**Exhibit2.3**

 

**ExecutionCopy**

 

 

 

 

**AGREEMENTAND PLAN OF MERGER**

 

 

among:

 

 

**Ditech Communication Corporations,**

a Delawarecorporation;

 

 

**Spitfire Acquisition Corp.,**

a Delawarecorporation;

 

 

**Jasomi Networks, Inc.,**

a Delawarecorporation;

 

 

**Jasomi Networks Canada, Inc.,**

an Albertacorporation;

and

 

 

**Certain Stockholders of Jasomi Networks, Inc.**

 

 

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Dated as of June6, 2005

 

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**TABLE OF CONTENTS**

 
| SECTION 1. | DESCRIPTION OF TRANSACTION                                                             |   |
|------------|----------------------------------------------------------------------------------------|--------|
| 1.1        | Merger of Merger Sub into the Company                                                  |   |
| 1.2        | Effect of the Merger                                                                   |   |
| 1.3        | Closing; Effective Time                                                                |   |
| 1.4        | Certificate of Incorporation and Bylaws; Directors  and Officers                       |   |
| 1.5        | Conversion of Shares                                                                   |   |
| 1.6        | Assumption of Company Options; Termination of  Rights to Acquire Company Capital Stock |   |
| 1.7        | Escrow                                                                                 |   |
| 1.8        | Merger Consideration Adjustment                                                        |   |
| 1.9        | Closing of the Company’s Transfer Books                                           |   |
| 1.10       | Exchange of Certificates                                                               |   |
| 1.11       | Dissenting Shares                                                                      |   |
| 1.12       | Further Action                                                                         |   |
|       |                                                                                   |   |
| SECTION 2. | REPRESENTATIONS AND WARRANTIES OF THE COMPANY                                          |   |
| 2.1        | Due Organization; No Subsidiaries; Etc                                                 |   |
| 2.2        | Certificate of Incorporation and Bylaws; Records                                       |   |
| 2.3        | Capitalization, Etc                                                                    |   |
| 2.4        | Financial Statements                                                                   |   |
| 2.5        | Absence of Changes                                                                     |   |
| 2.6        | Title to Assets                                                                        |   |
| 2.7        | Bank Accounts; Receivables                                                             |   |
| 2.8        | Equipment; Leasehold                                                                   |   |
| 2.9        | Intellectual Property                                                                  |   |
| 2.10       | Contracts                                                                              |   |
| 2.11       | Liabilities                                                                            |   |
| 2.12       | Compliance  with Legal Requirements                                                    |   |
| 2.13       | Governmental  Authorizations                                                           |   |
| 2.14       | Tax Matters                                                                            |   |
| 2.15       | Employee and  Labor Matters; Benefit Plans                                             |   |

 

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| 2.16        | Environmental  Matters                                      |   |
|-------------|-------------------------------------------------------------|--------|
| 2.17        | Insurance                                                   |   |
| 2.18        | Related  Party Transactions                                 |   |
| 2.19        | Legal  Proceedings; Orders                                  |   |
| 2.20        | Authority;  Binding Nature of Agreement                     |   |
| 2.21        | Non-Contravention;  Consents                                |   |
| 2.22        | No  Brokers/Finders                                         |   |
| 2.23        | Full  Disclosure                                            |   |
|        |                                                        |   |
| SECTION  3. | REPRESENTATIONS AND WARRANTIES OF SIGNING  STOCKHOLDERS     |   |
| 3.1         | Power and  Capacity, etc                                    |   |
| 3.2         | No Conflicts  or Consents                                   |   |
| 3.3         | Reserved                                                    |   |
| 3.4         | Title to  Securities                                        |   |
| 3.5         | Capacity;  Legal Proceedings                                |   |
| 3.6         | Private  Placement.                                         |   |
|        |                                                        |   |
| SECTION  4. | REPRESENTATIONS AND WARRANTIES OF PARENT AND  MERGER SUB    |   |
| 4.2         | SEC Filings;  Financial Statements                          |   |
| 4.3         | Authority;  Binding Nature of Agreement                     |   |
| 4.4         | No Conflict                                                 |   |
| 4.5         | Required  Filings and Consents                              |   |
| 4.6         | Offering                                                    |   |
| 4.7         | Valid Issuance  of Convertible Debentures and Parent Shares |   |
|        |                                                        |   |
| SECTION  5. | REPRESENTATIONS AND WARRANTIES OF JASOMI  CANADA            |   |
| 5.1         | Due  Organization                                           |   |
| 5.2         | Title to  Assets; Leasehold                                 |   |
| 5.3         | Intellectual  Property; No Contracts                        |   |
| 5.4         | Compliance  with Legal Requirements                         |   |
| 5.5         | Legal  Proceedings; Orders                                  |   |
| 5.6         | Authority;  Binding Nature of Agreement                     |   |

 

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| SECTION  6. | CERTAIN  COVENANTS OF THE COMPANY, JASOMI CANADA AND THE SIGNING STOCKHOLDERS |   |
|-------------|-------------------------------------------------------------------------------|--------|
| 6.1         | Access and  Investigation                                                     |   |
| 6.2         | Operation of  the Company’s and Jasomi Canada’s Business            |   |
| 6.3         | Notification;  Updates to Disclosure Schedule                                 |   |
| 6.4         | No Negotiation                                                                |   |
|        |                                                                          |   |
| SECTION  7. | ADDITIONAL  COVENANTS OF THE PARTIES                                          |   |
| 7.1         | Filings and  Consents                                                         |   |
| 7.2         | Company  Stockholders’ Meeting; Action by Written Consent                |   |
| 7.3         | Public  Announcements                                                         |   |
| 7.4         | Closing  Efforts                                                              |   |
| 7.5         | Reserved                                                                      |   |
| 7.6         | FIRPTA Matters                                                                |   |
| 7.7         | Release                                                                       |   |
| 7.8         | Employment  Matters                                                           |   |
| 7.9         | Indemnification  of Directors and Officers                                    |   |
| 7.10        | Registration  of Securities                                                   |   |
| 7.11        | Severance                                                                     |   |
|        |                                                                          |   |
| SECTION  8. | CONDITIONS  PRECEDENT TO OBLIGATIONS OF PARENT AND MERGER SUB                 |   |
| 8.1         | Accuracy of  Representations                                                  |   |
| 8.2         | Performance of  Covenants                                                     |   |
| 8.3         | Stockholder  Approval                                                         |   |
| 8.4         | Consents                                                                      |   |
| 8.5         | Agreements and  Documents                                                     |   |
| 8.6         | FIRPTA Compliance                                                             |   |
| 8.7         | No Restraints                                                                 |   |
| 8.8         | No Legal  Proceedings                                                         |   |
| 8.9         | Cancellation  of Convertible Promissory Notes                                 |   |
| 8.10        | Assumption  of Jasomi Canada Agreements                                       |   |
| 8.11        | Jasomi  Canada Indemnification Agreement                                      |   |

 

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| SECTION  9.  | CONDITIONS  PRECEDENT TO OBLIGATIONS OF THE COMPANY                |   |
|--------------|--------------------------------------------------------------------|--------|
| 9.1          | Accuracy of  Representations                                       |   |
| 9.2          | Performance of  Covenants                                          |   |
| 9.3          | Agreements and  Documents                                          |   |
| 9.4          | No Restraints                                                      |   |
| 9.5          | Assumption of  Jasomi Canada Agreements                            |   |
| 9.6          | Incentive Plan                                                     |   |
| 9.7          | Severance Plan                                                     |   |
| 9.8          | Offer Letters                                                      |   |
| 9.9          | Resale  Restrictions                                               |   |
|         |                                                               |   |
| SECTION  10. | TERMINATION                                                        |   |
| 10.1         | Termination  Events                                                |   |
| 10.2         | Termination  Procedures                                            |   |
| 10.3         | Effect of  Termination                                             |   |
|         |                                                               |   |
| SECTION  11. | INDEMNIFICATION,  ETC                                              |   |
| 11.1         | Survival of  Representations, Etc                                  |   |
| 11.2         | Indemnification  by Stockholders                                   |   |
| 11.3         | Indemnification  Claims Procedures From the Escrow Fund            |   |
| 11.4         | Indemnification  Claims Procedures From the Convertible Debentures |   |
| 11.5         | Satisfaction  of Indemnification Claim by Stockholders             |   |
| 11.6         | Threshold;  Ceiling; Joint and Several Liability                   |   |
| 11.7         | No  Contribution                                                   |   |
| 11.8         | Interest                                                           |   |
| 11.9         | Defense of  Third Party Claims                                     |   |
| 11.10        | Exercise  of Remedies by Indemnitees Other Than Parent             |   |
|         |                                                               |   |
| SECTION  12. | MISCELLANEOUS  PROVISIONS                                          |   |
| 12.1         | Stockholders’  Representative                                 |   |
| 12.2         | Further  Assurances                                                |   |
| 12.3         | Fees and  Expenses                                                 |   |

 

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| 12.4  | Notices                                    |   |
|-------|--------------------------------------------|--------|
| 12.5  | Confidentiality                            |   |
| 12.6  | Time of the  Essence                       |   |
| 12.7  | Headings                                   |   |
| 12.8  | Counterparts                               |   |
| 12.9  | Governing  Law                             |   |
| 12.10 | Arbitration                                |   |
| 12.11 | Successors  and Assigns                    |   |
| 12.12 | Remedies  Cumulative; Specific Performance |   |
| 12.13 | Waiver                                     |   |
| 12.14 | Amendments                                 |   |
| 12.15 | Severability                               |   |
| 12.16 | Parties in  Interest                       |   |
| 12.17 | Entire  Agreement                          |   |
| 12.18 | Construction                               |   |

 

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**EXHIBITS**

 
| Exhibit  A  | Signing  Stockholders                                                                        |   |
|-------------|----------------------------------------------------------------------------------------------|--------|
|        |                                                                                         |   |
| Exhibit  B  | Definitions                                                                                  |   |
|        |                                                                                         |   |
| Exhibit C   | Form of  Certificate of Merger                                                               |   |
|        |                                                                                         |   |
| Exhibit D   | Form of  Certificate of Incorporation of the Surviving Corporation at the Effective  Time    |   |
|        |                                                                                         |   |
| Exhibit E-1 | First Tranche  Convertible Debentures                                                        |   |
|        |                                                                                         |   |
| Exhibit E-2 | Second Tranche  Convertible Debentures                                                       |   |
|        |                                                                                         |   |
| Exhibit F   | Escrow Agreement                                                                             |   |
|        |                                                                                         |   |
| Exhibit G   | Form of Closing  Balance Sheet at the time of the Closing                                    |   |
|        |                                                                                         |   |
| Exhibit H   | Form of General  Release                                                                     |   |
|        |                                                                                         |   |
| Exhibit I   | Form of  Noncompetition and Nonsolicitation Agreement                                        |   |
|        |                                                                                         |   |
| Exhibit J   | Persons Signing  Noncompetition and Nonsolicitation Agreements                               |   |
|        |                                                                                         |   |
| Exhibit K   | Form of Offer  Letter                                                                        |   |
|        |                                                                                         |   |
| Exhibit L   | Form of Legal  Opinion of Gunderson Dettmer Stough  Villeneuve Franklin & Hachigian, LLP |   |
|        |                                                                                         |   |
| Exhibit M   | Form of Legal  Opinion of Cooley Godward LLP                                                 |   |
|        |                                                                                         |   |
| Exhibit N   | Form of  Assignment and Assumption Agreement                                                 |   |
|        |                                                                                         |   |
| Exhibit O   | Form of  Indemnification Agreement                                                           |   |

 

ALLSCHEDULES AND EXHIBITS (OTHER THAN EXHIBITS A AND B) TO THE AGREEMENT AND PLANOF MERGER HAVE BEEN OMITTED. COPIES OF SUCH SCHEDULES AND EXHIBITS WILL BEFURNISHED SUPPLEMENTALLY TO THE COMMISSION UPON REQUEST.

 

DisclosureSchedule - The Disclosure Schedule is a separate document not part of theAgreement and Plan of Merger, which includes exceptions to the representationsand warranties made by Jasomi Networks, Inc., Jasomi Networks (Canada), Inc.and the Signing Stockholders in the Agreement and Plan of Merger together withcertain disclosures made by Jasomi Networks, Inc., Jasomi Networks (Canada),Inc. and the Signing Stockholders relating to Jasomi Networks, Inc.

 

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**AGREEMENTAND PLAN OF MERGER**

 

**This Agreement and Plan of Merger**(“Agreement”) is made and entered into as of June 6, 2005, byand among:  **Ditech Communications Corporation,** a Delaware corporation (“Parent”);**Spitfire Acquisition Corp.,**a Delaware corporation and a wholly owned subsidiary of Parent (“Merger Sub”); **Jasomi Networks, Inc.,**a Delaware corporation (the “Company”); **JasomiNetworks (Canada), Inc.,** an Alberta corporation (“Jasomi Canada”);and the parties identified on Exhibit A (the “Signing Stockholders”).  Certain other capitalized terms used in thisAgreement are defined in Exhibit B.

 

**Recitals**

 

**A.**                                    Parent,Merger Sub and the Company intend to effect a merger of Merger Sub into theCompany in accordance with this Agreement and the DGCL (the “Merger”).  Upon consummation of the Merger, Merger Subwill cease to exist, and the Company will become a wholly owned subsidiary ofParent.

 

**B.**                                    Inconnection with the Merger, Parent intends to hire certain employees of JasomiCanada and Jasomi Canada intends to make certain representations and warrantiesto, and covenants with, Parent and Merger Sub as provided herein.

 

**C.**                                    ThisAgreement has been approved by the respective boards of directors of Parent,Merger Sub, the Company and Jasomi Canada.

 

**Agreement**

 

The parties to this Agreement agree as follows:

 

**SECTION 1****.**                            **Description of Transaction**

 

**1.1**                               **Merger of Merger Sub into the Company.**  Upon the terms and subject to the conditionsset forth in this Agreement, at the Effective Time (as defined inSection 1.3), Merger Sub shall be merged with and into the Company, andthe separate existence of Merger Sub shall cease.  The Company will continue as the survivingcorporation in the Merger (the “Surviving Corporation”).

 

**1.2**                               **Effect of the Merger.** The Merger shall have the effects set forth in this Agreement and in theapplicable provisions of the DGCL.

 

**1.3**                               **Closing; Effective Time.** The consummation of the transactions contemplated by this Agreement (the“Closing”) shall take place at the offices of Cooley Godward llp, 3175 Hanover St., Palo Alto,California 94304 at 10:00 a.m. on June 27, 2005, or at such other time and dateprior to August 2, 2005 as Parent may designate upon not less than five days’prior

 

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notice to theCompany (the “Scheduled Closing Time”). The date on which the Closing actually takes place is referred to inthis Agreement as the “Closing Date.” Contemporaneously with or as promptly as practicable after the Closing,a properly executed certificate of merger in the form attached hereto asExhibit C shall be filed with the Secretary of State of the State ofDelaware.  The Merger shall becomeeffective at the time such certificate of merger is filed with the Secretary ofState of the State of Delaware (the “Effective Time”).

 

**1.4**                               **Certificate of Incorporation and Bylaws; Directors and Officers.**  Unless otherwise determined by Parent and theCompany prior to the Effective Time:

 

**(a)**                                  theCertificate of Incorporation of the Surviving Corporation shall be amended andrestated as of the Effective Time to conform to Exhibit D;

 

**(b)**                                  theBylaws of the Surviving Corporation shall be amended and restated as of theEffective Time to conform to the Bylaws of Merger Sub as in effect immediatelyprior to the Effective Time; and

 

**(c)**                                  thedirectors and officers of the Surviving Corporation immediately after theEffective Time shall be the officers and directors of Merger Sub as in effectimmediately prior to the Effective Time.

 

**1.5**                               **Conversion of Shares**. Subject to Sections 1.7, 1.9, 1.10 and 1.11, at the Effective Time, byvirtue of the Merger and without any further action on the part of Parent,Merger Sub, the Company or any Stockholder of the Company and without regard tothe provisions of the Company’s Certificate of Incorporation:

 

**(a)**                                  eachshare of Company Common Stock outstanding immediately prior to the EffectiveTime shall be converted into the right to receive:  (i) cash equal to the Per Share Common CashAmount minus the Per Share Common Escrow Payment; (ii) convertible debenturesin substantially the form attached hereto as Exhibit E-1 (“First TrancheConvertible Debentures”) in the principal amount equal to the Per Share FirstTranche Common Debenture Amount; (iii) convertible debentures in substantiallythe form attached hereto as Exhibit E-2 (“Second Tranche ConvertibleDebentures,” and, together with the First Tranche Convertible Debentures, the “ConvertibleDebentures”) in the principal amount equal to the Per Share Second TrancheCommon Debenture Amount; (iv) any consideration required to be released fromthe Escrow Fund (as defined in Section 1.7(a)) with respect to such share ofCompany Common Stock to the former holder thereof in accordance with Section11.3 and the Escrow Agreement (as defined in Section 1.7(a)) (as and when suchconsideration is required to be released to such former holder); and (v) atsuch time, if any, as the Surviving Company shall receive any IntercompanyPayment Amount, cash equal to the Per Share Intercompany Payment Amount withrespect to such Intercompany Payment Amount;

 

**(b)**                                  eachshare of Company Preferred Stock outstanding immediately prior to the EffectiveTime shall be converted into the right to receive:  (i) cash equal to the Per Share Preferred CashAmount minus the Per Share Preferred Escrow Payment; (ii) First TrancheConvertible Debentures in the principal amount equal to the Per Share FirstTranche Preferred

 

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Debenture Amount;(iii) Second Tranche Convertible Debentures in the principal amount equal tothe Per Share Second Tranche Preferred Debenture Amount; (iv) any considerationrequired to be released from the Escrow Fund (as defined in Section 1.7(a))with respect to such share of Company Preferred Stock to the former holderthereof in accordance with Section 11.3 and the Escrow Agreement (as defined inSection 1.7(a)) (as and when such consideration is required to be released tosuch former holder); and (v) at such time, if any, as the Surviving Companyshall receive any Intercompany Payment Amount, cash equal to the Per ShareIntercompany Payment Amount with respect to such Intercompany Payment Amount;

 

**(c)**                                  eachshare of the common stock of Merger Sub outstanding immediately prior to theEffective Time shall be converted into one share of common stock of theSurviving Corporation; and

 

**(d)**                                  ifany shares of Company Common Stock that are outstanding immediately prior tothe Effective Time are unvested or are subject to a repurchase option, risk offorfeiture or other condition providing that such shares (“Company RestrictedStock”) may be forfeited or repurchased by the Company upon any termination ofthe Stockholder’s employment, directorship or other relationship with theCompany (and/or any affiliate of the Company) under the terms of any stockoption exercise agreement, restricted stock purchase agreement or otheragreement with the Company that does not by its terms provide that suchrepurchase option, risk of forfeiture or other condition lapses uponconsummation of the transactions contemplated hereby, then the ConvertibleDebentures and the cash consideration issued upon the conversion of such sharesin the Merger will continue to be unvested and subject to the same orequivalent repurchase options, risks of forfeiture or other conditionsfollowing the Effective Time. The Convertible Debentures may accordingly bemarked with appropriate legends noting such repurchase options, risks offorfeiture or other conditions.  Any cashportion of the Net Common Stock Consideration to be paid upon the conversion ofshares of Company Restricted Stock or upon release from the Escrow Fund, anycash to be paid upon maturity of the Convertible Debentures issued upon theconversion of shares of Company Restricted Stock, and any shares of ParentCommon Stock to be issued upon conversion of such Convertible Debentures, willbe held in escrow by Parent or its designee until such repurchase options,risks of forfeiture or other conditions lapse or are exercised by Parent. TheCompany shall use commercially reasonable efforts to ensure that, from andafter the Effective Time, the Surviving Corporation is entitled to exercise anysuch repurchase option or other right set forth in any such restricted stockpurchase agreement or other agreement.

 

**(e)**                                  Forpurposes of this Agreement:

 

**(i)**                                    “**Cash Consideration Percentage**” means the quotient obtainedby dividing (a) the Net Merger Consideration less $7,000,000, by (b) the NetMerger Consideration.

 

**(ii)**                                **“Common Stock Consideration”** means $0.9436.

 

**(iii)**                            “**First Tranche Debenture Consideration Percentage**” means thequotient obtained by dividing (a) $3,000,000, by (b) the Net MergerConsideration.

 

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**(iv)**                               “**Intercompany Payment Amount**” means any amount received bySurviving Company from Jasomi Canada pursuant to the Intercompany Agreements.

 

**(v)**                                   “**Net Common Stock Consideration**” means the Common StockConsideration, less the Per Share Working Capital Adjustment.

 

**(vi)**                               “**Net Merger Consideration**” means an amount equal to (a) thenumber of shares of Company Common Stock outstanding immediately prior to theEffective Time multiplied by the Net Common Stock Consideration, plus (b) thenumber of shares of Company Preferred Stock outstanding immediately prior tothe Effective Time multiplied by the Net Preferred Stock Consideration.

 

**(vii)**                           “**Net Preferred Stock Consideration**” means the Preferred StockConsideration, less the Per Share Working Capital Adjustment.

 

**(viii)**                       “**Option Exchange Ratio**” means the Net Common StockConsideration divided by the Parent Common Stock Price.

 

**(ix)**                              “**Parent Common Stock Price**” means the closing price per shareof Parent Common Stock on the Nasdaq National Market on the Closing Date.

 

**(x)**                                  “**Per Share****Common Cash Amount**”means the Cash Consideration Percentage multiplied by the Net Common StockConsideration.

 

**(xi)**                              “**Per Share****Common Escrow Payment**”means (a) $2,000,000 multiplied by (i) the Net Common Stock Considerationmultiplied by the number of shares of Company Common Stock outstandingimmediately prior to the Effective Time, divided by the Net Common StockConsideration multiplied by the number of shares of Company Common Stockoutstanding immediately prior to the Effective Time plus the Net PreferredStock Consideration multiplied by the number of shares of Company PreferredStock outstanding immediately prior to the Effective Time, divided by (ii) the numberof shares of Company Common Stock outstanding immediately prior to theEffective Time.

 

**(xii)**                          “**Per Share****First Tranche CommonDebenture Amount**” means the First Tranche Debenture ConsiderationPercentage multiplied by the Net Common Stock Consideration.

 

**(xiii)**                      “**Per Share****First Tranche PreferredDebenture Amount**” means the First Tranche Debenture ConsiderationPercentage multiplied by the Net Preferred Stock Consideration.

 

**(xiv)**                         “**Per Share Intercompany Payment Amount**” means, with respectto any Intercompany Payment Amount, such Intercompany Payment Amount divided bythe sum of the number of shares of Company Common Stock outstanding immediatelyprior to the Effective Time plus the number of shares of Company PreferredStock outstanding immediately prior to the Effective Time.

 

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**(xv)**                             “**Per Share****Second Tranche CommonDebenture Amount**” means the Second Tranche Debenture ConsiderationPercentage multiplied by the Net Common Stock Consideration.

 

**(xvi)**                         “**Per Share****Second Tranche PreferredDebenture Amount**” means the Second Tranche Debenture ConsiderationPercentage multiplied by the Net Preferred Stock Consideration.

 

**(xvii)**                     “**Per Share****Preferred Cash Amount**”shall mean the Cash Consideration Percentage multiplied by the Net PreferredStock Consideration.

 

**(xviii)**                 “**Per Share****Preferred Escrow Payment**”means (a) $2,000,000 multiplied by (i) the Net Preferred Stock Considerationmultiplied by the number of shares of Company Preferred Stock outstandingimmediately prior to the Effective Time, divided by the Net Common StockConsideration multiplied by the number of shares of Company Common Stockoutstanding immediately prior to the Effective Time plus the Net PreferredStock Consideration multiplied by the number of shares of Company PreferredStock outstanding immediately prior to the Effective Time, divided by (ii) thenumber of shares of Company Preferred Stock outstanding immediately prior tothe Effective Time.

 

**(xix)**                        “**Per Share Working Capital Shortfall**” means the WorkingCapital Shortfall, if any, divided by the sum of (i) the number of shares ofCompany Common Stock outstanding immediately prior to the Effective Time plus(ii) the number of shares of Company Preferred Stock outstanding immediatelyprior to the Effective Time.

 

**(xx)**                            “**Preferred Stock Consideration**” means $1.4536.

 

**(xxi)**                        “**Second Tranche Debenture Consideration Percentage**” means thequotient obtained by dividing (a) $4,000,000, by (b) the Net MergerConsideration.

 

**(f)**                                    Theparties hereby acknowledge and agree that the Escrow Fund (as defined inSection 1.7(a)) and the Convertible Debentures shall be treated as installmentobligations for purposes of Section 453 of the Code, and no party shall takeany action or filing position inconsistent with such characterization.  The parties agree that because the entireprincipal amount of the Convertible Debentures is contingent on the continuedemployment of certain employees of the Company, the initial adjusted issue priceof such Convertible Debentures for purposes of Sections 1271 through 1275 ofthe Code will be zero, and as a result the Company will not report any interestincome as earned by the holders of the Convertible Debentures until (i) thefirst anniversary of the issuance of such promissory notes, in the case of theFirst Tranche Convertible Debentures, and (ii) the second anniversary of theissuance of such promissory notes, in the case of the Second TrancheConvertible Debentures.

 

**1.6**                               **Assumption of Company Options; Termination of Rights to Acquire CompanyCapital Stock**.

 

**(a)**                                  Atthe Effective Time, each vested and unvested Company Option shall be assumedand converted into an option to purchase such number of shares of Parent Common

 

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Stock equal to theproduct of (i) the number of shares of Company Common Stock issuable uponexercise of such Company Option, multiplied by (ii) the Option Exchange Ratio(each such converted option referred to as a “Parent Option”), rounded down tothe nearest whole share.  The per shareexercise price of the Parent Option shall be equal to the exercise price pershare of the vested Company Option, divided by the Option Exchange Ratio,rounded up to the nearest whole cent.  Theterm, vesting schedule, and all of the other terms of the Company Options shallotherwise remain unchanged.  It is theintention of the parties that each Company Option so assumed by Parent shallqualify following the Effective Time as an incentive stock option as defined inSection 422 of the Code to the extent permitted under Section 422 of theCode and to the extent such Company Option qualified as an incentive stockoption prior to the Effective Time.

 

**(b)**                                  Atthe Effective Time, each warrant or other right to acquire Company CapitalStock (other than Company Options) shall be cancelled as of the timeimmediately prior to the Effective Time and shall have no further force ofeffect thereafter.

 

**1.7**                               **Escrow.**

 

**(a)**                                  Notwithstandinganything herein to the contrary, at the Effective Time, Parent shall: (1) remitto Greater Bay Trust Company, as escrow agent (the “Escrow Agent”), pursuant to an escrow agreement substantially inthe form attached hereto as Exhibit F (the “Escrow Agreement”), to be held in accordance with the termsthereof, an amount equal to two million dollars ($2,000,000), less the PerShare Common Escrow Payment or Per Share Preferred Escrow Payment, asapplicable, with respect to each Dissenting Share (the “Escrow Fund”), and (2) remit to the Surviving Company OneHundred Percent (100%) of the Net Merger Consideration to which holders ofDissenting Shares would be entitled with respect to such shares but for thepreservation by the holders of such Dissenting Shares of their appraisal rightspursuant to Section 262 of the DGCL; *provided*, thatfor purposes of this Section 1.7, any issued and outstanding share of capitalstock of the Company that has not been voted in favor of the adoption of thisAgreement and in favor of the Merger and for which appraisal rights pursuant toSection 262 of the DGCL remain available shall be deemed a Dissenting Share.

 

**(b)**                                  TheEscrow Fund shall be held by the Escrow Agent in accordance with the terms ofthis Agreement and the terms of the Escrow Agreement.  The Escrow Fund shall be held (i) for thebenefit of Parent and to provide for any payments, if any, to the formerholders of Company Capital Stock hereunder and pursuant to the terms of theEscrow Agreement, and (ii) to provide for any payments to be made to Parent orany Indemnitee hereunder including the indemnification obligations owed to anyIndemnitee and any amounts that may be owed to Parent under Section 1.8.  The Escrow Fund shall not be subject to anylien, attachment, trustee process or any other judicial process of any creditorof any Person, and shall be held and disbursed solely for the purposes and inaccordance with the terms of the Escrow Agreement.  Any income and gains of the Escrow Fund shallbe distributable to Parent in accordance with the terms of the EscrowAgreement.

 

**(c)**                                  Inthe event that a Dissenting Share is converted into the right to receive MergerConsideration in accordance with Section 1.11(a), the Certificate(s) evidencingsuch

 

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convertedDissenting Share is surrendered in accordance with Section 1.10, and the PerShare Common Cash Amount less the Per Share Common Escrow Payment, or the PerShare Preferred Cash Amount less the Per Share Preferred Escrow Payment, asapplicable, is made with respect thereto, then, notwithstanding anything hereinto the contrary, within five (5) business days of the date on which suchpayment is made, Parent (or the Surviving Company, if Parent has previouslyprovided the relevant Net Merger Consideration to the Surviving Company) shallremit to the Escrow Agent the Common Escrow Payment or the Preferred EscrowPayment, as applicable, with respect to such converted Dissenting Sharesrepresented by the surrendered Certificate(s), which amount shall be held inaccordance with the terms of the Escrow Agreement.

 

**(d)**                                  Tothe extent a holder of Company Capital Stock becomes a holder of DissentingShares (as defined in Section 1.11), subject to no longer being aDissenting Share, the Surviving Company shall retain the Net MergerConsideration otherwise payable with respect to the Dissenting Shares.

 

**1.8**                               **Merger Consideration Adjustment.**

 

**(a)**                                  Atthe Closing, the Company shall cause to be prepared and delivered to Parent abalance sheet of the Company in the form attached hereto as Exhibit G (the “ClosingBalance Sheet”) at the time of the Closing. The Closing Balance Sheet shall be prepared in accordance with practicesreasonably approved by Parent, butsubject to the requirements set forth in Sections 1.8(a)(i) and (ii).  Such Closing Balance Sheet shall include acalculation of “Net Working Capital” at the Closing.  For purposes of this Agreement, the followingdefinitions shall apply:

 

(i)                                     “Current Assets” means the currentassets of the Company at the Closing; *provided, however*,that notwithstanding anything herein to the contrary, the amount of accountsreceivable of the Company that would otherwise be included in Current Assetsshall be reduced by the excess, if any, of the amount of accounts receivable ofthe Company outstanding for more than ninety (90) days at the Closing BalanceSheet Effective Time; and *provided further,*that any amounts owed by Jasomi Canada to the Company that would constitute,upon receipt, Intercompany Payment Amounts and any cash received by the Companyin connection with exercises of Company Options on or after May 27, 2005 shallnot be current assets of the Company.

 

(ii)                                “Current Liabilities” shall mean thecurrent liabilities of the Company at the Closing Balance Sheet Effective Time;*provided, however*, that notwithstandinganything herein to the contrary, Current Liabilities shall include, withoutlimitation, the following amounts to the extent not paid prior to theClosing:  (A) all debt or other currentliabilities (other than indebtedness for borrowed money) of the Company as ofthe Closing that are due within one year of the Closing Date; (B) employeerelated obligations, including any unpaid change in control bonus as a resultof this Merger; and (C) any unpaid Transaction Costs.

 

(iv)                              “Net Working Capital” shall mean CurrentAssets less Current Liabilities.

 

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(v)                                 “Net Working Capital Shortfall” shallmean the amount, if any, by which the Net Working Capital as set forth on theClosing Balance Sheet is less than $10,000. For example, if the Net Working Capital as set forth on the ClosingBalance Sheet is -$50,000, then the Net Working Capital Shortfall will equal $60,000.  If the Net Working Capital amount as setforth on the Closing Balance Sheet is $10,000 or more, then there is no NetWorking Capital Shortfall.

 

**(b)**                                  Parentshall have 60 days following the Closing Date to audit the Closing BalanceSheet, and upon the discovery of any inaccuracies in such Closing BalanceSheet, it shall deliver a detailed statement (the “Objection Notice”)describing its objections to the Stockholders’ Representative within 60 daysafter the Closing Date, and setting forth the Net Working Capital as calculatedby Parent.  If Parent delivers theObjection Notice to the Stockholders’ Representative on a timely basis, and theStockholders’ Representative disagrees with the Net Working Capital ascalculated by Parent, Parent and the Stockholders’ Representative will usereasonable efforts to resolve any such objections themselves. If they do not obtaina final resolution within 30 days after the Stockholders’ Representative hasreceived the Objection Notice, either Parent or the Stockholders’Representative may refer the unresolved objections to Ernst & Young, LLP, oranother mutually agreeable nationally-recognized firm of independent auditorsthat has not performed work for, and is otherwise independent of, each ofParent, the Company and each Signing Stockholder (the “Independent Accountants”) for resolution, and the IndependentAccountants shall make the determination of what, if any, changes are requiredin the Net Working Capital as set forth in the Closing Balance Sheet,consistent with the provisions of this Section 1.8, which shall be final andbinding. The “Final Balance Sheet”shall mean the Closing Balance Sheet together with any revisions theretopursuant to this Section 1.8(b).

 

**(c)**                                  Inthe event the parties submit any unresolved objections to the IndependentAccountants for resolution as provided in Section 1.8(b) above, Parent and the Stockholders(through deductions from the Escrow Fund) will share responsibility for thefees and expenses of the Independent Accountants as follows:

 

(i)                                     ifthe Independent Accountants resolve all of the remaining objections in favor ofthe Stockholders’ Representative, determining that the Net Working Capital setforth on the Final Balance Sheet is the same as the Net Working Capital setforth in the Closing Balance Sheet (the “HighValue”), the fees and expenses of the Independent Accountants will bepaid by Parent;

 

(ii)                                  ifthe Independent Accountants resolve all of the remaining objections in favor ofParent, determining that the Net Working Capital set forth on the Final BalanceSheet is the same as the Net Working Capital set forth in the Objection Notice(the “Low Value”), all of thefees and expenses of the Independent Accountants will be paid out of the EscrowFund; and

 

(iii)                               ifthe Independent Accountants resolve some of the remaining objections in favorof Parent and the rest of the remaining objections in favor of the Stockholders’Representative (the Net Working Capital so determined is referred to herein asthe

 

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“Actual Value”), that fraction of thefees and expenses of the Independent Accountants equal to the quotientdetermined by dividing (x) the difference between the High Value and the ActualValue by (y) the difference between the High Value and the Low Value will bepaid out of the Escrow Fund, and Parent will be responsible for the remainderof the fees and expenses.

 

(iv)                              TheCompany will make the work papers and back-up materials used in preparing theClosing Balance Sheet available to Parent at the Closing.  Parent will deliver along with any ObjectionNotice the work papers and back-up materials used by Parent in analyzing theClosing Balance Sheet and preparing any Objection Notice.

 

**(d)**                                  **Net Working Capital Adjustment**.  If Net Working Capital as set forth on theFinal Balance Sheet is less than the Net Working Capital as set forth on theClosing Balance Sheet, then there shall be deemed to be a “Working Capital Deficit” equal to theamount by which the Net Working Capital as set forth on the Final Balance Sheetis less than the Net Working Capital as set forth on the Closing Balance Sheet.   If there is a Working Capital Deficit,Parent shall be entitled to receive out of the Escrow Fund an amount equal tothe amount of the Working Capital Deficit. To the extent any payment out of the Escrow Fund is required to be madeunder this Section 1.8, such payment shall be made within five (5) days of thedate on which the calculation of Net Working Capital becomes final.

 

**1.9**                               **Closing of the Company’s Transfer Books.**  At the Effective Time, holders ofcertificates representing shares of the Company’s Capital Stock that wereoutstanding immediately prior to the Effective Time shall cease to have anyrights as Stockholders of the Company, and the stock transfer books of theCompany shall be closed with respect to all shares of such Capital Stock outstandingimmediately prior to the Effective Time. No further transfer of any such shares of the Company’s Capital Stockshall be made on such stock transfer books after the Effective Time.  If, after the Effective Time, a validcertificate previously representing any of such shares of the Company’s CapitalStock (a “Company Stock Certificate”) is presented to the Surviving Corporationor Parent, such Company Stock Certificate shall be canceled and shall be exchangedas provided in Section 1.5.

 

**1.10**                        **Exchange of Certificates**.

 

**(a)**                                  Withrespect to any stock certificate representing Company Capital Stock deliveredto Parent at Closing, properly endorsed, a completed W-8 or W-9 form, asapplicable, signed by the applicable Stockholder, and a properly executed letterof transmittal in customary form and containing such provisions as Parent mayreasonably specify (the “Letter of Transmittal”) (together, the “Share ExchangeDelivery Requirements”), Parent shall (i) within 2 business days following theClosing cause to be delivered to such Stockholder the cash consideration towhich such Stockholder is entitled pursuant to Section 1.5 and (ii) as promptlyas is reasonably practicable cause to be delivered to such Stockholder theConvertible Debentures to which such Stockholder is entitled pursuant toSection 1.5.  With respect to which ShareExchange Delivery Requirements are not delivered to Parent at the Closing, ator as soon as practicable after the Effective Time, Parent will send to theholders of Company Stock Certificates (i) the Letter of Transmittal, and (ii)instructions for use in effecting the surrender of Company Stock Certificatesin exchange for the cash consideration and First Tranche

 

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Convertible Debenturesand Second Tranche Convertible Debentures as set forth in Section 1.5.  Until surrendered as contemplated by thisSection 1.10, each Company Stock Certificate shall be deemed, from and afterthe Effective Time, to represent only the right to receive upon such surrenderthe consideration set forth in Section 1.5. If any Company Stock Certificate shall have been lost, stolen ordestroyed, Parent may, in its discretion and as a condition precedent to thepayment of any cash or issuance of any Convertible Debentures, require theowner of such lost, stolen or destroyed Company Stock Certificate to provide anappropriate affidavit and to deliver a bond (in such sum as Parent mayreasonably direct) as indemnity against any claim that may be made against Parentor the Surviving Corporation with respect to such Company Stock Certificate.

 

**(b)**                                  Parentand the Surviving Corporation shall be entitled to deduct and withhold from anyconsideration payable or otherwise deliverable (including cash payable orshares issuable upon the Conversion of the Convertible Debentures) to anyholder or former holder of Company Capital Stock pursuant to this Agreementsuch amounts as Parent or the Surviving Corporation may be required to deductor withhold therefrom under the Code or under any applicable provision ofstate, local or foreign tax law.  To theextent such amounts are so deducted or withheld, such amounts shall be treatedfor all purposes under this Agreement as having been paid to the Person to whomsuch amounts would otherwise have been paid.

 

**(c)**                                  NeitherParent nor the Surviving Corporation shall be liable to any holder or formerholder of Company Capital Stock for any cash amounts or Convertible Debentures,delivered to any public official pursuant to any applicable abandoned property,escheat or similar law.

 

**1.11**                        **Dissenting Shares**.

 

**(a)**                                  Notwithstandinganything to the contrary contained in this Agreement, any shares of Company CapitalStock that, as of the Effective Time, are or may become Dissenting shares shallnot be converted into or represent the right to receive cash or ConvertibleDebentures in accordance with Section 1.5, and the holder or holders of suchshares shall be entitled only to such rights as may be granted to such holderor holders in Section 262 of the DGCL; *provided, however,*that if the status of any such shares as “dissenting shares” shall not beperfected, or if any such shares shall lose their status as “dissenting shares,”then, as of the later of the Effective Time or the time of the failure toperfect such status or the loss of such status, such shares shall automaticallybe converted into and shall represent only the right to receive (upon thesurrender of the certificate or certificates representing such shares) cash andConvertible Debentures in accordance with Section 1.5.

 

**(b)**                                  TheCompany shall give Parent (i) prompt notice of any written demand received bythe Company prior to the Effective Time to require the Company to purchaseshares of Company Capital Stock pursuant to Section 262 of the DGCL and of anyother demand, notice or instrument delivered to the Company prior to theEffective Time pursuant to the DGCL, and (ii) the opportunity to participate inall negotiations and proceedings with respect to any such demand, notice orinstrument.  The Company shall not makeany payment or settlement

 

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offer prior to theEffective Time with respect to any such demand unless Parent shall haveconsented in writing to such payment or settlement offer.

 

**1.12**                        **Further Action.**  If,at any time after the Effective Time, any further action is determined byParent to be necessary or desirable to carry out the purposes of this Agreementor to vest the Surviving Corporation or Parent with full right, title andpossession of and to all rights and property of Merger Sub and the Company, theofficers and directors of the Surviving Corporation and Parent shall be fullyauthorized (in the name of Merger Sub, in the name of the Company andotherwise) to take such action.

 

**SECTION 2****.**                            **Representations and Warranties ofthe Company**

 

The Company represents and warrants, to and for thebenefit of the Indemnitees, that the statements contained in this Section 2 aretrue and correct except as set forth in the disclosure schedule delivered bythe Company to Parent and Merger Sub concurrently with the execution of thisAgreement (the “Disclosure Schedule”).

 

**2.1**                               **Due Organization; No Subsidiaries; Etc.**

 

**(a)**                                  TheCompany is a corporation duly organized, validly existing and in good standingunder the laws of the State of Delaware and has all necessary power andauthority:  (i) to conduct its business inthe manner in which its business is currently being conducted; (ii) to own and useits assets in the manner in which its assets are currently owned and used; and (iii) to perform itsobligations under all Company Contracts.

 

**(b)**                                  Exceptas set forth in Part 2.1 of the Disclosure Schedule, the Company has notconducted any business under or otherwise used, for any purpose or in anyjurisdiction, any fictitious name, assumed name, trade name or other name,other than the names “Jasomi Networks” or “Jasomi.”

 

**(c)**                                  TheCompany has not been required to be qualified, authorized, registered orlicensed to do business as a foreign corporation in any jurisdiction other thanthe jurisdictions identified in Part 2.1 of the Disclosure Schedule, exceptwhere the failure to be so qualified, authorized, registered or licensed hasnot had, and, if the Company were to continue to operate its business ascurrently operated will not have, a Material Adverse Effect on theCompany.  The Company is in good standingas a foreign corporation in each of the jurisdictions identified in Part 2.1 ofthe Disclosure Schedule.

 

**(d)**                                  Part2.1 of the Disclosure Schedule accurately sets forth (i) the names of themembers of the Company’s board of directors, (ii) the names of the membersof each committee of the Company’s board of directors, and (iii) the namesand titles of the Company’s officers.

 

**(e)**                                  TheCompany does not own any controlling interest in any Entity and the Company hasnever owned, beneficially or otherwise, any shares or other securities of, orany direct or indirect equity interest in, any Entity.  The Company has not agreed and is notobligated to make any future investment in or capital contribution to anyEntity.  The Company has not

 

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guaranteed and isnot responsible or liable for any obligation of any of the Entities in which itowns or has owned any equity interest.

 

**2.2**                               **Certificate of Incorporation and Bylaws; Records. **The Company has delivered toParent accurate and complete copies of:  (1)the Company’s certificate of incorporation and bylaws, including all amendmentsthereto; (2) thestock records of the Company; and (3) the minutes and other records of themeetings and other proceedings (including any actions taken by written consentor otherwise without a meeting) of the Stockholders of the Company, the boardof directors of the Company and all committees of the board of directors of theCompany.  There have been no formalmeetings or other proceedings of the Stockholders of the Company, the board ofdirectors of the Company or any committee of the board of directors of theCompany that are not fully reflected in such minutes or other records.  There has not been any violation of any ofthe provisions of the Company’s certificate of incorporation or bylaws, and theCompany has not taken any action that is inconsistent in any material respectwith any resolution adopted by the Company or the Company’s Stockholders, theCompany’s board of directors or any committee of the Company’s board ofdirectors.  The books of account, stockrecords, minute books and other records of the Company are accurate, up-to-dateand complete in all material respects, and have been maintained in accordancewith prudent business practices.

 

**2.3**                               **Capitalization, Etc.**

 

**(a)**                                  Theauthorized capital stock of the Company consists of:  (i)25,000,000 shares of Company Common Stock, of which 12,720,477 shares have beenissued and are outstanding as of the date of this Agreement (including 490,208shares subject to vesting and repurchase restrictions); and (ii) 5,650,000 sharesof preferred stock, all of which have been designated “Series A Preferred Stock”(the “Preferred Stock”) of which 5,603,564 shares have been issued and areoutstanding as of the date of this Agreement. Each outstanding share of Preferred Stock is convertible into 1.02623shares of Company Common Stock.  All ofthe outstanding shares of Company Common Stock and Preferred Stock have beenduly authorized and validly issued, and are fully paid and non-assessable.  Part 2.3 of the Disclosure Schedule providesan accurate summary of the terms of each repurchase option which is held by theCompany and to which any of such shares is subject.

 

**(b)**                                  TheCompany has reserved 2,570,000 shares of Company Common Stock for issuanceunder the Option Plan, of which options to purchase 1,335,000 shares areoutstanding as of the date of this Agreement. As of the date of this Agreement, options to purchase 959,479 shares arenot vested.  Except as set forth in thisSection 2.3 and as set forth in Part 2.3 of the Disclosure Schedule, there isno:  (i) outstanding subscription,option, call, warrant or right (whether or not currently exercisable) toacquire any shares of the capital stock or other securities of the Company; (ii) outstandingsecurity, instrument or obligation that is or may become convertible into orexchangeable for any shares of the capital stock or other securities of theCompany;  (iii) Contract under which theCompany is or may become obligated to sell or otherwise issue any shares of itscapital stock or any other securities; or (iv) to the Company’s Knowledge, conditionor circumstance that may give rise to or provide a basis for the assertion of aclaim by any Person to the effect that such Person is entitled to acquire orreceive

 

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any shares ofcapital stock or other securities of the Company.  The Company has not granted any CompanyOptions since May 27, 2005 and, other than (i) the issuance of shares ofCompany Preferred Stock in connection with the conversion of convertiblepromissory notes disclosed on the Disclosure Schedule and (ii) the issuance ofshares of Company Common Stock in connection with the exercise of CompanyOptions, the Company has not issued any Company Capital Stock or othersecurities of the Company since May 27, 2005.

 

**(c)**                                  Alloutstanding shares of Company Common Stock and Preferred Stock, and alloutstanding Company Options, have been issued and granted in compliance with(i) all applicable securities laws and other applicable Legal Requirements, and(ii) all material requirements set forth in applicable Contracts.

 

**(d)**                                  Exceptas set forth in Part 2.3 of the Disclosure Schedule, the Company has neverrepurchased, redeemed or otherwise reacquired any shares of capital stock orother securities of the Company.  Allsecurities so reacquired by the Company were reacquired in compliance with (i)the applicable provisions of the DGCL and all other applicable LegalRequirements, and (ii) all requirements set forth in applicable restrictedstock purchase agreements and other applicable Contracts.

 

**2.4**                               **Financial Statements**.

 

**(a)**                                  TheCompany has delivered to Parent the following consolidated financial statementsand notes (collectively, the “Company Financial Statements”):

 

**(i)**                                    Theunaudited balance sheets of the Company as of December 31, 2004, 2003 and 2002,and the related unaudited income statements, statements of Stockholders’ equityand statements of cash flows of the Company for the years then ended; and

 

**(ii)**                                theunaudited balance sheet of the Company as of April 30, 2005 (the “UnauditedInterim Balance Sheet”), and the related unaudited income statement of theCompany for the four months then ended.

 

**(b)**                                  TheCompany Financial Statements, although not prepared in accordance withgenerally accepted accounting principles generally accepted in the UnitedStates of America (“U.S. GAAP”), are accurate and complete in all materialrespects and present fairly the financial position of the Company as of therespective dates thereof and the results of operations and (in the case of thefinancial statements referred to in Section 2.4(a)(i)) cash flows of theCompany for the periods covered thereby.

 

**2.5**                               **Absence of Changes.** Except as set forth in Part 2.5 of the Disclosure Schedule, since April30, 2005:

 

**(a)**                                  therehas not been any material adverse change in the Company’s business, condition,assets, liabilities, operations or financial performance, and, to the Company’sKnowledge, no event has occurred that will, or could reasonably be expected to,have a Material Adverse Effect on the Company;

 

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**(b)**                                  therehas not been any material loss, damage or destruction to, or any materialinterruption in the use of, any of the Company’s assets (whether or not coveredby insurance);

 

**(c)**                                  theCompany has not declared, accrued, set aside or paid any dividend or made anyother distribution in respect of any shares of capital stock, and has notrepurchased, redeemed or otherwise reacquired any shares of capital stock orother securities;

 

**(d)**                                  theCompany has not sold, issued or authorized the issuance of (i) any capitalstock or other security (except for Company Common Stock issued upon theexercise of outstanding Company Options), (ii) any option or right to acquireany capital stock or any other security (except for Company Options describedin Part 2.3 of the Disclosure Schedule), or (iii) any instrument convertibleinto or exchangeable for any capital stock or other security;

 

**(e)**                                  theCompany has not amended or waived any of its rights under, or taken anyaffirmative action to permit or cause the acceleration of vesting under, (i)any provision of the Option Plan, (ii) any provision of any agreementevidencing any outstanding Company Option, or (iii) any restricted stockpurchase agreement;

 

**(f)**                                    therehas been no amendment to the Company’s certificate of incorporation or bylaws,and the Company has not effected or been a party to any AcquisitionTransaction, recapitalization, reclassification of shares, stock split, reversestock split or similar transaction;

 

**(g)**                                 theCompany has not formed any subsidiary or acquired any equity interest or otherinterest in any other Entity;

 

**(h)**                                 theCompany has not made any capital expenditure which, when added to all othercapital expenditures made on behalf of the Company since April 30, 2005,exceeds $100,000;

 

**(i)**                                    theCompany has not (i) entered into or permitted any of the assets owned or usedby it to become bound by any Contract that is or would constitute a MaterialContract (as defined in Section 2.10(a)), or (ii) amended or prematurelyterminated, or waived any material right or remedy under, any such Contract;

 

**(j)**                                    theCompany has not (i) acquired, leased or licensed any right or other asset fromany other Person, (ii) sold or otherwise disposed of, or leased or licensed,any right or other asset to any other Person, or (iii) waived or relinquishedany right, except for immaterial rights or other immaterial assets acquired,leased, licensed or disposed of in the ordinary course of business andconsistent with the Company’s past practices;

 

**(k)**                                theCompany has not written off as uncollectible, or established any extraordinaryreserve with respect to, any account receivable or other indebtedness;

 

**(l)**                                    theCompany has not made any pledge of any of its assets or otherwise permitted anyof its assets to become subject to any Encumbrance, except for pledges of

 

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immaterial assetsmade in the ordinary course of business and consistent with the Company’s pastpractices;

 

**(m)**                              theCompany has not (i) lent money to any Person (other than pursuant to routinetravel advances made to employees in the ordinary course of business), or (ii)incurred or guaranteed any indebtedness for borrowed money;

 

**(n)**                                 theCompany has not (i) established or adopted any Employee Benefit Plan orentered into any change-of-control agreements with any of its directors,officers or employees, (ii) paid any bonus or made any profit-sharing orsimilar payment to, or increased the amount of the wages, salary, commissions,fringe benefits or other compensation or remuneration payable to, any of itsdirectors, officers or employees, or (iii) hired any new employee;

 

**(o)**                                  theCompany has not changed any of its methods of accounting or accountingpractices in any respect;

 

**(p)**                                  theCompany has not made any Tax election;

 

**(q)**                                  theCompany has not commenced or settled any Legal Proceeding;

 

**(r)**                                  exceptwith respect to the Merger and agreements related to the Merger, the Company hasnot entered into any material transaction or taken any other material actionoutside the ordinary course of business or inconsistent with its pastpractices; and

 

**(s)**                                  theCompany has not agreed or committed to take any of the actions referred to inclauses “(c)” through “(r)” above.

 

**2.6**                               **Title to Assets**.

 

**(a)**                                  TheCompany owns, and has good, valid and marketable title to, all assets (otherthan Intellectual Property and Intellectual Property Rights) purported to beowned by it, including:  (i)  all assets reflected on the Unaudited InterimBalance Sheet;  (ii)  all assets referred to in Part 2.7(b) of theDisclosure Schedule and all of the Company’s rights under the Contractsidentified in Part 2.10 of the Disclosure Schedule; and (iii) all other assetsreflected in the Company’s books and records as being owned by theCompany.  Except as set forth inPart 2.6 of the Disclosure Schedule, all of said assets are owned by theCompany free and clear of any liens or other Encumbrances, except for (x) anylien for current taxes not yet due and payable and statutory liens incurred forobligations not past due, and (y) minor liens that have arisen in the ordinarycourse of business and that do not (in any case or in the aggregate) materiallydetract from the value of the assets subject thereto or materially impair theoperations of the Company.  Representationsand warranties as to ownership of Intellectual Property and IntellectualProperty Rights is set forth in Section 2.9.

 

**(b)**                                  Part 2.6of the Disclosure Schedule identifies all assets that are material to thebusiness of the Company and that are being leased or licensed to the Company.

 

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**2.7**                               **Bank Accounts; Receivables**.

 

**(a)**                                  Part2.7(a) of the Disclosure Schedule provides accurate information with respect toeach account maintained by or for the benefit of the Company at any bank orother financial institution.

 

**(b)**                                  Part2.7(b) of the Disclosure Schedule provides an accurate and complete breakdownand aging of all accounts receivable, notes receivable and other receivables ofthe Company as of April 30, 2005.  Exceptas set forth in Part 2.7(b) of the Disclosure Schedule, all existing accountsreceivable of the Company (i) represent valid obligations of customers of theCompany arising from bona fide transactions entered into in the ordinary courseof business, and (ii) are current and will be collected in full when due,without any counterclaim or set off (net of an allowance for doubtful accountsnot to exceed $25,000 in the aggregate).

 

**2.8**                               **Equipment; Leasehold**.

 

**(a)**                                  Allmaterial items of equipment and other tangible assets owned by or leased to theCompany are adequate for the uses to which they are being put, are in goodcondition and repair (ordinary wear and tear excepted) and are adequate for theconduct of the Company’s business in the manner in which such business iscurrently being conducted.

 

**(b)**                                  TheCompany does not own any real property or any interest in real property, exceptfor the leasehold created under the real property lease identified in Part 2.10of the Disclosure Schedule.

 

**2.9**                               **Intellectual Property.**

 

**(a)**                                  Part2.9(a) of the Disclosure Schedule accurately identifies and describes:

 

**(i)**                                    inPart 2.9(a)(i) of the Disclosure Schedule, each proprietary product or servicedeveloped, manufactured, marketed, or sold by the Company at any time sinceinception and any product or service currently under development by theCompany;

 

**(ii)**                                inPart 2.9(a)(ii) of the Disclosure Schedule: (A) each item of Registered IP inwhich the Company has or purports to have an ownership interest of any nature(whether exclusively, jointly with another Person or otherwise); (B) thejurisdiction in which such item of Registered IP has been registered or filedand the applicable registration or serial number; (C) any other Person that hasan ownership interest in such item of Registered IP and the nature of suchownership interest; and (D) each product or service identified in Part2.9(a)(i) of the Disclosure Schedule that embodies, utilizes or is based uponor derived from (or, with respect to products and services under development,that is expected to embody, utilize or be based upon or derived from) such itemof Registered IP;

 

**(iii)**                            inPart 2.9(a)(iii) of the Disclosure Schedule: (A) all Intellectual PropertyRights or Intellectual Property licensed to the Company (other than anynon-customized software that: (1) is so licensed solely in executable or objectcode form pursuant to a nonexclusive, internal use software license, (2) is notincorporated into, or used directly in the

 

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development,manufacturing or distribution of, the products or services of the Company and(3) is generally available on standard terms for less than $10,000); (B) thecorresponding Contract or Contracts pursuant to which such IntellectualProperty Rights or Intellectual Property is licensed to the Company; and (C)whether the license or licenses so granted to the Company are exclusive ornonexclusive; and

 

**(iv)**                               inPart 2.9(a)(iv) of the Disclosure Schedule, each Contract pursuant to which anyPerson has been granted any license to, or otherwise has received or acquiredany right (whether or not currently exercisable) or interest in, any Company IP(other than Contracts pursuant to which the third-party owner of the LicensedIP granted a license or right to the Licensed IP to a third party).

 

**(b)**                                  TheCompany has provided to Parent a complete and accurate copy of each standardform of Company IP Contract currently used by the Company, including eachstandard form of: (i) end user license agreement; (ii) development agreement;(iii) distributor agreement; (iv) employee agreement containing anyassignment or license of Intellectual Property or Intellectual Property Rightsor any confidentiality provision; (v) consulting or independent contractoragreement containing any assignment or license of Intellectual Property orIntellectual Property Rights or any confidentiality provision; or (vi)confidentiality or nondisclosure agreement. Part 2.9(b) of the Disclosure Schedule accurately identifies eachCompany IP Contract that deviates in any material respect from thecorresponding standard form agreement provided to Parent.  Except for the nonexclusive licenses andrights granted in Contracts identified in Part 2.9(a)(iv) of the DisclosureSchedule, the Company is not bound by, and no Company IP is subject to, anyContract containing any covenant or other provision that in any way limits orrestricts the ability of the Company to use, exploit, assert, or enforce anyCompany IP anywhere in the world.

 

**(c)**                                  Tothe Company’s Knowledge, the Company exclusively owns all right, title andinterest to and in the Non-Licensed Company IP that is capable of protectionunder applicable trademark or patent law, free and clear of any Encumbrances(other than nonexclusive licenses granted pursuant to the Contracts listed inPart 2.9(a)(iv) of the Disclosure Schedule). The Company exclusively owns all right, title and interest to and in allother Non-Licensed Company IP, free and clear of any Encumbrances (other thannonexclusive licenses granted pursuant to the Contracts listed in Part2.9(a)(iv) of the Disclosure Schedule).  To the Company’s Knowledge, the Company has sufficient right to use theLicensed IP free and clear of any Encumbrances (other than nonexclusivelicenses granted pursuant to the Contracts listed in Part 2.9(a)(iv) of theDisclosure Schedule).

 

**(i)**                                    alldocuments and instruments necessary to perfect the rights of the Company in theCompany IP have been validly executed, delivered and filed in a timely mannerwith the appropriate Governmental Body;

 

**(ii)**                                eachPerson who is or was an employee or independent contractor of the Company andwho is or was involved in the creation or development of any Company IP hassigned a valid and enforceable agreement containing an irrevocable assignmentof

 

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IntellectualProperty Rights to the Company of Company IP and confidentiality provisionsprotecting the Company IP;

 

**(iii)**                            noCompany Employee has any claim, right (whether or not currently exercisable) orinterest to or in any Company IP;

 

**(iv)**                               tothe Knowledge of the Company, no employee or independent contractor of theCompany is: (A) bound by or otherwise subject to any Contract restricting himor her from performing his or her duties for the Company; or (B) in breach ofany Contract with any former employer or other Person concerning IntellectualProperty Rights or confidentiality;

 

**(v)**                                   nofunding, facilities or personnel of any Governmental Body were used, directlyor indirectly, to develop or create, in whole or in part, any Company IP;

 

**(vi)**                               theCompany has taken all commercially reasonable steps to maintain theconfidentiality of and otherwise protect and enforce its rights in all proprietaryinformation held by the Company, or purported to be held by the Company, as atrade secret;

 

**(vii)**                           sinceinception, the Company has never assigned or otherwise transferred ownershipof, or agreed to assign or otherwise transfer ownership of, any IntellectualProperty Right to any other Person;

 

**(viii)**                       theCompany is not now nor has ever been a member or promoter of, or a contributorto, any industry standards body or similar organization that could require orobligate the Company to grant or offer to any other Person any license or rightto any Company IP; and

 

**(ix)**                              tothe Company’s Knowledge, the Company owns or otherwise has, and after theClosing the Surviving Corporation will continue to have, all IntellectualProperty Rights with regards to Non-Licensed Company IP that is capable ofprotection under applicable trademark or patent law, needed to conduct thebusiness of the Company as currently conducted and currently planned by theCompany to be conducted.  The Companyowns or otherwise has, and after the Closing the Surviving Corporation willcontinue to have, all Intellectual Property Rights with regards to all otherNon-Licensed Company IP needed to conduct the business of the Company ascurrently conducted and currently planned by the Company as of the date of thisAgreement to be conducted.  To theKnowledge of the Company,  the Companyhas, and after the Closing the Surviving Corporation will continue to have, allIntellectual Property Rights with regard to the Licensed IP needed to conduct thebusiness of the Company as currently conducted and currently planned by theCompany to be conducted.

 

**(d)**                                  Withregards to copyrights and trade secrets only and to the Company’s Knowledgewith regards to patents and trademarks, all Non-Licensed Company IP and to theKnowledge of the Company, all Licensed IP is valid and enforceable.  Without limiting the generality of theforegoing:

 

**(i)**                                    theCompany does not have any pending patent or patent applications, or patentapplications that it intends to file;

 

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**(ii)**                                tothe Knowledge of the Company, no trademark (whether registered or unregistered)or trade name owned, used, or applied for by the Company conflicts orinterferes with any trademark (whether registered or unregistered) or tradename owned, used or applied for by any other Person;

 

**(iii)**                            tothe Knowledge of the Company, none of the goodwill associated with or inherentin any trademark (whether registered or unregistered) in which the Company hasor purports to have an ownership interest has been impaired;

 

**(iv)**                               eachitem of Company IP that is Registered IP is and at all times has been incompliance with all Legal Requirements, and all filings, payments and otheractions required to be made or taken to maintain such item of Company IP infull force and effect have been made by the applicable deadline;

 

**(v)**                             noapplication for a patent or for a copyright, mask work or trademarkregistration or any other type of Registered IP filed by or on behalf of the Companyhas been abandoned, allowed to lapse or rejected;

 

**(vi)**                         Part2.9(d)(vi) of the Disclosure Schedule accurately identifies and describes eachfiling, payment, and action that must be made or taken on or before the datethat is 120 days after the date of this Agreement in order to maintain eachsuch item of Company IP in full force and effect;

 

**(vii)**                     theCompany has provided to Parent complete and accurate copies of allapplications, correspondence and other material documents related to each suchitem of Registered IP;

 

**(viii)**                 nointerference, opposition, reissue, reexamination or other Legal Proceeding ofany nature is or has been pending or, to the Knowledge of the Company,threatened, in which the scope, validity or enforceability of any Company IP isbeing, has been or could reasonably be expected to be contested or challenged;and

 

**(ix)**                        tothe Knowledge of the Company there is no basis for a claim that anyNon-Licensed Company IP that is capable of protection under applicabletrademark or patent law is invalid or unenforceable.  There is no basis for a claim that any otherNon-Licensed Company IP is invalid or unenforceable.  To the Knowledge of the Company there is nobasis for a claim that any Licensed IP is invalid or unenforceable.

 

**(e)**                                  Neitherthe execution, delivery or performance of any of the Transactional Agreementsnor the consummation of any of the Transactions could, with or without noticeor the lapse of time, result in or give any other Person the right or option tocause or declare: (i) a loss of, or Encumbrance on, any Company IP; (ii) abreach of any Contract listed or required to be listed in Part 2.9(a)(iii) ofthe Disclosure Schedule; (iii) the release, disclosure or delivery of anyCompany IP by or to any escrow agent or other Person; or (iv) the grant,assignment or transfer to any other Person of any license or other right orinterest under, to or in any of the Company IP.

 

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**(f)**                                    Tothe Knowledge of the Company, no Person has infringed, misappropriated, orotherwise violated, and no Person is currently infringing, misappropriating orotherwise violating, any Company IP. Part 2.9(f) of the Disclosure Schedule accurately identifies (and theCompany has provided to Parent a complete and accurate copy of) each letter orother written or electronic communication or correspondence that has been sentor otherwise delivered by or to the Company or any Representative of theCompany regarding any actual, alleged or suspected infringement or misappropriationof any Company IP and provides a brief description of the current status of thematter referred to in such letter, communication or correspondence.

 

**(g)**                                 Tothe Knowledge of the Company, the Company has not infringed (directly,contributorily, by inducement or otherwise), misappropriated or otherwiseviolated any Intellectual Property Right of any other Person relating to anyNon-Licensed Company IP that is capable of protection under applicabletrademark or patent law.  The Company hasnot infringed (directly, contributorily, by inducement or otherwise),misappropriated or otherwise violated any Intellectual Property Right of anyother Person relating to any other Non-Licensed Company IP.  To its Knowledge, the Company has notinfringed (directly, contributorily, by inducement or otherwise),misappropriated or otherwise violated any Intellectual Property Right of anyother Person relating to any Licensed IP. Without limiting the generality of the foregoing:

 

**(i)**                                    Tothe Knowledge of the Company, (a) no product, information or service evermanufactured, produced, distributed, published, used, provided or sold by or onbehalf of the Company, and (b) no Intellectual Property that is Licensed IP,and no Intellectual Property that is Non-Licensed Company IP and that iscapable of protection under applicable trademark or patent law, ever owned,used or developed by the Company, has ever infringed, misappropriated orotherwise violated any Intellectual Property Right of any other Person.   No product, information or service solelywith respect to the extent it includes any Non-Licensed Company IP that is notcapable of protection under applicable trademark or patent law evermanufactured, produced, distributed, published, used, provided or sold by or onbehalf of the Company, and no Intellectual Property that is Non-Licensed CompanyIP that is not capable of protection under applicable trademark or patent lawever owned, used or developed by the Company, has ever infringed,misappropriated or otherwise violated any Intellectual Property Right of anyother Person;

 

**(ii)**                                noinfringement, misappropriation or similar claim or Proceeding is pending or hasbeen threatened against the Company, or to the Company’s Knowledge, against anyother Person who may be entitled to be indemnified, defended, held harmless orreimbursed by the Company with respect to such claim or Legal Proceeding;

 

**(iii)**                            theCompany has not received any notice or other communication (in writing orotherwise) relating to any actual, alleged or suspected infringement,misappropriation or violation of any Intellectual Property Right of anotherPerson;

 

**(iv)**                               theCompany is not bound by any Contract to indemnify, defend, hold harmless orreimburse any other Person with respect to any intellectual property

 

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infringement,misappropriation or similar claim (other than pursuant to the standard forms ofCompany IP Contracts described in Section 2.9(b), without material deviationtherefrom);

 

**(v)**                                   theCompany has not assumed, or agreed to discharge or otherwise takeresponsibility for, any existing or potential liability of another Person forinfringement, misappropriation or violation of any Intellectual Property Right(other than pursuant to the standard forms of Company IP Contracts described inSection 2.9(b), without material deviation therefrom); and

 

**(vi)**                               tothe Knowledge of the Company, no claim or Legal Proceeding involving anyIntellectual Property or Intellectual Property Right licensed to the Company ispending or, to the Knowledge of the Company, has been threatened, except forany such claim or Legal Proceeding that, if adversely determined, would notadversely affect: (A) the use or exploitation of such Intellectual Property orIntellectual Property Right by the Company; or (B) the manufacturing,distribution or sale of any product or service being developed, offered,manufactured, distributed or sold by the Company.

 

**(h)**

 

**(i)**                                    Tothe Knowledge of the Company, the Company has provided to Parent a complete andaccurate list of all bugs, defects, and errors in the Company Software (includingany bugs, defects or errors relating to or resulting from the display,manipulation, processing, storage, transmission or use of date data) thatmaterially and adversely affects the use, functionality or performance of anyproduct set forth in Part 2.9(a)(i) of the Disclosure Schedule, other thanRoutine Preclosing Bugs.

 

**(ii)**                                None of the Non-Licensed Company Software will function or perform or fail tofunction or perform in a manner that will result in or give rise to a LegalProceeding by a current Company customer resulting in damages incurred oragreed to by Parent or the Surviving Corporation that are not covered byinsurance.  The foregoing does not includeany function, performance, or failure in function or performance resulting fromany improvements or changes by Parent, the Surviving Corporation, or any otherthird party to the Non-Licensed Company Software.

 

**(i)**                                    Thesource code for all Non-Licensed Company Software contains clear and accurateannotations and programmer’s comments, and otherwise has been documented in amanner that is sufficient to independently enable a programmer of reasonableskill and competence in the field of SIP call control to understand, analyze,and interpret program logic, correct errors and improve, enhance, modify andsupport the Non-Licensed Company Software.

 

**(j)**                                    Noneof the Non-Licensed Company Software and to the Knowledge of the Company noneof the Licensed Company Software contains any “back door,” “drop dead device,” “timebomb,” “Trojan horse,” “virus,” or “worm” (as such terms are commonlyunderstood in the software industry) or any other code designed or intended tohave,  any of the following functions:(i) disrupting, disabling, harming or otherwise impeding in any manner theoperation of, or providing unauthorized access to, a computer system or networkor other device

 

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on which such codeis stored or installed; or (ii) damaging or destroying any data or file withoutthe user’s consent.

 

**(k)****                               **Noneof the Non-Licensed Company Software and to the Knowledge of the Company noneof the Licensed Company Software is subject to any “copyleft” or otherobligation or condition (including any obligation or condition under any “opensource” license such as the GNU Public License, Lesser GNU Public License orMozilla Public License) that: (i) could or does require, or could or does conditionthe use or distribution of such Company Software on, the disclosure, licensingor distribution of any source code for any portion of such Company Software; or(ii) could or does otherwise impose any limitation, restriction or condition onthe right or ability of the Company to use or distribute any Company Software.

 

**(l)****                                   **Nosource code for any Company Software has been delivered, licensed or madeavailable (other than by the third-party owner of Licensed Company Software andof which the Company has no Knowledge) to any escrow agent or other Person whois not, as of the date of this Agreement, an employee of the Company or aprevious employee or independent contractor of the Company subject to writtenobligations of confidentiality and non-use at least as restrictive as thoseterms in the Company’s standard form of non-disclosure or confidentialityagreement.  The Company has no duty orobligation (whether present, contingent or otherwise) to deliver, license ormake available the source code for any Company Software to any escrow agent orother Person who is not, as of the date of this Agreement, an employee of theCompany.  No event has occurred, and nocircumstance or condition exists, that (with or without notice or lapse oftime) will, or could reasonably be expected to, result in the delivery, licenseor disclosure of any source code for any Company Software (excluding any sourcecode for any Licensed IP if the delivery, license or disclosure of the sourcecode is performed by the licensor of such Licensed IP and the Company has noKnowledge of such delivery, license or disclosure) to any other Person who isnot, as of the date of this Agreement, an employee of the Company.

 

**2.10****                        Contracts**.

 

**(a)****                                 **Part2.10 of the Disclosure Schedule identifies (other than agreements related tooff-the-shelf, generally commercially available third party software licenses tothe Company in the ordinary course of the Company’s business):

 

**(i)****                                   **eachCompany Contract relating to the employment of, or the performance of servicesby, any employee, consultant or independent contractor;

 

**(ii)****                               **exceptwith respect to Contracts for the sale of the Company’s products in theordinary course of business, each Company Contract relating to the acquisition,transfer, use, development, sharing or license of any technology or anyIntellectual Property or Intellectual Property Right with payments in excess of$15,000 in the aggregate;

 

**(iii)****                           **eachCompany Contract requiring the Company to provide maintenance services to anyother Person;

 

**(iv)****                              **eachCompany Contract imposing any restriction on the Company’s right or ability (A)to compete with any other Person, (B) to acquire any product or

 

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other asset or anyservices from any other Person, to sell any product or other asset to orperform any services for any other Person or to transact business or deal inany other manner with any other Person, or (C) develop or distribute anytechnology;

 

**(v)****                                  **eachCompany Contract creating or involving any agency relationship, distributionarrangement or franchise relationship;

 

**(vi)****                              **eachCompany Contract relating to the acquisition, issuance or transfer of anysecurities;

 

**(vii)****                          **eachCompany Contract relating to the creation of any Encumbrance with respect toany asset of the Company;

 

**(viii)****                      **eachCompany Contract involving or incorporating any guaranty, any pledge, anyperformance or completion bond, any indemnity or any surety arrangement;

 

**(ix)****                             **eachCompany Contract creating or relating to any partnership or joint venture orany sharing of revenues, profits, losses, costs or liabilities;

 

**(x)****                                 **eachCompany Contract relating to the purchase or sale of any product or other assetby or to, or the performance of any services by or for, any Related Party (as definedin Section 2.18);

 

**(xi)****                             **anyother Company Contract that was entered into outside the ordinary course ofbusiness;

 

**(xii)****                         **anyother Company Contract that has a term of more than 60 days and that may not beterminated by the Company (without penalty) within 60 days after the deliveryof a termination notice by the Company; and

 

**(xiii)****                     **anyother Company Contract that contemplates or involves (A) the payment ordelivery of cash or other consideration in an amount or having a value inexcess of $10,000 in any calendar year under such Company Contract, or (B) theperformance of services having a value in excess of $10,000 in any calendaryear under such Company Contract.

 

Contractsin the respective categories described in clauses “(i)” through “(xiii)” aboveare referred to in this Agreement as “Material Contracts.”

 

**(b)****                                 **TheCompany has delivered or identified and made available to Parent accurate andcomplete copies of all written Contracts identified in Part 2.10 of theDisclosure Schedule, including all amendments thereto.  Part 2.10 of the Disclosure Schedule providesan accurate description of the material terms of each Company Contract that isnot in written form.  Each Contractidentified in Part 2.10 of the Disclosure Schedule is valid and in full forceand effect, and, to the Company’s Knowledge, is enforceable by the Company inaccordance with its terms, subject to (i) laws of general application relatingto bankruptcy, insolvency and the relief of debtors, and (ii) rules of lawgoverning specific performance, injunctive relief and other equitable remedies.

 

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**(c)****                                 **Exceptas set forth in Part 2.10 of the Disclosure Schedule:

 

**(i)****                                   **theCompany has not violated or breached, or committed any default under, anyCompany Contract, and, to the Company’s Knowledge, no other Person has violatedor breached, or committed any default under, any Company Contract;

 

**(ii)****                               **tothe Company’s Knowledge, no event has occurred, and no circumstance orcondition exists, that (with or without notice or lapse of time) will, or couldreasonably be expected to, (A) result in a violation or breach of any ofthe provisions of any Company Contract, (B) give any Person the right todeclare a default or exercise any remedy under any Company Contract,(C) give any Person the right to accelerate the maturity or performance ofany Company Contract, or (D) give any Person the right to cancel, terminate ormodify any Company Contract;

 

**(iii)****                           **sinceApril 30, 2005, the Company has not received any notice or other communicationregarding any actual or possible violation or breach of, or default under, anyCompany Contract; and

 

**(iv)****                              **theCompany has not waived any of its material rights under any Material Contract.

 

**(d)****                                 **NoPerson is renegotiating, or has a right pursuant to the terms of any CompanyContract to renegotiate, any amount paid or payable to the Company under anyMaterial Contract or any other material term or provision of any MaterialContract.

 

**(e)****                                 **TheContracts identified in Part 2.10 of the Disclosure Schedule collectivelyconstitute all of the Contracts necessary, to the Company’s knowledge, toenable the Company to conduct its business in the manner in which its businessis currently being conducted.

 

**(f)****                                   **Part 2.10of the Disclosure Schedule identifies and provides a brief description of eachproposed Contract as to which any bid, offer, award, written proposal, term sheet or similar document has beensubmitted or received by the Company since January 1, 2005.

 

**2.11****                        Liabilities**.  The Company has no accrued, contingent orother liabilities of any nature, either matured or unmatured (whether or notrequired to be reflected in financial statements in accordance with generallyaccepted accounting principles, and whether due or to become due), except for:(a) liabilities identified as such in the “liabilities” column of the UnauditedInterim Balance Sheet; (b) accounts payable or accrued salaries that have beenincurred by the Company since April 30, 2005, in the ordinary course of businessand consistent with the Company’s past practices; (c) liabilities under theCompany Contracts identified in Part 2.10 of the Disclosure Schedule, to theextent the nature and magnitude of such liabilities can be specificallyascertained by reference to the text of such Company Contracts; and (d) theliabilities identified in Part 2.11 of the Disclosure Schedule.  At the Closing, the Company will not have anydebt, short term or long term notes outstanding, including notes fromstockholders or deferred salaries, no aged payables beyond 90 days, nor anycredit for accounts receivables

 

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beyond 90 days.  Jasomi Canada will be able to pay, and willpay, all of its liabilities when they come due, and neither Parent nor theCompany will incur any liability, or suffer any Damages, for the failure ofJasomi Canada to pay any of its liabilities, in each case other than thoseliabilities specifically assumed by Parent pursuant to Section 7.8(a).

 

**2.12****                        Compliancewith Legal Requirements.**  The Companyis, and has at all times since December 31, 2004 been, in compliance with allapplicable Legal Requirements, except where the failure to comply with suchLegal Requirements has not had and will not have a Material Adverse Effect onthe Company.  Except as set forth in Part2.12 of the Disclosure Schedule, since April 30, 2005, the Company has not receivedany notice or other communication from any Governmental Body regarding anyactual or possible violation of, or failure to comply with, any LegalRequirement.

 

**2.13****                        GovernmentalAuthorizations. **Part 2.13 of theDisclosure Schedule identifies each material Governmental Authorization held bythe Company, and the Company has delivered to Parent accurate and completecopies of all Governmental Authorizations identified in Part 2.13 of theDisclosure Schedule.  The GovernmentalAuthorizations identified in Part 2.13 of the Disclosure Schedule are valid andin full force and effect, and collectively constitute all Governmental Authorizationsnecessary to enable the Company to conduct its business in the manner in whichits business is currently being conducted. The Company is, and at all times has been, in substantial compliancewith the terms and requirements of the respective Governmental Authorizationsidentified in Part 2.13 of the Disclosure Schedule. The Company has not receivedany notice or other communication from any Governmental Body regarding (a) anyactual or possible violation of or failure to comply with any term orrequirement of any Governmental Authorization, or (b) any actual or possiblerevocation, withdrawal, suspension, cancellation, termination or modificationof any Governmental Authorization.

 

**2.14****                        TaxMatters**.

 

**(a)****                                 **AllTax Returns required to be filed by or on behalf of the Company with anyGovernmental Body with respect to any taxable period ending on or before theClosing Date (the “Company Returns”) (i) have been or will be filed on orbefore the applicable due date (including any extensions of such due date), and(ii) have been, or will be when filed, true, accurate and complete in allmaterial respects and in compliance with all applicable Legal Requirements,except to the extent that a reserve for Taxes is reflected on the CompanyFinancial Statements.  All amounts shownon the Company Returns to be due on or before the Closing Date have been orwill be paid on or before the Closing Date. The Company has delivered to Parent accurate and complete copies of allCompany Returns filed since December 31, 2004 which have been requested byParent.

 

**(b)****                                 **Exceptto the extent that a reserve for Taxes is reflected on the Company FinancialStatements, the Company has complied with all applicable Legal Requirementsrelating to the payment and withholding of Taxes and has duly and timelywithheld from employee salaries, wages and other compensation and has paid overto the appropriate taxing authorities all amounts required to be so withheldand paid over for all periods under all applicable Legal Requirements.

 

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**(c)****                                 **TheCompany Financial Statements fully accrue all actual and contingent liabilitiesfor Taxes (whether or not reflected in any Tax Return) with respect to allperiods through the dates thereof in accordance with generally acceptedaccounting principles.  The Company willestablish, in the ordinary course of business and consistent with its pastpractices, reserves adequate for the payment of all Taxes for the period fromApril 30, 2005 through the Closing Date, and the Company will disclose thedollar amount of such reserves to Parent on or prior to the Closing Date.

 

**(d)****                                 **NoTax Return relating to income Taxes has ever been examined or audited by anyGovernmental Body.  Except as set forthin Part 2.14 of the Disclosure Schedule, there have been no examinationsor audits of any Tax Return.  The Companyhas delivered to Parent accurate and complete copies of all audit reports andsimilar documents (to which the Company has access) relating to the Tax Returns. Except as set forth in Part 2.14 of theDisclosure Schedule, no extension or waiver of the limitation period applicableto any of the Tax Returns has been granted (by the Company or any other Person)that is still in effect, and no such extension or waiver has been requestedfrom the Company.

 

**(e)****                                 **Tothe Company’s knowledge, no claim has been made by a taxing authority in ajurisdiction where the Company does not file a Tax Return that it is or may besubject to taxation by that jurisdiction.

 

**(f)****                                   **Exceptas set forth in Part 2.14 of the Disclosure Schedule, no claim or Legal Proceedingis pending, nor has the Company received notice of any threatened claim orLegal Proceeding against or with respect to the Company in respect of anyTax.  There are no unsatisfiedliabilities for Taxes (including liabilities for interest, additions to tax andpenalties thereon and related expenses) with respect to any notice ofdeficiency or similar document received by the Company with respect to any Tax(other than liabilities for Taxes asserted under any such notice of deficiencyor similar document which are being contested in good faith by the Company andwith respect to which adequate reserves for payment have beenestablished).  There are no liens forTaxes upon any of the assets of the Company except liens for current Taxes notyet due and payable.  The Company has notbeen, and the Company will not be, required to include any adjustment intaxable income for any tax period (or portion thereof) pursuant toSection 481 or 263A of the Code or any comparable provision under state orforeign Tax laws as a result of transactions or events occurring, or accountingmethods employed, prior to the Closing.

 

**(g)****                                **Thereis no agreement, plan, arrangement or other Contract covering any CompanyEmployee that, considered individually or considered collectively with anyother such Contracts, will, or could reasonably be expected to, give risedirectly or indirectly to the payment of any amount that would not bedeductible pursuant to Section 280G as determined without regard toSection 280G(b)(4) or Section 162 other than Section 162(a) of theCode.  The Company is not, and has neverbeen, a party to or bound by any tax indemnity agreement, tax sharingagreement, tax allocation agreement or similar Contract.

 

**(h)****                                **TheCompany is not and has never been a United States real Property HoldingCorporation within the meaning of § 897(c) of the Code.

 

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**2.15****                        Employeeand Labor Matters; Benefit Plans**.

 

**(a)****                                 **Part 2.15(a)of the Disclosure Schedule accurately sets forth, with respect to each current employeeof the Company or Jasomi Canada (including any employee of the Company orJasomi Canada who is on a leave of absence or on layoff status):

 

**(i)****                                   **thename of such employee and the date as of which such employee was originallyhired by the Company or Jasomi Canada and such employee’s title;

 

**(ii)****                               **eachCompany Employee Plan in which such employee participates or is eligible toparticipate; and

 

**(iii)****                           **anyGovernmental Authorization that is held by such employee and that relates to oris useful in connection with the Company’s or Jasomi Canada’s business.

 

**(b)****                                 **Part2.15(b) of the Disclosure Schedule accurately identifies each former employeeof the Company or Jasomi Canada who is receiving or is scheduled to receive (orwhose spouse or other dependent is receiving or is scheduled to receive) anybenefits (whether from the Company or Jasomi Canada or otherwise) relating tosuch former employee’s employment with the Company or Jasomi Canada, includingany accrued vacation or vacation pay; and Part 2.15(b) of the DisclosureSchedule accurately describes such benefits.

 

**(c)****                                 **Theemployment of each of the Company’s employees is terminable by the Company atwill.  No employee of the Company and noemployee of Jasomi Canada has any agreement as to length of notice, severance,change-of-control or termination payments that are required to be made beforethe Company or Jasomi Canada may terminate his or her employment, other thanwhat is required by applicable Legal Requirements.  The Company has delivered to Parent accurateand complete copies of all employee manuals and handbooks, disclosurematerials, policy statements and other materials relating to the employment of thecurrent and former employees of the Company and Jasomi Canada.

 

**(d)****                                 **Tothe Company’s Knowledge:

 

**(i)****                                   **noemployee of the Company or Jasomi Canada intends to terminate his employmentwith the Company or Jasomi Canada;

 

**(ii)****                               **noemployee of the Company or Jasomi Canada has received an offer to join abusiness that may be competitive with the Company’s business; and

 

**(iii)****                           **noemployee of the Company or Jasomi Canada is a party to or is bound by anyconfidentiality agreement, noncompetition agreement or other Contract (with anyPerson) that may have an adverse effect on: (A) the performance by suchemployee of any of his duties or responsibilities as an employee of the Companyor Jasomi Canada; or (B) the Company’s or Jasomi Canada’s business oroperations.

 

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**(e)****                                 **Part 2.15(e)of the Disclosure Schedule accurately sets forth, with respect to eachindependent contractor of the Company or Jasomi Canada since June 1, 2003:

 

**(i)****                                   **thename of such independent contractor and the date as of which such independentcontractor was originally hired by the Company or Jasomi Canada;

 

**(ii)****                               **adescription of such independent contractor’s duties and responsibilities;

 

**(iii)****                           **theterms of compensation of such independent contractor; and

 

**(iv)****                              **anyGovernmental Authorization that is held by such independent contractor and thatrelates to or is useful in connection with the Company’s or Jasomi Canada’s business.

 

**(f)****                                   **Exceptas set forth in Part 2.15(f) of the Disclosure Schedule, neither the Company norJasomi Canada is a party to or bound by, and neither the Company nor JasomiCanada has ever been a party to or bound by, any employment agreement or anyunion contract, collective bargaining agreement or similar Contract.

 

**(g)****                                **TheCompany is not engaged, and the Company has never been engaged, in any unfairlabor practice of any nature.  There hasnever been any slowdown, work stoppage, labor dispute or union organizingactivity, or any similar activity or dispute, affecting the Company or JasomiCanada.  No event has occurred, and nocondition or circumstance exists, that might directly or indirectly give riseto or provide a basis for the commencement of any such slowdown, work stoppage,labor dispute or union organizing activity or any similar activity ordispute.  There are no actions, suits,claims, labor disputes or grievances pending or, to the Company’s Knowledge,threatened or reasonably anticipated relating to any labor, safety, pay equityor discrimination matters involving any Company Employee, including, withoutlimitation, charges of unfair labor practices or discrimination complaints.

 

**(h)****                                **Neitherthe Company nor Jasomi Canada has ever had any temporary or leasedemployees.  No independent contractor of theCompany or Jasomi Canada is or has been eligible to participate in any CompanyEmployee Plan.

 

**(i)****                                   **Part2.15(i) of the Disclosure Schedule contains an accurate and complete list as ofthe date hereof of each Company Employee Plan and each Company EmployeeAgreement.  Neither the Company nor anyCompany Affiliate intends or has committed to establish or enter into any newCompany Employee Plan or Company Employee Agreement, or to modify any CompanyEmployee Plan or Company Employee Agreement (except to conform any such CompanyEmployee Plan or Company Employee Agreement to the requirements of anyapplicable Legal Requirements, in each case as previously disclosed to Parentin writing or as required by this Agreement).

 

**(j)****                                   **TheCompany and each of the Company’s Affiliates have delivered or identified and madeavailable to Parent: (i) correct and complete copies of all documents settingforth the terms of each Company Employee Plan and each Company EmployeeAgreement, including all amendments thereto and all related trust documents;(ii) the three most recent annual reports (Form Series 5500 and all schedulesand financial statements attached thereto), if any, required under ERISA, theCode or other related Legal Requirements in connection with

 

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each CompanyEmployee Plan; (iii) if the Company Employee Plan is subject to the minimumfunding standards of Section 302 of ERISA or other related Legal Requirements,the most recent annual and periodic accounting of Company Employee Plan assets;(iv) the most recent summary plan description together with the summaries ofmaterial modifications thereto, if any, required under ERISA or other relatedLegal Requirements with respect to each Company Employee Plan; (v) all materialwritten Contracts relating to each Company Employee Plan, includingadministrative service agreements and group insurance contracts; (vi) allwritten materials provided to any Company Employee relating to any CompanyEmployee Plan and any proposed Company Employee Plans, in each case, relatingto any amendments, terminations, establishments, increases or decreases inbenefits, acceleration of payments or vesting schedules or other events thatwould result in any liability to the Company or any Company Affiliate; (vii) allcorrespondence to or from any Governmental Body relating to any CompanyEmployee Plan; (viii) all COBRA forms and related notices; (ix) all insurancepolicies in the possession of the Company or any Company Affiliate pertainingto fiduciary liability insurance covering the fiduciaries for each CompanyEmployee Plan; (x) all discrimination tests required under the Code for eachCompany Employee Plan intended to be qualified under Section 401(a) of the Codefor the three most recent plan years; and (xi) the most recent IRSdetermination or opinion letter issued with respect to each Company EmployeePlan intended to be qualified under Section 401(a) of the Code.

 

**(k)****                               **TheCompany and each of the Company Affiliates have performed all obligationsrequired to be performed by them under each Company Employee Plan and are notin default or violation of, and the Company has no Knowledge of any default orviolation by any other party to, the terms of any Company Employee Plan, andeach Company Employee Plan has been established and maintained substantially inaccordance with its terms and in substantial compliance with all applicableLegal Requirements, including ERISA and the Code.  Any Company Employee Plan intended to bequalified under Section 401(a) of the Code has obtained a favorabledetermination letter (or opinion letter, if applicable) as to its qualifiedstatus under the Code and any Company Employee Plan required to be registeredunder Legal Requirements is so registered. No “prohibited transaction,” within the meaning of Section 4975 of theCode or Sections 406 and 407 of ERISA, and not otherwise exempt under Section408 of ERISA, has occurred with respect to any Company Employee Plan.  There are no claims or Legal Proceedingspending, or, to the Company’s Knowledge, threatened or reasonably anticipated(other than routine claims for benefits), against any Company Employee Plan oragainst the assets of any Company Employee Plan.  Each Company Employee Plan (other than anyCompany Employee Plan to be terminated prior to the Closing in accordance withthis Agreement) can be amended, terminated or otherwise discontinued after theClosing in accordance with its terms, without liability to Parent, the Company orany Company Affiliate (other than ordinary administration expenses).  There are no audits, inquiries or Legal Proceedingspending or, to the Company’s Knowledge, threatened by the IRS, DOL, or anyother Governmental Body with respect to any Company Employee Plan.  Neither the Company nor any Company Affiliatehas ever incurred any penalty or tax with respect to any Company Employee Planunder Section 502(i) of ERISA or Sections 4975 through 4980 of the Code or anyother related Legal Requirements.  TheCompany and each Company Affiliate has made all contributions and otherpayments required by and due under the terms of each Company Employee Plan.

 

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**(l)****                                   **Neitherthe Company nor any Company Affiliate has ever maintained, established,sponsored, participated in, or contributed to any: (i) Company Pension Plansubject to Title IV of ERISA or other applicable Legal requirements; or (ii) “multiemployerplan” within the meaning of Section (3)(37) of ERISA.  Neither the Company nor any Company Affiliatehas ever maintained, established, sponsored, participated in or contributed to,any Company Pension Plan in which stock of the Company or any Company Affiliateis or was held as a plan asset.  The fairmarket value of the assets of each funded Foreign Plan, the liability of eachinsurer for any Foreign Plan funded through insurance, or the book reserveestablished for any Foreign Plan, together with any accrued contributions, issufficient to procure or provide in full for the accrued benefit obligations,with respect to all current and former participants in such Foreign Planaccording to the actuarial assumptions and valuations most recently used todetermine employer contributions to and obligations under such Foreign Plan,and no transaction contemplated by this Agreement shall cause any such assetsor insurance obligations to be less than such benefit obligations.

 

**(m)****                             **NoCompany Employee Plan provides (except at no cost to the Company or any CompanyAffiliate), or reflects or represents any liability of the Company or anyCompany Affiliate to provide, retiree life insurance, retiree health benefitsor other retiree employee welfare benefits to any Person for any reason, exceptas may be required by COBRA or other applicable Legal Requirements.  Other than commitments made that involve nofuture costs to the Company or any Company Affiliate, neither the Company norany Company Affiliate has ever represented, promised or contracted (whether inoral or written form) to any Company Employee (either individually or to CompanyEmployees as a group) or any other Person that such Company Employee(s) orother person would be provided with retiree life insurance, retiree healthbenefit or other retiree employee welfare benefits, except to the extentrequired by applicable Legal Requirements.

 

**(n)****                                **Exceptas set forth in Part 2.15(n) of the Disclosure Schedule, and except asexpressly required or provided by this Agreement, neither the execution of thisAgreement nor the consummation of the transactions contemplated hereby will(either alone or upon the occurrence of any additional or subsequent events)constitute an event under any Company Employee Plan, Company EmployeeAgreement, trust or loan that will or may result (either alone or in connectionwith any other circumstance or event) in any payment (whether for severance pay,indemnity in lieu of notice, change of control award or otherwise),acceleration, forgiveness of indebtedness, vesting, distribution, increase inbenefits or obligation to fund benefits with respect to any Company Employee.

 

**(o)****                                 **Exceptas set forth in Part 2.15(o) of the Disclosure Schedule, the Company and eachof the Company Affiliates: (i) are, and at all times have been, in substantialcompliance with all applicable Legal Requirements respecting employment,employment practices, terms and conditions of employment, pay equity and wagesand hours, in each case, with respect to Company Employees, including thehealth care continuation requirements of COBRA, the requirements of FMLA, therequirements of HIPAA and any similar provisions of state law; (ii) havewithheld and reported all amounts required by applicable Legal Requirements orby Contract to be withheld and reported with respect to wages, salaries andother payments to Company Employees; (iii) are not liable for any arrears ofwages or any taxes or any penalty for

 

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failure to complywith the Legal Requirements applicable of the foregoing; and (iv) are notliable for any payment to any trust or other fund governed by or maintained byor on behalf of any Governmental Body with respect to unemployment compensationbenefits, social security or other benefits or obligations for CompanyEmployees (other than routine payments to be made in the normal course ofbusiness and consistent with past practice). There are no pending or, to the Company’s Knowledge, threatened orreasonably anticipated claims or Legal Proceedings against the Company or anyCompany Affiliate under any worker’s compensation policy or long-termdisability policy.

 

**(p)****                                 **Tothe Company’s Knowledge, no Stockholder nor any Company Employee is obligatedunder any Contract or subject to any judgment, decree, or order of any court orother Governmental Body that would interfere with such Person’s efforts topromote the interests of the Company or that would interfere with the businessof the Company or any Company Affiliate. Neither the execution nor the delivery of this Agreement, nor thecarrying on of the business of the Company or any Company Affiliate aspresently conducted nor any activity of such Stockholder or Company Employeesin connection with the carrying on of the business of the Company or anyCompany Affiliate as presently conducted will, to the Company’s Knowledge,conflict with, result in a breach of the terms, conditions or provisions of, orconstitute a default under, any Contract under which any of such Stockholdersor Company Employees is now bound.

 

**(q)****                                 **TheCompany has provided to Parent true, complete and accurate schedules settingforth the aggregate dollar amount of the compensation (including wages, salary,commissions, director’s fees, fringe benefits, bonuses, profit-sharing paymentsand other payments or benefits of any type) received by each Company Employee andindependent contractor from the Company and Jasomi Canada with respect toservices performed in each of 2004 and 2005 and each Company Employee’sannualized compensation as of the date of this Agreement.

 

**2.16****                        EnvironmentalMatters.**  To the Company’s Knowledge,it is in compliance in all material respects with all applicable EnvironmentalLaws, which compliance includes the possession by the Company of all permitsand other Governmental Authorizations required under applicable EnvironmentalLaws, and compliance with the terms and conditions thereof.  The Company has not received any notice orother communication (in writing or otherwise), whether from a GovernmentalBody, citizens group, employee or otherwise, that alleges that the Company isnot in compliance with any Environmental Law, and, to the Company’s Knowledge,there are no circumstances that may prevent or interfere with the Company’scompliance with any Environmental Law in the future.  To the Company’s Knowledge, no current orprior owner of any property leased or controlled by the Company has receivedany notice or other communication (in writing or otherwise), whether from aGovernment Body, citizens group, employee or otherwise, that alleges that suchcurrent or prior owner or the Company is not in compliance with anyEnvironmental Law.  All GovernmentalAuthorizations currently held by the Company pursuant to Environmental Laws areidentified in Part 2.16 of the Disclosure Schedule. (For purposes of thisSection 2.16: (i) “Environmental Law” means any federal, state, local orforeign Legal Requirement relating to pollution or protection of human healthor the environment (including ambient air, surface water, ground water, landsurface or subsurface

 

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strata), includingany law or regulation relating to emissions, discharges, releases or threatenedreleases of Materials of Environmental Concern, or otherwise relating to themanufacture, processing, distribution, use, treatment, storage, disposal,transport or handling of Materials of Environmental Concern; and (ii) “Materialsof Environmental Concern” include chemicals, pollutants, contaminants, wastes,toxic substances, petroleum and petroleum products and any other substance thatis now or hereafter regulated by any Environmental Law or that is otherwise adanger to health, reproduction or the environment.)

 

**2.17****                        Insurance.**  Part 2.17 of the Disclosure Scheduleidentifies all insurance policies maintained by, at the expense of or for thebenefit of the Company and identifies any material claims made thereunder, andthe Company has delivered to Parent accurate and complete copies of theinsurance policies identified on Part 2.17 of the Disclosure Schedule.  Each of the insurance policies identified inPart 2.17 of the Disclosure Schedule is in full force and effect.  The Company has not received any notice orother communication regarding any actual or possible (a) cancellation orinvalidation of any insurance policy, (b) refusal of any coverage or rejection ofany claim under any insurance policy, or (c) material adjustment in the amountof the premiums payable with respect to any insurance policy.

 

**2.18****                        RelatedParty Transactions.**  Except as setforth in Part 2.18 of the Disclosure Schedule:  (a) no Related Party has, and no RelatedParty has at any time had, any direct or indirect interest in any materialasset used in or otherwise relating to the business of the Company; (b) noRelated Party is indebted to the Company; (c) no Related Party has enteredinto, or has had any direct or indirect financial interest in, any materialContract, transaction or business dealing involving the Company; (d) no RelatedParty is competing, or has at any time competed, directly or indirectly, withthe Company; and (e) no Related Party has any claim or right against theCompany (other than rights to receive compensation for services performed as anemployee of the Company).  (For purposesof this Section 2.18 each of the following shall be deemed to be a “RelatedParty”:  (i)  each of the Signing Stockholders;  (ii) each individual who is, or who has at any time been, an officer of theCompany; (iii)  each member of theimmediate family of each of the individuals referred to in clauses “(i)” and “(ii)”above; and (iv) any trust or other Entity (other than the Company) in which anyone of the individuals referred to in clauses “(i)”, “(ii)” and “(iii)” aboveholds (or in which more than one of such individuals collectively hold),beneficially or otherwise, a material voting, proprietary or equity interest.)

 

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**2.19****                        LegalProceedings; Orders**.

 

**(a)****                                 **Exceptas set forth in Part 2.19 of the Disclosure Schedule, there is no pending LegalProceeding, and (to the Company’s Knowledge) no Person has threatened tocommence any Legal Proceeding:  (i) thatinvolves the Company or any of the assets owned or used by the Company or anyPerson whose liability the Company has or may have retained or assumed, eithercontractually or by operation of law; or (ii) that challenges, or that may havethe effect of preventing, delaying, making illegal or otherwise interferingwith, the Merger or any of the other transactions contemplated by thisAgreement.  To the Company’s Knowledge,except as set forth in Part 2.19 of the Disclosure Schedule, no event hasoccurred, and no claim, dispute or other condition or circumstance exists, thatwill, or that could reasonably be expected to, give rise to or serve as a basisfor the commencement of any such Legal Proceeding.

 

**(b)****                                 **Exceptas set forth in Part 2.19 of the Disclosure Schedule, no Legal Proceeding hasever been commenced by or has ever been pending against the Company.

 

**(c)****                                 **Thereis no order, writ, injunction, judgment or decree to which the Company, or anyof the assets owned or used by the Company, is subject.  To the Company’s Knowledge, none of the SigningStockholders is subject to any order, writ, injunction, judgment or decree thatrelates to the Company’s business or to any of the assets owned or used by theCompany.  To the Company’s Knowledge, noofficer or other employee of the Company is subject to any order, writ,injunction, judgment or decree that prohibits such officer or other employeefrom engaging in or continuing any conduct, activity or practice relating tothe Company’s business.

 

**(d)****                                 **Noclaim for indemnification has been made by any past or current director orofficer of the Company and, to the Company’s Knowledge, no basis exists for anysuch claim for indemnification.

 

**2.20****                        Authority;Binding Nature of Agreement. **TheCompany has the absolute and unrestricted right, power and authority to enterinto and to perform its obligations under this Agreement; and the execution,delivery and performance by the Company of this Agreement have been dulyauthorized by all necessary action on the part of the Company and its board ofdirectors.  This Agreement constitutesthe legal, valid and binding obligation of the Company, enforceable against theCompany in accordance with its terms, subject to (i) laws of generalapplication relating to bankruptcy, insolvency and the relief of debtors, and(ii) rules of law governing specific performance, injunctive relief and otherequitable remedies.

 

**2.21****                        Non-Contravention;Consents.**  Except as set forth inPart 2.21 of the Disclosure Schedule, neither (1) the execution, delivery orperformance of this Agreement or any of the other agreements referred to inthis Agreement, nor (2) the consummation of the Merger or any of the othertransactions contemplated by this Agreement, will directly or indirectly (withor without notice or lapse of time):

 

**(a)****                                 **contravene,conflict with or result in a violation of (i) any of the provisions of theCompany’s certificate of incorporation or bylaws, or (ii) any resolutionadopted by the

 

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Company’sStockholders, the Company’s board of directors or any committee of the Company’sboard of directors;

 

**(b)****                                 **contravene,conflict with or result in a violation of, or give any Governmental Body orother Person the right to challenge any of the transactions contemplated bythis Agreement or to exercise any remedy or obtain any relief under, any LegalRequirement or any order, writ, injunction, judgment or decree to which theCompany, or any of the assets owned or used by the Company, is subject;

 

**(c)****                                 **contravene,conflict with or result in a violation of any of the terms or requirements of,or give any Governmental Body the right to revoke, withdraw, suspend, cancel,terminate or modify, any Governmental Authorization that is held by the Companyor that otherwise relates to the Company’s business or to any of the assetsowned or used by the Company;

 

**(d)****                                 **contravene,conflict with or result in a violation or breach of, or result in a defaultunder, any provision of any Company Contract that is or would constitute aMaterial Contract, or give any Person the right to (i) declare a defaultor exercise any remedy under any such Company Contract, (ii) acceleratethe maturity or performance of any such Company Contract, or (iii) cancel,terminate or modify any such Company Contract; or

 

**(e)****                                 **resultin the imposition or creation of any lien or other Encumbrance upon or withrespect to any asset owned or used by the Company (except for minor liens thatwill not, in any case or in the aggregate, materially detract from the value ofthe assets subject thereto or materially impair the operations of the Company).

 

Except as setforth in Part 2.21 of the Disclosure Schedule, the Company and JasomiCanada are not and will not be required to make any filing with or give anynotice to, or to obtain any Consent from, any Person in connection with (x) theexecution, delivery or performance of this Agreement or any of the otheragreements referred to in this Agreement, or (y) the consummation of the Mergeror any of the other transactions contemplated by this Agreement.

 

**2.22****                        NoBrokers/Finders**.  Neither theCompany, Jasomi Canada nor any Signing Stockholder has agreed to pay, or takenany action that will result in any person or entity becoming entitled toreceive from the Company, any brokerage fee, finder’s fee or other similar feeor commission with respect to the Merger or any of the transactionscontemplated hereby, except that Redwood Capital Group, advisors to the Company,will receive a transaction fee in the amount and on the terms set forth in Part2.22 of the Disclosure Schedule.

 

**2.23****                        FullDisclosure**.

 

**(a)****                                 **ThisSection 2 (including the portions of the Disclosure Schedule related thereto)does not contain any untrue statement of a material fact or omit to state amaterial fact necessary to make any representation or warranty in this Section2 (in light of the circumstances under which such representations andwarranties were made) not misleading.

 

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**(b)****                                 **Theinformation supplied by the Company for inclusion in the Information Statement(as defined in Section 7.2) will not contain an untrue statement of a materialfact or omit to state a material fact necessary to make such information (inlight of the circumstances under which the statements in such information wasmade) not misleading.

 

**SECTION 3****.****                            Representations and Warranties of SigningStockholders**

 

Each SigningStockholder (as to such Signing Stockholder but not as to any other SigningStockholder or other Person) severally (but not jointly) represents andwarrants, to and for the benefit of the Indemnitees, as follows:

 

**3.1****                               Powerand Capacity, etc**.** **Such Signing Stockholder has the absolute and unrestricted power,capacity and authority to execute and deliver this Agreement and each otherContract referred to in or contemplated by this Agreement to which such SigningStockholder is or will become a party (this Agreement and such other Contractsbeing referred to collectively in this Agreement as the “StockholderTransaction Agreements”), and to perform such Signing Stockholder’s obligationshereunder and thereunder.  This Agreementhas been duly authorized and duly executed and delivered by such SigningStockholder and constitutes the legal, valid and binding obligation of suchSigning Stockholder, enforceable against such Signing Stockholder in accordancewith its terms, subject to (i) laws of general application relating tobankruptcy, insolvency, reorganization, moratorium and the enforcement ofcreditors’ rights generally, and (ii) rules of law governing specificperformance, injunctive relief and other equitable remedies. The otherStockholder Transaction Agreements, when executed and delivered by such SigningStockholder, will constitute legal, valid and binding obligations of suchSigning Stockholder, enforceable against such Signing Stockholder in accordancewith their terms, subject to (i) laws of general application relating tobankruptcy, insolvency, reorganization, moratorium and the enforcement ofcreditors’ rights generally, and (ii) rules of law governing specificperformance, injunctive relief and other equitable remedies.

 

**3.2****                               NoConflicts or Consents**.  The execution and delivery of theStockholder Transaction Agreements by such Signing Stockholder does not andwill not, and the performance of the Stockholder Transaction Agreements by suchSigning Stockholder will not: (i) conflict with or violate any currentlyexisting Legal Requirement or Order applicable to such Signing Stockholder; or(ii) result in or constitute (with or without notice or lapse of time) anybreach of or default under, or result (with or without notice or lapse of time)in the creation of any Encumbrance on any of the shares of Company CapitalStock or other securities of the Company held by such Signing Stockholderpursuant to, any Contract to which such Signing Stockholder is a party or bywhich such Signing Stockholder is or may become bound or affected. Theexecution and delivery of the Stockholder Transaction Agreements by suchSigning Stockholder does not and will not, and the performance of theStockholder Transaction Agreements by such Signing Stockholder will not,require any Consent of any Person which has not been obtained.

 

**3.3****                               Reserved**.

 

**3.4****                               Titleto Securities**.  Such SigningStockholder owns beneficially and of record, and has good and valid title (freeand clear of any Encumbrances) to, the shares of Company

 

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Capital Stockdescribed opposite such Signing Stockholder’s name in Part 3.4 of theDisclosure Schedule, and such Signing Stockholder does not directly orindirectly own any shares of capital stock or other securities of the Company,or any option, warrant or other right to acquire (by purchase, conversion orotherwise) any shares of capital stock or other securities of any of the Company,other than the shares described opposite such Signing Stockholder’s name inPart 3.4 of the Disclosure Schedule.

 

**3.5****                               Capacity;Legal Proceedings**.

 

**(a)****                                 **SuchSigning Stockholder has the capacity to comply with and perform all of suchSigning Stockholder’s covenants and obligations under the StockholderTransaction Agreements.

 

**(b)****                                 **SuchSigning Stockholder (and if such Signing Stockholder is a partnership, suchSigning Stockholder’s general partner) is not subject to any Legal Requirementor Order that may have an adverse effect on his or its ability to comply withor perform any of his or its covenants or obligations under any of the StockholderTransaction Agreements.

 

**(c)****                                 **Thereis no Legal Proceeding pending, and, to such Signing Stockholder’s Knowledge,no Person has threatened to commence any Legal Proceeding, that wouldreasonably be expected to have or result in an adverse effect on the ability ofsuch Signing Stockholder to comply with or perform any of such SigningStockholder’s covenants or obligations under any of the Stockholder TransactionAgreements.

 

**3.6****                               PrivatePlacement**.

 

**(a)****                                 **SuchSigning Stockholder understands and is aware that, if the ConvertibleDebentures and any Parent Common Stock to be issued upon conversion of suchConvertible Debentures (collectively, the “Securities”) to such SigningStockholder in the Merger is issued in reliance on the exemption from registrationset forth in Section 4(2) of the Securities Act or in Regulation D promulgatedunder the Securities Act,:

 

**(i)****                                   **anySecurities to be issued to such Signing Stockholder in the Merger will not beissued pursuant to a registration statement under the Securities Act, but willinstead be issued in reliance on the exemption from registration set forth inSection 4(2) of the Securities Act or in Regulation D promulgated under theSecurities Act;

 

**(ii)****                               **neitherthe Merger nor the issuance of such Securities has been or will be approved orreviewed by the SEC or by any other Governmental Body;

 

**(iii)****                           **anySecurities to be issued in the Merger cannot be offered, sold or otherwisetransferred, assigned, pledged or hypothecated unless such Securities areregistered under the Securities Act or unless an exemption from registration isavailable;

 

**(iv)****                              **Parent is under no obligation to file a registration statement with respect toany Securities to be issued to such Signing Stockholder in the Merger;

 

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**(v)****                                  **theprovisions of Rule 144 and Rule 145 under the Securities Act will permit resaleof any Parent Common Stock to be issued to such Signing Stockholder in theMerger only under limited circumstances, and the Signing Stockholder shall notmake any sale, transfer or other disposition of the Securities in violation ofthe Securities Act or the rules and regulations promulgated thereunder;

 

**(vi)****                              **Parentwill rely on such Signing Stockholder’s representations, warranties and certificationset forth in this Section 3.6 for purposes of determining such SigningStockholder’s suitability as an investor in Securities and for purposes ofconfirming the availability of an exemption from the registration requirementsof the Securities Act for the issuance of Securities in the Merger.

 

**(b)****                                 **AnySecurities to be issued to such Signing Stockholder in the Merger will beacquired by such Signing Stockholder for investment purposes only and for suchSigning Stockholder’s own account, and not with a view to, or for resale inconnection with, any unregistered distribution thereof.

 

**(c)****                                 **SuchSigning Stockholder has received and carefully examined Parent’s most recentAnnual Report on Form 10-K (the “Form 10-K”), Quarterly Report on Form 10-Q(the “Form 10-Q”) and proxy statement, and has paid particular attention to therisk factors described in the Form 10-K and Form 10-Q.

 

**(d)****                                 **SuchSigning Stockholder has been given the opportunity: (i) to ask questions of,and to receive answers from, Persons acting on behalf of the Company and Parentconcerning the terms and conditions of the Merger and the possible issuance ofSecurities in the Merger, and the business, properties, prospects and financialcondition of the Company and Parent; and (ii) to obtain any additionalinformation (to the extent the Company or Parent possesses such information oris able to acquire it without unreasonable effort or expense) that is necessaryto verify the accuracy of the information set forth in the documents providedor made available to such Signing Stockholder.

 

**(e)****                                 **SuchSigning Stockholder is knowledgeable, sophisticated and experienced in making,and is qualified to make, decisions with respect to investments in securitiespresenting investment decisions like that involved in such Signing Stockholder’spossible investment in Securities to be issued in the Merger.

 

**(f)****                                   **SuchSigning Stockholder is an “accredited investor,” as that term is defined inRule 501 under the Securities Act.

 

**SECTION 4****.****                            Representations and Warranties of Parent andMerger Sub**

 

Parent and Merger Sub jointly and severally representand warrant to the Company and the Signing Stockholders as follows:

 

**(a)****                                  Organizationand Qualification**.  Parent is acorporation duly incorporated, validly existing and in good standing under thelaws of Delaware and has all requisite corporate power and authority to own,lease and operate its properties and to carry on

 

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its business as itis now being conducted, except where the failure to be so organized, existingor in good standing or to have such corporate power and authority has not had aMaterial Adverse Effect.  Parent is dulyqualified or licensed as a foreign corporation to do business, and is in goodstanding, in each jurisdiction where the character of the properties owned,leased or operated by it or the nature of its business makes such qualificationor licensing necessary, except where the failure to be so qualified or licensedand in good standing has not had a Material Adverse Effect.  Merger Sub is a corporation dulyincorporated, validly existing and in good standing under the laws of the Stateof Delaware.

 

**4.2****                               SECFilings; Financial Statements**.

 

**(a)****                                 **Parenthas filed with the SEC Parent’s Annual Report on Form 10-K for the fiscal yearending April 30, 2004, and each Quarterly Report on Form 10-Q and each otherform, report or document required to be filed with the SEC subsequent thereto(the “Parent SEC Documents”).  As of thetime it was filed with the SEC (or, if amended or superseded by a filing priorto the date of this Agreement, then on the date of such filing):  (i) each of the Parent SEC Documents compliedin all material respects with the applicable requirements of the Securities Actor the Exchange Act (as the case may be); and (ii) none of the Parent SECDocuments contained any untrue statement of a material fact or omitted to statea material fact required to be stated therein or necessary in order to make thestatements therein, in the light of the circumstances under which they weremade, not misleading.  All of the ParentSEC Documents have been filed on EDGAR and are available to the Company on theSEC’s website at www.sec.gov.

 

**(b)****                                 **Theconsolidated financial statements contained in the Parent SEC Documents:  (i) complied as to form in all materialrespects with the published rules and regulations of the SEC applicablethereto; (ii) were prepared in accordance with generally accepted accountingprinciples applied on a consistent basis throughout the periods covered, exceptas may be indicated in the notes to such financial statements and (in the caseof unaudited statements) as permitted by Form 10-Q of the SEC, and except thatunaudited financial statements may not contain footnotes and are subject toyear-end audit adjustments; and (iii) fairly present in accordance with GAAP theconsolidated financial position of Parent and its subsidiaries as of therespective dates thereof and the consolidated results of operations of Parentand its subsidiaries for the periods covered thereby.

 

**4.3****                               Authority;Binding Nature of Agreement.**  Parentand Merger Sub have the absolute and unrestricted right, power and authority toperform their obligations under this Agreement; and the execution, delivery andperformance by Parent and Merger Sub of this Agreement have been dulyauthorized by all necessary action on the part of Parent and Merger Sub andtheir respective boards of directors.  Novote of Parent’s stockholders is needed to approve the Merger.  This Agreement constitutes the legal, validand binding obligation of Parent and Merger Sub, enforceable against them inaccordance with its terms, subject to (i) laws of general application relatingto bankruptcy, insolvency and the relief of debtors, and (ii) rules of lawgoverning specific performance, injunctive relief and other equitable remedies.

 

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**4.4****                               NoConflict.**  The execution and deliveryof this Agreement by each of Parent and Merger Sub do not, and the performanceof this Agreement by each of Parent and Merger Sub will not, (i) conflictwith or violate their respective organizational documents, (ii) assumingthat all consents, approvals, authorizations and other actions described inSection 4.5 have been obtained and all filings and obligations describedin Section 4.5 have been made or complied with, conflict with or violatein any material respect any Legal Requirement applicable to Parent or MergerSub, except, with respect to clauses (ii), for any such conflicts, violations,breaches, defaults, or other occurrences that could not reasonably be expectedto have, individually or in the aggregate, a Material Adverse Effect on Parent.

 

**4.5****                               RequiredFilings and Consents.**  The executionand delivery of this Agreement by each of Parent and Merger Sub do not, and theperformance of this Agreement by each of Parent and Merger Sub will not,require any consent, approval, order, authorization, registration or permit of,or filing with or notification to, any Governmental Body, except (i) forthe filing and recordation of appropriate merger documents as required by theDGCL, (ii) for applicable requirements, if any, of the Exchange Act of1934, as amended (the “Exchange Act”), federal, state and provincial securitieslaws and The Nasdaq National Market, and (iii) for such other consents,approvals, orders authorizations, registrations or permits, filings ornotifications that if not obtained or made could not reasonably be expected,individually or in the aggregate, to prevent or materially delay theconsummation of the transactions contemplated by this Agreement.

 

**4.6****                               Offering**.  Subject in part to the truth and accuracy ofthe representations and warranties of the Company set forth in Section 2 ofthis Agreement and the compliance with the information requirements of Rule 502of Regulation D under the Securities Act of the Information Statement providedto Stockholders as described in Section 6.2, the offer, sale and issuance ofthe First Tranche Convertible Debentures and the Second Tranche ConvertibleDebentures, and the issuance of the shares of Parent Common Stock uponconversion of the First Tranche Convertible Debentures and the Second TrancheConvertible Debentures, are exempt from the registration requirements of anyapplicable state and federal securities laws, and neither the Company, MergerSub nor any authorized agent acting on the behalf of either will intentionallytake any action hereafter that would cause the loss of such exemption.

 

**4.7****                               ValidIssuance of Convertible Debentures and Parent Shares**.  The First Tranche Convertible Debentures andthe Second Tranche Convertible Debentures to be issued to the Stockholdershereunder, when issued and delivered in accordance with the terms of thisAgreement, will be duly and validly issued. The shares of Parent Common Stock to be issued pursuant to the FirstTranche Convertible Debentures and the Second Tranche Convertible Debentureswill, when issued, be duly authorized, validly issued, fully paid andnon-assessable and will be free of restrictions on transfer other thanrestrictions under applicable state, federal and Canadian securities laws.

 

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**SECTION 5****.****                            Representations and Warranties of JasomiCanada**

 

Jasomi Canada represents and warrants, to and for thebenefit of the Indemnitees, that the statements contained in this Section 5 aretrue and correct except as set forth in the Disclosure Schedule.

 

**5.1****                               DueOrganization.**  Jasomi Canada is acorporation duly organized, validly existing and in good standing under thelaws of Alberta and has all necessary power and authority:  (i)to conduct its business in the manner in which its business is currently beingconducted; (ii)to own and use its assets in the manner in which its assets are currently ownedand used; and (iii)to perform its obligations under all of its Contracts.

 

**5.2****                               Titleto Assets; Leasehold**.  Jasomi Canadaowns, and has good, valid and marketable title to the assets to be assigned ortransferred to Parent or Merger Sub pursuant to the Assignment and AssumptionAgreement attached hereto as Exhibit N (the “Assignment and AssumptionAgreement”).  Except with respect to theleasehold interest pursuant to Consent to Subletting among Jasomi Canada, 594916 Alberta Ltd. and Compu DesignSystem and Services Group for the premises located at Sunrise Square, dated May10, 2004, all of said assets are owned by Jasomi Canada free and clearof any liens or other Encumbrances.

 

**5.3****                               Intellectual Property; No Contracts. **All Intellectual Propertydeveloped by or licensed to Jasomi Canada has been assigned to the Company andJasomi Canada does not retain any rights to any Intellectual Property,including any of the Company IP.  Exceptas set forth in Section 5.3 of the Disclosure Schedule, Jasomi Canada has noContracts with any other Person providing for the transfer or license of anyIntellectual Property Rights other than the Intercompany Agreements.

 

**5.4****                               Compliancewith Legal Requirements.**  JasomiCanada is, and has at all times since December 31, 2004 been, in compliancewith all applicable Legal Requirements, except where the failure to comply withsuch Legal Requirements has not had and will not have a Material Adverse Effecton Jasomi Canada.  Since April 30, 2005,the Company has not received any notice or other communication from anyGovernmental Body regarding any actual or possible violation of, or failure tocomply with, any Legal Requirement.

 

**5.5****                               LegalProceedings; Orders**.

 

**(a)****                                 **Thereis no pending Legal Proceeding, and no Person has threatened to commence anyLegal Proceeding:  (i) that involves JasomiCanada or any of the assets owned or used by Jasomi Canada or any Person whoseliability Jasomi Canada has or may have retained or assumed, eithercontractually or by operation of law; or (ii) that challenges, or that may havethe effect of preventing, delaying, making illegal or otherwise interferingwith, the Merger or any of the other transactions contemplated by thisAgreement.  No event has occurred, and noclaim, dispute or other condition or circumstance exists, that will, or thatcould reasonably be expected to, give rise to or serve as a basis for thecommencement of any such Legal Proceeding.

 

**(b)****                                 **Thereis no order, writ, injunction, judgment or decree to which Jasomi Canada, orany of the assets owned or used by Jasomi Canada, is subject.

 

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**5.6****                               Authority;Binding Nature of Agreement. **JasomiCanada has the absolute and unrestricted right, power and authority to enterinto and to perform its obligations under this Agreement; and the execution,delivery and performance by Jasomi Canada of this Agreement have been dulyauthorized by all necessary action on the part of Jasomi Canada, its sole shareholderand its board of directors.  ThisAgreement constitutes the legal, valid and binding obligation of Jasomi Canada,enforceable against Jasomi Canada in accordance with its terms, subject to (i)laws of general application relating to bankruptcy, insolvency and the reliefof debtors, and (ii) rules of law governing specific performance, injunctiverelief and other equitable remedies.

 

**SECTION 6****.****                            Certain Covenants of the Company, JasomiCanada and the Signing Stockholders**

 

**6.1****                               Accessand Investigation.**  During the periodfrom the date of this Agreement through the Effective Time (the “Pre-ClosingPeriod”), the Company and Jasomi Canada shall, and shall cause itsRepresentatives to:  (a) provide Parentand Parent’s Representatives with reasonable access to the Company’sRepresentatives, personnel and assets and to all existing books, records, TaxReturns, work papers and other documents and information relating to theCompany; and (b) provide Parent and Parent’s Representatives with copies ofsuch existing books, records, Tax Returns, work papers and other documents andinformation relating to the Company, and with such additional financial,operating and other data and information regarding the Company, as Parent mayreasonably request.

 

**6.2****                               Operationof the Company’s and Jasomi Canada’s Business**.  During the Pre-Closing Period:

 

**(a)****                                 **theCompany and Jasomi Canada shall conduct its business and operations in theordinary course and in substantially the same manner as such business andoperations have been conducted prior to the date of this Agreement;

 

**(b)****                                 **theCompany and Jasomi Canada shall use commercially reasonable efforts to preserveintact its current business organization, keep available the services of itscurrent officers and employees and maintain its relations and good will withall suppliers, customers, landlords, creditors, employees and other Personshaving business relationships with the Company and Jasomi Canada;

 

**(c)****                                 **theCompany and Jasomi Canada shall not amend or restate in any way theIntercompany Agreements;

 

**(d)****                                 **theCompany shall keep in full force all insurance policies identified inPart 2.17 of the Disclosure Schedule;

 

**(e)****                                 **theCompany and Jasomi Canada shall cause its officers to report to Parent asreasonably requested by Parent on not less than five (5) business days’ notice,concerning the status of the Company’s business and of Jasomi Canada’s business;

 

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**(f)****                                   **theCompany shall not declare, accrue, set aside or pay any dividend or make anyother distribution in respect of any shares of capital stock, and shall notrepurchase, redeem or otherwise reacquire any shares of capital stock or othersecurities (except that the Company may repurchase Company Common Stock fromformer employees, former directors or former consultants pursuant to the termsof existing restricted stock purchase agreements);

 

**(g)****                                **theCompany shall not sell, issue or authorize the issuance of (i) any capitalstock or other security, (ii) any option or right to acquire any capital stockor other security, or (iii) any instrument convertible into or exchangeable forany capital stock or other security (except that the Company shall be permitted(x) to issue Company Common Stock to employees upon the exercise of outstandingCompany Options, and (y) to issue shares of Company Common Stock upon theconversion of shares of Preferred Stock);

 

**(h)****                                **theCompany shall not amend or waive any of its rights under, or take anyaffirmative action to permit or cause the acceleration of vesting under,(i) any provision of the Option Plan, (ii) any provision of anyagreement evidencing any outstanding Company Option, or (iii) anyprovision of any restricted stock purchase agreement; *provided,however*, that the Company may permit or cause the acceleration of aportion of any Company Option held by a Company Employee who is a resident ofCanada, such portion not to exceed 19.5% of the number of unvested sharessubject to such Company Option;

 

**(i)****                                   **neitherthe Company nor any of the Signing Stockholders shall amend or permit theadoption of any amendment to the Company’s certificate of incorporation orbylaws, or effect or permit the Company to become a party to any AcquisitionTransaction, recapitalization, reclassification of shares, stock split, reversestock split or similar transaction (except that the Company may issue shares ofCompany Common Stock upon the conversion of shares of Preferred Stock);

 

**(j)****                                   **theCompany shall not form any subsidiary or acquire any equity interest or otherinterest in any other Entity;

 

**(k)****                               **theCompany shall not make any capital expenditure, except for capital expendituresthat, when added to all other capital expenditures made on behalf of theCompany during the Pre-Closing Period, do not exceed $10,000 per month;

 

**(l)****                                   **neitherthe Company nor Jasomi Canada shall (i) enter into, or permit any of the assetsowned or used by it to become bound by, any Contract that is or wouldconstitute a Material Contract (other than such Contracts that are entered intoin the ordinary course of business consistent with past practices), or (ii)amend or prematurely terminate, or waive any material right or remedy under,any such Contract;

 

**(m)****                             **theCompany or Jasomi Canada shall not (i) acquire, lease or license any right orother asset from any other Person, (ii) sell or otherwise dispose of, or leaseor license, any right or other asset to any other Person, or (iii) waive orrelinquish any right, except for assets acquired, leased, licensed or disposedof by the Company or Jasomi Canada pursuant to Contracts that are not MaterialContracts;

 

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**(n)****                                **theCompany shall not (i) lend money to any Person (except that the Company makeroutine travel advances to employees in the ordinary course of business andmay, consistent with its past practices, allow employees to acquire CompanyCommon Stock in exchange for promissory notes upon exercise of CompanyOptions), or (ii) incur or guarantee any indebtedness for borrowed money;

 

**(o)****                                 **neitherthe Company nor Jasomi Canada shall (i) establish, adopt or amend any EmployeeBenefit Plan, (ii) enter into any change-of-control agreements or arrangementswith any of its directors, officers or employees (other than agreements orarrangements which, collectively, will result in cash bonuses or cashincentives payable in the aggregate amount of not more than $30,000), (iii) payany bonus or make any profit-sharing payment, cash incentive payment or similarpayment to, or increase the amount of the wages, salary, commissions, fringebenefits or other compensation or remuneration payable to, any of itsdirectors, officers or employees (other than payments made pursuant toContracts existing as of May 27, 2005), or (iv) hire any new employee whoseaggregate annual compensation is expected to exceed $100,000 per year;

 

**(p)****                                 **theCompany shall not change any of its methods of accounting or accountingpractices in any material respect, except as requested by Parent;

 

**(q)****                                 **theCompany shall not make any Tax election;

 

**(r)****                                 **theCompany or Jasomi Canada shall not commence or settle any material LegalProceeding;

 

**(s)****                                 **theCompany or Jasomi Canada shall not agree or commit to take any of the actionsdescribed in clauses ”(e)” through “(q)” above.

 

Notwithstandingthe foregoing, the Company may take any action described in clauses “(e)”through “(r)” above if Parent gives its prior written consent to the taking ofsuch action by the Company.

 

**6.3****                               Notification;Updates to Disclosure Schedule**.

 

**(a)****                                 **Duringthe Pre-Closing Period, the Company, the Signing Stockholders and Jasomi Canadashall promptly notify Parent in writing of the discovery by the Company, theSigning Stockholders or Jasomi Canada:

 

**(i)****                                   **ofany event, condition, fact or circumstance that occurred or existed on or priorto the date of this Agreement and that caused or constitutes an inaccuracy inor breach of any representation or warranty made by the Company, the SigningStockholders or Jasomi Canada in this Agreement;

 

**(ii)****                               **ofany event, condition, fact or circumstance that occurs, arises or exists afterthe date of this Agreement and that would cause or constitute an inaccuracy inor breach of any representation or warranty made by the Company, Jasomi Canadaor any of the Signing Stockholders in this Agreement if (A) such representationor warranty had been made as

 

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of the time of theoccurrence, existence or discovery of such event, condition, fact orcircumstance, or (B) such event, condition, fact or circumstance hadoccurred, arisen or existed on or prior to the date of this Agreement;

 

**(iii)****                           **ofany breach of any covenant or obligation of the Company, Jasomi Canada or anyof the Signing Stockholders; and

 

**(iv)****                              **ofany event, condition, fact or circumstance that would make the timelysatisfaction of any of the conditions set forth in Section 8 orSection 9 impossible or unlikely.

 

**(b)****                                 **Ifany event, condition, fact or circumstance that is required to be disclosedpursuant to Section 6.3(a) requires any change in the Disclosure Schedule, orif any such event, condition, fact or circumstance would require such a changeassuming the Disclosure Schedule were dated as of the date of the occurrence,existence or discovery of such event, condition, fact or circumstance, then theCompany shall promptly deliver to Parent an update to the Disclosure Schedulespecifying such change.  No such updateshall be deemed to supplement or amend the Disclosure Schedule for the purposeof (i) determining the accuracy of any of the representations and warrantiesmade by the Company, the Signing Stockholders or Jasomi Canada in thisAgreement, or (ii) determining whether any of the conditions set forth inSection 8 has been satisfied.

 

**6.4****                               NoNegotiation.**

 

**(a)****                                 **Duringthe Pre-Closing Period, neither the Company, Jasomi Canada nor any of theSigning Stockholders shall, directly or indirectly:

 

**(i)****                                   **enterinto any agreement, understanding or arrangement relating to any AcquisitionProposal;

 

**(ii)****                               **consider,engage or continue in any discussions or negotiations relating to, anyAcquisition Proposal;

 

**(iii)****                           **provideany information regarding Jasomi or Jasomi Canada or any of their respectivebusinesses or operations to any party (other than to representatives of Parent);

 

**(iv)****                              **solicitor encourage the submission of any Acquisition Proposal; or

 

**(v)****                                  **permitany representative or affiliate of the Company, Jasomi Canada or the SigningStockholders to do any of the foregoing (it being agreed that any action by anyrepresentative or affiliate of Company or the Signing Stockholders of any ofthe foregoing shall be a breach by Company or the Signing Stockholders).

 

**(b)****                                 **Theterm “Acquisition Proposal,” as used in this paragraph, refers to any proposal,plan, agreement, understanding or arrangement (other than the Merger, this Agreementand any related agreements, understandings or arrangements) contemplating(i) any merger, consolidation, reorganization, recapitalization or similartransaction involving the Company or

 

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any of itsaffiliates, (ii) any transfer or issuance of any capital stock or othersecurities of the Company or any of its affiliates,  (iii) any transfer or license of anymaterial asset of the Company or any of its affiliates, or (iv) anytransaction that may be inconsistent with or that may have an adverse effectupon any of the transactions contemplated by this Agreement.

 

**(c)****                                 **TheCompany shall promptly notify Parent in writing of any material inquiry,proposal or offer relating to a possible Acquisition Transaction that isreceived by the Company or any of the Signing Stockholders during thePre-Closing Period.

 

**SECTION 7****.****                            Additional Covenants of the Parties**

 

**7.1****                               Filingsand Consents.**  As promptly aspracticable after the execution of this Agreement, the Company (a) shall makeall filings (if any) and give all notices (if any) required to be made andgiven by such party in connection with the Merger and the other transactionscontemplated by this Agreement, and (b) shall use all commercially reasonableefforts to obtain all Consents (if any) required to be obtained (pursuant toany applicable Legal Requirement or Contract, or otherwise) by such party inconnection with the Merger and the other transactions contemplated by thisAgreement.  The Company shall promptlydeliver to Parent a copy of each such filing made, each such notice given andeach such Consent obtained by the Company during the Pre-Closing Period.

 

**7.2****                               CompanyStockholders’ Meeting; Action by Written Consent.**  Promptly after the execution of this Agreement,the Company shall prepare an information statement or other disclosure document(the “Information Statement”) for distribution to all of the Company’sstockholders to solicit approval of the transactions contemplated by thisAgreement.  The Information Statementshall contain all information necessary to enable Parent to rely upon theexemption from registration of the Convertible Debentures pursuant to Rule 506of Regulation D promulgated under the Securities Act for issuances ofsecurities to at least one but no more than 35 investors who are not “accreditedinvestors” as defined in Regulation D. The Information Statement shall includethe recommendation of the board of directors of the Company in favor of theMerger.  Prior to the distribution of theInformation Statement, the Company shall provide a draft of the InformationStatement to Parent for its review and comment, and shall incorporate allcomments received from Parent in such Registration Statement.  The Company shall, in accordance with itscertificate of incorporation and bylaws and the applicable requirements of the DGCL,call and hold a special meeting of its Stockholders as promptly as practicablefor the purpose of permitting them to consider and to vote upon and approve theMerger and this Agreement (the “Company Stockholders’ Meeting”), or solicitsuch approval by written consent, and shall distribute the InformationStatement to all stockholders of the Company entitled to vote thereon.

 

**7.3****                               PublicAnnouncements.**  During the Pre-ClosingPeriod, (a) neither the Company, Jasomi Canada nor any of the SigningStockholders shall (and the Company and Jasomi Canada shall not permit any ofits Representatives to) issue any press release or make any public statementregarding this Agreement or the Merger, or regarding any of the othertransactions contemplated by this Agreement, without Parent’s prior writtenconsent, and

 

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(b) Parentwill use commercially reasonable efforts to consult with the Company prior toissuing any press release or making any public statement regarding thisAgreement or the Merger.

 

**7.4****                               ClosingEfforts.**  During the Pre-ClosingPeriod, (a) the Company, Jasomi Canada and the Signing Stockholders shall use allcommercially reasonable efforts to cause the conditions set forth in Section 8 tobe satisfied on a timely basis, and (b) Parent and Merger Sub shall use allcommercially reasonable efforts to cause the conditions set forth in Section 9 tobe satisfied on a timely basis.

 

**7.5****                               Reserved**.

 

**7.6****                               FIRPTAMatters.**  At the Closing, (a) theCompany shall deliver to Parent a statement (in such form as may be reasonablyrequested by counsel to Parent) conforming to the requirements of Section 1.897- 2(h)(1)(i) of the United States Treasury Regulations, and (b) the Companyshall deliver to the IRS the notification required under Section 1.897 -2(h)(2) of the United States Treasury Regulations.

 

**7.7****                               Release.**  At the Closing, Stockholders holding at least90% of the Company Capital Stock outstanding on the date of this Agreement shallexecute and deliver to Parent a General Release in the form of Exhibit H.

 

**7.8****                               EmploymentMatters.**

 

**(a)****                                 **Followingthe Effective Time, Parent shall be responsible for any severance or othersimilar rights of employees of Jasomi Canada not hired by Parent such that suchobligations would become liabilities of Parent, subject to the followinglimitations:  (i) Parent shall not beresponsible for any such liabilities as they relate to any employee of JasomiCanada that Parent offers to employ (or that Parent employs but such employeeleaves the employment of Parent within 30 days of employment for reasons otherthan Good Reason); and (ii) Parent shall not be responsible for an amount inexcess of the lesser of three months salary and such amount that would havebeen obtainable under Canadian law;

 

**(b)****                                 **JasomiCanada shall be responsible for any notice, indemnity in lieu of notice, severance,termination pay or other similar rights of employees of Jasomi Canada for whichParent is not responsible pursuant to Section 7.8(a) above; and

 

**(c)****                                 **Parent shall establisha pool of restricted stock awards with an aggregate value of approximately$2,717,117 (the “Parent Stock Awards”) for grant to Company employees or JasomiCanada employees hired by Parent pursuant to Parent’s 2005 New Recruit StockPlan, a draft of which has been furnished to the Company and which will beapproved by Parent’s Board of Directors in substantially such form with suchchanges thereto as the Stockholders’ Representative may approve, such approvalnot to be unreasonably withheld.  Withinfive (5) days following the Closing Date, Parent shall grant the Parent StockAwards to Company Employees hired by Parent. To the extent they are granted in unvested form, such Parent StockAwards shall vest at a rate not less than one-third (1/3) upon the 12-monthanniversary of the grant and the remainder thereafter in equal periodicinstallments over the 2-year period following such 12-month anniversary.

 

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**(d)****                                 **Priorto the Closing Date, Parent shall take all corporate action necessary toreserve for issuance a sufficient number of shares of Parent Common Stock forissuance upon the exercise of the Parent Options (as defined in Section 1.6) andParent Stock Awards described in Section 7.8(c).  Within twenty (20) days after the ClosingDate, Parent shall file with the SEC a registration statement on Form S-8 or asuccessor registration form with respect to the shares of Parent Common Stockissuable upon the exercise of such Parent Options or with respect to the ParentStock Awards and shall use commercially reasonable efforts to maintain theeffectiveness of such registration statement and maintain the current status ofthe prospectus referred to therein for so long as any Parent Options or ParentStock Awards remain outstanding.

 

**7.9****                               Indemnificationof Directors and Officers. **For aperiod of six years from and after the Closing Date, Parent agrees that itshall cause the Surviving Company to indemnify past and present officers anddirectors of the Company, to the same extent such Persons are indemnified as ofthe date of this Agreement by the Company pursuant to the Company’s Certificateof Incorporation or Bylaws.  Thisindemnification shall not apply to any claim by any such officer or director inconnection with the Merger, the terms of this Agreement or any other agreementcontemplated by this Agreement.

 

**7.10****                        Registrationof Securities.**

 

**(a)****                                 **Inthe event Stockholders having the right to receive at the Closing not less thantwenty-five percent (25%) of the aggregate principal amount of the ConvertibleDebentures deliver to Parent an opinion of counsel in a form reasonablyacceptable to Parent stating that such Stockholders will not be allowed to “tack”the issue dates of the shares of Parent Common Stock issued upon conversion ofthe Convertible Debentures back to the original issue date of such ConvertibleDebentures for purposes of measuring their holding periods under Rule 144(d) ofthe Securities Act, then Parent will, as soon as practicable following the laterof the date of the request of such Stockholders and the date on which Parent isfirst eligible to file a registration statement on Form S-3, use commerciallyreasonable efforts to file a registration statement on Form S-3 and shall usecommercially reasonable efforts to cause such registration statement to becomeeffective within forty-five days after the date of such Stockholder request, orotherwise as soon as practicable after such filing, providing for theregistration and resale of all “Eligible Shares” held by such Stockholdersrequesting registration.  “EligibleShares”******means Parent Common Stockissued upon conversion of the Convertible Debentures, provided that such sharesare not sold or able to be sold pursuant to Rule 144 of the Securities Act.

 

**(b)****                                 **Itshall be a condition precedent to the obligations of Parent to take any actionpursuant to this Section 7.10 that the selling holders of Eligible Shares(the “Holders”) shall furnish to Parent such information regarding themselves,the Eligible Shares held by them and the intended method of disposition of suchsecurities as shall be required to effect the registration of their EligibleShares.

 

**(c)****                                 **Parentshall keep such registration statement effective for the first to occur of (i)three years from the Effective Date, (ii) the first date upon which the sale ofall shares so registered may be sold pursuant to Rule 144 on such date and(iii) the date Parent shall cease to be able to use Form S-3; *provided, however*, that at any time and from time to time,upon written

 

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notice to theparticipating Holders and for a period not to exceed sixty (60) days thereafter(each such period a “Suspension Period”), Parent may delay the filing oreffectiveness of any registration statement or suspend the use or effectivenessof any registration statement (and the Holders hereby agree not to offer orsell any Eligible Shares pursuant to such registration statement during a SuspensionPeriod) if Parent reasonably believes that there is or may be in existencematerial nonpublic information or events involving Parent, the failure of whichto be disclosed in the prospectus included in the registration statement couldresult in a violation of state or federal securities laws.  If so directed by Parent, all Holdersregistering shares under such registration statement shall (i) not offer tosell any Eligible Shares pursuant to the registration statement during theperiod in which the delay or suspension is in effect after receiving notice ofsuch delay or suspension, and (ii) use their commercially reasonable efforts todeliver to Parent all copies, other than permanent file copies then in suchHolders’ possession, of the prospectus relating to such Eligible Shares currentat the time of receipt of such notice.  Notwithstanding the foregoing, Parent shallnot be required to file, cause to become effective or maintain the effectivenessof any registration statement other than a registration statement on Form S-3that contemplates a distribution of securities on a delayed or continuous basispursuant to Rule 415 under the Securities Act.

 

**(d)****                                 **Parentshall prepare and file with the SEC such amendments and supplements to suchregistration statement and the prospectus used in connection with suchregistration statement as may be necessary to comply with the provisions of theSecurities Act with respect to the disposition of all securities covered bysuch registration statement for the period set forth in Section 7.10(c) above.

 

**(e)****                                 **Parentshall furnish to the holders of Eligible Shares such number of copies of aprospectus, including a preliminary prospectus, in conformity with the requirementsof the Securities Act, and such other documents as they may reasonably requestin order to facilitate the disposition of Eligible Shares owned by them.

 

**(f)****                                   **Parentshall notify each Holder of Eligible Shares covered by such registrationstatement at any time when a prospectus relating thereto is required to bedelivered under the Securities Act of the happening of any event as a result ofwhich the prospectus included in such registration statement, as then ineffect, includes an untrue statement of a material fact or omits to state amaterial fact required to be stated therein or necessary to make the statementstherein not misleading in the light of the circumstances then existing. Parentwill use commercially reasonable efforts to amend or supplement such prospectusin order to cause such prospectus not to include any untrue statement of amaterial fact or omit to state a material fact required to be stated therein ornecessary to make the statements therein not misleading in the light of the circumstancesthen existing.

 

**(g)****                                **TheHolders of the Eligible Shares seeking registration of such Eligible Shares shallcontribute up to US$30,000 per requested registration toward the expenses ofsuch registration, which US$30,000 shall be delivered to Parent prior to Parentbeing required to begin the registration process.  If the total cost of such registration shallbe less than US$30,000, then the difference between US$30,000 and such actualamount of expenses shall be delivered to the

 

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Stockholders’Representative for disbursement to the Holders of Eligible Shares, and Parentshall have no liability for how such amount is distributed.

 

**(h)****                                **Parent’sobligations under this Section 7.10 shall terminate on the first date uponwhich no Convertible Debentures are outstanding and no shares of Parent CommonStock continue to be Eligible Shares.

 

**7.11****                        Severance.**  Prior to the Closing, Parent shall establisha severance plan pursuant to which each employee of the Company and JasomiCanada hired by Parent or an affiliate of Parent shall be offered the greaterof (a) three months Salary or (b) one month of Salary (up to a total of sixmonths of Salary) for each year or part thereof of service as an employeecollectively at Parent and the Company or Jasomi Canada, as severance in theevent his or her employment with Parent or any of its affiliates isinvoluntarily terminated for any reason other than Cause or terminates his orher employment for Good Reason prior to the second anniversary of the Closing,payable on Parent’s standard payroll schedule, provided that such employeeshall have provided a general release in favor of Parent and its affiliates ina form reasonably satisfactory to Parent. “Salary” shall mean such employee’s base salary as of the date oftermination of employment.  In addition,such severance plan shall provide that, if an employee receives severance undersuch severance plan and such employee is entitled to and timely electscontinued coverage under COBRA, Parent or an affiliate of Parent shall pay thefull amount of such employee’s COBRA premiums on behalf of such employee forsuch employee’s continued coverage under Parent’s health, dental and visionplans for a period of three months;*provided, however,*that no such premium payments shall be madefollowing such employee’s death or the effective date of such employee’scoverage by a medical, dental or vision insurance plan of a subsequentemployer.

 

**SECTION 8****.****                            Conditions Precedent to Obligations of Parentand Merger Sub**

 

The obligations of Parent and Merger Sub to effect theMerger and otherwise consummate the transactions contemplated by this Agreementare subject to the satisfaction, at or prior to the Closing, of each of thefollowing conditions:

 

**8.1****                               Accuracyof Representations**.  Solely forpurposes of determining Parent’s and Merger Sub’s obligations to effect theMerger and not for purposes of determining whether there has been a breach forwhich a claim for indemnification may be made, at each of the date of thisAgreement and at the Effective Time (i) the representations and warranties madeby the Company, the Signing Stockholders and Jasomi Canada in this Agreementand in each of the other agreements and instruments delivered to Parent in connectionwith the transactions contemplated by this Agreement shall have been true andcorrect in all respects except for breaches or inaccuracies in therepresentations and warranties of the Company, the Signing Stockholders andJasomi Canada that, when taken collectively with all other inaccuracies in the representationsand warranties, shall not result in a Material Company Change (it beingunderstood that, for purposes of determining the accuracy of suchrepresentations and warranties, all “Material Adverse Effect“ qualificationsand other materiality qualifications and similar qualifications contained insuch representations and warranties shall be disregarded), and (ii) the IntellectualProperty Warranty shall have been true and correct in all respects.

 

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**8.2****                               Performanceof Covenants**.  All of the covenantsand obligations that the Company, Jasomi Canada and the Signing Stockholdersare required to comply with or to perform at or prior to the Closing shall havebeen complied with and performed in all respects.

 

**8.3****                               StockholderApproval**.  The principal terms of theMerger shall have been duly approved by the affirmative vote of at least 90% ofthe aggregate number of shares of Company Common Stock and Preferred Stock,collectively, entitled to vote with respect thereto (including each holder ofin excess of 3% of the number of shares of the Company’s Capital Stockoutstanding), and the holders of Company Preferred Stock shall have elected tocause the Merger to not be a “liquidation” for purposes of Article IV.B.2(c)(i)of the Company’s Certificate of Incorporation.

 

**8.4****                               Consents**.  Parent shall have received the consent of 594916 Alberta Ltd. consenting to theassumption by Parent of the Consent to Subletting among Jasomi Canada, 594916 Alberta Ltd. and Compu DesignSystem and Services Group for the premises located at Sunrise Square, dated May10, 2004, which consent shall state that Parent shall not be liable forany claims arising prior to the Closing Date and shall be in full force andeffect.

 

**8.5****                               Agreementsand Documents.**  Parent and theCompany shall have received the following agreements and documents, each ofwhich shall be in full force and effect:

 

**(a)****                                 **Parentshall have received a certificate, executed by the executive officer of theCompany and by Daniel Freedman (solely in his capacity as a director of theCompany), dated as of the Closing Date, certifying as to the matters set forthin Sections 8.1, 8.2, 8.3, 8.4 and 8.8.

 

**(b)****                                 **Parentshall have received a certificate, in a form reasonably satisfactory to Parent,executed by Daniel Freedman and Cullen Jennings, dated as of the Closing Date,certifying on their own behalf and on in their capacities as directors of theCompany, that the representations and warranties set forth in the last sentenceof Section 2.3(b) are true and correct in all respects and certifying that theCompany has complied in all respects with the covenants set forth in Section 6.2(g),and agreeing in their personal capacity to indemnify and hold Parent harmless,without limitation, for any breach of such representations and warranties orfailure to comply with such covenants.

 

**(c)****                                 **Parentshall have received a certificate, duly executed by the executive officer ofthe Company and by Daniel Freedman (solely in his capacity as a director of theCompany), pursuant to which the Company certifies and represents and warrantsto Parent as to the following amounts and provides documents supporting suchamounts:  (1) the Net Working Capital, asset forth on the Closing Balance Sheet; (2) the name and address of record ofeach Stockholder who is a stockholder of the Company immediately prior to theEffective Time; (3) the number (on a per class and series basis) of shares ofCompany Capital Stock held by each such Stockholder immediately prior to theEffective Time; (4) the name and address of record of each holder of CompanyOptions immediately prior to the Effective Time; (5) the number of shares ofCompany Common Stock issuable upon exercise of such Company Options, includingoption grant dates, vesting schedules, exercise price and vesting accelerationrights for each such

 

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Company Option; (6)the amount of cash that each such Stockholder is entitled to receive inconnection with the Closing pursuant to Section 1.5; (7) the portion of theFirst Tranche Convertible Debentures that each such Stockholder is initiallyentitled to receive pursuant to Section 1.5; and (8) the portion of the SecondTranche Convertible Debentures that each such Stockholder is initially entitledto receive pursuant to Section 1.5.

 

**(d)****                                 **Noncompetitionand Nonsolicitation Agreements in the form of Exhibit I, executed by thepersons set forth on Exhibit J;

 

**(e)****                                 **executedoffer letters in the form of Exhibit K, executed by each of the DesignatedEmployees with Parent or an Affiliate of Parent;

 

**(f)****                                   **confidentialinvention and assignment agreements, reasonably satisfactory in form andcontent to Parent, executed by all employees and former employees of theCompany and Jasomi Canada and by all current and former consultants andindependent contractors to the Company and Jasomi Canada who have not alreadysigned such agreements (including the individuals identified in Part 2.9(f) ofthe Disclosure Schedule);

 

**(g)****                                **thestatement referred to in Section 7.6(a), executed by the Company;

 

**(h)****                                **alegal opinion of Gunderson DettmerStough Villeneuve Franklin & Hachigian, LLP, dated as of the ClosingDate, in the form of Exhibit L; and

 

**(i)****                                   **writtenresignations of all directors of the Company, effective as of the EffectiveTime.

 

**8.6****                               FIRPTACompliance.**  The Company shall havefiled with the IRS the notification referred to in Section 7.6(b).

 

**8.7****                               NoRestraints.**  No temporary restrainingorder, preliminary or permanent injunction or other order preventing theconsummation of the Merger shall have been issued by any court of competentjurisdiction and remain in effect, and there shall not be any Legal Requirementenacted or deemed applicable to the Merger that makes consummation of the Mergerillegal.

 

**8.8****                               NoLegal Proceedings.**  No Person shallhave commenced or threatened to commence any Legal Proceeding challenging orseeking the recovery of a material amount of damages in connection with theMerger or seeking to prohibit or limit the exercise by Parent of any materialright pertaining to its ownership of stock of the Surviving Corporation.

 

**8.9****                               Cancellationof Convertible Promissory Notes.**  Purchasershall have received the original, cancelled Convertible Promissory Notesdescribed in Exhibit G of the Disclosure Schedule or other evidence ofcancellation of such indebtedness reasonably satisfactory to Parent.

 

**8.10****                        Assumptionof Jasomi Canada Agreements.**  JasomiCanada shall have executed and delivered to Parent or an Affiliate of Parentthat certain Assignment and

 

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AssumptionAgreement, and shall have executed and delivered to Parent or an Affiliate ofParent all such instruments and other documents, and shall have taken suchother actions, as Parent or an Affiliate of Parent may reasonably request forthe purpose of carrying out or evidencing any of the transactions contemplatedby such Assignment and Assumption Agreement.

 

**8.11****                        JasomiCanada Indemnification Agreement. **DanielFreedman shall have executed and delivered to Parent an IndemnificationAgreement, in the form of Exhibit O hereto.

 

**SECTION 9****.****                            Conditions Precedent to Obligations of theCompany**

 

The obligations of the Company to effect the Mergerand otherwise consummate the transactions contemplated by this Agreement aresubject to the satisfaction, at or prior to the Closing, of the followingconditions:

 

**9.1****                               Accuracyof Representations**.  Each of therepresentations and warranties made by Parent and Merger Sub in this Agreementshall have been accurate in all respects as of the date of this Agreement andas of the Effective Time except that all inaccuracies in the representationsand warranties of Parent and Merger Sub that individually, or when takencollectively with all other inaccuracies in the representations and warranties,shall not result in a Material Adverse Effect on the Parent.

 

**9.2****                               Performanceof Covenants**.  All of the covenantsand obligations that Parent and Merger Sub are required to comply with or toperform at or prior to the Closing shall have been complied with and performedin all respects.

 

**9.3****                               Agreementsand Documents**.  The Company shallhave received from Parent the following agreements and documents, each of whichshall be in full force and effect:

 

**(a)****                                 **acertificate of Parent, executed by an executive officer of Parent, dated as ofthe Closing Date, certifying as to the matters set forth in Sections 9.1 and 9.2.

 

**(b)****                                 **alegal opinion of Cooley Godward LLP,dated as of the Closing Date, in the form of Exhibit M.

 

**9.4****                               NoRestraints**.  No temporary restrainingorder, preliminary or permanent injunction or other order preventing theconsummation of the Merger shall have been issued by any court of competentjurisdiction and remain in effect, and there shall not be any Legal Requirementenacted or deemed applicable to the Merger that makes consummation of theMerger illegal.

 

**9.5****                               Assumptionof Jasomi Canada Agreements**.  Parent oran Affiliate of Parent shall have executed and delivered to Jasomi Canada the Assignmentand Assumption Agreement, and shall have executed and delivered to the Companyall such instruments and other documents, and shall have taken such otheractions, as the Company or Jasomi Canada may reasonably request for the purposeof carrying out or evidencing any of the transactions contemplated by such Assignmentand Assumption Agreement.

 

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**9.6****                               IncentivePlan**.  Parent shall have establishedthe pool of Parent Stock Awards referenced in Section 7.8(c).

 

**9.7****                               SeverancePlan**.  Parent shall have establishedthe severance plan referenced in Section 7.11.

 

**9.8****                               OfferLetters**.  Parent or an Affiliate ofParent shall have executed an offer letter in the form of Exhibit K, with eachof the Designated Employees.

 

**9.9****                               ResaleRestrictions**.  Parent shall haveprovided to the Stockholders’ Representative, for the benefit of theStockholders, either (a) a certificate attesting to the fact that ”Parent isnot a reporting issuer in any jurisdiction of Canada.  After giving effectto the issue of the securities issuable in connection with the Merger and any sharesof Parent Common Stock that will be issued at the same time as the Closing,residents of Canada: (i) will not own directly or indirectly more than tenpercent (10%) of Parent’s outstanding shares of common stock, and (ii) will notrepresent in number more than ten percent (10%) of the total number of ownersdirectly or indirectly of Parent’s outstanding shares of common stock” or (b)an undertaking to apply, upon the request of the Stockholders’ Representativeand at Parent’s expense, for exemptive relief from the Canadian securitiesregulators in respect of the resale restrictions (other than any controlbloc restrictions) applicable to the shares of Parent Common Stock to be issuedpursuant to the Convertible Debentures.

 

**SECTION 10****.****                     Termination**

 

**10.1****                        TerminationEvents.**  This Agreement may beterminated prior to the Closing:

 

**(a)****                                 **byParent if Parent reasonably determines that the timely satisfaction of anycondition set forth in Section 8 has become impossible (other than as aresult of any failure on the part of Parent or Merger Sub to comply with orperform any covenant or obligation of Parent or Merger Sub set forth in thisAgreement);

 

**(b)****                                 **bythe Company if the Company reasonably determines that the timely satisfactionof any condition set forth in Section 9 has become impossible (other thanas a result of any failure on the part of the Company or any of the SigningStockholders to comply with or perform any covenant or obligation set forth inthis Agreement or in any other agreement or instrument delivered to Parent);

 

**(c)****                                 **byParent at or after the Scheduled Closing Time if any condition set forth inSection 8 has not been satisfied by the Scheduled Closing Time;

 

**(d)****                                 **bythe Company at or after the Scheduled Closing Time if any condition set forthin Section 9 has not been satisfied by the Scheduled Closing Time;

 

**(e)****                                 **byParent if the Closing has not taken place on or before August 2, 2005 (otherthan as a result of any failure on the part of Parent to comply with or performany covenant or obligation of Parent set forth in this Agreement);

 

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**(f)****                                   **bythe Company if the Closing has not taken place on or before August 2, 2005(other than as a result of any failure on the part of the Company to complywith or perform any covenant or obligation of the Company set forth in thisAgreement); or

 

**(g)****                                **bythe mutual consent of Parent and the Company.

 

**10.2****                        TerminationProcedures.**  If Parent wishes toterminate this Agreement pursuant to Section 10.1(a), Section 10.1(c) orSection 10.1(e), Parent shall deliver to the Company a written notice statingthat Parent is terminating this Agreement and setting forth a detailed descriptionof the basis on which Parent is terminating this Agreement.  If the Company wishes to terminate thisAgreement pursuant to Section 10.1(b), Section 10.1(d) orSection 10.1(f), the Company shall deliver to Parent a written noticestating that the Company is terminating this Agreement and setting forth a detaileddescription of the basis on which the Company is terminating this Agreement.

 

**10.3****                        Effect ofTermination.**  If this Agreement isterminated pursuant to Section 10.1, this Agreement shall forthwith becomevoid and all further obligations of the parties under this Agreement shallterminate; *provided, however*, that: (a) neither theCompany nor Parent shall be relieved of any obligation or liability arisingfrom any prior breach by such party of any provision of this Agreement; (b) the partiesshall, in all events, remain bound by and continue to be subject to theprovisions set forth in Section 12; and (c) the Company and Parent shall, in allevents, remain bound by and continue to be subject to Section 7.3 andSection 12.5.

 

**SECTION 11****.****                     Indemnification, Etc.**

 

**11.1****                        Survivalof Representations, Etc.**

 

**(a)****                                 **Therepresentations, warranties and covenants made by the Company, the SigningStockholders or Jasomi Canada (including the representations and warranties setforth in Sections 2, 3 and 5 and in the certificates referenced in Section8.5(a), (b) and (c)) shall survive the Closing and shall expire on the date twentyfour (24) months from the Closing Date (except that the representations andwarranties set forth in Section 2.9(h)(ii) shall expire on the date twelve (12)months from the Closing Date); *provided, however,*thatif, at any time prior to the date twenty four (24) months from the Closing Date(twelve (12) months from the Closing Date with respect to the representationsand warranties set forth in Section 2.9(h)(ii)), any Indemnitee (acting in goodfaith) delivers to Stockholders’ Representative a proper claim forindemnification pursuant to Section 11.3 or 11.4 alleging the existence of aninaccuracy in or a breach of any of the representations and warranties orcovenants made by the Company, Signing Stockholders or Jasomi Canada thatexpire on the date twenty four (24) months from the Closing Date (twelve (12)months from the Closing Date with respect to the representations and warrantiesset forth in Section 2.9(h)(ii)) and asserting a claim for recovery underSection 11.2 based on such alleged inaccuracy or breach, then the claimasserted in such notice shall survive the date twenty four (24) months from theClosing Date (twelve (12) months from the Closing Date with respect to therepresentations and warranties set forth in Section 2.9(h)(ii)) until such timeas such claim is fully and finally resolved. All representations and warranties made by Parent and Merger Sub shallterminate and expire as of the Effective Time, and any liability of Parent orMerger Sub

 

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with respect tosuch representations and warranties shall thereupon cease.  Notwithstanding anything to the contrarycontained herein, none of the limitations set forth herein shall apply inconnection with Fraud Claims.  Exceptwith respect to (i) a breach of a representation or warranty contained inSection 3, (ii) injunctive and other equitable relief; (iii) Fraud Claims; and(iv) any agreement (other than this Agreement) entered into between Parent orthe Surviving Company and any Stockholders, Parent and the Surviving Corporation acknowledge and agree (on behalf ofthemselves and the other Parent Indemnitees) that from and after the Closingtheir sole and exclusive remedy with respect to any and all claims relating tothe subject matter of this Agreement shall be pursuant to the indemnificationprovisions set forth in this Section 11.

 

**(b)****                                 **Therepresentations, warranties, covenants and obligations of the Company, the SigningStockholders or Jasomi Canada, and the rights and remedies that may beexercised by the Indemnitees, shall not be limited or otherwise affected by oras a result of any information furnished to, or any investigation made by orknowledge of, any of the Indemnitees or any of their Representatives.

 

**(c)****                                 **Forpurposes of this Agreement, each statement or other item of information setforth in the Disclosure Schedule or in any update to the Disclosure Scheduleshall be deemed to be a representation and warranty made by the Company.

 

**11.2****                        Indemnificationby Stockholders**.

 

**(a)****                                 **Fromand after the Effective Time (but subject to Section 11.1(a)), theStockholders, jointly and severally, shall hold harmless and indemnify each ofthe Indemnitees from and against, and shall compensate and reimburse each ofthe Indemnitees for, any Damages which are directly or indirectly suffered orincurred by any of the Indemnitees or to which any of the Indemnitees mayotherwise become subject (regardless of whether or not such Damages relate toany third-party claim) and which arise from or as a result of, or are directlyor indirectly connected with:  (i)  any inaccuracy in or breach of any representationor warranty set forth in Sections 2 or 5 as of the date of this Agreement(without giving effect to any update to the Disclosure Schedule); (ii) any inaccuracyin or breach of any representation or warranty set forth in Sections 2 or 5 asif such representation and warranty had been made on and as of the Closing Date(without giving effect to any update to the Disclosure Schedule) or in acertificate referenced in Section 8.5(a), (b) or (c);(iii) any breach of any covenant orobligation of the Company, Jasomi Canada or any of the Signing Stockholders(including the covenants set forth in Sections 6 and 7); or (iv) any Legal Proceeding relating to anyinaccuracy or breach of the type referred to in clause “(i),” “(ii)” or “(iii)”above (including any Legal Proceeding commenced by any Indemnitee for thepurpose of enforcing any of its rights under this Section 11).

 

**(b)****                                 **TheStockholders acknowledge and agree that, if the Surviving Corporation suffers,incurs or otherwise becomes subject to any Damages as a result of or inconnection with any inaccuracy in or breach of any representation, warranty,covenant or obligation, then (without limiting any of the rights of theSurviving Corporation as an Indemnitee) Parent shall also be deemed, by virtueof its ownership of the stock of the Surviving

 

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Corporation, tohave incurred Damages as a result of and in connection with such inaccuracy orbreach.

 

**11.3****                        IndemnificationClaims Procedures From the Escrow Fund**.  Except as otherwise provided herein, theEscrow Agent shall administer the Escrow Fund as follows:

 

**(a)****                                 **Ifany Indemnitee has or claims to have incurred or suffered Damages for which itis or may be entitled to indemnification, compensation or reimbursement underSection 11 or Section 1.8(d) of the this Agreement, such Indemnitee may,on or prior to the twenty four (24) month anniversary of the Closing Date (twelve(12) months from the Closing Date with respect to the representations andwarranties set forth in Section 2.9(h)(ii)), deliver a claim notice (a “ClaimNotice”) to Stockholders’ Representative and to the Escrow Agent.  Each Claim Notice shall state that suchIndemnitee believes that there is or has been a breach of a representation,warranty or covenant contained in the Agreement or that such Indemnitee isotherwise entitled to indemnification, compensation or reimbursement underSection 11 or Section 1.8(d) of the Agreement, and contain a reasonablydetailed description of the circumstances supporting such Indemnitee’s beliefthat there is or has been such a breach or that such Indemnitee is so entitledto indemnification, compensation or reimbursement and shall, to the extentpossible, contain a good faith, non-binding, preliminary estimate of the amountof Damages such Indemnitee claims to have so incurred or suffered (the “ClaimedAmount”).

 

**(b)****                                 **Within30 days after receipt by Stockholders’ Representative of a Claim Notice, Stockholders’Representative may deliver to the Indemnitee who delivered the Claim Notice andto the Escrow Agent a written response (the “Response Notice”) in which Stockholders’Representative:  (i) agrees that cashin an amount equal to the full Claimed Amount may be released from the EscrowFund to the Indemnitee; (ii) agrees that cash in an amount equal to part, butnot all, of the Claimed Amount (the “Agreed Amount”) may be released from the EscrowFund to the Indemnitee; or (iii) indicates that no part of the Escrow Fundmay be released from the Escrow Fund to the Indemnitee in respect of theClaimed Amount.  Any part of the ClaimedAmount that is not agreed to be released to the Indemnitee pursuant to theResponse Notice shall be the “Contested Amount.”  If a Response Notice is not received by theEscrow Agent within such 30-day period, then Stockholders’ Representative shallbe conclusively deemed to have agreed that cash in an amount equal to the fullClaimed Amount may be released to the Indemnitee from the Escrow Fund.

 

**(c)****                                 **IfStockholders’ Representative delivers a Response Notice agreeing that cash inan amount equal to the full Claimed Amount may be released from the Escrow Fundto the Indemnitee, or if Stockholders’ Representative does not deliver aResponse Notice on a timely basis in accordance with Section 11.3(b), theEscrow Agent shall within five business days following the receipt of suchResponse Notice (or, if the Escrow Agent has not received a Response Notice,within five business days following the expiration of the 30-day periodreferred to in Section 11.3(b)), deliver to such Indemnitee such cash.

 

**(d)****                                 **IfStockholders’ Representative delivers a Response Notice agreeing that cash inan amount equal to less than the full Claimed Amount may be released from the EscrowFund to the Indemnitee, the Escrow Agent shall, within five business daysfollowing the receipt

 

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of such ResponseNotice, deliver to such Indemnitee cash in an amount equal to the AgreedAmount.  Such payment shall not be deemedto be made in full satisfaction of the claim described in such Claim Notice,but shall count toward the satisfaction of the claim described in such ClaimNotice.

 

**(e)****                                 **IfStockholders’ Representative delivers a Response Notice indicating that thereis a Contested Amount, Stockholders’ Representative and the Indemnitee shallattempt in good faith to resolve the dispute related to the ContestedAmount.  If the Indemnitee and Stockholders’Representative resolve such dispute, such resolution shall be binding on all ofthe Stockholders and such Indemnitee and a settlement agreement shall be signedby such Indemnitee and Stockholders’ Representative and sent to the EscrowAgent, which shall, upon receipt thereof, if applicable, release cash from the EscrowFund in accordance with such agreement. Unless and until the Escrow Agent shall receive written notice that anysuch dispute has been resolved by the Indemnitee and Stockholders’Representative, the Escrow Agent may assume without inquiry that such disputehas not been resolved.

 

**(f)****                                   **IfStockholders’ Representative and the Indemnitee are unable to resolve thedispute relating to any Contested Amount within 60 days after the delivery ofthe Claim Notice (“Initial Resolution Period”), then the claim described in theClaim Notice shall be settled by binding arbitration as set forth in Section12.10 below.

 

**(g)****                                **TheEscrow Agent shall release cash from the Escrow Fund in connection with anyContested Amount within five business days after the delivery to it of:  (i) a copy of a settlement agreement executedby the Indemnitee and Stockholders’ Representative setting forth instructionsto the Escrow Agent as to the amount of cash, if any, to be released from the EscrowFund, with respect to such Contested Amount; or (ii) a copy of the award of thearbitrator(s) referred to and as provided in Section 12.10 setting forthinstructions to the Escrow Agent as to the amount of cash, if any, to bereleased from the Escrow Fund, with respect to such Contested Amount.

 

**11.4****                        IndemnificationClaims Procedures From the Convertible Debentures**.  The resolution of claims made forindemnification, for which satisfaction of such indemnification claims are tobe made by reduction in the principal amount of Convertible Debentures, shallbe made as nearly as practicable to the procedures set forth in Section 11.3,with (i) references to the Escrow Agent being changed to Parent, (ii)references to the Escrow Fund being changed to the principal amount of theapplicable Convertible Debentures, and (iii) references to cash being changedto principal reduction of the applicable Convertible Debentures.  If, prior to the date twenty four (24) monthsfrom the Closing Date (the “Termination Date”), any Indemnitee has given aClaim Notice containing a claim which has not been resolved prior to theTermination Date in accordance with the provisions set forth in this Section 4,Parent shall reduce the applicable Convertible Debentures pro rata inaccordance with the amount of principal thereon in an amount equal to 100% ofthe Claimed Amount or Contested Amount, as the case may be, with respect to allclaims which have not then been resolved.

 

**11.5****                        Satisfactionof Indemnification Claim by Stockholders. **In the event any Stockholder shall have any liability forindemnification to any Indemnitee under this Section 11,

 

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Parent shall beentitled to satisfy such liability by submitting a claim with the Escrow Agent,pursuant to the terms of the Escrow Agreement, or by reduction of the principalamount of the Convertible Debentures, but in the following order: (i) first byreduction of the principal amount of the First Tranche Convertible Debenturesin the amount of such liability; *provided, however,*that the principal amount of the First Tranche Convertible Debentures shall notbe reduced as a result of any indemnification claims made more than twelve (12)months following the Closing Date; (ii) to the extent the reduction of theprincipal amount of the First Tranche Convertible Debentures is no longeravailable, then from the cash held in the Escrow Fund; and (iii) to the extent theprincipal amount of the First Tranche Convertible Debentures has either beenreduced to zero or the First Tranche Convertible Debentures are otherwise nolonger available to satisfy the indemnification liability, and cash in theEscrow Fund is no longer available, by reduction of the principal amount of theSecond Tranche Convertible Debentures in the amount of such liability.

 

**11.6****                        Threshold;Ceiling; Joint and Several Liability**.

 

**(a)****                                 **TheStockholders shall not be required to make any indemnification payment pursuantto Section 11.2(a) for any inaccuracy in or breach of any representations and warrantiesset forth in Sections 2 or 5 or in a certificate referenced in Section 8.5(a),(b) or (c) until such time as the total amount of all Damages (including theDamages arising from such inaccuracy or breach and all other Damages arisingfrom any other inaccuracies in or breaches of any representations or warrantiesor covenants) that have been directly or indirectly suffered or incurred by anyone or more of the Indemnitees, or to which any one or more of the Indemniteeshas or have otherwise become subject, exceeds $100,000 in the aggregate; *provided, however*, that such threshold shall not apply withrespect to a claim for the Net Working Capital Shortfall.

 

**(b)****                                 **Noneof the limitations set forth in this Section 11 shall limit the Company, theSurviving Company, Merger Sub or Parent in any respects from pursuing otherremedies for Fraud Claims.

 

**(c)****                                 **Exceptwith respect to Fraud Claims, Parent and Merger Sub agree that, after theClosing Date, the sole and exclusive remedy of the Indemnitees with respect toa breach of the representations or warranties made in Sections 2 and 5 of thisAgreement or in the Disclosure Schedule or in the certificates referenced inSection 8.5(a), (b) or (c) or the other indemnification rights set forth inthis Section 11 shall be against the Escrow Fund and the Convertible Debentures.

 

**11.7****                        NoContribution.**  Each Stockholderwaives, and acknowledges and agrees that he/she/it shall not have and shall notexercise or assert (or attempt to exercise or assert), any right ofcontribution, right of indemnity or other right or remedy against the SurvivingCorporation in connection with any indemnification obligation or any otherliability to which he/she/it may become subject under or in connection withthis Agreement.

 

**11.8****                        Interest.**  Any Stockholder who is required to holdharmless, indemnify, compensate or reimburse any Indemnitee pursuant to thisSection 11 with respect to any Damages shall also be liable to suchIndemnitee for interest on the amount of such Damages (for

 

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the period commencingas of the date on which such Stockholder first received notice of a claim forrecovery by such Indemnitee and ending on the date on which the liability ofsuch Stockholder to such Indemnitee is fully satisfied by such Stockholder) ata floating rate equal to the rate of interest publicly announced by Bank ofAmerica, N.T. & S.A. from time to time as its prime, base or referencerate.

 

**11.9****                        Defense ofThird Party Claims. **The obligationsand liabilities of the Stockholders under this Section 11 with respect toDamages arising from actual or threatened claims or demands by any third partywhich are subject to the indemnification provided for in this Section 11 (“ThirdParty Claims”) shall be governed by and contingent upon the followingadditional terms and conditions:

 

**(a)****                                 **Ifan Indemnitee shall receive notice of any Third Party Claim, the Indemniteeshall give the Stockholders’ Representative notice of such Third Party Claimwithin 90 days of the receipt by the Indemnitee of such notice; *provided, however*, that the failure to provide such noticeshall not release the Stockholders from their obligations under this Section 11except to the extent that the Stockholders are materially prejudiced by suchfailure.  The notice of claim shalldescribe in reasonable detail the facts known to the Indemnitee giving rise tosuch indemnification claim, and the amount or good faith estimate of the amountarising therefrom.

 

**(b)****                                 **Ifthe Stockholders’ Representative acknowledges in writing the Stockholders’obligation to indemnify the Indemnitee hereunder against any Damages (not toexceed any applicable limitation set forth in Section 11.6) that may resultfrom such Third Party Claim,****then theStockholders’ Representative shall be entitled to assume and control the defenseof such Third Party Claim through counsel of its choice (such counsel to bereasonably acceptable to the Indemnitee); *provided, however*,that the Stockholders’ Representative shall not have the right to assume thedefense of the Third Party Claim if (i) any such claim seeks any relief otherthan monetary losses (including any license of technology, any injunctive orother equitable relief), (ii) the Stockholders’ Representative fails to providereasonable assurance to the Indemnitee of the adequacy of the Escrow Fund plusprincipal amount of the Convertible Debentures to provide complete and full indemnificationin accordance with the provisions of this Agreement with respect to suchproceeding, (iii) there is reasonably likely to exist a conflict of interestthat would make it inappropriate (in the judgment of the Indemnitee in itsreasonable discretion) for the same counsel to represent both the Indemniteeand the Stockholders, or (iv) settlement of, or an adverse judgment withrespect to, the Third Party Claim may establish (in the good faith judgment ofthe Indemnitee) a precedent adverse to the business interests of theIndemnitee; *provided further*, that if by reason ofthe Third Party Claim an Encumbrance is placed upon any of the property orassets of such Indemnitee, the Indemnifying Party, if it desires to exerciseits right to assume such defense of the Third Party Claim, must agree to use aportion of the Escrow Fund to furnish a satisfactory indemnity bond to obtainthe prompt release of such Encumbrance. If the Stockholders’ Representative assumes the defense of a Third PartyClaim, it will conduct the defense actively, diligently and at its own expense,and it will hold all Indemnitees harmless from and against all Damages causedby or arising out of any settlement thereof, subject to any applicablelimitation set forth in Section 11.6. The Indemnitee shall cooperate with the Stockholders’ Representative,with such expenses paid out of the Escrow

 

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Fund and/or byreduction in principal amount of the Convertible Debentures, in such defenseand make available to the Stockholders’ Representative all witnesses, pertinentrecords, materials and information in the Indemnitee’s possession or under the Indemnitee’scontrol relating thereto as is reasonably requested by the Stockholders’Representative.  Except with the writtenconsent of the Indemnitee, the Stockholders’ Representative will not, in thedefense of a Third Party Claim, consent to the entry of any judgment or enterinto any settlement.

 

**(c)****                                 **Inthe event that the Stockholders’ Representative fails or elects not to assumethe defense of an Indemnitee against such Third Party Claim which theIndemnifying Party had the right to assume pursuant to Section 11.9(b), theIndemnitee shall have the right, at the expense of the Stockholders, to defendor prosecute such claim in any manner as it may reasonably deem appropriate andmay settle such claim after giving written notice thereof to the Stockholders’Representative, on such terms as such Indemnitee may deem appropriate, and theIndemnitee may, subject to Section 11.3 and 11.4, seek prompt reimbursementfrom the Escrow Fund and/or by reduction in principal amount of the ConvertibleDebentures for any Damages incurred in connection with such settlement.  If no settlement of such Third Party Claim ismade, the Indemnitee may, subject to Section 11.3 and 11.4, seek promptreimbursement from the Escrow Fund and/or by reduction in principal amount ofthe Convertible Debentures for any Damages arising out of any judgment renderedwith respect to such claim.  Any Damagesfor which an Indemnitee is entitled to indemnification hereunder shall bepromptly paid as suffered, incurred or accrued (in accordance with U.S. GAAP).

 

**(d)****                                 **Inthe event that the Stockholders’ Representative is not entitled to assume thedefense of the Indemnitee against such Third Party Claim pursuant toSection 11.9(b), the Indemnitee shall have the right, at the expense ofthe Stockholders, to defend or prosecute such claim and consent to the entry ofany judgment or enter into any settlement with respect to the Third Party Claimin any manner it may reasonably deem appropriate after giving written noticethereof to the Stockholders’ Representative, and the Indemnitee may, subject toSections 11.3 and 11.4, seek prompt reimbursement from the Escrow Fund and/orby reduction in principal amount of the Convertible Debentures for any Damagesincurred in connection with such judgment or settlement.  In such case, the Indemnitee shall conductthe defense of the Third Party Claim actively and diligently, and theStockholders’ Representative shall cooperate with the Indemnitee in suchdefense and make available to the Indemnitee all such witnesses, records,materials and information in the Stockholders’ possession or under theStockholders’ control relating thereto as is reasonably requested by theIndemnitee.  Notwithstanding theforegoing, unless the Stockholders’ Representative shall have consented to suchsettlement, no settlement of any such claim by Indemnitee shall foreclose theStockholders’ Representative’s right to challenge the amount of thesettlement.  If no settlement of suchThird Party Claim is made, the Indemnitee may, subject to Sections 11.3 and11.4, seek prompt reimbursement from the Escrow Fund and/or by reduction inprincipal amount of the Convertible Debentures for any Damages arising out ofany judgment rendered with respect to such claim.  Any Damages for which an Indemnitee isentitled to indemnification hereunder shall be promptly paid as suffered,incurred or accrued (in accordance with U.S. GAAP).

 

**11.10****                 Exercise ofRemedies by Indemnitees Other Than Parent.** No Indemnitee (other than Parent or any successor thereto or assignthereof) shall be permitted to assert any

 

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indemnificationclaim or exercise any other remedy under this Agreement unless Parent (or anysuccessor thereto or assign thereof) shall have consented to the assertion ofsuch indemnification claim or the exercise of such other remedy.

 

**SECTION 12****.****                     Miscellaneous Provisions**

 

**12.1****                        Stockholders’Representative.**

 

**(a)****                                 **TheStockholders hereby irrevocably appoint Daniel Freedman as their agent (the “Stockholders’Representative”) for purposes of Section 1.8(b), Section 7.10(g) and Section 11to the extent any claims for indemnification thereunder do not exceed theEscrow Fund and the principal amount of the Convertible Debentures (as reducedby the occurrence of any Reduction Event, as defined in the Convertibledebentures, resulting from Designated Employees failing to remain in theemployment of Parent or its affiliates) and to consent or agree to anyamendment of this Agreement on behalf of the Stockholders and the Company(provided that the Stockholders’ Representative may not agree to any amendmentof this Agreement which (a) would decrease the aggregate amount ofconsideration payable to the Stockholders pursuant to this Agreement or theConvertible Debentures or (b) would change any Stockholder’s obligations orliabilities (including for indemnification) under this Agreement, the EscrowAgreement or the Convertible Debentures), and Daniel Freedman hereby acceptshis appointment as the Stockholders’ Representative for such purposes.  Parent shall be entitled to deal exclusivelywith the Stockholders’ Representative on all matters relating to Section1.8(b), Section 7.10(g) and Section 11 to the extent any claims forindemnification thereunder do not exceed the Escrow Fund and the principalamount of the Convertible Debentures (as reduced by the occurrence of anyReduction Event, as defined in the Convertible debentures, resulting fromDesignated Employees failing to remain in the employment of Parent or itsaffiliates), and shall be entitled to rely conclusively (without furtherevidence of any kind whatsoever) on any document executed or purported to beexecuted on behalf of any Stockholder by the Stockholders’ Representative, andon any other action taken or purported to be taken on behalf of any Stockholderby the Stockholders’ Representative, as fully binding upon suchStockholder.  If the Stockholders’Representative shall die, become disabled or otherwise be unable to fulfill hisor her responsibilities as agent of the Stockholders, then (a) Cullen Jenningsshall act as the temporary Stockholders’ Representative until a successorStockholders’ Representative is appointed by the Stockholders holding amajority of the Company Capital Stock outstanding immediately prior to theClosing, and (b) the Stockholders shall, within ninety (90) days after suchdeath or disability, appoint a successor Stockholders’ Representative and,promptly thereafter, shall notify Parent of the identity of suchsuccessor.  Any such successor shallbecome the “Stockholders’ Representative” for purposes of Section 1.8(b),Section 7.10(g), Section 11 and this Section 12.1(a).

 

**(b)****                                 **TheStockholders’ Representative shall not be liable to either Parent, Merger Subor any holder of Company Capital Stock for any act done or omitted hereunder asthe Stockholders’ Representative while acting in good faith and without grossnegligence or willful misconduct.  TheStockholders shall indemnify the Stockholders’ Representative and hold himharmless against any loss, liability or expense incurred without grossnegligence, willful misconduct or bad faith on the part of the Stockholders’Representative and arising out of or in

 

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connection withthe acceptance or administration of his duties hereunder.  If not paid directly to the Stockholders’Representative by the Stockholders, such losses, liabilities or expenses may berecovered by the Stockholders’ Representative from the Escrow Fund upon release(if any) of the Escrow Fund or any portion thereof following the expiration of twentyfour (24) months from the Closing pursuant to the terms hereof.

 

**12.2****                        FurtherAssurances.**  Each party hereto shallexecute and cause to be delivered to each other party hereto such instrumentsand other documents, and shall take such other actions, as such other party mayreasonably request (prior to, at or after the Closing) for the purpose ofcarrying out or evidencing any of the transactions contemplated by thisAgreement.

 

**12.3****                        Fees andExpenses.**  Subject to Section 1.8, eachparty to this Agreement shall bear and pay all fees, costs and expenses(including legal fees and accounting fees) that have been incurred or that areincurred by such party in connection with the transactions contemplated by thisAgreement, including all fees, costs and expenses incurred by such party inconnection with or by virtue of (a) the investigation and review conducted byParent and its Representatives with respect to the Company’s business (and thefurnishing of information to Parent and its Representatives in connection withsuch investigation and review), (b) the negotiation, preparation and review ofthis Agreement (including the Disclosure Schedule) and all agreements,certificates, opinions and other instruments and documents delivered or to bedelivered in connection with the transactions contemplated by this Agreement,(c) the preparation and submission of any filing or notice required to be madeor given in connection with any of the transactions contemplated by thisAgreement, and the obtaining of any Consent required to be obtained inconnection with any of such transactions, and (d) the consummation of theMerger.

 

**12.4****                        Notices.**  Any notice or other communication required orpermitted to be delivered to any party under this Agreement shall be in writingand shall be deemed properly delivered, given and received when delivered (byhand, by registered mail, by courier or express delivery service or byfacsimile) to the address or facsimile telephone number set forth beneath thename of such party below (or to such other address or facsimile telephonenumber as such party shall have specified in a written notice given to theother parties hereto):

 

**if to Parent:**

 

Ditech Communications Corporation

825 East Middlefield Road

Mountain View, CA 94043

Facsimile: (650) 564-9591

Attn:  WilliamJ. Tamblyn

 

with a copy to:

 

Cooley Godward LLP

Five Palo Alto Square

3000 El Camino Real

Palo Alto, CA 94306

Facsimile: (650) 849-7400

Attn:  Brett D.White, Esq.

 

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**if to the Company or Jasomi Canada:**

 

Jasomi Networks, Inc.

602 Eleventh Avenue SW, Suite 310

Calgary, AB, Canada T2R 1J8

Facsimile: (650) 849-7400

Attn:  DanielFreedman

 

with a copy to:

 

Gunderson Dettmer StoughVilleneuve Franklin & Hachigian, LLP

155 Constitution Drive

Menlo Park, California 94025

Facsimile: (650) 321-2800

Attn:  Bennett L. Yee, Esq.

 

**if to any of the Signing Stockholders:**

 

to such address or facsimile number provided onExhibit A

 

if to the Stockholders’ Representative:

 

Daniel Freedman

2205 Amherst Street SW

Calgary AB Canada T2T 3B8

 

with a copy to:

 

Gunderson Dettmer StoughVilleneuve Franklin & Hachigian, LLP

155 Constitution Drive

Menlo Park, California 94025

Facsimile: (650) 321-2800

Attn:  Bennett L. Yee, Esq.

 

**12.5****                        Confidentiality.**  Without limiting the generality of anythingcontained in Section 7.3, on and at all times after the Closing Date, eachSigning Stockholder and Jasomi Canada shall keep confidential, and shall not useor disclose to any other Person, any non-public document or other non-publicinformation in such Signing Stockholder’s or Jasomi Canada’s possession thatrelates to the business of the Company or Parent.

 

**12.6****                        Time ofthe Essence.**  Time is of the essenceof this Agreement.

 

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**12.7****                        Headings.**  The underlined headings contained in thisAgreement are for convenience of reference only, shall not be deemed to be apart of this Agreement and shall not be referred to in connection with theconstruction or interpretation of this Agreement.

 

**12.8****                        Counterparts.**  This Agreement may be executed in severalcounterparts, each of which shall constitute an original and all of which, whentaken together, shall constitute one agreement.

 

**12.9****                        GoverningLaw.**  This Agreement shall beconstrued in accordance with, and governed in all respects by, the internallaws of the State of California (without giving effect to principles ofconflicts of laws).

 

**12.10****                 Arbitration.**  Following the Closing, arbitration will bethe sole and exclusive remedy of the parties for the resolution of any disputesunder this Agreement.  The parties herebyirrevocably agree to resolve any disputes under this Agreement througharbitration and to not bring any such claim in any state or Federal court orassert, as a defense in any arbitration proceeding, that arbitration isimproper or that such dispute must be brought in any such courts.  Any party hereto may initiate arbitration bymaking a written demand for arbitration on the other party and simultaneouslyfiling copies of the demand, together with the required fees, with the officeof JAMS in San Jose, California. In such event, the matter shall be settled byarbitration held in San Jose, California under the then-prevailing rules andprocedures of JAMS, provided that discovery shall be permitted to the sameextent permitted by the Federal Rules of Civil Procedure as if the claim hadbeen brought in a federal court of competent jurisdiction, and the arbitratorshall have the same authority to impose sanctions, including attorneys’ feesand costs, to the same extent as a court of competent law or equity, should thearbitrators determine that discovery was refused or objected to withoutsubstantial justification.  Any judgmentupon the award rendered by the arbitrator may be entered in any court havingjurisdiction over the subject matter thereof. The arbitrator shall have the authority to grant any equitable and legalremedies that would be available in any judicial proceeding instituted toresolve such dispute).  There will be one(1) arbitrator chosen by mutual agreement of the parties, or, in the event theparties cannot agree within three (3) business days after either party’sissuance of a written demand for arbitration, by JAMS.  Each party will bear the expense of depositsand advances required by the arbitrator in equal proportions, but either partymay advance such amounts, subject to recovery as an addition or offset to anyaward.  Upon the conclusion of anyarbitration proceedings hereunder, the arbitrator will render findings of factand conclusions of law and a written opinion setting forth the basis andreasons for any decision reached and will deliver such documents to each partyto this Agreement along with a signed copy of the award.  The arbitrator may not award punitivedamages.  The arbitrator chosen inaccordance with these provisions will not have the power to alter, amend orotherwise affect the terms of these arbitration provisions or the provisions ofthis Agreement.

 

**12.11****                 Successors andAssigns.**  This Agreement shall bebinding upon: the Company and its successors and assigns (if any); JasomiCanada and its successors and assigns (if any); the Signing Stockholders andtheir respective personal representatives, executors, administrators, estates,heirs, successors and assigns (if any); Parent and its successors and assigns(if any); and Merger Sub and its successors and assigns (if any).  This Agreement shall inure to the benefit of:

 

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the Company; JasomiCanada, the Company’s Stockholders (to the extent set forth in Section 1.5);Parent; Merger Sub; the other Indemnitees (subject to Section 11.9); andthe respective successors and assigns (if any) of the foregoing.  Parent may freely assign any or all of itsrights under this Agreement (including its indemnification rights underSection 11), in whole or in part, to any other Person without obtainingthe consent or approval of any other party hereto or of any other Person.

 

**12.12****                 RemediesCumulative; Specific Performance.** The rights and remedies of the parties hereto shall be cumulative (andnot alternative).  The parties to thisAgreement agree that, in the event of any breach or threatened breach by anyparty to this Agreement of any covenant, obligation or other provision setforth in this Agreement for the benefit of any other party to this Agreement,such other party shall be entitled (in addition to any other remedy that may beavailable to it) to (a) a decree or order of specific performance ormandamus to enforce the observance and performance of such covenant, obligationor other provision, and (b) an injunction restraining such breach orthreatened breach.

 

**12.13****                 Waiver**.

 

**(a)****                                 **Nofailure on the part of any Person to exercise any power, right, privilege orremedy under this Agreement, and no delay on the part of any Person inexercising any power, right, privilege or remedy under this Agreement, shalloperate as a waiver of such power, right, privilege or remedy; and no single orpartial exercise of any such power, right, privilege or remedy shall precludeany other or further exercise thereof or of any other power, right, privilegeor remedy.

 

**(b)****                                 **NoPerson shall be deemed to have waived any claim arising out of this Agreement,or any power, right, privilege or remedy under this Agreement, unless thewaiver of such claim, power, right, privilege or remedy is expressly set forthin a written instrument duly executed and delivered on behalf of such Person;and any such waiver shall not be applicable or have any effect except in thespecific instance in which it is given.

 

**12.14****                 Amendments.**  This Agreement may not be amended, modified,altered or supplemented other than by means of a written instrument dulyexecuted and delivered on behalf of Parent, the Stockholders’ Representative,Jasomi Canada and, prior to the Closing, the Company.

 

**12.15****                 Severability.**  Any term or provision of this Agreement thatis invalid or unenforceable in any situation in any jurisdiction shall notaffect the validity or enforceability of the remaining terms and provisionshereof or the validity or enforceability of the offending term or provision inany other situation or in any other jurisdiction.  If the final judgment of a court of competentjurisdiction declares that any term or provision hereof is invalid orunenforceable, the parties hereto agree that the court making suchdetermination shall have the power to limit the term or provision, to deletespecific words or phrases, or to replace any invalid or unenforceable term orprovision with a term or provision that is valid and enforceable and that comesclosest to expressing the intention of the invalid or unenforceable term orprovision, and this Agreement shall be enforceable as so modified.  In the event such court does not exercise thepower granted

 

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to it in the priorsentence, the parties hereto agree to replace such invalid or unenforceableterm or provision with a valid and enforceable term or provision that willachieve, to the extent possible, the economic, business and other purposes ofsuch invalid or unenforceable term.

 

**12.16****                 Parties inInterest.**  Except for the provisionsof Sections 1.5, 7.10 and 11, none of the provisions of this Agreement isintended to provide any rights or remedies to any Person other than the partieshereto and their respective successors and assigns (if any).

 

**12.17****                 Entire Agreement.**  This Agreement and the other agreementsreferred to herein set forth the entire understanding of the parties heretorelating to the subject matter hereof and thereof and supersede all prioragreements and understandings among or between any of the parties relating tothe subject matter hereof and thereof; *provided, however,*thatthe Non-Disclosure Agreement executed on behalf of Parent on and the Company onJanuary 11, 2005, shall not be superseded by this Agreement and shall remain ineffect in accordance with its terms until the earlier of (a) the EffectiveTime, or (b) the date on which such Non-Disclosure Agreement is terminated inaccordance with its terms.

 

**12.18****                 Construction**.

 

**(a)****                                 **Forpurposes of this Agreement, whenever the context requires: the singular numbershall include the plural, and vice versa; the masculine gender shall includethe feminine and neuter genders; the feminine gender shall include themasculine and neuter genders; and the neuter gender shall include the masculineand feminine genders.

 

**(b)****                                 **Theparties hereto agree that any rule of construction to the effect thatambiguities are to be resolved against the drafting party shall not be appliedin the construction or interpretation of this Agreement.

 

**(c)****                                 **Asused in this Agreement, the words “include” and “including,” and variationsthereof, shall not be deemed to be terms of limitation, but rather shall bedeemed to be followed by the words “without limitation.”

 

**(d)****                                 **Exceptas otherwise indicated, all references in this Agreement to “Sections” and “Exhibits”are intended to refer to Sections of this Agreement and Exhibits to thisAgreement.

 

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The parties hereto have caused this Agreement to beexecuted and delivered as of June 6, 2005.

 
|   | **Ditech Communications Corporation,** |
|--------|----------------------------------------|
|   |   a Delaware corporation          |
|   |                                   |
|   | By:                                    | /s/ Timothy K.  Montgomery |   |
|   |                                   | Timothy K. Montgomery |
|   |                                   | Chairman of the Board and Chief  Executive Officer |
|   |                                   |
|   |                                   |
|   | **Spitfire Acquisition Corp.,**        |
|   |   a Delaware corporation          |
|   |                                   |
|   | By:                                    | /s/ Lowell B.  Trangsrud |   |
|   |                                   | Lowell B. Trangsrud |
|   |                                   | Chief Executive Officer and President |
|   |                                   |
|   |                                   |
|   | **Jasomi Networks, Inc.,**             |
|   |   a Delaware corporation          |
|   |                                   |
|   | By:                                    | /s/ Daniel  Freedman |   |
|   |                                   | Daniel Freedman |
|   |                                   | Founder and Chairman |
|   |                                   |
|   | **Jasomi Networks (Canada), Inc.,**    |
|   |   an Alberta corporation          |
|   |                                   |
|   | By:                                    | /s/ Daniel  Freedman |   |
|   |                                   | Daniel Freedman |
|   |                                   | Founder and Chairman |
|   |                                   |
|   |                                   |
|   | /s/ Daniel  Freedman                   |   |
|   | Daniel Freedman                        |   |
|   |                                   |   |
|   |                                   |   |
|   | /s/ Cullen  Jennings                   |   |
|   | Cullen Jennings                        |   |
|   |                                   |   |
|   |                                   |   |
|   | /s/ Todd Simpson                       |   |
|   | Todd Simpson                           |   |

 

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**Exhibit A**

 

**SIGNING STOCKHOLDERS**

 

 
| **Name  and Address**                                              | ** ** | ** ** |
|--------------------------------------------------------------------|------------|------------|
| ** **                                                         | ** ** | ** ** |
| Daniel Freedman  2205 Amherst Street SWCalgary AB Canada  T2T 3B8  |       |       |
|                                                               |       |       |
| Cullen Jennings  1385 Tanaka Drive  San Jose, CA 95131             |       |       |
|                                                               |       |       |
| Todd Simpson  602 11th Avenue SW  Calgary, Alberta, Canada T24 1J8 |       |       |

 

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**Exhibit B**

 

**CERTAIN DEFINITIONS**

 

For purposes of the Agreement (including thisExhibit B):

 

**Acquisition Transaction.**  “Acquisition Transaction” shall mean anytransaction involving:

 

**(a)****                                 **thesale, license, disposition or acquisition of all or a material portion of theCompany’s business or assets;

 

**(b)****                                 **theissuance, disposition or acquisition of (i) any capital stock or other equitysecurity of the Company (other than common stock issued to employees of theCompany, upon exercise of Company Options or otherwise, in routine transactionsin accordance with the Company’s past practices), (ii) any option, call,warrant or right (whether or not immediately exercisable) to acquire anycapital stock or other equity security of the Company (other than stock optionsgranted to employees of the Company in routine transactions in accordance withthe Company’s past practices), or (iii) any security, instrument or obligationthat is or may become convertible into or exchangeable for any capital stock orother equity security of the Company; or

 

**(c)****                                 **anymerger, consolidation, business combination, reorganization or similartransaction involving the Company.

 

**Agreement.**  “Agreement” shall mean the Agreement and Planof Merger to which this Exhibit B is attached (including the DisclosureSchedule), as it may be amended from time to time.

 

**Cause.  “**Cause**”** shall mean misconduct, including:  (i) commission of any felony or any crimeinvolving moral turpitude or dishonesty; (ii) participation in a fraud or actof dishonesty against Parent; (iii) material breach of Parent’s writtenpolicies; (iv) intentional and material damage to Parent property; (v) materialbreach by the employee of any provision of any material agreement between theemployee and Parent concerning the terms and conditions of the employee’semployment; (vi) conduct by the employee that Parent determines demonstratesunacceptable job performance or gross unfitness to serve; (vii) incapacity toperform the essential functions of the Designated Employee’s job for a periodof ninety (90) calendar days, or for at least sixty-five (65) business dayswithin twelve (12)-month period, *providedthat* Parent shall act upon this provision only in compliance withthe Family Medical Leave Act, and the Americans with Disabilities Act (withrespect to Canadian employees, with application of these principles), or (viii)death.  For purposes of this definitionof “Cause,” “Parent” shall also include any affiliate of Parent.

 

**COBRA.**  **“**COBRA**”**shall mean the Consolidated Omnibus Budget Reconciliation Act of 1985, asamended.

 

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**Code.  “**Code**”** shall mean the United Stated Internal Revenue Code of1986, as amended.

 

**Company Affiliate**.  “Company Affiliate” shall mean any Personunder common control with the Company within the meaning of Sections 414(b),(c), (m) and (o) of the Code, and the regulations issued thereunder, includingJasomi Canada.

 

**Company Capital Stock. **“Company Capital Stock”shall mean the Company Common Stock and Company Preferred Stock.

 

**Company Common Stock. **“Company Common Stock”shall mean the Common Stock of Jasomi Networks, Inc., par value $0.001.

 

**Company Contract.**  “Company Contract” shall mean anyContract:  (a) to which the Company is aparty; (b) by which the Company or any of their assets are or may become boundor under which the Company has, or may become subject to, any obligation; or(c) under which the Company has or may acquire any right or interest.

 

**Company****Employee.**  “CompanyEmployee” shall mean any current or former employee, independentcontractor or director of the Company or any Company Affiliate.

 

**Company****EmployeeAgreement.** “Company Employee Agreement” shall meaneach management, employment, severance, termination, notice, change-of-control,consulting, relocation, repatriation or expatriation agreement or otherContract between the Company or any Company Affiliate and any Company Employee.

 

**Company Employee Plan. ** “CompanyEmployee Plan” shall mean any plan, program, policy, practice, Contractor other arrangement providing for compensation, severance, indemnity in lieuof notice, change-of-control award, termination pay, deferred compensation,performance awards, stock or stock-related awards, fringe benefits or otheremployee benefits or remuneration of any kind, whether written, unwritten orotherwise, funded or unfunded, including each “employee benefit plan,” withinthe meaning of Section 3(3) of ERISA (whether or not ERISA is applicable tosuch plan), that is or has been maintained, contributed to, or required to becontributed to, by the Company or any Company Affiliate for the benefit of anyCompany Employee, or with respect to which the Company or any Company Affiliatehas or may have any liability or obligation, except such definition shall notinclude any Company Employee Agreement.

 

**Company IP.** “Company IP” shall mean all Intellectual Property Rights and Intellectual Property (includingwithout limitation all Intellectual Property Rights and Intellectual Propertyin the Company Software) used by the Company to conduct the business of theCompany as currently conducted or as planned to be conducted or in which theCompany has (or purports to have) an ownership interest or an exclusive licenseor similar exclusive right.

 

**Company IP Contract.** “Company IP Contract” shall mean any Contractto which the Company is or was a party or by which the Company is or was bound,that contains any assignment or license of, or any covenant not to assert orenforce, any Intellectual Property Right

 

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or that otherwise relatesto any Company IP or any Intellectual Property developed by, with or for theCompany.

 

**Company Option. **“Company Option” shall mean an option to purchaseshares of Company Common Stock that is outstanding under the Option Plan at theEffective Time, whether or not vested or exercisable.

 

**Company Pension Plan.**  “CompanyPension Plan” shall mean each Company Employee Plan that is an “employeepension benefit plan,” within the meaning of Section 3(2) of ERISA.

 

**Company Preferred Stock. **“Company Preferred Stock”shall mean the Preferred Stock of Jasomi Networks, Inc., par value $0.001 pershare.

 

**Company Software.** “Company Software” shall mean any software(including firmware and other software embedded in hardware devices) owned,developed (or currently being developed), used, marketed, distributed, licensedor sold by the Company at any time (other than non-customized third-party softwarelicensed to the Company for internal use on a non-exclusive basis).

 

**Consent.**  “Consent” shall mean any approval, consent,ratification, permission, waiver or authorization (including any GovernmentalAuthorization).

 

**Contract.**  “Contract” shall mean any written, oral orother agreement, contract, subcontract, lease, understanding, instrument, note,warranty, insurance policy, benefit plan or legally binding commitment orundertaking of any nature.

 

**Damages.**  “Damages” shall include any loss, damage, injury,decline in value, lost opportunity, liability, claim, demand, settlement,judgment, award, fine, penalty, Tax, fee (including reasonable attorneys’fees), charge, cost (including costs of investigation) or expense of anynature.

 

**Designated Employees**.  “Designated Employees” means those elevenindividuals set forth on the Designated Employees List executed by Parent andthe Company contemporaneously with this Agreement.

 

**DGCL. **“DGCL” means the Delaware GeneralCorporation Law.

 

**Disclosure Schedule.**  “Disclosure Schedule” shall mean the schedule(dated as of the date of the Agreement) delivered to Parent on behalf of theCompany and the Signing Stockholders.

 

**DGCL. **“DGCL” means the Delaware GeneralCorporation Law.

 

**Dissenting Shares.**  “Dissenting Shares” shall have the meaning asset forth in Section 262 of the DGCL

 

**DOL. **“DOL” means the United StatesDepartment of Labor.

 

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**Encumbrance.**  “Encumbrance” shall mean any lien, pledge,hypothecation, charge, mortgage, security interest, encumbrance, claim,infringement, interference, option, right of first refusal, preemptive right,community property interest or restriction of any nature (excluding any licenseof any right granted to or from any other Person and including any restrictionon the voting of any security, any restriction on the transfer of any securityor other asset, any restriction on the receipt of any income derived from anyasset, any restriction on the use of any asset and any restriction on thepossession, exercise or transfer of any other attribute of ownership of anyasset).

 

**Entity.**  “Entity” shall mean any corporation(including any non-profit corporation), general partnership, limitedpartnership, limited liability partnership, joint venture, estate, trust,company (including any limited liability company or joint stock company), firmor other enterprise, association, organization or entity.

 

**ERISA**.  “ERISA”shall mean the Employee Retirement Income Security Act of 1974, as amended.

 

**Exchange Act.**  “Exchange Act” shall mean the SecuritiesExchange Act of 1934, as amended.

 

**FMLA. ** “FMLA”shall mean the Family Medical Leave Act of 1993, as amended.

 

**Foreign Plan.  “**Foreign Plan” shall****mean: (i) any plan, program, policy,practice, Contract or other arrangement mandated by a Governmental Body otherthan the United States; (ii) any Company Employee Plan maintained orcontributed to by the Company or any Company Affiliate that is not subject toUnited States law; and (iii) any Company Employee Plan that covers or hascovered Company Employees whose services are performed primarily outside of theUnited States.

 

**Fraud Claims. **“Fraud Claims” shall mean any claim for Damages basedon an allegation of fraud by the Company, its officers, directors, employees orany affiliate or agent of the Company.

 

**GAAP.**  “GAAP” shall mean any generally acceptedaccounting principals in the United States.

 

**Good Reason.**  “Good Reason” shall mean that one or more ofthe following are undertaken by Parent without the express written consent ofthe employee:  (i) the assignment of anyduties or responsibilities that results in a material diminution in theemployee’s function as in effect on the date the employee began employment withParent; *provided, however*, that a change intitle or reporting relationships shall not provide the basis for a voluntarytermination with Good Reason; (ii) a material reduction by Parent in theemployee’s annual base salary, as in effect on the date the employee beganemployment with Parent or as increased thereafter; *provided,however*, that Good Reason shall not be deemed to have occurred inthe event of a reduction in the employee’s annual base salary that is pursuantto a salary reduction program affecting substantially all of the employees ofParent and that does not adversely affect the employee to a greater extent thanother similarly situated employees; (iii) any failure by Parent to

 

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continue in effect anybenefit plan or program, including incentive plans or plans with respect to thereceipt of securities of Parent, in which the employee was participating on thedate the employee began employment with Parent (hereinafter referred to as “***Benefit Plans***”), or the taking ofany action by Parent that would materially and adversely affect the employee’sparticipation in or materially reduce the employee’s benefits under the BenefitPlans or deprive the employee of any fringe benefit that the employee enjoyedimmediately prior to the date hereof; *provided, however*,that Good Reason shall not be deemed to have occurred if such reduction inbenefits under Benefit Plans shall apply in a similar manner to all employeesof Parent or if Parent provides for the employee’s participation in benefit plansand programs that, taken as a whole, are comparable to the Benefit Plans; *provided further,* that Good Reason shall not be deemed tohave occurred if Parent reduces or eliminates a Benefit Plan in which theemployee participates as a result of a change in accounting principles, thecontinuance of which Benefit Plan would adversely affect Parent financialresults (including the application of Financial Accounting Standards BoardStatement No. 123R, “Share-Based Payment”); (iv) a relocation of the employee’sbusiness office to a location more than 30 miles from the location at which theemployee performed the employee’s duties as of the date the employee beganemployment with Parent, (v) excessive and unreasonable required travel onParent’s business for such job position and responsibilities; or (vi) amaterial breach by Parent of any provision of any material agreement betweenthe employee and Parent concerning the terms and conditions of the employee’semployment. For purposes of this definition of “Good Reason,” “Parent” shallalso include any affiliate of Parent.

 

**Governmental Authorization.**  “Governmental Authorization” shall meanany:  (a) permit, license, certificate,franchise, permission, clearance, registration, qualification or authorizationissued, granted, given or otherwise made available by or under the authority ofany Governmental Body or pursuant to any Legal Requirement; or (b) right underany Contract with any Governmental Body.

 

**Governmental Body.**  “Governmental Body” shall mean any: (a) nation,state, commonwealth, province, territory, county, municipality, district orother jurisdiction of any nature; (b) federal, provincial, state,local, municipal, foreign or other government; or (c) governmental or quasi-governmentalauthority of any nature (including any governmental division, department,agency, commission, instrumentality, official, organization, unit, body orEntity and any court or other tribunal).

 

**HIPAA. ** “HIPAA”shall mean the Health Insurance Portability and Accountability Act of 1996, asamended.

 

**Indemnitees.**  “Indemnitees” shall mean the followingPersons:  (a) Parent; (b) Parent’scurrent and future affiliates (including the Surviving Corporation); (c) therespective Representatives of the Persons referred to in clauses “(a)” and “(b)”above; and (d) therespective successors and assigns of the Persons referred to in clauses “(a)”, “(b)”and “(c)” above; *provided, however*, that the Stockholdersshall not be deemed to be “Indemnitees.”

 

**Intellectual Property. **“Intellectual Property”shall mean algorithms, APIs, apparatus, circuit designs and assemblies, gatearrays, IP cores, net lists, photomasks, semiconductor

 

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devices, test vectors,databases, data collections, diagrams, formulae, inventions (whether or notpatentable), know-how, logos, marks (including brand names, product names,logos, and slogans), methods, network configurations and architectures,processes, proprietary information, protocols, schematics, specifications,software, software code (in any form, including source code and executable orobject code), subroutines, techniques, user interfaces, URLs, web sites, worksof authorship and other forms of technology (whether or not embodied in anytangible form and including all tangible embodiments of the foregoing, such asinstruction manuals, laboratory notebooks, prototypes, samples, studies andsummaries).

 

**Intellectual Property Rights**.  “Intellectual Property Rights” shall mean allpast, present, and future rights of the following types, which may exist or becreated under the laws of any jurisdiction in the world: (A) rights associatedwith works of authorship, including exclusive exploitation rights, copyrights,moral rights and mask works; (B) trademark and trade name rights and similarrights; (C) trade secret rights; (D) patent and industrial propertyrights; (E) other proprietary rights in Intellectual Property; and (F) rightsin or relating to registrations, renewals, extensions, combinations, divisions,and reissues of, and applications for, any of the rights referred to in clauses“(A)” through “(E)” above.

 

**Intellectual Property Warranty**.  “Intellectual Property Warranty” shall meanthe representations and warranties made by the Company in Section 2.9 of thisAgreement.

 

**Intercompany Agreements**.  “Intercompany Agreements” shall mean thatcertain Agreement Between JasomiNetworks, Inc and Jasomi Networks (Canada), Inc. dated January 7, 2002,as amended on June 6, 2005.

 

**IRS. ** “IRS”shall mean the United States Internal Revenue Service.

 

**Knowledge.**  “Knowledge” shall mean (i) the actualawareness of such fact or other matter of Daniel Freedman or any officer ordirector of the Company or Jasomi Canada, or with respect to any representationmade by a Signing Stockholder, such Signing Stockholder; (ii) the awareness ofsuch fact or other matter of Daniel Freedman or any officer or director of theCompany or Jasomi Canada that a person in such position could reasonably beexpected to discover or otherwise become aware of after having made reasonableinvestigation (which shall include, but not be limited to, inquiry of employeesof the Company and/or Jasomi Canada who would reasonably be expected to haveawareness of such fact or other matter, but any such inquiry shall not requireor shall not be assumed to include any patent or trademark search or review ofany patents or trademarks); and (iii) with respect to the representations andwarranties set forth in Section 2.9 of the Agreement, in addition to the above,such awareness of Ryan Kereliuk or Alan Hawrylyshen based on the same standardsas are set forth in (i) and (ii) above.

 

**Legal Proceeding.**  “Legal Proceeding” shall mean any action,suit, litigation, arbitration, proceeding (including any civil, criminal, administrative,investigative or appellate proceeding), hearing, inquiry, audit, examination orinvestigation commenced, brought, conducted or heard by or before, or otherwiseinvolving, any court or other Governmental Body or any arbitrator or arbitrationpanel.

 

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**Legal Requirement.**  “Legal Requirement” shall mean any federal, provincial,state, local, municipal, foreign or other law, statute, constitution, principleof common law, resolution, ordinance, code, edict, decree, rule, regulation,ruling or requirement issued, enacted, adopted, promulgated, implemented orotherwise put into effect by or under the authority of any Governmental Body.

 

**“LicensedCompany Software”** means Company Software that is licensed tothe Company as identified in Part 2.9(a)(iii) of the Disclosure Schedule.

 

**“LicensedIP”**means Company IP that is licensed to the Company asidentified in Part 2.9(a)(iii) of the Disclosure Schedule.

 

**Material Adverse Effect.**  A violation or other matter will be deemed tohave a “Material Adverse Effect” on a party if such violation or other matter(considered together with all other matters that would constitute exceptions tothe representations and warranties set forth in the Agreement but for the presenceof “Material Adverse Effect” or other materiality qualifications, or anysimilar qualifications, in such representations and warranties) would have amaterial adverse effect on the Company’s business, condition, assets,liabilities, operations or financial performance, except for any such events,changes or effects resulting from or in connection with any changes in generaleconomic or business conditions that do not disproportionately impact suchparty, or (ii) any changes or events affecting the industry in which such partyoperates that do not disproportionately impact such party.

 

**Material Company Change. **A “Material Company Change”shall mean any event, occurrence or condition which could reasonably beexpected to result in a liability in excess of $600,000 in the aggregate orwould create a diminution in value in excess of $600,000 in the aggregate inCompany’s business, condition, assets, liabilities, operations or financialperformance, except for any such events, changes or effects resulting from orin connection with any changes in general economic or business conditions thatdo not disproportionately impact such party, or (ii) any changes or eventsaffecting the industry in which such party operates that do notdisproportionately impact such party.

 

**“Non-LicensedCompany IP”** means all Company IP that is not Licensed IP.

 

**“Non-LicensedCompany Software”** means all Company Software that is notLicensed Company Software.

 

**Option Plan. ** “Option Plan” shall mean the Company’s2001 Stock Plan, as amended.

 

**Parent Common Stock. ** “Parent Common Stock” shall mean common stockof Parent, par value $0.001 per share.

 

**PBGC. ** “PBGC”shall mean the United States Pension Benefit Guaranty Corporation.

 

**Person.**  “Person” shall mean any individual, Entity orGovernmental Body.

 

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**Registered IP.**  “Registered IP” shall mean all IntellectualProperty Rights that are registered, filed, or issued under the authority of,with or by any Governmental Body, including all patents, registered copyrights,registered mask works and registered trademarks and all applications for any ofthe foregoing.

 

**Representatives.**  “Representatives” shall mean officers,directors, employees, agents, attorneys, accountants, advisors and representatives.

 

**Routine Preclosing Bugs.**  “Routine Preclosing Bugs” shall mean thosebugs, defects, and errors in the Company Software, first discovered by theCompany and disclosed by the Company to Parent between the date of thisAgreement and the Closing, that the Company would need to spend no more than threetimes the amount of time to correct as the Company spent to correct bugs,defects, and errors in the ninety (90) day period ending on the date of this Agreement.

 

**SEC.**  “SEC” shall mean the United States Securitiesand Exchange Commission.

 

**Securities Act.**  “Securities Act” shall mean the SecuritiesAct of 1933, as amended.

 

**Stockholders. **“Stockholders” shall mean the holders of the Company’sCapital Stock.

 

**Tax.**  “Tax” shall mean any tax (including anyincome tax, franchise tax, capital gains tax, gross receipts tax, value-addedtax, surtax, excise tax, ad valorem tax, transfer tax, stamp tax, sales tax,use tax, goods and services tax, property tax, business tax, withholding tax orpayroll tax), levy, assessment, tariff, duty (including any customs duty), andany Canada plan and provincial pension plan contribution, deficiency or fee,and any related charge or amount (including any fine, penalty or interest),imposed, assessed or collected by or under the authority of any GovernmentalBody.

 

**Tax Return.**  “Tax Return” shall mean any return (includingany information return), report, statement, declaration, estimate, schedule,notice, notification, form, election, certificate or other document or informationfiled with or submitted to, or required to be filed with or submitted to, anyGovernmental Body in connection with the determination, assessment, collectionor payment of any Tax or in connection with the administration, implementationor enforcement of or compliance with any Legal Requirement relating to any Tax.

 

**TaxWarranty.**  “TaxWarranty” shall mean the representations and warranties made by the Company andthe Signing Stockholders in Section 2.14 of this Agreement.

 

**Transaction Costs.**  “Transaction Costs” means the amount of allfees, costs and expenses that have been incurred or that are incurred by theCompany in connection with the transactions contemplated by this Agreement,including any fees, costs or expenses payable to the Company’s outside legalcounsel or to any financial advisor, investment banker, finder, accountant orother Person who performed services for or on behalf of the Company (including,specifically, the fees due to Redwood Capital Group), or who is otherwiseentitled to any compensation from the Company, in connection with thisAgreement or any of the transactions

 

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contemplated by this Agreement (except for salariesand other compensation paid or payable to employees of the Company and feespayable to service providers, in each case unrelated to this Agreement or thetransaction contemplated by this Agreement, and arising only in the ordinarycourse of business consistent with past practice).

 

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