in effect and restrains, enjoins
or otherwise prohibits consummation of the Merger or the other transactions
contemplated by this Agreement (collectively, an Order), and no Governmental Entity shall have
instituted any proceeding seeking any such Order. (d)           S-4.  The S-4 Registration Statement shall have become effective under
the Securities Act.  No stop order
suspending the effectiveness of the S-4 Registration Statement shall have been
issued, and no proceedings for that purpose shall have been initiated or be
threatened, by the SEC. (e)           Blue Sky Approvals.  Parent shall have received all state securities
and blue sky permits and approvals necessary to consummate the transactions
contemplated hereby. 7.2.          Conditions to Obligations of Parent
and Merger Sub.  The obligations
of Parent and Merger Sub to effect the Merger are also subject to the satisfaction
or waiver by Parent at or prior to the Effective Time of the following
conditions: (a)           Representations and Warranties.  The representations and warranties of the
Company set forth in this Agreement shall be true and correct as of the date of
this Agreement (without regard to any materiality qualification contained in
such representation or warranty) and as of the Closing Date (without regard to
any materiality qualification contained in such representation or warranty) as
though made on and as of the Closing Date (except to the extent any such
representation or warranty expressly speaks as of an earlier date); provided,
however, that notwithstanding anything herein to the contrary, this
Section 7.2(a) shall be deemed to have been satisfied even if such
representations or warranties are not so true and correct unless the failure of
such  -41- 
    representations or warranties to be so true and
correct, individually or in the aggregate, has had, or is reasonably likely to
have, a Company Material Adverse Effect. 
Parent shall have received a certificate signed on behalf of the Company
by the President of the Company to such effect. (b)           Performance of Obligations of the
Company.  The Company shall have
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Closing Date, and Parent shall have
received a certificate signed on behalf of the Company by the President of the
Company to such effect. (c)           Absence of Certain Changes.  Since the date hereof, there shall not have
been any change in the financial condition, properties, prospects, business or
results of operations of the Company and its Subsidiaries or any development or
combination of developments that, individually or in the aggregate, has had or
is reasonably likely to have, individually or in the aggregate, a Company
Material Adverse Effect. (d)           Regulatory Consents.  Other than the filing provided for in
Section 1.3, all notices, reports and other filings required to be made
prior to the Effective Time by the Company or Parent or any of their respective
Subsidiaries with, and all consents, registrations, approvals, permits and
authorizations required to be obtained prior to the Effective Time by the
Company or Parent or any of their respective Subsidiaries from, any
Governmental Entity in connection with the execution and delivery of this
Agreement and the consummation of the Merger and the other transactions
contemplated hereby by the Company, Parent and Merger Sub shall have been made
or obtained (as the case may be);provided, however,
that notwithstanding anything herein to the contrary, this Section 7.2(d) shall
be deemed to have been satisfied unless the failure to make such notices, reports
and other filings or obtain such consents, registrations, approvals, permits
and authorizations, individually or in the aggregate, has had, or is reasonably
likely to have, a Company Material Adverse Effect. (e)           Tax Opinion. 
Parent shall have received the opinion of Sullivan & Cromwell,
counsel to Parent, dated the Closing Date, to the effect that the Merger will
be treated for Federal income tax purposes as a reorganization within the
meaning of Section 368(a) of the Code, and that each of Parent, Merger Sub
and the Company will be a party to that reorganization within the meaning of
Section 368(b) of the Code.  In
rendering its opinion, Sullivan & Cromwell may require and rely upon
representations contained in letters from the Company, Parent and Merger Sub
and/or their officers or principal stockholders as are customary for such
opinions. (f)            Accountant Letter.  Parent shall have received, in form and
substance reasonably satisfactory to Parent, from PricewaterhouseCoopers LLP
the comfort letter described in Section 6.5(b).  -42- 
    7.3.          Conditions to Obligation of the
Company.  The obligation of the
Company to effect the Merger is also subject to the satisfaction or waiver by
the Company at or prior to the Effective Time of the following conditions: (a)           Representations and Warranties.  The representations and warranties of Parent
and Merger Sub set forth in this Agreement shall be true and correct as of the
date of this Agreement (without regard to any materiality qualification
contained in such representation or warranty) and as of the Closing Date
(without regard to any materiality qualification contained in such
representation or warranty) as though made on and as of the Closing Date,
(except to the extent any such representation and warranty expressly speaks as
of an earlier date); provided, however, that notwithstanding
anything herein to the contrary, this Section 7.3(a) shall be deemed to
have been satisfied even if such representations or warranties are not so true
and correct unless the failure of such representations or warranties to be so
true and correct, individually or in the aggregate, has had, or is reasonably
likely to have, a Parent Material Adverse Effect.  The Company shall have received a certificate signed on behalf of
Parent by the President of Parent and the President of Merger Sub to such
effect. (b)           Performance of Obligations of
Parent and Merger Sub.  Each of
Parent and Merger Sub shall have performed in all material respects all
obligations required to be performed by it under this Agreement at or prior to
the Closing Date, and the Company shall have received a certificate signed on
behalf of Parent and Merger Sub by the President of Parent to such effect. (c)           Absence of Certain Changes.  Since the date hereof, there shall not have
been any change in the financial condition, properties, prospects, business or
results of operations of the Parent and its Significant Subsidiaries or any
development or combination of developments that, individually or in the
aggregate, has had or is reasonably likely to have, individually or in the
aggregate, a Parent Material Adverse Effect. (d)           Regulatory Consents.  Other than the filing provided for in
Section 1.3, all notices, reports and other filings required to be made
prior to the Effective Time by Parent or any of its Subsidiaries with, and all
consents, registrations, approvals, permits and authorizations required to be
obtained prior to the Effective Time by Parent or any of its Subsidiaries from,
any Governmental Entity in connection with the execution and delivery of this
Agreement and the consummation of the Merger and the other transactions
contemplated hereby by the Company, Parent and Merger Sub shall have been made
or obtained (as the case may be); provided, however, that
notwithstanding anything herein to the contrary, this Section 7.3(d) shall be
deemed to have been satisfied unless the failure to make such notices, reports
and other filings or obtain such consents, registrations, approvals, permits
and authorizations, individually or in the aggregate, has had, or is reasonably
likely to have, a Parent Material Adverse Effect.  -43- 
    (e)           Tax Opinion. 
The Company shall have received the opinion of Kirkland & Ellis,
counsel to the Company, dated the Closing Date, to the effect that the Merger
will be treated for Federal income tax purposes as a reorganization within the
meaning of Section 368(a) of the Code, and that each of Parent, Merger Sub
and the Company will be a party to that reorganization within the meaning of
Section 368(b) of the Code.  In
rendering its opinion, Kirkland & Ellis may require and rely upon
representations contained in letters from the Company, Parent and Merger Sub
and/or their officers or principal stockholders as are customary for such
opinions. (f)            Nasdaq National Market Listing.  The shares of Parent Common Stock issuable
to the Company stockholders and the shares of Parent Common Stock issuable
pursuant to the Company Options and Company Warrants assumed by Parent pursuant
to this Agreement shall have been authorized for listing on the Nasdaq National
Market upon official notice of issuance. (g)           Accountant Letters.  The Company shall have received from
PricewaterhouseCoopers LLP the comfort letter described in Section 6.5(c). ARTICLE VIII Termination 8.1.          Termination by Mutual Consent.  This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, whether before
or after the approval by stockholders of the Company referred to in
Section 7.1(a), by mutual written consent of the Company and Parent by
action of their respective Boards of Directors. 8.2.          Termination by Either Parent or the
Company.  This Agreement may be
terminated and the Merger may be abandoned at any time prior to the Effective
Time by action of the Board of Directors of either Parent or the Company if
(i) the Merger shall not have been consummated by December 31, 2002,
whether such date is before or after the date of approval by the stockholders
of the Company;provided, however,
that if either party determines that additional time is necessary in order to
forestall any action to restrain, enjoin or prohibit the Merger by any federal,
state, local or foreign court or Governmental Entity with jurisdiction over
enforcement of any applicable antitrust laws, the Termination Date may be
extended by such partyto a date
not beyond March 31, 2003 (the Termination
Date); provided, further, that the right to terminate
this Agreement pursuant to this clause (i) shall not be available to any party
that has breached in any material respect its obligations under this Agreement
in any manner that shall have proximately caused the occurrence of the failure
of the Merger to be consummated; (ii) the approval of the Companys
stockholders required by Section 7.1(a) shall not have been obtained at a
meeting duly convened therefor or at any adjournment or postponement thereof;
or (iii) any Order permanently restraining, enjoining or otherwise
prohibiting consummation of the Merger shall become final and  -44- 
    non-appealable (whether before or after the approval
by the stockholders of the Company).  If
a party (the Extending Party)
elects to extendthe Termination
Date pursuant to the first proviso of this Section 8.2, then the other party
(the Non-Extending Party)
may deliver the Extending Party a written update of its Company Disclosure
Letter or Parent Disclosure Letter, as the case may be, within three Business
Days of such election to reflect new facts occurring after the date hereof
together with a written request that the Extending Party confirm that such new
facts shall not be deemed to render any of the Non-Extending Partys
representations and warranties untrue or incorrect as of such date or deemed to
constitute a Company Material Adverse Effect or a Parent Material Adverse
Effect, as the case may be, as of such date. 
If the Extending Party does not provide such confirmation prior to the
fifth Business Day after receiving such written update, then the Termination
Date shall not be extended. 8.3.          Termination by the Company.  This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, whether before
or after the approval by stockholders of the Company referred to in
Section 7.1(a), by action of the Board of Directors of the Company if
there has been a breach of any representation, warranty, covenant or agreement
made by Parent or Merger Sub in this Agreement, or any such representation and
warranty shall have become untrue after the date of this Agreement, such that
Section 7.3(a) or 7.3(b), as applicable, would not be satisfied and such breach
or condition is not curable or, if curable, is not cured within 30 days after
written notice thereof is given by the Company to Parent. 8.4.          Termination by Parent.  This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time by action of the
Board of Directors of Parent if (i) the Board of Directors of the Company
shall have withdrawn or adversely modified its approval or recommendation of
this Agreement or (ii) there has been a breach of any representation,
warranty, covenant or agreement made by the Company in this Agreement, or any
such representation and warranty shall have become untrue after the date of
this Agreement, such that Section 7.2(a) or 7.2(b), as applicable, would not be
satisfied and such breach or condition is not curable or, if curable, is not
cured within 30 days after written notice thereof is given by Parent to the
Company. 8.5.          Effect of Termination and
Abandonment.  (a) In the
event of termination of this Agreement and the abandonment of the Merger
pursuant to this Article VIII, this Agreement (other than as set forth in
Section 9.1) shall become void and of no effect with no liability on the
part of any party hereto (or of any of its directors, officers, employees,
agents, legal and financial advisors or other representatives); provided,
however, except as otherwise provided herein, no such termination shall
relieve any party hereto of any liability or damages resulting from any willful
breach of this Agreement. (b)           If
this Agreement is terminated by Parent pursuant to Section 8.4(i) in the
case of a withdrawal or adverse notification of the Companys Board of
Directors  -45- 
    approval or recommendation of this Agreement in the
absence of an Acquisition Proposal, then the Company shall promptly, but in no
event later than two days after the date of such termination, pay Parent a
termination fee of $5,000,000 and shall promptly, but in no event later than
two days after being notified of such by Parent, pay all of the charges and
expenses, including those of the Exchange Agent, incurred by Parent or Merger
Sub in connection with this Agreement and the transactions contemplated by this
Agreement, in each case payable by wire transfer of same day funds. (c)           In the event that an Acquisition Proposal shall have been
made to the Company or any of its Subsidiaries or any of its stockholders or
any Person shall have publicly announced an intention (whether or not
conditional) to make an Acquisition Proposal with respect to the Company or any
of its Subsidiaries and thereafter this Agreement is terminated by either
Parent or the Company pursuant to Section 8.2(i) or Section 8.2(ii)
or this Agreement is terminated by Parent pursuant to Section 8.4(i)
(other than under the circumstances contemplated in Section 8.5(b)) or
Section 8.4(ii) and thereafter the Company enters into any agreement to
consummate a transaction or series of transactions which, had such agreement
been proposed or negotiated during the term of this Agreement, would have
constituted an Acquisition Proposal (each, a Company Acquisition Agreement), which is publicly
announced within twelve (12) months after the termination of this Agreement and
is consummated within eighteen (18) months after the termination of this Agreement
(whether or not any Company Acquisition Agreement related to an Acquisition
Proposal which had been made or announced at the time of the termination of
this Agreement), then the Company shall, contemporaneously with such
consummation, pay Parent a termination fee of $45,000,000 and shall promptly,
but in no event later than two days after being notified of such by Parent, pay
all of the charges and expenses, including those of the Exchange Agent,
incurred by Parent or Merger Sub in connection with this Agreement and the
transactions contemplated by this Agreement, in each case payable by wire
transfer of same day funds. (d)           The Company acknowledges that the agreements contained in
Sections 8.5(b) and (c) are an integral part of the transactions contemplated
by this Agreement, and that, without these agreements, Parent and Merger Sub
would not enter into this Agreement; accordingly, if the Company fails to
promptly pay the amount due pursuant to Sections 8.5(b) or (c), and, in
order to obtain such payment, Parent or Merger Sub commences a suit which
results in a judgment against the Company for the fee set forth in Section
8.5(b) or (c), the Company shall pay to Parent or Merger Sub its costs and
expenses (including attorneys fees) in connection with such suit, together
with interest on the amount of the fee at the prime rate of Citibank, N.A. in
effect on the date such payment was required to be made.  -46- 
   ARTICLE IX Miscellaneous and General 9.1.          Survival. 
This Article IX and the agreements of the Company, Parent and Merger Sub
contained in Sections 6.6 (Taxation), 6.9 (Nasdaq National Market Listing
and De-listing), 6.11 (Benefits), 6.12 (Expenses), 6.13 (Indemnification;
Directors and Officers Insurance) and 6.17 (Rule 144 Reporting) shall survive
the consummation of the Merger.  This
Article IX, the agreements of the Company, Parent and Merger Sub contained in
Section 6.12 (Expenses), Section 8.5 (Effect of Termination and
Abandonment) and the Confidentiality Agreement shall survive the termination of
this Agreement.  All other
representations, warranties, covenants and agreements in this Agreement shall
not survive the consummation of the Merger or the termination of this
Agreement. 9.2.          Modification or Amendment.  Subject to the provisions of the applicable
law, at any time prior to the Effective Time, the parties hereto may modify or
amend this Agreement, by written agreement executed and delivered by duly
authorized officers of the respective parties. 9.3.          Waiver of Conditions.  The conditions to each of the parties
obligations to consummate the Merger are for the sole benefit of such party and
may be waived by such party in whole or in part to the extent permitted by
applicable law. 9.4.          Counterparts. 
This Agreement may be executed in any number of counterparts, each such
counterpart being deemed to be an original instrument, and all such
counterparts shall together constitute the same agreement. 9.5.          GOVERNING
LAW AND VENUE; WAIVER OF JURY TRIAL.(a)  THIS AGREEMENT SHALL BE DEEMED TO BE MADE IN AND IN ALL
RESPECTS SHALL BE INTERPRETED, CONSTRUED AND GOVERNED BY AND IN ACCORDANCE WITH
THE LAW OF THE STATE OF DELAWARE WITHOUT REGARD TO THE CONFLICT OF LAW
PRINCIPLES THEREOF.  The
parties hereby irrevocably submit to the jurisdiction of the courts of the
State of Delaware and the Federal courts of the United States of America
located in the State of Delaware solely in respect of the interpretation and
enforcement of the provisions of this Agreement and of the documents referred
to in this Agreement, and in respect of the transactions contemplated hereby,
and hereby waive, and agree not to assert, as a defense in any action, suit or
proceeding for the interpretation or enforcement hereof or of any such
document, that it is not subject thereto or that such action, suit or
proceeding may not be brought or is not maintainable in said courts or that the
venue thereof may not be appropriate or that this Agreement or any such
document may not be enforced in or by such courts, and the parties hereto
irrevocably agree that all claims with respect to such action or proceeding
shall be heard and determined in such a Delaware State or Federal court.  The parties hereby consent to and grant any
such court  -47- 
    jurisdiction over the person of such parties and over
the subject matter of such dispute and agree that mailing of process or other
papers in connection with any such action or proceeding in the manner provided
in Section 9.6 or in such other manner as may be permitted by law shall be
valid and sufficient service thereof. (b)           EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY
WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT
ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY
WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT,
OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.  EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (i) NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
TO ENFORCE THE FOREGOING WAIVER, (ii) EACH PARTY UNDERSTANDS AND HAS
CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (iii) EACH PARTY MAKES THIS
WAIVER VOLUNTARILY, AND (iv) EACH PARTY HAS BEEN INDUCED TO ENTER INTO
THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN
THIS SECTION 9.5. 9.6.          Notices.  Any
notice, request, instruction or other document to be given hereunder by any
party to the others shall be in writing and delivered personally or sent by
registered or certified mail, postage prepaid, or by facsimile: if to Parent or
Merger Sub eBay Inc.
2145 Hamilton Avenue
San Jose, California  95125
Attention:  General Counsel
Fax:  (408) 376-7514 with a copy, which
shall not constitute
notice, to: Alison Ressler,
Esq.,
Sullivan & Cromwell,
1888 Century Park East
Los Angeles, California 90067
Fax:  (310) 712-8800  -48- 
   if to the Company PayPal, Inc.
303 Bryant Street
Mountain View, California  94041
Attention:  General Counsel
Fax:  (650) 864-8225 with a copy, which
shall not constitute
notice, to: Richard Porter,
P.C.
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Fax:  (312) 861-2200 or to such other persons or addresses as may be
designated in writing by the party to receive such notice as provided above. 9.7.          Entire Agreement; No Other
Representations.  This Agreement
(including any exhibits hereto), the Company Disclosure Letter, the Parent
Disclosure Letter, two letters from the Company to Parent dated the date hereof
and the most recent Confidentiality Agreement between Parent and the Company
(the Confidentiality Agreement)
constitute the entire agreement, and supersede all other prior agreements,
understandings, representations and warranties both written and oral, among the
parties, with respect to the subject matter hereof. 9.8.          No Third Party Beneficiaries.  Except as provided in Section 6.13
(Indemnification; Directors and Officers Insurance), this Agreement is not
intended to confer upon any Person other than the parties hereto any rights or
remedies hereunder. 9.9.          Obligations of Parent and of the
Company.  Whenever this
Agreement requires a Subsidiary of Parent to take any action, such requirement
shall be deemed to include an undertaking on the part of Parent to cause such
Subsidiary to take such action. 
Whenever this Agreement requires a Subsidiary of the Company to take any
action, such requirement shall be deemed to include an undertaking on the part
of the Company to cause such Subsidiary to take such action and, after the
Effective Time, on the part of the Surviving Corporation to cause such
Subsidiary to take such action. 9.10.        Definitions. 
Each of the terms set forth in Annex A is defined in the Section of
this Agreement set forth opposite such term. 9.11.        Severability. 
The provisions of this Agreement shall be deemed severable and the
invalidity or unenforceability of any provision shall not affect the validity
or enforceability or the other provisions hereof.  If any provision of this Agreement, or the application thereof to
any Person or any circumstance, is invalid or  -49- 
    unenforceable, (a) a suitable and equitable provision
shall be substituted therefor in order to carry out, so far as may be valid and
enforceable, the intent and purpose of such invalid or unenforceable provision
and (b) the remainder of this Agreement and the application of such provision
to other Persons or circumstances shall not be affected by such invalidity or
unenforceability, nor shall such invalidity or unenforceability affect the
validity or enforceability of such provision, or the application thereof, in
any other jurisdiction. 9.12.        Interpretation.  The table of contents and headings herein are for convenience of
reference only, do not constitute part of this Agreement and shall not be
deemed to limit or otherwise affect any of the provisions hereof.  Where a reference in this Agreement is made
to a Section or Exhibit, such reference shall be to a Section of or Exhibit to this
Agreement unless otherwise indicated. 
Whenever the words include, includes or including are used in this
Agreement, they shall be deemed to be followed by the words without
limitation. 9.13.        Assignment. 
This Agreement shall not be assignable by operation of law or otherwise;
provided, however, that at any time prior to the Stockholders
Meeting, Parent may designate, by written notice to the Company, another
wholly-owned direct or indirect subsidiary to be a Constituent Corporation in
lieu of Merger Sub, in which event the parties hereto shall take such actions
as are necessary to effect such assignment and all references herein to Merger
Sub shall be deemed references to such other subsidiary, except that all
representations and warranties made herein with respect to Merger Sub as of the
date of this Agreement shall be deemed representations and warranties made with
respect to such other subsidiary as of the date of such designation.  -50- 
    IN WITNESS WHEREOF, this
Agreement has been duly executed and delivered by the duly authorized officers
of the parties hereto as of the date first written above. PAYPAL, INC.ByName:
  Peter A. ThielTitle:
  Chief Executive Officer and PresidentEBAY INC.ByName:
  Margaret C. WhitmanTitle:
  President, Chief Executive Officer and DirectorVAQUITA ACQUISITION CORP.ByName:
  Michael R. JacobsonTitle:
  Chairman of the Board and Secretary    -51- 
    DEFINED TERMS  Terms
  Section2001 Equity Incentive Plan
  5.1(b)2001 ESPP
  5.1(b)Acquisition Proposal
  6.2Advisers Act
  5.1(j)(iii)Affiliates Letter
  6.8Agreement
  PreambleAsset Management Company
  5.1(j)(iii)Audit Date
  5.1(f)Bankruptcy and Equity
  Exception
  5.1(c)(i)Benefit Plans
  5.1(h)(i)Business Intellectual
  Property
  5.1(q)Business Trade Secrets
  5.1(q)(ix)By-laws
  2.2Certificate
  4.1(a)Charter
  2.1Claims
  6.13(a)Closing
  1.2Closing Date
  1.2Code
  RecitalsCompany
  PreambleCompany Acquisition
  Agreement
  8.5(c)Company Disclosure Letter
  5.1Company Material Adverse
  Effect
  5.1(a)Company Option
  5.1(b)Company Reports
  5.1(e)Company Requisite Vote
  5.1(c)(i)Company Warrants
  5.1(b)Confidentiality Agreement
  9.7Confinity 1999 Plan
  5.1(b)Constituent Corporations
  PreambleContracts
  5.1(d)(iii)Copyrights
  5.1(q)Costs
  6.13(a)Current Premium
  6.13(c)D&O Insurance
  6.13(c)Delaware Certificate of
  Merger
  1.3DGCL
  1.1Effective Time
  1.3Employees
  5.1(h)(i)Employment Agreements
  RecitalsEnvironmental Laws
  5.1(l)   A-1 
    ERISA
  5.1(h)(i)ERISA Affiliate
  5.1(h)(iii)ERISA Plans
  5.1(h)(ii)Excess Shares
  4.2(d)Exchange
  Act
  5.1(c)(ii)Exchange Agent
  4.2(a)Exchange Fund
  4.2(a)Exchange Ratio
  4.1(a)Excluded Share
  4.1(a)Excluded Shares
  4.1(a)Extending Party
  8.2GAAP
  5.1(e)Governmental Entity
  5.1(d)(i)HSR Act
  5.1(d)(i)Indemnified Parties
  6.13(a)Intellectual Property
  5.1(q)Intellectual Property
  Contracts
  5.1(q)IRS
  5.1(h)(ii)IT Assets
  5.1(q)Laws
  5.1(d)(ii)Licensed Intellectual
  Property
  5.1(q)Material Contracts
  5.1(d)(ii)Merger
  RecitalsMerger Sub
  PreambleNon-Extending Party
  8.2Order
  7.1(c)Owned Intellectual
  Property
  5.1(q)Parent
  PreambleParent Audit Date
  5.2(f)Parent Business
  Intellectual Property
  5.2(m)Parent Common Stock
  4.1(a)Parent Companies
  4.1(a)Parent Disclosure Letter
  5.2Parent Intellectual
  Property Contracts
  5.2(m)Parent Material Adverse
  Effect
  5.2(b)Parent Owned Intellectual
  Property
  5.2(m)Parent Preferred Shares
  5.2(c)Parent Reports
  5.2(f)Patents
  5.1(q)Pension Plan
  5.1(h)(ii)Person
  4.2(b)Preferred Shares
  5.1(b)Prospectus/Proxy Statement
  6.3Registered
  5.1(q)Regulatory Laws
  5.1(j)(i)   A-2 
    Representatives
  6.7S-4 Registration Statement
  6.3SEC
  5.1(e)Securities Act
  5.1(d)(i)Share
  4.1(a)Shares
  4.1(a)Significant Subsidiary
  5.2(b)Stockholders Agreements
  RecitalsStockholders Meeting
  6.4Stock Plans
  5.1(b)Subsidiary
  5.1(a)Suit
  5.1(q)(iii)Superior Proposal
  6.2Surviving Corporation
  1.1Takeover Statute
  5.1(k)Tax
  5.1(n)Taxable
  5.1(n)Taxes
  5.1(n)Tax Return
  5.1(n)Termination Date
  8.2Trade Secrets
  5.1(q)Trademarks
  5.1(q)Voting Debt
  5.1(b)X.com 1999 Stock Plan
  5.1(b)    A-3 
             S-1