---

---

# AGREEMENT AND
  PLAN OF MERGER

# BY AND AMONG

# CHECK POINT SOFTWARE
TECHNOLOGIES LTD.,

# CHECK POINT SOFTWARE TECHNOLOGIES,
INC.,

# ZANZIBAR ACQUISITION,
L.L.C.

# AND

# ZONE LABS,
  INC.

# 

# DATED AS OF DECEMBER
15, 2003



---

---

# TABLE OF CONTENTS

|**ARTICLE
      1.   Definitions**                                   |  | **2**                                                              | 
|-------------------------------------------------------------------- |  | ------------------------------------------------------------------ | 
|                                                                     |  |                                                                    | 
|Section
      1.1                                                    |  | Certain
      Defined Terms                                        | 
|                                                                     |  |                                                                    | 
|**ARTICLE
      2.   The Merger**                                    |  | **15**                                                             | 
|                                                                     |  |                                                                    | 
|Section
      2.1                                                    |  | The
      Merger                                                   | 
|Section
      2.2                                                    |  | Effective
      Time                                               | 
|Section
      2.3                                                    |  | Effect
      of the Merger                                         | 
|Section
      2.4                                                    |  | Limited
      Liability Company Agreement of the Surviving Company | 
|Section
      2.5                                                    |  | Managers
      and Officers of the Surviving Company               | 
|Section
      2.6                                                    |  | Conversion
      of Securities                                     | 
|Section
      2.7                                                    |  | Escrow                                                             | 
|Section
      2.8                                                    |  | Distribution
      of the Transaction Consideration                | 
|Section
      2.9                                                    |  | No
      Further Ownership Rights in Shares of Company Stock       | 
|Section
      2.10                                                   |  | Lost,
      Stolen or Destroyed Certificates                       | 
|Section
      2.11                                                   |  | Dissenting
      Shares                                            | 
|Section
      2.12                                                   |  | Withholding                                                        | 
|                                                                     |  |                                                                    | 
|**ARTICLE
      3.   Closing Deliveries**                            |  | **24**                                                             | 
|                                                                     |  |                                                                    | 
|Section
      3.1                                                    |  | Closing
      Deliveries                                           | 
|                                                                     |  |                                                                    | 
|**ARTICLE
      4.   Representations and Warranties of the Company** |  | **25**                                                             | 
|                                                                     |  |                                                                    | 
|Section
      4.1                                                    |  | Organization                                                       | 
|Section
      4.2                                                    |  | Capitalization                                                     | 
|Section
      4.3                                                    |  | Subsidiaries                                                       | 
|Section
      4.4                                                    |  | Authority;
      No Violation                                      | 
|Section
      4.5                                                    |  | Consents
      and Approvals                                       | 
|Section
      4.6                                                    |  | Financial
      Statements                                         | 
|Section
      4.7                                                    |  | Contracts                                                          | 
|Section
      4.8                                                    |  | Intellectual
      Property                                        | 
|Section
      4.9                                                    |  | Employee
      Benefit Matters                                     | 
|Section
      4.10                                                   |  | Labor
      and Other Employment Matters                           | 
|Section
      4.11                                                   |  | Tax
      Matters                                                  | 
|Section
      4.12                                                   |  | Legal
      Proceedings                                            | 
|Section
      4.13                                                   |  | Compliance
      with Applicable Law                               | 
|Section
      4.14                                                   |  | Environmental
      Matters                                        | 
|Section
      4.15                                                   |  | Properties                                                         | 
|Section
      4.16                                                   |  | Insurance                                                          | 

i

---

---

|Section
      4.17                                                                          |  | No
      Broker                                                  |  | 45 | 
|------------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------- |  | -- | 
|Section
      4.18                                                                          |  | Absence
      of Certain Changes or Events                       |  | 45 | 
|Section
      4.19                                                                          |  | Sufficiency
      of and Title to Assets                         |  | 46 | 
|Section
      4.20                                                                          |  | Potential
      Conflicts of Interest                            |  | 47 | 
|Section
      4.21                                                                          |  | Transactions
      with Affiliates                               |  | 47 | 
|Section
      4.22                                                                          |  | Governmental
      Regulation                                    |  | 47 | 
|Section
      4.23                                                                          |  | No
      Loss of Customers                                       |  | 47 | 
|Section
      4.24                                                                          |  | Books
      and Records                                          |  | 47 | 
|Section
      4.25                                                                          |  | Foreign
      Corrupt Practices Act                              |  | 48 | 
|Section
      4.26                                                                          |  | Shareholder
      Vote Required                                  |  | 48 | 
|Section
      4.27                                                                          |  | Information
      Supplied by the Company                        |  | 48 | 
|Section
      4.28                                                                          |  | Material
      Misstatements and Omissions                       |  | 49 | 
|Section
      4.29                                                                          |  | Reorganization
      Treatment.                                  |  | 49 | 
|                                                                                            |  |                                                                  | 
|**ARTICLE
      5.   Representations and Warranties of Buyer, Parent and Merger
      Sub** |  | **51**                                                           | 
|                                                                                            |  |                                                                  |  |    | 
|Section
      5.1                                                                           |  | Organization                                                     |  | 51 | 
|Section
      5.2                                                                           |  | Authority;
      No Violation                                    |  | 51 | 
|Section
      5.3                                                                           |  | Consents
      and Approvals                                     |  | 52 | 
|Section
      5.4                                                                           |  | No
      Broker                                                  |  | 52 | 
|Section
      5.5                                                                           |  | Valid
      Issuance of Buyer Ordinary Shares                    |  | 52 | 
|Section
      5.6                                                                           |  | SEC
      Filings                                                |  | 52 | 
|Section
      5.7                                                                           |  | Information
      Supplied by Buyer, Parent and Merger Sub       |  | 52 | 
|Section
      5.8                                                                           |  | Material
      Misstatements and Omissions                       |  | 53 | 
|Section
      5.9                                                                           |  | Reorganization
      Treatment                                   |  | 53 | 
|                                                                                            |  |                                                                  | 
|**ARTICLE
      6.   Covenants and Additional Agreements**                                  |  | **56**                                                           | 
|                                                                                            |  |                                                                  |  |    | 
|Section
      6.1                                                                           |  | Conduct
      of Business                                        |  | 56 | 
|Section
      6.2                                                                           |  | Confidentiality
      and Announcements                          |  | 58 | 
|Section
      6.3                                                                           |  | Access
      by Buyer                                            |  | 59 | 
|Section
      6.4                                                                           |  | Notification
      of Certain Matters                            |  | 59 | 
|Section
      6.5                                                                           |  | Acquisition
      Proposals                                      |  | 59 | 
|Section
      6.6                                                                           |  | Fairness
      Hearing; Registration of Shares                   |  | 60 | 
|Section
      6.7                                                                           |  | Company
      Shareholder Approval; Shareholder Meeting          |  | 60 | 
|Section
      6.8                                                                           |  | Application
      for Listing of Buyer Ordinary Shares on NASDAQ |  | 61 | 
|Section
      6.9                                                                           |  | Takeover
      Statutes                                          |  | 61 | 
|Section
      6.10                                                                          |  | Further
      Assurances                                         |  | 61 | 
|Section
      6.11                                                                          |  | Employee
      Matters                                           |  | 62 | 
|Section
      6.12                                                                          |  | Expenses                                                         |  | 63 | 

ii

---

---

|Section
      6.13                               |  | Reservation
      of Buyer Ordinary Shares Issuable Upon Exercise of Assumed Options; Registration
      on Form S-8 |  | 63 | 
|------------------------------------------------ |  | -------------------------------------------------------------------------------------------------------------------- |  | -- | 
|                                                 |  |                                                                                                                      | 
|**ARTICLE
      7.   Tax Matters**               |  | **63**                                                                                                               | 
|                                                 |  |                                                                                                                      |  |    | 
|Section
      7.1                                |  | Tax
      Periods Ending on or Before the Closing Date                                                               |  | 63 | 
|Section
      7.2                                |  | Cooperation
      on Tax Matters                                                                                     |  | 63 | 
|Section
      7.3                                |  | Reorganization
      Matters.                                                                                        |  | 63 | 
|Section
      7.4                                |  | Certain
      Taxes                                                                                                  |  | 64 | 
|Section
      7.5                                |  | FIRPTA
      Certificate                                                                                             |  | 64 | 
|Section
      7.6                                |  | Characterization
      of Payments                                                                                   |  | 64 | 
|Section
      7.7                                |  | Carrybacks                                                                                                           |  | 64 | 
|                                                 |  |                                                                                                                      | 
|**ARTICLE
      8.   Conditions To Obligations** |  | **65**                                                                                                               | 
|                                                 |  |                                                                                                                      |  |    | 
|Section
      8.1                                |  | Conditions
      to Each Partys Obligations to Effect the Merger                                                    |  | 65 | 
|Section
      8.2                                |  | Conditions
      to the Companys Obligations to Effect the Merger                                                   |  | 65 | 
|Section
      8.3                                |  | Conditions
      to the Obligations of Buyer, Parent and Merger Sub to Effect the Merger                             |  | 66 | 
|                                                 |  |                                                                                                                      | 
|**ARTICLE
      9.   Termination**               |  | **67**                                                                                                               | 
|                                                 |  |                                                                                                                      |  |    | 
|Section
      9.1                                |  | Termination                                                                                                          |  | 67 | 
|Section
      9.2                                |  | Effect
      of Termination.                                                                                         |  | 69 | 
|                                                 |  |                                                                                                                      | 
|**ARTICLE
      10.   Indemnification**          |  | **69**                                                                                                               | 
|                                                 |  |                                                                                                                      |  |    | 
|Section
      10.1                               |  | Survival
      of Representations, Warranties and Covenants                                                          |  | 69 | 
|Section
      10.2                               |  | Indemnification
      by the Escrow Participants.                                                                    |  | 69 | 
|Section
      10.3                               |  | Indemnification
      by Buyer                                                                                       |  | 71 | 
|Section
      10.4                               |  | Procedures
      for Third-Party Claims.                                                                             |  | 71 | 
|Section
      10.5                               |  | Termination
      of Indemnification Obligations                                                                     |  | 73 | 
|Section
      10.6                               |  | Limitations
      on Indemnity; Maximum Liability.                                                                   |  | 73 | 
|                                                 |  |                                                                                                                      | 
|**ARTICLE
      11.   Miscellaneous**            |  | **73**                                                                                                               | 
|                                                 |  |                                                                                                                      |  |    | 
|Section
      11.1                               |  | Entire
      Agreement                                                                                               |  | 73 | 
|Section
      11.2                               |  | Interpretation                                                                                                       |  | 73 | 
|Section
      11.3                               |  | Severability                                                                                                         |  | 74 | 
|Section
      11.4                               |  | Notices                                                                                                              |  | 74 | 
|Section
      11.5                               |  | Binding
      Effect; Persons Benefiting; No Assignment                                                              |  | 75 | 
|Section
      11.6                               |  | Counterparts                                                                                                         |  | 75 | 
|Section
      11.7                               |  | Waiver
      of Jury Trial                                                                                           |  | 76 | 
|Section
      11.8                               |  | Governing
      Law                                                                                                  |  | 76 | 
|Section
      11.9                               |  | Consent
      to Jurisdiction                                                                                        |  | 76 | 
|Section
      11.10                              |  | Attorneys
      Fees                                                                                                |  | 76 | 
|Section
      11.11                              |  | Tax
      Disclosure Authorization                                                                                   |  | 76 | 

iii

---

---

|Exhibit
      A |  | List
      of Company Shareholders Executing Shareholder Support Agreements               | 
|--------------- |  | ----------------------------------------------------------------------------------------- | 
|Exhibit
      B |  | Form
      of Shareholder Support Agreement                                               | 
|Exhibit
      C |  | List
      of Individuals Executing Employment Agreements                                 | 
|Exhibit
      D |  | List
      of Individuals Executing Non-Competition Agreements                            | 
|Exhibit
      E |  | Form
      of Non-Competition Agreement                                                   | 
|Exhibit
      F |  | Company
      Operating Plan                                                              | 
|Exhibit
      G |  | Form
      of Escrow Agreement                                                            | 
|Exhibit
      H |  | Form
      of Opinion of Gray Cary Ware & Freidenrich LLP                                 | 
|Exhibit
      I |  | Form
      of Primary Securityholder Agreement                                            | 
|Exhibit
      J |  | Form
      of Securityholder Agreement                                                    | 
|Exhibit
      K |  | List
      of Individuals Executing Securityholder Agreements                             | 
|Exhibit
      L |  | Form
      of Opinion of Naschitz, Brandes & Co.                                          | 
|Exhibit
      M |  | Form
      of Opinion of Latham & Watkins LLP                                             | 
|Exhibit
      N |  | List
      of Company Business Employees to Remain in the Employ of the Surviving Company | 
|Exhibit
      O |  | List
      of Company Persons with Knowledge and Buyer Persons with Knowledge             | 

iv

---

---

THIS
AGREEMENT AND PLAN OF MERGER, dated as of December 15, 2003 (this Agreement), is made by and among Check Point Software Technologies Ltd., an Israeli company (Buyer), Check Point Software Technologies, Inc., a Delaware corporation and a wholly owned subsidiary
of Buyer (Parent), Zanzibar Acquisition, L.L.C., a California limited liability company and a wholly owned subsidiary
of Parent (Merger Sub), and Zone Labs, Inc., a California corporation (the Company).

WHEREAS,
each of the boards of directors of Buyer, Parent and the Company, and Parent, as the sole member
of Merger Sub, has approved and declared advisable the merger of the Company with and into Merger
Sub (the Merger) upon the terms and subject to the conditions of this Agreement and in accordance with the Beverly-Killea
Limited Liability Company Act of the State of California (the CLLCA) and the General Corporation Law of the State of California (the CGCL);

WHEREAS,
each of the boards of directors of Buyer, Parent and the Company, and Parent, as the sole member
of Merger Sub, has determined that the Merger is in furtherance of and consistent with their respective
business strategies and is in the best interest of their respective stockholders and shareholders,
as the case may be, and the board of directors of the Company has recommended that the Shareholders
(as defined herein) approve the Merger;

WHEREAS,
each of the boards of directors of Buyer, Parent and the Company, and Parent, as the sole member
of Merger Sub, intends, by approving resolutions authorizing this Agreement, to adopt this Agreement
as a plan of reorganization and that the Merger qualify as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as amended (the Code), and the regulations promulgated thereunder (the Treasury Regulations);

WHEREAS,
contemporaneously herewith, as a condition and an inducement to Buyer, Parent and Merger Subs
willingness to enter into this Agreement, each of the shareholders of the Company set forth on Exhibit A  hereto has entered into a Shareholder Support Agreement with Buyer, Parent and Merger Sub, in the
form attached hereto as Exhibit B (collectively, the Shareholder Support Agreements); and

WHEREAS,

contemporaneously herewith, as a condition and an inducement to Buyer, Parent and Merger Subs

willingness to enter into this Agreement, each of the individuals set forth on Exhibit C  hereto has entered into an Employment Agreement with Buyer, Parent and Merger Sub, each to become
effective at the Effective Time (as defined herein) (collectively, the Employment Agreements);

WHEREAS,

contemporaneously herewith, as a condition and an inducement to Buyer, Parent and Merger Subs

willingness to enter into this Agreement, each of the individuals set forth on Exhibit D  hereto has entered into a Non-Competition Agreement with Buyer, each to become effective at the Effective
Time (as defined herein) and substantially in the form attached hereto as Exhibit E (collectively, the Non-Competition Agreements);



---

---

NOW,
  THEREFORE, in consideration of the foregoing and the respective representations,
  warranties, covenants and agreements set forth in this Agreement and intending
  to be legally bound hereby, the parties hereto agree as follows:

ARTICLE 1.Definitions

Section
  1.1 Certain Defined Terms.  As used in this Agreement, the
  following terms shall have the following meanings:

401(k)
  Plan shall have the meaning set forth in Section 6.11.3 of this Agreement.

Accounts
  Receivable shall have the meaning set forth in Section 4.6.2 of this
  Agreement.

Acquisition
  Proposal shall have the meaning set forth in Section 6.5 of this Agreement.

Affiliate
  shall mean any individual, partnership, corporation, entity or other Person
  that directly, or indirectly through one or more intermediaries, controls, is
  controlled by or is under common control with the Person specified.

Aggregate
  Outstanding Claims shall have the meaning set forth in Section 2.7.2.1
  of this Agreement.

Agreement
  shall have the meaning set forth in the Preamble to this Agreement.

Ancillary
  Agreements shall mean the Shareholder Support Agreements, the Employment
  Agreements, the Non-Competition Agreements, the Escrow Agreement, the Primary
  Securityholder Agreements and the Securityholder Agreements.

Applicable
  Law shall mean any Law applicable to the Company, any of the Shareholders,
  Buyer, Parent or Merger Sub or any of their respective Affiliates, properties,
  assets, officers, directors, employees or agents, as the case may be.

Assumed
  Options shall mean all Company Options that are outstanding and unexercised
  immediately prior to the Effective Time and that are assumed by Buyer pursuant
  to Section 2.6.7 of this Agreement.

Assumed
  Options Value shall mean the dollar amount obtained by multiplying
  (x) the aggregate number of Buyer Ordinary Shares issuable upon the exercise
  of Assumed Options by (y) the Initial Measurement Price.

Audited
  Company Financial Statements shall have the meaning set forth in Section
  4.6.1 of this Agreement.

2

---

---

Benefit
  Arrangement shall mean any employment, consulting, severance or other
  similar contract, arrangement or policy (written or oral) and each plan, arrangement,
  program, agreement or commitment (written or oral) providing for insurance coverage
  (including, without limitation, any self-insured arrangements), workers
  compensation, disability benefits, supplemental unemployment benefits, vacation
  benefits, retirement benefits, life, health or accident benefits (including,
  without limitation, any voluntary employees beneficiary association
  as defined in Section 501(c)(9) of the Code providing for the same or other
  benefits) or for deferred compensation, profit-sharing, bonuses, stock options,
  stock appreciation rights, stock purchases or other forms of incentive compensation
  or post-retirement insurance, compensation or benefits which (a) is not a Welfare
  Plan, Pension Plan or Multiemployer Plan, (b) is entered into, maintained, contributed
  to or required to be contributed to, as the case may be, by the Company or any
  ERISA Affiliate or under which the Company or any ERISA Affiliate may incur
  any liability, and (c) covers any employee or former employee of the Company
  or any ERISA Affiliate (with respect to their relationship with such any entity).

Benefit
  Plan Enrollment Date shall have the meaning set forth in Section 6.11.1
  of this Agreement.

Business
  Day shall mean any day that is not a Saturday, a Sunday or other day
  on which banks are required or authorized by Law to be closed in the United
  States or Israel.

Buyer
  shall have the meaning set forth in the Preamble to this Agreement.

Buyer
  Benefit Plan shall have the meaning set forth in Section 6.11.1 of
  this Agreement.

Buyer
  Cure Period shall have the meaning set forth in Section 9.1.7 of this
  Agreement.

Buyer
  Indemnitees shall have the meaning set forth in Section 10.2.1 of
  this Agreement.

Buyer
  Material Adverse Effect shall mean a material adverse effect on the
  business, assets, liabilities, financial condition, results of operations or
  prospects of Buyer and its Subsidiaries, taken as a whole, or on the ability
  of Buyer, Parent or Merger Sub to complete the Closing pursuant to the terms
  hereof or comply with its obligations hereunder; provided, however, that
  a Buyer Material Adverse Effect shall not be deemed to have occurred if such
  effect is attributable to (i) changes in general U.S. or world economic or capital
  market conditions or changes generally affecting the industry in which the Buyer
  and its Subsidiaries operate (provided that such changes do not have
  a disproportionate adverse impact on the Buyer and its Subsidiaries, taken as
  a whole) or (ii) any adverse change, effect, event or occurrence (x) in Buyers
  relationship with any of its key employees, partners, suppliers or customers,
  or any failure to keep intact or renew any agreements with any of its customers,
  in each case proximately caused by the announcement or pendency of the Merger,
  or (y) resulting from any announcement or action by any competitor of Buyer
  with respect to the development, availability, marketing or sale of any competitive
  product or technology or any strategic partnerships or alliances regarding any
  of such matters of which Buyer did not have Knowledge or control prior to the
  execution of this Agreement.

3

---

---

Buyer
  Ordinary Shares shall mean the ordinary shares of Buyer, NIS 0.01
  nominal value.

Buyer
  SEC Filings shall have the meaning set forth in Section 5.6 of this
  Agreement.

California
  Permit shall have the meaning set forth in Section 4.27.1 of this
  Agreement.

Cash
  Consideration shall mean the aggregate cash consideration payable
  at Closing pursuant to Article 2 of this Agreement, including, without limitation,
  amounts payable pursuant to Section 2.6.10 of this Agreement.

Cash
  Equivalents shall mean investment securities with original maturities
  of ninety (90) days or less.

CERCLA
  shall mean the Comprehensive Environmental Response, Compensation and Liability
  Act, 42 U.S.C. Section 9601 et seq.

Certificate
  of Merger shall have the meaning set forth in Section 2.2 of this
  Agreement.

Certificates
  shall have the meaning set forth in Section 2.8.1 of this Agreement.

CGCL
  shall have the meaning set forth in the Recitals to this Agreement.

CLLCA
  shall have the meaning set forth in the Recitals to this Agreement.

Closing
  shall have the meaning set forth in Section 2.1.2 of this Agreement.

Closing
  Consideration Exhibit shall mean the exhibit prepared and delivered
  by the Company to Buyer at Closing that sets forth each Shareholders allocation
  of Transaction Consideration and each Escrow Participants allocation and
  Pro Rata Share of Escrow Consideration.

Closing
  Date shall have the meaning set forth in Section 2.1.2 of this Agreement.

Closing
  Date Price shall mean the closing price for Buyer Ordinary Shares
  on the NASDAQ National Market on the Closing Date as reported in The Wall
  Street Journal.

Closing
  Measurement Price shall mean the average of the closing prices for
  Buyer Ordinary Shares on the NASDAQ National Market as reported in The Wall
  Street Journal for the five (5) consecutive Trading Days ending on the second
  (2nd) Trading Day prior to the Closing Date.

4

---

---

COBRA
  shall mean the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended.

Code
  shall have the meaning set forth in the Recitals to this Agreement.

Commissioner
  shall have the meaning set forth in Section 6.6 of this Agreement.

Common
  Stock shall mean the common stock, no par value per share, of the
  Company.

Company
  shall have the meaning set forth in the Preamble to this Agreement.

Company
  Assets shall have the meaning set forth in Section 4.19 of this Agreement.

Company
  Business shall mean the business and operations of the Company or
  any of its Subsidiaries in the manner in which the same have been conducted
  prior to the date hereof, are currently being conducted and are currently proposed
  to be conducted, whether conducted by the Company or any of its Subsidiaries.

Company
  Business Employee shall mean any current or former employee of the
  Company or any of its Subsidiaries.

Company
  Business Independent Contractor shall mean any current or former independent
  contractor of the Company or any of its Subsidiaries.

Company
  Cure Period shall have the meaning set forth in Section 9.1.3 of this
  Agreement.

Company
  Disclosure Schedule shall have the meaning set forth in the introduction
  to Article 4 of this Agreement.

Company
  Dissenting Shares shall have the meaning set forth in Section 2.11
  of this Agreement.

Company
  Free Cash shall mean, as of the Closing Date, (x) the cash, Cash Equivalents
  and Short-Term Investments held by the Company, minus (y) any other cash
  liabilities of the Company triggered as a result of the transactions contemplated
  by this Agreement and the Ancillary Agreements, in each case incurred (but not
  paid in the ordinary course of business prior to the Closing Date) by the Company
  or any of its Subsidiaries in connection with this Agreement, the Ancillary
  Agreements, the Merger and the other transactions contemplated hereby and thereby,
  which cash liabilities would not arise other than as a result of the transactions
  contemplated by this Agreement and the Ancillary Agreements.

Company
  Free Cash Shortfall shall mean the dollar amount, if any, obtained
  by subtracting (x) the Company Free Cash from (y) the sum of (i) Fifteen Million
  Dollars ($15,000,000) and (ii) the aggregate exercise prices of all Company
  Options and Company Warrants exercised between the date of the Interim Period
  Unaudited Company Balance Sheet and the Closing Date.

5

---

---

Company
  Inbound License Agreement shall have the meaning set forth in Section
  4.8.6.1 of this Agreement.

Company
  Insurance Policies shall have the meaning set forth in Section 4.16
  of this Agreement.

Company
  Material Adverse Effect shall mean a material adverse effect on the
  business, assets, liabilities, financial condition, results of operations or
  prospects of the Company and its Subsidiaries, taken as a whole, or on the ability
  of the Company to complete the Closing pursuant to the terms hereof or comply
  with its obligations hereunder or adversely affect Buyers ability to conduct
  and operate the Company Business after the Closing; provided, however,
  that a Company Material Adverse Effect shall not be deemed to have occurred
  if such effect is attributable to (i) changes in general U.S. or world economic
  or capital market conditions or changes generally affecting the industry in
  which the Company and its Subsidiaries operate the Company Business (provided
  that such changes do not have a disproportionate adverse impact on the Company
  and its Subsidiaries, taken as a whole) or (ii) any adverse change, effect,
  event or occurrence (x) in the Companys relationship with any of its key
  employees, partners, suppliers or customers, or any failure to keep intact or
  renew any agreements with any of its customers (except as expressly provided
  in Section 8.3.5 of this Agreement), in each case proximately caused by the
  announcement or pendency of the Merger, or (y) resulting from any announcement
  or action by any competitor of the Company with respect to the development,
  availability, marketing or sale of any competitive product or technology or
  any strategic partnerships or alliances regarding any of such matters of which
  the Company did not have Knowledge or control prior to the execution of this
  Agreement.

Company
  Operating Plan shall mean the Companys operating plan as approved
  by Buyer for the fiscal year ended December 31, 2003 and the three months ended
  March 31, 2004, a true and correct copy of which is attached hereto as Exhibit
  F.

Company
  Options shall mean any and all options issued by the Company to purchase
  shares of Common Stock under any Company stock option plan or agreement.

Company
  Outbound License Agreement shall have the meaning set forth in Section
  4.8.6.2 of this Agreement.

Company
  Owned Copyrights shall have the meaning set forth in Section 4.8.4.1
  of this Agreement.

Company
  Stock shall mean the Preferred Stock and the Common Stock.

Company
  Transaction Expenses shall have the meaning set forth in Section 6.12
  of this Agreement.

6

---

---

Company
  Transaction Expenses List shall have the meaning set forth in Section
  6.12 of this Agreement.

Company
  Warrants shall mean any and all warrants issued by the Company to
  purchase shares of Common Stock.

Content
  shall have the meaning set forth in Section 4.8.7 of this Agreement.

Contracts
  shall mean all written or oral contracts, agreements, evidences of indebtedness,
  guarantees, leases and executory commitments to which the Company or any of
  its Subsidiaries is a party or by which any of the Companys or any of
  its Subsidiaries properties or assets are bound, or otherwise related
  to the Company Business.

Copyrights
  shall have the meaning set forth in Section 4.8.1 of this Agreement.

Court
  Order shall mean any judgment, decision, consent decree, injunction,
  ruling or order of any federal, state or local court or Governmental Authority
  that is binding on any Person or its property under Applicable Law.

Domain
  Names shall have the meaning set forth in Section 4.8.1 of this Agreement.

Effective
  Time shall have the meaning set forth in Section 2.2 of this Agreement.

Employee
  Plans shall mean all Benefit Arrangements, Multiemployer Plans, Pension
  Plans and Welfare Plans.

Employment
  Agreements shall have the meaning set forth in the Recitals to this
  Agreement.

Encumbrance
  shall mean any lien, pledge, mortgage, security interest, claim, charge, easement,
  limitation, commitment, encroachment, restriction (other than a restriction
  on transferability imposed by federal or state securities Laws) or other encumbrance
  of any kind or nature whatsoever (whether absolute or contingent).

Environmental
  Laws shall mean any and all federal, state, local and foreign statutes,
  laws, regulations, ordinances or rules in existence on the Closing Date relating
  to occupational safety and health; the effect of the environment or Substances
  on human health; or emissions, discharges or releases of Substances into the
  environment, including, without limitation, ambient air, surface water, groundwater
  or land; or otherwise relating to the handling of Substances or the investigation,
  clean-up or other remediation or analysis thereof.

Environmental
  Permit shall mean any permit, approval, identification number, license
  and other authorization required under any applicable Environmental Law.

ERISA
  shall mean the Employee Retirement Income Security Act of 1974, as amended.

7

---

---

ERISA
  Affiliate shall mean any entity which is (or at any relevant time
  was) a member of a controlled group of corporations with, under
  common control with, or a member of an affiliated service
  group with, or otherwise required to be aggregated with, the Company as
  set forth in Section 414(b), (c), (m) or (o) of the Code.

Escrow
  Account shall have the meaning set forth in Section 2.7.1.1 of this
  Agreement.

Escrow
  Agent shall have the meaning set forth in Section 2.7.1.1 of this
  Agreement.

Escrow
  Agreement shall have the meaning set forth in Section 2.7.1.1 of this
  Agreement.

Escrow
  Cash shall have the meaning set forth in Section 2.7.1.1 of this Agreement.

Escrow
  Consideration shall have the meaning set forth in Section 2.7.1.1
  of this Agreement.

Escrow
  Participant Representative shall have the meaning set forth in Section
  2.7.3.1 of this Agreement.

Escrow
  Participant shall have the meaning set forth in Section 2.7.1.1 of
  this Agreement.

Escrow
  Shares shall have the meaning set forth in Section 2.7.1.1 of this
  Agreement.

Excess
  Company Transaction Expenses shall have the meaning set forth in Section
  6.12 of this Agreement.

Exchange
  Act shall mean the Securities Exchange Act of 1934, as amended, and
  the rules and regulations of the SEC thereunder.

Exchange
  Ratio shall equal the Initial Exchange Ratio, as the same may be adjusted
  pursuant to Section 2.6.9 of this Agreement.

Excludable
  Patent Counterclaim Losses shall mean (i) any Losses incurred by any
  Buyer Indemnitee if and to the extent that such Losses resulted from a claim
  or counterclaim filed against Buyer following a written or filed claim by Buyer
  alleging third-party infringement of one or more of the Companys Patents
  or (ii) any Losses incurred by any Buyer Indemnitee if and to the extent that
  such Losses resulted from a claim or counterclaim filed against Buyer following
  a written or filed claim by Buyer alleging third-party infringement of one or
  more of Buyers Patents, but not alleging infringement of any of the Companys
  Patents; provided, however, that the first Five Million Dollars ($5,000,000)
  of any Losses described in this clause (ii) shall not constitute Excludable
  Patent Counterclaim Losses.

8

---

---

Exon-Florio
  Act shall mean the Exon-Florio Act of 1988, as amended.

Expiration
  Date shall mean the date that is eighteen (18) months after the Closing
  Date.

Fairness
  Approval shall have the meaning set forth in Section 6.6 of this Agreement.

GAAP
  shall mean generally accepted accounting principles, as applied in the United
  States.

Governmental
  Authority shall mean any United States or foreign government, any
  state or other political subdivision thereof, any entity exercising executive,
  legislative, judicial, regulatory or administrative functions of or pertaining
  to government, including the SEC or any other United States or foreign government
  authority, agency, department, board, commission or instrumentality of the United
  States, any state of the United States or any political subdivision thereof
  or any foreign jurisdiction, and any court, tribunal or arbitrator(s) of competent
  jurisdiction, and any United States or foreign governmental or non-governmental
  self-regulatory organization, agency or authority (including the NYSE and the
  NASD).

HSR
  Act shall mean the Hart-Scott-Rodino Antitrust Improvements Act of
  1976, as amended.

Hazardous
  Materials shall mean (i) any petroleum, petroleum products, byproducts
  or breakdown products, radioactive materials, asbestos-containing materials
  or polychlorinated biphenyls or (ii) any chemical, material or other substance
  defined or regulated as toxic or hazardous or as a pollutant or contaminant
  or waste under any applicable Environmental Law.

Holder
  shall have the meaning set forth in Section 2.6 of this Agreement.

Indemnification
  Notice shall have the meaning set forth in Section 10.2.2.1 of this
  Agreement.

Indemnified
  Party shall have the meaning set forth in Section 10.4.1 of this Agreement.

Initial
  Exchange Ratio shall mean 0.453.

Initial
  Measurement Price shall equal $17.28.

Intellectual
  Property shall mean, collectively, Trademarks, Patents, Copyrights,
  Domain Names and Trade Secrets, as those terms are defined in Section 4.8 of
  this Agreement.

Interim
  Period Unaudited Company Balance Sheet shall have the meaning set
  forth in Section 4.6.1 of this Agreement.

9

---

---

Interim
  Period Unaudited Company Financial Statements shall have the meaning
  set forth in Section 4.6.1 of this Agreement.

Investment
  Company Act shall have the meaning set forth in Section 4.22 of this
  Agreement.

Knowledge
  of (i) the Company shall mean the actual knowledge after reasonable inquiry
  of any of the individuals set forth on Exhibit O-1 to this Agreement
  and (ii) Buyer shall mean the actual knowledge after reasonable inquiry of any
  of the individuals set forth on Exhibit O-2 to this Agreement.

Law
  shall mean any domestic or foreign federal, state or local statute, law (whether
  statutory or common law), ordinance, rule, administrative interpretation, regulation,
  order, writ, injunction, directive, judgment, decree, policy, guideline or other
  requirement or arbitration award or finding (including those of the NASD, NYSE
  or any other self-regulatory organization).

Losses
  shall have the meaning set forth in Section 10.2.1 of this Agreement.

Merger
  shall have the meaning set forth in the Preamble to this Agreement.

Merger
  Sub shall have the meaning set forth in the Preamble to this Agreement.

Multiemployer
  Plan shall mean any multiemployer plan, as defined in
  Section 4001(a)(3) or 3(37) of ERISA, which (a) the Company or any ERISA
  Affiliate maintains, administers, contributes to or is required to contribute
  to, or, after September 25, 1980, maintained, administered, contributed
  to or was required to contribute to, or under which the Company or any ERISA
  Affiliate may incur any liability and (b) covers any employee or former employee
  of the Company or any ERISA Affiliate (with respect to their relationship with
  any such entity).

NIS
  shall mean New Israeli Shekels.

Non-Competition
  Agreements shall have the meaning set forth in the Recitals to this
  Agreement.

Non-Disclosure
  Agreement shall mean that certain Non-Disclosure Agreement, dated
  as of November 14, 2003, by and between Buyer and the Company, as the same may
  be amended from time to time by the parties.

Optionholders
  shall mean the Holders of Company Options.

Outside
  Date shall have the meaning set forth in Section 9.1.2 of this Agreement.

Parent
  shall have the meaning set forth in the Preamble to this Agreement.

Patents
  shall have the meaning set forth in Section 4.8.1 of this Agreement.

10

---

---

Pension
  Plan shall mean any employee pension benefit plan as defined
  in Section 3(2) of ERISA (other than a Multiemployer Plan) which (a) the Company
  or any ERISA Affiliate maintains, administers, contributes to or is required
  to contribute to, or, within the five (5) years prior to the Closing Date, maintained,
  administered, contributed to or was required to contribute to, or under which
  the Company or any ERISA Affiliate may incur any liability (including, without
  limitation, any contingent liability) and (b) covers any employee or former
  employee of the Company or any ERISA Affiliate (with respect to their relationship
  with any such entity).

Permit
  Application shall have the meaning set forth in Section 4.27.1 of
  this Agreement.

Permits
  shall have the meaning set forth in Section 4.13.1 of this Agreement.

Permitted
  Encumbrances shall mean (a) Encumbrances for current Taxes not yet
  due and payable; (b) purchase money security interests and (c) liens imposed
  by Law, such as mechanics liens.

Person
  shall mean any individual, corporation, company, partnership (limited or general),
  limited liability company, joint venture, association, trust or other business
  entity.

Personal
  Element shall mean a natural persons full name (or last name
  if associated with an address), telephone number, e-mail address, Unique Identifying
  Number, photograph, or any other information, alone or in combination, that
  allows the identification of a natural person.

Pipeline
  shall have the meaning set forth in Section 4.6.3 of this Agreement.

Preferred
  Stock shall mean the preferred stock, no par value per share, of the
  Company.

Primary
  Securityholder Agreements shall have the meaning set forth in Section
  3.1.1.7 of this Agreement.

Privacy
  Policies shall have the meaning set forth in Section 4.8.15.1 of this
  Agreement.

Proceedings
  shall have the meaning set forth in Section 4.12 of this Agreement.

Pro
  Rata Share shall mean, with respect to any Escrow Participant, the
  percentage of the aggregate Escrow Consideration attributable to such Escrow
  Participant.

Qualified
  Partnership shall have the meaning set forth in Section 5.9.10 of
  this Agreement.

Qualified
  Subsidiary shall have the meaning set forth in Section 5.9.10 of this
  Agreement.

11

---

---

Registration
  Statement shall have the meaning set forth in Section 6.6 of this
  Agreement.

Resolved
  Claim Notice shall have the meaning set forth in Section 10.2.2.1
  of this Agreement.

Retained
  Company Employee shall have the meaning set forth in Section 6.11.1
  of this Agreement.

Retained
  Escrow Consideration shall have the meaning set forth in Section 2.7.2.1
  of this Agreement.

Scheduled
  Contracts shall have the meaning set forth in Section 4.7 of this
  Agreement.

SEC
  shall mean the United States Securities and Exchange Commission, and any successor
  thereto.

Securities
  Act shall mean the Securities Act of 1933, as amended, and the rules
  and regulations of the SEC thereunder.

Securityholder
  Agreements shall have the meaning set forth in Section 3.1.1.8 of
  this Agreement.

Series
  A Preferred Stock shall mean the Series A Preferred Stock, no par
  value per share, of the Company.

Series
  B Preferred Stock shall mean the Series B Preferred Stock, no par
  value per share, of the Company.

Series
  C Preferred Stock shall mean the Series C Preferred Stock, no par
  value per share, of the Company.

Shareholder
  Consent shall have the meaning set forth in Section 4.26 of this Agreement.

Shareholder
  Support Agreements shall have the meaning set forth in the Recitals
  to this Agreement.

Shareholders
  shall mean the holders of shares of Company Stock as of immediately prior to
  the Effective Time.

Short-Term
  Investments shall mean investment securities with original maturities
  of one (1) year or less, excluding Cash Equivalents.

Software
  shall mean individually each, and collectively all, of the computer programs,
  including interfaces and any embedded software programs or applications, owned
  or licensed by the Company or otherwise included as an asset of the Company
  under this Agreement, including as to each program, the processes and routines
  used in the processing of data, the object code, source code (as to third-party
  source code, when rights to the source code may be obtained), tapes, disks,
  and all improvements, modifications, enhancements, versions and releases relating
  thereto.

12

---

---

Stock
  Consideration shall mean the Buyer Ordinary Shares issuable at Closing
  pursuant to Article 2 of this Agreement.

Subsidiary
  of a Person shall mean any other Person more than 50% of the voting stock (or
  of any other form of other voting or controlling equity interest in the case
  of a Person that is not a corporation) of which is beneficially owned by the
  Person directly or indirectly through one or more other Persons.

Substances
  shall mean any hazardous substance, hazardous waste,
  pollutant, contaminant or toxic substance,
  as defined by CERCLA, the Resources Conservation and Recovery Act, 42 U.S.C.
  Section 6901 et seq., the Clean Water Act, 33 U.S.C. Section 1251 et
  seq., the Clean Air Act, 42 U.S.C. Section 7401 et seq., or the Toxic
  Substances Control Act, 15 U.S.C. Section 2601 et seq., and regulations
  promulgated thereunder, or any analogous state and local Laws and regulations;
  petroleum and petroleum products; polychlorinated biphenyls or asbestos.

Surviving
  Company shall have the meaning set forth in Section 2.1.1 of this
  Agreement.

Takeover
  Statute shall mean any fair price, moratorium,
  control share acquisition or other similar antitakeover statute
  or regulation enacted under state or federal Laws in the United States.

Tax
  shall mean any federal, state, local or foreign income, gross receipts, license,
  payroll, employment, excise, severance, stamp, occupation, premium, windfall
  profits, environmental, customs duties, capital stock, franchise, profits, withholding,
  social security, unemployment, disability, real property, personal property,
  sales, use, transfer, registration, value added, alternative or add-on minimum,
  estimated, or other tax of any kind whatsoever, including any interest, penalty,
  or addition thereto, whether disputed or not.

Tax
  Benefit shall mean, with respect to any event or adjustment for any
  Person, the excess, if any, of the Tax liability of such Person without regard
  to such event or adjustment over the Tax liability of such Person taking into
  account such event or adjustment, with all other circumstances remaining unchanged.

Tax
  Contest shall mean any audit, other administrative proceeding or inquiry
  or judicial proceeding involving Taxes.

Tax
  Cost shall mean, with respect to any event or adjustment for any Person,
  the excess, if any, of the Tax liability of such Person taking such event or
  adjustment into account over the Tax liability of such Person without regard
  to such event or adjustment, with all other circumstances remaining unchanged.

13

---

---

Tax
  Return shall mean any return, declaration, report, claim for refund,
  or information return or statement relating to Taxes, including any schedule
  or attachment thereto, and including any amendment thereof.

Third-Party
  Claim shall have the meaning set forth in Section 10.4.1 of this Agreement.

Threshold
  Amount shall have the meaning set forth in Section 10.6.1 of this
  Agreement.

Trademarks
  shall have the meaning set forth in Section 4.8.1 of this Agreement.

Trade
  Secrets shall have the meaning set forth in Section 4.8.5.1 of this
  Agreement.

Trading
  Day shall mean any day on which the NASDAQ National Market is open
  and available for at least five (5) hours for the trading of securities.

Transaction
  Consideration shall mean Two Hundred Fifty-Five Million Dollars ($255,000,000)
  minus the Assumed Options Value.

Transfer
  Taxes shall have the meaning set forth in Section 7.6 of this Agreement.

Transmittal
  Letter shall have the meaning set forth in Section 2.8.1 of this Agreement.

Treasury
  Regulations shall have the meaning set forth in the Recitals to this
  Agreement.

Unique
  Identifying Number shall mean an identifier uniquely associated with
  a person such as a social security number, drivers license number, passport
  number or customer number, but excluding an identifier which is randomly or
  otherwise assigned so that it cannot reasonably be used to identify the person.

User
  Data shall mean, to the extent collected or acquired by or on behalf
  of the Company: (w) all data related to impression and click through
  activity of users, including user identification and associated activities at
  a web site as well as pings and activity related to closed loop reporting and
  all other data associated with a users behavior on the Internet, including
  without limitation all e-mail lists or other user information acquired by the
  Company directly or indirectly from a third party that collected such information,
  (x) all data that contains a Personal Element, (y) known, assumed or inferred
  information or attributes about a user or identifier, and (z) all derivatives
  and aggregations of (w), (x) and (y), including user profiles.

Welfare
  Plan shall mean any employee welfare benefit plan as defined
  in Section 3(1) of ERISA, which (a) the Company or any ERISA Affiliate
  maintains, administers, contributes to or is required to contribute to, or under
  which the Company or any ERISA Affiliate may incur any liability and (b) covers
  any employee or former employee of the Company or any ERISA Affiliate (with
  respect to their relationship with any such entity).

14

---

---

ARTICLE 2.The Merger

Section
2.1    The Merger

Section
  2.1.1    Merger of the Company into Merger Sub.  Upon
  the terms and subject to satisfaction or waiver of the conditions set forth
  in this Agreement, and in accordance with the CLLCA and the CGCL, at the Effective
  Time, the Company shall be merged with and into Merger Sub. As a result of the
  Merger, the separate corporate existence of the Company shall cease and Merger
  Sub shall continue as the surviving company of the Merger (the Surviving
  Company).

Section
  2.1.2    Closing.  Unless this Agreement shall
  have been terminated pursuant to Section 9.1 of this Agreement, and subject
  to the satisfaction (or, to the extent permitted by this Agreement, the waiver)
  of each of the conditions set forth in Article 8 of this Agreement, the consummation
  of the transactions contemplated by this Agreement (the Closing)
  shall take place at the offices of Latham & Watkins LLP, 505 Montgomery
  Street, Suite 1900, San Francisco, California 94111, at 2:00 p.m., Pacific Standard
  Time, on a day (to be selected by Buyer in its sole discretion) following the
  satisfaction (or, to the extent permitted by this Agreement, the waiver) of
  each of the conditions set forth in Article 8 of this Agreement (but in any
  event, within five (5) Business Days after the satisfaction or waiver of each
  of the conditions set forth in Article 8 of this Agreement), or at such other
  date, time and place as Buyer and the Company shall mutually agree in writing
  (the exact date on which the Closing takes place, the Closing Date).

Section
  2.2    Effective Time.  Subject to the
  terms and conditions set forth in this Agreement, on the Closing Date, the parties
  hereto shall cause the Merger to be consummated by filing a certificate of merger
  (the Certificate of Merger) with the Secretary of State of
  the State of California, in such form as required by, and executed in accordance
  with the relevant provisions of, the CLLCA (the date and time of such filing,
  or if another date and time is specified in such filing, such specified date
  and time, being the Effective Time).

Section
  2.3    Effect of the Merger.  At the
  Effective Time, the effect of the Merger shall be as provided in the applicable
  provisions of the CLLCA. Without limiting the generality of the foregoing, at
  the Effective Time, except as otherwise provided herein, all the property, rights,
  privileges, powers and franchises of the Company and Merger Sub shall vest in
  the Surviving Company, and all debts, liabilities and duties of the Company
  and Merger Sub shall become the debts, liabilities and duties of the Surviving
  Company.

Section
  2.4     Limited Liability Company Agreement of
  the Surviving Company.  At the Effective Time, the limited liability
  company agreement of Merger Sub as in effect immediately prior to the Effective
  Time shall become the limited liability company agreement of the Surviving Company.

15

---

---

Section
  2.5     Managers and Officers of the Surviving
  Company.  The managers of Merger Sub immediately prior to the Effective
  Time shall be the initial managers of the Surviving Company, each to hold office
  in accordance with the certificate of formation and limited liability company
  agreement of the Surviving Company. The officers of Merger Sub immediately prior
  to the Effective Time shall be the initial officers of the Surviving Company,
  each to hold office in accordance with the certificate of formation and limited
  liability company agreement of the Surviving Company.

Section
  2.6    Conversion of Securities.  At the Effective Time, by virtue of the Merger and without any action on the part of Buyer,
Parent, Merger Sub, the Company or the holders of any of the following securities (each, a Holder):

Section
  2.6.1    Membership Interests of Merger Sub.  Each
  membership interest of Merger Sub issued and outstanding immediately prior to
  the Effective Time shall be converted into and be exchanged for a newly and
  validly issued, fully paid and nonassessable membership interest of the Surviving
  Company such that immediately following the Effective Time, Parent will be the
  sole and exclusive owner of the membership interests of the Surviving Company.

Section
  2.6.2    Shares of Series A Preferred Stock.  Subject
  to Section 2.6.8 of this Agreement, each share of Series A Preferred Stock outstanding
  immediately prior to the Effective Time (other than any shares of Series A Preferred
  Stock held in the treasury of the Company immediately prior to the Effective
  Time, which shares shall be cancelled and extinguished without any payment being
  made in respect thereof, or any Company Dissenting Shares) shall be converted
  into the right to receive $7.83 in the aggregate, without interest, in the form
  of Cash Consideration. All shares of Series A Preferred Stock converted pursuant
  to this Section 2.6.2 shall no longer be outstanding and shall automatically
  be cancelled and retired and shall cease to exist after the Effective Time.

Section
  2.6.3    Shares of Series B Preferred Stock.  Subject
  to Section 2.6.8 of this Agreement, each share of Series B Preferred Stock outstanding
  immediately prior to the Effective Time (other than any shares of Series B Preferred
  Stock held in the treasury of the Company immediately prior to the Effective
  Time, which shares shall be cancelled and extinguished without any payment being
  made in respect thereof, or any Company Dissenting Shares) shall be converted
  into the right to receive $7.83 in the aggregate, without interest, in the form
  of Cash Consideration. All shares of Series B Preferred Stock converted pursuant
  to this Section 2.6.3 shall no longer be outstanding and shall automatically
  be cancelled and retired and shall cease to exist after the Effective Time.

Section
  2.6.4    Shares of Series C Preferred Stock.  Subject
  to Section 2.6.8 of this Agreement, each share of Series C Preferred Stock outstanding
  immediately prior to the Effective Time (other than any shares of Series C Preferred
  Stock held in the treasury of the Company immediately prior to the Effective
  Time, which shares shall be cancelled and extinguished without any payment being
  made in respect thereof, or any Company Dissenting Shares) shall be converted
  into the right to receive $9.74 in the aggregate, without interest, in the form
  of Cash Consideration. All shares of Series C Preferred Stock converted pursuant
  to this Section 2.6.4 shall no longer be outstanding and shall automatically
  be cancelled and retired and shall cease to exist after the Effective Time.

16

---

---

Section
  2.6.5    Shares of Common Stock.  Each share
  of Common Stock outstanding immediately prior to the Effective Time (other than
  any shares of Common Stock held in the treasury of the Company immediately prior
  to the Effective Time, which shares shall be cancelled and extinguished without
  any payment being made in respect thereof, or any Company Dissenting Shares)
  shall be converted into the right to receive a number of Buyer Ordinary Shares
  equal to the Exchange Ratio. All shares of Common Stock converted pursuant to
  this Section 2.6.5 shall no longer be outstanding and shall automatically be
  cancelled and retired and shall cease to exist after the Effective Time.

Section
  2.6.6    Company Warrants.  The Company shall
  take all actions necessary to provide that, at the Effective Time, each Company
  Warrant that is outstanding, unexercised and unexpired immediately prior to
  the Effective Time, whether or not then exercisable, shall be canceled.

Section
  2.6.7    Company Options.  The Company shall
  take all actions necessary, including obtaining any requisite consents of the
  Optionholders, to provide that, at the Effective Time, each of the Companys
  stock option plans and each Company Option that is outstanding, unexercised
  and unexpired immediately prior to the Effective Time, whether or not then exercisable,
  shall be assumed by Buyer. Each Company Option so assumed by Buyer under this
  Agreement shall continue to have, and be subject to, the same terms and conditions
  as set forth in any stock option plan and/or agreement pursuant to which such
  Company Option was issued, in each case, as in effect immediately prior to the
  Effective Time, except that (i) each Company Option shall be exercisable (or
  shall become exercisable in accordance with its terms) for that number of Buyer
  Ordinary Shares equal to the product of (x) the number of shares of Common Stock
  that were issuable upon exercise of such Company Option immediately prior to
  the Effective Time multiplied by (y) the Exchange Ratio, rounded down
  to the nearest whole number of Buyer Ordinary Shares, and (ii) the per share
  exercise price for the Buyer Ordinary Shares issuable upon exercise of such
  Company Option assumed shall be equal to the quotient obtained by dividing
  (x) the exercise price per share of Common Stock at which such Company Option
  was exercisable immediately prior to the Effective Time by (y) the Exchange
  Ratio, rounded up to the nearest whole cent.  The conversion of any Company
  Options which are incentive stock options within the meaning of Section 422
  of the Code into options to purchase Buyer Ordinary Shares shall be made so
  as not to constitute a modification of such Company Options within
  the meaning of Section 424 of the Code.

Section
  2.6.8    Adjustments to Allocation of Transaction Consideration
  in the Event of Excess Cash Consideration.  In the event that, as of
  the Effective Time, the aggregate Cash Consideration exceeds fifty-five percent
  (55%) of the aggregate Transaction Consideration, then each share of Preferred
  Stock shall be converted into the right to receive a combination of Cash Consideration
  and Stock Consideration, with each share of Preferred Stock receiving a number
  of Buyer Ordinary Shares equal to the product of (x) a fraction, the numerator
  of which is the amount of Transaction Consideration to which such share of Preferred
  Stock is entitled as set forth in Sections 2.6.2, 2.6.3 or 2.6.4 of this Agreement,
  as applicable, and the denominator of which is the aggregate amount of Transaction
  Consideration to which all shares of Preferred Stock are entitled as set forth
  in Sections 2.6.2, 2.6.3 or 2.6.4 of this Agreement, as applicable, multiplied
  by (y) the aggregate amount of the Stock Consideration that must be issued
  to the Holders of Preferred Stock in lieu of Cash Consideration pursuant to
  this Section 2.6.8 such that the aggregate Stock Consideration represents forty-five
  percent (45%) of the aggregate Transaction Consideration. For the sole purpose
  of the foregoing calculations and to determine the number of Buyer Ordinary
  Shares to be issued to the Holders of Preferred Stock pursuant to this Section
  2.6.8, (i) all Stock Consideration (including, solely for the purpose of the
  foregoing calculations, the Stock Consideration issuable to Holders of Common
  Stock) shall be valued at the Closing Date Price and (ii) each share of Company
  Stock that is eligible as of the opening of business on the Closing Date to
  constitute a Company Dissenting Share shall be deemed to be entitled to receive,
  in the case of Common Stock, $7.83, and in the case of Preferred Stock, the
  amounts specified in Sections 2.6.2, 2.6.3 or 2.6.4, as applicable, in the form
  of Cash Consideration.

17

---

---

Section
  2.6.9    Adjustments to Exchange Ratio and Valuation
  of Stock Consideration Issuable to Holders of Common Stock Based on Closing
  Measurement Price.

Section
  2.6.9.1  If the Closing Measurement Price is greater than 125% but less
  than 150% of the Initial Measurement Price, (i) the Exchange Ratio shall be
  adjusted to equal the product of (x) the Initial Exchange Ratio multiplied
  by (y) a fraction, the numerator of which is 125 and the denominator of
  which is the Closing Measurement Price expressed as a percentage of the Initial
  Measurement Price and (ii) Buyer shall issue a number of Buyer Ordinary Shares
  to each Holder of Common Stock in connection with the Merger equal to the product
  of (x) the number of Buyer Ordinary Shares that would have been issued to such
  Holder in connection with the Merger if such shares had been valued at the Initial
  Measurement Price multiplied by (y) a fraction, the numerator of which
  is 125 and the denominator of which is the Closing Measurement Price expressed
  as a percentage of the Initial Measurement Price. For example, if the Closing
  Measurement Price is 140% of the Initial Measurement Price, Buyer would issue
  to each Holder of Common Stock approximately 89.3% (i.e., 125% divided by 140%)
  as many Buyer Ordinary Shares in connection with the Merger as it would have
  issued to such Holder had the Closing Measurement Price been 125% of the Initial
  Measurement Price.

Section
  2.6.9.2  If the Closing Measurement Price is less than 85% but more than
  50% of the Initial Measurement Price, (i) the Exchange Ratio shall be adjusted
  to equal the product of (x) the Initial Exchange Ratio multiplied by
  (y) a fraction, the numerator of which is 85 and the denominator of which is
  the Closing Measurement Price expressed as a percentage of the Initial Measurement
  Price and (ii) Buyer shall issue a number of Buyer Ordinary Shares to each Holder
  of Common Stock in connection with the Merger equal to the product of (x) the
  number of Buyer Ordinary Shares that would have been issued to such Holder in
  connection with the Merger if such shares had been valued at the Initial Measurement
  Price multiplied by (y) a fraction, the numerator of which is 85 and
  the denominator of which is the Closing Measurement Price expressed as a percentage
  of the Initial Measurement Price. For example, if the Closing Measurement Price
  is 60% of the Initial Measurement Price, Buyer would issue to each Holder of
  Common Stock approximately 142.7% (i.e., 85% divided by 60%) as many Buyer Ordinary
  Shares in connection with the Merger as it would have issued to such Holder
  had the Closing Measurement Price been 85% of the Initial Measurement Price.

Section
  2.6.10    No Fractional Buyer Ordinary Shares.  No
  certificates or scrip representing fractional Buyer Ordinary Shares shall be
  issued in connection with the Merger, but in lieu thereof each Holder who would
  otherwise be entitled to receive a fraction of a Buyer Ordinary Share shall
  receive from Buyer an amount of cash equal to the product of (i) the fraction
  of a Buyer Ordinary Share to which such holder would otherwise be entitled multiplied
  by (ii) the Closing Measurement Price.

18

---

---

Section
  2.6.11    Restrictions on Shares of Company Stock.
   If any shares of Company Stock outstanding immediately prior to the Effective
  Time are unvested or are subject to a repurchase option, risk of forfeiture
  or other condition under any applicable restricted stock purchase agreement
  or other agreement with the Company, then the Buyer Ordinary Shares issued in
  exchange for such shares will also be unvested and subject to the same repurchase
  option, risk of forfeiture or other condition, and the certificates representing
  such Buyer Ordinary Shares may accordingly be marked with appropriate legends.
  The Company shall not, by any action or inaction, prevent Buyer from enforcing
  any such repurchase option or other right set forth in any such restricted stock
  purchase agreement or other agreement from and after the Effective Time.

Section
  2.7     Escrow.

Section
  2.7.1     Escrow Consideration.

Section
  2.7.1.1  At the Closing, to provide funds for the satisfaction of any claims
  for indemnification made by Buyer pursuant to Article 10 of this Agreement,
  Buyer shall deliver ten percent (10%) of the aggregate Transaction Consideration
  to which each Shareholder (each, an Escrow Participant and
  collectively, the Escrow Participants) is entitled pursuant
  to this Article 2, which shall consist of ten percent (10%) of the aggregate
  Cash Consideration to which each Shareholder is entitled pursuant to this Article
  2 (collectively, the Escrow Cash) and ten percent (10%) of
  the aggregate Stock Consideration to which each Shareholder is entitled pursuant
  to this Article 2 (collectively, the Escrow Shares and, together
  with the Escrow Cash, the Escrow Consideration) to an escrow
  account (the Escrow Account) to be established by Buyer with
  U.S. Bank Trust National Association (the Escrow Agent),
  to be held by the Escrow Agent pursuant to the terms of an escrow agreement,
  substantially in the form attached hereto as Exhibit G (the Escrow
  Agreement).

Section
  2.7.1.2  The certificates representing the Escrow Shares shall be issued
  in the names of the respective Escrow Participants at the Effective Time and
  such certificates and the Escrow Cash shall be retained in the Escrow Account
  until released pursuant to Section 2.7.2 below. The Escrow Shares and the Escrow
  Cash shall be separately accounted for by the Escrow Agent and shall be segregated
  into separate accounts within the Escrow Account. During the period in which
  the Escrow Shares are retained in the Escrow Account, they will be held for
  the benefit of the registered holders of the Escrow Shares, and such registered
  holders shall be entitled to vote the Escrow Shares and to receive the economic
  benefit of any dividends paid with respect to the Escrow Shares until it has
  been determined conclusively that Buyer is entitled to retain the Escrow Shares
  in respect of indemnification claims pursuant to Section 10.2.2 hereof (it being
  understood that any cash dividends paid on such shares, and any taxable non-cash
  dividends paid on such shares, shall be distributed currently to the applicable
  Escrow Participant and any tax-free non-cash dividends paid on such shares shall
  continue to be held in the Escrow Account for the benefit of the Escrow Participants).
  From and after the Closing Date, unless and until it is determined that Buyer
  is entitled to retain the Escrow Shares in respect of indemnification claims,
  the Escrow Shares shall appear as issued and outstanding on the balance sheet
  of Buyer. During the period in which the Escrow Cash is retained in the Escrow
  Account, the Escrow Cash shall be held for the benefit of the applicable Escrow
  Participants, and such Escrow Participants shall be the owners of the Escrow
  Cash for Tax purposes. All interest or other income earned from the investment
  of Escrow Cash shall be retained in the Escrow Account as additional Escrow
  Cash; provided, however, that at the request of the applicable Escrow
  Participants, the Escrow Agent shall from time to time distribute a portion
  of the interest or other income earned from the investment of Escrow Cash in
  an amount sufficient to enable the applicable Escrow Participants to discharge
  the Tax liability attributable to such interest or other income.

19

---

---

Section
  2.7.2     Release of Escrow Consideration.

Section
  2.7.2.1  Within five (5) Business Days following the Expiration Date, the
  Escrow Agent shall distribute to the Escrow Participants, at their respective
  addresses and in proportion to their respective Pro Rata Shares set forth on
  the Closing Consideration Exhibit, any Escrow Consideration deposited into the
  Escrow Account pursuant to this Section 2.7 less (i) the amount of Escrow
  Consideration offset prior to the Expiration Date pursuant to Section 10.2.2
  hereof, and (ii) an amount of Escrow Consideration which the Escrow Agent shall
  retain equal to the aggregate amount of indemnification claims in U.S. Dollars
  made by Buyer pursuant to Section 10.2 hereof which shall be outstanding and
  unresolved (the Aggregate Outstanding Claims), or, in the
  event that the Aggregate Outstanding Claims exceed the remaining amount of Escrow
  Consideration, all remaining Escrow Consideration (such amount of retained Escrow
  Consideration, as well as any such amount of retained Escrow Consideration as
  it may be further reduced after the Expiration Date by distributions to the
  Escrow Participants and offsets by Buyer pursuant to Section 10.2.2 hereof,
  the Retained Escrow Consideration).  For all purposes
  under this Agreement and the Escrow Agreement, the Escrow Shares shall be valued
  at the Closing Measurement Price.

Section
  2.7.2.2  In the event and to the extent that after the Expiration Date
  any outstanding indemnification claim made by Buyer pursuant to Section 10.2
  hereof is resolved against Buyer, the Escrow Agent shall deliver to the Escrow
  Participants, at their respective addresses and in proportion to their respective
  Pro Rata Shares set forth on the Closing Consideration Exhibit, an amount of
  the Retained Escrow Consideration corresponding to the amount of the outstanding
  indemnification claim resolved against Buyer, unless the remaining Aggregate
  Outstanding Claims would exceed the Retained Escrow Consideration after such
  distribution, in which case the Escrow Agent shall retain in the Escrow Account
  an amount of Escrow Consideration equal to the amount of the remaining Aggregate
  Outstanding Claims.

Section
  2.7.3     Escrow Participant Representative.

Section
  2.7.3.1  Gregor Freund is hereby appointed and constituted the Escrow
  Participant Representative under this Agreement, and as such shall
  serve as agent for and have all powers as attorney-in-fact of each Escrow Participant,
  for and on behalf of each Escrow Participant, to take the following actions
  in connection with the negotiation, settlement and compromise of indemnification
  claims pursuant to Article 10 of this Agreement and the release of Escrow Consideration
  in connection therewith:  to give and receive notices of communications;
  to agree to, negotiate or enter into settlements and compromises of and comply
  with orders of courts with respect to any disputes involving any claims made
  by Buyer or the Escrow Participants under this Agreement; to sign receipts,
  consents or other documents to effect any of the transactions contemplated by
  this Agreement or the Ancillary Agreements; and to take all actions necessary
  or appropriate in the judgment of the Escrow Participant Representative in connection
  with the foregoing. The Escrow Participant Representative shall consult with
  Escrow Participants representing at least a majority of the aggregate Escrow
  Consideration (with the Escrow Shares for the purpose of this calculation valued
  at the Closing Date Price) prior to settling or compromising any claim or dispute
  involving more than $250,000; provided, however, that in no event shall
  the consent of any Escrow Participant be required for the Escrow Participant
  Representative to settle or compromise any claim or dispute on behalf of the
  Escrow Participants.

20

---

---

Section
  2.7.3.2  If the Escrow Participant Representative elects to resign as Escrow
  Participant Representative for any reason, the Escrow Participant Representative
  shall notify Buyer of his or her intent to resign, and Escrow Participants representing
  at least a majority of the aggregate Escrow Consideration (with the Escrow Shares
  for the purpose of this calculation valued at the Closing Date Price) shall,
  by written notice to Buyer, appoint a successor Escrow Participant Representative
  within five (5) Business Days thereafter. Escrow Participants representing at
  least a majority of the aggregate Escrow Consideration (with the Escrow Shares
  for the purpose of this calculation valued at the Closing Date Price) may, at
  any time, by written notice to Buyer, appoint a replacement Escrow Participant
  Representative.

Section
  2.7.3.3  Notice or communications to or from the Escrow Participant Representative
  pursuant to this Section 2.7 shall constitute notice to or from each of the
  Escrow Participants.

Section
  2.7.3.4  A decision, act, consent or instruction of the Escrow Participant
  Representative pursuant to this Section 2.7 shall constitute a decision, act,
  consent or instruction of each and all of the Escrow Participants, and shall
  be final, binding and conclusive upon each and all of the Escrow Participants,
  and Buyer shall be entitled to rely upon any decision, act, consent or instruction
  of the Escrow Participant Representative as being the decision, act, consent
  or instruction of each and all of the Escrow Participants, and Buyer shall be
  relieved from any liability to any Person for any acts done by it in accordance
  with such decision, act, consent or instruction.

Section
  2.7.3.5  The Escrow Participant Representative shall promptly notify each
  Escrow Participant in the event of any decision, act, consent or instruction
  of the Escrow Participant Representative pursuant to this Section 2.7.3. Each
  Escrow Participant, severally in proportion to their respective Pro Rata Shares
  and not jointly, with right of contribution among them, shall indemnify and
  hold harmless the Escrow Participant Representative with respect to any claim,
  loss, damage and liability against such Escrow Participant Representative, including
  without limitation reasonable attorneys fees and costs, arising from any
  decision, act, consent or instruction of such Escrow Participant Representative
  pursuant to this Section 2.7.3, unless and to the extent that such claim arises
  from such Escrow Participant Representatives gross negligence or willful
  misconduct.

21

---

---

Section
  2.8     Distribution of the Transaction Consideration.

Section
  2.8.1  Distribution of Transmittal Letter.  Prior to the Closing
  Date, Buyer shall make available to and, as soon as practicable following the
  Effective Time (and, in any event, within five (5) Business Days thereafter),
  Buyer shall cause to be mailed to each record holder of certificates evidencing
  Company Stock (the Certificates) a letter of transmittal
  in customary form (which shall specify that delivery shall be effected, and
  risk of loss and title to the Certificates shall pass, only upon delivery of
  the Certificates to Buyer or its designated representative and shall be in such
  form and have such other provisions as Buyer shall reasonably specify) (the
  Transmittal Letter) and instructions for such holders
  use in effecting the surrender of the Certificates and the exercise of the rights
  of such holder to obtain its share of the Transaction Consideration.

Section
  2.8.2  Delivery of Transaction Consideration.  Upon surrender
  to Buyer or its designated representative of any Certificates for cancellation,
  together with a duly executed and completed Transmittal Letter, the holder of
  such Certificate shall be entitled to receive, in exchange therefor the Transaction
  Consideration to which such holder is entitled pursuant to Section 2.6 of this
  Agreement. Buyer shall transmit the Cash Consideration to which such holder
  is entitled within three (3) Business Days after receipt of all such holders
  Certificates for cancellation, together with a duly executed and completed Transmittal
  Letter. Buyer shall use its commercially reasonable efforts to cause American
  Stock Transfer & Trust Company to transmit the Stock Consideration to which
  such holder is entitled within seven (7) Business Days after receipt of all
  such holders Certificates for cancellation, together with a duly executed
  and completed Transmittal Letter.

Section
  2.8.3  Cancellation of Company Stock.  Upon surrender of each
  Certificate and delivery by Buyer of the Transaction Consideration to be delivered
  in exchange therefor, such Certificate shall forthwith be cancelled. Until so
  surrendered, each Certificate (other than Certificates representing Company
  Dissenting Shares) shall be deemed for all corporate purposes to evidence only
  the right to receive upon such surrender the Transaction Consideration into
  which the Company Stock represented thereby shall have been converted in accordance
  with the terms and upon the conditions of this Agreement.

Section
  2.8.4  Distributions With Respect to Unexchanged Shares of Company Stock.
   No dividends or other distributions with respect to Buyer Ordinary Shares
  declared or made after the Effective Time and with a record date after the Effective
  Time will be paid to the holder of any unsurrendered Certificate with respect
  to the Buyer Ordinary Shares to be issued in exchange therefor until the holder
  of record of such Certificate shall surrender such Certificate. Subject to Applicable
  Law, promptly following surrender of any such Certificate, there shall be paid
  to the record holder of the certificates representing Buyer Ordinary Shares
  issued in exchange therefor, without interest, at the time of such surrender,
  the amount of dividends or other distributions with a record date after the
  Effective Time, if any, theretofore payable with respect to such Buyer Ordinary
  Shares.

Section
  2.9    No Further Ownership Rights in Shares of
  Company Stock..  The Transaction Consideration delivered upon the surrender
  for exchange of Company Stock in accordance with the terms hereof shall be deemed
  to have been issued in full satisfaction of all rights pertaining to such shares
  of Company Stock, and there shall be no further registration of transfers of
  Company Stock which were outstanding immediately prior to the Effective Time
  on the records of the Surviving Company. If, after the Effective Time, the Certificates
  are presented to the Surviving Company for any reason, they shall be cancelled
  and exchanged as provided in this Article 2.

22

---

---

Section
  2.10      Lost, Stolen or Destroyed Certificates.  In the event any Certificates shall have been lost, stolen or destroyed, Buyer shall issue
in exchange for such lost, stolen or destroyed Certificates, upon the making of an affidavit of that
fact by the holder thereof, such Transaction Consideration as may be required pursuant to Section 2.6
of this Agreement; provided, however, that Buyer may, in its sole discretion and as a condition precedent to the issuance thereof, require
the owner of such lost, stolen or destroyed Certificates to deliver an indemnity or bond in such
sum as it may reasonably direct as indemnity against any claim that may be made against Buyer with
respect to the Certificates alleged to have been lost, stolen or destroyed.

Section
2.11     Dissenting Shares.  Any holder of shares of Company Stock issued and outstanding immediately prior to the Effective
Time with respect to which dissenters rights, if any, are available by reason of the Merger
pursuant to Chapter 13 of the CGCL who has not voted in favor of the Merger or consented thereto
in writing and who complies with Chapter 13 of the CGCL (Company Dissenting Shares) shall not be entitled to receive any portion of the Transaction Consideration pursuant to this
Article 2, unless such holder fails to perfect, effectively withdraws or loses its dissenters
rights under the CGCL. Such holder shall be entitled to receive only such rights as are granted under
Chapter 13 of the CGCL. If any such holder fails to perfect, effectively withdraws or loses such
dissenters rights under the CGCL, such Company Dissenting Shares shall thereupon be deemed
to have been converted as of the Effective Time into the right to receive the Transaction Consideration
to which such shares of Company Stock are entitled pursuant to this Article 2, without interest.
The Company shall give Buyer prompt notice of any demands for appraisal pursuant to Chapter 13 of
the CGCL received by the Company, withdrawals of any such demands and any other documents or instruments
received by the Company in connection therewith. Buyer shall have the right to participate in and
direct all negotiations and proceedings with respect to any such demands. The Company shall not,
except with the prior written consent of Buyer and the Escrow Participant Representative, which consent
shall not unreasonably be withheld or delayed, make any payment with respect to, or settle or offer
to settle, any such demands, or agree to do any of the foregoing. Any payments made with respect
to Company Dissenting Shares shall be made solely by the Surviving Company, and no funds or other
property have been or shall be provided by Buyer, Merger Sub or any of Buyers Affiliates for such payment.

Section
2.12     Withholding.  Buyer shall be entitled to deduct and withhold from any consideration otherwise payable pursuant
to this Agreement such amounts as it may be required to deduct and withhold with respect to the making
of such payment under the Code, or any provision of applicable Tax Law, other than as expressly provided
in Section 7.4 of this Agreement. To the extent that amounts are so withheld or paid over to or deposited
with the relevant Governmental Authority by Buyer, such amounts shall be treated for all purposes
of this Agreement as having been paid to the applicable Person in respect of which Buyer made such
deduction and withholding.

23

---

---

ARTICLE 3.Closing Deliveries

Section
  3.1    Closing Deliveries.

Section
  3.1.1    Closing Deliveries by the Company.  At
  the Closing, the Company shall deliver, or shall cause to be delivered, to Buyer:

Section
  3.1.1.1  the written opinion of Gray Cary Ware & Freidenrich LLP, counsel
  for the Company, dated as of the Closing Date, substantially in the form attached
  hereto as Exhibit H;

Section
  3.1.1.2  certified organizational documents and certificates of good standing
  issued by (x) the Secretary of State of the State of California and the California
  State Franchise Tax Board for the Company and (y) the Secretary of State of
  each state in which the Company is qualified to do business as a foreign corporation,
  in each case dated not more than five (5) Business Days prior to the Closing
  Date, together with bring-down good standing certificates (or a verbal confirmation
  thereof) dated as of the Closing Date;

Section
  3.1.1.3  a certificate, dated as of the Closing Date and executed by the
  Chief Executive Officer and Chief Financial Officer of the Company, as to the
  fulfillment of each of the conditions set forth in Section 8.3 of this Agreement;

Section
  3.1.1.4  a certificate, dated as of the Closing Date and executed by the
  Secretary of the Company, certifying the resolutions adopted by the Companys
  board of directors and shareholders relating to the transactions contemplated
  by this Agreement and the Ancillary Agreements;

Section
  3.1.1.5  copies of all third-party and governmental notices, consents,
  approvals and filings required to be delivered, obtained or made, as the case
  may be, by the Company in connection with the consummation of the transactions
  contemplated by this Agreement and the Ancillary Agreements;

Section
  3.1.1.6  a copy of the Escrow Agreement, executed by the Company;

Section
  3.1.1.7  a copy of the Primary Securityholder Agreement, substantially
  in the form attached hereto as Exhibit I (the Primary Securityholder
  Agreements), executed by each Shareholder that holds Fifty Thousand
  (50,000) or more shares of Common Stock as of immediately prior to the Effective
  Time;

Section
  3.1.1.8  a copy of the Securityholder Agreement, substantially in the form
  attached hereto as Exhibit J (the Securityholder Agreements),
  executed by each of the Persons set forth on Exhibit K to this Agreement
  that hold any shares of Company Stock as of immediately prior to the Effective
  Time and that were not required to execute a Primary Securityholder Agreement
  pursuant to the terms of Section 3.1.1.7 of this Agreement;

Section
  3.1.1.9  the certificate required by Section 7.5 of this Agreement;

24

---

---

Section
  3.1.1.10  true, correct and complete copies of the unaudited consolidated
  balance sheet of the Company and its Subsidiaries as of November 30, 2003 and
  the related unaudited consolidated statements of income and changes in shareholders
  equity for the eleven (11) months ended November 30, 2003;

Section
  3.1.1.11  the Closing Consideration Exhibit; and

Section
  3.1.1.12  such other documents as Buyer may reasonably request.

Section
  3.1.2    Closing Deliveries by Buyer.  At the
  Closing, Buyer shall deliver, or shall cause to be delivered, the following:

Section
  3.1.2.1  to the Escrow Agent, the Escrow Consideration, to be delivered
  as instructed by the Escrow Agent;

Section
  3.1.2.2  the written opinion of Naschitz, Brandes & Co., counsel for
  Buyer, dated as of the Closing Date, substantially in the form attached hereto
  as Exhibit L;

Section
  3.1.2.3  the written opinion of Latham & Watkins LLP, counsel for Buyer,
  Parent and Merger Sub, dated as of the Closing Date, substantially in the form
  attached hereto as Exhibit M;

Section
  3.1.2.4  a certificate, dated as of the Closing Date and executed by the
  Chief Executive Officer or Chief Financial Officer of each of Buyer, Parent
  and Merger Sub, as to the fulfillment of each of the conditions set forth in
  Section 8.2 of this Agreement;

Section
  3.1.2.5  a certificate, dated as of the Closing Date and executed by the
  Secretary or any Assistant Secretary of each of Buyer, Parent and Merger Sub,
  certifying the resolutions adopted by each of Buyers, Parents and
  Merger Subs board of directors and Parent, as the sole member of Merger
  Sub, relating to the transactions contemplated by this Agreement and the Ancillary
  Agreements;

Section
  3.1.2.6  copies of all third-party and governmental notices, consents,
  approvals and filings required to be delivered, obtained or made, as the case
  may be, by Buyer, Parent or Merger Sub in connection with the consummation of
  the transactions contemplated by this Agreement and the Ancillary Agreements;

Section
  3.1.2.7  a copy of the Escrow Agreement, executed by Buyer; and

Section
  3.1.2.8  such other documents as the Company may reasonably request.

ARTICLE 4.Representations and Warranties of the Company

As
a material inducement to Buyer, Parent and Merger Sub to enter into this Agreement, except as set
forth in the Disclosure Schedule delivered by the Company to Buyer prior to the execution of this
Agreement (the Company Disclosure Schedule), each section of which shall only qualify the representation or warranty in the correspondingly
numbered Section of this Agreement, the Company hereby represents and warrants to Buyer, Parent and
Merger Sub as follows:

25

---

---

Section
  4.1     Organization.  The Company is a corporation, duly formed, validly existing and in good standing under the
Laws of the State of California, and each of its Subsidiaries is a corporation or other business
entity duly organized, validly existing and in good standing under the Laws of its jurisdiction of
organization as set forth on Section 4.3  of the Company Disclosure Schedule.  The Company has the corporate power and authority, and each
of its Subsidiaries has the corporate or other applicable power and authority, and each possesses
all material governmental franchises, licenses, permits, authorizations and approvals necessary to
carry on their respective businesses substantially in the manner as they are now being conducted
and to own, lease and operate all of their respective properties and assets. Section 4.1  of the Company Disclosure Schedule sets forth a true, correct and complete list of each jurisdiction
in which the Company and any of its Subsidiaries is qualified to do business as a foreign corporation.
 Each of the Company and its Subsidiaries is duly licensed or qualified to do business in each
jurisdiction in which the nature of the business conducted by it or the character or location of
the properties and assets owned, leased or operated by it makes such qualification or licensing necessary
except in jurisdictions where the failure of such license or qualification would not have a Company
Material Adverse Effect.  The copies of the Companys articles of incorporation and bylaws
and each of its Subsidiaries organizational documents delivered by the Company to Buyer prior
to the execution of this Agreement are accurate, complete and correct copies of such instruments
as in effect on the date hereof.

Section
  4.2
  Capitalization.

Section
  4.2.1    Authorized, Issued and Outstanding Capital Stock.
   The authorized capital stock of the Company consists of Fifty-Six Million
  One Hundred Forty-Four Thousand One Hundred and Forty-Eight (56,144,148) shares,
  without par value, of which (i) Forty-Two Million (42,000,000) shares are Common
  Stock and (ii) Fourteen Million One Hundred Forty-Four Thousand One Hundred
  and Forty-Eight (14,144,148) shares are Preferred Stock, of which (x) Four Million
  Three Hundred Thousand (4,300,000) shares have been designated as Series A Preferred
  Stock, (y) Four Million Three Hundred Thousand (4,300,000) shares have been
  designated as Series B Preferred Stock and (z) Five Million Five Hundred Forty-Four
  Thousand One Hundred and Forty-Eight (5,544,148) shares have been designated
  Series C Preferred Stock. As of the date of this Agreement, there are issued
  and outstanding 11,454,638 shares of Common Stock, 4,295,004 shares of Series
  A Preferred Stock, 3,931,210 shares of Series B Preferred Stock and 5,047,223
  shares of Series C Preferred Stock. The Company has no other capital stock authorized,
  issued or outstanding. Section 4.2.1 of the Company Disclosure Schedule
  sets forth the name of each Holder of shares of Company Stock, as well as the
  number of shares of Common Stock and Preferred Stock held by each such Holder.

Section
  4.2.2    Company Options.  As of the date of
  this Agreement, 6,033,154 shares of Common Stock are reserved for issuance upon
  the exercise of outstanding Company Options. Section 4.2.2 of the
  Company Disclosure Schedule sets forth the name of each Holder of Company Options,
  as well as the number of Company Options held by each such Holder, the number
  of shares of Common Stock for which each such Company Option is exercisable,
  the vesting schedule for each such Company Option and the price per share of
  Common Stock for which each such Company Option is exercisable (without taking
  into account whether or not such Company Option is in fact exercisable on the
  date hereof).  The Company has delivered to Buyer true, accurate and complete
  copies of each plan or agreement pursuant to which any Company Option has been
  granted, including any and all amendments thereto.

26

---

---

Section
  4.2.3    Company Warrants.  As of the date of
  this Agreement, 98,281 shares of Common Stock are reserved for issuance upon
  exercise of outstanding Company Warrants. Section 4.2.3 of the Company
  Disclosure Schedule sets forth the name of each Holder of Company Warrants,
  as well as the number of Company Warrants held by each such Holder, the number
  of shares of Common Stock for which such Company Warrant is exercisable, the
  vesting schedule for each such Company Warrant and the price per share of Common
  Stock for which each such Company Warrant is exercisable (without taking into
  account whether or not such Company Option is in fact exercisable on the date
  hereof).  The Company has delivered to Buyer true, accurate and complete
  copies of each plan or agreement pursuant to which any Company Warrant has been
  issued, including any and all amendments thereto.

Section
  4.2.4    No Other Capital Stock, Company Options or Company
  Warrants.  Except for the Company Options, Company Warrants and Preferred
  Stock referred to above, there are no outstanding options, warrants, convertible
  securities or rights of any kind to purchase or otherwise acquire any shares
  of capital stock or other securities of the Company. Except for the aggregate
  of 6,033,154 shares of Common Stock reserved for issuance upon exercise of outstanding
  Company Options, 98,281 shares of Common Stock reserved for issuance upon exercise
  of outstanding Company Warrants and 13,273,437 shares of Common Stock reserved
  for issuance upon conversion of outstanding shares of Preferred Stock, no shares
  of capital stock of the Company are reserved for issuance.

Section
  4.2.5    No Other Agreements.  There are no
  outstanding contractual obligations between the Company and any of its security
  holders (i) restricting the transfer of; (ii) affecting the voting rights of;
  (iii) requiring or allowing the repurchase, redemption or disposition of, or
  containing any right of first refusal with respect to; (iv) requiring the registration
  or sale of or (v) granting any preemptive or antidilutive right with respect
  to, any shares of Common Stock, Preferred Stock or any capital stock of, or
  other equity interests in, the Company.

Section
  4.2.6    Valid Issuances.  All of the issued
  and outstanding shares of capital stock of the Company have been duly authorized
  and validly issued, are fully paid and nonassessable and are free of any preemptive
  rights in respect thereto. All outstanding securities of the Company have been
  issued in compliance with all applicable state and federal securities Laws.
  The stock ledgers and related records that have been delivered by the Company
  to Buyer are complete and accurate.

Section
  4.3    Subsidiaries.  Section 4.3
  of the Company Disclosure Schedule lists each Subsidiary of the Company. Each
  of the Companys Subsidiaries is wholly owned by the Company. All of the
  outstanding shares of capital stock of, or other equity interests in, each such
  Subsidiary of the Company have been validly issued and are fully paid and nonassessable
  and such shares or interests are owned directly by the Company, free and clear
  of all Encumbrances and free of any restriction on the right to vote, sell or
  otherwise dispose of such capital stock or other ownership interests. Except
  for the capital stock or other ownership interests of each of its Subsidiaries,
  the Company does not beneficially own directly or indirectly any capital stock,
  membership interest, partnership interest, joint venture interest or other equity
  interest in any Person.

27

---

---

Section
  4.4     Authority; No Violation.

Section
  4.4.1    The Company has full corporate power and authority
  to execute and deliver this Agreement and the Ancillary Agreements to which
  it is a party, to perform its obligations hereunder and thereunder and to consummate
  the transactions contemplated hereby and thereby. The execution and delivery
  of this Agreement and the Ancillary Agreements to which the Company is a party
  and the consummation of the transactions contemplated hereby and thereby have
  been duly and validly approved by all requisite corporate action on the part
  of the Company, and no other corporate proceedings on the part of the Company
  are necessary to approve this Agreement or the Ancillary Agreements to which
  the Company is a party or to authorize or consummate the transactions contemplated
  hereby or thereby. This Agreement and the Ancillary Agreements to which the
  Company is a party have been duly and validly executed and delivered by the
  Company and (assuming the due authorization, execution and delivery of this
  Agreement and the Ancillary Agreements to which the Company is a party by each
  of the other parties hereto and thereto) constitute valid and binding obligations
  of the Company, enforceable against the Company in accordance with their respective
  terms, except as the enforceability thereof may be subject to or limited by
  bankruptcy, insolvency, reorganization, moratorium or similar Laws relating
  to or affecting the rights of creditors generally and the availability of equitable
  relief (whether in proceedings at law or in equity).

Section
  4.4.2    Neither the execution and delivery by the Company
  or any of its Affiliates of this Agreement or the Ancillary Agreements to which
  the Company or any of its Affiliates is a party nor the consummation by the
  Company or any of its Affiliates of any of the transactions contemplated hereby
  or thereby, nor compliance by the Company or any of its Affiliates with any
  of the terms or provisions hereof or thereof, will (i) violate any provision
  of the articles of incorporation, charter or bylaws or comparable organizational
  documents of the Company or any of its Subsidiaries or (ii) (x) violate, conflict
  with or require any notice, filing, consent, waiver or approval under any material
  Applicable Law to which the Company or any of its Subsidiaries or any of their
  respective properties, contracts or assets are subject, or (y) violate, conflict
  with, result in a breach of any provision of or the loss of any benefit under,
  constitute a default (or an event which, with or without notice or lapse of
  time, or both, would constitute a default) under, result in the termination
  of or a right of termination or cancellation under, accelerate or result in
  a right of acceleration of the performance required by, result in the creation
  of any Encumbrance upon the Preferred Stock, the Common Stock or any Encumbrance
  upon the properties, contracts or assets of the Company or any of its Subsidiaries
  under, or require any notice, approval, waiver or consent under, any note, bond,
  mortgage, indenture, deed of trust, license, lease, agreement or other instrument
  or obligation to which the Company or any of its Subsidiaries is a party, or
  by which the Company or any of its Subsidiaries or any of their respective properties
  or assets may be bound or affected in any material respect.

28

---

---

Section
  4.5    Consents and Approvals.  Except for those consents, approvals and notices set forth on Section 4.5  of the Company Disclosure Schedule, no consents or approvals of or notices to or filings, declarations
or registrations with any Governmental Authority or any third party are necessary in connection with
(i) the execution and delivery by the Company and its Affiliates of this Agreement or any of the
Ancillary Agreements or (ii) the consummation by the Company or any of its Affiliates of the transactions
contemplated hereby or thereby so as to permit the Surviving Company to continue the Company Business
after the Closing Date.

Section
  4.6    Financial Statements.

Section
  4.6.1    Section 4.6.1 of the Company Disclosure
  Schedule sets forth true, correct and complete copies of (i) the unaudited consolidated
  balance sheet of the Company and its Subsidiaries as of September 30, 2003 and
  the related consolidated statements of income and changes in shareholders
  equity for the nine (9) months ended September 30, 2003 (the statements referred
  to in this clause (i) (including the balance sheet), the Interim Period
  Unaudited Company Financial Statements and the balance sheet as of
  September 30, 2003, the Interim Period Unaudited Company Balance Sheet);
  and (ii) the audited consolidated balance sheets of the Company and its Subsidiaries
  as of December 31, 2002, 2001 and 2000 and the related consolidated statements
  of income and changes in shareholders equity for the fiscal years ended
  December 31, 2002, 2001 and 2000 (the statements referred to in this clause
  (ii) (including the balance sheets), the Audited Company Financial
  Statements).  The Interim Period Unaudited Company Financial
  Statements and the Audited Company Financial Statements present fairly, in all
  material respects, the consolidated financial position of the Company and its
  Subsidiaries as of the respective dates thereof and the results of the Companys
  consolidated operations for the fiscal periods therein set forth. Each of the
  Audited Company Financial Statements and the Interim Period Unaudited Company
  Financial Statements have been prepared in accordance with both the Companys
  past practice and GAAP consistently applied throughout such fiscal periods,
  subject to normal year-end audit adjustments and except that the Interim Period
  Unaudited Company Financial Statements do not contain notes that may be required
  by GAAP.

Section
  4.6.2    Section 4.6.2 of the Company Disclosure
  Schedule sets forth a true, correct and complete itemization of the accounts
  receivable (including aging) of the Company as of December 5, 2003 (the Accounts
  Receivable).  The Accounts Receivable represent bona fide
  claims against debtors for sales, services performed or other charges arising
  on or before the respective dates of recording thereof. All Accounts Receivable
  have been billed in accordance with the past practice of the Company consistently
  applied and, to the Knowledge of the Company, are collectible in the ordinary
  course of business within three (3) months, except to the extent of an amount
  not in excess of the reserve for doubtful accounts reflected on the Interim
  Period Unaudited Company Balance Sheet.

Section
  4.6.3    Section 4.6.3 of the Company Disclosure
  Schedule sets forth the Companys pipeline as of December 5, 2003 used
  by the Company in the ordinary course of business and setting forth all material
  customer prospects for the sale of products and services by the Company (the
  Pipeline).  The Pipeline was prepared in good faith
  and on a reasonable basis in accordance with the past practices of the Company
  consistently applied.

29

---

---

Section
  4.6.4    To the Knowledge of the Company, there are no outstanding
  claims against the Company that, in the aggregate, are material to the Company,
  to return any products by reason of alleged overshipments, defective products
  or otherwise, or of products in the hands of customers under a written agreement
  that such merchandise would be returnable. No outstanding purchase commitment
  of the Company presently is in excess of the normal, ordinary and usual requirements
  of the Company Business or was made at any price in excess of the now current
  market price or contains terms or conditions more onerous than those usual and
  customary in the Company Business.

Section
  4.7    Contracts.  Section 4.7  of the Company Disclosure Schedule sets forth a complete and accurate list or description of all Contracts,
except for click through end user license agreements entered into in the ordinary course
of business: (v) pursuant to which the Company or any of its Subsidiaries is either obligated to
pay or entitled to receive in excess of $25,000 and that is not otherwise required to be disclosed
pursuant to subsections (w), (x), (y) or (z) of this Section 4.7; provided, however, that Section 4.7  of the Company Disclosure Schedule does not omit any Contracts pursuant to which, when viewed collectively,
the Company or any of its Subsidiaries are either obligated to pay or entitled to receive in excess
of $250,000 in the aggregate; (w) that are not terminable by the Company within ninety (90) days
from the date of this Agreement without penalty or further obligation on the part of the Company
or any of its Subsidiaries; (x) that involve payments based on profits or revenues of the Company
or any of its Subsidiaries; (y) that are employment, management, consulting or severance agreements
or other agreements or arrangements with any of the Company Business Employees or Company Business
Independent Contractors (other than offer letters and employee invention and proprietary rights assignment
agreements and option agreements, in each case, in the Companys standard forms previously provided
to Buyer); or (z) that include any noncompetition or nonsolicitation covenant or any exclusive dealing
or similar arrangement that limits the ability of the Company or any of its Subsidiaries or any of
their respective Affiliates to compete (geographically or otherwise) in any line of business (collectively,
the Scheduled Contracts).  As of the date hereof, each of the Contracts is a legal, valid and binding obligation
of the Company or its Subsidiaries (assuming the due authorization, execution and delivery by the
other parties thereto) and is in full force and effect and enforceable in accordance with its terms,
except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium
and similar Laws relating to or affecting creditors generally and by the availability of equitable
remedies (whether in proceedings at law or in equity). Neither the Company nor any of its Subsidiaries
has received notice of cancellation of or default under or intent to cancel or call a default under
any of the Contracts. The Company and each of its Subsidiaries has performed all obligations required
to be performed by it to date under the Contracts where such nonperformance would result in a material
breach of or default under any such Contract, and there exists no event or condition which with or
without notice or lapse of time or both would be a material breach or a material default on the part
of the Company or any of its Subsidiaries or, to the Knowledge of the Company, on the part of any
other party to such Contracts.

Section
  4.8     Intellectual Property.

Section
  4.8.1    Generally.  Section 4.8.1
  of the Company Disclosure Schedule sets forth a complete and accurate list
  of all United States and foreign: (i) trademarks and service marks (whether
  registered or unregistered), trade names and designs (collectively, Trademarks);
  (ii) patents and patent applications (including any continuations, continuations-in-part,
  divisionals, reissues, renewals and applications for any of the foregoing) (collectively
  Patents); (iii) copyright registrations and applications
  (collectively Copyrights); and (iv) domain names, including
  top-level Internet domain names and all lower-level Internet domain names for
  which such top-level domains are a root or parent, and World Wide Web Universal
  Resource Locators (collectively, Domain Names), in each case
  owned by or licensed to the Company, in whole or in part, including jointly
  with others (such schedule specifying if such Intellectual Property is owned
  jointly), or used by the Company in the conduct or operation of the Company
  Business.

30

---

---

Section
  4.8.2     Trademarks.

Section
  4.8.2.1  All Trademarks of the Company for which an application for trademark
  registration has been filed are currently in compliance with all legal requirements,
  other than any requirement that, if not satisfied, would not result in a cancellation
  of any such registration or otherwise adversely affect the use, priority or
  enforceability of the Trademark in question. No registered Trademark of the
  Company has been or is now involved in any opposition or cancellation proceeding
  in the United States Patent and Trademark Office. To the Knowledge of the Company,
  there has been no prior use of any Trademark of the Company by any third party
  that confers upon said third party superior rights in any such Trademark.

Section
  4.8.2.2  The Company is the owner of all right, title and interest in and
  to all of the Trademarks, in each case free and clear of any and all Encumbrances,
  covenants, conditions and restrictions or other adverse claims or interests
  of any kind or nature, and the Company has not received any written notice or
  claim or, to the Knowledge of the Company, any oral notice or claim, challenging
  the Companys complete and exclusive ownership of the Trademarks or suggesting
  that any other Person has any claim of legal or beneficial ownership with respect
  thereto. There is no agreement, decree, arbitral award or other provision or
  contingency which obligates the Company to grant licenses in future Trademarks.

Section
  4.8.3     Patents.

Section
  4.8.3.1  All Patents of the Company are currently in compliance with legal
  requirements (including payment of filing, examination, and maintenance fees
  and proofs of working or use) other than any requirement that, if not satisfied,
  would not result in a revocation or lapse or otherwise adversely affect the
  enforceability of the Patent in question and, to the Knowledge of the Company,
  the Company has not taken any action or failed to take any action (including
  a failure to disclose material prior art in connection with the prosecution
  of any Patent), or used or enforced (or failed to use or enforce) any of the
  Patents in a manner that would result in the abandonment or unenforceability
  of any of the Patents.

Section
  4.8.3.2  No Patent of the Company has been or is now involved in any interference,
  reissue, reexamination or opposing proceeding in the United States Patent and
  Trademark Office or any foreign patent office and, to the Knowledge of the Company,
  no such action has been threatened. There is no Patent of any Person that claims
  the same subject matter as any Patent of the Company and, to the Knowledge of
  the Company, no prior art that invalidates any claim of any Patent of the Company.

31

---

---

Section
  4.8.3.3  The Company is the owner of all right, title and interest in and
  to all of the Patents, in each case free and clear of any and all Encumbrances,
  covenants, conditions and restrictions or other adverse claims or interests
  of any kind or nature, and the Company has not received any written or oral
  notice or claim challenging the Companys complete and exclusive ownership
  of the Patents or suggesting that any other Person has any claim of legal or
  beneficial ownership with respect thereto. There is no agreement, decree, arbitral
  award or other provision or contingency which obligates the Company to grant
  licenses in future Patents.

Section
  4.8.3.4  To the Knowledge of the Company, the inventions disclosed in the
  Patents may be practiced by the Company without infringing any other patents
  owned by any Person.

Section
  4.8.4     Copyrights.

Section
  4.8.4.1  The Company is the owner of all right, title and interest in and
  to each of the Copyrights used by the Company other than those as to which the
  rights being exercised by the Company have been licensed from another Person
  (collectively, Company Owned Copyrights), free and clear
  of any and all Encumbrances, covenants, conditions and restrictions or other
  adverse claims or interests of any kind or nature, and the Company has not received
  any notice or claim (whether written or oral) challenging the Companys
  complete and exclusive ownership of the Copyrights or suggesting that any other
  Person has any claim of legal or beneficial ownership with respect thereto.

Section
  4.8.4.2  The Company has not received any notice or claim (whether written
  or oral) challenging or questioning the validity or enforceability of any of
  the Company Owned Copyrights or indicating an intention on the part of any Person
  to bring a claim that any Company Owned Copyright is invalid, is unenforceable
  or has been misused and, to the Knowledge of the Company, no Company Owned Copyright
  otherwise has been challenged or threatened in any way.

Section
  4.8.4.3  The Company has not taken any action or, to the Knowledge of the
  Company, failed to take any action (including a failure to disclose required
  information to the United States Copyright Office in connection with any registration
  of a registered copyright therewith), or used or enforced (or failed to use
  or enforce) any of the Company Owned Copyrights, in each case in a manner that
  would result in the unenforceability of any of the Company Owned Copyrights.
  The Company has taken all reasonable steps to protect the Companys rights
  in and to the Company Owned Copyrights. To the Knowledge of the Company, no
  other Person has infringed or is infringing any of the Company Owned Copyrights.

Section
  4.8.5     Trade Secrets.

Section
  4.8.5.1  The Company has taken all reasonable steps in accordance with
  normal industry practice to protect its rights in confidential information and
  proprietary information, including any formula, pattern, compilation, program,
  device, method, technique, or process, that: (1) derives independent economic
  value, actual or potential, from not being generally known to the public or
  to other Persons who can obtain economic value from its disclosure or use; and
  (2) is the subject of efforts that are reasonable under the circumstances to
  maintain its secrecy (collectively, Trade Secrets).

32

---

---

Section
  4.8.5.2  Without limiting the generality of Section 4.8.5.1, the Company
  enforces a policy of requiring each relevant employee, consultant and contractor
  to execute proprietary information, confidentiality and assignment agreements
  substantially in the Companys standard forms that assign to the Company
  all rights to any Intellectual Property relating to the Company Business that
  are developed by the employees, consultants or contractors, as applicable, and
  that otherwise appropriately protect the Intellectual Property of the Company,
  and, except subject to appropriate confidentiality obligations, there has been
  no disclosure by the Company of its confidential information or Trade Secrets;
  nor have any actions been taken by the Company which would affect the Companys
  ability to obtain U.S. or, to the Knowledge of the Company, foreign protection
  for the Companys inventions.

Section
  4.8.6     License Agreements.

Section
  4.8.6.1  Section 4.8.6.1 of the Company Disclosure Schedule sets
  forth a complete and accurate list of all license agreements granting to the
  Company any right to use or practice any rights under any Intellectual Property
  currently or proposed to be used by the Company in the operation of its business
  (other than off-the-shelf shrink wrap Software commercially available
  on reasonable terms to any Person for a license fee of no more than Ten Thousand
  Dollars ($10,000), but including all such agreements that are otherwise material
  to the Company) (collectively, the Company Inbound License Agreements),
  indicating for each the title and the parties thereto.

Section
  4.8.6.2  Section 4.8.6.2 of the Company Disclosure Schedule sets
  forth a complete and accurate list of all license agreements (other than click
  through end user license agreements entered into in the ordinary course
  of the Companys business) currently in effect and providing for annual
  payments to the Company in excess of Twenty-Five Thousand Dollars ($25,000)
  under which the Company has granted licenses of Software or other rights to
  in or to use or practice any rights under any Company Intellectual Property
  (indicating for each the title and parties thereto) and the Companys current
  forms of license agreements used by the Company in the ordinary course) under
  which the Company grants licenses of Software or grants other rights in or to
  use or practice any rights under any of the Companys Intellectual Property
  (indicating for each the title of such form agreement) (collectively, the Company
  Outbound License Agreements).

Section
  4.8.6.3  There is no outstanding or, to the Knowledge of the Company, threatened
  dispute or disagreement with respect to any Company Inbound License Agreement
  or any Company Outbound License Agreement. Correct and complete executed copies
  of all Company Inbound License Agreements and Company Outbound License Agreements
  have been made available to Buyer.

33

---

---

Section
  4.8.7    Domain Names.  The Company is the sole
  owner of the Domain Names, and all such Domain Names are currently registered
  by the Company, as sole owner, with an ICANN accredited registrar, and the registration
  fees are paid through the date(s) listed on Section 4.8.7 of the Company
  Disclosure Schedule.  The Company is the owner or has sufficient rights
  to display all content displayed on the Internet site associated with each of
  the Domain Names (collectively, the Content), and no consent,
  license or approval from any third party is required in connection with the
  sale or transfer of the ownership of the Domain Names and the continued use
  of the Content by Buyer or the Surviving Company. To the Knowledge of the Company,
  no facts or circumstances exist which could reasonably form the basis of a challenge
  relating to Buyers unencumbered use of the Domain Names or Content, or
  any part thereof.

Section
  4.8.8    Ownership; Sufficiency of Intellectual Property
  Assets.  The Company owns or possesses adequate licenses or other rights
  to use, free and clear of Encumbrances (except in the case of licenses, the
  interests of the licensing party), orders, arbitration awards and contingent
  licenses arising from termination provisions (or other causes) in agreements
  between the Company and any other Person, including, without limitation, all
  of its Intellectual Property used in the conduct of the Company Business. The
  Intellectual Property identified in Section 4.8.1 of the Company
  Disclosure Schedule, together with Trade Secrets, Company Owned Copyrights,
  the Companys unregistered Copyrights and the Companys rights granted
  to it under the Company Inbound License Agreements, constitute all the Intellectual
  Property rights and Company Inbound License Agreements used in the operation
  of the Company Business as currently conducted and are all such Intellectual
  Property rights and Company Inbound License Agreements necessary to operate
  the Company Business after the Closing in substantially the same manner as the
  Company Business has been operated by the Company during the six (6) months
  prior to the Closing.

Section
  4.8.9    No Infringement by the Company.  The
  products used, manufactured, marketed, sold or licensed by the Company, and
  all Intellectual Property used in the conduct of the Company Business as currently
  conducted, do not infringe upon, violate or constitute the unauthorized use
  of any rights owned or controlled by any third party, including any Intellectual
  Property of any third party. No litigation is now, or since incorporation of
  the Company has been, pending and no notice or other claim has been received
  by the Company, (A) alleging that the Company has engaged in any activity
  or conduct that infringes upon, violates or constitutes the unauthorized use
  of the Intellectual Property rights of any third party, including any contamination
  or misappropriation of trade secrets claims, or (B) challenging the ownership,
  use, validity or enforceability of any Intellectual Property owned or exclusively
  licensed by or to the Company.

Section
  4.8.10    No Infringement by Third Parties.  To
  the Knowledge of the Company, no third party is misappropriating, infringing,
  diluting or violating any Intellectual Property owned or exclusively licensed
  by the Company, and no claims for any of the foregoing have been brought against
  any third party by the Company. The Company has taken reasonable steps in accordance
  with normal industry practice to protect its Intellectual Property.

Section
  4.8.11    Assignment; Change of Control.  To
  the Knowledge of the Company, the execution, delivery and performance by the
  Company of this Agreement, the Ancillary Agreements and each of the other documents
  contemplated hereby or thereby to which it is a party, and the consummation
  of the transactions contemplated hereby and thereby, will not result in the
  loss or impairment of, or give rise to any right of any third party to terminate,
  any of the Companys rights to own any of its Intellectual Property or
  rights under any Company Inbound License Agreement or Company Outbound License
  Agreement, nor require the consent of any Governmental Authority or third party
  in respect of any such Intellectual Property.

34

---

---

Section
  4.8.12    Software.  The Software owned or purported
  to be owned by the Company was: (i) developed by employees of the Company within
  the scope of their employment; (ii) developed by independent contractors who
  have assigned their rights to the Company pursuant to written agreements; or
  (iii) otherwise acquired by the Company from a third party who assigned all
  Intellectual Property rights in the Software to the Company. None of the Software
  is, in whole or in part, subject to the provisions of any open source or quasi-open
  source license agreement. The Company has made no submission or suggestion and
  is not subject to any agreement with standards bodies or other entities which
  would obligate the Company to grant licenses to or otherwise impair its control
  of its Intellectual Property.

Section
  4.8.13    Encryption Technology.  The Company
  Business as currently conducted and as currently proposed to be conducted complies
  with all U.S. and, to the Knowledge of the Company, non-U.S. Applicable Laws,
  rules and regulations, whether domestic or foreign, regarding encryption technology,
  including, without limitation, the import and export thereof. A copy of all
  CCATs received by the Company is attached to Section 4.8.13 of
  the Company Disclosure Schedule.

Section
  4.8.14    Performance of Existing Products.  The
  Companys currently licensed and marketed commercially available products,
  including any customized products, perform in all material respects with
  the functions described in any agreed specifications or end user documentation
  provided to Buyer or to customers or potential customers of the Company and
  in accordance with the Companys contractual obligations to the Companys
  customers. The Company has not been notified, either verbally or in writing,
  that such products do not perform as set forth above. To the extent that the
  Companys products have not been launched, the Company has fully disclosed
  to Buyer in writing all currently known technical problems or concerns associated
  with such products that affect the performance of the Companys products.

Section
  4.8.15     Use of User Data.

Section
  4.8.15.1  The Companys use, license, sublicense and sale of
  any User Data collected from users at www.zonelabs.com and any co-branded websites
  which the Company manages have complied in all material respects with the Companys
  published privacy policy at the time such User Data was collected (collectively,
  the Privacy Policies), excluding any violation that, if disclosed,
  would not reasonably be expected to result in a material claim against the Company.

Section
4.8.15.2  The Company is in compliance in all material respects with all U.S. and, to the
Knowledge of the Company, non-U.S. Applicable Laws and contractual obligations binding on the Company
that relate to or govern the compilation, use and transfer of User Data.

35

---

---

Section
4.8.15.3  There is no Proceeding (including any audit or investigation) pending or, to
the Knowledge of the Company, threatened, by any Person or any Governmental Authority involving the
use, disclosure or transfer of any User Data by the Company, nor, to the Knowledge of the Company,
has the Company been contacted by any Governmental Authority regarding the use, disclosure or transfer
of any User Data by the Company.

Section
4.8.15.4  None of the Privacy Policies prohibits the transfer of User Data to Buyer and
its Affiliates pursuant to Buyers acquisition of the websites of the Company pursuant to this
Agreement (it being understood that, following such transfer, such User Data remains subject to the
applicable use limitations set forth in such Privacy Policies).

Section
4.8.15.5  To the Knowledge of the Company, no Person has obtained unauthorized access to
User Data stored on the computer systems of the Company (including, without limitation, any User
Data contained in any hard copy printouts), nor has there been any other unauthorized acquisition
of material computerized data of the Company (including, without limitation, any data contained in
any hard copy printouts) that has compromised the security, confidentiality or integrity of any User
Data maintained by the Company in any material manner.

Section
  4.9     Employee Benefit Matters.

Section
  4.9.1    Section 4.9.1 of the Company Disclosure
  Schedule contains a complete list of Employee Plans which cover or have covered
  employees of the Company. True and complete copies of each of the following
  documents have been delivered by the Company to Buyer: (i) each Employee Plan
  (and, if applicable, related trust agreements, annuity contracts or other funding
  instruments) which covers or has covered employees of the Company (with respect
  to their relationship with the Company) and all amendments thereto, all current
  summary plan descriptions, the most recent summary of material modifications
  (as defined in ERISA) and all written interpretations and descriptions thereof
  which the Company generally distributes to participants therein and a complete
  description of any Employee Plan which is not in writing, (ii) the most recent
  determination letter issued by the Internal Revenue Service and any opinion
  letter issued by the Department of Labor with respect to each Pension Plan and
  each voluntary employees beneficiary association as defined under Section
  501(c)(9) of the Code (other than a Multiemployer Plan) which covers or has
  covered employees of the Company (with respect to their relationship with the
  Company), (iii) for the three (3) most recent plan years, Annual Reports on
  Form 5500 Series required to be filed with any governmental agency for each
  Pension Plan or Welfare Plan which covers or has covered employees of the Company
  (with respect to their relationship with the Company), (iv) a description
  of complete age, gender, race, salary, service and related data as of the last
  day of the last plan year for employees and former employees of the Company,
  and (v) a description setting forth the amount of any liability of the Company
  as of the Closing Date for payments more than thirty (30) calendar days past
  due with respect to any Welfare Plan.

36

---

---

Section
  4.9.2     Pension Plans.

Section
  4.9.2.1  No Employee Plan is or was at any time subject to Title IV or
  Part 3 of Title I of ERISA or Section 412 of the Code and neither the Company
  nor any ERISA Affiliate is subject to any liability under Title IV or Part 3
  of Title I of ERISA.

Section
  4.9.2.2  Each Pension Plan and each related trust agreement, annuity contract
  or other funding instrument which covers or has covered employees or former
  employees of the Company (with respect to their relationship with the Company)
  which has been operated as a qualified plan has received either a favorable
  determination letter, or a favorable opinion letter issued to such Pension Plans
  prototype sponsor, from the Internal Revenue Service stating that such Pension
  Plan and each related trust is qualified and tax-exempt under the provisions
  of Code Sections 401(a) (or 403(a), as appropriate) and 501(a) and (2) to the
  Knowledge of the Company has been so qualified during the period from its adoption
  to date.

Section
  4.9.2.3  Each Pension Plan and each related trust agreement, annuity contract
  or other funding instrument which covers or has covered employees or former
  employees of the Company (with respect to their relationship with the Company)
  currently complies in all material respects and has been maintained in compliance
  in all material respects with its terms and, both as to form and in operation,
  with the requirements prescribed by any and all statutes, orders, rules and
  regulations which are applicable to such plans, including, without limitation,
  ERISA and the Code.

Section
  4.9.3    Multiemployer Plans.  Neither the Company
  nor any ERISA Affiliate has any liability with respect to a Multiemployer Plan,
  and no liability will arise or be imposed on the Company or any ERISA Affiliate
  under, or with respect to, any Multiemployer Plan.

Section
  4.9.4     Welfare Plans.

Section
  4.9.4.1  Each Welfare Plan which covers or has covered employees or former
  employees of the Company (with respect to their relationship with the Company)
  currently complies in all material respects and has been maintained in compliance
  in all material respects with its terms and, both as to form and operation,
  with the requirements prescribed by any and all statutes, orders, rules and
  regulations which are applicable to such Welfare Plan, including, without limitation,
  ERISA and the Code.

Section
  4.9.4.2  Except as required by COBRA, none of the Company, any ERISA Affiliate
  or any Welfare Plan has any present or future obligation to make any payment
  to, or with respect to any present or former employee of the Company or any
  ERISA Affiliate pursuant to, any retiree medical benefit plan, or other retiree
  Welfare Plan, and no condition exists which would prevent the Company or an
  ERISA Affiliate from amending or terminating any such benefit plan or such Welfare
  Plan.

Section
  4.9.4.3  Each Welfare Plan which covers or has covered employees or former
  employees of the Company (with respect to their relationship with the Company)
  and which is a group health plan, as defined in Section 607(1) of
  ERISA, presently complies in all material respects with and has been operated
  in compliance in all material respects with provisions of COBRA.

37

---

---

Section
  4.9.4.4  The insurance policies or other funding instruments, if any, for
  each Welfare Plan provide coverage for each employee, consultant, independent
  contractor or retiree of the Company or any of its Subsidiaries (and, if applicable,
  their respective dependents) who has been advised by the Company, whether through
  an Employee Plan or otherwise, that he or she is covered by such Welfare Plan.

Section
  4.9.5    Benefit Arrangements.  Each Benefit
  Arrangement which covers or has covered employees or former employees of the
  Company (with respect to their relationship to the Company) presently complies
  and has been maintained in compliance in all material respects with its terms
  and with the requirements prescribed by any and all statutes, orders, rules
  and regulations which are applicable to such Benefit Arrangement, including,
  without limitation, the Code. The employment of all persons presently employed
  or retained by the Company is terminable at will.

Section
  4.9.6    Unrelated Business Taxable Income; Unpaid Contributions.
   No Employee Plan (or trust or other funding vehicle pursuant thereto)
  has incurred any liability under Code Section 511. Neither the Company nor any
  ERISA Affiliate has any liability for unpaid contributions under Section 515
  of ERISA with respect to any Employee Plan.

Section
  4.9.7    Fiduciary Duties and Prohibited Transactions.
   Neither the Company nor any plan fiduciary of any Welfare Plan or Pension
  Plan which covers or has covered employees or former employees of the Company
  or any ERISA Affiliate has engaged in, or has any liability in respect of, any
  transaction in violation of Sections 404 or 406 of ERISA or any prohibited
  transaction, as defined in Section 4975(c)(1) of the Code, or has otherwise
  violated the provisions of Part 4 of Title I, Subtitle B of ERISA
  so as to create any liability of the Company or any of its Subsidiaries or any
  Employee Plan. The Company has not participated in a violation of Part 4
  of Title I, Subtitle B of ERISA by any plan fiduciary of any Welfare
  Plan or Pension Plan, and the Company and its Subsidiaries have not been assessed
  any civil penalty under Section 502(l) of ERISA.

Section
  4.9.8    Litigation.  There is no action, order,
  writ, injunction, judgment or decree outstanding or claim (other than routine
  claims for benefits), suit, litigation, proceeding, arbitration proceeding,
  governmental audit or investigation relating to or seeking benefits under any
  Employee Plan that is pending or, to the Knowledge of the Company, anticipated
  or threatened against the Company, any ERISA Affiliate or any Employee Plan.

Section
  4.9.9    No Amendments.  Neither the Company
  nor any ERISA Affiliate has announced to employees, former employees, consultants
  or directors an intention to create, or otherwise created, a legally binding
  commitment to adopt any additional Employee Plan which is intended to cover
  employees or former employees of the Company (with respect to their relationship
  with the Company) or to amend or modify any existing Employee Plan which covers
  or has covered employees or former employees of the Company or any of its Subsidiaries
  (with respect to their relationship with the Company or any of its Subsidiaries).

Section
  4.9.10   Unpaid Contributions.  Neither the Company
  nor any ERISA Affiliate has any liability for unpaid contributions under Section
  515 of ERISA with respect to any Pension Plan, Multiemployer Plan or Welfare
  Plan.

38

---

---

Section
  4.9.11    Insurance Contracts.  No Employee
  Plan holds as an asset of any Employee Plan any interest in any annuity contract,
  guaranteed investment contract or any other investment or insurance contract
  issued by an insurance company that is the subject of bankruptcy, conservatorship
  or rehabilitation proceedings.

Section
  4.9.12    No Acceleration or Creation of Rights.
   Neither the execution and delivery of this Agreement or the Ancillary
  Agreements by the Company nor the consummation of the transactions contemplated
  hereby or thereby will result in the acceleration or creation of any rights
  of any person to benefits under any Employee Plan (including, without limitation,
  the acceleration of the vesting or exercisability of any stock options, the
  acceleration of the vesting of any restricted stock, the acceleration of the
  accrual or vesting of any benefits under any Pension Plan or the acceleration
  or creation of any rights under any severance, parachute or change in control
  agreement).

Section
  4.9.13    No Other Material Liability.  To the
  Knowledge of the Company, no event has occurred in connection with which the
  Company, any ERISA Affiliate or any Employee Plan, directly or indirectly, could
  be subject to any material liability (other than the payment of benefits under
  the terms of such Employee Plan) (A) under any statute, regulation or governmental
  order relating to any Employee Plan or (B) pursuant to any obligation of the
  Company to indemnify any person against liability incurred under any such statute,
  regulation or order as they relate to the Employee Plans.

Section
  4.10    Labor and Other Employment Matters.

Section
  4.10.1    Schedule 4.10.1 of the Company Disclosure
  Schedule sets forth a complete and accurate list (giving name, job title, credited
  service, current annual compensation (including a separate statement of base
  salary, bonus and benefits for each individual)) of each current Company Business
  Employee and his or her current employer. Neither the Company nor any of its
  Subsidiaries is or has ever been delinquent in payments to any Company Business
  Employees or Company Business Independent Contractors for any wages, salaries,
  commissions, bonuses or other direct compensation for any services performed
  for it or amounts required to be reimbursed to such employee. The Company and
  each of its Subsidiaries are and have always been in compliance in all material
  respects with all Applicable Law respecting labor, employment, immigration,
  fair employment practices, terms and conditions of employment, workers
  compensation, occupational safety, plant closings, wages and hours. The Company
  and each of its Subsidiaries has withheld all amounts required by Applicable
  Law or by agreement to be withheld from the wages, salaries, and other payments
  to employees; and neither the Company nor any of its Subsidiaries is or has
  ever been liable for any arrears of wages or any penalty for failure to comply
  with any of the foregoing. Neither the Company nor any of its Subsidiaries is
  or has ever been liable for any payment to any trust or other fund or to any
  Governmental Authority, with respect to unemployment compensation benefits,
  social security or other benefits or obligations for employees (other than routine
  payments to be made in the ordinary course of business and consistent with past
  practice).

39

---

---

Section
  4.10.2    There are no pending claims against the Company
  or any of its Subsidiaries under any workers compensation plan or policy
  or for long-term disability. Neither the Company nor any of its Subsidiaries
  is bound by or subject to (and none of their respective assets or properties
  are bound by or subject to) any written or oral, express or implied, contract,
  commitment or arrangement with any labor union, and no labor union has requested
  or, to the Knowledge of the Company, has sought to represent any of the employees,
  representatives or agents of the Company or any of its Subsidiaries. There is
  no strike or other labor dispute involving the Company or any of its Subsidiaries
  pending or, to the Knowledge of the Company, threatened. The Company has not,
  during the three year period prior to the date of this Agreement, received any
  demand letters, civil rights charges, suits, drafts of suits, or administrative
  claims of or from any of its employees. There are no controversies pending or,
  to the Knowledge of the Company, threatened, between the Company or any of its
  Subsidiaries and any Company Business Employees or Company Business Independent
  Contractors, which controversies have or could reasonably be expected to result
  in an action, suit, proceeding, claim, arbitration or investigation before any
  Governmental Authority.

Section
  4.10.3    To the Knowledge of the Company, no Company Business
  Employees or Company Business Independent Contractors are or have ever been
  in violation of any term of any employment contract, non-disclosure agreement,
  noncompetition agreement, or any restrictive covenant to a former employer relating
  to the right of any such employee to be employed by the Company or any of its
  Subsidiaries because of the nature of the business conducted or presently proposed
  to be conducted by the Company or any of its Subsidiaries or to the use by the
  Company or any of its Subsidiaries of trade secrets or proprietary information
  of others. To the Knowledge of the Company, no Company Business Employees or
  Company Business Independent Contractors are or have ever been in violation
  of any term of any employment contract, non-disclosure agreement, noncompetition
  agreement, or any restrictive covenant relating to the Company Business.

Section
  4.10.4    No current Company Business Employees or Company
  Business Independent Contractors have given notice to the Company or any of
  its Subsidiaries, nor is the Company or any of its Subsidiaries otherwise aware,
  that any such Person intends to terminate his or her employment with the Company
  or any of its Subsidiaries. The Company and each of its Subsidiaries is in compliance
  with all Laws concerning the classification of employees and independent contractors
  and has properly classified all such Persons for purposes of participation in
  the Employee Plans.

Section
  4.11    Tax Matters.

Section
  4.11.1    Filing of Tax Returns.  The Company
  and each of its Subsidiaries have timely filed with the appropriate Tax authorities
  all Tax Returns required to be filed through the date hereof. All such Tax Returns
  are complete and accurate in all respects. All Taxes shown due and payable on
  such Tax Returns have been paid. None of the Company nor any of its Subsidiaries
  is currently the beneficiary of any extension of time within which to file any
  Tax Return. No claim has ever been made by an authority in a jurisdiction where
  the Company or its Subsidiaries do not file Tax Returns that any of them is
  or may be subject to taxation by that jurisdiction.

40

---

---

Section
  4.11.2    Payment of Taxes.  The unpaid
  Taxes of the Company and its Subsidiaries (i) did not, as of the date of the
  Interim Period Unaudited Company Financial Statements, exceed the reserve for
  Tax liability (excluding any reserve for deferred Taxes established to reflect
  timing differences between book and Tax income) set forth on the face of the
  Interim Period Unaudited Company Balance Sheet (rather than in any notes thereto),
  and (ii) will not exceed that reserve as adjusted for operations and transactions
  through the Closing Date in accordance with the past custom and practice of
  the Company in filing its Tax Returns. Since the date of Interim Period Unaudited
  Company Financial Statements, the Company and its Subsidiaries have not incurred
  any liability for Taxes outside the ordinary course of business or otherwise
  inconsistent with past custom and practice.

Section
  4.11.3    Audits, Investigations or Claims.  No
  deficiencies for Taxes the Company or any of its Subsidiaries have been claimed,
  proposed or assessed by any Tax authority other Governmental Authority. There
  are no pending or, to the Knowledge of the Company, threatened audits, assessments
  or other actions for or relating to any liability in respect of Taxes of the
  Company or any of its Subsidiaries, and there are no matters under discussion
  with any Tax authorities or other Governmental Authorities, or known to the
  Company with respect to Taxes that are likely to result in an additional liability
  for Taxes with respect to the Company or any of its Subsidiaries. The Company
  has delivered or made available to Buyer complete and accurate copies of federal,
  state and local Tax Returns of the Company, its Subsidiaries and their respective
  predecessors for the years ended December 31, 1999, 2000, 2001 and 2002,
  and complete and accurate copies of all examination reports and statements of
  deficiencies assessed against or agreed to by the Company, any of its Subsidiaries
  or any of their respective predecessors since December 31, 1999. None of the
  Company, any of its Subsidiaries nor any of their respective predecessors has
  waived any statute of limitations in respect of Taxes or agreed to any extension
  of time with respect to a Tax assessment or deficiency, nor has any request
  been made in writing for any such extension or waiver. No power of attorney
  (other than powers of attorney authorizing employees of the Company or any of
  its Subsidiaries to act on behalf of the Company or any of its Subsidiaries,
  as applicable) with respect to any Taxes has been executed or filed with any
  Tax authority.

Section
  4.11.4    Liens.  There are no Encumbrances
  for Taxes other than Encumbrances for Taxes not yet due and payable on any assets
  of the Company or any of its Subsidiaries.

Section
  4.11.5    Tax Elections.  All material
  elections with respect to Taxes affecting the Company or any of its Subsidiaries
  as of the date hereof, to the extent such elections are not shown on or in the
  Tax Returns that have been delivered or made available to Buyer, are set forth
  on Section 4.11.5 of the Company Disclosure Schedule.  Neither
  the Company nor any of its Subsidiaries (i) has consented at any time under
  former Section 341(f)(1) of the Code to have the provisions of former Section 341(f)(2)
  of the Code apply to any disposition of the assets of the Company; (ii) has
  agreed, or is required, to make any adjustment under Section 481(a) of
  the Code by reason of a change in accounting method or otherwise; (iii) has
  made an election, or is required, to treat any of its assets as owned by another
  Person pursuant to the provisions of former Section 168(f) of the Code
  or as tax-exempt bond financed property or tax-exempt use property within the
  meaning of Section 168 of the Code; (iv) has acquired or owns any
  assets that directly or indirectly secure any debt the interest on which is
  tax exempt under Section 103(a) of the Code; (v) has made or will
  make a consent dividend election under Section 565 of the Code; (vi) has elected
  at any time to be treated as an S corporation within the meaning of Sections
  1361 or 1362 of the Code; or (vii) made any of the foregoing elections
  or is required to apply any of the foregoing rules under any comparable state
  or local Tax provision.

41

---

---

Section
  4.11.6    Tax Sharing Agreements.  There
  are no Tax-sharing agreements or similar arrangements (including indemnity arrangements)
  with respect to or involving the Company or any of its Subsidiaries.

Section
  4.11.7    Other Entity Liability.  Neither
  the Company nor any of its Subsidiaries has ever been a member of an affiliated
  group filing a consolidated federal income Tax Return (other than a group the
  common parent of which is the Company). Neither the Company nor any of its Subsidiaries
  has liability for the Taxes of any Person (other than Taxes of the Company or
  any of its Subsidiaries) (i) under Treasury Regulation Section 1.1502-6
  (or any similar provision of state, local, or foreign Law), (ii) as a transferee
  or successor, (iii) by contract, or (iv) otherwise.

Section
  4.11.8    No Withholding.  The Company
  and each of its Subsidiaries have withheld and paid all Taxes required to have
  been withheld and paid in connection with amounts paid or owing to any employee,
  independent contractor, creditor, stockholder or other third party.

Section
  4.11.9    USRPHC.  The Company has never
  been a United States real property holding corporation within the meaning of
  Section 897(c)(2) of the Code during the applicable period specified in section
  897(c)(1)(A)(ii) of the Code.

Section
  4.11.10    Partnerships, Single Member LLCs, CFCs, PHCs
  and PFICs.  Neither the Company nor any of its Subsidiaries (i)
  is a partner for Tax purposes with respect to any joint venture, partnership,
  or other arrangement or contract which is treated as a partnership for Tax purposes,
  (ii) owns a single member limited liability company which is treated as a disregarded
  entity other than LLC, (iii) is a stockholder of a controlled foreign
  corporation as defined in Section 957 of the Code (or any similar provision
  of state, local or foreign law), (iv) is a personal holding company
  as defined in Section 542 of the Code (or any similar provision of state, local
  or foreign law), and (v) is a passive foreign investment company
  within the meaning of Section 1297 of the Code.

Section
  4.11.11    Permanent Establishment.  Neither
  the Company nor any of its Subsidiaries has or has had a permanent establishment
  in any foreign country, as defined in any applicable Tax treaty or convention
  between the United States of America and such foreign country.

Section
  4.11.12    Disallowance of Interest Deductions.  None
  of the outstanding indebtedness of the Company or any of its Subsidiaries constitutes
  indebtedness with respect to which any interest deductions may be disallowed
  under Sections 163(i) or 163(l) or 279 of the Code or under any other provision
  of Applicable Law.

Section
  4.11.13    International Boycotts.  Neither
  the Company nor any of its Subsidiaries has participated in or is participating
  in an international boycott within the meaning of Section 999 of the Code.

42

---

---

Section
  4.11.14    Tax Shelters.  Neither the Company
  nor any of its Subsidiaries has entered into any transaction identified as a
  listed transaction for purposes of Treasury Regulations Sections
  1.6011-4(b)(2) or 301.6111-2(b)(2). If the Company or any of its Subsidiaries
  has entered into any transaction such that, if the treatment claimed by it were
  to be disallowed, the transaction would constitute a substantial understatement
  of federal income Tax within the meaning of Section 6662 of the Code, then it
  believes that it has either (x) substantial authority for the Tax treatment
  of such transaction or (y) disclosed on its Tax Return the relevant facts affecting
  the Tax treatment of such transaction.

Section
  4.11.15    Spin-Offs.  Neither the Company
  nor any of its Subsidiaries has distributed the stock of any corporation in
  a transaction satisfying the requirements of Section 355 of the Code since April
  16, 1997, and the stock of each of the Company and any of its Subsidiaries has
  not been distributed in a transaction satisfying the requirements of Section
  355 of the Code since April 16, 1997.

Section
  4.11.16    Deductibility of Payments.  To
  the Knowledge of the Company, there is no contract, agreement, plan or arrangement
  covering any employee or former employee of the Company or any of its Subsidiaries
  (with respect to such employees relationship with the Company or any of
  its Subsidiaries, as applicable) that, individually or collectively, requires
  the payment by the Company or any of its Subsidiaries of any amount (i) that
  is not deductible under Section 162(a)(1) or 404 of the Code or (ii) that
  is an excess parachute payment pursuant to Section 280G of the Code.

Section
  4.12Legal Proceedings  There
  are no legal, administrative, arbitral or other proceedings (including disciplinary
  proceedings), claims, suits, actions or governmental or regulatory investigations
  of any nature (collectively, Proceedings) of which the Company
  or any of its Subsidiaries has received written notice or that, to the Knowledge
  of the Company, are pending or threatened (i) against the Company, any of its
  Subsidiaries, any of the Company Assets or the Company Business or that challenge
  the validity or propriety of the transactions contemplated by this Agreement
  or by any of the Ancillary Agreements; (ii) involving any of the Companys
  or any of its Subsidiaries products; or (iii) challenging the Companys
  or any of its Subsidiaries right to use any products owned or licensed
  by any of the Companys or its Subsidiaries vendors. There is no
  injunction, order, judgment, decree or regulatory restriction imposed upon the
  Company or any of its Subsidiaries or any of the Company Assets or the Company
  Business.

Section
  4.13    Compliance with Applicable Law.

Section
  4.13.1    The Company and each of its Subsidiaries holds,
  and at all times has held, and at Closing will hold, all material licenses,
  franchises, decrees, permits and authorizations required under Applicable Law
  (collectively, Permits) for the lawful ownership, operation
  and use of the Company Assets and the conduct of the Company Business under
  and pursuant to, and has complied with each, and none of the Company or any
  of its Subsidiaries is in default under any Applicable Law relating to the Company
  or any of its Subsidiaries or any of their respective assets, properties or
  operations in any material respect, and there are no outstanding material violations
  of any of the above, and none of the Company nor any of its Subsidiaries has
  received notice asserting any such violation. The Company and each of its Subsidiaries
  have been and are in compliance with all Permits in all material respects. Section
  4.13.1 of the Company Disclosure Schedule sets forth a true and complete
  list of all Permits currently held by the Company and each of its Subsidiaries.

43

---

---

Section
  4.13.2    No Governmental Authority has provided notice
  to the Company or any of its Subsidiaries of, and, to the Knowledge of the Company,
  no Governmental Authority has otherwise initiated or threatened to commence,
  any proceeding or investigation into the business or operations of the Company
  or any of its Subsidiaries or any of their respective officers, directors or
  employees in their capacity as such with the Company or any of its Subsidiaries
  and, to the Knowledge of the Company, no such proceedings or investigations
  are contemplated. There is no unresolved deficiency, violation or exception
  claimed or asserted by any Governmental Authority with respect to any examination
  of any of the Company or any of its Subsidiaries.

Section
  4.14    Environmental MattersThe
  Company and each of its Subsidiaries (v) are in compliance with all, and are
  not subject to any liability, in each case with respect to any, applicable Environmental
  Laws, (w) hold or have applied for all Environmental Permits necessary to conduct
  their current operations, and (x) are in compliance with their respective Environmental
  Permits. Neither the Company nor any of its Subsidiaries has received any notice,
  demand, letter, claim or request for information alleging that the Company or
  any of its Subsidiaries may be in violation of, or liable under, any Environmental
  Law. Neither the Company nor any of its Subsidiaries (y) has entered into or
  agreed to any consent decree or order or is subject to any judgment, decree
  or judicial order relating to compliance with Environmental Laws, Environmental
  Permits or the investigation, sampling, monitoring, treatment, remediation,
  removal or cleanup of Hazardous Materials and no investigation, litigation or
  other proceeding is pending or threatened with respect thereto, or (z) is an
  indemnitor in connection with any claim threatened or asserted by any third-party
  indemnitee for any liability under any Environmental Law or relating to any
  Hazardous Materials. Neither the Company nor any of its Subsidiaries uses any
  Hazardous Materials in the conduct or operation of the Company Business. None
  of the real property owned or leased by the Company or any of its Subsidiaries
  is listed or, to the Knowledge of the Company, proposed for listing on the National
  Priorities List under CERCLA, as updated through the date hereof, or any
  similar state or foreign list of sites requiring investigation or cleanup.

Section
  4.15Properties.The
  Company and each of its Subsidiaries has good and marketable title to, or valid
  leasehold interests in, all of its properties and assets. All such assets and
  properties, other than assets and properties in which the Company or any of
  its Subsidiaries has a leasehold interest, are free and clear of all Encumbrances,
  other than Permitted Encumbrances. Each of the Company and its Subsidiaries
  has complied in all material respects with the material terms of all leases
  to which it is a party and under which it is in occupancy, and all such leases
  are in full force and effect. Each of the Company and its Subsidiaries enjoy
  peaceful and undisturbed possession under all such leases. Section 4.15
  of the Company Disclosure Schedule sets forth a complete list, as of November
  30, 2003, of all real property and interests in real property owned or leased
  by the Company and a true and complete list of all personal property, equipment
  and fixtures (other than items or categories of items having a book value of
  less than $5,000 individually) owned by the Company, all of which personal property,
  equipment and fixtures are in good condition, normal wear and tear excepted.

44

---

---

Section
  4.16Insurance.  Section
  4.16 of the Company Disclosure Schedule includes a list of all policies
  of fire, liability, product liability, workmens compensation, health and
  other forms of insurance presently in effect with respect to the Company Business
  (the Company Insurance Policies), including the named insured(s)
  and all beneficiaries thereunder, true and complete copies of which have been
  delivered to, or made available for review by, Buyer. All Company Insurance
  Policies are valid, outstanding and enforceable policies and provide insurance
  coverage for the Company Assets and operation of the Company Business, of the
  kinds, in the amounts and against the risks required to comply with Applicable
  Law and/or any contractual or other obligations. Neither the Company nor any
  of its Subsidiaries has been refused any insurance with respect to any aspect
  of the operations of its business, nor has its coverage been limited by any
  insurance carrier to which it has applied for insurance or with which it has
  carried insurance. No notice of cancellation or termination has been received
  with respect to any such policy. The activities and operations of the Company
  and each of its Subsidiaries have been conducted in a manner so as to conform
  in all material respects to all applicable provisions of the Company Insurance
  Policies.

Section
  4.17    No Broker.No
  broker, finder or similar intermediary has acted for or on behalf of, or is
  entitled to any brokers, finders or similar fee or other commission
  from, the Company or any of its Affiliates in connection with this Agreement,
  any of the Ancillary Agreements or the transactions contemplated hereby or thereby.
  The Company has heretofore provided to Buyer a complete copy of all agreements
  between the Company and any broker, finder or similar intermediary pursuant
  to which such Person would be entitled to any payment relating to the transactions
  contemplated by this Agreement or any of the Ancillary Agreements.

Section
  4.18    Absence of Certain Changes or Events.Since September 30,
  2003, there has not been any:

Section
  4.18.1    Company Material Adverse Effect or any event or
  development that could, individually or in the aggregate, reasonably be expected
  to have a Company Material Adverse Effect;

Section
  4.18.2    failure to operate the Company Business in the
  ordinary course so as to use all commercially reasonable efforts to preserve
  the Company Business intact and to preserve the continued services of the Companys
  employees and the goodwill of suppliers, customers and others having business
  relations with the Company or its Subsidiaries;

Section
  4.18.3    resignation or termination of any key employee
  or independent contractor, officer or manager, or any increase in the rate of
  compensation payable or to become payable to any officer or manager of the Company
  (other than general, regularly-scheduled reviews), including the making of any
  loan to, or the payment, grant or accrual of any bonus, incentive compensation,
  service award or other similar benefit to, any such Person, or the addition
  to, modification of, or contribution to any Employee Plan;

Section
  4.18.4    sale, assignment, license, transfer or Encumbrance
  of any of the Company Assets, tangible or intangible, singly or in the aggregate,
  other than sales of products and services in the ordinary course of business
  and consistent with past practice;

45

---

---

Section
  4.18.5    new Contracts, or extensions, modifications, terminations
  or renewals thereof, except for Contracts entered into, modified or terminated
  in the ordinary course of business and consistent with past practice or Contracts
  that are otherwise immaterial to the Company;

Section
  4.18.6    change in accounting methods or practices by the
  Company or revaluation by the Company of any of the Company Assets, including
  writing off or establishing reserves with respect to inventory, notes or accounts
  receivable (other than for which adequate reserves have been previously established);

Section
  4.18.7    damage, destruction or loss (whether or not covered
  by insurance) materially adversely affecting the Company Assets, the Company
  Business or the prospects of the Company;

Section
  4.18.8    declaration, setting aside or payment of any dividend
  or distribution in respect of any capital stock of the Company or any redemption,
  purchase or other acquisition of any equity securities of the Company;

Section
  4.18.9    failure to pay any material obligation of the Company
  when due;

Section
  4.18.10    cancellation of any indebtedness or waiver of
  any rights of substantial value to the Company, except in the ordinary course
  of business and consistent with past practice;

Section
  4.18.11    indebtedness incurred by the Company for borrowed
  money or any commitment to borrow money entered into by the Company, or any
  loans made or agreed to be made by the Company;

Section
  4.18.12    acquisition of any equity interest in any other Person;

Section
  4.18.13    adoption, modification or termination of any Employee
  Plan; or

Section
  4.18.14    agreement by the Company directly or indirectly to
  do any of the foregoing.

Section
  4.19    Sufficiency of and Title to Assets.The
  Company owns, and upon the consummation of the transactions contemplated by
  this Agreement Buyer or the Surviving Company will own, all right, title and
  interest in and to all of the properties, assets and rights of any kind, whether
  tangible or intangible, real or personal (including, without limitation, the
  Companys Intellectual Property), necessary to enable the Company (prior
  to the Closing) and Buyer and the Surviving Company (after the Closing) to conduct
  the Company Business (the Company Assets), free and clear
  of any Encumbrances, other than Permitted Encumbrances. Except for those licenses,
  consents and payments set forth on Section 4.19 of the Company Disclosure
  Schedule, no licenses or consents from, or payments to, any Person are or will
  be necessary for Buyer to use any of the Company Assets in substantially the
  manner in which the Company and its Affiliates have used the Company Assets.
   No restrictions will exist on Buyers right to sell, resell, license
  or sublicense any of the Company Assets or engage in the Company Business, nor
  will any such restrictions be placed on Buyer as a consequence of the Merger
  or any of the other transactions contemplated by this Agreement or any of the
  Ancillary Agreements.  The Company has sole right, title and interest in
  and to all of the assets on the Interim Period Unaudited Company Balance Sheet,
  free and clear of any Encumbrances, other than Permitted Encumbrances.

46

---

---

Section
  4.20Potential Conflicts of Interest.Neither
  the Company nor any of its Subsidiaries, nor any director or officer of the
  Company or any of its Subsidiaries:

Section
  4.20.1    owns, directly or indirectly, any interest in
  (excepting less than one percent (1%) stock holdings for investment purposes
  in securities of publicly traded companies), or is an officer, director, employee
  or consultant of, any Person that carries on business in competition with the
  Company; or

Section
  4.20.2    has any claim against, or owes any amount to,
  the Company, except for claims for salary, commissions, accrued vacation pay
  and accrued benefits under Employee Plans.

Section
  4.21Transactions with Affiliates.No
  Contract, understanding or arrangement between the Company or any of its Subsidiaries,
  on the one hand, and any of their respective directors, officer or security
  holders, on the other hand, will continue in effect subsequent to the Closing
  Date, except for such rights as pertain to such person as an employee of the
  Company or a holder of the Companys equity securities. After the Closing,
  none of the Shareholders will have any interest in any Company Asset. None of
  the Shareholders provides any material services to the Company or its Subsidiaries
  other than in his or her capacity as an employee of the Company.

Section
  4.22 Governmental Regulation.The
  Company is not an investment company within the meaning of the Investment
  Company Act of 1940, as amended (the Investment Company Act),
  which is required to be registered under the Investment Company Act in order
  to engage in the transactions described in Section 7 of that Act. The Company
  is not a broker or dealer within the meaning of the
  Exchange Act. The Company does not act as investment adviser or subadviser to
  any investment company, as defined in the Investment Company Act,
  which is registered under such Act.

Section
  4.23No Loss of Customers.Since
  September 30, 2003, the Company has not suffered cancellations or non-renewals
  from any customer or group of related customers which accounted for three percent
  (3%) or more of the total dollar value of all revenue from enterprise customers
  under contract as of September 30, 2003. To the Knowledge of the Company, since
  September 30, 2003, there has been no material adverse change in the business
  relationship of the Company with any enterprise customer or distributor, and
  neither the Company nor any of its Subsidiaries has received any written (or,
  to the Knowledge of the Company, oral) communication regarding the intention
  of any enterprise customer or distributor to terminate its relationship with
  the Company or any of its Subsidiaries.

Section
  4.24Books and Records.The
  Company has made and kept (and given Buyer access to) its true, correct and
  complete books and records and accounts, which, in reasonable detail, accurately
  and fairly reflect the activities of the Company Business. The minute books
  of the Company and its Subsidiaries previously delivered to Buyer materially,
  accurately and adequately reflect all action previously taken by the shareholders,
  board of directors and committees of the board of directors of the Company and
  its Subsidiaries. The copies of the stock book records of the Company previously
  delivered to Buyer in connection with Buyers due diligence are true, correct
  and complete, and accurately reflect all transactions effected in the Companys
  equity securities through and including the date hereof. The Company has not
  engaged in any transaction, maintained any bank account or used any corporate
  funds except for transactions, bank accounts and funds which have been and are
  reflected in the Companys books and records.

47

---

---

Section
  4.25Foreign Corrupt Practices Act.Neither
  the Company, any of its Subsidiaries nor any predecessor nor, to the Knowledge
  of the Company, any agent, employee or other Person associated with or acting
  on behalf of the Company or any of its Subsidiaries or any predecessor has,
  directly or indirectly, used any corporate funds for unlawful contributions,
  gifts, entertainment or other unlawful expenses relating to political activity,
  made any unlawful payment to foreign or domestic government officials or employees
  or to foreign or domestic political parties or campaigns from corporate funds,
  violated any provision of the Foreign Corrupt Practices Act of 1977, as amended,
  or made any bribe, rebate, payoff, influence payment, kickback or other similar
  unlawful payment.

Section
  4.26Shareholder Vote Required.The
  only votes of any class or series of the Companys capital stock necessary
  to adopt or approve this Agreement, the Ancillary Agreements, the Merger and
  the other transactions contemplated hereby and thereby are: (a) the affirmative
  vote of a majority of the shares of Common Stock, voting as a separate class
  and (b) the affirmative vote of more than 66 2/3% of the shares of Preferred
  Stock, voting as a separate class (collectively, the Shareholder Consent).

Section
  4.27Information Supplied by the Company.

Section
  4.27.1    The information supplied by the Company for inclusion
  in the application (the Permit Application) for issuance
  of a permit pursuant to Section 25121 of the California Corporate Securities
  Law of 1968, as amended (the California Permit) for the qualification
  of the Buyer Ordinary Shares to be issued in connection with the Merger shall
  not either at the time the fairness hearing is held before the Department of
  Corporations of the State of California or the time the qualification of such
  securities is effective under Section 25122 of the California Corporate
  Securities Law of 1968, as amended, contain any untrue statement of a material
  fact or omit to state any material fact required to be stated therein or necessary
  in order to make the statements therein, in light of the circumstances under
  which they were made, not misleading. Notwithstanding the foregoing, the Company
  makes no representation, warranty or covenant with respect to any information
  supplied by Buyer, Parent or Merger Sub which is contained in the Permit Application.

Section
  4.27.2    If the parties prepare and file the Registration
  Statement, the information supplied by the Company for inclusion in the Registration
  Statement shall not at the time the Registration Statement or any amendments
  thereto is filed with the SEC or at the time the Registration Statement is declared
  effective by the SEC contain any untrue statement of a material fact or omit
  to state any material fact required to be stated therein or necessary in order
  to make the statements therein, in light of the circumstances in which such
  statements are made, not misleading. Notwithstanding the foregoing, the Company
  makes no representation, warranty or covenant with respect to any information
  supplied by Buyer, Parent or Merger Sub which is contained in the Registration
  Statement.

48

---

---

Section
  4.27.3    None of the information regarding the Company
  or any of its Subsidiaries supplied or to be supplied by the Company or any
  of its Subsidiaries for inclusion in any other documents to be filed with any
  Governmental Authority in connection with the transactions contemplated by this
  Agreement or any of the Ancillary Agreements will, at the respective times such
  documents are filed with any Governmental Authority, contain any untrue statement
  of a material fact or omit to state a material fact required to be stated therein
  or necessary in order to make the statements therein, in light of the circumstances
  under which they were made, not misleading.

Section
  4.28Material Misstatements and OmissionsNo
  representations or warranties by the Company in this Agreement, any Ancillary
  Agreement nor any exhibit, certificate or schedule furnished to Buyer pursuant
  hereto or thereto, contains or will contain any untrue statement of a material
  fact, or omits or will omit to state any material fact necessary to make the
  statements or facts contained therein not misleading.

Section
  4.29Reorganization Treatment.

Section
  4.29.1Assets.
   At the Effective Time, the Company will hold at least 90 percent of the
  fair market value of its net assets and at least 70 percent of the fair market
  value of its gross assets held immediately prior to the Effective Time. For
  purposes of this representation, amounts paid to dissenting Shareholders, amounts
  used by the Company to pay Merger expenses, amounts paid by the Company to redeem
  stock, securities, warrants or options of the Company as part of any overall
  plan of which the Merger is part, and amounts distributed by the Company to
  Shareholders (except for any regular, normal dividends) as part of an overall
  plan of which the Merger is a part, in each case will be treated as constituting
  assets of the Company immediately prior to the Effective Time.

Section
  4.29.2Business.
   The Company currently conducts a business. Such business is the Companys
  historic business within the meaning of Treasury Regulations Section
  1.368-1(d), and no assets of the Company have been sold, transferred, or otherwise
  disposed of that would prevent Buyer from continuing the historic business
  of the Company or from using a significant portion of the Companys
  historic business assets in a business following the Merger, as
  such terms are used in Treasury Regulations Section 1.368-1(d).

Section
  4.29.3Redemptions
  and Distributions.  Neither the Company nor any Person related to the
  Company within the meaning of Treasury Regulations Sections 1.368-1(e)(3), (e)(4)
  and (e)(5) has purchased, redeemed or otherwise acquired, or made any distributions
  with respect to, any of the Companys stock prior to or in contemplation
  of the Merger, or otherwise as part of a plan of which the Merger is a part.

49

---

---

Section
  4.29.4Continuity
  of Interest.  To the Knowledge of the Company, as of the date of this
  Agreement, the Buyer Ordinary Shares to be received by Shareholders in the Merger
  have a value of not less than forty-five percent (45%) of the aggregate value
  of the Transaction Consideration. To the Knowledge of the Company, as of the
  Effective Time, the Buyer Ordinary Shares received by Shareholders in the Merger
  shall have a value of not less than forty-five percent (45%) of the aggregate
  value as of such time of the Transaction Consideration. For purposes of determining
  the value of Buyer Ordinary Shares as of the date of this Agreement, Buyer Ordinary
  Shares shall be valued at the Initial Measurement Price. For purposes of determining
  the value of the Buyer Ordinary Shares as of the Effective Time, Buyer Ordinary
  Shares shall be valued based at the Closing Date Price.

Section
  4.29.5Investment
  Company.  The Company is not an investment company, as defined in Sections
  368(a)(2)(F)(iii) and (iv) of the Code.

Section
  4.29.6Title
  11.  The Company is not under the jurisdiction of a court in a Title
  11 or similar case within the meaning of Section 368(a)(3)(A) of the Code.

Section
  4.29.7Intercorporate
  Indebtedness.  At the Effective Time, there will be no intercorporate
  indebtedness existing between Buyer and the Company that was issued or acquired,
  or will be settled, at a discount.

Section
  4.29.8Liabilities.
   The liabilities of the Company assumed by Merger Sub and the liabilities
  to which the transferred assets are subject were incurred by the Company in
  the ordinary course of its business.

Section
  4.29.9Value
  of Transferred Assets.  The fair market value of the assets of the
  Company transferred to Merger Sub will equal or exceed the sum of the liabilities
  assumed by Merger Sub, plus the amount of liabilities, if any, to which the
  transferred assets are subject.

Section
  4.29.10    Merger Expenses.  The Company will
  pay its expenses, if any, incurred in connection with the Merger.

Section
  4.29.11    United States Transferors.  To the
  Knowledge of the Company, United States transferors (as defined in Treasury
  Regulation Section 1.367(a)-3(c)(5)(v)) will receive, in the aggregate, fifty
  percent (50%) or less of the total voting power and total value of the stock
  of Buyer in the Merger.

Section
  4.29.12    Ownership of Buyer Following the Merger.
   To the Knowledge of the Company, not more than fifty percent (50%) of
  each of the total voting power and the total value of the stock of Buyer will
  be owned, in the aggregate, immediately after the merger by United States persons
  who are either officers or directors of the Company or who are five-percent
  target shareholders.  For this purpose, the term five-percent
  target shareholder means a person that owns at least five percent (5%)
  of either the total voting power or the total value of the stock of the Company
  immediately prior to the Merger. For this purpose, United States person
  means a citizen or resident of the United States, a domestic partnership, a
  domestic corporation or any estate or trust other than a foreign estate or trust
  (as such terms are defined in Section 7701 of the Code and the applicable Treasury
  Regulations).

Section
  4.29.13    Five Percent Shareholder.  To the
  Knowledge of the Company, no Shareholder who is a United States person and receives
  Buyer Ordinary Shares in exchange for Common Stock in the Merger will own five
  percent (5%) or more of the stock of Buyer immediately after the Merger. For
  this purpose, such Shareholder is deemed to own stock in accordance with the
  rules set forth in Section 958 of the Code.

50

---

---

ARTICLE 5.Representations and Warranties of Buyer, Parent and Merger Sub

As
  a material inducement to the Company to enter into this Agreement, each of Buyer,
  Parent and Merger Sub hereby represents and warrants to the Company as follows:

Section
  5.1Organization.  Buyer is a
  company, duly organized and validly existing under the Laws of Israel. Parent
  is a corporation, duly organized, validly existing and in good standing under
  the Laws of the State of Delaware. Merger Sub is a limited liability company,
  duly organized, validly existing and in good standing under the Laws of the
  State of California. Each of Buyer, Parent and Merger Sub has the corporate
  or limited liability company power and authority, as applicable, and each possesses
  all material governmental franchises, licenses, permits, authorizations and
  approvals necessary to carry on their respective businesses substantially in
  the manner as they are now being conducted and to own, lease and operate all
  of their respective properties and assets.

Section
  5.2Authority; No Violation.

Section
  5.2.1    Each of Buyer, Parent and Merger Sub has full power
  and authority to execute and deliver this Agreement and the Ancillary Agreements
  to which it is a party and to consummate the transactions contemplated hereby
  and thereby. The execution and delivery of this Agreement and the Ancillary
  Agreements to which each of Buyer, Parent and Merger Sub is a party and the
  consummation of the transactions contemplated hereby and thereby have been duly
  authorized by all necessary corporate action on the part of each of Buyer, Parent
  and Merger Sub, and no other corporate action on the part of Buyer, Parent or
  Merger Sub is necessary to approve this Agreement or the Ancillary Agreements
  to which they are a party or authorize or consummate the transactions contemplated
  hereby and thereby. This Agreement and the Ancillary Agreements to which each
  of Buyer, Parent and Merger Sub is a party have been duly and validly executed
  and delivered by each of Buyer, Parent and Merger Sub (assuming the due authorization,
  execution and delivery of this Agreement and the Ancillary Agreements by the
  other parties hereto and thereto) constitute valid and binding obligations of
  each of Buyer, Parent and Merger Sub, enforceable against each of Buyer, Parent
  and Merger Sub in accordance with their terms, except as the enforceability
  thereof may be subject to or limited by bankruptcy, insolvency, reorganization,
  moratorium or similar Laws relating to or affecting the rights of creditors
  generally and the availability of equitable relief (whether in proceedings at
  law or in equity).

51

---

---

Section
  5.2.2    Neither the execution and delivery of this Agreement
  or the Ancillary Agreements to which it is a party by each of Buyer, Parent
  and Merger Sub nor the consummation by Buyer, Parent or Merger Sub of the transactions
  contemplated hereby or thereby to be performed by Buyer, Parent or Merger Sub,
  nor compliance by Buyer, Parent or Merger Sub with any of the terms or provisions
  hereof or thereof, will (i) violate any provision of the organizational documents
  of Buyer or Merger Sub or violate any provision of the certificate of incorporation
  or bylaws of Parent, (ii) (x) violate, conflict with or require any notice,
  filing, consent or approval under any material Applicable Law to which Buyer,
  Parent, Merger Sub or any of their respective Subsidiaries or any of their respective
  properties, contracts or assets are subject, or (y) violate, conflict with,
  result in a breach of any provision of or the loss of any benefit under, constitute
  a default (or an event which, with or without notice or lapse of time, or both,
  would constitute a default) under, result in the termination of or a right of
  termination or cancellation under, accelerate or result in a right of acceleration
  of the performance required by, result in the creation of any Encumbrance upon
  the properties, contracts or assets of Buyer, Parent or Merger Sub under, or
  require any notice, approval or consent under, any note, bond, mortgage, indenture,
  deed of trust, license, lease, agreement or other instrument or obligation to
  which Buyer, Parent Merger Sub or any of their respective Subsidiaries is a
  party, or by which Buyer, Parent Merger Sub or any of their respective Subsidiaries,
  or any of their respective properties or assets, may be bound or affected in
  any material respect.

Section
  5.3Consents and Approvals.Except
  for the filing of the Certificate of Merger with the Secretary of State of the
  State of California, the Fairness Approval and such filings as are required
  to be made under the HSR Act and the Exon-Florio Act, no consents or approvals
  of or filings or registrations with any Governmental Authority or any third
  party are necessary in connection with the execution and delivery by Buyer,
  Parent or Merger Sub of this Agreement and the Ancillary Agreements to which
  they are a party or the consummation by Buyer, Parent or Merger Sub of the transactions
  contemplated hereby or thereby.

Section
  5.4No Broker.  No broker, finder
  or similar intermediary has acted for or on behalf of, or is entitled to any
  brokers, finders or similar fee or other commission from, Buyer,
  Parent, Merger Sub or any of their respective Subsidiaries in connection with
  this Agreement or the transactions contemplated hereby.

Section
  5.5Valid Issuance of Buyer Ordinary Shares.  The
  Buyer Ordinary Shares to be issued by Buyer in connection with the Merger, when
  issued and paid for in accordance with the terms of this Agreement, will be
  (a) validly issued, fully paid, nonassessable and free of any preemptive rights
  or restrictions on trading on the NASDAQ National Market imposed by Israeli
  law or Buyers organizational documents in respect thereto and (b) assuming
  that the representations and warranties of the Company contained in Article
  4 of this Agreement are true and correct, issued in compliance with all material
  applicable foreign, federal and state securities laws.

Section
  5.6SEC Filings.  As of their
  respective filing dates, all of the forms, reports and documents filed by Buyer
  with the SEC since December 31, 2002 (collectively, the Buyer SEC Filings)
  complied in all material respects with the requirements of the Securities Act
  and the Exchange Act, as the case may be, and none of the Buyer SEC Filings
  contained any untrue statement of a material fact or omitted to state a material
  fact required to be stated therein or necessary to make the statements made
  therein, in the light of the circumstances under which they were made, not misleading,
  except to the extent corrected by a subsequent Buyer SEC Filing.

Section
  5.7Information Supplied by Buyer, Parent and
  Merger Sub.

Section
  5.7.1    The information supplied by Buyer, Parent or Merger
  Sub for inclusion in the Permit Application for the qualification of the Buyer
  Ordinary Shares to be issued in connection with the Merger shall not either
  at the time the fairness hearing is held before the Department of Corporations
  of the State of California or the time the qualification of such securities
  is effective under Section 25122 of the California Corporate Securities
  Law of 1968, as amended, contain any untrue statement of a material fact or
  omit to state any material fact required to be stated therein or necessary in
  order to make the statements therein, in light of the circumstances under which
  they were made, not misleading. Notwithstanding the foregoing, neither Buyer,
  Parent or Merger Sub makes any representation, warranty or covenant with respect
  to any information supplied by the Company which is contained in the Permit
  Application.

52

---

---

Section
  5.7.2    If the parties prepare and file the Registration
  Statement, the information supplied by Buyer, Parent or Merger Sub for inclusion
  in the Registration Statement shall not at the time the Registration Statement
  or any amendments thereto is filed with the SEC or at the time the Registration
  Statement is declared effective by the SEC contain any untrue statement of a
  material fact or omit to state any material fact required to be stated therein
  or necessary in order to make the statements therein, in light of the circumstances
  in which such statements are made, not misleading. Notwithstanding the foregoing,
  neither Buyer, Parent or Merger Sub makes any representation, warranty or covenant
  with respect to any information supplied by the Company which is contained in
  the Registration Statement.

Section
  5.7.3    None of the information regarding Buyer, Parent,
  Merger Sub or any of their Subsidiaries supplied or to be supplied by Buyer,
  Parent, Merger Sub or any of their Subsidiaries for inclusion in any other documents
  to be filed with any Governmental Authority in connection with the transactions
  contemplated by this Agreement or any of the Ancillary Agreements will, at the
  respective times such documents are filed with any Governmental Authority, contain
  any untrue statement of a material fact or omit to state a material fact required
  to be stated therein or necessary in order to make the statements therein, in
  light of the circumstances under which they were made, not misleading.

Section
  5.8Material Misstatements and Omissions.  No
  representations or warranties by Buyer, Parent or Merger Sub in this Agreement,
  any Ancillary Agreement nor any exhibit, certificate or schedule furnished to
  the Company pursuant hereto or thereto, contains or will contain any untrue
  statement of a material fact, or omits or will omit to state any material fact
  necessary to make the statements or facts contained therein not misleading.

Section
  5.9Reorganization Treatment.

Section
  5.9.1    Intention Regarding Buyer Stock.  Except
  with respect to (i) open-market purchases of Buyers stock pursuant to
  a general stock repurchase program of Buyer that has not been created or modified
  in connection with the Merger or (ii) payments of cash in lieu of the issuance
  of fractional shares, neither Buyer nor any Person related to Buyer within the
  meaning of Treasury Regulation Sections 1.368-1(e)(3), (e)(4) and (e)(5) has
  any plan or intention to, redeem or otherwise acquire any of the stock of Buyer
  issued to the Shareholders pursuant to this Agreement following the Merger.

53

---

---

Section
  5.9.2    Acquisitions of Company Shares.  Neither
  Buyer nor, to the knowledge of the Buyer, any person related to Buyer (within
  the meaning of Treasury Regulation Sections 1.368-1(e)(3), (e)(4) and (e)(5))
  has acquired any Common Stock or Preferred Stock in contemplation of the Merger
  or otherwise as part of a plan of which the Merger is part.

Section
  5.9.3    Control.  Buyer has no plan or intention
  to cause the Surviving Company, after the Merger, to issue additional shares
  of stock of the Surviving Company that would result in Buyer losing control
  of the Surviving Company within the meaning of Section 368(c) of the Code.

Section
  5.9.4    Intention Regarding the Surviving Company.
   Except for transfers of stock and assets described in Treasury Regulation
  Section 1.368-2(k) or transfers of stock of the Surviving Company to another
  subsidiary controlled by Buyer within the meaning of Section 368(c) of the Code,
  Buyer has no plan or intention to liquidate the Surviving Company; to merge
  the Surviving Company with or into another corporation; to sell or otherwise
  dispose of the stock of the Surviving Company; or, except for dispositions made
  in the ordinary course of business, to cause the Surviving Company to sell or
  otherwise dispose of any of its assets.

Section
  5.9.5    Business.  Assuming the accuracy of
  the Companys representation contained in Section 4.29.2 of this Agreement,
  Buyer will cause the Surviving Company to continue the Companys historic
  business or use a significant portion of the Companys historic business
  assets in a business. For purposes of this representation, Buyer will be deemed
  to satisfy the foregoing representation if (a) the members of Buyers qualified
  group (as defined in Treasury Regulation Section 1.368-1(d)(4)(ii)), in the
  aggregate, continue the historic business of the Company or use a significant
  portion of the Companys historic business assets in a business, or (b)
  the foregoing activities are undertaken by a partnership as contemplated by
  Treasury Regulation Section 1.368-1(d)(4) (provided, however, that in
  the event that Section 4.30(b) is or has been breached, this Section 5.9.5 shall
  not be considered to be or have been breached).

Section
  5.9.6    Investment Company.  Neither Buyer
  nor Merger Sub is an investment company as defined in Section 368(a)(2)(F)(iii)
  and (iv) of the Code.

Section
  5.9.7    Assets.  Assuming the accuracy of the
  Companys representation contained in Section 4.29.1, at the Effective
  Time, the Surviving Company will hold at least 90 percent of the fair market
  value of the Companys net assets and at least 70 percent of the fair market
  value of the Companys gross assets and at least 90 percent of the fair
  market value of Merger Subs net assets and at least 70 percent of the
  fair market value of Merger Subs gross assets held immediately prior to
  the Effective Time. For purposes of this representation, amounts paid by the
  Company to dissenting the Shareholders, amounts used by the Company to pay Merger
  expenses, amounts paid by the Company to redeem stock, securities, warrants
  or options of the Company as part of any overall plan of which the Merger is
  a part, and amounts distributed by the Company to Shareholders (except for any
  regular, normal dividends) as part of an overall plan of which the Merger is
  a part, including, but not limited to, any indebtedness owed by the Shareholders
  to the Company that is forgiven as part of an overall plan of which the Merger
  is a part, in each case will be treated as constituting assets of the Company
  immediately prior to the Effective Time (provided, however, that in the
  event that Section 4.29.1 is or has been breached, this Section 5.9.7 shall
  not be considered to be or have been breached).

54

---

---

Section
  5.9.8    Expenses.  Buyer, Parent and Merger
  Sub shall pay their respective expenses, if any, incurred in connection with
  the Merger. In the Merger, no liabilities of the Shareholders will be assumed
  by Buyer, and Buyer will not assume any Encumbrances or any similar liabilities
  relating to any Company Stock acquired by Buyer in the Merger.

Section
  5.9.9    Intercorporate Indebtedness.  At the
  Effective Time, there will be no intercorporate indebtedness existing between
  Buyer, Parent or Merger Sub and the Company that was issued or acquired, or
  will be settled, at a discount.

Section
  5.9.10    Active Trade or Business.  Buyer or
  a qualified subsidiary (as defined in Treasury Regulation Section
  1.367(a)-3(c)(5)(vii)) (a Qualified Subsidiary) or a qualified
  partnership (as defined in Treasury Regulation Section 1.367(a)-3(c)(5)(viii))
  (a Qualified Partnership) of Buyer has been engaged in an
  active trade or business outside of the United States, within the meaning of
  Treasury Regulation Sections 1.367(a)-2T(b)(2) and (3), for the entire 36-month
  period immediately before the Effective Time.

Section
  5.9.11    Intention Regarding Active Trade or Business.
   None of Buyer, any Qualified Subsidiary of Buyer or any Qualified Partnership
  of Buyer engaged in the active trade or business referred to in the immediately
  preceding representation has any intention to dispose of or discontinue such
  trade or business.

Section
  5.9.12    Substantiality.  The fair market value
  of Buyer is at least equal to the fair market value of the Company (the substantiality
  test).  For this purpose:

Section
5.9.12.1    The value of Buyer will include assets acquired outside the ordinary
course of business within the 36-month period prior to the Effective Time only if either of the following
requirements is satisfied:  (x) both (i) at the Effective Time such assets or, as applicable,
the proceeds therefrom, do not produce, and are not held for the production of, passive income as
defined in Section 1296(b) of the Code and (ii) such assets are not acquired for the principal purpose
of satisfying the substantiality test, or (y) such assets consist of stock of a Qualified Subsidiary
or an interest in a Qualified Partnership.

Section
5.9.12.2    The value of Buyer will not include the value of the stock of any
Qualified Subsidiary or an interest in any Qualified Partnership to the extent the value is attributable
to assets acquired by such Qualified Subsidiary or Qualified Partnership outside of the ordinary
course of business and within the 36-month period preceding the Merger unless those assets satisfy
the requirements of subparagraph (a) immediately above; and

Section
  5.9.12.3    The value of Buyer will not include the value
  of assets received within the 36-month period preceding the Effective Time notwithstanding
  subparagraph (a) above if such assets were owned by the Company or an affiliate
  of the Company (as defined in Treasury Regulation Section 1.367(a)-3(c)(3)(iii)(B)(3))
  at any time during such 36-month period.

55

---

---

Section
  5.9.13    Tax Reporting.  After the Merger,
  Buyer will cause the Company to comply with the reporting requirements set forth
  in Treasury Regulation Sections 1.368-3 and 1.367(a)-3(c)(6) by attaching the
  required statement to each of the Companys and its timely filed United
  States federal income Tax Returns for the taxable year in which the Merger occurs.

Section
  5.9.14    Continuity of Interest.  To the Knowledge
  of Buyer, as of the date of this Agreement, the Buyer Ordinary Shares to be
  received by Shareholders in the Merger have a value of not less than forty-five
  percent (45%) of the aggregate value of the Transaction Consideration. To the
  Knowledge of Buyer, as of the Effective Time, the Buyer Ordinary Shares received
  by Shareholders in the Merger shall have a value of not less than forty-five
  percent (45%) of the aggregate value as of such time of the Transaction Consideration.
  For purposes of this Section 5.9.14, the value of Buyer Ordinary Shares as of
  the date of this Agreement and as of the Effective Time shall be determined
  in accordance with the principles set forth in Section 4.29.4 of this Agreement.

ARTICLE 6.Covenants and Additional Agreements

Section
  6.1Conduct of Business.  From the
  date of this Agreement through the earlier of the termination of this Agreement
  and the Closing, the Company shall carry on the operation of the Company Business
  in the ordinary course and substantially in accordance with past practice and
  shall use its best efforts not to take any action inconsistent with the provisions
  of this Agreement or any of the Ancillary Agreements. Except as expressly set
  forth in this Agreement or the Ancillary Agreements, the Company shall use its
  best efforts to maintain the present character and quality of the Company Business,
  including its present operations, physical facilities, working conditions, and
  relationships with lessors, licensors, suppliers, customers and employees. Without
  limiting the generality of the foregoing, unless specifically consented to by
  Buyer in advance in writing, except as expressly set forth in this Agreement,
  the Ancillary Agreements or the Company Operating Plan, the Company and its
  Subsidiaries shall not:

Section
  6.1.1    incur any indebtedness for borrowed or purchase
  money or letters of credit, or assume, guarantee, endorse (other than endorsements
  for deposit or collection in the ordinary course of business), or otherwise
  become responsible for obligations of any other Person in excess of $10,000
  in the aggregate;

Section
  6.1.2    issue (except pursuant to Company Options outstanding
  on the date of this Agreement and disclosed on Section 4.2.2 of
  the Company Disclosure Schedule, Company Warrants outstanding on the date of
  this Agreement and disclosed on Section 4.2.3 of the Company Disclosure
  Schedule and upon the conversion of shares of Preferred Stock issued and outstanding
  on the date of this Agreement and disclosed on Section 4.2.1 of
  the Company Disclosure Schedule) or commit to issue any shares of its capital
  stock or any other securities or any securities convertible into shares of its
  capital stock or any other securities, including, without limitation, any options
  to acquire capital stock;

Section
  6.1.3    amend, waive or modify any terms of any Company
  Option or Company Warrant, including, without limitation, by directly or indirectly
  increasing or reducing the per share exercise price or the number of shares
  of Common Stock subject to any Company Option or Company Warrant;

56

---

---

Section
  6.1.4    declare, set aside, make, pay or incur any obligation
  to pay any dividend or distribution on its capital stock (whether payable in
  cash, stock, property or a combination thereof) or enter into any voting agreement
  with respect to its capital stock;

Section
  6.1.5    reclassify, combine, split, subdivide or redeem,
  purchase or otherwise acquire, directly or indirectly, any of its capital stock,
  other equity interests or securities;

Section
  6.1.6    make any change to the Companys articles
  of incorporation or bylaws, except for an amendment to the Companys articles
  of incorporation made for the sole purpose of expressly providing that Holders
  of Company Stock shall be entitled to receive the Transaction Consideration
  set forth in this Agreement upon consummation of the Merger; provided, however,
  that such amendment shall not adversely affect Buyer;

Section
  6.1.7    mortgage, pledge or otherwise encumber any Company
  Assets or sell, transfer, license or otherwise dispose of any Company Assets
  except for the sale or license of the Companys products and services to
  customers in the ordinary course of business and consistent with the Companys
  past practice;

Section
  6.1.8    cancel, release or assign any indebtedness owed
  to it or any claims or rights held by it in excess of $5,000 individually or
  $50,000 in the aggregate;

Section
  6.1.9    make any investment or commitment of a capital
  nature either by purchase of stock or securities, contributions to capital,
  business or product line acquisitions, property transfer or otherwise, or by
  the purchase of any property or assets of any other Person in excess of $10,000
  in the aggregate;

Section
  6.1.10    adopt a plan of partial or complete liquidation,
  dissolution, merger, consolidation, restructuring, recapitalization or other
  reorganization (other than the Merger) or otherwise permit its corporate existence
  to be suspended, lapsed or revoked;

Section
  6.1.11    terminate any Contract, make any change in or
  waive or exercise any right under any Contract, or enter into or renew any Contract,
  other than (A) with respect to Contracts that do not include special pricing
  terms or require product modifications or (B) terminations, changes, waivers
  or exercises of rights under click through end user license agreements
  entered into between the Company and its customers in the ordinary course of
  business consistent with past practice;

Section
  6.1.12    (A) enter into or modify any employment Contract,
  (B) change the status, title or responsibilities, including without limitation,
  termination or promotion, of any officer of the Company, or promote any Company
  Business Employee (who is not an officer as of the date of this Agreement) to
  an officer position; (C) pay any compensation to or for any Company Business
  Employee, officer or director other than in the ordinary course of business
  and pursuant to existing employment arrangements, (D) pay or agree to pay any
  bonus, incentive compensation, service award, severance, stay bonus
  or other like benefit, (E) enter into or modify any Employee Plan other
  than as required by Applicable Law;

57

---

---

Section
  6.1.13    make any change in any method of accounting or
  accounting practice other than as required by GAAP, Applicable Law or any Governmental
  Authority;

Section
  6.1.14    make or change any election in respect of Taxes,
  adopt or change any material accounting method in respect of Taxes, enter into
  any Tax allocation agreement, Tax sharing agreement, Tax indemnity agreement
  or closing agreement, settle or compromise any claim, notice, audit report or
  assessment in respect of Taxes, or consent to any extension or waiver of the
  limitation period applicable to any claim or assessment in respect of Taxes;

Section
  6.1.15    (A) prepay any long-term debt, or pay, discharge
  or satisfy any claims, liabilities or obligations (absolute, accrued, contingent
  or otherwise), (B) accelerate or delay the collection of notes or accounts receivable
  in advance of or beyond their regular due dates or the dates on which the same
  would have been collected in the ordinary course of business consistent with
  past practice or (C) delay or accelerate the payment of any account payable
  in advance of its due date or the date such liability would have been paid in
  the ordinary course of business consistent with past practice;

Section
  6.1.16    write up, write down or write off the book value
  of any Company Assets, except for depreciation and amortization or impairment
  of assets in accordance with GAAP consistently applied;

Section
  6.1.17    make any individual cash payment in excess of
  $10,000 individually or $50,000 in the aggregate, other than payments made in
  the ordinary course of business (including, without limitation, payments for
  Taxes due and payments to the Companys suppliers in the ordinary course
  of business);

Section
  6.1.18    waive, release, assign, settle or compromise any
  material claims or settle any Proceeding;

Section
  6.1.19    do any other act which would cause any representation
  or warranty of the Company in this Agreement to be or become untrue in any material
  respect or that is not in the ordinary course of business consistent with past
  practice;

Section
  6.1.20    transfer to any Person any Intellectual Property,
  other than pursuant to end user license agreements to customers in the ordinary
  course of business consistent with past practice; or

Section
  6.1.21    directly or indirectly take, agree to take or
  otherwise permit to occur any of the actions described in Sections 6.1.1 through
  6.1.20.

Section
  6.2Confidentiality and Announcements.

Section
  6.2.1    The parties to this Agreement hereby agree to be
  bound by and comply with the provisions set forth in the Non-Disclosure Agreement,
  the provisions of which are hereby incorporated herein by reference. Effective
  upon, and only upon, the Closing (or, if no Closing ever occurs, upon the date
  which is two (2) years after the date of this Agreement), Buyers obligations
  under the Non-Disclosure Agreement shall terminate.

Section
  6.2.2     Subject to Section 6.2.1 of this Agreement,
  the parties to this Agreement shall consult with each other as to the form,
  substance and timing of any press release or other public disclosure related
  to this Agreement or the transactions contemplated hereby and no such press
  release or other public disclosure shall be made without the consent of the
  other parties hereto, which consent shall not be unreasonably withheld or delayed;
  provided, however, that the parties may make such disclosure to
  the extent permitted and subject to the provisions of the Non-Disclosure Agreement.

58

---

---

Section
  6.3    Access by Buyer.   Subject
  to the terms of the Non-Disclosure Agreement, from the date of this Agreement
  through the Closing Date, the Company shall, and shall cause each of its directors,
  officers, employees and representatives to, afford Buyer and its representatives
  reasonable access upon reasonable notice and at all reasonable times to the
  Company Business for the purpose of inspecting the same, and to its directors,
  officers, employees and representatives, properties, books and records, Contracts
  and Company Assets, and shall furnish Buyer and its representatives, upon reasonable
  notice and in a timely manner, all financial, operating and other data and information
  as Buyer or its Affiliates, through their respective representatives, may reasonably
  request.

Section
  6.4    Notification of Certain Matters.The
  Company shall give prompt notice to Buyer of (i) the occurrence, or failure
  to occur, of any event that would be likely to cause any representation or warranty
  of the Company contained in this Agreement or in any Ancillary Agreement to
  which it is a party to be untrue or inaccurate in any material respect and (ii)
  any failure of the Company to comply with or satisfy in any material respect
  any covenant, condition or agreement to be complied with or satisfied by it
  hereunder; provided, however, that such disclosure shall not be
  deemed to cure any breach of a representation, warranty, covenant or agreement
  or to satisfy any condition. The Company shall promptly notify Buyer of any
  default, the threat or commencement of any Proceeding, or any development that
  occurs before the Closing that could reasonably be expected to result in a Company
  Material Adverse Effect.

Section
  6.5Acquisition Proposals.From
  the date of this Agreement until the earlier of the Closing Date or the date
  this Agreement is terminated pursuant to Section 9.1 hereof, neither the Company
  nor any of its directors, officers, agents, employees, Affiliates or representatives
  will directly or indirectly: (i) solicit, encourage, initiate, entertain,
  substantively review or participate in any negotiations or discussions with
  respect to any offer or proposal (formal or informal, oral, written or otherwise)
  to acquire all or any part of the Company, whether by purchase of assets, exclusive
  license, joint venture formation, purchase of stock, business combination or
  otherwise (an Acquisition Proposal), (ii) disclose any
  information not customarily disclosed to any Person concerning the Company and
  which the Company believes would be used for the purposes of formulating any
  Acquisition Proposal, (iii) assist, cooperate with, facilitate or encourage
  any Person to make any Acquisition Proposal (directly or indirectly), (iv) agree
  to, enter into a contract regarding, approve, recommend or endorse any transaction
  involving any Acquisition Proposal, or (v) authorize or permit any of the Companys
  representatives to take any such action. From the date of this Agreement until
  the earlier of the Closing Date or the date this Agreement is terminated pursuant
  to Section 9.1 hereof, the
  Company shall notify Buyer promptly of any proposal or offer (formal or informal,
  oral, written or otherwise), or any inquiry
  or contact with any Person with respect thereto, regarding any Acquisition Proposal,
  such notice to include the identity of the Person proposing such Acquisition
  Proposal and the terms thereof, and shall keep Buyer apprised, on a current
  basis, of the status of any such Acquisition
  Proposal and of any modifications to the terms thereof.

59

---

---

Section
  6.6Fairness Hearing; Registration of Shares.Buyer,
  Merger Sub and the Company shall each take all steps necessary or desirable,
  utilize all commercially reasonable efforts and cooperate with one another in
  every way to obtain as promptly as practicable the approval of the Commissioner
  of the California Department of Corporations (the Commissioner)
  of the fairness (the Fairness Approval) of the terms and
  conditions of the issuance of the Buyer Ordinary Shares as contemplated by this
  Agreement after a hearing held pursuant to Section 25142 of the California Corporate
  Securities Law of 1968, as amended, and the rules of the Commissioner thereunder.
  The Company shall promptly notify Buyer if the Company becomes aware that one
  of its shareholders intends to dissent or object to the Merger and the transactions
  contemplated hereby at such hearing. If for any reason whatsoever the Commissioner
  does not render the Fairness Approval of the terms and conditions of the Merger
  and the issuance of the Buyer Ordinary Shares as contemplated by this Agreement
  (or if Buyer determines in its reasonable judgment not to pursue such a hearing;
  provided that Buyer shall consult with the Company prior to making such
  determination), the parties hereto agree to take all steps necessary and desirable,
  utilize all commercially reasonable efforts and cooperate with one another in
  every way to have the Buyer Ordinary Shares to be issued in the Merger registered
  with the SEC on Form F-4 or a successor registration form (the Registration
  Statement) by filing with the SEC as promptly as practicable after
  the decision to utilize the Registration Statement is made, the Registration
  Statement with respect to the Buyer Ordinary Shares to be issued in connection
  with the Merger, which shall be in form and substance satisfactory to Buyer
  (but with advance copies provided to the Company for its review and comment,
  which such comments shall be promptly conveyed by the Company).  Each of
  Buyer and the Company shall use all commercially reasonable efforts to respond
  to any comments of the SEC to the Registration Statement.  Each of Buyer
  and the Company shall notify the other promptly of the receipt of any comments
  from the SEC to the Registration Statement and of any request by the SEC for
  amendments or supplements to the Registration Statement or additional information,
  and will supply the other party with copies of all correspondence between such
  party or any of its representatives and the SEC with respect to the Registration
  Statement.  As promptly as practicable after any comments to the Registration
  Statement are received from the SEC, Buyer shall file with the SEC an amendment
  to the Registration Statement and Buyer and the Company shall use all commercially
  reasonable efforts to cause the Registration Statement to become effective as
  soon thereafter as practicable.  Whenever any event occurs that is required
  to be set forth in an amendment or supplement to the Registration Statement,
  Buyer or the Company, as the case may be, shall promptly inform the other party
  of such occurrence and cooperate in filing with the SEC and/or mailing to shareholders
  of the Company, such amendment or supplement.

Section
  6.7Company Shareholder Approval; Shareholder
  Meeting.The
  Company shall use its commercially reasonable efforts to obtain the Shareholder
  Consent. Without limiting the generality of the foregoing, as promptly as practicable
  following Buyers receipt of the Fairness Approval and the California Permit,
  the Company shall submit this Agreement and the transactions contemplated hereby,
  including, without limitation, the Merger, to the Companys shareholders
  for approval and adoption at a meeting of the Companys shareholders, which
  shall be called and held in accordance with the CGCL and the Companys
  articles of incorporation and bylaws. The materials submitted to the Companys
  shareholders in connection with such meeting shall be subject to review and
  approval by Buyer and shall include information regarding the Company, the terms
  of this Agreement and the Merger and the unanimous recommendation of the Companys
  board of directors that the Companys shareholders vote their shares in
  favor of the adoption of this Agreement and the approval of the Merger and the
  other transactions contemplated by this Agreement and the Ancillary Agreements.

60

---

---

Section
  6.8Application for Listing of Buyer Ordinary
  Shares on NASDAQ.Buyer
  shall use its commercially reasonable efforts to cause the Buyer Ordinary Shares
  to be issued in connection with the Merger to be authorized for listing on the
  NASDAQ National Market, subject to official notice of issuance.

Section
  6.9Takeover Statutes.If
  any Takeover Statute is or may become applicable to the Merger or any of the
  other transactions contemplated by this Agreement and the Ancillary Agreements,
  the board of directors of the Company shall use commercially reasonable efforts
  to grant such approvals and take such actions as are reasonably necessary so
  that the Merger and such other transactions contemplated by this Agreement and
  the Ancillary Agreements may be consummated as promptly as practicable on the
  terms set forth in this Agreement and the Ancillary Agreements and otherwise
  act to eliminate the effects of any Takeover Statute on the Merger and any of
  the other transactions contemplated by this Agreement and the Ancillary Agreements.

Section
  6.10Further Assurances.Upon
  the terms and subject to the conditions contained in this Agreement, the parties
  hereby agree, in each case both before and after the Closing, (i) to use
  all commercially reasonable efforts to take, or cause to be taken, all actions
  and to do, or cause to be done, all things necessary, proper or advisable to
  consummate and make effective the transactions contemplated by this Agreement
  and the Ancillary Agreements, (ii) to use their respective commercially
  reasonable efforts to cause the Merger to qualify, and not take any actions
  which to their knowledge could reasonably be expected to prevent the Merger
  from qualifying, as a reorganization under the provisions of Section 368(a)
  of the Code, (iii) to execute any documents, instruments or conveyances
  of any kind which may be reasonably necessary or advisable to carry out any
  of the transactions contemplated hereunder and thereunder and (iv) to cooperate,
  to the extent practicable, with each other in connection with the foregoing.
  Without limiting the generality of the foregoing, the parties agree to use their
  respective commercially reasonable efforts (A) to promptly seek to obtain
  any necessary consents (including, without limitation, the making of all filings
  required to be made under the HSR Act, the Exon-Florio Act and/or with any U.S.
  or foreign Governmental Authority with respect to this Agreement, the Ancillary
  Agreements, the Merger and the other transactions contemplated hereby and thereby),
  (B) to give all notices to, and make all registrations and filings with
  third parties, including submissions of information requested by U.S. and foreign
  Governmental Authorities and (C) to fulfill all other conditions to this
  Agreement. Notwithstanding the foregoing, (y) no amendment or modification shall
  be made to any Contract to obtain any required consent in response to the request
  of a U.S. or foreign Governmental Authority without the prior written consent
  of Buyer and (z) no party hereto or any of their respective Affiliates shall
  be required to sell, transfer, divest or otherwise dispose of any of its respective
  business, assets or properties in connection with this Agreement, the Ancillary
  Agreements, the Merger or any of the other transactions contemplated hereby
  or thereby. Each party shall deliver customary closing certificates and representations
  for the purpose of facilitating delivery of the opinions of counsel contemplated
  by this Agreement.

61

---

---

Section
  6.11Employee Matters.

Section
  6.11.1    Following the Effective Time, Buyer may enroll
  those current Company Business Employees who will be retained by the Surviving
  Company following the Closing (each a Retained Company Employee)
  in Buyers employee benefit plans as defined in Section 3(3)
  of ERISA or other plans, arrangements or agreements providing benefits to U.S.
  employees (or to any dependent or beneficiary thereof) of Buyer, including,
  without limitation, all incentive, bonus, deferred compensation, vacation, holiday,
  cafeteria, medical, disability, stock purchase, stock option plans, policies,
  programs, practices or arrangements (each a Buyer Benefit Plan)
  made available to Buyers U.S. employees generally. The date of Buyers
  enrollment of Retained Company Employees in the Buyer Benefit Plans, if ever, may
  vary with respect to each Buyer Benefit Plan, but shall hereafter be referred
  to with respect to each Buyer Benefit Plan as the Benefit Plan Enrollment
  Date.  During the period between the Effective Time and
  the Benefit Plan Enrollment Date, if any, for a Buyer Benefit Plan, each
  Retained Company Employee shall remain enrolled and eligible to participate,
  to the substantially similar extent permitted prior to the Effective Time, in
  the relevant Company Benefit Plans.

Section
  6.11.2    To the extent any Retained Company Employee is,
  or becomes, eligible to participate in any Buyer Benefit Plans after the Effective
  Time, Buyer shall, or shall cause the Surviving Company to:  (i) give
  such Retained Company Employee service credit for their employment with the
  Company for eligibility and vesting purposes (but not benefit accrual) under
  all applicable Buyer Benefit Plans, as if such service has been performed with
  Buyer; (ii) give credit to each Retained Company Employee for earned but unused
  vacation and accrued vacation; (iii) cause any pre-existing conditions or limitations
  and eligibility waiting periods under any group health plan of Buyer to be waived
  with respect to Retained Company Employees and their eligible dependents and
  (iv) give each Retained Company Employee credit for the plan year in which the
  Benefit Plan Enrollment Date occurs toward applicable deductions and annual
  out-of-pocket limits for expenses incurred prior to the Benefit Plan Enrollment
  Date for which payment has been made.

Section
  6.11.3    Unless Buyer and the Company agree otherwise in
  writing, the board of directors of the Company shall adopt resolutions terminating,
  effective at least two (2) days prior to the Closing Date, any Employee Plan
  which is intended to meet the requirements of Section 401(k) of the Code (each
  such Employee Plan, a 401(k) Plan).  At the Closing,
  the Company shall provide Buyer (i) executed resolutions of the board of directors
  of the Company authorizing such termination and (ii) if required, an executed
  amendment to each such 401(k) Plan intended to assure compliance with all applicable
  requirements of the Code and regulations thereunder.

62

---

---

Section
  6.12Expenses.At
  least three (3) Business Days prior to the Closing Date, the Company shall provide
  to Buyer an itemized and complete list (the Company Transaction Expenses
  List) of all direct expenses of the Company incurred by the Company
  in connection with the negotiation and preparation of this Agreement, the Ancillary
  Agreements and the consummation of the Merger and the other transactions contemplated
  hereby and thereby, including any amounts relating to any legal, accounting
  and any other transaction fees (collectively, Company Transaction Expenses).
   The Company shall pay the Company Transaction Expenses prior to the Closing.
  Any Company Transaction Expenses in excess of $200,000 in the aggregate, as
  well as any Company Transaction Expenses that are not set forth on the Company
  Transaction Expenses List (any such excess or unlisted Company Transaction Expenses,
  the Excess Company Transaction Expenses), shall be paid to
  Buyer out of the Escrow Consideration pursuant to Section 10.2.1.4 of this Agreement
  on a dollar-for-dollar basis, which payment shall not be subject to the limitations
  set forth in Article 10 of this Agreement.  Except as expressly provided
  otherwise in this Agreement, the parties shall each bear their respective direct
  and indirect expenses incurred in connection with the negotiation and preparation
  of this Agreement and the Ancillary Agreements and the consummation of the Merger
  and the other transactions contemplated hereby and thereby.

Section
  6.13Reservation of Buyer Ordinary Shares Issuable
  Upon Exercise of Assumed Options; Registration on Form S-8.Prior
  to the Closing Date, Buyer shall take all corporate action necessary to reserve
  for issuance a sufficient number of Buyer Ordinary Shares for issuance upon
  the exercise of the Assumed Options. Within thirty (30) days after the Closing
  Date, Buyer shall file with the SEC a registration statement on Form S-8 or
  a successor registration form with respect to the Buyer Ordinary Shares issuable
  upon the exercise of the Assumed Options and shall use commercially reasonable
  efforts to maintain the effectiveness of such registration statement(s) and
  maintain the current status of the prospectus(es) referred to therein for so
  long as any Assumed Options remain outstanding.

ARTICLE 7.Tax Matters

Section
  7.1Tax Periods Ending on or Before the Closing
  Date.Buyer
  shall prepare or cause to be prepared and file or cause to be filed all Tax
  Returns for the Company and its Subsidiaries for all periods ending on or prior
  to the Closing Date which are filed after the Closing Date.

Section
  7.2Cooperation on Tax Matters.Buyer
  and the Escrow Participant Representative agree, upon request, to use commercially
  reasonable efforts to obtain any certificate or other document from any Governmental
  Authority or any other Person as may be necessary to mitigate, reduce or eliminate
  any Tax that could be imposed (including, but not limited to, with respect to
  the transactions contemplated hereby).

Section
  7.3Reorganization Matters.

Section
  7.3.1    The parties intend the Merger to qualify as a reorganization
  under Section 368(a) of the Code. However, neither Buyer nor the Company makes
  any representation or warranty to the other or to any Shareholder regarding
  the Tax treatment of the Merger or whether the Merger will qualify as a reorganization
  under Section 368(a) of the Code. Each of the Company, the Shareholders and
  Buyer acknowledges that it is relying on its own advisors in connection with
  the Tax treatment of the Merger and the other transactions contemplated by this
  Agreement. The Company, the Shareholders and Buyer each agree to use their respective
  commercially reasonable efforts to cause the Merger to qualify, and will not
  take any actions which to their knowledge could reasonably be expected to prevent
  the Merger from qualifying, as a reorganization under Section 368(a) of the
  Code.

63

---

---

Section
  7.3.2    This Agreement has been adopted as a plan
  of reorganization within the meaning Treasury Regulation Sections 1.368-2(g)
  and 1.368-3(a). Each of Buyer and the Company shall report the Merger as a reorganization
  within the meaning of Section 368(a) of the Code, unless otherwise required
  pursuant to a determination within the meaning of Section 1313(a)
  of the Code.

Section
  7.4Certain Taxes.Except
  as expressly set forth in this Section 7.4, all transfer, documentary, sales,
  use, stamp, registration and other substantially similar Taxes and fees (including
  any penalties and interest) incurred in connection with this Agreement (collectively,
  Transfer Taxes) shall be paid by the Shareholders when due,
  and the Shareholders shall, at their own expense, file all necessary Tax Returns
  and other documentation with respect to all such Transfer Taxes and, if required
  by Applicable Law, Buyer shall, and shall cause its Affiliates to, join in the
  execution of any such Tax Returns and other documentation. The Shareholders
  shall (i) provide Buyer with evidence satisfactory to Buyer that such Transfer
  Taxes have been paid by the Shareholders and (ii) use their commercially reasonable
  efforts to provide Buyer at Closing with a clearance certificate or similar
  document(s) which may be required by any state Taxing authority to relieve Buyer
  of any obligation to withhold any portion of the payments to the Shareholders
  pursuant to this Agreement.  Buyer shall pay (and shall not withhold
  pursuant to Section 2.12 of this Agreement) any Israeli transfer, documentary,
  sales, use, stamp, registration and other substantially similar Taxes and fees
  (including any penalties and interest) incurred in connection with the issuance
  of the Stock Consideration and any actual or deemed transfer of assets from
  the Company to Merger Sub in connection with this Agreement.

Section
  7.5FIRPTA Certificate.On
  or prior to the Closing Date, the Company shall have delivered to Buyer a form
  of notice to the Internal Revenue Service in accordance with the requirements
  of Treasury Regulation Section 1.897-2(h)(2) and in form and substance reasonably
  acceptable to Buyer along with written authorization for Buyer to deliver such
  notice form to the Internal Revenue Service on behalf of the Company upon the
  Closing of the Merger.

Section
  7.6Characterization of Payments.Any
  payments made to any Buyer Indemnitees pursuant to Section 10.2 of this Agreement
  shall constitute an adjustment of the consideration paid for the Common Stock
  and Preferred Stock, as applicable, for Tax purposes and shall be treated as
  such by the parties on their Tax Returns to the extent permitted by Law.

Section
  7.7Carrybacks.The
  parties agree and acknowledge that any net operating losses or similar Tax attribute
  of the Company and its Subsidiaries is an asset of the Company and its Subsidiaries
  that (subject to any applicable limitations imposed by Law) is being acquired
  by Buyer pursuant to the Merger, and that the Company and its Subsidiaries shall
  not elect to carryback any such Tax attributes to Tax periods of the Company
  and its Subsidiaries prior to the Closing Date or otherwise act so as to limit
  the ability of Buyer to use such attributes subsequent to the Merger.

64

---

---

**ARTICLE
  8.****Conditions To Obligations**

Section
  8.1Conditions to Each Partys Obligations
  to Effect the Merger.The
  respective obligations of each party hereto to consummate the transactions provided
  for hereby are subject to the satisfaction, on or prior to the Closing Date,
  of each of the following conditions:

Section
  8.1.1    The waiting period applicable to the Merger under
  the HSR Act and any waiting period applicable to the Merger under the Exon-Florio
  Act shall have been terminated or shall have expired, all approvals under antitrust
  regulatory filings in any jurisdiction that shall be necessary or determined
  by Buyer and the Company to be reasonably desirable shall have been obtained,
  and there shall be no commitment by Buyer, the Company or any of their respective
  Subsidiaries to any Governmental Authority not to close the transactions contemplated
  hereby before a date certain.

Section
  8.1.2    No Proceeding by any Governmental Authority shall
  have been instituted and remain in effect which questions the validity or legality
  of the transactions contemplated hereby and which could reasonably be expected
  to adversely affect the Company Business or the Company Assets if the transactions
  contemplated hereby are consummated. There shall not be any Applicable Law or
  Court Order that enjoins or makes the transactions contemplated hereby illegal
  or otherwise prohibited.

Section
  8.1.3    The Fairness Approval shall have been obtained
  or, if the Fairness Approval has not been obtained, then the Registration Statement
  shall have been declared effective by the SEC under the Securities Act, and
  no stop order (or similar action) suspending the effectiveness of the Registration
  Statement shall have been issued (or taken) by the SEC, as applicable.

Section
  8.1.4    Any other governmental or regulatory notices or
  approvals required under any Applicable Law to carry out the transactions contemplated
  by this Agreement and the Ancillary Agreements shall have been obtained and
  the parties shall have complied with all Applicable Laws applicable to the transactions
  contemplated by this Agreement and the Ancillary Agreements.

Section
  8.2Conditions to the Companys Obligations
  to Effect the Merger.The
  obligations of the Company to consummate the transactions provided for hereby
  are subject to the satisfaction, on or prior to the Closing Date, of each of
  the following conditions, any of which may be waived by the Company:

65

---

---

Section
  8.2.1    Each of (i) the representations and warranties
  of Buyer, Parent and Merger Sub contained in this Agreement that are qualified
  by Buyer Material Adverse Effect shall be true and correct in all respects as
  of the Effective Time as though made on and as of the Effective Time (except
  that those representations and warranties which address matters only as of a
  particular date need only be true and correct as of such date), and (ii) the
  representations and warranties of Buyer, Parent and Merger Sub contained in
  this Agreement that are not so qualified (including, without limitation, those
  which are qualified by the phrase material) shall be true and correct
  in all material respects as of the Effective Time as though made on and as of
  the Effective Time (except that those representations and warranties which address
  matters only as of a particular date need only be true and correct as of such
  date).

Section
  8.2.2    Each of Buyer, Parent and Merger Sub shall have
  performed or complied with all agreements and covenants required by this Agreement
  and each Ancillary Agreement to which it is a party to be performed or complied
  with by it in all material respects on or prior to the Effective Time.

Section
  8.2.3    Each of Buyer, Parent and Merger Sub shall have
  tendered for delivery the documents and other items to be delivered by such
  parties pursuant to Article 3 of this Agreement.

Section
  8.3Conditions to the Obligations of Buyer, Parent
  and Merger Sub to Effect the Merger.The
  respective obligations of Buyer, Parent and Merger Sub to consummate the transactions
  provided for hereby are subject to the satisfaction, on or prior to the Closing
  Date, of each of the following conditions, any of which may be waived by Buyer,
  Parent or Merger Sub:

Section
  8.3.1    Each of (i) the representations and warranties
  of the Company contained in this Agreement that are qualified by Company Material
  Adverse Effect shall be true and correct in all respects as of the Effective
  Time as though made on and as of the Effective Time (except that those representations
  and warranties which address matters only as of a particular date need only
  be true and correct as of such date), and (ii) the representations and warranties
  of the Company contained in this Agreement that are not so qualified (including,
  without limitation, those which are qualified by the phrase material)
  shall be true and correct in all material respects as of the Effective Time
  as though made on and as of the Effective Time (except that those representations
  and warranties which address matters only as of a particular date need only
  be true and correct as of such date).

Section
  8.3.2    The Company shall have performed or complied with
  all agreements and covenants required by this Agreement and each Ancillary Agreement
  to which it is a party to be performed or complied with by it in all material
  respects on or prior to the Effective Time.

Section
  8.3.3    The Company shall have tendered for delivery the
  documents and other items to be delivered by the Company pursuant to Article 3
  of this Agreement.

Section
  8.3.4    Each of the Shareholder Support Agreements, Employment
  Agreements and Non-Competition Agreements executed and delivered contemporaneously
  with the execution and delivery of this Agreement shall remain in full force
  and effect.

Section
  8.3.5    The Company shall have received all Permits and
  consents by Governmental Authorities that are required for the consummation
  of the transactions contemplated hereby and any consents by third parties to
  each of the agreements set forth on Section 8.3.5 of the Company
  Disclosure Schedule that are required for the consummation of the transactions
  contemplated hereby.

66

---

---

Section
  8.3.6    Since the date of this Agreement, there shall not
  have occurred and be continuing any Company Material Adverse Effect.

Section
  8.3.7    This Agreement shall have been adopted, and the
  Merger and the other transactions contemplated hereby shall have been approved,
  by the requisite vote or consent of the Companys shareholders.

Section
  8.3.8    All Company Warrants shall have been exercised or canceled.

Section
  8.3.9    All of the individuals set forth on Exhibit
  N-1 hereto and not less than seventy-five percent (75%) of the individuals
  set forth on Exhibit N-2 hereto shall have accepted offers of employment
  with the Surviving Company, provided that each such individual is offered
  compensation no less favorable than such individuals current terms of
  employment with the Company (other than with respect to employee benefits, which
  shall be provided in accordance with the terms of the Buyer Benefit Plans).

Section
  8.3.10   No more than five percent (5%) of the shares of Company
  Stock (calculated on an as-converted to Common Stock basis) as of the Closing
  Date shall be Company Dissenting Shares.

**ARTICLE
  9.
  Termination**

****Section
  9.1Termination.  This Agreement
  may be terminated and the Merger may be abandoned at any time prior to the Effective
  Time:

Section
  9.1.1    by mutual written consent of Buyer, Parent, Merger Sub
  and the Company;

Section
  9.1.2    by Buyer, Parent and Merger Sub or the Company
  if (i) any court of competent jurisdiction or other Governmental Authority
  shall have issued a final order, decree or ruling or taken any other final action
  restraining, enjoining or otherwise prohibiting the Merger and such order, decree,
  ruling or other action is or shall have become nonappealable or (ii) the Merger
  has not been consummated by April 30, 2004 (the Outside Date);
  provided, however, that no party may terminate this Agreement pursuant
  to this clause (ii) if such partys failure to fulfill any of its obligations
  under this Agreement shall have been the reason that the Effective Time shall
  not have occurred on or before said date;

Section
  9.1.3    by Buyer, Parent and Merger Sub if there shall
  have been (i) a breach by the Company of any of its representations or warranties
  contained in this Agreement, or if any such representation or warranty shall
  have become untrue, or (ii) a breach or nonperformance by the Company of any
  of its covenants or agreements contained in this Agreement, such that, in the
  case of either (i) or (ii) above, the conditions set forth in Section 8.3.1
  and 8.3.2 would not be satisfied; provided, however, that if such breach,
  inaccuracy or nonperformance is curable by the Company through the exercise
  of its commercially reasonable efforts within fifteen (15) Business Days after
  notice to Buyer (the Company Cure Period), then Buyer, Parent
  and Merger Sub may not terminate this Agreement pursuant to this Section 9.1.3
  prior to the expiration of the Company Cure Period (it being understood and
  agreed that the Company shall promptly notify Buyer of any such breach, inaccuracy
  or nonperformance and shall continue to exercise commercially reasonable efforts
  to cure such breach, inaccuracy or nonperformance during the Company Cure Period);

67

---

---

Section
  9.1.4    by Buyer, Parent and Merger Sub if the approval
  by the shareholders of the Company required for the consummation of the Merger
  or the other transactions contemplated hereby or by the Ancillary Agreements
  shall not have been obtained by reason of the failure to obtain the required
  vote at a duly held meeting of the shareholders of the Company or at any adjournment
  thereof due to the existence of an Acquisition Proposal (other than the Merger);

Section
  9.1.5    by Buyer, Parent and Merger Sub or the Company
  (i) if the Closing Measurement Price is less than 50% of the Initial Measurement
  Price or (ii) if the Closing Measurement Price is greater than 150% of the Initial
  Measurement Price; provided, however, that the Company shall not be entitled
  to terminate this Agreement pursuant to this clause (ii) if Buyer agrees to
  issue the same number of Buyer Ordinary Shares to each Holder of Common Stock
  in connection with the Merger as it would be obligated to issue under Article
  2 of this Agreement if the Closing Measurement Price were 150% of the Initial
  Measurement Price;

Section
  9.1.6    by the Company if, based on a decline in the market
  price of the Buyer Ordinary Shares between the date of this Agreement and the
  Closing Date, the Company reasonably determines that the Merger will not qualify
  as a reorganization within the meaning of Section 368(a) of the Code; provided,
  however, that the Company shall not be entitled to terminate this Agreement
  pursuant to this Section 9.1.6 if Buyer agrees to adjust the relative amounts
  of Stock Consideration and Cash Consideration such that the Merger qualifies
  as a reorganization within the meaning of Section 368(a) of the Code. For purposes
  of determining whether the Merger will not qualify as a reorganization within
  the meaning of Section 368(a) of the Code as a result of a decline in the market
  price of Buyer Ordinary Shares between the date of this Agreement and the Closing
  Date, the parties agree that the Merger will not fail to so qualify if the value
  of the Buyer Ordinary Shares received by Shareholders in the Merger (determined
  in accordance with the principles set forth in the last sentence of Section
  4.29.4 of this Agreement) equals not less than forty-five percent (45%) of the
  aggregate value of the Transaction Consideration as of the Closing Date;

Section
  9.1.7    by the Company if there shall have been (i) a breach
  by Buyer, Parent or Merger Sub of any of their representations or warranties
  contained in this Agreement, or if any such representation or warranty shall
  have become untrue, or (ii) a breach or nonperformance by Buyer, Parent or Merger
  Sub of any of their covenants or agreements contained in this Agreement, such
  that, in the case of either (i) or (ii) above, the conditions set forth in Section
  8.2.1 and 8.2.2 would not be satisfied; provided, however, that if such
  breach, inaccuracy or nonperformance is curable by Buyer, Parent or Merger Sub
  through the exercise of its commercially reasonable efforts within fifteen (15)
  Business Days after notice to Buyer (the Buyer Cure Period),
  then the Company may not terminate this Agreement pursuant to this Section 9.1.7
  prior to the expiration of the Buyer Cure Period (it being understood and agreed
  that Buyer shall promptly notify the Company of any such breach, inaccuracy
  or nonperformance and shall continue to exercise commercially reasonable efforts
  to cure such breach, inaccuracy or nonperformance during the Buyer Cure Period);

68

---

---

Section
  9.2Effect of Termination.

Section
  9.2.1    In the event of the termination and abandonment
  of this Agreement pursuant to Section 9.1, this Agreement shall forthwith become
  void and have no effect and there shall be no liability on the part of any party
  hereto or its Affiliates, directors, officers or stockholders except as set
  forth in Section 6.12, this Section 9.2 and Article 11 hereof, each of which
  shall survive the termination of this Agreement. Nothing contained in this Section
  9.2 shall relieve any party from liability for any breach of this Agreement.

Section
  9.2.2    In the event that this Agreement is terminated
  by Buyer, Parent and Merger Sub pursuant to Section 9.1.4, then the Company
  shall pay to Buyer a termination fee of Seven Million Six Hundred Fifty Thousand
  Dollars ($7,650,000) within two (2) Business Days after such termination.

ARTICLE 10.Indemnification

Section
  10.1Survival of Representations, Warranties and
  Covenants.All
  of the representations and warranties set forth in this Agreement or in any
  instrument executed and delivered in fulfillment of the requirements of this
  Agreement shall survive the Closing until the Expiration Date. All covenants
  or other agreements contained in this Agreement shall survive the Closing indefinitely
  or for such lesser period of time as may be specified herein.

Section
  10.2Indemnification by the Escrow Participants.

Section
  10.2.1    Indemnification by the Escrow Participants.
   From and after the Closing Date, each of the Escrow Participants shall,
  severally in proportion to their respective Pro Rata Shares and not jointly,
  indemnify and hold Buyer, Parent, Merger Sub, the Company and each of their
  Subsidiaries, and each of their respective officers, directors, employees, members,
  stockholders, agents and representatives (Buyer Indemnitees)
  harmless from and against all losses, damages, liabilities, claims, demands,
  obligations, deficiencies, payments, judgments, settlements, costs, Tax Costs
  and expenses of any nature whatsoever (including the costs and expenses of any
  and all investigations, actions, suits, proceedings, demands, assessments, judgments,
  orders, settlements and compromises relating thereto, and reasonable attorneys,
  accountants, experts and other fees and expenses in connection therewith
  (Losses) resulting from, arising out of, or due to, directly
  or indirectly, any of the following (but excluding any Excludable Patent Counterclaim
  Losses):

Section
  10.2.1.1    Any inaccuracy or misrepresentation in, or breach
  or nonfulfillment of, any representation or warranty of the Company, or any
  breach or nonfulfillment of any covenant of the Company, contained in this Agreement,
  in any schedule delivered hereunder by the Company, or in any certificates delivered
  by the Company pursuant to this Agreement;

69

---

---

Section
10.2.1.2    Any of the matters set forth on Section 10.2.1.2  of the Company Disclosure Schedule;

Section
10.2.1.3    Any Company Free Cash Shortfall;

Section
10.2.1.4    Any Excess Company Transaction Expenses;

Section
10.2.1.5    With respect to each Company Dissenting Share, any payments made
by Buyer in respect of any demands for appraisal of such Company Dissenting Share to the extent such
payments exceed the net amount ultimately paid with respect to a share of Company Stock of the same
class and series that is not a Company Dissenting Share pursuant to this Agreement following completion
of operation of this Article 10 and the Escrow Agreement, each Buyer Ordinary Share being valued
for such purpose at the Closing Measurement Price, plus the reasonable fees and expenses of Buyer
incurred in connection with the defense of such demands; and

Section
10.2.1.6    Any claims by any Person other than the parties to this Agreement
arising out of such Persons ownership or claim of ownership of any equity securities of the
Company.

Section
  10.2.2    Offset; Waiver.  For purposes of this
  Section 10.2:

Section
  10.2.2.1    In the event that a Buyer Indemnitee wishes
  to make any indemnification claim under this Section 10.2, such Buyer Indemnitee
  shall provide written notice of such claim (an Indemnification Notice)
  to the Escrow Agent and the Escrow Participant Representative. Any such notice
  shall, to the extent practicable, set forth in reasonable detail the basis for
  the claim and shall include a good faith determination of the estimated amount
  of the claim. Thereafter, the Escrow Participant Representative shall have twenty
  (20) Business Days following the Escrow Participant Representatives receipt
  of the Indemnification Notice in which to deliver notice of objection to such
  claim to the Buyer Indemnitee and the Escrow Agent. If no objection notice is
  given, then the claim in the amount alleged by the Buyer Indemnitee in the Indemnification
  Notice shall be deemed to be valid and indemnifiable pursuant hereto, and the
  Buyer Indemnitee shall be entitled to offset the full amount of such claim against
  the Escrow Consideration. No offset shall be permitted if the relevant claim
  is timely disputed as set forth above, unless and until its validity is finally
  resolved. In the event that the Buyer Indemnitee is entitled to offset as a
  result of the final resolution of the validity of such claim, such Buyer Indemnitee
  shall provide written notice (the Resolved Claim Notice)
  of such offset to the Escrow Agent and the Escrow Participant Representative.
   Within five (5) Business Days after receipt of the Resolved Claim Notice,
  the Escrow Agent shall deliver to such Buyer Indemnitee an amount of Escrow
  Consideration equal to the amount of such offset.  Each Escrow Participant
  shall be severally liable for the dollar amount equal to the product of (x)
  the dollar amount set forth in such Resolved Claim Notice multiplied by
  (y) such Escrow Participants Pro Rata Share, but in no event greater than
  the remaining amount of the Escrow Consideration attributable to such Escrow
  Participant; provided, however, that in the event the Resolved Claim
  Notice involves a claim by a Buyer Indemnitee for indemnification pursuant to
  Section 10.2.1.1 of this Agreement for breach of the Companys representations
  and warranties contained in Sections 4.2.2 or 4.2.4 of this Agreement, and the
  amount of the offset remains unfulfilled after payment of the Escrow Consideration,
  then each Escrow Participant shall be severally liable for the delivery to such
  Buyer Indemnitee, in cash, of the dollar amount equal to the product of (x)
  the dollar amount of the offset remaining after payment of the Escrow Consideration
  multiplied by (y) such Escrow Participants Pro Rata Share; and
  provided further, that in no event shall an Escrow Participants aggregate
  liability for money damages pursuant to Section 10.2.1.1 of this Agreement for
  breach of the Companys representations and warranties contained in Sections
  4.2.2 or 4.2.4 of this Agreement exceed the total Transaction Consideration
  received by such Escrow Participant pursuant to this Agreement (for purposes
  of these provisos, any Resolved Claim Notice involving such claim for indemnification
  shall be deemed the last Resolved Claim Notice paid following resolution of
  all claims).  With respect to each Escrow Participant, such Escrow Participants
  Pro Rata Share of the claim set forth in the Resolved Claim Notice shall be
  offset as follows:  first, against the Escrow Cash then remaining
  in the Escrow Account that is attributable to such Escrow Participant and second,
  if and to the extent that the amount of Escrow Cash then remaining in the Escrow
  Account that is attributable to such Escrow Participant is insufficient to satisfy
  such Escrow Participants Pro Rata Share of the claim set forth in the
  Resolved Claim Notice, against the Escrow Shares then remaining in the Escrow
  Account that are attributable to such Escrow Participant, valued at the Closing
  Measurement Price.

70

---

---

Section
  10.2.2.2    The obligations of the Escrow Participants to
  indemnify the Buyer Indemnitees pursuant to this Section 10.2 are personal
  to the Escrow Participants and are assumed in light of the consideration they
  are to receive at the Closing hereunder, and each Escrow Participant waives
  any rights and releases all Buyer Indemnitees from any claims or assertions
  of cross-indemnification or contribution from any Buyer Indemnitees, whether
  arising in law or in equity from and after the Closing, as a result of such
  Escrow Participants payment, coverage or assumption of any Losses incurred
  by Buyer or the Company pursuant to this Section 10.2, including any claims
  or contribution in respect of any attorneys fees and expenses incurred
  by such Escrow Participant in defending against, or seeking contribution or
  recovery arising from, its, his or her indemnification obligations under this
  Section 10.2.

Section
  10.3Indemnification
  by Buyer.From
  and after the Closing Date, Buyer shall indemnify and hold each of the Escrow
  Participants harmless from and against all Losses resulting from, arising out
  of, or due to, directly or indirectly, any of the following:

Section
  10.3.1    Any inaccuracy or misrepresentation in, or breach
  or nonfulfillment of, any representation or warranty of Buyer, Parent or Merger
  Sub, or any breach or nonfulfillment of any covenant of Buyer, Parent or Merger
  Sub, contained in this Agreement, in any schedule delivered hereunder by Buyer,
  Parent or Merger Sub, or in any certificates delivered by Buyer, Parent or Merger
  Sub pursuant to this Agreement; and

Section
  10.3.2    Any claims arising solely out of the conduct or
  operation of the Company Business after the Closing Date.

Section
  10.4    Procedures for Third-Party Claims.

Section
  10.4.1    Third-Party Claims.  In order for
  a Person (the Indemnified Party) to be entitled to any indemnification
  provided for under Section 10.2 or 10.3 hereof in respect of, arising out of
  or involving a claim made by any Person against the Indemnified Party (a Third-Party
  Claim), such Indemnified Party must notify the indemnifying party
  in writing of the Third-Party Claim promptly following receipt by such Indemnified
  Party of written notice of the Third-Party Claim; provided, however,
  that failure to give such notification shall not affect the indemnification
  provided hereunder except and only to the extent the indemnifying party demonstrates
  that it has been actually prejudiced as a result of such failure. Thereafter,
  the Indemnified Party shall deliver to the indemnifying party, as promptly as
  practicable following the Indemnified Partys receipt thereof, copies of
  all notices and documents (including court papers) received by the Indemnified
  Party relating to the Third-Party Claim that are not separately addressed to
  the indemnifying party.

71

---

---

Section
  10.4.2    Assumption.  If a Third-Party Claim
  is made against an Indemnified Party, the indemnifying party shall be entitled
  to participate in the defense thereof and, if it so chooses, to assume the defense
  thereof with counsel selected by the indemnifying party; provided, however,
  that such counsel is not reasonably objected to by the Indemnified Party. Should
  the indemnifying party so elect to assume the defense of a Third-Party Claim,
  the indemnifying party shall not be liable to the Indemnified Party for any
  reasonable legal expenses subsequently incurred by the Indemnified Party in
  connection with the defense thereof. If the indemnifying party assumes such
  defense, the Indemnified Party shall have the right to participate in the defense
  thereof and to employ counsel, at its own expense, separate from the counsel
  employed by the indemnifying party, it being understood that the indemnifying
  party shall control such defense; provided, however, that the indemnifying
  party shall bear the reasonable fees and expenses of such separate counsel (i)
  if the parties to any such action or proceeding (including impleaded parties)
  include any of the Shareholders and representation of both parties would, in
  the reasonable opinion of counsel for the Indemnified Party, be inappropriate
  due to a conflict of interest or (ii) if the indemnifying party shall not have
  employed counsel (other than counsel that is reasonably objected to by the Indemnified
  Party) within a reasonable time after the Indemnified Party has given notice
  of the institution of a Third-Party Claim in compliance with Section 10.4.1
  hereof.  The indemnifying party shall be liable for the reasonable fees
  and expenses of counsel employed by the Indemnified Party for any period during
  which the indemnifying party has not assumed the defense thereof, provided,
  however, that such counsel is not reasonably objected to by the indemnifying
  party.  If the indemnifying party chooses to defend or prosecute a Third-Party
  Claim, all the Indemnified Parties shall cooperate in the defense or prosecution
  thereof.  Such cooperation shall include, to the extent within the control
  of each such Indemnified Party, the retention and (upon the indemnifying partys
  request) the provision to the indemnifying party of records and information
  that are reasonably relevant to such Third-Party Claim, and making employees
  available on a mutually convenient basis to provide additional information and
  explanation of any material provided hereunder.  The Indemnified Party
  shall not admit any liability with respect to, or settle, compromise or discharge,
  such Third-Party Claim without the indemnifying partys prior written consent
  (which consent shall not be unreasonably withheld).  If the indemnifying
  party assumes the defense of a Third-Party Claim, the Indemnified Party shall
  agree to any settlement, compromise or discharge of a Third-Party Claim that
  the indemnifying party may recommend and that by its terms obligates the indemnifying
  party to pay the full amount of the liability in connection with such Third-Party
  Claim (and, with respect to indemnification by the Escrow Participants, for
  which the Escrow Consideration then remaining in the Escrow Account is sufficient
  to satisfy the entire settlement, compromise or discharge), which releases the
  Indemnified Party completely in connection with such Third-Party Claim and that
  would not otherwise materially adversely affect the Indemnified Party.

72

---

---

Section
  10.5Termination of Indemnification Obligations.The
  obligations to indemnify and hold harmless any Person pursuant to Sections 10.2
  and 10.3 hereof shall terminate on the Expiration Date; provided, however,
  that such obligations to indemnify and hold harmless shall not terminate with
  respect to any item as to which the Person to be indemnified shall have, before
  the expiration of the applicable period, previously made a bona fide
  claim by delivering a notice of such claim pursuant to Sections 10.2.2 or 10.4
  hereof to the indemnifying party.

Section
  10.6Limitations on Indemnity; Maximum Liability.

Section
  10.6.1    Notwithstanding the foregoing, the Escrow Participants
  shall not be obligated to indemnify any Buyer Indemnitee pursuant to Section
  10.2.1.1 of this Agreement unless and until the aggregate of all Losses suffered
  by all Buyer Indemnitees under this Agreement exceeds $250,000 (the Threshold
  Amount), whereupon, provided that the other requirements of this Article
  10 have been complied with, the amount of all such Losses, and all subsequent
  Losses, shall become due and payable; provided, however, that the Threshold
  Amount shall not apply to the representations and warranties of the Company
  set forth in Sections 4.1, 4.2, 4.4.1, 4.4.2(i), 4.9, 4.11, 4.14 and 4.29 of
  this Agreement.

Section
  10.6.2    Except in the case of torts or criminal activity
  and except as set forth in the provisos in Section 10.2.2.1 of this Agreement,
  the aggregate liability of each Escrow Participant for money damages under this
  Agreement shall be limited to the product of (x) the Escrow Consideration multiplied
  by (y) such Escrow Participants Pro Rata Share.

Section
  10.6.3    For all purposes under this Agreement, Losses
  shall be calculated net of any Tax Benefits actually realized by Buyer or any
  of its Subsidiaries on account of such Losses following the payment of any and
  all amounts pursuant to this Article 10.

ARTICLE 11.Miscellaneous

Section
  11.1Entire Agreement.  This Agreement
  (including the Company Disclosure Schedule, any other exhibits, schedules, certificates,
  lists and documents referred to herein, and any documents executed by the parties
  simultaneously herewith or pursuant thereto), the Ancillary Agreements and the
  Non-Disclosure Agreement constitute the entire agreement of the parties hereto,
  except as provided herein, and supersedes all prior agreements and understandings,
  written and oral, among the parties with respect to the subject matter hereof.

Section
  11.2Interpretation.When
  a reference is made in this Agreement to Sections, Exhibits or Schedules, such
  reference shall be to a Section of or an Exhibit or a Schedule to this Agreement
  unless otherwise indicated. The table of contents and headings contained in
  this Agreement are for reference purposes only and shall not affect in any way
  the meaning or interpretation of this Agreement. Whenever the words include,
  includes or including are used in this Agreement, they
  shall be deemed to be followed by the words without limitation.  The
  phrases the date of this Agreement, the date hereof
  and terms of similar import, unless the context otherwise requires, shall be
  deemed to refer to the date set forth in the first paragraph of this Agreement.

73

---

---

Section
  11.3Severability.Any
  term or provision of this Agreement which is invalid or unenforceable in any
  jurisdiction shall, as to that jurisdiction, be ineffective to the extent of
  such invalidity or unenforceability without rendering invalid or unenforceable
  the remaining terms and provisions of this Agreement or affecting the validity
  or enforceability of any of the terms or provisions of this Agreement in any
  other jurisdiction. If any provision of this Agreement is so broad as to be
  unenforceable, the provision shall be interpreted to be only so broadly as is
  enforceable.

Section
  11.4Notices.Unless
  otherwise provided herein, all notices and other communications hereunder shall
  be in writing and shall be deemed given if (a) delivered in person, (b) transmitted
  by telecopy (with written confirmation), (c) mailed by certified or registered
  mail (return receipt requested) (in which case such notice shall be deemed given
  on the third (3rd) day after such mailing, but only if deposited
  at a U.S. Postal Service office in California) or (d) delivered by an express
  courier (with written confirmation) to the parties at the following addresses
  (or at such other address for a party as shall be specified by like notice):

If
  to Buyer, Parent or Merger Sub or to the Company after the Closing Date:

| | Check Point Software
      Technologies Ltd.
      3A Jabotinsky St., Diamond Tower                                                                                           
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Ramat Gan, 52520 Israel  
      
      Facsimile:   +972-3-575-9256
      Attention:  Chief Financial Officer                                                                 
| |                                                                                                                                                                               
| | With copies (which shall
      not constitute notice) to:                                                                                                                     
| |                                                                                                                                                                               
| | Latham & Watkins
      LLP
      135 Commonwealth Drive
      Menlo Park, California  94025
      Facsimile:    (650) 463-2600
      Attention:   Christopher L. Kaufman, Esq.
| |                                                                                                                                                                               
| | and                                                                                                                                                                           
| |                                                                                                                                                                               
| | Naschitz, Brandes &
      Co.
      5 Tuval Street
      Tel Aviv 67897 Israel
      Facsimile:    +972-3-623-5005
      Attention:   Hanina Brandes, Esq.                    

If
  to the Company before the Closing Date:

| | Zone Labs, Inc.
      475 Brannan St., Suite 300                           
| | ---------------------------------------------------------------------------
| | San Francisco, California
      94107                                      
| | Facsimile:  
      (415) 633-4501
      Attention:  Chief Executive Officer

74

---

---

With
  a copy (which shall not constitute notice) to:

| | Gray Cary Ware &
      Freidenrich LLP
      2000 University Avenue
      East Palo Alto, California  94303
      Facsimile:   (650) 833-2001
      Attention:  Peter M. Astiz, Esq.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

If
  to the Escrow Participant Representative:

| | Gregor Freund
      26 Vulcan Stairway
      San Francisco, California  94114
| | -----------------------------------------------------------------------------
| | Facsimile:  (415)
      723-7297                                             

With
  a copy (which shall not constitute notice) to:

| | Gray Cary Ware &
      Freidenrich LLP
      2000 University Avenue
      East Palo Alto, California  94303
      Facsimile:  (650) 833-2001
      Attention:  Peter M. Astiz, Esq.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Section
  11.5Binding Effect; Persons Benefiting; No Assignment.This
  Agreement shall inure to the benefit of and be binding upon the parties hereto
  and their respective successors and permitted assigns. No provision of this
  Agreement is intended or shall be construed to confer upon any entity or Person
  other than the parties hereto and their respective successors and permitted
  assigns any right, remedy or claim under or by reason of this Agreement or any
  part hereof. This Agreement may not be assigned by any of the parties hereto;
  provided, however, that Buyer may assign all or part of its rights under
  this Agreement and delegate all or part of its obligations under this Agreement
  to (i) a wholly owned Subsidiary of Buyer, in which event all of the rights
  and powers of Buyer and remedies available to Buyer under this Agreement shall
  extend to and be enforceable by such Subsidiary (provided that Buyer
  remains jointly and severally liable with such assignee for any obligations
  of Buyer hereunder after such assignment) or (ii) any Person who acquires Buyer,
  whether by way of merger or the purchase of all of Buyers outstanding
  capital stock or substantially all of Buyers assets.  In the event
  of any such assignment and delegation, the term Buyer as used in
  this Agreement shall be deemed to refer to such Subsidiary or successor of Buyer,
  as the case may be, where reference is made with respect to actions to be taken
  with respect to the transactions contemplated by this Agreement and the Ancillary
  Agreements, and shall be deemed to include both Buyer and such Subsidiary or
  successor of Buyer, as the case may be, where appropriate.

Section
  11.6Counterparts.This
  Agreement may be executed in two or more counterparts, each of which shall be
  deemed an original, but all of which taken together shall constitute one and
  the same agreement, it being understood that all of the parties need not sign
  the same counterpart.

75

---

---

Section
  11.7Waiver of Jury Trial.EACH
  OF THE PARTIES HERETO 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.

Section
  11.8Governing Law.THIS
  AGREEMENT, THE LEGAL RELATIONS BETWEEN THE PARTIES AND THE ADJUDICATION AND
  THE ENFORCEMENT THEREOF, SHALL BE GOVERNED BY AND INTERPRETED AND CONSTRUED
  IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE STATE OF CALIFORNIA WITHOUT REGARD
  TO APPLICABLE CHOICE OF LAW PROVISIONS THEREOF.

Section
  11.9Consent to Jurisdiction.Except
  as otherwise expressly provided in any of the Ancillary Agreements, each of
  the parties hereto hereby irrevocably and unconditionally submits to the jurisdiction
  of any state court of the State of California and any federal court sitting
  in San Francisco or San Jose, California and irrevocably agrees that all actions
  or proceedings arising out of or relating to this agreement or the transactions
  contemplated hereby or in aid or arbitration or for enforcement of an arbitral
  award shall be litigated exclusively in such courts. Each of the parties hereto
  agrees not to commence any legal proceedings related hereto except in such courts.
  Each of the parties hereto irrevocably waives any objection which he or it may
  now or hereafter have to the laying of the venue of any such proceeding in any
  such court and hereby further irrevocably and unconditionally waives and agrees
  not to plead or claim in any such court that any such action, suit or proceeding
  brought in any such court has been brought in an inconvenient forum.

Section
  11.10Attorneys Fees.If
  any proceeding relating to this Agreement or any of the Ancillary Agreements
  or the enforcement of any provision hereof or thereof is brought against any
  party to this Agreement, the prevailing party in such suit or proceeding shall
  be entitled to recover its reasonable attorneys fees, costs and disbursements
  incurred in the course of such proceeding, in addition to any other relief to
  which the prevailing party may be entitled.

Section
  11.11Tax Disclosure Authorization.  Notwithstanding
  anything to the contrary set forth herein or in any other written or oral understanding
  or agreement to which the parties hereto are parties or by which they are bound,
  the parties acknowledge and agree that any obligations of confidentiality contained
  herein and therein shall not apply to the Tax treatment and Tax structure of
  the transaction upon the earlier to occur of (i) the date of the public announcement
  of discussions relating to the transaction, (ii) the date of the public announcement
  of the transaction, or (iii) the date of the execution of this Agreement, all
  within the meaning of Treasury Regulations Section 1.6011-4; provided however,
  that each party recognizes that the privilege each has to maintain, in its sole
  discretion, the confidentiality of a communication relating to any such transaction,
  including a confidential communication with its attorney or a confidential communication
  with a federally authorized Tax practitioner under Section 7525 of the Code,
  is not intended to be affected by the foregoing.

[Signature
  Page Follows]

76

---

---

IN
  WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
  as of the date first above written.

| | CHECK POINT SOFTWARE                                   
| | -------------------------------------------------------
| | TECHNOLOGIES LTD.,
      an Israeli company            
| |                                                        
| |                                                        
| | By:        /s/
      Eyal Desheh                       
| |                                         
| | Name:   Eyal
      Desheh                              
| | Title:     Chief
      Financial Officer               
| |                                                        
| |                                                        
| | CHECK POINT SOFTWARE                                   
| | TECHNOLOGIES, INC.,
      a Delaware corporation       
| |                                                        
| |                                                        
| | By:        /s/
      Jerry Ungerman                    
| |                                         
| | Name:   Jerry
      Ungerman                           
| | Title:     President                                   
| |                                                        
| |                                                        
| | ZANZIBAR ACQUISITION,
      L.L.C., a California       
| | limited liability company                              
| |                                                        
| |                                                        
| | By:        /s/
      John Slavitt                      
| |                                         
| | Name:   John
      Slavitt                             
| | Title:     General
      Counsel and Secretary of Check
| | Point
      Software Technologies, Inc, its sole       
| | member                                                 
| |                                                        
| |                                                        
| | ZONE LABS, INC.,
      a California corporation        
| |                                                        
| |                                                        
| | By:        /s/
      Gregor Freund                     
| |                                         
| | Name:   Gregor
      Freund                            
| | Title:     Chief
      Executive Officer               

77

---

---