##### 



EXHIBIT 2.1    AGREEMENT AND PLAN OF MERGER among: iPass Inc.,
a Delaware corporation; Montage Acquisition Corp.,
a Delaware corporation; Mobile Automation, Inc.,
a Delaware corporation; and David Strohm,
as Stockholders Agent.




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Table Of Contents PAGESECTION 1.
    
    DESCRIPTION OF TRANSACTION
    
    
    11.1
    
    Merger of Merger Sub with and into the Company
    
    
    11.2
    
    Effect of the Merger
    
    
    11.3
    
    Closing; Effective Time
    
    
    11.4
    
    Certificate of Incorporation and Bylaws; Directors and Officers
    
    
    21.5
    
    Conversion of Shares
    
    
    21.6
    
    Stock Options; Warrants
    
    
    31.7
    
    Closing of the Companys Transfer Books
    
    
    41.8
    
    Balance Sheet Adjustment
    
    
    41.9
    
    Dissenting Shares
    
    
    51.10
    
    Further Action
    
    
    5SECTION 2.
    
    REPRESENTATIONS AND WARRANTIES OF THE COMPANY
    
    
    52.1
    
    Due Organization; No Subsidiaries; Etc
    
    
    62.2
    
    Certificate of Incorporation and Bylaws; Records
    
    
    62.3
    
    Capitalization, Etc
    
    
    72.4
    
    Financial Statements; Financial Controls
    
    
    82.5
    
    Absence of Changes
    
    
    92.6
    
    Title to Assets; Equipment
    
    
    112.7
    
    Bank Accounts; Receivables
    
    
    122.8
    
    Title to Real Property
    
    
    122.9
    
    Intellectual Property
    
    
    122.10
    
    Contracts
    
    
    182.11
    
    Liabilities
    
    
    202.12
    
    Compliance with Legal Requirements
    
    
    202.13
    
    Governmental Authorizations
    
    
    202.14
    
    Tax Matters
    
    
    212.15
    
    Employee and Labor Matters; Benefit Plans
    
    
    222.16
    
    Insurance
    
    
    242.17
    
    Related Party Transactions
    
    
    242.18
    
    Legal Proceedings; Orders
    
    
    25
 i.




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Table Of Contents(continued) PAGE2.19
    
    Authority; Binding Nature of Agreement
    
    
    252.20
    
    Non-Contravention; Consents
    
    
    252.21
    
    Full Disclosure
    
    
    262.22
    
    Vote Required
    
    
    262.23
    
    No Brokers
    
    
    272.24
    
    Certain Business Practices
    
    
    272.25
    
    No Discussions
    
    
    27SECTION 3.
    
    REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
    
    
    273.1
    
    Due Organization; Corporate Power
    
    
    273.2
    
    Authority; Binding Nature of Agreement
    
    
    273.3
    
    No Brokers
    
    
    27SECTION 4.
    
    CERTAIN COVENANTS OF THE COMPANY
    
    
    274.1
    
    Access and Investigation
    
    
    274.2
    
    Operation of the Companys Business
    
    
    284.3
    
    Notification; Updates to Disclosure Schedule
    
    
    294.4
    
    No Negotiation
    
    
    304.5
    
    Conversion of Preferred Stock
    
    
    30SECTION 5.
    
    ADDITIONAL COVENANTS OF THE PARTIES
    
    
    305.1
    
    Filings and Consents
    
    
    305.2
    
    Company Stockholders Meeting; Written Consents; Delivery of Certificates
    
    
    315.3
    
    Public Announcements
    
    
    315.4
    
    Reasonable Efforts
    
    
    325.5
    
    Termination of Agreements
    
    
    325.6
    
    FIRPTA Matters
    
    
    325.7
    
    Termination of Employment; Termination of Employee Plans
    
    
    325.8
    
    Continuing Indemnification of Directors & Officers
    
    
    32SECTION 6.
    
    CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT AND MERGER SUB
    
    
    336.1
    
    Accuracy of Representations
    
    
    336.2
    
    Performance of Covenants
    
    
    33
 ii.




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Table Of Contents(continued) PAGE6.3
    
    Stockholder Approval
    
    
    336.4
    
    Board Approval
    
    
    336.5
    
    Consents
    
    
    336.6
    
    Employees
    
    
    336.7
    
    Assignment of Intellectual Property Rights
    
    
    336.8
    
    Agreements and Documents
    
    
    346.9
    
    Absence of Material Adverse Effect
    
    
    346.10
    
    FIRPTA Compliance
    
    
    346.11
    
    No Restraints
    
    
    356.12
    
    No Legal Proceedings
    
    
    356.13
    
    Termination of Employee Plans
    
    
    356.14
    
    Termination of Agreements
    
    
    356.15
    
    Company Warrants
    
    
    356.16
    
    Dissenters Rights
    
    
    356.17
    
    Conversion of Preferred Stock
    
    
    356.18
    
    Delivery of Supplement to Opinion Letters
    
    
    35SECTION 7.
    
    CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY
    
    
    367.1
    
    Accuracy of Representations
    
    
    367.2
    
    Performance of Covenants
    
    
    367.3
    
    Documents
    
    
    367.4
    
    No Restraints
    
    
    36SECTION 8.
    
    TERMINATION
    
    
    368.1
    
    Termination Events
    
    
    368.2
    
    Termination Procedures
    
    
    378.3
    
    Effect of Termination
    
    
    37SECTION 9.
    
    INDEMNIFICATION, ETC
    
    
    379.1
    
    Survival of Representations, Etc
    
    
    379.2
    
    Indemnification by Company
    
    
    389.3
    
    Defense of Third Party Claims
    
    
    399.4
    
    Exercise of Remedies by Indemnitees Other Than Parent
    
    
    40
 iii.




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Table Of Contents(continued) PAGESECTION 10.
    
    MISCELLANEOUS PROVISIONS
    
    
    4010.1
    
    Stockholders Agent
    
    
    4010.2
    
    Further Assurances
    
    
    4010.3
    
    Fees and Expenses
    
    
    4010.4
    
    Attorneys Fees
    
    
    4110.5
    
    Notices
    
    
    4110.6
    
    Time of the Essence
    
    
    4210.7
    
    Headings
    
    
    4210.8
    
    Counterparts
    
    
    4210.9
    
    Governing Law; Venue
    
    
    4210.10
    
    Successors and Assigns
    
    
    4210.11
    
    Remedies Cumulative; Specific Performance
    
    
    4210.12
    
    Waiver
    
    
    4310.13
    
    Waiver of Jury Trial
    
    
    4310.14
    
    Amendments
    
    
    4310.15
    
    Severability
    
    
    4310.16
    
    Parties in Interest
    
    
    4310.17
    
    Entire Agreement
    
    
    4310.18
    
    Construction
    
    
    44
 iv.




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EXHIBITS Exhibit A
    
    -
    
    Certain DefinitionsExhibit B
    
    -
    
    Form of Proprietary Information and Inventions AgreementExhibit C-1
    
    -
    
    Form of Offer LetterExhibit C-2
    
    -
    
    Continuing Employees from the CompanyExhibit D
    
    -
    
    Escrow AgreementExhibit E-1
    
    -
    
    Form of ReleaseExhibit E-2
    
    -
    
    List of Individuals Signing ReleaseExhibit F
    
    -
    
    Form of Legal Opinion of Stradling Yocca Carlson & RauthSchedule I
    
    -
    
    Specified Payment Obligations




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AGREEMENT AND PLAN OF MERGER This Agreement and Plan of Merger(this Agreement) is made and entered into as
of October 26, 2004, by and among: iPass Inc., a Delaware corporation (Parent);
Montage Acquisition Corp., a Delaware corporation and a wholly owned subsidiary
of Parent (Merger Sub); Mobile Automation, Inc., a Delaware corporation (the Company);
and, for the limited purpose of agreeing to and becoming bound by the provisions of Section 10.1,
David Strohm, as Stockholders Agent. Certain other capitalized terms used in this Agreement are
defined in Exhibit A. Recitals A.Parent, Merger Sub and the Company intend to effect a merger of Merger Sub with and into
the Company in accordance with this Agreement and the Delaware General Corporation Law (the DGCL)
(the Merger). Upon consummation of the Merger, Merger Sub will cease to exist, and the Company
will become a wholly owned subsidiary of Parent. B.This Agreement has been approved by the respective boards of directors of Parent, Merger
Sub and the Company. C.In order to induce Parent to enter into this Agreement and to consummate the transactions
contemplated by this Agreement, contemporaneously with the execution and delivery of this
Agreement, the individuals listed on Exhibit C-2are each executing a proprietary information and
inventions agreements of even date substantially in the form of Exhibit B. Agreement The parties to this Agreement agree as follows: SECTION 1.Description of Transaction 1.1 Merger of Merger Sub with and into the Company.Upon the terms and subject to the
conditions set forth in this Agreement, at the Effective Time (as defined in Section 1.3), Merger
Sub shall be merged with and into the Company, and the separate existence of Merger Sub shall
cease. The Company will continue as the surviving corporation in the Merger (the Surviving
Corporation). 1.2 Effect of the Merger.The Merger shall have the effects set forth in this Agreement and
in the applicable provisions of the DGCL. 1.3 Closing; Effective Time.The consummation of the transactions contemplated by this
Agreement (the Closing) shall take place at the offices of Cooley Godward llp, 3175
Hanover Street, Palo Alto, California 94306 at 10:00 a.m. on a date to be mutually agreed to
by Parent and the Company after the satisfaction (or, to the extent permitted, waiver) of the
conditions set forth in Sections 6 and 7. The date on which the Closing actually takes place is 1.




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referred to in this Agreement as the Closing Date. Contemporaneously with or as promptly as
practicable after the Closing, a properly executed certificate of merger conforming to the
requirements of the DGCL shall be filed with the Secretary of State of the State of Delaware. The
Merger shall become effective at the time such certificate of merger is filed with the Secretary of
State of the State of Delaware (the Effective Time). 1.4 Certificate of Incorporation and Bylaws; Directors and Officers.Unless otherwise
determined by Parent and the Company prior to the Effective Time: (a)the certificate of incorporation of the Surviving Corporation shall be the Certificate of
Incorporation of Merger Sub as in effect immediately prior to the Effective Time; (b)the bylaws of the Surviving Corporation shall be the bylaws of Merger Sub as in effect
immediately prior to the Effective Time; and (c)the directors and officers of the Surviving Corporation immediately after the Effective
Time shall be the respective individuals who are directors and officers of Merger Sub immediately
prior to the Effective Time. 1.5 Conversion of Shares. (a)Immediately prior to the Effective Time, each share of Company Preferred Stock shall be
converted into one (1) share of Company Common Stock. (b)The aggregate consideration to be paid by Parent and Merger Sub in the Merger to holders
of Company Common Stock, the Converted Option Holders (as defined in Section 1.6 below) and the
Converted Warrant Holders (as defined in Section 1.6 below) shall be U.S. $20,000,000, less the
amount of (1) specified payment obligations of the Company as set forth on Schedule Ihereto (as
may be updated prior to the Closing) that would be assumed by Parent (the Specified Payment
Obligations) and (2) fees, costs and expenses for which the Company Stockholders, the Converted
Option Holders and the Converted Warrant Holders are responsible pursuant to Section 10.3 (the
Merger Consideration). (c)Subject to the other subsections of this Section 1.5 and Sections 1.6, 1.8, 1.9 and 1.10,
at the Effective Time, by virtue of the Merger and without any further action on the part of
Parent, Merger Sub, the Company or any stockholder, Converted Option Holder or Converted Warrant
Holder of the Company: (i)each share of the common stock (par value $0.001 per share) of Merger Sub then outstanding
shall remain outstanding and each certificate therefor shall be converted into one share of common
stock of the Surviving Corporation; (ii)each share of Company Common Stock held in the Companys treasury as of the Effective
Time shall be cancelled and retired and all rights in respect thereof
shall cease to exist, without any conversion thereof or payment of any consideration therefor; and 2.




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(iii)each share of Company Common Stock outstanding immediately prior to the Effective Time
shall be converted into the right to receive from Parent, upon surrender of the certificate
representing such share of Company Capital Stock, an amount of cash, without interest, equal to (i)
the Merger Consideration divided by (ii) the sum of (a) the number of shares of Common Stock
outstanding immediately prior to the Effective Time and (b) the number of Net Option Shares (as set
forth in the definition of Option Consideration in Exhibit A) and Net Warrant Shares (as set forth
in the definition of Warrant Consideration in Exhibit A) outstanding immediately prior to the
Effective Time. (d)Notwithstanding anything to the contrary contained in Section 1.5 or elsewhere in this
Agreement, at or promptly after the Closing, $4,000,000 of the aggregate consideration otherwise
payable to the holders of Company Common Stock, Converted Option Holders and Converted Warrant
Holders pursuant to Section 1.5 (the Escrow Amount) shall be withheld from such stockholders
Converted Option Holders and Converted Warrant Holders and deposited with the Escrow Agent in an
escrow account (the Escrow Account), to be held and distributed in accordance with the terms of
that certain Escrow Agreement, substantially in the form of Exhibit D(the Escrow Agreement). (e)If, between the date of this Agreement and the Effective Time, the outstanding shares of
Company Capital Stock are changed into a different number or class of shares by reason of any stock
split, division or subdivision of shares, stock dividend, reverse stock split, consolidation of
shares, reclassification, recapitalization or other similar transaction, then the Merger
Consideration shall be appropriately adjusted. 1.6 Stock Options; Warrants. (a)The Company shall take such action as is necessary or required, including action necessary
or required under the Companys Amended and Restated Certificate of Incorporation and any Company
Stock Plan and each outstanding option grant thereunder (Company Option), to accelerate the
vesting of such Company Options effective immediately prior to the Effective Time. Prior to the
Effective Time, the Company may enter into an agreement, in a form reasonably satisfactory to
Parent (each a Stock Option Cancellation Agreement), with each holder (each a Converted Option
Holder) of an outstanding Company Option providing for a termination of such Company Option
effective as of the Effective Time, in exchange for the payment (an subject to the provisions of
Section 1.8) of the Option Consideration; provided, that the Option Consideration shall be reduced
by any applicable federal and state withholding taxes. Each outstanding Company Option that
remains unexercised or outstanding immediately prior to the Effective Time shall be terminated in
accordance with the terms of such Company Option and not be assumed by Parent, and all rights with
respect to Company Capital Stock under outstanding Company Option shall thereupon be terminated. (b)Prior to the Effective Time, the Company may enter into an agreement, in a form reasonably
satisfactory to Parent, with each holder (each a Converted Warrant Holder) of an outstanding
warrant to purchase or acquire Company Capital Stock (Company
Warrant) providing for a termination of such Company Warrant effective as of the Effective
Time, in exchange for the payment (subject to the provisions of Section 1.8) of the Warrant 3.




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Consideration; provided, that the Warrant Consideration shall be reduced by any applicable federal
and state withholding taxes. Each Company Warrant that remains unexercised or outstanding
immediately prior to the Effective Time shall be terminated in accordance with the terms of such
Company Warrant and not be assumed by Parent, and all rights with respect to Company Capital Stock
under outstanding Company Warrants shall thereupon be terminated. (c)At the Effective Time, the Company shall take all action that may be necessary (under the
Companys Stock Plan and related stock option agreements, the Company Warrants, applicable law or
regulation and otherwise) to effectuate the provisions of this Section 1.6. 1.7 Closing of the Companys Transfer Books.At the Effective Time, holders of certificates
representing shares of the Companys capital stock that were outstanding immediately prior to the
Effective Time shall cease to have any rights as stockholders of the Company, and the stock
transfer books of the Company shall be closed with respect to all shares of such capital stock
outstanding immediately prior to the Effective Time. No further transfer of any such shares of the
Companys capital stock shall be made on such stock transfer books after the Effective Time. If,
after the Effective Time, a valid certificate previously representing any of such shares of the
Companys capital stock (a Company Stock Certificate) is presented to the Surviving Corporation
or Parent, such Company Stock Certificate shall be cancelled. 1.8 Balance Sheet Adjustment. (a)Notwithstanding anything to the contrary contained elsewhere in this Agreement, in
addition to the Escrow Amount withheld pursuant to Section 1.5(d), a portion of the aggregate
consideration otherwise payable to the Company Common Stockholders, Converted Option Holders and
Converted Warrant Holders pursuant to Section 1.5(a)(ii) of this Agreement equal to $300,000 (the
Adjustment Amount) shall be withheld. In the event that at any time within thirty (30) days
following the Closing Date (the Determination Deadline) it is determined by Parent in good faith
and based on documentation shared with the Stockholders Agent that (i) the outstanding debt of the
Company as of the Closing is greater than the amounts listed on Schedule Ihereto; or (ii) the
amount of Current Net Assets of the Company as of the Closing (excluding any fees, costs and
expenses of the Company described in Section 10.3 of this Agreement) are less than the Current Net
Assets of the Company set forth in the Unaudited Interim Balance Sheet (as defined in Section
2.4(a)(ii)) (the aggregate amount of any difference under clause (i) and (ii) being the
Shortfall), then Parent shall have the right to recover from the Escrow Amount the extent of the
Shortfall. (b)Within five (5) business days following the Determination Deadline, Parent shall
distribute on a pro rata basis to the Company Common Stockholders, Converted Option Holders and
Converted Warrant Holders the Adjustment Amount, less any Shortfall. With respect to distribution
of the Adjustment Amount, if any, to the Company Common Stockholders, Converted Option Holders and
Converted Warrant Holders, Parents sole obligation is to deliver the balance of the Adjustment
Amount, if any. The Company Common
Stockholders, Converted Option Holders or Converted Warrant Holders will not be entitled to
any interest on the Adjustment Amount. The parties hereto agree that the Adjustment Amount is 4.




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intended to secure Parent partially against any Shortfall and is not the sole or exclusive remedy
for Parent or any other Indemnitee for recovery of any payments or losses arising from any
inaccuracy or breach of representations, warranties and covenants, and Parent shall be entitled to
recover any such losses or payments exceeding the Adjustment Amount through the Escrow Amount or
other available remedy. 1.9 Dissenting Shares. (a)Notwithstanding anything to the contrary contained in this Agreement, to the extent that
the provisions of Section 262 of the DGCL or Chapter 13 of the CGCL are or prior to the Effective
Date may become applicable to the Merger, any shares of Company Common Stock that, as of the
Effective Time, may carry appraisal rights under Section 262 of the DGCL or Chapter 13 of the CGCL
shall not be converted into or represent the right to receive the Merger Consideration, and the
holder or holders of such shares shall be entitled only to such rights as may be granted to such
holder or holders in Section 262 of the DGCL or Chapter 13 of the CGCL; provided, however, that if
shares carrying appraisal rights shall not be perfected, or if any such shares shall lose their
status as shares carrying appraisal rights, then, as of the later of the Effective Time or the time
of the failure to perfect such status or the loss of such status, such shares shall automatically
be converted into and shall represent only the right to receive (upon the surrender of the
certificate or certificates representing such shares) the Merger Consideration in accordance with
Section 1.5. (b)The Company shall give Parent (i) prompt notice of any written demand received by the
Company prior to the Effective Time to require the Company to purchase shares of Company Common
Stock pursuant to Section 262 of the DGCL or Chapter 13 of the CGCL and of any other demand, notice
or instrument delivered to the Company prior to the Effective Time pursuant to the DGCL or CGCL,
and (ii) the opportunity to participate in all negotiations and proceedings with respect to any
such demand, notice or instrument. The Company shall not make any payment or settlement offer prior
to the Effective Time with respect to any such demand unless Parent shall have consented in writing
to such payment or settlement offer. 1.10 Further Action.If, at any time after the Effective Time, any further action is
determined by Parent to be necessary or desirable to carry out the purposes of this Agreement or to
vest the Surviving Corporation or Parent with full right, title and possession of and to all rights
and property of Merger Sub and the Company, the officers and directors of the Surviving Corporation
and Parent shall be fully authorized (in the name of Merger Sub, in the name of the Company and
otherwise) to take such action. SECTION 2.Representations and Warranties of the Company The Company represents and warrants, to and for the benefit of the Indemnitees, that each
statement set forth in each of the sections and subsections of this Section 2 (each such statement
being a representation and warranty of the Company) is accurate and complete, except as set forth
in the Disclosure Schedule delivered separately to Parent by the Company on the date of this
Agreement corresponding to the particular section or subsection of this Section 2
in which such representation and warranty appears (it being understood, however, that a
disclosure in a particular Disclosure Schedule will also be deemed to qualify a representation and 5.




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warranty that does not appear in the corresponding section or subsection of this Section 2 if it is
readily apparent on the face of such disclosure that such disclosure qualifies such representation
and warranty). 2.1 Due Organization; No Subsidiaries; Etc. (a)The Company is a corporation duly organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation and has all necessary power and authority: (i)
to conduct its business in the manner in which its business is currently being conducted; (ii) to
own and use its assets in the manner in which its assets are currently owned and used; and (iii) to
perform its obligations under all Company Contracts. (b)Except as set forth in Part 2.1 of the Disclosure Schedule, the Company has not conducted
any business under or otherwise used, for any purpose or in any jurisdiction, any fictitious name,
assumed name, trade name or other name, other than the name Mobile Automation, Inc. (c)The Company is not and has not been required to be qualified, authorized, registered or
licensed to do business as a foreign corporation in any jurisdiction, except where the failure to
be so qualified, authorized, registered or licensed has not had and would not reasonably be
expected to have a Material Adverse Effect on the Company. (d)Part 2.1 of the Disclosure Schedule accurately sets forth (i) the names of the members of
the board of directors of the Company, (ii) the names of the members of each committee of the board
of directors of the Company, and (iii) the names and titles of the officers of the Company. (e)The Company does not directly or indirectly own any controlling interest in any Entity
and, except for the equity interests identified in Part 2.1 of the Disclosure Schedule, the Company
has never owned, beneficially or otherwise, any shares or other securities of, or any direct or
indirect equity interest in, any Entity. The Company has neither agreed to nor is obligated to
make any future investment in or capital contribution to any Entity. The Company has neither
guaranteed nor is responsible or liable for any obligation of any of the Entities in which it owns
or has owned any equity interest. 2.2 Certificate of Incorporation and Bylaws; Records.The Company has delivered to Parent
accurate and complete copies of: (a) the Companys certificate of incorporation and bylaws,
including all amendments thereto; (b) the stock records of the Company; and (c) except as set forth
in Part 2.2 of the Disclosure Schedule, the minutes and other records of the meetings and other
proceedings (including any actions taken by written consent or otherwise without a meeting) of the
stockholders of the Company, the board of directors of the Company and all committees of the board
of directors of the Company. There have been no formal meetings or other proceedings of the
stockholders of the Company, the board of directors of the Company or any committee of the board of
directors of the Company that are not reflected in all material respects in such minutes or other
records. There has not been
any violation of any of the provisions of the Companys certificate of incorporation or
bylaws, and the Company has not taken any action that is inconsistent in any material respect with
any 6.




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resolution adopted by each the Companys stockholders, the board of directors of the Company or
any committee of the Companys board of directors. The books of account, stock records, minute
books and other records of the Company are accurate, up-to-date and complete in all material
respects, and have been maintained in accordance with prudent business practices. 2.3 Capitalization, Etc. (a)The authorized capital stock of the Company consists of: (i) 50,000,000 shares of Company
Common Stock, of which 7,009,003 shares have been issued and are outstanding as of the date of this
Agreement; and (ii) 30,000,000 shares of Preferred Stock (A) 1,000,000 of which have been
designated Series A Preferred Stock, of which 735,294 shares have been issued and are outstanding
as of the date of this Agreement and (B) 16,000,000 of which have been designated Series B
Preferred Stock, of which 15,941,179 shares have been issued and are outstanding as of the date of
this Agreement. Each outstanding share of Series A Preferred Stock is convertible into one share
of Company Common Stock. Each outstanding share of Series B Preferred Stock is convertible into
one share of Company Common Stock. All of the outstanding shares of Company Capital Stock have
been duly authorized and validly issued, and are fully paid and non-assessable. Part 2.3(a) of the
Disclosure Schedule (i) provides an accurate and complete description of the terms of each
repurchase option which is held by the Company and to which any of such shares is subject and (ii)
sets forth all issued and outstanding shares of the Company Capital Stock as of the date of this
Agreement. (b)The Company has reserved 7,319,635 shares of Company Common Stock for issuance under its
Stock Plan, of which options to purchase 6,670,353 shares are outstanding as of the date of this
Agreement. The Company has reserved an additional (i) 147,060 shares of Company Common Stock for
issuance upon exercise of Common Stock Company Warrants; and (ii) 683,125 shares of Series B
Preferred Stock for issuance upon exercise of Series B Company Warrants. The Company has delivered
to Parent accurate and complete copies of the Company Warrants. The exercise price of the Common
Stock Company Warrants is $0.34 per share. The exercise price of the Series B Company Warrants is
between $0.05 and $0.20 per share. Part 2.3 of the Disclosure Schedule accurately sets forth, with
respect to each Company Option and Company Warrant that is outstanding as of the date of this
Agreement: (i) the name of the holder of such Company Option or Company Warrant; (ii) the total
number of shares of Company Common Stock or Series B Preferred Stock, as applicable, that are
subject to such Company Option or Company Warrant and the number of shares of Company Common Stock
or Series B Preferred Stock with respect to which such Company Option or Company Warrant is
immediately exercisable; (iii) the date on which such Company Option or Company Warrant was granted
and the term of such Company Option or Company Warrant; (iv) the vesting schedule for such Company
Option or Company Warrant; (v) the exercise price per share of Company Common Stock or Series B
Preferred Stock purchasable under such Company Option or Company Warrant; and (vi) whether such
Company Option has been designated an incentive stock option as defined in Section 422 of the
Code. Except for the Company Options and Company Warrants and except as set forth in Part 2.3(b)
of the Disclosure Schedule, there is no: (A) outstanding subscription, option, call, warrant or
right (whether or not currently exercisable)
to acquire any shares of the capital stock or other securities of the Company; (B) outstanding
security, instrument or obligation that is or may become convertible into or exchangeable for any 7.




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shares of the capital stock or other securities of the Company; (C) Contract under which the
Company is or may become obligated to sell or otherwise issue any shares of its capital stock or
any other securities; or (D) to the best Knowledge of the Company, condition or circumstance that
may give rise to or provide a basis for the assertion of a claim by any Person to the effect that
such Person is entitled to acquire or receive any shares of capital stock or other securities of
the Company. (c)All outstanding shares of Company Capital Stock and all outstanding Company Options and
Company Warrants, have been issued and granted in compliance with (i) all applicable securities
laws and other applicable Legal Requirements, and (ii) all requirements set forth in applicable
Contracts. (d)Except as set forth in Part 2.3(d) of the Disclosure Schedule, the Company has never
repurchased, redeemed or otherwise reacquired any shares of capital stock or other securities of
the Company. All securities so reacquired by the Company were reacquired in compliance with (i)
the applicable provisions of the DGCL and all other applicable Legal Requirements, and (ii) all
requirements set forth in applicable restricted stock purchase agreements and other applicable
Contracts. (e)Immediately prior to the Effective Time, and following: (i) the filing of a Certificate of
Amendment of Amended and Restated Certificate of Incorporation with the Secretary of State of
Delaware to increase the authorized number of shares of Series B Preferred Stock from 16,000,000 to
29,000,000, (ii) conversion of all principal and accrued interest on certain indebtedness of
Greylock IX, Limited Partnership into shares of Series B Preferred Stock, and (iii) conversion of
all issued and outstanding shares of Preferred Stock into shares of Company Common Stock, the
authorized capital stock of the Company shall consist of: (A) 50,000,000 shares of Company Common
Stock, of which 34,775,725 shares shall be issued and are outstanding; and (B) 30,000,000 shares of
Preferred Stock (x) 1,000,000 of which have been designated Series A Preferred Stock, none of
which shall be issued and outstanding and (y) 29,000,000 of which have been designated Series B
Preferred Stock, none of which shall be issued and outstanding. 2.4 Financial Statements; Financial Controls. (a)The Company has delivered to Parent the following financial statements and notes
(collectively, the Company Financial Statements): (i)The unaudited balance sheets of the Company as of December 31, 2003, and the
related unaudited income statements, statements of stockholders equity and statements of
cash flows of the Company for the year then-ended; and (ii)the unaudited balance sheet and unaudited statements of cashflows of the Company,
as of August 31, 2004 (the Unaudited Interim Balance Sheet), and the related unaudited
income statement of the Company for the eight months then ended. (b)The Company Financial Statements are accurate and complete in all material respects and
present fairly the financial position of the Company as of the respective 8.




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dates thereof and the
results of operations and (in the case of the financial statements referred to in Section
2.4(a)(i)) cash flows of the Company for the periods covered thereby. The Company Financial
Statements have been prepared in accordance with United States generally accepted accounting
principles applied on a consistent basis throughout the periods covered (except that the financial
statements referred to in Section 2.4(a)(ii) do not contain footnotes and are subject to normal and
recurring year-end audit adjustments, which will not, individually or in the aggregate, be material
in magnitude). (c)Part 2.4(c) of the Disclosure Schedule provides an accurate and complete breakdown and
aging of all accounts receivable, notes receivable and other receivables of the Company. Except as
set forth on Part 2.4(c) of the Disclosure Schedule, all existing accounts receivable of the
Company (i) represent valid obligations of customers of the Company arising from bona fide
transactions entered into in the ordinary course of business, (ii) are current, and (iii) to the
Knowledge of the Company, will be collected in full, without any counterclaim or set off, when due,
except to the extent such accounts receivable become uncollectible as a result of an action taken
by Parent following the Effective Time. (d)Part 2.4(d) of the Disclosure Schedule (i) identifies the revenues received from each
customer of the Company and from each other Person from whom the Company generated revenues in the
fiscal year ended December 31, 2003, and (ii) identifies the revenues received from each customer
of the Company and from each other Person from whom the Company generated revenues in the first
eight (8) months of 2004. The Company has not received any notice or other communication
indicating that any customer or other Person identified on Part 2.4(d) of the Disclosure Schedule
intends or expects to cease dealing with the Company or to effect a material reduction in the
volume of business transacted by such Person with the Company below historical levels. (e)Part 2.4(e) of the Disclosure Schedule lists, and the Company has delivered to Parent
accurate and complete copies of all documentation creating or governing, any securitization
transaction and off-balance sheet arrangements (as defined in Item 303(c) of Regulation S-K of
the United States Securities and Exchange Commission) effected or maintained in effect by the
Company since its inception. (f)The Company maintains books and records reflecting its assets and liabilities that are
accurate and complete in all material respects and maintains adequate internal accounting controls
so that: (i) transactions are executed with managements authorization; (ii) transactions are
recorded as necessary to permit preparation of the financial statements of the Company and to
maintain accountability for the assets of the Company; (iii) access to the assets of the Company is
permitted only in accordance with managements authorization; (iv) the reporting of the assets of
the Company is compared with existing assets at regular intervals; and (v) accounts, notes and
other receivables are recorded accurately. (g)The Company has not entered into any oral Contract that may be materially inconsistent
with the terms of any of its written sales Contracts or related Contracts.
Since its inception, the Company has not entered into any barter transaction. No reseller, 9.




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distributor or other customer that is not the end-user of a product sold by the Company has any
return right, right to price protection or similar right with respect to such product. (h)Part 2.4(h) of the Disclosure Schedule contains an accurate and complete list of all
outstanding loans and advances made by the Company to any Company employee, other than routine
travel advances made to current employees in the ordinary course of business. 2.5 Absence of Changes.Except as set forth in Part 2.5 of the Disclosure Schedule, since
August 31, 2004: (a)there has not been any material adverse change in the Company business, condition,
assets, liabilities, operations, financial performance or prospects, and, to the best Knowledge of
the Company, no event has occurred that will, or could reasonably be expected to, have a Material
Adverse Effect on the Company; (b)there has not been any material loss, damage or destruction to, or any material
interruption in the use of, any of the Company assets (whether or not covered by insurance); (c)the Company has not declared, accrued, set aside or paid any dividend or made any other
distribution in respect of any shares of capital stock, and has not repurchased, redeemed or
otherwise reacquired any shares of its capital stock or other securities; (d)the Company has not sold, issued or authorized the issuance of (i) any capital stock or
other security (except for Company Common Stock issued upon the exercise of outstanding Company
Options), (ii) any option or right to acquire any capital stock or any other security (except for
Company Options described in Part 2.3 of the Disclosure Schedule) or (iii) any instrument
convertible into or exchangeable for any capital stock or other security of the Company; (e)except as described in Section 1.6 of this Agreement, the Company has not amended or
waived any of its rights under, or permitted the acceleration of vesting under, (i) any provision
of the Stock Plan, (ii) any provision of any agreement evidencing any outstanding Company Option or
Company Warrant, or (iii) any restricted stock purchase agreement; (f)there has been no amendment to the Companys certificate of incorporation or bylaws, and
the Company has not effected or been a party to any Acquisition Transaction, recapitalization,
reclassification of shares, stock split, reverse stock split or similar transaction; (g)the Company has not formed any subsidiary or acquired any equity or other interest in any
other Entity; (h)the Company has not made any capital expenditure that exceeds $5,000; 10.




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(i)the Company has not amended or prematurely terminated, or waived any material right or
remedy under, any such Contract that is or would constitute a Material Contract (as defined in
Section 2.10(a)); (j)the Company has not (i) acquired, leased or licensed any right or other asset from any
other Person, (ii) sold or otherwise disposed of, or leased or licensed, any right or other asset
to any other Person or (iii) waived or relinquished any right, except in each case for rights or
other assets acquired, leased, licensed or disposed of in the ordinary course of business and
consistent with the Companys past practices; (k)the Company has not written off as uncollectible, or established any extraordinary reserve
with respect to, any account receivable or other indebtedness; (l)the Company has not made any pledge of any of its assets or otherwise permitted any of its
assets to become subject to any Encumbrance, except for pledges of immaterial assets made in the
ordinary course of business and consistent with the Companys past practices; (m)the Company has not (i) lent money to any Person or (ii) incurred or guaranteed any
indebtedness; (n)the Company has not (i) established or adopted any Employee Benefit Plan, (ii) paid any
bonus or made any profit-sharing or similar payment to, or increased the amount of the wages,
salary, commissions, fringe benefits or other compensation or remuneration payable to, any of its
directors, officers or employees, or (iii) hired any new employee; (o)the Company has not changed any of its methods of accounting or accounting practices in
any material respect; (p)the Company has not made any Tax election other than in the ordinary course of business
and pursuant to past practices; (q)the Company has not commenced or settled any Legal Proceeding; (r)the Company has not entered into any material transaction or taken any other material
action outside the ordinary course of business or inconsistent with its past practices; and (s)the Company has not agreed or committed to take any of the actions referred to in clauses
(c) through (r) above. 2.6 Title to Assets; Equipment. (a)The Company owns, and has good, valid and marketable title to, all assets purported to be
owned by it, including: (i) all assets reflected on the Unaudited Interim Balance Sheet; (ii)
all assets referred to in Parts 2.1, 2.7(b) and 2.9 of the Disclosure Schedule and all of 11.




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the Company rights under the Contracts identified in Part 2.10 of the Disclosure Schedule;
and (iii) all other assets reflected in the Companys books and records as being owned by the
Company. Except as set forth in Part 2.6(a) of the Disclosure Schedule, all of the assets
purported to be owned by the Company are owned by the Company free and clear of any liens or other
Encumbrances, except for (i) any lien for current Taxes not yet due and payable and (ii) minor
liens that have arisen in the ordinary course of business and that do not (in any individual case
or in the aggregate) materially detract from the value of the assets subject thereto or materially
impair the operations of the Company. (b)Part 2.6(b) of the Disclosure Schedule identifies all assets that are material to the
business of the Company and that are being leased or licensed to the Company. (c)All material items of equipment and other tangible assets owned by or leased to the
Company are reasonably adequate for the uses to which they are being put, are in good condition and
repair (ordinary wear and tear excepted) and are reasonably adequate for the conduct of the
Company business in the manner in which such business is currently being conducted and is
currently being proposed to be conducted. 2.7 Bank Accounts; Receivables. (a)Part 2.7(a) of the Disclosure Schedule provides accurate information with respect to each
account maintained by or for the benefit of the Company at any bank or other financial institution. (b)Part 2.7(b) of the Disclosure Schedule provides an accurate and complete breakdown and
aging of all accounts receivable, notes receivable and other receivables of the Company as of June
30, 2004. Except as set forth in Part 2.7(b) of the Disclosure Schedule, all existing accounts
receivable of the Company (including those accounts receivable reflected on the Unaudited Interim
Balance Sheet that have not yet been collected and those accounts receivable that have arisen since
June 30, 2004 and have not yet been collected) (i) represent valid obligations of customers of the
Company arising from bona fide transactions entered into in the ordinary course of business, and
(ii) are current and, to the best Knowledge of the Company, will be collected in full when due,
without any counterclaim or set off. 2.8 Title to Real Property.The Company does not own any real property or interests in real
property other than leasehold interests in real property. Part 2.8 of the Disclosure Schedule sets
forth a complete list of all real property and interests in real property leased by the Company
(Leased Real Property). The Company has good and valid title to the leasehold interests in all
Leased Real Property, in each case free and clear of all Encumbrances, except leases, subleases and
similar agreements set forth in Part 2.8 of the Disclosure Schedule. 2.9 Intellectual Property (a) Disclosures (i)Products and Services. Part 2.9(a)(i) of the Disclosure Schedule accurately
identifies and describes each Company Product developed, distributed, licensed, 12.




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leased, manufactured, marketed, provided, or sold, directly or indirectly, by or on behalf of
the Company at any time since January 1, 2001, and any Company Product currently under development
by the Company, whether or not in collaboration with any Person, including an identification of
each version thereof, the general release date of each such version, the primary designers and
developers of each such version, and any material components of each such version that were not
developed by people who were, when they were developing such components, employees of the Company. (ii)Registered IP. Part 2.9(a)(ii) of the Disclosure Schedule accurately identifies
(A) each item of Registered IP in which the Company has or purports to have an ownership interest
of any nature (whether exclusively, jointly with another Person, or otherwise); (B) the
jurisdiction in which such item of Registered IP has been registered or filed and the applicable
registration or serial number; (C) any other Person that has an ownership interest in such item of
Registered IP and the nature of such ownership interest; and (D) each component of the Company
Products that embodies, utilizes, or is based upon or derived from (or, with respect to Company
Products under development, that is expected to embody, utilize, or be based upon or derived from)
such item of Registered IP. The Company has provided to Parent complete and accurate copies of all
applications, correspondence, and other material documents (including correspondence with the U.S.
PTO, U.S. Copyright Office, and similar authorities in other jurisdictions) related to each such
item of Registered IP. (iii)Third Party IP and Inbound Licenses. Part 2.9(a)(iii) of the Disclosure
Schedule accurately identifies (A) all Intellectual Property Rights or Intellectual Property
licensed to the Company (other than any non-customized software that (1) is so licensed solely in
executable or object code form pursuant to a non-exclusive, internal use software license, (2) is
not incorporated into, or used directly in the development, manufacturing, or distribution of, the
Company Products, and (3) is generally available on standard terms for less than $1,000); (B) the
corresponding Contract or Contracts pursuant to which such Intellectual Property Rights or
Intellectual Property is licensed to the Company; and (C) whether the license or licenses granted
to the Company are exclusive or non-exclusive. (iv)Outbound Licenses. Part 2.9(a)(iv) of the Disclosure Schedule accurately
identifies each Contract pursuant to which any Person has been granted any license under, or
otherwise has received or acquired any right (whether or not currently exercisable) or interest in,
the Company IP (other than non-exclusive, internal use, object code software licenses granted to
end user customers in the ordinary course of business pursuant to the Companys standard form of
end user license agreement). (v)Standard Form IP Agreements. The Company has provided to Parent a complete and
accurate copy of each standard form of Company IP Contract used by the Company at any time since
January 1, 2001, including each standard form of (A) end user license agreement; (B) maintenance or
support agreement; (C) development agreement; (D) distributor, reseller agreement, sales
representative, or referral agreement; (E) application service provider, hosting services, managed
services, outsourcing services, or service bureau agreement, (F) employee agreement containing
intellectual property assignment or license of Intellectual Property or Intellectual Property
Rights or any confidentiality provision; (G) consulting or 13.




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independent contractor agreement containing intellectual property assignment or license of
Intellectual Property or Intellectual Property Rights or any confidentiality provision; and (H)
confidentiality or nondisclosure agreement. Part 2.9(a)(v) of the Disclosure Schedule accurately
identifies each Company IP Contract that deviates in any material respect from the corresponding
standard form agreement provided to Parent. (b) Company IP (i)Ownership Free and Clear. The Company exclusively owns all right, title, and
interest to and in the Company IP (other than Intellectual Property Rights exclusively licensed to
the Company, as identified in Part 2.9(b)(i) of the Disclosure Schedule) free and clear of any
Encumbrances (other than non-exclusive licenses granted pursuant to the Contracts listed in Part
2.9(a)(iv) of the Disclosure Schedule). Without limiting the generality of the foregoing: (A) Perfection of Rights. All documents and instruments necessary to perfect the
rights of the Company in the Company IP have been validly executed, delivered, and filed in a
timely manner with the appropriate Governmental Body. (B) Employees and Contractors. Each Person who is or was an employee or contractor of
the Company and who is or was involved in the creation or development of any Company IP has signed
a valid, enforceable agreement containing an assignment of Intellectual Property Rights to the
Company and confidentiality provisions protecting the Company IP. No current or former
shareholder, officer, director, or employee of the Company has any claim, right (whether or not
currently exercisable), or interest to or in any Company IP. No employee of the Company is (a)
bound by or otherwise subject to any Contract restricting him or her from performing his or her
duties for the Company or any of its Subsidiaries or (b) in breach of any Contract with any former
employer or other Person concerning Intellectual Property Rights or confidentiality. (C) Government Rights. No funding, facilities, or personnel of any Governmental Body
were used, directly or indirectly, to develop or create, in whole or in part, any Company IP. (D) Protection of Proprietary Information. The Company has taken all reasonable steps
to maintain the confidentiality of and otherwise protect and enforce their rights in all Company
Source Code and other proprietary information, that the Company holds, or purports to hold, as a
trade secret. (E) Past IP Dispositions. Since January 1, 2001, the Company has not assigned or
otherwise transferred ownership of, or agreed to assign or otherwise transferred ownership of, any
Intellectual Property Right to any other Person. (F) Standards Bodies. The Company is not nor was ever a member or promoter of, or a
contributor to, any industry standards body or similar organization that could require or obligate
the Company to grant or offer to any other Person any license or right to any Company IP. 14.




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(G) Sufficiency. The Company owns or otherwise has, and after the Closing will have,
all Intellectual Property Rights needed to conduct its business as currently conducted and planned
to be conducted. (H) Limitations. The Company is not bound by, and no Company IP is subject to, any
Contract containing any covenant or other provision that in any way limits or restricts the ability
of the Company to use, exploit, assert, or enforce any Company IP anywhere in the world. (ii)Valid and Enforceable. All Company, all Company IP is valid,subsisting, and enforceable. Without limiting the generality of the foregoing: (A) Patents. Each U.S. patent application and U.S. patent in which the Company has or
purports to have an ownership interest was filed within one year of a printed publication, public
use, or offer for sale of each invention described in the U.S. patent application or U.S. patent.
Each foreign patent application and foreign patent in which the Company has or purports to have an
ownership interest was filed or claims priority to a patent application filed prior to each
invention described in the foreign patent application or foreign patent being made available to the
public. (B) Trademarks. No trademark or trade name owned, used, or applied for by the Company
conflicts or interferes with any trademark or trade name owned, used, or applied for by any other
Person. No event or circumstance (including a failure to exercise adequate quality controls and an
assignment in gross without the accompanying goodwill) has occurred or exists that has resulted in,
or could reasonably be expected to result in, the abandonment of any trademark (whether registered
or unregistered) owned, used, or applied for by the Company. (C) Legal Requirements and Deadlines. Each item of Company IP that is Registered IP
is and at all times has been in compliance with all legal requirements and all filings, payments,
and other actions required to be made or taken to maintain such item of Company IP in full force
and effect have been made by the applicable deadline. No application for a patent or a copyright,
mask work, or trademark registration or any other type of Registered IP filed by or on behalf of
the Company has been abandoned, allowed to lapse, or rejected. Part 2.9(b)(ii)(C) of the
Disclosure Schedule accurately identifies and describes each action, filing, and payment that must
be taken or made on or before the date that is ninety (90) days after the Closing Date in order to
maintain such item of Company IP in full force and effect. (D) Interference Proceedings and Similar Claims. No interference, opposition,
reissue, reexamination, or other Legal Proceeding is or since the Companys inception has been
pending or, to the best of the Companys Knowledge, threatened, in which the scope, validity, or
enforceability of Company IP is being, has been, or could reasonably be expected to be contested or
challenged. There is no basis for a claim that any Company IP is invalid or unenforceable. (iii)Third-Party Infringement of Company IP. No Person has infringed,
misappropriated, or otherwise violated, and no Person is currently infringing, 15.




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misappropriating, or otherwise violating, any Company IP. Part 2.9(b)(iii) of the Disclosure
Schedule accurately identifies (and the Company has provided to Parent a complete and accurate copy
of) each letter or other written or electronic communication or correspondence that has been sent
or otherwise delivered since the Companys inception by or to the Company or any representative of
the Company regarding any actual, alleged, or suspected infringement or misappropriation of any
Company IP, and provides a brief description of the current status of the matter referred to in
such letter, communication, or correspondence. (iv)Effects of This Transaction. Neither the execution, delivery, or performance of
this Agreement (or any of the ancillary agreements) nor the consummation of any of the transactions
contemplated by this Agreement (or any of the ancillary agreements) will, with or without notice or
lapse of time, result in, or give any other Person the right or option to cause or declare, (A) a
loss of, or Encumbrance on, any Company IP; (B) a breach of any Company IP Contract; (C) the
release, disclosure, or delivery of any source code or other Company IP by or to any escrow agent
or other Person; (D) the grant, assignment, or transfer to any other Person of any license or other
right or interest under, to, or in any of the Company IP; or (E) any limitation or restriction on
the ability of Parent, Merger Sub, or the Company to use, exploit, assert, or enforce any
Intellectual Property or Intellectual Property Rights owned or exclusively licensed to them
anywhere in the world. (c) Infringement Claims and Liability (i)No Infringement of Third Party IP Rights. The Company has never infringed
(directly, contributorily, by inducement, or otherwise), misappropriated, or otherwise violated any
Intellectual Property Right of any other Person. (ii)Infringing Acts. No product, information, or service ever manufactured,
produced, distributed, published, used, provided, or sold by or on behalf of the Company has
infringed, misappropriated, or otherwise violated the Intellectual Property Rights of any other
Person. (iii)Infringement Claims. No infringement, misappropriation, or similar claim or
Legal Proceeding is pending or, to the best of the Companys Knowledge, threatened against the
Company or against any other Person who may be entitled to be indemnified, defended, held harmless,
or reimbursed by the Company with respect to such claim or Legal Proceeding. The Company has never
received any notice or other communication (in writing or otherwise) relating to any actual,
alleged, or suspected infringement, misappropriation, or violation of any Intellectual Property
Rights of another Person. (iv)Other Infringement Liability. Except as set forth in Part 2.9(c)(iv) of the
Disclosure Schedule, the Company is not bound by any Contract to indemnify, defend, hold harmless,
or reimburse any other Person with respect to any intellectual property infringement,
misappropriation, or similar claim. The Company has never assumed, or agreed to discharge or
otherwise take responsibility for, any existing or potential liability of another Person for
infringement, misappropriation, or violation of any Intellectual Property Right. 16.




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(v)Infringement Claims Affecting In-Licensed IP Licensed. To the best of the
Companys Knowledge, no claim or Legal Proceeding involving any Intellectual Property or
Intellectual Property Right licensed to the Company is pending or has been threatened, except for
any such claim or Legal Proceeding that, if adversely determined, would not adversely affect (A)
the use or exploitation of such Intellectual Property or Intellectual Property Right by the
Company, or (B) the development, distribution, licensing, leasing, manufacturing, marketing,
provision, or sale of any Company Product by the Company. (d) Software; and Services (i)Bugs. None of the software (including firmware and other software embedded in
hardware devices) owned, developed (or currently being developed), used, marketed, distributed,
licensed, or sold by the Company (other than non-customized third-party software licensed to the
Company for internal use on a non-exclusive basis) (collectively, Company Software) (a) contains
any bug, defect, or error (including any bug, defect, or error relating to or resulting from the
display, manipulation, processing, storage, transmission, or use of date data) that materially and
adversely affects the use, functionality, or performance of such Company Software or any product or
system containing or used in conjunction with such Company Software; or (b) fails (or when sold,
licensed, or otherwise made available did fail) to comply with any applicable warranty or other
contractual commitment relating to the use, functionality, or performance of such Company Software
or any product or system containing or used in conjunction with such Company Software. The Company
has provided to Parent a complete and accurate list of all known bugs, defects, and errors in each
version and component of the Company Software. (ii)Harmful Code. No Company Software contains any back door, drop dead device,
time bomb, Trojan horse, virus, or worm (as such terms are commonly understood in the
software industry) or any other code designed or intended to have, or capable of performing, any of
the following functions: (A) disrupting, disabling, harming, or otherwise impeding in any manner
the operation of, or providing unauthorized access to, a computer system or network or other device
on which such code is stored or installed; or (B) damaging or destroying any data or file without
the users consent. (iii)Source Code. No Company Source Code has been delivered, licensed, or made
available to any escrow agent or other Person who is not, as of the date of this Agreement, an
employee of the Company. Except as set forth in Part 2.9(d)(iii) of the Disclosure Schedule, the
Company has no duty or obligation (whether present, contingent, or otherwise) to deliver, license,
or make available the Company Source Code to any escrow agent or other Person who is not, as of the
date of this Agreement, an employee of the Company. No event has occurred, and no circumstance or
condition exists, that (with or without notice or lapse of time) will, or could reasonably be
expected to, result in the delivery, license, or disclosure of any Company Source Code to any other
Person who is not, as of the date of this Agreement, an employee of the Company. (iv)Open Source Code. No Company Software is subject to any copyleft or other
obligation or condition (including any obligation or condition under any 17.




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open source license such as the GNU Public License, Lesser GNU Public License, or Mozilla
Public License) that (a) could require, or could condition the use or distribution of such Company
Software on, the disclosure, licensing, or distribution of any Company Source Code, or (b) could
otherwise impose any limitation, restriction, or condition on the right or ability of the Company
to use or distribute any Company Software. (v)All installation services, programming services, integration services, repair services,
maintenance services, support services, training services, upgrade services and other services that
have been performed by the Company were performed properly and in conformity with the terms and
requirements of all applicable warranties and other Contracts and with all applicable Legal
Requirements. (vi)Except as set forth in Part 2.9(d)(vi) of the Disclosure Schedule, since January 1, 2001,
no customer or other Person has asserted or, to the best Knowledge of the Company, threatened to
assert any claim against the Company: (i) under or based upon any warranty provided by or on behalf
of any of the Company; or (ii) based upon any services performed by the Company. 2.10 Contracts. (a)Part 2.10(a) of the Disclosure Schedule identifies: (i)each Company Contract (A) relating to the employment of, or the performance of
services by, any employee, consultant or independent contractor, (B) pursuant to which the
Company is or may become obligated to make any severance, termination or similar payment to
any Person, or (C) pursuant to which the Company is or may become obligated to make any
bonus or similar payment) in excess of $5,000 to any Person; (ii)each Company Contract imposing any restriction on the Companys right or ability
(A) to compete with any other Person, (B) to solicit, hire or retain any Person as an
employee, consultant or independent contractor, (C) to develop, sell, supply, distribute,
offer, support or service any product or technology to or for any other Person or (D) to
transact business or deal in any other manner with any other Person; (iii)each Company Contract creating or involving any agency relationship, distribution
arrangement or franchise relationship; (iv)each Company Contract (other than Company Contracts evidencing Company Options and
Company Warrants) relating to the acquisition, issuance or transfer of any securities; (v)each Company Contract creating or relating to any partnership or joint venture or
any sharing of revenues, profits, losses, costs or Liabilities; 18.




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(vi)each Company Contract with any Related Party (as defined in Section 2.17); (vii)each Company Contract with a corporate or similar sponsor; (viii)each Company Contract relating to the acquisition, transfer, use, development,
sharing or license of any Intellectual Property or any Intellectual Property Right; (ix)each Company Contract relating to the creation of any Encumbrance with respect to
any asset of the Company; (x)each Company Contract relating to the grant of rights to manufacture, produce,
assemble, license, market, or sell any of the Companys current or future products to any
other Person or otherwise affecting the Companys exclusive right to develop, manufacture,
assemble, distribute, market or sell its current or future products; (xi)each Company Contract relating to indemnification by any of the Company with
respect to infringements of Intellectual Property Rights; (xii)each Company Contract (A) to which any Governmental Body is a party or under
which any Governmental Body has any rights or obligations, or (B) directly or indirectly
benefiting any Governmental Body; (xiii)each Company Contract that contemplates or involves (A) the payment or delivery
of cash or other consideration in an amount or having a value in excess of $10,000 in the
aggregate or (B) the performance of services having a value in excess of $5,000 in the
aggregate, in each case other than Contracts that have a term of less than 60 days or that
may be terminated by the Company (without penalty) within 60 days after the delivery of a
termination notice by the Company; (xiv)each Company Contract that is material to the business of the Company; and (xv)any Contract relating to the acquisition, sale, spin-off, outsourcing or
disposition of any business operation or unit or any product line of the Company, including
any right of first offer, right of first refusal or any similar or related right; (Contracts in the respective categories described in clauses (i) through (xiv) above are
referred to in this Agreement as Material Contracts.) (b)The Company has delivered to Parent accurate and complete copies of all written Contracts
identified in Part 2.10 of the Disclosure Schedule, including all amendments thereto. Part 2.10 of
the Disclosure Schedule provides an accurate description of the terms of each Material Contract
that is not in written form. Each Contract identified in Part 2.10 of the Disclosure Schedule is
valid and in full force and effect and is enforceable by the Company in 19.




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accordance with its terms, subject to (i) laws of general application relating to bankruptcy,
insolvency and the relief of debtors and (ii) rules of law governing specific performance,
injunctive relief and other equitable remedies. (c)Except as set forth in Part 2.10 of the Disclosure Schedule: (i)the Company has not violated or breached, or committed any default under, any
Material Contract, and, to the best Knowledge of the Knowledge of the Company, no other
Person has violated or breached, or committed any default under, any Material Contract; (ii)no event has occurred, and no circumstance or condition exists, that (with or
without notice or lapse of time) will, or could reasonably be expected to, (A) result in a
violation or breach of any of the provisions of any Material Contract, (B) give any Person
the right to declare a default or exercise any remedy under any Material Contract, (C) give
any Person the right to accelerate the maturity or performance of any Material Contract or
(D) give any Person the right to cancel, terminate or modify any Material Contract; (iii)the Company has not received any notice or other communication regarding any
actual or possible violation or breach of, or default under, any Material Contract and the
Company is not aware of any basis therefore; and (iv)the Company has not waived any of its material rights under any Material Contract. (d)No Person is renegotiating, or has a right pursuant to the terms of any Company Contract
to renegotiate, any amount paid or payable to the Company under any Material Contract or any other
material term or provision of any Material Contract. (e)The Contracts identified in Part 2.10 of the Disclosure Schedule collectively constitute
all of the Contracts necessary to enable the Company to conduct its business in the manner in which
its business is currently being conducted. 2.11 Liabilities. (a)The Company has no accrued, contingent or other liabilities of any nature, either matured
or unmatured (whether or not required to be reflected in financial statements in accordance with
generally accepted accounting principles, and whether due or to become due), except for: (i)
liabilities identified as such in the liabilities column of the Unaudited Interim Balance Sheet;
and (ii) the liabilities identified on Part 2.11(a) of the Disclosure Schedule, in excess of $5,000
in the aggregate. (b)Part 2.11(b) of the Disclosure Schedule provides an accurate and complete breakdown and
aging of (i) all accounts payable of the Company, and (ii) all notes payable of the Company and all
indebtedness of the Company for borrowed money. 20.




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(c)No event has occurred, and no circumstance or condition exists, that has resulted in, or
that will or would reasonably be expected to result in, any claim for indemnification or
reimbursement by any Company employee pursuant to (i) the terms of the Companys certificate of
incorporation or bylaws, (ii) any indemnification agreement or other Contract between the Company
and any such Company employee, or (iii) any applicable Legal Requirement. 2.12 Compliance with Legal Requirements.The Company is, and has at all times been, in
compliance in all material respects with all applicable Legal Requirements. Except as set forth in
Part 2.12 of the Disclosure Schedule, the Company has not received any notice or other
communication from any Governmental Body regarding any actual or possible violation of, or failure
to comply with, any Legal Requirement. 2.13 Governmental Authorizations.Part 2.13 of the Disclosure Schedule identifies each
material Governmental Authorization held by the Company as of the date of this Agreement. The
Company has delivered to Parent accurate and complete copies of all Governmental Authorizations
identified in Part 2.13 of the Disclosure Schedule. The Governmental Authorizations identified in
Part 2.13 of the Disclosure Schedule are valid and in full force and effect, and collectively
constitute all Governmental Authorizations necessary to enable the Company to conduct its business
in the manner in which its business is currently being conducted and is currently proposed to be
conducted. The Company is, and at all times has been, in compliance in all material respects with
the terms and requirements of the respective Governmental Authorizations identified in Part 2.13 of
the Disclosure Schedule. The Company has not received any notice or other communication from any
Governmental Body regarding (a) any actual or possible violation of or failure to comply with any
term or requirement of any Governmental Authorization or (b) any actual or possible revocation,
withdrawal, suspension, cancellation, termination or modification of any Governmental
Authorization. 2.14 Tax Matters. (a)Each of the Tax Returns required to be filed by or on behalf of the Company with any
Governmental Body with respect to any taxable period ending on or before the Closing Date (the
Company Returns) (i) has been or will be filed on or before the applicable due date (including
any extensions of such due date), and (ii) has been, or will be when filed, prepared in all
material respects in compliance with all applicable Legal Requirements. All amounts shown on the
Company Returns to be due on or before the Closing Date have been or will be paid on or before the
Closing Date. The Company has delivered to Parent accurate and complete copies of all Company
Returns filed by the Company. (b)The Unaudited Interim Balance Sheet accrues all actual and contingent liabilities for
Taxes with respect to all periods through June 30, 2004 in accordance with generally accepted
accounting principles. The Company will establish, in the ordinary course of business and
consistent with its past practices, reserves adequate for the payment of all Taxes for the period
from June 30, 2004 through the Closing Date. (c)No Company Return has ever been examined or audited by any Governmental Body. No
extension or waiver of the limitation period applicable to any of the 21.




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Company Returns has been granted (by the Company or any other Person), and no such extension
or waiver has been requested from the Company. (d)No claim or Legal Proceeding is pending or has been threatened against or with respect to
the Company in respect of any material Tax. There are no unsatisfied liabilities for material
Taxes with respect to any notice of deficiency or similar document received by the Company with
respect to any material Tax (other than liabilities for Taxes asserted under any such notice of
deficiency or similar document which are being contested in good faith by the Company and with
respect to which adequate reserves for payment have been established on the Unaudited Interim
Balance Sheet). There are no liens for material Taxes upon any of the assets of the Company except
liens for current Taxes not yet due and payable. The Company has not been, and will not be,
required to include any adjustment in taxable income for any tax period (or portion thereof)
pursuant to Section 481 or 263A of the Code (or any comparable provision of state or foreign Tax
laws) as a result of transactions or events occurring, or accounting methods employed, prior to the
Closing. The Company has not made any distribution of stock of any controlled corporation, as that
term is defined in Code Section 355(a)(1). (e)There is no agreement, plan, arrangement or other Contract covering any employee or
independent contractor or former employee or independent contractor of the Company that, considered
individually or considered collectively with any other such Contracts, will, or could reasonably be
expected to, give rise directly or indirectly to the payment of any amount that would not be
deductible pursuant to Section 280G or Section 162 of the Code (or any comparable provision under
state or foreign Tax laws). The Company is not, and has never been, a party to or bound by any tax
indemnity agreement, tax sharing agreement, tax allocation agreement or similar Contract. 2.15 Employee and Labor Matters; Benefit Plans. (a)Part 2.15(a) of the Disclosure Schedule identifies each salary, bonus, vacation, deferred
compensation, incentive compensation, stock purchase, stock option, severance pay, termination pay,
death and disability benefits, hospitalization, medical, life or other insurance, flexible
benefits, supplemental unemployment benefits, profit-sharing, pension or retirement plan, program
or agreement and each other employee benefit plan or arrangement (collectively, the Employee
Plans) sponsored, maintained, contributed to or required to be contributed to by the Company for
the benefit of any current or former employee of the Company. (b)Except as set forth in Part 2.15(a) of the Disclosure Schedule, the Company does not
maintain, sponsor or contribute to, and the Company has not at any time in the past maintained,
sponsored or contributed to, any employee pension benefit plan (as defined in Section 3(2) of the
Employee Retirement Income Security Act of 1974, as amended (ERISA), or any similar pension
benefit plan under the laws of any foreign jurisdiction, whether or not excluded from coverage
under specific Titles or Subtitles of ERISA for the benefit of employees or former employees of the
Company (a Pension Plan). (c)Except as set forth in Part 2.15(a) of the Disclosure Schedule, the Company does not
maintain, sponsor or contribute to any employee welfare benefit plan (as 22.




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defined in Section 3(1) of ERISA or any similar welfare benefit plan under the laws of any
foreign jurisdiction, whether or not excluded from coverage under specific Titles or Subtitles of
ERISA), for the benefit of any current or former employees or directors of the Company (a Welfare
Plan). (d)With respect to each Employee Plan, the Company has delivered to Parent: (i) an accurate
and complete copy of such Employee Plan (including all amendments thereto); (ii) an accurate and
complete copy of the annual report, if required under ERISA, with respect to such Employee Plan for
the last two years; (iii) an accurate and complete copy of the most recent summary plan
description, together with each summary of material modifications, if required under ERISA, with
respect to such Employee Plan, (iv) if such Employee Plan is funded through a trust or any third
party funding vehicle, an accurate and complete copy of the trust or other funding agreement
(including all amendments thereto) and accurate and complete copies the most recent financial
statements thereof; (v) accurate and complete copies of all Contracts relating to such Employee
Plan, including service provider agreements, insurance contracts, minimum premium contracts,
stop-loss agreements, investment management agreements, subscription and participation agreements
and recordkeeping agreements; and (vi) an accurate and complete copy of the most recent
determination letter received from the Internal Revenue Service with respect to such Employee Plan
(if such Employee Plan is intended to be qualified under Section 401(a) of the Code). (e)The Company neither is or has ever been required to be treated as a single employer with
any other Person under Section 4001(b)(1) of ERISA or Section 414(b), (c), (m) or (o) of the Code.
The Company has never been a member of an affiliated service group within the meaning of Section
414(m) of the Code. None of the Employee Plans identified in the Disclosure Schedule is a
multiemployer plan (within the meaning of Section 3(37) of ERISA). The Company has never made a
complete or partial withdrawal from a multiemployer plan, as such term is defined in Section 3(37)
of ERISA, resulting in withdrawal liability, as such term is defined in Section 4201 of ERISA
(without regard to subsequent reduction or waiver of such liability under either Section 4207 or
4208 of ERISA). (f)The Company has no plan or commitment to create any Welfare Plan or any Pension Plan, or
to modify or change any existing Welfare Plan or Pension Plan (other than to comply with applicable
law) in a manner that would affect any current or former employee or director of the Company. (g)No Employee Plan provides death, medical or health benefits (whether or not insured) with
respect to any current or former employee or director of the Company after any termination of
service of such employee or director (other than benefit coverage mandated by applicable law,
including coverage provided pursuant to Section 4980B of the Code). (h)With respect to any Employee Plan constituting a group health plan within the meaning of
Section 4980B(g)(2) of the Code, the provisions of Section 4980B of the Code (COBRA) have been
complied with in all material respects. Part 2.15(h) of the Disclosure Schedule describes all
obligations of the Company as of the date of this Agreement under any of the provisions of COBRA. 23.




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(i)Each of the Employee Plans has been operated and administered in all material respects in
accordance with its terms and with applicable Legal Requirements, including ERISA, the Code and
applicable foreign Legal Requirements. The Company has performed all of its obligations under the
Employee Plans. (j)Each of the Employee Plans intended to be qualified under Section 401(a) of the Code has
received a favorable determination letter from the Internal Revenue Service, and nothing has
occurred that would adversely affect such determination. (k)Except as may be set forth in Part 2.15 (k) of the Disclosure Schedule, neither the
execution, delivery or performance of this Agreement, nor the consummation of the Merger or any of
the other transactions contemplated by this Agreement, will result in any bonus, golden parachute,
severance or other payment or obligation to any current or former employee or director of the
Company (whether or not under any Employee Plan), or materially increase the benefits payable or
provided under any Employee Plan, or, except as contemplated by Section 1.6 of this Agreement,
result in any acceleration of the time of payment or vesting of any such benefits. Without limiting
the generality of the foregoing (and except as set forth in Part 2.15(k) of the Disclosure
Schedule), the consummation of the Merger will not result in the acceleration of vesting of any
unvested Company Options. (l)Part 2.15 (l) of the Disclosure Schedule contains a list of all employees of the Company
as of the date of this Agreement, and correctly reflects, in all material respects, their salaries
or hourly compensation, any other compensation payable to them (including compensation payable
pursuant to bonus, deferred compensation or commission arrangements), their dates of employment and
their positions. The Company is not a party to any collective bargaining contract or other
Contract with a labor union involving any of its employees. All of the employees of the Company
are at will employees. (m)Part 2.15(m) of the Disclosure Schedule identifies each employee of the Company who is not
fully available to perform work because of disability or other leave and sets forth the basis of
such disability or leave and the anticipated date of return to full service. (n)The Company is in compliance in all material respects with all applicable Legal
Requirements and Contracts relating to employment, employment practices, wages, bonuses and terms
and conditions of employment, including employee compensation matters. (o)The Company has good labor relations, and the Company has no Knowledge of any facts
indicating that (i) the consummation of the Merger or any of the other transactions contemplated by
this Agreement will have a material adverse effect on the labor relations of the Company, or (ii)
any of the employees of the Company intends to terminate his or her employment with the Company. 2.16 Insurance.Part 2.16 of the Disclosure Schedule identifies all insurance policies
maintained by, at the expense of or for the benefit of the Company, identifies any material claims
made thereunder, and includes a summary of the amounts and types of coverage and the deductibles
under each such insurance policy. Each of the insurance policies identified in Part 2.16 of the
Disclosure Schedule is in full force and effect. The Company has not received any 24.




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notice or other communication regarding any actual or possible (a) cancellation or
invalidation of any insurance policy, (b) refusal of any coverage or rejection of any claim under
any insurance policy or (c) material adjustment in the amount of the premiums payable with respect
to any insurance policy. 2.17 Related Party Transactions.Except as set forth in Part 2.17 of the Disclosure Schedule:
(a) no Related Party has, and no Related Party has at any time had, any direct or indirect
interest in any material asset used in or otherwise relating to the business of the Company; (b) no
Related Party is, or has at any time been, indebted to the Company; (c) no Related Party has
entered into, or has had any direct or indirect financial interest in, any material Contract,
transaction or business dealing involving the Company; (d) no Related Party is competing, or has at
any time competed, directly or indirectly, with the Company; and (e) no Related Party has any claim
or right against the Company (other than rights to receive compensation for services performed as
an employee of the Company). (For purposes of this Section 2.18 each of the following shall be
deemed to be a Related Party: (i) each of the stockholders of the Company; (ii) each
individual who is, or who has at any time been, an officer of the Company; (iii) each member of
the immediate family of each of the individuals referred to in clauses (i) and (ii) above; and
(iv) any trust or other Entity (other than the Company) in which any one of the individuals
referred to in clauses (i), (ii) and (iii) above holds (or in which more than one of such
individuals collectively hold), beneficially or otherwise, a material voting, proprietary or equity
interest.) 2.18 Legal Proceedings; Orders. (a)Except as set forth in Part 2.18(a) of the Disclosure Schedule, there is no pending Legal
Proceeding, and to the Knowledge of the Company, no Person has threatened to commence any Legal
Proceeding: (i) that involves the Company or any of the assets owned or used by the Company; (ii)
that involves any Person whose liability the Company has or may have retained or assumed, either
contractually or by operation of law; or (iii) that challenges, or that may have the effect of
preventing, delaying, making illegal or otherwise interfering with, the Merger or any of the other
transactions contemplated by this Agreement. Except as set forth in Part 2.18(a) of the Disclosure
Schedule, to the Knowledge of the Company, no event has occurred, and no claim, dispute or other
condition or circumstance exists, that will, or that could reasonably be expected to, give rise to
or serve as a basis for the commencement of any such Legal Proceeding. (b)Except as set forth in Part 2.18(b) of the Disclosure Schedule, no Legal Proceeding has
ever been commenced by or has ever been pending against the Company. (c)There is no order, writ, injunction, judgment or decree to which the Company, or any of
the assets owned or used by the Company, is subject. To the Knowledge of the Company, none of the
stockholders of the Company is subject to any order, writ, injunction, judgment or decree that
relates to the business of the Company or to any of the assets owned or used by the Company. 2.19 Authority; Binding Nature of Agreement.Subject to obtaining the Required Vote, the
Company has the absolute and unrestricted right, power and authority to enter into and 25.




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to perform its obligations under this Agreement; and the execution, delivery and performance
by the Company of this Agreement have been duly authorized by all necessary action on the part of
the Company and its board of directors. This Agreement constitutes the legal, valid and binding
obligation of the Company, enforceable against the Company in accordance with its terms, subject to
(a) laws of general application relating to bankruptcy, insolvency and the relief of debtors, and
(b) rules of law governing specific performance, injunctive relief and other equitable remedies. 2.20 Non-Contravention; Consents.Except as set forth in Part 2.20 of the Disclosure
Schedule, neither (1) the execution, delivery or performance of this Agreement or any of the other
agreements referred to in this Agreement, nor (2) the consummation of the Merger or any of the
other transactions contemplated by this Agreement, will directly or indirectly (with or without
notice or lapse of time): (a)contravene, conflict with or result in a violation of (i) any of the provisions of the
Companys certificate of incorporation or bylaws, or (ii) any resolution adopted by the Companys
stockholders, the Companys board of directors or any committee of the Companys board of
directors; (b)contravene, conflict with or result in a violation of, or give any Governmental Body or
other Person the right to challenge any of the transactions contemplated by this Agreement or to
exercise any remedy or obtain any relief under, any Legal Requirement or any order, writ,
injunction, judgment or decree to which the Company, or any of the assets owned or used by the
Company, is subject; (c)contravene, conflict with or result in a violation of any of the terms or requirements of,
or give any Governmental Body the right to revoke, withdraw, suspend, cancel, terminate or modify,
any Governmental Authorization that is held by the Company or that otherwise relates to the
Companys business or to any of the assets owned or used by the Company; (d)contravene, conflict with or result in a violation or breach of, or result in a default
under, any provision of any Company Contract that is or would constitute a Material Contract, or
give any Person the right to (i) declare a default or exercise any remedy under any such Company
Contract, (ii) accelerate the maturity or performance of any such Company Contract, or (iii)
cancel, terminate or modify any such Company Contract; or (e)result in the imposition or creation of any lien or other Encumbrance upon or with respect
to any asset owned or used by the Company (except for minor liens that will not, in any case or in
the aggregate, materially detract from the value of the assets subject thereto or materially impair
the operations of the Company). Except as set forth in Part 2.20 of the Disclosure Schedule, the Company is not and will not be
required to make any filing with or give any notice to, or to obtain any Consent from, any Person
in connection with (x) the execution, delivery or performance of this Agreement or any of the other
agreements referred to in this Agreement, or (y) the consummation of the Merger or any of the other
transactions contemplated by this Agreement. 26.




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2.21 Full Disclosure. (a)This Agreement (when taken together with the Disclosure Schedule) does not, and the
Closing Certificate will not, (i) contain any representation, warranty or information that is false
or misleading with respect to any material fact, or (ii) omit to state any material fact necessary
in order to make the representations, warranties and information contained and to be contained
herein and therein (in the light of the circumstances under which such representations, warranties
and information were or will be made or provided) not false or misleading. (b)The information supplied by the Company for inclusion in the Information Statement (as
defined in Section 5.2) will not, as of the date of the Information Statement or as of the date of
the Company Stockholders Meeting (as defined in Section 5.2), (i) contain any statement that is
inaccurate or misleading with respect to any material fact, or (ii) omit to state any material fact
necessary in order to make such information (in the light of the circumstances under which it is
provided) not false or misleading. 2.22 Vote Required.The affirmative vote of the holders of a majority of the outstanding
shares of Company Common Stock, voting as a single class, a majority of the outstanding shares of
Series A Preferred Stock, voting as a single class and a majority of the outstanding shares of
Series B Preferred Stock, voting as a single class (the Required Vote), is the only vote of the
holders of any class or series of the Company Capital Stock necessary to adopt this Agreement. 2.23 No Brokers.Except for Sequoia Partners, which will be entitled only to the amount set
forth in Schedule I, no broker, finder or investment banker is entitled to any brokerage, finders
or other fee or commission in connection with the transactions contemplated by this Agreement based
on arrangements made by or on behalf of the Company. 2.24 Certain Business Practices.Neither the Company, nor, to the Knowledge of the Company,
any Representative of the Company or Company employee, has (i) used any funds for unlawful
contributions, gifts, entertainment or other unlawful expenses relating to political activity, (ii)
made any unlawful payment to foreign or domestic government officials or employees or to foreign or
domestic political parties or campaigns, violated any provision of the Foreign Corrupt Practices
Act of 1977, as amended, or (iii) taken any action that would constitute a violation of the Foreign
Corrupt Practices Act of 1977, as amended, if the Company were publicly held. 2.25 No Discussions.The Company nor any Representative of the Company is engaged, directly
or indirectly, in any discussions or negotiations with any other Person relating to any Acquisition
Proposal. SECTION 3.Representations and Warranties of Parent and Merger Sub Parent and Merger Sub jointly and severally represent and warrant to the Company as follows: 27.




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3.1 Due Organization; Corporate Power.Each of the Parent and the Merger Sub is a corporation
duly organized, validly existing and in good standing under the laws of the State of Delaware.
Parent has all requisite 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. 3.2 Authority; Binding Nature of Agreement.Parent and Merger Sub have the absolute and
unrestricted right, power and authority to perform their obligations under this Agreement; and the
execution, delivery and performance by Parent and Merger Sub of this Agreement have been duly
authorized by all necessary corporate action on the part of Parent and Merger Sub and their
respective boards of directors. No vote of Parents stockholders is needed to adopt this
Agreement. This Agreement constitutes the legal, valid and binding obligation of Parent and Merger
Sub, enforceable against them in accordance with its terms, subject to (a) laws of general
application relating to bankruptcy, insolvency and the relief of debtors, and (b) rules of law
governing specific performance, injunctive relief and other equitable remedies. 3.3 No Brokers. No broker, finder or investment banker is entitled to any brokerage, finders
or other fee or commission in connection with the transactions contemplated by this Agreement based
on arrangements made by or on behalf of Parent. SECTION 4.Certain Covenants of the Company 4.1 Access and Investigation.During the period from the date of this Agreement through the
Effective Time (the Pre-Closing Period), the Company shall, and shall cause its Representatives
to: (a) provide Parent and Parents Representatives with reasonable access to the Companys
Representatives, personnel and assets and to all existing books, records, Tax Returns, work papers
and other documents and information relating to the Company; and (b) provide Parent and Parents
Representatives with copies of such existing books, records, Tax Returns, work papers and other
documents and information relating to the Company, and with such additional financial, operating
and other data and information regarding the Company, as Parent may reasonably request. 4.2 Operation of the Companys Business.During the Pre-Closing Period: (a)the Company shall conduct its business and operations in the ordinary course and in
substantially the same manner as such business and operations have been conducted prior to the date
of this Agreement; (b)the Company shall use its best efforts to preserve intact its current business
organization, keep available the services of its current officers and employees and maintain its
relations and goodwill with all suppliers, customers, landlords, creditors, licenses, employees and
other Persons having business relationships with the Company; (c)the Company shall keep in full force all insurance policies identified in Part 2.16 of the
Disclosure Schedule; (d)the Company shall not sell, issue or authorize the issuance of (i) any capital stock or
other security, (ii) any option or right to acquire any capital stock or other 28.




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security or (iii) any instrument convertible into or exchangeable for any capital stock or
other security (except that the Company shall be permitted (A) to issue Company Common Stock to
employees upon the exercise of outstanding Company Options, (B) to issue shares of Company Common
Stock upon the conversion of shares of Series A Preferred Stock or Series B Preferred Stock or (C)
to issue shares of Company Capital Stock upon the exercise of Company Warrants); (e)the Company shall not declare, accrue, set aside or pay any dividend or make any other
distribution in respect of any shares of capital stock, and shall not repurchase, redeem or
otherwise reacquire any shares of capital stock or other securities (except that the Company may
repurchase Company Capital Stock from former employees pursuant to existing restricted stock
purchase agreements); (f)except to the extent contemplated by Section 1.6 of this Agreement, the Company shall not
amend or waive any of its rights under, (i) any provision of the Stock Plan, (ii) any provision of
any agreement evidencing any outstanding Company Option or Company Warrant, or (iii) any provision
of any restricted stock purchase agreement, (except that the Company may modify the vesting
schedules of outstanding Company Options and may modify the terms of repurchase rights of the
Company to the extent that such modifications would not alter the Merger Consideration); (g)the Company shall not amend or permit the adoption of any amendment to the certificate of
incorporation or bylaws of the Company, or effect or permit the Company to become a party to any
Acquisition Transaction, recapitalization, reclassification of shares, stock split, reverse stock
split or similar transaction; (h)the Company shall not form any subsidiary or acquire any equity interest or other interest
in any other Entity; (i)the Company shall not make any capital expenditure; (j)the Company shall not (i) enter into, or permit any of the assets owned or used by it to
become bound by, any Contract that is or would constitute a Material Contract or (ii) amend or
prematurely terminate, or waive any material right or remedy under, any such Material Contract; (k)the Company shall not (i) acquire, lease or license any right or other asset from any
other Person or sell or otherwise dispose of, or lease or license, any right or other asset to any
other Person or (ii) waive or relinquish any material right; (l)the Company shall not (i) lend money to any Person or (ii) incur or guarantee any
indebtedness; (m)the Company shall not (i) establish, adopt or amend any Employee Plan or (ii) pay any
bonus or make any profit-sharing payment, cash incentive payment or similar payment to, or increase
the amount of the wages, salary, commissions, fringe benefits or other compensation or remuneration
payable to, any of its directors, officers or employees, in a manner that is inconsistent with its
past business practices; 29.




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(n)the Company shall not change any of its methods of accounting or accounting practices; (o)the Company shall not make any Tax election except in the ordinary course of business and
pursuant to past practices; (p)the Company shall not commence or settle any Legal Proceeding; and (q)the Company shall not agree or commit to take any of the actions described in clauses
"(d) through (p) above. 4.3 Notification; Updates to Disclosure Schedule. (a)During the Pre-Closing Period, the Company shall promptly notify Parent in writing of:
(i) the discovery by the Company of any event, condition, fact or circumstance that occurred or
existed on or prior to the date of this Agreement and that caused or constitutes an inaccuracy in
or a breach of any representation or warranty made by the Company in this Agreement; (ii) any
event, condition, fact or circumstance that occurs, arises or exists after the date of this
Agreement and that would cause or constitute an inaccuracy in or a breach of any representation or
warranty made by the Company in this Agreement if (A) such representation or warranty had been made
as of the time of the occurrence, existence or discovery of such event, condition, fact or
circumstance or (B) such event, condition, fact or circumstance had occurred, arisen or existed on
or prior to the date of this Agreement; (iii) any breach of any covenant or obligation of the
Company; and (iv) any event, condition, fact or circumstance that would make the timely
satisfaction of any of the conditions set forth in Section 6 or Section 7 impossible or unlikely. (b)If any event, condition, fact or circumstance that is required to be disclosed pursuant to
Section 4.3(a) requires any change in the Disclosure Schedule, or if any such event, condition,
fact or circumstance would require such a change assuming the Disclosure Schedule were dated as of
the date of the occurrence, existence or discovery of such event, condition, fact or circumstance,
then the Company shall promptly deliver to Parent an update to the Disclosure Schedule specifying
such change. No such update shall be deemed to supplement or amend the Disclosure Schedule for the
purpose of (i) determining the accuracy of any of the representations and warranties made by the
Company in this Agreement or (ii) determining whether any of the conditions set forth in Section 6
has been satisfied. 4.4 No Negotiation.During the Pre-Closing Period, the Company shall not, directly or
indirectly: (a)solicit or encourage the submission of any expression of interest, proposal, plan or offer
from, or provide any non-public information to, any Person (other than Parent) relating to a
possible Acquisition Transaction; (b)engage in any discussions or negotiations or enter into any agreement, understanding or
arrangement with any Person (other than Parent) relating to, or in connection with, a possible
Acquisition Transaction; or 30.




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(c)consider, entertain or accept any proposal or offer from any Person (other than Parent)
relating to a possible Acquisition Transaction; (d)permit any Representative of the Company or any stockholder of the Company to do any of
the foregoing. The Company shall, and shall cause each of its Representatives to, immediately discontinue any
ongoing discussions or negotiations (other than any ongoing discussions with Parent) relating to a
possible Acquisition Transaction. The Company shall promptly provide Parent with an oral and a
written description of any expression of interest, inquiry, proposal or offer relating to a
possible Acquisition Transaction that is received by the Company or any of its Representatives or
stockholders during the Pre-Closing Period. 4.5 Conversion of Preferred Stock.The Company shall obtain the consent of the holders of
Company Preferred Stock to convert all of the Company Preferred Stock into shares of Company Common
Stock pursuant to the terms of the Companys Amended and Restated Certificate of Incorporation,
such conversion to be effective immediately prior to the Effective Time. SECTION 5.Additional Covenants of the Parties 5.1 Filings and Consents.As promptly as practicable after the execution of this Agreement,
(a) each party to this Agreement shall make all filings (if any) and give all notices (if any)
required to be made and given by such party in connection with the Merger and the other
transactions contemplated by this Agreement, and (b) the Company shall use all commercially
reasonable efforts to obtain all Consents (if any) required to be obtained (pursuant to any
applicable Legal Requirement or Contract, or otherwise) by the Company in connection with the
Merger and the other transactions contemplated by this Agreement. The Company shall (upon request)
promptly deliver to Parent a copy of each such filing made, each such notice given and each such
Consent obtained by the Company during the Pre-Closing Period. 5.2 Company Stockholders Meeting; Written Consents; Delivery of Certificates. (a)As promptly as practicable after the execution of this Agreement, the Company shall
prepare an Information Statement relating to the adoption of this Agreement by the Companys
stockholders (the Information Statement). The Company shall, in accordance with its certificate
of incorporation and bylaws and the applicable requirements of the DGCL, call and hold a special
meeting of its stockholders as promptly as practicable for the purpose of permitting them to
consider and to vote upon and adopt this Agreement (the Company Stockholders Meeting). In lieu
of calling and holding the Company Stockholders Meeting, the Company may solicit written consents
of the stockholders of the Company in accordance with the applicable requirements of the DGCL for
the purpose of permitting the stockholders of the Company to vote upon and adopt this Agreement.
The Company shall cause a copy of the Information Statement to be delivered to each stockholder of
the Company who is entitled to vote at the Company Stockholders Meeting or to act by written
consent. As promptly as practicable after the delivery of copies of the Information Statement to
all stockholders entitled to vote at the Company Stockholders Meeting or to act by written 31.




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consent, the Company shall
use its best efforts to solicit from each such stockholder a proxy or written consent (in the
event the Company has elected to solicit written consents in lieu of a meeting) in favor of the
adoption of this Agreement. (b)The board of directors of the Company shall unanimously recommend that the Companys
stockholders vote in favor of and adopt this Agreement at the Company Stockholders Meeting or by
written consent; (ii) the Information Statement shall include a statement to the effect that the
board of directors of the Company has unanimously recommended that the Companys stockholders vote
in favor of and adopt this Agreement at the Company Stockholders Meeting or by written consent;
and (iii) neither the board of directors of the Company nor any committee thereof shall withdraw,
amend or modify, or propose or resolve to withdraw, amend or modify, in a manner adverse to Parent,
the unanimous recommendation of the board of directors of the Company that the Companys
stockholders vote in favor of and adopt this Agreement. For purposes of this Agreement, said
recommendation of the board of directors of the Company shall be deemed to have been modified in a
manner adverse to Parent if said recommendation shall no longer be unanimous. (c)The Company shall use its best efforts to cause each Company Stockholder to surrender to
Parent at the Closing all certificates representing Company Capital Stock (properly endorsed for
transfer) together with an accurately and fully completed letter of transmittal in a form to be
provided to each Company Stockholder by Parent. 5.3 Public Announcements.During the Pre-Closing Period, the Company shall not (nor shall it
permit any of its Representatives to) issue any press release or make any public statement
regarding this Agreement or the Merger, or regarding any of the other transactions contemplated by
this Agreement (other than to stockholders or Representatives of the Company), without the Parents
prior written consent. 5.4 Reasonable Efforts.During the Pre-Closing Period, (a) the Company shall use its
reasonable efforts to cause the conditions set forth in Section 6 to be satisfied on a timely
basis, and (b) Parent and Merger Sub shall use their reasonable efforts to cause the conditions set
forth in Section 7 to be satisfied on a timely basis. 5.5 Termination of Agreements. Prior to the Closing, the Company shall use commercially
reasonable efforts to cause the following agreements to be terminated: (a)All agreements under which Douglas Neal is entitled to receive royalty or similar payments
relating to the Companys products or service offerings; (b)The Companys 1998 Stock Option/Stock Issuance Plan; (c)Workers Compensation and Employers Liability Insurance from Great American Insurance
Company of New York; (d)Commercial Automobile Insurance Policy from Chubb Group of Insurance Companies  Federal
Insurance Company; 32.




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(e)Commercial Excess and Umbrella Insurance Policy from Chubb Group of Insurance Companies -
Federal Insurance Company; and (f)Customarq Classic Insurance Program from Chubb Group of Insurance Companies  Federal
Insurance Company, for Property, Liability, Crime and Common Policy. 5.6 FIRPTA Matters.At the Closing, (a) the Company shall deliver to Parent a statement (in
such form as may be reasonably requested by counsel to Parent) conforming to the requirements of
Section 1.897  2(h)(1)(i) of the United States Treasury Regulations, and (b) the Company shall
deliver to the Internal Revenue Service the notification required under Section 1.897  2(h)(2) of
the United States Treasury Regulations. 5.7 Termination of Employment; Termination of Employee Plans.Prior to the Closing, the
Company shall terminate the employment of all employees of the Company other than the Retained
Employees. At the Closing, the Company shall have obtained the necessary consents and approvals to
terminate its 401(k) plan, and shall terminate its stock option plans and other incentive plans,
and shall ensure that no employee or former employee of the Company has any rights under any of
such Plans and that any liabilities of the Company under such Plans (including any such liabilities
relating to services performed prior to the Closing) are, or will be, fully extinguished at no cost
to the Company. 5.8 Continuing Indemnification of Directors & Officers.The indemnification provisions
contained in the Certificate of Incorporation or bylaws of the Surviving Corporation shall not
substantially reduce or impair the rights to indemnification now existing in the Certificate of
Incorporation or bylaws of the Company for the officers and directors of the Company as of the date
of this Agreement for acts or omissions of such individuals occurring prior to the Effective Time,
except to the extent such changes may reasonably be determined by the Surviving Corporation to be
required to conform with changes in applicable law and any changes which do not adversely affect
the application of such provisions to acts or omissions of such individuals prior to the Closing. SECTION 6.Conditions Precedent to Obligations of Parent and Merger Sub The obligations of Parent and Merger Sub to effect the Merger and otherwise consummate
the transactions contemplated by this Agreement are subject to the satisfaction, at or prior
to the Closing, of each of the following conditions: 6.1 Accuracy of Representations. Each of the representations and warranties made by the
Company in this Agreement and in each of the other agreements and instruments delivered to Parent
in connection with the transactions contemplated by this Agreement shall have been accurate in all
material respects as of the date of this Agreement (without giving effect to any Material Adverse
Effect or other materiality qualifications, or any similar qualifications, contained or
incorporated directly or indirectly in such representations and warranties), and shall be accurate
in all material respects as of the Closing Date as if made on the Closing Date (without giving
effect to any Material Adverse Effect or other materiality qualifications, or any similar
qualifications, contained or incorporated directly or indirectly in such representations and
warranties). 33.




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6.2 Performance of Covenants.All of the covenants and obligations that the Company is
required to comply with or to perform at or prior to the Closing shall have been complied with and
performed in all material respects. 6.3 Stockholder Approval.This Agreement shall have been duly adopted by the Required Vote.
On or prior to the date which is five (5) business days following the date of this Agreement, the
Company shall have delivered written consents by such holders of the Companys capital stock as is
required to approve the Merger under the provisions of applicable law. 6.4 Board Approval.This Agreement and all related agreements and transactions shall have
been duly adopted by the Board of Directors of the Company and Parent. 6.5 Consents.All Consents required to be obtained in connection with the Merger and the
other transactions contemplated by this Agreement (including the Consents identified in Part 2.20
of the Disclosure Schedule) shall have been obtained and shall be in full force and effect. 6.6 Employees.Parent shall have executed offer letters in the form set forth on Exhibit C-1,
and proprietary information and inventions agreements in the form set forth on Exhibit Bwith the
employees of the Company identified on ExhibitC-2. 6.7 Assignment of Intellectual Property Rights.Doug Neal shall have terminated all royalty
rights and assigned all Intellectual Property Rights to the Company relating to the Company IP. 6.8 Agreements and Documents.Parent and the Company shall have received the following
agreements and documents, each of which shall be in full force and effect: (a)Stock Option Cancellation Agreements, executed by each of the Converted Option Holders; (b)a Release in the form of Exhibit E-1, executed by each of the individuals identified on
Exhibit C-2; (c)legal opinion of Stradling Yocca Carlson & Rauth, the Companys legal counsel, (reasonably
satisfactory to Parent) in the United States, dated as of the Closing Date, in the form of Exhibit
F; (d)confidential invention and assignment agreements, reasonably satisfactory in form and
content to Parent, executed by all employees and former employees of the Company and by all
consultants and independent contractors and former consultants and former independent contractors
to the Company who have not already signed such agreements (including the individuals identified in
Part 2.9(f) of the Disclosure Schedule and each of the Retained Employees); 34.




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(e)an estoppel certificate, dated as of a date not more than five days prior to the Closing
Date and satisfactory in form and content to Parent, executed by Sheffield Properties of Illinois,
Inc.; (f)a statement (in such form as may be reasonably requested by counsel to Parent) conforming
to the requirements of Section 1.897  2(h)(1)(i) of the United States Treasury Regulations; (g)written resignations of all directors and officers of the Company, effective as of the
Effective Time; (h)a certificate executed by the Company containing the representation and warranty of the
Company that each of the representations and warranties set forth in Section 2 is accurate in all
respects as of the Closing Date as if made on the Closing Date and that the conditions set forth in
Section 6 have been duly satisfied (the Closing Certificate). 6.9 Absence of Material Adverse Effect.Since the date of this Agreement, there shall not
have occurred any Material Adverse Effect on the Company, and no event shall have occurred or
circumstance shall exist that, in combination with any other events or circumstances, could
reasonably be expected to have a Material Adverse Effect on the Company; provided, however, that an
increase of the Companys outstanding debt (including costs and expenses incurred in connection
with the transactions contemplated by this Agreement) to an amount not exceeding $1,500,000 shall
not constitute a Material Adverse Effect. 6.10 FIRPTA Compliance.The Company shall have filed with the Internal Revenue Service the
notification required under Section 1.897  2(h)(2) of the United States Treasury Regulations. 6.11 No Restraints.No temporary restraining order, preliminary or permanent injunction or
other order preventing the consummation of the Merger shall have been issued by any court of
competent jurisdiction and remain in effect, and there shall not be any Legal Requirement enacted
or deemed applicable to the Merger that makes consummation of the Merger illegal. 6.12 No Legal Proceedings.There shall not be pending or threatened any suit, action,
proceeding other than the matters set forth in Part 2.18(a) of the Disclosure Schedule. There
shall not be pending or threatened any suit, action, proceeding or investigation: (i) challenging
or seeking to restrain or prohibit the consummation of the Merger or any of the other transactions
contemplated by this Agreement; (ii) relating to the Merger and seeking to obtain from Parent any
damages (iii) seeking to prohibit or limit in any material respect Parents ability to vote,
receive dividends with respect to or otherwise exercise ownership rights with respect to the stock
of the Surviving Corporation; (iv) which would materially and adversely affect the right of the
Surviving Corporation to own the assets or operate the business of the Company; or (v) which, if
adversely determined, could have a Material Adverse Effect on the Company or Parent. 6.13 Termination of Employee Plans.The Company shall have provided Parent with evidence,
reasonably satisfactory to Parent, (a) as to the termination of the Stock Plan and 35.




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additional Employee Plans to be terminated (if any), (b) that no employee or former employee
of the Company has any rights under any of such Employee Plans and (c) that any Liabilities of the
Company under such Employee Plans (including any such Liabilities relating to services performed
prior to the Closing) are fully extinguished at no cost to the Company. 6.14 Termination of Agreements.The Company shall have provided Parent with evidence,
reasonably satisfactory to Parent, of the termination of the agreements set forth in Section 5.5 of
this Agreement. 6.15 Company Warrants.Parent shall have received evidence reasonably satisfactory to it that
all Company Warrants shall have been exercised or terminated. 6.16 Dissenters Rights.Any Company stockholders exercising dissenters rights pursuant to
Section 1.10 must collectively hold less than five percent (5%) of the Companys outstanding
capital stock. 6.17 Conversion of Preferred Stock.The Company shall have obtained the consent of the
holders of Company Preferred Stock to convert all of the Company Preferred Stock into shares of
Company Common Stock pursuant to the terms of the Companys Amended and Restated Certificate of
Incorporation with such conversion to be effective immediately prior to the Effective Time. 6.18 Delivery of Supplement to Opinion Letters.Parent and the Company shall have received a
supplement to each of the October 2004 opinion letters of Stradling Yocca Carlson & Rauth delivered
to the Company, which supplements shall be in a form reasonably acceptable to Parent. SECTION 7.Conditions Precedent to Obligations of the Company The obligations of the Company to effect the Merger and otherwise consummate the transactions
contemplated by this Agreement are subject to the satisfaction, at or prior to the Closing, of the
following conditions: 7.1 Accuracy of Representations.Each of the representations and warranties made by Parent
and Merger Sub in this Agreement shall have been accurate in all material respects as of the date
of this Agreement (without giving effect to any materiality or similar qualifications contained in
such representations and warranties), and shall be accurate in all material respects as of the
Closing Date as if made on the Closing Date (without giving effect to any materiality or similar
qualifications contained in such representations and warranties). 7.2 Performance of Covenants.All of the covenants and obligations that Parent and Merger Sub
are required to comply with or to perform at or prior to the Closing shall have been complied with
and performed in all material respects. 7.3 Documents.The Company shall have received a certificate executed by Parent and Merger
Sub containing the representations and warranties of Parent and Merger Sub that the conditions set
forth in Sections 7.1, 7.2 and 7.4 have been duly satisfied. 36.




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7.4 No Restraints.No temporary restraining order, preliminary or permanent injunction or
other order preventing the consummation of the Merger shall have been issued by any court of
competent jurisdiction and remain in effect, and there shall not be any Legal Requirement enacted
or deemed applicable to the Merger that makes consummation of the Merger illegal. SECTION 8.Termination 8.1 Termination Events.This Agreement may be terminated prior to the Closing: (a)by Parent if the Closing has not taken place on or before October 31, 2004 (other than as
a result of any failure on the part of Parent or Merger Sub to comply with or perform any covenant
or obligation of Parent or Merger Sub set forth in this Agreement or in any other agreement or
instrument delivered to the Company); (b)by the Company if the Closing has not taken place on or before October 31, 2004 (other
than as a result of the failure on the part of the Company to comply with or perform any covenant
or obligation set forth in this Agreement or in any other agreement or instrument delivered to
Parent); (c)by mutual written consent of Parent and the Company; or (d)by either Parent or the Company if a court of competent jurisdiction or other Governmental
Body shall have issued a final and nonappealable order, decree or ruling, or shall have taken any
other action, having the effect of permanently restraining, enjoining or otherwise prohibiting the
Merger. 8.2 Termination Procedures.If Parent wishes to terminate this Agreement pursuant to Section
8.1(a) or Section 8.1(d), Parent shall deliver to the Company a written notice stating that Parent
is terminating this Agreement and setting forth a brief description of the basis on which Parent is
terminating this Agreement. If the Company wishes to terminate this Agreement pursuant to Section
8.1(b) or Section 8.1(d), the Company shall deliver to Parent a written notice stating that the
Company is terminating this Agreement and setting forth a brief description of the basis on which
it is terminating this Agreement. 8.3 Effect of Termination.If this Agreement is terminated pursuant to Section 8.1, all
further obligations of the parties under this Agreement shall terminate; provided, however, that
notwithstanding such termination: (i) neither the Company nor Parent shall be relieved of any
obligation or liability arising from any prior material breach by such party of any representation,
warranty or covenant contained in, or other provision of, this Agreement; (ii) the parties shall,
in all events, remain bound by and continue to be subject to the provisions set forth in Section
10; and (iii) the Company shall, in all events, remain bound by and continue to be subject to
Section 5.3. 37.




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SECTION 9.Indemnification, Etc. 9.1 Survival of Representations, Etc. (a)Other than the representations and warranties set forth in Sections 2.3, 2.4, 2.6, 2.7,
2.9, 2.11, 2.12, 2.14, 2.15, 2.18, 2.19 and 2.20 (the Specified Representations), the
representations and warranties made by the Company (including the representations and warranties
set forth in Section 2 and the representations and warranties set forth in the Closing Certificate)
shall survive the Closing for a period of one (1) year. The Specified Representations shall
survive Closing for a period of eighteen (18) months; provided, however, that if, at any time prior
to the termination of the representation of warranty in question, if any Indemnitee (acting in good
faith) delivers to the Stockholders Agent a written notice alleging the existence of an inaccuracy
in or a breach of any of the representations and warranties made by the Company (and setting forth
in reasonable detail the basis for such Indemnitees belief that such an inaccuracy or breach may
exist) and asserting a claim for recovery under this Section 9 based on such alleged inaccuracy or
breach, then the claim asserted in such notice shall survive until such time as such claim is fully
and finally resolved. All representations and warranties made by Parent and Merger Sub shall
terminate and expire as of the Effective Time, and any liability of Parent or Merger Sub with
respect to such representations and warranties shall thereupon cease. Notwithstanding anything to
the contrary contained in Section 9.1(a), the limitations set forth in Sections 9.1(a) shall not
apply in the case of claims based upon intentional misrepresentation or fraud. (b)The representations, warranties, covenants and obligations of the Company, and the rights
and remedies that may be exercised by the Indemnitees, shall not be limited or otherwise affected
by or as a result of any information furnished to, or any investigation made by or Knowledge of,
any of the Indemnitees or any of their Representatives. (c)For purposes of this Agreement, each statement or other item of information set forth in
the Disclosure Schedule or in any update to the Disclosure Schedule shall be deemed to be a
representation and warranty made by the Company in this Agreement. 9.2 Indemnification by Company. (a)From and after the Effective Time (but subject to Section 9.1(a)), the Company (the
Indemnitors), shall hold harmless and indemnify each of the Indemnitees from and against, and
shall compensate and reimburse each of the Indemnitees for, any Damages which are directly or
indirectly suffered or incurred by any of the Indemnitees or to which any of the Indemnitees may
otherwise become subject (regardless of whether or not such Damages relate to any third-party
claim) and which arise from or as a result of, or are directly or indirectly connected with: (i)
any inaccuracy in or breach of any representation or warranty of the Company set forth in this
Agreement, the Disclosure Schedule or the Closing Certificate (without giving effect to any
Material Adverse Effect or other materiality qualification or any similar qualification contained
or incorporated directly or indirectly in such representation or warranty); (ii) any inaccuracy in
or breach of any representation or warranty of the Company set forth in this Agreement, the
Disclosure Schedule or the Closing Certificate as if such representation and warranty had been made
on and as of the Closing Date, except to the extent 38.




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that such representations and warranties relate to a specific date, in which case such
representations and warranties shall be accurate on and as of such specific date, (without giving
effect to any Material Adverse Effect or other materiality qualification or any similar
qualification contained or incorporated directly or indirectly in such representation or warranty);
(iii) any breach of any covenant or failure to perform any obligation of the Company set forth in
this Agreement, the Disclosure Schedule or the Closing Certificate; (iv) the failure of the Company
to comply with local, state or federal labor and employment laws, rules and regulations, including
without limitation all laws, rules or regulations dealing with employee wages and hours, on or
before the Closing; (v) any matter or correspondence described in Part 2.9 of the Disclosure
Schedule or (vi) any Legal Proceeding relating to any breach or inaccuracy of the type referred to
in clause (i), (ii), (iii), (iv) or (iv) above (including any Legal Proceeding commenced by
any Indemnitee for the purpose of enforcing any of its rights under this Section 9). (b)With the exception of inaccuracies or breaches of representations, warranties and
covenants involving intentional misrepresentation or fraud, the Parent shall be entitled to be
indemnified solely from the Escrow Amount not yet released by Parent pursuant to Section 1.8 for
any Damages actually incurred by an Indemnitee as set forth in Section 9.2(a). (c)Except in the case of intentional misrepresentation or fraud, and without limiting the
effect of any other limitation contained in this Section 9, the indemnification provided for in
this Section 9.2 shall not apply, and an Indemnitee shall not be entitled to exercise any
indemnification rights under this Section 9.2, except to the extent that the aggregate amount of
the Damages against which all Indemnitees would otherwise be entitled to be indemnified under this
Section 9.2 exceeds $200,000. At such time as the cumulative amount of such Damages exceeds
$200,000 in the aggregate, then the Indemnitees shall be entitled to be indemnified against and
compensated and reimbursed for the cumulative amount of such Damages (and not merely the portion of
such Damages exceeding $200,000). (d)In the case of intentional misrepresentation or fraud by the Company or any Company
Stockholder, the following provisions shall apply: (i)the Indemnitees shall have recourse to the Escrow Amount with respect to any Damages to
which an Indemnitee is entitled to be held harmless, indemnified, compensated or reimbursed
pursuant to Section 9.2 and which arise from or as a result of, or are connected with, such
intentional misrepresentation or fraud (irrespective of the Person who actually participated in or
had knowledge of such intentional misrepresentation or fraud); and (ii)in addition to the rights and remedies referred to in clause (i) of this sentence, with
respect to any Company Stockholder who participated in or had knowledge of such intentional
misrepresentation or fraud, there shall be no limit on such Company Stockholders liability for
such intentional misrepresentation or fraud. (e)Nothing in this Agreement shall limit any remedy an Indemnitee may have against any Person
for intentional misrepresentation or fraud under applicable tort laws. 39.




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9.3 Defense of Third Party Claims.In the event of the assertion or commencement by any
Person of any claim or Legal Proceeding (whether against Merger Sub, the Company, Parent or any
other Person) with respect to which any of the Indemnitors may become obligated to hold harmless,
indemnify, compensate or reimburse any Indemnitee pursuant to this Section 9, Parent shall have the
right, at its election, to proceed with the defense of such claim or Legal Proceeding on its own.
If Parent so proceeds with the defense of any such claim or Legal Proceeding: (a)all reasonable expenses relating to the defense of such claim or Legal Proceeding shall be
borne and paid from the Escrow Amount; (b)each Indemnitor shall make available to Parent any documents and materials in his or its
possession or control that may be necessary to the defense of such claim or Legal Proceeding; and (c)Parent shall have the right to settle, adjust or compromise such claim or Legal Proceeding
with the consent of the Stockholders Agent; provided, however, that such consent shall not be
unreasonably withheld or delayed. Parent shall (i) give the Stockholders Agent notice of the commencement of any such claim or Legal
Proceeding against Parent, Merger Sub or the Company promptly after Parent becomes aware of such
claims or Legal Proceeding and (ii) use reasonable efforts to notify the Stockholders Agent of all
material developments relating to such claims or Legal Proceeding; provided, however,that any
failure on the part of Parent to so notify the Stockholders Agent shall not limit any of the
obligations of the Indemnitors under this Section 9 (except to the extent such failure materially
prejudices the defense of such Legal Proceeding). If Parent does not elect to proceed with the
defense of any such claim or Legal Proceeding, the Stockholders Agent may proceed with the defense
of such claim or Legal Proceeding with counsel reasonably satisfactory to the Parent; provided,
however,that the Stockholders Agent (i) will use reasonable efforts to notify Parent of all
material developments relating to such claim or Legal Proceeding and (ii) may not settle, adjust or
compromise any such claim or Legal Proceeding without the prior written consent of Parent (which
consent may not be unreasonably withheld or delayed). 9.4 Exercise of Remedies by Indemnitees Other Than Parent.No Indemnitee (other than Parent
or any successor thereto or assign thereof) shall be permitted to assert any indemnification claim
or exercise any other remedy under this Agreement unless Parent (or any successor thereto or assign
thereof) shall have consented to the assertion of such indemnification claim or the exercise of
such other remedy. SECTION 10.Miscellaneous Provisions 10.1 Stockholders Agent.If this Agreement is duly adopted by the Companys stockholders,
the Companys stockholders shall be deemed to have irrevocably appointed David Strohm as their
agent for purposes of Section 9 and for purposes of acting on behalf of the Companys stockholders
pursuant to the indemnity and holdback terms of this Agreement (the Stockholders Agent). Mr.
Strohm hereby accepts his appointment as the Stockholders Agent. Parent shall be entitled to deal
exclusively with the Stockholders Agent on all matters 40.




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relating to Section 9 and such indemnity and holdback provisions, and shall be entitled to
rely conclusively (without further evidence of any kind whatsoever) on any document executed or
purported to be executed on behalf of any Indemnitor by the Stockholders Agent, and on any other
action taken or purported to be taken on behalf of any Indemnitor by the Stockholders Agent, as
fully binding upon such Indemnitor. If the Stockholders Agent shall die, become disabled or
otherwise be unable to fulfill his responsibilities as agent of the Indemnitors, then the
Indemnitors shall, within ten days after such death or disability, appoint a successor agent and,
promptly thereafter, shall notify Parent of the identity of such successor. Any such successor
shall become the Stockholders Agent for purposes of Section 9, and such indemnity and holdback
provisions, and this Section 10.1. If for any reason there is no Stockholders Agent at any time,
all references herein to the Stockholders Agent shall be deemed to refer to the Indemnitors. 10.2 Further Assurances.Each party hereto shall execute and cause to be delivered to each
other party hereto such instruments and other documents, and shall take such other actions, as such
other party may reasonably request (prior to, at or after the Closing) for the purpose of carrying
out or evidencing any of the transactions contemplated by this Agreement. 10.3 Fees and Expenses.Each party to this Agreement shall bear and pay all fees, costs and
expenses (including legal fees and accounting fees) that have been incurred or that are incurred in
the future by such party in connection with the transactions contemplated by this Agreement,
including all fees, costs and expenses incurred by such party in connection with or by virtue of
(a) the negotiation, preparation and review of this Agreement (including the Disclosure Schedule)
and all agreements, certificates, opinions and other instruments and documents delivered or to be
delivered in connection with the transactions contemplated by this Agreement, (b) the preparation
and submission of any filing or notice required to be made or given in connection with any of the
transactions contemplated by this Agreement, and the obtaining of any Consent required to be
obtained in connection with any of such transactions, and (c) the consummation of the Merger;
provided, however, that, notwithstanding anything to the contrary contained in this Agreement, the
total amount of all such fees, costs and expenses incurred by or for the benefit of the Company,
including all fees and expenses to be paid to the Escrow Agent in connection with the Escrow
Amount, shall be borne and paid solely by the stockholders of the Company, the Converted Option
Holders and Converted Warrant Holders, Converted Option Holders and Converted Warrant Holders, and
not by the Company. Such fees, costs and expenses incurred by or for the benefit of the Company
shall be deducted from the Merger Consideration in accordance with Section 1.5(a) above. 10.4 Attorneys Fees.If any action or proceeding relating to this Agreement or the
enforcement of any provision of this Agreement is brought against any party hereto, 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). 10.5 Notices.Any notice or other communication required or permitted to be delivered to any
party under this Agreement shall be in writing and shall be deemed properly delivered, given and
received (a) upon receipt when delivered by hand, or (b) two business days after sent by registered
mail or by courier or express delivery service, or by facsimile, provided 41.




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that in each case the notice or other communication is sent to the address or facsimile telephone number set forth beneath the name of such party below (or to such other address or facsimile telephone number as such party shall have specified in a written notice given to the other parties hereto): if to Parent or Merger Sub:iPass Inc.3800 Bridge ParkwayRedwood Shores, CAAttention: Bruce Posey, Esq.Facsimile No.: (650) 232-0250with a copy to:Cooley Godwardllp3000 El Camino RealFive Palo Alto SquarePalo Alto, CA 94306Attention: Timothy J. Moore, Esq.Facsimile No.: (650) 849-7400if to the Company:Mobile Automation, Inc.310 North Westlake Blvd.Westlake Village, CA 91362Attention:Facsimile No.: (310) 914-9703with a copy to:Stradling Yocca Carlson &
Rauth
660 Newport Center Drive, Suite 1600Newport Beach, CA 92660Attention: Steven R. Pacelli, Esq.Facsimile No.: (949) 725-4100if to the Stockholders Agent:David StrohmGreylock2929 Campus Dr., Suite 400San Mateo, CA 94403Facsimile No.: (650) 493-5575
 10.6 Time of the Essence.Time is of the essence of this Agreement. 42.




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10.7 Headings.The headings contained in this Agreement are for convenience of reference
only, shall not be deemed to be a part of this Agreement and shall not be referred to in connection
with the construction or interpretation of this Agreement. 10.8 Counterparts.This Agreement may be executed in several counterparts, each of which
shall constitute an original and all of which, when taken together, shall constitute one agreement. 10.9 Governing Law; Venue.This Agreement shall be construed in accordance with, and governed
in all respects by, the internal laws of the State of Delaware (without giving effect to principles
of conflicts of laws). In any action between any of the parties arising out of or relating to this
Agreement or any of the transactions contemplated by this Agreement: (a) each of the parties
irrevocably and unconditionally consents to and submits to the exclusive jurisdiction and venue of
the state and federal courts located in Santa Clara County, California; (b) if any such action is
commenced in a state court, then, subject to applicable law, no party shall object to the removal
of such action to any federal court located in the Northern District of California; and (c) each of
the parties irrevocably consents to service of process by first class certified mail, return
receipt requested, postage prepaid, to the address at which such party is to receive notice in
accordance with Section 10.5. 10.10 Successors and Assigns.This Agreement shall be binding upon each of the parties hereto
and each of their respective successors and assigns, if any. This Agreement shall inure to the
benefit of: the Company; Parent; Merger Sub; the other Indemnitees; and the respective successors
and assigns (if any) of the foregoing. Parent may freely assign any or all any of its rights under
this Agreement (including its indemnification rights under Section 9), in whole or in part, to any
other Person without obtaining the consent or approval of any other party hereto or of any other
Person. 10.11 Remedies Cumulative; Specific Performance.The rights and remedies of the parties
hereto shall be cumulative (and not alternative). The parties to this Agreement agree that, in the
event of any breach or threatened breach by any party to this Agreement of any covenant, obligation
or other provision set forth in this Agreement for the benefit of any other party to this
Agreement, such other party shall be entitled (in addition to any other remedy that may be
available to it) to (a) a decree or order of specific performance or mandamus to enforce the
observance and performance of such covenant, obligation or other provision, and (b) an injunction
restraining such breach or threatened breach. 10.12 Waiver. (a)No failure on the part of any Person to exercise any power, right, privilege or remedy
under this Agreement, and no delay on the part of any Person 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. 43.




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(b)No Person shall 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 such Person; and any such waiver shall not be applicable or have any effect
except in the specific instance in which it is given. 10.13 Waiver of Jury Trial. Each of the parties hereto hereby irrevocably waives any and all
right to trial by jury in any Legal Proceeding arising out of or related to this Agreement or the
transactions contemplated hereby. 10.14 Amendments.This Agreement may not be amended, modified, altered or supplemented other
than by means of a written instrument duly executed and delivered on behalf of all of the parties
hereto. 10.15 Severability.In the event that any provision of this Agreement, or the application of
any such provision to any Person or set of circumstances, shall be determined to be invalid,
unlawful, void or unenforceable to any extent, the remainder of this Agreement, and the application
of such provision to Persons or circumstances other than those as to which it is determined to be
invalid, unlawful, void or unenforceable, shall not be impaired or otherwise affected and shall
continue to be valid and enforceable to the fullest extent permitted by law. 10.16 Parties in Interest.Except for the provisions of Sections 1.5 and 9, none of the
provisions of this Agreement is intended to provide any rights or remedies to any Person other than
the parties hereto and their respective successors and assigns (if any). 10.17 Entire Agreement.This Agreement and the other agreements referred to herein set forth
the entire understanding of the parties hereto relating to the subject matter hereof and thereof
and supersede all prior agreements and understandings among or between any of the parties relating
to the subject matter hereof and thereof; provided, however,that the no-shop agreement executed
on behalf of Parent and the Company on September 3, 2004 shall not be superseded by this Agreement
and shall remain in effect in accordance with its terms until the earlier of (a) the Effective
Time, or (b) the date on which such agreement is terminated in accordance with its terms. 10.18 Construction. (a)For purposes of this Agreement, whenever the context requires: the singular number shall
include the plural, and vice versa; the masculine gender shall include the feminine and neuter
genders; the feminine gender shall include the masculine and neuter genders; and the neuter gender
shall include the masculine and feminine genders. (b)The parties hereto agree that any rule of construction to the effect that ambiguities are
to be resolved against the drafting party shall not be applied in the construction or
interpretation of this Agreement. 44.




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(c)As used in this Agreement, the words include and including, and variations thereof,
shall not be deemed to be terms of limitation, but rather shall be deemed to be followed by the
words without limitation. (d)Except as otherwise indicated, all references in this Agreement to Sections and
Exhibits are intended to refer to Sections of this Agreement and Exhibits to this Agreement. 45.




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The parties hereto have caused this Agreement to be executed and delivered as of the date
first written above. iPass Inc.,a Delaware
corporationBy:______________________________Printed
Name:______________________Title:_____________________________Montage Acquisition Corp.a Delaware
corporationBy:______________________________Printed
Name:______________________Title:_____________________________Mobile Automation, Inc.,a Delaware
corporationBy:______________________________Printed
Name:______________________Title:_____________________________Stockholders
AgentBy:______________________________Printed Name:______________________
 46.




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Exhibit A CERTAIN DEFINITIONS For purposes of the Agreement (including this Exhibit A): Acquisition Transaction.Acquisition Transaction shall mean any transaction involving any
(a) merger, consolidation, business combination, or similar transaction involving the Company, (b)
sale, license on an exclusive basis, lease or other disposition directly or indirectly by merger,
consolidation, business combination, share exchange, joint venture, or otherwise of assets of the
Company representing 50% or more of the assets of the Company, (c) issuance, sale, or other
disposition of (including by way of merger, consolidation, business combination, share exchange,
joint venture, or any similar transaction) securities (or options, rights or warrants to purchase,
or securities convertible into or exchangeable for such securities) representing 50% or more of the
voting power of the Company, (d) transaction in which any person shall acquire beneficial
ownership, or the right to acquire beneficial ownership or any group shall have been formed which
beneficially owns or has the right to acquire beneficial ownership of 50% or more of the
outstanding voting capital stock of the Company or (e) any combination of the foregoing (other than
the Merger). Acquisition Proposal.Acquisition Proposal shall mean any offer, proposal, inquiry or
indication of interest (other than an offer, proposal, inquiry or indication of interest by Parent)
contemplating or otherwise relating to any Acquisition Transaction. Agreement.Agreement shall mean the Agreement and Plan of Merger to which this Exhibit Ais
attached, as it may be amended from time to time. CGCL.CGCL shall mean the California General Corporation Law. Code.Code shall mean the Internal Revenue Code of 1986, as amended. Company.Company shall mean the Company and all of the Subsidiaries. Company Capital Stock.Company Capital Stock shall mean the Company Common Stock and the
Company Preferred Stock. Company Common Stock.Company Common Stock shall mean the common stock ($0.001 par value
per share) of the Company. Company Common Stock Warrants.Company Common Stock Warrants shall mean warrants to
purchase shares of Company Common Stock. Company Contract.Company Contract shall mean any Contract: (a) to which the Company is a
party; (b) by which the Company or any of its assets is or may become bound or under which the
Company has, or may become subject to, any obligation; or (c) under which the Company has or may
acquire any right or interest. Company IP.Company IP means (a) all Intellectual Property Rights in the Company Products
and Company Software and (b) all Intellectual Property Rights and Intellectual Property 1.




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in which the Company has (or purports to have) an ownership interest or an exclusive license
or similar exclusive right. Company Options.Company Options shall have the meaning set forth in Section 1.6. Company Preferred Stock.Company Preferred Stock shall mean the Series A Preferred Stock
and Series B Preferred Stock. Company Series A Warrants.Company Series A Warrants shall mean warrants to purchase shares
of Series A Preferred Stock. Company Series B Warrants.Company Series B Warrants shall mean warrants to purchase shares
of Series B Preferred Stock. Company Product.Company Product means any product or service developed, distributed,
licensed, leased, manufactured, marketed, provided, or sold, directly or indirectly, by or on
behalf of the Company at any time, and any product or service currently under development by the
Company, whether or not in collaboration with any Person. Company Software.Company Software shall mean any software (including firmware and other
software embedded in hardware devices) owned, developed (or currently being developed), used,
marketed, distributed, licensed or sold by the Company at any time (other than non-customized
third-party software licensed to the Company solely for internal use on a non-exclusive basis). Company Source Code.Company Source Code shall mean the human-readable source code version
of any Company Software, including all calculation formulae embodied in the Company Software,
descriptions or details of any algorithms embodied in the Company Software, and all annotations,
commentary, instructions, specifications (including design, functional, and other technical
specifications), programmer notes (technical or otherwise), logic diagrams, flowcharts, input and
output layouts, field descriptions, sort sequences, data dictionaries, and file layouts relating to
any Company Software. Company Stockholder.Company Stockholder shall mean each stockholder of the Company that
does not perfect its dissenters rights or rights of appraisal and is otherwise entitled to receive
the Merger Consideration pursuant to Section 1.5. Company Stock Plan.Company Stock Plan means the Companys 1998 Stock Option/Stock Issuance
Plan. Company Warrants.Company Warrants shall have the meaning set forth in Section 1.6. Consent.Consent shall mean any approval, consent, ratification, permission, waiver or
authorization (including any Governmental Authorization). Contract.Contract shall mean any written, oral or other agreement, contract, subcontract,
lease, understanding, instrument, note, warranty, insurance policy, benefit plan or legally binding
commitment or undertaking of any nature. 2.




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Current Net Assets.Current Net Assets means the total current assets of the Company as of
a certain balance sheet date less the total current liabilities of the Company as of the same
balance sheet date, in each case as determined in accordance with GAAP. Damages.Damages shall include any loss, damage, injury, decline in value, lost
opportunity, Liability, claim, demand, settlement, judgment, award, fine, penalty, Tax, fee
(including reasonable attorneys fees), charge, cost (including costs of investigation) or expense
of any nature. Disclosure Schedule.Disclosure Schedule shall mean the schedule (dated as of the date of
the Agreement) delivered separately to Parent on behalf of the Company. Encumbrance.Encumbrance shall mean any lien, pledge, hypothecation, charge, mortgage,
security interest, encumbrance, claim, infringement, interference, option, right of first refusal,
preemptive right, community property interest or restriction of any nature (including any
restriction on the voting of any security, any restriction on the transfer of any security or other
asset, any restriction on the receipt of any income derived from any asset, any restriction on the
use of any asset and any restriction on the possession, exercise or transfer of any other attribute
of ownership of any asset). Entity.Entity shall mean any corporation (including any non-profit corporation), general
partnership, limited partnership, limited liability partnership, joint venture, estate, trust,
company (including any limited liability company or joint stock company), firm or other enterprise,
association, organization or entity. Escrow Agent.Escrow Agent shall mean U.S. Bank National Association. Governmental Authorization.Governmental Authorization shall mean any: (a) permit,
license, certificate, franchise, permission, clearance, registration, qualification or
authorization issued, granted, given or otherwise made available by or under the authority of any
Governmental Body or pursuant to any Legal Requirement; or (b) right under any Contract with any
Governmental Body. Governmental Body.Governmental Body shall mean any: (a) nation, state, commonwealth,
province, territory, county, municipality, district or other jurisdiction of any nature; (b)
federal, state, local, municipal, foreign or other government; or (c) governmental or
quasi-governmental authority of any nature (including any governmental division, department,
agency, commission, instrumentality, official, organization, unit, body or Entity and any court or
other tribunal). Indemnitees.Indemnitees shall mean the following Persons: (a) Parent; (b) Parents
current and future affiliates (including the Surviving Corporation); (c) the respective
Representatives of the Persons referred to in clauses (a) and (b) above; and (d) the respective
successors and assigns of the Persons referred to in clauses (a), (b) and (c) above;
provided, however, that the stockholders of the Company shall not be deemed to be Indemnitees. Intellectual Property.Intellectual Property means and includes all algorithms, APIs,
apparatus, databases and data collections, diagrams, formulae, inventions (whether or not 3.




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patentable), know-how, logos, marks (including brand names, product names, logos, and
slogans), methods, network configurations and architectures, processes, proprietary information,
protocols, schematics, specifications, software, software code (in any form including source code
and executable or object code), subroutines, user interfaces, techniques, URLs, web sites, works of
authorship, and other forms of technology (whether or not embodied in any tangible form and
including all tangible embodiments of the foregoing such as instruction manuals, laboratory
notebooks, prototypes, samples, studies, and summaries). Intellectual Property Rights.Intellectual Property Rights means and includes all past,
present, and future rights of the following types, which may exist or be created under the laws of
any jurisdiction in the world: (a) rights associated with works of authorship, including exclusive
exploitation rights, copyrights, moral rights, and mask works; (b) trademark and trade name rights
and similar rights; (c) trade secret rights; (d) patents and industrial property rights; (e) other
proprietary rights in Intellectual Property of every kind and nature; and (f) all registrations,
renewals, extensions, combinations, divisions, or reissues of, and applications for, any of the
rights referred to in clauses (a) through (f) above. Knowledge.Information shall be deemed to be known to or to the Knowledge of the Company or
a Company Stockholder if that information is actually known or should be known by any officer or
director of the Company or such Company Stockholder after due inquiry. Legal Proceeding.Legal Proceeding shall mean any action, suit, litigation, arbitration,
proceeding (including any civil, criminal, administrative, investigative or appellate proceeding),
hearing, inquiry, audit, examination or investigation commenced, brought, conducted or heard by or
before, or otherwise involving, any court or other Governmental Body or any arbitrator or
arbitration panel. Legal Requirement.Legal Requirement shall mean any federal, state, local, municipal,
foreign or other law, statute, constitution, principle of common law, resolution, ordinance, code,
edict, decree, rule, regulation, ruling or requirement issued, enacted, adopted, promulgated,
implemented or otherwise put into effect by or under the authority of any Governmental Body. Liability.Liability shall mean any debt, obligation, duty or liability of any nature
(including any unknown, undisclosed, unmatured, unaccrued, unasserted, contingent, indirect,
conditional, implied, vicarious, derivative, joint, several or secondary liability), regardless of
whether such debt, obligation, duty or liability would be required to be disclosed on a balance
sheet prepared in accordance with generally accepted accounting principles and regardless of
whether such debt, obligation, duty or liability is immediately due and payable. Material Adverse Effect.An event, violation, inaccuracy, circumstance or other matter will be
deemed to have a Material Adverse Effect on the Company if such event, violation, inaccuracy,
circumstance or other matter (considered together with all other matters that would constitute
exceptions to the representations and warranties set forth in the Agreement or in the Closing
Certificate but for the presence of Material Adverse Effect or other materiality qualifications,
or any similar qualifications, in such representations and warranties) would have a material
adverse effect on (i) the business, condition, capitalization, assets, liabilities, operations or
financial performance of the Company, (ii) the ability of the Company to consummate the 4.




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Merger or any of the other transactions contemplated by the Agreement or to perform any of its
obligations under the Agreement, or (iii) Parents ability to vote, receive dividends with respect
to or otherwise exercise ownership rights with respect to the stock of the Surviving Corporation. Option Consideration.Option Consideration shall mean an amount in cash equal to the
product of (i) the excess of the Merger Consideration per share of Company Common Stock underlying
such Company Option over the exercise price per share of Company Common Stock of such Company
Option and (ii) the number of shares of Company Common Stock (the NetOption Shares)
computed using the following formula: X = Y(A-B)/A Where: X = the Net Option Shares Y = number of shares of Company Common Stock for which such Company Option is exercisable
immediately prior to the Effective Time after giving effect to any acceleration of vesting
resulting from the Merger A = the Merger Consideration per share of Company Common Stock underlying such Company Option B = Exercise price per share of Company Common Stock of such Company Option Person.Person shall mean any individual, Entity or Governmental Body. Registered IP.Registered IP means all Intellectual Property Rights that are registered,
filed, or issued under the authority of any Governmental Body, including all patents, registered
copyrights, registered mask works, and registered trademarks and all applications for any of the
foregoing. Representatives.Representatives shall mean officers, directors, employees, agents,
affiliates, attorneys, accountants, advisors and other representatives. Series A Preferred Stock.Series A Preferred Stock shall mean the preferred stock of the
Company ($0.005 par value per share) designated as Series A. Series B Preferred Stock.Series B Preferred Stock shall mean the preferred stock of the
Company ($0.005 par value per share) designated as Series B. Subsidiary.Any Entity shall be deemed to be a Subsidiary of another Person if such Person
directly or indirectly (a) has the power to direct the management or policies of such Entity or (b)
owns, beneficially or of record, (i) an amount of voting securities or other interest of such
Entity that is sufficient to enable such Person to elect at least a majority of the members of such
Entitys board of directors or other governing body, or (ii) at least 50% of the outstanding equity
or financial interests of such Entity. Tax.Tax shall mean any tax (including any income tax, franchise tax, capital gains tax,
gross receipts tax, value-added tax, surtax, excise tax, ad valorem tax, transfer tax, stamp 5.




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tax, sales tax, use tax, property tax, business tax, withholding tax or payroll tax), levy,
assessment, tariff, duty (including any customs duty), deficiency or fee, and any related charge or
amount (including any fine, penalty or interest), imposed, assessed or collected by or under the
authority of any Governmental Body. Tax Return.Tax Return shall mean any return (including any information return), report,
statement, declaration, estimate, schedule, notice, notification, form, election, certificate or
other document or information filed with or submitted to, or required to be filed with or submitted
to, any Governmental Body in connection with the determination, assessment, collection or payment
of any Tax or in connection with the administration, implementation or enforcement of or compliance
with any Legal Requirement relating to any Tax. Warrant Consideration.Warrant Consideration shall mean an amount in cash equal to the
product of (a) the excess of the Merger Consideration per share of Company Common Stock underlying
such Company Warrant over the exercise price per share of Company Common Stock of such Company
Warrant and (b) the number of shares of Company Common Stock (the Net Warrant Shares) computed
using the following formula: X = Y(A-B)/A Where: X = the Net Warrant Shares Y = number of shares of Company Common Stock for which such Company Warrant is exercisable
immediately prior to the Effective Time A = the Merger Consideration per share of Company Common Stock underlying such Company Warrant B = Exercise price per share of Company Common Stock of such Company Warrant 6.




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Exhibit B FORM OF PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT 7.




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Exhibit C-1 FORM OF OFFER LETTER 8.




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Exhibit C-2 CONTINUING EMPLOYEES OF THE COMPANY Mark Bell Bruce Temesy Steve Recker Jay Steidle Hank Nowak Ryan Thomas Lisa Cell Mike Teplinsky Chad Sanders Geoff Schemel Jack Horner Alan Hand Alex Chernyakhovsky Michael Russell Dale Schroeder Justin Killen Alex Balint Marc Farer David Adkins Steve Rogers Douglas Neal Kay Buell 9.




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Exhibit D ESCROW AGREEMENT 10.




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Exhibit E-1 FORM OF RELEASE 11.




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Exhibit E-2 LIST OF INDIVIDUALS SIGNING RELEASE Greylock IX Limited Partnership David Strohm Silicon Valley Bank Douglas Neal The Peter Norton Living Trust Safi Qureshey Safi U. Qureshey Family Trust Uns Safi Qureshey Investment Trust Zeshan Qureshey Investment Trust Rod Turner 12.




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Exhibit F FORM OF LEGAL OPINION FROM STRADLING YOCCA CARLSON & ROTH 13.




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Schedule I SPECIFIED PAYMENT OBLIGATIONS 14.