Exhibit 10.24




 




[*]

CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE

BEEN OMITTED AND HAVE BEEN SEPARATELY FILED WITH THE COMMISSION. CONFIDENTIAL

TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.




 




EXECUTION COPY




 




 




ASSET PURCHASE AGREEMENT




 




 




 




BY AND AMONG




 




 




INTERWAVE COMMUNICATIONS INTERNATIONAL, LTD,




 




 




INTERWAVE ADVANCED COMMUNICATIONS, INC.




 




 




AND




 




 




GBASE COMMUNICATIONS




 




 




 




Dated as of August 16, 2002




 





























 




TABLE OF CONTENTS




 




	

  ARTICLE I DEFINITIONS


  
	

   


  
	

  1.1


  	

  Certain Definitions


  
	

   


  	

   


  
	

  ARTICLE II PURCHASE AND SALE OF ASSETS


  
	

   


  
	

  2.1


  	

  Purchase and Sale of Assets


  
	

  2.2


  	

  Assumption of Liabilities


  
	

  2.3


  	

  Consideration for Purchased Assets


  
	

  2.4


  	

  Sales and Use Taxes


  
	

  2.5


  	

  Bulk Transfer Laws


  
	

  2.6


  	

  Closing


  
	

  2.7


  	

  Nontransferable Assets


  
	

  2.8


  	

  Taking of Necessary Action; Further Action


  
	

  2.9


  	

  Earn-Out


  
	

  2.10


  	

  Consideration Guarantee


  
	

   


  	

   


  
	

  ARTICLE

  III REPRESENTATIONS AND WARRANTIES OF SELLER


  
	

   


  
	

  3.1


  	

  Organization,

  Qualification, and Corporate Power


  
	

  3.2


  	

  Authorization


  
	

  3.3


  	

  Capitalization


  
	

  3.4


  	

  Subsidiaries


  
	

  3.5


  	

  No

  Conflicts


  
	

  3.6


  	

  Consents


  
	

  3.7


  	

  Financial Statements


  
	

  3.8


  	

  Undisclosed Liabilities


  
	

  3.9


  	

  Events Subsequent to Most Recent Fiscal

  Period End


  
	

  3.10


  	

  Legal

  Compliance


  
	

  3.11


  	

  Tax

  Matters


  
	

  3.12


  	

  Title of Properties; Absence of Liens and

  Encumbrances; Condition of Equipment


  
	

  3.13


  	

  Intellectual Property


  
	

  3.14


  	

  Contracts


  
	

  3.15


  	

  Notes and Accounts Receivable


  
	

  3.16


  	

  Power

  of Attorney


  
	

  3.17


  	

  Insurance


  
	

  3.18


  	

  Litigation


  
	

  3.19


  	

  Restrictions on Business Activities


  
	

  3.20


  	

  Product

  Warranty


  
	

  3.21


  	

  Guaranties; Indemnities


  
	

  3.22


  	

  Employees


  
	

  3.23


  	

  Employee Matters and Benefit Plans


  
	

  3.24


  	

  Environment,

  Health, and Safety


  





 




-i-





























 




	

  3.25


  	

  Sufficiency of Assets


  
	

  3.26


  	

  Certain Business Relationships With Seller


  
	

  3.27


  	

  No Adverse Developments


  
	

  3.28


  	

  Fees


  
	

  3.29


  	

  Complete Copies of Materials


  
	

  3.30


  	

  Board

  Approval


  
	

  3.31


  	

  Export Control Laws


  
	

  3.32


  	

  Preferences; Solvency


  
	

  3.33


  	

  Full

  Disclosure


  
	

  3.34


  	

  Information Supplied


  
	

   


  	

   


  
	

  ARTICLE IV REPRESENTATIONS AND WARRANTIES

  OF PARENT AND BUYER


  
	

   


  
	

  4.1


  	

  Organization, Qualification, and Corporate

  Power


  
	

  4.2


  	

  Authorization


  
	

  4.3


  	

  Capitalization


  
	

  4.4


  	

  No Conflicts


  
	

  4.5


  	

  Consents


  
	

  4.6


  	

  SEC

  Filings


  
	

  4.7


  	

  Brokers’

  Fees


  
	

  4.8


  	

  Information Supplied


  
	

  4.9


  	

  Parent Engaged in Active Trade or Business


  
	

  4.10


  	

  Fair Market Value of Parent At Least Equal

  to that of Seller


  
	

  4.11


  	

  Employees


  
	

  4.12


  	

  Employee

  Matters and Benefit Plans.


  
	

   


  	

   


  
	

  ARTICLE V PRE-CLOSING COVENANTS


  
	

   


  	

   


  
	

  5.1


  	

  Operation of Business


  
	

  5.2


  	

  Access to Information


  
	

  5.3


  	

  Notice of Developments


  
	

  5.4


  	

  Shareholder Approval


  
	

  5.5


  	

  No

  Solicitation


  
	

  5.6


  	

  Affiliate Agreements


  
	

  5.7


  	

  Reasonable Efforts


  
	

  5.8


  	

  Notices and Consents


  
	

   


  	

   


  
	

  ARTICLE VI OTHER AGREEMENTS AND COVENANTS


  
	

   


  
	

  6.1


  	

  Confidentiality


  
	

  6.2


  	

  Additional Documents and Further Assurances


  
	

  6.3


  	

  Treatment as Reorganization


  
	

  6.4


  	

  Employee Plans and Benefit Arrangements


  
	

  6.5


  	

  Seller Options and Warrants


  





 




-ii-





























 




	

  6.6


  	

  Benefits Liabilities


  
	

  6.7


  	

  Retained Employees


  
	

  6.8


  	

  Listing of Additional Shares


  
	

  6.9


  	

  Registration of Parent Guarantee Shares


  
	

  6.10


  	

  Shareholder Observer Rights


  
	

  6.11


  	

  Shareholder Representative on Parent Board

  of Directors


  
	

  6.12


  	

  Parent

  Loans


  
	

  6.13


  	

  Liquidation of Seller


  
	

  6.14


  	

  Reasonable Cooperation of Buyer


  
	

  6.15


  	

  Seller Operations


  
	

   


  	

   


  
	

  ARTICLE

  VII CONDITIONS TO THE CLOSING


  
	

   


  	

   


  
	

  7.1


  	

  Conditions to Parent’s and Buyer’s

  Obligation to Close


  
	

  7.2


  	

  Conditions to Seller’s Obligations


  
	

   


  	

   


  
	

  ARTICLE

  VIII INDEMNIFICATION; ESCROW


  
	

   


  
	

  8.1


  	

  Survival of Representations and Warranties


  
	

  8.2


  	

  Indemnification by Seller


  
	

   


  	

   


  
	

  ARTICLE IX TERMINATION


  
	

   


  	

   


  
	

  9.1


  	

  Termination of the Agreement


  
	

  9.2


  	

  Effect of Termination


  
	

   


  	

   


  
	

  ARTICLE X MISCELLANEOUS


  
	

   


  
	

  10.1


  	

  Press Releases and Public Announcements


  
	

  10.2


  	

  No Third-Party Beneficiaries


  
	

  10.3


  	

  Entire Agreement and Modification


  
	

  10.4


  	

  Amendment


  
	

  10.5


  	

  Waivers


  
	

  10.6


  	

  Successors and Assigns


  
	

  10.7


  	

  Counterparts


  
	

  10.8


  	

  Headings


  
	

  10.9


  	

  Notices


  
	

  10.10


  	

  Governing

  Law


  
	

  10.11


  	

  Forum Selection; Consent to Jurisdiction


  
	

  10.12


  	

  Severability


  
	

  10.13


  	

  Expenses


  
	

  10.14


  	

  Construction


  
	

  10.15


  	

  Seller Disclosure Letter


  
	

  10.16


  	

  Attorneys’

  Fees


  
	

  10.17


  	

  Further Assurances


  
	

  10.18


  	

  Time

  of Essence


  





 




-iii-





























 




	

  EXHIBITS


  	

   


  
	

   


  	

   


  
	

  Exhibit A-1


  	

  List of

  Shareholders signing Voting Agreement (omitted)


  
	

  Exhibit A-2


  	

  Form of

  Voting Agreement


  
	

  Exhibit B-1


  	

  List of

  Persons signing Non-Competition Agreements (omitted)


  
	

  Exhibit B-2


  	

  Form of

  Non-Competition Agreement


  
	

  Exhibit C-1


  	

  List of

  Persons signing Offer Letters (omitted)


  
	

  Exhibit C-2


  	

  Form of

  Offer Letter


  
	

  Exhibit D


  	

  Form of

  Lock-Up Agreement


  
	

  Exhibit E


  	

  Form of

  Affiliate Agreement


  
	

  Exhibit F


  	

  Form of

  Registration Rights Agreement


  
	

  Exhibit G


  	

  Form of

  Employee Proprietary Information Agreement


  
	

  Exhibit H


  	

  Form of

  Confirmatory Agreement from Milroute Technologies, Inc.

  ("Milroute") to GBase Communications ("GBase") (omitted)

  - This agreement confirms that Milroute has transferred all technology and

  intellectual property that is necessary or useful for the conduct of GBase's

  business to GBase.


  
	

  Exhibit I


  	

  Form of

  License Agreement by and between Milroute Technologies, Inc. and interWAVE

  Advanced Communications, Inc. ("IWV") (omitted) - This agreement

  memorializes the license grant of certain technology and intellectual

  property owned by Milroute and necessary or useful for the conduct of GBase's

  business to IWV.


  
	

  Exhibit J


  	

  Form of

  Liquidating Trust Agreement and Declaration of Trust (omitted)


  
	

   


  	

   


  
	

  SCHEDULES


  
	

   


  	

   


  
	

  Schedule

  1.1(i)


  	

  Hired

  Employees (omitted)


  
	

   


  	

   


  
	

  Schedule

  1.1(cc)


  	

  Intellectual

  Property (omitted)


  
	

   


  	

   


  
	

  Schedule

  1.1(dd)


  	

  Shareholders

  (omitted)


  
	

   


  	

   


  
	

  Schedule

  2.1(b)(iii)


  	

  Accounts,

  Notes and Other Receivables (omitted)


  
	

   


  	

   


  
	

  Schedule

  2.1(b)(vii)


  	

  Assigned

  Contracts (omitted)


  
	

   


  	

   


  
	

  Schedule

  2.1(c)(ii)


  	

  Excluded

  Bank Accounts (omitted)


  
	

   


  	

   


  
	

  Schedule

  2.2(b)(ii)


  	

  Hired

  Employee Vacation Pay (omitted)


  
	

   


  	

   


  
	

  Schedule

  2.2(b)(iii)


  	

  Accounts

  Payable and Other Expenses (omitted)


  
	

   


  	

   


  
	

  Schedule

  2.2(b)(iv)


  	

  Hired

  Employee June 15, 2002 Payroll (omitted)


  
	

   


  	

   


  
	

  Schedule

  2.2(b)(v)


  	

  Seller Expenses

  (omitted)


  
	

   


  	

   


  
	

  Schedule

  2.2(b)(vi)


  	

  Agilent and

  Telogy Liabilities (omitted)


  
	

   


  	

   


  
	

  Schedule

  2.2(b)(x)


  	

  Additional

  Assumed Liabilities (omitted)


  
	

   


  	

   


  
	

  Schedule

  7.1(f)


  	

  Required

  Consents (omitted)


  
			





 




-iv-





























 




ASSET PURCHASE AGREEMENT




 




THIS ASSET

PURCHASE AGREEMENT (this “Agreement”)

is made and entered into as of August 16, 2002, by and among interWAVE

Communications International, Ltd, a Bermuda corporation (“Parent”), interWAVE Advanced

Communications, Inc., a Delaware corporation and wholly owned subsidiary of

Parent (“Buyer”) and GBase

Communications, a California corporation (“Seller”).  Parent, Buyer and Seller are sometimes

referred to herein individually as a “Party”

and collectively as the “Parties.”




 




RECITALS




 




A.            Seller desires to sell to Buyer, and

Buyer desires to purchase from Seller, on the terms and subject to the

conditions set forth herein, the assets of Seller described herein, and Seller

desires Buyer to assume certain of Seller’s liabilities, which Buyer would

agree to assume on the terms and subject to the conditions set forth herein.




 




B.            The Board of Directors of each of

Parent, Buyer and Seller believes it is in the best interests of its respective

corporation and shareholders that the transactions contemplated hereby be

consummated and, in furtherance thereof, has approved this Agreement and the

transactions contemplated hereby.




 




C.            Parent, Buyer and Seller desire to

make certain representations, warranties, covenants and other agreements in

connection with the transactions contemplated hereby.




 




D.            The parties intend, by executing

this Agreement, to adopt a plan of reorganization within the meaning of Section

368 of the Internal Revenue Code of 1986, as amended (the “Code”), and to cause the transactions

contemplated hereby to qualify as a “reorganization” under the provisions of

Section 368(a)(1)(C) of the Code.




 




E.             Concurrent with the execution of

this Agreement, as a material inducement to Parent and Buyer to enter into this

Agreement, certain shareholders with beneficial ownership of a majority of the

Seller Preferred Stock and a majority of the Seller Common Stock as set forth

on Exhibit A-1 are entering into

voting agreements in the form of Exhibit A-2

hereto (the “Voting Agreements”).




 




F.             As a further inducement to Parent

and Buyer to enter into this Agreement, prior to Closing, certain employees of

Seller set forth on Exhibit B-1

hereto will enter into non-competition agreements in the form of Exhibit B-2 hereto (the “Non-Competition Agreements”), certain

employees of Seller set forth on Exhibit C-1

hereto will countersign offer letters in the form of Exhibit C-2 hereto (the “Offer

Letters”), all shareholders of Seller will enter into Lock-Up

Agreements in the form of Exhibit D

hereto with Parent (“Lock-Up Agreements”),

and all affiliates of Seller will enter into affiliate agreements in the form

of Exhibit E hereto with Parent (the “Affiliate

Agreements”).




 




 





























 




G.            A portion of the Parent Common Stock

otherwise issuable by Parent in connection with the transactions contemplated

by this Agreement shall be placed in escrow by Parent, the release of which

amount shall be contingent upon certain events and conditions.




 




H.            Concurrent with the execution of

this Agreement, as a material inducement to Parent and Buyer to enter into this

Agreement, Milroute Technologies, Inc. (“Milroute”)

will enter into and deliver a Confirmatory Agreement to Seller in the form of Exhibit H hereto (the “Confirmatory Agreement”), confirming the

transfer of certain technology and intellectual property developed and owned by

Milroute that is necessary or useful for the conduct of Seller’s business to

Seller.




 




I.              Concurrent with the execution of

this Agreement, as a material inducement to Parent and Buyer to enter into this

Agreement, Milroute Technologies, Inc. will enter into and deliver a License

Agreement to Buyer in the form of Exhibit I

hereto (the “License Agreement”),

granting the right to use certain technology and intellectual property

developed and owned by Milroute that is necessary or useful for the conduct of

Seller’s business to Buyer.




 




NOW,

THEREFORE, in consideration of the covenants and representations set forth

herein, and for other good and valuable consideration, the parties agree as

follows:




 




ARTICLE

I




 




DEFINITIONS




 




1.1           Certain Definitions.  As used in this Agreement, the following

terms have the following meanings (terms defined in the singular to have a

correlative meaning when used in the plural and vice versa).  Certain other terms are defined in the text

of this Agreement.




 




(a)           “Affiliate”

of a Person means any other Person that directly or indirectly, through one or

more intermediaries, controls, is controlled by, or is under common control

with such Person.




 




(b)           “Business”

means all the business, operations and activities of Seller (as currently

conducted and as contemplated to be conducted by Seller), including developing,

designing, manufacturing, testing, debugging, marketing, selling, distributing,

supporting and repairing the Products.




 




(c)           “Buyer

Restriction” means: (i) any agreement between Buyer and any third

party, other than the Assigned Contracts or any other contracts or agreements

assigned by Seller to Buyer pursuant to this Agreement, or (ii) any other legal

obligation to which Buyer is subject as a result of Buyer’s conduct unrelated

to the operation of the Business and other than as a result of this Agreement,

the Ancillary Agreements or the transactions contemplated herein and therein.




 




2





























 




(d)           “Cash

Equivalents” means certificates of deposit, time deposits, bankers’

acceptances, commercial paper and government securities, in each case, with

maturities of less than one (1) year.




 




(e)           “Derivative

Work” has the meaning ascribed to it under the United States

Copyright Law, Title 17 U.S.C. Sec. 101 et. seq., as the same may be amended

from time to time.




 




(f)            “Escrow

Shares” shall mean 225,000 shares of Parent Common.




 




(g)           “Fourth

Calendar Quarter” shall mean the period beginning October 1, 2003

and terminating on December 31, 2003.




 




(h)           “Governmental Body” means any:




 




(i)            nation, province, state, county,

city, town, village, district, or other jurisdiction of any nature;




 




(ii)           federal, provincial, state, local,

municipal, foreign, or other government;




 




(iii)          governmental or quasi-governmental

authority of any nature (including any governmental agency, branch, department,

official, or entity and any court or other tribunal);




 




(iv)          multi-national organization or body;

or




 




(v)           body exercising, or entitled to

exercise, any administrative, executive, judicial, legislative, police,

regulatory, or taxing authority or power of any nature.




 




(i)            “Hired Employee” shall mean the employees of

Seller set forth on Schedule 1.1(i).




 




(j)            “Intellectual

Property Rights” any or all of the following and all rights in,

arising out of, or associated therewith: 

(i) all United States and foreign patents and utility models and

applications therefor and all reissues, divisions, re-examinations, renewals,

extensions, provisionals, continuations and continuations-in-part thereof, and

equivalent or similar rights anywhere in the world in inventions and

discoveries including without limitation invention disclosures (“Patents”); (ii) all trade secrets and other

rights in know-how and confidential or proprietary information; (iii) all

copyrights, copyright registrations and applications therefor and all other

rights corresponding thereto throughout the world (“Copyrights”); (iv) all mask works, mask work registrations and

applications therefor, and any equivalent or similar rights in semiconductor

masks, layouts, architectures or topology (“Maskworks”);

(v) all industrial designs and any registrations and applications therefor

throughout the world; (vi) all rights in World Wide Web addresses and domain

names and applications and registrations therefor; (vii) all trade names,

logos, common law trademarks and service marks, trademark and service mark

registrations and




 




3





























 




applications therefor and all

goodwill associated therewith throughout the world (“Trademarks”); (viii) any similar, corresponding or equivalent

rights to any of the foregoing anywhere in the world, including, without

limitation, moral rights; and (ix) any other rights in or to any Technology (as

defined in Section 1.1(ff)).




 




(k)           “Issuance

Trading Price” shall mean the average closing sale price of Parent’s

Common Stock as reported by the Nasdaq National Market for each of the ten (10)

consecutive trading days ending two days prior to the date Parent instructs its

transfer agent to issue the Parent Consideration Shares, the Earn-Out Shares or

the Parent Guarantee Shares, as the case may be.




 




(l)            “Key

Employees” shall mean Kiomars Anvari, Mike Parker, James Chen,

Prasanna Kuma, Narender Enduri, Upendra Chintra.




 




(m)          “Lien”

means any mortgage, pledge, lien, charge, claim, security interest, adverse

claims of ownership or use, restrictions on transfer, defect of title or other

encumbrance of any sort, other than (a) mechanic’s, materialmen’s, and similar

liens with respect to any amounts not yet due and payable, and (b) liens for

taxes not yet due and payable.




 




(n)           “Material

Adverse Effect” shall mean any adverse change in the business,  operations, assets (including intangible

assets), liabilities (contingent or otherwise), results of operations or

financial performance, or condition (financial or otherwise) of Parent or any

of its subsidiaries or Seller or any of its subsidiaries, as the case may be,

which is material to Parent and its subsidiaries, taken as a whole, or Seller

and its subsidiaries, taken as a whole, as the case may be.




 




(o)           “Parent

Common Stock” means Common Stock of Parent, $0.001 par value.




 




(p)           “Parent

SEC Reports” has the meaning set forth in Section 5.6.




 




(q)           “Permit”

shall mean the licenses, permits, authorizations, registrations, certificates,

variances, approvals, consents and franchises and similar rights obtained from

governments and any Governmental Body, and any pending applications relating to

the foregoing.




 




(r)            “Parent

Consideration Shares” shall mean (i) 3,700,000 shares of Parent

Common Stock minus (ii) the number of shares equal to (a) 50% of the aggregate

principal amount loaned by Parent to Seller prior to the Closing Date plus all

accrued interest minus $212,000 paid to Qualcomm Incorporated in connection

with the Enterprise Infrastructure Equipment License Agreement, dated as of

November 22, 2000, divided by (b) the Trading Price.




 




(s)           “Person”

means any individual, corporation (including any non-profit corporation),

general or limited partnership, limited liability company, joint venture,

estate, trust, association, organization, labor union, Governmental Body or

other entity.




 




(t)            “Products”

means any and all products developed or under development, manufactured,

marketed or sold by or for Seller, including (i) all designs, packaging,

displays, and




 




4





























 




documentation associated with

or related to any of the foregoing; (iii) all versions of any of the foregoing,

including prior versions, alpha and beta test versions, new versions or

portions thereof currently under development or proposed to be developed; and

(iv) all documentation and training materials related to any of the foregoing.  “Products” shall include without limitation

the following products: indoor pico-BSS, indoor Pico-BTS, outdoor pico-BSS,

Micro-BSS, PC based, PDSN, cPCI based PDSN, and associated management systems.




 




(u)           “Registered

Intellectual Property Rights” all United States, international and

foreign: (i) Patents, including applications therefor (including provisional

applications); (ii) registered Trademarks, applications to register Trademarks,

including intent-to-use applications, or other registrations or applications related

to Trademarks; (iii) Copyrights registrations and applications to register

Copyrights; (iv) Mask Work registrations and applications to register Mask

Works; (v) domain name registrations; and (vi) any other Technology that is the

subject of an application, certificate, filing, registration or other document

issued by, filed with, or recorded by, any state, government or other public or

private legal authority at any time.




 




(v)           “Representatives”

means, with respect to a Person, that Person’s officers, directors, employees,

accountants, counsel, investment bankers, financial advisors, agents and other

representatives.




 




(w)          “SEC”

means the United States Securities and Exchange Commission.




 




(x)            “Seller

Capital Stock” means Seller Common Stock or Seller Preferred Stock.




 




(y)           “Seller

Common Stock” means Common Stock of Seller, $0.001 par value per

share.




 




(z)            “Seller

Options” shall have the meaning ascribed to such term in Section

6.5.




 




(aa)         “Seller

Preferred Stock” means Series A Preferred Stock of Seller, $0.001

par value per share, Series B Preferred Stock of Seller, $0.001 par value per

share and Series C Preferred Stock, $0.001 par value per share.




 




(bb)         “Seller’s

Retained Environmental Liabilities” means any liability, obligation,

judgment, penalty, fine, cost or expense, (including reasonable attorneys’ fees

and environmental consultant costs) of any kind or nature, or the duty to

indemnify, defend or reimburse any Person with respect to: (i) the presence on

or before the Closing Date of any Hazardous Material in the soil, groundwater,

surface water, air or building materials of any Business Facility, or known to

be migrating to a Business Facility as of the Closing Date (“Pre-Existing Contamination”); (ii) the

migration at any time prior to or after the Closing Date of Pre-Existing

Contamination to any other real property, or the soil, groundwater, surface

water, air or building materials thereof; (iii) the exposure of any Person to

Pre-Existing Contamination or to Hazardous Materials in the course of or as a

consequence of any activities of the Business, without regard to whether any

health effect of the exposure has been manifested as of the Closing Date; (iv)

the violation of any Environmental Laws




 




5





























 




by the Seller or its agents,

employees, predecessors in interest, contractors, invitees or licensees prior

to the Closing Date or in connection with the operation of the Business prior

to the Closing Date; (v) any actions or proceedings brought or threatened by

any third party with respect to any of the foregoing; and (vi) any of the

foregoing to the extent they continue after the Closing Date.




 




(cc)         “Seller

Intellectual Property” means any and all Technology and any and all

Intellectual Property Rights, including Seller Registered Intellectual Property

Rights (as defined below), that is or are owned (in whole or in part) by or

exclusively licensed to Seller, including Intellectual Property listed or

described in Schedule 1.1(cc).




 




(dd)         “Shareholders”

shall mean the holders of Seller Capital Stock of record immediately prior to

the Closing as set forth on Schedule 1.1(dd).




 




(ee)         “Six

Month Lowest Share Price” shall mean $0.63 per share.




 




(ff)           “Technology”

shall mean any or all of the following: 

(i) works of authorship including, without limitation, computer

programs, source code and executable code, whether embodied in software,

firmware or otherwise, documentation, designs, files, net lists, records, data

and mask works; (ii) inventions (whether or not patentable), improvements, and

technology; (iii) proprietary and confidential information, including technical

data and customer and supplier lists, trade secrets and know how; (iv)

databases, data compilations and collections and technical data; (v) logos,

trade names, trade dress, trademarks, service marks; (vi) World Wide Web

addresses, domain names and sites; (vii) tools, systems, devices,

specifications, manuals, flow charts, methods, algorithms, formulae and

processes; (viii) technology, technical and business information relating to

the Business or Products; methods and processes; and (viii) all instantiations

of the foregoing in any form and embodied in any media.




 




(gg)         “Trading

Price” shall mean the average closing sale price of Parent’s Common

Stock as reported by the Nasdaq National Market for each of the ten (10)

consecutive trading days ending two days prior to the date Parent instructs its

transfer agent to issue the Parent Consideration Shares, the Earn-Out Shares or

the Parent Guarantee Shares, as the case may be.




 




ARTICLE

II




 




PURCHASE AND SALE OF ASSETS




 




2.1           Purchase and Sale of Assets.




 




(a)           Purchase and Sale.  Upon the terms and subject to the conditions

set forth herein, at the Closing (as defined in Section 2.6(a) hereof), Buyer

shall purchase from Seller, and Seller shall irrevocably sell, convey,

transfer, assign and deliver to Buyer, the Purchased Assets (as defined in

Section 2.1(b) hereof), free and clear of all Liens.




 




(b)           Definition of Purchased Assets.  For all purposes of and under this Agreement,

the term “Purchased Assets” shall

mean, refer to and include all of Seller’s right, title




 




6





























 




and interest in and to all

tangible and intangible assets, properties and rights which are owned, used or

held for use by Seller, including, without limitation, the following to the

extent owned, used or held for use by Seller as of the Closing (but

specifically excluding the Excluded Assets (as defined in Section 2.1(c)

hereof)):




 




(i)            all real property, and any

leaseholds and sub-leaseholds therein, buildings, structures, improvements,

fixtures, furnishings and other fittings thereon, and easements, rights-of-way,

and other appurtenances thereto;




 




(ii)           all tangible personal property

(whether or not located on Seller’s premises), including, without limitation,

all machinery, equipment and tools, furniture and furnishings, computers and

computer supplies, office materials and supplies, inventories of any kind or

nature, raw materials and supplies, manufactured and purchased goods, and all

goods in process and finished goods;




 




(iii)          all accounts, notes and other

receivables, including but not limited to those accounts, notes and other

receivables set forth on Schedule 2.1(b)(iii);




 




(iv)          all prepaid assets and expenses;




 




(v)           all books, records (other than

records relating to Taxes), ledgers, files, documents, correspondence,

customer, supplier, advertiser, circulation and other lists (including

subscribers), invoices and sales data, creative, advertising and other promotional

materials, studies, reports, and other printed or written materials or data;




 




(vi)          all Seller Intellectual Property,

together with all goodwill of Seller appurtenant thereto, licenses and

sublicenses granted and obtained with respect thereto, rights thereunder,

appurtenant, rights to protection of interests therein under the applicable

laws of all jurisdictions;




 




(vii)         all rights under any contracts,

indentures, mortgages, instruments, Liens, guaranties or other agreements of

Seller, including the agreements set forth on Schedule 2.1(b)(vii), but

excluding the Excluded Agreements (the “Assigned

Contracts”);




 




(viii)        all rights under all permits,

authorizations, orders, registrations, certificates, variances, approvals,

consents and franchises or any pending applications of Seller, including

without limitation all Permits to the extent such rights are transferable;




 




(ix)           all claims, actions, deposits,

prepayments, refunds, causes of action, choses in action, rights of recovery,

rights of set off, and rights of recoupment of any kind or character;




 




(x)            all insurance policies, and refunds

paid or payable in connection with the cancellation or discontinuance of any

such insurance policies following the Closing; and




 




7





























 




(xi)           the goodwill associated with the

business of Seller.




 




(c)           Definition of

Excluded Assets.  Notwithstanding

anything to the contrary set forth in this Section 2.1 or elsewhere in this

Agreement, the term “Purchased Assets”

shall not mean, refer to or include the following (collectively, the “Excluded Assets”) to the extent owned, used

or held for use by Seller as of the Closing:




 




(i)            the corporate charter and bylaws,

qualifications to transact business as a foreign corporation, arrangements with

registered agents relating to foreign qualifications, taxpayer and other

identification numbers, seals, minute books, stock transfer books, blank stock

certificates, and other documents relating to the organization, maintenance,

and existence of Seller as a corporation;




 




(ii)           cash on deposit in Seller bank

accounts (including approximately $99,000 in connection with the Lease but not

including any cash on deposit as a result of loans made to Seller by Parent or

Buyer) set forth on Schedule 2.1(c)(ii);




 




(iii)          all refunds of Taxes;




 




(iv)          all claims, actions, deposits,

prepayments, refunds, causes of action, choses in action, rights of recovery,

rights of set off, and rights of recoupment of any kind or nature (including

any such item relating to Taxes) relating to the Excluded Agreements, Excluded

Assets or the Excluded Liabilities;




 




(v)           all directors’ and officers’

insurance policies, and refunds paid or payable in connection with the

cancellation or discontinuance of any such insurance policies following the

Closing;




 




(vi)          all rights of Seller under this

Agreement, any agreement, certificate, instrument or other document executed

and delivered by Seller or Buyer in connection with the transactions

contemplated hereby, or any side agreement between Seller and Buyer entered

into on or after the date hereof;




 




(vii)         all books and records of Seller which

relate to the Taxes, Excluded Agreements or Excluded Assets; provided, however, Seller agrees that it

shall provide Buyer with copies of, or reasonable access to, such books and

records to the extent that any such books and records relate to any of the

Purchased Assets or Assumed Liabilities; and




 




2.2           Assumption of Liabilities.




 




(a)           Assumption.  Upon the terms and subject to the conditions

set forth herein, at the Closing, Buyer shall assume from Seller, and Seller

shall irrevocably convey, transfer and assign to Buyer, all of the Assumed

Liabilities (as defined in Section 2.2(b) hereof).  Buyer shall not assume any Liabilities (as defined in Section

2.2(b) hereof) of Seller pursuant hereto, other than the Assumed Liabilities.




 




8





























 




(b)           Definition of

Assumed Liabilities.  For all

purposes of and under this Agreement, the term “Assumed Liabilities” shall mean, refer to and include the

following liabilities of Seller (but specifically excluding the Excluded

Liabilities (as defined in Section 2.2(c) hereof)) up to $450,000 in the

aggregate:




 




(i)            up to $212,000 in contractual

obligations associated with the Enterprise Infrastructure Equipment License

Agreement, dated November 22, 2000, by and among Qualcomm Incorporated and

Seller, as amended, which has been paid directly to Qualcomm Incorporated by

Buyer;




 




(ii)           up to $45,000 in vacation pay owed to

Hired Employees by Seller as set forth on Schedule 2.2(b)(ii);




 




(iii)          up to $43,000 for accounts payable and

other expenses as set forth on Schedule 2.2(b)(iii);




 




(iv)          up to $48,000 in payroll expenses of

Hired Employees due as of June 15, 2002 as set forth on Schedule 2.2(b)(iv);




 




(v)           up to $50,000 in Seller Expenses (as

defined in Section 10.13) as set forth on Schedule 2.2(b)(v);




 




(vi)          up to $9,000 in liabilities arising

after the Closing Date for (1) the equipment leases dated June 28, 2000 by and

among Agilent Technologies and Seller and the Master Lease Agreement dated

November 30, 2000 by and among Agilent Financial Services and Seller and (2)

the Master Equipment Lease Agreement dated as of May 15, 2001, by and between

TestMart and Seller as set forth on Schedule 2.2(b)(vi);




 




(vii)         all liabilities under Permits arising

after the Closing Date;




 




(viii)        all liabilities related to the Purchased

Assets to the extent arising from or related to any facts or circumstances

occurring after the Closing Date;




 




(ix)           all liabilities related to the Hired

Employees arising from or related to any facts or circumstances occurring after

the Closing Date, except as otherwise expressly provided herein; and




 




(x)            up to $44,000 in liabilities of

Seller (but specifically excluding the Excluded Liabilities as defined in

Section 2.2(c) hereof) set forth in Schedule 2.2(b)(x) under an express

statement (that the Buyer has initialed) to the effect that the definition of

Assumed Liabilities will include the liabilities and obligations so disclosed.




 




(c)           Definition of Excluded Liabilities.  Notwithstanding anything to the contrary set

forth in this Section 2.2 or elsewhere in this Agreement, the term “Assumed Liabilities” shall not mean, refer

to or include the following (collectively, “Excluded

Liabilities”):




 




9





























 




(i)            liabilities in excess of the amounts

set forth in Sections 2.2(b)(i), (ii), (iii), (iv), (v), (vi) and (x);




 




(ii)           all liabilities relating to

agreements not assumed by the Company (the “Excluded

Agreements”);




 




(iii)          any and all liabilities or obligations

of Seller arising from the breach by Seller of any term, covenant or provisions

of any of the Assigned Contracts;




 




(iv)          all liabilities for Taxes of Seller or

Taxes attributable to the ownership or operation of the Purchased Assets for

any taxable period (or portion of any period) ending on or prior to the Closing

Date and, including, without limitation, all Liabilities for Taxes attributable

to the transactions contemplated by this Agreement including any Taxes

resulting from a determination by any Tax authority that the transactions

contemplated hereby do not qualify as a “reorganization” within the meaning of

Section 368(a)(1)(C) of the Code;




 




(v)           all liabilities relating to options,

warrants and other rights to purchase or otherwise acquire shares of capital

stock of Seller;




 




(vi)          all liabilities to shareholders of

Seller in their capacity as such;




 




(vii)         all liabilities of Seller under this

Agreement or any other certificate, instrument or other agreement entered into

in connection with the transactions contemplated hereby;




 




(viii)        except as set forth in Section 2.2(b),

all liabilities for any commitment, obligation, duty or liability (including

but not limited to employee benefits and compensation arrangements) (1) of

Seller to any Hired Employee, (2) to any Hired Employee that arose prior to the

Closing Date, (3) to any employee that is not a Hired Employee;




 




(ix)           Seller’s Retained Environmental

Liabilities;




 




(x)            Benefits Liabilities (as defined in

Section 3.23), whether incurred before, on or after the Closing;




 




(xi)           any and all liabilities, commitments

and obligations of Seller resulting from any litigation, claim, arbitration,

investigation or other proceeding, and all other liabilities, commitments and

obligations arising in connection with all actions, suits, claims,

arbitrations, investigations or proceedings pending on the Closing Date or

arising after the Closing Date;




 




(xii)          all liabilities of Seller or any

successor thereto for any breach of this Agreement by Seller or any agreement

contemplated by this Agreement, or any representation or warranty of Seller

contained herein; and




 




10





























 




(xiii)         all contractual obligations of Seller

associated with the Shadelands Business Park Office Lease (the “Lease”) dated

June 21, 2001 by and among JCS Sharelands LLC (the “Landlord”) and Seller;




 




(xiv)        all liabilities other than Assumed

Liabilities.




 




2.3           Consideration for Purchased Assets.




 




(a)           Consideration.  On the terms and subject to the conditions

set forth in this Agreement, as full payment for the transfer of the Purchased

Assets by Seller to Buyer, at the Closing,




 




(i)            Buyer shall deliver to Seller the

Parent Consideration Shares, less the Escrow Shares;




 




(ii)           Buyer shall assume all of the Assumed

Liabilities pursuant to Section 2.2 hereof, if any remain, or Buyer shall have

paid such liabilities prior to the Closing and Seller shall have acknowledged

such payment in writing prior to the Closing; and




 




(iii)          Buyer shall grant to Seller the right

to receive the Earn-Out Shares, subject to the fulfillment of the conditions

specified in Section 2.9 hereof.




 




The

consideration set forth in Section 2.3(a)(i), (ii) and (iii) shall collectively

be referred to as the “Purchase Price”.




 




(b)           Adjustments to

Parent Common Stock.  The number of

shares of Parent Common Stock issuable in Section 2.3(a) shall be adjusted to

reflect fully the effect of any stock split, reverse stock split, stock

dividend (including any dividend or distribution of securities convertible into

Parent Common Stock or Seller Capital Stock), reorganization, recapitalization

or other like change with respect to Parent Common Stock occurring after the

date hereof and prior to the Closing.




 




(c)           Escrow Deposit.  Notwithstanding the terms of Section 2.3(a)

hereof, subject to and in accordance with the provisions of Article VIII

hereof, at the Closing, Buyer shall cause to be delivered to the Escrow Agent

(as defined in Section 8.2 hereof) a certificate or certificates representing

the Escrow Shares, which shall be registered in the name of the Escrow Agent as

nominee for Seller.  The Escrow Shares

shall be available to compensate Parent, Buyer or any other Buyer Indemnified

Person (as defined in Section 8.2(a) hereof) for any Losses (as defined in

Section 8.2(a) hereof) for which Parent, Buyer or any other Buyer Indemnified

Person is entitled to indemnification from Seller or any successor thereto

pursuant to Article VIII hereof.  To the

extent not used for such purposes, such Escrow Shares shall be released

pursuant to and in accordance with the terms of Article VIII hereof.




 




2.4           Sales and Use Taxes.  Seller shall bear and pay any and all sales, use and transfer

taxes (or other similar taxes) arising out of the transfer of the Purchased

Assets to Buyer pursuant




 




11





























 




hereto (the “Transfer Taxes”).  To the extent permitted by applicable law, Parent and Buyer shall

cooperate fully with Seller in minimizing such Transfer Taxes.  To the extent any tax authority provides

notice to Parent or Buyer of an audit of the Transfer Taxes, Seller shall

promptly assume responsibility for such audit and shall bear and pay when due

any additional Transfer Taxes (plus interest and penalties determined to be due

thereon).




 




2.5           Bulk Transfer Laws.  Parent, Buyer and Seller shall waive, to the

fullest extent permitted by applicable law, any and all bulk transfer or

similar laws that may apply to the transactions contemplated by this Agreement.




 




2.6           Closing.




 




(a)           Closing Place, Time and Date.  Unless this Agreement is earlier terminated

pursuant to Section 9.1 hereof, the closing of the transactions contemplated by

this Agreement (the “Closing”)

shall be held at the offices of Wilson Sonsini Goodrich & Rosati,

Professional Corporation, One Market Street, Spear Tower, Suite 3300, San

Francisco, CA  94105, at 10:00 a.m. on

the date which is two (2) business days following the satisfaction or, if

permitted pursuant to the terms of Article VII hereof, waiver of the conditions

to Closing set forth in Article VII hereof, or at such other place and such

other time and/or date as the parties hereto shall mutually agree (the actual

date on which the Closing shall occur being referred to herein as the “Closing Date”).




 




(b)           Closing

Deliveries.




 




(i)            At the Closing,

Buyer shall deliver, or cause to be delivered, to Seller or the Escrow Agent,

as applicable, the following, dated as of the Closing Date and executed for and

on behalf of Parent or Buyer (as applicable) by a duly authorized officer

thereof:




 




(a)           one or more instruments of assignment

and assumption, in customary form and substance reasonably satisfactory to

Buyer and Seller and their respective counsel;




 




(b)           any and all other instruments, certificates

and agreements contemplated by Article VII hereof or as Seller may reasonably

request in order to effectively make Buyer responsible for all Assumed

Liabilities pursuant hereto to the fullest extent permitted by applicable law.




 




(ii)           At the Closing,

Seller shall deliver, or cause to be delivered, to Buyer the following, dated

as of the Closing Date and executed for and on behalf of Seller by a duly

authorized officer thereof:




 




(a)           a bill of sale, in customary form and

substance reasonably satisfactory to Buyer and Seller and their respective

counsel;




 




(b)           one or more instruments and

assumption, in customary form and substance reasonably satisfactory to Buyer

and Seller and their respective counsel;




 




12





























 




(c)           an instrument of assignment of

Patents, in customary form and substance reasonably satisfactory to Buyer and

Seller and their respective counsel;




 




(d)           an instrument of assignment of

Copyrights, in customary form and substance reasonably satisfactory to Buyer

and Seller and their respective counsel, and for each Product containing

copyrightable work for which Seller has not registered the Copyright if any, an

application, in customary form and substance reasonably satisfactory to Buyer

and Seller and their respective counsel, to register such Copyright, along with

the required extracts of the Product to accompany such application;




 




(e)           an instrument of assignment of

Trademarks, in customary form and substance reasonably satisfactory to Buyer

and Seller and their respective counsel; and




 




(f)            any and all other instruments,

certificates and agreements contemplated by Article VII hereof or as Buyer may

reasonably request in order to effectively transfer to Buyer all of the

Purchased Assets pursuant hereto to the fullest extent permitted by applicable

law.




 




(c)           Closing.  The effective date of the transfer of the

Purchased Assets from Seller to Buyer pursuant hereto shall be 12:01 a.m. of

the Closing Date (the “Closing”).  From and after the Closing, the business of

Seller shall be conducted and the Purchased Assets shall be held for the

account and benefit, and at the risk, of Buyer.




 




2.7           Nontransferable Assets.  To the extent that any Purchased Asset or

Assumed Liability to be sold, conveyed, assigned, transferred, delivered or

assumed to or by Buyer pursuant hereto, or any claim, right or benefit arising

thereunder or resulting therefrom, is not capable of being sold, conveyed,

assigned, transferred or delivered without the approval, consent or waiver of the

issuer thereof or the other party thereto, or any third person (including a

government or governmental unit), or if such sale, conveyance, assignment,

transfer or delivery or attempted sale, conveyance, assignment, transfer or

delivery would constitute a breach or termination right thereof or a violation

of any law, decree, order, regulation or other governmental edict, except as

expressly otherwise provided herein, this Agreement shall not constitute a

sale, conveyance, assignment, transfer or delivery thereof, or an attempted

sale, conveyance, assignment, transfer or delivery thereof absent such

approvals, consents or waivers.  If any

such approval, consent or waiver shall not be obtained, or if an attempted assignment

of any such Purchased Asset or the assumption of any Assumed Liability by Buyer

would be ineffective so that Buyer would not in fact receive all such Purchased

Assets or assume all such Assumed Liabilities pursuant hereto, Seller, Buyer

and Parent shall cooperate in a mutually agreeable arrangement under which

Buyer would obtain the benefits and assume the obligations of such Purchased

Assets and Assumed Liabilities in accordance with this Agreement, including

subcontracting, sub-licensing, or sub-leasing to Buyer, or under which Seller,

at Buyer’s expense, would enforce for the benefit of Buyer, with Buyer assuming

all of Seller’s obligations thereunder, any and all rights of Seller against a

third party thereto.  From and after the

Closing, Seller shall promptly pay to Buyer when received all monies received

by Seller under any Purchased Asset or any claim or right or any benefit

arising thereunder, except to the extent the same represents an Excluded Asset

hereunder, and Buyer shall promptly pay, perform and discharge when




 




13





























 




due all Assumed

Liabilities.  The failure of Seller to

obtain any third party consent hereunder shall not affect the Purchase Price if

the Closing shall occur.




 




2.8           Taking of Necessary Action; Further

Action.  From time to time after

the Closing Date, at the request of either Party hereto and at the expense of

such Party, the Parties hereto shall execute and deliver such other instruments

of sale, transfer, conveyance, assignment and confirmation and take such action

as Buyer may reasonably determine is necessary to transfer, convey and assign

to Buyer, and to confirm Buyer’s title to or interest in the Purchased Assets,

to put Buyer in actual possession and operating control thereof and to assist

Buyer in exercising all rights with respect thereto.  Seller hereby constitutes and appoints Buyer and its successors

and assigns as its true and lawful attorney in fact in connection with the

transactions contemplated by this instrument, with full power of substitution,

in the name and stead of Seller but on behalf of and for the benefit of Buyer

and its successors and assigns, to demand and receive any and all of the

assets, properties, rights and business hereby conveyed, assigned, and

transferred or intended so to be, and to give receipt and releases for and in

respect of the same and any part thereof, and from time to time to institute

and prosecute, in the name of Seller or otherwise, for the benefit of Buyer or

its successors and assigns, proceedings at law, in equity, or otherwise, which

Buyer or its successors or assigns reasonably deem proper in order to collect

or reduce to possession or endorse any of the Purchased Assets and to do all

acts and things in relation to the Purchased Assets which Buyer or its

successors or assigns reasonably deem desirable.




 




2.9           Earn-Out.




 




(a)           Earn-Out Escrow Fund.  As soon as practicable after the Closing,

the Earn-Out Shares will be deposited with Wells Fargo Corporate Trust

Services, as escrow agent (the “Earn-Out

Escrow Agent”), without any act by Seller, such deposit to

constitute an earn-out escrow fund (the “Earn-Out

Escrow Fund”) to be governed by the terms set forth herein.




 




(b)           Escrow Period; Distribution.  The Earn-Out Escrow Fund shall remain in

existence during the period following the Closing until the Earn-Out Shares

have been distributed according to this Section 2.9 (the “Earn-Out Escrow Period”).




 




(i)            As soon as practicable following

receipt of a Final Determination, the Earn-Out Escrow Agent shall deliver (1)

the First Earn-Out Shares to Seller or any successor thereto (including the

Trust) and (2) the number of shares equal to the Aggregate First Earn-Out

Shares minus the First Earn-Out Shares to Parent.




 




(ii)           As soon as practicable following

receipt of a Final Determination, the Earn-Out Escrow Agent shall deliver (1)

the Second Earn-Out Shares to Seller or any successor thereto (including the

Trust) and (2) the number of shares equal to the Aggregate Second Earn-Out

Shares minus the Second Earn-Out Shares to Parent.




 




(c)           Determination of First Earn-Out

Escrow Shares and Second Earn-Out Escrow Shares.  Parent shall deliver to Seller or any successor thereto

(including the Trust) (i) within 60 days following First Earn-Out Measurement

Date, a statement setting forth the number of First Earn-Out




 




14





























 




Shares and (ii) within 60 days

following Second Earn-Out Measurement Date, a statement setting forth the

number of Second Earn-Out Shares, each as determined and calculated by Parent

pursuant to this Agreement (the “Calculations”).  Parent shall, upon request, make available

during normal business hours all books and records supporting the Calculations

for review by Seller or any successor thereto (including the Trust).  In the event that Seller or any successor

thereto (including the Trust) disputes any portion of the Calculations, Seller

or any successor thereto (including the Trust) shall notify Parent in writing

(an “Earn-Out Dispute Notice”) of

the amount, nature and basis of such dispute, within thirty (30) calendar days

after delivery of the Calculations.  If

Seller or any successor thereto (including the Trust) does not provide an

Earn-Out Dispute Notice during such period, then the Calculations delivered by

Parent shall be binding and conclusive upon Seller or any successor thereto

(including the Trust), the Shareholders and all parties to this Agreement.  In the event of a timely Earn-Out Dispute

Notice, Seller or any successor thereto (including the Trust) and Parent shall

first endeavor to resolve such dispute among themselves.  If Seller or any successor thereto

(including the Trust) and Parent are unable to resolve the dispute within

forty-five (45) calendar days, the dispute, including, without limitation, each

party’s proposed final calculation (“Final

Calculation”) at the end of such 45-day period (which may differ

from the Calculations or any amounts set forth in the Earn-Out Dispute Notice),

shall be submitted to arbitration in San Francisco County, California, under

the rules then in effect of the San Francisco Judicial Arbitration and

Mediation Service (“JAMS”).  Each Party to any arbitration pursuant to

this Section 2.9 shall pay its own expenses; the fees of the arbitrator and the

administrative fee of JAMS shall be borne equally by Parent and Seller or any

successor thereto (including the Trust). 

The determination in the arbitration as to the resolution of any dispute

shall be binding and conclusive upon Seller or any successor thereto (including

the Trust), the Shareholders and all parties to this Agreement, absent fraud.




 




(d)           Definitions.




 




(i)            “Cause”

shall mean (i) a material act of dishonesty by a Key Employee in connection

with the Key Employee’s responsibilities as an employee, (ii) a Key Employee’s

conviction of, or plea of nolo contendere to, a felony, or (iii) a Key

Employee’s unsatisfactory performance of his duties hereunder as reasonably

determined by the Key Employee’s supervisor; provided, however, that such

duties do not materially deviate from such Key Employee’s prior duties,

experience or background.




 




(ii)           “Constructive

Termination” shall mean (a) a material reduction in the Key

Employee’s cash compensation as of the day following the Closing Date paid on

the Company’s standard salary payment schedule, less applicable withholding or

benefits, (b) a material reduction in authority, status, obligations or

responsibilities as of the day following the Closing Date, or (c) the

requirement that a Key Employee relocates to more than 50 miles from Seller’s

headquarters as of the day following the Closing Date.









(iii)          “Earn-Out

Shares” shall mean 800,000 shares of Parent Common Stock, of which

560,000 shares shall be designated “Aggregate

First Earn-Out Shares” and 240,000 shares shall be designated “Aggregate Second Earn-Out Shares”.




 




15





























 




(iv)          “Final

Determination” shall mean a determination of the number of First

Earn-Out Shares or Second Earn-Out Shares, as the case may be, in accordance

with this Section 2.9 as evidenced by the written agreement of Parent and

Seller or any successor thereto (including the Trust), the written statement of

Parent indicating that neither Seller nor any successor thereto (including the

Trust) submitted an Earn-Out Dispute Notice within thirty (30) calendar days

after delivery of the Calculations or the written decision of the arbitrator as

described in Section 2.9(d).




 




(v)           “First

Earn-Out Measurement Date” shall mean the date one year following

the Closing Date.




 




(vi)          “First

Earn-Out Shares” shall equal the sum of the numbers of shares set

forth below to the right of each Key Employee’s name; provided, however that a number shall not

be included in such calculation in the event that the corresponding Key

Employee (1) voluntarily terminates his employment with Buyer prior to the

First Earn-Out Measurement Date, (2) terminates his employment with Buyer under

circumstances that constitute a Constructive termination prior to the First

Earn-Out Measurement Date or (3) is terminated by Parent for Cause prior to the

First Earn-Out Measurement Date.




 




(a)           [ * * * ]




 




(b)           [ * * * ]




 




(c)           [ * * * ]




 




(d)           [ * * * ]




 




(e)           [ * * * ]




 




(f)            [ * * * ]




 




(vii)         “Second

Earn-Out Measurement Date” shall mean the date eighteen months

following the Closing Date.




 




(viii)        “Second

Earn-Out Shares” shall equal the sum of the numbers of shares set

forth below to the right of each Key Employee’s name; provided, however that a number shall not

be included in such calculation in the event that the corresponding Key

Employee (1) voluntarily terminates his employment with Buyer prior to the

Second Earn-Out Measurement Date, (2) terminates his employment with Buyer

under circumstances that constitute a Constructive termination prior to the

Second Earn-Out Measurement Date or (3) is terminated by Parent for Cause prior

to the Second Earn-Out Measurement Date.




 




(a)           [ * * * ]




 




(b)           [ * * * ]




 




16





























 




(c)           [ * * * ]




 




(d)           [ * * * ]




 




(e)           [ * * * ]




 




(f)            [ * * * ]




 




(e)           Protection of

Escrow Fund.  The Earn-Out Escrow

Agent shall hold and safeguard the Earn-Out Escrow Fund during the Earn-Out

Escrow Period, shall treat such fund as a trust fund in accordance with the

terms of this Agreement and not as the property of Buyer or Parent and shall

hold and dispose of the Earn-Out Escrow Fund only in accordance with the terms

hereof.




 




(f)            Distributions;

Voting.




 




(i)            Any shares of Parent Common Stock or

other equity securities issued or distributed by Parent (including shares

issued upon a stock split, stock dividend, recapitalization or other similar

event) (“New Earn-Out Shares”) in

respect of Parent Common Stock in the Earn-Out Escrow Fund which have not been

released from the Earn-Out Escrow Fund shall be added to the Earn-Out Escrow

Fund and become a part thereof.  New

Earn-Out Shares issued in respect of shares of Parent Common Stock which have

been released from the Earn-Out Escrow Fund shall not be added to the Earn-Out

Escrow Fund but shall be distributed to Seller or any successor thereto

(including the Trust).  Cash dividends

on Parent Common Stock shall not be added to the Earn-Out Escrow Fund but shall

be distributed to Seller or any successor thereto (including the Trust).




 




(ii)           Seller or any successor thereto

(including the Trust) shall be shown as the record owner of Parent Common Stock

on Parent’s books and records and shall have voting rights with respect to the

shares of Parent Common Stock held in the Escrow Fund on behalf of Seller or

any successor thereto  (including the

Trust) (and on any voting securities added to the Escrow Fund in respect of

such shares of Parent Common Stock).




 




(g)           Seller’s Agent.  After the Closing, Seller or any successor

thereto (including the Trust) may appoint an agent to act on its behalf with

respect to this Section 2.9, with the prior written consent of Parent, which

consent shall not be unreasonably withheld.




 




(h)           Earn-Out Escrow

Agent’s Duties.




 




(i)            The Earn-Out Escrow Agent’s duties

are purely ministerial in nature, and the Earn-Out Escrow Agent shall be obligated

only for the performance of such duties as are specifically set forth in this

Agreement and as set forth in any additional written escrow instructions which

the Earn-Out Escrow Agent may receive after the date of this Agreement which

are signed by an officer of Parent and the Seller or any successor thereto

(including the Trust), and may rely and shall be protected in relying or

refraining from acting on any instrument reasonably believed to be genuine and

to have been signed or presented by the proper Party or Parties.  The Earn-Out Escrow Agent shall not be

liable for any action taken, suffered or omitted hereunder as Earn-Out Escrow




 




17





























 




Agent absent gross negligence

or willful misconduct, and the Earn-Out Escrow Agent shall be fully protected

and shall incur no liability for any action taken, suffered or omitted pursuant

to the advice of counsel.




 




(ii)           The Earn-Out Escrow Agent is hereby

expressly authorized to disregard any and all warnings given by any of the

Parties hereto or by any other Person, excepting only orders or process of

courts of law, and is hereby expressly authorized to comply with and obey

orders, judgments or decrees of any court. 

In case the Earn-Out Escrow Agent obeys or complies with any such order,

judgment or decree of any court, the Earn-Out Escrow Agent shall not be liable

to any of the Parties hereto or to any other Person by reason of such

compliance, notwithstanding any such order, judgment or decree being

subsequently reversed, modified, annulled, set aside, vacated or found to have

been entered without jurisdiction.




 




(iii)          The Earn-Out Escrow Agent shall not be

liable in any respect on account of the identity, authority or rights of the

Parties executing or delivering or purporting to execute or deliver this

Agreement or any documents or papers deposited or called for hereunder.




 




(iv)          The Earn-Out Escrow Agent shall not be

liable for the expiration of any rights under any statute of limitations with

respect to this Agreement or any documents deposited with the Earn-Out Escrow

Agent.




 




(v)           In performing any duties under the

Agreement, the Earn-Out Escrow Agent shall not be liable to any Party for

damages, claims, liabilities, losses, or expenses, except for gross negligence

or willful misconduct on the part of the Earn-Out Escrow Agent (which for all

purposes of any section of this Agreement as it pertains to the Earn-Out Escrow

Agent shall be finally determined by a court of competent jurisdiction).  The Earn-Out Escrow Agent shall not incur

any such liability for (A) any action taken, suffered or omitted in good faith,

or (B) any action taken, suffered or omitted in reliance upon any instrument,

including any written statement or affidavit provided for in this Agreement that

the Earn-Out Escrow Agent shall in good faith believe to be genuine, nor will

the Earn-Out Escrow Agent be liable or responsible for forgeries, fraud,

impersonations, or determining the scope of any representative authority.  In addition, the Earn-Out Escrow Agent may

consult with legal counsel in connection with Earn-Out Escrow Agent’s duties

under this Agreement and shall be fully protected in any action taken,

suffered, or omitted by it in accordance with the advice of counsel.  The Earn-Out Escrow Agent is not responsible

for determining and verifying the authority of any Person acting or purporting

to act on behalf of any Party to this Agreement.  The Earn-Out Escrow Agent shall have the right to perform any of

its duties hereunder through agents, custodians or nominees, and the Earn-Out

Escrow Agent shall not be liable or responsible for any misconduct or

negligence on the part of any such agent, custodian or nominee absent gross

negligence, willful misconduct or bad faith on the part of the Earn-Out Escrow

Agent in the selection and continued employment thereof.




 




(vi)          If any controversy arises between the

Parties to this Agreement, or with any other party, concerning the subject

matter of this Agreement, its terms or conditions, the Earn-Out Escrow Agent

will not be required to determine the controversy or to take any action

regarding it.  The Earn-Out Escrow Agent

may hold all documents and funds and may wait for




 




18





























 




settlement of any such

controversy by final appropriate legal proceedings or other means as, in the

Earn-Out Escrow Agent’s discretion, the Earn-Out Escrow Agent may be required,

despite what may be set forth elsewhere in this Agreement.  In such event, the Earn-Out Escrow Agent

will not be liable for damages. 

Furthermore, the Earn-Out Escrow Agent may at its option, file an action

of interpleader requiring the Parties to answer and litigate any claims and

rights among themselves.  The Earn-Out

Escrow Agent is authorized to deposit with the clerk of the court all documents

and funds held in escrow, except all cost, expenses, charges and reasonable

attorney fees incurred by the Earn-Out Escrow Agent through such time and which

the Parties jointly and severally agree to pay.  Upon initiating such action, the Earn-Out Escrow Agent shall be

fully released and discharged of and from all obligations and liability imposed

by the terms of this Agreement.




 




(vii)         The Parties and their respective

successors and assigns agree jointly and severally to indemnify and hold

Earn-Out Escrow Agent harmless against any and all losses, claims, costs,

fines, settlement judgments, penalties, demands, damages, liabilities, and

expenses, including reasonable costs of investigation, counsel fees, including

allocated costs of in-house counsel and disbursements that may be imposed on

Earn-Out Escrow Agent or incurred by Earn-Out Escrow Agent in connection with

the execution of this Agreement or the performance of its duties under this

Agreement, including but not limited to any litigation arising from this

Agreement or involving its subject matter other than arising out of its

negligence or willful misconduct.




 




(viii)        The Earn-Out Escrow Agent may resign at

any time upon giving at least thirty (30) days written notice to the Parties; provided, however, that no such

resignation shall become effective until the appointment of a successor escrow

agent which shall be accomplished as follows: 

the Parties shall use their best efforts to mutually agree on a

successor escrow agent within thirty (30) days after receiving such

notice.  If the Parties fail to agree

upon a successor escrow agent within such time, the Earn-Out Escrow Agent shall

have the right to appoint a successor escrow agent authorized to do business in

the State of California.  The successor

escrow agent shall execute and deliver an instrument accepting such appointment

and it shall, without further acts, be vested with all the estates, properties,

rights, powers, and duties of the predecessor escrow agent as if originally

named as escrow agent.  Upon appointment

of a successor escrow agent, the Earn-Out Escrow Agent shall be discharged from

any further duties and liability under this Agreement.  Alternatively, if a successor escrow agent

is not appointed within the above time frames, then the Earn-Out Escrow Agent

may apply to a court of competent jurisdiction for appointment of a successor

escrow agent.




 




(ix)           In no event shall the Earn-Out Escrow

Agent be liable for special, indirect, incidental, punitive or consequential

loss or damage of any kind whatsoever (including but not limited to lost

profits) even if the Earn-Out Escrow Agent has been advised of the likelihood

of such loss or damage and regardless of the form of action.




 




(x)            Any Person into which the Earn-Out

Escrow Agent may be merged or converted or with which it may be consolidated,

or any Person resulting from any merger, conversion or consolidation to which

the Earn-Out Escrow Agent in its individual capacity shall be a




 




19





























 




party, or any Person to which

substantially all the business of the Earn-Out Escrow Agent may be transferred,

shall be the Earn-Out Escrow Agent under this Agreement without further act.




 




(i)            Fees.  All fees of the Earn-Out Escrow Agent for

performance of its duties hereunder shall be paid by Parent in accordance with

the schedule of the Earn-Out Escrow Agent delivered to Parent at or prior to

the execution of this Agreement.  Such

fee schedule may be amended or modified upon mutual consent of Parent and the

Earn-Out Escrow Agent.  It is understood

that the fees and usual charges agreed upon for services of the Earn-Out Escrow

Agent shall be considered compensation for ordinary services as contemplated by

this Agreement.  In the event that the

conditions of this Agreement are not promptly fulfilled, or if the Earn-Out

Escrow Agent renders any service not provided for in this Agreement, or if the

Parties request a substantial modification of its terms, or if any controversy

arises, or if the Earn-Out Escrow Agent is made a party to, or intervenes in,

any litigation pertaining to the Escrow Fund or its subject matter, the

Earn-Out Escrow Agent shall be reasonably compensated for such extraordinary

services and reimbursed for all costs, attorney’s fees, including allocated

costs of in-house counsel, and expenses occasioned by such default, delay,

controversy or litigation and the Earn-Out Escrow Agent shall not be obligated

to take any such action unless and until it is reasonably satisfied that it

will receive such compensation and reimbursement.




 




(j)            Notwithstanding anything to the

contrary in this Agreement, the Earn-Out Escrow Agent shall perform only those

duties and functions as set forth in Section 2.9 of this Agreement, shall not

have any other obligations under any other section of this Agreement

whatsoever, and shall not be responsible for, or chargeable with, knowledge of

any other terms or other provisions contained in this Agreement or any other

separate agreement(s) and understanding(s) between the parties thereto.  The Earn-Out Escrow Agent shall not be

liable for the accuracy of any calculations or the sufficiency of any funds or

shares of stock for any purpose.




 




2.10         Consideration Guarantee.




 




(a)           In the event the average closing sale

price of a share of Parent Common Stock, as reported on the Nasdaq National

Market, in the Fourth Calendar Quarter (the “Fourth

Quarter Average Share Price”) is less than $2 per share, the Parent

shall issue to Seller or any successor thereto (including the Trust) the Parent

Guarantee Amount (as defined in Section 2.10(d)) in accordance with the

provisions of this Section 2.10.




 




(b)           Within ten (10) calendar days of

termination of the Fourth Calendar Quarter, Seller or any successor thereto

(including the Trust) shall provide evidence to Parent in a form satisfactory

to Parent of the number of Seller Guarantee Shares (as defined in Section

2.10(d)) (the “Seller Guarantee Notice”).  Parent will deliver to Seller or any

successor thereto (including the Trust) (i) within ten (10) calendar days

following the actual receipt of the Seller Guarantee Notice, Parent shall

provide a statement setting forth the Parent Guarantee Amount, as determined

and calculated by Parent pursuant to this Agreement (the “Guarantee Calculations”).  Parent shall, upon request, make available

during normal business hours all books and records supporting the Guarantee

Calculations for review by the Seller or any successor thereto (including the

Trust).  In the event that Seller or any

successor thereto (including the Trust) disputes any portion of the




 




20





























 




Guarantee Calculations, Seller

or any successor thereto (including the Trust) shall notify Parent in writing

(a “Guarantee Dispute Notice”) of

the amount, nature and basis of such dispute, within ten (10) calendar days

after delivery of the Guarantee Calculations. 

If Seller or any successor thereto (including the Trust) does not

provide Guarantee Dispute Notice during such period, then the Guarantee

Calculations delivered by Parent shall be binding and conclusive upon Seller or

any successor thereto (including the Trust), the Shareholders and all parties

to this Agreement and the Parent shall (i) direct its transfer agent to issue

to Seller or any successor thereto (including the Trust) the applicable number

of Parent Guarantee Shares and (ii) issue to Seller or any successor thereto

(including the Trust) the applicable portion of the Parent Guarantee Cash, if

any, both as determined pursuant to this Section 2.10, within ten (10) calendar

days.  In the event of a timely

Guarantee Dispute Notice, Seller or any successor thereto (including the Trust)

and Parent shall first endeavor to resolve such dispute among themselves.  If Seller or any successor thereto

(including the Trust) and Parent are unable to resolve the dispute within

thirty (30) calendar days, the dispute, including, without limitation, each

party’s proposed final calculation (“Final

Guarantee Calculation”) of the Parent Guarantee Amount at the end of

such 30-day period (which may differ from the Guarantee Calculations or any

amounts set forth in the Guarantee Dispute Notice), shall be submitted to an

auditing firm selected by mutual agreement of Parent and Seller or any successor

thereto (including the Trust) (the “Auditing

Firm”).  The Auditing Firm

shall use its best efforts to resolve the dispute within thirty (30) calendar

days after submission.  The

determination of the Auditing Firm as to the resolution of any dispute shall be

binding and conclusive upon Seller or any successor thereto (including the

Trust), the Shareholders and all parties to this Agreement, absent fraud.  The fees and expenses of the Auditing Firm

in connection with resolving a Guarantee Dispute Notice shall be borne by the

party whose Final Guarantee Calculation of the aggregate payment to Seller or

any successor thereto (including the Trust) in connection with the Parent

Guarantee Amount is further from the amount determined by the Auditing Firm;

provided, however, that if such fees and expenses are to be borne by Seller or

any successor (including the Trust) the amount of such fees and expenses may,

at Parent’s option, be offset on a pro rata basis against any earn-out payments

hereunder.




 




(c)           As soon as practicable

after final determination of the Parent Guarantee Amount, Parent shall (i)

direct its transfer agent to issue to Seller or any successor thereto

(including the Trust) the applicable number of Parent Guarantee Shares and (ii)

pay to Seller or any successor thereto (including the Trust) the applicable

portion of the Parent Guarantee Cash, if any, both as determined pursuant to

this Section 2.10.




 




(d)           Definitions:




 




(i)            The “Parent Guarantee Amount” shall equal the sum of the Parent

Guarantee Shares and the Parent Guarantee Cash.




 




(ii)           The “Parent Guarantee Shares” shall equal the lower of (1) 19.9% of

Parent’s outstanding stock on the Closing Date minus 4,500,000 (the “Ceiling Shares”) or (2) number of shares

(the “Formula Shares”) derived by

the following formula:




 




($2 — X)Y divided by X,




 




21





























 




where “X” equals the greater of (1) the Fourth Quarter Average Share

Price and (2) the Six Month Lowest Share Price, and




 




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




 




(iii)          The “Parent

Guarantee Cash” shall equal the lower of (A) Cash Ceiling and (B)

the product of (1) the number of Formula Shares minus the number of Ceiling

Shares and (2) greater of the Fourth Quarter Average Share Price and the Six Month

Lowest Share Price; provided, however, that if the number of Ceiling Shares is

greater than the number of Formula Shares the Parent Guarantee Cash shall equal

zero.




 




(iv)          The “Seller

Guarantee Shares” shall equal the number of Parent Consideration

Shares and Earn-Out Shares held by Seller or any successor thereto and the

Shareholders on the last day of the Fourth Calendar Quarter.




 




(v)           The “Cash Ceiling” shall equal (1) 19% of the sum of (w) the

product of the Issuance Trading Price and the sum of the number of Parent

Consideration Shares and the number of Earn-Out Shares issued to date

(including the Parent Guarantee Shares), (x) the aggregate value of the Assumed

Liability, (y) the aggregate value of the Excluded Assets, and (z) the cash to

be issued pursuant to Cash Ceiling, less (2) the sum of (y) the aggregate value

of the Assumed Liability and (z) the aggregate value of the Excluded Assets.




 




ARTICLE

III




 




REPRESENTATIONS AND WARRANTIES OF SELLER




 




Subject to

such exceptions as are specifically disclosed in the disclosure letter

(referencing the appropriate section numbers) supplied by Seller to Parent and

Buyer (the “Seller Disclosure Letter”),

Seller hereby represents and warrants to Parent and Buyer that the statements

contained in this Article III are true and correct as of the date of this

Agreement and will be true and correct as of the Closing (as though made at the

Closing ); provided, that the representations and warranties

made as of a specified date will be true and correct as of such date.




 




3.1           Organization, Qualification, and Corporate

Power.  Seller is a corporation duly

organized, validly existing, and in good standing under the laws of the State

of California.  Seller is duly

authorized to conduct business and is in good standing under the laws of each

other jurisdiction where such qualification is required and in which the

failure to so qualify is reasonably likely to have a Material Adverse Effect on

Seller.  There is no state other than

California in which Seller owns any property or in which it has any employees,

offices or operations.  Seller has full

corporate power and authority to carry on the businesses in which it is engaged

and to own and use the properties owned and used by it.  Section 3.1 of Seller Disclosure Letter

lists the directors and officers of Seller. 

The operations now being conducted by Seller have not been conducted

under any other name since its inception. 

The copies of Seller’s Articles of Incorporation, Bylaws, minute books,

stock transfer ledger, stock option ledger and warrant ledger which have been

delivered to Parent are true, correct and complete as of the date hereof and

shall be as of the Closing.




 




22





























 




3.2           Authorization. 

Seller has full power and authority to execute and deliver this

Agreement and all agreements and instruments delivered pursuant hereto (the “Ancillary Agreements”) to which it is a

party, and, subject to receipt of the requisite approval of its shareholders,

to consummate the transactions contemplated hereunder and to perform its

obligations hereunder and no other proceedings on the part of Seller are

necessary to authorize the execution, delivery and performance of this

Agreement and the Ancillary Agreements to which Seller is a party.  This Agreement and the Ancillary Agreements

to which Seller is a party and the transactions contemplated hereby and thereby

have been approved by the unanimous vote of Seller’s Board of Directors.  This Agreement and the Ancillary Agreements

to which Seller is a party constitute the valid and legally binding obligations

of Seller, enforceable against Seller in accordance with their respective terms

and conditions, except as such enforceability may be limited by principles of

public policy and subject to the laws of general application relating to

bankruptcy, insolvency and the relief of debtors and rules of law governing

specific performance, injunctive relief or other equitable remedies.




 




3.3           Capitalization.




 




(a)           Capital Stock.  The entire authorized capital stock of

Seller consists of 37,000,000 shares of Common Stock, 3,515,000 of which are

issued and outstanding, 14,000,000 shares of Series A Preferred Stock,

12,479,956 of which are issued and outstanding, 1,000,000 shares of Series B

Preferred Stock, 10,000 of which are issued and outstanding, and 10,000,000

shares of Series C Preferred Stock, 8,806,535 of which are issued and

outstanding.  All of the issued and

outstanding shares of capital stock have been duly authorized, are validly

issued, fully paid, non-assessable and were not issued in violation of any

preemptive rights, rights of first refusal, or any similar rights and are held

of record by the respective shareholders with the domicile addresses as set

forth in Section 3.3(a) of Seller Disclosure Letter.  None of the issued and outstanding shares of capital stock are

subject to any preemptive rights, rights of first refusal, or any similar

rights.  All of the outstanding shares

of capital stock have been offered, issued and sold by Seller in compliance with

applicable federal and state securities laws. 

All shares of Preferred Stock of Seller are convertible into shares of

Seller Common Stock at a one-for-one conversion ratio.  There are no declared or accrued but unpaid

dividends with respect to any shares of capital stock of Seller.




 




(b)           Options, Rights or Other

Agreements. Except for the 2000 Employee and Consultant Equity Incentive

Plan (the “Seller Plan”), Seller has not adopted or maintained and Seller is

not obligated under, any stock option plan or other plan providing for equity

compensation of any person.  Seller has

reserved 4,000,000 shares of Seller Common Stock for issuance to employees,

contract workers and directors of, and consultants to, Seller upon the exercise

of options granted under the Seller Plan, of which 516,000 shares are issuable,

as of the date hereof, upon the exercise of outstanding, unexercised options

granted under the Plan.  Section 3.3(b)

of Seller Disclosure Letter sets forth for each outstanding option granted by

Seller under the Seller Plan (the “Seller Options”), the name of the holder of

such option, the domicile address of such holder, the number of shares of

Seller Common Stock issuable upon the exercise of such option, the exercise

price of such option, the vesting schedule for such option, including the

extent vested to date and whether the




 




23





























 




vesting of such option will be

accelerated by the transactions contemplated by this Agreement, and whether

such option is intended to qualify as an incentive stock option as defined in

Section 422 of the Code.  Except for

Seller Options, there are no options, warrants, calls, rights, commitments or

agreements of any character, written or oral, to which Seller is a party or by

which it is bound obligating Seller to issue, deliver, sell, repurchase or

redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any

shares of the capital stock of Seller or obligating Seller to grant, extend,

accelerate the vesting of, change the price of, otherwise amend or enter into

any such option, warrant, call, right, commitment or agreement.  There are no outstanding or authorized stock

appreciation, phantom stock, profit participation, or other similar rights with

respect to Seller.  Except as

contemplated hereby, there are no voting trusts, proxies, or other agreements

or understandings with respect to the voting stock of Seller.




 




3.4           Subsidiaries. 

Seller does not have, and never has had, any subsidiaries and does not

otherwise own, and has not otherwise owned, any shares in the capital of or any

interest in, or control, directly or indirectly, any other corporation,

partnership, association, joint venture or other business entity.  In addition, there are no corporations,

partnerships, associations, joint ventures or other business entities

controlled by, directly or indirectly, any party that may be deemed to control

Seller.




 




3.5           No

Conflicts.  Neither the

execution and the delivery of this Agreement by Seller nor the consummation of

the transactions contemplated hereby will (A) violate any constitution,

statute, regulation, rule, injunction, judgment, order, decree, ruling, charge,

or other restriction of any government, governmental agency, or court to which

Seller is subject, (B) violate or conflict with any provision of its Articles

of Incorporation or bylaws, or (C) conflict with, result in a breach of,

constitute a default under, result in the acceleration of, create in any party

the right to accelerate, terminate, modify, or cancel, or require any notice or

consent under, any agreement, contract, lease, license, instrument, franchise,

permit, mortgage, indenture or other arrangement to which Seller is a party or

by which it is bound or to which any of its assets are subject (or result in

the imposition of any Lien upon any of their respective assets).




 




3.6           Consents.  No consent, waiver, approval, order or

authorization of, or registration, declaration or filing with, any Governmental

Body or any third party, including a party to any agreement with Seller, is

required by or with respect to Seller in connection with the execution and

delivery of this Agreement or the consummation of the transactions contemplated

hereby, except for (i) such consents, waivers, approvals, orders, authorizations,

registrations, declarations and filings as may be required under applicable

federal and state securities laws, and (ii) any applicable filings required

under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.




 




3.7           Financial Statements.  Section 3.7 of Seller Disclosure Letter

contains the following financial statements (collectively the “Financial Statements”): (i) unaudited

balance sheets (the “Most Recent Balance

Sheet”)  and statements of

income and cash flows (the “Most Recent

Financial Statements”) as of and for the fiscal year ended December

31, 2001 for Seller (the “Most Recent Fiscal

Period End”), (ii) audited balance sheets and statements of income

and cash flows as of and for the fiscal year ended December 31, 2000 for

Seller; and (ii) an unaudited balance sheet




 




24





























 




and statements of income and

cash flows) as of and for the five month period ended May 31, 2002 for

Seller.  The Financial Statements,

(including the notes thereto) have been prepared in accordance with generally

accepted accounting principles (“GAAP”)

applied on a consistent basis throughout the periods covered thereby and

present fairly in all material respects the financial condition of Seller as of

such dates and the results of operations of Seller for such periods; provided, however, that the Most Recent

Financial Statements lack footnotes and certain other presentation items and

are subject to normal year end adjustments which will not be material individually

or in the aggregate.  The books of

account of Seller reflect, in all material respects, as of the dates shown

thereon all items of income and expenses, and all assets, liabilities and

accruals of Seller required to be reflected therein.




 




3.8           Undisclosed Liabilities.  Seller has no liability, indebtedness,

obligation, expense, claim, deficiency, guaranty or endorsement of any type

(whether asserted or unasserted, whether absolute or contingent, whether

accrued or unaccrued, whether liquidated or unliquidated, and whether due or to

become due, including any liability for taxes), except for that which

individually or in the aggregate (i) is reflected on the Most Recent Balance

Sheet or (ii) has arisen after the Most Recent Fiscal Period End in the ordinary

course of business.




 




3.9           Events Subsequent to Most Recent

Fiscal Period End.  Since the

Most Recent Fiscal Period End, there has not been any material adverse change

in the business, operations, assets (including intangible assets), liabilities

(contingent or otherwise), results of operations or financial performance, or

condition (financial or otherwise) of Seller. 

Without limiting the generality of the foregoing, since that date:




 




(a)           Seller has not sold, leased,

transferred, or assigned any assets or properties, tangible or intangible,

outside the ordinary course of business;




 




(b)           Seller has not entered into, assumed

or become bound under or obligated by any agreement, contract, lease or

commitment (collectively a “Contract”)

or extended or modified the terms of any Contract which (i) involves the

payment of greater than $10,000 per annum or which extends for more than one

(1) year, (ii) involves any payment or obligation to any Affiliate of Seller

other than in the ordinary course of business, (iii) involves the sale of any

material assets, or (iv) involves any license of any Seller Intellectual

Property;




 




(c)           no party (including Seller) has

accelerated, terminated, made modifications to, or canceled any agreement,

contract, lease, or license to which Seller is a party or by which it is bound

and Seller has not modified, canceled or waived or settled any debts or claims

held by it, outside the ordinary course of business, or waived or settled any

rights or claims of a substantial value, whether or not in the ordinary course

of business;




 




(d)           none of the assets of Seller,

tangible or intangible, has become subject to any Lien;




 




(e)           Seller has not made any capital

expenditures except in the ordinary course of business and not exceeding

$10,000 in the aggregate of all such capital expenditures;




 




25





























 




(f)            Seller has not made any capital

investment in, or any loan to, any other Person;




 




(g)           Seller has not created, incurred,

assumed, prepaid or guaranteed any indebtedness for borrowed money and

capitalized lease obligations, or extended or modified any existing

indebtedness;




 




(h)           Seller has not granted any license or

sublicense of any rights under or with respect to any Seller Intellectual

Property;




 




(i)            there has been no change made or

authorized in the Articles of Incorporation or bylaws of Seller, except as

contemplated by this Agreement;




 




(j)            other than the issuance of Seller

Common Stock pursuant to the exercise of employee stock options granted under

the Seller Plan outstanding as of the date hereof, there has not been (i) any

change in Seller’s authorized or issued capital stock, (ii) any grant of any

stock option or right to purchase shares of capital stock of Seller, (iii) the

issuance of any security convertible into such capital stock, (iv) the grant of

any registration rights, (v) any purchase, redemption, retirement, or other

acquisition by Seller of any shares of any such capital stock or (vi) any

declaration or payment of any dividend or other distribution or payment in

respect of shares of capital stock;




 




(k)           Seller has not experienced any

damage, destruction, or loss (whether or not covered by insurance) to its

property in excess of $10,000 in the aggregate of all such damage, destruction

and losses;




 




(l)            Seller has not suffered any

repeated, recurring or prolonged shortage, cessation or interruption of

communications, customer access, supplies or utility services;




 




(m)          Seller has not made any loan to, or

entered into any other transaction with, or paid any bonuses in excess of an

aggregate of $10,000 to, any of its Affiliates, directors, officers, or

employees or their Affiliates, and, in any event, any such transaction was on

fair and reasonable terms no less favorable to Seller than would be obtained in

a comparable arm’s length transaction with a Person which is not such a

director, officer or employee or Affiliate thereof;




 




(n)           Seller has not entered into any

employment contract or collective bargaining agreement, written or oral, or

modified the terms of any existing such contract or agreement;




 




(o)           Seller has not granted any increase

in the base compensation of any of its directors or officers, or, except in the

ordinary course of business, any of its employees;




 




(p)           Seller has not adopted, amended,

modified, or terminated any bonus, profit-sharing, incentive, severance, or

other plan, contract, or commitment for the benefit of any of its directors,

officers, or employees (or taken any such action with respect to any other

Seller Employee Plans);




 




26





























 




(q)           Seller has not made any other change

in employment terms for any of its directors or officers, and Seller has not

made any other change in employment terms for any other employees outside the

ordinary course of business;




 




(r)            Seller has not suffered any

significant adverse change or any threat of any significant adverse change in

its relations with, or any loss or threat of loss of, any of its major

customers, distributors or partners;




 




(s)           Seller has not suffered any adverse

change or any threat of any adverse change in its relations with, or any loss

or threat of loss of, any of its major suppliers;




 




(t)            Seller has not received notice and

does not have knowledge of any actual or threatened labor trouble or strike, or

any other occurrence, event or condition of a similar character;




 




(u)           Seller has not changed any of the

accounting principles followed by it or the method of applying such principles;




 




(v)           Seller has not made a change in any

of its banking or safe deposit arrangements;




 




(w)          Seller has not entered into any

agreement, contract or commitment materially limiting the freedom of Seller to

engage in any line of business or to compete with any person;




 




(x)            Seller has not entered into any

transaction other than in the ordinary course of business; and




 




(y)           Seller has not become obligated to do

any of the foregoing.




 




3.10         Legal Compliance.  Seller is in compliance in all material respects with all

applicable laws (including rules, regulations, codes, plans, injunctions,

judgments, orders, decrees, rulings, and charges thereunder) of federal, state,

local, and foreign governments (and all agencies thereof).  No action, suit, proceeding, hearing,

investigation, charge, complaint, claim, demand, notice or inquiry is pending,

or to the knowledge of Seller, is threatened against Seller by any governmental

body alleging any failure to so comply. 

Seller has all licenses, permits, approvals, registrations,

qualifications, certificates and other governmental authorizations that are

necessary for the operations of Seller as they are presently conducted.




 




3.11         Tax Matters.




 




(a)           For purposes of this Agreement, (i) “Tax” or, collectively, “Taxes”, means (i) any and all federal,

state, local and foreign taxes, assessments and other governmental charges,

duties, impositions and liabilities, including taxes based upon or measured by

gross receipts, income, profits, sales, use and occupation, and value added, ad

valorem, transfer, franchise, withholding, payroll, recapture, employment,

excise and property taxes, together with all interest, penalties and additions

imposed with respect to such amounts; (ii) any liability for the payment of any

amounts of




 




27





























 




the type described in clause

(i) as a result of being or ceasing to be a member of an affiliated,

consolidated, combined or unitary group for any period (including, without

limitation, any liability under Treas. Reg. Section 1.1502-6 or any comparable

provision of foreign, state or local law); and (iii) any liability for the

payment of any amounts of the type described in clause (i) or (ii) as a result

of any express or implied obligation to indemnify any other person or as a

result of any obligations under any agreements or arrangements with any other

person with respect to such amounts and including any liability for taxes of a

predecessor entity.




 




(b)           Seller has timely filed all reports

and returns with respect to any Taxes (“Tax

Returns”) that it was required to file.  All such Tax Returns were correct and complete in all respects so

as to avoid any additional assessments and have been completed in accordance

with applicable law and were prepared in accordance with the applicable

statutes, rules and regulations. All Taxes owed by Seller (whether or not shown

on any Tax Return) were paid in full when due or are being contested in good

faith and are supported by adequate reserves on the Most Recent Financial

Statements.




 




(c)           Seller has withheld with respect to

its employees all federal and state income Taxes, Taxes pursuant to the Federal

Insurance Contribution Act (“FICA”),

Taxes pursuant to the Federal Unemployment Tax Act (“FUTA”), and other Taxes required to be withheld.




 




(d)           Except as set forth in Section

3.11(d) of Seller Disclosure Letter, Seller is not currently the beneficiary of

any extension of time within which to file any Tax Return, and Seller has not

waived any statute of limitations in respect of Taxes or agreed to any

extension of time with respect to any Tax assessment or deficiency.




 




(e)           There is no dispute, claim or

proposed adjustment concerning any Tax liability of Seller either (A) claimed

or raised by any authority in writing or (B) based upon personal contact with

any agent of such authority.  Seller is

not a party to nor has it been notified that it is the subject of any pending,

proposed or threatened action, investigation, proceeding, audit, claim or

assessment by or before the Internal Revenue Service or any other governmental

authority and no claim for assessment, deficiency or collection of Taxes, or

proposed assessment, deficiency or collection from the Internal Revenue Service

or any other governmental authority which has not been satisfied, nor does

Seller have any reason to believe that any such notice will be received in the

future.




 




(f)            No Tax Returns are currently the

subject of audit or examination nor has Seller been notified of any request for

an audit or examination.




 




(g)           No power of attorney has been granted

by Seller or any of its Affiliates with respect to any matter relating to Taxes

of Seller.




 




(h)           There are no Liens upon any property

or assets of Seller relating to or attributable to Taxes, except for Liens for

taxes not yet due and payable.




 




28





























 




(i)            Seller has no knowledge of any basis

for the assertion of any claim relating or attributable to Taxes which, if

adversely determined, would result in any Lien upon any property or assets of

Seller.




 




(j)            Seller has not made any payments, is

not obligated to make any payments, and is not a party to any agreement that

under any circumstances could obligate it to make any payments as a result of

the consummation of the transactions contemplated by this Agreement that will

not be deductible under Section 280G or 162 of the Code.




 




(k)           Seller is not a party to any tax

allocation or sharing agreement nor does Seller owe any amount under any such

agreement.




 




(l)            Seller has not requested or received

a ruling from any taxing authority or signed a closing agreement with any

taxing authority.  No claim has ever

been made by a taxing authority in a jurisdiction where Seller does not file

Tax Returns that Seller is or may be subject to taxation by such jurisdiction.




 




(m)          The unpaid Taxes of Seller (A) did not,

as of the Most Recent Fiscal Period End, exceed by any amount the reserve for

Tax liability (other than any reserve for deferred taxes established to reflect

timing differences between book and tax income) set forth on the face of the

Most Recent Balance Sheet (rather than in any notes thereto) and (B) will not

exceed that reserve as adjusted for operations and transactions through the

Closing Date in accordance with the past custom and practice of Seller in

filing its Tax Returns.




 




(n)           Seller has provided to Parent copies

of all federal and state income and all state sales and use Tax Returns for all

periods since the Seller’s incorporation.




 




3.12         Title of Properties; Absence of Liens

and Encumbrances; Condition of Equipment.




 




(a)           Seller owns no real property, nor has

it ever owned any real property.  All

current leases are in full force and effect, are valid and effective in

accordance with their respective terms, and there is not, under any of such

leases, any existing default or event of default (or event which with notice or

lapse of time, or both, would constitute a default) on the part of Seller and,

to the knowledge of Seller, on the part of any other party thereto.




 




(b)           Seller has good and valid title to,

or, in the case of leased properties and assets, valid leasehold interests in,

all of its tangible properties and assets, real, personal and mixed, used or

held for use in its business, free and clear of any Liens, except (i) as

reflected in the Most Recent Balance Sheet, and (ii) such imperfections of

title and encumbrances, if any, which do not detract from the value in any

material respect or interfere with the present use of the property subject

thereto or affected thereby.




 




(c)           Section 3.12(c) of Seller Disclosure

Letter lists each material item of equipment with a value of $5,000 or more

(the “Equipment”) owned or leased

by Seller, and such




 




29





























 




Equipment is (i) adequate for

the conduct of the business of Seller as currently conducted, and (ii) in good

operating condition, regularly and properly maintained, subject to normal wear

and tear.




 




(d)           Seller owns, free and clear of any

Liens, all customer lists, customer contact information, customer

correspondence and customer licensing and purchasing histories relating to its

current and former customers (the “Customer

Information”).  Other than

Seller and the customers to which such Customer Information relates, no person

possesses any claims or rights with respect to use of the Customer Information.




 




3.13         Intellectual Property.




 




(a)           Section 3.13(a) of Seller Disclosure

Letter lists all Registered Intellectual Property Rights owned by, filed in the

name of, or applied for, by Seller (the “Seller

Registered Intellectual Property Rights”) and lists any proceedings

or actions before any court, tribunal (including the United States Patent and

Trademark Office (the “PTO”) or

equivalent authority anywhere in the world) related to any of Seller Registered

Intellectual Property Rights or Seller Intellectual Property.




 




(b)           Each item of Seller Registered

Intellectual Property Rights is valid and subsisting, and all necessary

registration, maintenance and renewal fees in connection with such Seller

Registered Intellectual Property Rights have been paid and all necessary

documents and certificates in connection with such Seller Registered

Intellectual Property Rights have been filed with the relevant patent,

copyright, trademark or other authorities in the United States or foreign

jurisdictions, as the case may be, for the purposes of maintaining such

Registered Intellectual Property Rights. 

Except as set forth on Section 3.13(b) of Seller Disclosure Letter,

there are no actions that must be taken by Seller within one hundred twenty

(120) days of the Closing Date, including the payment of any registration,

maintenance or renewal fees or the filing of any responses to PTO office

actions, documents, applications or certificates for the purposes of obtaining,

maintaining, perfecting or preserving or renewing any Registered Intellectual

Property Rights.  In each case in which

Seller has acquired any Technology or Intellectual Property Right from any

person, Seller or such Subsidiary has obtained a valid and enforceable

assignment sufficient to irrevocably transfer all rights in such Technology and

the associated Intellectual Property Rights (including the right to seek past

and future damages with respect thereto) to Seller.  To the maximum extent provided for by, and in accordance with,

applicable laws and regulations, Seller has recorded each such assignment of a

Registered Intellectual Property Right assigned to Seller with the relevant

Governmental Body, including the PTO, the U.S. Copyright Office, or their

respective equivalents in any relevant foreign jurisdiction, as the case may

be.  Except as set forth on Section

3.13(b) of Seller Disclosure Letter, Seller has not claimed a particular

status, including “Small Business Status,” in the application for any

Registered Intellectual Property Rights, which claim of status was not at the

time made, or which has since become, inaccurate or false or that will not be

true and accurate with respect to Buyer after the Closing.




 




(c)           Seller has no knowledge of any facts

or circumstances that would render any Seller Intellectual Property invalid or

unenforceable. Without limiting the foregoing, Seller knows of no information,

materials, facts, or circumstances, including any information or fact that

would 




 




30





























 




constitute prior art, that

would render any of Seller Registered Intellectual Property Rights invalid or

unenforceable, or would adversely effect any pending application for any Seller

Registered Intellectual Property Right and Seller has not misrepresented, or

failed to disclose, and has no knowledge of any misrepresentation or failure to

disclose, any fact or circumstances in any application for any Seller

Registered Intellectual Property Right that would constitute fraud or a

misrepresentation with respect to such application or that would otherwise

affect the validity or enforceability of any Seller Registered Intellectual

Property Right.




 




(d)           Each item of Seller Intellectual

Property is free and clear of any Liens (i) except as set forth in Section

3.13(d) of Seller Disclosure Letter and (2) except for non-exclusive licenses

granted to end-user customers in the ordinary course of business.  Except as set forth in Section 3.13(d) of

Seller Disclosure Letter, Seller is the exclusive owner or exclusive licensee

of all Seller Intellectual Property. 

Without limiting the foregoing: (i) Seller is the exclusive owner of all

Trademarks used in connection with the operation or conduct of the Business of

Seller, including the sale, licensing, distribution or provision of any

Products or services by Seller; (ii) Seller owns exclusively, and has good

title to, all Copyrighted Works that are Products or which Seller otherwise

purports to own; and (iii) to the extent that any Patents would otherwise be

infringed by any Product, or by any services of Seller, such Patents constitute

Seller Intellectual Property.




 




(e)           Except as set forth in Section

3.13(e) of Seller Disclosure Letter, all Seller Intellectual Property will be

fully transferable, alienable and licensable by Buyer and/or Parent without

restriction and without payment of any kind to any third party.




 




(f)            Except as set forth on Section

3.13(f) of Seller Disclosure Letter and with exception of “shrink-wrap” or

similar widely-available commercial end-user licenses, all Technology embodied

or incorporated in any Product or otherwise used in or necessary to the conduct

of Seller’s Business as presently conducted or currently contemplated to be

conducted by Seller was written, developed or and created solely by either (i)

employees of Seller acting within the scope of their employment or (ii) by

third parties who have validly and irrevocably assigned all of their rights in

or to such Technology, including Intellectual Property Rights therein, to

Seller, and no third party owns or has any rights to any of such Technology.




 




(g)           Except as set forth in Section

3.13(g) of Seller Disclosure Letter, all employees and consultants of Seller

have entered into a valid and binding written agreement with Seller sufficient

to vest title in Seller of all Technology, including all accompanying

Intellectual Property Rights, created by such employee or consultant in the

scope of his or her services or employment for Seller.




 




(h)           Seller has taken all steps that are

reasonably required to protect Seller’s rights in confidential information and

trade secrets of Seller or provided by any other person to Seller.  Without limiting the foregoing, Seller has,

and enforces, a policy requiring each employee, consultant and contractor to

execute a proprietary information, confidentiality and assignment agreement,

substantially in the form attached hereto as Section 3.13(h) of Seller

Disclosure Letter, and all current and former employees, consultants and

contractors of Seller have executed such an agreement.




 




31





























 




(i)            Except as set forth on Section

3.13(i) of Seller Disclosure Letter, no person who has licensed Technology or

Intellectual Property Rights to Seller has ownership rights or license rights

to improvements, modifications or Derivative Works made by Seller in such

Technology or Intellectual Property Rights.




 




(j)            Except as set forth in Section

3.13(j) of Seller Disclosure Letter, Seller has not transferred ownership of,

or granted any exclusive license of or right to use, or authorized the

retention of any exclusive rights to use or joint ownership of, any Technology

or Intellectual Property Right that is or was Seller Intellectual Property, to

any other person.




 




(k)           Other than inbound “shrink-wrap” and

similar publicly available commercial binary code end-user licenses and

outbound “shrink-wrap” licenses in the form set forth on Section 3.13(k)(A) of

Seller Disclosure Letter, the contracts, licenses and agreements listed in

Section 3.13(k)(A) of Seller Disclosure Letter are all contracts, licenses and

agreements to which Seller is a party with respect to any Technology or

Intellectual Property Rights.  Except as

set forth in Section 3.13(k)(B) of Seller Disclosure Letter, Seller is not in

breach of nor has Seller failed to perform under, any of the foregoing

contracts, licenses or agreements and, to Seller’s knowledge, no other party to

any such contract, license or agreement is in breach thereof or has failed to

perform thereunder.




 




(l)            Section 3.13(l) of Seller Disclosure

Letter lists all material contracts, licenses and agreements between Seller and

any other person wherein or whereby Seller has agreed to, or assumed, any

obligation or duty to warrant, indemnify, reimburse, hold harmless, guaranty or

otherwise assume or incur any obligation or liability or provide a right of

rescission with respect to the infringement or misappropriation by Seller or

such other person of the Intellectual Property Rights of any person other than

Seller.




 




(m)          Except as set forth in Section 3.13(m)

of Seller Disclosure Letter, to the knowledge of Seller, there are no

contracts, licenses or agreements between Seller and any other person with

respect to any Intellectual Property Rights or Technology under which there is

any dispute regarding the scope of such agreement, or performance under such

agreement, including with respect to any payments to be made or received by

Seller thereunder.




 




(n)           The operation of the Business of

Seller as it currently is conducted or is contemplated to be conducted by Seller,

including but not limited to the design, development, use, import, branding,

advertising, promotion, marketing, manufacture and sale of the Products; or

Seller’s Technology, or the performance of services performed or offered by

Seller (including Products, Technology or services currently under development)

does not and will not and will not when conducted by Parent and/or Buyer in

substantially the same manner following the Closing, infringe or misappropriate

any Intellectual Property Right of any person, violate any right of any person

(including any right to privacy or publicity) or constitute unfair competition

or trade practices under the laws of any jurisdiction, and Seller has not

received notice from any person claiming that such operation or any act,

Product, Technology or service (including Products, Technology or services

currently under development) of Seller infringes or misappropriates any

Intellectual




 




32





























 




Property Right of any person or

constitutes unfair competition or trade practices under the laws of any

jurisdiction (nor does Seller have knowledge of any basis therefor).




 




(o)           To Seller’s

knowledge, no person is infringing or misappropriating any Seller Intellectual

Property Right.




 




(p)           No Seller

Intellectual Property or service of Seller is subject to any proceeding or

outstanding decree, order, judgment or settlement agreement or stipulation that

restricts in any manner the use, transfer or licensing thereof by Seller or may

affect the validity, use or enforceability of such Seller Intellectual

Property.




 




(q)           No (i) Product,

Technology, service or publication of Seller, (ii) material published or

distributed by Seller, or (iii) conduct or statement of Seller constitutes

obscene material, a defamatory statement or material, false advertising or

otherwise violates in any material respect any law or regulation.




 




(r)            Except as set forth

on Section 3.13(r) of Seller Disclosure Letter, Seller Intellectual Property

constitutes all the Technology and Intellectual Property Rights used in and/or

necessary to the conduct of the Business of Seller as currently conducted; and

contemplated to be conducted by Seller, including, without limitation, the

design, development, manufacture, use, import and sale of the Products, and

Seller’s Technology and the performance of services performed or offered by

Seller (including Products, Technology or services currently under

development).




 




(s)           Other than as a

result of a Buyer Restriction, neither this Agreement nor the transactions

contemplated by this Agreement, including the assignment to Buyer, by operation

of law or otherwise, of any contracts or agreements to which Seller is a party,

will result in (i) either Parent’s or the Buyer’s granting to any third party

any right to or with respect to any Technology or Intellectual Property Right

owned by, or licensed to, either of them, (ii) either the Parent’s or the

Buyer’s being bound by, or subject to, any non-compete or other restriction on

the operation or scope of their respective businesses, or (iii) either the

Parent’s or the Buyer’s being obligated to pay any royalties or other amounts

to any third party in excess of those payable by Parent or Buyer, respectively,

prior to the Closing.




 




(t)            Except as set forth

in Section 3.13(t) of Seller Disclosure Letter, there are no royalties, fees,

honoraria or other payments payable by Seller to any person or entity by reason

of the ownership, development, use, license, sale or disposition of Seller

Intellectual Property, other than salaries and sales commissions paid to

employees and sales agents in the ordinary course of business.




 




3.14         Contracts.  Section 3.14 of Seller Disclosure Letter

lists the following written or oral contracts, agreements, commitments and

other arrangements under which Seller is obligated or by which Seller or any of

its assets is bound:




 




(a)           any agreement (or

group of related agreements) for the lease of personal property to or from any

Person that involves aggregate annual payments of more than $20,000;




 




33





























 




(b)           any agreement under

which the consequences of a default or termination could have a Material

Adverse Effect on Seller;




 




(c)           any agreement (or

group of related agreements) for the purchase or sale of commodities, supplies,

products, or other personal property, or for the furnishing or receipt of

services, the performance of which will extend over a period of more than one

year or involve consideration in excess of $20,000;




 




(d)           any agreement for

the purchase of supplies, components, products or services from single source

suppliers, custom manufacturers or subcontractors that involves aggregate

annual payments of more than $10,000;




 




(e)           any agreement

concerning a partnership or joint venture;




 




(f)            any agreement (or

group of related agreements) under which Seller has created, incurred, assumed,

or guaranteed any indebtedness for borrowed money or any capitalized lease

obligation in excess of $20,000 or under which a Lien has been imposed on any

of Seller’s assets, tangible or intangible;




 




(g)           any agreement to

which Seller is a party and which contains covenants of Seller not to compete

or engage in any line of business, in any geographic area or with any person or

covenants of any other person not to compete with Seller or engage in any line

of business of Seller;




 




(h)           any agreement with

any Seller Shareholder or any of such shareholder’s Affiliates (other than

Seller) or with any Affiliate of Seller;




 




(i)            any profit sharing,

stock option, stock purchase, stock appreciation, deferred compensation,

severance, or other plan or arrangement for the benefit of its current or

former directors, officers or employees;




 




(j)            any collective

bargaining agreement;




 




(k)           any agreement for

the employment (other than Offer Letters that are terminable at will by Seller

without payment of any penalty or severance benefit) of any individual on a

full-time, part-time, consulting, or other basis;




 




(l)            any executory

agreement under which Seller has advanced or loaned any amount to any of its

directors, officers, and employees;




 




(m)          any advertising

services, e-commerce or other agreement involving the promotion of products and

services of third parties by Seller;




 




(n)           any executory

agreement pursuant to which Seller is obligated to provide maintenance, support

or training for its services or products;




 




34





























 




(o)           any revenue or

profit participation agreement which involves aggregate annual payments of more

than $20,000;




 




(p)           any license,

agreement or other permission which Seller or any Affiliate of Seller has

granted to any third party with respect to any of the Intellectual Property

used in Seller’s business;




 




(q)           any agreement for

the purchase or sale of materials, supplies, equipment, merchandise or services

that contains an escalation clause or that obligates Seller to purchase all or

substantially all of its requirements of a particular product or service from a

supplier or to make periodic minimum purchases of a particular product or

service from a supplier, which is not terminable on not more than 30 days

notice (without penalty or premium);




 




(r)            any agreement of

surety, guarantee or indemnification, other than agreements in the ordinary

course of business with respect to obligations in an aggregate amount not in

excess of $20,000;




 




(s)           any agreement with

customers or suppliers for the sharing of fees, the rebating of charges or

other similar arrangements;




 




(t)            any agreement

obligating Seller to deliver maintenance services or future product

enhancements or containing a “most favored nation” pricing clause;




 




(u)           any agreement

obligating Seller to provide source code to any third party for any Seller

Intellectual Property;




 




(v)           any agreement

granting an exclusive license to any Seller Intellectual Property or granting

any exclusive sales, marketing or distribution rights;




 




(w)          any agreement

relating to the acquisition by Seller of any operating business or the capital

stock of any other person;




 




(x)            any agreement

requiring the payment to any person of a brokerage or sales commission or a

finder’s or referral fee (other than arrangements to pay commissions or fees to

employees in the ordinary course of business); and




 




(y)           any other agreement

(or group of related agreements) the performance of which involves

consideration in excess of $20,000 or which is expected to continue for more

than one (1) year from the date hereof.




 




Seller has

delivered to Parent a correct and complete copy of each written agreement (as

amended to date) listed in Section 3.14 of Seller Disclosure Letter and a

written summary setting forth the terms and conditions of each oral agreement

referred to in Section 3.14 of Seller Disclosure Letter.  With respect to each such agreement: (A) the

agreement, with respect to Seller and, to Seller’s knowledge, all other parties

thereto, is legal, valid, binding, enforceable, and in full force 




 




35





























 




and effect in all respects; (B)

neither Seller nor, to Seller’s knowledge, any other party is in breach or

default, and no event has occurred, which with notice or lapse of time would

constitute a breach or default, or permit termination, modification, or

acceleration, under the agreement; and (C) Seller has not received notice that

any party has repudiated any provision of the agreement.  Except as set forth on Section 3.5 of the

Seller Disclosure Letter, Seller has obtained or will obtain prior to the

Closing Date, all necessary consents, waivers and approvals of parties to any

such agreement as are required thereunder in connection with the transactions

contemplated by this Agreement or to remain in effect without modification

after the Closing. Except as set forth on Section 3.5 of the Seller Disclosure

Letter, following the Closing, Buyer will be permitted to exercise all of

Seller’s rights under such agreements to the same extent Seller would have been

able to had the transactions contemplated by this Agreement not occurred and

without the payment of any additional amounts or consideration other than

ongoing fees, royalties or payments which Seller would otherwise be required to

pay.




 




3.15         Notes and Accounts Receivable.  All notes and accounts receivable of Seller,

all of which are reflected properly on the books and records of Seller, are

valid receivables subject to no setoffs, defenses or counterclaims known to

Seller, are current and, to Seller’s knowledge, collectible subject in each

case only to the reserve for bad debts set forth on the face of the Most Recent

Balance Sheet as adjusted for operations and transactions through the Closing

Date in accordance with the past custom and practice of Seller.




 




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

Seller.




 




3.17         Insurance.  Seller has delivered to Parent copies of

each insurance policy (including policies providing property, casualty,

liability, and workers’ compensation coverage and bond and surety arrangements)

with respect to which Seller is a party. 

With respect to each such insurance policy: (A) the policy is legal,

valid, binding, enforceable, and in full force and effect (and there has been

no notice of cancellation or nonrenewal of the policy received); (B) Seller is

not in breach or default (including with respect to the payment of premiums or

the giving of notices), and no event has occurred which, with notice or the

lapse of time, would constitute such a breach or default by Seller, or permit

termination, modification, or acceleration, under the policy; (C) Seller has not

received notice that any party to the policy has repudiated any provision

thereof; and (D) there has been no failure by Seller to give any notice or

present any claim under the policy in due and timely fashion. Section 3.17 of

Seller Disclosure Letter describes any self-insurance arrangements presently

maintained by Seller.




 




3.18         Litigation.  Section 3.18 of Seller Disclosure Letter

sets forth each instance in which Seller (or any of its assets) (i) is subject

to any outstanding injunction, judgment, order, decree, ruling, or charge or

(ii) is or has been, or, to the knowledge of Seller, is threatened to be made a

party, to any action, suit, proceeding, hearing, arbitration, or investigation

of, in, or before any court or quasi-judicial or administrative agency of any

federal, state, local, or foreign jurisdiction or before any arbitrator.  To the knowledge of Seller, there are no

facts or circumstances that would form the reasonable basis of any claim

against Seller.




 




36





























 




3.19         Restrictions on Business Activities.  Except as set forth in Section 3.19 of the

Disclosure Letter, there is no agreement (not to compete or otherwise),

commitment, judgment, injunction, order or decree to which Seller is a party or

which is otherwise binding upon Seller which has the effect of prohibiting or

restricting any business or any acquisition of property (tangible or

intangible) by Seller.  Without limiting

the foregoing, Seller has not entered into any agreement under which Seller is

restricted from selling, licensing or otherwise distributing any of its

technology (including any Seller Intellectual Property) or products to or

providing services to, customers or potential customers or any class of

customers, in any geographic area, or in any segment of the market.




 




3.20         Product Warranty.  The technologies or products licensed, sold, leased, and

delivered and all services provided by Seller have conformed in all material

respects with all applicable contractual commitments and all express and

implied warranties, and Seller has no liability (whether known or unknown,

whether asserted or unasserted, whether absolute or contingent, whether accrued

or unaccrued, whether liquidated or unliquidated, and whether due or to become

due) for replacement or modification thereof or other damages in connection

therewith, other than in the ordinary course of business in an aggregate amount

not exceeding $20,000.




 




3.21         Guaranties; Indemnities.  Seller is not a guarantor or indemnitor or

is not otherwise responsible for any liability or obligation (including

indebtedness) of any other Person.




 




3.22         Employees.  No

executive, key employee, or significant group of employees has advised any

executive officer of Seller that he, she or they plan to terminate employment

with Seller during the next 12 months. 

Seller is not a party to or bound by any collective bargaining

agreement, nor has it experienced any strike or grievance, claim of unfair

labor practices, or other collective bargaining dispute.  To Seller’s knowledge, there is no

organizational effort presently being made or threatened by or on behalf of any

labor union with respect to employees of Seller.




 




3.23         Employee Matters and Benefit Plans.




 




(a)           Definitions.  With the exception of the definition of

“Affiliate” set forth in Section 3.23(a)(i) below (which definition shall apply

only to this Section 3.23), for purposes of this Agreement, the following terms

shall have the meanings set forth below:




 




(i)            “Affiliate”

shall mean any other person or entity under common control with Seller within

the meaning of Section 414(b), (c), (m) or (o) of the Code and the regulations

issued thereunder;




 




(ii)           “Benefits

Liabilities” shall mean, with respect to any Seller Employee Plan,

any and all claims, debts, liabilities, commitment and obligations, whether

fixed, contingent or absolute, matured or unmatured, liquidated or

unliquidated, accrued or unaccrued, known or unknown, whenever or however

arising, including all costs and expenses relating thereto, and including those

debts, liabilities and obligations arising under law, rule, regulation,

permits, action or proceeding before any court or regulatory agency or

administrative agency, order or consent decree 




 




37





























 




or any award of any arbitrator

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




 




(iii)          “COBRA”

shall mean the Consolidated Omnibus Budget Reconciliation Act of 1985, as

amended;




 




(iv)          “DOL”

shall mean the Department of Labor;




 




(v)           “Employee”

shall mean any current or former or retired employee, consultant or director of

Seller or any Affiliate;




 




(vi)          “Employment

Agreement” shall mean each management, employment, severance,

consulting, relocation, repatriation, expatriation, visas, work permit or other

agreement, contract or understanding between Seller or any Affiliate and any

Employee;




(vii)         “ERISA”

shall mean the Employee Retirement Income Security Act of 1974, as amended;




 




(viii)        “FMLA”

shall mean the Family Medical Leave Act of 1993, as amended;




 




(ix)           “International

Employee Plan”  shall mean

each Seller Employee Plan that has been adopted or maintained by Seller or any

Affiliate, whether informally or formally, or with respect to which Seller or

any Affiliate will or may have any liability, for the benefit of Employees who

perform services outside the United States;




 




(x)            “IRS”

shall mean the Internal Revenue Service;




 




(xi)           “Multiemployer

Plan” shall mean any “Pension Plan” (as defined below) which is a

“multiemployer plan,” as defined in Section 3(37) of ERISA;




 




(xii)          “Pension

Plan” shall mean each Seller Employee Plan which is an “employee

pension benefit plan,” within the meaning of Section 3(2) of ERISA;




 




(xiii)         “Seller

Employee Plan” shall mean any plan, program, policy, practice,

contract, agreement or other arrangement providing for compensation, severance,

termination pay, deferred compensation, performance awards, stock or

stock-related awards, fringe benefits or other employee benefits or

remuneration of any kind, whether written or unwritten or otherwise, funded or

unfunded, including without limitation, each “employee benefit plan,” within

the meaning of Section 3(3) of ERISA which is or has been maintained,

contributed to, or required to be contributed to, by Seller or any Affiliate

for the benefit of any Employee, or with respect to which Seller or any

Affiliate has or may have any liability or obligation;




 




(b)           Schedule.  Schedule 3.23(b) contains an accurate and

complete list of each Seller Employee Plan, International Employee Plan, and

each Employment Agreement.  Seller does 




 




38





























 




not have any plan or commitment

to establish, adopt or enter into any Seller Employee Plan, International

Employee Plan, or Employment Agreement, to modify any Seller Employee Plan or

Employment Agreement (except to the extent required by law or to conform any

such Seller Employee Plan or Employment Agreement to the requirements of any

applicable law, in each case as previously disclosed to Parent in writing, or

as required by this Agreement).




 




(c)           Documents.  Seller has provided to Parent correct and

complete copies of: (i) all documents embodying each Seller Employee Plan and

each Employment Agreement including (without limitation) all amendments thereto

and all related trust documents, administrative service agreements, group

annuity contracts, group insurance contracts, and policies pertaining to

fiduciary liability insurance covering the fiduciaries for each Plan; (ii) the

most recent annual actuarial valuations, if any, prepared for each Seller

Employee Plan; (iii) the three (3) most recent annual reports (Form Series 5500

and all schedules and financial statements attached thereto), if any, required

under ERISA or the Code in connection with each Seller Employee Plan; (iv) if

Seller Employee Plan is funded, the most recent annual and periodic accounting

of Seller Employee Plan assets; (v) the most recent summary plan description

together with the summary(ies) of material modifications thereto, if any,

required under ERISA with respect to each Seller Employee Plan; (vi) all IRS

determination, opinion, notification and advisory letters, and all applications

and correspondence to or from the IRS or the DOL with respect to any such

application or letter; (vii) all written communications material to any

Employee or Employees relating to any Seller Employee Plan and any proposed

Seller Employee Plans, in each case, relating to any amendments, terminations,

establishments, increases or decreases in benefits, acceleration of payments or

vesting schedules or other events which would result in any material liability

to Seller; (viii) all correspondence to or from any governmental agency

relating to any Seller Employee Plan; (ix) all COBRA forms and related notices

(or such forms and notices as required under comparable law); (x) the three (3)

most recent plan years discrimination tests for each Seller Employee Plan; and

(xi) all registration statements, annual reports (Form 11-K and all attachments

thereto) and prospectuses prepared in connection with each Seller Employee

Plan.




 




(d)           Employee Plan Compliance.  Except as set forth on Schedule 3.23(d), (i)

Seller has performed in all material respects all obligations required to be

performed by it under, is not in default or violation of, and has no knowledge

of any default or violation by any other party to each Seller Employee Plan,

and each Seller Employee Plan has been established and maintained in all

material respects in accordance with its terms and in compliance with all

applicable laws, statutes, orders, rules and regulations, including but not

limited to ERISA or the Code; (ii) each Seller Employee Plan intended to

qualify under Section 401(a) of the Code and each trust intended to qualify

under Section 501(a) of the Code has either received a favorable determination,

opinion, notification or advisory letter from the IRS with respect to each such

Seller Employee Plan as to its qualified status under the Code, including all

amendments to the Code effected by the Tax Reform Act of 1986 and subsequent

legislation, or has remaining a period of time under applicable Treasury

regulations or IRS pronouncements in which to apply for such a letter and make

any amendments necessary to obtain a favorable determination as to the

qualified status of each such Seller Employee Plan; (iii) no “prohibited

transaction,” within the meaning of Section 4975 of the Code or Sections 406

and 407 of ERISA, and not otherwise exempt under Section 4975 of the Code or 




 




39





























 




Section 408 of ERISA (or any

administrative class exemption issued thereunder), has occurred with respect to

any Seller Employee Plan; (iv) there are no actions, suits or claims pending,

or, to the knowledge of Seller, threatened or reasonably anticipated (other

than routine claims for benefits) against any Seller Employee Plan or against

the assets of any Seller Employee Plan; (v) each Seller Employee Plan (other

than any stock option plan) can be amended, terminated or otherwise

discontinued after the Closing, without material liability to Parent, Buyer or

any of their Affiliates (other than ordinary administration expenses); (vi)

there are no audits, inquiries or proceedings pending or, to the knowledge of

Seller or any Affiliates, threatened by the IRS or DOL with respect to any

Seller Employee Plan; and (vii) neither Seller nor any Affiliate is subject to

any penalty or tax with respect to any Seller Employee Plan under Section

502(i) of ERISA or Sections 4975 through 4980 of the Code.




 




(e)           Pension Plan.  Neither Seller nor any Affiliate has ever

maintained, established, sponsored, participated in, or contributed to, any

Pension Plan which is subject to Title IV of ERISA or Section 412 of the Code.




 




(f)            Collectively Bargained,

Multiemployer and Multiple Employer Plans. 

At no time has Seller or any Affiliate contributed to or been obligated

to contribute to any Multiemployer Plan. 

Neither Seller, nor any Affiliate has at any time ever maintained,

established, sponsored, participated in, or contributed to any multiple

employer plan, or to any plan described in Section 413 of the Code.




 




(g)           No Post-Employment Obligations.  No Seller Employee Plan provides, or has any

liability to provide, life insurance, medical or other employee benefits to any

current or former Employee upon his or her retirement or termination of

employment for any reason, except as may be required by statute, and neither

Seller nor any of its Affiliates has ever represented, promised or contracted (whether

in oral or written form) to any Employee (either individually or to Employees

as a group) that such Employee(s) would be provided with life insurance,

medical or other employee welfare benefits upon their retirement or termination

of employment, except to the extent required by statute.




 




(h)           Welfare Plan Compliance.  Seller and, as applicable, its Affiliates,

have, prior to the Closing, complied with the health care continuation

requirements of COBRA, the requirement of FMLA, the requirements of the Health

Insurance Portability and Accountability Act of 1996, the requirements of the

Women’s Health and Cancer Rights Act of 1998, the requirements of the Newborns’

and Mothers’ Health Protection Act of 1996, or any similar provisions of state

law applicable to its Employees.




 




(i)            Effect of

Transaction.




 




(i)            Except as set forth on Schedule

3.23(i), the execution of this Agreement and the consummation of the

transactions contemplated hereby will not (either alone or upon the occurrence

of any additional or subsequent events) constitute an event under any Seller

Employee Plan, Employment Agreement, trust or loan that will or may result in

any payment




 




40





























 




(whether of severance pay or

otherwise), acceleration, forgiveness of indebtedness, vesting, distribution,

increase in benefits or obligation to fund benefits with respect to any

Employee.




 




(ii)           Except as set forth on Schedule

3.23(i) and other than the Retention Options, no payment or benefit which will

or may be made by Seller or its Affiliates with respect to any Employee will be

characterized as a “parachute payment,” within the meaning of Section

280G(b)(2) of the Code.




 




(j)            Employment Matters.  Seller: (i) is in compliance in all respects

with all applicable foreign, federal, state and local laws, rules and

regulations respecting employment, employment practices, terms and conditions

of employment and wages and hours, in each case, with respect to Employees;

(ii) has withheld and reported all amounts required by law or by agreement to

be withheld and reported with respect to wages, salaries and other payments to

Employees; (iii) is not liable for any arrears of wages or any taxes or any

penalty for failure to comply with any of the foregoing; and (iv) is not liable

for any payment to any trust or other fund governed by or maintained by or on

behalf of any governmental authority, with respect to unemployment compensation

benefits, social security or other benefits or obligations for Employees (other

than routine payments to be made in the normal course of business and

consistent with past practice).  There

are no pending, threatened or reasonably anticipated claims or actions against

Seller under any worker’s compensation policy or long-term disability policy.




 




(k)           Labor.  No work stoppage or labor strike against

Seller is pending,  threatened or

reasonably anticipated.  Seller does not

know of any activities or proceedings of any labor union to organize any

Employees.  Except as set forth in

Schedule 3.23(k), there are no actions, suits, claims, labor disputes or

grievances pending, or, to the knowledge of Seller, threatened or reasonably

anticipated relating to any labor, safety or discrimination matters involving

any Employee, including, without limitation, charges of unfair labor practices

or discrimination complaints, which, if adversely determined, would,

individually or in the aggregate, result in any material liability to

Seller.  Neither Seller nor any of its

subsidiaries has engaged in any unfair labor practices within the meaning of

the National Labor Relations Act. 

Except as set forth in Schedule 3.23(k), Seller is not presently, nor

has it been in the past, a party to, or bound by, any collective bargaining

agreement or union contract with respect to Employees and no collective

bargaining agreement is being negotiated by Seller.




 




(l)            International Employee Plan.  Seller does not now, nor has it ever had the

obligation to, maintain, establish, sponsor, participate in, or contribute to

any International Employee Plan.




 




3.24         Environment,

Health, and Safety.  For purposes of

this Agreement, the following terms shall have the meanings ascribed to them

below:




 




(a)           Definitions:




 




(i)            “Hazardous

Material” is any material, chemical or substance that is prohibited or

regulated by any Environmental Law or that has been designated by any

Governmental 




 




41





























 




Authority to be radioactive,

toxic, hazardous or otherwise a danger to health, reproduction or the

environment.




 




(ii)           “Governmental

Authority” is any local, state, provincial, federal, or

international governmental authority or agency which has had or now has

jurisdiction over any portion of the subject matter of this Agreement, any

Business Facility or the Seller.




 




(iii)          “Business

Facility” is any property including the land, the improvements

thereon, the groundwater thereunder and the surface water thereon, that is or

at any time has been owned, operated, occupied, controlled or leased by the

Seller in connection with the operation of its business.




 




(iv)          “Environmental

Laws” are all applicable laws, rules, regulations, orders, treaties,

statutes, and codes promulgated by any Governmental Authority which prohibit,

regulate or control any Hazardous Material or any Hazardous Material Activity,

including, without limitation, the Comprehensive Environmental Response,

Compensation, and Liability Act of 1980, the Resource Recovery and Conservation

Act of 1976, the Federal Water Pollution Control Act, the Clean Air Act, the Hazardous

Materials Transportation Act, the Occupational Safety and Health Act, the Clean

Water Act, comparable laws, rules, regulations, ordinances, orders, treaties,

statutes, and codes of other Governmental Authorities, the regulations

promulgated pursuant to any of the foregoing, and all amendments and

modifications of any of the foregoing.




 




(v)           “Hazardous

Materials Activity” is the transportation, transfer, recycling,

storage, use, treatment, manufacture, removal, remediation, release, exposure

of others to, sale, or distribution of any Hazardous Material or any product

containing a Hazardous Material.




 




(vi)          “Environmental

Permit” is any approval, permit, license, clearance or consent

required to be obtained from any private person or any Governmental Authority

with respect to a Hazardous Materials Activity which is or was conducted by the

Seller.




 




(b)           Condition of Property:  As of the Closing, except in compliance with

Environmental Laws and in a manner that could not reasonably be expected to

subject the Seller to liability, no Hazardous Materials are present on any

Business Facility currently owned, operated, occupied, controlled or leased by

the Seller or were present on any other Business Facility at the time it ceased

to be owned, operated, occupied, controlled or leased by the Seller.  There are no underground storage tanks,

asbestos which is friable or likely to become friable or PCBs present on any

Business Facility currently owned, operated, occupied, controlled or leased by

the Seller or as a consequence of the acts of the Seller or its agents.




 




(c)           Hazardous Materials Activities:  The Seller has conducted all Hazardous

Material Activities relating to the Business in compliance in all material

respects with all applicable Environmental Laws.  The Hazardous Materials Activities of the Seller prior to the

Closing have not resulted in the exposure of any person to a Hazardous Material

in a manner which has caused or could reasonably be expected to cause an

adverse health effect to any such person.




 




42





























 




(d)           Permits:  Seller holds all Environmental Permits

necessary for the conduct of the Seller’s Business as currently being conducted

by Seller and as currently contemplated to be conducted.




 




(e)           Environmental Litigation:  No action, proceeding, revocation

proceeding, amendment procedure, writ, injunction or claim is pending, or to

the best of the Seller’s knowledge, 

threatened, concerning or relating to any Environmental Permit or any

Hazardous Materials Activity of the Seller relating to its Business, or any

Business Facility.




 




(f)            Environmental Liabilities:  The Seller is not aware of any fact or

circumstance, which could result in any environmental liability which could

reasonably be expected to result in a material adverse effect on the business

or financial status of the Seller.




 




(g)           Reports and Records:  The Seller has not used any Hazardous

Materials in any Business Facilities other than those contained in office and

janitorial supplies used by Seller.  The

Seller has delivered to Buyer or made available for inspection by Buyer and its

agents, representatives and employees all records in the Seller’s possession

concerning the Hazardous Materials Activities of the Seller relating to its

Business and all environmental audits and environmental assessments of any

Business Facility conducted at the request of, or otherwise in the possession

of the Seller.  The Seller has complied

with all environmental disclosure obligations imposed by applicable law with

respect to this transaction.




 




3.25         Sufficiency of Assets.  The Purchased Assets, the personnel set

forth in Schedule 6.7 and the rights acquired by Buyer under this Agreement,

including the Ancillary Agreements and the third party contracts assigned by

Seller to Buyer pursuant to this Agreement, excluding the Excluded Assets and

any nontransferable assets pursuant to Section 2.7, include all assets,

personnel and rights of Seller, that: (i) are used or held for use by Seller

for Seller’s operation or conduct of the Business, or (ii) are necessary for,

or would otherwise be infringed by, the operation or conduct the Business by

Buyer immediately following the Closing in substantially the same manner as

currently conducted or contemplated to be conducted by Seller, and such assets,

personnel and rights are sufficient for the conduct of the Business by Buyer

immediately following the Closing in substantially the same manner as currently

conducted or contemplated to be conducted by Seller.




 




3.26         Certain Business Relationships

With Seller.  To Seller’s

knowledge, neither any shareholders of Seller nor any director or officer of

Seller, nor any member of their immediate families, nor any Affiliate of any of

the foregoing, owns, directly or indirectly, or has an ownership interest

(excluding any direct or indirect ownership by a shareholders of Seller of up

to 1% of the outstanding capital stock of a publicly traded entity) in (a) any

business (corporate or otherwise) which is a party to, or in any property which

is the subject of, any business arrangement or relationship of any kind with

Seller, or (b) any business (corporate or otherwise) which conducts the same

business as, or a business similar to, that conducted by Seller.




 




3.27         No Adverse Developments.  There is no development (exclusive of

general economic factors affecting business or Seller’s industry in general)

or, to Seller’s knowledge, threatened development affecting Seller (or

affecting customers, suppliers, employees, and other Persons which 




 




43





























 




have relationships with Seller)

that (i) is having or is reasonably likely to have a Material Adverse Effect on

Seller, or (ii) would prevent Buyer from conducting the business of Seller

following the Closing in the manner in which it was conducted by Seller prior

to the Closing.




 




3.28         Fees.  Seller has no liability or obligation to pay

any fees or commissions to any broker, finder, agent or attorney, with respect

to the transactions contemplated by this Agreement.




 




3.29         Complete Copies of Materials.  Seller has delivered or made available true

and complete copies of each document (or summaries of same) that has been

requested by Parent or its counsel.




 




3.30         Board Approval. 

The Board of Directors of Seller has unanimously (i) approved this

Agreement and the transactions contemplated hereby, (ii) determined that the

transactions contemplated hereby are in the best interests of the shareholders

of Seller and is on terms that are fair to such shareholders, (iii) recommended

that the shareholders of Seller approve this Agreement and the transactions

contemplated hereby, and (iv) adopted a plan of liquidation for purposes of

California Corporations Code and other applicable laws.




 




3.31         Export Control Laws.  Except as set forth in Section 3.31 of the

Seller Disclosure Letter, Seller has conducted its export transactions in

accordance, in all material respects, with applicable provisions of United

States export control laws and regulations, including but not limited to the

Export Administration Act and implementing Export Administration

Regulations.  Without limiting the

foregoing, except as set forth in Section 3.31 of the Seller Disclosure Letter,

Seller represents and warrants that:




 




(a)           Seller has obtained all material

export licenses and other approvals required for its exports of products,

software and technologies from the United States;




 




(b)           Seller is in compliance with the

terms of all applicable export licenses or other approvals;




 




(c)           there are no pending or, to the knowledge

of Seller, threatened claims against Seller with respect to such export

licenses or other approvals;




 




(d)           to the knowledge of Seller, there are

no actions, conditions or circumstances pertaining to Seller’s export

transactions that may give rise to any future claims; and




 




(e)           no consents or approvals for the

transfer of export licenses to Buyer are required, or such consents and

approvals can be obtained expeditiously without material cost.




 




3.32         Preferences; Solvency.  The following statements are, after giving

effect to the transactions contemplated hereby, and will be, upon each

distribution of any assets or property of Seller to the Trust (as defined in

Section 6.13 hereof) or the shareholders of Seller, true and correct:




 




44





























 




(a)           The aggregate value of all assets and

properties of Seller or the Trust, at their respective then present fair

saleable values, exceeds the amount of all the debts and Liabilities

(including, without limitation, contingent, subordinated, unmatured and

unliquidated liabilities) of Seller or the Trust.  Seller understands that, in this context, “present fair saleable

value” means the amount which may be realized within a reasonable time through

a sale within such period by a capable and diligent businessperson from an

interested buyer who is willing to purchase under ordinary selling

conditions.  In determining the present

fair saleable value of Seller’s contingent liabilities (such as litigation,

guarantees and pension plan liabilities), Seller has considered such

liabilities that could possibly become actual or matured liabilities.




 




(b)           Seller is not insolvent as such term

is used in Section 548 of the Bankruptcy Code and the Uniform Fraudulent

Transfers Act as adopted in the State of California, and all other applicable

fraudulent transfer or fraudulent conveyance laws, statutes, rules or

regulations applicable to Seller.




 




(c)           The Purchase Price received by Seller

in connection with the transactions contemplated hereby constitutes reasonably

equivalent consideration for the Purchased Assets.




 




3.33         Full Disclosure.  No representation or warranty in this Article III or in any

document delivered by Seller or its Representatives pursuant to the

transactions contemplated by this Agreement, and no statement, list,

certificate or instrument furnished to Parent pursuant hereto or in connection

with this Agreement, when taken as a whole, contains any untrue statement of a

material fact, or omits to state a material fact necessary to make the

statement herein or therein, in light of the circumstances in which they were

made, not misleading. Seller has delivered to Parent true, correct and complete

copies of all documents, including all amendments, supplements and

modifications thereof or waivers currently in effect thereunder, described in

Seller Disclosure Letter.




 




3.34         Information Supplied.  The information supplied by Seller

specifically for inclusion in the Shareholder Materials (as defined in Section

5.4) to be sent to the shareholders of Seller shall not, on the date the

Shareholder Materials is first mailed to the shareholders of Seller and at the

time of the meeting of the shareholders of Seller held to vote on the approval

the transactions contemplated by this Agreement, contain any untrue statement

of material fact or omit to state any material fact required to be stated

therein or necessary in order to make the statements therein not misleading or

omit to state any material fact necessary to correct any statement in any

earlier communication with respect to the solicitation of proxies or consents

for the approval of the transactions contemplated by this Agreement which has

become false or misleading. 

Notwithstanding the foregoing, Seller makes no representation or

warranty with respect to any information supplied by Parent or Buyer which is

contained in any of the foregoing documents.




 




ARTICLE

IV




 




REPRESENTATIONS AND WARRANTIES OF PARENT AND

BUYER




 




Subject to

such exceptions as are specifically disclosed in the disclosure letter (referencing

the appropriate section and paragraph numbers) supplied by the Parent to Seller

(the “Parent




 




45





























 




Disclosure

Letter”), each of Parent and Buyer, jointly and

severally, hereby represents and warrants to Seller that the statements

contained in this Article IV are true and correct as of the date of this

Agreement and will be true and correct as of the Closing (as though made at the

Closing); provided, that the

representations and warranties made as of a specified date will be true and

correct as of such date.




 




4.1           Organization,

Qualification, and Corporate Power. 

Parent is a corporation duly organized, validly existing, and in good

standing under the laws of Bermuda. 

Buyer is a corporation duly organized, validly existing, and in good

standing under the laws of the Sate of Delaware.  Parent and Buyer are duly authorized to conduct business and are

in good standing under the laws of each other jurisdiction where such

qualification is required and in which the failure to so qualify is reasonably

likely to have a Material Adverse Effect on Parent.  Parent and Buyer have full corporate power and authority, and

have all necessary licenses and permits (other than licenses or permits the

failure of which to possess would not result in a Material Adverse Effect on

Parent), to carry on the businesses in which they are engaged and to own and

use the properties owned and used by them.




 




4.2           Authorization.  Parent and Buyer have full power and

authority to execute and deliver this Agreement and the Ancillary Agreements to

which they are parties, and to consummate the transactions contemplated

hereunder and to perform their obligations hereunder, and no other proceedings

on the part of Parent or Buyer are necessary to authorize the execution,

delivery and performance of this Agreement and the Ancillary Agreements to

which they are parties.  This Agreement

and the Ancillary Agreements to which they are parties and the transactions

contemplated hereby and thereby have been approved by Parent’s Board of

Directors.  The consummation of the

transactions contemplated hereby does not require the approval or consent of

the shareholders of Parent.  This

Agreement and the Ancillary Agreements to which they are parties constitute the

valid and legally binding obligations of Parent and/or Buyer, enforceable

against Parent and/or Buyer in accordance with their respective terms and

conditions, except as such enforceability may be limited by principles of

public policy and subject to the laws of general application relating to

bankruptcy, insolvency and the relief of debtors and rules of law governing

specific performance, injunctive relief or other equitable remedies.




 




4.3           Capitalization.




 




(a)           As of June 30, 2002, the authorized

capital stock of Parent consisted of (i) 10,000,000 shares of Preferred Stock,

$0.001 par value, none of which was issued or outstanding, and (ii) 100,000,000

shares of Common Stock, $0.001 par value, of which 58,357,982 shares were

issued and outstanding. All of the outstanding shares of Parent’s capital stock

have been duly authorized and validly issued and are fully paid and

nonassessable. As of the date hereof, the authorized capital stock of Buyer

consists of 1,000 shares of Common Stock, $0.001 par value per share, of which

1,000 shares have been duly authorized and validly issued, are fully paid and

nonassessable, all of which are owned by Parent.




 




(b)           The shares of Parent Common Stock to

be issued pursuant to Section 2.3 of this Agreement will be duly authorized,

validly issued, fully paid, non-assessable.




 




46





























 




4.4           No

Conflicts.  Neither the

execution and the delivery of this Agreement nor the consummation of the

transactions contemplated hereby, will (A) violate any constitution, statute,

regulation, rule, injunction, judgment, order, decree, ruling, charge, or other

restriction of any government, governmental agency, or court to which Parent or

Buyer is subject, (B) violate or conflict with any provision of the charters or

bylaws of Parent or Buyer, or (C) conflict with, result in a breach of,

constitute a default under, result in the acceleration of, create in any party

the right to accelerate, terminate, modify, or cancel, or require any notice

under, any agreement, contract, lease, license, instrument, or other

arrangement to which Parent or Buyer is a party or by which either is bound or

to which any of their assets is subject which has been filed as an exhibit to

the Parent SEC Reports, other than any of the foregoing which would not in the

aggregate have a Material Adverse Effect on Parent or adversely affect the

ability of Parent to consummate the transactions contemplated hereby.




 




4.5           Consents.  No consent, waiver, approval, order or

authorization of, or registration, declaration or filing with, any Governmental

Body or any third party, including a party to any agreement with Parent, is

required by or with respect to Parent in connection with the execution and

delivery of this Agreement or the consummation of the transactions contemplated

hereby, except for (i) such consents, waivers, approvals, orders,

authorizations, registrations, declarations and filings as may be required

under applicable federal and state securities laws, (ii) any applicable filings

required under the HSR Act and (iii) such consents, waivers, approvals, orders,

authorizations, registrations, declarations and filings in which the failure of

which to obtain would not in the aggregate have a Material Adverse Effect on

Parent or adversely affect the ability of Parent to consummate the transactions

contemplated hereby.




 




4.6           SEC

Filings.  Parent has filed all

forms, reports and documents required to be filed with the SEC since

September 27, 2001 (collectively, the “Parent

SEC Reports”).  The Parent

SEC Reports (i) were prepared in accordance with the requirements of the

Securities Exchange Act of 1934, as amended, and (ii) did not at the time they

were filed (or if amended or superseded by a filing prior to the date of this

Agreement, then on the date of such filing) contain any untrue statement of a

material fact or omit to state a material fact required to be stated therein or

necessary in order to make the statements therein, in the light of the

circumstances under which they were made, not misleading.




 




4.7           Brokers’

Fees.  Parent does not have any

liability or obligation to pay any fees or commissions to any broker, finder,

or agent with respect to the transactions contemplated by this Agreement.




 




4.8           Information

Supplied.  The information supplied

by Parent or Buyer specifically for inclusion in the Shareholder Materials (as

defined in Section 5.4) to be sent to the shareholders of Seller shall not, on

the date the Shareholder Materials is first mailed to the shareholders of

Seller and at the time of the Seller’s shareholder meeting held to vote on the

approval of the transactions contemplated by this Agreement, contain any untrue

statement of material fact or omit to state any material fact required to be

stated therein or necessary in order to make the statements therein not

misleading or omit to state any material fact necessary to correct any

statement in any earlier




 




47





























 




communication with respect to

the solicitation of proxies or consents for the approval of the transactions

contemplated by this Agreement which has become false or misleading.  Notwithstanding the foregoing, Parent and

Buyer make no representations or warranties with respect to any information

supplied by Seller which is contained in any of the foregoing documents.




 




4.9           Parent Engaged in Active Trade or

Business.  For the entire

thirty-six month period ending on the Closing Date, Parent will have been

engaged in an active trade or business (as defined in section 1.367(a)-2T(b) of

the Treasury Regulations) outside the United States.  Parent has no intention, and as of the Closing Date shall have no

intention, to substantially dispose of or discontinue such trade or business.




 




4.10         Fair Market Value of Parent At Least

Equal to that of Seller.  As of

the Closing Date, the fair market value of Parent will be at least equal to the

fair market value of the Seller.  For

purposes of this Section 4.10, the fair market value of Parent shall include

assets acquired outside Parent’s ordinary course of business within the

thirty-six month period ending on the Closing Date only if either (i) both (a)

as of the Closing Date such assets do not produce, and are not held for the

production of, passive income as herein defined in Section 1296(b) of the Code,

and (b) such assets were not acquired for the principal purpose of satisfying

this requirement that Parent’s fair market value at least equal that of Seller

or (ii) such assets consist of (a) the stock of a foreign corporation whose

stock is at least 80% owned (by total voting power and total value), directly

or indirectly, by Parent or (b) an interest in a partnership in which Parent

has active and substantial management functions as a partner with regard to the

partnership business or has an interest representing a 25% or greater interest

in the partnership’s capital and profits.




 




4.11         Employees.  Buyer is not a party to or bound by any

collective bargaining agreement, nor has it experienced any strike or

grievance, claim of unfair labor practices, or other collective bargaining

dispute.  To Buyer’s knowledge, there is

no organizational effort presently being made or threatened by or on behalf of

any labor union with respect to employees of Seller.




 




4.12         Employee Matters and Benefit Plans.




 




(a)           Definitions.




 




(i)            “Buyer

Affiliate” shall mean any other person or entity under common

control with Buyer within the meaning of Section 414(b), (c), (m) or (o) of the

Code and the regulations issued thereunder;




 




(ii)           “Buyer

Benefits Plan” shall mean any plan, program, policy, practice,

contract, agreement or other arrangement providing for compensation, severance,

termination pay, deferred compensation, performance awards, stock or

stock-related awards, fringe benefits or other employee benefits or remuneration

of any kind, whether written or unwritten or otherwise, funded or unfunded,

including without limitation, each “employee benefit plan,” within the meaning

of Section 3(3) of ERISA which is or has been maintained, contributed to, or

required to be contributed to, by




 




48





























 




Buyer or any Buyer Affiliate

for the benefit of any Buyer Employee, or with respect to which Buyer or any

Buyer Affiliate has or may have any liability or obligation that may affect

Seller;




 




(iii)          “Buyer

Benefits Liabilities” shall mean, with respect to any Buyer Employee

Plan, any and all claims, debts, liabilities, commitment and obligations,

whether fixed, contingent or absolute, matured or unmatured, liquidated or

unliquidated, accrued or unaccrued, known or unknown, whenever or however

arising, including all costs and expenses relating thereto, and including those

debts, liabilities and obligations arising under law, rule, regulation,

permits, action or proceeding before any court or regulatory agency or

administrative agency, order or consent decree or any award of any arbitrator

of any kind, and those arising under contract, commitment or undertaking;




 




(iv)          “Buyer

Employee” shall mean any current or former or retired employee,

consultant or director of Buyer or any Buyer Affiliate;




 




(v)           “Buyer

International Employee Plan” shall mean each Buyer Employee Plan

that has been adopted or maintained by Buyer or any Buyer Affiliate, whether

informally or formally, or with respect to which Buyer or any Buyer Affiliate

will or may have any liability, for the benefit of Buyer Employees who perform

services outside the United States that may affect Seller.




 




(b)           Schedule.  Schedule 4.12(b) contains an accurate and

complete list of each Buyer Employee Plan and Buyer International Employee

Plan.




 




(c)           Employee Plan Compliance.  Except as set forth on Schedule 4.12(c), (i)

Buyer has performed in all material respects all obligations required to be

performed by it under, is not in default or violation of, and has no knowledge

of any default or violation by any other party to each Buyer Employee Plan, and

each Buyer Employee Plan has been established and maintained in all material

respects in accordance with its terms and in compliance with all applicable laws,

statutes, orders, rules and regulations, including but not limited to ERISA or

the Code; (ii) each Buyer Employee Plan intended to qualify under Section

401(a) of the Code and each trust intended to qualify under Section 501(a) of

the Code has either received a favorable determination, opinion, notification

or advisory letter from the IRS with respect to each such Buyer Employee Plan

as to its qualified status under the Code, including all amendments to the Code

effected by the Tax Reform Act of 1986 and subsequent legislation, or has

remaining a period of time under applicable Treasury regulations or IRS

pronouncements in which to apply for such a letter and make any amendments

necessary to obtain a favorable determination as to the qualified status of

each such Buyer Employee Plan; (iii) no “prohibited transaction,” within the

meaning of Section 4975 of the Code or Sections 406 and 407 of ERISA, and not

otherwise exempt under Section 4975 of the Code or Section 408 of ERISA (or any

administrative class exemption issued thereunder), has occurred with respect to

any Buyer Employee Plan; (iv) there are no actions, suits or claims pending,

or, to the knowledge of Buyer, threatened or reasonably anticipated (other than

routine claims for benefits) against any Buyer Employee Plan or against the

assets of any Buyer Employee Plan; (v) each Buyer Employee Plan can be amended,

terminated or otherwise discontinued after the Closing, without material

liability to Seller or any of their Affiliates; (vi) there are no audits,

inquiries or proceedings pending




 




49





























 




or, to the knowledge of Buyer

or any Buyer Affiliates, threatened by the IRS or DOL with respect to any Buyer

Employee Plan; and (vii) neither Buyer nor any Buyer Affiliate is subject to

any penalty or tax with respect to any Buyer Employee Plan under Section 502(i)

of ERISA or Sections 4975 through 4980 of the Code.




 




(d)           Pension Plan.  Neither Buyer nor any Buyer Affiliate has

ever maintained, established, sponsored, participated in, or contributed to,

any Pension Plan which is subject to Title IV of ERISA or Section 412 of the

Code.




 




(e)           Collectively Bargained,

Multiemployer and Multiple Employer Plans. 

At no time has Buyer or any Buyer Affiliate contributed to or been

obligated to contribute to any Multiemployer Plan.  Neither Buyer, nor any Buyer Affiliate has at any time ever

maintained, established, sponsored, participated in, or contributed to any

multiple employer plan, or to any plan described in Section 413 of the Code.




 




(f)            No Post-Employment Obligations.  No Buyer Employee Plan provides, or has any

liability to provide, life insurance, medical or other employee benefits to any

current or former Buyer Employee upon his or her retirement or termination of employment

for any reason, except as may be required by statute, and neither Buyer nor any

Buyer Affiliate has ever represented, promised or contracted (whether in oral

or written form) to any Buyer Employee (either individually or to Buyer

Employees as a group) that such Buyer Employee(s) would be provided with life

insurance, medical or other employee welfare benefits upon their retirement or

termination of employment, except to the extent required by statute.




 




(g)           Effect of Transaction.  Except as set forth on Schedule 4.12(g), the

execution of this Agreement and the consummation of the transactions

contemplated hereby will not (either alone or upon the occurrence of any

additional or subsequent events) constitute an event under any Buyer Employee

Plan, Employment Agreement, trust or loan that will or may result in any

payment (whether of severance pay or otherwise), acceleration, forgiveness of

indebtedness, vesting, distribution, increase in benefits or obligation to fund

benefits with respect to any Buyer Employee.




 




(h)           Employment Matters.  Buyer: (i) is in material compliance in all

respects with all applicable foreign, federal, state and local laws, rules and

regulations respecting employment, employment practices, terms and conditions

of employment and wages and hours, in each case, with respect to Buyer

Employees; (ii) has withheld and reported all amounts required by law or by

agreement to be withheld and reported with respect to wages, salaries and other

payments to Buyer Employees; (iii) is not liable for any arrears of wages or

any taxes or any penalty for failure to comply with any of the foregoing; and

(iv) is not liable for any payment to any trust or other fund governed by or

maintained by or on behalf of any governmental authority, with respect to

unemployment compensation benefits, social security or other benefits or

obligations for Buyer Employees (other than routine payments to be made in the

normal course of business and consistent with past practice).  There are no pending, threatened or reasonably

anticipated claims or actions against Buyer under any worker’s compensation

policy or long-term disability policy.




 




50





























 




(i)            Labor.  No work stoppage or labor strike against

Buyer is pending, threatened or reasonably anticipated.  Buyer does not know of any activities or

proceedings of any labor union to organize any Buyer Employees.  Except as set forth in Schedule 4.12(i),

there are no actions, suits, claims, labor disputes or grievances pending, or,

to the knowledge of Buyer, threatened or reasonably anticipated relating to any

labor, safety or discrimination matters involving any Buyer Employee,

including, without limitation, charges of unfair labor practices or

discrimination complaints, which, if adversely determined, would, individually

or in the aggregate, result in any material liability to Seller.  Neither Buyer nor any of its subsidiaries

has engaged in any unfair labor practices within the meaning of the National

Labor Relations Act.  Except as set

forth in Schedule 4.12(i), Buyer is not presently, nor has it been in the past,

a party to, or bound by, any collective bargaining agreement or union contract

with respect to Buyer Employees and no collective bargaining agreement is being

negotiated by Buyer.




 




(j)            International Employee Plan.  Buyer does not now, nor has it ever had the

obligation to, maintain, establish, sponsor, participate in, or contribute to

any Buyer International Employee Plan.




 




ARTICLE

V




 




PRE-CLOSING COVENANTS




 




With respect

to the period between the execution of this Agreement and the earlier of the

termination of this Agreement and the Closing:




 




5.1           Operation of Business.  During the period from the date of this

Agreement and continuing until the earlier of the termination of this Agreement

and the Closing, Seller agrees (except to the extent that the other parties

shall otherwise consent in writing or this Agreement shall otherwise require)

to carry on the business of Seller in the usual, regular and ordinary course in

substantially the same manner as heretofore conducted, to pay debts and Taxes

when due, to pay or perform other obligations when due, and, to the extent

consistent with such business, use all reasonable efforts consistent with past

practice and policies to preserve intact the present business organization,

keep available the services of the present officers and key employees and,

except as or this Agreement shall otherwise require, preserve their

relationships with customers, suppliers, distributors, licensors, licensees,

and others having business dealings with it, all with the goal of preserving

unimpaired its goodwill and ongoing businesses at the Closing. Seller shall

promptly notify Parent of any event or occurrence or emergency not in the

ordinary course of its business, and any material event involving it.  Except as expressly contemplated by this

Agreement, Seller shall not, without the prior written consent of Parent:




 




(a)           Enter into any commitment or

transaction not in the ordinary course of business.




 




(b)           (i) Sell or enter into any license

agreement with respect to Seller Intellectual Property with any person or

entity or (ii) buy or enter into any license agreement with respect to the

Intellectual Property of any person or entity;




 




51





























 




(c)           Transfer to any person or entity any

rights to Seller Intellectual Property (other than pursuant to end user

licenses in the ordinary course of business);




 




(d)           Enter into or amend any agreements

pursuant to which any other party is granted marketing, distribution or similar

rights of any type or scope with respect to any products or technology of

Seller;




 




(e)           Enter into or amend any Contract

pursuant to which any other party is granted marketing, distribution or similar

rights of any type or scope with respect to any products or technology of

Seller;




 




(f)            Amend or otherwise modify (or agree

to do so), except in the ordinary course of business, or violate the terms of,

any of the Contracts set forth or described in the Seller Disclosure Letter;




 




(g)           Commence any litigation;




 




(h)           Declare, set aside or pay any

dividends on or make any other distributions (whether in cash, stock or

property) in respect of any of its capital stock, or split, combine or

reclassify any of its capital stock or issue or authorize the issuance of any

other securities in respect of, in lieu of or in substitution for shares of

capital stock of Seller, or repurchase, redeem or otherwise acquire, directly

or indirectly, any shares of its capital stock (or options, warrants or other

rights exercisable therefore);




 




(i)            Except for the issuance of shares of

Seller Capital Stock upon exercise or conversion of presently outstanding

Seller Options or warrants, issue, grant, deliver or sell or authorize or propose

the issuance, grant, delivery or sale of, or purchase or propose the purchase

of, any shares of its capital stock or securities convertible into, or

subscriptions, rights, warrants or options to acquire, or other agreements or

commitments of any character obligating it to issue any such shares or other

convertible securities;




 




(j)            Cause or permit any amendments to

its articles of incorporation or bylaws or other organizational documents;




 




(k)           Acquire or agree to acquire by

merging or consolidating with, or by purchasing any assets or equity securities

of, or by any other manner, any business or any corporation, partnership,

association or other business organization or division thereof, or otherwise

acquire or agree to acquire any assets which are material, individually or in

the aggregate, to the business of Seller;




 




(l)            Sell, lease, license or otherwise

dispose of any of its properties or assets, except in the ordinary course of

business;




 




(m)          Incur any indebtedness for borrowed

money or guarantee any such indebtedness or issue or sell any debt securities

of Seller or guarantee any debt securities of others;




 




52





























 




(n)           Grant any loans to others or purchase

debt securities of others or amend the terms of any outstanding loan agreement

except for advances to employees for travel and business expenses in the

ordinary course of business, consistent with past practices;




 




(o)           Grant any severance or termination

pay in cash or otherwise to any director, officer or employee except pursuant

to written agreements outstanding and disclosed and provided to Parent, or

policies existing, on the date hereof and as previously disclosed in writing or

made available to Parent, or adopt any new severance plan, amend or modify or alter

in any manner any severance plan, agreement or arrangement existing on the date

hereof or grant any bonus, payment or equity-based compensation (except as

expressly permitted by this Agreement), whether payable in cash, stock or other

securities;




 




(p)           Adopt or amend any employee benefit

plan, or enter into any employment contract, pay or agree to pay any special

bonus or special remuneration to any director or employee, or increase the

salaries or wage rates of its employees;




 




(q)           Revalue any of its assets, including

without limitation writing down the value of inventory or writing off notes or

accounts receivable other than in the ordinary course of business;




 




(r)            Take any action to accelerate or

modify the vesting of any options, warrants, restricted stock or other rights

to acquire shares of the capital stock of Seller or take any action that could

jeopardize the tax-free reorganization hereunder;




 




(s)           Pay, discharge or satisfy, in an

amount in excess of $10,000, any claim, liability or obligation (absolute,

accrued, asserted or unasserted, contingent or otherwise), other than the

payment, discharge or satisfaction in the ordinary course of business of

liabilities reflected or reserved against in the Financial Statements (or the

notes thereto);




 




(t)            Make or change any material election

in respect of Taxes, adopt or change any accounting method in respect of Taxes,

enter into any closing agreement, settle any claim or assessment in respect of

Taxes, or consent to any extension or waiver of the limitation period

applicable to any claim or assessment in respect of Taxes;




 




(u)           Enter into any strategic alliance or

joint marketing arrangement or agreement;




 




(v)           Hire or terminate employees or

encourage employees to resign other than in the ordinary course of business;




 




(w)          Take, or agree in writing or otherwise

to take, any of the actions described in Sections 5.1(a) through (v) above, or

any other action that would prevent Seller from performing or cause Seller not

to perform its covenants hereunder.




 




5.2           Access to Information.  Each of Seller and Parent will permit the

other Party and its representatives to have access at all reasonable times, and

in a manner so as not to interfere with its normal business operations, to its

business and operations (subject, in the case of Parent, to 




 




53





























 




compliance with applicable

securities laws).  Neither such access,

inspection and furnishing of information to any Party and its representatives,

nor any investigation by any Party and its representatives, shall in any way

diminish or otherwise affect such Party’s right to rely on any representation

or warranty made by the other Parties hereunder.




 




5.3           Notice of Developments.  Seller shall give prompt notice to Parent of

(i) the occurrence or non-occurrence of any event, the occurrence or

non-occurrence of which is likely to cause any representation or warranty of

Seller contained in this Agreement to be untrue or inaccurate at or prior to

the Closing and (ii) any failure of Seller to comply with or satisfy any

covenant, condition or agreement to be complied with or satisfied by it

hereunder; provided, however,

that the delivery of any notice pursuant to this Section 5.3 shall not limit or

otherwise affect any remedies available to the Party receiving such

notice.  No disclosure by Seller

pursuant to this Section 5.3, however, shall be deemed to amend or supplement

Seller Disclosure Letter or prevent or cure any misrepresentations, breach of warranty

or breach of covenant without the written consent of Parent.




 




5.4           Shareholder Approval.  As promptly as practicable after the

execution of this Agreement, Seller shall submit this Agreement and the

transactions contemplated hereby to the Seller’s shareholders for approval and

adoption as provided by California Law and its Articles of Incorporation and

Bylaws.  Seller shall use its best

efforts to solicit and obtain the consent of its shareholders sufficient to

approve the transactions contemplated by this Agreement and to enable the Closing

to occur as promptly as practicable. 

All material to be submitted to Seller’s shareholders (the “Shareholder Materials”) shall be subject to

review and approval by Parent and include information regarding Seller, the

terms of the transactions contemplated by this Agreement and the unanimous

recommendation of the Board of Directors of Seller regarding the transactions

contemplated by this Agreement.  At

Buyer’s request, Seller shall include in the Shareholder Materials for approval

by the requisite vote of its shareholders a proposal regarding any payments

contemplated under this Agreement or the transactions contemplated hereby that

may be deemed to constitute “parachute payments” pursuant to Section 280G of

the Code such that all such payments shall not be deemed to be “parachute

payments” under Section 280G of the Code or shall be exempt from such treatment

under Section 280G of the Code.  Seller

shall deliver to Parent, concurrently with the execution of this Agreement,

executed Voting Agreements from holders with beneficial ownership of (i) a

majority of the outstanding shares of Seller Preferred Stock and (ii) a

majority of the outstanding shares of Seller Common Stock.




 




5.5           No Solicitation.




 




(a)           From and after the date hereof and

until the earlier of the Closing or the termination of this Agreement, Seller

shall not (nor shall it permit its Representatives to) directly or indirectly

take any of the following actions with any Person other than Parent and its

designees: (a) solicit, initiate or encourage any proposals or offers from, or

conduct discussions with or engage in negotiations with, any Person relating to

any possible Acquisition Proposal with Seller or any of its subsidiaries

(whether such subsidiaries are in existence on the date hereof or are hereafter

organized), (b) provide information with respect to Seller to any Person, other

than Parent, relating to, or otherwise cooperate with, facilitate or encourage

any effort or attempt by any such Person with




 




54





























 




regard to, any possible

Acquisition Proposal with Seller or any subsidiary of Seller (whether such

subsidiaries are in existence on the date hereof or are hereafter organized),

(c) enter into a contract or agreement (whether oral or written) with any

Person, other than Parent, providing for an Acquisition Proposal with Seller or

any subsidiary (whether such subsidiaries are in existence on the date hereof

or are hereafter organized), or (d) make or authorize any statement,

recommendation or solicitation in support of any possible Acquisition Proposal

with Seller or any subsidiary (whether such subsidiary is in existence on the

date hereof or are hereafter organized) other than by Parent.  Seller shall, and shall cause its

Representatives to, immediately cease and cause to be terminated any such

contacts or negotiations with any Person relating to any Acquisition

Proposal.  In addition to the foregoing,

if Seller or any of its Representatives receives, prior to the Closing or the

termination of this Agreement, any offer or proposal (formal or informal)

relating to any of the above, Seller shall immediately notify Parent thereof

and provide Parent with the details thereof including the identity of the

Person or Persons making such offer or proposal, and will keep Parent fully

informed of the status and details of any such offer of proposal.  Each of Seller and Parent acknowledge that

this Section 5.5 was a significant inducement for Buyer and Parent to enter

into this Agreement and the absence of such provision would have resulted in

either (i) a material reduction in the Purchase Price to be paid to Seller or

(ii) a failure to induce Buyer and Parent to enter into this Agreement.




 




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




 




(i)            a proposal or offer for a merger,

consolidation or other business combination involving an acquisition of Seller

or any material assets of Seller; or




 




(ii)           any proposal to acquire in any manner

any Seller Capital Stock (other than upon the exercise of options outstanding

on the date hereof as listed in Section 3.3(b) of Seller Disclosure Letter.




 




5.6           Affiliate Agreements.  Section 5.6 of Seller Disclosure Letter sets

forth those Persons who, in Seller’s reasonable judgment, are or may be

Affiliates of Seller.  Seller shall

provide Parent such information and documents as Parent shall reasonably

request for purposes of reviewing such list. 

Seller shall deliver or cause to be delivered to Parent, concurrently

with the execution of this Agreement (and in any case prior to the Closing

Date) from each of the Affiliates of Seller, an executed Affiliate

Agreement.  Parent and Buyer shall be

entitled to place appropriate legends on the certificates evidencing any Parent

Common Stock to be received by such Affiliates pursuant to the terms of this

Agreement, and to issue appropriate stop transfer instructions to the transfer

agent for Parent Common Stock, consistent with the terms of such Affiliate

Agreements.




 




5.7           Reasonable Efforts.  Each of the Parties will use their

reasonable efforts to take all action and to do all things necessary, proper,

or advisable in order to consummate and make effective the transactions

contemplated by this Agreement (including satisfaction, but not waiver, of the

closing conditions set forth in Section 8 below).




 




5.8           Notices and Consents.  Seller will give any notices to third

parties and obtain any third party consents that are required in connection

with the matters identified in Sections 3.5 and 3.6 of Seller Disclosure Letter

or otherwise required in connection with the transactions contemplated by




 




55





























 




this Agreement so as to

preserve all material rights of or benefits to Seller. Each of the Parties will

give any notices to, make any filings with, and use its reasonable best efforts

to obtain any authorizations, consents, and approvals of governments and

governmental agencies in connection with the matters identified in Sections 3.5

and 3.6 of Seller Disclosure Letter or as otherwise required in connection with

the transactions contemplated by this Agreement.




 




ARTICLE

VI




 




OTHER AGREEMENTS AND COVENANTS




 




6.1           Confidentiality.  Each of the Parties hereto hereby agrees to keep such information

or knowledge obtained in any due diligence or other investigation pursuant to

the negotiation and execution of this Agreement or the effectuation of the

transactions contemplated hereby, confidential; provided, however, that the foregoing shall not apply to

information or knowledge which (a) a party can demonstrate was already lawfully

in its possession prior to the disclosure thereof by the other party, (b) is

generally known to the public and did not become so known through any violation

of law, (c) became known to the public through no fault of such party, (d) is

later lawfully acquired by such party from other sources, (e) is required to be

disclosed by order of court or government agency with subpoena powers or (f)

which is disclosed in the course of any litigation between any of the parties hereto.

In this regard, Seller and its employees and agents acknowledge that Parent’s

Common Stock is publicly traded and that any information obtained during the

course of its due diligence could be considered to be material non-public

information within the meaning of federal and state securities laws.  Accordingly, Seller and its employees and

agents, acknowledge and agree not to engage in any transactions in Parent’s

Common Stock in violation of applicable insider trading laws.




 




6.2           Additional Documents and Further

Assurances.  Each Party hereto,

at the request of another Party hereto, shall execute and deliver such other

instruments and do and perform such other acts and things as may be necessary

or desirable for effecting completely the consummation of the transactions

contemplated hereby.




 




6.3           Treatment as Reorganization.  It is intended by the parties hereto that

the transactions contemplated hereby shall qualify as a “reorganization” within

the meaning of Section 368(a)(1)(C) of the Code.  Notwithstanding the foregoing, no party to this Agreement makes

any representations as to the tax consequences of the transactions contemplated

by this Agreement.




 




6.4           Employee Plans and Benefit

Arrangements.  Effective as of

the day immediately preceding the Closing Date, the Seller and any of its

Affiliates shall terminate any and all group severance, separation or salary

continuation plans, programs or arrangements and any and all plans intended to

include an Internal Revenue Code Section 401(k) arrangement (unless Parent

provides written notice to the Seller that such 401(k) plans shall not be

terminated) (collectively, “Seller Employee

Plans”).  Unless Parent

provides such written notice to the Seller, no later than five business days

prior to the Closing Date, the Seller shall provide Parent with evidence that

such Seller Employee Plan(s) have been terminated (effective as of the day

immediately preceding the Closing Date) pursuant to resolutions of the Seller’s

Board of Directors.  The form and

substance of such




 




56





























 




resolutions shall be subject to

review and approval of Parent.  The

Seller also shall take such other actions in furtherance of terminating such

Seller Employee Plan(s) as Parent may reasonably require.




 




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

options or warrants.




 




6.6           Benefits Liabilities.  From and after the Closing Date, Seller and

any of its Affiliates shall (i) sponsor and (ii) assume or retain, as the case

may be, and be solely responsible for all Benefits Liabilities arising under,

resulting from or relating to the Seller Employee Plans whether incurred

before, on or after the Closing.




 




6.7           Retained Employees.  Prior to the Closing, Buyer shall make an

offer of employment to each employee of Seller set forth on Schedule 6.7, which

such employment shall commence upon Closing.




 




6.8           Listing of Additional Shares.  Prior to the Closing, Parent shall file with

the Nasdaq Stock Market a Notification Form for Listing of Additional Shares,

if required, with respect to the shares of Parent Common Stock issuable

pursuant hereto.




 




6.9           Registration of Parent Guarantee

Shares.  In accordance with a

Registration Rights Agreement substantially in the form attached hereto as Exhibit F (the “Registration Rights Agreement”), Parent shall prepare and

file within 30 days after the final determination of the Parent Guarantee

Amount pursuant to Section 2.10 a registration statement on Form F-3 under the

Securities Act covering the Parent Guarantee Shares issued pursuant to this

Agreement; provided, however,

that Parent shall have no obligation to file a registration statement on Form

F-3 if Parent is not eligible to use Form F-3 at the time such registration

statement is to be filed pursuant to this Section 6.9.  Parent shall use commercially reasonable

efforts to cause the F-3 to become effective within 30 days of the filing of

such registration statement.




 




6.10         Shareholder Observer Rights.




 




(a)           Parent will allow one individual

nominated by the Seller or any successor thereto (including the Trust) (the “Observer”) to act as an authorized

representative of Seller or any successor (including the Trust) and the

Shareholders to participate in and attend all meetings of the Board of

Directors of Parent in a non-voting observer capacity.




 




(b)           Parent shall provide notice of and

other information with respect to such Board of Director meetings as are

delivered to the directors of Parent. 

The Observer, Seller or any successor thereto (including the Trust)

shall maintain the confidentiality of all financial, confidential and

proprietary information of Parent obtained by them as a result of these rights,

and represent and agree that the information provided by Parent pursuant to

these rights shall not be made available to any competitor or customer of, or

vendor to, Parent or any affiliate or associate of any such entity.  Upon Parent’s request, an agreement

providing for nondisclosure of Parent’s proprietary information will be

executed and signed by the Observer. 

Parent may exclude the Observer from any meetings or portions thereof

if, in the good faith determination of a majority of the Board of Directors of




 




57





























 




Parent, (i) the subject matter

to be discussed relates to disputes or negotiations relating to Seller or any

successor thereto (including the Trust) or the Shareholders, or (ii) if

attendance by the Observer could result in waiver or loss of the

attorney-client privilege or other competitive advantage as reasonably

determined by the Parent, or (iii) fulfill Parent’s obligations with respect to

confidential or proprietary information of third parties.  Parent will use its reasonable best efforts

to ensure that any withholding of information or any restriction on attendance

is strictly limited only to the extent necessary set forth in the preceding

sentence.




 




(c)           The observer rights granted under

this Section 6.10 shall terminate on the date two years following the Closing

Date (the “Observer Rights Termination Date”). 

If Seller or any successor thereto (including the Trust) or the

Shareholders provide the Parent evidence satisfactory to Parent within 30 days

prior to the Observer Rights Termination Date that Seller or any successor

thereto (including the Trust) and the Shareholders hold at least 2 million

shares of Parent Common Stock, the observer rights granted under this Section

6.10 shall be extended until the earlier of (x) such time that Seller or any

successor thereto (including the Trust) and the Shareholders no longer own at

least 2 million shares of Parent Common Stock or (y) the date two years

following the Observer Rights Termination Date.  The foregoing notwithstanding, the observer rights granted under

this Section 6.10 shall terminate immediately upon the election of a

Shareholder Director (as defined in Section 6.11).




 




(d)           The rights granted hereunder may not

be assigned or otherwise conveyed by the Shareholders without the prior written

consent of Parent.




 




6.11         Shareholder Representative on

Parent Board of Directors.  In

the event an incumbent member of Parent’s Board of Directors voluntarily

decides not to seek re-election to Parent’s Board of Directors at the 2002

annual meeting of shareholders, Dr. Priscilla Lu shall nominate an individual

designated by Seller or any successor thereto (including the Trust) (a “Shareholder Director”) for consideration by

the Board of Directors for nomination to Parent’s shareholders for election as

a member of Parent’s Board of Directors at Parent’s 2002 annual meeting of

shareholders.




 




6.12         Parent

Loans.  Following the execution

of this Agreement but prior to the earlier of the Closing or the termination of

the Agreement in accordance with Section 9, Parent may loan the Seller funds

for operating expenses incurred following the date of this Agreement in

accordance with a secured promissory note in a form satisfactory to

Parent.  Any cash loaned by Parent or

Buyer to Seller retained by Seller on the Closing Date shall be repaid to

Parent or Buyer on the Closing Date.




 




6.13         Liquidation of Seller.




 




(a)           Within five (5) business days

following the Closing, Seller shall (i) file a Certificate of Election pursuant

to Section 1901 of the California Corporations Code (the “Certificate of Election”) with the Secretary

of State of California pursuant to the California Corporations Code and other

applicable law, and (ii) enter into the Agreement and Declaration of Trust, in

substantially the form attached hereto as Exhibit

J (the “Trust Agreement”),

for the benefit of the shareholders of Seller, designating one or more of

Seller’s directors as initial trustees




 




58





























 




thereunder, and designating the

other directors of Seller as initial members of the advisory committee thereunder,

and (iii) transfer to the trust established under the Trust Agreement (the “Trust”) all of the assets and liabilities

of Seller (including, without limitation, the shares of Parent Common Stock

issued to Seller pursuant hereto and all of Seller’s rights under this

Agreement and the Escrow Agreement). 

Seller shall, as soon as practicable after the Closing, but in no event

more than twelve (12) months following the Closing, file a Certificate of

Dissolution




.




(b)           Following the Closing Date, Seller shall

not carry on the business for which it was established or any other business

(including, without limitation, the Business), except as may be necessary or

incidental to the winding up of its affairs.




 




(c)           After filing the Certificate of

Election, Seller or the Trust, as the case may be, shall (i) provide notice to

claimants, and (ii) make payments and distributions, pursuant to the California

Corporations Code and other applicable law.




 




(d)           Seller or the Trust shall, pursuant

to the Trust Agreement and the California Corporations Code and other

applicable law, (i) provide notice to claimants, (ii) pay or make reasonable

provision to pay all claims and obligations, including all contingent,

conditional or unmatured contractual claims known to Seller or the Trust, and

(iii) make such provision as will be sufficient to provide compensation for

claims that have not been made or known to Seller or the Trust or that have not

arisen but that, based upon facts known to Seller or the Trust, are likely to

arise or to become known to Seller or the Trust prior to the expiration of

applicable statutes of limitation.  Such

claims shall be paid in full or adequately provided for, pursuant to the

California Corporations Code and other applicable law.  After paying Seller’s or the Trust’s debts

and satisfying all of Seller’s or the Trust’s liabilities, or making provision

therefor in accordance with the foregoing (the “Debt Payment”), Seller or the

Trust shall distribute all of the remaining assets and properties of Seller or

the Trust (including the Parent Consideration Shares, the Earn-Out Shares and

the Parent Guarantee Shares) to its shareholders in complete cancellation of

all of the issued and outstanding Seller Capital Stock.  Seller or the Trust shall not distribute the

Parent Consideration Shares, the Earn-Out Shares or the Parent Guarantee Shares

prior to the Debt Payment.




 




6.14         Reasonable Cooperation of Buyer.

 Parent and Buyer shall cooperate

with Seller to the extent reasonable with Seller’s efforts to obtain any third

party consents set forth on Schedule 7.1(f) hereof; provided, however, that this Section 6.14(a) shall not

obligate Parent and Buyer (in the aggregate) to incur any additional expense or

liability.




 




6.15         Seller Operations.  Buyer shall maintain the principal office of

the Business at the Shadelands Business Park office or an alternative office

located within 10 miles of the Shadelands Business Park office until at least

December 31, 2003.




 




59





























 




ARTICLE

VII




 




CONDITIONS TO THE CLOSING




 




7.1           Conditions to Parent’s and Buyer’s

Obligation to Close.    The obligations of Parent and Buyer hereunder are subject to the

fulfillment or satisfaction on, and as of the Closing, of each of the following

conditions (any one or more of which may be waived by Parent, but only in a

writing signed by Parent):




 




(a)           Representations and Warranties.

The representations and warranties of Seller set forth in Article III that are

qualified as to materiality or Material Adverse Effect, or in Sections 3.1, 3.2

or 3.3 shall be true and correct, and those that are not so qualified shall be

true and correct in all material respects, in each case as of the date of this

Agreement, and as of the Closing with the same force and effect as if made on

and as of the Closing (except to the extent expressly made as of a particular

date, in which case as of such date).




 




(b)           Covenants.  Seller shall have performed or complied in

all material respects with all agreements and covenants required by this Agreement

to be performed or complied with by Seller on or prior to the Closing.




 




(c)           No Actions.  No action, suit, or proceeding shall be

threatened or pending before any court or quasi-judicial or administrative

agency of any federal, state, local, or foreign jurisdiction or before any

arbitrator wherein an unfavorable injunction, judgment, order, decree, ruling,

or charge would, if successful, (A) prevent consummation of any of the

transactions contemplated by this Agreement, or (B) result in a Material Adverse

Effect to Seller or the Purchased Assets.




 




(d)           No Material Adverse Effect.  From the date of the Most Recent Balance

Sheet, there shall not have been any event or development which has resulted in

a Material Adverse Effect on Seller nor shall there have occurred any event or

development which could reasonably be likely to result in the future in a

Material Adverse Effect on Seller or the Purchased Assets.




 




(e)           Certificates.  The President of Seller shall have delivered

to Parent a certificate to the effect that each of the conditions specified

above in Section 7.1(a) to 7.1(d) (inclusive) is satisfied in all respects.




 




(f)            Required Consents. Buyer and

Parent shall have been furnished with evidence satisfactory to it that Seller

has obtained the consents, approvals and waivers set forth in Schedule 7.1(f)

attached hereto.




 




(g)           Governmental Authorizations.  The Parties shall have received all

authorizations, consents and approvals of Governmental Bodies set forth in

Section 3.6 of the Seller Disclosure Letter.




 




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(h)           Non-Competition Agreements.

The Persons listed on Exhibit B-1

shall each have executed and delivered to Buyer a Non-Competition Agreement in

substantially the form attached hereto as Exhibit

B-2, and such Non-Competition Agreements shall be in full force and

effect.




 




(i)            Offer Letters.  The Persons listed on Exhibit C-1 shall each have executed and

delivered to Buyer an Offer Letter in substantially the form attached hereto as

Exhibit C-2, and such Offer

Letters shall be in full force and effect.




 




(j)            Employee Proprietary Information

Agreements.  Each Hired Employee

shall have executed and delivered to Buyer the standard form of Employee

Proprietary Information, Agreement of Buyer or Parent in substantially the form

attached hereto as Exhibit F, and

such agreements shall be in full force and effect.




 




(k)           Legal Opinion.  Parent and Buyer shall have received from

Crosby Heafy Roach & May, counsel to Seller, an opinion in form and

substance reasonably acceptable to Parent and Buyer and its counsel, addressed

to Parent and Buyer, and dated as of the Closing Date.




 




(l)            Voting Agreements.  The Voting Agreements executed and delivered

to Parent on the date hereof shall remain in full force and effect.




 




(m)          Securities Exemptions.  Parent shall be reasonably satisfied that

the issuance of its shares of Parent Common Stock and other securities pursuant

to Section 2.3(a) of this Agreement shall: 

(a) be exempt from the registration requirements of the Securities Act

of 1933, as amended (the “Securities Act”);

and (b) be exempt from the registration and/or qualification requirements of

all applicable state “blue sky” securities laws.




 




(n)           Releases.  Each officer and director of Seller, and

each holder of more than five percent (5%) of Seller’s capital stock, shall

have executed and delivered, in form and substance mutually agreed by the

parties, a release of claims against the Purchased Assets, Buyer and Parent

which would be, or could be construed as, Assumed Liabilities.




 




(o)           Amendment of the Qualcomm

Agreement.  The Qualcomm Agreement

shall have been amended to the satisfaction of Parent and Buyer and an

assignment agreement in a form satisfactory to Parent and Buyer executed by

Seller and Qualcomm shall have been delivered to Parent.




 




(p)           280G Agreements.   The shareholders of Seller shall have

approved, by the requisite vote under applicable law, any payments of cash or

stock contemplated by this Agreement that may be deemed to constitute

“parachute payments” within the meaning of Section 280G of the Code, such that

all such payments resulting from the transactions contemplated hereby shall not

qualify as “excess parachute payments” within the meaning of Section 280G of

the Code or shall be exempt from such treatment under Section 280G of the Code.




 




61





























 




(q)           Hired Employees.  All of the Hired Employees set forth on

Schedule 1.1(i) shall have accepted employment with Buyer, effective as of the

Closing.




 




(r)            Shareholder Representation and

Lock-up Agreement.  Parent and Buyer

shall have received a copy of the Shareholder Representation and Lock-up

Agreement executed for and on behalf of each Shareholder.




 




(s)           Nasdaq Listing.  The shares of Parent Common Stock issuable

in connection with the transactions contemplated by this Agreement shall have

been authorized for listing, if required, on the Nasdaq National Market upon

official notice of issuance.




(t)            Termination of Company Options.  Seller shall have provided a Cancellation

Notice to the holders of options under Seller’s 2000 Employee and Consultant

Equity Incentive Plan and such options shall have been terminated to the

reasonable satisfaction of Parent and Buyer.




 




(u)           Termination of 401(k) Plan.  Parent and Buyer shall have received from

Seller evidence that Seller’s 401(k) plan has been terminated pursuant to

resolution of Seller’s Board of Directors (the form and substance of which

shall have been subject to review and approval of Buyer), effective as of the

date immediately preceding the Closing Date.




 




(v)           Amendment of the Equipment Rental

Agreement.  The Equipment Rental

Agreement, dated as of March 1, 2001, by and between Milroute Technologies,

Inc. and Seller shall have been amended to the satisfaction of Parent and Buyer

and an assignment agreement in a form satisfactory to Parent and Buyer executed

by Seller and Milroute shall have been delivered to Parent.




 




7.2           Conditions to Seller’s Obligations.

 The obligations of Seller hereunder

are subject to the fulfillment or satisfaction on, and as of the Closing, of

each of the following conditions (any one or more of which may be waived by

Seller, but only in a writing signed by Seller):




 




(a)           Representations and Warranties.

The representations and warranties of Parent and Buyer set forth in Article IV

that are qualified as to materiality or Material Adverse Effect, or in Sections

4.1, 4.2 or 4.3 shall be true and correct, and those that are not so qualified

shall be true and correct in all material respects, in each case as of the date

of this Agreement, and as of the Closing with the same force and effect as if

made on and as of the Closing (except to the extent expressly made as of a

particular date, in which case as of such date).




 




(b)           Covenants. Parent and Buyer

shall have performed or complied in all material respects with all agreements

and covenants required by this Agreement to be performed or complied with by

them on or prior to the Closing.




 




(c)           No Material Adverse Effect.  Since March 31, 2002, there shall not have

been any event or development which has resulted in a Material Adverse Effect

on Parent nor shall there have occurred any event or development which could

reasonably be likely to result in the future in a Material Adverse Effect on

Parent; provided, however, that

for the purposes of this Section 7.2 (c), the following shall not be considered

a Material Adverse Effect:  (i) a change

in the market price or




 




62





























 




trading volume of Parent Common

Stock between the date hereof and the Closing, in and of itself, and not

otherwise attributable to or resulting from any other effects, changes, events,

circumstances or conditions which by itself would constitute a Material Adverse

Effect  or (ii) effects, changes, events,

circumstances and conditions generally affecting the industry in which Parent

and its subsidiaries operate or from changes in general business or economic

conditions in the region, nation or world.




 




(d)           Certificate.  An officer of Parent shall have delivered to

Seller a certificate to the effect that each of the conditions specified above

in Section 7.2(a), 7.2(b) and 7.3(c) is satisfied in all respects.




 




(e)           Nasdaq Listing.  The shares of Parent Common Stock issuable

in connection with the transactions contemplated by this Agreement shall have

been authorized for listing, if required, on the Nasdaq National Market upon

official notice of issuance.




 




ARTICLE

VIII




 




INDEMNIFICATION; ESCROW




 




8.1           Survival of Representations and

Warranties.  All representations

and warranties set forth in this Agreement, the Seller Disclosure Letter, the

Buyer Disclosure Letter or in any certificate or instrument delivered pursuant

to this Agreement, shall survive the Closing for a period ending on the one (1)

year anniversary of the Closing. The covenants and other agreements set forth

in this Agreement shall terminate at the Closing, except for covenants and

other agreements which by their terms contemplate or require performance

following the Closing, each of which shall survive without limitation until

complete performance of the terms thereof. 

Except with respect to Losses related to Excluded Liabilities and Taxes,

the Escrow Fund shall be the sole recourse of recovery for any and all

indemnification claims of Buyer, Parent or the other Buyer Indemnified Persons.




 




8.2           Indemnification by Seller.




 




(a)           Indemnity; Escrow Fund.




 




(i)            Seller agrees to indemnify and hold

harmless Buyer, Parent and its Representatives and Affiliates (collectively,

the “Buyer Indemnified Persons”) from

against all claims, losses, liabilities, Benefits Liabilities, damages,

deficiencies, costs, expenses (including attorneys’ fees and expenses of

investigation) (hereinafter individually a “Loss”

and collectively “Losses”) arising

out of, or resulting from, or incurred with respect to, (A) any breach or

inaccuracy of a representation or warranty of Seller contained in this

Agreement, the Seller Disclosure Letter or any certificate or instrument

delivered pursuant to this Agreement (for the purposes of this Section 8.2, the

determination of any breach or inaccuracy of any representation or warranty

shall be made without regard to any qualifications as to knowledge, materiality

or Material Adverse Effect), (B) any failure by Seller to perform or comply with

any covenant contained in this Agreement, or (C) any Excluded Liabilities.  Except with respect to Losses related to

Excluded Liabilities and Taxes, the Escrow Fund shall be the sole source

available to compensate the Buyer Indemnified 




 




63





























 




Persons for such Losses.  Buyer, Parent and Seller each acknowledge

that such Losses, if any, would relate to unresolved contingencies existing at

the Closing, which if resolved at the Closing would have led to a reduction in

the aggregate Purchase Price.




 




(ii)           As soon as practicable after the

Closing, the Escrow Shares will be deposited with Wells Fargo Corporate Trust

Services, as escrow agent (the “Escrow Agent”),

without any act by Seller, such deposit to constitute an escrow fund (the “Escrow Fund”) to be governed by the terms

set forth herein.




 




(iii)          At such time as Officer’s Certificates

with respect to Losses have been delivered, Parent and Buyer shall be entitled

to indemnification for all Losses.




 




(iv)          The Escrow Fund shall be available to

compensate the Buyer Indemnified Persons for Losses.  Except with respect to Losses related to Excluded Liabilities,

the remedies provided in this Article VIII shall be the exclusive remedies

available to Buyer, Parent or the other Buyer Indemnified Persons.  Notwithstanding the foregoing, any Losses

related to Excluded Liabilities during the Escrow Period (as defined below)

shall be first satisfied through the Escrow Fund.  To the extent the Escrow Fund is insufficient or no longer

available to satisfy Losses related to Excluded Liabilities, Buyer, Parent or

the other Buyer Indemnified Parties shall be entitled to offset any such

unsatisfied Losses or portion thereof against the Earn-Out Shares or the Parent

Guarantee Shares or to seek and obtain recourse against Seller or any successor

thereto (including the Trust) through any other legal remedies for any such

unsatisfied Losses.  Notwithstanding the

foregoing or anything to the contrary set forth herein, nothing in this Agreement

shall limit the liability (i) of Seller for any breach of any representation,

warranty or covenant contained herein if the Closing shall not occur, (ii) of

Seller for any Losses arising out of fraud or intentional misrepresentation by

Seller, or (iii) of any shareholder of Seller in connection with any breach by

such shareholder of the Voting Agreement between such shareholder and Buyer.




 




(b)           Escrow Period; Distribution upon

Termination of Escrow Period. Subject to the following requirements, the

Escrow Fund shall remain in existence during the period following the Closing

until the one year anniversary of the Closing (the “Escrow Period”).  At

the expiration of the Escrow Period a portion of the Escrow Fund shall be

released from Escrow to Seller or any successor thereto (including the Trust)

in an amount equal to the Escrow Shares less an amount equal to the sum of (i)

all amounts theretofore distributed out of the Escrow Fund to Buyer, Parent and

the other Buyer Indemnified Persons pursuant to this Article VIII and (ii) an

amount equal to such portion of the Escrow Fund which, in the reasonable

judgment of Parent, subject to the reasonable objection of Seller or any

successor thereto (including the Trust) and the subsequent arbitration of the

matter in the manner provided in Section 8.2(f) hereof, is necessary to satisfy

any unsatisfied claims specified in any Officer’s Certificate theretofore

delivered to the Escrow Agent prior to the end of the Escrow Period, which

amount shall remain in the Escrow Fund (and the Escrow Fund shall remain in

existence) until such claims have been resolved.  As soon as all such claims have been resolved (such resolution to

be evidenced by the written agreement of Parent and the Seller (or any

successor thereto (including the Trust)) or the written decision of the

arbitrators as




 




64





























 




described in Section 8.2(f)),

the Escrow Agent shall deliver to Seller or any successor thereto (including

the Trust) the remaining portion of the Escrow Fund not required to satisfy

such claims.




 




(c)           Protection of Escrow Fund.  The Escrow Agent shall hold and safeguard

the Escrow Fund during the Escrow Period, shall treat such fund as a trust fund

in accordance with the terms of this Agreement and not as the property of Buyer

or Parent and shall hold and dispose of the Escrow Fund only in accordance with

the terms hereof.




 




(d)           Distributions; Voting.




 




(i)            Any shares of Parent Common Stock or

other equity securities issued or distributed by Parent (including shares

issued upon a stock split, stock dividend, recapitalization or other similar

event) (“New Shares”) in respect

of Parent Common Stock in the Escrow Fund which have not been released from the

Escrow Fund shall be added to the Escrow Fund and become a part thereof.  New Shares issued in respect of shares of

Parent Common Stock which have been released from the Escrow Fund shall not be

added to the Escrow Fund but shall be distributed to Seller or any successor

thereto (including the Trust).  Cash

dividends on Parent Common Stock shall not be added to the Escrow Fund but

shall be distributed to Seller or any successor thereto (including the Trust).









(ii)           Seller or its successor shall be

shown as the record owner of Parent Common Stock on Parent’s books and records

and shall have voting rights with respect to the shares of Parent Common Stock

held in the Escrow Fund on behalf of Seller or any successor thereto (including

the Trust) (and on any voting securities added to the Escrow Fund in respect of

such shares of Parent Common Stock).




 




(e)           Claims Upon Escrow Fund.




 




(i)            Upon receipt by the Escrow Agent at

any time on or before the last day of the Escrow Period of a certificate signed

by any officer of Parent (an “Officer’s

Certificate”):  (A) stating

that Buyer, Parent or their Affiliates has incurred and paid or properly

accrued Losses, or reasonably anticipates that it may have to pay or accrue

Losses, (B) specifying in reasonable detail the individual items of Losses

included in the amount so stated, the date on which each such item was incurred

and paid or properly accrued, or the basis for such anticipated liability, and

the nature of the misrepresentation, breach of warranty or claim to which such

item is related, and (C) indicating the number of shares of Parent Common Stock

to be disbursed to Parent out of the Escrow Fund, the Escrow Agent shall,

subject to the provisions of Section 8.2(f) hereof, deliver to Parent out of

the Escrow Fund, as promptly as practicable, such amounts held in the Escrow

Fund equal to such Losses.




 




(ii)           For the purposes of determining the

number of shares of Parent Common Stock to be disbursed to Parent out of the

Escrow Fund, the shares of Parent Common Stock shall be valued at the Trading

Price.




 




65





























 




(f)            Objections to Claims. At the

time of delivery of any Officer’s Certificate to the Escrow Agent, a duplicate

copy of such certificate promptly shall be delivered to the Seller or any

successor thereto (including the Trust), and for a period of thirty (30) days

after such delivery the Escrow Agent shall make no delivery to Parent of any

Escrow Shares specified in such Officer’s Certificate unless the Escrow Agent

shall have received written authorization from Seller or any successor thereto

(including the Trust) to make such delivery. 

After the expiration of such thirty (30) day period, the Escrow Agent

shall make delivery of an amount from the Escrow Fund in accordance with such

Officer’s Certificate and Section 8.2(e) hereof, provided that no such payment

or delivery may be made if Seller or any successor thereto (including the

Trust) shall object in a written statement to the claim made in the Officer’s

Certificate, and such statement shall have been delivered to the Escrow Agent

prior to the expiration of such thirty (30) day period.




 




(g)           Resolution of Conflicts;

Arbitration.




 




(i)            In case Seller or any successor

thereto (including the Trust) shall so object in writing to any claim or claims

made in any Officer’s Certificate within 30 days after delivery of such

Officer’s Certificate, Seller or any successor thereto (including the Trust)

and Parent shall attempt in good faith to agree upon the rights of the

respective Parties with respect to each of such claims.  If Seller or any successor thereto

(including the Trust) and Parent should so agree, a memorandum setting forth

such agreement shall be prepared and signed by both Parties and shall be

furnished to the Escrow Agent.  The Escrow

Agent shall be entitled to rely on any such memorandum and distribute amounts

from the Escrow Fund in accordance with the terms thereof.




 




(ii)           If no such agreement can be reached

after good faith negotiation, either Parent or Seller or any successor thereto

(including the Trust) may demand arbitration of the matter unless the amount of

the damage or loss is at issue in pending litigation with a third party, in

which event arbitration shall not be commenced until such amount is ascertained

or both Parties agree to arbitration; and in either such event the matter shall

be settled by arbitration conducted by one arbitrator  who shall be a retired judge at JAMS (as defined below) mutually

agreeable to Parent and the Seller or any successor thereto (including the

Trust).  In the event that within forty-five

(45) days after submission of any dispute to arbitration, Parent and Seller or

any successor thereto (including the Trust) cannot mutually agree on an

arbitrator, then JAMS shall select a retired judge with ten (10) days.  The arbitrator or arbitrators, as the case

may be, shall set a limited time period not to exceed forty-five (45) and

establish procedures designed to limit the cost and time for discovery while

allowing the Parties an opportunity, adequate in the sole judgment of the

arbitrator or majority of the three arbitrators, as the case may be, to

discover relevant information from the opposing Parties about the subject

matter of the dispute.  The arbitrator

or a majority of the three arbitrators, as the case may be, shall rule upon

motions to compel or limit discovery and shall have the authority to impose

sanctions, including attorneys’ fees and costs, to the same extent as a

competent court of law or equity, should the arbitrators or a majority of the

three arbitrators, as the case may be, determine that discovery was sought

without substantial justification or that discovery was refused or objected to

without substantial justification.  The

decision of the arbitrator or a majority of the three arbitrators, as the case

may be, as to the validity and amount of any claim in such Officer’s

Certificate shall be binding and conclusive upon the Parties to this Agreement,

and




 




66





























 




notwithstanding anything in

Section 8.2(f) to the hereof, the Escrow Agent shall be entitled to act in

accordance with such decision and make or withhold payments out of the Escrow

Funds in accordance therewith.  Such

decision shall be written and shall be supported by written findings of fact

and conclusions which shall set forth the award, judgment, decree or order

awarded by the arbitrator(s).  In the

event that the Escrow Agent has not received evidence of resolution under

Section 8.2(g)(i) or this Section 8.2(g)(ii), the Escrow Agent shall continue

to hold the Escrow Funds in accordance herewith.




 




(iii)          Judgment upon any award rendered by

the arbitrators may be entered in any court having jurisdiction.  Any such arbitration shall be held in San

Francisco County, California, under the rules then in effect of the San Francisco

Judicial Arbitration and Mediation Service (“JAMS”).  Each Party to any arbitration pursuant to

this Section 8.2(g) shall pay its own expenses; the fees of the arbitrator and

the administrative fee of JAMS shall be borne equally by Parent, on the one hand

and Seller, on the other.  Neither the

expenses that Seller or any successor thereto (including the Trust) incurs in

the course of any arbitration pursuant to this Section 8.2(g) nor the Seller’s

or any successor’s portion of the fees of the arbitrator or the administrative

fees for JAMS shall be deducted from any amounts held in the Escrow Fund.




 




(h)           Seller’s Agent.  After the Closing, Seller (or any successor

thereto) may appoint an agent to act on its behalf with respect to this Section

8.2, with the prior written consent of Parent, which consent shall not be

unreasonably withheld.




 




(i)            [INTENTIONALLY OMITTED]




 




(j)            Third-Party Claims. In the

event that Buyer or Parent becomes aware of any claim or legal proceeding by a

person who is not a party to this Agreement (the “Third Party Claim”) which

Buyer or Parent believes may result in a demand against the Escrow Fund, Parent

shall notify Seller or any successor thereto (including the Trust) of such

claim, and Seller or any successor thereto (including the Trust) shall be

entitled, at their expense, to participate in any defense of such claim.  Parent shall have the right in its sole

discretion to settle any such claim which is (i) limited to payment of money

damages only, or (ii) affects only the Purchased Assets or Assumed Liabilities; provided, however, that except with the

consent of the Seller (or any successor thereto), no settlement of any such

claim with third-party claimants shall alone be determinative of the amount of

any claim against the Escrow Fund.  In

the event that Seller or any successor thereto (including the Trust) has

consented to any such settlement, Seller or any successor thereto (including

the Trust) shall have no power or authority to object under any provision of

this Article VIII to the amount of any claim by Buyer or Parent against the

Escrow Fund with respect to such settlement to the extent that such amount is

consistent with the terms of such settlement.




(k)           In connection with any Third Party

Claim, Seller or any successor thereto (including the Trust) may, upon written

notice to Parent, assume the defense of any such claim or legal proceeding, the

costs and expenses of which defense shall be paid from the Escrow Fund, if

Seller’s or any successor thereto (including the Trust) acknowledges to Parent

in writing Seller or any successor thereto’s (including the Trust) obligation

to indemnify Parent with respect to all elements of such claim (subject to any

limitations on such liability contained in this Agreement). If,




 




67





























 




however, Seller or any

successor thereto (including the Trust) fails or refuses to undertake the

defense of such Third Party Claim within fifteen (15) days after written notice

of such claim has been delivered to Seller or any successor thereto (including

the Trust) by Parent, Parent shall have the right to undertake the defense,

compromise and settlement of such Third Party Claim with counsel of its own

choosing. Failure of Parent to furnish written notice to Seller or any

successor thereto (including the Trust) or the Escrow Agent of a Third Party

Claim shall not release Seller or any successor thereto (including the Trust)

from its obligations hereunder, except to the extent it is prejudiced by such

failure. If Seller or any successor thereto (including the Trust) assumes the

defense of any such claim or legal proceeding, it may use counsel of its choice

to prosecute such defense, subject to the approval of such counsel by Parent,

which approval shall not be unreasonably withheld or delayed. Parent shall be

entitled to participate in the defense of any such action, with its counsel and

its own expense; provided, however, that if there exists a conflict of interest

between Seller or any successor thereto (including the Trust) and Parent, then

Parent shall have the right to engage separate counsel, the reasonable costs

and expenses of which shall be paid from the Escrow Fund, but in no event shall

Seller or any successor thereto (including the Trust) be liable for the costs

and expenses of more than one such separate counsel. If Seller or any successor

thereto (including the Trust) assumes the defense of any such claim or legal

proceeding, Seller or any successor thereto (including the Trust) shall take

all steps necessary to pursue the resolution thereof in a prompt and diligent

manner.  Seller or any successor thereto

(including the Trust) shall be entitled to consent to a settlement of, or the

stipulation of any judgment arising from, any such claim or legal proceeding,

with the consent of Parent, which consent shall not be unreasonably withheld or

delayed.  Notwithstanding the foregoing,

however, Parent shall be entitled to the control of the defense of any such

action if it (a) is reasonably likely to result in liabilities which, taken

with other then existing claims by Parent, Buyer or any Buyer Indemnified

Parties under this Article VIII, would not be fully indemnified hereunder, or

(b) is reasonably likely to result in a Material Adverse Effect even if Seller

or any successor thereto (including the Trust) pays all indemnification amounts

in full. If Parent is entitled to control the defense of an action, Parent

shall be entitled to consent to a settlement of, or the stipulation of any

judgment arising from, any such claim or legal proceeding.




 




(l)            Escrow Agent’s Duties.




 




(i)            The Escrow Agent’s duties are purely

ministerial in nature, and the Escrow Agent shall be obligated only for the

performance of such duties as are specifically set forth in this Agreement and

as set forth in any additional written escrow instructions which the Escrow

Agent may receive after the date of this Agreement which are signed by an

officer of Parent and the Seller or any successor thereto (including the

Trust), and may rely and shall be protected in relying or refraining from

acting on any instrument reasonably believed to be genuine and to have been

signed or presented by the proper Party or Parties.  The Escrow Agent shall not be liable for any action taken,

suffered or omitted hereunder as Escrow Agent absent gross negligence or

willful misconduct, and the Escrow Agent shall be fully protected and shall

incur no liability for any action taken, suffered or omitted pursuant to the

advice of counsel.




 




(ii)           The Escrow Agent is hereby expressly authorized

to disregard any and all warnings given by any of the Parties hereto or by any

other Person, excepting only orders or




 




68





























 




process of courts of law, and

is hereby expressly authorized to comply with and obey orders, judgments or

decrees of any court.  In case the

Escrow Agent obeys or complies with any such order, judgment or decree of any

court, the Escrow Agent shall not be liable to any of the Parties hereto or to

any other Person by reason of such compliance, notwithstanding any such order,

judgment or decree being subsequently reversed, modified, annulled, set aside,

vacated or found to have been entered without jurisdiction.




 




(iii)          The Escrow Agent shall not be liable

in any respect on account of the identity, authority or rights of the Parties

executing or delivering or purporting to execute or deliver this Agreement or

any documents or papers deposited or called for hereunder.




 




(iv)          The Escrow Agent shall not be liable

for the expiration of any rights under any statute of limitations with respect

to this Agreement or any documents deposited with the Escrow Agent.




 




(v)           In performing any duties under the

Agreement, the Escrow Agent shall not be liable to any Party for damages,

claims, liabilities, losses, or expenses, except for gross negligence or

willful misconduct on the part of the Escrow Agent (which for all purposes of

any section of this Agreement as it pertains to the Escrow Agent shall be

finally determined by a court of competent jurisdiction).  The Escrow Agent shall not incur any such

liability for (A) any action taken, suffered or omitted in good faith, or (B)

any action taken, suffered  or omitted

in reliance upon any instrument, including any written statement or affidavit

provided for in this Agreement that the Escrow Agent shall in good faith

believe to be genuine, nor will the Escrow Agent be liable or responsible for

forgeries, fraud, impersonations, or determining the scope of any

representative authority.  In addition,

the Escrow Agent may consult with legal counsel in connection with Escrow

Agent’s duties under this Agreement and shall be fully protected in any action

taken, suffered, or omitted by it in accordance with the advice of

counsel.  The Escrow Agent is not

responsible for determining and verifying the authority of any Person acting or

purporting to act on behalf of any Party to this Agreement.  The Escrow Agent shall have the right to

perform any of its duties hereunder through agents, custodians or nominees, and

the Escrow Agent shall not be liable or responsible for any misconduct or

negligence on the part of any such agent, custodian or nominee absent gross

negligence, willful misconduct or bad faith on the part of the Escrow Agent in

the selection and continued employment thereof.




 




(vi)          If any controversy arises between the

Parties to this Agreement, or with any other party, concerning the subject

matter of this Agreement, its terms or conditions, the Escrow Agent will not be

required to determine the controversy or to take any action regarding it.  The Escrow Agent may hold all documents and

funds and may wait for settlement of any such controversy by final appropriate

legal proceedings or other means as, in the Escrow Agent’s discretion, the

Escrow Agent may be required, despite what may be set forth elsewhere in this

Agreement.  In such event, the Escrow

Agent will not be liable for damages. 

Furthermore, the Escrow Agent may at its option, file an action of

interpleader requiring the Parties to answer and litigate any claims and rights

among themselves.  The Escrow Agent is

authorized to deposit with the clerk of the court all documents and funds held

in escrow, except all cost, expenses, charges and




 




69





























 




reasonable attorney fees

incurred by the Escrow Agent through such time and which the Parties jointly

and severally agree to pay.  Upon

initiating such action, the Escrow Agent shall be fully released and discharged

of and from all obligations and liability imposed by the terms of this

Agreement.




 




(vii)         The Parties and their respective

successors and assigns agree jointly and severally to indemnify and hold Escrow

Agent harmless against any and all losses, claims, costs, fines, settlement

judgments, penalties, demands, damages, liabilities, and expenses, including

reasonable costs of investigation, counsel fees, including allocated costs of

in-house counsel and disbursements that may be imposed on Escrow Agent or

incurred by Escrow Agent in connection with the execution of this Agreement or

the performance of its duties under this Agreement, including but not limited

to any litigation arising from this Agreement or involving its subject matter

other than arising out of its negligence or willful misconduct.




 




(viii)        The Escrow Agent may resign at any time

upon giving at least thirty (30) days written notice to the Parties; provided, however, that no such

resignation shall become effective until the appointment of a successor escrow

agent which shall be accomplished as follows: 

the Parties shall use their best efforts to mutually agree on a

successor escrow agent within thirty (30) days after receiving such

notice.  If the Parties fail to agree upon

a successor escrow agent within such time, the Escrow Agent shall have the right

to appoint a successor escrow agent authorized to do business in the State of

California.  The successor escrow agent

shall execute and deliver an instrument accepting such appointment and it

shall, without further acts, be vested with all the estates, properties,

rights, powers, and duties of the predecessor escrow agent as if originally

named as escrow agent.  Upon appointment

of a successor escrow agent, the Escrow Agent shall be discharged from any

further duties and liability under this Agreement.  Alternatively, if a successor escrow agent is not appointed

within the above time frames, then the Escrow Agent may apply to a court of

competent jurisdiction for appointment of a successor escrow agent.




 




(ix)           In no event shall the Escrow Agent be

liable for special, indirect, incidental, punitive or consequential loss or

damage of any kind whatsoever (including but not limited to lost profits) even

if the Escrow Agent has been advised of the likelihood of such loss or damage

and regardless of the form of action.




 




(x)            Any Person into which the Escrow

Agent may be merged or converted or with which it may be consolidated, or any

Person resulting from any merger, conversion or consolidation to which the

Escrow Agent in its individual capacity shall be a party, or any Person to

which substantially all the business of the Escrow Agent may be transferred,

shall be the Escrow Agent under this Agreement without further act.




 




(m)          Fees.  All fees of the Escrow Agent for performance of its duties

hereunder shall be paid by Parent in accordance with the schedule of the Escrow

Agent delivered to Parent at or prior to the execution of this Agreement.  Such fee schedule may be amended or modified

upon mutual consent of Parent and the Escrow Agent.  It is understood that the fees and usual charges agreed upon for

services of the Escrow Agent shall be considered compensation for ordinary

services as contemplated by this Agreement. 

In the event that the conditions of this Agreement are




 




70





























 




not promptly fulfilled, or if

the Escrow Agent renders any service not provided for in this Agreement, or if

the Parties request a substantial modification of its terms, or if any

controversy arises, or if the Escrow Agent is made a party to, or intervenes

in, any litigation pertaining to the Escrow Fund or its subject matter, the

Escrow Agent shall be reasonably compensated for such extraordinary services

and reimbursed for all costs, attorney’s fees, including allocated costs of

in-house counsel, and expenses occasioned by such default, delay, controversy

or litigation and the Escrow Agent shall not be obligated to take any such

action unless and until it is reasonably satisfied that it will receive such

compensation and reimbursement.




 




(n)           Survival.  The obligations of the Parties under Section

8.2(k) and Section 8.2(j) hereof shall survive termination of this Agreement

and resignation or substitution of the Escrow Agent.




 




(o)           Notwithstanding anything to the

contrary in this Agreement, the Escrow Agent shall perform only those duties

and functions as set forth in Section 2.3, Article VIII and Section 10.9 of

this Agreement, shall not have any other obligations under any other section of

this Agreement whatsoever, and shall not be responsible for, or chargeable

with, knowledge of any other terms or other provisions contained in this

Agreement or any other separate agreement(s) and understanding(s) between the

parties thereto.  The Escrow Agent shall

not be liable for the accuracy of any calculations or the sufficiency of any

funds or shares of stock for any purpose.




 




ARTICLE

IX




 




TERMINATION




 




9.1           Termination of the Agreement.  The Parties may terminate this Agreement

as provided below:




 




(a)           Parent and Seller may terminate this

Agreement as to all Parties by mutual written consent at any time prior to the

Closing;




 




(b)           Parent or Seller may terminate this

Agreement by written notice if:  (i) the

Closing has not occurred by September 30, 2002; provided, however, that the right to terminate this Agreement

under this Section 9.1(b)(i) shall not be available to any Party whose action

or failure to act has been a principal cause of or resulted in the failure of

the Closing to occur on or before such date and such action or failure to act

constitutes a breach of this Agreement; (ii) there shall be a final

nonappealable order of a court  of

competent jurisdiction in effect preventing consummation of the transactions

contemplated by this Agreement or (iii) there shall be any statute, rule,

regulation or order enacted, promulgated or issued or deemed applicable to the

transactions contemplated by this Agreement by any Governmental Body that would

make consummation of the transactions contemplated by this Agreement illegal;




 




(c)           Parent may terminate this Agreement

by written notice if there shall be any action taken, or any statute, rule,

regulation or order enacted, promulgated or issued or deemed applicable to the

transactions contemplated by this Agreement by any Governmental Body, which




 




71





























 




would (i) prohibit Parent’s or

Buyer’s ownership or operation of all or a portion of the business of Seller or

(ii) compel Parent or Buyer to dispose of or hold separate all or a portion of

the business or assets of Parent or Seller as a result of the transactions

contemplated by this Agreement;




 




(d)           Parent may terminate this Agreement

by written notice if it is not in material breach of its obligations under this

Agreement and there has been a material breach of any representation, warranty,

covenant or agreement contained in this Agreement on the part of Seller and

such breach has not been cured within thirty (30) calendar days after written

notice to Seller; provided, however,

that, no cure period shall be required for a breach which by its nature cannot

be cured;




 




(e)           Seller may terminate this Agreement

by written notice if it is not in material breach of its obligations under this

Agreement and there has been a material breach of any representation, warranty,

covenant or agreement contained in this Agreement on the part of Parent and

such breach has not been cured within thirty (30) calendar days after written

notice to Parent; provided, however,

that no cure period shall be required for a breach which by its nature cannot be

cured;




 




(f)            Parent or Seller may terminate this

Agreement by written notice if Seller’s shareholders shall have taken a final

vote on the transactions contemplated hereby, and such matters shall not have

been approved by Seller’s shareholders; and




 




(g)           Parent may terminate this Agreement

by written notice if an event having a Material Adverse Effect on Seller or on

the Purchased Assets shall have occurred after the date of this Agreement.




 




(h)           Seller may terminate this Agreement

by written notice if an event having a Material Adverse Effect on Parent shall

have occurred after the date of this Agreement.




 




9.2           Effect of Termination.  If any Party terminates this Agreement

pursuant to Section 9.1 above, all rights and obligations of the Parties

hereunder shall terminate without any liability of any Party to any other Party

(except for any liability of any Party then in breach); provided that each

Party shall remain liable for any willful breaches of this Agreement prior to

its termination and provided, further,

that the provisions contained in Section 6.1 (Confidentiality) and Section 10

(Miscellaneous) shall survive termination.




 




ARTICLE

X




 




MISCELLANEOUS




 




10.1         Press Releases and Public

Announcements.  No Party shall

issue any press release or make any public announcement relating to the subject

matter of this Agreement prior to the Closing without the prior written

approval of the other Party; provided,

however, that (a) Parent may make any public disclosure it believes

in good faith is required by applicable law or any listing or trading




 




72





























 




agreement concerning its

publicly-traded securities (in which case Parent will use its reasonable

efforts to advise Seller prior to making the disclosure) and (b) Seller may

correspond with third parties in writings in form and substance reasonably

satisfactory to Parent with respect to obtaining consents from such parties

pursuant to Sections 5.8 and 7.1(f).  In

furtherance of the foregoing sentence, the Parties agree and acknowledge that

Parent will issue a press release following the execution and delivery of this

Agreement by the Parties.




 




10.2         No Third-Party Beneficiaries.  This Agreement shall not confer any rights

or remedies upon any Person other than the Parties, and their respective

successors and permitted assigns, other than as specifically set forth herein.




 




10.3         Entire Agreement and Modification.

 This Agreement (including the

exhibits hereto) constitutes the entire agreement among the Parties with

respect to the subject matter hereof and supersedes any prior understandings,

agreements, or representations by or among the Parties, written or oral, to the

extent they related in any way to the subject matter hereof.  This Agreement may not be amended except by

a written agreement executed by all Parties.




 




10.4         Amendment.  At any time prior to the Closing, this

Agreement may be amended by the parties hereto at any time by execution of an

instrument in writing signed on behalf of each of the parties hereto. At any

time after the Closing, this Agreement may be amended by Parent, Buyer and

Seller or any successor thereto (including the Trust) by execution of an

instrument in writing.




 




10.5         Waivers.  The rights and remedies of the Parties to

this Agreement are cumulative and not alternative.  Neither the failure nor any delay by any Party in exercising any

right, power or privilege under this Agreement or the documents referred to in

this Agreement will operate as a waiver of such right, power or privilege, and

no single or partial exercise of such right, power, or privilege will preclude

any other or further exercise of such right, power, or privilege or the

exercise of any other right, power, or privilege.  To the maximum extent permitted by applicable law, (i) no claim

or right arising out of this Agreement or the documents referred to in this

Agreement can be discharged by one Party, in whole or in part, by a waiver or

renunciation of the claim or right unless in writing signed by the other Party;

(ii) no waiver that may be given by a Party will be applicable except in the

specific instance for which it is given; and (iii) no notice to or demand on

one Party will be deemed to be a waiver of any obligation of such Party or of

the right of the Party giving such notice or demand to take further action

without notice or demand as provided in this Agreement or the documents

referred to in this Agreement.




 




10.6         Successors and Assigns.  This Agreement shall be binding upon and

inure to the benefit of the Parties named herein and their respective

successors and permitted assigns.  No

Party may assign either this Agreement or any of its rights, interests, or

obligations hereunder without the prior written approval of the other Parties

other than the Escrow Agent; provided,

however, that so long as Parent remains liable for all obligations

under this Agreement, Parent may (i) assign any or all of its rights and

interests hereunder to one or more of its Affiliates and (ii) designate one or

more of its Affiliates to perform its obligations hereunder.




 




73





























 




10.7         Counterparts.  This Agreement may be executed in

counterparts, each of which shall be deemed an original but all of which

together will constitute one and the same instrument.




 




10.8         Headings.  The section headings contained in this

Agreement are inserted for convenience only and shall not affect in any way the

meaning or interpretation of this Agreement.




 




10.9         Notices.

 All notices and other

communications required or permitted hereunder shall be in writing, shall be

effective when given, and shall in any event be deemed to be given upon receipt

or, if earlier, (a) five (5) days after deposit with the U.S. Postal Service or

other applicable postal service, if delivered by certified or registered first

class mail, postage prepaid, return receipt requested, (b) upon delivery, if

delivered by hand, (c) one business day after the business day of deposit with

Federal Express or similar overnight courier, freight prepaid or (d) one

business day after the business day of facsimile transmission, if delivered by

facsimile transmission with copy by certified or registered first class mail,

postage prepaid, return receipt requested and shall be addressed to the

intended recipient as set forth below:




 




If to Parent:




 




interWAVE

Communications International Ltd.




312

Constitution Drive




Menlo Park,

California  94025




Attention:              Robin

Foor, Vice President and General Counsel




Facsimile:               (650)

321-6381




 




Copy to:




 




Wilson Sonsini

Goodrich & Rosati, Professional Corporation




650 Page Mill

Road




Palo Alto,

California  94304




Attention:              Christopher

D. Mitchell, Esq.




Facsimile:               (650)

493-6811




 




If to Seller:




 




GBase

Communications




420 Wiget Lane




Walnut Creek,

California 94598




Attention:              Kiomars

Anvari, President




Facsimile:               (925)

935-8592




 




74





























 




Copy to:




 




Crosby Heafy

Roach & May




1999 Harrison

Street




Oakland,

California 94612




Attention:              Dan Leer,

Esq.




Facsimile:               (510)

273-8832




 




If to the

Escrow Agent:




 




Wells Fargo

Bank Minnesota N.A.




Corporate

Trust Services




MAC N9303-110




Sixth and

Marquette




Minneapolis,

Minnesota 55479




Attention:              Marco

Morales




Telephone:            (612)

667-8687




Facsimile:               (612)

667-9825




 




Any Party may

change the address to which notices, requests, demands, claims, and other

communications hereunder are to be delivered by giving the other Parties ten

(10) days’ advance written notice to the other Parties pursuant to the

provisions above.




 




10.10       Governing

Law.  This Agreement shall be

governed by and construed in accordance with the domestic laws of the State of

California without giving effect to any choice or conflict of law provision or

rule (whether of the State of California or any other jurisdiction) that would

cause the application of the laws of any jurisdiction other than the State of

California.




 




10.11       Forum Selection; Consent to

Jurisdiction.  All disputes

arising out of or in connection with this Agreement (other than matters subject

to arbitration pursuant to the terms of this Agreement or the other agreements

delivered by the Parties pursuant hereto) shall be solely and exclusively

resolved by a court of competent jurisdiction in the State of California.  The Parties hereby consent to the

jurisdiction of the courts of the State of California and the United States

District Courts of the Northern District of California and waive any objections

or rights as to forum nonconvenience, lack of personal jurisdiction or similar

grounds with respect to any dispute relating to this Agreement.




 




10.12       Severability.  Any term or provision of this Agreement that

is invalid or unenforceable in any situation in any jurisdiction shall not

affect the validity or enforceability of the remaining terms and provisions

hereof or the validity or enforceability of the offending term or provision in

any other situation or in any other jurisdiction.




 




10.13       Expenses.  Each Party will bear its own costs and

expenses (including legal and accounting fees and expenses) incurred in

connection with this Agreement and the transactions contemplated hereby.  In the event the transactions contemplated

by this Agreement are




 




75





























 




consummated, Parent will assume

the reasonable costs and expenses (including accounting and legal fees and

expenses) of Seller up to a maximum of $50,000, incurred in connection with

this Agreement and the transactions contemplated thereby (“Seller Expenses”) within 10 days of the

receipt of an invoice (supported by reasonable documentation), up to a maximum

of $50,000; any costs or expenses in excess of such amount shall be Excluded

Liabilities.  Buyer shall not assume and

Seller shall pay any such Excluded Liabilities.




 




10.14       Construction.  The Parties have participated jointly in the

negotiation and drafting of this Agreement. 

In the event an ambiguity or question of intent or interpretation

arises, this Agreement shall be construed as if drafted jointly by the Parties

and no presumption or burden of proof shall arise favoring or disfavoring any

Party by virtue of the authorship of any of the provisions of this

Agreement.  Any reference to any

federal, state, local, or foreign statute or law shall be deemed also to refer

to all rules and regulations promulgated thereunder, unless the context requires

otherwise.  The word “including” shall

mean including without limitation.




 




10.15       Seller Disclosure Letter.




 




(a)           The disclosures in Seller Disclosure

Letter, and those in any Supplement thereto, must relate only to the

representations and warranties in the section of the Agreement to which they

expressly relate and not to any other representation or warranty in this

Agreement.  Notwithstanding the

foregoing, any contract, agreement, commitment or arrangement set forth in any

of paragraphs (a) - (y) of Section 3.14 herein shall be deemed to be disclosed

for any other paragraph of paragraphs (a) - (y) of Section 3.14.




 




(b)           In the event of any inconsistency

between the statements in the body of this Agreement and those in Seller

Disclosure Letter (other than an exception expressly set forth as such in

Seller Disclosure Letter with respect to a specifically identified

representation or warranty), the statements in the body of this Agreement will

control.




 




(c)           Statements contained within the

Seller Disclosure Letter shall be deemed to be representations and warranties

under this Agreement, including, without limitation, Article VIII.




 




10.16       Attorneys’

Fees.  If any legal proceeding

or other action relating to this Agreement is brought or otherwise initiated,

the prevailing Party shall be entitled to recover reasonable attorneys fees,

costs and disbursements (in addition to any other relief to which the

prevailing Party may be entitled).




 




10.17       Further Assurances.  The Parties agree (a) to furnish upon request to each other such

further information, (b) to execute and deliver to each other such other

documents, and (c) to do such other acts and things, all as the other Party may

reasonably request for the purpose of carrying out the intent of this Agreement

and the documents referred to in this Agreement.




 




10.18       Time of Essence.  With regard to all dates and time periods set forth or referred

to in this Agreement, time is of the essence.




 




76





























 




IN WITNESS

WHEREOF, the Parties hereto have executed this Agreement on of the date first

above written.




 




	

  Parent:


  	

  INTERWAVE COMMUNICATIONS


  
	

   


  	

  INTERNATIONAL LTD


  
	

   


  	

   


  
	

   


  	

  By:


  	

   


  	

   


  
	

   


  	

  Name:


  	

   Priscilla Lu


  	

   


  
	

   


  	

  Title:  


  	

  Chief

  Executive Officer


  	

   


  
						





 




	

  Buyer:


  	

  INTERWAVE ADVANCED


  
	

   


  	

  COMMUNICATIONS, INC.


  
	

   


  	

   


  
	

   


  	

  By:


  	

   


  	

   


  
	

   


  	

  Name:


  	

   Priscilla Lu


  	

   


  
	

   


  	

  Title:  


  	

  Chief

  Executive Officer


  	

   


  
						





 




	

  Seller:


  	

  GBASE COMMUNICATIONS


  
	

   


  	

   


  
	

   


  	

   


  
	

   


  	

  By:


  	

   


  	

   


  
	

   


  	

  Name:


  	

   Kiomars Anvari


  	

   


  
	

   


  	

  Title:  


  	

  President


  	

   


  
						





 




77






















 













 




EXHIBIT A-2




EXECUTION COPY




VOTING AGREEMENT




This Voting Agreement (the “Agreement”)

is made and entered into as of August 16, 2002, by and among interWAVE

Communications International Ltd., a corporation organized under the laws of

Bermuda (“Parent”),

interWAVE Advanced Communications, Inc., a Delaware corporation and a wholly

owned subsidiary of Parent (“Buyer”), and the undersigned shareholder

and/or optionholder (the “Shareholder”) of Gbase Communications, a

California corporation (“Seller”).




RECITALS




A.            Seller, Buyer and Parent have entered into an Asset

Purchase Agreement of even date herewith (the “Purchase Agreement”), which

contemplates the acquisition (the “Acquisition”) of the Purchased Assets (as

defined in the Purchase Agreement) in exchange for shares of Common Stock of

Parent, as set forth in the Purchase Agreement;




B.            Shareholder is the beneficial owner (as defined in Rule

13d-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”))

of such number of shares of the outstanding capital stock of Seller and shares

subject to outstanding options and warrants as is indicated on the signature

page of this Agreement; and




C.            In order to induce Parent to execute the Purchase

Agreement, Shareholder agrees to vote the Shares (as defined below) and other

such shares of capital stock of Seller over which Shareholder has voting power

so as to facilitate consummation of the Acquisition.  The execution and delivery of this Agreement and of the attached

form of proxy is a material condition to Parent’s willingness to enter into the

Purchase Agreement.




NOW, THEREFORE, in

consideration of the foregoing and for other good and valuable consideration,

the receipt and sufficiency of which are hereby acknowledged, the parties

hereto, intending to be legally bound, hereby agree as follows:




1.             Certain Definitions. 

Capitalized terms not defined herein shall have the meanings ascribed to

them in the Purchase Agreement.  For

purposes of this Agreement:




1.1           “Closing Date” shall mean the earlier to

occur of (i) such date and time as the Purchase Agreement shall have been

validly terminated pursuant to Article IX thereof, or (ii) such date and time

as the Acquisition shall be consummated in accordance with the terms and

provisions of the Purchase Agreement.




1.2           “Person” means any individual, corporation,

partnership, limited liability company, joint venture, association, joint stock

company, trust (including any beneficiary 




 




2





























 




thereof), unincorporated organization or government or

any agency or political subdivision thereof.




1.3           “Shares” shall mean: (i) all equity

securities of Seller (including all shares of Seller Common Stock or Preferred

Stock and all options, warrants and other rights to acquire shares of Seller

Common Stock or Preferred Stock) beneficially owned by Shareholder as of the

date of this Agreement; and (ii) all additional equity securities of Seller

(including all additional shares of Seller Common Stock or Preferred Stock and

all additional options, warrants and other rights to acquire shares of Seller

Common Stock or Preferred Stock) of which Shareholder acquires beneficial

ownership during the period from the date of this Agreement through the Closing

Date.




1.4           A Person shall be deemed to have

effected a “Transfer” of a security if such person directly or indirectly:

(i) sells, pledges, encumbers, grants an option with respect to, transfers or

disposes of such security or any interest in such security; or (ii) enters into

an agreement or commitment providing for the sale of, pledge of, encumbrance

of, grant of an option with respect to, transfer of or disposition of such

security or any interest therein.




2.             Transfer of Shares.




2.1   Transferee of Shares to be Bound by this Agreement.  Shareholder agrees that, during the period

from the date of this Agreement through the Closing Date, Shareholder shall not

cause or permit any Transfer (other than a Transfer to such Shareholder’s

estate upon death; provided however, that

such transferee agrees in writing to be bound by the terms of this Voting

Agreement) of any of the Shares to be effected.




2.2   Transfer of Voting Rights.  Shareholder agrees that, during the period from the date of this

Agreement through the Closing Date, Shareholder shall not deposit (or permit

the deposit of) any Shares in a voting trust or grant any proxy or enter into

any voting agreement or similar agreement in contravention of the obligations

of Shareholder under this Agreement with respect to any of the Shares.




3.             Agreement to Vote Shares. During the period from the

date of this Agreement through the Closing Date, at every meeting of

shareholders of Seller called with respect to any of the following, and at

every adjournment thereof, and on every action or approval by written consent

of shareholders of Seller with respect to any of the following, Shareholder

shall vote the Shares:




3.1           in favor of approval of the

Acquisition, the execution and delivery by Seller of the Purchase Agreement and

the adoption and approval of the terms thereof and in favor of each of the

other actions contemplated by the Purchase Agreement and any action required in

furtherance hereof and thereof;




3.2      

against approval of any proposal made in opposition to or in competition

with consummation of the Acquisition and the Purchase Agreement; and




 




3





























 




3.3           against any of the following actions

(other than those actions that relate to the Acquisition and the transactions

contemplated by the Purchase Agreement): 

(A) any merger, consolidation, business combination, sale of assets,

reorga­ni­za­tion or recapitalization with any party, (B) any sale, lease or

transfer of more than any significant part of the assets of Seller, (C) any

reorganization, recapitalization, dissolution, liquidation or winding up of

Seller, (D) any material change in the capitalization of Seller or Seller’s

corporate structure, or (E) any other action that is intended, or could

reasonably be expected to, impede, interfere with, delay, postpone, discourage

or adversely affect the Acquisition or any of the other transactions

contemplated by the Purchase Agreement.




 




Prior to the Closing Date, Shareholder shall not enter into any

agreement or understanding with any person to vote or give instructions in any

manner inconsistent with this Section 3.




4.     Non-Solicitation Agreement.  Shareholder covenants and agrees, prior to the Closing Date, not

to, directly or indirectly, (i) solicit, initiate or encourage submission of

proposals or offers or engage in negotiations with any persons other than

Parent or Buyer or take any action intended, designed or reasonably likely to

facilitate the efforts of any persons, other than Parent and Buyer, relating to

(A) the possible acquisition of Seller (whether by way of merger, purchase of

its capital stock, purchase of assets or otherwise) or any material portion of

its capital stock or assets or (B) any other material transaction (including

without limitation, a joint venture or other similar transaction) (an “Opposing

Proposal”); (ii) furnish any non-public information regarding Seller

to any person in connection with or in response to an Opposing Proposal or

potential Opposing Proposal; (iii) engage in discussions with any persons with

respect to any Opposing Proposal; (iv) approve, endorse or recommend any

Opposing Proposal; or (v) enter into any letter of intent or other similar

document or any contract contemplating or otherwise relating to any Opposing

Proposal.  Shareholder shall immediately

cease any existing discussions with any persons other than Parent and Buyer

that relate to any Opposing Proposal. 

In the event that Shareholder receives from any third party any offer or

indication of interest (whether made in writing or otherwise) regarding any of

the transactions referred to in the foregoing, then Shareholder shall promptly

communicate to Parent and Buyer the material terms of each such offer,

indication of interest, or request, including the identity of the third party.




5.     Irrevocable Proxy. 

Concurrently with the execution of this Agreement, Shareholder shall

deliver to Parent a proxy in the form attached hereto as Exhibit A (the “Proxy”),

which shall be irrevocable to the fullest extent permissible by law, with

respect to the Shares.




6.     Representations and Warranties of the Shareholder.  Shareholder (i) except for the right of first

refusal set forth in Article 10, Section 1 of the Seller’s Bylaws, is the sole

record and beneficial owner of the shares of Common Stock of Seller, Preferred

Stock of Seller and the options and warrants to purchase shares of Common Stock

of Seller indicated on the signature page hereof, free and clear of any liens,

claims, options, rights of first refusal, co-sale rights, charges or other

encumbrances; (ii) does not beneficially own any securities of Seller other

than the shares of Common Stock of Seller, Preferred Stock of Seller and

options and warrants to purchase shares of Common Stock of Seller indicated on

the signature page of this Agreement; (iii) has full power and authority to

make, enter into and, assuming due execution and delivery




 




4





























 




thereof by each other

party thereto, carry out the terms of this Agreement and the Proxy; and (iv)

has sole voting power and sole power to issue instructions with respect to the

matters set forth in Section 3 hereof, sole power of disposition, sole power of

conversion, sole power to demand appraisal rights and sole power to agree to

all of the matters set forth in this Voting Agreement, in each case with

respect to all of the Shares set forth on the signature page hereof, with no

limitations, qualifications or restrictions on such rights, subject to

applicable securities laws, and the terms of this Voting Agreement.  The Shareholder shall not, directly or

indirectly, take any action that would make any representation or warranty

contained herein untrue or incorrect or have the effect of preventing or

disabling the Shareholder from performing the Shareholder’s obligations under

this Agreement.




7.     Additional Documents. 

From time to time, at the Parent’s or Buyer’s reasonable request and

without further consideration, the Shareholder shall execute and deliver such

additional documents and take all such further lawful actions as may be

necessary or desirable to consummate and make effective, in the most

expeditious manner practicable, the transactions contemplated by this Voting

Agreement.




8.     Consent and Waiver. 

Shareholder (not in his capacity as a director or officer of Seller)

hereby gives any consents or waivers (including waivers of preemptive rights,

rights of first refusal and co-sale rights) that are reasonably required for

the consummation of the Acquisition under the terms of any agreements to which

Shareholder is a party or pursuant to any rights Shareholder may have.




9.     Legending of Shares. 

If so requested by Parent or Buyer, Shareholder agrees that the Shares

shall bear a legend stating that they are subject to this Agreement and to an

irrevocable proxy.




10.   Termination. 

This Agreement shall terminate and shall have no further force or effect

as of the Closing Date.




11.   Miscellaneous.




11.1         Severability.  If

any term, provision, covenant or restriction of this Agreement is held by a

court of competent jurisdiction to be invalid, void or unenforceable, then the

remainder of the terms, provisions, covenants and restrictions of this

Agreement shall remain in full force and effect and shall in no way be

affected, impaired or invalidated.




11.2         Binding Effect and Assignment.  This Agreement and all of the provisions hereof shall be binding

upon and inure to the benefit of the parties hereto and their respective

successors and permitted assigns, but, except as otherwise specifically

provided herein, neither this Agreement nor any of the rights, interests or

obligations of the parties hereto may be assigned by either of the parties

without prior written consent of the other, provided that the Parent and/or

Buyer may assign, in its sole discretion, its rights and obligations hereunder

to any direct or indirect wholly owned subsidiary of the Parent and/or Buyer,

but no such assignment shall relieve the Parent or Buyer of its obligations

hereunder if such assignee does not perform such obligations.




 




5





























 




11.3         Amendments and Modification.  This Agreement may not be modified, amended, altered or

supplemented except upon the execution and delivery of a written agreement

executed by the parties hereto.




11.4         Waiver.  No

failure on the part of Parent and/or Buyer to exercise any power, right,

privilege or remedy under this Agreement, and no delay on the part of Parent or

Buyer in exercising any power, right, privilege or remedy under this Agreement,

shall operate as a waiver of such power, right, privilege or remedy; and no

single or partial exercise of any such power, right, privilege or remedy shall

preclude any other or further exercise thereof or of any other power, right,

privilege or remedy.  Parent and/or

Buyer shall not be deemed to have waived any claim arising out of this

Agreement, or any power, right, privilege or remedy under this Agreement,

unless the waiver of such claim, power, right, privilege or remedy is expressly

set forth in a written instrument duly executed and delivered on behalf of

Parent and/or Buyer; and any such waiver shall not be applicable or have any

effect except in the specific instance in which it is given.




11.5         Specific

Performance; Injunctive Relief. 

The parties hereto acknowledge that Parent and Buyer will be irreparably

harmed and that there will be no adequate remedy at law for a violation of any

of the covenants or agreements of Shareholder set forth herein.  Therefore, it is agreed that, in addition to

any other remedies that may be available to Parent and Buyer upon any such

violation, Parent and Buyer shall have the right to enforce such covenants and

agreements by specific performance, injunctive relief or by any other means

available to Parent and/or Buyer at law or in equity.




11.6         Notices.  All

notices and other communications required or permitted hereunder shall be in

writing, shall be effective when given, and shall in any event be deemed to be

given upon receipt or, if earlier, (a) five (5) days after deposit with the

U.S. Postal Service or other applicable postal service, if delivered by

certified or registered first class mail, postage prepaid, (b) upon delivery,

if delivered by hand, (c) one business day after the business day of deposit

with Federal Express or similar overnight courier, freight prepaid or (d) one

business day after the business day of facsimile transmission, if delivered by

facsimile transmission with copy by certified or registered first class mail,

postage prepaid, and shall be addressed to the intended recipient as set forth

below:




 




If to Parent or Buyer:           InterWAVE Communications

International Ltd.




                312 Constitution Drive




                Menlo Park, California 94025




                Attention: 

Robin Foor, General Counsel




                Facsimile: 

(650) 261-6220




 




6





























 




             With a copy to:        Wilson Sonsini Goodrich & Rosati




                Professional

Corporation




                650 Page Mill Road




                Palo Alto, California 94304




                Attention: 

            Christopher D.

Mitchell, Esq.




                Telephone:            (650)

493-9300




                Facsimile: 

             (650) 493-6811




 




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

hereof.




11.7         Governing Law.  This Agreement shall be governed by and

construed in accordance with the domestic laws of the State of California

without giving effect to any choice or conflict of law provision or rule

(whether of the State of California or any other jurisdiction) that would cause

the application of the laws of any jurisdiction other than the State of

Delaware.  Shareholder hereby consents

to the personal jurisdiction of the state and federal courts located in

California for any action or proceeding arising from or relating to this

Agreement or relating to any arbitration in which the parties are participants.




11.8         Attorneys’ Fees and Expenses.  If any legal action or other legal proceeding relating to the

enforcement of any provision of this Agreement is brought against Shareholder,

the prevailing party shall be entitled to recover reasonable attorneys’ fees,

costs and disbursements (in addition to any other relief to which the

prevailing party may be entitled).




11.9         Entire Agreement. 

This Agreement and the Proxy contain the entire understanding of the

parties in respect of the subject matter hereof and supersede all prior

negotiations and understandings between the parties with respect to such

subject matter.




11.10       Effect of Headings. 

The section headings are for convenience only and shall not affect the

construction or interpretation of this Agreement.




11.11       Counterparts. 

This Agreement may be executed in several counterparts, each of which

shall be an original, but all of which together shall constitute one and the

same agreement.




*     *     *




 




7





























 




IN WITNESS

WHEREOF, the parties have caused this Agreement to be duly executed on the day

and year first above written.




 




	

  INTERWAVE COMMUNICATIONS INTERNATIONAL LTD.


  	

   


  	

  SHAREHOLDER


  
	

   


  	

   


  	

   


  
	

   


  	

   


  	

   


  
	

  By:


  	

   


  	

   


  	

  Signature


  
	

   


  	

  Signature of Authorized Signatory


  	

   


  	

   


  
	

   


  	

   


  	

   


  
	

   


  	

   


  	

   


  
	

   


  	

   


  	

   


  	

   


  
	

   


  	

  Print Name and Title


  	

   


  	

   


  
	

   


  	

   


  	

   


  
	

   


  	

   


  	

  Print Name


  
	

   


  	

   


  	

   


  
	

  INTERWAVE ADVANCED COMMUNICATIONS, INC.


  	

   


  	

   


  
	

   


  	

   


  	

   


  
	

   


  	

   


  	

  Print

  Address


  
	

   


  	

   


  	

   


  
	

  By:


  	

   


  	

   


  	

   


  
	

   


  	

  Signature of

  Authorized Signatory


  	

   


  	

  Telephone


  
	

   


  	

   


  	

   


  
	

   


  	

   


  	

   


  
	

   


  	

   


  	

   


  	

  Facsimile

  No.


  
	

   


  	

  Print Name

  and Title


  	

   


  	

   


  
	

   


  	

   


  	

  Shares

  beneficially owned:


   


  
	

   


  	

   


  	

  
________ shares of Seller Common

  Stock 


  


  ________ shares of Seller Preferred Stock 


  


  ________ shares of Seller Common Stock issuable upon exercise of outstanding

  options or warrants 


  


  ________ shares of Seller Preferred Stock issuable upon exercise of

  outstanding options or warrants


  





 [SIGNATURE PAGE TO VOTING

AGREEMENT]




 




8





























 




Exhibit A




IRREVOCABLE

PROXY




The undersigned

shareholder of GBase Communications, a California corporation  (“Seller”), hereby irrevocably (to the

fullest extent permitted by law) appoints Priscilla Lu, Chief Executive Officer

and Robin Foor, General Counsel of interWAVE Communications International Ltd.,

a corporation organized under the laws of Bermuda (“Parent”), and each of them,

as the sole and exclusive attorneys and proxies of the undersigned, with full

power of substitution and resubstitution, to vote and exercise all voting and

related rights (to the full extent that the undersigned is entitled to do so)

with respect to all of the shares of capital stock of Seller that now are or

hereafter may be beneficially owned by the undersigned, and any and all other

shares or equity securities of Seller issued or issuable in respect thereof on

or after the date hereof (collectively, the “Shares”) in accordance with

the terms of this Proxy.  The Shares

beneficially owned by the undersigned shareholder of Seller as of the date of

this Proxy are listed on the final page of this Proxy.  Upon the undersigned’s execution of this

Proxy, any and all prior proxies given by the undersigned with respect to any

Shares are hereby revoked and the undersigned agrees not to grant any

subsequent proxies with respect to the Shares until after the Closing Date (as

defined below).




This Proxy is irrevocable

(to the fullest extent permitted by law), is coupled with an interest and is

granted pursuant to that certain Voting Agreement of even date herewith by and

among Parent and the undersigned shareholder (the “Voting Agreement”), and is

granted in consideration of Parent entering into that certain Asset Purchase

Agreement (the “Purchase Agreement”), among Parent, Buyer, Seller and certain other parties.  The Purchase Agreement provides for the acquisition (the “Acquisition”)

of the Purchased Assets (as defined in the Purchase Agreement).  As used herein, the term “Closing Date”

shall mean the earlier to occur of (i) such date and time as the Purchase

Agreement shall have been validly terminated pursuant to Article IX thereof or

(ii) such date and time as the Acquisition shall be consummated in

accordance with the terms and provisions of the Purchase Agreement.




The attorneys and proxies

named above, and each of them, are hereby authorized and empowered by the

undersigned, at any time prior to the Closing Date, to act as the undersigned’s

attorney and proxy to vote the Shares, and to exercise all voting, consent and

similar rights of the undersigned with respect to the Shares (including,

without limitation, the power to execute and deliver written consents) at every

annual, special or adjourned meeting of shareholders of Seller and in every

written consent in lieu of such meeting:




                                (i)            in favor of approval of the

Acquisition, the execution and delivery by Seller of the Purchase Agreement and

the adoption and approval of the terms thereof and in favor of each of the

other actions contemplated by the Purchase Agreement and any action required in

furtherance hereof and thereof;




 




                                (ii)           against

approval of any proposal made in opposition to or in competition with

consummation of the Acquisition and the Purchase Agreement; and




 




9





























 




                (iii)          against

any of the following actions (other than those actions that relate to the

Acquisition and the transactions contemplated by the Purchase Agreement):  (A) any merger, consolidation, business

combination, sale of assets, reorga­ni­za­tion or recapitalization with any

party, (B) any sale, lease or transfer of more than any significant part of the

assets of Seller, (C) any reorganization, recapitalization, dissolution,

liquidation or winding up of Seller, (D) any material change in the

capitalization of Seller or Seller’s corporate structure, or (E) any other

action that is intended, or could reasonably be expected to, impede, interfere

with, delay, postpone, discourage or adversely affect the Acquisition or any of

the other transactions contemplated by the Purchase Agreement.




 




                The attorneys and proxies named above may not

exercise this Proxy on any other matter except as provided in clauses (i), (ii)

and (iii) above.  The undersigned

Shareholder may vote the Shares on all other matters.




 




                Any obligation of the undersigned hereunder

shall be binding upon the successors and assigns of the undersigned.




 




                This Proxy is irrevocable (to the fullest

extent permitted by law).  This Proxy

shall terminate, and be of no further force and effect, automatically upon the

Closing Date.




 




	

  Dated:


  	

   


  	

   


  	

  Signature of

  Shareholder:


  	

   


  
	

   


  	

   


  	

   


  	

   


  	

   


  
	

   


  	

   


  	

   


  	

  Print Name

  of Shareholder:


  	

   


  
	

   


  	

   


  	

   


  	

   


  	

   


  
	

   


  	

   


  	

   


  	

  Shares

  beneficially owned:


  	

   


  
	

   


  	

   


  	

   


  	

   


  	

   


  
	

   


  	

   


  	

   


  	

   


  	

   


  	

  shares of

  Seller Common Stock


  
	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  
	

   


  	

   


  	

   


  	

   


  	

   


  	

  shares of

  Seller Preferred Stock


  
	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  
	

   


  	

   


  	

   


  	

   


  	

   


  	

  shares

  of Seller Common Stock issuable upon exercise of outstanding options or

  warrants


  
	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  
	

   


  	

   


  	

   


  	

   


  	

   


  	

  shares

  of Seller Preferred Stock issuable upon exercise of outstanding options or

  warrants


  
							





 




 




 




 




 




[SIGNATURE PAGE TO

IRREVOCABLE PROXY]




 




10





























 




EXHIIT

B-2




 




NON-COMPETITION

AGREEMENT




 




                THIS NON-COMPETITION AGREEMENT (this “Agreement”)

is made and entered into as of               

, 2002 by and among interWAVE Communications International, Ltd, a

Bermuda corporation (“Acquiror”), interWAVE Advanced Communications,

Inc. (the “Buyer”), and the undersigned shareholder (“Shareholder”)

of GBase Communications, a California corporation (the “Company”).  The Closing Date (as defined in the Purchase

Agreement (as defined below)) shall be the “Effective Date” of this

Agreement.




RECITALS




 




                A.            Acquiror,

the Company, and the Buyer have entered into an Asset Purchase Agreement dated

as of August 16, 2002 (the “Purchase Agreement”) pursuant to which the

Buyer shall purchase substantially all of the Company’s assets, and assume

certain of its liabilities, (the “Purchase”) in exchange for shares of

common stock of Acquiror ultimately held by the shareholders of the Company (“Shares”),

including Shareholder.




 




                B.            Shareholder

acknowledges that he or she is a substantial and/or significant shareholder of

the Company.




 




                C.            As

a result of the Purchase, Shareholder shall receive from Acquiror significant

consideration in the form of (i) shares of common stock of Acquiror pursuant to

the terms of the Purchase Agreement and (ii) the substitution by Acquiror of

all options to purchase common stock of the Company held by Shareholder.




 




                D.            As

a condition and mutual inducement to the Purchase, and to preserve the value of

the business being acquired by Acquiror after the Purchase, the Purchase

Agreement contemplates, among other things, that Shareholder shall enter into

this Agreement and that this Agreement shall become effective on the Effective

Date.




 




                NOW, THEREFORE, in

consideration of the mutual promises made herein, Acquiror, the Buyer and the

Shareholder hereby agree as follows:




 




                1.             Covenant

Not to Compete or Solicit.




 




                                (a)           Beginning

on the Effective Date and ending on the first (1st) anniversary of the

Effective Date of this Agreement (the “Non-Competition Period”),

Shareholder shall not, directly or indirectly, without the prior written

consent of Acquiror: (i) engage in, anywhere in the jurisdictions in which

Acquiror and its subsidiaries (including but not limited to the Buyer) and

affiliates conduct business (the “Restricted Area”), whether as an

employee, agent, consultant, advisor, independent contractor, proprietor,

partner, officer, director or otherwise, or have any ownership interest in

(except for ownership of one percent (1%) or less of any publicly-held entity),

or participate in or facilitate the financing, operation, management or control

of, any




 




11





























 




firm, partnership, corporation,

entity or business that engages or participates in a Competing Business Purpose

(as defined below); or (ii) interfere with the business of Acquiror and its

subsidiaries (including but not limited to the Buyer) and affiliates or

approach, contact or solicit customers of Acquiror, or any subsidiaries

(including but not limited to the Buyer) or affiliates of Acquiror, in

connection with a Competing Business Purpose. 

For purposes of this Agreement, “Competing Business Purpose”

shall mean any business which engages in the same line of business as Acquiror

or the Buyer, including but not limited to any business which engages in the

design, development, manufacture or sale of any (i) base station transceiver (“BTS”)

and BTS components and software for global system for mobile communication (“GSM”),

general packet radio service (“GPRS”), code-division multiple access (“CDMA”)

and/or single carrier radio transmission technology (“1xRTT”) and/or

CDMA2000, and wideband code-division multiple access (“WCDMA”)

technologies; (ii) base station controller (“BSC”) and BSC components

and software for GSM, GPRS, CDMA and/or 1xRTT and/or CDMA2000, and WCDMA

technologies; (iii) mobile switching center (“MSC”) and MSC components

and software for GSM, GPRS, CDMA and/or 1xRTT and/or CDMA2000, and WCDMA

technologies; (iv) packet data service node (“PDSN”) and PDSN components

and software for CDMA and/or 1xRTT and/or CDMA2000; (v) radio access network (“RAN”)

and RAN components and software for WCDMA; and (vi) node “B” and node “B”

components and software for WCDMA.




 




                                (b)           Beginning

on the Effective Date and ending on the first (1st) anniversary of the

Effective Date of this Agreement (the “Non-Solicitation Period”),

Shareholder shall not, directly or indirectly, without the prior written

consent of Acquiror, solicit, encourage or take any other action which is

intended to induce or encourage, or has the effect of inducing or encouraging,

any employee of Acquiror or any subsidiary of Acquiror (including but not

limited to the Buyer) or any affiliate of Acquiror to (i) terminate his or her

employment with Acquiror or such subsidiary of Acquiror or such affiliate of

Acquiror, or (ii) engage in any action in which Shareholder would, under the

provisions of Section 1(a) hereof, be prohibited from engaging.




 




                                (c)           The

covenants contained in Section 1(a) hereof shall be construed as a

series of separate covenants, one for each country, province, state, city or

other political subdivision of the Restricted Area.  Except for geographic coverage, each such separate covenant shall

be deemed identical in terms to the covenant contained in Section 1(a)

hereof.  If, in any judicial proceeding,

a court refuses to enforce any of such separate covenants (or any part

thereof), then such unenforceable covenant (or such part) shall be eliminated

from this Agreement to the extent necessary to permit the remaining separate

covenants (or portions thereof) to be enforced.  In the event that the provisions of this Section 1 are

deemed to exceed the time, geographic or scope limitations permitted by

applicable law, then such provisions shall be reformed to the maximum time,

geographic or scope limitations, as the case may be, permitted by applicable

laws.




 




                                (d)           Shareholder

expressly agrees and acknowledges that the restrictions contained in this

Section 1 do not preclude Shareholder from earning a livelihood, nor do they

unreasonably impose limitations on Shareholder’s ability to earn a living.  Shareholder further acknowledges that (i)

the goodwill associated with the existing business, customers and assets of the

Company prior to the Purchase is an integral component of the value of the

Company to Acquiror and is reflected in the portion of the Purchase Shares (as

that term is defined in the Purchase Agreement) issuable to Shareholder, and

(ii) Shareholder’s agreement as set forth herein is necessary




 




12





























 




to preserve the value of the

business and operation of the Company for Acquiror following the Purchase.  Shareholder also acknowledges that the

limitations of time, geography and scope of activity agreed to in this

Agreement are reasonable because, among other things: (A) the Company and

Acquiror are engaged in a highly competitive industry, (B) Shareholder has

unique access to, and will continue to have access to, the trade secrets and

know-how of the Company and Acquiror, including, without limitation, the plans

and strategy (and, in particular, the competitive strategy) of the Company and

Acquiror, and (C) Shareholder is receiving significant consideration in

connection with the Purchase.




 




                                (e)           Shareholder’s

obligations under this Agreement shall remain in effect regardless of

Shareholder’s employment with Acquiror or the Buyer.




 




                                (f)            REMEDIES.

SHAREHOLDER HEREBY RECOGNIZES AND ACKNOWLEDGES THAT A MATERIAL VIOLATION OF THE

TERMS AND PROVISIONS OF THIS SECTION 1 WOULD CAUSE IRREPARABLE INJURY TO

ACQUIROR  OR ANY OF ITS SUBSIDIARIES OR

AFFILIATES, AS THE CASE MAY BE, FOR WHICH ACQUIROR OR ANY OF ITS RESPECTIVE

SUBSIDIARIES OR AFFILIATES WOULD HAVE NO ADEQUATE REMEDY AT LAW.  ACCORDINGLY, IN THE EVENT THAT SHAREHOLDER

SHALL FAIL TO MATERIALLY COMPLY WITH THE TERMS AND PROVISIONS OF THIS SECTION 1

IN ANY RESPECT, AND NOTWITHSTANDING ANY ARBITRATION AGREEMENT BETWEEN

ACQUIROR  AND SHAREHOLDER, ACQUIROR AND

THE BUYER SHALL BE ENTITLED TO PRELIMINARY AND OTHER INJUNCTIVE RELIEF AND TO

SPECIFIC PERFORMANCE OF THE TERMS AND PROVISIONS HEREOF.  IN FURTHERANCE AND NOT IN LIMITATION OF THE

FOREGOING, SHAREHOLDER HEREBY WAIVES ANY CLAIM OR DEFENSE RELATING TO ANY

VIOLATION OR BREACH BY SHAREHOLDER OF THE TERMS AND PROVISIONS OF THIS SECTION

1 THAT ACQUIROR OR ANY OF ITS RESPECTIVE SUBSIDIARIES OR AFFILIATES HAVE AN

ADEQUATE REMEDY AT LAW OR THAT MONEY DAMAGES WOULD PROVIDE AN ADEQUATE REMEDY

FOR SUCH VIOLATION OR BREACH.




 




                2.             Miscellaneous.




 




                                (a)           Governing

Law; Consent to Personal Jurisdiction. 

This Agreement shall be governed by the laws of the State of California

without reference to rules of conflicts of law.  Shareholder hereby consents to the personal jurisdiction of the

state and federal courts located in California for any action or proceeding arising

from or relating to this Agreement or relating to any arbitration in which the

parties are participants.




 




                                (b)           Severability.  If any portion of this Agreement is held by

a court of competent jurisdiction to conflict with any federal, state or local

law, or to be otherwise invalid or unenforceable, such portion of this

Agreement shall be of no force or effect and this Agreement shall otherwise

remain in full force and effect and be construed as if such portion had not

been included in this Agreement.




 




13





























 




                                (c)           No

Assignment.  Because the nature of

the Agreement is specific to the actions of Shareholder, Shareholder may not

assign this Agreement.  This Agreement

shall inure to the benefit of Acquiror, the Buyer and their respective

successors and assigns.




 




                                (d)           Notices.  All notices and other communications

hereunder shall be in writing and shall be deemed given if delivered personally

or by commercial messenger or courier service, or mailed by registered or

certified mail (return receipt requested) or sent via facsimile (with

acknowledgment of complete transmission) to the parties at the following

addresses (or at such other address for a party as shall be specified by like

notice); provided, however, that notices sent by mail will

not be deemed given until received:




 




	

  If to Acquiror


  	

   


  	

  interWAVE Advanced Communications Inc.


  
	

  or Buyer:


  	

   


  	

  c/o interWAVE Communications, Inc.


  
	

   


  	

   


  	

  312 Constitution Drive


  
	

   


  	

   


  	

  Menlo Park, CA 94025


  
	

   


  	

   


  	

  Attn: Robin Foor


  
	

   


  	

   


  	

  Telephone No.: (650) 838-2101


  
	

   


  	

   


  	

  Facsimile No.:  (650) 321-6381


  
	

   


  	

   


  	

   


  
	

  With a copy to:


  	

   


  	

  Wilson Sonsini Goodrich & Rosati


  
	

   


  	

   


  	

  Professional Corporation


  
	

   


  	

   


  	

  650 Page Mill Road


  
	

   


  	

   


  	

  Palo Alto, California 94304


  
	

   


  	

   


  	

  Attn: Christopher Mitchell, Esq.


  
	

   


  	

   


  	

  Telephone No.: (650) 493-9300


  
	

   


  	

   


  	

  Facsimile No.:

  (650) 493-6811


  
	

   


  	

   


  	

   


  
	

  If to Shareholder:


  	

   


  	

  To the address

  set forth on the signature page hereof


  
	

   


  	

   


  	

   


  
	

  With a copy

  to:


  	

   


  	

  Crosby,

  Heafey, Roach & May Professional Corporation


  
	

   


  	

   


  	

  1999 Harrison Street, Suite 2200


  
	

   


  	

   


  	

  Oakland, CA 94612-3572


  
	

   


  	

   


  	

  Attn:  Daniel Leer, Esq.


  
	

   


  	

   


  	

  Telephone No.: (510) 763-2000


  
	

   


  	

   


  	

  Facsimile No.: (510) 273-8832


  





 




 




                                (f)            Entire

Agreement.  This Agreement contains

the entire agreement and understanding of the parties and supersedes all prior

discussions, agreements and understandings relating to the subject matter

hereof.  This Agreement may not be

changed or modified, except by an agreement in writing executed by each of

Acquiror, the Buyer and Shareholder.




 




                                (g)           Waiver

of Breach.  The waiver of a breach

of any term or provision of this Agreement, which must be in writing, shall not

operate as or be construed to be a waiver of any other previous or subsequent

breach of this Agreement.




 




14





























 




                                (h)           Headings.  All captions and section headings used in

this Agreement are for convenience only and do not form a part of this

Agreement.




 




                                (i)            Counterparts.  This Agreement may be executed in

counterparts, and each counterpart shall have the same force and effect as an

original and shall constitute an effective, binding agreement on the part of

each of the undersigned.




 




                                (j)            Termination.  This Agreement shall terminate and be of no

force and effect upon the earlier of (i) the termination of the Purchase

Agreement pursuant to Article IX of the Purchase Agreement, or (ii) one (1)

year from the effective Date of this Agreement.




*  *  *




 




15





























 




 




IN WITNESS

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




 








	

  INTERWAVE COMMUNICATIONS


  INTERNATIONAL, LTD.


  
	

   


  	

   


  
	

   


  	

   


  
	

  By:


  	

   


  
	

  Name:


  	

   


  
	

  Title:


  	

   


  
	

   


  	

   


  
	

   


  	

   


  
	

  INTERWAVE ADVANCED COMMUNICATIONS, INC.


  
	

   


  	

   


  
	

   


  	

   


  
	

  By:


  	

   


  
	

  Name:


  	

   


  
	

  Title:


  	

   


  
	

   


  	

   


  
	

   


  	

   


  
	

  SHAREHOLDER


  
	

   


  	

   


  
	

   


  	

   


  
	

   


  
	

  Signature


  
	

   


  
	

  Print

  Name


  
	

   


  	

   


  
	

   


  	

   


  
	

  Address:


  
	

   


  	

   


  
	

   


  
	

   


  
	

   


  










 




1





























 




EXHIBIT

C-2




 




 









Date                , 2002




 




 




To:          Employee




 




 




 




Welcome to interWAVE Communications!  We are happy to offer you employment with

interWAVE contingent upon the closing of the acquisition of substantially all

of the assets of Gbase Communications. 

We are excited about the future and believe that you will make a

contribution to our strategic product initiatives.




 




Subject to the approval of the Board of

Directors of interWAVE and final closing of the acquisition, we will be

proposing the following to you:




 




Position Title:




 




Salary:




 




 




Stock Options:




 




If you accept this offer of employment, your

employment will be “at-will” and you or the Company can terminate your

employment at any time for any reason or for no reason.  In addition, any disputes arising out of

your employment will be subject to mandatory arbitration governed by California

law.  As a condition to your employment,

you will be required to sign and observe the Company’s Proprietary and

Confidential Information Agreements. 

Employment is governed by current policies and procedures of interWAVE.  In the next weeks, interWAVE will be communicating

more details as to you regarding HR issues such as benefits.  Please refer questions regarding these terms

to your HR representative.




 




Your signature signifies acknowledgement of

your receipt of this information and/ or acceptance. Keep the original for your

records and submit a copy to HR.  Please

return acknowledgement of this proposal by     

, 2002 and acceptance/decline of this offer by




     ,

2002.




 




Again, we look forward to you joining us and

to your contributions to the interWAVE family.




 




Regards,




 




 




	

   


  
	

  Priscilla Lu


  
	

  Chairman and CEO


  





 




1





























 




I acknowledge receipt of this proposed offer:




 




 




	

   


  	

   


  	

   


  
	

  Signature


  	

   


  	

  Date


  





 




 




_______      

I accept this offer of employment




 




_______        I do not accept this offer of employment




 




 




 




 




	

   


  	

   


  	

   


  
	

  Signature


  	

   


  	

  Date


  





 




2





























 




EXHIBIT D




 




EXECUTION COPY




 




 




September      , 2002




 




 




interWAVE Communications

International Ltd.




312 Constitution Drive




Menlo Park, CA 94025




Attn:       Priscilla

Lu,




                Chief Executive

Officer




 




                Re:          Shareholder

Representation and Lock-up Agreement




 




Reference is made to the

provisions of the Asset Purchase Agreement, dated August 16, 2002 (the “Purchase Agreement”), by and among interWAVE

Communications International Ltd.,

a corporation organized under the laws of Bermuda (“ Parent”), interWAVE Advanced Communications, Inc., a Delaware

corporation and a wholly owned subsidiary of Parent (“Buyer”) and GBase Communications, a

California corporation (“Seller”),

which provides for the acquisition (the “Acquisition”)

of certain assets of Seller in exchange for shares of common stock of Parent,

as set forth in the Purchase Agreement. This letter constitutes the

undertakings of the undersigned contemplated by the Purchase Agreement.

Capitalized terms without definition shall have the meanings assigned to them

in the Purchase Agreement.




As consideration of

Parent’s willingness to enter into (and in order to induce Parent to enter

into) the Purchase Agreement, and for other good and valuable consideration,

the receipt and sufficiency of which is hereby acknowledged, the undersigned

agrees to the following:




For the period beginning

on the date of closing of the acquisition (the “Closing Date”) and ending one year after the Closing Date, the

undersigned will not offer, sell, contract to sell, pledge, grant any option to

purchase, make any short sale with respect to or otherwise dispose of

(collectively, “Transfer”) any

Parent Consideration Shares or Earn-Out Shares (as defined in the Purchase

Agreement) or any options or warrants to purchase any Parent Consideration

Shares or Earn-Out Shares and will not Transfer any securities convertible

into, exchangeable for or that represent the right to receive Parent

Consideration Shares or Earn-Out Shares that the undersigned receives in

connection with the acquisition described above or that are otherwise hereafter

acquired (collectively, the “Shares”)

whether (i) held of record by the undersigned (including holding as a

custodian) or (ii) owned beneficially as defined under the rules and

regulations of the Securities and Exchange Commission.




Notwithstanding the

foregoing restrictions, the undersigned may Transfer the Shares: (i) as a bona fide

gift or gifts, provided that the donee or donees thereof agree to be bound in

writing by the




 




1





























 




restrictions set forth herein; (ii) to any trust for

the direct or indirect benefit of the undersigned or the immediate family of

the undersigned, provided that the trustee of the trust agrees to be bound in

writing by the restrictions set forth herein; or (iii) with the prior written

consent of Parent.  For purposes of this

Lock-Up Agreement, “immediate family” shall mean the undersigned’s spouse,

siblings and lineal ancestors or descendants (including by way of

adoption).  The undersigned also agrees

and consents to (i) the placement of a legend on all certificates representing

the Shares reflecting the terms of this Agreement and (ii) the entry of stop

transfer instructions with Parent’s transfer agent and registrar against the

Transfer of the Shares except in compliance with the foregoing restrictions.




The undersigned

understands that Parent is relying upon this Lock-Up Agreement in executing the

Purchase Agreement.  The undersigned

further understands that this Lock-Up Agreement is irrevocable to the fullest

extent permitted by applicable law and shall be binding upon the undersigned’s

heirs, legal representatives, successors, and assigns.




In addition, in

connection with the issuance of the Shares and the Parent Guarantee Shares, as

defined in the Purchase Agreement (collectively, the “Total Consideration Shares”), the

undersigned represents to Parent as follows:




 




1.     Purchasing

for Investment.  The

undersigned is purchasing the Total Consideration Shares solely for investment

purposes, and not for further distribution. 

The entire legal and beneficial ownership interest in the Total

Consideration Shares is being purchased and shall be held solely for the

undersigned’s account. The undersigned is not a party to, and does not

presently intend to enter into, any contract or other arrangement with any other

person or entity involving the resale, transfer, grant of participation with

respect to or other distribution of any of the Total Consideration Shares.  The undersigned’s investment intent is not

limited to a present intention to hold the Total Consideration Shares for the

minimum capital gains period specified under any applicable tax law, for a

deferred sale, for a specified increase or decrease in the market price of the

Total Consideration Shares, or for any other fixed period in the future.




 




2.     Protection

of Interests.  The

undersigned can properly evaluate the merits and risks of an investment in the

Total Consideration Shares and can protect his or its own interests in this

regard, whether by reason of business and financial expertise, the business and

financial expertise of certain professional advisors unaffiliated with Parent

with whom the undersigned has consulted, or the undersigned’s preexisting

business or personal relationship with Parent or any of its officers, directors

or controlling persons.




 




3.     Informed.  The undersigned is sufficiently aware of the

Parent’s business affairs and financial condition to reach an informed and

knowledgeable decision to acquire the Total Consideration Shares.  The undersigned has had opportunity to

discuss the plans, operations and financial condition of Parent with its

officers, directors or controlling persons, and has received all information he

deems appropriate for assessing the risk of an investment in the Total

Consideration Shares.




 




4.     Economic

Risk.  The undersigned

realizes that the purchase of the Total Consideration Shares involves a high

degree of risk, and that Parent’s future prospects are uncertain.  The undersigned is able to hold the Total

Consideration Shares indefinitely if required, and is able to bear the loss of

his entire investment in the Total Consideration Shares.




 




2





























 




5.     The Total

Consideration Shares are Restricted Securities.  The undersigned understands that the Total

Consideration Shares are “restricted securities” in that Parent’s issuance of

the Total Consideration Shares to the undersigned has not been registered under

the Securities Act of 1933, as amended (the “Securities Act”) in reliance upon

an exemption for non-public offerings. 

In this regard, the undersigned also understands and agrees that:




 




a.     He

must hold the Total Consideration Shares indefinitely, unless any subsequent

proposed resale by the undersigned is registered under the Securities Act, or

unless an exemption from registration is otherwise available (such as Rule 144);




 




b.     Except

as set forth in the Purchase Agreement, Parent is under no obligation to

register any subsequent proposed resale of the Total Consideration Shares by

the undersigned; and




 




c.     the

certificate evidencing the Total Consideration Shares will be imprinted with a

legend which prohibits the transfer of the Total Consideration Shares unless

such transfer is registered or such registration is not required in the opinion

of counsel for Parent.




 




6.     Rule 144.  The undersigned is familiar with Rule 144

adopted under the Securities Act, which in some circumstances permits limited

public resales of “restricted securities” like the Total Consideration Shares

acquired from an issuer in a non-public offering.  The undersigned understands that his ability to sell the Total

Consideration Shares under Rule 144 in the future is uncertain, and will depend

upon, among other things: (i) the availability of certain current public

information about Parent; (ii) the resale occurring more than one year following

receipt of the Total Consideration Shares and full payment (within the meaning

of Rule 144) for the Total Consideration Shares; and (iii) if the

undersigned is an affiliate of Parent, or a non-affiliate who has held the

Total Consideration Shares less than two years after the purchase and full

payment: (A) the sale being made through a broker in an unsolicited

“broker’s transaction” or in transactions directly with a market maker, as said

term is defined under the Securities Exchange Act of 1934, as amended, (B) the

amount of Shares being sold during any three month period not exceeding the

specified limitations stated in Rule 144, and (C) timely filing of a

notice of proposed sale on Form 144, if applicable.




 




7.     Rule 144 May

Never be Available.  The

undersigned understands that the requirements of Rule 144 may never be

met, and that the Total Consideration Shares may never be saleable.  The undersigned further understands that at

the time he wishes to sell the Total Consideration Shares, there may be no

public market for Parent’s stock upon which to make such a sale, or the current

public information requirements of Rule 144 may not be satisfied, either

of which would preclude the undersigned from selling the Total Consideration

Shares under Rule 144 even if the one-year minimum holding period had been

satisfied.




 




8.     Further

Restrictions on Resale.  The

undersigned understands that in the event Rule 144 is not available, any future

proposed sale of any of the Total Consideration Shares will not be possible

without prior registration under the Securities Act, compliance with some other

registration exemption (which may or may not be available), or each of

the following: (i) written notice to Parent containing detailed information

regarding the proposed sale, (ii) providing an opinion of counsel to the effect

that such sale will not require registration, and (iii) Parent notifying the

undersigned in writing that its counsel concurs in such opinion.  The undersigned understands




 




3





























 




that neither Parent nor its counsel is obligated to provide any such

opinion.  The undersigned understands

that although Rule 144 is not exclusive, the Staff of the SEC has stated

that persons proposing to sell private placement securities other than in a

registered offering or pursuant to Rule 144 will have a substantial burden

of proof in establishing that an exemption from registration is available for

such offers or sales, and that such persons and their respective brokers who

participate in such transactions do so at their own risk.




 




9.     Accredited

Investor.  The undersigned

hereby represents to the Company and, by signing below, now certifies that he

is an “accredited investor” as that term is defined in Rule 501 of the

Securities Act.




This

letter agreement shall be governed by the internal substantive laws, but not

the choice of law rules, of the State of California.




 




[Remainder

of Page Intentionally Left Blank]




 




4





























 




This

letter agreement is hereby executed as of the date set forth above.




 




 




	

   


  
	

  [Name]


  





 




 




 




Acknowledged and Agreed to:




 




	

  INTERWAVE

  COMMUNICATIONS INTERNATIONAL LTD.


  
	

   


  	 

	

  By:


  	

   


  	 

	

   


  	 

	

  Name:


  	

   


  	 

	

   


  	 

	

  Title:


  	

   


  	 

					





 




 




[Signature Page to Shareholder Representation and Lock-Up

Agreement]




 




5





























 




EXHIBIT

E




 




EXECUTION

COPY




September      , 2002




 




 




interWAVE Communications International Ltd.




312 Constitution Drive




MenloPark, CA 94025




Attn:       Priscilla

Lu,




                Chief

Executive Officer




 




Re:          Affiliate Agreement




 




Ladies

and Gentlemen:




 




Reference is made to the

provisions of the Asset Purchase Agreement, dated August 16, 2002 (the “Purchase Agreement”), by and among interWAVE

Communications International Ltd.,

a corporation organized under the laws of Bermuda (“ Parent”), interWAVE Advanced Communications, Inc., a Delaware

corporation and a wholly owned subsidiary of Parent (“Buyer”) and GBase Communications, a California

corporation (“Seller”), which

provides for the acquisition (the “Acquisition”)

of certain assets of Seller in exchange for shares of common stock of Parent,

as set forth in the Purchase Agreement. This letter constitutes the

undertakings of the undersigned contemplated by the Purchase Agreement.

Capitalized terms without definition shall have the meanings assigned to them

in the Purchase Agreement.




 




A.            I understand that I

may be deemed to be an “affiliate” of Seller, as such term is defined for purposes

of Rule 145 (“ Rule 145”)

promulgated under the Securities Act of 1933 (the “Securities Act”), and that the transferability of the shares

of common stock, par value of $0.001 per share, of Parent (the “Parent Shares”) which I will receive in

connection with the Acquisition in exchange for my shares of capital stock of

Seller (the “Seller Shares”), is

therefore restricted.




 




B.            I hereby

represent, warrant and covenant to Parent and Buyer that I will not transfer,

sell or otherwise dispose of any of the Parent Shares except (a) pursuant to an

effective registration statement under the Securities Act, (b) as permitted by,

and in accordance with, Rule 145 or another applicable exemption under the

Securities Act; or (c) pursuant to an opinion of counsel furnished to and

satisfactory to Parent, to the effect that no registration under the Securities

Act would be required in connection with the proposed offer, sale, pledge,

transfer or other disposition.




 




C.            I understand that

Parent will issue stop transfer instructions to its transfer agent with respect

to the Parent Shares and that a restrictive legend will be placed on

certificates delivered to me

evidencing the Parent Shares in

substantially the following form:




 




1





























 




“THIS

CERTIFICATE AND THE SHARES REPRESENTED HEREBY HAVE BEEN ISSUED PURSUANT TO A

TRANSACTION GOVERNED BY RULE “RULE 145 (“RULE 145”) PROMULGATED UNDER THE

SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND MAY NOT BE SOLD

OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT PURSUANT TO

A REGISTRATION STATEMENT IN EFFECT AT THE TIME OR UNLESS THE PROPOSED SALE OR

DISPOSITION CAN BE MADE IN COMPLIANCE WITH RULE 145 OR OTHER CONDITIONS IN THE

LETTER REFERRED TO BELOW WITHOUT REGISTRATION IN RELIANCE ON ANOTHER EXEMPTION

THEREFROM. REFERENCE IS MADE TO THAT CERTAIN LETTER AGREEMENT, DATED

AUGUST      , 2002, BETWEEN THE HOLDER

AND THE ISSUER, A COPY OF WHICH IS ON FILE IN THE PRINCIPAL OFFICE OF THE

ISSUER WHICH CONTAINS FURTHER RESTRICTIONS ON THE TRANSFERABILITV OF THIS CERTIFICATE

AND THE SHARES REPRESENTED HEREBY.”




 




D.            The term, “Parent Shares,” as used in this letter

shall mean and include not only the common stock of Parent as presently

constituted, but also any other stock, which may be issued in exchange for, in  lieu of, or in addition to, all or any part

of such Parent Shares.




 




E.             This agreement

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




 




F.             I hereby

acknowledge that the receipt of this letter by Parent and Buyer is an

inducement to their entering into

the Purchase Agreement and a condition to Parent’s and Buyer’s respective obligation to consummate

the Acquisition under the Purchase Agreement and that I understand the

requirements of this letter and the limitations imposed upon the transfer, sale

or other disposition of the Parent Shares and Seller Shares.




 




 








	

  Very

  truly yours,


  
	

   


  
	

   


  
	

   


  










 




2





























 




EXHIBIT

F




 




EXECUTION

COPY




 




REGISTRATION RIGHTS

AGREEMENT




This Registration Rights

Agreement (this “Agreement”) is

made as of September      , 2002 by and

among interWAVE Communications International Ltd., a corporation organized

under the laws of Bermuda (the “Company”)

and the persons identified on Exhibit A attached hereto (each

individually, a “Holder,” and

collectively, the “Holders”).




RECITALS




WHEREAS, The Company,

interWAVE Advanced Communications, Inc., a wholly owned subsidiary of the

Company (the “Buyer”), and GBase

Communications, a California corporation (the “Seller”) have entered into an Asset Purchase Agreement of even

date herewith (the “Purchase Agreement”), whereby the Seller’s

obligations are conditioned upon the execution and delivery of the Holders and

the Company of this Agreement.




NOW, THEREFORE, in

consideration of the foregoing and for other good and valuable consideration,

the receipt and sufficiency of which are hereby acknowledged, the parties

hereto, intending to be legally bound, hereby agree as follows:




AGREEMENT




1.             Certain Definitions.  As used in this Agreement, the following

terms shall have the following respective meanings:




“Commission” shall

mean the United States Securities and Exchange Commission or any other Federal

agency at the time administering the Securities Act of 1933, as amended.




“Exchange Act”

shall mean the Securities Exchange Act of 1934, as amended, or any similar

federal statute and the rules and regulations of the Commission thereunder, all

as the same shall be in effect from time to time.




“Registrable Securities”

means the shares of Common Stock issued to the Holders as Parent Guarantee

Shares (as defined in the Purchase Agreement) (and any securities issued as a

stock dividend with respect to or as a result of a stock split or

recapitalization of the Common Stock issued to the Holders as Parent Guarantee

Shares) of the Company in connection with the Purchase Agreement and owned by

the Holders.




The terms “register,”

“registered” and “registration” refer to a registration effected

by preparing and filing a registration statement in compliance with the

Securities Act, and the declaration or ordering of the effectiveness of such

registration statement.




 




1





























 




“Registration Expenses”

shall mean all expenses, except as otherwise stated below, incurred by the

Company in complying with Section 1 herof, including, without limitation,

all registration, qualification and filing fees, printing expenses, escrow

fees, fees and disbursements of counsel for the Company, blue sky fees and

expenses, the expense of any special audits incident to or required by any such

registration, including legal fees and expenses of one counsel to Holders (but

excluding the compensation of regular employees of the Company which shall be

paid in any event by the Company).




“Securities Act”

shall mean the United States Securities Act of 1933, as amended, or any similar

federal statute, and the rules and regulations of the Commission thereunder,

all as the same shall be in effect at the time.




“Selling Expenses”

shall mean selling commissions and stock transfer taxes applicable to the

securities registered by the Holders.




 




1.1.        Registration

on Form S-3.  In the event

Registrable Securities are to be issued in accordance to the Purchase

Agreement, the Company shall prepare and file within thirty (30) days after the

issuance of such Registrable Securities, a registration statement on Form S-3

under the Securities Act covering the Registrable Securities issued pursuant to

the Purchase Agreement and held by signatory(ies) to the Registration Rights

Agreement as of the filing date.




 




1.2.        Expenses of Registration.  The Company shall bear all Registration

Expenses in connection with the registration exclusive of any Selling

Expenses.  All Selling Expenses relating

to securities registered on behalf of the Holders shall be borne by the Holders

on a pro rata basis.




 




1.3.        

Registration Procedures.  In

the case of each registration, qualification or compliance effected by the

Company pursuant to this Section 1, the Company will keep the Holders

advised in writing as to the initiation of the registration, qualification and

compliance and as to the completion thereof. 

At its expense the Company will:




(a)   Prepare and file with the Commission a

registration statement with respect to such securities and use its best efforts

to cause such registration statement to become and remain effective until that

date one year following the Effective Time or less if the distribution

described in the Registration Statement has been completed.




(b)   Prepare and file with the Commission such

amendments and supplements to such registration statement and the prospectus

used in connection with such registration statement as may be necessary to

comply with the provisions of the Securities Act with respect to the

disposition of all securities covered by such registration statement.




(c)   Furnish to the Holders such reasonable number

of copies of the registration statement, preliminary prospectus, final

prospectus and such other documents as Holders may reasonably request in order

to facilitate the public offering of such securities.




 




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(d)   Use its best efforts to register and qualify

the securities covered by such registration statement under such other

securities or Blue Sky laws of such jurisdictions as shall be reasonably

requested by the Holders, provided that the Company shall not be required in

connection therewith or as a condition thereto to qualify to do business or to

file a general consent to service of process in any such states or

jurisdictions.




(e)    Notify the Holders of Registrable Securities

covered by such registration statement at any time when a prospectus relating

thereto is required to be delivered under the Securities Act of the happening

of any event as a result of which the prospectus included in such registration

statement, as then in effect, includes an untrue statement of a material fact

or omits to state a material fact required to be stated therein or necessary to

make the statements therein not misleading in light of the circumstances then

existing.




(f)    Furnish, at the request of the Holders on

the date that the registration statement with respect to such securities

becomes effective, (i) an opinion, dated as of such date, of the counsel

representing the Company for the purposes of such registration, in form and

substance as is customarily given to underwriters in an underwritten public

offering and reasonably satisfactory to the Holders, addressed to the Holders

and (ii) a letter dated as of such date, from the independent certified

public accountants of the Company, in form and substance as is customarily

given by independent certified public accountants to underwriters in connection

with an underwritten public offering and reasonably satisfactory to the

Holders, addressed to the Holders.




1.4            Temporary Cessation of Offers and

Sales.  The Holders acknowledge that

there may occasionally be times when the Company may be required to suspend the

use of the prospectus forming part of the registration statement until such

time as an amendment to the registration statement has been filed by the

Company and declared effective by the Commission, until the prospectus is

supplemented or amended to comply with the Securities Act, or until such time

as the Company has filed an appropriate report with the Commission pursuant to

the Exchange Act.  The Holders hereby covenant

that they will not sell any Registrable Securities pursuant to said prospectus

during the period commencing at the time at which the Company gives the Holders

notice of the suspension of the use of said prospectus and ending at the time

the Company gives the Holders notice that the Holders may thereafter effect

sales pursuant to said prospectus, as the same may have been supplemented or

amended, provided, however, that if the use of the prospectus is suspended, the

Company shall use its best efforts to take all actions reasonably necessary to

supplement or to amend the prospectus such that the prospectus shall again be

effective.  In the event of any

suspension of use of a registration statement pursuant to this paragraph, the

time period during which the Company is obligated to maintain the effectiveness

of such registration statement pursuant to this Agreement shall be tolled for

the duration of the period during which use of the registration statement was

suspended.




 




3





























 




1.5.           Indemnification.




(a)           The Company will indemnify each

Holder within the meaning of Section 15 of the Securities Act, with

respect to which registration, qualification or compliance has been effected

pursuant to this Section 1.5, against all expenses, claims, losses,

damages or liabilities (or actions in respect thereof), including any of the

foregoing incurred in settlement of any litigation, commenced or threatened,

arising out of or based on any untrue statement (or alleged untrue statement)

of a material fact contained in any registration statement, prospectus, offering

circular or other document, or any amendment or supplement thereto, incident to

any such registration, qualification or compliance, or based on any omission

(or alleged omission) to state therein a material fact required to be stated

therein or necessary to make the statements therein, in light of the

circumstances in which they were made, not misleading, or any violation by the

Company of the Securities Act or any rule or regulation promulgated under the

Securities Act applicable to the Company in connection with any such

registration, qualification or compliance, and the Company will reimburse each

Holder, for any legal and any other expenses reasonably incurred in connection

with investigating, preparing or defending any such claim, loss, damage, liability

or action, provided that the Company will not be liable in any such case to the

extent that any such claim, loss, damage, liability or expense arises out of or

is based on any untrue statement or omission or alleged untrue statement or

omission, made in reliance upon and in conformity with written information

furnished to the Company by an instrument duly executed by the Holders

specifically for use therein, or the failure of the Holders to deliver a

prospectus that was delivered to the Holders prior to a sale or sales by such

Holders.




(b)            The Holders will, if Registrable

Securities held by the Holders are included in the securities as to which such

registration, qualification or compliance is being effected, indemnify the

Company, each of its directors and officers, each person who controls the

Company within the meaning of Section 15 of the Securities Act, against

all claims, losses, damages and liabilities (or actions in respect thereof)

arising out of or based on any untrue statement (or alleged untrue statement)

of a material fact contained in any such registration statement, prospectus,

offering circular or other document, or any omission (or alleged omission) to

state therein a material fact required to be stated therein or necessary to

make the statements therein not misleading, and will reimburse the Company,

such directors, officers, persons, or control persons for any legal or any

other expenses reasonably incurred in connection with investigating or

defending any such claim, loss, damage, liability or action, in each case to

the extent, but only to the extent, that such untrue statement (or alleged

untrue statement) or omission (or alleged omission) is made in such

registration statement, prospectus, offering circular or other document in reliance

upon and in conformity with written information furnished to the Company by an

instrument duly executed by such Holders specifically for use therein.  Notwithstanding the foregoing, the liability

of the Holders under this subsection (b) shall be limited to the proportion of

any such loss, claim, damage, liability or expense which is equal to the

proportion that the public offering price of the shares sold by such Holders

under such registration statement bears to the total public offering price of all

securities sold thereunder, but not to exceed the proceeds received by such

Holders from the sale of Registrable Securities covered by such registration

statement.  The Holders will not be

required to enter into any agreement or undertaking in connection with any

registration under this Section 1 providing for any




 




4





























 




indemnification or

contribution on the part of such Holders greater than the Holders’ obligations

under this Section 1.5(b).




(c)            Each party entitled to

indemnification under this Section 1.5 (the “Indemnified Party”) shall

give notice to the party required to provide indemnification (the “Indemnifying

Party”) promptly after such Indemnified Party has actual knowledge of any claim

as to which indemnity may be sought, and shall permit the Indemnifying Party to

assume the defense of any such claim or any litigation resulting therefrom,

provided that counsel for the Indemnifying Party, who shall conduct the defense

of such claim or litigation, shall be approved by the Indemnified Party (whose approval

shall not unreasonably be withheld), and the Indemnified Party may participate

in such defense at such party’s expense, and provided further that the failure

of any Indemnified Party to give notice as provided herein shall not relieve

the Indemnifying Party of its obligations under this Section 1 unless the

failure to give such notice is materially prejudicial to an Indemnifying

Party’s ability to defend such action and provided further, that the

Indemnifying Party shall not assume the defense for matters as to which the

Indemnified Party in good faith concludes there is an actual or potential

conflict of interest or separate and different defenses but shall bear the

expense of such defense nevertheless. 

No Indemnifying Party, in the defense of any such claim or litigation,

shall, except with the consent of each Indemnified Party, consent to entry of

any judgment or enter into any settlement which does not include as an

unconditional term thereof the giving by the claimant or plaintiff to such Indemnified

Party of a release from all liability in respect to such claim or litigation.




(d)             If the indemnification provided for

paragraphs (a) through (c) of this Section 1.5 is unavailable or

insufficient to hold harmless an indemnified party under such paragraphs in

respect of any losses, claims, damages or liabilities or actions in respect

thereof referred to therein, then each indemnifying party shall in lieu of

indemnifying such indemnified party contribute to the amount paid or payable by

such indemnified party as a result of such losses, claims, damages, liabilities

or actions in such proportion as appropriate to reflect the relative fault of

the Company, on the one hand, and the Holders of such Registrable Securities,

on the other, in connection with the statements or omissions which resulted in

such losses, claims, damages, liabilities or actions as well as any other

relevant equitable considerations, including the failure to give any notice

under paragraph (c).  The relative

fault shall be determined by reference to, among other things, whether the

untrue or alleged untrue statement of a material fact relates to information

supplied by the Company, on the one hand, or the Holders, on the other, and to

the parties’ relative intent, knowledge, access to information and opportunity

to correct or prevent such statement or omission.  The Company and the Holders agree that it would not be just and

equitable if contributions pursuant to this paragraph were determined by pro

rata allocation or by any other method of allocation which did not take

account of the equitable considerations referred to above in this

paragraph.  The amount paid or payable

by an indemnified party as a result of the losses, claims, damages, liabilities

or action in respect thereof, referred to above in this paragraph, shall be

deemed to include any legal or other expenses reasonably incurred by such

indemnified party in connection with investigating or defending any such action

or claim.  Notwithstanding the

provisions of this paragraph, the Holders shall not be required to contribute

any amount in excess of the lesser of (i) the




 




5





























 




proportion that

the public offering price of shares sold by such Holders under such

registration statement bears to the total public offering price of all securities

sold thereunder, but not to exceed the proceeds received by such Holders for

the sale of Registrable Securities covered by such registration statement and

(ii) the amount of any damages which they would have otherwise been

required to pay by reason of such untrue or alleged untrue statement or

omission.  No person guilty of

fraudulent misrepresentations (within the meaning of Section 11(f) of the

Securities Act), shall be entitled to contribution from any person who is not

guilty of such fraudulent misrepresentation.




1.6            Information by Holders.  The Holders of Registrable Securities

included in any registration shall furnish to the Company such information

regarding the Holders, the Registrable Securities held by him and the

distribution proposed by the Holders as the Company may reasonably request in

writing and as shall be required in connection with any registration,

qualification or compliance referred to in this Section 1.




1.7            Assignment of Registration Rights.  The rights to cause the Company to register

Registrable Securities pursuant to this Agreement may be assigned by Holders to

a transferee or assignee of Registrable Securities which is a family member of

Holders or trust for the benefit of Holders; provided, however, (A) the

transferor shall, within ten (10) days after such transfer, furnish to the

Company written notice of the name and address of such transferee or assignee

and the securities with respect to which such registration rights are being

assigned and (B) such transferee shall agree to be subject to all

restrictions set forth in this Agreement.




1.8            SEC Reporting.  With a view to making available to the

Holders the benefits of certain rules and regulations of the SEC which may

permit the sale of the Registrable Securities to the public without

registration, the Company agrees to use its best efforts to:




(a)           Make and keep public information

available, as those terms are understood and defined in SEC Rule 144 or

any similar or analogous rule promulgated under the Securities Act;




(b)           File

with the SEC, in a timely manner, all reports and other documents required of

the Company under the Exchange Act;




(c)           So

long as the Holders own any Registrable securities, furnish to Holders

forthwith upon request:  a written

statement by the Company as to its compliance with the reporting requirements

of said Rule 144 of the Securities Act, and of the Exchange Act (at any

time after it has become subject to such reporting requirements); a copy of the

most recent annual or quarterly report of the Company; and such other reports

and documents as a Holder may reasonably request in availing itself of any rule

or regulation of the SEC allowing it to sell any such securities without

registration.




1.10          Effective Time.  This Agreement shall become effective upon

the closing of the asset sale as described in the Purchase Agreement by and

among the Company, the Buyer and the Seller.




 




6





























 




In the event the

Purchase Agreement is terminated prior to the consummation of the asset sale,

this Agreement shall terminate and be of no further force or effect concurrent

with such termination.




2.     Miscellaneous.




2.1            Governing Law.  This Agreement shall be governed in all

respects by the laws of the State of California as such laws are applied to

agreements between California residents entered into and to be performed

entirely within California.




2.2           Successors and Assigns.  Except as otherwise expressly provided

herein, the provisions hereof shall inure to the benefit of, and be binding

upon, the successors, assigns, heirs, executors and administrators of the

parties hereto.




2.3            Entire Agreement.  This Agreement and the Purchase Agreement

constitute the full and entire understanding and agreement between the parties

with regard to the subjects hereof and thereof.




2.4            Notices.  All notices and other communications

required or permitted hereunder shall be effective upon receipt and shall be in

writing and may be delivered in person, by telecopy, electronic mail, overnight

delivery service or U.S. mail, in which event it may be mailed by

first-class, certified or registered, postage prepaid, addressed (a) if to

Holders, at such address as Holders shall have furnished the Company in

writing, or, until any such Holders so furnishes an address to the Company,

then to and at the address of the last Holders of such securities who has so

furnished an address to the Company, or (b) if to the Company, at its

address set forth on the signature page of this Agreement, or at such other

address as the Company shall have furnished to Holders.  Notwithstanding the foregoing, all notices

and communications to addresses outside the United States shall be given by

telecopier and confirmed in writing sent by overnight or two-day courier

service.




2.5            Titles and Subtitles.  The titles of the paragraphs and

subparagraphs of this Agreement are for convenience of reference only and are

not to be considered in construing this Agreement.




2.6            Counterparts.  This Agreement may be executed in any number

of counterparts, each of which shall be an original, but all of which together

shall constitute one instrument.




2.7            Facsimile.  Facsimile signatures shall constitute

original signatures for purposes of this Agreement.




 




*  *  *




 




7





























 




The foregoing

Registration Rights Agreement is hereby executed as of the date first above

written.




 




	

  “COMPANY”


  
	

   


  
	

   


  
	

  INTERWAVE COMMUNICATIONS INTERNATIONAL, LTD.


  
	

  a

  corporation organized under the laws of Bermuda


  	 

	

   


  	 

	

  By:


  	

   


  	 

	

   


  	

   


  	 

	

  Name:


  	

   


  	 

	

   


  	

   


  	 

	

  Title:


  	

   


  	 

	

   


  	

   


  	 

	

   


  	 

	

   


  	 

	

  “HOLDERS”


  	 

	

   


  	 

	

   


  	 

	

  Name:


  	

   


  	 

	

   


  	

   


  	 

	

  By:


  	

   


  	 

	

   


  	

   


  	 

	

  Title:


  	

   


  	 






 




 




 




[Signature Page to

Registration Rights Agreement]




8





























 




EXHIBIT G




 




interWAVE Communications Inc.




a subsidiary of

interWAVE Communications International Ltd.




312 Constitution Drive,

Menlo Park, California 94025




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

solutions




 




 




 




EMPLOYMENT AND PROPRIETARY INFORMATION

AGREEMENT




 




 




As

a condition of my employment with interWAVE Communications Inc., its parent

corporation (interWAVE Communications International, Ltd.) subsidiaries,

affiliates, successors or assigns (together the “Company”), and in consideration

of my employment with the Company and my receipt of the compensation now and

hereafter paid to me by Company, I agree to the following:




 




1.     At-Will Employment.  I understand and acknowledge that my

employment with the Company is for an unspecified duration and constitutes

“at-will” employment.  I acknowledge

that this employment relationship may be terminated or I may be demoted,

promoted, transferred or have my compensation, benefits, duties or location of work

changed at any time, with or without good cause or for any or no cause, at the

option either of the Company or myself, with or without notice.  My status as an at will employee cannot be

changed at any time, with or without good cause or for any or no cause, at the

option either of the Company or myself, with or without notice.  My status as an at will employee cannot be

changed except through a written agreement signed by the designated officer of

the Company.




 




2.     Confidential Information.




 




(a)   Company Information.  I agree at all times during the term of my

employment and thereafter, to hold in strictest con­fidence, and not to use,

except for the benefit of the Company, or to disclose to any person, firm or

corporation without written authorization of the Board of Directors of the

Company, any Con­fidential Information of the Company.  I understand that “Confiden­tial Information” means

any Company proprietary information, technical data, trade secrets or know-how,

including, but not limited to, research, product plans, products, services, customer

lists and customers (including, but not limited to, customers of the Company on

whom I called or with whom I became acquainted during the term of my

employment), markets, software, developments, inventions, processes, formulas,

technology, designs, drawings, engineering, hardware configuration information,

marketing, finan­ces or other business information disclosed to me by the

Company either directly or indirectly in writing, orally or by drawings or

observation of parts or equipment.  I

further understand that Confidential Information does not include any of the

foregoing items which has become publicly known and made generally available

through no wrongful act of mine or of others who were under con­fidentiality

obligations as to the item or items involved.




 




1





























 




(b)   Former Employer Information.  I agree that I will not, during my

employment with the Company, improperly use or disclose any proprietary

information or trade secrets of any former or concurrent employer or other

person or entity and that I will not bring onto the premises of the Company any

unpublished document or proprietary information belonging to any such employer,

person or entity unless consented to in writing by such employer, person or

entity.




 




(c)   Third Party Information.  I recognize that the Company has received

and in the future will receive from third parties their confidential or

proprietary information subject to a duty on the Company’s part to maintain the

confidentiality of such information and to use it only for certain limited

purposes.  I agree to hold all such

confidential or proprietary information in the strictest confidence and not to

disclose it to any person, firm or corporation or to use it except as necessary

in carrying out my work for the Company consistent with the Company’s agreement

with such third party.




 




2





























 




3.     Inventions.




 




(a)   Inventions Retained and Licensed.  I have attached hereto, as Exhibit A,

a list describing all inventions, original works of authorship, developments,

improvements, and trade secrets which were made by me prior to my employment

with the Company (collectively referred to as “Prior Inventions”), which

belong to me, which relate to the Company’s proposed business, products or

research and development, and which are not assigned to the Company hereunder;

or, if no such list is attached, I represent that there are no such Prior

Inventions.  If in the course of my

employment with the Company, I incorporate into a Company product, process or

machine a Prior Invention owned by me or in which I have an inter­est, the

Company is hereby granted and shall have a nonexclusive, royalty-free,

irrevocable, perpetual, worldwide license to make, have made, modify, use and

sell such Prior Invention as part of or in connection with such product, process

or machine.




 




(b)   Assignment of Inventions. I agree that

I will promptly make full written disclosure to the Company, will hold in trust

for the sole right and benefit of the Company, and hereby assign to the

Company, or its designee, all my right, title, and interest in and to any and

all inventions, original works of authorship, developments, concepts,

improvements or trade secrets, whether or not patentable or registrable under

copyright or similar laws, which I may solely or jointly conceive or develop or

reduce to practice, or cause to be conceived or developed or reduced to

practice, during the period of time I am in the employ of the Company

(collectively referred to as “Inventions”), except as provided in

Section 3(f) below.  I further

acknowledge that all original works of authorship which are made by me (solely

or jointly with others) within the scope of and during the period of my

employment with the Company and which are protectible by copy­right are “works

made for hire,” as that term is defined in the United States Copyright Act.




 




 (c)  Inventions

Assigned to the United States.  I

agree to assign to the United States government all my right, title, and

interest in and to any and all Inventions whenever such full title is required

to be in the United States by a contract between the Company and the United

States or any of its agencies.




 




(d)   Maintenance of Records.  I agree to keep and main­tain adequate and

current written records of all Inventions made by me (solely or jointly with

others) during the term of my employment with the Company.  The records will be in the form of notes,

sketches, drawings, and any other format that may be specified by the

Company.  The records will be available

to and remain the sole property of the Company at all times.




 




(e)   Patent and copyright Registrations.  I agree to assist the Company, or its

designee, at the Company’s expense, in every proper way to secure the Company’s

rights in the Inventions and any copyrights, patents, mask work rights or other

intellectual property rights relating thereto in any and all countries, includ­ing

the disclosure to the Company of all pertinent information and data with

respect thereto, the execution of all applications, specifications, oaths,

assignments and all other instruments which the Company shall deem necessary in

order to apply for and obtain such rights and in order to assign and convey to

the Company, its successors, assigns and nominees the sole and




 




3





























 




exclusive

rights, title and interest in and to such Inventions, and any copyrights,

patents, mask work rights or other intellectual property rights relating

thereto.  I further agree that my

obligation to execute or cause to be executed, when it is in my power to do so,

any such instrument or papers shall continue after the termination of this

Agreement.  If the Company is unable

because of my mental or physical incapacity or for any other reason to secure

my signature to apply for or to pursue any application for any United States or

foreign patents or copyright registrations covering Inventions or original

works of authorship assigned to the Company as above, then I hereby irrevocably

designate and appoint the Company and its duly authorized officers and agents

as my agent and attorney in fact, to act for and in my behalf and stead to

execute and file any such applications and to do all other lawfully permitted

acts to further the prosecution and issuance of letters patent or copyright

registrations thereon with the same legal force and effect as if executed by

me.




 




 




(f)    Exception to Assignments.  I understand that the provisions of this

Agreement requiring assignment of Inventions to the Company do not apply to any

invention which qualifies fully under the provisions of California Labor Code

Section 2870 (attached hereto as Exhibit B).  I will advise the Company promptly in writing of any inventions

that I believe meet the criteria in California Labor Code Section 2870 and not

otherwise disclosed on Exhibit A.




 




4.     Conflicting Employment.  I agree that, during the term of my

employment with the Company, I will not engage in any other employment,

occupation, consulting or other business activity directly related to the

business in which the Company is now involved or becomes involved during the

term of my employment, nor will I engage in any other activities that conflict

with my obliga­tions to the Company.




 




5.     Returning Company Documents.  I agree that, at the time of leaving the

employ of the Company, I will deliver to the Company (and will not keep in my

possession, recreate or deliver to anyone else) any and all devices, records,

data, notes, reports, pro­posals, lists, correspondence, specifications,

drawings, blue­prints, sketches, materials, equipment, other documents or pro­perty,

or reproductions of any aforementioned items developed by me pursuant to my

employment with the Company or otherwise belonging to the Company, its

successors or assigns.  In the event of

the termination of my employment, I agree to sign and deliver the “Termination

Certification” attached hereto as Exhibit C.




 




6.     Notification to New Employer.  In the event that I leave the employ of the

Company, I hereby grant consent to notification by the Company to my new

employer about my rights and obligations under this Agreement.




 




7.     Solicitation of Employees.  I agree that for a period of twelve (12)

months immediately following the termination of my relationship with the

Company for any reason, whether with or without cause, I shall not either

directly or indirectly solicit, induce, recruit or encourage any of the

Company’s employees to leave their employment, or take away such employees, or

attempt to solicit, induce, recruit, encourage or take away employees of the

Company, either for myself or for any other person or entity.




 




4





























 




8.     Conflict of Interest Guidelines.  I agree to diligently adhere to the Conflict

of Interest Guidelines attached as Exhibit D hereto.




 




9.     Representations.  I agree to execute any proper oath or verify

any proper document required to carry out the terms of this Agreement.  I represent that my performance of all the

terms of this Agreement will not breach any agreement to keep in confidence

proprietary information acquired by me in confidence or in trust prior to my

employment by the Company.  I have not

entered into, and I agree I will not enter into, any oral or written agreement

in conflict herewith.




 




10.  Arbitration and Equitable Relief.




 




(a)   Arbitration.  Except as provided in Section 10(b) below, I agree that any

dispute or controversy arising out of or relating to my employment with the

Company, or this Agreement including Section 1 hereof, or any matter relating

to Section 1 of this Agreement or the amount of salary compensation, severance

or other similar amount allegedly owing to me shall be settled by arbitration to

be held in San Francisco, California before Judicial Arbitration and Mediation

Service (“JAMS”) before a retired judge under the JAMS Rules. The arbitrator

may grant injunctions or other relief in such dispute or controversy.  The decision of the arbitrator shall be in

writing, final, conclusive and binding on the parties to the arbitration.  Judgment may be entered on the arbitrator’s

decision in any court having jurisdiction. 

The Company and I shall each pay one-half of the costs and expenses of

such arbitration, and each of us shall separately pay our counsel fees and

expenses.




 




5





























 




(b)   Equitable Remedies.  I agree that it would be impossible or

inadequate to measure and calculate the Company’s damages from any breach set

forth in Sections 2, 3, 4, 7 and 8 herein. 

Accordingly, I agree that the Company will have available, in addition

to any right or remedy available, the right to obtain an injunction from a

court of competent jurisdiction restraining any breach or threatened breach by

me and to specific performance of such provision of this Agreement.  I hereby consent to the issuance of any such

injunction and to the ordering of specific performance.




 




11.  General Provisions




 




(a)   Governing Law: Consent to Personal

Jurisdiction. This Agreement will be governed by the laws of the State of

California. I hereby expressly consent to the personal juris­diction of the

state and federal courts located in California for any lawsuit filed there

against me by the Company arising from or relating to this Agreement.




 




(b)   Entire Agreement.  This Agreement sets forth the entire

agreement and understanding between the Company and me relating to the subject

matter herein and merges all prior discus­sions between us.  No modification of or amendment to this

Agree­ment, nor any waiver of any rights under this agreement, will be

effective unless in writing signed by the party to be charged.  Any subsequent change or changes in my

duties, salary or compensation will not affect the validity or scope of this

Agreement.




 




(c)   Severability.  If one or more of the provisions in this

Agreement are deemed void by law, then the remaining provi­sions will continue

in full force and effect.




 




(d)   Successors and Assigns.  This Agreement will be binding upon my

heirs, executors, administrators and other legal representatives and will be

for the benefit of the Company, its successors, and its assigns.




 




 




 




	

  Date:


  	

   


  	

   


  	

   


  	

   


  
	

   


  	

   


  	

   


  	

   


  	

   


  
	

   


  	

   


  	

   


  	

   


  
	

   


  	

   


  	

   


  	

   


  	

  Signature


  
	

   


  	

   


  	

   


  	

   


  	

   


  
	

   


  	

   


  	

   


  	

   


  
	

   


  	

   


  	

   


  	

   


  	

  Name

  of Employee


  
	

   


  	

   


  	

   


  	

   


  	

  (typed

  or printed)


  
	

   


  	

   


  	

   


  	

   


  	

   


  
	

   


  	

   


  	

   


  	

   


  
	

  Witness


  	

   


  	

   


  	

   


  





 




6





























 




EXHIBIT

A




 




 




LIST

OF PRIOR INVENTIONS




AND

ORIGINAL WORKS OF AUTHORSHIP




 




 




 




	

   


  	

   


  	

   


  	

   


  	

  Identifying

  Number


  
	

  Title


  	

   


  	

  Date


  	

   


  	

  or

  Brief Description


  





 




 




 




 




 




 




 




 




 




 




 




 




 




 




 




 




 




 




 




 




 




 




 




 




 




 




__ No inventions or improvements




 




__ Additional Sheets Attached




 




 




Signature

of Employee:  ________________________




 




 




Print

Name of Employee: ________________________




 




 




Date:

________________




 




 




7





























 




EXHIBIT

B




 




 




CALIFORNIA

LABOR CODE SECTION 2870




 




EMPLOYMENT

AGREEMENTS; ASSIGNMENT OF RIGHTS




 




 




(a)  Any provision in an employment agreement

which provides that an employee shall assign, or offer to assign, any of his or

her rights in an invention to his or her employer shall not apply to an

invention that the employee developed entirely on his or her own time without

using the employer’s equipment, supplies, facili­ties, or trade secret

information except for those inventions that either:




 




        (1)   Relate at the time

of conception or reduction to practice of the invention to the employer’s

business, or actual or demonstrably anticipated research or development of the

employer.




 




        (2)   Result from any

work performed by the employee for the employer.




 




(b)  To the extent a provision in an employment

agreement purports to require an employee to assign an invention otherwise

excluded from being required to be assigned under subdivision (a), the

provision is against the public policy of this state and is unenforceable.”




 




8





























 




EXHIBIT

C




 




 




interWAVE

Communications Inc.




TERMINATION

CERTIFICATION




 




 




 




This is to certify that I do not have in

my possession, nor have I failed to return, any devices, records, data, notes,

reports, proposals, lists, correspondence, specifications, draw­ings,

blueprints, sketches, materials, equipment, other documents or property, or

reproductions of any aforementioned items belonging to interWAVE Communications

International, its parent corporation (interWAVE Communications International

Ltd.) subsidiaries, affiliates, successors or assigns.




 




I further certify that I have complied

with all the terms of the Company’s Proprietary Information Agreement signed by

me, including the reporting of any inventions and original works of authorship

(as defined therein), conceived or made by me (solely or jointly with others)

covered by that agreement.




 




I further agree that, in compliance with

the Proprietary Information Agreement, I will preserve as confidential all

trade secrets, confidential knowledge, data or other proprietary information

relating to products, processes, know-how, designs, formulas, developmental or

experimental work, computer programs, data bases, other original works of

authorship, customer lists, business plans, financial information or other

subject matter pertaining to any business of the Company or any of its

employees, clients, consultants or licensees.




 




I further agree that for twelve (12)

months from this date, I will not directly or indirectly, for myself or for any

other person, firm, or corporation or other legal entity, solicit any employee

or consultant/contractor of the Company to leave their present employment for

the other.




 




 




 




	

  Date:


  	

   


  	

   


  	

   


  	

   


  	

   


  
	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  
	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  
	

   


  	

   


  	

   


  	

  (Employee’s

  Signature)


  
	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  
	

   


  	

   


  	

   


  	

   


  	

   


  
	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

  (Type/Print

  Employee’s Name)


  





 




9





























 




EXHIBIT D




 




                                                            interWAVE Communications, Inc.




 




                                                            CONFLICT OF INTEREST GUIDELINES




 




It is the policy of

interWAVE Communications, Inc., its parent corporation (interWAVE

Communications International, Ltd.) and subsidiaries, affiliates, successors or

assigns (together the “Company”) to conduct its affairs in strict compliance

with the letter and spirit of the law and to adhere to the highest principles

of business ethics.  Accordingly, all

officers, employees and independent contractors must avoid activities which are

in conflict, or give the appearance of being in conflict, with these principles

and with the interests of the Company. 

The following are potentially compromising situations which must be

avoided.  Any exceptions must be

reported to the Chief Executive Officer and written approval for continuation

must be obtained.




 




1.   Revealing confidential information to

outsiders or misusing confidential information.  Unauthorized divulging of information is a violation of this

policy whether or not for personal gain and whether or not harm to the Company

is intended. (The Employment, Confidential Information and Invention Assignment

Agreement elaborates on this principle and is a binding agreement.)




 




2.   Accepting or offering substantial gifts,

excessive entertainment, favors or payments which may be deemed to constitute

undue influence or otherwise be improper or embarrassing to the Company.




 




3.     Participating in civic or professional

organizations that might involve divulging confidential information of the

Company.




 




4.   Initiating or approving personnel actions

affecting reward or punishment of employees or applicants where there is a

family relationship or is or appears to be a personal or social involvement.




 




5.     Initiating or approving any form of

personal or social harassment of employees.




 




6.   Investing or holding outside directorships

in suppliers, customers or competing companies, including financial speculation,

where such investment or directorship might influence in any manner a decision

or course of action of the Company.




 




7.     Borrowing from or lending to employees,

customers or suppliers.




 




8.     Acquiring real estate of interest to the

Company.




 




9.     Improperly using or disclosing to the

Company any pro­prietary information or trade secrets of any former or

concurrent employer or other person or entity with whom obligations of con­fidentiality

exist.




 




10





























 




10.   Unlawfully discussing prices, costs,

customers, sales or markets with competing companies or their employees.




 




11.   Making any unlawful agreements with

distributors with respect to prices.




 




12.   Improperly using or authorizing the use of

any inventions which are the subject of patent claims of any other person or

entity.




 




13.   Engaging in any conduct which is not in the

best interest of the Company.




 




Each officer, employee

and independent contractor must take every necessary action to ensure

compliance with these guidelines and to bring problem areas to the attention of

higher management for review. 

Violations of this conflict of interest policy may result in discharge

without warning.




 




11